Fresh From the Bench: Precedential Patent Cases From the Federal Circuit
In re Magnum Oil – The Circuit rules that the Board erred in shifting the burden of proof on obviousness in this IPR from the petitioner, McClinton, to the patent owner, Magnum, and comes down hard on the Board for doing so. According to the opinion, the burden of persuasion never shifts to the patentee in the context of a patent infringement litigation, and shifting of the burden of production is inappropriate where the only question presented is whether a claim is obvious upon consideration of the four Graham factors. Additionally, the panel finds that incorporating by reference obviousness arguments with respect to a first base reference is insufficient to show obviousness in light of a second base reference. Instead, the petitioner must make a particularized argument for why a skilled artisan would have sought to combine the additional prior art with the second base reference to achieve the claimed invention. Furthermore, the opinion states that the Board must base its obviousness decision on the evidence presented by the petitioner, and cannot adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR.
Comment: This opinion was written by Judge O’Malley but it has Judge Newman’s hand all over it. Judge Newman has repeatedly dissented from affirmations of IPR rulings invalidating patents because the IPR process does not sufficiently replicate patent litigation, even though its stated purpose is to be a substitute for litigating validity in court. Her argument that “broadest reasonable interpretation” is an inappropriate standard for claim construction in IPRs was soundly rejected by the Supreme Court in Cuozzo, but if you are a patentee appealing an invalidation ruling in an IPR, you should hope Judge Newman is on the panel. The language in this opinion is noticeably strong in ruling that the PTO needs to change its thinking and practices regarding the burden of proof in IPRs.
AGIS v. Life360 –The Circuit affirms a determination of indefiniteness under § 112, ¶ 6 to the two patents-in-suit directed to systems for establishing a communication network for cellphone users.
The Circuit first considers whether the term “symbol generator” should be construed as a means plus function claim element. Under Williamson v. Citrix, there is a rebuttable presumption, but no longer a strong presumption, that unless the term “means” is used, claim elements should not be construed as means plus function elements. The test is whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure. The panel holds that the term "symbol generator" invokes the application of § 112, ¶ 6 because it fails to describe a sufficient structure and otherwise recites abstract elements for causing actions, or elements that can perform functions. The panel therefore holds that the district court was correct to conclude that the asserted claims which recite the term "symbol generator" are subject to 35 U.S.C. § 112, ¶ 6.
In looking to see if there is corresponding structure in the specification to support means plus function language, the panel notes that in the case of computer-implemented functions, the Circuit requires that the specification disclose an algorithm for performing the claimed function. Here the specifications of the patents-in-suit do not disclose an operative algorithm for the claim elements reciting "symbol generator." Although the specification of the '728 patent suggests that these symbols are generated via "a map database and a database of geographically referenced fixed locations ... with a specified latitude and longitude,...and a database with the constantly updated GPS location," this only addresses the medium through which the symbols are generated. A patentee cannot claim a means for performing a specific function and subsequently disclose a general purpose computer as the structure designed to perform that function because this amounts to pure functional claiming. Accordingly, the panel affirms the district court judgment that the asserted claims are indefinite under 35 U.S.C. § 112, ¶ 2.
During this litigation, Life360 repeatedly referred to AGIS as a patent troll even thoughAGIS appears to be involved in a number of research and development projects for military and civilian uses. In fact, in response to an AGIS cease and desist letter, according to the complaint, Life360’s CEO addressed AGIS as “Dear Piece of Shit.” AGIS sued Life360 under 4 patents and the lower court granted Life360 almost $700,000 in attorney fees, with the district court judge referring to the case as being exceptionally weak.
Verinata v. Ariosa – In what seems to be a fairly obvious result, the Circuit affirms the district court in ruling that a patent infringement issue does not need to be arbitrated since the arbitration clause excludes disputes relating to intellectual property rights. The parties entered into a supply agreement in which they stated that certain disputes would be subject to compulsory arbitration. The arbitration clause came into dispute when Illumina sued Ariosa for patent infringement and Ariosa counterclaimed for breach of contract on that grounds that, under the terms of the supply agreement, Ariosa had a license to the patent-in-suit. Illumina moved to compel arbitration and the panel now affirms the district court ruling that this dispute falls squarely within the exclusion-from-arbitration clause, which provides: “[A]ny dispute relating to the breach … of this Agreement, shall be determined by arbitration [but that this section] … shall not apply to, and no arbitration shall resolve, disputes relating to issues of scope, infringement, validity and/or enforceability of any Intellectual Property Rights.”
In re Magnum Oil Tools International, Ltd., Fed. Cir. 2015-1300 (July 25, 2016)
McClinton Energy Group, LLC filed a petition for IPR of a ’413 patent owned by Magnum. The PTAB instituted review and issued a final written decision holding all challenged claims of the patent obvious. Subsequently, McClinton and Magnum settled their dispute over the ’413 patent and other patents not at issue here, but Magnum appeals the Board’s judgment regarding the ’413 patent and the PTO intervened.
The ’413 patent is directed to technology in the field of oil drilling through use of hydraulic fracturing, commonly known as “fracking.” The patent teaches the use of an insert having a “lower shear or shearable mechanism” for releasing a setting tool. The patent also teaches that the insert is placed within the plug body and contains both shearable and nonshearable threads.
McClinton filed this IPR challenging all claims of the ’413 patent. In its Petition, McClinton argued that the claims would have been obvious over Alpha as a base reference, in combination with Cockrell and Kristiansen. While McClinton also noted that the claims would have been obvious over the combination of Lehr as a base reference (in view of Cockrell and Kristiansen), McClinton largely “incorporated by reference” its arguments on Lehr from its earlier arguments based on Alpha (incorporating by reference arguments with respect to Lehr “as discussed above with respect to Alpha,” and noting that “the same analysis applies to combinations using Lehr as a base reference”).
Finding that McClinton had established a reasonable likelihood of success in its Petition, the Board instituted IPR of all challenged claims based on Lehr in view of Cockrell and Kristiansen, but not on the basis of Alpha. The Board ultimately issued a final written decision holding all challenged claims unpatentable under 35 U.S.C. § 103.
The Board Improperly Shifted the Burden of Proof from the Petitioner to the Patentee
As an initial matter . . . there are two distinct burdens of proof: a burden of persuasion and a burden of production. In an inter partes review, the burden of persuasion is on the petitioner to prove “unpatentability by a preponderance of the evidence,” 35 U.S.C. § 316(e), and that burden never shifts to the patentee. Indeed, the Supreme Court has never imposed nor even contemplated a formal burden-shifting framework in the patent litigation context.
Additionally, the PTO incorrectly contends that “the burden of production—or the burden of going forward with evidence, shifts between the petitioner and the patent owner,” as soon as the Board institutes an IPR. Where, as here, the only question presented is whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee. This is especially true where the only issues to be considered are what the prior art discloses, whether there would have been a motivation to combine the prior art, and whether that combination would render the patented claims obvious. Furthermore, because of the “significant difference” between the standards of proof at institution and trial during an IPR, it is inappropriate to shift the burden to the patentee after institution to prove that the patent is patentable. Instead, the petitioner continues to bear the burden of proving unpatentability after institution, and must do so by a preponderance of the evidence at trial.
Magnum points out that McClinton attempted to establish obviousness in its petition by arguing from Alpha as the primary base reference. The Board did not initiate the IPR based on Alpha, however. But, contends Magnum, the Board in its final written decision improperly incorporated by reference McClinton’s arguments based on Alpha into the Board’s conclusion that the claimed invention would have been obvious in light of the primary reference Lehr.
Magnum cites to several examples in the Board’s decision where the Board required Magnum to rebut Petitioner McClinton’s assertions that a skilled artisan would have been motivated to combine the prior art references, without first requiring McClinton to provide evidence to support its assertions. We agree with Magnum that the Board improperly shifted the burden to it, as the patentee, to prove nonobviousness. Because McClinton failed to separately meet its burden of establishing obviousness in view of Lehr, Cockrell, and Kristiansen, we reverse.
Incorporating by Reference Arguments Made with Respect to Alpha Was Insufficient to Show Obviousness Over Lehr
The record reveals that McClinton failed to articulate a motivation to combine the specific teachings of Lehr, Cockrell, and Kristiansen to achieve the claimed invention. Indeed, McClinton merely attempted to incorporate its arguments based on Alpha to its obviousness analysis based on Lehr, without presenting particularized arguments explaining why those arguments from Alpha would be cross-applicable to the Lehr reference.
The Board Cannot Adopt Arguments on Behalf of Petitioners that Were Not Raised by Petitioners
Finally, we address the PTO’s assertion that the Board did not err in making an obviousness argument on behalf of McClinton based on the primary reference Lehr because this argument “could have been included in a properly-drafted petition.” It is the petitioner that bears the burden of proof in IPRs, however. It is true that the entire IPR process is one designed as an “efficient system for challenging patents that should not have issued.” But it is still a system that is predicated on a petition followed by a trial in which the petitioner bears the burden of proof. Given that framework, we find no support for the PTO’s position that the Board is free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR. Instead, the Board must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond.
As explained above, the Board erred in shifting the burden of proof on obviousness in this IPR from the petitioner, McClinton, to the patent owner, Magnum. The Board further failed to articulate a sufficient rationale for why a skilled artisan would have sought to combine the asserted prior art to achieve the claimed invention. The Board’s decision was premised on a legally incorrect standard for assessing obviousness, and the Board’s factual findings regarding the alleged motivation to combine lacked substantial evidence. Accordingly, we reverse the Board’s decision.
Advanced Ground Information Systems, Inc. v. Life360, Fed. Cir. Case No. 2015-1732 (July 28, 2016)
AGIS is a technology company, software developer, and military contractor, as well as the owner of the patents-in-suit. The patents-in-suit relate to methods, devices, and systems for establishing a communication network for users of mobile devices, such as cellular phones.
The '728 Patent-In-Suit
The '728 patent describes a cellular communication system that allows multiple cellular phone users to monitor others' locations and statuses via visual display of such information on a map. For example, as illustrated in Figure 1 of the '728 patent, users of a mobile device can see the locations of other users on the network (indicated by triangle 30 and square 34 symbols):
The '681 Patent-In-Suit
The '681 patent is a continuation-in-part of the '728 patent. It describes how "a designated administrator using a personal computer (PC) or other input device can reprogram all user and network participants' cell phone devices to change, modify, or create new virtual switch names and new symbols for a different operating environment."
The Asserted Claims
Claims 3 and 10 of the '728 patent and claims 5 and 9 of the '681 patent recite a "symbol generator" that generates symbols representing each user in the network on the display of a user's cellular phone. Claim 3 of the '728 patent is a system claim that recites a "symbol generator in [a central processing unit (‘CPU’)] that can generate symbols that represent each of the participants' cell phones in the communication network on the display screen." Claim 5 of the '681 patent is a system claim similar to claim 3 of the '728 patent in all relevant respects, except that it recites a "symbol generator in a CPU that can generate symbols that represent each of the participants in the communication network on the display screen," as opposed to "each of the participants' cell phones."
Claim 10 of the '728 patent and claim 9 of the '681 patent are apparatus claims that recite a "cellular phone for use in a communication network for a plurality of participants comprising... a symbol generator connected to [a] CPU and [a] database for generating symbols on a touch screen display screen." Both claims also recite that the cellular phone comprises "CPU software."
Life360 is a startup company and the creator of a smartphone software application. The Life360 mobile app was designed to allow families to stay better connected—it "runs on a mobile device to allow users to view their family members on a map, communicate with them, and receive alerts when their loved ones arrive at home, school, or work." AGIS filed a complaint in the district court alleging that the Life360 mobile app infringed claims of its two patents.
Life360 asserted that the claim terms "symbol generator" and "CPU software" in the asserted claims invoked means-plus-function claiming allowed under 35 U.S.C. § 112, ¶ 6, but the terms failed to disclose adequate structure and, therefore, are indefinite under 35 U.S.C. § 112, ¶ 2. Paragraph 6 of 35 U.S.C. § 112 allows "an element in a claim for a combination" to "be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." Pursuant to 35 U.S.C. § 112, ¶ 6, if the specification of a patent does not disclose "corresponding structure, material, or acts" for "performing the specified function" in the claims, the patent will be found to be invalid for indefiniteness under 35 U.S.C. § 112, ¶ 2 because it does not "distinctly claim the subject matter… the inventor. . . regards as the invention."
In addition to construing various claims of the patents-in-suit, the district court found that the terms "symbol generator" and "CPU software" in the asserted claims—i.e., claims 3 and 10 of the '728 patent and claims 5 and 9 of the '681 patent—invoked 35 U.S.C. § 112, ¶ 6, and were indefinite under 35 U.S.C. § 112, ¶ 2. AGIS appeals the district court's indefiniteness determinations.
Our analysis proceeds in two steps. First, we address whether "symbol generator" in the asserted claims is in means-plus-function form pursuant to 35 U.S.C. § 112, ¶ 6. If we find that the relevant claim terms recite a means-plus-function limitation, we proceed to our second inquiry and "attempt to construe the disputed claim term by identifying the corresponding structure, material, or acts described in the specification to which the term will be limited." However, "if the specification is not clear as to the structure that the patentee intends to correspond to the claimed function, then the patentee has not paid that price but is...attempting to claim in functional terms unbounded by any reference to structure in the specification." We address each step in turn.
The Claim Term "Symbol Generator" Invokes 35 U.S.C. § 112, ¶ 6
The district court held that "symbol generator" and "CPU software" in claims 3 and 10 of the '728 patent and claims 5 and 9 of the '681 patent invoked 35 U.S.C. § 112, ¶ 6, but were indefinite under 35 U.S.C. § 112, ¶ 2. "Symbol generator" appears in all of the asserted claims. Thus, if we find that claim term indefinite under 35 U.S.C. § 112, ¶ 2, we need not independently address whether the claim term "CPU software" also renders clam 10 of the '728 patent and claim 9 of the '681 patent invalid for indefiniteness.
The district court's construction of patent claims based on evidence intrinsic to the patent, including any finding that the claim language invokes 35 U.S.C. § 112, ¶ 6, is reviewed de novo as a question of law. If a claim element "contains the word 'means' and recites a function," this creates a presumption that the claim is in means-plus-function form under 35 U.S.C. § 112, ¶ 6. That presumption falls, however, if the claim itself recites sufficient structure to perform the claimed function.
"The failure to use the word 'means' also creates a rebuttable presumption—this time that § 112, para. 6 does not apply." Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015) (en banc). However, "if the challenger demonstrates that the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function," this presumption may be rebutted. Id. The standard is whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure. In determining whether this presumption has been rebutted, the challenger must establish by a preponderance of the evidence that the claims are to be governed by § 112, ¶ 6.
Here, although the asserted claims do not include the word "means," the district court determined that AGIS intended to invoke § 112, ¶ 6. AGIS challenges the district court's determination, asserting that the district court "erred when it concluded that the 'symbol generator' elements in [the asserted claims] are subject to § 112, ¶ 6." We conclude that the term "symbol generator" invokes the application of § 112, ¶ 6 because it fails to describe a sufficient structure and otherwise recites abstract elements "for" causing actions, or elements "that can" perform functions. Through the testimony of Dr. Goldberg, AGIS contends "those skilled in the art would have understood a 'symbol generator' to refer to a class of structures instead of a particular structure. " However, contrary to AGIS's contention, Dr. Goldberg testified that the term "symbol generator" is a term coined for the purposes of the patents-in-suit. The term is not used in "common parlance or by persons of skill in the pertinent art to designate structure," such that it connotes sufficient structure to avoid the application of 35 U.S.C. § 112, ¶ 6. Thus, we see no clear error in the district court's findings regarding Dr. Goldberg's testimony.
Finally, the claim term "symbol generator," by itself, does not identify a structure by its function, nor do the asserted claims suggest that the term connotes a definite structure. Accordingly, because the term "symbol generator" does not describe anything structural, the district court was correct to conclude that the asserted claims which recite the term "symbol generator" are subject to 35 U.S.C. § 112, ¶ 6.
The Claim Term "Symbol Generator" Is Indefinite Under § 112, ¶ 2
Because the claim term "symbol generator" is a means-plus-function term, we must construe the disputed claim term by identifying the corresponding structure, material, or acts described in the specification to which the claim term will be limited. If a patentee employs means-plus-function language in a claim, the patentee must set forth in the specification an adequate disclosure showing what is meant by that language. If the specification does not contain an adequate disclosure of the structure that corresponds to the claimed function, the patentee will have failed to particularly point out and distinctly claim the invention [under § 112, ¶ 2], which renders the claim invalid for indefiniteness.
We agree with the district court's determination that the term "symbol generator" is indefinite. "In a means-plus-function claim in which the disclosed structure is a computer or microprocessor programmed to carry out an algorithm, [as is the case here], the disclosed structure is...[a] special purpose computer programmed to perform the disclosed algorithm." See '728 patent (stating that "when the cellular phone/PDA/GPS System user uses his stylus or finger to touch one or more of the symbols or a location on the cellular phone display, the system's software causes the status and latitude and longitude information concerning that symbol or location to be displayed"). In the case of computer-implemented functions, we require that the specification "disclose an algorithm for performing the claimed function."
The specifications of the patents-in-suit do not disclose an operative algorithm for the claim elements reciting "symbol generator." Although the specification of the '728 patent suggests that these symbols are generated via "a map database and a database of geographically referenced fixed locations ... with a specified latitude and longitude,...and a database with the constantly updated GPS location," this only addresses the medium through which the symbols are generated. A patentee cannot claim a means for performing a specific function and subsequently disclose a general purpose computer as the structure designed to perform that function because this amounts to pure functional claiming. Because the specifications of the patents-in-suit do not disclose sufficient structure for the "symbol generator" function and the asserted claims include this term, the asserted claims are indefinite under 35 U.S.C. § 112, ¶ 2.
Verinata Health, Inc. and Illumina, Inc. v. Ariosa Diagnostics, Inc., Fed. Cir. 2015-1970 (July 26, 2016)
Illumina develops, manufactures, and markets systems and tools for analysis of DNA. In late 2009, Ariosa endeavored to develop a noninvasive prenatal diagnostic test for the detection of fetal aneuploidies, which can lead to conditions such as Down syndrome. Between 2010 and 2011, Ariosa provided Illumina, as a prospective investor in Ariosa, technical information about its product proposals under development.
In January 2012, Ariosa entered into a three-year supply agreement with Illumina, under which Illumina agreed to exclusively supply specific consumables, hardware, and software to Ariosa. The agreement provided Ariosa with a non-exclusive license to Illumina's "Core IP Rights in Goods," while excluding from the scope of the license Illumina's "Secondary IP Rights in Goods." The agreement defines "Core IP Rights in Goods" as follows:
Illumina Intellectual Property Rights that pertain to the Goods (and use thereof in accordance with their Documentation) other than Secondary Illumina IP Rights in Goods, which are expressly excluded from Core IP Rights in Goods.
The agreement defines "Secondary IP Rights in Goods" as follows:
the secondary Illumina Intellectual Property Rights that pertain to the Goods (and use thereof) only with regard to particular field(s) or application(s), and are not common to the Goods in all applications and fields.
Ariosa was required to "identify and ensure that it has all rights from third parties and, with respect to Secondary IP Rights in Goods, all rights from Illumina that are necessary for its intended use of Goods."
The supply agreement also provided an arbitration clause and an exclusion-from-arbitration clause:
[A]ny dispute, claim or controversy arising out of or relating to the breach, termination, enforcement, interpretation or validity of this Agreement, shall be determined by arbitration. This Section 31(c) shall not apply to, and no arbitration shall resolve, disputes relating to issues of scope, infringement, validity and/or enforceability of any Intellectual Property Rights.
In March 2012, using materials supplied by Illumina, Ariosa launched a DNA-sequencing test called the Harmony Prenatal Test. In October 2012, Verinata and Stanford University sued Ariosa for patent infringement, alleging infringement of two patents not at issue in this appeal. In January 2013, Illumina acquired Verinata. In early 2014 Illumina accused Ariosa of breaching the supply agreement by failing to license Secondary IP Rights in Goods, as defined and required by the supply agreement. Illumina demanded that Ariosa license "Secondary IP Rights that [then Verinata, now Illumina] has set out in the pending patent litigation against Ariosa." Ariosa denied breaching the agreement.
Illumina then sued Ariosa in the Northern District of California, alleging that the Harmony Prenatal Test infringed its patent. Ariosa counterclaimed for (1) declaratory judgment of invalidity and non-infringement; (2) breach of contract; and (3) breach of the covenant of good faith and fair dealing. Ariosa raised license and estoppel as affirmative defenses. Ariosa's counterclaims alleged that Illumina breached the supply agreement by "bringing a lawsuit against Ariosa for infringement of the '794 patent" and "by asserting pretextual claims of 'breach' of the [supply agreement]."
Illumina filed a motion to dismiss Ariosa's counterclaims in view of the arbitration clause. The motion was denied. Illumina appealed, and we remanded so that Illumina could resubmit its motion as a motion to compel arbitration. The district court denied that motion on grounds that Ariosa's defense that it possessed an express or implied license was "directly related to whether a patent has been infringed."
The Arbitration Provisions Unambiguously Exclude Disputes Relating to Patent Infringement
Illumina argues that the district court should have compelled arbitration under the supply agreement. Illumina asserts that the supply agreement's arbitration clause is ambiguous. Illumina contends that due to this ambiguity, it need only demonstrate that the agreement is susceptible to an interpretation in favor of arbitration and that that interpretation is reasonable.
First, Illumina contends that Ariosa's contract counterclaims do not involve evaluating the scope of the patent because no claim construction or infringement analysis is needed to resolve Ariosa's contract counterclaims. Second, Illumina contends that the court interpreted the term "relating to" too broadly because the interpretation fails to give effect to the federal policy in favor of arbitration. Finally, Illumina asserts that, in the event Ariosa's counterclaims are determined to fall within the exclusion-from-arbitration clause, the contract counterclaims not involving Ariosa's license defense should be arbitrated.
We disagree. The language of the arbitration provision is unambiguous and makes clear that "disputes relating to issues of" patent scope and infringement are not subject to mandatory arbitration. Illumina put the scope of licensed patent rights in issue by suing Ariosa for patent infringement. The counterclaims at issue—declaratory judgment of non-infringement, breach of contract, and breach of certain covenants—are predicated on the notion that the infringement allegations cannot stand because of the licensing provisions within the supply agreement. The scope of the licensed intellectual property rights is germane to whether Ariosa ultimately obtained a license to the '794 patent for goods that it has been exclusively purchasing from Illumina under the supply agreement. Ariosa's counterclaims are not about licensing or a license defense in the abstract—they are centered on whether Ariosa is licensed to use, and thus is immunized from infringement of, the asserted claims of the '794 patent. Given the scope of the supply agreement term "any Intellectual Property Rights," it would be an odd circumstance to countenance parallel district court litigation with license as an affirmative defense, while forcing arbitration over counterclaims arising from that very license.
The arbitration clause applies to issues identified by the supply agreement that are not patent-related. Illumina's argument fails to appreciate that the excluded issues are about disputes over the scope of the licensed intellectual property—not whether a party lacked capacity to contract or failed to ship product under agreed upon terms and conditions.
The district court was correct not to sever the contract counterclaims. Illumina fails to articulate how to separate as discrete the patent infringement issues involved in the contract counterclaims. The nucleus of Ariosa's counterclaims is the patent infringement lawsuit filed by Illumina. Illumina cannot hijack the counterclaims and make them its own for purposes of compelling arbitration. The counterclaims all rise or fall on the scope determination of licensed intellectual property rights, a matter that the parties expressly agreed to exempt from arbitration.