Author: FCBJ

Althen v. Sec’y of HHS
418 F.3d 1274 (Fed. Cir. 2005)
Authored by David W. Rifkin

Statement of Facts: On March 28, 1997, Margaret Althen (“Althen”) received tetanus toxoid (“TT”) and hepatitis A vaccinations. Within a matter of eighteen days after the administration of the vaccines, Althen began to experience headaches, painful eye movements, and blurred vision in her right eye, which progressed to a complete loss of sight in that eye. She was diagnosed with optic neuritis. Shortly thereafter, Althen began to experience fever, confusion, and neck stiffness. On June 4, 1997, Althen was admitted to the hospital where she was diagnosed with acute disseminated encephalomyelitis (“ADEM”), right optic neuritis, and congenital Duane’s syndrome. From this point forward, Althen’s condition became increasingly worse. On July 2, 1997, Althen returned to the hospital experiencing dizziness and gait instability. The medical staff attributed these symptoms to both encephalitis and ADEM. On July 27, 1998, Althen again began to experience optic neuritis, but this time in her left eye. And on August 6, 2000, Althen suffered a brain seizure. Following a brain biopsy, doctors concluded that Althen had a primary diagnosis of vasculitis with secondary tissue destruction and demyelination consistent with primary angiitis. Althen filed a petition seeking compensation under the National Childhood Vaccine Injury Act of 1986 (“Vaccine Act”) for injuries she suffered as a direct result of the TT vaccination.

Procedural History: The petition for compensation was assigned to the Chief Special Master of the Court of Federal Claims pursuant to 42 U.S.C. § 300aa–10. During an evidentiary hearing, the Special Master denied Althen’s claim for compensation. Applying the Stevens test, the Special Master concluded that despite testimony from a board-certified neurologist that the TT vaccine caused Althen’s injuries and that the onset of her optic neuritis occurred within a medically-accepted time period for a causal connection, because Althen did not provide peer-reviewed literature to support that assertion, she failed to prove causation by a preponderance of the evidence. On a Motion for Review, the Court of Federal Claims reversed, finding Althen sufficiently proved causation and that the Special Master erred as a matter of law in its legal analysis. The government appealed the trial court’s decision to the Federal Circuit.

Questions Presented: First,whether the analytical framework developed in Stevens v. Secretary of Department of Health & Human Services, 99-594V, 2001 WL 387418 (Fed. Cl. 2001) impermissibly raised the burden of proof for showing causation under the Vaccine Act. Second, whether the evidence presented at trial was sufficient to prove by a preponderance of the evidence that the TT vaccination proximately caused Althen’s injuries.

Holdings: First,yes, the Stevens Prongs materially altered the statutory burden of proof under the Vaccine Act and therefore are erroneous as a matter of law. Second,yes, Althen established by a preponderance of the evidence that the TT vaccination caused her central nervous system demyelinating disorder.

Reasoning: The Vaccine Act provides for the establishment of causation in one of two ways: through a statutory presumption of causation under the Vaccine Injury Table (“Table injury”) or by proving causation in fact for an injury not listed in the Vaccine Injury Table (“off-Table injury”). See 42 U.S.C. §§ 300aa–11(c)(1)(C)(ii)(I), –13(a)(1)(A), –14(a). If an injured claimant meets the statutory burden of proving causation under either statutory provision, she will be entitled to judgement as a matter of law. Because Althen sought redress for an off-Table injury, she was required to prove by a preponderance of the evidence that the TT vaccination caused her illness though the use of medical records or medical opinion. The Federal Circuit began by reviewing the Stevens test, an analytical framework developed by the Chief Special Master which required a claimant to prove causation by showing: “(1) medical plausibility; (2) confirmation of medical plausibility from the medical community and literature; (3) an injury recognized by the medical plausibility evidence and literature; (4) a medically-acceptable temporal relationship between the vaccination and the onset of the alleged injury; and (5) the elimination of other causes.” Althen, 418 F.3d at 1279 (citing Stevens, 2001 WL 387418, at *23­26). The Federal Circuit rejected prongs two and three of the test. The court held that the Vaccine Act does not preclude a claimant establishing causation in fact in the absence of peer reviewed literature, so prongs two and three impermissibly increased the statutorily prescribed burden of proof. Moreover, the Federal Circuit reasoned that requiring Althen to support her claim with medical literature impeded her ability to prove causation through the use of circumstantial evidence and contravened Congress’s longstanding intent in resolving ambiguities in favor of injured claimants. However, the court upheld the remainder of the Stevens test as it merely recited well-established precedent.

The Federal Circuit affirmed the Court of Federal Claims’s reversal and reiterated its finding that the Chief Special Master’s duties do not include crafting a legal standard to be used in causation in fact cases. If a question of law arises regarding the interpretation or implementation of the Vaccine Act, answering that question is a matter for the courts, not the Special Master. In elaborating on the causation requirement, the Federal Circuit articulated a three-part test under which Vaccine Act claimants may establish causation by presenting: “(1) a medical theory causally connecting the vaccination and the injury; (2) a logical sequence of cause and effect showing that the vaccination was the reason for the injury; and (3) a showing of a proximate temporal relationship between vaccination and injury.” Althen, 418 F.3d at 1278. Applying these factors, the Federal Circuit found that Althen met the statutory burden for establishing causation by a preponderance of the evidence and concluded that the government failed to prove that factors unrelated to the TT vaccine were principally responsible for her resulting injuries.

 

New York and Presbyterian Hospital v. United States
881 F.3d 877 (Fed. Cir. 2018)
Authored by N. Alexander O’Hara

Statement of Facts: Medical residents sued New York and Presbyterian Hospital, the succeeding entity of a merger between The Society of The New York Hospital and The Presbyterian Hospital (collectively, the “Hospital”), in the U.S. District Court for the Southern District of New York for claims connected to the Hospital’s failure to file protective refund claims for the Federal Insurance Contributions Act (“FICA”) taxes that the Hospital had withheld from the residents’ pay. Under FICA, employers and employees each pay FICA taxes on all wages paid to the employees, with the employer responsible for withholding the necessary amount, and Internal Revenue Service (“IRS”) indemnifying the employers against the claims made against such payments.

In the underlying case, Childers v. New York and Presbyterian Hospital, 36 F. Supp. 3d (S.D.N.Y. 2014), the Hospital had filed for protective FICA refund claims for one group of residents and fellows between 1995 and 2001, but had failed to do the same for others. The Hospital also entered a confidential settlement with the IRS which, in return for valuable consideration, gave up the Hospital’s right to seek refunds for FICA taxes. The Hospital did so without the consent of the staff and failed to inform employees they could file protective FICA claims on their own, despite knowing that staff did not know how to do so.

Procedural History: The Hospital filed a third-party complaint against the United States (the “Government”) seeking indemnification, then sued the Government in the U.S. Court of Federal Claims (“Claims Court”), alleging that the Hospital is entitled to payment from the government for recovery of the sums paid to the residents under the provisions of 26 U.S.C. § 3102(b). The Government responded by filing a motion to dismiss for lack of subject matter jurisdiction, arguing that section 3102(b) is not a “money-mandating statute”, and thus must be dismissed for lack of subject-matter jurisdiction under Rule 12(b)(1) of the Rules of the Court of Federal Claims.

The Claims Court granted the Government’s motion for dismissal, finding that section 3102(b) is an immunity provision, not a mandate for reimbursement, and that 26 U.S.C.A §7422 (1998) precludes “any court” from hearing a case seeking the recovery of taxes until a claim has first been made with the IRS.

Questions Presented: First, when an employer “shall be indemnified” under section 3102(b), does this indemnification constitute a money-mandating source of substantive law? Second, did the Claims Court err by determining it did not have jurisdiction over conflicts arising from demands for compensation under section 3102(b)?

Holdings: First, yes, because the plain language of the statute, based upon clear meaning, comparison with similar provisions elsewhere in the Internal Revenue Code, and the legislative history, is reasonably amendable to an interpretation that it is money-mandating. Second, yes. Because section 3102(b) is a money-mandating statute under the provisions of the Tucker Act, the Claims Court has subject-matter jurisdiction over claims arising from this statute, and they erred in granting the motion to dismiss. The case is reversed and remanded, with costs to the Hospital.

Reasoning: Pursuant to the Tucker Act, the Claims Court has jurisdiction to render judgement upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort. 28 U.S.C. § 1491(a)(1).

The Tucker Act, however, only grants jurisdiction and is not an independent source of substantive rights that may be enforced against the Government. Those seeking to bring claims against the Government must show either an unequivocal waiver of sovereign immunity, or an express or implied money-mandating source of substantive law upon which to seek payment.

A law can be fairly interpreted as mandating compensation if it is reasonably amenable to the reading that it mandates a right of recovery in damages, unless there are strong indications that Congress did not intend to mandate money damages. More than simply being reasonably amenable to this interpretation, however, the only reasonable interpretation of section 3102(b) is that is creates a mandate that the Government shall provide reimbursements for FICA taxes paid to an employer.

Section 3102(b) states, every employer required to deduct the tax “shall be liable for the payment of such tax, and shall be indemnified against the claims and demands of any person for the amount of any such payment made by such employer.” Under a plain reading, it is reasonable to understand the word indemnified as mandating a right of recovery, because the word indemnify, as it was used at the time the statute was enacted, contemplated the concept of reimbursement. A review of multiple dictionaries, including Black’s Law Dictionary, confirms this understanding of indemnify.

While the government attempted to argue that because the first definition in the dictionaries did not contemplate payment, the fair interpretation standard does not require that only the first-listed dictionary definition be considered. The order of the definitions does not matter under the relevant legal standard, which is simply whether the words are reasonably amenable to an interpretation that the government has created a mandate for payment.

Furthermore, other sections of the Internal Revenue Code support this interpretation of section 3102(b). Section 3202(b), which is the counterpart of section 3102(b), but for employees of railroads, rather than schools, provides that the “employer . . . shall not be liable to any person for the amount of any such payment” with regards to taxes deducted. The same language is used in section 3404, which concerns withholding of taxes by an employer. Because these sections are structured the same (merely substituting “shall not be liable” for “shall be indemnified”), and because Congress is generally presumed to act with intentionality, it can be presumed that Congress intended for these similar sections to have different legal meanings.

The Government also conceded that the original case against the Hospital should have been dismissed under section 7422 of the Internal Revenue Code, as it immunized the Hospital from claims. While the Claims Court interpreted this to mean that the Government should be immunized, section 7422 is better understood as evidence that if Congress had meant to simply write an indemnity provision into 3102(b), it was more than capable of doing so.

Finally, the legislative history of section 3102(b) supports the conclusion that it is reasonably amenable to an interpretation that it provides a money mandate. The only relevant legislative history regards section 802(a) of the Social Security Act, the immediate predecessor to section 3102(b). In that statute, Congress indemnified employers against claims and demands “up to the correct amount”, which only makes sense if Congress is contemplating the payment of money.

Therefore, because this language is reasonably amenable to an interpretation that it mandates the Government to reimburse FICA taxes paid by an employer, it is money-mandating, and the Claims Court erred in dismissing the claims for lack of jurisdiction.

Dissenting Opinion: Circuit Judge O’Malley dissented with the majority’s interpretation of section 3102(b) as a reimbursement provision. While the majority is correct that a statute is money-mandating if it can fairly be interpreted as mandating compensation, the analysis of the majority was insufficient to arrive at this conclusion.

The case the majority relies upon for the “reasonably amenable” standard, United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003), was a slim decision, with four justices dissenting against the expansion of the test for when Congress had conferred a substantive right that could be enforced against the government. Prior to this, the Federal Circuit had determined that the proper understanding of what constitutes a fair inference is not whether a court could determine an inference was merely reasonable, but whether it was the most correct interpretation.

At most, prior case history suggests that a fair inference warrants a liberal interpretation of whether a statute is money-mandating. This does not mean, however, that courts can avoid determining whether a money-mandating interpretation is the most reasonable interpretation. The majority mistakes this determination for whether the statute can mean it confers a right to reimbursement, when the appropriate question is whether the statute does confer a right to reimbursement.

In coming to that determination, the majority correctly notes the ambiguity of the word indemnify, and that it can mean providing compensation. However, the court’s role is to resolve that ambiguity. Given the framework of section 7422, which precludes courts from considering employee claims for recovery of FICA taxes before they file an IRS claim, it makes no sense for the Government to confer a right of reimbursement on the employer, as this would allow employers to pay taxes at their whim, and demand payment from the Government to do so. This section serves as an immunity for the government and should not be compared to the immunity provisions provided to employers under section 3102(b).

Additionally, the majority points to the notion that section 3102(b) uses different language than either section 3202(b) or section 3403. However, they fail to note that these statutes have been enacted and updated in piecemeal fashion, not as a uniform whole. Nothing in the legislative history suggests that the distinction in updating the language in some areas, but not others, was intended to confer a different meaning. Nor does the fact that the predecessor statute to section 3102(b) included “correct amount” suggest that Congress intended to contemplate payment of money. This phrase merely means that they shall be indemnified up to the amount of taxes paid. This is the same effect that sections 3202(b) and 3403 have, and the majority acknowledge these as merely being indemnity statutes, not as money mandating ones.

The appropriate standard is not whether it is possible that Congress intended to create a money-mandating provision, but whether it did intend to create one. Furthermore, the most logical interpretation of similar provisions found in law is that they merely act as indemnity provisions. For these reasons, section 3102(b) should not be read to include a money-mandate, and the Claims Court was correct to dismiss for lack of subject matter jurisdiction.

 

 

Changzhou Trina Solar Energy Co., Ltd. v. United States ITC
879 F.3d 1377 (Fed. Cir. 2018)
Authored by John Nakoneczny

Statement of Facts: Changzhou Trina Solar Energy Co., Ltd. and Yingli Green Energy Holding Company, Ltd. are manufacturers of crystalline silicon photovoltaic cells, modules, laminates, and panels (CSPV products). Trina Solar (U.S.), Inc. and Yingli Green Energy Americas, Inc. imported these solar energy products into the United States. On October 19, 2011, SolarWorld Americas, Inc. petitioned the U.S. Department of Commerce seeking the imposition of antidumping duties under 19 U.S.C. §§ 1673–1673h, and of countervailing duties under 19 U.S.C. §§ 1671–1671h against the respective CSVP products, known as the subject imports.

Procedural History: The U.S. Department of Commerce (“Commerce”) found that the subject imports were being sold in the United States at less than fair value and were being unfairly subsidized by the Chinese Government. In turn, per statute, the International Trade Commission (“ITC”) then evaluated the relevant industry conditions and determined that “an industry in the United States [was] materially injured by reason of” the subject imports. Crystalline Silicon Photo-voltaic Cells and Modules from China, Inv. Nos. 701-TA-481 and 731-TA-1190), USITC Pub. 4360, at 3 (Nov. 2012) (Final) (ITC Final Decision). The Chinese manufacturers and the U.S. importers–collectively, the “Chinese Respondents”–appealed the ITC’s determination to the United States Court of International Trade. The Chinese Respondents argued that the ITC failed to properly find a causal connection between the unfairly priced or foreign government-subsidized subject imports and the domestic CSVP industry’s weakened state–a causal relationship identified as an industry being “materially injured by reason of” the imports. Changzhou Trina Solar Energy Co., Ltd. v. U.S. Int’l Trade Comm’n, 100 F. Supp. 3d 1314, 1331–32, 1349 (Ct. Int’l Trade 2015). The Court of International Trade rejected the challenge, sustaining the ITC’s determination. The Chinese Respondents timely appealed to the United States Court of Appeals for the Federal Circuit.

Questions Presented: First, what causal relationship must the International Trade Commission find to meet the “by reason of” standard for imposing duties on imports, as provided by the statutory language of 19 U.S.C. §§ 1673d(b)(1), 1671d(b)(1)? Second, did the International Trade Commission adequately address the causal relationship between the subject imports and a material injury to the domestic industry?

Holdings: First, the “by reason of” standard requires the finding of, at a minimum, a but-for causal relationship. The methodology of how the standard is applied by the International Trade Commission may vary based on the factual circumstances from case to case, but the standard itself will remain the same. Second, the Federal Circuit affirmed the International Trade Commission’s determination that the domestic industry was materially injured but-for the subject imports.

Reasoning: 19 U.S.C. §§ 1673d(b)(1), 1671d(b)(1) require that final determinations about the dumping of imports or the providing of countervailable subsidies by foreign governments, respectively, find a material injury to the relevant domestic industry “by reason of” a subject import. The Federal Circuit surveyed the case law regarding the meaning of this statutory phrase and found that it has a settled ordinary meaning. As recently as 2014, the Supreme Court of the United States acknowledged that the phrase requires, at a minimum, but-for causation. See Burrage v. United States, 134 S. Ct. 881, 889 (2014). At the Court of Appeals levels, several courts have recognized the Supreme Court’s interpretation that the phrase requires, at a minimum, but-for causation. The Federal Circuit acknowledged that Congress may use legal terms in novel ways; but, it is a common principle that when Congress uses a legal term without indication of an alternative meaning, then the well-settled common law meaning is presumed. See Sekhar v. United States, 133 S. Ct. 2720, 2724 (2013). Finally, the Federal Circuit noted that its own precedents regarding the “by reason of” standard in the context of import-dumping cases requires a but-for causal connection. See e.g., Mittal Steel Point Lisas Ltd. v. United States, 542 F.3d 867, 876 (Fed. Cir. 2008) (holding that the standard “requires the finder of fact to ask whether conditions would have been different for the domestic industry in the absence of dumping”).

The Federal Circuit recognized that how the but-for standard applies may vary with the facts. Pointing to its previous decision in Swiff-Train Co. v. United States, the court reiterated that “the [Federal Circuit] does not require the use of any particular model or methodology.” 793 F.3d 1355, 1361 (Fed. Cir. 2015). As the factual circumstances change from case to case, the International Trade Commission may choose to use a variety of approaches in determining whether the standard is met. Nonetheless, applying different methods of explanation to different sets of facts does not mean that a different standard is applied. The substance of the ITC’s analysis, rather than its formulation, is what determines whether the ITC has adequately answered the question of but for causation.

The Chinese Respondents argued that the ITC failed to adequately address the question of but-for causation between the subject imports and a material injury to the domestic industry, because it insufficiently accounted for certain facts about the marketplace during the period of investigation – January 2009 to June 2012. Specifically, the Chinese Respondents argued that the domestic industry would have been materially as badly off regardless of the unfairly priced and subsidized subject imports because of (1) the pressure CSVP sellers faced to lower prices in order to compete with the price at which utility companies could buy natural gas for power generation (i.e. “grid parity”); (2) the decline of Government subsidies for solar energy products which prevented sellers from offering lower prices; and, (3) the increase in demand in the utility segment of the market, as compared to other segments. Changzhou, 879 F.3d at 1384.  The Federal Circuit reviewed the ITC’s findings, noting that they rested on various types of evidence. The court held that the ITC had addressed the three facts highlighted by the Chinese Respondents, and that it found that those facts did not entirely account for the industry’s weakened state. Instead, the ITC attributed a significant portion of the industry’s state to the subject imports because of “significant underselling of the domestic like product by subject imports from China . . . [that] enabled subject importers to gain market share at the expense of the domestic industry.” Crystalline Silicon Photo-voltaic Cells and Modules from China, Inv. Nos. 701-TA-481 and 731-TA-1190), USITC Pub. 4360, at 33 (Nov. 2012) (Final) (ITC Final Decision). By accounting for the facts highlighted by the Chinese Respondents and concluding that they did not account materially for all of the domestic industry’s weakening during the period of investigation, the ITC made the required analysis to determine a but-for causal relationship. The Federal Circuit saw no reason to deem the ITC’s factual findings insufficient under the substantial-evidence test. See Administrative Procedure Act, 5 U.S.C. § 706(2)(E).

Presidio Components, Inc. v. American Technical Ceramics Corp.
875 F.3d 1369 (Fed. Cir. 2017)
Authored by Matheus Lopes 

Statement of Facts: Presidio is the owner of U.S. Patent No. 6,816,356 (“the ’356 patent”), which consists of a multilayer capacitor design and teaches a multilayer integrated network of capacitors electrically connected in series and in parallel. 875 F.3d at 1373. These multilayer capacitors are positioned edge-to-edge, forming a “fringe-effect” capacitance between the external contacts. Presidio filed suit against American Technical Ceramics Corp. (“ATC”) in the District Court for the Southern District of California alleging infringement of the ’356 patent.

ATC sought an ex parte reexamination of the claims of the ’356 patent in light of new prior art while the case was pending in the district court. The examiner rejected these claims. After the USPTO issued a reexamination certificate for the ’356 patent, Presidio amended its district court complaint. The amended complaint alleged infringement of the ’356 patent claims 1, 3, 5, 16, 18, and 19 as amended by the reexamination certificate. Specifically, Presidio alleged that ATC’s 550 line of capacitors infringed on the ’356 patent. ATC’s defense was that the claims were indefinite, that the reexamination amendment entitled it to intervening rights, which limits damages, and that Presidio was not entitled to lost profits or enhanced damages.

ATC filed a motion for summary judgment on the affirmative defense of absolute intervening rights, which the district court granted. A jury trial ensued and the jury returned a verdict, finding direct infringement and induced infringement of claims 1, 3, 5, 16, 18, and 19 of the ’356 patent by all of the accused products–ATC’s 550 line of capacitors. Furthermore, the jury found that Presidio met its burden of proving by clear and convincing evidence that ATC’s infringement of the asserted claims was willful. The jury awarded Presidio $2,166,654 in lost profit damages, but it did not decide Presidio’s claim for a reasonable royalty. The jury further issued an advisory verdict regarding the indefiniteness of the claims, finding that ATC failed to prove by clear and convincing evidence that claim 1 of the ’356 patent is indefinite.

Finally, the district court rejected ATC’s argument that the asserted claims of the ’356 patent are invalid due to indefiniteness. The court denied ATC’s motion contending that Presidio had failed, as a matter of law, to prove lost profits, and denied Presidio’s motion for enhanced damages, finding that enhanced damages were not called for despite a jury finding of willful infringement. The district court then entered a permanent injunction against ATC.

Procedural History: The district court first granted ATC’s motion for summary judgment on the affirmative defense of absolute intervening rights. After separate jury and bench trials, the district court held that ATC infringed the asserted claims and that the claims are not invalid, and granted a permanent injunction. The jury returned a verdict finding ATC had had directly infringed claims 1, 3, 5, 16, 18, and 19 of the ’356 patent through its 550 line of capacitors. The district court limited damages due to intervening rights. The district court denied Presidio’s motion for enhanced damages, determining that, regardless of a jury finding of willfulness, enhanced damages were not warranted despite a jury finding of willful infringement. ATC appealed, challenging the district court’s determination as to absolute intervening rights and the denial of enhanced damages.

Questions Presented:

• Whether the claims are indefinite.
• Whether ATC is entitled to absolute intervening rights.
• Whether Presidio established its right to recover lost profits.
• Whether the district court abused its discretion by not awarding enhanced damages.
• Whether the district court abused its discretion when it granted a permanent injunction.

Holdings:

• The claims are not indefinite. The court affirmed.
• ATC is entitled to absolute intervening rights. The court affirmed.
• The evidence does not support an award of lost profits. The court reversed and remanded the award of lost profits for determination of a reasonable royalty.
• The district court did not abuse its discretion in declining to award enhanced damages.
• The court vacated the permanent injunction and remanded the case for further proceedings with respect to the injunction.

Reasoning: The Federal Circuit held that the claims were not indefinite because the insertion loss testing method was well established and referenced in the patent. Presidio presented expert testimony at trial that a person skilled in the art would know how to measure the impact of fringe-effect capacitance on performance of the capacitor. ATC argued that the expert developed a new test methodology rather than using an existing test or one for which the patent provided necessary guidance. Therefore, ATC argued, the claims are indefinite. The Federal Circuit concluded that, although the specific steps performed by Presidio’s expert witness’s testimony had not been published in any industry publications or peer-reviewed articles, the general approach of making modifications to a capacitor to isolate the impact of discrete capacitances was within the knowledge of someone skilled in the art. Such measurement was within the skill of a skilled artisan based on an established method.

The Federal Circuit held that ATC is entitled to absolute intervening rights because a substantive change made in the original claims. Because the district court found that ATC was entitled to intervening rights, Presidio argued that the scope of the claims did not change during the ex parte reexamination because the goal in amending the claim was to adopt the district court’s construction in Presidio I. Presidio declared it was making the amendment “to incorporate and make explicit the interpretation of the independent claim that was established in the Presidio I litigation.” 875 F.3d at 1379 (citing J.A. 128). There was a substantive change in the scope of the claim, because under the scope of the original claim, theoretical calculations are enough to satisfy the claim limitation, whereas after the amendments, the claims are not.

The Federal Circuit also held that the evidence does not support an award of lost profits. Although the BB capacitor does not practice the patent, Presidio could still recover lost profits because the BB capacitor competes directly with the infringing 550 capacitors. ATC argued that the district court incorrectly found that substantial evidence supported that Presidio had satisfied the second prong of the Panduit four-factor analysis. See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). Presidio also argued that the 560L product did not perform as well as the infringing 550 capacitor. The district court should have relied on evidence comparing the 560L capacitor to Presidio’s BB capacitor in a hypothetical market without the infringing 550 capacitor. Presidio failed to provide evidence that the 560L capacitor was either not an acceptable or available substitute to Presidio’s BB capacitor. The Federal Circuit also found that the fact that ATC sold the 560L capacitor to a single customer did not establish that it was unavailable. Also, the fact that the 560L capacitors were not widely advertised when sold in a market with the 550 capacitors does not show a lack of availability.

The Federal Circuit further concluded that the district court did not abuse its discretion in declining to award enhanced damages. The discretion remains with the district courts to determine whether the conduct was sufficiently egregious to warrant enhanced damages. When making this determination, courts should consider the overall circumstances of the case. The court concluded that the district court conducted a correct analysis of ATC’s culpability, which looked only at the period beginning when the reexamination certificate issued on December 8, 2015. The district court properly considered the particular circumstances of the case and correctly concluded that the situation was not sufficiently egregious to warrant enhanced damages.

Finally, the Federal Circuit vacated the permanent injunction and remanded the case for further proceedings with respect to the injunction due to the court’s reversal of the lost profits award for lack of proof of past lost sales. The Federal Circuit directed that on remand, the district court should reopen the record and consider current available evidence of irreparable harm. Specifically, the district court should consider whether consumers have turned to non-infringing alternatives to the BB capacitor, such as the 560L capacitor, after the 550 series capacitors became unavailable. The court should also consider whether Presidio’s sales of the BB capacitor have increased because the 550 is no longer on the market. In light of this further evidence, the Federal Circuit remanded for the district court to determine whether Presidio has established irreparable injury and the appropriateness of the injunction.

Glycine & More, Inc. v. United States
880 F.3d 13335 (Fed. Cir. 2018)
Authored by Amber Mulcare

Statement of Facts: The Department of Commerce (“Commerce”) oversees the issuance of antidumping orders. Antidumping orders impose a special duty for foreign merchandise sold for less than fair value within the United States that may materially injure US industries. If Commerce receives a request for administrative review of a previously issued antidumping order, they must conduct at least one annual review. In 1997, Commerce re-promulgated rules for evaluating any withdrawals of administrative review requests, indicating that the Secretary will rescind administrative reviews when the requestor withdraws the request within 90 days of the notice of initiation of the requested review and “[t]he Secretary may extend this time limit if the Secretary decides that it is reasonable to do so.” 19 C.F.R. § 351.213(d)(1).

In 2011, Commerce published a “Notice” stating that it would not consider extending the 90-day deadline unless the requestor demonstrated an “extraordinary circumstance” that would prevent timely filing of a withdrawal request. 880 F.3d at 1340. Commerce noted that the guidance would apply to all future requests for extensions, whereby Commerce would no longer grant extensions for untimely withdrawals based on the criteria documented in the comments of the 1997 final rule.

On March 1, 2012, Commerce notified interested parties of the opportunity to request an administrative review regarding its 1995 Antidumping Duty Order: Glycine from the People’s Republic of China. These parties included producers of glycine: GEO Specialty Chemicals, Inc. (“GEO”) (defendant-appellant and a U.S. producer of glycine) and Baoding Mantong Fine Chemistry Co., Ltd. (“Baoding Mantong”) (a Chinese producer and exporter of glycine.) GEO and Baoding Mantong separately replied on April 30, 2012 to request an administrative review. On April 30, 2012, Commerce published notice that it had initiated an administrative review.

On July 10, 2012, Commerce selected Baoding Mantong as one of two mandatory respondents and issued a questionnaire to the company. On July 30, 2012, GEO submitted what was determined to be its timely withdrawal. On August 7, 2012—after the 90-day period had ended—Baoding Mantong asked Commerce for an extension of the 90-day period in which to file its withdrawal, and an extension of the deadline for its questionnaire response. On August 22, 2012, Commerce informed Baoding Mantong that Commerce was considering its request, and that it did not have to respond to Commerce’s questionnaire. Subsequently, Commerce informed Baoding Mantong that it was rejecting its untimely withdrawal and instructed Baoding Mantong to respond to the questionnaire. Baoding Mantong responded, informing Commerce that it would not participate in the administrative review or respond to the questionnaire.

On December 6, 2012, Commerce published its Preliminary Results and proposed a 453.79% dumping duty margin. On December 17, 2012, the plaintiff-appellee Glycine & More, a third-party, entered an appearance before Commerce and objected to 1) Commerce’s rejection of Baoding Mantong’s request to withdraw; and 2) the dumping duty margin. Glycine & More is an affiliate of Baoding Mantong and imports glycine manufactured by Baoding Mantong. On April 8, 2013, Commerce published its Final Results, confirming the same dumping margin. 

Procedural History: On April 26, 2013, Glycine & More filed a complaint with the United States Court of International Trade (“CIT”) stating that Commerce had violated its own regulation regarding the 90-day period. Glycine & More moved for judgment on the agency record. Commerce and GEO opposed the motion.

CIT held that Commerce’s interpretation of its antidumping duty order regulation was unreasonable and its rejection of Baoding Mantong’s untimely withdrawal was improper. CIT remanded for Commerce to re-decide whether the extension should be granted, instructing Commerce to reach its decision in accordance with the purpose of the 1997 regulation. In its instructions, CIT noted that Commerce must consider the circumstances around Baoding Mantong’s request and that it was likely that only new and compelling circumstances, not previously identified by Commerce, would support Commerce’s previous decision. In addition, CIT clarified that “although this regulation grants [Commerce] discretion over whether to extend the 90-day period, the compelling circumstances giving rise to this case, when viewed according to the purpose of the regulation, would call into question any decision on remand reinstating the previous, challenged decision to deny the extension.” Glycine & More, Inc. v. United States, 107 F. Supp. 3d 1356, 1370 (Ct. Int’l Trade 2015).

After remand, Commerce filed its redetermination decision in favor of Baoding Mantong; extending, under protest, the withdrawal deadline. In that same decision, Commerce asserted that the CIT’s decision improperly nullified Commerce’s discretion under the statute. CIT issued a judgement and opinion affirming Commerce’s redetermination and granted Glycine & More’s motion for judgement on the agency record. CIT emphasized that it was not affirming all statements in Commerce’s redetermination decision, as CIT believed that its decision did not nullify the agency’s discretion.

GEO appealed the CIT’s affirmation decision to the Federal Circuit, arguing that CIT failed to give proper deference to Commerce’s interpretation of its own regulation and improperly directed Commerce’s findings on remand. Neither Commerce nor the United States joined the appeal.

Questions Presented: First, can an agency regulation, previously adopted by formal notice-and-comment rulemaking pursuant to the Administrative Procedure Act (“APA”), be amended by an informal guidance document that is not enacted in accordance with the APA? Second, was the 2011 guidance “Notice” ambiguous? Third, were CIT’s remand instructions improper?

 Holdings: First, agency guidance intended to effectively override the substantive meaning of an existing regulation, without following formal rulemaking requirements required by the APA, is improper. Second, the 2011 guidance “Notice” was not ambiguous. Third, the CIT’s instructions for remand were proper. The Federal Circuit affirmed the judgement of the CIT. 

Reasoning: The Federal Circuit reviewed the CIT’s factual determinations for clear error and the CIT’s grant of judgement upon the record and legal determinations without deference.

As a threshold issue, the court examined whether Commerce’s 2011 Notice’s meaning is plain and unambiguous. The court held that the explanation given by the text of the notice itself left little room for doubt of the agency’s intent to change the language of the original rule; furthermore, Commerce’s application of the 90-day provision indicated that it did so with an understanding of its decision. Prior to the Notice, the regulation provided the Secretary with wide discretion to determine the facts, circumstances, and reasonableness of a request to extend the withdrawal notice deadline.

Affirming the CIT’s holding, the Federal Circuit stated that the 2011 Notice narrowed the Secretary’s discretion to only cases where extraordinary circumstances were proven by the applicant; thus, representing an incompatible departure from the clear meaning of the original statute. Agencies cannot make substantial amendments or revisions to the original, unambiguous text of a regulation under the guise of agency interpretation. Christensen v. Harris County., 529 U.S. 576, 588 (2000).

Here, the court held that for the 2011 Notice to have the force of law, Commerce was required to engage in notice-and-comment rulemaking and failed to do so. Under the APA formal rulemaking procedures, the Notice had no legal standing and therefore did not provide the basis upon which the Secretary could make his decision. The CIT order required Commerce to re-determine the extension decision using criteria in the only legally applicable standard, that which was set out in § 351.213(d)(1). Therefore, CIT properly instructed remand and properly granted Baoding Mantong’s extension in its affirmation judgement.

 

 

Gray v. Secretary of Veterans Affairs
875 F.3d 1102 (Fed. Cir. 2017)
Authored by Hunjin Lee

Statement of Facts: The Agent Orange Act of 1991 provides the framework for adjudicating compensation claims for Vietnam War veterans with diseases incurred by herbicide exposure. The Act presumes that such diseases are caused by herbicide exposure during Vietnam War, if a veteran who “served in the Republic of Vietnam” during Vietnam War suffers from any of certain designated diseases. 38 U.S.C. § 1116(f). The Act also mandates the Department of Veterans Affairs (“VA”) to establish additional regulatory presumptions that a veteran’s service in Vietnam incurred or aggravated certain diseases. Id. § 1116(a).

In May 1993, the VA issued regulations that the Act should also find presumptive service connection for any veteran who served “in the waters offshore and service in other locations” as any veteran who served in the Republic of Vietnam, “if the conditions of service involved duty or visitation in the Republic of Vietnam.” 38 C.F.R. § 3.307(a)(6)(iii) (1993). However, the VA did not authorize the Act to recognize presumptive service connection for “Blue Water” veterans, the veterans who served in the open waters surrounding Vietnam. Moreover, VA also excluded veterans who served in bays, harbors, and ports of Vietnam from presumptive service connection. The VA did not go through the notice and comment rulemaking process to implement this additional restriction, but rather incorporated it into the M21-1 Manual.

The M21-1 Manual is an internal manual which VA adjudicators use for guidance, and the M21-1 Manual’s provisions only binds the Veterans Benefits Administration employees. Thus, the M21-1 Manual and any interpretations of the guidelines do not bind the Board of Veterans’ Appeals (“Board”). 38 C.F.R. § 19.5.

Procedural History: In 2007, Gray filed a claim for disability compensation based on his naval service in Da Nang Harbor during Vietnam War. However, the VA denied the claim pursuant to the M21-1 Manual and a February 2009 letter. The M21-1 Manual defines “service in the Republic of Vietnam (RVN)” as “service in the RVN or its inland waterways,” and February 2009 letter defines inland waterways not to mean “ . . . open deep-water coastal ports and harbors where there is no evidence of herbicide use.” M21-1 Manual, part IV, ch. 1, ¶ H.28.a (2005); Gray v. McDonald, 27 Vet. App. 313, 321–22 (2015). Thus, Gray appealed to the U.S. Court of Appeals for the Veterans Claims (“the Veterans Court”). The Veterans Court concluded that the VA’s definition of “inland waterway” was “both inconsistent with the regulatory purpose and irrational,” and remanded the matter to the VA with instructions to redefine inland waterways to be consistent with § 3.307(a)(6)(iii). Gray, 27 Vet. App. at 326–27. In February 2016, the VA published a Memorandum of Changes announcing a revision of the M21-1 Manual regarding the definition of inland waterways. Accordingly, the VA excluded all Navy veterans who served outside the newly defined inland waterways of Vietnam, such as ports, harbors, and open waters, from presumptive service connection for diseases connected with exposure to herbicides. Petitioners sought review of this revision pursuant to 38 U.S.C. § 502.

Question Presented: Whether the Federal Circuit has the jurisdiction to review the February 2016 revision to the M21-1 Manual under 38 U.S.C. § 502.

Holding: No, the Federal Circuit lacks jurisdiction to review the February 2016 revision to the M21-1 Manual under 38 U.S.C. § 502. The petition is dismissed for lack of jurisdiction.

Reasoning: Under 38 U.S.C. § 502, the Federal Circuit has jurisdiction to review only the agency actions that are subject to 5 U.S.C. §§ 552(a)(1) and 553, but not § 552(a)(2). The Federal Circuit recently ruled in Disabled American Veterans v. Secretary of Veterans Affairs (“DAV”), that M21-1 Manual revision is not reviewable under § 502. 859 F.3d 1072, 1074–75 (Fed. Cir. 2017). Although the M21-1 Manual provisions at issue here and those in DAV differ, their scope and binding effect are identical. The ruling in DAV compels the same result in this case.

In DAV, the Federal Circuit ruled that it does not have jurisdiction to review when an action does not have binding effect. The Federal Circuit found in DAV that the M21-1 Manual revision is not a § 553 rulemaking, because it does not carry the force of law. Id. at 1077. The Federal Circuit then held that the revisions in question “clearly fell under” § 552(a)(2), but not § 552(a)(1). Id. at 1078. This is because the M21-1 Manual provisions “[were] interpretations adopted by the agency, not published in the Federal Register, not binding on the Board itself, and contained within an administrative staff manual . . .” Id.

Similarly, the February 2016 revision is an interpretation adopted by the agency and the agency never published the revisions at issue in the Federal Register or the Code of Federal Regulations. Thus, the February 2016 revision does not intend to establish substantive rules. The Board is not bound by the M21-1 Manual. See id. And the revisions are contained within the M21-1 Manual, which is an administrative staff manual. Therefore, the February 2016 revision falls under § 552(a)(2), but not § 552(a)(1). While compliance with the February 2016 revision will impact the concerned veteran, the Board is still not bound to accept adjudications premised on that compliance.

Furthermore, this disposition does not take away petitioners’ right to recourse. For example, when a M21-1 Manual provision adversely impacts a veteran, the veteran can challenge the provison’s validity as regards to the facts of the case under 38 U.S.C. § 7292. DAV, 859 F.3d at 1078. Affected individuals and organizations can also petition the VA for rulemaking. Therefore, the Federal Circuit does not have the jurisdiction to review the February 2016 revision.

Concurring/Dissenting Opinion: Circuit Judge Dyk agreed with the majority’s holding that the Federal Circuit, bound by DAV, lacks jurisdiction to review the February 2016 revision to the M21-1 Manual. However, Circuit Judge Dyk contended that DAV had been wrongly decided. He added that DAV conflicts with Federal Circuit precedent and departs from the approach of other courts of appeals, as below. Additionally, DAV imposes a substantial and unnecessary burden on individual veterans.

In DAV, the Federal Circuit ruled that it lacked jurisdiction because the M21-1 Manual is an  “interpretation adopted by the agency, [1] not published in the Federal Register, [2] not binding on the Board itself, and [3] contained within an administrative staff manual, they fall within § 552(a)(2)—not § 552(a)(1).” 859 F.3d at 1078. However, Circuit Judge Dyk was unconvinced by any of these three arguments. First, whether and where to publish a rule are not relevant in deciding the scope of § 552(a)(1). Second, though not binding on the Board itself, there are circumstances where agency actions are reviewable under § 552(a)(1) because they had a binding effect on parties or entities other than internal VA adjudicators. See Lefevre v. Secretary, Department of Veterans Affairs, 66 F.3d 1191, 1196–98 (Fed. Cir. 1995). Additionally, other circuits have held reviewable agency actions that were binding on subordinate agency officials. See Appalachian Power Co. v. Environmental Protection Agency, 208 F.3d 1015, 1022 (D.C. Cir. 2000). For example, the District of Columbia Circuit found an informally published Clean Air Act guidance which was not subject to notice and comment to be a “final agency action, reflecting a settled agency position which has legal consequences.” Id. at 1020–23. Additionally, the District of Columbia Circuit recognized a Federal Highway Administration investigative training manual to be reviewable. Aulenback, Inc. v. Fed. Highway Admin., 103 F.3d 156, 163–65 (D.C. Cir. 1997). Finally, DAV’s reasoning that § 552(a)(2) and § 552(a)(1) are mutually exclusive is wrong. There is no support for the view that provisions of agency manuals are not rules of general applicability for purposes of § 552(a)(1) just because they are described in § 552(a)(2).

Moreover, precedent from the Supreme Court, other courts of appeals, and the Federal Circuit held that similar agency pronouncements are included under § 552(a)(1) despite appearing within agency manuals. For instance, the Supreme Court ruled that it was necessary to publish the Indian Affairs Manual provisions in the Federal Register pursuant to § 552(a)(1)(D). Morton v. Ruiz, 415 U.S. 199, 232–36 (1974). The 9th Circuit also held that a provision of the Medicare Carrier’s Manual was subject to § 552(a)(1)(D)’s publication. Linoz v. Heckler, 800 F.2d 871, 878 n.11 (9th Cir. 1986). Finally, the Federal Circuit found that provisions of Army Standard Operating Procedures document were subject to § 552(a)(1)(D) publication. NI Industries, Inc. v. United States, 841 F.2d 1104, 1107 (Fed. Cir. 1988).

Circuit Judge Dyk even found the majority’s approach to be inconsistent with the Federal Circuit’s prior rulings that focused on the effect of an agency action rather than its form. For example, the Federal Circuit found a VA letter to be reviewable because a VA letter affects the veteran’s rights. Military Order of the Purple Heart v. Secretary of Veterans Affairs, 580 F.3d 1293, 1296 (Fed. Cir. 2009); see also Coalition for Common Sense in Government Procurement v. Secretary of Veterans Affairs, 464 F.3d 1306, 1316–18 (finding jurisdiction to review a VA letter because of its effect within the agency and on outside parties, but not because of its form).

Therefore, Circuit Judge Dyk concluded that DAV had been wrongly decided because it is inconsistent with the previous rulings of the Federal Circuit and other courts, which have found the provisions of agency manuals and similar documents to be subject to pre-enforcement review.

 

Inventor Holdings, LLC v. Bed Bath & Beyond, Inc.
876 F.3d 1372 (Fed. Cir. 2017)
Authored by Elizabeth LoPresti

Statement of Facts: Inventor Holdings, LLC (“Inventor Holdings”) was assigned U.S. Patent No. 6,381,582 (“the ’582 patent”) as part of a corporate restructuring in September 2013. Compl. ¶ 11. The ’582 patent concerns remote payment processing; it describes a method for allowing consumers to pay locally for goods purchased remotely. The ’582 patent describes a system where a remote seller is connected to a local point-of-sale (“POS”) system through an internet connection, which allows customers to purchase goods from a remote seller and pay for those goods at a local retailer. That is, the ’582 patent provides a method for allowing consumers to place orders online, receive an order code, and take the order code in-store to complete the purchase without entering credit card information online or over telephone.

In April 2014, Inventor Holdings sued Bed, Bath & Beyond, Inc. (“Bed, Bath & Beyond”) alleging its “order online Pick Up In A Store” purchase option infringed the ’582 patent. Two months later, the United States Supreme Court issued its decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014). Alice stands for the proposition that a patent-ineligible concept, such as an abstract idea, cannot transform into a patent-eligible invention merely by requiring generic computer implementation. 134 S. Ct. at 2357. Bed, Bath & Beyond successfully argued in the district court and on appeal that the ’582 patent described only an abstract idea implemented through generic computer technology and was therefore invalid under 35 U.S.C. § 101.

Bed, Bath & Beyond’s subsequent motion to recover attorney fees pursuant to 35 U.S.C. § 285 forms the basis of this appeal.

Procedural History: On April 8, 2014, Inventor Holdings filed a complaint against Bed, Bath & Beyond in the United States District Court for the District of Delaware alleging infringement of the ’582 patent. Appellant’s Opening Br. 1, 4. Bed, Bath & Beyond filed a motion for judgement on the pleadings pursuant to Fed. R. Civ. P. 12(c), arguing that the Supreme Court’s decision in Alice made clear that the ’582 patent was invalid under 35 U.S.C. § 101 because its claims were directed to an abstract idea. The district court found that the ’582 patent was analogous to that invalidated in Alice and granted Bed, Bath & Beyond’s § 101 motion on August 21, 2015.

Bed, Bath & Beyond then moved for an award of attorney’s fees under 35 U.S.C. § 285, which provides that the “court in exceptional cases may award reasonable attorney fees to the prevailing party.” Inventor Holdings argued that this case is not exceptional because § 101 is an evolving area of law, making patent-eligibility analyses difficult and uncertain. However, the district court found that this was an exceptional case because Inventor Holdings had an obligation to re-evaluate its case post-Alice, recognize the ’582 patent was objectively patent-ineligible, and move to dismiss the case. The district court granted the fees motion and awarded Bed, Bath & Beyond $931,903.45 for fees incurred after the Alice decision was handed down on June 19, 2014. This appeal timely followed.

Questions Presented: First, whether the district court abused its discretion by granting Bed, Bath & Beyond’s § 285 motion for attorney fees when fee awards are authorized only in exceptional cases. Second, whether Alice worked a significant change in § 101 law.

Holding: First, no. The district court acted within the scope of its discretion. Second, yes. As applied to the particular facts of this case, Alice worked a significant change to § 101 law. The Federal Circuit affirms the district court.

Reasoning: The Federal Circuit first declared that granting attorney fees in this case was not an abuse of discretion because weakness of litigation position and the need to deter wasteful future litigation, the grounds relied upon by the district court, can render a case exceptional under § 285. The Federal Circuit then analyzed the strength of Inventor Holdings’ patent infringement claim in light of Alice.

The Federal Circuit articulated the standard for exceptional cases under § 285. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), the Court explained that an exceptional case under § 285 is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” 134 S. Ct. at 1756. The district court based its fee award entirely on the weakness of Inventor Holdings’ argument post-Alice and the need to deter wasteful litigation on similarly weak arguments in the future. The Federal Circuit held that the district court did not abuse its discretion by relying on these grounds to award attorney fees and proceeded to demonstrate the weakness of Inventor Holdings’ § 101 claims post-Alice.

The Federal Circuit applied the two-step Alice test for patent eligibility to the ’582 patent. The Alice test first asks what abstract idea is represented in the patent’s claims, then whether the claims add significantly more to transform the abstract idea into a patent-eligible invention. The Federal Circuit held that the district court correctly found that the claims of the ’582 patent are directed to an abstract idea, that is, “local processing of payments for remotely purchased goods.” The Federal Circuit then held that the remaining claims of the ’582 patent contained only generic computer implementation of that abstract idea and therefore lacked the requisite inventive concept to rescue the patent under § 101.

The Federal Circuit dispensed with Inventor Holdings remaining arguments. Inventor Holdings argued that Alice did not work a fundamental change on § 101 jurisprudence so as to render the ’582 patent clearly invalid. However, the Federal Circuit disagreed. The court found that Alice explained a previously “less than clear” area of computer-implemented business transaction inventions and that the ’582 patent was “plainly invalid in view of Alice and its reasoning.” 876 F.3d at 1379. The Federal Circuit held that it is the plaintiff’s responsibility to continually reassess its case in light of new precedent and, because Inventor Holdings failed to reassess the weakness of its case in light of Alice, the district court did not abuse its discretion in awarding Bed, Bath & Beyond attorney fees accrued post-Alice.

 

BASF Corp. v. Johnson Matthey, Inc.
875 F.3d 1360 (Fed. Cir. 2017)
Authored by Karl Lindgren

Statement of Facts: In 2014, BASF Corporation sued Johnson Matthey for infringement of its patent, No. 8,524,185 (“the ’185 patent”). The patent is a diesel fuel filtration system which includes several interrelated parts. The major controversy is the definiteness of description of one aspect of the patent. Specifically, the patent describes a catalytic coating to filter exhaust gas containing nitrogen oxide. This chemical reaction may be done through many different catalyzing agents (a limitless number), which were not enumerated in the patent, nor limitations in relation to which chemicals might be used. Johnson contended that this lack of definiteness rendered the patent indefinite; BASF contended that this is only an aspect of a greater invention, and that the controverted portion of the patent was not indefinite for a person in the industry of ordinary skill to ascertain which reactions were meant to be included.

Johnson Matthey made two specific points: first, that the language lacked an objective boundary as to the degree of effectiveness; and, second, regarding how the level of certainty is determined. Johnson Matthey’s expert testimony put forth that these forms of chemical reactions could be done through a multitude of methods, and the lack of specification makes the patent overly broad, or imprecise. BASF responded through its own expert testimony that the term would be ordinarily understood in the context of treating engine exhaust gas.

Procedural History: The district court entered a judgement of indefiniteness in favor of Johnson Matthey, deciding that “effective for catalyzing/effective to catalyze” is indefinite language and, as such, infringements cannot proceed on that basis. BASF appealed. 875 F.3d 1360, 1366. The Federal Circuit reversed on the law and remanded for further proceedings.

Question Presented: Does the language “composition . . . effective to catalyze” have a definite meaning under the standard set forth in Nautilus, Inc. v. Biosig Instruments, Inc.?

Holding: Yes, the language used in the ’185 patent, “composition…effective to catalyze”, is clear enough that a person of ordinary skill would be reasonably certain as to which reactions would qualify in regard to the catalyzation aspect of the patent. The uniqueness which warrants the patenting comes from the overall structure of the invention rather than the “choice of materials.” The Federal Circuit overturned the district court, finding a judgment of indefiniteness unsupported.

Reasoning: The Federal Circuit gives a specific rebuttal to the district court’s determination, as well as gives a more general rationale for overturning the judgment of indefiniteness. The specific rebuttal is based upon the standard set by the Supreme Court in Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124 (2014), where the Court held that uncertainty is judged “in light of the specification delineating the patent, and the prosecution history” where the scope of the invention is not reasonably certain. Johnson Matthey was required to prove, by clear and convincing evidence, the patent’s indefiniteness. The Federal Circuit found that enumerating every possible catalyst for oxidation was unnecessary given the explanation of function, and the ordinary skill of those examining the patent.

More generally, the Federal Circuit’s reasoning appeared fundamentally guided by the related point that the invention’s novelty was not dependent on the contested portion. Essentially, the indefiniteness of the catalyzing agent portion of the invention did not make the patent indefinite overall. 875 F.3d 1360, 1367 (“the specification makes clear that it is the arrangement of the SCR and AMOx catalysts, rather than the selection of particular catalysts, that purportedly renders the inventions claimed in the ’185 patent a patentable advance over the prior art”) (emphasis added). In light of the modest controversy, relative to the overall structure and advances of the patent, it was reasonable to assume that an ordinary chemist would be reasonably sure what catalysts were included, and that the ambiguity was not sufficient to warrant a judgment of indefiniteness.

Alpine PCS, Inc. v. United States
878 F.3d 1086 (Fed. Cir. 2018)
Authored by Nicole Monteith

Statement of Facts:  Following a spectrum-license auction in 1996, the Federal Communications Commission (“FCC”) awarded plaintiff-appellant Alpine PCS, Inc. (“Alpine”) two 10-year licenses for the provision of wireless telecommunications services. In exchange for the licenses, Alpine issued promissory notes to the FCC assuring quarterly payments of the contract amount. Additionally, Alpine executed security agreements designating the licenses as collateral. The terms of the finance instruments provided that the Communications Act of 1934 (the “Communications Act”), as amended, FCC Orders and Regulations, as amended, and federal law should govern each instrument.

In January 2002, Alpine defaulted on its payment obligations to the FCC. At the time of default, the applicable regulations provided licensees a 90-day non-delinquency period, followed by an additional 90-day grace period, during which time a licensee could redeem its license. 47 C.F.R. § 1.2110(g)(4)(i)–(ii) (2000). If any licensee failed to pay the total amount due by the end of the grace period, the FCC would declare the licensee in default and cancel the license(s) at issue. Id. § 1.2110(g)(4)(iii)–(iv).

Following the 180-day grace period, the FCC unilaterally canceled Alpine’s spectrum licenses. In January 2016, Alpine filed suit against the United States under the Tucker Act, 28 U.S.C. § 1491(a)(1) (the “Tucker Act”), in the United States Court of Federal Claims. Alpine asserted: (1) the FCC’s regulatory taking of property in canceling its license under the amended regulations constituted a violation of the Fifth Amendment of the United States Constitution (the “takings claim”) and (2) various breach of contract claims.

Procedural History: The Court of Federal Claims (the “claims court”) dismissed each claim for lack of jurisdiction. Having determined that the takings claim was filed outside of the time allotted by the six-year statute of limitations set forth in 28 U.S.C. § 2501, the claims court dismissed the takings claim as untimely. The claims court additionally determined that the Communications Act preempts the Tucker Act for breach of contract claims. The Communications Act explicitly directs licensees harmed by FCC license modifications and revocations to seek judicial relief from the United States Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”).  Alpine appealed to the Federal Circuit.

Questions Presented: First, whether Alpine’s contract claims fall within the purview of § 402(b) of the Communications Act, effectively preempting the Tucker Act and rendering the trial and appellate courts without jurisdiction to hear and decide Alpine’s breach of contract claims. Second, whether the taking, if any, occurred within the six-year statute of limitations, giving rise to a claim for just compensation under the Tucker Act.

Holdings: Yes. Alpine’s breach of contract claims challenging the FCC’s ability to revoke the spectrum licenses falls “squarely within” § 402(b) of the Communications Act, thus limiting judicial review of the FCC’s decision to the D.C. Circuit. The court did not decide the second question presented.  While the parties’ appellate briefs contested the timeframe for when the taking occurred, the Federal Circuit determined that the Communications Act displaced the Tucker Act jurisdiction with regards to the takings issue, thus rendering any examination of timeliness moot for the purposes of this appeal. The Federal Circuit affirmed the claims court.

Reasoning: In rendering its decision, the Federal Circuit examined the purpose of the Tucker Act, as well as the United States Supreme Court’s interpretation of the Act. Foundationally, the Tucker Act provides the Court of Federal Claims jurisdiction over claims against the United States, which are based upon either constitutional or contractual challenges. Notwithstanding this relatively broad jurisdictional power, in United States v. Bormes, the Supreme Court limited the scope of the Tucker Act to serve only a “gap filling role” by allowing only claims “not otherwise judicially enforceable” to be brought under the Tucker Act. 568 U.S. 6, 12–13 (2012). Thus, where Congress provides a specific and comprehensive scheme for review of administrative and judicial decisions, the Court of Federal Claim’s jurisdiction under the Tucker Act is displaced.

Ultimately, the Federal Circuit determined that Alpine’s takings and breach of contract claims were preempted by the Communications Act, because such claims fell squarely within § 402(b) of the Act. The Communications Act § 402(b)(5) explicitly provides that FCC “decisions and orders” be appealed to the D.C. Circuit. Though Alpine argued that it was contesting the breach of contract that resulted in the revocation of its licenses, rather than the revocation itself, the Federal Circuit found this distinction unpersuasive. Provided the explicit and comprehensive scheme for relief found in § 402(b), the Federal Circuit held that the D.C. Circuit had exclusive jurisdiction over issues pertaining to both the FCC’s licensing determinations and the applicable rules it consults when rendering such licensing decisions.

After concluding that Alpine’s contractual claims were preempted by the Communications Act, the Federal Circuit, acting sua sponte, similarly determined that Alpine’s taking claims were preempted on the same grounds. The Federal Circuit determined that though the parties raised the issue of timeliness in their appellate briefs, the court need not decide the issue due to displacement by the Communications Act. Instead, the Federal Circuit held that the Communications Act encompasses a “comprehensive statutory scheme” through which “Alpine could have raised a constitutional takings claim; the FCC had the authority to grant relief; and the D.C. Circuit had jurisdiction to review whether a taking occurred and, if so, whether the FCC decision yielded just compensation.” Alpine PCS, Inc., 878 F.3d 1086 at 1098 (citing Williamson County, 473 U.S. 172, at 194 (1985)).

 

 

 

Advanced Video Techs., LLC v. HTC Corp.
879 F.3d 1314 (Fed. Cir. 2018)
Authored by Nalini Mummalaneni

Statement of Facts: The U.S. Patent No. 5,781,788 (“the ’788 patent”), subject to an infringement suit, has three co-inventors. When the parent application of the ’788 patent was filed, two of the inventors assigned their co-ownership interests to AVC Technology Inc. (“AVC”), but the third inventor, Ms. Hsiun, refused to do so. AVC filed a petition before the U.S. Patent and Trademark Office (“PTO”) requesting that it be permitted to prosecute the patent application without an assignment from Ms. Hsiun, offering as evidence of ownership the 1992 Employment Agreement (“Agreement”) executed by Ms. Hsiun. AVC subsequently transferred its ownership interests to Advanced Video Technologies LLC (“Advanced Video”), the appellant in the infringement suit. Advanced Video argued that Ms. Hsiun immediately transferred her ownership interests in the ’788 patent upon execution of the Agreement, pursuant to the three provisions of the Agreement: a will assign provision, a trust provision, and a quitclaim provision. Advanced Video filed three infringement suits against the appellees in the United States District Court for the Southern District of New York (“district court”).

Procedural History: The district court agreed with the appellees and dismissed Advanced Video’s complaint for lack of standing because the co-inventor, Ms. Hsiun, had not assigned co-ownership interest in the ’788 patent pursuant to the Agreement and was not a party to the action. In response to appellees’ motion to dismiss, Advanced Video argued that Ms. Hsiun’s transfer of her ownership interests in the ’788 patent was effected upon execution of the Employment Agreement. Advanced Video appealed to the Federal Circuit.

Questions Presented: First, can the employer rely upon the “will assign,” trust, and quitclaim provisions of an Employment Agreement executed by the employee inventor prior to the filing of the patent application to obtain ownership interests in the patent invented by the employee when the employee refused to assign the rights in the patent to the employer? Second, can a non-consenting co-inventor or co-owner be involuntarily joined in an infringement action?

Holding: No to both. Unless there is a current assignment of ownership rights in the patent under question, the employment agreement executed before such assignment, standing alone, cannot immediately transfer ownership rights in the patent to the employer. A non-consenting co-inventor or co-owner can never be involuntarily joined in an infringement action. The court affirmed the district court’s dismissal.

Reasoning: The Agreement was executed under California law. The “will assign” language in the Agreement did not itself effect an assignment but was merely a promise to assign.

The “will hold in trust” clause created an immediate trust in favor of the assignee employer with Ms. Hsiun as the beneficiary, but did not automatically transfer ownership interests out of the trust in favor of the employer.  In order to be a “real party in interest” to the infringement suit, Advanced Video must obtain complete ownership rights in the ’788 patent by effectuating transfer of invention rights from Ms. Hsiun (for example, by bringing a suit against Ms. Hsiun for breach of her duties as a trustee). Alternatively, Ms. Hsiun could be made a party to the infringement suit or could consent to the suit.

The quitclaim provision waives Ms. Hsiun’s rights to interests in any patent rights that she assigned under the Agreement, but the ’788 patent rights were never actually assigned. Therefore, the Agreement was insufficient to confer standing to Advanced Video. Because Advanced Video does not have full ownership of the ’788 patent and Ms. Hsiun is neither a party to the suit nor has consented to the suit, Advanced Video has no standing to maintain the infringement suit against the appellees.

Concurring Opinion: Judge O’Malley concurred in the judgement, agreeing with the majority’s application of California law to interpret the Agreement, but disagreed with the majority’s opinion that a non-consenting co-inventor or co-owner could never be involuntarily joined in an infringement action. Judge O’Malley called for a change in Federal Circuit’s precedent to allow involuntary joinder of a non-consenting co-inventor or co-owner in patent infringement suits pursuant to Rule 19 of the Federal Rules of Civil Procedure. To support her argument, Judge O’Malley explained that the criteria for assessing joinder in patent cases, like any other federal civil actions, are governed by Rule 19 and not by substantive judge-made laws. Judge O’Malley examined Rule 19, pertinent case law, and the Patent Act to conclude that the Federal Circuit’s precedent lacks statutory basis and is inconsistent with the Patent Act. Rather than exempting patent cases from the rules governing mainstream federal litigation, Judge O’Malley further suggested that the Federal Circuit reconsider, en banc, the Federal Circuit’s Rule 19 precedent, and either clarify the basis for such a precedent or hold that the involuntary joinder provisions of Rule 19 apply to patent cases.

Dissenting Opinion: Judge Newman dissented, arguing that Ms. Hsiun never had co-ownership rights because the Agreement placed ownership of Ms. Hsiun’s inventions with the employer.  PTO accepted the Agreement as proof of assignment of ownership rights by Ms. Hsiun to the employer and Ms. Hsiun never asserted her ownership interests in the ’788 patent.

Judge Newman opined that, according to the Agreement, the trust vested immediately upon creation of an invention, and that the beneficiary could act on behalf of the trust if the trustee were absent or inactive. The quitclaim provision of the Agreement demonstrates a mutual intent and understanding that Ms. Hsiun retained no ownership of patents on her inventions.