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

July 1, 2014

Overview

Hill-Rom – A divided panel reverses the district court's claim construction on several grounds, including improperly reading limitations from the specification into the claims and improperly invoking judicial estoppel to limit the claims.

Nintendo - The Circuit determines that the Eastern District of Texas abused its discretion ‎in denying a motion to sever and transfer a patent infringement case against Nintendo and its customers to the Western District of Washington when all of the identified witnesses reside in the transferee forum.

Ceats – The Circuit refuses to throw out a judgment despite finding the ‎court-appointed mediator acted improperly by failing to disclose "an ‎endearing social relationship" with a law firm and attorney who ‎represented the defendants in the mediation and in the subsequent trial. ‎

Hill-Rom Services, Inc. et al. v. Stryker Corporation et al., Fed. Cir. Case 2013-1450 (June 27, 2014)

Hill-Rom, the owner of several patents directed to systems for monitoring the status of hospital beds, asserted its patents against Stryker. Following claim construction, the district court granted summary judgment that Stryker did not infringe the asserted claims. Hill-Rom appealed, arguing that the district court's judgment was premised on erroneous claim construction.

Judges Moore and Schall agreed with Hill-Rom, concluding that the district court had failed to give the claims terms "their plain and ordinary meanings to one of skill in the art when read in the context of the specification and prosecution history." Only two exceptions to this general rule were recognized: "1) when a patentee sets out a definition and acts as his own lexicographer, or 2) when the patentee disavows the full scope of the claim term either in the specification or during prosecution." The first exception only occurs when the patentee "clearly set[s] forth a definition of the disputed claim term other than its plain and ordinary meaning" and "must clearly express an intent to redefine the term." The second exception requires that "the specification or prosecution history make clear that the invention does not include a particular feature." Simply disclosing a single embodiment in the specification does not imply that the claims of the patent must be construed as being limited to that embodiment unless the patentee has used words or expressions of manifest exclusion or restriction.

The opinion helpfully provided several examples of behavior that may constitute disavowal:

  • "when the preferred embodiment is described in the specification as the invention itself"
  • "when the patentee makes statements such as 'the present invention requires…' or 'the present invention is…' or 'all embodiments of the present invention are…'"
  • "when the specification indicate[s] that for 'successful manufacture' a particular step was 'require[d]'"
  • "when the specification indicated that the invention operated by 'pushing (as opposed to pulling) forces,' and then characterized the 'pushing forces' as 'an important feature of the present invention'"
  • "when the patent repeatedly disparaged an embodiment as 'antiquated,' having 'inherent inadequacies,' and then detailed the 'deficiencies [that] make it difficult' to use"
  • "when the specification described [a] features as a 'very important feature…in an aspect of the present invention' and disparaged alternatives to that feature"

One disputed claim term, "a datalink," was construed by the district court to require a cable connection. The Circuit disagreed, construing the term as "a wired or wireless link that carries data," and found that the absence of an embodiment teaching a wireless receiver does not prevent the claimed datalink from being given its plain and ordinary meaning at the relevant time. The Circuit particularly rejected the district court's contention that, if "datalink" were construed to include wireless links, the claims at issue would not be enabled. Instead, the majority stated that where the meaning of a claim term is clear, it will not rewrite the claim to preserve its validity, and advised that courts should be cautious not to allow claim construction to morph into a mini-trial on validity.

Another disputed claim term, "bed condition message," was construed by the district court to be limited to "a message not generated in response to any user request…" based on statements made during the prosecution of a later Hill-Rom patent that did not claim priority to the patents-at-issue. The majority noted that, for judicial estoppel to apply: "1) a party's position must be clearly inconsistent with an earlier position taken; 2) the party must have prevailed on the basis of the earlier position; and 3) the party asserting the inconsistent position would derive an unfair advantage… if not estopped." The Circuit rejected the application of judicial estoppel here, citing Pfizer, Inc. v. Ranbaxy Laboratories, Inc., 457 F.3d 1285, 1290 (Fed. Cir. 2006) as holding that "statements made during prosecution of [a] later, unrelated… patent cannot be used to interpret claims of [an earlier] patent." The Circuit also noted that Hill-Rom's statements during prosecution of the later patent were themselves internally inconsistent, and consequently, were not clearly inconsistent with Hill-Rom's proposed construction.

Judge Reyna dissented as to the Circuit's construction of "datalink," giving weight to the fact that all embodiments of the datalink discussed in the specification referred to a wired link, also pointing out that Hill-Rom later filed a patent application whose purported point of novelty was the use of a wireless link and which characterized the patents-at-issue as being limited to a "wired connection." Finally, Judge Reyna found Hill-Rom's expert testimony lacking any connection to the state of the art at the time of filing, and unpersuasive for its lack of any supporting documentary evidence.

In re Nintendo of America, Inc., Fed. Cir. Case 2014-132 (June 25, 2014)‎

The Circuit determines that the Eastern District of Texas abused its discretion ‎in denying a ‎motion to sever and transfer a patent infringement case against Nintendo and its customers to the ‎Western District of Washington when all of the identified witnesses reside in the transferee ‎forum and plaintiff, "a company that acquires, licenses, and enforces patents," only opened ‎a small office in the Eastern District immediately before it started filing infringement actions. ‎

Secure Axcess brought this ‎suit in the Eastern District of Texas, charging Nintendo and eleven retailer ‎defendants (the "Retailers") with patent infringement. The district court denied the ‎motion of Nintendo and the Retailers to sever and stay the claims against the ‎Retailers, and transfer the separated action against Nintendo to the Western District ‎of Washington. The district court based its denial on Secure Axcess' assertion it could ‎obtain a higher royalty against the Retailers than it could against Nintendo. The court determined that it should not sever the claims because plaintiffs should ‎be allowed to pursue Nintendo and the Retailers simultaneously for an ‎award of damages, even though it may only collect once." Having decided against ‎severance, the district court held that the request for transfer must be denied. ‎

The panel noted that, pursuant to 28 U.S.C. § 1404(a), a district court is authorized ‎to transfer any civil action to any other district where it might have been brought. ‎Where, as here, it is unclear whether the entire action could have been brought in ‎the transferee venue, courts may sever defendants for purposes of transfer. ‎‎ ‎

Nintendo coordinates the manufacture and marketing of its products from its ‎Redmond, Washington campus, where it employs approximately 830 persons. According to Nintendo, sales and marketing decisions ‎concerning the accused products are made in Redmond, and this is where it ‎maintains documents relating to finance, sales, licensing, contracts, advertising, and ‎product development. Plaintiff's executives work in various parts of the country, ‎but its officers' business cards list its principal ‎place of business in Plano, Texas. This is where Secure Access leased 200 square feet of office space ‎before beginning to file patent infringement suits in the Eastern District. Although two ‎of the eleven Retailers are headquartered in Texas, none maintains principal ‎operations in the Eastern District or had any information relating to the ‎development or design of the accused Nintendo products. ‎

The panel compared the present action to the situation where ‎a patent owner files an infringement suit against a manufacturer's customer and the ‎manufacturer then files an action of noninfringement or patent invalidity, noting that the manufacturer's action generally take precedence. This "customer-suit" exception to ‎the "first-to-file" rule exists to avoid, if possible, imposing the burdens of trial on ‎the customer, for it is the manufacturer who is generally the true defendant in the ‎dispute. ‎

Secure Axcess maintains that its choice of forum is entitled to deference because it is ‎filing in its home venue. However, according to the panel, decisions granting transfer have looked beyond ‎the connection of the parties with the transferor venue when the disparity of ‎convenience is so marked as to outweigh the plaintiff's right to choose the forum. ‎Secure Axcess' argument regarding the pursuit of higher royalty rates from the Retailers is ‎outweighed where, "although there ‎may be additional issues involving the defendants in the customer action, their ‎prosecution will be advanced if the plaintiff is successful on the major premises ‎being litigated in the manufacturer litigation, and may well be mooted if the plaintiff ‎is unsuccessful."

The panel therefore ruled that the district court should have exercised its discretion ‎to grant the petition, and issued the writ of mandamus directing the district court to ‎sever the Retailers and transfer the case against Nintendo to the Western District of ‎Washington.

Nintendo is similar to In re Toyota Motor Corp., 747 F.3d 1338 (Fed. Cir. 2014)where the Circuit also ruled that the E.D. of Texas abused its ‎discretion ‎in denying a motion to transfer where there were no factors that favored ‎keeping the ‎claims against Toyota in the transferor forum and where ‎several factors favored the transferee ‎forum. It also brings to mind the denial of a writ of mandamus in In re Apple Inc., 743 F.3d 1377 (Fed. Cir. 2014).

Nintendo, Toyota and Apple all demonstrate that in both opposing and ‎advocating ‎for a motion to transfer, the parties must provide detailed accounts of how ‎witnesses ‎and evidence are going to be more conveniently obtained in ‎either the transferor or transferee ‎forum. Nintendo identified several witnesses it was going to call who were based in the ‎transferee forum and the opinion did not cite to any Secure Access witnesses that resided in ‎Texas. The Nintendo decision also suggests that it will be difficult for non-practicing-entity ‎plaintiffs to maintain jurisdiction in the forum of their choosing unless they really have a presence ‎and can point to critical witnesses in that forum.‎

Ceats, Inc. v. Continental Airlines et al., Fed. Cir. Case 2013-1529 (June 24, 2014)

A former Magistrate Judge Robert Faulkner was appointed by the district court to mediate a patent infringement case. After the parties failed to reach a settlement during mediation, the case went to trial where a jury found that Ceats' patents were infringed, but invalid. Shortly after the district court entered final judgment of invalidity, Ceats learned about an unrelated litigation ("the Karlseng litigation") that the mediator had a relationship with the Fish and Richardson firm and one of defendants' attorneys, Brett Johnson, a partner in the Fish in the firm.

The Karlseng litigation was an arbitration conducted in Texas by Faulkner, who was a member of a JAMS panel. Pursuant to JAMS rules, Faulkner disclosed that he previously had participated in arbitrations and mediations with the named Fish attorneys, but disclosed no other contacts with them. Shortly after this disclosure Johnson made his first appearance in the case. Faulkner made no changes to his general disclosure form, and during the arbitration Faulkner acted as if he had not met Johnson previously. In the arbitration, Faulkner issued a ruling in favor of Fish's client for $22 million. After learning that Faulkner and Johnson were, in fact, previously acquainted, opposing counsel asked to conduct discovery regarding the nature of their relationship. This request was challenged by Fish but was ultimately allowed by the Texas appellate court. Faulkner and Johnson were both deposed, where it was learned that Faulkner and Johnson had "an enduring social relationship [that] ... included expensive outings and gifts, and an active business relationship between Faulkner and the Fish firm." Between the first two mediation sessions in this case—the Texas court of appeals issued its decision vacating the arbitration award, finding that Faulkner's failure to disclose his relationship with Johnson violated his obligations as an arbitrator and tainted the arbitration award.

After the Circuit affirmed the invalidity of Ceats' patents, Ceats filed a motion for relief from the judgment pursuant to Rule 60(b) based on a relationship between Faulkner, Johnson and the Fish firm. The district court denied Ceats' Rule 60(b) motion based on its ruling that the mediator was not required to have disclosed his relationship with the Fish firm.

The Circuit panel determined that the district court erred in finding that a reasonably objective person would not have wanted to consider circumstances surrounding the Karlseng litigation when deciding whether to object to Faulkner's appointment as mediator in this case. In this case, at the same time Faulkner served as the court-appointed mediator, the Faulkner-Johnson-Fish relationship was directly at issue in a state appellate court. Importantly, this meant that Fish, as a firm, was actively defending Faulkner's personal disclosure decisions while he was mediating this case. Despite the absence of a formal attorney-client relationship, Fish's ongoing defense of Faulkner's award reasonably could give rise to the appearance impropriety. Though the record does not reveal any coordination between Fish and Faulkner, the mere fact that Faulkner testified in support of the arbitration award and was asked, not just about his relationship with Johnson, but with the Fish firm and its clients as well, further emphasizes the need for disclosure on these facts.

Furthermore, the Texas appeals court's decision holding that Faulkner breached his disclosure obligations in the Karlseng litigation was released between the first two mediation sessions in this case, and well before the third. Thus, the state court found that the Faulkner-Johnson-Fish relationship was a disqualifying, social and business relationship, which "could reasonably be seen as raising a question about the mediator's impartiality" while this case was ongoing.

In the Fifth Circuit, the party seeking relief under Rule 60(b)(3) must prove by clear and convincing evidence "(1) that the adverse party engaged in fraud or other misconduct, and (2) that this misconduct prevented the moving party from fully and fairly presenting his case." While the panel expressed concern about failing to provide a remedy for a mediator's non-compliance with disclosure requirements, the panel agreed determined that Ceats failed to ‎show a meaningful risk of injustice in this case. Although Faulkner should have disclosed the ‎circumstances surrounding the Karlseng litigation and his ‎relationship with the Fish firm, the panel determined ‎that Ceats was able to fully and fairly present its case before an impartial judge and jury. There is no ‎evidence in the record that suggests that Faulkner wrongfully disclosed confidential information. ‎Because of this, the panel affirmed the district court's finding that Ceats is not entitled to relief under Rule 60(b)(3).

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