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After a brief hiatus, Winston’s Federal Circuit Patent Decision Summaries newsletter is back online! You are receiving this email because you previously received the newsletter or you were identified as someone interested in trends in patent infringement. The Summaries, which will be published monthly, will cover key precedential patent cases decided by the Federal Circuit in the previous four weeks.
We hope you find the Summaries useful. Questions can be directed to any of the editors listed below. Thanks and Happy New Year! |
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The patentee claimed infringement of a standard essential patent (SEP), and the alleged infringer stipulated not to challenge infringement or validity. The alleged infringer appealed the damages calculation on several grounds.
The Federal Circuit reversed in part.
The alleged infringer appealed the district court’s decision not to calculate damages based on the smallest salable patent practicing unit. The Federal Circuit reiterated that “damages awarded for patent infringement must reflect the value attributable to the infringing features of the product, and no more.” This principle is apportionment and governs damages for multi-component products. To reliably apportion a royalty base requires use of the smallest salable patent practicing unit. Here, the court held that starting with the smallest salable patent practicing unit was not necessary because “the district court began with the parties’ negotiations. [T]he parties negotiated over the value of the asserted patent, ‘and no more.’”
The alleged infringer also argued that the patent was inappropriately given value created by its status as a SEP. The patentee argued that the alleged infringer was seeking to impose reasonable and non-discriminatory licensing (RAND) terms even though the patentee did not commit to RAND terms. The Federal Circuit agreed with the alleged infringer and rejected the patentee’s argument stating: “Reasonable royalties for SEPs generally—and not only those subject to a RAND commitment—must not include any value flowing to the patent from the standard’s adoption.” |
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| Written by Kathleen Barry, Partner – Winston & Strawn LLP |
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The patent owner appealed an inter partes review (IPR) finding the patent invalid on anticipation and obviousness grounds and denying a motion to amend. The Federal Circuit affirmed the Patent Trial and Appeal Board’s (PTAB’s) decision.
With regard to the patentee’s motion to amend, the patentee initially argued that the PTAB improperly placed the burden on the patentee to show patentability in light of the proposed amendments. The court found that this argument was foreclosed by the Federal Circuit’s earlier decision in Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015). As an alternative, the patentee argued that it did not have to show patentability of amendments in light of prior art cited in the original prosecution that was not cited as prior art of record in the IPR. The Federal Circuit rejected this alternative argument, finding that the patentee failed to adequately support its assertion of patentability of its claims over the cited art.
Following the Federal Circuit’s decision in Proxyconn, the PTAB issued further guidance for motions to amend. In particular, the PTAB indicated that “prior art of record” “includes any material art in the prosecution history of the patent.” The court concluded that the PTAB’s approach was reasonable because the “denial of the motion to amend rested on a merits assessment of the entire record developed on the motion, not just the initial motion itself.” Further, the PTAB’s requirement that the patent owner distinguish references from the original file history “is not in conflict with any statute or regulation.” Indeed, “it is not unreasonable to require the patentee to meet this burden” because “[t]he prior art references cited in the original patent’s prosecution history often will be the closest prior art and will already have been reviewed by the patentee.” |
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| Written by Andrew Sommer, Partner – Winston & Strawn LLP |
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Within a month of the IPR’s institution, the petitioner filed a motion to submit supplemental information under 37 C.F.R. § 42.123(a). The supplemental information included a 60-page expert declaration. The original petition did not rely on an expert declaration, and the petitioner’s only justification for submitting the expert declaration as supplemental information was that the delayed submission was cost effective. The PTAB denied the motion and expunged the supplemental information from the record. The petitioner appealed the denial of the motion to submit supplemental information, and the Federal Circuit affirmed.
The petitioner argued that the PTAB must accept supplemental information submissions that meet the criteria under 37 C.F.R. § 42.123(a) and that the PTAB cannot impose other criteria for the submission of supplemental information. The Federal Circuit rejected this argument. The court held that the PTAB’s interpretation of its regulation to permit consideration of other factors before accepting supplemental information was not plainly erroneous. Indeed, requiring the PTAB to accept all supplemental submissions that were timely made even if relevant would cut against the PTAB’s mandate to ensure efficient administration of IPR proceedings. Thus, when the supplemental submission reasonably could have been filed with the original petition, the PTAB has discretion to reject a timely filed motion. |
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The patentee owned two patents that disclosed methods for the electronic sale and distribution of digital audio and video signals. The petitioner petitioned the PTO for a covered business method (CBM) review of several claims on anticipation grounds only. The PTO granted the petition, and the PTAB found all the challenged claims invalid for obviousness. The patentee appealed, arguing that the PTAB’s decision should be set aside because the petition did not assert obviousness, and only asserted anticipation, and because the prior art did not provide a motivation to combine the elements of the claims. The petitioner countered that the Federal Circuit lacked jurisdiction to review the PTAB decision to institute the CBM. The Federal Circuit affirmed.
The Federal Circuit held it lacked jurisdiction to review the PTO’s decision to institute CBM review even though the petition raised only anticipation challenges. The court held, however, that it could review whether the challenged patents were in fact CBM patents. The PTAB had found that the challenged patents were CBM patents because they constituted a “financial product or service” and were not “technological inventions.” The court affirmed the PTAB’s decision that an activity not directed to money management or banking, such as content distribution described in the patents, can constitute a “financial product or service” within the meaning of the statute. The court also affirmed the PTAB’s decision that the challenged patents did not claim “technological inventions” because the claims were determined to be directed to nothing more than a combination of known technologies.
The court also upheld the PTAB’s obviousness determination. The court found that the prior art publications themselves expressly provided a reason for their combination. Because the patentee conceded that the prior art publications described elements working according to their established functions in a predictable manner, the court found an express reason to combine the references, rendering claimed inventions obvious to one of ordinary skill in the art. The court also affirmed a finding of no commercial success because there was no proof of a nexus between the claimed invention and the success of the alleged commercial embodiment; the success of the petitioner’s products were instead found to be due to other unclaimed and unrelated features. |
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| Written by Louis Campbell, Of Counsel – Winston & Strawn LLP |
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The PTAB held the patent claims obvious in an IPR. The patentee challenged the decision to initiate the IPR and whether the final decision violated Article III or the Seventh Amendment’s right to trial by jury. The Federal Circuit rejected these arguments.
The Federal Circuit reiterated that Section 314(d) prohibits the court from reviewing any decision to institute an IPR.
The court also explained that the Supreme Court has repeatedly recognized that Congress may delegate authority over disputes involving public rights to non-Article III courts. Public rights include rights derived “from a federal regulatory scheme” or “created by federal law.” Patent rights are indisputably public rights. IPRs are Congressionally established adjudications of these public patent rights. Given that Congress has the authority to delegate issuance of patents to the PTO, “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.” Thus, IPRs do not violate Article III.
Further, the court held that IPRs do not violate the Seventh Amendment’s right to trial by jury. As with Congress’s right to delegate authority over public rights disputes, the Supreme Court has held that Congress may delegate adjudication of public rights to administrative agencies without complying with the Seventh Amendment. This decision extends to IPRs the court’s prior decision that previously established that ex parte reexamination proceedings do not violate Article III or the right to a jury trial. |
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After a jury finding of infringement, the alleged infringer appealed the district court’s construction of the claim term “virtual machine.” On appeal, the Federal Circuit reversed the construction. The patentee sought a petition for writ of mandamus, and the Supreme Court vacated and remanded this decision for consideration in light of the standard for claim construction in the Court’s decision in Teva Pharm. USA, Inc. v. Sandoz, Inc. On remand, the Federal Circuit again reversed the construction and granted a finding of no infringement as a matter of law.
The Federal Circuit reiterated its view that under Teva, “it is not enough that the district court may have heard extrinsic evidence during a claim construction proceeding—rather, the district court must have actually made a factual finding in order to trigger Teva’s deferential review.” In this case, the district court made no factual findings based on the extrinsic evidence. Accordingly, the district court’s decision was subject to de novo review.
Further, the court rejected the patentee’s argument that reliance on precedent defining a “virtual machine” was extrinsic evidence contradicting the district court’s factual findings. Although the court’s previous opinion had imprecisely referred to its prior precedents as “extrinsic evidence,” reliance on precedents is not improper when those precedents are consistent with the intrinsic record. Here, the precedents were entirely consistent with the intrinsic record’s meaning of a “virtual machine.” The court then held that patentee waived any arguments that alleged infringer infringed under the correct construction of that term and granted a finding of no infringement to the alleged infringer as a matter of law. |
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