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

February 17, 2017

Overview

In Metalcraft, the Circuit affirms a preliminary injunction based largely on the patentee’s proof that it ‎would be impossible to quantify damages ‎caused by loss of potentially-lifelong customers who ‎prefer to ‎purchase an entire line of products from the same manufacturer‎. Xilinx reverses a dismissal for lack of ‎personal jurisdiction over a German NPE that traveled into the forum to meet with the accused infringer ‎and had filed seven prior infringement cases there. ‎In PersonalWeb, the Circuit sends an IPR ‎determination of obviousness back to the Board for a more detailed discussion of the bases for its ‎holding. MPHJ affirms a determination of anticipation, ruling that the Board’s broad claim interpretation ‎is supported by the fact that a limiting description in the provisional application was deleted in the non-‎provisional that matured into the patent at issue. ‎

Thanks to my colleague Wes Parker for his help with this week’s report.‎

Pete

Metalcraft of Mayville, Inc. v. The Toro Company  The Circuit affirms the grant of a preliminary injunction precluding Toro from selling infringing ‎lawnmowers, with a showing of irreparable harm based on plaintiff’s proof that it would be impossible to ‎quantify damages ‎caused by loss of potentially-lifelong customers who prefer to purchase an entire line ‎of products from the same manufacturer‎.‎

Metalcraft dba Scag (“Scag”) is owner of a patent directed to a platform for a ride-on lawnmower that ‎includes a suspended operator platform that isolates an operator from vibration. Following ‎introduction of Scag’s patented mower, Toro introduced its own line of mowers with a similar suspended ‎platform. In granting Scag’s motion for preliminary injunction, the district court found that Scag had ‎shown infringement, that Toro failed to raise a substantial question of validity, that the balance of ‎hardships tipped in Scag’s favor, and that the public interest supported the injunction. ‎ ‎

The Circuit’s opinion first looks to infringement to determine if Toro established that the district court ‎committed clear error. The asserted claims all state: “an operator platform that supports the seat and an ‎entire body of an operator.” Toro argued the accused mowers do not meet the limitation “an entire body ‎of an operator” because the steering controls of the accused mowers are mounted to the chassis, not ‎the operator platform, and therefore the operator’s hands and arms are not supported by the platform. ‎The panel disagrees, noting that while some of the dependent claims not at issue require that the steering ‎controls be connected to the operator platform,‎ the claims at issue include no such limitation. Moreover, ‎the specification supports the court’s construction. ‎

As to validity, Toro argued that a person of ordinary skill in the art would have been motivated to ‎combine patents to a motorcycle shock absorber and to a suspended truck cab. The panel rules that the ‎district court was not clearly erroneous in holding that Toro presented no proof of motivation to combine ‎such teachings. “With no motivation to combine, we are left with only hindsight bias that KSR warns ‎against.” The panel thus concludes that Toro did not raise a substantial question of validity.‎

As to irreparable harm, Toro argues the district court abused its discretion by ignoring evidence of at ‎least twelve other companies that sell mowers designed to decrease shock loads to the operator. ‎However, the panel rules that the fact that other infringers may be in the marketplace does not negate ‎irreparable harm. Furthermore, the district court determined the damage to Scag is irreparable because it ‎is impossible to quantify the damages caused by the loss of a potentially lifelong customer. The fact ‎that Toro’s own Senior Marketing Manager declared that some customers “prefer to purchase an entire ‎line of products from the same manufacturer for consistency” supports the court’s determination. Citing ‎the 2015 Apple v. Samsung Circuit ruling, the opinion notes that the loss of Scag customers may have ‎far-reaching, long-term impact on its future revenues, and such sales are difficult to quantify. ‎

As to the balance of equities and the public interest, the panel agrees with the district court that Scag’s ‎harm in the absence of an injunction outweighs Toro’s harm if enjoined. It also concluded that in light of ‎the importance of encouraging innovation and the fact that the public can continue to obtain the patented ‎suspension system from Scag or other non-infringing mowers from Toro, the public interest favors the ‎issuance of an injunction. ‎

Comments: In addition to being supported by Apple v. Samsung, 801 F. 3d 1352 (Fed. Cir. 2015), this ‎decision brings to mind WBIP, LLC. v. Kohler Co., 829 F.3d 1317 (Fed. Cir. 2016), in which the Circuit ‎rejected the argument that permitting an injunction would leave the plaintiff, a much smaller company, as ‎the sole supplier of patented equipment. In all three decisions, the Circuit stressed the public’s interest in ‎the enforcement of patent rights, especially where the parties are competitors. This is the kind of ‎language we heard from the Circuit pre-eBay. ‎

Read the full opinion

Xilinx, Inc. v. Papst Licensing GMBH & Co. KG   In a ruling that will be welcomed by parties filing declaratory actions against non-practicing ‎entities, ‎particularly those based overseas, the Circuit reverses the dismissal of a DJ action based on ‎lack of ‎personal jurisdiction, ruling that specific jurisdiction exists over a German NPE.‎ This holding was ‎based on the fact that the forum is close to plaintiff’s office, Papst personnel traveled into the forum in ‎an unsuccessful attempt to negotiate a license with Xilinx, Papst litigated seven other patent infringement ‎cases in California, and Papst would have to litigate the infringement somewhere in the U.S.‎

Immediately following the unsuccessful meeting in California, Xilinx filed a DJ action in the Northern ‎District of California. On the same day, Papst filed an infringement suit in the District of Delaware. Papst ‎successfully moved to dismiss the California DJ action for lack of personal jurisdiction, the court ‎holding that specific jurisdiction did not exist as to Papst.‎

In prior cases the Circuit has summarized the Supreme Court’s due process jurisprudence for specific ‎jurisdiction in a three-factor test: (1) whether the defendant “purposefully directed” its activities at ‎residents of the forum; (2) whether the claim “arises out of or relates to” the defendant’s activities with the ‎forum; and (3) whether assertion of personal jurisdiction complies with the Fourteenth Amendment’s due ‎process clause. The first two factors correspond with the “minimum contacts” prong of International ‎Shoe, and the third factor corresponds with the “fair play and substantial justice” prong of the analysis. ‎

Papst makes no argument that its activities directed to Xilinx do not satisfy the minimum contacts prong. ‎Papst purposefully directed its activities to California when it sent multiple notice letters to Xilinx and ‎traveled there to discuss Xilinx’s alleged patent infringement and potential licensing arrangements. ‎Xilinx’s declaratory judgment action of noninfringement certainly relates to these contacts. Therefore, the ‎minimum contacts prong is satisfied.‎

The Supreme Court has repeatedly said that the reasonableness prong is typically satisfied by a showing ‎of minimum contacts. Where a defendant who purposefully has directed his activities at forum residents ‎seeks to defeat jurisdiction, he must present a compelling case that the presence of some other ‎considerations would render jurisdiction unreasonable. In its 1985 Burger King case, the Supreme Court ‎identified five considerations relevant to the reasonableness analysis: (1) the burden on the defendant, ‎‎(2) the forum State’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient ‎and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of ‎controversies, and (5) the shared interest of the several States in furthering fundamental substantive ‎social policies.‎

Papst makes no argument that factors 2–5 weigh against a finding of personal jurisdiction, nor could it. ‎Xilinx, which is headquartered in California, indisputably has an interest in protecting itself from patent ‎infringement by obtaining relief “from a nearby federal court.” Jurisdiction over Xilinx’s DJ claims in ‎California would also result in an efficient resolution of the controversy. Finally, there is no conflict ‎between the interests of California and any other state, since the same body of federal patent law would ‎govern the patent invalidity claim irrespective of the forum.‎

With respect to the burden on the defendant, Papst sent letters into the forum and its representatives ‎traveled there to meet with Xilinx. Also, the burden on Papst is mitigated by Papst’s status as an NPE ‎residing outside of the U.S. By the very nature of its business, Papst must litigate its patents in the ‎U.S., thus falling right into the fourth factor: the interstate judicial system’s interest in obtaining the most ‎efficient resolution of controversies. The lack of significant burden on Papst is also evidenced by ‎Papst’s prior seven patent litigations in California. Finally, Papst has not demonstrated that it would be ‎unduly burdensome to litigate in California rather than elsewhere in the U.S. ‎

In light of the totality of circumstances, the panel holds that this is not one of the rare situations in which ‎sufficient minimum contacts exist but where the exercise of jurisdiction would be unreasonable. In other ‎words, there is simply no compelling case here that personal jurisdiction over Papst is unreasonable. ‎

Read the full opinion

PersonalWeb Tech., LLC v. Apple, Inc.   In yet another example of the Circuit demanding more detailed findings from the PTAB, the panel ‎vacates an IPR obviousness determination in favor of Apple, instructing the Board to support its ‎findings that the prior art disclosed all of the elements of the challenged claims and explain why a skilled ‎artisan would have been motivated to combine prior art teachings with a reasonable expectation of ‎success.‎

This matter arose when PersonalWeb sued Apple, alleging infringement of seven of its patents by iTunes ‎and iCloud. PersonalWeb also sued EMC, Google and Facebook, and all but the ’310 patent were ‎successfully challenged by EMC in other IPR proceedings. The present appeal is from Apple’s ‎successful IPR against the ’310 patent, based on prior art patents to Woodhill and Stefik. ‎

The panel first affirms claim construction as being plain from the face of the claims, and then turns to ‎obviousness. Under the theory presented by Apple and adopted by the Board, the panel rules that the ‎Board had to make findings, supported by evidence and explanation, on two points. First, the Board had ‎to find in Woodhill and Stefik all of the elements of the claims at issue. Citing the 2016 NuVasive, ‎Warsaw Orthopedic and Ariosa Diagnostics cases, the panel holds that the Board also had to find that a ‎person of ordinary skill in the art would have been motivated to combine the prior art as claimed and had ‎a reasonable expectation of success in doing so. KSR explained that it is important to identify a reason ‎that would have prompted a person of ordinary skill to combine the elements in the way the claimed new ‎invention does. According to the Supreme Court: “To facilitate review, this analysis should be made ‎explicit.” ‎

The panel finds the Board’s opinion to be inadequate. For example, claim 24 requires “causing the ‎content-dependent name of the particular data item to be compared to a plurality of values.” The Board ‎found this element satisfied but the Board discussion mentions only Stefik, not Woodhill. The Board’s ‎opinion does not explicitly say, let alone explain, how Woodhill shows that determination to involve a ‎comparison between the content-based identifier and a plurality of values. ‎

The panel also finds the Board’s reasoning to be deficient in its finding that a relevant skilled artisan ‎would have had a motivation to combine Woodhill and Stefik in the way claimed or that this combination ‎would have had a reasonable expectation of success. The Board merely agrees with Apple’s contention ‎that a person of ordinary skill reading Woodhill and Stefik would have understood that the combination ‎would have allowed for the selective access features of Stefik to be used with Woodhill’s content-‎dependent identifiers feature. But that reasoning seems to say no more than that a skilled artisan, once ‎presented with the two references, would have understood that they could be combined. ‎

The panel concludes that its remand is not simply for the Board to explain what it meant or what it ‎considered in reaching its decision. That is what the Circuit advised the Board in the NuVasive, Warsaw Orthopedic and Ariosa Diagnostics cases. Here, the Board is told that the remand is for the Board to go ‎beyond that and reconsider the merits of the obviousness challenge. ‎

Read the full opinion

MPHJ Tech. Investments, LLC v. Ricoh Americas Corp.   MPHJ appealed an IPR decision by the PTAB that found the claims of MPHJ’s patent directed to scan-‎to-email technology to be anticipated. In its opinion affirming the decision, the panel considers the fact ‎that the related provisional application included a limiting description of disputed claim terms that was ‎omitted in the non-provisional to be evidence that the inventor intended a broader definition of the ‎disputed claim terms. The panel affirms the Board’s decision of anticipation based on the broader ‎definition of the disputed claim terms.‎

The patent is directed to a virtual copier that “extends the notion of copying from a process that involves ‎paper going through a conventional copier device, to a process that involves paper being scanned from ‎a device at one location and copied to a device at another location.” Independent claim 1 recites that “in ‎response to the selection of said Go button, an electronic document management system integrates at ‎least one of said electronic image, electronic graphics and electronic document using software so that ‎said electronic image, electronic graphics and electronic document gets seamlessly replicated and ‎transmitted to at least one of said plurality of external destinations.” Additionally, independent method ‎claim 4 recites “interfacing between at least one of said scanner, digital copier or other multifunction ‎peripheral and email application software.” MPHJ argued that the terms “seamlessly,” “interfacing,” and ‎‎“Go button” represent a single-step operation that does not require any human intervention between the ‎selection of the Go button and the replication at the external destination.‎

Under the broadest reasonable interpretation required by Cuozzo, the panel holds that the terms ‎‎“seamlessly,” “interfacing,” and “Go button” do not limit the claims to a single-step operation either ‎inherently or as informed by the specification. Additionally, the specification describes the one-step ‎operation as “optional.” MPHJ pointed to passages from the provisional application to which the patent ‎claims priority, which described that “the IMAGinE Virtual Copier can copy paper from a physical device ‎directly into a third-party software application in one step,” and distinguished the virtual copier from prior ‎art systems that required two or more steps. However, these passages were omitted from the non-‎provisional application. The panel states that “a person of skill in this field would deem the removal of ‎these limiting clauses to be significant.” Accordingly, the panel holds that the claims would encompass ‎a multi-step operation, and are therefore anticipated. ‎

Judge O’Malley concurs in part and dissents in part, saying that she agrees that claims 1-3 are ‎anticipated but that she would uphold the patentability of claims 4-8. Judge O’Malley disagrees with the ‎majority’s interpretation of the effect of the omission of description that was included in the provisional ‎application. She notes that the provisional application was incorporated by reference in the non-‎provisional application, so the “omitted” portions were actually effectively included in the non-provisional ‎application. Because of this and further evidence in the specification, Judge O’Malley would hold that ‎the terms “Go button” and “interfacing” require a one-step operation.‎

Comment: This case serves as a warning to all of us that when we make changes to the disclosure in ‎preparing a non-provisional application based upon a previously-filed provisional, we need to make sure ‎to be that lexicographer we hear so much about if we don’t want those changes to be held against our ‎client during claim construction. ‎

Read the full opinion

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