Fresh From the Bench: Precedential Patent Cases From the Federal Circuit
Rosebud – The Circuit affirms summary judgment that Adobe is not liable for pre-issuance damages under 35 U.S.C. §154(d) because it had no "actual notice" of Rosebud's published patent application before it terminated sales of the accused product. The panel holds that constructive notice does not satisfy the actual notice requirement of §154(d), which instead requires actual knowledge. Moreover, an affirmative act by the claimant is not required to demonstrate actual notice. Affirmative notice would be sufficient but so would a demonstration of actual knowledge on the part of the infringer. Because there is insufficient evidence for a reasonable jury to conclude that Adobe had actual knowledge of the published patent application, summary judgment in Adobe's favor is appropriate. Finally, the panel rules that the district court did not abuse its discretion in granting summary judgment prior to the conclusion of discovery relating to Adobe's knowledge of the published application.
Convolve – The Circuit again affirms in part and reverses in part a case that Convolve filed against Compaq and Seagate 16 years ago, giving life to Convolve's case based on alleged infringement of a patent directed to computer hard drives. This is the second time the case has been to the Circuit. In the first appeal the Circuit reversed a summary judgment ruling that no accused products met the patent's "selected unwanted frequencies" limitation. On remand, the district court granted summary judgment of non-infringement based on the absence of the claimed "user interface" as well as the claimed "command" steps. The district court also ruled on summary judgment that defendants had intervening rights due to an amendment made during reexamination.
The panel affirms summary judgment as to the absence of "user interface," but reverses as to some of the claims where the district court read limitations into the "command" steps. The Circuit also reverses summary judgment as to intervening rights because even though amendments were made to the claims on reexamination in response to a prior art rejection, the term "seek" that was added was implicit in the original claim language. Therefore, the claims were "substantially identical," and under 35 U.S.C. § 252 there are no intervening rights.
TransWeb – The Circuit determines that attorney fees incurred defending a patent suit qualify as antitrust damages subject to trebling under the Sherman Act, affirming a $26 million award against 3M. The panel first affirms the district court's finding that 3M had engaged in inequitable conduct in procuring its patents, and rules that post-Therasense, the standards for inequitable conduct and a Walker Process "bad act" are essentially the same. The panel rejects 3M's argument that defense costs do not constitute an antitrust injury because they lead neither to reduced competition nor to increased prices. Pointing to a 1977 6th Circuit decision, the Circuit reasons that where the accused infringer has the choice either of (a) abandoning the market or (b) defending itself in court, treating only the former as antitrust injury would incentivize parties to leave the market, inevitably leading to reduced competition. Thus, the Court rules, an accused infringer that chooses to stand its ground and fight an ill-gotten patent should be able to claim defense costs as antitrust damages.
This decision puts a powerful new weapon in the hands of accused infringers where credible allegations of inequitable conduct exist. The case also increases the potential malpractice liability to the firm that prosecuted the patent application, and suggests that prior to filing suit, patentee's counsel should engage in a full study of the prosecution history and the prior art known to the patentee prior to issuance. Remember that the Supplemental Examination procedure, established by the AIA, can be used to eliminate duty-of-disclosure issues prior to bringing suit if there does appear to be a problem.
Synopsys v. Mentor Graphics – Petitioner Synopsys appeals a final decision in an IPR involving a Mentor patent. In a split decision, the majority affirms the PTAB's determination that certain claims of Mentor's patent were anticipated. More significantly, the majority holds that (1) the final order of the Board need not address every claim raised in the petition because the language in the statute is clear and the PTO rules, which are a reasonable interpretation of the statute, provide for a final decision on fewer than all of the petitioned claims, and (2) the Board did not err in denying Mentor's motion to amend the claims or in requiring Mentor to demonstrate that its proposed claims would be patentable over the prior art. Judge Newman dissents, as she has in virtually all decisions that appear to limit the patentee's rights during AIA proceedings, expressing that the AIA system of reviewing validity issues in the PTO, with estoppel provisions limiting subsequent validity challenges, must assure patentees a fair forum in which to have validity heard and, if unsuccessful, appealed. She contends that this decision does neither.
Nike – Adidas filed a petition for IPR regarding a Nike patent directed to a shoe upper. The PTAB instituted the IPR as to all 46 claims. Nike then filed a motion to amend in which it requested cancellation of claims 1-46, proposing substitute claims 47-50. The Board granted Nike's motion to cancel claims, but, as in the Synopsys case described above, denied the motion to substitute claims because Nike failed to meet its burden of establishing patentability of the substitute claims.
The panel reviews the obviousness determination and concludes that the Board failed to explain its conclusions as to the secondary considerations. Therefore, the case is remanded for the Board to consider and state its factual findings so the Circuit can properly assess whether its holdings are supported by substantial evidence. The panel also rules that, while it is appropriate for the Board to require a patentee to show that its claims are patentable based on the prior art of record, there is no obligation on the part of the patentee to demonstrate patentability with respect to prior art that is not of record, absent an allegation of conduct violating the duty of candor.
Adidas further argued that a "flat knit edge" limitation in the proposed claims is a negative limitation and that there is a heightened written description requirement for negative limitations. The panel rejects both arguments and holds the written description to be satisfied as to the proposed claims.
Lexmark v. Impression – An en banc Federal Circuit rules 10-2 that overseas sales do not exhaust a patent owner's right to sue in the U.S. That is, a buyer cannot ignore a patentee's restrictions on resale of a patented product, and sales into the U.S. constitute infringement of the U.S. patent if there is no license from the patentee. The Circuit took 129 pages to say that its view of the law is not changing despite the fact that the U.S. Supreme Court came to the opposite conclusion in a 2013 copyright case, Kirtsaeng v. John Wiley. The decision means that Lexmark can proceed in its litigation against Impression Products, which purchases and remanufactures Lexmark cartridges in the U.S.
The opinion cites to the language in 35 U.S.C. § 271(a), which states that "whoever without authority … imports into the United States any patented invention during the term of the patent therefor, infringes the patent." According to the majority, the patentee has a bundle of rights, and "without authority" means that the patentee can condition a sale to transfer fewer than all of those rights. Copyright protection is more international in nature, given the Berne Convention, and this justifies the difference in treatment
Rosebud LMS Inc. v. Adobe Systems Inc., Fed. Cir. Case 2015-1428
(February 9, 2016)
The Circuit affirms a grant of summary judgment that Adobe is not liable for pre-issuance patent infringement damages under 35 U.S.C. §154(d) because it had no "actual notice" of the published patent application that led to the asserted '280 patent.
Rosebud filed two suits against Adobe for infringement of its ‘'699 and ‘'760 patents but both actions were dismissed. Rosebud then filed the present action alleging infringement of the ''280 patent, a continuation of the ''699 and ''760 patents. Adobe moved for summary judgment, arguing that it had discontinued use of the accused technology before the issuance of the '280 patent, and because it had no "actual notice" of the published patent application. Adobe argued the statute required Rosebud to take affirmative steps to put it on notice of the published application and that Adobe had no actual knowledge of the published application. Rosebud argued that there was no requirement that it affirmatively put Adobe on notice and in any event Adobe had actual knowledge because Adobe followed Rosebud and its products, and it would have been standard practice in the industry for Adobe's counsel to search for related patent applications during the prior litigations.
Section 154(d)'s "Actual Notice" Requirement
Generally, patent owners may only collect damages for patent infringement that takes place during the term of the patent. See 35 U.S.C. § 271. Section 154(d) is a narrow exception to that rule:
(1) In general.--In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b), . . . and ending on the date the patent is issued--
(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application . . . ; and
(B) had actual notice of the published patent application . . . .
The nature of the § 154(d) "actual notice" requirement is an issue of first impression for this court. Adobe argues that actual notice under § 154(d) requires an affirmative act by the patent applicant. Without conceding knowledge, Adobe argues that knowledge of the patent would not have been enough—notice had to come directly from the patentee for the "actual notice" requirement to be met. Because it is undisputed that Rosebud did not affirmatively give Adobe notice of the published '280 patent application, Adobe argues that we should affirm the district court's summary judgment.
Constructive Knowledge Is Not Sufficient, and Affirmative Notice Is Not Required
We agree with Adobe and the district court that constructive knowledge would not satisfy the actual notice requirement. We do not, however, agree with Adobe that the § 154(d) requirement of actual notice requires an affirmative act by the applicant giving notice of the published patent application to the infringer. Certainly, "actual notice" includes a party affirmatively acting to provide notice. But the ordinary meaning of "actual notice" also includes knowledge obtained without an affirmative act of notification. Indeed, "actual notice" is synonymous with knowledge.
The Difference in the Language in the Patent Marking Statute Shows Congressional intent
Nor does 35 U.S.C. § 287(a), the patent-marking provision, apply to § 154(d). Section 287(a) prohibits the collection of post-issuance damages if a patentee sells a product that falls within its own patent claims without (1) marking the patented articles with the patent number or (2) proof that the infringer was notified of the infringement and continued to infringe thereafter. We have interpreted this latter provision to require the affirmative communication of a specific charge of infringement. But we will not read this requirement into § 154(d), where the statute itself does not recite the condition. If § 154(d) contained § 287(a)'s "proof that the infringer was notified" language, our interpretation of § 287(a) would be relevant, and likely dispositive. But that is not the case. Section 287(a) explicitly requires an act of notification, unlike § 154(d), which merely requires "actual notice." If anything, these differences suggest that we should interpret the two statutes differently.
Summary Judgment Is Appropriate Since No Reasonable Jury Could Find Actual Knowledge
Having interpreted § 154(d)'s "actual notice" requirement to include actual knowledge of the published patent application, we next consider if there is a genuine dispute of material fact as to whether Adobe actually knew of the published '280 patent application. Adobe asserted in its verified interrogatory response that it first received notice of the published '280 patent application when Rosebud's counsel threatened this lawsuit on February 4, 2014—after it had discontinued use of the patented technology. Rosebud disputes Adobe's assertion and claims that it presented sufficient circumstantial evidence of Adobe's knowledge that a reasonable jury could find in its favor. We do not agree and conclude, as the district court did, that there is no genuine dispute of material fact on the record before us.
First, the fact that Adobe knew of the related '760 patent does not show it had actual notice of the published '280 patent application. The alleged infringer must also have notice of the claims of the published patent application and the fact that the applicant is seeking a patent covering those claims. Indeed, § 154(d)(2) provides that pre-issuance damages are not available unless the invention claimed in the published patent application is "substantially identical" to the patented invention. Knowledge of related patents does not serve this function, and is therefore legally insufficient to establish actual notice of the published patent application.
Second, Rosebud argues that it put forth evidence showing that Adobe followed Rosebud and its product and sought to emulate the product's features. But nothing in the evidence suggests that Adobe or its employees were monitoring Rosebud and its products, let alone to such an extent that they would have actively sought out Rosebud's published patent applications.
Finally, Rosebud argues that a reasonable jury could conclude that Adobe's outside counsel would have discovered the published '280 patent application while preparing for the earlier litigation. Rosebud argues that it is standard practice during litigation to review related patents, applications, and prosecution history to evaluate possible claim constructions. However, the earlier litigation never reached the claim construction stage because Rosebud missed all of the court deadlines. Even when all reasonable inferences are made in Rosebud's favor, we agree with the district court that no reasonable jury could find that Adobe had actual knowledge of the published '280 patent application.
Rosebud's Delay in Requesting Discovery Demonstrates There Was No Abuse of Discretion
Rosebud alternatively argues that the district court abused its discretion when it granted summary judgment before completion of fact discovery relating to Adobe's knowledge of the published '280 patent application. However, Rosebud had notice of Adobe's intent to file an early motion for summary judgment, and did not oppose this request or indicate at the time that it needed further discovery on issues relevant to the motion. Moreover, Rosebud did not serve its Rule 30(b)(6) deposition notice or its subpoenas on Adobe's outside counsel until several weeks after it received Adobe's motion for summary judgment. It appears that Rosebud delayed filing much of its discovery until after it received Adobe's motion for summary judgment, without informing Adobe or the court that such discovery might be necessary. Given this timing, we see no abuse of discretion in the district court's action.
Convolve, Inc. v. Compaq Computer Corp., Fed. Cir. Case 2014-1732 (February 10, 2016)
This case returns to us after a remand to the S. D. N.Y. In the first appeal, we reversed a summary judgment ruling that no accused products met the patent's "selected unwanted frequencies" limitation. On remand, the court granted summary judgment on alternative grounds. Because we agree that Seagate's disk drives do not possess a user interface, but conclude that the court erred by importing limitations into the "command" steps and in granting summary judgment based on intervening rights, we again affirm-in-part, vacate-in-part, reverse-in-part, and remand for further proceedings.
As we explained in the first appeal, the technology at issue relates to improvements in computer hard drives described in Convolve's '473 patent. Claim 10 is representative, and is reproduced below. The words added during reexamination are italicized and the words deleted are in brackets:
Method for controlling operation of a data storage device, comprising:
providing a user interface for controlling one of a seek time of the data storage device and [an] a seek acoustic noise level of the data storage device;
operating the user interface so as to alter settings of one of the seek time and the seek acoustic noise level of the data storage device in inverse relation; and
outputting commands to the data storage device causing the data storage device to alter seek trajectory shape by shaping input signals to the data storage device to reduce selected unwanted frequencies from a plurality of frequencies in accordance with the altered settings.
Compaq's accused products are computers that contain the F10 BIOS user interface in combination with a Seagate hard drive. The F10 BIOS is a graphical user interface that allows a user to select certain hardware settings, including the seek speed and acoustic noise of a Seagate hard drive, but does not itself issue commands that directly change the seek speed of the disk drives.
Summary Judgment of No Direct Infringement Based Upon "User Interface" Is Affirmed
The district court did not err in granting summary judgment of no direct infringement to Seagate because Seagate's ATA/SCSI disk drives do not meet the "user interface" limitation present in the asserted claims. Specifically, we find that both the court's construction of the term "user interface" and its application of that construction were proper. The language of the claims supports the construction of "user interface" as "the site at which a user actually selects an operating mode." The specification confirms this reading.
Convolve argues that the prosecution history shows that it specifically broadened the asserted claims to include Seagate's hard drives. While these amendments may be broadening in some sense, the only evidence that these amendments were meant to encompass Seagate's product is a declaration by one of the inventors submitted in this litigation. This post-hoc explanation is not enough to overcome the language of the claims and the disclosures in the specification.
The Grant of Summary Judgment with Respect to the "Commands" Limitation Is Affirmed-in-Part and Reversed-in-Part
In its summary judgment ruling, the district court treated all asserted claims as having the same scope, and concluded that the recited "commands" must be "shaped when issued from the processor in order to satisfy the claim limitations," and therefore Compaq's F10 BIOS interface cannot infringe because it itself does not issue shaped commands. Implicit in this ruling is a claim interpretation that requires a singular processor associated with the user interface that issues commands, and excludes the existence of a second processor capable of issuing those commands, such as one integrated into the data storage device. This overlooks the differences among the asserted claims.
Turning to the specifics of the claims, we look to three groups. Claims 7, 8, and 10-14 do not plainly require the "user interface" to perform the "outputting commands" function. These claims require three core steps: "providing" a user interface, "operating" the user interface, and "outputting commands." Although a user interface component is the object of the first two steps, the third step simply recites "outputting commands to the data storage device," without tying that outputting to a particular processor or to the antecedent user interface. The language of these claims does not, as the district court assumed, require the user interface to issue the "shaped commands" recited in the claims. This is consistent with the court's interpretation of the other claim elements, and with the specification, which discloses an embodiment where the shaped command originates from the device itself. Thus, it was error for the district court to grant summary judgment for these claims.
Claims 9 and 15 recite an apparatus comprising "a processor" that executes certain process steps "to generate a user interface," "to alter settings in the user interface," and "to output commands to the data storage device." This court has repeatedly emphasized that an indefinite article "a" or "an" in patent parlance carries the meaning of "one or more" in open-ended claims containing the transitional phrase '"comprising." Thus, absent a clear intent in the claims themselves, the specification, or the prosecution history, we interpret "a processor" as "one or more processors."
Here, we find no such evidence clearly limiting "a processor" to a singular processor. While it is true that the patentee recited other claim terms in the plural, e.g., "output commands," "alter settings," or "input signals," this does not compel a departure from our general rule that "a" means "one or more" when following the open ended term "comprising." Such a conclusion is bolstered by the specification's plain disclosure of an embodiment where "seeks" are controlled by a "separate controller dedicated to the disk drive." Thus, it was error for the district court to grant summary judgment for these claims.
Claims 1, 3, and 5, likewise, recite "a processor," but do so in the context of reciting the function of the "user interface." Specifically, claim 1 recites a "user interface for . . . working with a processor. . . comprising:" a means for controlling seek time on a data storage device, and a "means for causing the processor to output commands to the data storage device." Here, unlike claims 9 and 15, claim 1 demonstrates a clear intent to tie the processor that "outputs commands to the data storage device" to the "user interface." Given this claim language, which contrasts with the claims described above that allow for multiple processors, we conclude that claims 1, 3, and 5 require the user interface to work with a single processor in performing all of the claim steps. Under this construction, the Compaq computers do not meet each limitation of the claims, because the "user interface" processor does not send shaped commands to the hard drive. Thus, we affirm the non-infringement ruling as to claims 1, 3 and 5.
The District Court Also Erred in Granting Summary Judgment Based on Intervening Rights
A patentee of a patent that survives reexamination is only entitled to infringement damages for the time period between the date of issuance of the original claims and the date of the reexamined claims if the original and the reexamined claims are "substantially identical." 35 U.S.C. § 252. It is the scope of the claim that must be identical, not that identical words must be used. As a result, amendments made during reexamination do not necessarily compel a conclusion that the scope of the claims has been substantively changed. This is true even where the claims at issue were amended during reexamination after a rejection based on prior art. Rather, to determine whether a claim change is substantive it is necessary to analyze the claims of the original and the reexamined patents in light of the particular facts, including the prior art, the prosecution history, other claims, and any other pertinent information.
In this case, the patentee added the modifier "seek" in front of "acoustic noise" during the 2008 reexamination proceedings after a prior art rejection. Our task, therefore, is to determine whether the pre-2008 reexamination claims are limited to "seek acoustic noise" or whether the original claims cover both seek and spindle acoustic noise. Applying the framework of Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), we conclude that the claims were originally limited to seek acoustic noise, and the addition of the word "seek" did not alter the scope of the claims.
On their face, the original claims recite only "acoustic noise," which could encompass any manner of acoustic noise, including that generated from the spindle. But when read in conjunction with the remaining claim limitations and in light of the specification and prosecution history, a person of ordinary skill in the art would understand the claims to be limited to seek acoustic noise. Therefore, the addition of the term "seek" before "acoustic noise" did not alter the scope of the claim. Accordingly, summary judgment based on intervening right is reversed.
TransWeb, LLC v. 3M Innovative Properties Co., Fed. Cir. Case 2014-1646 (February 10, 2016)
Rule of Reason Is Used to Determine Sufficiency of Corroboration as to Public Use
Oral testimony by an interested party on its own will generally not suffice as "clear and convincing" evidence of invalidity. Rather, such oral testimony must be corroborated by some other evidence. The corroborating evidence can include documents and testimonial evidence.
A "rule of reason" analysis is used to determine the sufficiency of corroboration, under which all pertinent evidence is examined in order to determine whether the inventor's story is credible. Importantly, this analysis does not require that every detail of the testimony be independently and conclusively supported by the corroborating evidence. We have generally been most skeptical of oral testimony that is supported only by testimonial evidence of other interested persons. But there are no hard and fast rules as to what constitutes sufficient corroboration, and each case must be decided on its own facts. We treat the ultimate determination of whether such oral testimony is sufficiently corroborated as a question of fact, which we review for clear error.
3M's arguments against sufficiency of corroboration can be summed up as follows: as a legal matter, TransWeb must independently evidence all "material facts" of the purported invalidating public use; and as a factual matter, TransWeb provided no corroborating evidence for one of the material facts, viz., that it was the plasma-fluorinated material that was distributed at the expo.
3M's legal argument attempts to lead us to a legal conclusion that this court has repeatedly rejected. 3M asks us to focus on one particular detail of the oral testimony and determine whether that detail is independently evidenced. But we have repeatedly rejected an element-wise attack on corroboration of oral testimony. As applied to this case, our rule of reason analysis requires that independent evidence, taken as a whole, makes credible Mr. Ogale's testimony that he distributed the plasma-fluorinated material at the expo.
There Is No Clear Error in the District Court's Finding of Inequitable Conduct
The jury reached an advisory verdict that both the '458 and '551 patents were unenforceable for inequitable conduct. The district court reached the same conclusion. 3M contests this judgment on all of the required elements of inequitable conduct.
The expo samples present a definitional case of "but for" materiality. During prosecution of the '497 application, the examiner initially allowed all claims. When 3M notified the examiner of one of the TransWeb samples that it had on hand, the examiner rejected all claims as obvious over that disclosure and the Angadjivand patent. Only when 3M clarified its dubious assertion that the TransWeb samples were only received after signing of a confidentiality agreement and thus were not prior art did the examiner allow the claims. Because the examiner would not have allowed the claims had the TransWeb samples been properly disclosed as prior art, the TransWeb samples are "but-for" material.
The district court noted that Mr. Hanson waited several years between learning of the potential TransWeb prior art and informing the patent office. In fact, Mr. Hanson did not disclose the TransWeb material to the patent office until after negotiations for 3M to purchase TransWeb had broken down. Further, Mr. Hanson waited until the last possible moment, when a notice of allowance had already been mailed, to submit the TransWeb material in a request for continued prosecution. The district court found Mr. Hanson's testimony at trial attempting to explain this delay wholly incredible.
Based on these factual findings, the district court concluded that the only reasonable inference that explains the actions of Mr. Hanson and Mr. Jones is that they strategically delayed in disclosing the TransWeb prior art and then intentionally made an inaccurate disclosure of that material. We can find no clear error in this conclusion, particularly as the district court's findings are based in large degree on its determinations that Mr. Jones and Mr. Hanson were not credible during relevant parts of their testimony.
Attorney Fees Can Constitute Antitrust Damages
Section 4 of the Clayton Act provides that any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. TransWeb incurred approximately $3.2 million in attorney fees prosecuting the antitrust claim and approximately $7.7 million defending the infringement suit. The district court awarded the $3.2 million on a one-for-one basis as "cost of suit" fees. The district court awarded the $7.7 million trebled to approximately $23 million as damages.
TransWeb's attorney fees are themselves both injury-in-fact and sufficiently stemming from the competition-reducing aspect of 3M's behavior to qualify as antitrust injury.
This conclusion is supported by the only persuasive authority that addresses the award of attorney fees as damages for a Walker Process violation: Kearney & Trecker Corp. v. Cincinnati Milacron Inc., 562 F.2d 365 (6th Cir. 1977). In Kearney, the district court found the patentee liable under § 2 of the Sherman Act based on the Walker Process theory of liability. The patentee had obtained a patent through inequitable conduct and later sued the defendant for infringement of that patent. The appeals court held that the defendant's attorney fees could be awarded as § 4 damages even though the defendant did not prove direct market place damages resulting from the patentee's anticompetitive acts. The court relied on the reasoning from the district court that the patentee forced the defendant into a position of having to choose from three alternatives: cease competition, take a license, or defend the infringement action. The appeals court held that one who has established or is attempting to establish an illegal monopoly by fraud on the Patent Office or misuse of a patent should not be permitted to further this goal by means of an infringement suit. When the antitrust violations are causally connected to the infringement action it is permissible to include the expenses of defending that action in the award of damages.
While a causal connection is no longer a sufficient connection after Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), the core logic in Kearney is still valid: the patentee instigated an anticompetitive suit that forced the defendant to choose between ceasing competition, taking a disadvantageous position in competition (taking a license), or defending the suit. Because the injury suffered by the antitrust-plaintiff under each choice flows from the anticompetitive aspect of the patent owner's behavior, each can be recovered as antitrust damages.
3M had indicated that it would not license its patents to TransWeb. Therefore, in response to 3M's anticompetitive infringement suit, TransWeb had only the options of ceasing competition altogether or defending the suit. Had TransWeb chosen the first option, evidence at trial demonstrated that TransWeb would have been forced out of the market and higher prices would have resulted. So, harmful effects on competition would have resulted and TransWeb would have undoubtedly suffered antitrust injury. TransWeb chose the second option. This prevented the harmful impacts to consumers of the relevant products but caused TransWeb to suffer a very real injury of its own, the cost of defending the suit. Both the lost profits suffered under option one and the attorney fees suffered under option two were attributable to what made 3M's behavior unlawful, i.e., bringing the lawsuit on a fraudulently-obtained patent in pursuit of a monopoly. Therefore, the injury suffered by TransWeb under either option qualifies as antitrust injury and thus can form the basis of damages under § 4.
No assertion of a patent known to be fraudulently obtained can be a proper use of legal process. No successful outcome of that litigation, regardless of how much the patentee subjectively desires it, would save that suit from being improper due to its tainted origin.
To conclude otherwise would be contrary to the purpose of the antitrust laws. The antitrust laws exist to protect competition. If we were to hold that TransWeb can seek antitrust damages only under option one, forfeiture of competition, but not option two, defending the anticompetitive suit, then we would be incentivizing the former over the latter. This would amount to incentivizing TransWeb to forfeit competition rather than continue it. This is not in accord with the purpose of those very same antitrust laws.
Synopsys, Inc. v. Mentor Graphics Corp., Fed. Cir. Case 2014-1516, -1530 (February 10, 2016)
The '376 patent claims a method of tracing bugs, i.e., errors in coding, in the design of computer chips. Synopsys filed a petition for IPR of claims 1-15 and claims 20-33 of the '376 patent. In its preliminary patent owner response, Mentor contested Synopsys' invalidity contentions and argued that Synopsys' petition was time-barred. Specifically, after filing the petition for IPR, Synopsys had acquired an entity that had been sued by Mentor for infringement of the '376 patent more than one year earlier. Mentor argued that the petition for IPR was time-barred under 35 U.S.C. § 315(b), which states that IPR may not be instituted if the petition is filed more than one year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent. In the alternative, Mentor argued that the acquired entity, rather than Synopsys, was the appropriate real party in interest to the IPR review and, in light of the earlier suit, the IPR review was time barred.
The Board instituted review of claims 1-9, 11, and 28-29 based on anticipation by Gregory, but denied the petition as to other claims. In the decision to institute, the Board rejected Mentor's argument that Synopsys' petition was time barred, holding that the § 315(b) bar is measured as of the filing date of the petition, pursuant to 37 C.F.R. § 42.101(b), which states that a petition is barred only if the petition requesting the proceeding is filed more than one year after the date on which the petitioner is served with a complaint alleging infringement of the patent. Mentor had not "provided persuasive evidence that Synopsys and the newly acquired entity that had been sued by Mentor more than one year earlier were in privity on the filing date of the petition." The Board also found that Synopsys was the appropriate real party in interest. Therefore, the Board found that the petition was not time barred.
After institution, Mentor filed a motion to amend and substitute claims 34-43 for claims 1, 5, 28, 2, 3, 6, 8, 9, 11, and 29, respectively, which was denied because Mentor failed to "demonstrate general patentability over prior art," including Gregory. In its final decision the Board found claims 5, 8, and 9 anticipated by Gregory. However, the Board also found that claims 1-4, 6, 7, 11, 28, and 29 were not anticipated.
Synopsys appeals, arguing that the Board erred in finding claims 1 and 28 not anticipated and by issuing a final decision that did not address the validity of all claims raised in the petition. Mentor cross appeals, challenging the Board's finding that the petition was not time barred and the denial of its motion to amend.
The Board Was Not Required to Address Every Claim Raised in the IPR Petition
IPR proceeds in two stages. In the first stage, the Board, acting on behalf of the Director, reviews the petition to decide whether "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." The PTO has adopted a regulation allowing the Board to initiate IPR "on all or some of the challenged claims." 37 C.F.R. § 42.108(a). At the second stage, the Board issues a final decision with respect to any patent claim challenged by the petitioner. § 318(a).
The decision of the Board to institute IPR cannot be appealed. 35 U.S.C. § 314(d); In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015), cert. granted. However, Synopsys does not challenge the decision to institute but rather the scope of the final decision itself, and therefore, we can hear this appeal.
On the merits, Synopsys argues that, because § 318(a) directs the Board to issue a final written decision with respect to "any patent claim challenged by the petitioner," the Board's final decision must address every claim raised in the petition. However, the statute cannot be read to impose such a requirement. First, the text makes clear that the claims that the Board must address in the final decision are different than the claims raised in the petition. Congress explicitly chose to use a different phrase when describing claims raised in the petition for IPR in § 314(a) and claims on which IPR has been instituted in § 318(a). Section 314(a) specifies that Board may not institute IPR unless "the information presented in the petition and any response filed shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." However, in describing the final written decision in § 318(a), Congress stated that the Board must issue a final written decision with respect to any "claim challenged by the petitioner." When Congress chooses to use two different words or phrases, this typically suggests that the two were deemed to have two different meanings.
In addition, the conditional phrase if an IPR is instituted in § 318(a) also strongly suggests that the "challenged" claims referenced are the claims for which IPR was instituted, not every claim challenged in the petition. Thus, the text of § 318(a) demonstrates that the Board need only issue a final written decision with respect to claims on which IPR has been initiated and which are challenged by the petitioner after the institution stage.
Second, the statute would make very little sense if it required the Board to issue final decisions addressing patent claims for which IPR had not been initiated. After IPR is initiated, the patentee files a response to the petition. Both parties may submit information to supplement the record by taking discovery, submitting affidavits, and by submitting expert declarations. Parties may present their cases in an oral hearing. All of these various mechanisms allow the Board to issue a final decision based on a full record rather than just on the limited record in the initial petition and the patent owner's preliminary response. It would make no sense to interpret § 318 in a way that would require the Board to issue a final determination on validity of patent claims without the benefit of this additional argument and record.
The statute is quite clear that the PTO can choose whether to institute IPR on a claim-by-claim basis. In deciding when to institute IPR, the statute requires a claim-by-claim inquiry to determine whether "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." § 314(a). Unless at least one of the claims satisfies this inquiry, the Board cannot institute. The statute strongly implies that the initiation decision be made on a claim-by-claim basis and that the Board can pick and choose among the claims in the decision to institute.
Although we find that the language is clear, if the statute was deemed ambiguous, the PTO has promulgated that the Board "authorizes the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim." 37 C.F.R. § 42.108. The PTO has explicit authority to promulgate regulations "setting forth the standards for the showing of sufficient grounds to institute" inter partes review. § 316(a)(2). This regulation is plainly an exercise of that authority. Under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), this regulation is a reasonable interpretation of the statutory provision governing IPRs. As the PTO noted in adopting the regulation, the claim-by-claim approach "streamlines and converges the issues for consideration" and aids in efficient operation and the ability to complete the review within the one-year timeframe.
Synopsys argues that the Board's practice of issuing final decisions addressing some of the claims in the petition is inconsistent with the estoppel provisions of the AIA because final decisions that do not address all of the claims "will have limited estoppel effect" and thus do not "force a party to bring all of its claims in one forum." The validity of claims for which the Board did not institute IPR can still be litigated in district court. IPR cannot replace the district court in all instances, for example, when claims are challenged as invalid based on the on-sale bar, for claiming patent-ineligible subject matter, or on grounds of indefiniteness. See 35 U. S. C. § 311 (b) (limiting inter partes review to grounds "that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications").
The Board Properly Placed the Burden on Mentor to Show that Proposed Claims Were Patentable
Mentor argues in its cross appeal that the Board impermissibly placed the burden of proving patentability of the proposed claims on Mentor when it denied Mentor's contingent motion to substitute certain claims. The Board denied the motion to substitute the claims on two grounds. First, the Board found that "Mentor Graphics has not met its burden to show that the proposed claims would not have been obvious based on the disclosure of Gregory." We have previously held in Microsoft Corp. v. Proxyconn, Inc. that the Board may properly place the burden of proving patentability of substitute claims on the patentee for the prior art of record. 789 F.3d 1292 (Fed. Cir. 2015). Mentor argues that Proxyconn does not control because the Proxyconn opinion did not address whether the patentee ought to bear the burden to distinguish all prior art known to the patent owner and whether this requirement is contrary to 35 U.S.C. § 316(e), which states that in an inter partes review, "the petitioner shall have the burden of proving a proposition of unpatentability." As in Proxyconn, we see no error in placing the burden of demonstrating patentability of substitute claims on the patentee over Gregory, which was the only piece of prior art for the IPR.
Section 316(e) does not alter our analysis. That section reads: "In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence." 35 U.S.C. § 316(e). The introductory phrase referring to an "inter partes review instituted under this chapter" makes clear that this provision specifically relates to claims for which inter partes review was initiated, i.e., the original claims of the patent that a party has challenged in a petition for review. Inter partes review was not initiated for the claims put forward in the motion to amend.
Judge Newman's Dissent
As she has in other recent dissents, Judge Newman expresses that the AIA system of reviewing validity issues in the PTO, with estoppel provisions limiting subsequent validity challenges, must assure patentees a fair forum in which to have validity heard and, if unsuccessful, appealed. She takes issue with several aspects of the majority's ruling. First, because of the PTAB's practice of picking and choosing which of the challenged patent claims and issues it will decide, there is an absence of finality that negates the AIA's purpose of providing an alternative and efficient forum for resolving patent validity issues. Instead, the practice of partial decision leads to duplicative proceedings in the PTAB and the district courts. Second, the majority misapplies the AIA provision that the decision whether to "institute" these post-grant proceedings is not appealable. The majority removes from judicial review any decision during the institution phase—here the question of whether certain prior patent litigation is a statutory or jurisdictional bar. Next, the majority improperly supports the PTO's elimination of the statutory designation of different decision-makers for the institution phase and the trial phase. The AIA assigns the former role to the Director and the latter role to the PTAB. Judge Newman next criticizes the majority's support of the PTO's "stingy implementation of the statutory authorization for claim amendment." The opportunity to amend is an important part of the balance struck in the AIA. The easier standards and lighter burdens for invalidation in AIA proceedings, including the PTAB's use of the broadest claim interpretation instead of the correct claim interpretation, up-end the delicate balance crafted by Congress.
Nike, Inc. v. Adidas AG, Fed. Cir. Case 2014-1719 (February 11, 2016)
Adidas petitioned the Board for IPR as to all 46 of the claims of the '011 patent, and the Board agreed to institute as to all such claims. Nike then moved to cancel claims 1-46 and substitute claims 47-50. In its final written decision, the Board granted Nike's request to cancel claims 1-46, but denied Nike's request to enter claims 47-50. First, the Board acknowledged the requirement announced in the Board's Idle Free decision that a patent owner "persuade the Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner." 2013 WL 5947697 (PTAB June 11, 2013). Because Nike's motion included only a conclusory statement that the proposed claims were patentable over prior art not of record but known to Nike, the Board denied Nike's motion. Alternatively, the Board denied entry of the substitute claims because Nike failed to establish that the substitute claims were patentable over the Nishida and Schuessler references of record.
In this appeal, Nike raises three primary arguments. First, Nike asserts that the Board erroneously shifted to Nike (the patent owner) the burden of proving patentability of its proposed substitute claims 47-50. Second, Nike contests the Board's finding on the merits that the proposed substitute claims are unpatentable as obvious. Finally, Nike objects to the Board's practice of requiring a patent owner to establish patentability of substitute claims over all prior art known to the patent owner, including prior art not of record but known to the patent owner.
The Burden of Proof Was Properly on Nike to Prove Its Proposed Claims Patentable
The Board addressed these regulations in its Idle Free decision in which it interpreted section 42.20(c) and explained that "the burden is not on the petitioner to show unpatentability of new, substitute claims, but on the patent owner to show patentable distinction over the prior art." In our recent decision in Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015), we held that the Board's interpretation of section 42.20(c) was permissible in light of the text of § 316(a)(9) and the language of the PTO's regulation. We further explained that placing this burden on the patent owner for its newly formulated claims is appropriate given "the very nature of IPRs," which are distinctly different from a typical PTO examination or reexamination where a patent examiner performs a prior art search and independently conducts a patentability analysis of all claims, whether newly proposed or previously existing. In this way, placing the burden on the patent owner ensures that proposed substitute claims are critically analyzed before they are entered as claims that are part of the issued patent. See also Synopsys Inc. v. Mentor Graphics Corp., No. 14-1516 (Fed. Cir. Feb. 10, 2016). Thus, the Board did not err by placing the burden on Nike to establish patentability over the prior art of Nike's proposed substitute claims.
The Board Failed to Address Secondary Considerations in Finding Proposed Claims Unpatentable
Nike next asserts that the Board erred in concluding that Nike failed to carry its burden of establishing that proposed substitute claims 47-50 were patentable. The panel reviews the holdings in Graham v. John Deere Co., 383 U.S. 1 (1966), KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007) and concludes that there is substantial evidence to support the Board's conclusion that there was a motivation to combine the Nishida and Schuessler references to arrive at the invention defined by proposed claim 48.
Nike points to our decision in Leo Pharmaceuticals Products, Ltd. v. Rea, 726 F.3d 1346 (Fed. Cir. 2013) and argues that the age of these references and the passage of time between their public availability and the inventions recited in the proposed substitute claims should have precluded the Board from finding a reason to combine the references. Nike over reads our precedent. The relevant portion of Leo Pharmaceuticals stands for the proposition that the age of a reference can highlight the fact that no one in the art understood the problem to be solved. Because there was no prior recognition of the problem solved by the subject invention, there was no reason in the record why one of skill in the art would attempt to combine the cited prior art to arrive at the claimed invention. Persons of skill in the art cannot have tried and failed to solve the problem if they were never aware of that problem to begin with. Thus, the number of years that passed between the prior art and the claimed invention may be a relevant factor to underscore that skilled artisans had long failed to appreciate the problem solved by that invention. Here, there is no question that skilled artisans knew of the desire to reduce waste when producing wearable, knitted shoe uppers because that problem is expressly recognized in Nishida. Thus, Leo Pharmaceuticals does not control the present case.
Remand Is Appropriate Here
In Nike's brief supporting the motion to amend filed at the Board, Nike argued and presented evidence that reducing waste was a long-felt need in the shoe manufacturing industry and that Nishida did not resolve this need because the process in Nishida still resulted in some waste. Despite this argument and evidence, the Board's final written decision lacks a discussion, or even an acknowledgement, of secondary considerations. It is well-established that "evidence rising out of the so-called 'secondary considerations' must always when present be considered en route to a determination of obviousness." Nothing in the Board's decision suggests that it weighed and rejected Nike's evidence of long-felt need to eliminate waste in the manufacture of knit textile uppers en route to concluding that the proposed substitute claims were unpatentable as obvious. We must therefore remand for the Board to examine Nike's evidence and its impact, if any, on the Board's analysis under the first three Graham factors.
Adidas finally argues that we can alternatively affirm the obviousness determination, despite the absence of findings on secondary considerations, because there is no nexus between Nike's evidence and the merits of the invention in claims 47-50. We express no opinion on this argument, except to recognize that the Board may certainly consider it on remand.
The Panel Remands as to Obviousness of Claims 48 and 49 Due to Absence of Factual Findings
As mentioned above, Nike filed a motion to amend in which it sought to cancel the challenged patent claims and propose substitute claims. Section 316(d) provides that a patent owner's ability to substitute claims is limited to proposing a "reasonable number of substitute claims." The PTO interpreted this limit in 37 C.F.R. § 42.121(a)(3) by explaining that "the presumption is that only one substitute claim would be needed to replace each challenged claim." The regulation also acknowledges that this presumption "may be rebutted by a demonstration of need." In its Idle Free decision, the Board further explained that when a patent owner seeks to provide more than one substitute claim for a challenged claim, "the patent owner needs to show patentable distinction of the additional substitute claim over all other substitute claims for the same challenged claim." If the patent owner fails to carry this burden, "then at the Board's discretion, the proposed additional claim may be denied entry, or be deemed as standing and falling with, another substitute claim for the same challenged claim for purposes of considering patentability over prior art."
Because Nike proposed substitute claims 48 and 49 to replace challenged claim 19, under Idle Free, Nike was required to demonstrate that proposed claims 48 and 49 were patentably distinct from one another. On appeal, Nike argues only that the Board erred in its treatment of claim 49 and asserts that the Board should have ultimately found claim 49 patentable.
We agree with Nike that the Board did not engage in any such analysis comparing proposed substitute claims 48 and 49. Thus, the Board's decision to group substitute claims 48 and 49 together, meaning that claim 49 would stand and fall with claim 48, is not consistent with the rule set out by the Board in Idle Free. We must therefore remand for a proper determination of how these claims should be treated per the standard set forth in Idle Free, and, if necessary, a full consideration of the patentability of each.
As to the obviousness of the proposed claim 49, at no point did the Board refer to the Graham factors and conclude that Nishida renders proposed substitute claim 49 obvious. The Board's statements are insufficient to support a conclusion that proposed substitute claim 49 is unpatentable as obvious. Obviousness determinations require underlying fact-findings, which are missing from the Board's decision as it relates to the specific limitations in claim 49. This portion of the Board's analysis on whether Nike's proposal of claim 48 and 49 constituted a reasonable number of substitute claims for originally issued claim 19 lacks critical fact-findings needed for any obviousness determination. We are unable to engage in such fact-finding in the first instance and must therefore remand for further proceedings. Any resolution of this issue requires a factual analysis that must be done by the Board in the first instance.
The Panel Rejects Adidas' Arguments on Claim Construction and Written Description
Adidas also argues that, even if we cannot affirm the Board's obviousness conclusion, there are numerous alternative grounds on which we could affirm claim 49's unpatentability. First, Adidas argues that the Board's construction of "flat knit edges" is overly narrow and that, under the correct construction, Nishida renders the claimed invention obvious. The panel conducts a de novo review because "the intrinsic record fully determines the proper construction," and concludes that the Board's broadest reasonable construction was proper.
Finally, Adidas contends that we should affirm the outcome reached by the Board because, contrary to the Board's decision, Nike's proposed substitute claims are inadequately supported by the '011 patent's written description. Adidas argued that the "flat knit edge" limitation was a negative limitation, and that negative limitations must satisfy a heightened written description requirement under our decision in Santarus, Inc. v. Par Pharmaceutical, Inc., 694 F.3d 1344 (Fed. Cir. 2012). The Board disagreed and concluded that, even if the limitation was a negative limitation, it was "supported by the positive disclosure of the various forms of the textile element" shown in the '011 patent's written description. The panel holds that, even if it assumes, as the Board did, that this claim limitation is a negative limitation, Adidas is incorrect that any sort of heightened standard applies. The panel reviews the evidence considered by the Board and, based on the figures, the disclosures in the written description, and the expert testimony, concludes that substantial evidence supports the Board's decision that the proposed substitute claims are adequately supported by the written description.
Nike's Representation that the Claims Were Nonobvious Based on Prior Art Known to Nike Was Adequate So This Was Not a Proper Ground to Reject the Motion to Amend
The Board's Idle Free decision explained that, under 37 C.F.R. § 42.20(c), a motion to amend will be successful only if the patent owner "persuades the Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner." Nike attempted to carry this burden in its motion to amend by simply stating that its proposed claims were patentable over prior art known to Nike, but not part of the record of the proceedings. The Board denied Nike's request to enter proposed substitute claims 47-50 in part because Nike's motion failed to address "any prior art not of record." Because we must vacate and remand the Board's obviousness conclusion, we must now consider whether the Board's denial of Nike's motion to amend for failure to show patentable distinction over "prior art not of record but known to the patent owner" provides an adequate basis for affirmance. For the reasons explained below, we conclude that it is not.
After the Board's decision in this case, the Board issued MasterImage 3D, Inc. v. RealD Inc., 2015 WL 4383224 (PTAB July 15, 2015). In MasterImage 3D, the Board made three points of clarification regarding Idle Free's requirement that the patent owner show that its proposed substitute claims are patentable over the prior art of record and also other prior art known to the patent owner. Importantly, the Board explained that the reference to "prior art known to the patent owner" in Idle Free, should be understood as no more than the material prior art that Patent Owner makes of record in the current proceeding pursuant to its duty of candor and good faith. The PTO further explained that, although the Board's denial of Nike's motion to amend was based on a reasonable reading of Idle Free, given the clarification in MasterImage 3D, the PTO acknowledged that the Board "read Idle Free too aggressively in this decision."
We agree with the PTO. At the heart of Idle Free, as interpreted by MasterImage 3D, is the question of whether the patent owner has submitted the necessary information to comply with its duty of candor. In this case, there is not, and there has never been, an allegation that Nike violated that duty. Moreover, the PTO acknowledged that Nike's statement about the substitute claims' patentability over prior art not of record but known to Nike would satisfy the obligation as explained in MasterImage 3D. After MasterImage's explanation of Idle Free, we cannot see how the statement used by Nike would be inadequate, absent an allegation of conduct violating the duty of candor. We therefore conclude that this was an improper ground on which to deny Nike's motion to amend.
- Scott EadsShareholder
- Peter HeuserShareholder
- Bryan D. KirkpatrickShareholder