Category: Case Briefs

Visual Memory, LLC v. NVIDIA Corp.
867 F.3d 1253 (Fed. Cir. 2017)

Authored by John A. Bertino

Statement of Facts: Visual Memory, LLC (“Visual”) developed United States Patent No. 5,953,740 (“the ‘740 patent”) to improve computer memory systems. Specifically, the ’740 patent describes a computer system using a three-tiered memory hierarchy: “1) a low-cost, low speed memory, such as a magnetic disk, for bulk storage of data; 2) a medium-speed memory that serves as the main memory; and 3) an expensive, high-speed memory that acts as a processor cache memory.” Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1255 (Fed. Cir. 2017). Visual alleges that the ‘740 patent can overcome prior art memory systems’ lack of versatility by adding programmable operation characteristics that can be used with multiple different processors without a reduction in performance. Visual further alleges that the ‘740 patent’s “multiple mode operation” confers a substantial advantage by “allow[ing] different types of processors to be installed with the [same] subject memory system without significantly compromising their individual performance.” ’740 Patent col. 5 ll. 25-29. On September 8, 2015, Visual filed a patent infringement action against NVIDIA Corporation (“NVIDIA”) for infringement of the ‘740 patent. NVIDIA moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, arguing that the claims were patent-ineligible subject matter.

Procedural History: The United States District Court for the District of Delaware granted NVIDIA’s motion to dismiss, finding that the ‘740 patent was directed to patent-ineligible subject matter and lacked an inventive concept. Visual appealed to the Federal Circuit.

Question Presented: Did the district court err in finding all claims to be directed to an abstract idea and therefore not patent-eligible?

Holding: Yes, the district court erred in granting the motion to dismiss based on 35 U.S.C. § 101 because all claims are patent-eligible. The Federal Circuit reversed the district court and remanded the case for further proceedings.

Reasoning: The Federal Circuit reviewed the district court’s grant of a motion to dismiss de novo and rejected its finding of section 101 invalidity.

Section 101 defines the scope of patent-eligible subject matter as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101. However, the Supreme Court has recognized exceptions to this broad definition for laws of nature, natural phenomena, and abstract ideas. Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (citation omitted).

The Supreme Court set out a two-step test for distinguishing between claims that are patent eligible and claims drawn to a patent-ineligible concept. Alice Corp. Pty. v. CLS Bank International, 134 S. Ct. 2347, 2355 (2014). Under the first step in the test set forth in Alice Corp. (the “Alice test”), the district court found that ‘740 patent claims were drawn to the patent-ineligible concept of an abstract idea. Id. at 2354 (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 71 (2012)). The district court rejected Visual’s reliance on the recent decision in Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) that the ‘740 patent claims “improve[d] the functioning of a computer itself” and thus [were] patent eligible,” asserting that the claims were not directed to a specific or concrete improvement in the way the software operates but instead were directed to the idea of categorical data storage. Visual Memory LLC v. NVIDIA Corp., 2016 WL 3041847, at *4-5 (D. Del. May 27, 2016).

Following the Alice test, the Federal Circuit disagreed with the district court’s analysis, finding the ’740 patent claims demonstrated that they were directed to an improved computer memory system and not an abstract idea of categorical data storage.

The Federal Circuit clarified their finding in Enfish, 822 F.3d 1327, that claims reciting a self-referential table for a computer database were patent-eligible under Alice step one because they were directed to an improvement in the computer’s functionality. The Federal Circuit also clarified that in Thales Visionix Inc. v. United States, 850 F.3d 1343, 1347 (Fed. Cir. 2017), claims reciting a unique configuration of inertial sensors and mathematical equations to calculate the location and orientation of an object relative to moving platforms was patent eligible because the sensors and equations were used in a non-conventional manner to increase accuracy.

Like in Enfish and Thales, the claims at issue here were focused on a “specific asserted improvement in computer capabilities – the use of programmable operational characteristics that are configurable based on the type of processor – instead of on a process that qualifies as an abstract idea . . . .” Visual Memory, 867 F.3d at 1259-1260 (internal quotations and citation omitted).

Further, the Federal Circuit reasoned that this was “not a case where the claims merely recite[d] the use of an abstract mathematical formula on any general purpose computer, a purely conventional computer implementation of a mathematical formula, or generalized steps to be performed on a computer using conventional computer activity.” Visual Memory, 867 F.3d at 1260 (internal quotations and citation omitted). Because the Federal Circuit found that the claims were not directed to a patent-ineligible concept, the court need not proceed to step two of the analysis.

The majority criticized the dissent, contending that (1) the dissent’s assumption that the code would not teach one of ordinary skill in the art was improper, (2) whether a patent specification teaches an ordinarily skilled artisan how to implement the claimed invention presents an enablement issue under 35 U.S.C. § 112 and not an eligibility issue under section 101, and (3) the dissent’s assumption that the innovative effort in the ‘740 patent lies in the programming required for a computer to configure a programmable operational characteristic of a cache memory was inconsistent with the patent specification itself. “The specification makes clear that the inventors viewed their innovation as the creation of a memory system which is efficiently operable with different types of host processors . . . and the patent discloses how to implement such a memory system.” Visual Memory¸ 867 F.3d at 1261 (citation omitted). Further, under Mayo and Alice, “an invention is not rendered ineligible for patent simply because it involves an abstract concept.” Id.

In sum, the Federal Circuit found, under 35 U.S.C. § 101, the ‘740 patent was not directed to patent-ineligible subject matter.

Dissenting Opinion: Judge Hughes contends that the ‘740 patent claims encompassed categorical data storage at an unduly high level of abstraction. Judge Hughes found that the programmable operational characteristic was nothing more than a black box for performing the abstract idea because it did not describe its implementation and required someone else to supply the innovative programming effort.

At Alice step two, Judge Hughes found no additional elements to transform the nature of the claim into a patent-eligible application. Judge Hughes asserted that the claims did not contain an inventive concept and only referred to the generic computer components to perform generic computer functions.

TC Heartland LLC v. Kraft Food Grp. Brands LLC
137 S. Ct. 1514 (2017)

Authored by Damos R. Anderson

Statement of Facts: Incorporated and headquartered in Indiana, TC Heartland LLC, the petitioner, manufactures water enhancer mixes. Incorporated in Delaware with its principal place of business in Illinois, Kraft Food Group Brands LLC is TC’s competitor. Kraft, alleging a patent violation, brought a patent infringement suit against TC in the District Court for the District of Delaware.

“The patent venue statute, 28 U.S.C. § 1400(b), provides that any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” TC Heartland LLC v. Kraft Food Group Brands LLC, 137 S. Ct. 1514, 1517 (2017) (internal quotations omitted). Relying on the Transmirra Prods. Corp. v. Fourco Glass Co. interpretation of § 1400(b), which holds a corporation resides only in its incorporating State, the petitioner moved to dismiss the case or transfer venue to the District Court for the Southern District of Indiana. 353 U.S. 222 (1957).

Procedural History: The district court rejected the petitioner’s motion and the Federal Circuit refused to issue a writ of mandamus. The Federal Circuit held that amendments to the general venue statute, 28 U.S.C. § 1391(c), defines “resides” for § 1400(b) and therefore the district court had personal jurisdiction over the petitioner. The Supreme Court granted cert after TC appealed the decision.

Question Presented: What is the proper venue for a domestic corporation in a patent infringement dispute?

Holding: Section 1400(b) exclusively defines venue for domestic corporations in patent infringement suits. Venue is proper in the State of incorporation only. The Court reversed the judgment of the Federal Circuit and remanded the case for further proceedings consistent with its opinion.

Reasoning: In 1897, to resolve an earlier patent venue dispute, Congress enacted § 1400(b)’s predecessor, a patent specific venue statute. The Court reasoned that this placed patent infringement cases in its own class separate and apart from general venue. The Court confirmed this view in Stonite Products Co. v. Melvin Lloyd Co., where it held that the patent venue statute alone, separate and apart from the general venue statute, controlled patent infringement suits. 315 U.S. 561 (1942).

Section 1400(b)’s predecessor statute gave jurisdiction to the district the defendant inhabited (incorporated in), maintained a regular and established place of business, or committed an act of infringement. Congress recodified that statute in 1948 to its current § 1400(b) form which merely replaces the word inhabited with the word resides. The Court has interpreted those two words to mean the same thing. Fourco, 353 U.S. at 226. Also in 1948, Congress enacted the general statute § 1391(c), which defined residence for venue purposes in all actions as the state of incorporation, the location the business license, or any judicial district of business operations. Courts differed on if § 1391(c) defined “resides” for § 1400(b) but the Court in Fourco again confirmed that § 1400(b) is a complete and independent statute for patent infringement suits. Id. at 229. Congress has not amended § 1400(b) since the decision in Fourco.

“Congress amended the general venue statute, § 1391(c), to provide that for purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Heartland, 137 S. Ct. at 1519 (internal quotations omitted emphasis added). Because § 1400(b) and § 1391 are in the same chapter, the Federal Circuit took this to be an explicit intention to redefine § 1400(b)’s definition of reside. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574, 1578–80 (1990). Congress again amended § 1391(a) in 2011, adding the provision “except as otherwise provided by law . . . this section shall govern the venue of all civil actions brought in district courts of the United States.” The Federal Circuit did not see the amendments as cause to alter its prior decision in VE Holding.

The Court here, took this case and reaffirmed its past holdings, that § 1400(b) is exclusive to patent infringement suits and is separate and apart from § 1391. The respondents did not persuade the Court that Congress intended to change this interpretation. Section 1400(b) retains the same meaning it has always had and the Court noted that ordinarily if Congress wanted to make a change to such a set interpretation they would not do so by implication. Respondent’s argument that § 1391 is binding on § 1400(b) because § 1391 contains the words “all venue purposes” was not helpful. The Court interpreted the previous version of § 1391 to implicitly mean the same thing and still held § 1400(b) to be exempt. The Court saw no reason to change this interpretation particularly in light of the saving clause, which makes the rationale of the Federal Circuit weaker. The saving clause of § 1391 states, “otherwise provided by law”. This recognizes that portions of the chapter were to be exempt. The patent infringement specific § 1400(b) is one such section.

Parrott v. Shulkin

851 F.3d 1242 (Fed. Cir. 2017)

Authored by Darby T. R. Findley

Statement of Facts: Paula Parrott’s husband, a military veteran, died as a result of esophageal adenocarcinoma, with liver and peritoneal metastasis. Mrs. Parrott submitted an entitlement claim to the Board of Veterans Appeals (“Board”) for benefits after her husband’s death. The Board denied her claim and she appealed to the Veterans Court. The Veterans Court remanded her case back to the Board for adjudication, reversing the outright denial. Mrs. Parrott then filed a claim for $7,163.11 to cover her legal expenses as permitted under the Equal Access to Justice Act (“EAJA”). The EAJA statutorily mandates payment of fees and other expenses to a prevailing party in a civil or agency action brought by or against the United States. 28 U.S.C. § 2412(d)(1)(A). In calculating the cost of living adjustment to be used to determine her attorney’s hourly rate, the Board decided to award Mrs. Parrott only $4,050 in legal fees and expenses. Mrs. Parrott appealed the decision to the Court of Appeals for Veterans Claims, seeking the original amount plus additional appeal costs. The Veterans Court decided to award Mrs. Parrott $4,050 in attorney fees to be paid to her attorney, Chris Attig, and to cover other expenses. Although attorney fees are usually capped at $125 per hour, the cap can be raised to account for a high cost of living. To determine whether the cap should be raised, courts use the national Consumer Price Index (“CPI”) for Urban Consumers or a local CPI. Mrs. Parrot calculated her CPI adjustment using the local CPI for Washington, D.C., which resulted in an hourly rate of $191.69.

Procedural History:  The Secretary of Veterans Affairs agreed that Mrs. Parrott prevailed in her claim for legal fees and expenses, but thought that the full $7,163.11 claimed was unreasonable. The Secretary agreed that the cap should be raised, but argued that the CPI for Dallas, TX, where Mr. Attig had his principal office, should be used instead. The Dallas, TX CPI resulted in a rate of $183.74 an hour.

The Veterans Court declined to use either of the proposed approaches, reasoning instead that the local CPI from each of the locations that Mr. Attig performed his legal services should be used to calculate the hourly rate in each of the three locations. After the three hourly rates are calculated, the Veterans Court reasoned that Mr. Attig’s itemized billing statement should be reviewed and each of the billing entries apportioned to the office where the work was performed. To correctly determine the hourly rates to be awarded, the Veterans Court reasoned that it would need additional information from Mrs. Parrot and Mr. Attig. Instead of acquiring the information needed, the Veterans Court decided to use the $125 rate to calculate Mrs. Parrott’s award. After finding 32 to be a reasonable number of hours for the work performed, Mrs. Parrott was entitled $4,000 of attorney feel and $50 in filing fees. Mrs. Parrott appealed the Veterans Court’s decision. 

Questions Presented: (1) Whether the Veterans Court adopted an incorrect approach for determining the cost of living adjustment to be used in calculating her attorney hourly rate under EAJA. (2) Whether the Veterans Court abused its discretion by not allowing Mrs. Parrott to resubmit her EAJA application using the approach the court adopted. 

Holdings: The Federal Circuit held that (1) the Veterans Court did not adopt an incorrect approach for making the cost of living adjustment determination and (2) that it lacked jurisdiction to determine whether the Veterans Court abused its discretion in not allowing Mrs. Parrott to resubmit her EAJA application.

Reasoning: The local CPI approach, where available, is more consistent with the EAJA than the national approach. First, the plain language of the EAJA defines attorney fees as rates influenced by both market rates and the cost of living. These two factors are inherently local in nature, making the local CPI approach most consistent with the plain language of the statute. Second, the local CPI approach is more consistent with the underlying purpose of the EAJA. The EAJA was passed to ensure adequate representation for those filing suit against the government and to minimize such costs to taxpayers. The local CPI approach furthers both of these goals by assisting litigants in obtaining counsel whose rates may exceed the national average, and by preventing windfalls to attorneys whose cost of living is below the national average. Use of the national CPI approach would provide a windfall to attorneys with a low cost of living at the expense of taxpayers and would undercompensate attorneys with higher costs of living, thereby discouraging the type of representation the EAJA is meant to ensure. Third, the local CPI approach is consistent with the Federal Circuit’s holding in Levernier Constr., Inc. v. United States, 947 F.2d 497 (Fed. Cir. 1991), where the court refused to grant a cap increase to an attorney whose market rate was below the statutory cap. The Levernier case suggests local market condition can serve as a proper indicator for EAJA awards – a conclusion reached by other circuits, as well. See, e.g., Sprinkle v. Colvin, 777 F.3d 421, 428 n.2 (7th Cir. 2015); Bryant v. Comm’r of Soc. Sec., 578 F.3d 443, 450 (6th Cir. 2009); Johnson v. Sullivan, 919 F.2d 503, 505 (8th Cir. 1990); Clark v. Comm’r of Soc. Sec., 664 Fed. App’x. 525, 529 (6th Cir. 2016).

The Federal Circuit also found that Mrs. Parrot’s contention that an EAJA application can choose the CPI approach that results in the most favorable rate is incorrect for three reasons. First, the EAJA requires applicants to justify a request for a higher award and tie their requests to prevailing market rates. Allowing any CPA approach to be used would result in statutorily prohibited windfalls for either the prevailing party or the attorney. Second, there is no ambiguity in the EAJA’s language. Third, the cases cited by Mrs. Parrott that interpret veterans benefit statutes do not apply to this statute of general applicability. Mrs. Parrot fails to cite a case that holds that a statute should be construed in favor of a litigant because the litigant is a veteran.

Finally, the Federal Circuit noted that it does not have the authority to review all discretionary actions taken by the Veterans Court. In its decision to deny Mrs. Parrott the opportunity to resubmit her EAJA application, the Veterans Court did not interpret any law or regulation. The Veterans Court just stated that Mrs. Parrott failed to demonstrate the need for a higher fee and used its discretion to calculate her EAJA fee. The Federal Circuit does not have the power to review that factual determination. There is also no controlling statute or regulation that would require the Veterans Court to submit another application. As such, the Veterans Court did not commit any legal error.

Kerrigan v. Merit Systems Protection Board
833 F.3d 1349 (Fed. Cir. 2016)
Authored by Gil Landau

Statement of Facts: Phillip Kerrigan was an employee of the Department of the Navy between 1985 and 1986. He injured himself while working and accordingly was granted workers’ compensation benefits (“benefits”) by the Department of Labor (“DOL”). Starting in 1993, Kerrigan raised concerns about the DOL’s administration of his benefits. Among other concerns, Kerrigan complained about not being able to see his preferred physician, Dr. Webber. In 2001, Kerrigan saw an orthopedic surgeon who determined Kerrigan could return to work with restrictions and referred Kerrigan to vocational rehabilitation.

On November 21, 2001, Kerrigan sent the DOL Office of Inspector General (“OIG”) a letter alleging that the department’s refusal to let him see Dr. Webber was based on a DOL employee illegally falsifying and destroying a physician election form. The OIG declined to investigate and forwarded Kerrigan’s complaint to the DOL. On December 18, 2001, the same day the DOL received the OIG’s letter, the DOL referred Kerrigan to vocational rehabilitation. Kerrigan refused to attend. On March 19, 2002, the DOL reduced Kerrigan’s benefits to zero due to his refusal to attend vocational rehabilitation. Kerrigan appealed this decision to the Employees Compensation Appeals Board, which affirmed the DOL’s decision in 2003. In 2013, Kerrigan filed a complaint with the Office of Special Counsel (“OSC”). The OSC declined to investigate but, construing his allegations as a whistleblowing complaint, referred it to the Merit Systems Protection Board (“MSPB”). In 2014, Kerrigan filed an Individual Right of Action (“IRA”) before the MSPB, alleging that his benefits were terminated due to his November 21, 2001 whistleblower letter to the DOL OIG.

Procedural History: The MSPB administrative judge (“AJ”) found that the MSPB did not have jurisdiction because the Whistleblower Protection Act (“WPA”) only protects employees from actions taken by their own agency and Kerrigan did not work for the DOL.

Kerrigan appealed to the MSPB’s Board. The Board affirmed the AJ’s holding on separate grounds. The Board explained that it had no jurisdiction because Kerrigan was challenging benefits determinations and 5 U.S.C. § 8128(b) provides that the DOL makes final and unreviewable determinations regarding benefits. Moreover, even if it was within the Board’s jurisdiction, Kerrigan failed to make non-frivolous allegations that his protected disclosures were a contributing factor in the DOL’s decision to terminate his benefits. Kerrigan appealed the Board’s decision to the Federal Circuit.

Question Presented: First, does 5 U.S.C. § 8128(b) prohibit the MSPB from exercising jurisdiction under the WPA over an allegedly retaliatory termination of workers compensation benefits?

Second, did the appellant make sufficient, non-frivolous allegations of retaliation to establish the MSPB’s jurisdiction under the WPA?  

Holding: The Federal Circuit held that the termination of workers’ compensation benefits is within the jurisdiction of the MSPB under the WPA, while affirming the Board’s dismissal due to lack of sufficient, non-frivolous allegations of retaliation. The court held that although the DOL’s decisions to grant or deny benefits are final, this does not bar review of benefits determinations on other grounds, such as the WPA. However, the court agreed that Kerrigan failed to make non-frivolous allegations that his protected disclosures were a contributing factor in the DOL’s decision to terminate his benefits. Accordingly, the court held that the MPSB lack jurisdiction under the WPA.

Reasoning: The court explained that, although under § 8128(b) DOL benefits determinations are “final and conclusive” and “not subject to review . . . by a court . . . .,” this only applies to a DOL decision as it relates to an individual’s eligibility for payment. However, § 8128(b) does not bar the MSPB from acting within its own jurisdiction even when the facts that relate to the MSPB’s decision may overlap with those in the DOL’s decision. The court clarified that the question of an individual’s eligibility for DOL benefits is separate from the question of whether the DOL retaliated against him by terminating those benefits in violation of the WPA. Moreover, termination of benefits due to whistleblowing can be a violation under the WPA despite the lack of an employment relationship between the whistleblower and the retaliating agency.

Nonetheless, a petitioner needs to establish that the MSPB has jurisdiction by exhausting remedies before the OSC as well as non-frivolously alleging that (1) the petitioner made a 5 U.S.C. § 2302(b)(8)(A) protected disclosure and that (2) it was a contributing factor for a § 2302(a) prohibited personnel action. Cahill v. Merit Systems Protection Board, 821 F.3d 1370, 1373 (Fed. Cir. 2016). Here, the Board held that Kerrigan failed to establish that the official terminating his benefits had any knowledge of his protected disclosure, despite the protected disclosure being sent to the agency. Thus, Kerrigan did not non-frivolously allege his protected disclosure was a contributing factor.

The court acknowledged that Kerrigan’s protected disclosure to the OIG was sent to the DOL on the same day that the DOL ordered Kerrigan to attend vocational rehabilitation (which led to the termination of his benefits). However, the court explained that while proximity in time can indicate that there is knowledge, it is not sufficient for jurisdiction. The court held that a non-frivolous allegation cannot solely rely on the inference that a decision-making official had knowledge due to temporal proximity. While Kerrigan was not required to prove that the decision-making official knew of his protected allegation, Kerrigan was required to allege that a decision-making official had knowledge. Moreover, the court refused to infer knowledge after considering that the DOL’s requirement for vocational rehabilitation arose a few months after a physician recommended Kerrigan return to work.

SCA Hygiene Products Aktiebolag v. First Quality Baby Products

137 S. Ct. 954 (2017)

Authored by Brianna Ryan

Statement of Facts: SCA Hygiene Products Aktiebolag (“SCA”) sold adult incontinence products. In October 2003, SCA sent First Quality Baby Products (“First Quality”) a letter alleging First Quality was infringing on SCA’s patent number 6,375,646 B1 (“‘646 patent”). First Quality responded, claiming their patent (5,415,649) was issued before ‘646 patent and concerned the same diaper construction. First Quality believed the ‘646 patent was invalid. SCA asked the Patent and Trademark Office (“PTO”) to reexamine the ‘646 patent to determine the validity, which the PTO confirmed.

Procedural History: SCA filed a patent infringement suit against First Quality in August 2010. The District Court of the Western District of Kentucky (“District Court”) granted First Quality’s summary judgment motion based on laches and equitable estoppel grounds. SCA appealed to the Federal Circuit and the Federal Circuit held SCA’s claims were barred by laches but not on equitable estoppel grounds, based on precedent under A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc). While this case was pending, the Supreme Court decided Petrella v. Metro-Goldwyn-Mayer, which held laches could not preclude a claim for damages incurred within the Copyright Act’s 3-year limitations period. 134 S. Ct 1962 (2014). Based on the Petrella decision, the Federal Circuit reheard the case to reconsider Aukerman. The court reaffirmed Aukerman’s holding that laches can be asserted to defeat a claim for damages incurred within the 6 year period set out in the Patent Act. The Supreme Court then granted certiorari.

Question Presented: Whether the reasoning behind Petrella’s holding that laches cannot preclude a claim for damages incurred within the Copyright Act’s 3-year limitations period applies to a similar provision of the Patent Act, 35 U.S.C. § 286.

Holding: Yes, the reasoning behind Petrella applies to 35 U.S.C. § 286 in that laches cannot be used as a defense against damages where the infringement occurred within the 6-year period of the Patent Act. The Federal Circuit’s judgment is vacated in part and remanded for further proceedings.

Reasoning: Petrella’s holding rested on separation of powers principles and the traditional role of laches in equity, which easily fits into the provision of the Patent Act. Congress created a statute of limitations to provide a rule for determining when claims are timely. If a court applies laches within the statute of limitations to bar claims, the courts are overriding legislation and this is beyond the power of judiciary. Laches was meant to fill the gap in legislation where there was no statute of limitations, but there is a 6-year statute of limitations provided, just like there was a 3-year statute of limitations provided in Petrella. First Quality claimed § 286 is not a true statute of limitations because the statute of limitations runs backward from the filing of the complaint, however, Petrella also stated the Copyright Act’s statute of limitations runs backward from the date the suit is filed and laches did not bar a claim. The Federal Circuit found § 282 of the Patent Act to be an exception to § 286. While § 282 does not specifically mention laches as a defense, it does mention unenforceability as a defense. First Quality argued laches to be included under unenforceability. However, it does not follow that the defense could be invoked within the time period even if the unenforceability provision did incorporate laches to some degree. It also would be very unusual and unprecedented for Congress to include a statute of limitations and laches provision in the same federal statute.

The Federal Circuit and First Quality relied on cases prior to the enactment of the Patent Act and claimed § 282 codified the practice of allowing laches to be asserted against damages claims. However, the well-established general rule at the time of § 286’s enactment was that laches could not be invoked to bar a claim for damages incurred within the statute of limitations. The court evaluated the cases the Federal Circuit and First Quality relied on pre- and post-1938 based on the merging of the courts of law and equity. First were the pre-1938 cases, where the courts of law and equity were separated, which the Supreme Court did not find persuasive. Most of the cases did not state whether the plaintiff asked for damages. Those that did mention damages either indicated in dicta that laches may limit recovery of damages or were so few in number that it could not be considered a national consensus. The most that could be stated from these cases was that laches could bar a claim in an equity court but not that it could entirely prevent the plaintiff from recovering damages. In addition, there were too few of cases to indicate Congress legislated against the common law and First Quality did not overcome their burden of showing Congress intended to legislate against the common law. In the post-1938 cases with the merging of the two courts, there was no indication of a settled uniform practice of applying laches to damages claims since only two courts held laches could bar a damages claim.

Dissenting Opinion: Unlike the majority, Justice Breyer believes laches fills a gap that exists in § 286. The statute does not provide a time period in which one must sue, but allows a plaintiff to sue at any time, only limiting damages to the 6 years prior to filing. Since plaintiffs can wait to sue, laches fills the gap in the statute of limitations. During the enactment of § 286, courts applied laches in patent infringement damages cases and Congress knew of this practice and chose to codify the practice. Section 286 provided no recovery would be allowed for infringement more than 6 years prior to the filing of the complaint except as otherwise provided by law and § 282 is the statute that is otherwise provided as law. Section 282 states unenforceability is a defense, which at common law included laches. From the late 19^th century through the enactment of the Patent Act, courts consistently held laches as a bar to damages. The majority stated courts of equity did so to fill the gap when no time limitation existed, but Congress enacted a statute of limitations for patent claims brought in courts of equity and courts continued to apply laches. In addition, Congress recognized that patent infringement largely took place in courts of equity prior to the merger of law and equity courts so when Congress wished to codify the legal practice in § 286, they would have looked to the equity courts. Although only a couple of courts of law applied laches, this was because the majority of patent litigation occurred in courts of equity. Even after the merger of law and equity courts, courts still applied laches to patent damages cases.

The majority may have found weaknesses in the reasoning of the pre-1952 cases, but they are not sufficient to suggest laches may not be used to bar patent claims. The majority cannot find a single court to hold laches could not bar a patent infringement claim. By separating the cases into subgroups like the majority did, they found there was not a consensus applying laches to bar claims, but when looked at as a whole, there is sufficient support. The majority’s strongest argument is the Petrella but there are several differences between copyright and patent law. First, copyright law does not have the same history of patent law in applying laches to bar claims. The Copyright Act also contained other provisions to prevent the unfairness of bringing a claim years later while the Patent Act did not contain additional provisions. Additionally, the evidentiary loss from time in copyright cases harm both the plaintiffs and defenses, while in patent law evidentiary losses do not burden plaintiffs and defendants symmetrically. Finally, there are incentives in patent law to delay suit to financially harm infringers as much as possible.

Meridian Products, LLC v. United States

851 F.3d 1375 (Fed. Cir. 2017)

Authored by Wesley Stafford

Statement of Facts: In 2012, the plaintiff-appellee, Meridian Products, LLC (“Meridian”), asked the defendant-appellant, the U.S. Department of Commerce (“Commerce”), to issue a scope ruling that an imported product containing aluminum extrusions[1] made specifically to line refrigerators did not fail inside the scope of the antidumping and countervailing duty orders on aluminum extrusions from China. (The Antidumping Order and the Countervailing Duty Order are identical in scope). Any imported product that fell inside the scope of the order would be subject to duties and taxes. Meridian was attempting to exclude its product from the order to avoid paying such duties and taxes. The applicable order, promulgated by the Department of Commerce, stated that the materials subject to the order are “‘aluminum extrusions’ that ‘are shapes and forms, produced by an extrusion process, made from’ specified aluminum alloys.” Meridian Products, LLC v. United States, 851 F.3d 1375 (Fed. Cir. 2017) (quoting Antidumping Duty Order, 76 Fed. Reg. 30,650 (Dep’t of Commerce May 26, 2011)). These extrusions “may be described at the time of importation as parts for final finished products that are assembled after importation” and “may be identified with reference to their end use.” Antidumping Duty Order, 76 Fed. Reg. at 30,650–51. The order contains several exclusions. The relevant exclusion here states that the order:

excludes finished goods containing aluminum extrusions that are entered unassembled in a “finished goods kit.” A finished goods kit is understood to mean a packaged combination of parts that contains, at the time of importation, all of the necessary parts to fully assemble a final finished good and requires no further finishing or fabrication, such as cutting or punching, and is assembled “as is” into a finished product. An imported product will not be considered a “finished goods kit” and therefore excluded from the scope of the [Orders] merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product. Id. at 30,651.

Commerce initially found that Meridian’s product did fall inside the scope of the order. It also found that the applicable exclusion did not apply, despite Meridian including an installation kit with fasteners, an instruction manual, hinge covers, and a hexagonal wrench.

Procedural History: Meridian appealed Commerce’s scope ruling to the U.S. Court of International Trade (“CIT”). The CIT remanded Commerce’s findings for failing to consider a previous scope ruling interpreting terms of the order. Meridian Prods., LLC v. United States (Meridian I), No. 1:13-cv-00018-RKM, 2013 WL 2996233, at *1 (Ct. Int’l Trade 2013). The saga of litigation that followed involved three total remands to the department of commerce for reconsideration, and five written opinions from the CIT. Upon the final remand, Commerce found that the imported products fell inside the conclusion; however, it also stated that the CIT’s directives created a tension between the plain language of the order and the holdings of CIT’s fifth opinion. Meridian Prods., LLC v. United States (Meridian V), 145 F. Supp. 3d 1329, 1330 (Ct. Int’l Trade 2016). United States then appealed to the Federal Circuit.

Question Presented: Does an imported product made primarily of aluminum extrusions, while containing fasteners, hinge covers, hexagonal wrenches, and an instruction manual, fall inside the finished goods kit exclusion to the Antidumping Duty Order or the Countervailing Duty Order because the order’s scope is ambiguous on its face or because the various non-extrusion elements to the finished goods kit were enough for the product to fall into the exception to the exclusion?

Holding: Reversing the CIT’s Holding in Meridian I that Commerce originally had incorrectly applied the finished good’s kit exclusion and vacating all subsequent rulings and holdings in the Meridian saga, the Federal Circuit held that the scope of the order was not ambiguous and that the non-extrusion parts included in the finished goods kit did not fit the exception to the exclusion.

Reasoning: The Federal Circuit disagreed with the CIT on two points: 1) that there was no ambiguity in the plain language of the order’s scope, and 2) that the finished goods kit did not fall in the exception to the exclusion based on the substantial evidence gathered by Commerce that the kit included only aluminum extrusions and fasteners.

The Federal Circuit found CIT’s reasoning that there was ambiguity in the order’s scope flawed for three reasons. First, CIT found that if a product fit the definition of the finished goods kit exclusion, the inquiry ended, and that there was no exception to the exclusion based simply on the inclusion of “fasteners such as screws, bolts, etc.” Antidumping Duty Order, 76 Fed. Reg. at 30,651. The Federal Circuit found that the CIT failed to include all the language of the exclusion in its determinations when it effectively read out the screws and bolts exception to the exclusion. The CIT stated that when an order contains multiple sentences and when there is no indication that one sentence is meant to inform the scope of an order while others do not, that the order must be read as a whole, and each part must be read such that it contributes to the overall understanding of the order. See Allegheny Bradford Corp. v. United States, 342 F. Supp. 2d 1172, 1183, 1190 (Ct. Int’l Trade 2004) (holding that a scope determination may not in itself change the scope of the order, but simply find whether a product falls inside the order’s scope).

Second, the CIT held that the order would exclude kits comprised solely of aluminum extrusions and fasteners. The only items not excluded by the order would be single pieces of extruded aluminum. The Federal Circuit found that the CIT’s interpretation of the exception would become the rule, making the order meaningless. This interpretation of the order would thus change the scope of the order, which it cannot do. See, e.g., Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097 (Fed. Cir. 2002) (explaining that the scope is the foundation of the analysis and the precursor to the interpretive process).

Third, The Federal Circuit found that CIT created internal inconsistencies because its rulings allowed for unassembled extrusions and their fasteners to be excluded while the same aluminum extrusions individually imported outside of the finished goods kit, or as parts to be assembled upon arrival with other parts, included. Wheatland Tube Co. v. United States, 161 F.3d 1365, 1371 (Fed. Cir. 1998).

Additionally, the Federal Circuit found that Commerce did not incorrectly interpret the finished goods kit exclusion. Commerce found that for a product to fall outside the scope, or within the exclusion, the kit must include aluminum exclusions as well as other non-extruded aluminum parts. See Antidumping Duty Order, 76 Fed. Reg. at 30,651. The Federal Circuit agreed with Commerce that the mere addition of fasteners, such as hinges, bolts, and screws, does not therefore qualify a kit for the exception to the exclusion. Id. The Court also agreed with Commerce that the only parts to be considered are those that will be included in the finished product. Id. Those items not a part of the final assembled product, e.g. wrenches and wrenches, will not be considered in conjunction with those materials that physically make up the final assembled product for purposes of qualifying a product for the exception to the exclusion. Also, the Court agreed with Commerce that those products that consisted of Aluminum extrusions were included in the order while products that included items not of aluminum extrusion were outside the order. This gave life to the purpose of the order and disagreeing with the CIT that there was any ambiguity in the scope of the order regarding the exclusion’s exception.

Finally, the Federal Circuit held that Commerce had presented substantial evidence that Meridian’s product was a finished goods kit but did not meet the requirements to fall into the exception to the exclusion for three reasons: 1) Meridian did not dispute that the majority of the items were aluminum extrusions; 2) Commerce found that the brackets and screws meet the definition of fasteners; and 3) Commerce also found that the hinge covers, hexagonal wrench and the instruction manuals were not part of the final assembled product and therefore not relevant to the inquiry. As such, the Federal Circuit ruled that Meridian’s imported product did not fit the exception to exclusion for the order and if it chooses to import its product it would be required to pay the applicable duties and taxes.

 

[1] Extrusions are the product of a process called extrusion. This is a process which transforms solid, raw metals into specific shapes by pressing those metals through a pre-formed outline, or die. This process is most analogous to pushing raw pasta dough through a pasta machine (process of extrusion), creating thin noodles of spaghetti (the extrusions) from a clump of raw dough (raw metal). Aluminum Extruders Council, http://www.aec.org/?page=dres_extrusion (last visited Apr. 20, 2017).

Kingdomware Technologies, Inc. v. United States

136 S. Ct. 1969 (2016)

Authored by Gesué Staltari

Statement of Facts: On February 22, 2012, the Department of Veterans Affairs (“VA”) procured an Emergency Notification Service from a non-veteran owned small business through its Federal Supply Schedule (“FSS”). The FSS is a streamlined system whereby the General Services Administration negotiates with outside vendors on behalf of government agencies to acquire certain supplies and services in bulk, such as office supplies or food equipment. The VA extended the contract for an additional year, with performance completed in May 2013. Kingdomware Technologies, Inc. (“Kingdomware”), a service-disabled veteran-owned small business, filed a bid protest with the Government Accountability Office (“GAO”) alleging that by awarding the contract to a non-veteran-owned small business, the VA had violated 38 U.S.C. §§ 8127, 8128, commonly known as the Veterans Benefits, Health Care, and Information Technology Act of 2006 (“Act”).

The Act establishes specific goals that encourage contracting with veteran-owned or service-disabled veteran owned small businesses (“VOSBs”, collectively). See id. at § 8127(a). A certain provision of the Act, section 8172(d), also called the “Rule of Two,” provides that the VA “shall award” contracts by restricting competition for the contract to VOSBs if the contracting officer reasonably suspects that at least two of these businesses will submit offers for a fair price that confers the “best value” to the United States. 38 U.S.C. § 8127(d). The Rule of Two operates “[e]xcept as provided in [§ 8127] subsections (b) and (c).” These sub-sections provide that a contracting officer “may” use non-competitive procedures to (1) VOSBs providing for goods or services worth less than $100,000, id. at § 8127(b), and (2) VOSBs providing for goods or services between $100,000 and $5 million if they are “responsible” in performing contract services and the award can be made at a fair and reasonable price. Id. at § 8127(c).

Kingdomware filed a bid protest with the GAO to challenge the VA’s actions. The GAO found in Kingdomware’s favor and issued a non-binding determination with which the VA disagreed. Kingdomware then filed suit in the Court of Federal Claims, seeking declaratory and injunctive relief from the VA’s decision to award the contracts

Procedural History:. The Court of Federal Claims granted summary judgment in favor of the VA. Kingdomware appealed to the Federal Circuit, which affirmed the judgment in a split-decision. The majority found that the Rule of Two was not a mandatory requirement of the Act but applied insofar as the VA had yet to meet the benchmarks in section 8127(a). The Supreme Court granted certiorari.

Question Presented: Whether section 8127(d) requires the VA to apply the Rule of Two in all of its contracting.

Holding: Section 8127(d) categorically requires the VA to apply the Rule of Two, regardless of whether the VA has met the benchmarks in section 8127(a).

Reasoning: Before reaching the merits of the claim, the Court first addressed whether there was a case or controversy over which it would have jurisdiction. As the Court noted, Kingdomware sought injunctive and declaratory relief from Court of Federal Claims but the VA’s suspect procurement ended in May 2013. As such, Kingdomware’s claims would have ordinarily been moot. The Court, however, applied an exception to the mootness doctrine, which operates when (1) the duration of the challenged action is “too short to be fully litigated prior to [its] cessation or expiration” and (2) there is a “reasonable expectation” the claimant will “be subject to the same action again.” Spencer v. Kemma, 523 U.S. 1, 17 (1998). Kingdomware’s case met each of these elements. First, the procurements at issue lasted two years—too short to complete judicial review of their lawfulness. See Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 514–16 (1911). Second, the VA would reasonably be expected to refuse to apply the Rule of Two in other procurements for the kind of services Kingdomware provides. As a result, the claim was not moot.

The Court’s decision on the merits rested on its analysis of the “unambiguous” language of the statute. The Court noted that the Rule of Two operates as a general requirement to which Congress provided two discretionary exceptions, contained within section 8127(b) and (c). For support, the Court contrasted the statute’s use of mandatory language— the word “shall”—in section 8127(d), with the statute’s use of discretionary language—the word “may”—in sub-sections (b) and (c). Moreover, because the statute’s terms were unambiguous, the Court followed the general inference that a statute’s use of both “shall” and “may” supplies different meanings to the words: the former commands while the latter gives permission.

In dicta, the Court addressed several of the Federal Circuit’s justifications for its holdings and the VA’s arguments. First, the Court dismissed as contrary to precedent and anomalous the Federal Circuit’s understanding that the statute’s prefatory language should govern the interpretation of the operative clauses. Kingdomware Technologies, 136 S. Ct. at 1978 (citing Yazoo & Mississippi Valley R. Co. v. Thomas, 132 U.S. 174, 188 (1889)). Second, the VA argued that FSS procedures did not qualify as “contracts” within the meaning of the Act. To the Court, however, FSS procedures and their results fit the ordinary and regulatory definition of the word. Third, the VA claimed that the Court’s holding would be overly burdensome because the VA uses FSS procedures for simplified purchases and should therefore be exempt from the Rule of Two. The Court noted, however, that the VA also uses FSS procedures for complex contracts and purchases, but under the statute it could still use the discretionary exceptions in sub-sections (b) and (c). Finally, the Court dismissed the VA’s argument that its interpretation of the statute merited Chevron deference because the statute’s terms were unambiguous.

PersonalWeb Techs., LLC v. Apple, Inc.

848 F.3d 987 (Fed. Cir. 2017)

Authored by Cem Islikci

Statement of Facts: Apple Inc. (“Apple”) petitioned for inter partes review of certain claims of PersonalWeb Technologies, LLC’s (“PersonalWeb”) U.S. Patent No. 7,802,310 (“the ’310 Patent”), specifically claims 24, 32, 70, 81, 82, and 86. In short, the ’310 Patent generates an identifier for the data file based on the file’s content, to locate and control access to data. PersonalWeb Technologies., LLC v. Apple, Inc., 848 F.3d 987, 989 (Fed. Cir. 2017).

Apple argued that under 35 U.S.C. § 103, these claims are unpatentable for obviousness based on a combination of the Woodhill reference (U.S. Patent No. 5,649,196) and the Stefik reference (U.S. Patent No. 7,359,881). The Woodhill reference “focuses on a system for backing up or restoring data.” PersonalWeb Techs., 848 F.3d at 989. It shows “a system for using content-based identifiers in performing file management functions, such as backing up files.” Id. Stefik focuses on “an authentication system designed to control access to digital works stored in a repository.” Id. Under this system, a paid user receives a digital ticket, which gives the user access to the specific digital file.

On March 25, 2015, the Patent Trial and Appeal Board (“PTAB”) issued its Final Written Decision, which held claims 24, 32, 70, 81, 82, and 86 unpatentable because the patent “at issue would have been obvious to a relevant skilled artisan over a combination of Woodhill and Stefik” Id. at 991. In its Final Written Decision, the PTAB used the broadest-reasonable-interpretation standard to explain what content-dependent name, content-based identifier, and digital identifier (“content-dependent name”) meant. Under this standard, the PTAB found that content-dependent name is “an identifier for a data item being based, at least in part, on a given function of at least some of the bits in the particular sequence of bits of the particular data item.” Id. at 990 (quoting Apple Inc. v. PersonalWeb Technologies, LLC, IPR2013-00596, 2015 WL 1777147, at *4, *5 (P.T.A.B. Mar. 25, 2015)).

Procedural History: On March 26, 2014, the PTAB instituted review on Apple Inc. v. PersonalWeb Technologies. On March 25, 2015, the PTAB issued its Final Written Decision. It held that the claims 24, 32, 70, 81, 82, and 86 are unpatentable. On April 24, 2015, PersonalWeb filed a motion seeking a rehearing. On August 3, 2015, the PTAB denied the motion. PersonalWeb appealed the decision to the Federal Circuit.

PersonalWeb argued that the PTAB was mistaken in using the broadest-reasonable-interpretation when constructing these claims. Furthermore, it argued that, under its interpretation, the terms require the identifier to rely on “all of the data in the data item”. Id. PersonalWeb also challenged “the adequacy of the Board’s findings and explanations in concluding that the claims of the ’310 Patent at issue would have been obvious to a relevant skilled artisan over a combination of Woodhill and Stefik.” Id. at 991.

Questions Presented: (1) Whether the PTAB was correct in construing the terms to mean “an identifier for a data item being based, at least in part, on a given function of at least some of the bits in the particular sequence of bits of the particular data item.” Id. at 990. (2) Whether the PTAB had adequate findings and explanations in concluding that the claims of the “’310 patent here at issue would have been obvious to a relevant skilled artisan over a combination of Woodhill and Stefik.” Id. at 991.

Holdings: Affirmed in part, vacated and remanded in part. (1) Under de novo review, the Federal Circuit affirmed the PTAB’s claim construction method. More specifically, it affirmed that “the content-based identifier need not be generated from ‘all’ of the information in a data item.” Id. at 990-91. (2) Agreeing with PersonalWeb, the Federal Circuit found that the PTAB did not have adequate findings and explanations in concluding that the claims of the ’310 patent would have been obvious to a relevant skilled artisan over a combination of Woodhill and Stefik. The Federal Circuit vacated the PTAB’s obviousness determination of the appealed claims because the PTAB did not adequately support its findings. The Federal Circuit remanded the case “for the Board to reconsider the merits of the obviousness challenge, within proper procedural constraints.” Id. at 994.

Reasoning: After determining that claim construction is a legal issue under de novo review the court found that the PTAB was correct in finding that the content-based identifier need not be generated from all of the information in a data item. In reaching its conclusion for the first issue, the court used an example from one of the claims at issue. In claim 24, the content-dependent name is “‘based, at least in part, on at least a function of the data in the particular data item’ and ‘the data used by the function to determine the content-dependent name comprises at least some of the contents of the particular data item.’” Id. at 991 (quoting ‘310 patent, col. 40, lines 7–12.). By adopting the plain meaning of the language, the Federal Circuit found that the term at least some must mean that it is not possible to interpret the terms at issue to require use of all of the data.

For the second issue, the court found that the PTAB did not do enough to support its conclusion that that the inventions in the patent would have been obvious based on combination of Woodhill and Stefik references. The determination of obviousness is reviewed under de novo standard. Under the obviousness theory, the PTAB had to make findings on two points: finding all of the elements of the ’310 patent claims at issue in Woodhill and Stefik and finding that “a person of ordinary skill in the art would have been motivated to combine the prior art in the way claimed by the ’310 patent claims at issue and had a reasonable expectation of success in doing so.” Id. Furthermore the PTAB had to support its findings with adequate evidence and explanation. The Federal Circuit stated under each obviousness analysis, the amount of explanation should vary based on the complexity of the matter.

Furthermore the Federal Circuit reinforced its requirement of explanation for the obviousness theory with administrative law. The court explained that these requirements are there to ensure that an administrative agency does not act arbitrary and capricious. Using the analysis made in the Supreme Court case, SEC v. Chenery Corp., 318 U.S. 80 (1943), the Federal Circuit found that this support is necessary to (a) allow the courts to exercise their duty of review by understanding agency’s actions, and (b) to prevent judicial intrusion on agency authority.

Here the PTAB did not provide adequate explanation for its two findings. The Federal Circuit used multiple examples to show this inadequacy. For example, the PTAB found that Woodhill and Stefik disclose all of the elements recited in the challenged claims. For claim 24, the PTAB used solely Stefik to explain its reasoning. However Apple’s brief stated that Apple solely relied on Woodhill on this issue. Despite this, the PTAB did not reference Woodhill in its explanation.  By referencing inconsistencies such as this one, the court found that the PTAB’s decision on obviousness theory was not adequately supported by evidence. Therefore, the court remanded the case to allow the PTAB to “reconsider the merits of the obviousness challenge, within proper procedural constraints.” PersonalWeb Techs., 848 F.3d at 994.

Boyd v. Office of Pers. Mgmt.

851 F.3d 1309 (Fed. Cir. 2017)

Authored by Kevin Sipe

Statement of Facts: On March 2, 2011, after a 25-year career with the United States Postal Service, Robin Boyd (“petitioner”) applied for immediate retirement based on disability. After applying for disability benefits under the Federal Employee Retirement System (“FERS”), petitioner received a letter from the Office of Personnel Management (“OPM”) on June 21, 2011 approving her application. The letter stated that her reward would be delayed until OPM had received confirmation that petitioner had applied for Social Security disability benefits. Any disability payments petitioner received was to offset petitioner’s FERS award, and she was instructed to not negotiate any Social Security checks until after her FERS reward had been reduced.

The Social Security Administration (“SSA”) advised petitioner on August 18, 2012 that she was entitled to monthly benefits, and petitioner provided OPM with a copy of that notice in September of that year. OPM did not immediately reduce petitioner’s FERS benefit, and petitioner negotiated her Social Security checks. On January 20, 2013, OPM notified petitioner that she had been overpaid $3,322 from August 2012 through December 2012 and would need to pay monthly installments of $92.27 to offset the overpayment. On February 6, 2013, petitioner requested a waiver of her obligation to reimburse OPM, citing financial hardship, and OPM replied on December 8, 2014, advising her of the requirements of the waiver and requesting an updated Financial Resources Questionnaire. Having not received the requested document, OPM denied her request for a waiver on January 16, 2015.

Procedural History: Petitioner appealed OPM’s decision to the Merit Systems Protection Board (“MSPB”), electing to receive all notifications of filings and orders through an e-filing system. On February 10, 2015, the administrative judge assigned to petitioner’s case ordered her to provide any additional evidence to support her appeal within 30 days. Petitioner did not file any documents and did not respond to the administrative judge’s subsequent Show Cause Order. Based on the written record, the administrative judge affirmed OPM’s denial of petitioner’s waiver because the petitioner was at least partially at fault due to her negotiation of Social Security checks.

Petitioner filed a petition for review by the full MSPB, alleging that she had not received any communications from the administrative judge because her fiancé had deleted the relevant emails by mistake. The MSPB affirmed the administrative judge’s decision, concluding that she was not entitled to a waiver. Petitioner then filed a petition for review to the Federal Circuit.

Questions Presented: (1) Whether the MSPB abused its discretion by determining that petitioner was at fault for her overpayment. (2) Whether the MSPB abused its discretion by failing to consider financial hardship evidence submitted by petitioner to OPM and the MSPB. (3) Whether the MSPB abused its discretion by finding that she had not shown good cause for failure to respond to the administrative judge’s electronic communications. 

Holdings: (1) The Federal Circuit found the conclusion that petitioner was at fault for her overpayment to be legally erroneous. (2) The Federal Circuit remanded the question to the MSPB to determine if petitioner had knowledge of the overpayment. (3) The Federal Circuit found that the MSPB did not abuse its discretion in not allowing petitioner to late file an answer because petitioner did not exercise due diligence in following the case. The Federal Circuit thus vacated the Board’s decision due to its erroneous application of the overpayment recovery statute and remanded the proceeding for further consideration of Petitioner’s claim.

Reasoning:

1. Petitioner’s Fault Regarding the Overpayment

5 U.S.C. § 8346(b) provides that OPM has the authority to determine what constitutes “fault.” OPM has done so through 5 C.F.R. § 831.1401 and policy guidelines, stating that an individual is without fault in regards to overpayment “if he/she performed no act of commission or omission which resulted in the overpayment.” An individual is at fault if “he/she accepted a payment which he/she knew to be erroneous [or] should have known to be erroneous.” Policy Guidelines § I.B.3. Additionally, the regulations state that recovery can be waived under equity and good conscience if it “would cause financial hardship to the person from whom it is sought.” 5 C.F.R. § 831.1403(a)(1) (2016).

OPM has crafted an exception to the determination of fault known as the Prompt Notification Exception. Policy Guidelines § I.B.6. The exception states,

“Individuals who accept a payment in excess of the amount to which they are entitled will automatically be found, without fault, regardless of whether they knew or should have known that the payment was erroneous, if they promptly contact OPM and question the correctness of the payment. In general, an individual must contact OPM within 60 days of the receipt of the overpayment—i.e., a one-time prompt notification requirement.”

OPM ignores the Prompt Notification Exception, despite the MSPB applying the Exception in similar cases. In James v. Office of Pers. Mgmt., the MSPB found that notifying OPM of receipt of Social Security payments satisfied the “prompt notification” requirement and absolved all fault. 72 M.S.P.R. 211, 218 (1996); see also Maxwell v. Office of Pers. Mgmt., 78 M.S.P.R. 350, 361 (1998) (“OPM stipulated [that] the appellate was ‘without fault’”). Therefore, because the MSPB had applied the Prompt Notification Exception in similar circumstances, the Federal Circuit holds that it applies to petitioner.

OPM argues that even if the Prompt Notification Exception applies, it does not justify a waiver because petitioner has not shown “exceptional circumstances.” Boyd v. Office of Pers. Mgmt., 851 F.3d 1309, 1315 (Fed. Cir. 2017). OPM argues that such circumstances only apply when there are “extremely egregious errors or delay by OPM.” Policy Guidelines § I.C.4. This is known as the Set-Aside Rule. However, the Set-Aside rule does not apply to individuals who do not know or suspect they are being overpaid. Id. Because the analysis is different for unknowing individuals, the Federal Circuit found that financial hardship could still be used to waive a recovery against the petitioner. 

1. Petitioner’s Failure to Respond to E-Filing

Petitioner argues that her fiancé deleting the emails sent by the administrative judge constitutes “good cause.” Under 5 C.F.R. § 1201.12, “[a] judge may, for good cause shown, waive a MSPB regulation unless a statute requires application of the regulation.” The MSPB rejected petitioner’s argument due to a precedent that failure to use due diligence in monitoring a case did not constitute good cause. Rocha v. Merit Sys. Prot. Bd., 688 F.3d 1307, 1311 (Fed. Cir. 2012).

Petitioner accepted e-filing as a proper means of service, and therefore consented to receive MSPB communications exclusively via email. See 5 C.F.R. § 1201.14(e)(1) (2016) (“Registration as an e-filer constitutes consent to accept electronic service of . . . documents issued by the [MSPB].”). Additionally, petitioner is required to properly monitor her proceedings, even if the emails were mistakenly deleted. See 5 C.F.R. § 1201.14(j)(3) (“[Petitioner] is responsible for monitoring [her] case activity at the Repository at e-Appeal Online to ensure that [she] ha[d] received all case-related documents.”). Thus, the Federal Circuit found that petitioner did not have good cause for her failure to reply to the administrative judge’s orders.

Despite petitioner’s lack of good cause for failure to respond to administrative judge’s directions, the administrative judge’s decision, as sustained by the MSPB, was still based on an incomplete application of 5 U.S.C. § 8346(b) and was therefore vacated and remanded for further proceedings.

Alamo v. United States

850 F.3d 1349 (Fed. Cir. 2017)

Authored by Heather Paik

Statement of Facts: The Army employed plaintiff-appellants as Emergency Medical Technicians (“EMTs”) to provide emergency medical services at Fort Stewart, Liberty, Georgia. The EMTs were generally scheduled for a compressed schedule consisting of 24 hours on-duty followed by 48 hours off-duty. After October 2012, the EMTs switched to a schedule of two 48-hour workweeks. Because the EMTs worked more than 40 hours in one week, they were entitled to Fair Labor Standards Act (“FLSA”) overtime pay. For a typical biweekly pay period, the government compensated the EMTs with (1) basic pay under the Federal Employees Pay Act (“Title 5”); (2) standby duty premium pay under Title 5; and (3) FLSA overtime pay for regularly scheduled overtime.

Procedural History: The EMTs filed suit in the Court of Federal Claims, alleging the government underpaid them by using an incorrect formula to calculate their FLSA overtime. The parties cross-moved for summary judgment. The Court of Federal Claims granted the government’s motion and denied the EMTs’ motion, finding that no underpayment occurred because the government applied the correct calculations to the EMTs’ pay. The EMTs appealed to the Federal Circuit, which claimed jurisdiction under 28 U.S.C. § 1295(a)(3). 

Questions Presented: (1) Did underpayment occur because the government applied incorrect methodology to calculate the EMTs’ pay pursuant to § 551.512(b) of the FLSA? (2) Did the Army correctly calculate the EMTs’ regular rate of pay when determining the halftime portion of their FLSA pay and their pay on a weekly basis under § 551.501(a) of the FLSA?

Holding: Affirmed. (1) No. The Court of Federal Claims properly concluded that no underpayment occurred because the government applied the correct methodology to calculate the EMTs’ pay. (2) Yes. The Army correctly calculated the EMTs’ regular rate of pay for their FLSA pay and their pay on a weekly basis under § 551.501(a) of the FLSA.

Reasoning: (1) To the extent the regulatory language of 5 C.F.R. § 551.512 is unclear, contextual analysis of Title 5 and the FLSA resolves any ambiguity. 850 F.3d at 1352. The FLSA gives employees their normal compensation for regular scheduled overtime hour, plus an additional halftime bonus. Id. at 1353.By design in Title 5, Congress and the Office of Personnel Management (“OPM”) intended federal employees working standby hours to receive less pay than those who actively work during their entire regularly scheduled overtime. 5 U.S.C. § 5545(c)(1). Regulations such as 5 C.F.R. § 551.512 must be interpreted in light of the wide discretion the OPM has to prescribe rules for federal employee pay.

Under the FLSA, an agency must compensate its overtime-eligible employees for all hours of work in excess of 8 in a day or 40 in a workweek at a rate equal to one and one-half times the employee’s hourly regulated rate of pay, subject to certain exceptions. 5 C.F.R. § 551.501(a); 29 U.S.C.§ 207(a)(1). If an employee qualifies for FLSA overtime, he or she is entitled to: the straight time rate of pay times all overtime hours worked; plus one-half times the employee’s hourly regular rate of pay times all overtime hours worked. 5 C.F.R. § 551.512(a). Ordinarily, an employee’s straight time rate of pay is equal to the employee’s rate of pay for his or her position, exclusive of any premiums, differentials, or cash awards or bonuses. 5 C.F.R. § 551.512(b). Moreover, 5 C.F.R. § 551.512(c) requires the government to pay employees at a rate at least equal to the employee’s straight time rate of pay for all nonovertime hours of work in the workweek, and 5 C.F.R. § 551.513 mandates that employees are paid their FLSA overtime in addition to other pay.

Here, the EMTs receive the straight time rate of pay times all overtime hours worked when the government pays them annual premium standby pay in addition to basic pay. The EMTs’ straight time rate of pay is calculated differently since they must remain at their duty stations for longer than 40 hours per week. Thus, because the EMTs receive standby pay, their straight time rate of pay is equal to basic pay plus annual premium pay divided by the hours for which the basic pay plus annual premium pay is intended. Prescribing a separate formula for calculating the straight time rate of pay when an employee receives standby pay reflects the OPM’s intent to cover all regularly scheduled hours, including regularly scheduled overtime hours, through the combination of basic and standby pay. Because the EMTs receive the additional half-time bonus on top of their straight time rate of pay, which itself covers all hours worked, the government’s formula satisfies both provisions of §§ 551.512 and 551.513.

(2) The EMTs argue that the Army miscalculated the EMTs’ regular rate of pay when determining the halftime portion of their FLSA pay. 5 C.F.R. § 551.512(a)(2). The EMTs conceded that their argument fails if the court finds, as they have, that the Army properly paid them the “straight time” portion of overtime under the FLSA. 850 F.3d at 1354. Thus, the court concludes that the Army properly calculated the EMTs’ regular rate of pay.

Finally, the plain language of the applicable regulations requires FLSA overtime to be calculated on a weekly basis: an employee is entitled to overtime “for all hours of work in excess of 8 in a day or 40 in a workweek.” 5 C.F.R. § 551.501(a) (emphasis added). Thus, the EMTs’ argument that they are entitled to have their FLSA overtime calculated on a biweekly rather than weekly basis fails. Accordingly, the Army correctly calculates the EMTs’ pay on a weekly basis.