Precedential Patent Cases From the Federal Circuit in the Past Week
Nordock – This opinion is full of guidance on design patent damages, preserving the right to appeal, functionality and infringement. Nordock filed suit against Systems, alleging infringement of a design patent directed to a lip and hinge plate for a dock leveler. A jury found that Systems' levelers infringed, and the court entered judgment for $46,825 in damages. The panel holds that the court erred in applying a "cost savings" methodology, rather than the gross profits methodology. Specifically, the district court's "cost savings" methodology was limited to the "lip and hinge plate" portion of the dock levelers, because that was the only portion depicted in the design patent. Citing its Apple v. Samsung opinion earlier this year, the panel holds that this ignores the fact that total profits should be based on the article of manufacture to which the design patent is applied—not just a portion of that article of manufacture. The panel found it significant that the lip and hinge plate were only sold as part of the entire dock leveler. A determination of damages on the entire dock leveler will likely increase the damage award ted-fold.
As to its cross appeal, Systems failed to properly renew the motion for JMOL as to validity with sufficient particularity. Counsel's statement: "Everything we made we renew. I'm not sure what that is, but just for the record whatever we said before …" failed to provide "reasonable specification" necessary to preserve its right to appeal. Nonetheless, the panel still examines validity and infringement and finds that there is substantial evidence to support the verdict that the patented designs are not impermissibly functional and are infringed.
Achates – The Circuit dismisses an appeal of a PTAB decision in an IPR proceeding, holding that 35 U.S.C. § 314(d) prohibits the Circuit from reviewing the Board's determination to initiate IPR proceedings based on its assessment of the time-bar of § 315(b), even if such assessment is reconsidered during the merits phase of proceedings and restated as part of the Board's final written decision. The panel also states that the Board's institution decision does not violate a clear statutory mandate. Thus, there would also not be an exception to the bar on judicial review.
In Re Steed – The panel affirms the rejection of claims of an application by Steed, which was apparently filed and appealed pro se. The panel disagreed with the Board that arguments of Steed attempting to swear behind a reference were waived but agreed that there was substantial evidence to support the Examiner's decision that Steed's evidence was insufficiently detailed. The panel also affirmed the Board's refusal to consider certain evidence that was offered for the first time at oral argument.
State of Vermont – The State of Vermont filed a state court action against non-practicing entity MPHJ, alleging violations of the Vermont Consumer Protection Act. The complaint alleged that letters mailed to Vermont businesses informing them that they may be infringing certain patents were deceptive and otherwise violative of the VCPA. MPHJ removed the case twice to federal court under the original and amended complaints. The district court remanded the case to state court both times. MPHJ has been attempting to get the case before the federal court so that it could argue that the VCPA is preempted by federal patent law. Of interest is the panel's holding that the issue of whether the VCPA is preempted by federal patent law is an issue that the Circuit could properly hear despite the Supreme Court's Gunn v. Minton case that rejected Federal Circuit jurisdiction over a patent malpractice case, and in doing so criticizing the Circuit for being too eager to find that cases "arise under the patent laws."
Before this court is MPHJ's appeal of the district court's second remand order. Because removal under 28 U.S.C.§ 1442(a)(2) is not authorized in the circumstances at issue here, the judgment below is affirmed. That statute is commonly called the "federal officer removal statute" covering property rights derived from a federal officer. This decision is similar to one reached a year ago, finding that an appeal was not permitted under 28 U.S.C. § 1447(c) unless the remand is based on a defect in removal procedure or lack of subject matter jurisdiction. Because that opinion was discussed in my report of August 18, 2014, and § 1442(a)(2) is a very narrow provision not likely to arise very often, this decision will not be further discussed below.
Nordock, Inc. v. Systems Inc. , Fed. Cir. Case 2014-1762, -1795 (September 29, 2015)
Nordock filed suit against Systems alleging infringement of the '754 design patent directed to a lip and hinge plate for a dock leveler. A jury found that Systems' hydraulic dock levelers infringed the D'754 Patent, and that the patent is not invalid, and the district court entered judgment awarding Nordock $46,825 as a reasonable royalty.
According to Nordock, a new trial is necessary "to determine § 289 damages as the District Court's decision adopting a finding that Systems' profits are $0 or do not need to be determined is without factual or legal basis and is against the substantial weight of the credible evidence." When a patent is infringed, the patentee is entitled to "damages adequate to compensate for infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." 35 U.S.C. § 284. In the case of design patent infringement, a patentee can recover damages under § 284 or under 35 U.S.C. § 289, which is entitled "additional remedy for infringement of design patent." The plain language of § 289 permits design patentees to claim either $250 or the infringer's "total profit" on sales of "any article of manufacture" to which the patented design was applied.
We have recognized that where, as here, "only a design patent is at issue, a patentee may not recover both infringer profits and additional damages under § 284." Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305 (Fed. Cir. 2013) (en banc). Accordingly, a design patentee can recover either (1) total profits from the infringer's sales under § 289, or (2) damages in the form of the patentee's lost profits or a reasonable royalty under § 284, or (3) $250 in statutory damages under § 289, whichever is greater.
"Cost Savings Methodology"
We conclude that the district court erred in relying on Systems' expert Bero's "cost savings" methodology, rather than on the gross profits methodology required by law and described in the jury instructions. There are several problems with this so-called "cost savings" approach. First, it is inconsistent with the fact that § 289 provides for recovery of the infringer's total profits. Indeed, this court has interpreted § 289 to require "the disgorgement of the infringers' profits to the patent holder, such that the infringers retain no profit from their wrong." Profits are based on gross revenue after deducting certain allowable expenses. Rather than using gross revenue as a starting point, Bero used his "cost savings" methodology, which was limited to the "lip and hinge plate" portion of the dock levelers. In doing so, Bero ignored the fact that total profits are based on the article of manufacture to which the D'754 Patent is applied—not just a portion of that article of manufacture.
Systems maintains that Nordock is not entitled to recover profits on the entire dock leveler, but rather only those profits attributable to the "lip and hinge plate" shown in the D'754 Patent. To the contrary, however, we recently reiterated that apportioning profits in the context of design patent infringement is not appropriate, and that "Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design." Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983 (Fed. Cir. 2015) (rejecting Samsung's attempt to limit the profits awarded to the "portion of the product as sold that incorporates or embodies the subject matter of the patent").
The D'754 Patent is entitled "Lip and Hinge Plate for a Dock Leveler," and makes clear that the claimed design is applied to and used with a dock leveler. And, as Nordock points out, the evidence and testimony at trial demonstrated that the levelers are welded together. Importantly, there was no evidence that Systems sold a "lip and hinge plate" separate from the leveler as a complete unit. We therefore reject Systems' attempts to apportion damages to the lip and hinge plate where it is clear that the article of manufacture at issue is a dock leveler. Because no reasonable jury could have believed Bero's testimony that profits were less than $15 per unit, and because the district court erred in relying on Bero's "cost savings" methodology in denying Nordock's motion for a new trial on § 289 damages, we find it necessary to reverse and remand this case to the district court for a new trial on damages.
Evidence of Systems' Total Profits
Nordock also argues that there is no credible evidence that Systems' total profits for its sales of the infringing levelers were $0. According to Nordock, the manifest weight of the evidence shows that Systems' profits were over $600,000 for its infringing LHP/LHD levelers.
As previously discussed, Bero's attempt to limit profits to only the "lip and hinge plate" is inconsistent with § 289. Nordock is entitled to a determination of Systems' total profits for the sale of the levelers found to infringe. Because there is no credible evidence that Systems' profits on its sales of the 1,457 infringing levelers were $0, we conclude that the jury's verdict was "against the manifest weight of the evidence" such that a new trial is warranted.
Systems' Cross-Appeal is Barred by Failure to Renew its Motion for JMOL
Systems cross-appeals from the district court's decisions denying its motion for JMOL that the D'754 Patent is invalid as purely functional. Systems also argues that the district court erred in denying its motion for JMOL of non-infringement with respect to the 6 1/2 foot dock leveler.
As a threshold matter, Nordock argues that Systems did not preserve the issue of validity for appeal because it did not raise it in a Rule 50 or Rule 59 motion. According to Nordock, because Systems failed to file a motion contesting the sufficiency of the evidence with respect to the validity of the D'754 Patent, this court should reject Systems' cross-appeal challenging validity in its entirety.
Rule 7(b)(1) of the Federal Rules requires that motions must "state with particularity the grounds for seeking the order." The record reveals that, after the jury reached its verdict, the district court asked counsel whether there were any post-trial motions. At that point, counsel for Systems had the following exchange with the court:
MR. MANN: Well, I guess at this point, Judge, just as a routine matter whatever motions we made during the trial, JMOL and so forth, we would renew those motions to the extent that they are necessary. . . .
Everything we made we renew. I'm not sure what that is, but just for the record whatever we said before-
Thereafter, although Systems filed a Rule 59(e) motion with respect to infringement, it did not file any post-verdict motion as to validity.
We conclude that counsel for Systems failed to renew the motion for JMOL as to validity with sufficient particularity to satisfy the Seventh Circuit's "reasonable specification" standard. While there is no requirement that a Rule 50(b) motion be in writing, it is counsel's responsibility to ensure that the record is sufficiently clear for both the district court and the appellate court reviewing the record to understand the grounds therefor.
Even if we were to consider Systems' arguments, however, we would conclude that substantial evidence supports the jury's finding that Systems failed to prove that the D'754 Patent is invalid. It is well established that a design patent "only protects the novel, ornamental features of the patented design." OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997). If a patented design is "primarily functional rather than ornamental, the patent is invalid." The determination of whether a patented design is dictated by function "must ultimately rest on an analysis of its overall appearance." Here, the testimony and evidence at trial demonstrated that: (1) Nordock intended the design to be distinctive and ornamental; (2) the header plate is not necessary to the function of a dock leveler; (3) there is a wide range of alternate designs available, including an open lug front end design and a standard piano hinge design; and (4) the alternate designs available achieve the same utilitarian purpose as the patented design. On this record, there was substantial evidence from which a jury could conclude that the claimed design is not dictated by function.
Systems also argues that the district court erred by denying its motion for JMOL of non-infringement of the 6 1/2 foot dock leveler. To the extent Systems cross appeals from the district court's denial of its motion for JMOL of non-infringement, that argument was not properly preserved for appeal for the same reason discussed in the context of Systems' motion for JMOL of invalidity: counsel's Rule 50(b) motion was insufficient. Although Systems did not file a post-verdict motion with respect to validity, it did file a Rule 59(e) motion seeking to amend the judgment on grounds that no evidence was presented at trial regarding the accused 6 1/2 foot dock levelers. Therefore, although Systems' infringement arguments on appeal are framed in the context of JMOL, we are reviewing the district court's denial of Systems' Rule 59(e) motion to alter or amend the judgment. To prevail on a Rule 59(e) motion to amend the judgment, a party must clearly establish (1) that the court committed a manifest error of law or fact, or (2) that newly discovered evidence precluded entry of judgment.
The district court denied Systems' motion to amend on grounds that "the trial testimony and exhibits support the jury's finding that Systems' 6-, 6 1/2-, and 7-foot wide LHP/LHD levelers infringed Nordock's '754 Patent." The court explained that the patent pertains to the "front end" of a dock leveler, and the jury saw evidence and heard testimony from Nordock's president and CEO that "the 6-foot leveler and the middle 6-foot portion of the 6 1/2- and 7-foot levelers are the same." Because Systems offered no evidence to the contrary, the court concluded that a jury could reasonably infer that there is no significant difference between the three sizes of levelers. And, because both Systems' and Nordock's brochures showed only the 6 and 7 foot levelers, the court found that the jury could reasonably infer from the omission of the 6 1/2-foot leveler that it is "substantially similar to the 6- and 7-foot levelers."
We conclude that the district court did not abuse its discretion by denying Systems' motion to amend the judgment with respect to infringement. Systems failed to establish that the court "committed a manifest error of law or fact."
Comment: In several opinions in the past few years the Circuit has advised district courts that they must exercise caution in applying the "entire market value" rule to utility patent infringement cases when the claims are directed to a portion of an entire machine or apparatus. Following the Apple v. Samsung case earlier this year, the Nordock case tells us that for design patents, such a showing does not need to be made. The opinion is very clear that § 289 permits design patentees to claim the infringer's "total profit" on sales of "any article of manufacture" to which the patented design was applied. This case thus presents yet another example of why design patents are more important and valuable than ever before.
While the panel states that motions for JMOL do not need to be in writing, this case shows how important it is to have sufficient detail in all motions made during trial, whether for directed verdict or JMOL. Because counsel have so much to do during a trial, this opinion underscores the necessity of having motions prepared prior to trial so they can either be read into the record or filed with the court.
Achates Reference Publishing, Inc. v. Apple Inc. , Fed. Cir. Case 2014-1767, (September 30, 2015)
On June 20, 2011, Achates sued QuickOffice, Inc. for infringing Achates' patents. One year later, Achates added Apple to the case as an additional defendant. On December 14, 2012, Apple filed IPRs as to the patents in suit. In responding to the petitions Achates contended that, based on a blank indemnification agreement, Apple had a relationship with QuickOffice and that such relationship caused Apple's IPRs to be time-barred under 35 U. S. C. § 315(b).
To support its contention, Achates moved for discovery of evidence to prove Apple's specific relationships with the codefendants. The Board denied that motion, finding no basis to believe that even if the blank indemnification agreement had been signed, it would show QuickOffice to be real parties in interest or in privity with Apple as those terms are used in § 315(b).
The Board found that none of the codefendants were real parties in interest or privies of Apple. Accordingly, the Board, acting as the Director's delegee, instituted IPR proceedings for both patents. During the merits phase of the IPRs, Achates continued to argue that Apple's petitions were time-barred under § 315(b). In its final written decisions, the Board reaffirmed its earlier decisions that the IPR proceedings were not time-barred. The Board ultimately invalidated all the challenged claims as either anticipated and/or obvious.
On appeal, Achates challenges the Board's final written decisions, arguing that the Board erred in denying its motions for discovery and in concluding that Apple's petitions were not time-barred under § 315(b).
Both IPR and covered business method review (CBMR) proceed in two stages. In the first stage, the Director determines whether to institute IPR or CBMR. In the second phase, the Board conducts the IPR or CBMR proceedings on the merits and issues a final written decision. An IPR may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent. Statutory provisions make explicit that "the determination by the Director whether to institute IPR or CBMR under these sections shall be final and non-appealable."
The Present Dispute
First, the § 315(b) time bar does not impact the Board's authority to invalidate a patent claim—it only bars particular petitioners from challenging the claim. The Board may still invalidate a claim challenged in a time-barred petition via a properly-filed petition from another petitioner. Further, § 315(b) provides that "the time limitation . . . shall not apply to a request for joinder under subsection (c)." This means that an otherwise time-barred party may nonetheless participate in an IPR proceeding if another party files a proper petition. The timeliness issue here could have been avoided if Apple's petition had been filed a year earlier or if a petition identical to Apple's were filed by another party.
In addition, the time-bar here is not like the CBM classification addressed in Versata II . Versata II found that review of the CBM determination was proper because the determination was the "defining characteristic" of the Board's "authority to invalidate" a patent in the specialized CBMR process. The determination is "defining" because it subjects that patent "to a special Board power to invalidate." Whether an IPR petition is filed one year after the petitioner is served with an infringement complaint or one year and a day is not such a characteristic because compliance with the time-bar does not itself give the Board the power to invalidate a patent. Instead, the time-bar sets out the procedure for seeking IPR. Indeed, like other "filing deadlines," the IPR time bar here is merely a "rule that seeks to promote the orderly progress of litigation by requiring that the parties take certain procedural steps at certain specified times."
Achates argues two additional theories for pulling this issue into the Circuit's jurisdiction. First, the Board reaffirmed its time-bar determination in its final written decision. Achates argues that this indicates that the time-bar determination is, in fact, part of the final written decision. That the Board considered the time-bar in its final determination does not mean the issue suddenly becomes available for review or that the issue goes to the Board's ultimate authority to invalidate—the Board is always entitled to reconsider its own decisions.
Achates also contends that § 314(d) does not limit the Circuit's review of the timeliness of Apple's petition under § 315, because § 314(d) says "the determination by the Director whether to institute an IPR under this section shall be final and non-appealable". Achates' reading is contradicted by this court's precedent. The words "under this section" in § 314 modify the word "institute" and proscribe review of the institution determination for whatever reason.
We thus hold that 35 U.S.C. § 314(d) prohibits this court from reviewing the Board's determination to initiate IPR proceedings based on its assessment of the time-bar of § 315(b), even if such assessment is reconsidered during the merits phase of proceedings and restated as part of the Board's final written decision.
In re Thomas Steed , Fed. Cir. Case 2014-1458 (October 1, 2015)
Steed appeals a PTAB rejection of claims on his ‘600 application based on obviousness. The invention is described in the specification as directed to "a debt records and debt collection system and database, and in particular to a web integrated debt records and debt collection system that can be accessed and operated across the Internet by a variety of users in a variety of user roles."
The Examiner rejected all of the claims as obvious in view of Evans. Evans was found by the Examiner to anticipate the '600 Application's web-integrated debt recovery system. After unsuccessfully attempting to distinguish the Evans Rejections on the merits, Steed undertook to remove Evans as a reference in accordance with 37 C.F.R. § 1.131, a procedure called "swearing behind."
During examination Steed submitted a Rule 131 Declaration that included four exhibits, as well as statements from Steed that Exhibit A showed "conception of the invention prior to the date of the Evans et al. reference," and that Exhibits B, C, and D showed "diligence continuing to the constructive reduction to practice." The Examiner found the Declaration and the exhibits insufficient, stating that the evidence relied on to show conception was "a high level presentation that does not include any specifics of the actual invention, only a broad overview of the idea" and that it "fail[ed] to disclose any of the key elements of independent claim 37."
The Applicants filed two new exhibits consisting of pages from the notebook of co-inventor Bhattacharya and the diary of co-inventor Steed. These exhibits consisted of over 150 pages of documents that Steed stated established "both the inventive act and reduction to practice prior to the publication date of Evans et al." and "due diligence of nearly 63 months." The Examiner found these exhibits, considered together with the prior documents, to be insufficient to show conception or reduction to practice.
Steed appealed to the Board. During the Board hearing, the Board stated that it could not consider any evidence not already of record before the Examiner, referring specifically to materials presented at the hearing. In its decision, the Board stated that it could not consider any new argument or new evidence without a showing of good cause why the argument or evidence was not previously presented to the Examiner, citing 37 C.F.R. § 41.37(c)(1)(vii) (2011). The Board stated that the reduction to practice assertions at oral argument "are not set forth in the Appeal Brief or the Reply Brief, and are thus considered waived . . . Appellants have not set forth sufficient facts to support an actual reduction to practice."
The Board then reviewed and affirmed the Examiner's rejection on the ground of obviousness based on Evans. This appeal followed. The principal issue on appeal is whether Steed antedated the Evans reference in accordance with the requirements and law implemented by Rule 131, for Steed bears the burden to establish "facts . . . in character and weight, as to establish reduction to practice prior to the effective date of the reference, or conception of the invention prior to the effective date of the reference coupled with due diligence from prior to said date to a subsequent reduction to practice or to the filing of the application." 37 C.F.R. § 1.131(b).
The Ruling of Waiver
The Board held that "assertions that the claimed invention was actually reduced to practice in December of 1997, and at the latest by August of 2000 are not set forth in the Appeal Brief or the Reply Brief, and are thus considered waived." We discern no such waiver. To the contrary, the appeal briefs included well over a hundred pages of exhibits and arguments, all directed to actual reduction to practice. Although the Board concluded that the evidence did not establish an actual reduction to practice, the issue was not omitted from the appeal briefs. However, despite its charge of waiver, the Board appears to have considered the relevant information.
Actual Reduction to Practice
The burden of showing actual reduction of practice is on the party seeking its benefit. The Board held that Steed did not provide facts showing any specific dates or events of actual reduction of practice but only presented statements of generalized activity. Steed responds that these statements were supported by two independent third-party witnesses, whose affidavits were offered and discussed during the Board hearing. Steed states that these witnesses corroborate the inventors' activities and support the asserted reduction to practice, and complains that the Board refused to receive the affidavits into evidence because they were not provided until the Board hearing. The Board declined to rely on these two affidavits or other materials presented for the first time at the Board hearing.
Steed argues that these third-party affidavits were not new evidence because they were listed on the Table included in the Appeal Brief to the Board. Steed states that the two affidavits "were presented in [the Table]. The Board stated that it did not consider the Table because it had not previously been provided to the Examiner. The Board also stated that the Table appears to be directed to diligence starting in 1997 and does not explicitly describe the claimed system. The Board found that the Table does not identify any specific activity on any specific date or provide any details to relate such activity to the claims on appeal.
A note to the Table stated: "If Examiner or Appeal Board has any question re: the above data and how they can be traced to the Exhibits, please call the Inventors." Steed criticizes the Examiner and the Board for not having called the Inventors as requested. We do not discern a breach of agency duty, for although it might indeed have assisted this pro se applicant to be advised of the insufficiencies in the evidence, the Examiner had already responded that specific dates and activities were lacking from the materials provided. The Board criticized the "hundred pages" of documents as being "replete with shorthand notations, incomplete records of phone conversations, and technical terminology spread out over many years . . . we find many of these documents almost completely incomprehensible without the Appellants providing context." On our review, this criticism is accurate and we conclude that substantial evidence supports the Board's findings, and the ruling that Steed did not establish an actual reduction to practice before the Evans effective date of December 23, 2002.
Conception and Diligence
An inventor can antedate a Section 103 reference by showing that the invention was conceived before the effective date of the reference, with diligence to actual or constructive reduction to practice. 37 C.F.R. § 131(b). The Board found that the exhibits did not provide information sufficient to establish that the inventors conceived the claimed invention before the Evans date, or to establish diligence to reduction to practice. The Board's conclusion that conception or reduction to practice before the Evans date was not established is based on findings that are supported by substantial evidence and must be sustained. Thus the Evans publication remains as a reference. The PTO held that this reference served to invalidate the Steed claims on the ground of obviousness.
On this appeal Steed simply states that Evans "significantly non-overlaps with the current invention." The PTO points out that Steed advances no substantive arguments of non-obviousness. This is correct. In the absence of a reasonable showing that the Examiner and the Board erred in deeming the Steed system obvious in view of the Evans Rejections, the rejection must be sustained.