Fresh From the Bench: Recent Patent Cases From the Supreme Court and the Federal Circuit
By now we all know the holdings in Octane and Highmark but after summarizing the cases I share some thoughts on lessons to be learned fromthe opinions.
Octane - The Supreme Court holds that district courts should determine whether a case is "exceptional" in a case-by-case exercise of their discretion, considering the totality of the circumstances.
Highmark - The Supreme Court rules that the district court's decision on whether a case is exceptional should be reviewed on appeal for abuse of discretion and not de novo.
GE Lighting Solutions - A Federal Circuit panel agreed as to 3 of the 4 patents in suit but was divided as to the fourth where the written description apparently did not conform to the figures.
Octane Fitness, LLC v. Icon Health & Fitness, Inc., Supreme Court Case 12-1184 (4/29/2014)
The district court and the Circuit had applied the test set forth in Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F. 3d 1378 (2005). In that case the Circuit held that a case is exceptional under §285 only "when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions." Absent misconduct in conduct of the litigation or in securing the patent, fees may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.
In reversing the Circuit, Justice Sotomayor stated the proper test to be as follows:
We hold, then, that an "exceptional" case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.
Later in the opinion Justice Sotomayor stated that the exceptional nature of the case only needs to be proven by a preponderance of the evidence and not by clear and convincing evidence.
Highmark, Inc. v. AllCare Health Management System, Inc., Supreme Court Case 12-1163 (4/29/2014)
Highmark vacated another decision of the Circuit, based upon its ruling in Octane. Octane held that a determination of "exceptional" is to be decided by the district court on a case-by-case exercise of their discretion considering a totality of the circumstances, so the district court's decision should be reviewed on appeal for abuse of discretion and not de novo.
Lessons to be considered in view of Octane and Highmark:
1. NPE's and others asserting weak patent infringement claims run the risk, for the first time, of being liable themselves;
2. The Circuit will have to accord more respect to district court decisions, suggesting that the Court may similarly jettison de novo review of claim construction in the pending Teva Pharmaceuticals case;
3. Like KSR, this is an example of the Federal Circuit being told it is applying too high a burden of proof, particularly on patent infringement defendants;
4. Like eBay, this is an example of the Court telling the Federal Circuit it should not be applying special rules to patent cases;
5. In combination with post-issuance validity proceedings, this shows a power shift from NPE's to those defending unreasonable patent infringement filings;
6. Although the Senate is prepared to consider fee-shifting legislation, it would seem that Octane would cause both the Senate and the House to reconsider the need for such legislation, much like damages cases decided by the Circuit in 2010 and 2011 rendered less necessary legislation reducing the likelihood of excessive damage awards that otherwise might have been included in AIA; and
7. The cases will likely increase the tendency of plaintiffs to file in jurisdictions perceived as being friendly to patentees, such as the Eastern District of Texas, to reduce the risk of an adverse fee award.
GE Lighting Solutions, LLC v. Agilight, Inc., Fed. Cir. Case 2013-1267 (5/1/2014)
As to the ‘140 and ‘771 patents, the panel agreed that the district court's grant of summary judgment of noninfringement was not appropriate due to the improper construction of the term "IDC connector," an acronym for "insulation displacement connector." The district court had relied on an embodiment disclosed in the figures and cited to several of the dependent claims to narrowly construe the term.
The panel noted that there was no dispute that IDC connector is a commonly used term and that there is nothing in the intrinsic record that requires a departure from this plain and ordinary meaning. There are only two instances where the specification and prosecution history can compel departure from the plain meaning: lexicography and disavowal. Noting that the standards for finding lexicography and disavowal are exacting, the panel stated: "To act as his own lexicographer, a patentee must clearly set forth a definition of the disputed claim term, and clearly express an intent to define the term. Similarly, disavowal requires that the specification [or prosecution history] make clear that the invention does not include a particular feature." The panel found neither here. "Likewise, while the specifications only disclose a single embodiment of an IDC connector, they do not disavow or disclaim the plan meaning of IDC connector or otherwise limit it to that embodiment. A patent that discloses only one embodiment is not necessarily limited to that embodiment."
The panel then turned to the district court's importing limitations from the dependent claims into the independent claims, noting this was a violation of the doctrine of claim differentiation. "The doctrine of claim differentiation "creates a presumption that these dependent claim limitations are not included in the independent claim." Here the panel found there was nothing to rebut the presumption.
A majority of the panel also reversed the district court's summary judgment of noninfringement as to the ‘896 patent due to its disagreement with the court on the construction of "substantially ellipsoidal inner profile" and "generally spherical outer profile." The parties stipulated on the meaning of the terms but then, as we all know can happen, disagreed on their application at trial. The majority determined that to adopt Agilight's construction as to the first term would exclude the depiction of the preferred embodiment, and no evidence here supports such a construction. As to the second term, the majority found that drawings presented by the expert witnesses demonstrated that issues of fact remained that would need to be resolved at trial.
As to the ‘055 patent in suit the panel agreed with the district court's construction of "annular gasket" to be "a three-dimensional deformable material used to make a pressure-tight joint between stationary parts, with an opening in its center capable of sealing off its center area when bonded statically between stationary parts on its top and bottom." The panel also agreed with the district court that because the accused design had no "opening," there was no infringement, and summary judgment was appropriate.
Judge Reyna dissented as to the ‘896 patent, noting that the specification mistakenly says that the depicted profile is "ellipsoidal" when the full profile clearly is not. While he expresses that an ambiguity in the patent that affects the scope of the claims should typically be resolved in favor of the public over the patentee, here he finds that the ambiguity is resolved from the amendments and remarks made during prosecution. What the majority has done here "allows the patentee to recapture surrendered claim scope and ensnare the prior art." Under a proper interpretation of the disputed claim language, Judge Reyna would affirm the court's grant of summary judgment of noninfringement as to the ‘896 patent because GE Lighting did not raise a genuine issue of material fact as to the application of that language to the accused design.