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Fresh From the Bench: Recent Patent Cases From the Federal Circuit

March 31, 2014

Overview

Shire – The Circuit continues the trend since Ballast Lighting to reverse claim constructions – here the district court's overly broad construction was inconsistent with the ordinary meaning of the terms, the logical reading of the claim, and the specification.

StoneEagle – A declaratory judgment action is dismissed for lack of subject matter jurisdiction where the sole basis for the action was that the defendant claimed he had written the patent application for the patent at issue, but never claimed he was an inventor.

Shire Development, LLC v. Watson Pharmaceuticals, Inc., Fed. Cir. Case 2013- 1409 (3/28/2014)

The district court construed "inner lipophilic matrix" to mean "a matrix including at least one lipophilic excipient, where the matrix is located within one or more substances." Similarly, the court construed "outer hydrophilic matrix" as "a matrix of at least one hydrophilic excipient, where the matrix is located outside the inner lipophilic matrix." According to the panel, a review of the intrinsic evidence as a whole reveals that the district court's construction of each phrase was overly broad.

Looking first to the language of the claims, "lipophilic" is an adjective that modifies matrix. The parties stipulated that "lipophilic" means "poor affinity towards aqueous fluids." Thus, the matrix—not just an excipient within the matrix—must exhibit the stipulated-to lipophilic characteristic.

Referring to the claim structure, the claims require the inner lipophilic matrix to be separate, if not distinct, from the outer hydrophilic matrix. Element (a) of claim 1 recites "an inner lipophilic matrix." Element (b) of claim 1 separately recites "an outer hydrophobic matrix." The separation of these elements within the claims indicates that the claim requires two separate matrices. Moreover, a logical reading of the claim requires separation between the matrices because the matrices are defined by mutually exclusive spatial characteristics—one inner, one outer—and mutually exclusive compositional characteristics—one hydrophilic, one lipophilic.

This conclusion is bolstered by the specification, which explains that a lipophilic matrix is one in ‎which the main component exhibits certain lipophilic properties, and that a lipophilic matrix ‎generally entails non-linear, but exponential release of the active ingredient. Thus, a "lipophilic ‎matrix" is more than just a matrix with at least one lipophilic excipient — the matrix itself must ‎exhibit lipophilic characteristics. The patent teaches that this occurs when "the main component ‎of the matrix structure" is lipophilic. ‎

The compositions of the inner volume and outer volume, i.e., inner matrix and outer matrix, are further limited by the Markush groups. During prosecution, applicants added Markush groups to overcome the examiner's rejection of the claims as obvious. The lack of overlap of the two Markush groups supports the requirement that the volumes be separate.

Accordingly, the panel reversed the district court's constructions and subsequent infringement determination, and remanded the case.

This decision continues the trend of claim construction reversals since Ballast Lighting confirmed that claim ‎construction is still to be decided de novo (See Vederi, E2Interactive, Ancora, Butamax, Frans Nooren ‎and Starhome, with only the Bose and Novatek cases (Novatek, a nonprecedential decision, also being decided last week) affirming claim construction of the lower court). This trend is interesting because the amici who argued in favor of maintaining de novo review in Ballast Lighting noted that recent reversal trends showed that far fewer than 50% of claim construction rulings resulted in reversals. If the trend of the past month continues, it might encourage the Supreme Court to accept certiorari and consider whether de novo review is too wasteful of litigants' and lower court resources. ‎

StoneEagle Services, Inc. v. David Gillman et al., Fed. Cir. Case 2013-1248 (3/26/2014)

The Circuit, per Chief Judge Rader, ruled that the district court never had subject matter jurisdiction over a declaratory judgment claim and thereby vacated a preliminary injunction that barred defendants from using materials or processes developed by StoneEagle because there was no actual controversy regarding plaintiff's inventorship claim.

Gillman and StoneEagle's principal Allen teamed up to adapt StoneEagle's electronic payment system to process health care claims, agreeing that StoneEagle owned the technology. Gillman helped draft a patent application to the system, which named Allen the sole inventor.

About a year later the relationship between Allen and Gillman soured. At a meeting with potential investors Gillman became upset when he learned that the investors considered the patent to be very valuable. He claimed it was his patent, ‎"that he wrote the patent, that it is on his computer, and ‎that he ‘authored' or ‘wrote' it, or words to that effect." Gillman allegedly threw down his business cards and left the ‎meeting. Shortly thereafter StoneEagle sued, seeking a declaratory judgment that Allen was the sole inventor and owner of the patent, and moving for injunctive relief based on a state trade secret misappropriation claim. The district court granted StoneEagle's motion for preliminary injunction, ordering defendants to refrain from using materials or processes developed by StoneEagle in ‎connection with the health care payment system.

On appeal the defendants admitted that Gillman was not an inventor, arguing that there was no actual controversy regarding StoneEagle's invention claim, the sole claim in StoneEagle's complaint arising under federal law. The panel agreed, first noting that the case involves both ownership and inventorship, but ownership is typically a question of state, not federal, law. Therefore, the case turns on whether the complaint sets forth a sufficient controversy concerning inventorship. According to the panel:

This court has stated that assistance in reducing an ‎invention to practice generally does not contribute to ‎inventorship. In this case, the most favorable inference from the record in favor of StoneEagle shows only that Gillman assisted in constructively reducing an invention to practice. Those activities confer no more rights of inventor‎ship than activities in furtherance of an actual reduction to practice. Otherwise, patent attorneys and patent ‎agents would be co-inventors on nearly every patent. Of ‎course, this proposition cannot be correct.‎ (citations deleted)

The Circuit thus vacated the proceedings below, including the preliminary injunction, and instructed the district court to dismiss the case for lack of subject matter jurisdiction.

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