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

September 8, 2017

Overview

Intercontinental v. Kellogg involves a fight between two food industry powerhouses, Kraft and Kellogg, in which a majority of the panel affirms summary judgment of obviousness of a patent directed to a resealable cookie package based on the same prior art that had been considered in a prior unsuccessful ex parte reexamination. Lifetime v. Trim-Lokreverses the grant of a motion to dismiss based on insufficient pleadings but does not decide if the test to be applied should be under the now-abrogated Form 18 or the Iqbal/Twombly standard. In Southwire v. Cerro, the panel affirms an IPR determination of obviousness even though it found that the Board’s determination of inherency in the principal reference was erroneous.

In a precedential order involving Mentor Graphics, Eve-USA and Synopsys, the Circuit denies rehearing en banc and therefore rejects a Synopsys petition arguing for apportionment of damages. None of the three opinions was accepted by a majority of the Circuit judges so the opinions are not binding in future cases. The petition argued that because Mentor’s patent covered only two of the many features in its infringing computer chip design tool, Mentor’s $36 million award should have been apportioned. See our report on the panel opinion here.

Thanks to my new colleague Michael Bernadicou for his help with this week’s report. Michael is in the group of patent attorneys that joined us earlier this summer. See here.

Pete

Intercontinental Great Brands v. Kellogg, Fed. Cir. Case 2015-2082 & -2084 (September 7, 2017)

A divided panel affirms summary judgments as to obviousness and no unenforceability with respect to a patent directed to resealable food packaging. Kraft Foods Global Brands (now called Intercontinental) sued Kellogg for infringement of its ’532 patent. Kellogg responded by filing a motion for summary judgment of obviousness based on prior art that had previously formed the basis of an unsuccessful ex parte reexamination by a third party. Kellogg also contended that Kraft engaged in inequitable conduct in the reexamination, and Kraft moved for summary judgment on that issue.

The opinion provides a good discussion of KSR, noting that the Supreme Court ordered summary judgment after determining there was no genuine issue of material fact, and a conclusory affidavit as to obviousness did not preclude summary judgment. The panel first rejects Kraft’s argument that the district court treated the objective indicia as “an afterthought.” The opinion notes that the district court first concluded that Kellogg had made an extremely strong prima facie showing of obviousness, holding that no reasonable jury could conclude that a person skilled in packaging design would not be motivated to combine these features. Kraft, and Judge Reyna in his dissent, contended that the objective indicia must be evaluated before drawing a conclusion as to whether a reasonable jury would find motivation, not merely before drawing the ultimate obviousness conclusion. But, according to the majority, even with a motivation proved, the record may reveal reasons that, after all, the court should not conclude that the combination would have been obvious. One type of such additional evidence consists of evidence of objective indicia—commercial success traceable to the claimed invention, industry praise, copying, and certain other facts concerning people’s actions and statements.

According to the opinion, this approach to the obviousness analysis fulfills the KSR requirement that the obviousness determination must be “expansive” and “flexible.” It reflects an understanding of the role of “motivation” that fits the Circuit’s consistent treatment of that element of the analysis as factual in nature. It also fits the Supreme Court’s treatment of objective indicia as evidence to be weighed in the overall legal determination of obviousness. In his dissent, Judge Reyna argues that there should be no prima facie rule or test in the obviousness inquiry. That is, the burden of persuasion should not shift from the challenger to the patent holder after a legal determination of obviousness has already been made.

Kellogg avoided issues of fact as to the objective indicia by asking the district court to accept Kraft’s assertions as to commercial success, industry praise, and copying. Therefore, the only thing left was a weighing of those indicia in order to come up with an ultimate conclusion. Kraft was critical of the fact that Kellogg did not offer expert witness testimony in support of its “common sense motivation to combine” argument, but the panel cites to other cases involving technologies and prior art that are simple enough that no expert testimony is needed.

The panel also rejects Kraft’s final argument that the party challenging validity shoulders an enhanced burden if the invalidity argument relies on the same prior art considered during examination (here reexamination). The opinion concedes that, while it may be harder to meet the clear and convincing burden when the invalidity contention is based upon the same argument on the same reference that the PTO already considered, this does not mean that something more than clear and convincing evidence is required. In any event, the panel concludes that this is not a case in which what the PTO concluded makes a difference. First, the only express analysis of the most pertinent prior art (a Machinery Updatearticle) was by the examiner, who rejected the claims. Second, the panel feels that the showing of obviousness is sufficiently strong that no PTO contrary determination could alter the conclusion about summary judgment.

As to Kellogg’s cross-appeal, the entire panel sees no reversible error in the district court’s conclusion that Kellogg’s evidence was insufficient to permit a finding of the intent required for inequitable conduct based on Kraft’s reexamination arguments. Kellogg’s charge rests on a sentence in the Packaging News article—a short article that was the central focus before the Board, when the Board was specifically looking at and asking about the brief text. The relevant sentence in that article describes the Re-Seal It packaging as not using “conventional wrapping film.” Kellogg says that the sentence is a misprint and that Kraft committed inequitable conduct by not so informing the Board.

The opinion distinguishes the Circuit’s Therasense and Ohio Willow Wood cases, noting that, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found. The alleged wrong is not what Kraft affirmatively stated about Packaging News. The only alleged wrong is Kraft’s omission of any statement that the sentence in the Packaging News reference on which the Board was directly focusing was actually a misprint. Even if the sentence was a misprint, the district court properly concluded that the record does not support an inference of deceptive intent under the Therasense standard.

Read the full opinion 

Lifetime Industries, Inc. v. Trim-Lok, Inc., Fed. Cir. Case 2017-1096 (September 7, 2017)

The Circuit reverses the grant of a motion to dismiss a patent infringement complaint for failing to adequately allege that Trim-Lok either directly or indirectly infringed a ’590 patent directed to a two-part seal used for a slide-out room in recreational vehicles. In an action that was filed prior to the December 2015 effective date of the abrogation of Form 18, the panel does not rule as to whether the relaxed pleading requirements of Form 18 apply or the more stringent requirements of Twombly and Iqbal, holding that the complaint was adequate under either standard.

Lifetime sued Trim-Lok in 2013, alleging direct and indirect infringement. Trim-Lock moved to dismiss on the bases that Lifetime had not adequately identified the products that allegedly infringed. Rather than oppose the motion, Lifetime filed a First Amended Complaint (FAC) in an attempt to identify the accused products. Trim-Lok moved to dismiss the FAC, which was granted by the district court, but giving Lifetime leave to file a Second Amended Complaint (SAC). Lifetime filed its SAC alleging that in the months before it filed the original complaint, two of its engineers with knowledge of the ’590 patent and the Lifetime product line left Lifetime to work for Trim-Lok. The SAC identified a Lifetime employee, who discovered a two-part Trim-Lok seal installed in an RV with a slide-out room at a plant run by Forest River, an RV manufacturer; an agent of Trim-Lok visited the Forest River plant and installed Trim-Lok’s two-part seal onto an RV having a slide-out room; and the Trim-Lok agent installed the seal to solicit sales of the seal to Forest River.

As for induced infringement, Lifetime alleged that Forest River’s making, using, offering for sale and selling of an RV having the two-part seal constitutes infringement; that Trim-Lok influenced Forest River to include the two-part seal in their RVs, knowing that such combination would fulfill all elements of at least one claim of the ’590 patent; and that employees or representatives or agents of Trim-Lok assisted in the installation, or directed the installation of the seals. Thus, Lifetime alleged that Trim-Lok induced Forest River to infringe.

Concerning contributory infringement, Lifetime alleged that the two-part seal sold by Trim-Lok had only one purpose—for use on RVs with slide-out rooms, that Trim-Lok assisted in or directed the installation of the seal on an RV, and that the seals were not staple articles of commerce suitable for noninfringing use.

Despite the foregoing details, the district court granted Trim-Lok’s motion to dismiss the SAC. Although the court determined that Lifetime had adequately identified the accused product, the court concluded that Lifetime had not adequately pleaded direct or indirect infringement.

The first issue for the panel to decide was whether the pleading standards of Form 18 or Twombly/Iqbal apply. Form 18 provided a sample allegation of direct infringement, which required very little other than the barest of allegations. The Circuit had ruled that compliance with Form 18 immunized a claimant from attack regarding the sufficiency of the pleading. However, Form 18 was abrogated effective December 1, 2015, with the pertinent Supreme Court order stating that Form 18 will govern “insofar as just and practicable, all proceedings” pending on that date. Lifetime filed its SAC in 2014, but the district court did not issue its order dismissing the SAC until 2016. In its order, the court did not reference Form 18, but repeatedly referenced the Iqbal/Twomblystandard. Lifetime argues that the district court erred because the court should have applied the requirements of Form 18. In the alternative, Lifetime argues that the SAC meets the Iqbal/Twombly standard.

The panel notes that the parties assume that there is a difference between the requirements of Form 18 and Iqbal/Twombly, but the Circuit has never recognized such a distinction. In any event, the panel sees no need to resolve that question or to decide which standard applies since the SAC met the Iqbal/Twombly standard for pleading direct infringement. The opinion discusses the detailed recitations of the SAC, and rules that, “drawing reasonable inferences in Lifetime’s favor, these facts make it plausible that a Trim-Lok agent installed the seal onto the Forest River RV.” Taken together, these allegations render Lifetime’s pleadings sufficiently plausible to survive a motion to dismiss.

As to indirect infringement, Form 18 does not apply, so the Iqbal/Twombly standard is applicable. Under this standard, for an allegation of induced infringement to survive a motion to dismiss, a complaint must plead facts plausibly showing that the accused infringer specifically intended another party to infringe the patent and knew that the other party’s acts constituted infringement. The panel agrees with Lifetime that it has plausibly alleged that Trim-Lok induced infringement of the ’590 patent. Citing Twombly and the Circuit’s 2012 Bill of Lading case, the panel rules that the plausibility requirement is not akin to a “probability” requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal that the defendant is liable for the misconduct alleged.

The panel compares this case to Bill of Lading. In that case, it was unclear whether the claimed method had been performed at all, but the Circuit determined that the patent owner had adequately pleaded intent where it alleged knowledge of the patent and had plausibly pleaded that the defendants’ customers performed the claimed method. Lifetime pleaded facts that are at least as strong, because Lifetime could rely on direct evidence (i.e., the two-part seal found installed on an RV at the Forest River plant) that tended to show infringement. This evidence, taken together with Trim-Lok’s prior knowledge of the patent and viewed in Lifetime’s favor, “gives rise to a reasonable inference that Trim-Lok intended to induce” Forest River to infringe.

Finally, Lifetime argues that the district court erred in dismissing its contributory infringement count because contributory infringement only requires knowledge of the patent and of infringement, not the intent to infringe. The panel agrees, and holds that it plausibly pleaded contributory infringement.

Comments: While this was a fairly easy case, it does provide some guidance as to what is required for allegations of direct and indirect infringement under Iqbal/Twombly. Another recent case, Lyda v. CBS Corp., 838 F.3d 1331 (Fed. Cir. 2016), applied Iqbal/Twombly in a joint infringement case and found that the pleading was insufficient under the requirements of Akamai. District court decisions deciding cases filed after December 15, 2015, are all over the map in applying Iqbal/Twombly. They vary from requiring an application of the asserted claims to the accused designs, to requiring little more than Form 18 because local rules require claim charts to be provided early in the case. Undoubtedly the best practice, and that which appears to be required from a majority of the district courts, is to include claim charts applying the asserted claims to the accused products. Courts will need to be lenient in permitting amendment to such allegations as discovery proceeds and the courts render their Markman decisions.

Read the full opinion 

Southwire Company v. Cerro Wire LLC, Fed. Cir. Case 2016-2287 (September 8, 2017)

The Circuit affirms an IPR determination of obviousness of a patent directed to a method of manufacturing electric cable in which a lubricant is incorporated into the outer sheath such that there is a reduction in pulling force required to install the cable.

Claim 1 is representative and is long and detailed, essentially claiming a method of manufacturing electrical cable in which a lubricant is applied to the material making up the outer layer of the cable during manufacture, such that the amount of force required to install the cable is reduced by at least about 30%. Cerro petitioned for IPR, after the patent had undergone two prior ex parte reexaminations in which the claims were determined to be patentable. During the IPR, Southwire sought to add claims 30-42 but the examiner concluded that all of claims 1-42 would have been obvious over various combinations of prior art.

Southwire appealed to the Board, which affirmed, explaining that “where the claimed and prior art products are produced by identical or substantially identical processes, a prima facie case of either anticipation or obviousness has been established. It found that Summers’s lubricants “would achieve the claimed force reduction” because Summers (in view of Dow) teaches the same method steps—namely, extruding a cable jacket formed from a plastic material containing a lubricant, such that the lubricant migrates to the surface of the jacket and lubricates the interface between the cable and any surface of the cable passageway.

On appeal, Southwire argues that, as an initial matter, the Board erred in relying on “inherency” in making its obviousness determination. The panel agrees with Southwire that the Board erred in relying on inherency in making its obviousness determination. The panel notes that the Circuit has recognized that inherency may supply a missing claim limitation in an obviousness analysis, and “the limitation at issue necessarily must be present” in order to be inherently disclosed by the reference. The Board cited no evidence that a reduction of 30% in the pulling force would necessarily result from the claimed process, which contains no steps that ensure such reduction.

However, the panel concludes that the Board’s error was harmless because, although it improperly invoked inherency, it need not have. It made the necessary underlying factual findings to support an obviousness determination. It found that the claimed method simply applies the same process for the same purpose as disclosed in Summers—i.e., to reduce the pulling force on a cable for ease of installation. Those findings are supported by substantial record evidence.

Southwire also argues that the Board erred in acknowledging that Southwire’s evidence shows a long-felt need, but then disregarding the evidence by finding that the prior art solved that need. The panel rejects this argument, noting that substantial evidence supports the Board’s findings that Southwire’s evidence lacked factual support, that its objective evidence lacked a nexus to the claimed invention, and that any long-felt need adduced from the evidence had already been met by Summers. 

Read the full opinion 

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