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

May 5, 2017

Overview

In Nichia the Circuit affirms the denial of a permanent injunction because Nichia failed to prove irreparable injury. In RecogniCorp the panel throws out as not being directed to patentable subject matter claims directed to facial image transmission technology allegedly used in Nintendo’s Wii gaming system. The Circuit says in Helsinn v. Teva that the AIA did not change the law to require that the details of an invention need to be made public in order to be an invalidating sale.

We will include in next week’s report today’s Affinity Labs case affirming the PTO’s refusal to dismiss ‎pre-AIA ex parte and inter partes reexaminations despite a prior validity ruling in co-pending district ‎court litigation.‎

Pete

Nichia Corp. v. Everlight Americas, Fed. Cir. Case 2016-1585, 2016-1618 (April 28, 2017)

Despite the defendant’s failure to invalidate any of the three patents in suit and its unsuccessful noninfringement arguments, the Circuit affirms the denial of a permanent injunction requested by LED maker Nichia due to its dominant share of the market, its failure to identify a single lost sale to Everlight, and its widespread licensing of the patents to other low cost competitors. This affirmance is based solely on the lack of a showing of irreparable injury, without consideration of the other three eBay factors.

The panel first reviews the district court’s bench-trial findings as to claim construction, infringement and obviousness, and holds that the evidence supports the district court’s findings. However, the most interesting part of the opinion relates to Nichia’s motion for permanent injunction. After setting forth the four-factor eBay test, the panel notes eBay’s statement that, historically, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.  The opinion then points out that the Circuit has similarly observed that “while a patentee is not entitled to an injunction in every case, ‘it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.’”

Nichia challenges the district court’s finding that it failed to establish that it will suffer irreparable harm absent an injunction. The court’s conclusion relied on several findings, each weighing against Nichia. Specifically, the court found that (1) there is an absence of meaningful competition; (2) Nichia had failed to establish past irreparable harm, or the likelihood of irreparable harm in the future based on lost sales or price erosion; and (3) Nichia’s licensing of the patents to major competitors suggested that harm from infringement of the patents-in-suit is not irreparable.

The panel finds that there is abundant support for these factual findings. As to the absence of meaningful competition, the district court found that Everlight generally sells to distributors rather than directly to customers, as Nichia does. The court explained that Everlight’s competition accounted for “the proverbial ‘drop in the bucket’” when compared to Nichia’s total sales. Nichia identified 516 sales opportunities, with Everlight as a competitor in only 3. As to the one and only alleged instance of a lost sale, the evidence showed several other lower-priced, licensed competitors for the same opportunity. 

Nichia also had alleged that it suffered price erosion because of Everlight’s infringement in a sale to General Electric. While Nichia eventually won the GE contract at a price lower than it originally offered, Nichia’s lower-price sale had been required by GE, so Nichia was going to have to lower its prices regardless of Everlight’s competition. Further, the court found that several licensed competitors had offered products at lower prices, which drove down prices. There was therefore no clear error in the finding that Nichia failed to establish price erosion.

Nichia argues that the court wrongly found that its licensing activities precluded a finding of irreparable harm.  To the extent the district court adopted a categorical rule, the panel agrees with Nichia. But the panel agrees that Nichia’s prior licenses weigh against a finding of irreparable harm.  

Because the panel finds no clear error in the district court’s finding that Nichia failed to prove that it would suffer irreparable harm absent the injunction, and this is one of the four equitable factors, the court did not abuse its discretion in denying Nichia’s request for an injunction.

This refusal of the panel to see a need to evaluate the other three eBay factors is consistent with some and inconsistent with other Circuit and district court decisions, which often have evaluated all four factors and then decided whether injunctive relief is appropriate. 

Read the full opinion

RecogniCorp, LLC v. Nintendo Co., Ltd., Fed. Cir. Case 2016-1499 (April 28, 2017)

RecogniCorp sued Nintendo for infringement of a patent directed to facial image transmission allegedly used in Nintendo’s Wii video gaming system. The Circuit affirms a determination of invalidity by Judge Jones of the Western District of Washington under § 101, holding that the claims are directed to the abstract idea of encoding and decoding image data, and the claims do not contain an inventive concept sufficient to render the patent eligible.  

Representative claim 1 recites:

  1. A method for creating a composite image, comprising:

    displaying facial feature images on a first area of a first display via a first device associated with the first display, wherein the facial feature images are associated with facial feature element codes;

    selecting a facial feature image from the first area of the first display via a user interface associated with the first device, wherein the first device incorporates the selected facial feature image into a composite image on a second area of the first display, wherein the composite image is associated with a composite facial image code having at least a facial feature element code and wherein the composite facial image code is derived by performing at least one multiplication operation on a facial code using one or more code factors as input parameters to the multiplication operation; and

    reproducing the composite image on a second display based on the composite facial image code.

Under the first step of Alice, the panel holds that claim 1 is directed to the abstract idea of encoding and decoding image data. This method reflects standard encoding and decoding, an abstract concept long utilized to transmit information.  

The panel rejects RecogniCorp’s citation of Diehr, noting that Diehr is distinguishable because, outside of the math, claim 1 of the patent is not directed to otherwise eligible subject matter. Adding one abstract idea (math) to another abstract idea (encoding and decoding) does not render the claim non-abstract. The panel also distinguishes Enfish. Unlike Enfish, claim 1 does not claim a software method that improves the functioning of a computer. The panel holds that this case is similar to Digitech, where the claims were directed to the abstract idea of organizing information through mathematical correlations.

Proceeding to the second step of Alice, the panel finds that these claim elements do not transform the nature of the patent claims into a patent-eligible application. Distinguishing DDR Holdings, the panel holds that claim 1 contains no inventive concept. Nor does the presence of a mathematical formula dictate otherwise. Claims that are directed to a non-abstract idea are not rendered abstract simply because they use a mathematical formula. But the converse is also true: A claim directed to an abstract idea does not automatically become eligible merely by adding a mathematical formula.

The opinion notes that in BASCOM, the patent owner alleged that an inventive concept can be found in the ordered combination of claim limitations that transform the abstract idea of filtering content into a particular, practical application of that abstract idea. That allegation was found to be sufficient to survive a motion to dismiss similar to the motion at issue here, where all facts had to be construed in the patent owner’s favor. However, RecogniCorp has not alleged a particularized application of encoding and decoding image data. In fact, claim 1 does not even require a computer; the invention can be practiced verbally or with a telephone.   

Read the full opinion

Helsinn Healthcare v. Teva, Fed. Cir. Case 2016-1284, 2016-1787 (May 1, 2017)

The Circuit reverses the district court and finds that four patents directed to a drug for reducing chemotherapy-induced nausea and vomiting are invalid as being on sale prior to the critical date, thus permitting Teva to introduce a generic substitute for Helsinn’s popular Aloxi® product. In doing so, the Circuit refuses to accept the argument that the AIA changed on-sale law to require that the details of an invention be made public prior to the critical date by the addition of the language “or otherwise available to the public.”

The panel first addresses whether the invention of the ’724, ’725, and ’424 patents was subject to a sale or offer for sale prior to the critical date. Helsinn admits that the Supply and Purchase Agreement was binding as of its effective date, April 6, 2001, and that, if the FDA approved the 0.25 mg dose and/or the 0.75 mg dose of palonosetron, the agreement obligated Helsinn to sell and MGI to purchase those products. The fact that an agreement covered one party’s requirements as opposed to a specified quantity does not prevent application of the on-sale bar.

The panel also rejects Helsinn’s argument that at the critical date it was uncertain whether the FDA would approve the 0.25 mg dose, pointing out that absence of FDA approval before the critical date does not prevent a sale or offer for sale from triggering the on-sale bar.   

Helsinn also argues that, even if the agreement of sale for the 0.25 mg dose could be an invalidating sale, the agreement was uncertain because it covered the 0.25 mg dose, the 0.75 mg dose, and both doses. However, the panel rules that even if the agreement had given the purchaser the option of choosing between the two doses, there would still be a binding agreement.

The panel next turns to the issue of whether the AIA changed the meaning of the on-sale bar under § 102 so that there was no qualifying sale as to the ’219 patent. Before the AIA, § 102(b) barred the patentability of an invention that was “patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent.” By enacting the AIA, Congress amended § 102 to bar the patentability of an “invention that was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1). Helsinn argued that the “otherwise available to the public” phrase changed the law, which now does not encompass secret sales and requires that a sale make the invention available to the public in order to trigger application of the on-sale bar.

Apart from the additional statutory language, this argument primarily relies on floor statements made by individual members of Congress that dealt more with public use, which is not now before the Circuit. The panel notes that as to offers for sale, requiring public disclosure of the details of the claimed invention as a condition of the on-sale bar “would work a foundational change in the theory of the statutory on-sale bar.” It is sufficient that, if the existence of the sale is public, the details of the invention need not be publicly disclosed.

Finally, the panel addresses the issue of whether, under the Supreme Court’s Pfaff v. Wells case, the invention was ready for patenting as of the critical date. The panel rejects the holding of the district court and the argument of Helsinn that in order for the invention to be ready for patenting, it had to meet the FDA standard, which requires finalized reports with fully analyzed results from successful Phase III trials. The panel finds that before the critical date of January 30, 2002, it was established that the patented invention would work for its intended purpose.

Read the full opinion

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