By Peter E. Heuser and Joanna Lee
Carnegie Mellon – The Circuit affirms a judgment of infringement and validity, affirms the rejection of Marvell’s laches defense, substantially rejects Marvell’s challenge to the royalty, but reverses the willful infringement award because Marvell’s defenses were not “objectively unreasonable” and remands as to whether many of the sales took place in the U.S. or elsewhere. By doing so the Circuit either reverses or brings into question almost $1 billion dollars of the record $1.5 billion Carnegie Mellon had been awarded. The remand will be both important and difficult as the district court decides whether Marvell chips made and delivered abroad but never imported into the U.S. are subject to U.S. patent laws.
Allergan –The Circuit affirms a determination of validity and infringement reached in a bench trial by the Eastern District of Texas. Defendants Sandoz and Lupin alleged that the patents, covering Allergan’s Lumigan® 0.01% drug for the treatment of glaucoma, was simply a diluted version of prior art formulations but that contention was rejected by both the district court and the panel. The panel also rejected defendants’ contention that the patents were invalid for an inadequate written description even though the district improperly considered the clinical protocol, which was not included in the specification. The unanimous panel also found no clear error in the determination of literal infringement.
Addiction – A divided panel affirms dismissal of a complaint for direct and induced infringement of a patent directed to therapies for detoxifying a patient who is addicted to one or more opioids because the direct infringement count does not identify the infringing process and the induced infringement count does not set forth facts sufficient to permit the court to infer that there was a specific intent to induce. The majority holds that the court did not abuse its discretion in denying the motion to amend since the proposed amended complaint did not correct the deficiencies and therefore would have been futile. The dissent notes that Form 18 identifies the accused item because it was an apparatus claim and such specificity is not possible with method claims. As to indirect infringement, the dissent is critical of the panel for failing to identify what would have been sufficient. Author’s note: Form 18 is expected to be retired at the end of the year but patent bills in the House and Senate would add far more stringent patent pleading requirements.
Carnegie Mellon University v. Marvell Technology Group, Ltd., Fed. Cir. Case 2014-1492
(August 4, 2015)
Carnegie Mellon University (“CMU”) owns two patents on inventions that reduce errors and reliably detect data recorded on magnetic data storage media of hard disk drives in computers, inventions developed by Drs. Kavcic and Moura of CMU. Marvell designs and sells integrated circuits that control the read-write heads used in hard disk drives. No later than 2001, Marvell became aware of Kavcic’s and Moura’s work. Based on that work, Marvell engineers built a simulator to use as a “gold standard” for testing their chip designs, and they paid tribute to their source by dubbing the simulator “Kavcic Viterbi.” Marvell engineers later designed what they considered a “sub-optimal” version of Kavcic Viterbi for use in a new generation of chips. Still later, Marvell created a detector that its engineers recognized turned out to be the original structure that Kavcic proposed in his paper.
CMU sued Marvell for infringement. A jury found for CMU on infringement and validity, and it awarded roughly $1.17 billion as a reasonable royalty for the infringing acts (50 cents for each infringing chip), extended the award to the date of judgment, awarded a 23 percent enhancement based on Marvell’s willfulness, and awarded a continuing royalty, resulting in a total award of over $1.5 billion. Marvell appeals the rulings on infringement, invalidity, and damages, as well as willfulness and laches. The validity and infringement holdings in the appeal were fairly conventional so won’t be discussed.
The panel concludes that the district court conducted a thorough review following the principles of the Circuit’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co. 960 F.2d 1020 (Fed. Cir. 1992). After finding that Marvell satisfied the threshold requirements to invoke laches under Aukerman, the district court concluded that the equities clearly favor CMU rather than Marvell, which copied CMU’s patents consciously and deliberately for an entire decade. The panel thought this was reasonable and supports the district court’s consideration of the extent and egregiousness of Marvell’s copying, the culpability on the part of CMU in delaying suit, and the ramifications for public policy of allowing a laches claim. Based on this, the panel concludes that the district court did not abuse its discretion in rejecting Marvell’s laches argument.
Enhancement of Damages Under 35 U.S.C. § 284
Although Marvell knew of CMU’s patents before this action began, that Marvell knew or should have known that its actions would infringe the claims at issue, and that Marvell acted in a subjectively reckless manner with respect to the risk of infringing the subject patents, the enhancement of damages must be reversed because Marvell’s invalidity defense was objectively reasonable. Although a jury could properly reject Marvell’s invalidity defenses based on a prior art Worstell patent, the panel concludes that there was enough uncertainty about what the Worstell patent disclosed and what CMU’s claims require that the defenses were not objectively unreasonable. It is irrelevant that Marvell presented no evidence that it developed its invalidity defense when undertaking its infringing activity; the Circuit has repeatedly assessed objective reasonableness without requiring that the infringer had the defense in mind before the litigation.
Admission of Damages Expert Testimony
Marvell challenges the admission of the testimony of CMU’s damages expert, Ms. Lawton. The court considered her range of knowledge, skills, and training and, like the many other courts before which she has appeared, deemed her qualified to testify on reasonable-royalty damages. The court also examined the basis for her testimony by reviewing her expert reports and by holding an extended Daubert hearing. And, as noted more fully below, Lawton in fact took reasoned account of the evidence that Marvell says that she disregarded. In these circumstances, the panel holds that the district court did not err in admitting Lawton’s testimony.
Marvell challenges both the choice of a per-unit license instead of a flat fee and the rate of the per-unit license. One approach to calculating a reasonable royalty that measures the value of the use of the patented technology posits a “hypothetical negotiation” between a “willing licensor” and a “willing licensee.” This Court has noted the common economic justifications for using per-unit royalties for measuring the value of use of a technology. Marvell contends that the parties’ past practices compels a finding that the parties would have agreed to a flat fee, not a per-unit royalty. But because CMU presented sufficient evidence pointing to “economically relevant differences” between those past practices and the circumstances of the negotiation here, the jury was not required to agree with Marvell.
There also was ample evidence that 50 cents was an appropriate amount for the per-chip license. At the time of the hypothetical negotiation, Marvell had no alternative to CMU’s technology, and Marvell’s previous attempt to produce a new design was failing because the resulting chips produced excessive heat. Additionally, the evidence showed that if Marvell could use CMU’s technology, it could pay CMU 50 cents per chip and still meet its reasonable profit goal. Therefore, the jury could properly find that a royalty of 50 cents per chip reasonably would have been a good deal in the hypothetical negotiation.
The Supreme Court has confirmed that the patent laws, like other laws, are to be understood against a background presumption against extraterritorial reach. For the present context, § 271(a) clearly defines what Congress intended to reach—making or using or selling in the United States or importing into the United States, even if one or more of those activities also occur abroad.
Marvel appeals the district court’s denial of JMOL striking the portion of the damages award that rested on sales of foreign chips that were manufactured, sold, and used abroad without ever entering into the U.S. As to these chips, avoiding extraterritoriality depends on whether they were sold in the U. S. With the exception of the chip making, all of Marvell’s activities related to designing, simulating, testing, evaluating, and qualifying the chips by Marvell as well as by its customers occur in the U.S. From California Marvell provides potential customers with samples and simulations incorporating its designs. There was some evidence suggesting that specific contractual commitments for specific volumes of chips were made in the U.S., and Marvell points to no evidence to the contrary. Marvell is not entitled to JMOL that the royalty base must exclude chips not imported into the U.S. On the other hand, CMU is not entitled to affirmance with respect to those chips.
The standards for determining where a sale may be said to occur do not pinpoint a single, universally applicable fact that determines the answer, and it is not even settled whether a sale can have more than one location. The jury instructions erroneously omitted the requirement that the jury find a domestic location of sale as to those chips not made or used in, or imported into, the U.S. in order to find that Marvell infringed with respect to those chips. We accordingly must vacate the portion of the damages award which applies the royalty rate to chips not made or used in, or imported into, the United States. A new trial is required to determine whether those chips were sold in the United States.
Comment: The panel concedes there is little certainty in the law as to “where” a sale has taken place, thus subjecting the infringer to liability under U.S. patent law, but does not provide any clarity here. Perhaps this silence was out of concern that this would be an advisory opinion, but appellate courts often provide guidance as to the law that is to be applied on remand. The “sale” issue is particularly difficult in the context of computer technologies, where products are often, if not typically, designed in the U.S. but manufactured and delivered elsewhere. Given the amount of money at stake, it is likely this case will show up again in a few years for the Circuit to review how the district court has handled the remand. Perhaps then it will tell us and the district court how it should have handled this issue.
Allergan, Inc. v. Sandoz Inc., Fed. Cir. Case 2014-1275 (August 4, 2015)
Allergan owns five patents that are all listed in the FDA’s “Orange Book” as claiming Lumigan 0.01% and its approved uses. After Allergan received FDA-approval of Lumigan 0.01%, Sandoz, Lupin, Hi-Tech, and Watson each submitted ANDAs to the FDA, seeking approval to market generic versions of Lumigan 0.01% prior to the expiration of the patents. In response, Allergan sued the ANDA applicants, and the Eastern District of Texas consolidated those actions into one case.
After a five day bench trial the district court concluded that the asserted claims would not have been obvious in view of the cited prior art because the prior art teaches away from the claimed invention and there would not have been a reason to pursue the claimed invention or a reasonable expectation of success if it were pursued. The court also found evidence of long-felt need, unexpected results, and commercial success, and rejected defendants’ argument that Galderma Laboratories, L.P. v. Tolmar, Inc., 737 F.3d 731 (Fed. Cir. 2013), compels a conclusion of obviousness in this case.
The district court also rejected the defendants’ invalidity challenges based on the written description and enablement requirements, found that each of the ANDA products literally infringed each of the asserted claims, and, in the alternative, that Hi-Tech’s ANDA product infringed under the doctrine of equivalents.
The District Court’s Determination that the Claimed Inventions are not Obvious is Supported by the Underlying Factual Findings
The district court’s conclusion that the asserted claims would not have been obvious is supported by underlying factual findings, which are not clearly erroneous on this record. In particular, the court did not clearly err in finding that the prior art taught away from a formulation comprising 0.01% bimatoprost and 200 ppm BAK, and that such a formulation exhibited unexpected results.
As we explained in Galderma, where there is a range disclosed in the prior art, and the claimed invention falls within that range, a relevant inquiry is whether there would have been a motivation to select the claimed composition from the prior art ranges. In those circumstances, “the burden of production falls upon the patentee to come forward with evidence that (1) the prior art taught away from the claimed invention; (2) there were new and unexpected results relative to the prior art; or (3) there are other pertinent secondary considerations.” Here in this case, the prior art ranges are broader than the range in Galderma, and the record shows that the claimed amounts of the two different ingredients could and did materially and unpredictably alter the property of the claimed formulation. Thus, Galderma does not compel a conclusion of obviousness in this case. It may also be true here that “the disclosed range[s are] so broad as to encompass a very large number of possible distinct compositions,” such that they do not teach any specific amounts or combinations and that the burden of producing evidence of teaching away, unexpected results, and other pertinent secondary considerations did not shift to Allergan. But we need not decide that issue, as it would not affect our affirmance of the district court’s conclusion of nonobviousness, because we conclude that the district court did not clearly err in finding that Allergan had produced ample evidence of teaching away and unexpected results, and that such evidence fully supports a conclusion of nonobviousness.
There is Support in the Record for the District Court’s Finding that the Written Description Requirement has been Satisfied
The Appellants argue that the claims that recite clinical profile limitations are not adequately supported by the written description because the written description does not disclose any efficacy or hyperemia data of a formulation comprising 0.01% bimatoprost and 200 ppm BAK. The Appellants assert that the district court erred by relying on the permeability data of test formulations (which are not efficacy or hyperemia data), the constructive example (which relates to a formulation comprising 0.015% bimatoprost and 125 ppm BAK), and the clinical protocol (which is not part of the specifications). Hi-Tech additionally argues that there are no “blaze marks” in the specifications to allow the skilled artisan to immediately discern the clinical profile claim limitations.
We agree with Allergan that the specifications of the asserted patents provide an adequate written description of the invention. The specifications specifically describe a formulation comprising 0.01% bimatoprost and 200 ppm BAK as one of the best modes of the invention. The claims require the same amounts of bimatoprost and BAK. The specifications thus disclose the claimed formulation as characterized by those ingredients, and the skilled artisan would immediately discern the claimed formulation in that disclosure.
We do find, however, that the court erred by relying on the undisclosed clinical protocol to support its written description determination. It is the disclosures of the applications that count, and the clinical protocol is not part of the specifications. It should not form the basis of the written description inquiry, even if it shows that the inventors had made the invention before the filing date. Nevertheless, as indicated, because the specifications contain an adequate disclosure of the claimed formulation, the court’s erroneous reliance on the clinical protocol does not affect the outcome of this case.
Reviewing Compliance with the Enablement Requirement De Novo, the Panel Affirms
Whether a claim satisfies the enablement requirement is a question of law that we review without deference. We review the factual issues underlying enablement for clear error. To prove that a claim is invalid for lack of enablement, a challenger must show by clear and convincing evidence that a person of ordinary skill in the art would not be able to practice the claimed invention without undue experimentation.
Lupin argues that the asserted claims are invalid for lack of enablement because the specifications contain no actual efficacy data; rather, they merely provide a research proposal. According to Lupin, the skilled artisan would not accept without doubt the asserted utility of the claimed formulation, i.e., comparable efficacy as Lumigan 0.03% and less hyperemia. Lupin argues that if the claims are held to be nonobvious, then they must fail the enablement requirement because the court found that ophthalmic formulation is unpredictable and that prior art taught away from the claimed invention.
We agree with Allergan that the asserted claims are not invalid for lack of enablement. “[A] patent does not need to guarantee that the invention works for a claim to be enabled.” Alcon, 745 F.3d at 1189. And efficacy data are generally not required in a patent application. Only a sufficient description enabling a person of ordinary skill in the art to carry out an invention is needed. “Similarly, a patentee is not required to provide actual working examples; we have rejected enablement challenges based on the theory that there can be no guarantee that prophetic examples actually work.”
Literal Infringement is Also Affirmed
Finally, we address Hi-Tech’s arguments contending that the district court erred in finding that its ANDA product infringed, both literally and under the doctrine of equivalents, the Group I claims, which require the claimed composition to have a “pH of about 7.3.” Hi-Tech argues that the court erred in construing a “pH of about 7.3.” Hi-Tech also argues that the district court erred in finding that Hi-Tech literally infringed the Group I claims. Allergan responds that Hi-Tech stipulated to the claim construction in the district court and cannot now allege error for the first time on appeal. Allergan also responds that the district court did not clearly err in finding both literal infringement and infringement under the doctrine of equivalents.
We agree with Allergan that the court did not clearly err in finding that Hi-Tech literally infringed the Group I claims. In the district court, the parties agreed to construe a “pH of about 7.3” as a “pH of approximately 7.3,” and the court adopted that construction. HiTech did not argue for further construction in the district court. That construction thus controls in this case.
Addiction and Detoxification Institute L.L.C. v. James Carpenter , Fed. Cir. Case 2014-1797
(July 21, 2015)
As to direct infringement the complaint alleged: “in violation of Addiction’s exclusive rights …, Defendants have directly infringed the Patent by making, using, selling, offering for sale … activities, methods and procedures claimed in the Patent. This original complaint contained a single allegation of indirect infringement: “Defendants have induced infringement of and/or contributorily infringed the Patent.” Defendants moved to dismiss, arguing that Addiction’s claim of direct infringement failed to satisfy Rule 8 because it did not follow Form 18 in the Appendix of Forms, and Addiction’s claim of indirect infringement failed to satisfy Rule 8 because it did not allege any facts showing that Defendants had the specific intent to cause infringement.
In response, Addiction moved to file an amended complaint to include additional allegations with regard to indirect infringement, that Defendants acted “with specific intent to urge, instruct, encourage” infringement by “causing, urging, aiding, or instructing others to perform one or more claimed methods of the ‘411 patent” and that Defendants acted “with specific intent to induce third parties to infringe the ‘411 patent.”
The court granted the motion to dismiss and denied Addiction’s motion to amend, concluding that to satisfy Form 18, a complaint must allege that the defendants were notified of infringement before the complaint was filed. It dismissed the indirect infringement claim because neither the original complaint nor the amended complaint contained allegations of pre-filing notice or facts supporting the contention that Defendants specifically intended to cause infringement.
The Requirements of Rule 8(a), Form 18, Twombly and Iqbal
Rule 8(a)(2) Fed. R. Civ. P. generally requires only “short and plain” statement of the plaintiff’s claim, not an exposition of his legal argument. Skinner v. Switzer, 562 U.S. 521 (2011). To survive a motion to dismiss, a complaint must plead enough factual matter that, when taken as true, states a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662 (2009). Twombly and Iqbal require that a complaint for patent infringement contain sufficient factual allegations such that a reasonable court could, assuming the allegations were true, conclude that the defendant infringed.
A motion to dismiss a claim of direct infringement, however, will not be granted if the complaint follows Form 18. In re Bill of Lading, 681 F.3d 1323 (Fed. Cir. 2012). We have held that a complaint that complies with Form 18 will satisfy Rule 8, but Form 18 applies only to direct infringement, so we have rejected the idea that it provides a model for indirect infringement, which must comply with Twombly and Iqbal.
Dismissal as to Direct Infringement is Affirmed because the Complaint did not Identify the Processes that were being Accused of Infringement
With regard to Addiction’s direct infringement claim, the court erred to the extent it required that the complaint include an allegation of pre-filing written notice. Paragraph 4 of the complaint in Form 18 states that “the plaintiff has complied with the statutory requirement of placing a notice of the Letters Patent on all electric motors it manufactures and sells and has given the defendant written notice of the infringement.” The district court erred to the extent it held that this portion of the Form creates a legal requirement that written notice be given before a complaint is filed. Pre-filing notice could be relevant to damages, such as where a patented apparatus is not marked, but is not required to sue for direct infringement.
Nonetheless, we affirm the dismissal of the direct infringement claim. Paragraph 3 of the complaint in Form 18 states that “defendant has infringed and is still infringing the Letters Patent by making, selling, and using electric motors that embody the patented invention, and the defendant will continue to do so unless enjoined by this court.” Form 18 notifies the defendant about what is being accused of infringement—electric motors. Addiction’s complaint only alleges that Defendants make, use, sell, and offer for sale undefined “activities, methods, and procedures” and provides no detail whatsoever that would put Defendants on notice as to what activity, method, or procedure is alleged to infringe. There must be some allegation of specific services or products of the defendants which are being accused. We thus affirm the dismissal of the direct infringement claim. The court did not abuse its discretion when it denied the motion to amend the complaint with respect to the direct infringement claim because Addiction did not amend its direct infringement allegations in the First Amended Complaint.
Dismissal as to Indirect Infringement is Affirmed because the Amended Complaint did not Include Facts That Would Allow a Court to Infer a Specific Intent to Induce Infringement.
The Original Complaint alleged that “Defendants have induced infringement of and/or contributorily infringed the Patent.” To state a claim for induced infringement, a plaintiff must allege that the defendant knew of the patent and that the induced acts constitute patent infringement. Commil USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920 (2015). The Original Complaint contains no allegations regarding intent or any specific acts caused by Defendants. “To state a claim for contributory infringement . . . a plaintiff must, among other things, plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses.” In re Bill of Lading. The Original Complaint contains no allegations regarding substantial non-infringing uses. Simply repeating the legal conclusion that Defendants induced infringement or contributorily infringed does not plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal.
The district court did not abuse its discretion when it denied the motion to amend as futile with respect to indirect infringement. The First Amended Complaint stated that Defendants acted “with specific intent to urge, instruct, encourage” infringement by “causing, urging, aiding, or instructing others to perform one or more claimed methods of the ‘411 patent” and that Defendants acted “with specific intent to induce third parties to infringe the ‘411 patent.” The First Amended Complaint did not include facts that would allow a court to reasonably infer that Defendants had the specific intent to induce infringement. Rather, the First Amended Complaint simply recites the legal conclusion that Defendants acted with specific intent.
Judge Bryson Dissents, finding the Original Complaint Adequate as to Direct Infringement and the Amended Complaint Adequate as to Indirect Infringement
Form 18 directed to infringement of a product claim, identifies the accused products as “electric motors that embody the patented invention.” Because the patent in this case includes only method claims, it is not possible to identify an infringing product. Instead, the complaint alleges that the defendants have directly infringed the patent “by making, using, selling, and offering for sale in the U.S. activities, methods claimed in the Patent,” which are methods and therapies for detoxifying an addicted patient. Similarly, to the extent that the majority finds the complaint wanting because it does not specifically call out each of the limitations of the claims, such detailed recitations are not required. See McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
The amended complaint alleges that the individual defendants have had actual knowledge of the patent since at least the filing date of the original complaint, and that they “induced infringement by others through their complete dominion and control over Eagle Advancement Institute, causing, urging, encouraging, aiding or instructing others to perform one or more claimed methods of the ‘411 patent.” The complaint further alleges that defendants acted with specific intent to urge, instruct, and encourage such infringement by continuing their alleged infringing activities “with knowledge of the ‘411 patent.” Once again, the majority does not explain why the allegations in the amended complaint are insufficient to plead specific intent, nor does it make clear what factual allegations would be required to do so.
Comments: We don’t very often get guidance as to what is required in a patent infringement complaint so even though this decision is non-precedential, it permits us to see how strongly most of the Circuit feels about identifying the accused items or processes as to direct infringement, and being specific about what acts have constituted inducement. Judge Aiken, Chief Judge of the Oregon District, similarly showed her impatience with an insufficient amended patent complaint in Videx, Inc. v. Triteq Lock and Security, LLC , 2014 US Dist LEXIS 63653 (D. Or. June 4, 2014). With Form 18 expiring and the status of patent legislation uncertain, litigation over the sufficiency of such pleadings is likely to continue.
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