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

July 10, 2017

Overview

In AdjustaCam v. Newegg, the Circuit reverses the denial of attorney fees where Judge Gilstrap simply adopted a pre-Octane Fitness determination by a prior judge, despite the Circuit’s post-Octane Fitness remand of the case in which it said that Newegg’s arguments “appear to have significant merit.” In IPCom v. HTC, the panel reverses a claim construction where the Board failed to identify structure in the specification that corresponded to a means-plus-function claim limitation.

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AdjustaCam v. Newegg, Fed. Cir. Case 2016-1882 (July 5, 2017)

Showing its post-Octane Fitness willingness to award attorney fees to prevailing defendants, the Circuit reverses the judgment of Judge Gilstrap of the Eastern District of Texas and awards fees to Newegg, which has a reputation for not settling such cases. This follows the remand of a prior appeal in the case following the Octane Fitness decision. In its remand, the Circuit noted that Newegg’s arguments “appear to have significant merit.”

AdjustaCam sued Newegg and dozens of other defendants for a patent directed to a camera clip that supports a camera both on a flat surface and when attached to a computer monitor. Unlike the claimed invention, Newegg’s accused products use a ball-and-socket joint, allowing rotation about more than one axis. Prior to claim construction, AdjustaCam moved to dismiss most of the defendants from the litigation after they settled for far less than the cost of litigation.

Almost two years later, the court construed the patent to be limited to a rotatable attachment that permitted rotation about a single axis. Just prior to summary judgment briefing, AdjustaCam moved to dismiss its case against Newegg with prejudice. Newegg moved for a declaration that the case was exceptional, because AdjustaCam brought the action simply to extract nuisance-value settlements, and that AdjustaCam had no reasonable expectation of success, particularly after the Markman order. Newegg also noted that AdjustaCam served a substantively different “supplemental” infringement report the day of its infringement expert’s deposition, without explaining the delay. Judge Gilstrap denied the motion, noting that AdjustaCam asserted relatively low damages against many defendants, and credited AdjustaCam’s explanation that it had inadvertently served a draft expert report on Newegg and did not realize its mistake until the day of its expert’s deposition.

While a first appeal of this case was pending, the Supreme Court issued its Octane Fitness decision, so the Circuit remanded the case to the Eastern District for reconsideration in view of Octane, noting that Newegg’s arguments “appear to have significant merit, particularly its argument that AdjustaCam’s continued pursuit of its infringement claims after the district court construed the claim term ‘rotatably attached’ was baseless.” However, on remand, Judge Gilstrap, who took over the case due to the retirement of the judge making the original ruling, simply adopted the early determinations endeavoring “not to circumvent by hindsight the judgments and in person evaluations that the trial judge who dealt with this case in the courtroom arena was best-positioned to have made.”

Despite the high “abuse of discretion” standard of review under the Supreme Court’s Highmark case, the panel reverses the denial of attorney fees, holding under Octane that this case does in fact stand out from others with respect to the substantive strength of AdjustaCam’s litigation position and the unreasonable manner in which the case was litigated. The panel appeared to be particularly incensed with Judge Gilstrap’s wholesale adoption of the prior determinations, despite the remand instructions that Newegg’s arguments “appear to have significant merit.”

The panel also differs with both district court judges in their determinations that AdjustaCam’s damages theories were not so outrageous as to justify an award of attorney fees.  The panel indicates that it would be inclined to affirm if AdjustaCam’s damages methodology were the only issue. However, in light of AdjustaCam’s frivolous infringement argument and unreasonable manner of litigation, the panel concludes “that the district court clearly erred by failing to consider AdjustaCam’s damages methodology as part of a totality-of-the-circumstances analysis. The irregularities in AdjustaCam’s damages model and the purported nuisance value of many of its settlements should have played a role in the evaluation of whether this is case exceptional.”

Read the full opinion

IPCom GmbH v. HTC Corporation, Fed. Cir. Case 2016-1474 (July 7, 2017)

The Circuit vacates obviousness determinations in an inter partes reexamination, ruling that the Board failed to conduct proper claim construction since it did not identify the structure in the specification that corresponds to a means-plus-function claim limitation.

In a prior appeal of the case, the Circuit determined that the phrase “an arrangement for reactivating the link with the first base station” is a means-plus-function limitation. While the Board recognized that ruling, it failed to properly construe that limitation. The Board rejected IPCom’s proposed three-step algorithm allegedly disclosed in the ’830 specification for performing the “arrangement for reactivating the link” function, but the Board failed to identify what it believed to be the correct algorithm from the specification; that omission led to an incomplete construction of the claim limitation and is incompatible with the Circuit’s 1994 en banc holding in In re Donaldson.

In Donaldson, the PTO rejected Donaldson’s claims by construing a means-plus-function limitation to encompass any means capable of performing the recited function, giving no consideration to the content in the specification. The PTO argued that such a practice was permissible under the broadest reasonable interpretation standard used by the agency. The Circuit rejected the PTO’s view, holding that the agency must follow the plain language of § 112 ¶ 6.

Here, the issue of identifying in the ’830 patent the algorithm for performing the “arrangement for reactivating the link” function was front and center during the reexamination. After the Board rejected IPCom’s proposed three-step algorithm, the Board only questioned whether each individual step of IPCom’s proposed algorithm was separately necessary. The Board then concluded its analysis by stating that it “need not consider whether or not the combination of Anderson and McDonald discloses or suggests these method steps.”

The Board’s analysis was erroneous because it never specified what it believed was the actual algorithm disclosed in the ’830 patent for performing the “arrangement for reactivating the link” function. Like Donaldson, the Board here impermissibly treated the means-plus-function limitation in its patentability analysis as if it were a purely functional limitation. The panel therefore vacates the Board’s claim construction of the “arrangement for reactivating the link” limitation, and remands for the Board to identify the corresponding algorithm (if any) in the specification. The panel affirms the obviousness determinations as to the claims on appeal that did not include the “arrangement” limitation.

Read the full opinion

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