Fresh From the Bench: Recent Patent Cases From the Federal Circuit
Every week or so we will continue to provide summaries of cases we think clients might find of interest and pertinent to their business. If you have any questions about the information provided in these case summaries or wish to discuss them further, please contact the Schwabe patent attorney with whom you currently work, or contact Peter Heuser at 503-796-2424 or email@example.com.
Fresenius USA, Inc. v Baxter Intl. Inc., Fed. Cir. No. 2012-1334, rehearing petition denied 11/5/2013
PTO reexamination invalidation of patent renders $24 million verdict unenforceable.
Patent validity will always be subject to PTO decisions on patentability until a final court judgment is rendered in which all issues are resolved. The Circuit denied a motion for rehearing en banc on a 6-4 vote, thus affirming a Federal Circuit panel decision throwing out a $24 million patent infringement award after more than ten years of litigation.
Several years after initiation of litigation in court, Fresenius filed a reexamination request in the PTO. Baxter prevailed in the district court and in the Federal Circuit, but the Circuit had remanded the decision to the district court to render a final judgment. The PTO Board of Appeals had the benefit of the district and Circuit decisions but held that the patent was invalid for obviousness. A Circuit panel had ruled that the Board should take note of the prior court decisions but need not reach the same result. A three judge panel of the Federal Circuit had held that a prior court decision that is final in all respects constitutes res judicata that would permit an award of damages even if the patent was subsequently found invalid by the PTO. In the present case, however, the panel felt that because the decision was not final in all respects when the PTO decision was rendered, the patent should be considered invalid for all purposes and the $24 million did not have to be paid. On the motion for rehearing en banc, a majority of the Circuit judges relied on Supreme Court and Federal Circuit precedent to deny en banc review, therefore holding that the PTO decision superceded court proceedings until a court judgment was final in all respects.
The four judges dissenting from the denial of en banc rehearing argued that the decision was sufficiently final because it was ready for appeal. Judge O'Malley suggested that this decision renders district courts virtually meaningless in deciding issues of patent validity. The majority responded that when Congress established the reexamination procedure, it expected that cancellation of claims during reexamination would be binding in concurrent infringement litigation.
Fresenius is similar to the CEC v. Powerscreen case we handled in which ten years after a jury awarded our client triple damages and attorney fees and the Oregon District Court granted a permanent injunction, the defendant Powerscreen filed a reexamination request in the PTO based upon new prior art it had discovered. The PTO examiner and the Board found the infringed claims to be invalid despite our arguments that collateral estoppel should prevent Powerscreen from being able to challenge validity. In a split decision, the Federal Circuit held, like the majority in Fresenius, that Congress established the reexamination procedure and courts needed to defer to Congress. The majority found it important that the prior art was much closer than the art that was considered during the original trial. Judge Newman dissented, as she did in Fresenius, arguing that the earlier litigation was final in all respects and therefore should constitute collateral estoppel. Notably the judgment was not final in all respects in Fresenius, and that was determinative in that case.
Nonetheless, because the reexamination took 3 years to make it through the PTO and appeal process, the CEC patent was close to expiration by the time the injunction was lifted, and of course CEC was able to keep its damages award. While CEC taught us that the patent validity determination is never really final, Fresenius casts doubt on CEC because of the Fresenius majority's focus on the finality of the court judgment, rather than on the CEC panel's looking to see whether new arguments of validity were being presented.
Apple Inc. v. Samsung Electronics Co., Ltd., Fed. Cir., No. 2013-1129, 11/18/13
Denial of permanent injunction affirmed as to design patents but remanded as to utility patents.
The Federal Circuit held that a clear nexus must be established between infringing sales and irreparable harm, but that the moving party does not need to show that the patented features were the sole reason consumers purchased the infringing product. Moreover, while licensing of the patents in suit and the ability of the defendant to pay are factors to be considered in determining whether or not there is irreparable injury, neither factor should be considered determinative.
The design patents at issue were to Apple's so-called minimalist design consisting of a large rectangular display having rounded corners and a circular button below the display.
The utility patents were directed to (1) the "bounce back" feature in which when a user scrolls in one direction across the face of the device past the edge of an electronic document, the screen bounces back to the document, (2) the "pinch-to-zoom" feature, using two fingers to zoom in or out, and (3) the "double-tap-to-zoom" capability.
The Circuit affirmed the denial of a permanent injunction as to Samsung's smart phones and tablets that had been held to infringe Apple's design patents and trade dress but vacated and remanded the denial of the injunction with respect to Apple's utility patents. The Circuit agreed with the district court that Apple should have to show a causal nexus between Samsung's infringing sales and Apple's irreparable harm. Apple had argued that while causal nexus was an appropriate requirement as to a preliminary injunction, it should not be a requirement for permanent injunctions since the jury verdict constituted a finding that Apple had a property right granting it the right to exclude Samsung from practicing the patent. However, the district court went too far in requiring Apple to show that a patented feature was the sole reason consumers purchased Samsung's products. In any event, the Circuit found that the court did not abuse its discretion in finding that Apple failed to demonstrate a causal nexus between Samsung's infringement of its design patents and Apple's lost market share. As to the district court's finding that Apple failed to demonstrate a nexus under the utility patents, the Circuit instructed the district court to reconsider the evidence, applying the proper test for finding the presence of a nexus.
The district court was also found to have abused its discretion by failing to properly analyze whether damages would adequately compensate Apple for the infringements. Samsung had pointed out its undisputed ability to pay any monetary judgment. The Circuit held that even though an inability to pay may demonstrate the inadequacy of damages, a defendant's ability to pay a judgment does not necessarily defeat a claim for irreparable injury. Where the defendant is able to pay, the Circuit said, courts should look to other factors.
Samsung also argued that damages would be adequate because Apple had licensed the patents to others, and had even offered to license some of its patents to Samsung. The panel found that licensing to others is one factor to be considered but it really only shows that Apple was willing to license the asserted utility patents in some circumstances and that Apple was willing to license some patents to Samsung. Apple argued that some of these licenses were to parties who did not compete in the smart phone space, and that other licenses were to settle pending litigation. While Apple did offer to license Samsung certain patents, it never offered to license the patents in suit to Samsung.
Finally, Apple had appealed the district court's denial of its request for an injunction based on Samsung's prior sale of six smart phones found by the jury to dilute Apple's iPhone trade dress under the Federal Trademark Dilution Act. The district court concluded that there was irreparable harm but denied the injunction because none of those phones was still on the market, nor was there evidence suggesting that Samsung would resume selling them. The Circuit determined that the district court had not abused its discretion in denying Apple's injunction request.