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NDA Forum Selection Clause Doesn’t Bar IPR in Response to Subsequent Infringement Suit

by | Oct 21, 2021 |

The US Court of Appeals for the Federal Circuit affirmed the denial of a preliminary injunction that would have forced the accused infringer to seek dismissal of its petitions for inter partes review (IPR) based on a forum-selection clause in an earlier nondisclosure agreement (NDA). Kannuu Pty Ltd. v. Samsung Elects. Co, Ltd., Case No. 21-1638 (Fed. Cir. Oct. 7, 2021) (Chen, J.) (Newman, J., dissenting).

Kannuu is a start-up that develops media-related products, including certain remote control search-and-navigation technology. Samsung explored licensing the technology and entered into an NDA with Kannuu. The NDA included a forum-selection clause, which stated that any legal action “arising out of or relating to this Agreement or the transactions contemplated hereby must be instituted exclusively” in a New York state or federal court. The negotiations were unsuccessful. Several years later, Kannuu sued Samsung for alleged infringement of five patents relating to the same technology and alleged breach of the NDA. Samsung petitioned for IPR of the five patents, and two of the petitions resulted in institution. Kannuu filed for a preliminary injunction to force Samsung to dismiss the IPRs that had been instituted. The district court denied the preliminary injunction. Kannuu appealed.

The Federal Circuit determined that the district court had not abused its discretion in denying the preliminary injunction, distinguishing between an NDA (which relates to confidentiality) and a patent license agreement (which relates to patent rights). The Court explained that because the forum selection clause was in an NDA, patent infringement defenses did not “arise out of or relate to this Agreement or the transactions contemplated thereby.” In other words, the patent infringement defenses were too attenuated from the subject matter of the NDA to be governed by the forum selection clause therein. The Court noted that whether any patent claim was held invalid would not affect Kannuu’s breach of contract claim arising from an alleged breach of the NDA.

In dissent, Judge Pauline Newman reasoned that a patent license was one of the “transactions contemplated” by the NDA. Therefore, she would have found that the patent infringement defenses were within the scope of the forum selection provision of the NDA.

Practice Note: The Federal Circuit noted how a failed licensing negotiation commonly leads to a subsequent infringement suit. Parties should craft provisions of the NDA regarding forum selection and related issues (e.g., choice of laws) to explicitly include or exclude potential infringement litigation from their scope.



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PTO’s Financial Benefits from IPR Don’t Render PTAB Unconstitutional

by | Oct 21, 2021 |

A split panel of the US Court of Appeals for the Federal Circuit concluded that the structure and functions of the Patent Trial & Appeal Board (PTAB) survived yet another constitutional challenge, this time based on the PTAB’s fee and compensation structure, lack of director review over the institution decision and applicability of the Takings Clause. Mobility WorkX, LLC v. Unified Patents LLC, Case No. 20-1441 (Fed. Cir.) (Dyk, J.) (Newman, J., dissenting).

With the dust barely settled after the Supreme Court’s ruling in US v. Arthrex, Inc. that the PTAB’s rendering of final written decisions without director review violated the Appointments Clause, this case presented a whole new slate of potential deficiencies with the PTAB. Although none of these deficiencies were initially raised with the PTAB, the Court exercised its discretion to nonetheless consider the challenges based on publicly available records that it could judicially notice.

The first challenge, already made in many other cases, was that the Federal Circuit remand for the director to consider a rehearing petition in view of Arthrex. This remedy, already afforded in other post-Arthrex challenges, was a simple grant. Yet, here, Mobility asked for something more, arguing that because the director did not resolve the inter partes review (IPR) within the 12-month statutory period, the director must confirm the claims or dismiss the IPR. The Court declined to rule on this issue, instructing Mobility to raise the issue on remand.

The issue receiving the most attention by the Federal Circuit was Mobility’s claims that the PTAB’s fee structure and bonus payments to administrative patent judges (APJs) based on their workload violated the Due Process Clause. According to Mobility, the APJs have a financial incentive to institute IPRs (i.e., significant fees), which provide a significant benefit to the agency. But the Court concluded that the APJs (even the leadership APJs) have only an attenuated role in budget control and thus have an insignificant interest in the financial health of the US Patent & Trademark Office as a whole. Because Congress holds the purse strings and the more significant budget responsibilities fall on the director and the president, the majority held that little connection existed between institution decisions and the agency’s overall financial health, which was consistent with the Court’s own precedent regarding reexaminations and other circuits’ precedents regarding executive agency fee collection. This attenuated connection differentiated the PTAB’s collected fees from Supreme Court cases that found due process violations based on the structure of certain executive courts presided over by a mayor who also held concomitant budget responsibilities.

Similarly, the Federal Circuit held that the APJs’ incentive to render a certain number of decisions—i.e., APJs receive bonus payments if they earn at least 84 decisional units, and the number of decisions is part of performance evaluation—did not provide an unconstitutional incentive to institute. The majority reasoned that ample alternative means existed for the APJs to earn their bonuses, namely, the ability to volunteer for non-America Invents Act (AIA) decisions (such as [...]

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Update: Absent Explicit Statutory Language? The American Rule Still Applies

by | Oct 21, 2021 |

The US Court of Appeals for the Federal Circuit updated its earlier opinion to remove language ascribing motive to a prolific inventor’s actions before the US Patent & Trademark Office (PTO). Hyatt v. Hirshfeld, Case Nos. 020-2321; -2325 (Fed. Cir. Aug. 18, 2021) (modified Oct. 12, 2021) (Hughes, J.)

The original opinion noted that Gilbert Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay.” The modified opinion deletes language in the original opinion ascribing to Hyatt the motive of “in an effort to submarine his patent applications and receive lengthy patent terms.”

The Federal Circuit did not alter its earlier reversal of the district court’s grant of attorneys’ fees to Hyatt (since he was not the prevailing party) or its affirmance of the district court’s denial of the PTO’s request for expert fees (after finding “[a]ll the expenses of the proceedings shall be paid by the applicant” under 35 U.S.C. § 145, not specifically and explicitly shifting expert witness fees). The rest of the text of the opinion remains unchanged.



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Oh the Horror: No Work for Hire in Friday the 13th Screenplay

by | Oct 14, 2021 |

The US Court of Appeals for the Second Circuit affirmed a summary judgment grant, ruling that an author was an independent contractor when writing the screenplay for a horror film and entitled to authorship rights, and therefore entitled to exercise his copyright § 203 termination right. Horror Inc. v. Miller, Case No. 18-3123 (2d Cir. Sept. 30, 2021) (Carney, J.)

Victor Miller is an author who has written numerous novels, screenplays and teleplays. Sean Cunningham is a producer, director and writer of feature films and is the general partner of Manny Company. Miller and Cunningham were close friends who began working together around 1976 and collaborated on five motion pictures in their first five years working together. Miller was a member of the Writers Guild of America, East (WGA) and was a signatory of their Minimum Basic Agreement (MBA), which was the collective bargaining agreement at the time.

In 1979, the success of the horror film Halloween inspired Cunningham to produce a horror film. Cunningham reached out to Miller and they orally agreed that Miller would write the screenplay for their upcoming project. The two came to an agreement using the WGA standard form. Miller then began developing the screenplay and the two worked closely together in discussing ideas for the film. Miller picked his working hours but was responsible for completing drafts based on the production schedule of the film. Cunningham had no right to assign additional works to Miller beyond the screenplay.

The dispute concerns whether, for Copyright Act purposes, Miller was an employee or independent contractor of Manny Company, of which Cunningham was the general partner. Cunningham argued that he taught Miller the key elements of a successful horror film, that he gave significant contributions and that he had final authority over what ended up in the screenplay. Miller agreed that Cunningham gave notes but stated that Cunningham never dictated what he wrote. The parties agreed that Cunningham did provide the ideas for making the movie killings “personal,” that the killer remain masked and that they kill a major character early. Miller received “sole ‘written by’ credit” as the screenwriter.

Horror Inc. (successor to Georgetown Horror) financed the project and was given complete control over the screenplay and film. Manny assigned its rights in the film and screenplay to Horror, which registered the copyrights. In the registration, Horror was listed as the film’s work made for hire author with a credit given to Miller for the screenplay. The initial film was a huge hit and has spawned 11 sequels.

In 2016, Miller attempted to reclaim his copyright ownership by invoking his termination rights under 17 U.S.C. § 203 and served notices of termination to Manny and Horror. The two responded by suing Miller and seeking a declaration that the screenplay was a “work for hire,” and therefore Miller could not give a valid termination notice. The district court granted summary judgment to Miller, stating that Miller was the author as he did not prepare the screenplay as [...]

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Design Patent Prior Art Must Be From Same or Analogous Field as Claimed Article of Manufacture

by | Oct 14, 2021 |

Finding that the Patent Trial & Appeal Board (Board) applied an erroneous interpretation of claim scope, the US Court of Appeals for the Federal Circuit reversed a Board decision upholding an examiner’s rejection of a lip implant design patent as anticipated by a non-analogous art tool. In re: SurgiSil, Case No. 20-1940 (Fed. Cir. Oct. 4, 2021) (Moore, C.J.)

SurgiSil filed a design application for a lip implant shaped like a generally cylindrical rod that tapered to a point at each end. The examiner rejected the patent as anticipated by a “stump,” an art tool of similar, almost identical, shape used for smoothing and blending areas of pastel or charcoal. SurgiSil appealed the rejection to the Board. The Board affirmed the rejection, finding that the differences in the shapes of SurgiSil’s lip implant and the art tool were minor. The Board rejected SurgiSil’s argument that the two articles of manufacture were “very different,” reasoning that it is irrelevant whether a prior art reference is analogous for anticipation purposes. SurgiSil appealed.

Reviewing the Board’s legal conclusions de novo, the Federal Circuit found that the Board erred as a matter of law. Citing 35 U.S.C. § 171(a) and the 1871 Supreme Court decision in Gorham Co. v. White, the Court explained that a design patent claim does not cover the design in the abstract, and that it is limited to the particular article of manufacture identified in the claim. The Court concluded that the claimed design was limited to a lip implant, did not cover other articles of manufacture and that the Board’s decision therefore rested on an erroneous interpretation of the claim’s scope.



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Party May Not Veil EU Individual’s Information under GDPR at the TTAB

by | Oct 14, 2021 | ,

In a rare precedential opinion, the Trademark Trial & Appeal Board (TTAB, Board) ruled that the EU General Data Protection Regulation (GDPR) does not apply in Board proceedings. Chicago Mercantile Exchange, Inc. v. Intercontinental Exchange Holdings, Inc., Opposition Nos. 91235909; 91254514 (T.T.A.B. Sept. 27, 2021) (Faint, Interlocutory Attorney).

This was a consolidated proceeding between Chicago Mercantile Exchange and New York Mercantile Exchange (collectively, CME) and Intercontinental Exchange Holdings (ICE) and brought before the TTAB. CME sought to amend the Board’s standard protective order (SPO) to allow in-house access to information and materials designated by ICE as “Confidential – Attorney’s Eyes Only” and asked the TTAB to find that the EU GDPR does not apply in the proceedings.

The Board’s SPO is automatically imposed in all inter partes proceedings. In order for the Board to disturb their SPO, CME needed to show that protection of ICE’s trade secrets will impair CME’s prosecution of its claims. ICE asserted that CME failed to show good cause for modification of the SPO and the Board agreed. As an initial matter, CME failed to provide information sufficient for the Board to determine in-house counsel’s responsibilities, including whether those responsibilities included competitive decision-making such that disclosure to in-house counsel would competitively harm ICE. Secondly, CME failed to clearly demonstrate that there was a need for access to the highly sensitive competitive information to adequately prepare its case. Accordingly, the Board denied CME’s motion to amend the protective order.

CME next raised the issue of whether ICE may redact names, email addresses and other information from documents and electronically stored information (ESI) originating in the European Union prior to its production on the basis that the GDPR requires such redaction. CME argued that because ICE waited more than 18 months to assert this objection, the objection is waived, that CME will be severely prejudiced if ICE’s objection stands and that the GDPR does not apply in inter partes Board proceedings.

For background, the GDPR is an EU regulation made effective May 25, 2018, in order to protect the privacy and security of EU citizens’ personal data by limiting the transfer of such information among member states of the European Union, as well as between the European Union and other countries, including the United States. The broad definition given to “personal data” in the GDPR encompasses “any information relating to an identified or identifiable person.” However, this class of information (an individual’s name, position, job title and email address) is generally required to be produced in discovery pursuant to the Fed. R. Civ. Pro. 26(b)(1).

In this precedential decision, the Board, citing the 1987 Supreme Court case Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court, established that a foreign country’s law precluding disclosure of evidence in US courts and tribunals will generally not deprive those courts and tribunals of “the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.”. Additionally, the GDPR does not per [...]

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Ex Parte Reexamination Not Allowed After Failed IPR Challenge

by | Oct 14, 2021 |

The US Court of Appeals for the Federal Circuit found that ex parte reexamination was unavailable to a challenger who repeatedly tried and failed to raise the same arguments for the same patent in a prior inter partes review (IPR) proceeding. In re: Vivint, Inc., Case No. 20-1992 (Fed. Cir. Sept. 29, 2021) (Moore, C.J.)

Vivint sued Alarm.com in 2015 for infringement of several patents. In response, Alarm requested that the Patent Trial & Appeal Board (PTAB) institute “a litany of post-issuance review proceedings,” including three separate IPR petitions directed to one of the patents. The PTAB refused to institute two of the petitions because Alarm failed show to a reasonable likelihood that it would prevail on at least one challenged claim and also refused to institute the third petition because it represented an example of “undesirable, incremental petitioning.” According to the PTAB, Alarm had “used prior Board decisions as a roadmap to correct past deficiencies” and allowing such “similar, serial challenges to the same patent” by the same challenger risked, not only harassment of patent owners, but also frustration of congressional intent behind the America Invents Act (AIA).

More than a year later, Alarm filed a request for ex parte reexamination of the patent—a request that used repackaged versions of arguments from its unsuccessful IPR petition. Despite the striking similarity between Alarm’s prior and current arguments, including two out of the four original IPR patentability questions being copied verbatim from the failed petition into the ex parte reexamination request, the PTAB found the petition raised substantial new questions of patentability and ordered reexamination. Vivint responded by seeking dismissal of the ex parte reexamination under 37 C.F.R. § 1.181, arguing that the PTAB has the authority under 35 U.S.C § 325(d) to deny the ex parte reexamination request because that statute applies to ex parte reexaminations and IPRs with “equal force.” The PTAB rejected Vivint’s request, stating that any § 1.181 petition raising a § 325(d) challenge must be filed before reexamination is ordered.

Vivint filed a second § 1.181 petition seeking reconsideration of the § 325(d) issue, arguing that it would have been impossible for Vivint to file the § 1.181 petition before ex parte reexamination was ordered. Vivint also argued that even if the PTAB lacked general authority to terminate the reexamination, it could exercise such authority under the Administrative Procedure Act (APA). Vivint also asserted that the PTAB “acted arbitrarily and capriciously by applying the same law to the same facts and reaching a different conclusion.” The PTAB rejected Vivint’s arguments and denied its second petition, finding that Vivint could have sought a waiver of the rules having to do with the required prior-to-ex parte timing of a § 1.181 petition vis-à-vis institution of ex parte reexamination. The PTAB also noted that ex parte reexamination was not inconsistent with denying the initial IPR. Ultimately, after an examiner issued a final rejection for all claims of the patent, Vivint appealed to the PTAB. The PTAB affirmed and Vivint [...]

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Authentication Claim Under Alice—A Two-Step Process

by | Oct 14, 2021 |

The US Court of Appeals for the Federal Circuit found patent claims directed to a method of authenticating the identity of a user performing a transaction at a terminal was patent-eligible under 35 U.S.C. § 101 and reversed the district court’s entry of judgment on the pleadings. CosmoKey Solutions GmbH & Co. KG. v. Duo Security LLC, Case No. 20-2043 (Fed. Cir. Oct. 4, 2021) (Stoll, J.) (Reyna, concurring).

CosmoKey sued Duo for patent infringement and Duo moved for judgment on the pleadings, arguing that all claims of the patent at issue are ineligible under 35 U.S.C. § 101. The district court analyzed the claims under the Alice two-step framework. At step one, the court agreed with Duo, finding that the patent claims were directed to the abstract idea of authentication—the verification of identity to permit access to transactions. Relying on Federal Circuit precedent, the court reasoned that “authentication” is an abstract concept. Moving to step two, the court determined that the patent merely teaches generic computer functionality, reasoning that the patent itself admits that “the detection of an authentication function’s activity and the activation by users of an authentication function within a pre-determined time relation were well-understood and routine, conventional activities previously known in the authentication technology field.” After the court granted Duo’s motion for judgment on the pleadings, CosmoKey appealed.

Applying Third Circuit law, the Federal Circuit reversed the lower court’s decision and provided more insight into the “inventive concept” analysis and “two-step” process framework. The Federal Circuit first acknowledged that while it had previously found claims directed to authentication to be abstract, it also found claims directed to specific verification methods that depart from earlier approaches and improve technology eligible under § 101.

The Federal Circuit disagreed with the district court’s broad characterization of the claims under Alice step one, finding instead that the claims and written description suggest that the claims are directed to a more specific authentication function. Nevertheless, the Court noted that it did not need to answer this question because the patent claims satisfy Alice step two. Under step two, the Court focused on the purported technical advance and found that the invention provides a “specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity.” The Court explained that the district court erred in its interpretation of certain sections of the specification. Specifically, the court read the specification to describe prior art that shows the steps were routine or conventional. However, the Court pointed out that the last four steps of claim one of the patent solved a technical problem in the field using steps that were not conventional.

Judge Jimmie V. Reyna concurred with the decision but took issue with the Court’s dismissal of analyzing the claims under Alice step one, finding the approach “extraordinary and contrary to Supreme Court precedent.” He noted that step two does not operate independently of step one, [...]

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Failing to Address All Reasons for Noninfringement Renders Appeal Moot

by | Oct 14, 2021 |

In deciding whether the district court correctly interpreted various claim terms in four patents related to communication techniques used in computer gaming technology, the US Court of Appeals for the Federal Circuit found that rendering a decision as to the terms for at least two of the patents would be moot. Accordingly, the Federal Circuit affirmed the district court’s grant of summary judgment on noninfringement. Acceleration Bay LLC v. Take-Two Interactive Software (Oct. 4, 2021) (Reyna, J.)

Acceleration Bay is the owner of four unrelated patents that are generally directed to communication techniques associated with computer gaming. In particular, certain of the patents teach that an originating computer sends a message to its neighbors on a broadcast channel using point-to-point connections, and that the neighboring computers then sends the message to only their neighboring connections. This reduces the number of connections that each computer must maintain and improves efficiency in the system.

Acceleration Bay filed a patent infringement suit claiming that Take-Two Interactive Software, a software designer for various video games, including Grand Theft Auto V, NBA 2K15 and NBA 2K16, directly infringed the four asserted patents. As part of the district court proceedings, multiple terms recited in the claims of the four patents were construed. In particular, the court construed the claim term “m-regular” to mean “a state that the network is configured to maintain, where each participant is connected to exactly m neighbor participants.” Additionally, the court effectively embedded this definition of “m-regular” into other construed claim terms, including “fully connected portal computer” and “each participant being connected to three or more other participants.”

After claim construction, the district court granted summary judgment of noninfringement in favor of Take-Two on all asserted patents. In granting summary judgment, the court observed that Take-Two makes software, not computer networks or broadcast channels, and therefore its customers must introduce those elements. As such, direct infringement is inappropriate because multiple entities, not just Take-Two, contribute to the allegedly infringing system. The court rejected Acceleration Bay’s argument under Centrak, Inc. v. Sonitor Techs., Inc. that Take-Two was actually the “final assembler” because it installed the software for its customers. The court additionally identified multiple reasons why the “m-regular” limitation was not met in the accused products, including the fact that Acceleration Bay identified no source code to support its theory. Acceleration Bay appealed.

With respect to two of the four patents on appeal, Take-Two argued that Acceleration Bay’s appeal is moot because it only addressed one of the two reasons the district court granted summary judgment of noninfringement. Specifically, the court granted summary judgment on these two patents because (1) the accused products do not meet the “m-regular” limitation and (2) Acceleration Bay’s “final assembler” theory fails as a matter of law. On appeal, Acceleration Bay addressed only the “final assembler” theory. As such, the Federal Circuit found that a ruling on this issue would not affect the court’s summary judgment ruling, and the appeal of these two patents is [...]

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Induced Infringement Finding May Support Willfulness Finding

by | Oct 7, 2021 |

In a redux visit, the US Court of Appeals for the Federal Circuit found that the record compelled reversal of a district court’s refusal to reinstate a jury’s willful infringement verdict and enhanced damages award but affirmed an attorneys’ fees award, taking into account the finding of willful infringement. SRI International, Inc. v Cisco Systems, Inc., Case Nos. 20-1685; -1704 (Fed. Cir. Sept. 28, 2021) (Stoll, J.)

This is the second appeal in the case. In the first appeal, the Federal Circuit found that the record was insufficient to establish that Cisco’s conduct before May 2012 (when Cisco became aware of the asserted patents) rose to the level of wanton, malicious and bad faith behavior required for willful infringement. In view of the finding, the Court concluded that Cisco could not have willfully infringed and therefore vacated the district court’s enhancement of damages for pre-May 2012 conduct. As for post-2012 conduct, the Court remanded the case to the district court to decide in the first instance whether the jury’s finding of willful infringement after May 8, 2012, (the date Cisco received notice) was supported by substantial evidence. The Court also vacated the district court’s decision to award SRI its attorneys’ fees and remanded for recalculation. On remand, the district court interpreted the original Federal Circuit opinion as requiring a more stringent standard willful infringement and concluded that substantial evidence did not support the jury verdict of willful infringement after May 8, 2012. SRI appealed.

In the second appeal, the Federal Circuit determined whether the record demonstrated that substantial evidence supported the jury’s verdict of willful infringement after May 2021. In analyzing willful infringement, the Court reviewed the instructions provided to the jury on induced infringement:

“Defendant is liable for active inducement only if plaintiff proves by a preponderance of the evidence” that, among other things, (1) “Defendant took some action intending to encourage or instruct its customers to perform acts that you, the jury, find would directly infringe”; and (2) “Defendant was aware of the asserted patents at the time of the alleged conduct and knew that its customer’s acts (if taken) would constitute infringement of an asserted patent.”

The Federal Circuit found that the jury considered the evidence provided by SRI in view of the instructions on induced infringement and that Cisco induced infringement of the asserted claims. Acknowledging that the standard for induced infringement is different than that for willful infringement, the Court nevertheless found that the jury’s unchallenged finding related to induced infringement (i.e., Cisco did not challenge the jury’s findings on appeal) and, combined with Cisco’s lack of reasonable defenses to infringement, was sufficient to support the jury’s verdict of post-2012 willful infringement. Since Cisco was found to have willfully infringed on the asserted patents, the Court determined that SRI was entitled to enhanced damages.



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