Precedential Patent Cases From the Federal Circuit in the Past Week
Gilead- The panel affirms the grant of a motion for summary judgment by the Eastern District of Virginia that the Director of the PTO properly calculated the Patent Term Adjustment period. Specifically, the panel finds that a reasonable interpretation of the PTA statute is that Congress intended to sanction not only applicant conduct that results in actual delay, but also conduct having the potential to result in delay irrespective of whether such delay actually occurred.
Biax – The Circuit reverses a grant of attorneys' fees for continuing to litigate, in bad faith, what the district court held was an objectively baseless position. The decision is non-precedential but significant since it is the first reversal of a grant of attorney fees since the Octane decision in which the Supreme Court lowered the bar to award attorney fees as being exceptional under 35 U.S.C. 285. Even though it applied the deferential "abuse of discretion" standard of review dictated by the Supreme Court's Highmark decision, the panel concluded that the district court misread the expert's testimony and found that there was nothing unreasonable about Biax's infringement position.
Gilead Sciences, Inc. v. Michelle K. Lee , Fed. Cir. Case 2014-1159 (February 26, 2015)
The term of a patent begins upon issuance and ends 20 years from the filing date. To prevent the patent term from being shortened due to prosecution delays caused by the PTO, Congress enacted provisions under which patent applicants may seek Patent Term Adjustments (PTAs) for prosecution delays caused by the PTO. Specifically, 35 U.S.C. § 154(b) divides PTO actions which cause delay into three general categories. Under category A, a patent owner may seek a PTA if the PTO does not issue a notification under § 132 or provide a notice of allowance under § 151 within fourteen months of an application filing. 35 U.S.C. § 154(b)(1)(A)(i). The statute provides that "the term of the patent shall be extended 1 day for each day" the PTO does not meet its response deadlines. Category B, allows for a one-day extension for each day the PTO fails to issue a patent three years after the actual filing date of the application, subject to certain limitations. Finally, category C accounts for each day of delay due to an interference, secrecy order, or successful appeal.
The statute also accounts for delays attributed to applicant conduct. This appeal involves § 154(b)(2)(C), which reduces PTAs by accounting for delays caused by the patent applicant. Gilead filed its application on February 22, 2008. On November 18, 2009, the PTO issued a restriction requirement, and Gilead responded on February 18, 2010, selecting one of the four groups for examination. While waiting for the PTO to issue a first office action on the merits, Gilead filed a supplemental IDS on April 16, 2010, which disclosed two other co-pending Gilead patent applications. The PTO issued a notice of allowance on July 29, 2011 and the patent issued on April 3, 2012.
The parties agree Gilead is entitled to a PTA as a result of the PTO's failure to meet the statutorily-mandated timeliness requirements of § 154 in issuing the patent. In calculating the appropriate PTA, the PTO issued Gilead 245 days of "A Delay" for its failure to meet the mandated statutory response deadlines and 406 days of "B Delay" for its "failure to issue the patent within three years of the application's filing date." The 651 combined days were subsequently reduced by overlapping and applicant-induced delay. The first reduction amounted to thirty-five days for overlapping delay. See 35 U.S.C. § 154(b)(2)(A). The second reduction was for an additional fifty-seven days. The fifty-seven day reduction was assessed for the period between Gilead's initial reply to the restriction requirement and its filing of a supplemental IDS on April 16, 2010. In total, the PTO granted Gilead a PTA of 559 days.
On October 27, 2011, Gilead contested the PTO's assessment of the fifty-seven day applicant delay. Gilead argued its filing of the supplemental IDS did not cause any actual delay and therefore should not have been subtracted from its PTA. The PTO rejected this argument, countering that the first action was the restriction requirement mailed on November 18, 2009. Therefore, according to the PTO, Gilead's filing of a supplemental IDS after it had filed a response to the restriction requirement constituted a failure to engage in a reasonable effort to conclude prosecution as required by 37 C.F.R. § 1.704(c)(8).
In its appeal to the district court, Gilead argued the PTO's interpretation of 35 U.S.C. § 154(b) was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law and in excess of statutory jurisdiction, authority, or limitation." Because Gilead did not demonstrate that the PTO's interpretation was unreasonable, the district court granted the PTO's motion for summary judgment.
The Circuit reviews a district court's grant of summary judgment de novo. Under the review provision of the Administrative Procedure Act ("APA"), a court may set aside the PTO's actions only if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). When reviewing an agency's statutory interpretation, this court applies the two-step framework established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
Congress Did Not Address the Precise Question at Issue
On appeal, Gilead argues the PTA statute only allows for adjustments in instances where the applicant's conduct actually delays the conclusion of prosecution.
First, Gilead argues § 154(b)(2)(C)(i), which provides that any PTA for PTO delay will be reduced by "the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application", when read in context with surrounding statutory language, requires applicant behavior resulting in actual delay. Second, Gilead points to the statutory purpose and legislative history in order to support the argument that Congress intended to penalize only applicant conduct that causes actual delay.
Step-one of Chevron asks whether Congress "directly addressed the precise question at issue." The district court determined "the precise issue is whether filing a supplemental IDS after submitting a reply to a restriction requirement constitutes a failure to engage in reasonable efforts to conclude prosecution of the application." Adoption of Gilead's interpretation of the statute necessarily leads to an illogical distinction between applicants whose conduct is intended to cause delay, but who nonetheless fail, from those whose conduct incidentally results in causing actual delay. In such a scenario, egregious and obvious delay tactics would remain unsanctioned merely because they do not result in actual delay. Thus, because the legislative history of the statute does not support the finding that Congress aimed to distinguish between patent applicants whose conduct attempts to delay issuance of a patent from those whose conduct actually results in a delay, this court rejects Gilead's attempt to read it into the statute.
Because Congress has not addressed the precise question at issue in this case—whether a failure to engage in reasonable efforts requires conduct that actually causes delay—this court must proceed to an analysis under Chevron step-two.
The PTO's Interpretation and Application of the Statute Is Permissible
In step-two, Chevron requires determination of "whether the [PTO's] answer is based on a permissible construction of the statute." At this stage of the Chevron analysis, judicial deference to an agency's construction of a statutory scheme is afforded considerable weight. Chevron teaches that when Congress explicitly leaves a gap for an agency to fill, "[s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute." Therefore, the Circuit is required to accept the agency's construction of the statute even if the agency's reading differs from what the court believes is the best statutory interpretation.
Gilead's Chevron step-two argument parallels its Chevron step-one argument, and for the same reasons outlined above, the panel rejects its contentions. Congress expressly delegated authority to the PTO by granting authority to "[t]he Director [to] prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application." 35 U.S.C. § 154(b)(2)(C)(iii). As permitted by statute, the PTO promulgated 37 C.F.R. § 1.704(c)(8), which encompasses the precise situation in this case—the filing of a supplemental IDS after submission of a reply to a restriction requirement. This demonstrates Congress intended the PTO to employ its expertise in identifying applicant conduct demonstrating a lack of "reasonable efforts to conclude processing or examination of an application."
Therefore, the panel finds that a reasonable interpretation of the statute is that Congress intended to sanction not only applicant conduct or behavior that result in actual delay, but also those having the potential to result in delay irrespective of whether such delay actually occurred. Because the panel finds the PTO's construction of the statute reasonable, it rejects Gilead's contention that the regulation is overbroad and an unreasonable interpretation of the statute, and affirms the grant of summary judgment.
Biax Corp. v. Nvidia Corp., Fed Cir. Case 2013-1649, 1656, and 1654 (February 24, 2015)
Biax sued Nvidia and Sony for infringement of two patents directed to parallel processing computer systems. The district court granted attorney fees to defendants under § 285 despite applying the then-prevailing standard articulated in Brooks Furniture, which required that a defendant demonstrate that the litigation was objectively baseless and brought in subjective bad faith in order to be entitled to fees.
The district court found objective baselessness and bad faith and awarded fees for the period between Biax's expert's deposition and the court's summary judgment decision. According to the district court, the award was justified because Biax's expert admitted in his deposition that Biax had no infringement position under the court's claim construction orders. The district court then denied Nvidia's and Sony's motion for fees under § 1927, explaining that Dorsey did not "exceed the bounds of zealous advocacy."
Biax appealed the award of fees under § 285, while Nvidia and Sony cross-appealed the denial of fees under § 1927. While the appeals were pending, the Supreme Court decided Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), and Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct. 1744 (2014), which changed the standard for awarding fees under § 285 and the standard for appellate review.
Reversal of Fee Award Under § 285
Section 285 provides: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." In Octane Fitness, the Supreme Court rejected the Brooks Furniture standard, explaining that "there is no precise rule or formula for making" a determination as to whether a case is exceptional. It is a case-by-case determination based on considering the totality of the circumstances. Such an exceptional case is "rare." But, if the case "stands out from others with respect to the substantive strength of a party's litigating position . . . or the unreasonable manner in which the case was litigated," it is "exceptional" under the meaning of the statute. An abuse-of-discretion standard applies in reviewing a § 285 determination. Highmark.
The district court's fee award does not appear to be based on Biax's continued disagreement with the court's claim construction. Certainly Biax was entitled to seek reconsideration of that claim construction in the district court and challenge that construction on appeal. But Biax could not continue to assert its infringement claims in the district court unless it had an objectively reasonable infringement position under the court's claim construction. The district court held that Biax had no such reasonable position.
Determining whether the court was correct that Biax had no reasonable theory of infringement after claim construction requires an understanding of Biax's argument as to infringement. Biax initially accused products containing various graphical processor units ("GPUs") of infringement. The GPUs at issue are computer chips, each containing a number of sub-units called "shaders." The shaders on the accused chips have one or more processors and multiple code registers associated with them. The processor(s) for a particular shader can access all of that shader's own code registers. But, the processors cannot access the code registers on other shaders.
Following claim construction, Biax argued that individual shaders were infringing products and that processors on a particular shader need only access condition code registers associated with that same shader—that is, it was not necessary for the processors on an accused shader to access condition code registers throughout the chip. According to Biax, because a shader taken in isolation met the stipulated definition of a "computer" (which is not in dispute) and met the other limitations of claim 1, each shader taken in isolation infringed. Thus, according to Biax, even under the court's claim construction, it had a reasonable infringement position, and continued prosecution of the action in the district court was not objectively baseless or in bad faith.
In awarding attorneys' fees under § 285, the district court here disagreed, holding that, first, Biax's "own expert conceded that the processors in defendants' chips cannot access all of the condition code storage locations," and second, the language in its claim construction orders precluded Biax's scope argument. As to the first ground, the district court misread the expert's testimony. Contrary to the court's interpretation of the exchange, Biax's expert did not admit that Biax had no infringement position under the claim construction. Indeed, at oral argument in the Circuit, counsel for defendants admitted that the expert did not say that there is no infringement if one considers only the individual shaders. Nor did the district court's pre-summary judgment claim construction foreclose Biax's infringement position. The claim construction did not require that processors must be able to access condition code registers on a chipwide basis.
After the district court issued its claim construction order, the defendants filed a motion for clarification. In it, they requested that the district court "clarify" its order by modifying the construction of "condition code register" to include the requirement that "any processor element is able to access any condition code register." The district court rejected this proposed clarification. This clarification order did nothing to resolve the ambiguity as to whether the shared-by-all limitation applied on a shader-by-shader or chip-by-chip basis; if anything, the district court's claim construction orders appeared to suggest that the claim limitations apply to each shader separately and not to all processors and all condition code registers on the chip.
It was not until summary judgment that the district court finally resolved the uncertainty. Thus, it was not until a year and half after the claim construction orders that the district court finally answered the "on what" question against Biax. Biax's claim construction position, that the asserted claims read onto individual shaders, was reasonable under the claim construction orders, especially in light of the stipulated definition of "computer," which was met by the individual shaders.
Because neither the expert testimony nor the claim construction orders rendered Biax's position unreasonable, the basis for the district court's award of fees no longer exists. Thus, even applying the deferential standard of review under Highmark, the fee award must be set aside. In some cases decided under the old Brooks Furniture standard, we have remanded for the district court to consider whether the case is "exceptional" in light of the new Octane Fitness standard. A remand is not necessary here because neither the defendants nor the district court has suggested any basis for awarding fees other than the lack of objective reasonableness, and the resulting bad faith from continuing to litigate an objectively baseless position. Therefore, the panel reverses rather than vacates the fee award.
Denial of Fees Under § 1927
In addition to asking for fees under § 285, the defendants asked for fees from the Dorsey law firm under 28 U.S.C. § 1927. The district court denied this basis for the fee award. It found that Dorsey did not "exceed the bounds of zealous advocacy." The defendants appeal that denial.
The denial of fees under § 1927 is affirmed for the same reasons the award of fees under § 285 is reversed—because § 1927 is inapplicable when the lawyer puts forth only objectively reasonable arguments in the absence of bad faith. Therefore, the panel did not address whether the "unreasonable and vexatious" standard of § 1927 under Tenth Circuit law is more stringent than the "exceptional" standard of § 285.