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

December 28, 2017

Overview

In both HTC v. Cellular and Microsoft v. Biscotti, the Circuit affirms rare IPR determinations that all of the claims of the patents at issue are not invalid. In Travel Sentry v. Tropp, the Circuit vacates summary judgment in favor of luggage manufacturers, after the district court had ruled that defendants do not infringe a patent on locks that may be opened by airport security workers. In its ruling, the panel takes an expansive view of Akamai v. Limelight, and holds that there are genuine issues as to whether the luggage makers have a close enough relationship with TSA workers to justify a ruling that they can infringe.

The Circuit denies rehearing en banc in Regeneron Pharmaceuticals v. Merus, with Judge Newman writing a dissenting opinion arguing that inequitable conduct in patent prosecution cannot be retrospectively imposed by “adverse inference” arising from later misconduct in litigation, without a showing of deceptive intent in the PTO. This opinion will not be discussed further.

Thanks to my colleague Abdul Abdullahi for his help with this week’s report. Wishing a happy and prosperous New Year to all.

Pete Heuser

HTC Corporation, ZTE (USA), Inc. v. Cellular Communications Equipment, LLC, Fed. Cir. Case 2016-1880 (December 18, 2017)

A panel of the Circuit affirms a Board IPR determination that none of the claims of Cellular’s patent directed to wireless communication systems are invalid. In its affirmance, the panel agrees with the Board’s interpretation of the term “message” and finds that there is substantial evidence to support the Board’s determination that the claims were neither anticipated nor rendered obvious by the teachings of a patent HTC contended was not adequately addressed by the Board.

As to construction of the term “message,” the panel struggled with the fact that HTC did not seek construction of the term before the Board and on appeal took three different positions on construction in its opening brief, its reply brief and at oral argument.  The panel concludes that HTC appears to contend that the Board’s application of the term “message” improperly excluded embodiments of “transmissions of data at intervals specified in a Universal Mobile Telecommunications System.”  But the Board made no such exclusion. Rather, the Board agreed with Cellular that a message transmission may occur over a single frame or over multiple frames and timeslots. The Board thus properly understood “message” to encompass messages that last a single frame.

As to anticipation, the panel rejects HTC’s argument that a reference to Baker either explicitly discloses a critical limitation of the claim or inherently does so. As to inherency, the panel notes that a party seeking to establish inherent anticipation must show that a person of ordinary skill in the art would recognize that missing descriptive matter in a prior art reference is nevertheless necessarily present. The mere fact that a certain thing may result from a given set of circumstances is not sufficient. Therefore, substantial evidence supports the Board’s finding that Baker does not inherently anticipate the challenged claims.

As to obviousness, HTC argued that the Board ignored that prior art reference Reed contemplates creating power headroom for the entire mobile device by teaching that one data stream can be deprioritized in order to increase the transmit power available for another data stream. The panel points out where in its opinion the Board explicitly dealt with this argument, relying on both parties’ expert witness declarations although it rejected a second declaration by HTC’s expert that the Board found to be inconsistent with his first declaration. The panel concludes that substantial evidence supports the Board’s findings that HTC failed to demonstrate that the cited art rendered the claims obvious. 

Read the full opinion

Microsoft Corporation v. Biscotti, Inc., Fed. Cir. Case 2016-2080, -2082, -2083 (December 28, 2017)

A divided panel affirms IPR determinations of no invalidity in three separate proceedings relating to a patent directed to video conferencing, finding substantial evidence to support the Board’s decision on anticipation and obviousness, and agreeing with the Board as to claim construction.

Biscotti sued Microsoft in the Eastern District of Texas and Microsoft filed three separate IPRs, challenging claims based on anticipation and obviousness. The Board instituted review of claims 6 and 69 on anticipation grounds, and of claims that depend from claims 6 and 69 on anticipation and obviousness grounds. The result on appeal may not matter too much to the parties, however, as the district court action continued and a jury decided that Microsoft did not infringe. The jury also found several of the patent claims to be invalid. Given the result here, Biscotti would likely appeal the denial of JMOL. However, the result here was largely due to the majority’s deference to the Board, and the Circuit would have to give the same deference to factual issues decided by the jury, even if the result is inconsistent with the result in the present appeal.

Citing the Circuit’s 2015 Kennametal and 2016 Blue Calypsocases, Microsoft argued on appeal that the Board applied an unduly narrow anticipation standard in its final written decision, asserting that a prior art reference must be viewed in its “totality” for what it describes, and does not have to disclose anything more than is described in the challenged invention. The majority concedes that a claim does not need to “expressly spell out” all limitations combined as in the claim if a POSA would “at once envisage” the arrangement or combination. However, this test was considered by the Board. Microsoft’s arguments are not unreasonable, but the Circuit does not review this question de novo; anticipation is a question of fact, and the review is merely to look for substantial evidence. Given the evidence before the Board, the Board’s finding that Kenoyer did not anticipate claim 6 is supported by substantial evidence.

As to claim 69, the majority notes that Microsoft did not present to the Board the full argument that it presented on appeal. Microsoft’s bare-bones allegation to the Board provided no argument as to how the interface of Figure 5 allows for connection to a set-top box or how a POSA would understand to use the codec described in Figure 5 along with the figureless description of a codec that can be used in an independent housing and coupled to the set-top box. Microsoft’s brief on appeal is far more detailed and contains substantial new arguments regarding why it believes Kenoyer anticipates this limitation of claim 69. Microsoft needed to include those arguments in the petition to institute. The Board’s factual findings in favor of Biscotti are supported by substantial evidence, and any supplemental argument seeking to refute those findings on appeal has been waived.

With respect to construction of the term “set-top box,” any error would not be prejudicial because Microsoft waived the arguments regarding claim 69 that relate to this construction. In other words, the Board’s decision hinged on factors that were not affected by an allegedly erroneous construction of “set-top box.” Although some of the reasoning provided by the Board might be affected by use of Microsoft’s construction of set-top box—like the Board’s discussion of Figure 5 and Figure 3—there are other bases for the Board’s decision that would not change and which suffice to support its conclusions.

According to Microsoft, the Board erred in its obviousness analysis for the same reasons it erred in its anticipation analysis because the Board relied on the same reading of Kenoyer without conducting a separate obviousness analysis. However, the majority refers back to its determination that the Board’s findings as to claims 6 and 69 are supported by substantial evidence. Because Microsoft does not argue separately that the Board erred in its obviousness analysis, the majority also affirms the Board’s obviousness holdings.

 In her dissent, Judge Newman argues that the anticipation is clear. Every claim component was previously known, and performs the same function in the same way in the same combination. The claims at issue are “anticipated,” under even the most rigorous application of the law of anticipation.

Read the full opinion

Travel Sentry, Inc. v. Tropp, Fed. Cir. Case 2016-2386, -2387, -2714 and 2017-1025 (December 19, 2017)

The Circuit vacates summary judgment in favor of Samsonite and other luggage manufacturers, after the district court had ruled that defendants do not infringe a patent on locks that may be opened by airport security workers. In its ruling, the panel takes an expansive view of the Circuit’s 2015 Akamai v. Limelight decision, and holds that there are genuine issues of material fact as to whether the luggage makers have a close enough relationship with TSA workers to justify a ruling that they can infringe where the luggage makers perform some of the claimed steps and TSA workers perform others.

The case was filed by David Tropp, CEO of Safe Skies, a competitor of lock maker Travel Sentry. Both companies make locks that can be opened by the owner or by TSA workers, who are provided with master keys and training in using the locks. Travel Sentry licenses its lock technology to Samsonite and other luggage manufacturers. The Eastern District of New York granted summary judgment of non-infringement in favor of Travel Sentry, holding that Travel Sentry did not directly or indirectly infringe the claims at issue because Travel Sentry did not control or mastermind the alleged infringing acts of a third party.

The panel distinguishes the present case from Akamai, which was a simple customer-client relationship. Here, Travel Sentry provides master keys to the TSA as well as training that was needed to use the locks. Summary judgment was vacated because the TSA obtained access to certain benefits (being able to non-destructively open the locks), but was able to do so by complying with a written agreement to perform steps as taught by defendants.

Comments: According to this decision, attribution to a single defendant is only possible if a trier of fact can reasonably conclude from the facts at issue that: (i) a first party performed at least one step in a claim in order to receive one or more benefits from a second party, or the first party performed one or more steps in the claim according to conditions imposed by the second party; and (ii) the second party established the manner or timing of the performance to be executed by the first party‎. 

Readers will recall that the Circuit’s en banc Akamai decision eliminated the requirement that there had to be a contractual relationship or other close ties between two parties who, between them, practiced all of the claimed steps of a method patent. (See our report on Akamai.) In Akamai, the Circuit affirmed the principle that “direct infringement under § 271(a) occurs where all steps of a claimed method are performed by or attributable to a single entity,” holding that an entity is responsible for others’ performance of method steps where that entity directs or controls others’ performance or where the actors form a joint enterprise. The Circuit also concluded that, on the facts presented, liability under § 271(a) could be found when an alleged infringer “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method” and “establishes the manner or timing of that performance.”

The present decision appears to go even farther than Akamaiin its definition of “conditioning” and “establishing the manner” of the performance. Moreover, this ruling will require those determinations to be made by juries, which are often pro-patentee when it appears to them that defendants are trying to avoid liability based on complicated legal arguments. 

Read the full opinion

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