Category: Case Briefs

Secure Axcess, LLC v. PNC Bank Nat’l Ass’n
848 F.3d 1370 (Fed. Cir. 2017)
Authored by Peter McDonald

Statement of Facts: This case arose from a patent infringement claim that Secure Axcess, LLC brought against approximately 50 financial institutions. Secure Axcess owns U.S. Patent No. 7,631,191 (“the ’191 patent”), which is entitled “System and Method for Authenticating a Web Page.” The ‘191 patent “relates generally to computer security, and more particularly, to systems and methods for authenticating a web page.” ‘191 patent at 1:16–18. The ‘191 patent explains that an Internet user might be misled to the wrong website without proper authentication. The written description of the ‘191 patent generally discusses computer security with a focus on authenticating a web page, but contains some references that might be considered to concern activities that are financial in nature. In addition, despite typically referring to Internet “users,” the patent occasionally refers to “customers” and “consumers.” Id. at 1:28–29, 1:44.

Procedural History: At the initial decision-to-institute stage, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”) determined that the ‘191 patent was a covered business method (“CBM”) patent. After consolidating three separate CBM review proceedings with regard to the ‘191 patent, in each of which the patent was treated as a CBM patent, PTAB issued the Final Written Decision at issue on appeal. In its Final Written Decision, PTAB maintained that the ‘191 patent was a CBM patent.

Furthermore, PTAB held that claims 1–32 of the ‘191 patent were unpatentable because they would have been obvious under 35 U.S.C. § 103 in light of the cited prior art. PTAB focused most of its reasoning on the ‘191 patent claims as dealing with activities that are or might be financial in nature. PTAB reasoned that since the patent is “directed to solving problems related to providing a web site to customers of financial institutions . . . the ‘191 patent covers the ancillary activity related to a financial product or service of Web site management and functionality.” 848 F.3d at 1375. PTAB further explained that the “method and apparatus of the ‘191 patent perform operations used in the administration of a financial product or service.” Id. PTAB also observed that Secure Axcess’s allegations of infringement by approximately 50 financial institutions was a factor “weighing toward the conclusion that the ‘191 patent claims a method or apparatus that at least is incidental to a financial activity.” Id. at 1376. Secure Axcess timely appealed the PTAB’s Final Written Decision.

Questions Presented: 1) Whether the ‘191 patent is a CBM patent subject to review under Section 18 of the Leahy-Smith America Invents Act (“AIA”); 2) Whether PTAB’s claim constructions are reasonable under the broadest reasonable construction standard.

Holdings: 1) The ‘191 patent is outside the definition of a CBM patent that Congress provided by statute. PTAB’s conclusion is reversed; 2) PTAB’s constructions are reasonable in light of the standard PTAB used, but the ruling is vacated because PTAB used the wrong standard in making their obviousness determination.

Reasoning: Judge Plager described the standard of review of PTAB’s determination regarding whether the ‘191 patent is within the scope of the CBM statute. The standard of review in this case is under the Administrative Procedures Act § 706(2): “The reviewing court shall . . . hold unlawful and set aside agency actions, findings, and conclusions found to be–– (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. . . [or] (C) in excess of statutory jurisdiction, authority, or limitation, or short of statutory right . . . ” Judge Plager explained that the issue here is whether PTAB properly understood the scope of the statutory definition of CBM patent, which is a question of law. Judge Plager concluded that, as a matter of law, the statutory definition of a CBM patent precludes PTAB’s determination that the ‘191 patent is a CBM patent. Thus, Judge Plager concluded that PTAB acted “not in accordance with law” and “in excess of statutory jurisdiction.”

Judge Plager noted that Congress defined a CBM patent as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service.” AIA § 18(d)(1). Judge Plager focused primarily on two phrases from that definition: “a patent that claims . . .” and “. . . a financial product or service.” Judge Plager explains that the question here is whether the requirement that a patent claim something applies only to the first clause or whether it applies to both clauses. Judge Plager concluded that both phrases must be read and analyzed in conjunction in order for the statute to work as Congress intended.

First, Judge Plager explains that the phrase “a patent that claims” has a clear meaning, and that it refers to the claims of the patent which, as properly construed, define the scope of the patentee’s rights. Judge Plager notes that, for a claim to be properly construed, it must be understood in light of the patent’s written description. However, Judge Plager explains that the written description of the patent alone cannot substitute for what may be missing in the patent “claims” and cannot, in isolation, determine CBM status. In addition, Judge Plager notes that reading the statute as only to the first phrase would give the CBM program unconstrained reach. Any claim for a method for performing any operations that happen to be used in the practice or administration of a financial product or service would be covered under such a broad reading. Judge Plager explains that Congress intended for the CBM patent program to be more limited in scope and not to refer to any patent that can or would be used in the sale of a good or service.

Judge Plager, in his discussion about “financial product or service,” argued that PTAB’s phrase that it used as part of its reasoning for its ‘191 patent determination is not part of the statutory definition of what is a CBM patent. 848 F.3d at 1379–81. PTAB concluded that “the method and apparatus claimed by the ‘191 patent perform operations used in the practice, administration, or management of a financial product or service and are incidental to a financial activity.” Id. at 1380 (emphasis added). Judge Plager pointed out that the Federal Circuit in Unwired Planet v. Google, 841 F.3d 1379, 1381–82 (Fed. Cir. 2016) had ruled that PTAB must limit itself to the express language of the statutory definition of a CBM patent because the plain words of the CBM statutory definition are clear, and they do not support additional interpretive phrases. In Unwired Planet, the Federal Circuit held that the emphasized phrases in the case were not part of the statutory definition, and when used “as the legal standard to determine whether a patent is a CBM patent” that standard “was not in accordance with law.” 841 F.3d at 1382. Here, Judge Plager explains that PTAB did not limit itself to the statutory definition, as it pointed to the legislative history of the CBM statute when coming to its determination of the proper legal standard. Judge Plager rules that PTAB’s use of legislative history is consistent with Unwired Planet, and the Federal Circuit must conclude that the definition used in this case is beyond the scope of the statutory standard and thus, is “not in accordance with law.”

After determining that PTAB used an overly-broad interpretation of the CBM statute, Judge Plager, writing for the 2-1 panel majority and joined by Judge Taranto, reversed the PTAB’s conclusion that the ‘191 patent is a CBM patent. As for the second issue in the case, Judge Plager and the majority vacated the board’s other determinations as they bear on obviousness. Judge Plager explained that, since the first issue was reversed, it would be better for PTAB to revisit its other determinations using the correct definition.

Dissenting Opinion: Judge Lourie respectfully dissented from the majority’s conclusion that the claims of the ‘191 patent are not directed to a CBM and are not subject to review under AIA § 18. Judge Lourie argues that the claims of the ‘191 patent are covered under the plain language of the statute. Judge Lourie explains that the claims of the ‘191 patent should qualify as a CBM patent under a reasonable interpretation of both phrases in the CBM statute. Judge Louire also explains that an examination of the ‘191 patent leads to the conclusion that the invention is clearly intended to be used in the management of a financial service. Judge Lourie also points out that the fact that Secure Axcess has sued multiple financial institutions for infringement of this patent shows that Secure Axcess believes their invention is used for the management of a financial service or product. The fact that the word “financial” does not appear in the claims of the ‘191 patent should not automatically lead to a conclusion that the claims would not meet the plain language of the statute. Judge Lourie cites other decisions from the Federal Circuit where CBM patent claims were not limited to financial products or services. In Judge Lourie’s view, PTAB correctly concluded that the claims of the ‘191 patent are in accordance with the CBM patent statutory definition, and Judge Lourie would not have reversed the decision. Judge Lourie recognizes that PTAB’s “overly broad language” has been cabined by the Unwired Planet decision, but believes that this should not cause the panel to “topple over an otherwise sound decision.” 848 F.3d at 1385.

Xilinx, Inc. v. Papst Licensing GmbH & Co. KG

848 F.3d 1346 (Fed. Cir. 2017)

Authored by Julia Kopcienski

 

Statement of Facts: Xilinx, Inc. (“Xilinx”) is a California-based company, incorporated in Delaware, which “designs, develops, and markets programmable logic devices for use in electronics systems.” Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346, 1349–50 (Fed. Cir. 2017). Papst Licensing GmbH & Co. KG (“Papst”) is a German-based company that monetizes and licenses intellectual property patent rights. Papst’s primary business activity is that of securing patents, locating potential infringement of those patents, and then engaging in attempted licensing negotiations or, if necessary, infringement actions with companies alleged to be infringing on those patents.

Papst is the assignee of U.S. Patent Nos. 6,574,759 and 6,704,891, and in 2012, it performed due diligence investigations as to potential infringement of these two patents. From these investigations, Papst identified Xilinx as a potential infringer of the patents-in-suit. In response, Papst contacted Xilinx regarding the alleged infringement—first, sending two successive letters inviting Xilinx to negotiate, and then, when the letters failed to produce a response, dispatching several Papst representatives to Xilinx’s headquarters in California to discuss a licensing arrangement. The meeting produced no such arrangement, and separately, each party commenced litigation.

Procedural History: In response to Papst’s allegations of infringement, Xilinx brought a declaratory judgment action against Papst in the U.S. District Court for the Northern District of California, seeking a declaration that there was no infringement and that the patents were invalid. On the same day, Papst filed an infringement action regarding the patents-in-suit in the District of Delaware. Papst responded to Xilinx’s California suit by moving for dismissal for lack of personal jurisdiction, and in the alternative, for transfer of the suit to Delaware. Agreeing with Papst’s arguments, the California court dismissed Xilinx’s action for lack of personal jurisdiction, and Xilinx appealed.

Question Presented: Under California’s long-arm statute and the due process clause of the U.S. Constitution, can the U.S. District Court for the Northern District of California properly exercise personal jurisdiction over Papst, a foreign company alleging patent infringement against a U.S. company?

Holding: Yes. Because Papst had sufficient minimum contacts with California, and because litigating the case in California would not unduly burden Papst, the court held that exercising personal jurisdiction over Papst in California was indeed reasonable and proper. Thus, the case was reversed and remanded for further proceedings.

Reasoning: Because California’s long-arm statute does not restrict the due process clause of the U.S. Constitution, the essential question before the court was whether the exercise of personal jurisdiction over Papst would conform with the due process clause of the U.S. Constitution. To determine whether due process was protected, the court invoked the Supreme Court’s three-factor test as to due process in the exercise of personal jurisdiction: “(1) whether the defendant ‘purposefully directed’ its activities at residents of the forum; (2) whether the claim ‘arises out of or relates to’ the defendant’s activities with the forum; and (3) whether assertion of personal jurisdiction is ‘reasonable and fair.’” Xilinx, 848 F.3d at 1353 (citing Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001)). The court quickly dispensed of the first two prongs of the personal jurisdiction analysis, which together constituted a minimum contacts analysis. The court found that Papst’s contacts with California satisfied the minimum contacts test because the case clearly arose out of Papst’s activities in the forum state, and because Papst purposefully directed those activities at a resident of the forum when it sent letters to Xilinx and then sent representatives to negotiate with Xilinx in person.

Turning to the third prong, the court used a five-factor test to analyze the reasonableness of exercising personal jurisdiction over the defendant. In its analysis of the last four of the five factors, the court evaluated both California’s and Xilinx’s interests in litigating the issue in the forum state in a quick, efficient, and predictable manner that would conform with federal patent law. The bulk of the court’s discussion focused on the first factor—whether litigation in California would cause undue burden on the defendant. Papst argued that its relatively minor contacts with California were not sufficient to justify the burden of asking a German company to litigate in California. According to Papst, simply sending cease-and-desist letters should not allow the accused infringer to require litigation in the state where the letters were received. The court responded by noting that the letters were not simply cease-and-desist orders, but instead were invitations to negotiate. Moreover, Papst did not merely send letters, but sent three representatives to meet with Xilinx and attempt to negotiate in its home state of California. In assessing the burden on Papst of requiring litigation in California, the court noted the fact that Papst had previously initiated at least seven patent infringement lawsuits in California. Thus, because Papst directed substantial contact at Xilinx, a California resident, and because the burden on Papst was not so high as to prevent it from commencing prior litigation in the state, the Federal Circuit found that there was no undue burden on Papst. Therefore, California could properly exercise personal jurisdiction over Papst.

Life Technologies Corp. v. Promega Corp.
137 S. Ct. 734 (2017)
Authored by Mario Kolev

Statement of Facts: The Tautz patent claims a toolkit for genetic testing. Respondent Promega Corporation (“Promega”) was the exclusive licensee of the Tautz patent. Petition Life Technologies Corporation (“Life Technologies”) manufactured genetic testing kits. The kits are comprised of five components, one of which is Taq polymerase. During the relevant timeframe, Promega sublicensed the Tautz patent to Life Technologies for manufacture and sale to certain law enforcement fields worldwide. Life Technologies manufactured all but one component of the kits in the United Kingdom. It manufactured Taq polymerase in the United States. Following manufacture of Taq polymerase, Life Technologies then shipped the component to the United Kingdom, where it was combined with the other four components. Four years into the agreement between the two parties, Promega sued Life Technologies on the grounds that Life Technologies had infringed the patent by selling the kits outside the licensed fields of use to clinical and research markets. Specifically, Promega alleged that Life Technologies’ supply of the Taq polymerase from the United States to its manufacturing facilities in the United Kingdom triggered liability under § 271(f)(1) of the Patent Act.

Procedural History: At trial, the jury returned a verdict for Promega, finding that Life Technologies had infringed the patent. Life Technologies then moved for judgment as a matter of law and The District Court for the Western District of Wisconsin (“the District Court”) granted the motion. Promega Corp. v. Life Technologies Corp., 2012 WL 12862829, *3 (WD Wis., Sept. 13, 2012).

The District Court found that the § 271(f)(1)’s phrase “all or a substantial portion” did not encompass the supply of a single component of a multicomponent invention. The Federal Circuit reversed, finding that a single important component could constitute a “substantial portion” under § 271(f)(1) and that Taq polymerase was such a component. Life Technologies appealed to the U.S. Supreme Court.

Questions Presented: 1) Whether the supply of a single component of a multicomponent invention is an infringing act under 35 U. S. C. § 271(f)(1). 2) Whether, as a matter of law, a single component can ever constitute a “substantial portion” so as to trigger liability under § 271(f)(1).

Holdings: 1)No. The supply of a single component of a multicomponent invention for manufacture abroad does not give rise to § 271(f)(1) liability.  2) No. As a matter of law, the supply of a single component cannot constitute a “substantial portion” so as to trigger liability under § 271(f)(1).

Reasoning: In reaching its conclusion, the Court considered the issue of whether § 271(f)(1)’s requirement of a “substantial portion” of the components of a patented invention refers to a quantitative or qualitative measurement. Noting that the Patent Act does not define the term “substantial,” the Court turned to the word’s ordinary meaning. Finding that meaning to be ambiguous, the Court looked to the context in which the word “substantial” appears within the statute. The Court reasoned that the neighboring terms –“all” and “portion”– suggest that “substantial” has a quantitative, rather than a qualitative meaning. The Court reasoned that adopting a qualitative meaning would render certain statutory provisions superfluous – an outcome that is contrary to the canon of statutory interpretation dictating that, whenever possible, the Court should adopt an interpretation that gives meaning to each statutory provision. The Court also rejected Promega’s invitation to adopt a “case-specific approach” that would require the fact-finder to decide whether the components at issue are a “substantial portion” under  either a qualitative or quantitative test. 137 S. Ct. 734, 740. The Court reasoned that because “substantial portion” is ambiguous, adopting Promega’s proposed approach would only compound the ambiguity by tasking juries with interpreting the meaning of a statute on an ad hoc basis.

Having determined that the term “substantial portion” refers to a quantitative measurement, the Court moved to the issue of whether a single component can ever constitute a “substantial portion” so as to trigger liability under § 271(f)(1). The Court again looked to the text of the statute, focusing on the words “of the components.” The Court found that the text specifies a substantial portion of “components,” plural, indicating that a substantial portion includes multiple components. The Court further reasoned that allowing § 271(f)(1) to cover any single component would leave little room for § 271(f)(2), which refers to a single component “. . . especially made or especially adapted for use in the invention.”

In bolstering the rationale for its decision, the Court notes that the history of § 271(f) supports the holding. In particular, the Court notes that Congress enacted the statute in response to Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), to fill a gap in the enforceability of patent rights by reaching components that are manufactured in the United States but assembled overseas. Finally, the Court noted that its holding is limited to what is required to resolve the question presented – one component does not constitute “all or a substantial portion” of a multicomponent invention under § 271(f)(1).

Concurring Opinion: Justice Alito, joined by Justice Thomas, concurred in the judgment, but noted that the Court’s opinion does not resolve the question of how much more than one component is necessary to constitute a “substantial portion” under § 271(f)(1).

 

 

 

 

 

Fed. Educ. Ass’n-Stateside Region v. DOD
841 F.3d 1362 (Fed. Cir. 2016)
Authored by Irán García Domenech

Statement of Facts: Ms. Karen Graviss was a preschool teacher for special needs children at Kingsolver Elementary of the Department of Defense and Domestic Dependent Elementary  School and Secondary Schools (“DDESS”). On January 22, 2010, Ms. Graviss was reprimanded by Dr. Andrea McClain, the principal at Kingsolver Elementary and Ms. Graviss’s direct supervisor, based on inappropriate interactions with a student and for failure to follow directives. Ms. Graviss was accused of physically carrying a misbehaving student to the principal’s office and of failing to bring the issue directly to Dr. McClain. Later, on March 22, 2010, Ms. Graviss physically restrained a child in an attempt to subdue him. Two of Ms. Graviss’ classroom aides reported the incidents to Dr. McClain. Dr. McClain conducted an interview with Ms. Graviss, and then completed and submitted a Serious Incident Report and Alleged Child Abuse Report to the DOD Education Activity (“DODEA”)’s Family Advocacy Program. On March 26, 2010, Dr. McClain e-mailed the Serious Incident Report (“March 26 e-mail”) to her direct supervisor, Community Superintendent John Todd Curkendall, and his supervisor, District Superintendent Dr. Frank Calvano. Dr. Calvano responded that regardless of his belief that there would be a ruling of no foul play, they should try to terminate Ms. Graviss for repeated use of corporal punishment because it would match a DODEA regulation for a second offense of insubordination and a DODEA regulation on causing bodily harm, both offenses punished by either suspension or removal from the position. On April 12, 2010, Dr. McClain issued a notice of proposed removal for Ms. Graviss. The notice alleged only a single charge of “inappropriate physical contact with a student” and said that Mr. Curkendall would serve as the deciding official.  Id.

Procedural History: On June 14, 2010, after considering Ms. Graviss’ submitted replies to the accusations, Mr. Curkendall issued a formal written decision concluding that the proposed removal and charge against Ms. Graviss are fully supported by a preponderance of the evidence, and that the removal is reasonable. On June 16, 2010, Ms. Graviss was removed from her position. On September 9, 2010, The Federal Education Association (“FEA”), Ms. Graviss’ Union, filed a grievance challenging her removal. DDESS denied the grievance and FEA invoked arbitration. In his final decision, the arbitrator rejected Ms. Graviss’ due process claim that the March 26 e-mail should have been disclosed to her at an earlier stage of the proceedings because earlier disclosure would not have eliminated any bias. The arbitrator additionally rejected Ms. Graviss’s claim that the March 26 e-mail constituted an improper ex parte communication under Stone v. Federal Deposit Insurance Corp., 179 F.3d 1368 (Fed. Cir. 1999). Fed. Educ. Ass’n-Stateside Region v. DOD, 841 F.3d 1362, 1365 (Fed. Cir. 2016). The arbitrator held, without discussing any of the Stone factors, that the March 26 e-mail did not contain any new information and that Mr. Curkendall independently decided that Ms. Graviss should be removed from the position. Ms. Graviss petitioned the Federal Circuit for review.

Question Presented: Whether the March 26 e-mail constituted an improper ex parte communication under Stone that violated Ms. Graviss’ pre-termination due process rights under the Fifth Amendment.

Holding: Yes. Ms. Graviss’ pre-termination due process rights were violated because it is “constitutionally impermissible to allow a deciding official to receive additional material information that may undermine the objectivity required to protect the fairness of the process.” Fed. Educ. Ass’n-Stateside Region, 841 F.3d at 1366 (citing Stone, 179 F.3d at 1376). The majority reversed the arbitrator’s decision and remanded for further proceedings.

Reasoning: The majority held that substantial evidence does not support the arbitrator’s decision and that an examination of the Stone factors reveals that the March 26 e-mail violated Ms. Graviss’ due process rights. In Stone, the majority articulate three factors to consider when determining whether an ex parte communication violated a person’s due process guarantee of notice and the opportunity to respond: “whether (1) the ex parte communication merely introduces ‘cumulative’ information or new information”; (2) the employee knew of the error and had a chance to respond to it; and (3) the communications were of the type likely to result in undue pressure upon the deciding official to rule in a particular manner.” Fed. Educ. Ass’n-Stateside Region, 841 F.3d at 1366 (citing Stone, 179 F.3d at 1377).

In regards to the first Stone factor, the majority found that the March 26 e-mail introduced new information to the deciding officer, Mr. Curkendall, because it informed him for the first time that his supervisor wanted Ms. Graviss to be removed for insubordination and use of corporal punishment. Thus, the majority held that the first Stone factor was satisfied.

Concerning the second Stone factor, the majority found that Ms. Graviss learned about the March 26 e-mail during the discovery process leading up to the arbitration, “long after [Ms. Graviss’s] opportunity to respond to her proposed termination had closed, the termination decision was made, and she was removed from her position.” Id. at 1368. The majority found that because Ms. Graviss learned about the March 26 e-mail four years after her termination she was not given a constitutionally correct removal procedure. Thus, the majority held that the second Stone factor was satisfied.

As to the third Stone factor, the majority stated that “the fundamental issue is whether there was a substantial potential for undue pressure using the objective standard of Stone.” Fed. Educ. Ass’n-Stateside Region, 841 F.3d at 1369. The third Stone factor directs the inquiry to the type of communication involved, and does not require proof that the ex parte communication actually resulted in undue pressure upon the deciding official to rule in a particular matter. The majority held that the March 26 e-mail was the type of communication likely to result in undue pressure on the deciding official. The language included in the e-mail by Dr. Calvano created a high risk that his subordinate deciding officer, Mr. Curkendall, would have been unduly pressured to terminate Ms. Graviss. Thus, because the undisclosed e-mail was of the type of communication likely to result in undue pressure, the third Stone factor was satisfied.

Dissenting Opinion: Judge Plager dissented from the majority’s conclusion that Ms. Graviss was denied her constitutional rights during her removal. Judge Plager opined that the majority’s decision “has the potential to chill important discussions regarding personnel matters among responsible supervisors, discussions that are essential to well-functioning agency administration.” Id. at 1370. Judge Plager concluded that none of the three Stone factors were satisfied.

Concerning the first Stone factor, Judge Plager said that when the factor invokes the concept of a relevant ex parte communication it is a communication that contains new and material information about the facts and circumstances of the event at issue. Here, Dr. Calvano’s e-mail did not contain any new information about the specifics of the incident described in the report, on which the charges against Ms. Graviss were based. Thus, Judge Plager would have held that the first Stone factor was not met.

Regarding the second Stone factor, Judge Plager opined that the majority opinion is imposing a higher due process standard than that imposed by Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985). Fed. Educ. Ass’n-Stateside Region, 841 F.3d at 1374. In Loudermill, the Supreme Court held that during a termination hearing, a public employee is entitled to oral or written notice of the charges against him, an explanation of the employer’s evidence, and an opportunity to present his side of the story. Judge Plager points to the record of the arbitration proceeding and found that the arbitrator gave Ms. Graviss full opportunity to respond to the implications of the March 26 e-mail. The hearing before the arbitrator, although it occurred after her removal from her position, provided Ms. Graviss with a full opportunity to explore the ramifications of the communication, including the opportunity to confront the administrator who made the decision to remove her. Thus, Judge Plager would have held that the second Stone factor was not met.

As to the third Stone factor, Judge Plager found that the facts and circumstances of this case show that there was no undue pressure on the deciding official. Judge Plager states that the majority should have adopted a more deferential standard of review and should not have overruled the impartial arbitrator’s factual conclusions. The arbitrator had an opportunity to hear from Mr. Curkendall and was convinced that Mr. Curkendall did not feel any pressure regarding how to decide the case. Therefore, Judge Plager would have held that the third Stone factor was not met, and that the arbitrator’s decision should not have been reversed.

Sonix Tech. Co. v. Publications Int’l, Ltd.,
844 F.3d 1370 (Fed. Cir. Jan. 5, 2017)
Authored by Jacky Beda

Statement of Facts: Sonix Tech. Co. (“Sonix”) owns the U.S. Patent 7,328,845 (“the ’845 patent”), which is a system and method for using a “graphical indicator” to encode information on the surface of an object. While encoding information on the surface of an object is not new and the ’845 patent admits that information has been recorded on the surface of objects “dating back to ancient times,” see ’845 patent, col. 1 ll. 15-16, the ’845 patent is unique because it improves on the conventional methods of recording information on the surface of an object by rendering the graphical indicators “visually negligible.”

The ’845 patent describes the visually negligible standard as a unique pattern of micro-units arranged in a layout that can store information with graphical indicators negligible to the human eye. In addition, the ’845 patent also contains written descriptions of differentiability, brightness, and homogeneity requirements for the graphical indicators to be considered negligible to the human eye. First, the written description requires the indicator to be so small that it is impossible for the human eye to differentiate one graphical indicator from another. Second, the patent contains a requirement that the number of micro-units be reduced based on the size and pitch of the graphical micro unit, as well as its desired visual effect, so that it will “have little influence on the brightness of the surface of the object.” See ’845 patent, col. 4 l. 67–col. 5 l. 1. Finally, the written description requires the number of micro-units of each graphical indicator to be substantially equal to each other so that they become invisible to the human eye.

In 2010, Sonix alleged that GeneralPlus infringed the ’845 patent by using dot pattern technology in children’s books. SunPlus (the parent company of GeneralPlus) then requested a reexamination of the ’845 patent from the U.S. Patent and Trademark Office (“USPTO”). Ultimately, the USPTO confirmed the patentability of the ’845 patent.

Procedural History: In 2013, Sonix alleged that Publications International, Ltd., SD-X Interactive, Inc., Encyclopedia Brittannica, Inc., and Herff Jones, Inc. (collectively, “Appellees”) infringed the ’845 patent. The United States District Court for the Northern District of Illinois ruled in favor of the Appellees in determining that the ’845 patent was invalid because it was indefinite. The district court reasoned that the term “visually negligible” was purely subjective and determined that the term, along with the written description of the patent, did not provide a person of ordinary skill with a meaning that is reasonably certain or objective. As a result, the district court granted summary judgment in favor of the Appellees and against Sonix, holding the asserted claims of the ‘845 patent invalid as indefinite. Sonix appealed to the Federal Circuit.

Question Presented: Whether the term “visually negligible” rendered the asserted claims under the ‘845 patent invalid as indefinite under 35 U.S.C. § 112.

Holding: The Federal Circuit held that the term “visually negligible” is not a purely subjective term and that the record, along with the written description and prosecution history, provided sufficient support to inform with reasonable certainty those skilled in the art of the scope of the ’845 patent. As a result, the Federal Circuit reversed the district court’s holding that the ’845 patent was invalid as indefinite.

Reasoning: The first issue was the standard of review to be applied in the case. The Federal Circuit concluded that it would review the district court’s determination that a claim is invalid as indefinite under a de novo standard. In concluding that the district court’s determination should be reviewed de novo, the Federal Circuit reasoned that a determination relating to the meaning of the intrinsic evidence and whether it conveys scope of the claims with reasonably certainty are legal conclusions. The district court therefore made legal conclusions that were not transformed into factual issues “simply by having an expert offer an opinion on them.” Teva Pharm. USA, Inc. v. Sandoz, Inc., 789 F.3d 1335, 1342 (Fed. Cir. 2015) (“Teva II”). As a result, the Federal Circuit applied a de novo standard of review.

On the merits, the Federal Circuit determined that both intrinsic and extrinsic evidence supported its conclusion that there was an objective standard to determine the meaning of “visually negligible;” therefore, the ’845 patent was not indefinite. First, the Federal Circuit looked at 35 U.S.C. § 112, which requires that a patent inform those skilled in the art about the scope of the invention with reasonable certainty. See Nautilus v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2129 (2014). In analyzing Section 112, the Federal Circuit cited case law indicating that “a patentee need not define his invention with mathematical precision in order to comply with the definiteness requirement.” Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1384 (Fed. Cir. 2005). Instead, as long as there is intrinsic evidence providing guidance as to the scope of the patent, the terms of degree are not indefinite. See Enzo Biochem, Inc. v. Applera Corp., 599 F.3d 1325, 1336 (Fed. Cir. 2010).

While the Federal Circuit in Datamize held that claims to an “aesthetically pleasing” look and feel for interface screens were indefinite because such language provided no guidance and was subjective, the question of whether something is “visually negligible” involves what the normal human eye can see and therefore contains an objective baseline. See Datamize,LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1348–49 (Fed. Cir. 2005). Similarly to Datamize, Interval Licensing involved a claim relating to displaying content “in an unobtrusive manner that does not distract a user.” Interval Licensing LLC v. AOL, Inc., 766 F.3d 1364, 1370 (Fed. Cir. 2014). Just as in Datamize, this too was considered a term of degree that was “purely subjective” since it offered “no objective indication of the manner in which content images are to be displayed to the user.” Id. at 1372. In both Datamize and Interval Licensing, a determination of whether something was “aesthetically pleasing” and “an unobtrusive manner that does not distract the user” was completely dependent on a person’s subjective opinion. On the other hand, while the term “visually negligible” may be a term of degree, it is not purely subjective because it involves what can be seen with a normal human eye, which provides an objective baseline through which to interpret claims. Therefore, “visually negligible” was not a purely subjective term.

In addition, the written description of the ’845 patent also demonstrates that the patent contained specific detail and included certain requirements and examples to guide the determination of whether a graphical indicator was “visually negligible.” The written descriptions here are similar to those in Enzo, where the Federal Circuit reasoned that the written description provided guidance and points of comparisons for skilled artisans. In Enzo, the written descriptions included examples of noninterfering structures and included procedures for selecting them. Similarly, the written description here included differentiability, brightness, and homogeneity requirements for the graphical indicators to possess in order to be considered visually negligible to the human eye. The descriptions were objective and support the conclusion that a skilled artisan would have been able to follow the guidelines to understand with reasonable certainty whether a graphical indicator was “visually negligible” or not. Conversely, in Datamize, the written description did not contain any examples of an “aesthetically pleasing” interface, nor did it provide factors that would guide a person in considering whether a feature was aesthetically pleasing. As a result, the ’845 patent contains considerably more detail than the Datamize patent, since the ’845 patent contains specific written descriptions to be considered, along with two specific examples of visually-negligible indicators.

Lastly, the prosecution history helps demonstrate that the term “visually negligible” was objective because expert witnesses were able to opine with sufficient certainty whether other patents were visually negligible. For example, during the first reexamination, SunPlus used the term “visually negligible” without any apparent uncertainty as to the meaning or scope of the term. In addition, Serjersen, one of Sonix’s expert witnesses, was able to understand the term as well as the written descriptions with sufficient certainty to (1) replicate the claimed indicator and (2) opine regarding whether it, and the indicators Lamoure and Priddy, were visually negligible. Thus, he was able to differentiate between which indicators were and were not “visually negligible.” Finally, the Appellees did not contend that the term “visually negligible” was indefinite for the first several years of litigation, even though they contended that twenty-eight other terms were indefinite.

As a result, the Federal Circuit held that the term “visually negligible” is not a purely subjective term and that the record, along with the written description and prosecution history, provided sufficient support to inform with reasonable certainty those skilled in the art of the scope of the ’845 patent. As a result, the Federal Circuit reversed the district court’s holding that the ’845 patent was invalid as indefinite.

 

 

Merck v. Gnosis S.P.A.
820 F.3d 432 (Fed. Cir. 2016)
Authored by Bailey Gallagher

Statement of Facts: Merck, or MSD as it is called internationally, is a healthcare company that develops, manufactures, and distributes pharmaceuticals across the globe. See About Us, Merck, http://www.merck.com/about/home.html (last visited Feb. 12, 2017). Merck owns Patent No. 6,011,040 (“the ’040 patent”), which protects the company’s ownership rights to a process that uses folates to lower homocysteine levels in humans, an amino acid linked to cardiovascular, ocular, neurological, and skeletal disorders. Merck v. Gnosis, 808 F.3d 829, 831 (Fed. Cir. 2015).

Gnosis challenged claims 1–3, 5, 6, 8, 9, 11–15, and 19–22 of the ’040 patent, filing a formal complaint with the United States Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”). Id.  PTAB initiated inter partes review (“IPR”) of the contested claims. Merck then canceled six of the challenged claims, leaving PTAB to review the patentability of claims 8, 9, 11, 12, 14, 15, and 19–22. Id.  PTAB invalidated these claims for obviousness. Id. at 832.

Merck appealed this decision to the Federal Circuit, and a panel of three Circuit Judges, applying the deferential “substantial evidence” standard of review, affirmed PTAB’s conclusions. Merck brought a petition for rehearing en banc.

Procedural History: The three-judge panel held that the “claimed method of treating elevated levels of homocysteine would have been obvious to a person of skill in light of the prior art” and was thus patent ineligible. Id. at 839. Merck then filed a petition with the Federal Circuit for rehearing en banc, arguing that because Congress intended courts to review PTAB rulings for proper application of the “preponderance of the evidence” standard as established by the America Invents Act (“AIA”), the Federal Circuit must review PTAB’s orders for “clear error” rather than “substantial evidence.” The petition was referred to the panel that originally heard Merck’s appeal. The panel subsequently referred the petition and its response to the petition to the remaining Circuit Judges. The judges took a poll and the poll failed. This decision expresses the court’s response to Merck’s petition for rehearing en banc.

Question Presented: Must the court apply the more searching “clear error” standard of review, rather than the “substantial evidence” standard, when reviewing appeals from IPR proceedings under the AIA?

Holding: The court denied Merck’s petition for rehearing en banc, declining to apply the more searching “clear error” standard of review for PTAB’s factual findings when reviewing appeals from IPR proceedings under the AIA.

Reasoning: Under Section 706 of the Administrative Procedure Act (“APA”), the “substantial evidence” standard is the proper standard of review when considering an appeal arising from an IPR proceeding under the AIA.

Concurring Opinion: Judge O’Malley joined in the majority’s holding, but wrote separately to express his opinion that the “substantial evidence standard of review makes little sense in the context of an appeal from an IPR proceeding.” Merck v. Gnosis, 820 F.3d 432, 433 (Fed. Cir. 2016). He concluded, however, that current Supreme Court and Federal Circuit precedent compelled the court to apply that standard. He determined that any change in the appropriate standard for reviewing an appeal from an IPR proceeding must come from Congress, codified in the AIA, rather than the judiciary.

O’Malley relied, in part, on the Supreme Court’s decision in Dickinson v. Zurko, which held that “5 U.S.C. § 706 of the APA does apply to Board findings, and the Federal Circuit must use the framework set forth in that section.” Id. (quoting Dickinson v. Zurko, 527 U.S. 150, 152 (1999)). O’Malley also looked to the Federal Circuit’s decision in In re Gartside, in which the court determined that it must use one of the standards presented in Section 706 of the APA when reviewing an appeal from an IPR proceeding. Section 706 sets forth two standards of review: (1) the “arbitrary and capricious” standard, and (2) the “substantial evidence” standard. In In re Gartside, the court concluded that the “substantial evidence” standard was appropriate for review of PTAB’s factual findings. According to O’Malley, In re Gartside “controls [the Federal Circuit’s] standard of review for all Board proceedings, including those under the AIA.” Merck, 820 F.3d at 434.

O’Malley discussed Congress’s intent with respect to authorizing PTAB to conduct IPR proceedings for patent review under the AIA. In permitting such proceedings, Congress intended to create an alternative to expensive litigation in district court. In light of this purpose, O’Malley concluded that it would make the most sense for courts to review such proceedings under the same standard they would use when reviewing factual findings of district court judges, the “clear error” standard.  O’Malley reasoned that while in Zurko, the Supreme Court referred to “clear error” review as “court/court” review rather than “court/agency” review, IPR proceedings do not adhere to the typical “court/agency” review structure present in Zurko. Unlike most agency proceedings, Congress established IPR proceedings as an alternative to litigation in district court. Reviewing an IPR decision is therefore more analogous to “court/court” review, to which courts apply the “clear error” standard, than to “court/agency” review, to which courts apply the “substantial evidence” standard as well as other standards of review that the APA prescribes. The similar natures of IPR and district court proceedings suggests that the same “clear error” standard should apply to each.

Despite Congress’s intent for authorizing IPR proceedings for patent review under the AIA, O’Malley reasoned that the court is bound by Supreme Court and Federal Circuit precedent. Thus, although applying the “clear error” standard to this appeal and other similar appeals for review of PTAB’s factual findings seems to make the most sense, the APA’s “substantial evidence” standard is appropriate until Congress or the Supreme Court explicitly changes the standard of review.

Dissenting Opinion: Judge Newman dissented from the court’s denial of petition for rehearing en banc, reasoning that applying the “substantial evidence” standard of review to IRP proceedings under the AIA contravened the Act’s legislative purpose. Newman concluded that the “substantial evidence” standard is overly deferential to PTAB. Instead, Congress contemplated that the courts would apply a more searching standard of review, like the “clear error” standard, when reviewing PTAB’s factual findings. Newman determined that a close analysis of the legislative history and purpose of the AIA reveals that Congress intended for PTAB’s decisions to be reviewed on the same standard as would district court holdings. It is the Federal Circuit’s responsibility, she reasoned, to interpret a statute in accordance with its legislative purpose.

Newman distinguished this case from Zurko, which O’Malley concluded prevented the court from applying any standard of review other than the two outlined in Section 706 of the APA to PTAB’s findings. Unlike the law in Zurko, the statute here created a quasi-judicial body that conducted proceedings as a substitute for district court actions. Zurko is thus not controlling in this case under Newman’s analysis.

Newman finally concluded that because the PTAB proceedings at issue are between private parties and impose estoppel against the petitioner, rather than for providing an agency grant, the deferential “substantial evidence” standard is not commensurate with the quasi-judicial nature of such proceedings. Newman resolved that the AIA’s substantial departures from the APA, including its provisions for direct appeal to the Federal Circuit, its removal of district court review, and its imposition of estoppel against private parties engaged in PTAB proceedings, evidenced congressional intent to create a quasi-judicial body whose decisions would be reviewed under the same searching standard as would district court proceedings. Under this analysis, Newman determined that the court should have granted en banc review to ensure the alignment of the appellate standard of review with the legislative purpose.

 

Amgen Inc. v. Sandoz Inc.

794 F.3d 1347 (Fed. Cir. 2015), cert. granted, No. 15-1039, 2017 WL 125661 (U.S. Jan. 13, 2017), and cert. granted, No. 15-1195, 2017 WL 125662 (U.S. Jan. 13, 2017)

Authored by Gabrielle Farkosh

Statement of Facts: The Food and Drug Administration (“FDA”) normally approves biological products for commercial licenses. When the creator of a future biosimilar product seeks a commercial license, the Biologics Price Competition and Innovation Act (“BPCIA”) permits an applicant to file an abbreviated biologics license application (“aBLA”), giving the applicant the opportunity to “demonstrate that its product is ‘biosimilar’ to or ‘interchangeable’ with a previously approved reference product.” Amgen Inc. v. Sandoz Inc., 794 F.3d 1347, 1351 (Fed. Cir. 2015). The BPCIA then provides for an information exchange process between the reference product sponsor (“RPS”) and the applicant, along with a commercial marketing requirement.

In May 2014, Sandoz sought an aBLA for its filgrastim product, Zarxio, claiming that it is a biosimilar product to Neupogen, which is Amgen’s filgrastim product. Sandoz notified Amgen on July 8, 2014, that the application had been filed, but did not disclose its aBLA or manufacturing information to Amgen, as the BPCIA requires. On March 6, 2015, the FDA approved the aBLA and Sandoz gave notice of commercial marketing.

Amgen sued Sandoz in the United States District Court for the Northern District of California, claiming unfair competition, conversion for using Amgen’s license on Neupogen, and patent infringement. Amgen alleged Sandoz violated the BPCIA when it failed to disclose the required information in the information exchange process and gave ineffective notice of commercial marketing. Sandoz filed for declaratory judgment, claiming it correctly interpreted the BPCIA and did not commit patent infringement. In January 2015, Amgen and Sandoz filed cross-motions for summary judgment. In February 2015, Amgen filed for a preliminary injunction attempting to enjoin Sandoz from introducing its product.

Procedural History: The United States District Court for the Northern District of California held that the BPCIA permits an applicant not to disclose its aBLA to the RPS, subject only to the RPS’s action against the applicant for a “declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.” 42 U.S.C. § 262(l)(9)(C). This alone is not a basis for injunctive relief, restitution, or damages. The district court also concluded that the applicant may give commercial notice of marketing before FDA approval. Both the unfair competition and conversion claims were dismissed with prejudice and Amgen’s motion for preliminary injunction was denied. Amgen then appealed to the the Federal Circuit.

Questions Presented: (1) Does the BPCIA allow an applicant to elect not to disclose its aBLA and manufacturing information to the RPS, and instead subject itself to the consequences in section 262(l)(9)(C)? (2) Does the applicant satisfy the notice of commercial marketing requirement by giving notice before the FDA licenses its product? Is the commercial marketing requirement mandatory? (3) Did the district court properly dismiss the unfair competition and conversion claims? (4) Did the district court properly deny Amgen’s motion for preliminary injunction?

Holdings: (1) Yes. An applicant is permitted not to disclose its aBLA and manufacturing information to the RPS, and instead subject itself to “remedies based on a claim of patent infringement.” Amgen Inc., 794 F.3d at 1357. (2) No. An applicant can only give effective notice of commercial marketing once its product has been licensed. Yes. The commercial marketing notice requirement is mandatory. (3) Yes. The district court properly dismissed the unfair competition and conversion claims. (4) Amgen’s appeal from the denial of its motion for preliminary injunction is moot because the district court resolved the parties’ motions for judgment on the pleadings in favor of Sandoz.

Reasoning: Regarding the first question, the Federal Circuit began with statutory interpretation. Section 262(l)(2)(A) provides that the applicant “shall provide to the reference product sponsor a copy of the application . . . and such other information that describes the process or processes used to manufacture the biological product . . .” 42 U.S.C. § 262(l)(2)(A) (emphasis added). Read in isolation, this provision appears to require the applicant to disclose the aBLA to the RPS. Such a mandatory interpretation favors Amgen regarding Sandoz’s failure to comply with section 262(l)(2)(A). However, section 262(l)(2)(A) must be read in conjunction with section (l)(9)(C), which states that when the applicant “fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the section (k) applicant, may bring an action . . . for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.” 42 U.S.C. § 262(l)(9)(C). The majority held that, read together, the provisions account for instances where the applicant fails to disclose required information; therefore, compliance with section (l)(2)(A) is not mandatory. If compliance were mandatory, the remedy in section (l)(9)(C) would be useless.

Regarding the notice of commercial marketing issue, the majority determined that notice of commercial marketing could only be given after the FDA has licensed the biosimilar product. Section 262(l)(8)(A) provides that the applicant “shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).” 42 U.S.C. § 262(l)(8)(A) (emphasis added). The majority reasoned that because section (l)(8)(A) is the only subsection to use the language “biological product licensed under subsection (k),” Congress intended notice to be given after the FDA licenses the product. Amgen Inc., 794 F.3d at 1357. Elsewhere in subsection (l), the product is referred to as “the biological product that is the subject of” the application. Id. The majority concludes that if Congress meant for notice of commercial marketing to be given before the FDA has licensed the product, then it would have used “subject of” rather than “licensed” in section (l)(8)(A).

The majority has three reasons for interpreting the notice of commercial marketing provision as such. First, it prevents litigation against products before one knows when or if the product will be licensed. Second, “[g]iving notice after FDA licensure . . . allows the RPS to effectively determine whether, and on which patents, to seek a preliminary injunction from the court.” Id. at 1358. Notice before licensure might require the RPS to guess as to the scope of the license. Third, this interpretation does not conflict with section 262(k)(7)(A)’s 12-year exclusivity period by adding an additional 180 days, except in rare instances. Most aBLAs will be filed during the exclusivity period; therefore, the exclusivity period will not be extended 180 days.

The majority also concluded that notice of commercial marketing is mandatory. In contrast to section (l)(2)(A) and the statutory provisions setting out the consequences for noncompliance, the notice of commercial marketing section does not have a corresponding section setting out the consequences of noncompliance when the applicant has not complied with section (l)(8)(A). Here, because the applicants have not complied with section (l)(2)(A), the majority stated that the remedy available in section (l)(9)(B) is not available to the RPS; therefore, notice of commercial marketing is mandatory for Sandoz. Sandoz provided effective notice on March 6, 2015; therefore, Sandoz cannot market its products until 180 days later on September 2, 2015. The majority also concludes that section (l)(8)(A) is a standalone provision, conditioned upon no other provisions of subsection (l).

The majority dismissed the unfair competition claim on two bases. First, Sandoz did not violate the BPCIA by failing to comply with section (l)(2)(A). In California, unfair competition remedies are only available where the underlying law (in this case, the BPCIA) does not provide an exclusive remedy. Because the BPCIA provides an exclusive remedy for violation of section (l)(2)(A), the unfair competition remedy is unavailable to Amgen. Second, the unfair competition claim based on ineffective notice of commercial marketing is moot because Sandoz gave effective notice and cannot market until September 2, 2015.

Regarding the conversion claim, the majority concludes Amgen failed to show a wrongful act (because compliance with subsection (k) is not mandatory), which is required for a conversion claim. Also, the exclusivity requirement is not met because the 12-year exclusivity period for Neupogen has expired.

Concurring-in-Part: Judge Newman concurred that notice of commercial marketing cannot be effectively given until after the FDA licenses the product, but Judge Newman disagreed with the majority’s interpretation that compliance with section (l)(2)(A) is not required just because the statute provides that the RPS can file an infringement suit when the applicant does not comply.

In Judge Newman’s opinion, the majority inconsistently interpreted the words “shall provide” that appear in both the notice of commercial marketing section and in section (l)(2)(A). She believed that “shall” is a command and should be treated as such when interpreting a statute. The BPCIA uses “shall” and “may” throughout, indicating that drafters knew how to construct mandatory and permissive language.

Judge Newman also points out that the exclusive remedies in section (l)(9)(C) apply only “to ‘product’ and ‘use’ claims, and does not include manufacturing process” claims. Amgen Inc., 794 F.3d at 1364 (Newman, J., concurring in part). Manufacturing process claims are at issue here; therefore, the exclusive remedies of section (l)(9)(C) are not available.

Finally, Judge Newman relies heavily on the BPCIA’s legislative history to establish a reciprocal obligation between the applicant and the RPS. She concludes that “[w]hen a beneficiary of the statute withholds compliance with provisions enacted to benefit others, the withholder violates that balance.” Id. at 1366.

Dissenting-in-Part: Judge Chen agreed with the majority that failure to comply with section (l)(2)(A) is not a violation of the BPCIA because of the remedy provided in sections (l)(9) and 271(e), but he thought that this reasoning should also be applied consistently to the notice of commercial marketing provision. Section (l)(8)(A) must be read in the context of subsection (l) in its entirety as “simply part and parcel of the integrated litigation management process contemplated in (l)(2)–(l)(8).” Amgen Inc., 794 F.3d at 1367 (Chen J., dissenting in part). Just as the “shall” provisions in sections (l)(2)–(l)(7) are contingent upon performing section (l)(2), section (l)(8) is also contingent upon that performance. In short, once the “applicant fails to comply with (l)(2), the provisions in (l)(3)–(l)(8) cease to matter.” Id. Section (l)(8), then, is not a separate standalone provision. “[T]he most logical reading of (l)(8) in context is that (l)(8)’s vitality is predicated on the performance of the preceding steps in subsection (l)’s litigation management process. Without first engaging in these procedures, (l)(8) lacks meaning.” Id. at 1369.

Judge Chen also stated that section (l)(8)(A), under the majority’s interpretation, creates an automatic 180-day injunction, even though the applicant has not complied with section (l)(2)(A). Congress knows how to create automatic stays and would have explicitly done so if that is what it meant. “[T]he better reading of (l)(8) is that it does not apply, just as (l)(3)–(l)(7) do not apply, when the (k) applicant fails to comply with (l)(2).” Id. at 1371.

Samsung Elecs. Co. v. Apple, Inc.
137 S. Ct. 429 (2016)
Authored by David Bly

Statement of Facts: During the iPhone design development, Apple obtained several patents and trade dress protections. At issue before the Supreme Court were three design patents: (1) D618,677: a design patent for the black rectangular front face and rounded corners; (2) D593,087: a design patent covering the raised rim along with the rectangular front face and rounded corners; and (3) D604,305: a design patent covering the grid of sixteen icons imposed on a black screen. Samsung developed and manufactured numerous smartphones that Apple alleged infringed Apple’s intellectual property, which served as the basis for this litigation, starting in the United States District Court for the Northern District of California and then working its way up through the Federal Circuit to the Supreme Court. For more detailed information about the case below, see Apple, Inc. v. Samsung Electronics Co., Ltd., 786 F.3d 983 (Fed. Cir. 2015).

Procedural History: In 2012, a jury in the district court ordered Samsung to pay over $1 billion in damages to Apple for repeated patent infringement and trade dress dilution. After the jury trial, the district court upheld the jury’s findings of patent infringement and trade dress dilution, as well as $639,403,248 in damages. The court ordered a partial retrial of the remainder of damages because Samsung lacked notice of some of the patents. The jury in the partial retrial awarded $290,456,703 to Apple and Samsung subsequently appealed to the Federal Circuit. The Federal Circuit decided a wide range of issues, affirming the design patent infringement finding, the validity of two utility patents, and the damages awards for design and utility patent infringement. The Federal Circuit reversed and remanded the claims with respect to trade dress dilution. In awarding damages, the Federal Circuit awarded Apple all of Samsung’s profits resulting from the sale of the infringing devices. The Supreme Court granted certiorari to determine whether an award of an infringer’s profits should only be limited to those profits attributable to the component in question.

Question Presented: Under Section 289 of the Patent Act, must the relevant “article of manufacture” be the end product sold to the consumer, rather than a mere component of that product?

Holding: No. Under Section 289 of the Patent Act, a relevant “article of manufacture” may be a component of a multicomponent product.

Reasoning: The Supreme Court reversed and remanded the Federal Circuit’s patent infringement damages award of all profits for design patent infringement, invalidating the Federal Circuit’s holding that the language of Section 289 requires a damages award to include all profits from an end product because the infringing items were not sold separately. In rejecting the Federal Circuit’s reasoning, the Supreme Court explained that arriving at a Section 289 damages award involves a two-part test: (1) identifying the “article of manufacture,” then (2) calculating the infringer’s profit made from that article of manufacture. See Samsung Elecs. Co. v. Apple, Inc., 137 S. Ct. 429, 434 (2016). The Supreme Court did not consider the second inquiry, but held an “article of manufacture” may include smaller components in a multicomponent product.  

The Supreme Court reached its conclusion individually defining “article” and “manufacture.” The Supreme Court defined an “article” under Section 289 of the Patent Act as “a particular thing.” Likewise, the Supreme Court defined “manufacture” as “the conversion of raw materials by the hand, or by machinery, into articles suitable for the use of man.” Id. at 435. An “article of manufacture,” the Supreme Court reasoned, simply means a thing made by hand or machine. While this construction seems exceptionally broad, the Supreme Court explicitly stated that it was adopting a broad meaning of “article of manufacture.” Id. at 434. Among the Supreme Court’s considerations in adopting this broad construction was whether a component should be outside the category of articles of manufacture simply because that component may be integrated into a larger product. To avoid an absurd result based on an overly-technical construction, the Supreme Court used the Stormonth Dictionary of the English Language and the American Heritage Dictionary to define “article” and “manufacture.”

With this understanding of what constitutes an “article of manufacture,” the Supreme Court held that the term is broad enough to encompass both composite end products and their individual component parts. The Supreme Court further reasoned that this definition is consistent with Section 171(a) of the Patent Act, which makes “new, original and ornamental design for an article of manufacture” eligible for design patents, which courts have held to permit a design patent for a component of a multicomponent product. Id. Additionally, the Supreme Court reasoned that this understanding is consistent with Section 101 of the Patent Act, which states that “any new and useful . . . manufacture . . . or any new and useful improvement thereof” is eligible for utility patent protection. Id.

The Supreme Court declined to address whether the relevant “article of manufacture” at issue was the entire smartphone or a component part. The Court did not resolve the issue, nor did it establish a test for the first step of the damages inquiry because neither party briefed the issue and because applying such a test would require an undesirable parsing of the record. Accordingly, the Supreme Court left the issue for the Federal Circuit on remand. The judgment of the Federal Circuit was therefore reversed and remanded for proceedings consistent with this opinion.

Subsequent History: Although the Supreme Court left the issue of setting out a test for identifying the relevant article of manufacture at the first step of the § 289 damages inquiry for the Federal Circuit, the Supreme Court notably referenced the United States’ proposed test submitted as Amicus Curiae. The Federal Circuit has since remanded the case to the district court to determine what additional proceedings, if any, are needed. If a new trial is needed, the district court may create a test for identifying the relevant article of manufacture for purposes of § 289 and calculate the damages accordingly. Apple Inc. v. Samsung Elecs. Co., No. 2014-1335, 2017 WL 490419 (Fed. Cir. Feb. 7, 2017).

Phigenix, Inc. v. ImmunoGen, Inc.
845 F.3d 1168 (Fed. Cir. Jan. 9, 2017)
Authored by Kelsey Barnes

Statement of Facts: The U.S. Patent and Trademark Office (“USPTO”) assigned Appellee ImmunoGen, Inc. (“ImmunoGen”) U.S. Patent No. 8,337,856 (“the ’856 patent”), which claimed methods of treatment for a variety of cancers. ImmunoGen granted Genentech, Inc. (“Genentech”) an exclusive license to the ‘856 patent, which Genentech used to produce the drug Kadcyla®™ (“Kadcyla”). Appellant Phigenix, Inc. (“Phigenix”) is a for-profit biotechnology, pharmaceutical, and biomedical research company that developed an intellectual property portfolio consisting of various cancer-fighting drugs and treatments. Phigenix’s portfolio included U.S. Patent No. 8,080,534 (“the ’534 patent”). Phigenix alleged that the ’534 patent covered subject matter claimed in the ’856 patent and brought litigation against Genentech in relation to its production of the drug Kadcyla.

Procedural History: Phigenix sought inter partes review of the ’856 patent, alleging that claims 1-8 (“the Asserted Claims”) of the patent were unpatentable as obvious over prior art references. The USPTO Patent Trial and Appeal Board (“PTAB”) found the Asserted Claims nonobvious. Phigenix appealed the PTAB’s final written decision to the Federal Circuit. ImmunoGen filed a motion to dismiss, asserting that Phigenix lacked Article III standing to appeal the PTAB’s Final Written Decision. The Federal Circuit denied the motion and requested that the parties address the standing issue in their briefs.

Question Presented: Under Article III of the Constitution, does Phigenix have standing to appeal the PTAB’s Final Written Decision affirming patentability of the Asserted Claims of the ’856 patent?

Holding: No. Phigenix does not have standing under Article III of the Constitution to appeal the PTAB’s Final Written Decision because Phigenix did not demonstrate injury in fact consistent with the Federal Circuit’s legal requirements to demonstrate standing in an appeal from a final agency action.

Reasoning: In addressing the question presented, the court considered (1) general Article III standing requirements, (2) the legal requirements to demonstrate standing in an appeal from a final agency action, and (3) whether Phigenix met each of these requirements.

The court first recognized its general obligation to ensure that litigants have Article III standing, DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 340 (2006), even when a litigant appeals from a final agency action, Massachusetts v. EPA, 549 U.S. 497, 505-06, 516-26 (2007). The constitutional minimum of standing consists of three elements under Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992): (a) an appellant must have suffered an injury in fact; (b) the injury must be fairly traceable to the challenged conduct of the appellee; and (c) the injury is likely to be redressed by a favorable judicial decision. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). The Appellant’s injury must be “concrete and particularized.” Id. at 1545. A “concrete” injury is one that “actually exist[s],” id. at 1548, or appears “imminent,” Lujan, 504 U.S. at 560. An injury is “particularized” if it affects an appellant “in a personal and individual way.” Spokeo, 136 S. Ct. at 1548. “[A]lthough Article III standing is not necessarily a requirement to appear before an administrative agency,” Consumer Watchdog v. Wisconsin Alumni Research Found., 753 F.3d 1258, 1261 (Fed. Cir. 2014), an appellant must supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in a federal court, Massachusetts v. EPA, 549 U.S. 497, 517 (2007).

The court then established the legal standard for demonstrating standing in an appeal from a final agency action – a standard the Federal Circuit had not set in the thirty-five years since the court’s inception. The legal requirements for demonstrating standing in an appeal from a final agency action include: (a) the burden of production; (b) the evidence an appellant must produce to meet that burden; and (c) when an appellant must produce that evidence. See Phigenix v. ImmunoGen, Inc., 845 F.3d 1168, 1172 (Fed. Cir. Jan. 9, 2017). First, an appellant seeking a federal court’s review of a final agency action bears the same burden of production as that of a plaintiff moving for summary judgment in a district court. See Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002). The court joined four other circuits in adopting the D.C. Circuit’s summary judgment burden of production. Second, the appellant must either identify record evidence from the agency proceeding sufficient to support its standing to seek review in federal court or, if there is none because standing was not an issue before the agency, submit additional evidence to the court of appeals. Lastly, because standing involves threshold questions regarding a court’s authority to hear a dispute, Massachusetts, 549 U.S. at 505, the appellant must produce evidence establishing its standing “at the first appropriate” time, “whether in response to a motion to dismiss or in the opening brief.” Phigenix, 845 F.3d at 1173 (citing Sierra Club, 292 F.3d at 900). If there is no record evidence to support the standing at the time of appeal, “the appellant must produce such evidence at the appellate level at the earliest possible opportunity.” Id.

Phigenix failed to meet these requirements in establishing that it had suffered an injury in fact. Phigenix attempted to argue that it had suffered an actual economic injury because the existence of ImmunoGen’s ’856 patent encumbered Phigenix’s licensing efforts. Phigenix did not substantiate this argument with record evidence developed before the PTAB. Phigenix relied upon non-record documents, including declarations used to support Phigenix’s response to ImmunoGen’s motion to dismiss. The court applied Fed. R. Civ. P. 56(c)(4) to conclude that the declarations did not set out facts sufficient to support a concrete economic injury because Phigenix never licensed the ’534 patent to anyone. Thus, the invalidation of the ’856 patent would not increase Phigenix’s licensing revenues. Phigenix also contended that it had suffered an injury in fact because 35 U.S.C. § 141(c) provided a statutory basis for appeal. The Federal Circuit concluded that Phigenix could not base its injury in fact upon a violation of § 141(c) because Phigenix had been permitted to file its appeal, and the exercise of its right to appeal did not necessarily establish that Phigenix possessed Article III standing. Lastly, Phigenix attempted to argue that the estoppel effect of the PTAB’s decision adversely impacted Phigenix’s ability to provide a contractual warranty. However, the court held that an estoppel provision does not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit.

Cumberland Pharmaceuticals Inc. v. Mylan Institutional LLC, Mylan Inc.
846 F.3d 1213 (Fed. Cir. 2017)
Authored by John De Vito

Statement of Facts: Cumberland Pharmaceuticals, Inc. (“Cumberland”) owns U.S. Patent No. 8,399,445 (the “ ’445 patent”), which claims acetylcysteine compositions free of chelating agents. The FDA approved the ’445 patent, allowing Cumberland to market a chelating-agent free acetylcysteine composition. Mylan Institutional LLC (“Mylan”) filed its own application with the FDA to market a chelating-agent free acetylcysteine composition. Acetylcysteine compositions normally have a stability problem and a prior art response to the stability problem was to include edetate disodium (“EDTA”), a chelating agent.

In 2002, Cumberland sought permission from the FDA to market an EDTA-containing composition of acetylcysteine. On December 10, 2002, the FDA sent Cumberland a letter asking Cumberland to justify EDTA inclusion. On December 20, 2002, Cumberland sent a letter written by Leo Pavliv justifying EDTA inclusion. In a subsequent phone call on March 5, 2003, Mr. Pavliv expressed to the FDA that Cumberland intended to perform a stability study to determine whether it could create acetylcysteine formulations without EDTA or with less EDTA. The FDA approved Cumberland’s EDTA-containing acetylcysteine composition in a letter on January 23, 2004 and reminded Cumberland of its commitment to study acetylcysteine compositions with lower concentrations and no concentration of EDTA. After some months of encouraging data, Cumberland filed for a patent on August 24, 2005 and received U.S. Patent No. 8,148,356 (the “ ’356 patent”), the parent of the ’445 patent, for an EDTA and other chelating agent free acetylcysteine composition. In January 2011, the FDA approved Cumberland’s EDTA and other chelating agent-free acetylcysteine composition for the market. In December 2011, Mylan filed an application to market a generic version of Cumberland’s EDTA-free acetylcysteine composition. On May 17, 2012, Cumberland sued Mylan for infringement of its patent and amended its complaint on March 19, 2013 after Cumberland received the ’445 patent.

Procedural History: Cumberland brought suit in the United States District Court for the Northern District of Illinois. The district court ruled in favor of the plaintiff after a bench trial. The district court held that Mylan neither proved (1) that a representative at the FDA conceived the invention before Cumberland had nor (2) that Cumberland’s invention was obvious. Mylan appealed to the Federal Circuit.

Questions Presented: (1) Whether Cumberland derived the ’445 patent from a representative at the FDA under 35 U.S.C. § 271(e)(2)(A) when Cumberland agreed to study the stability of acetylcysteine compositions without or with diminished levels of EDTA. (2) Whether the ’445 patent was obvious under 35 U.S.C. § 271(e)(2)(A) when prior art teaches all of the elements of the invention except the removal of EDTA.

Holdings:  The Federal Circuit affirmed the district court judgment that: (1) Mylan did not clearly and convincingly show that Cumberland derived the invention claimed in the ’445 patent from a representative at the FDA and (2) prior art gave no reasonable expectation that a formulation without chelating agents would be stable and, therefore, the invention claimed in the ’445 patent was not obvious.

Reasoning: Whether a patentee derived an invention from a prior conception is a mixed question of law and fact. A challenger asserting derivation must show by clear and convincing evidence that there was a prior conception of the claimed invention and that the conception was communicated to the patentee. Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir. 1993) In this case, Mylan was required to show that someone at the FDA had a specific idea to remove EDTA from acetylcysteine, to not add another chelating agent, and that this idea was communicated to Cumberland. The FDA’s December 10, 2002 letter to Cumberland did not demonstrate a prior conception of the ’445 patent because it merely requested justification for the inclusion of EDTA. The request for justification for the inclusion of EDTA is not the same as an idea to remove EDTA and not replace it with other chelating agents. Mylan’s suggestion that the FDA’s request for justification led to the inevitable invention of EDTA-free acetylcysteine also fails because a research plan does not constitute a permanent idea required for derivation. Further, in communication to the FDA between December 2002 and March 2003, Mr. Pavliv of Cumberland was the first to suggest that Cumberland test the stability of acetylcysteine with EDTA and other chelating agents were removed.

Whether an invention was obvious is a question of law. A party claiming obviousness must demonstrate by clear and convincing evidence that an inventor using the teachings of prior art would have achieved the claimed invention with a reasonable expectation of success. Kinetic Concepts, Inc. v. Smith & Nephew, Inc.,688 F.3d 1342, 1360 (Fed. Cir. 2012). Mylan claimed that Cumberland’s EDTA-containing acetylcysteine composition made its EDTA-free acetylcysteine composition obvious by teaching all of the elements of the invention in the ’445 patent except the removal of EDTA. Persons of ordinary skill in the prior art did not have a reasonable expectation of success at achieving a stable EDTA and other chelating agent free acetylcysteine composition. All prior acetylcysteine compositions contained EDTA and prior art taught that EDTA or other chelating agents were necessary for stable acetylcysteine compositions. Further, the FDA letter asking Cumberland to study EDTA did not suggest that Cumberland would have a reasonable expectation of success at achieving a stable acetylcysteine composition.