2018 Patent Law Decisions of the Federal Circuit

68 Am. U. L. Rev. 1263 (2019).

* Partner, King & Spalding LLP; J.D., 2003, Seton Hall University School of Law; M.S., Electrical Engineering, 1992, Pennsylvania State University; B.S., Electrical Engineering, 1990, Lafayette College. The views expressed here are my own and should not be attributed to my firm, any of my colleagues, or any of our clients.

Introduction

The Supreme Court and the U.S. Court of Appeals for the Federal Circuit issued several decisions that had a significant impact on patent law. In a major win for patent owners, the Supreme Court’s ruling in WesternGeco LLC v. ION Geophysical Corp.¹created the potential for dramatic increases in damages awards, when it held that patent owners can recover lost profits from foreign use of an invention.² The fate of invalidation proceedings before the Patent Trial and Appeal Board (PTAB) at the U.S. Patent and Trademark Office (PTO) hung in the balance in 2018. In Oil States Energy Services LLC v. Greene’s Energy Group, LLC,³ the Supreme Court upheld the constitutionality of the PTAB inter partes review (IPR) proceedings.⁴ In a case decided on the same day, SAS Institute Inc. v. Iancu,⁵ the PTAB’s partial institution practice was struck down by the Supreme Court.⁶ This case fundamentally transformed strategy for both petitioners and patent owners at the PTAB.

The Federal Circuit maintained a large patent docket in 2018 with over half of its opinions issuing on appeals from the PTAB. Many of the cases decided in 2018 involved novel legal questions regarding venue, tribal sovereign immunity in PTAB cases, the statutory interpretation of the one-year bar in IPR proceedings, apportionment of damages, Article III standing to appeal adverse PTAB decisions, and continued to address the question of patent eligibility. This Article collects and summarizes the Federal Circuit’s 2018 patent decisions and analyzes their impact.

I. Claim Construction

Claim construction remained a popular issue presented in Federal Circuit appeals in 2018 because claim construction gets a de novo review at the Federal Circuit. Most cases followed the standard framework articulated in Thorner v. Sony Computer Entertainment America LLC⁷ and addressed common disputes such as incorporating limitations from the specification into the claims and the use of plain and ordinary meaning.⁸ For PTAB appeals, claim construction was again a common theme in the cases that the Federal Circuit remanded or reversed.⁹ This Section highlights a few of the interesting claim construction decisions from 2018.

The most notable claim construction cases in 2018 dealt with collateral estoppel effect of prior judicial constructions. In Knowles Electronics LLC v. Cirrus Logic, Inc.,¹⁰ an appeal from the decision of PTAB in a reexamination proceeding, the Federal Circuit determined that the PTAB properly considered extrinsic evidence in its claim construction analysis because the intrinsic evidence was not definitive as to the meaning of the term “package.”¹¹ More importantly, the Federal Circuit addressed the interplay between the construction of the same term in a 2011 Federal Circuit case and the PTAB’s construction in the reexamination.¹² The Federal Circuit rejected Knowles’s argument that the PTAB erred by failing to evaluate the Federal Circuit’s claim construction during its claim construction analysis and found that the PTAB’s construction was consistent with the prior judicial construction, and thus proper.¹³ Judge Newman dissented, arguing that “consistency” was the wrong inquiry.¹⁴ Rather, Judge Newman asserted “[t]he question is whether the PTAB decision is precluded by the prior judicial decision, and whether any equitable or due process exception to preclusion may apply.”¹⁵ In this case, because preclusion applied, Judge Newman argued that the prior Federal Circuit construction should have bound the PTAB.¹⁶

Nestle USA, Inc. v. Steuben Foods, Inc.¹⁷ applied collateral estoppel based on a prior Federal Circuit claim construction of the same term in a related patent.¹⁸ In an appeal of a different but related patent owned by Steuben Foods, the Federal Circuit construed the term “aseptic,” and relied on binding lexicography in the specification.¹⁹ In this case, the claims at issue used the term “aseptic” in a similar fashion.²⁰ Because neither party identified any material difference between the two patents or their prosecution histories that would give rise to claim construction issues, the court vacated the PTAB’s construction and construed “aseptic” to have the same meaning as the prior appeal.²¹

The Federal Circuit also addressed the issue of claim language sufficient to invoke 35 U.S.C. § 112(f).²² In Zeroclick, LLC v. Apple Inc.,²³ the Federal Circuit considered whether the use of “program” and “user interface code” in a claim element invokes 35 U.S.C. § 112, ¶ 6.²⁴ The Federal Circuit found that the district court erred in construing the limitations “program that can operate the movement of the pointer (0)” and “user interface code being configured to detect one or more locations touched by a movement of the user’s finger on the screen without requiring the exertion of pressure and determine therefrom a selected operation” as means-plus-function claims.²⁵ The failure to use the word “means” in these limitations created the rebuttable presumption that § 112, ¶ 6 does not apply.²⁶ To overcome the presumption, Apple was required to demonstrate that “the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function.”²⁷ Because Apple failed to do so, it failed to rebut the presumption against application of § 112, ¶ 6.²⁸ The Federal Circuit found that the district court, which relied on Apple’s arguments, “erred by effectively treating “program” and “user interface code” as nonce words, which can operate as substitutes for “means” and presumptively bring the disputed claims limitations within the ambit of § 112, ¶ 6.”²⁹

One of the most significant changes in claim construction was made by rule, not case law. In 2018, the PTO enacted a rule that changed the claim construction standard for all America Invents Act (AIA) invalidity challenges that were filed on or after November 13, 2018. The standard changed from the broadest reasonable interpretation standard to the same standard used in district courts.³⁰ Because the claim construction rule change was not retroactive, the Federal Circuit will be addressing claim construction disputes under the broadest reasonable interpretation standard for years to come.

One interesting 2018 case, Arendi S.A.R.L. v. Google LLC,³¹ considered the role of prosecution history plays in a claim construction determination using the broadest reasonable construction standard.³² In the final written decision, the PTAB presented alternative rulings on claim construction—a primary ruling holding that no prosecution history disclaimer occurred and an alternative ruling assuming prosecution history disclaimer—and found the claims invalid under each.³³ The Federal Circuit determined that the PTAB erred in declining to apply prosecution disclaimer in its primary ruling. It reasoned that because the amended claim included a sufficient explanation for the changes and the examiner confirmed that explanation, the amended claims met the requirements for prosecution history disclaimer and were allowable.³⁴

The interpretation of product-by-process claim language also took center stage in 2018 in In re Nordt Development Co.,³⁵ an appeal of the PTAB’s affirmance of the examiner’s claim rejections.³⁶ During prosecution, the examiner found that the phrase “injection molded,” recited throughout the claim, described a “method of manufacturing an apparatus,” whereas the claim was an apparatus claim.³⁷ The examiner rejected the claims contending that “[i]n order to anticipate the injection molded feature, the prior art must disclose the finished product and not the method of making the product.”³⁸ The PTAB affirmed the finding that the applicant did not “persuasively explain what structural limitation is imparted by this manufacturing practice.”³⁹ The Federal Circuit disagreed and found that the phrase “injection molded” connotes structure and noted that the specification describes injection molding as forming an integral component.⁴⁰ The court further noted that “words of limitation that can connote with equal force a structural characteristic of the product or a process of manufacture are commonly and by default interpreted in their structural sense, unless the patentee has demonstrated otherwise.”⁴¹ The Federal Circuit vacated the PTAB’s anticipatory rejection based on an incorrect claim construction and remanded for the PTAB to construe the term “injection molded.”⁴²

II. Validity

A. Patent-Eligible Subject Matter

The Federal Circuit addressed nine § 101 cases in 2018. Section 101 provides that “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” is patent-eligible if it meets the other statutory requirements.⁴³ However, this provision “contains an important implicit exception: [l]aws of nature, natural phenomena, and abstract ideas are not patentable.”⁴⁴ In Alice Corp. v. CLS Bank International,⁴⁵ the Supreme Court set forth a two-step framework for distinguishing a patent that claims laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.⁴⁶ The first step requires discerning “whether the claims at issue are directed to one of those patent-ineligible concepts.”⁴⁷ The first step is the search for an “inventive concept” sufficient “to ensure that the claim amounts to ‘significantly more’ than the abstract idea itself.”⁴⁸ If the claims are directed to a patent-ineligible concept, the court then considers the “elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.”⁴⁹ Many of the cases included dissents or concurrences expressing concerns about the current state of patent eligibility jurisprudence.⁵⁰

1. Cases implicating the timing of subject matter eligibility challenges

Several Federal Circuit cases in 2018 made it more difficult for defendants in a patent litigation to challenge subject matter eligibility in the early stages of the litigation. For example, in Berkheimer v. HP Inc.,⁵¹ the Federal Circuit held that “[w]hile patent eligibility is ultimately a question of law, the district court erred in concluding there are no underlying factual questions to the § 101 inquiry.”⁵² In this case, the Federal Circuit considered whether a patentee waived his ability to argue that the dependent claims are separately patent eligible when the district court treated the sole asserted independent claim as representative.⁵³ Here, because the patentee did not agree to make the independent claim 1 representative, and the district court improperly treated the claim as representative because it was the sole asserted independent claim, the Federal Circuit found that the patentee did not waive its arguments regarding the dependent claims.⁵⁴ The court then turned to the two-step Alice test. In step one, the Federal Circuit rejected the patentee’s argument that the claims are not abstract because the parsing limitation of the claims “roots the claims in technology and transforms the data structure from source code to object code.”⁵⁵ The court found that limiting the invention to a technological environment does “not make an abstract concept any less abstract under step one.”⁵⁶ Regarding step two, the Federal Circuit found that a subset of asserted claims contain limitations directed to an arguably unconventional inventive concept.⁵⁷ Because the step two analysis involved a disputed question of fact, the district court’s summary judgment of the invalidity of these claims was improper.⁵⁸ Judge Lourie concurred, noting that “the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems.”⁵⁹ In Aatrix Software, Inc. v. Green Shades Software, Inc.,⁶⁰ issued only a week after Berkheimer, the Federal Circuit held that the district court erred in finding the claims invalid under the § 101 at the Rule 12(b)(6) stage of the litigation.⁶¹ The district court granted the defendant’s Rule 12(b)(6) motion to dismiss, holding the asserted claims invalid as directed to ineligible subject matter.⁶² The Federal Circuit vacated, finding that the district court erred to the extent that it held the claims ineligible solely because it directed to an intangible embodiment.⁶³ Because the representative claim constituted a system claim, the Federal Circuit found that it fit within one of the four statutorily provided categories of patent-eligible subject matter, unlike claims to pure data and claims to transitory signals embedded with data.⁶⁴ Writing separately, Judge Reyna disagreed “with the majority’s broad statements on the role of factual evidence in a § 101 inquiry,” stating that Federal Circuit’s “precedent is clear that the § 101 inquiry is a legal question.”⁶⁵

Next, Voter Verified, Inc. v. Election Systems & Software LLC⁶⁶ involved issue preclusion at the Rule 12(b)(6) phase.⁶⁷ Voter Verified, previously sued Election Systems’ predecessors alleging infringement of the patent asserted in the present case.⁶⁸ The court in the prior case entered summary judgment in favor of Voter Verified, concluding that all claims except one were not invalid under § 101 because Election Systems failed to present any arguments or evidence regarding the invalidity of these claims.⁶⁹ On appeal, the Federal Circuit determined that the district court did not err in holding these claims were not proven invalid.⁷⁰ Over six years later, Voter Verified sued Election Systems in a different venue, and Election Systems filed a motion to dismiss the complaint under Rule 12(b)(6), arguing that all asserted claims were invalid under § 101.⁷¹ Voter Verified argued that issue preclusion prevents Election Systems from relitigating the § 101 issue.⁷² The district court granted the motion to dismiss and concluded that Alice’s two-step analysis constituted “a substantial change” in the law such that “the issue of patent validity is not precluded from further litigation.”⁷³

The Federal Circuit first addressed the threshold issue of whether Alice was “a substantial change” in the law such that issue preclusion did not apply.⁷⁴ The Federal Circuit concluded that Alice did not alter the governing law of § 101 because the Supreme Court applied the same two-step framework it created in Mayo Collaborative Services v. Prometheus Laboratories, Inc.⁷⁵ in its § 101 analysis.⁷⁶ The Federal Circuit next considered the four required elements for issue preclusion under the Eleventh Circuit’s test⁷⁷

(1) the issue at stake must be identical to the one involved in the prior litigation; (2) the issue must have been actually litigated in the prior suit; (3) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that action; and (4) the party against whom the earlier decision is asserted must have had a full and fair opportunity to litigate the issue in the earlier proceeding.

CSX Transp., Inc. v. Bhd. of Maint. of Way Emps., 327 F.3d 1309, 1317 (11th Cir. 2003). and determined that issue preclusion did not apply here because the § 101 issue was not actually litigated in the first district court action and was not necessary to the judgment in that case.⁷⁸

Applying the two-step Alice framework, the Federal Circuit found that the claims as a whole are drawn to the concept of voting, verifying the vote, and submitting the vote for tabulation—fundamental activities that have been performed by humans for hundreds of years, and therefore are “nothing more than abstract ideas.”⁷⁹ Because neither party disputed that the claims recited the use of a general purpose computer that carries out the abstract idea, the Federal Circuit determined that there was no inventive concept sufficient to transform the claims into patent-eligible subject matter.⁸⁰

2. Claims found eligible

Finjan, Inc. v. Blue Coat Systems, Inc.⁸¹ involved a software innovation—“a method of providing computer security by scanning a downloadable and attaching the results of that scan to the downloadable itself in the form of a ‘security profile.’”⁸² For software innovations, like the claims at issue in Finjan, the first inquiry often turns on whether the claims focus on “the specific asserted improvement in computer capabilities . . . or, instead, on a process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a tool.”⁸³ The Federal Circuit found the claims to be directed to a non-abstract improvement in computer functionality because the claimed method “employs a new kind of file that enables a computer security system to do things it could not do before.”⁸⁴

Core Wireless Licensing S.A.R.L. v. LG Electronics, Inc.⁸⁵ also dealt with a software invention and involved Alice’s step one analysis.⁸⁶ The asserted claims were directed to an improved user interface for computing devices, particularly devices with small screens.⁸⁷ Specifically, the majority found that the invention improves efficiency by bringing together function and commonly accessed data in a summary window without requiring the user to open the application.⁸⁸ Therefore, the asserted claims were not directed to an abstract idea of an index, as argued by LG.⁸⁹

Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Ltd.⁹⁰ addressed the patent eligibility of method of treatment claims.⁹¹ The Federal Circuit held that the claims of the asserted patent were patent eligible.⁹² When applying Alice step one, the Federal Circuit rejected the West-Ward’s contention that similar claims were found to be patent ineligible in Mayo, and Ass’n for Molecular Pathology v. Myriad Genetics, Inc.⁹³ The court noted that the claims in Mayo were not directed to a novel method of treating a disease but instead, were targeted at a diagnostic method based on the “relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm.”⁹⁴ As such, Mayo’s claim as a whole was not directed to the application of a drug to a patient.⁹⁵ Here, the claims were directed to a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome and therefore were different from Mayo.⁹⁶ Further, unlike the claims in Mayo, the asserted claims encompass more than the natural relationship between compounds; instead, they recite a method of treating patients based on this relationship.⁹⁷ The court found that Myriad did not compel a different result because “the asserted claims fall squarely within categories of claims that the [Supreme] Court stated were not implicated by its decision.”⁹⁸ Chief Judge Prost dissented and argued that the claims were directed to a law of nature, and therefore were patent ineligible.⁹⁹

3. Claims found ineligible

In SAP America, Inc. v. Investpic, LLC,¹⁰⁰ another software invention case, the Federal Circuit affirmed the district court’s finding that the asserted claims were not patent-eligible.¹⁰¹ The asserted patent described and claimed systems and methods for performing certain statistical analyses of investment information.¹⁰² Applying the two-step Alice framework, the Federal Circuit found that the asserted claims were directed to abstract ideas; namely, selecting certain information, analyzing it, using mathematical techniques, and reporting or displaying the results of the analyses.¹⁰³ The fact that the information describes real investments did not change the analysis.¹⁰⁴ Regarding Alice step two, the Federal Circuit concluded that nothing in the claims moved them from the class of a subject matter ineligible application to an eligible application.¹⁰⁵ Although some of the claims required hardware components, these limitations required no improved computer resources and in fact, are already available computers would suffice for the claims.¹⁰⁶

The Federal Circuit in Interval Licensing LLC v. AOL, Inc.,¹⁰⁷ affirmed the district court’s determination that the asserted claims directed to the operation of an “attention manager” that provides information to a computer user without interfering with the user’s primary activity failed to recite patent-eligible subject matter.¹⁰⁸ Applying the abstract idea step of the two-step Alice framework, the majority found that the recited claims were directed to an abstract idea because “they consist of generic and conventional information acquisition and organization steps that are connected to, but do not convert, the abstract idea—displaying a second set of data without interfering with a first set of data—into a particular conception of how to carry out that concept.”¹⁰⁹ Turning to Alice step two, the majority found that nothing in the claim converted the abstract idea into an inventive concept.¹¹⁰ Judge Plager wrote separately to “concur in the carefully reasoned opinion” by the majority based on the current state of the law and to “dissent from our court’s continued application of this incoherent body of doctrine.”¹¹¹

The Federal Circuit affirmed the district court’s grant of summary judgment that all of the asserted patent claims were ineligible under § 101 in BSG Tech LLC v. Buyseasons, Inc.¹¹² The asserted patents are directed to a “self-evolving generic index” for organizing information stored in a database.¹¹³ Under step one of the Alice framework, the Federal Circuit “agree[d] with the district court that the asserted claims are directed to the abstract idea of considering historical usage information while inputting data.”¹¹⁴ The Federal Circuit rejected the patent owner’s argument that the claims could not be directed to abstract ideas because their limitations were not satisfied by a generic computer.¹¹⁵ In this case, the database structure provided a generic environment in which the claimed method is performed, and thus, the recitation of a database structure slightly more detailed than a generic database did not save the asserted claims at step one.¹¹⁶ The Federal Circuit also found that the alleged benefits raised by the patent owner were not improvements to database functionality, but instead were benefits that flow from performing an abstract idea with a well-known database structure.¹¹⁷ Under step two of Alice, the Federal Circuit agreed with the district court that the asserted claims lacked an inventive concept.¹¹⁸ The court noted that “[i]f a claim’s only ‘inventive concept’ is the application of an abstract idea using conventional and well-understood techniques, the claim has not been transformed into a patent-eligible application of an abstract idea.”¹¹⁹ In this case, the Federal Circuit found that the only alleged unconventional feature was the requirement that users are guided by summary comparison usage information or relative historical usage information which is the abstract idea.¹²⁰

In re Marco Guldenaar Holding B.V.¹²¹ dealt with subject matter eligibility in the patent examination context.¹²² The claims at issue were directed to rules for playing a dice game and specifically, the markings (or lack thereof) on the dice.¹²³ The examiner rejected the claims as being directed to patent-ineligible subject matter under § 101 and the PTAB affirmed.¹²⁴ Under Alice step one, the Federal Circuit agreed with the PTAB that the claims were directed to the abstract idea of “rules for playing a dice game.”¹²⁵ The court found no error in the PTAB’s use of a more refined characterization of the claimed abstract idea as a means of acknowledging one method of organizing human activity.¹²⁶ The Federal Circuit rejected the applicant’s argument that the claimed dice have markings on one, two, or three die faces and were therefore not conventional.¹²⁷ The court found that the printed indicia on each die did not functionally relate to the substrate of the die, and therefore the markings constituted printed matter.¹²⁸ Because the printed matter, to which § 101 is inapplicable, constituted the only disputably unconventional aspect of the recited method of playing a dice game, the Federal Circuit held that “the rejected claims do not recite an ‘inventive concept’ sufficient to ‘transform’ the claimed subject matter into a patent-eligible application of the abstract idea.”¹²⁹ Judge Mayer wrote separately in concurrence and argued that “claims directed to dice, card, and board games can never meet the [§] 101 threshold because they endeavor to influence human behavior rather than effect technological change.”¹³⁰ Judge Mayer also disagreed with the court’s statement that patent eligibility inquiry “may contain underlying issues of fact,” and stated that “subject matter eligibility under . . . § 101 is a pure question of law, one that can, and should, be resolved at the earliest stages of litigation.”¹³¹

B. Anticipation

The Federal Circuit addressed anticipation in several contexts in 2018. In Monsanto Technology LLC v. E.I. DuPont de Nemours & Co.,¹³¹878 F.3d 1336 (Fed. Cir. 2018). the Federal Circuit considered inherent anticipation.¹³² At issue in Monsanto was the extent to which extrinsic evidence, specifically expert declarations, may be used to support what is “necessarily present” in a prior art reference’s teaching.¹³³ Noting that “[i]t is well established that such reliance on extrinsic evidence is proper in an inherency analysis,”¹³⁴ the Federal Circuit concluded that the expert declarations did not expand the meaning of the prior art reference or serve as prior art; they demonstrated what is inherent in the prior art reference.¹³⁵ The Federal Circuit therefore held that substantial evidence supported the PTAB’s finding that the applied reference inherently anticipated a disputed limitation of the challenged claims.¹³⁶

In Core Wireless S.A.R.L. v. LG Electronics, Inc.,¹³⁷ the jury found the asserted claims remained valid, even though the plaintiff chose not to present any affirmative evidence to rebut the defendant’s prima facie case of anticipation.¹³⁸ The accused infringer, LG, argued that because the plaintiff failed to present affirmative evidence in rebuttal, it was entitled to judgment as a matter of law that the applied reference anticipated the claims.¹³⁹ The Federal Circuit disagreed and affirmed the denial of the defendant’s motion for judgment as a matter of law, finding that the jury was entitled to evaluate the testimony of the defendant’s expert and determine whether defendant clearly and convincingly established that the reference anticipated the claims.¹⁴⁰ The Federal Circuit noted that “granting judgment as a matter of law for the party carrying the burden of proof is generally ‘reserved for extreme cases,’” and this case did not rise to that level.¹⁴¹

Medicines Co. v. Hospira, Inc.¹⁴² involved application of the on-sale bar.¹⁴³ A patent is invalid under the on-sale bar if, before the critical date, the product is the subject of a commercial offer for sale and the invention is ready for patenting.¹⁴⁴ The asserted patents in Medicines Co. covered an improved process for manufacturing a drug product of bivalirudin, marketed by Medicines Co. under the brand name Angiomax.¹⁴⁵ On February 27, 2007, Medicines Co. entered into a distribution agreement stating that Medicines Co. desired “to sell the Product” to Integrated Commercialization Solutions, Inc. (ICS), and ICS “desire[d] to purchase and distribute the Product.”¹⁴⁶ The agreement further forbade the Medicines Co. from selling Angiomax to any other party for the duration of the contract.¹⁴⁷ The Federal Circuit found that the terms of the distribution agreement made clear that Medicines Co. and ICS entered an agreement to sell and purchase the product, and thus constituted a commercial offer for sale for purposes of the on-sale bar.¹⁴⁸ The Federal Circuit remanded to the district court to consider whether the distribution agreement covered the patented product.¹⁴⁹

The court dealt with the impact of prior reexamination decisions in Exmark Manufacturing Co. v. Briggs & Stratton Power Products Group, LLC.¹⁵⁰ In this case, the Federal Circuit found that the district court erred by basing its summary judgment of no invalidity solely on the fact that the asserted claim survived multiple reexaminations.¹⁵¹ The court held that a reexamination confirming patentability of a patent claim alone is not determinative of whether a genuine issue of fact precludes summary judgment of no invalidity.¹⁵² The holding is supported by prior Federal Court decisions that a district court “is never bound by an examiner’s finding in an ex parte patent application proceeding.”¹⁵³ Instead, the deference owed to the decisions of the PTO takes the form of the presumption of validity under 35 U.S.C. § 282.¹⁵⁴ The presumption of validity can be overcome by the patent challenger who meets its burden of providing the factual elements of invalidity by clear and convincing evidence.¹⁵⁵

C. Obviousness

Most of the Federal Circuit’s decisions on obviousness do not warrant extended discussion because they dealt with case-specific disputes about underlying facts.¹⁵⁶ This section discusses a few representative cases from 2018 addressing interesting fact patterns and legal issues.

Impax Laboratories Inc. v. Lannett Holdings Inc.¹⁵⁷ highlights that although obviousness is ultimately a legal question, the lower court’s underlying findings of fact often dictate the outcome in the appeal.¹⁵⁸ Lannett contended that the district court erred in concluding the claims at issue would not have been obvious based on an erroneous finding that the prior art taught away from nasal formulations of zolmitriptan.¹⁵⁹ Impax responded that the district court did not err because it correctly found that a skilled artisan would not have been motivated to make nasal formulations of zolmitriptan or have a reasonable expectation of success in doing so.¹⁶⁰ Based on the record, the Federal Circuit held that the court clearly erred in its findings that a skilled artisan would not have been motivated to make a zolmitriptan nasal spray with a reasonable expectation of success.¹⁶¹ Zolmitriptan’s known significant reliance on its active metabolite would have, on balance, dissuaded a person of skill in the art from making nasal formulations of zolmitriptan.¹⁶² Noting that “this case was close,” the Federal Circuit affirmed, deferring to the district court in its fact findings.¹⁶³

Next, In re Brandt¹⁶⁴ involved an appeal from the examiner’s obviousness finding during examination.¹⁶⁵ The claim at issue required that the recited coverboard have a density “less than [six] pounds per cubic foot.”¹⁶⁶ The examiner rejected the claim based on a reference disclosing a density between six and twenty-five pounds per cubic foot, concluding that it would have been an obvious design choice for a skilled artisan to have a coverboard with a density less than six pounds per cubic foot.¹⁶⁷ The PTAB affirmed the examiner’s rejection and determined that the claims were prima facie obvious based on the general rule that “when the difference between the claimed invention and the prior art is the range or value of a particular variable, then a prima facie rejection is properly established when the difference in the range or value is minor.”¹⁶⁸ The PTAB also found that applicant did not rebut the prima facie rejection through argument or evidence of unexpected results or teaching away nor did applicant show that the low-end range of six pounds per cubic foot had any different properties from a coverboard with a lower density of 5.99 pounds per cubic foot.¹⁶⁹

The Federal Circuit affirmed finding that the PTAB’s factual findings underlying the obviousness analysis were supported by substantial evidence.¹⁷⁰ The court explained one of the procedural tools available to an examiner—the prima facie case of unpatentability.¹⁷¹ If the examiner establishes a prima facie case, the burden shifts to the applicant to come forward with rebuttal evidence or argument.¹⁷² The examiner then considers the evidence as a whole before reaching a conclusion on the claims’ patentability under 35 U.S.C. § 103(a).¹⁷³ In this case, the court rejected the applicant’s argument that the examiner can only find a case of obviousness when there is an overlap between the claimed range and prior art range.¹⁷⁴ Here, because the claimed range and prior art range abut one another, and the applicant conceded as fact that there is no meaningful distinction between the two ranges, the Federal Circuit determined that substantial evidence supports the PTAB’s finding that the differences in density ranges “could not be smaller.”¹⁷⁵ The Federal Circuit also rejected the applicant’s teaching away argument that was in essence an assertion that there is some criticality to having a coverboard density of greater than six pounds per cubic foot because applicant failed to introduce any supporting evidence.¹⁷⁶

In ZUP, LLC v. Nash Manufacturing, Inc.,¹⁷⁷ the Federal Circuit addressed the methodology for considering secondary considerations of nonobviousness.¹⁷⁸ In its appeal, the patentee, ZUP, argued that the district court improperly shifted the burden to prove non-obviousness to ZUP.¹⁷⁹ The majority “quickly dismissed” this argument and noted that Federal Circuit precedent is clear that “the burden of persuasion remains with the challenger during litigation because every issued patent is entitled to a presumption of validity.”¹⁸⁰ The majority then found that even when all reasonable inferences are drawn in favor of ZUP, the “weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.”¹⁸¹ Judge Newman dissented and argued that the majority improperly held that only three of the four Graham v. John Deere Co.¹⁸² factors are considered in order to establish a prima facie case of obviousness, and the fourth Graham factor is applied only in rebuttal, whereby it must outweigh and rebut the first three factors.¹⁸³ Instead, Judge Newman argued that secondary consideration evidence must be considered together with the other evidence and not separated out and required to outweigh or rebut the other factors.¹⁸⁴

In E.I. DuPont de Nemours & Co. v. Synvina C.V.,¹⁸⁵ the Federal Circuit reversed the PTAB’s finding that the petitioner failed to prove that the challenged claims were obvious because the PTAB applied the wrong legal standards for obviousness.¹⁸⁶ Specifically, the Federal Circuit found that the PTAB erred in concluding that the type of burden-shifting framework consistently applied in the Federal Circuit’s overlapping range cases was implicitly foreclosed by subsequent cases not addressing this framework.¹⁸⁷ Neither In re Magnum Oil Tools International, Ltd.,¹⁸⁸ nor Dynamic Drinkware, LLC v. National Graphics, Inc.¹⁸⁹ forecloses application of this burden-shifting framework in the IPR context.¹⁹⁰

For decades, the Federal Circuit and its predecessor have recognized that “where the general conditions of a claim are disclosed in the prior art, it is not inventive to discover the optimum or workable ranges by routine experimentation.”¹⁹¹ An application of this principle is that “[a] prima facie case of obviousness typically exists when the ranges of a claimed composition overlap the ranges disclosed in the prior art.”¹⁹² Such an overlap creates a presumption of obviousness that a patentee may rebut in several ways.¹⁹³ That is, where there is a range disclosed in the prior art, and the claimed invention falls within that range, the burden of production falls upon the patentee to come forward with evidence of nonobviousness.¹⁹⁴ For example, a modification of a process parameter may be patentable if it “produce[s] a new and unexpected result which is different in kind and not merely in degree from the results of the prior art.”¹⁹⁵ A claimed range that demonstrates such unexpected results is referred to as a “critical” range, and the patentee has the burden of proving criticality.¹⁹⁶ A patentee may rebut the presumption of obviousness by showing that the prior art taught away from the claimed range.¹⁹⁷ Additionally, a change to a parameter may be patentable if the parameter was not recognized as “result-effective.”¹⁹⁸ The factfinder then assesses that evidence, along with all other evidence of record, to determine whether a patent challenger has carried its burden of persuasion to prove that the claimed range was obvious.¹⁹⁹ In this case, the presumption of obviousness applied and the patentee failed to show any of the means to rebut obviousness.²⁰⁰

“Incorporation by reference” is a common practice in patent drafting that incorporates the disclosure of another document into a patent by including a simple reference statement to that document. Disputes on the scope of incorporation typically arise when one party attempts to rely on the incorporated material to support an anticipation or obviousness challenge. In Paice LLC v. Ford Motor Co.,²⁰¹ the Federal Circuit addressed an interesting twist on incorporation by reference—the effect of incorporation by reference on priority date of an asserted patent. In response to a patent infringement suit, Ford filed twenty-five IPR proceedings against Paice, including those that led to the six proceedings against two patents at issue in this appeal.²⁰² The PTAB found that a Patent Cooperation Treaty (PCT) publication, in view of a patent to Severinsky, rendered a set of challenged claims obvious.²⁰³ Paice argued that the PCT publication was not prior art because both challenged patents claimed priority to a patent application which predated the PCT publication and incorporated the Severinsky patent by reference, providing written description support for the claims.²⁰⁴ The PTAB rejected these arguments and determined that the application did not incorporate Severinsky, and the claims therefore lacked written description support.²⁰⁵ The Federal Circuit disagreed and found that the language “is incorporated herein by this reference” sufficiently incorporated the entire Severinsky patent despite other language stating that only portions of Severinsky would be applicable to the application’s purportedly new and improved hybrid vehicle.²⁰⁶ The court noted that “[t]he applicability of a document’s disclosed features and the incorporation of the document itself are distinct concepts.”²⁰⁷ The court remanded for a determination of whether the priority patent application, with the Severinsky patent incorporated, provided adequate written description support for the claims.²⁰⁸

D. Indefiniteness

One case in 2018 dealt with the issue of indefiniteness. In Berkheimer v. HP Inc.,²⁰⁹ the Federal Circuit affirmed the district court’s determination that the asserted claims were indefinite.²¹⁰ The claims at issue each recited the term “minimal redundancy.”²¹¹ Because the specification uses inconsistent terminology to describe the level of redundancy that the system achieves and neither the claims nor the prosecution history add clarity, the Federal Circuit found that it was not clear error for the district court to find that a skilled artisan would not have known the meaning of “minimal redundancy” with reasonable certainty.²¹² The court stressed that it was not holding that “all terms of degree are indefinite,” only that the term “minimal redundancy” is indefinite in light of the evidence.²¹³

E. Written Description and Enablement

In 2018, the Federal Circuit addressed a relatively high number of cases involving written decision and enablement. One common fact pattern in these 2018 cases used written description to attack priority benefit claims. For example, in D Three Enterprises, LLC v. SunModo Corp.,²¹⁴ the Federal Circuit affirmed the district court’s finding that an asserted patent was not entitled to claim priority benefit to its provisional because the provisional lacked adequate written description support for the claimed subject matter. In the district court litigation, because the accused product was available to the public after the filing of the provisional application but before the filing of the asserted patents,²¹⁵ the patentee had to establish priority benefit to the provisional application to assert the patents against the accused product.²¹⁶ To claim priority benefit, a patent application must disclose the claimed subject matter “in the manner provided by § 112(a)” which states that “[t]he specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable [a PHOSITA] to which it pertains . . . to make and use the same.”²¹⁷ On summary judgment, the district court determined that the asserted claims were not entitled to priority benefit of the provisional application because they were broader than the invention disclosed in the provisional such that they did not meet the written description requirement.²¹⁸ The Federal Circuit affirmed and noted that “[i]t is not sufficient for purposes of the written description requirement of § 112 that the disclosure, when combined with the knowledge in the art, would lead one to speculate as to the modifications that the inventor might have envisioned, but failed to disclose.”²¹⁹ The court also found that the statement in the patent that said “[i]t is therefore intended that the following appended claims hereinafter introduced are interpreted to include all such modifications, permutations, additions and subcombinations are within their true sprit [sic] and scope” was merely boilerplate language, insufficient to show adequate disclosure of the claims.²²⁰

Written description disputes also arise in cases involving genus-species claims. Knowles Electronics LLC v. Cirrus Logic, Inc.²²¹ addressed the PTAB’s determination that although the specification disclosed a genus, solder pads that are capable of being connected to a board, it failed to provide adequate written description support for the claimed species, pads that are connectable to a board specifically by using a reflow process.²²² The Federal Circuit affirmed and found substantial evidence supported the PTAB’s determination that the specification does not provide adequate written description to allow a person having of ordinary skill in the art (PHOSITA) to recognize the inventor invented what is claimed.²²³ The court also rejected Knowles’s contention that PTAB disregarded “the state of the art at the time of filing” and the “prior art knowledge” that would have demonstrated that a PHOSITA knew solder pads were intended to be capable of reflow attachment to a user’s board.²²⁴ Because of the conflicting views presented on the knowledge of a PHOSITA, the Federal Circuit determined that the PTAB reasonably found that a PHOSITA would not have recognized that the inventor possessed solder pads “configured to” connect to a printed circuit board through a reflow process.²²⁵

In addition to interesting legal issues when assessing obviousness, claimed ranges are also often subjects of written description disputes. In 2018, the Federal Circuit addressed written description support for a claimed range General Hospital Corp. v. Sienna Biopharmaceuticals, Inc.²²⁶ In an interference, the PTAB determined that the application lacked written description support and dismissed the interference proceeding.²²⁷ After construing the term about in the representative claim to mean “within 10%,” the PTAB found that none of the disclosed values in the application fall within the claimed 10% value.²²⁸ The specification also broadly stated that in an embodiment the particles have an optical density of at least “about 1 O.D” but does not expressly identify a maximum concentration.²²⁹ Where a specification discloses a broad range of values and a value within that range is claimed, the disclosure must allow one skilled in the art to “immediately discern the limitation at issue in the claims.”²³⁰ The Federal Circuit determined that substantial evidence supported the PTAB’s determination that the examples provided in the specification, including disclosure of a range that only minimally overlapped with the claimed range, do not provide written description support for the claim term, noting “one cannot disclose a forest in the original application, and then pick a tree out of the forest and say here is my invention.”²³¹

The Federal Circuit addressed enablement in one case in 2018—In Trustees of Boston University v. Everlight Electronics Co.²³² In this case, the Federal Circuit reversed the denial of the defendant’s motion for judgment as a matter of law that the asserted patent was not enabled as a matter of law.²³³ “[T]o be enabling, the specification of a patent must teach those skilled in the art how to make and use the full scope of the claimed invention without ‘undue experimentation.’”²³⁴ The claim at issue in this case recited “a non-single crystalline buffer layer” and “a growth layer grown on the buffer layer.”²³⁵ The court construed “non-single crystalline buffer layer” to encompass polycrystalline, amorphous, or a mixture of polycrystalline and amorphous.²³⁶ The constructions resulted in six permutations for the relationship between the growth layer and the buffer layer.²³⁷ The enablement issue concerned only one of the six permutations—a monocrystalline growth layer formed directly on an amorphous buffer layer.²³⁸ Because experts for both parties agreed that it is “impossible to epitaxially grow a monocrystalline film directly on an amorphous structure,” the Federal Circuit noted that it could “safely conclude that the specification does not enable what the experts agree is physically impossible.”²³⁹ Because “the specification must enable the full scope of the claimed invention,” the Federal Circuit rejected the patentee’s argument that the enabling disclosure of five out of six permutations was sufficient.²⁴⁰ The Federal Circuit also rejected the patentee’s evidence that others have successfully grown a monocrystalline layer directly on an amorphous layer because patentee’s evidence did not suggest that these results were accomplished by following the specification’s teachings or that achieving these results was within an ordinary artisan’s skill as of the patent’s effective filing date.²⁴¹ Because “[t]he inquiry is whether the patent’s specification taught one of skill in the art how to make such a device without undue experimentation as of the patent’s effective filing date,” the Federal Circuit found that the patentee’s evidence was not probative of enablement.²⁴²

F. Obviousness-Type Double Patenting

Obviousness-type double patenting is an equitable doctrine with a goal of avoiding an unfair extension of patent term to a patentee. Invalidity attacks based on obviousness-type double patenting are rare and often involve a detailed analysis of the prosecution history to determine whether the one-way or two-way test applies and whether the patentee is entitled to benefit of the statutory safe harbor. For example, in In re Janssen Biotech, Inc.,²⁴³ the Federal Circuit addressed the application of the safe harbor provision, 35 U.S.C. § 121,²⁴⁴ in an obviousness-type double patenting case.²⁴⁵ The applicant filed the patent at issue as a continuation-in-part (CIP) including subject matter from its parent application and additional matter from another previously filed application.²⁴⁶ However, the patent issued with claims directed to subject matter in only the parent application and not to the added subject matter.²⁴⁷ The PTO subsequently granted an ex parte reexamination finding the claims unpatentable based on obviousness-type double patenting over three patents.²⁴⁸

During the reexamination proceeding, Janssen requested that the patent specification be amended to delete portions that were not present in the parent application so that the patent can be designated a divisional of the parent application, rather than a CIP.²⁴⁹ The PTO entered the amendments but did not confirm the status of the patent as a divisional.²⁵⁰ After determining that the safe harbor provision of § 121 did not apply,²⁵¹ the examiner determined that the claims were unpatentable under the one-way test for double patenting.²⁵² The PTAB affirmed the double patenting rejections on appeal.²⁵³ The threshold issue in the appeal was whether the § 121 safe harbor provision applied and protected the patent from invalidation based on the reference patents.²⁵⁴ The Federal Circuit stressed that “aside from the original application and the original patent, the protection afforded by § 121 is limited to divisional applications and patents issued on divisional applications.”²⁵⁵ Here, the applicant voluntarily and deliberately filed an application properly designated as a CIP and the challenged patent issued from that CIP application, not a divisional application as required by the § 121 safe harbor provision. The Federal Circuit held that the patent owner cannot retroactively bring the challenged patent within the scope of the § 121 safe harbor provision by amending the CIP application during a reexamination to re-designate it as a divisional application.²⁵⁶

The Federal Circuit next turned to the issue of whether the PTAB’s application of the one-way test for obviousness double patenting was proper. The one-way test asks whether the “application claims are obvious over the patent claims,” whereas the two-way test additionally asks “whether the patent claims are obvious over the application claims.”²⁵⁷ The Federal Circuit affirmed the PTAB’s rejection under the doctrine of obviousness-type double patenting, finding that patent owner was not entitled to the two-way test for obviousness double patenting.²⁵⁸

In UCB, Inc. v. Accord Healthcare, Inc.,²⁵⁹ a Hatch-Waxman²⁶⁰ case, the Federal Circuit affirmed the district court’s finding that the challenged claims were not invalid for obviousness-type double patenting.²⁶¹ As part of the double patenting inquiry, the court construes the claims in the earlier and later patents and determines the differences.²⁶² The court then determines whether those differences render the claims patentably distinct.²⁶³ The dispute in UCB centered on how the two-step analysis should be applied. However, the majority found that the asserted claims were not invalid under either of the competing approaches because a PHOSITA would not have had reason to modify the earlier compound to arrive at lacosamide and would not have had a reasonable expectation of success.²⁶⁴ Chief Judge Prost dissented and argued that the prior art supported a reasonable expectation of success.²⁶⁵

III. Infringement

Many of the Federal Circuit’s infringement cases were routine and upheld lower courts factual findings.²⁶⁶ However, several cases addressed interesting fact patterns and uncommon points of law. One case, Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc.,²⁶⁷ addressed the impact on infringement for a product that includes an infringing feature that is incapable of being used.²⁶⁸ At trial, the jury found infringement of both method and system claims based on the inclusion of a specific mode in the products, referred to as “Mode 3.”²⁶⁹ Because there was no evidence that the accused products actually used Mode 3, the Federal Circuit reversed the verdict of infringement of the method claims.²⁷⁰ However, the court affirmed the judgment of infringement of the apparatus claims because infringement of apparatus claims requires that the accused products have the ability to perform in Mode 3; it does not require actual use of the accused products in Mode 3.²⁷¹

Polara Engineering Inc. v. Campbell Co.²⁷² involved the issue of public and experiment use of a claimed invention. In the district court proceeding, the jury found that the asserted claims directed to a control system for crosswalk stations were not proven to be invalid.²⁷³ However, prior to the priority date of the patent, the patentee tested prototypes satisfying the limitations of the asserted claims.²⁷⁴ Following post-trial motions, the district court upheld the jury’s verdict that the invention was not invalid based on this public use because substantial evidence supported the jury’s finding that the installation of prototypes was experimental use necessary to ensure that the invention would work for its intended purpose.²⁷⁵ Under pre-AIA 35 U.S.C. § 102(b), “[a] person shall be entitled a patent unless . . . the invention was . . . in public use . . . in this country, more than one year prior to the date of the application for patent in the United States.”²⁷⁶ However, “an inventor who seeks to perfect his discovery may conduct extensive testing without losing his right to obtain a patent for his invention—even if such testing occurs in the public eye.”²⁷⁷ The Federal Circuit affirmed the jury’s verdict and found that “substantial evidence supports the jury’s finding of experimental use that negates the application of the public use bar.”²⁷⁸ After articulating the factors that may be relevant to determining whether a use is experimental,²⁷⁹

(1) the necessity for public testing, (2) the amount of control over the experiment retained by the inventor, (3) the nature of the invention, (4) the length of the test period, (5) whether payment was made, (6) whether there was a secrecy obligation, (7) whether records of the experiment were kept, (8) who conducted the experiment, (9) the degree of commercial exploitation during testing, (10) whether the invention reasonably requires evaluation under actual conditions of use, (11) whether testing was systematically performed, (12) whether the inventor continually monitored the invention during testing, and (13) the nature of contacts made with potential customers.

Clock Spring, L.P. v. Wrapmaster, Inc., 560 F.3d 1317, 1327 (Fed. Cir. 2009). the court noted that because invention relates to public safety, “the inventors could reasonably believe that they needed to ensure the invention’s durability and safety before being certain that it would work for its intended purpose.”²⁸⁰

In another Hatch-Waman case, Merck Sharp & Dohme Corp. v. Amneal Pharmaceuticals LLC,²⁸¹ the Federal Circuit affirmed the district court’s finding of non-infringement and held that the district court did not abuse its discretion in denying plaintiff’s request for additional samples of the accused product.²⁸² The asserted patent claims involved mometasone furoate monohydrate (MFM), which is an ingredient in Merck’s Nasonex nasal product.²⁸³ In 2014, Amneal filed an Abbreviated New Drug Application (ANDA) seeking approval to market a generic nasal spray containing corticosteroid anhydrous mometasone furoate,²⁸⁴ and sent Merck a notice letter certifying that its proposed product would not infringe the asserted patent claims and that the asserted patent was invalid.²⁸⁵ Merck subsequently filed an infringement suit against Amneal.²⁸⁶ The Food and Drug Administration (FDA) required Amneal to complete a bulk-hold study in which Amneal’s commercial batch would be held for a four-day period before being packaged into nasal spray bottles.²⁸⁷ Amneal drew samples from the batch on the first day (“Day 1 Batch”) and on the fourth day (“Day 4 Batch”).²⁸⁸ After the bulk-hold study was completed, it mixed a 100 kg commercial batch and bottled it for storage (“A Batch”).²⁸⁹ Amneal produced samples from the Day 1 Batch to Merck but did not provide samples of either the Day 4 Batch or the A Batch.²⁹⁰ The district court did not compel Amneal to produce these samples but instead gave Merck the opportunity to prove at trial that the Day 4 and A Batch samples were substantively different than the Day 1 Batch samples.²⁹¹ The district court then found that Merck failed to carry its burden of proving infringement.²⁹²

The Federal Circuit affirmed. After noting the question was a close one, the Federal Circuit found that the district court did not abuse its discretion when it decided to proceed to trial as opposed to ordering additional discovery and delaying trial.²⁹³ The court determined that the district court took adequate steps to ensure that proceeding to trial would not prejudice Merck, including giving Merck the opportunity to prove at trial that the Day 4 and A Batch samples were different than the Day 1 Batch samples for purposes of infringement.²⁹⁴ Regarding infringement, the Federal Circuit found no clear error in the district court’s fact finding that three Raman peaks were required and that Amneal’s ANDA product will not infringe.²⁹⁵

Because design patents are not usually asserted in patent infringement cases, the Federal Circuit does not often issue opinions associated with design patents. However, in 2018, the Federal Circuit considered the application of prosecution history estoppel in a design patent infringement context in Advantech Marketing, Inc. v. Shanghai Walk-Long Tools, Co.²⁹⁶ Advantek sued its former manufacturer, Shanghai Walk-Long Tools (“Walk-Long”), for infringement of its design patent for a portable animal cage.²⁹⁷ The district court granted judgment on the pleadings under Federal Rule of Civil Procedure 12(c), holding that prosecution history estoppel barred Advantek from enforcing its design patent against the accused product.²⁹⁸ The Federal Circuit reversed.

Prosecution history estoppel in a design patent case depends on: “(1) whether there was a surrender; (2) whether it was for reasons of patentability; and (3) whether the accused design is within the scope of the surrender.”²⁹⁹ During prosecution of the patent at issue, the examiner required the patentee to elect to prosecute claims to either a kennel without a cover or a kennel with a cover.³⁰⁰ Advantek elected to prosecute the embodiment of a kennel without a cover.³⁰¹ Based on this prosecution history, the Federal Circuit found that Advantek elected to patent the ornamental design for a kennel with a particular skeletal structure.³⁰² A competitor selling a kennel embodying the patented structure infringes Advantek’s patent, regardless of any extra features that the competitor might add to the kennel.³⁰³ The Federal Circuit concluded that Advantek was not estopped by the prosecution history from asserting its design patent against Walk-Long.³⁰⁴

IV. Equitable Defenses

In addition to defenses based on on-infringement and invalidity, a party accused of infringement can assert a set of equitable defenses based on the conduct of the patentee. These defenses are non-statutory and are highly fact dependent. In 2018, the Federal Circuit addressed a wide variety of cases involving equitable defenses ranging from instances of litigation misconduct to improper conduct during prosecution of the asserted patents.

A. Unclean Hands

In Gilead Sciences, Inc. v. Merck & Co.,³⁰⁵ the Federal Circuit affirmed the district court’s holding that Merck could not enforce the two asserted patents because its conduct gave it unclean hands.³⁰⁶

[D]etermination of unclean hands may be reached when “misconduct” of a party seeking relief “has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation,” i.e., “for such violations of conscience as in some measure affect the equitable relations between the parties in respect of something brought before the court.³⁰⁷

The doctrine “necessarily gives wide range to the equity court’s use of discretion in refusing to aid the unclean litigant.”³⁰⁸

Here, the Federal Circuit determined, based on the totality of the evidence-supported misconduct, the district court properly found that the patentee engaged in pre-litigation business misconduct.³⁰⁹ First, Merck violated an agreed upon “firewall” by permitting an employee involved in related patent prosecution to participate in a conference call with Pharmasset³¹⁰ representatives discussing the structure of its compound for treating Hepatitis C.³¹¹ Merck compounded this violation by continuing to use this employee in related patent prosecutions after the call.³¹² The evidence supported the district court’s finding that the employee’s improperly acquired knowledge of Pharmasset’s compound influenced Merck’s prosecution strategy and was directly connected to the present patent litigation.³¹³

The Federal Circuit also determined that misconduct continued into the litigation.³¹⁴ First, the court found that the employee gave intentionally false testimony that he did not participate in the conference call.³¹⁵ Second, the court found that the employee’s testimony about the role of the Pharmasset’s compound in its prosecution of amended claims was “so incredible as to be intentionally false.”³¹⁶ The Federal Circuit also found no abuse in discretion in the district court’s conclusion that the unclean hands defense extended to both asserted patents.³¹⁷ In addition to finding that the employee played a key role in the prosecution of both patents, the district court concluded that “Merck’s litigation misconduct infects the entire lawsuit, including the enforceability of the ‘712 Patent.”³¹⁸

B. Inequitable Conduct

Inequitable conduct is an equitable issue committed to the discretion of the trial court and is, therefore, reviewed by the Federal Circuit under an abuse of discretion standard.³¹⁹ In Energy Heating, LLC v. Heat On-the-Fly, LLC,³²⁰ the Federal Circuit affirmed the district court’s conclusion that the asserted patent was unenforceable for inequitable conduct.³²¹ The patent-at-issue involved a method and apparatus “for the continuous preparation of heated water flow for use in hydraulic fracturing” (also known as “fracing”).³²² The sole inventor knew that the patent process required that he file his application within one year of the first offer for sale or public use; yet, he did not disclose any of his companies sixty-one frac jobs that used the system to the PTO during prosecution as potential on-sale or public uses.³²³ The Federal Circuit found that the district court did not err in finding the prior frac jobs were not experimental. Because the continuation patent was issued after the district court’s judgment and had claims that were materially different, the district court did not abuse its discretion by not considering the PTO’s issuance of a continuation patent in which the frac jobs were disclosed.³²⁴ Finally, the Federal Circuit found that the district court did not abuse its discretion in finding there was clear and convincing evidence “the inventor knew that the prior frac jobs were material and specifically intended to deceive the PTO by not disclosing these jobs.”³²⁵

C. Laches

The equitable defenses of laches and equitable estoppel can arise when a patent holder delays action against an alleged infringer. In John Bean Technologies Corp. v. Morris & Associates, Inc.,³²⁶ the Federal Circuit was confronted with intersection of laches and ex parte reexamination. In June 2002, U.S. Patent No. 6,397,622 (“the ‘622 patent”) issued two claims.³²⁷ Shortly after issuance, the defendant sent the patent owner a demand letter notifying the patent owner that the defendant believed the patent to be invalid and stating that any statements that assert infringement made from this point were likely to be met with a suit for unfair competition.³²⁸ The patent owner did not respond to the demand letter.³²⁹ In December 2013, eleven years after the ‘622 patent was issued, the patent owner filed an ex parte reexamination.³³⁰ During that proceeding, the patent owner amended both of the original claims and added six additional claims.³³¹ After the PTO issued a reexamination certificate in 2013, the patent owner sued the defendant for infringement from the date the reexamination certificate issued.³³² The district court granted summary judgment to the defendant holding that the infringement action was barred by both laches and equitable estoppel because the patent owner’s decade-long silence was misleading conduct on which the defendant relied, and the defendant would be materially prejudiced if the patent owner was permitted to pursue its infringement case.³³³ The Federal Circuit disagreed and reversed.

The parties agreed that the Supreme Court’s intervening decision in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC,³³⁴ which held “that laches cannot be asserted as a defense to infringement occurring within the six-year period prior to the filing of a complaint for infringement,” barred Morris & Associates’ laches defense,³³⁵ leaving only the defense of equitable estoppel. Because amended and issued reexamination claims cannot be broader than the original claims, the validity analysis for reexamination claims necessarily differs and what constitutes an infringing product can change.”³³⁶ Because the asserted claims did not exist at, or were substantively altered since the time defendant sent patent owner the demand letter, the Federal Circuit determined that the patent owner “could not have engaged in misleading conduct or silence with respect to those claims.”³³⁷ The district court’s application of equitable estoppel was therefore an abuse of discretion.³³⁸

D. Implied Waiver

The conduct of a patentee during interaction with standards setting organization can also be the basis of an equitable defense called implied waiver. The Federal Circuit considered the scope of implied waiver in Core Wireless Licensing S.A.R.L. v. Apple Inc.³³⁹ The asserted patent in this case specifically refers to a version of the General Packet Radio Service (GPRS) standard that was being considered by the European Telecommunications Standards Institute (ETSI) at the time of the patent application.³⁴⁰ When ETSI was developing proposals to address the problem of propagation delay in GPRS networks, Nokia submitted a proposal by the inventor of the asserted patent to ETSI, and ETSI initially recommended implementing the proposal in the standard.³⁴¹ Contemporaneously, Nokia filed a Finnish patent application based on the invention, to which the asserted patent claimed priority.³⁴² ETSI however subsequently rejected Nokia’s proposal.³⁴³ Four years later, Nokia disclosed the Finnish patent application and the U.S. patent application to ETSI.³⁴⁴

The court explained that “a participant in a standards-setting organization may waive its right to assert infringement claims against products that practice the standard.”³⁴⁵ Such a wavier is implied when the patentee’s “conduct was so inconsistent with an intent to enforce its rights as to induce a reasonable belief that such right has been relinquished.”³⁴⁶ Conduct supporting implied waiver exists when “(1) the patentee had a duty of disclosure to the standard setting organization, and (2) the patentee breached that duty.”³⁴⁷ The district court determined that Nokia did not have a duty to disclose the Finnish application because ETSI rejected Nokia’s proposal.³⁴⁸ The district court also stated that “Apple presented no evidence that any ETSI member or other entity interpreted Nokia’s failure to disclose the patent . . . as evidence that Nokia relinquished its patent rights.”³⁴⁹ The Federal Circuit found that none of these reasons supported the district court’s conclusion.³⁵⁰ Rather than reversing, the Federal Circuit remanded for additional proceedings because it was “possible to interpret the district court’s ruling as being based on the conclusion that, because Nokia’s proposal was not adopted, no inequitable consequence flowed from Nokia’s failure to disclose its patent application.”³⁵¹

V. Patent Office Appeals

Appeals from the PTAB continued to dominant the Federal Circuit’s case load in 2018. The Federal Circuit decided 226 PTAB appeals last year with most of these cases being appeals from AIA post-grant proceedings. Supreme Court decisions issued in early 2018 had the potential to dramatically change the practice of invalidation proceedings in the United States. In April, the Supreme Court issued its much-anticipated decision on the constitutionality of AIA post-grant challenges in Oil States Energy Services LLC v. Greene’s Energy Group, LLC.³⁵² In a 7–2 decision, the Supreme Court upheld the constitutionality of inter partes review proceedings. The Supreme Court’s decision in SAS Institute Inc. v. Iancu³⁵³issued on the same day had a dramatic impact on post-grant practice. In SAS, the Supreme Court overruled the PTAB’s practice of partial institution and created a ripple effect at the Federal Circuit in cases on appeal having a partial institution on either claims or grounds.³⁵⁴ Many of the Federal Circuit’s decisions in the second quarter of 2018 addressed procedural issues created by the SAS decision. While the Federal Circuit continued to affirm about half of all PTAB appeals in summary affirmances, referred to as Rule 36 affirmances, many of the Federal Circuit’s decisions addressed unsettled issues of statutory interpretation.

A. AIA Post-Grant Proceedings

1. Jurisdiction and standing

In § 314(d), Congress explicitly limited the court’s jurisdiction over appeals from PTAB institutional decisions.³⁵⁵ That provision states that “[t]he determination by the Director whether to institute an [IPR] under this section shall be final and non-appealable.”³⁵⁶ Since 2015, the Federal Circuit broadly applied § 314(d) to deny itself jurisdiction over appeals seeking review of the PTAB’s decisions of whether a petitioner was statutorily barred under § 315(b).³⁵⁷

However, in Wi-Fi One, LLC v. Broadcom Corp.,³⁵⁸ the court reversed course. The en banc court reconsidered whether § 314(d) prohibits review of questions relating to the time bar in view of the Supreme Court’s analysis of § 314(d) in Cuozzo Speed Technologies v. Lee.³⁵⁹ In a 9–4 decision, the Federal Circuit overruled Achates Reference Publishing, Inc. v. Apple Inc.³⁶⁰ and expanded its jurisdiction over PTAB appeals relating to the statutory bar of § 315(b).³⁶¹ The Federal Circuit noted that a prohibition on reviewability requires clear indication by Congress in view of the strong presumption of reviewability of agency action.³⁶² The court interpreted Cuozzo to suggest that § 314(d) only forbids review of “determinations closely related to the preliminary patentability determination or the exercise of discretion not to institute.”³⁶³ Finding the statutory bar of § 315(b) unrelated to either category, the court held that it had jurisdiction to review PTAB determinations related to § 315(b).³⁶⁴ The court has since extended this holding to encompass assignor estoppel.³⁶⁵

The court took on Article III standing in Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, Inc.³⁶⁶ “Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy required by Article III.”³⁶⁷ To have standing to challenge the decision of a lower tribunal, an appellant “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged [action], and (3) that is likely to be redressed by a favorable judicial decision.”³⁶⁸ Because inter partes reviews can be filed by anyone other than the patent owner, the lack of Article III standing can preclude a petitioner from appealing an adverse decision of the PTAB.

In 2011, Altair and Paragon entered into an agreement to pursue FDA approval for Altaire’s products, including R-phenylephrine hydrochloride products containing a 2.5% and a 10% phenylephrine hydrochloride ophthalmic solution.³⁶⁹ Paragon, pursuant to the agreement, submitted a new drug application (NDA).³⁷⁰ The FDA responded by recommending that Paragon “[c]onsider adding a chiral purity test to the d[r]ug product specification.”³⁷¹ Altaire performed the recommended tests and provided a summary of the test results to Paragon who submitted a supplementary NDA filing to the FDA.³⁷² Paragon later proposed an amendment to the agreement that addressed a new patent application filing.³⁷³ Altaire responded that the formulation, processes, and controls were developed solely by Altaire’s CEO and were confidential information of Altaire.³⁷⁴ There was no indication in the record that Paragon’s counsel responded to Altaire’s substantive comments.³⁷⁵

In November 2013, Paragon filed a drug patent application, which subsequently was issued as U.S. Patent No. 8,859,623.³⁷⁶ In April 2015, Altaire filed a complaint against Paragon that alleged breach of a nondisclosure clause of the parties’ agreement.³⁷⁷ In May 2015, Altaire filed a petition for post-grant review of the challenged patent supported by a declaration from its chief executive.³⁷⁸ In its final written decision, the PTAB determined that Altaire failed to prove by a preponderance of the evidence that the challenged claims would have been obvious and that Altaire failed to timely qualify its chief executive as an expert.³⁷⁹ Subsequently, in April 2017, Altaire filed a complaint seeking a declaratory judgment of invalidity of the ‘623 patent.³⁸⁰

The Federal Circuit found that Altaire sufficiently demonstrated imminent harm, noting that Altaire intended to file an ANDA once the agreement is terminated and resume marketing its proprietary formation of the products and that Paragon refused to stipulate that it will not sue Altaire for infringement.³⁸¹ The Federal Circuit recognized that while “[a] claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all,” under the circumstances here, Altaire’s injury is inevitable.³⁸² Because the agreement between the parties prevents Altaire from manufacturing its products, the Federal Circuit also found that the injury was concrete and particularized.³⁸³ Judge Schall dissented, disagreeing as to whether Altaire demonstrated imminent harm.³⁸⁴ Judge Schall argued that at this point, one of two things will happen in the breach of contract suit—either Altaire or Paragon will prevail. If Paragon prevailed, Paragon might have the right to terminate the agreement.”³⁸⁵ If Altaire prevailed, the critical linchpin of Altaire’s claim of imminent harm—the possibility that Paragon will be given the right to terminate the agreement—will have been eliminated.³⁸⁶ Judge Schall therefore concluded that a determination of imminent harm is speculative and did not warrant a determination of Article III standing for Altaire.³⁸⁷

In another Article III standing case, JTEKT Corp. v. GKN Automotive Ltd.,³⁸⁸ the Federal Circuit dismissed the appeal by the petitioner, JTEKT, because JTEKT lacked Article III standing to appeal.³⁸⁹ JTEKT filed an IPR petition against a patent owned by GKN. In a mixed decision, the PTAB found a subset of the challenged claims were not proven by JTEKT to be unpatentable.³⁹⁰ Because JTEKT does not have a product on the market, to establish Article III standing for an appeal of the adverse decision, JTEKT was required to show that “it has concrete plans for future activity that creates a substantial risk of future infringement or likely cause the patentee to assert a claim of infringement.”³⁹¹ The Federal Circuit found that JTEKT’s evidence did not establish that its planned product would create a substantial risk of infringement or likely lead to charges of infringement.³⁹² The Federal Circuit rejected JTEKT’s argument that IPR estoppel “constitutes a separate, and independent, injury in fact,” explaining that “estoppel provisions do not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit.”³⁹³ However, in E.I. DuPont de Nemours & Co. v. Synvina C.V.,³⁹⁴ the Federal Circuit found that DuPont had Article III standing despite not facing a specific threat of infringement litigation by the patentee because DuPont had taken and planned to take action that would have implicated the challenged patent.³⁹⁵

Finally, inKnowles Electronics LLC v. Iancu,³⁹⁶ the Federal Circuit addressed the ability of the PTO to intervene in an appeal to defend the PTAB’s ruling after the petitioner departs. Patent owner, Knowles Electronics, appealed from the PTAB’s determination that the claims challenged in a reexamination were invalid as anticipated or obvious.³⁹⁷ The third-party requester declined to appear and the PTO Director intervened “as of right.”³⁹⁸ The majority held that the Director of the PTO “has an unconditional statutory ‘right to intervene in an appeal from a [PTAB] decision’” under § 143.³⁹⁹ Judge Newman dissented, arguing that the PTO does not have authority as intervener to litigate when there is no appellee or respondent, unless the director has a concrete and particularized interest such as responding to a challenge to agency jurisdiction, regulations, or procedures.⁴⁰⁰ No such interest existed in this case.⁴⁰¹

2. Privity and real party in interest

The AIA prohibits institution of petitions filed more than one year after “the petitioner, real party in interest, or privy of the petitioner” was served with a complaint.⁴⁰² For five years, the PTAB had the final say on who was a “real party in interest, or privy of the petitioner.”⁴⁰³ Having expanded its jurisdiction to review PTAB determinations relating to the one-year statutory bar in Wi-Fi One, LLC v. Broadcom Corp.,⁴⁰⁴ the Federal Circuit finally began reviewing the PTAB’s statutory interpretation, with mixed results.

The court’s initial reviews affirmed the PTAB’s privity analyses on the narrow ground that they were responsive to the arguments made by the respective patent owners.⁴⁰⁵ In Wi-Fi One, the petitioner was alleged to have had an indemnification agreement with a party that was barred from filing its own petition.⁴⁰⁶ The PTAB denied discovery related to the alleged agreement, stating that indemnity payments would not establish privity or control.⁴⁰⁷ In WesternGeco LLC v. ION Geophysical Corp.,⁴⁰⁸ the appellant was time-barred from filing its own petition but was able to join a petition filed by its indemnitor under § 315(c).⁴⁰⁹ The patent owner argued that the original petitioner, who had settled the case before it was decided, was time-barred due to its relationship to the appellant.⁴¹⁰

The appellants in both cases argued that the PTAB applied a restrictive standard for privity that would require the patent owner to prove that the petitioner had control over the related district court proceeding that triggered the § 315(b) bar.⁴¹¹ In both cases, the court noted that “privy” in § 315(b) carries its common law meaning⁴¹² and is not limited to control,⁴¹³ which is but one factor that the Supreme Court has given for a finding of privity.⁴¹⁴ But it was not improper for PTAB to limit its analysis to control where the patent owner had limited its argument to that factor.⁴¹⁵

The decision in Wi-Fi One also had a ripple effect, creating an opportunity for the Federal Circuit to address the meaning of the term “real party in interest” in the context of § 315(b).⁴¹⁶ In its Trial Practice Guide, the PTAB noted that “[w]hether a party who is not a named participant in a given proceeding nonetheless constitutes a ‘real party-in-interest’ or ‘privy’ to that proceeding is a highly fact-dependent question” that is “handled by the Office on a case-by-case basis.”⁴¹⁷ In practice, the PTAB’s analysis of “real party-in-interest” focused on assessing whether the extent of funding and control the non-participant party exercised in the proceeding. The Federal Circuit in Applications in Internet Time, LLC v. RPX Corp.⁴¹⁸ provided a detailed discussion for the determination of whether a non-participant is a real party-in-interest. The Federal Circuit determined that the PTAB applied an unduly restrictive test for determining whether a person or entity is a “real party in interest.”⁴¹⁹ The court explained that “[d]etermining whether a non-party is a ‘real party in interest’ demands a flexible approach that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner.”⁴²⁰

The Federal Circuit’s review of the PTO’s statutory interpretation under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.⁴²¹ in Applications in Internet Time provides insight into the contours of “real party in interest.” Starting with assessing the usage of the term in the common law context, the court noted that the inclusion of the “real party in interest” and “privy of the petitioner” in § 315(b) makes clear that Congress planned for the provision to apply broadly—sweeping in not only what might be traditionally known as real parties in interest, but privies as well.⁴²² The court also noted that the statutory language bars petitions where proxies or privies would benefit from an instituted IPR, even where the petitioning party might separately have its own interest in initiating an IPR.⁴²³ The court further looked to Federal Rule of Civil Procedure 17(a), titled “Real Party in Interest,” which codified the common law principles for real party in interest.⁴²⁴

[a]n action must be prosecuted in the name of the real party in interest, and specifies seven categories of individuals who may sue in their own names without joining the person for whose benefit the action is brought: (1) executors; (2) administrators; (3) guardians; (4) bailees; (5) trustees of express trusts; (6) parties with whom or in whose name a contract has been made for another’s benefit; and (7) parties authorized by statute.

Id. (citing Charles Alan Wright et al., Federal Practice & Procedure§ 1545 (3d ed. 2018)). Referencing a note to the 1966 Amendment of Rule 17(a) by the Advisory Committee describing the basis for the real-party-in-interest rule,⁴²⁵ the Federal Circuit identified two questions: “(1) what ‘right’ is being enforced; and (2) who is ‘entitled’ to enforce that right.”⁴²⁶ In the context of IPRs, the court determined that the right being enforced “is a petitioner’s right to seek administrative reexamination of the patentability of issued claims as an alternative to invalidating those claims in a judicial proceeding.”⁴²⁷ On the second question, the court assessed how close the relationship between the real party in interest and the IPR petitioner must be.⁴²⁸ When it comes to evaluating this relationship, the common law seeks to ascertain who, from a “practical and equitable” standpoint, will benefit from the redress that the chosen tribunal might provide.⁴²⁹ This common law notion applies with equal force in the IPR context when a patent owner is dragged into an IPR by a petitioner who necessarily has an interest in canceling the patent owner’s claims. That patent owner should not be forced to defend against later judicial or administrative attacks on the same or related grounds by a party that is so closely related to the original petitioner as to qualify as a real party in interest.⁴³⁰

The Federal Circuit found that nothing suggested Congress intended for term to have meaning that departs from its common law origins.⁴³¹ The legislative history indicates that the terms “real party in interest” and “privy” were included in § 315 to serve two related purposes: (1) to ensure that third parties who have sufficiently close relationships with IPR petitioners would be bound by the IPR estoppel provision; and (2) to safeguard patent owners from having to defend their patents against belated administrative attacks by related parties via § 315(b).⁴³²

The Federal Circuit then found that the PTAB’s determination that Salesforce was not a real party in interest under § 315(b) relied on an impermissibly narrow understanding of the common law meaning of the term. It also found that the PTAB’s interpretation of the term was not based on consideration of the entirety of the administrative record, and seemingly misallocated the burden of proof.⁴³³ RPX, unlike a traditional trade association, is a for-profit company whose clients pay for its portfolio of “patent risk solutions,”⁴³⁴ which in turn help paying members “extricate themselves from NPE lawsuits.”⁴³⁵ One of RPX’s “strategies” for transforming the patent market is “the facilitation of challenges to patent validity” to “reduce expenses for [RPX’s] clients.”⁴³⁶ The Federal Circuit determined that the PTAB erred by not considering these and other facts, which, taken together, imply that RPX can and does file IPRs to serve its clients’ financial interests, and also that a key reason clients pay RPX is to benefit from this practice in the event they are sued by a non-practicing entity (NPE).⁴³⁷ The court further stressed that RPX bore the burden of persuasion on this issue.⁴³⁸ The Federal Circuit vacated the PTAB’s decision and remanded for further proceedings.⁴³⁹

The Federal Circuit took on burden framework to be used in the real-party-in-interest analysis in Worlds Inc. v. Bungie, Inc.⁴⁴⁰ The Federal Circuit first stressed that the IPR petitioner bears the ultimate burden of persuasion to show that its petitions are not time-barred under § 315(b) based on a complaint served on an alleged real party-in-interest more than a year earlier.⁴⁴¹ Turning to the procedure, the court agreed with the PTAB’s practice of accepting an IPR petitioner’s identification of the real parties in interest unless and until disputed by a patent owner.⁴⁴² However, the court disagreed that this acceptance created a rebuttable presumption that shifted the burden of production to the patent owner to rebut.⁴⁴³ Instead, the patent owner must “produce some evidence that tends to show that a particular third party should be named a real party in interest.”⁴⁴⁴ The court explained that “[a] mere assertion that a third party is an unnamed real party in interest, without any support for that assertion, is insufficient to put the issue into dispute.”⁴⁴⁵

In this case, the Federal Circuit expressed concerns because the PTAB’s statement that it was unpersuaded “that there is sufficient evidence that Activision is an unnamed real party in interest for the reasons given in the Institution Decision” based on patent owner’s arguments implied that the PTAB assumed the burden of persuasion rested on patent owner.⁴⁴⁶ The court was also concerned that the PTAB may have relied on attorney argument as evidence that Activision was not controlling or funding these IPRs.⁴⁴⁷ The Federal Circuit therefore vacated the final written decisions and remanded the proceeding with instructions for the PTAB to weigh the evidence in a manner that places the ultimate burden of persuasion on Bungie, the IPR petitioner, and to do so in a manner consistent with recent precedent.⁴⁴⁸

3. Impact of the Supreme Court’s decision in SAS

The primary transitional issue that the Federal Circuit had to face was whether it had jurisdiction, after SAS, to address appeals involving post-grant proceedings with partial institutions.⁴⁴⁹ The Federal Circuit decided that issue in the affirmative in PGS Geophysical AS v. Iancu.⁴⁵⁰ The appeal in that case covered final written decisions in three IPRs and found certain claims of the challenged patent invalid as anticipated and other claims invalid as obvious.⁴⁵¹ The PTAB, however, did not institute trial on all claims or all grounds set forth in the three petitions.⁴⁵² The Federal Circuit considered whether it had jurisdiction to address the IPR appeals in view of SASand if so, whether it may and should decide the appeals and do so without sua sponte remanding for the PTAB to address the claims and grounds in the petition excluded by the PTAB in the IPRs.⁴⁵³ The Federal Circuit concluded that the existence of non-instituted claims and grounds did not deprive it of jurisdiction to decide the IPR appeals.⁴⁵⁴ The court determined that the standard for “final agency action” under the Administrative Procedure Act (APA) because the PTAB’s decision terminated the IPR proceeding as to all claims and all grounds and the PTAB made patentability determinations that affect the patent rights of patentee.⁴⁵⁵ Although some of what the PTAB did is now seen to be legally erroneous under SAS, legal error does not mean lack of finality.⁴⁵⁶ The Federal Circuit further determined that it need not reopen the non-instituted claims and grounds because no party sought SAS-based relief in this case.⁴⁵⁷

In Nobel Biocare Services AG v. Instradent USA, Inc.,⁴⁵⁸ the Federal Circuit concluded that that it had jurisdiction over the appeal of an IPR in which the PTAB instituted trial on fewer than all challenged claims and grounds and was not obligated to reopen non-instituted claims or grounds.⁴⁵⁹ Because neither party requested a remand for the PTAB to consider non-instituted claims, the court saw no reason to exercise any discretion to remand the non-instituted claims or grounds sua sponte.⁴⁶⁰ The Federal Circuit, in other cases, granted motions by a party to remand for the PTAB to consider non-instituted grounds or claims.⁴⁶¹

4. One-year statutory bar

Under Section 315(b), accused infringers must file any IPR petitions against an asserted patent within one-year of service of a complaint alleging infringement of that patent.⁴⁶² In Click-to-Call Technologies, LP v. Ingenio, Inc.,⁴⁶³ the Federal Circuit addressed the interpretation of the statutory language “served with a complaint alleging infringement of a patent.”⁴⁶⁴ In an en banc footnote, the Federal Circuit reversed the PTAB’s interpretation, holding that § 315(b)’s time-bar applies “to bar institution when an IPR petitioner was served with a complaint for patent infringement more than one year before filing its petition, but the district court action in which the petitioner was so served was voluntarily dismissed without prejudice.”⁴⁶⁵

Although the holding is relatively straightforward, the facts of the case are more complex and involve transfers of ownership, acquisitions, and name changes. In 2001, the current exclusive licensee of the patent at issue filed an infringement action against Keen, which subsequently changed its name to Ingenio, Inc.⁴⁶⁶ Subsequently, the exclusive licensee voluntarily dismissed the complaint “without prejudice.”⁴⁶⁷ Ingenio was then acquired by AT&T which then sold its interest in Ingenio.⁴⁶⁸ After Click-to-Call acquired the patent, it filed a patent suit against Ingenio, which changed its name to YP Interactive LLC.⁴⁶⁹ In May 2013, Ingenio with other petitioners filed an IPR petition challenging the asserted claims, and the PTAB rejected Click-to-Call’s contention that the IPR was time-barred by the 2001 complaint against Keen in its institution decision.⁴⁷⁰ In its final written decision, the PTAB affirmed its conclusion that petitioners were not barred from filing an IPR petition because the initial action was dismissed without prejudice, which left the parties in the same legal position as if the underlying complaint had never been served.⁴⁷¹

The Federal Circuit reversed the PTAB’s narrow interpretationfinding that the statutory language “unambiguously precludes” the PTAB from instituting an IPR if the petition is filed more than one year after the petitioner or real party-in-interest is served with a complaint of patent infringement.⁴⁷² The majority found that section 315(b) is agnostic regarding what events transpired after the defendant was served.⁴⁷³ Judge Dyk dissented, arguing that the PTAB’s interpretation was correct and section 315(b)’s time-bar should not apply.⁴⁷⁴ Several subsequent Federal Circuit decisions relied on Click-to-Call to dismiss several other IPRs.⁴⁷⁵

The Click-to-Call decision opens the door to patent owners serving and subsequently voluntarily dismissing a complaint without prejudice to “start the clock” running against a defendant. This creates a strategic dilemma for a defendant who is no longer under imminent risk of patent litigation but has a limited time window to challenge the patent at the PTAB.

5. Tribal sovereign immunity

Last year also presented the Federal Circuit with the opportunity to address a controversial attempt by Allergan to terminate an IPR proceeding under the doctrine of tribal immunity by transferring its patents to the Saint Regis Mohawk Tribe. The case, Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc.,⁴⁷⁶ addressed the threshold issue of whether tribal sovereign immunity applies to IPR proceedings.⁴⁷⁷ Mylan, Teva, and Akorn each filed IPR petitions against Allergan’s Restasis patents.⁴⁷⁸ The PTAB instituted trial and scheduled a consolidated oral hearing.⁴⁷⁹ Before the hearing, Allergan transferred the Restasis patents to the Saint Regis Mohawk Tribe.⁴⁸⁰ The Saint Regis Mohawk Tribe subsequently moved to terminate the IPR proceedings arguing that it is entitled to assert tribal sovereign immunity, and Allergan moved to withdraw from the proceedings.⁴⁸¹ The PTAB denied both motions.⁴⁸² Allergan and the Saint Regis Mohawk Tribe appealed.⁴⁸³

The Federal Circuit affirmed, holding that tribal sovereign immunity cannot be asserted in an IPR proceeding.⁴⁸⁴ Several factors convinced the court that an IPR proceeding was more like an agency enforcement action than a civil suit brought by a private party.⁴⁸⁵ First, the director possesses broad discretion in deciding whether to institute review.⁴⁸⁶ Second, because a petitioner is not required to participate in a proceeding, the role of the parties suggests that immunity does not apply.⁴⁸⁷ Third, the PTO procedures in an IPR do not mirror the Federal Rules of Civil Procedure.⁴⁸⁸ In making its decision, the Federal Circuit also stressed that it was leaving “for another day” the question of whether there is any reason to treat state sovereign immunity differently.⁴⁸⁹ Judge Dyk wrote separately in concurrence “to describe in greater detail the history of [IPR] proceedings, history that confirms that those proceedings are not adjudications between private parties.”⁴⁹⁰

The Saint Regis decision left open the question of whether state sovereign immunity still applies in IPR proceedings. To date, the PTAB has treated state sovereign immunity differently than tribal sovereign immunity and ruled that state universities were shielded from PTAB challenges under this doctrine. The reasoning in Saint Regisdecision indicates that the Federal Circuit may find that state sovereign immunity also does not apply in the PTAB.

6. Motions to amend

In October 2017, the en banc Federal Circuit in Aqua Products, Inc. v. Matal⁴⁹¹ held that under the PTO’s current rules, the PTO may not place the burden of persuasion regarding the patentability of proposed amended claims on the patent owner.⁴⁹² This decision caused a significant change in PTAB procedure which previously placed the burden on the patent owner as the moving party to demonstrate the patentability of the proposed substitute claims.⁴⁹³ In 2018, the Federal Circuit addressed several interim cases in which final written decisions were issued prior to the en banc decision in Aqua Products. In these cases, the PTAB vacated the PTAB’s denial of the motions to amend because they improperly placed the burden on patent owners to demonstrate patentability and remanded to the PTAB to reconsider in light of Aqua Products.⁴⁹⁴

7. Issue preclusion

MaxLinear, Inc. v. CF CRESPE LLC⁴⁹⁵ addressed the application of issue preclusion in AIA post-grant proceedings.⁴⁹⁶ Petitioner, MaxLinear, appealed the PTAB’s final written decision, finding that the challenged claims were patentable.⁴⁹⁷ During the pendency of this appeal, the Federal Circuit affirmed the PTAB’s decision in a separate IPR proceeding that held the challenged independent claims to be unpatentable over different prior art grounds.⁴⁹⁸ The Federal Circuit held that issue preclusion applied. The fact that the separate IPR became final while the present case was pending on appeal was irrelevant.⁴⁹⁹ The Federal Circuit vacated the PTAB’s finding of patentability and remanded for the PTAB to decide whether the remaining dependent claims can survive in view of the collateral estoppel effect of the finding of unpatentability of the independent claims in the previous IPR.⁵⁰⁰

In another issue preclusion case, VirnetX Inc. v. Apple, Inc.,⁵⁰¹ the Federal Circuit found that VirnetX was collaterally estopped by the Federal Circuit’s Rule 36 judgment in a related appeal from relitigating the question of whether an applied reference was a printed publication.⁵⁰² Apple filed two IPR petitions against the challenged claims.⁵⁰³ Both petitions relied on RFC 2401 in a ground of unpatentability.⁵⁰⁴ The PTAB instituted trial in both, and VirnetX filed patent owner responses arguing that RFC 2401 was not a printed publication.⁵⁰⁵ The PTAB disagreed and concluded that the challenged claims were unpatentable as obvious.⁵⁰⁶ In a related appeal, VirnetX appealed seven final written decisions in which the PTAB found that RFC 2401—in combination with other references—rendered obvious a number of patents related to the challenged patent in this case.⁵⁰⁷ In those cases, VirnetX also argued that RFC 2401 was not a printed publication.⁵⁰⁸ The Federal Circuit summarily affirmed the PTAB’s final written decisions pursuant to Rule 36.⁵⁰⁹ The Federal Circuit found that VirnetX was collaterally estopped from relitigating the question of whether RFC 2401 was a printed publication because that question was necessary and essential to the judgment in the related appeal; in fact, it was the only issued raised in that appeal.⁵¹⁰

The Federal Circuit applied collateral estoppel sua sponte inXY, LLC v. Trans Ova Genetics, L.C.⁵¹¹ In the underlying district court case, the jury found the challenged claims neither invalid nor infringed.⁵¹² Defendant appealed the district court’s decision, claiming an abuse of discretion in determining the invalidity of its claim.⁵¹³ The asserted claims were also challenged in an IPR proceeding.⁵¹⁴ The PTAB held that a set of claims (the Freezing Patent claims) were unpatentable,⁵¹⁵ and the Federal Circuit affirmed the PTAB’s finding of unpatentability.⁵¹⁶ The court’s majority found that the affirmance of an invalidity finding, whether from a district court or the PTAB, has a collateral estoppel effect on all pending or co-pending actions.⁵¹⁷ The Federal Circuit therefore did not address the defendant’s invalidity arguments as to the Freezing Patent claims and dismissed the appeal of these claims as moot.⁵¹⁸ Judge Newman dissented arguing that “due process is not served by [the majority’s] sua sponte creation of this estoppel on this appeal, without notice to the parties, without briefing, and without opportunity to respond.”⁵¹⁹

8. Estoppel

The scope and extent of the estoppel provisions of the AIA statute remained a hotly debated issued in 2018. The Federal Circuit addressed one estoppel case in 2018, Arthrex, Inc. v. Smith & Nephew, Inc.,⁵²⁰ involving the interplay between statutory disclaimer, adverse judgment, and patent owner estoppel.⁵²¹ Prior to institution, the patent owner, Arthrex, statutorily disclaimed all claims challenged in the IPR and stated that the filing of the statutory disclaimer was not a request for an adverse judgment.⁵²² The PTAB however entered an adverse judgment against Arthrex concluding that 37 C.F.R. § 42.73(b) permits the PTAB to construe the statutory disclaimer of all challenged claims as a request for adverse judgment, even when the statutory disclaimer occurs before the institution decision.⁵²³ As a result of the adverse judgment, patent owner estoppel under 37 C.F.R. § 42.73(d)(3)(i)⁵²⁴ attached to Arthrex.⁵²⁵

The Federal Circuit first addressed the threshold issue of whether the adverse final judgment was appealable under 35 U.S.C. § 319⁵²⁶ since the PTAB did not issue a “final written decision.”⁵²⁷ The majority held that the adverse judgment was appealable because 28 U.S.C. § 1295 provides the Federal Circuit with jurisdiction over “an appeal from a decision of—the Patent Trial and Appeal Board of the United States Patent and Trademark Office with respect to . . . inter partes review under title 35” and 35 U.S.C. § 319 “does not cabin” the appeal rights conferred by § 1295.⁵²⁸

The Federal Circuit was split on the issue of whether the PTAB properly entered an adverse judgment against Arthrex.⁵²⁹ Rule § 42.73(b) provides that “[a] party may request judgment against itself at any time during a proceeding” and lists four actions that may be construed by the PTAB as a request for adverse judgment, including “cancellation or disclaimer of a claim such that the party has no remaining claim in the trial.”⁵³⁰ The majority held that the PTAB’s interpretation is consistent with the rule because “in the trial” can be interpreted to mean that there is no claim remaining for trial.⁵³¹ Judge O’Malley wrote separately to highlight that the PTO’s expansive definition of “proceeding,” encompassing both the trial and the preliminary proceeding, and its practice of issuing adverse judgments prior to institution seem to conflict with the Federal Circuit’s decision in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc.,⁵³² that “[t]he IPR does not begin until it is instituted.”⁵³³ In dissent, Judge Newman disagreed with the majority’s interpretation arguing that because all challenged claims were disclaimed before the PTAB instituted trial, the PTAB’s authority to render adverse judgment did not arise.⁵³⁴

9. Due process and procedural requirements

Arguments that the PTAB violated due process or procedural requirements⁵³⁵ of the APA continued to take center stage in Federal Circuit cases in 2018. Many of these cases address the PTAB’s handling of evidence and arguments, particularly the difficult issue of whether evidence and argument presented in a petitioner’s reply is impermissible. In Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, Inc.,⁵³⁶ the Federal Circuit found that the PTAB violated the APA by refusing to consider patentee’s expert testimony and test data.⁵³⁷ In May 2015, Altaire filed a petition for post-grant review of the challenged patent supported by a declaration of its chief executive, Mr. Al Sawaya.⁵³⁸ In its patent owner response, Paragon challenged the declaration as not satisfying the requirements of 37 C.F.R. § 42.65(b).⁵³⁹ In its reply, Altaire included a second declaration from Mr. Al Sawaya discussing his experience and providing additional information regarding how the testing was performed.⁵⁴⁰ The PTAB determined that Altaire failed to timely qualify Mr. Al Sawaya as an expert and that Altaire’s test data were entitled no weight.⁵⁴¹

The Federal Circuit determined that the PTAB abused its discretion by failing to consider Mr. Al Sawaya’s testimony.⁵⁴² Because Paragon challenged Mr. Al Sawaya’s qualifications and knowledge of test results in its response, it was proper for Altaire to submit a second declaration responding to the arguments raised in the patent owner response.⁵⁴³ The Federal Circuit noted that the PTAB could have granted Paragon a sur-reply, rather than refuse to consider Mr. Al Sawaya’s declaration.⁵⁴⁴ The Federal Circuit also determined that the PTAB abused its discretion by refusing to consider evidence regarding the test data and testing method.⁵⁴⁵ The Federal Circuit remanded for the PTAB to consider Mr. Al Sawaya’s declaration and reconsider the test data.⁵⁴⁶

Next, Dell Inc. v. Acceleron, LLC⁵⁴⁷ involved the appeal of a remand determination by the PTAB in an IPR proceeding.⁵⁴⁸ In the underlying IPR, the PTAB relied on a new argument and evidence presented by Dell for the first time at oral argument, without providing Acceleron an opportunity to respond.⁵⁴⁹ The PTAB confirmed the validity of a set of claims and cancelled the remaining claims as either anticipated or obvious.⁵⁵⁰ Both parties appealed and the Federal Circuit remanded, among other reasons, on grounds that the PTAB erred when it failed to give Acceleron an opportunity to respond.⁵⁵¹ On remand, the PTAB decided to not consider the newly raised “slides” argument during oral argument due to it being new and non-responsive. The PTAB further held that the claim presented was not anticipated.⁵⁵²

Dell argued that the PTAB’s failure to consider its argument was contrary to Federal Circuit precedent and the remand order.⁵⁵³ The Federal Circuit disagreed and affirmed the PTAB’s decision, finding that precedent did not compel the PTAB to consider Dell’s new evidence and “[u]nless it chose to exercise its waiver authority under 37 C.F.R. § 42.5(b), the PTAB was obligated to dismiss Dell’s untimely argument given that the untimely argument in this case was raised for the first time during oral argument.”⁵⁵⁴ Regarding Dell’s second argument, the Federal Circuit stated that the remand order did not order PTAB to consider Dell’s new argument and Acceleron’s response, but set out the requisite procedures that would apply had the PTAB actually considered Dell’s evidence.⁵⁵⁵ The Federal Circuit also rejected Dell’s public policy argument holding that due process and preserving the PTAB’s discretion outweigh any negative effects of not invalidating a patent claim.⁵⁵⁶

In Anacor Pharmaceuticals, Inc. v. Iancu,⁵⁵⁷ the Federal Circuit addressed APA and due process arguments in the context of post-grant proceedings. Anacor argued that the PTAB’s final written decision violated the APA and due process for two reasons: first, the PTAB adopted a new theory of unpatentability presented in petitioner’s reply without giving Anacor notice and opportunity to respond; and second, the petitioner impermissibly relied on new evidence not included in the petition to satisfy burden of showing prima facie case of obviousness.⁵⁵⁸ The Federal Circuit rejected the first argument because the PTAB based its decision on the same references and inferences proposed in the petition.”⁵⁵⁹ The Federal Circuit rejected the second argument as well, noting that there is “no blanket prohibition against the introduction of new evidence during an inter partes review proceeding” and in this case, Anacor had ample notice and opportunity to respond to the new reference which were properly offered in reply to arguments made by Anacor and for purpose of showing state of the art at the time of the patent application.⁵⁶⁰

In Yeda Research & Development Co. v. Mylan Pharmaceuticals Inc.,⁵⁶¹ the Federal Circuit rejected the patent owner’s argument that its due process rights and the APA were violated because it did not have notice of, and an opportunity to respond to, a reference introduced for the first time in the reply declaration of petitioner’s expert.⁵⁶² Under Genzyme Therapeutic Products LP v. Biomarin Pharmaceutical Inc.,⁵⁶³ “the introduction of new evidence in the course of the trial is to be expected in [IPR] trial proceedings and, as long as the opposing party is given notice of the evidence and an opportunity to respond to it, the introduction of such evidence is perfectly permissible under the APA.”⁵⁶⁴ In Yeda, the patent owner received notice because the reference was provided with petitioner’s reply, and patent owner deposed petitioner’s expert, including questioning the expert about the reference at issue.⁵⁶⁵ Further, the patent owner could have addressed the reference at oral argument or sought leave to file a sur-reply to respond but did not take either action.⁵⁶⁶ The patent owner also argued that PTAB erred in considering the reference when assessing “knowledge, motivations, and expectations of a PHOSITA regarding the prior art because the reference did not qualify as prior art.”⁵⁶⁷ The Federal Circuit disagreed noting that the PTAB has recognized that non-prior art evidence of what was known “cannot be applied, independently, as teachings separately combinable” with other prior art. However, this evidence “can be relied on for their proper supporting roles, e.g., indicating the level of ordinary skill in the art, what certain terms would mean to one with ordinary skill in the art, and how one with ordinary skill in the art would have under-stood a prior art disclosure.”⁵⁶⁸ The Federal Circuit therefore found that the PTAB did not violate the APA or patent owner’s due process rights.⁵⁶⁹

Ericsson Inc. v. Intellectual Ventures I LLC⁵⁷⁰ addressed the scope of the PTAB’s ability to strike arguments included in a petitioner’s reply.⁵⁷¹ In its final written decision, the PTAB found that Ericsson had not proven the challenged claims were unpatentable because the asserted reference only taught one type of interleaving, interleaving R-blocks within an S-block as opposed to the interleaving of packets with other packets within a packet block.⁵⁷² In reaching its decision, the PTAB rejected portions of Ericsson’s reply that argued to a person of ordinary skill in the art, the difference between the disclosed and claimed interleaving was insubstantial given that interleaving packets together was known in the art, holding that this was a new theory beyond the scope of a proper reply.⁵⁷³ The Federal Circuit disagreed, finding that Ericsson’s arguments “merely expand[ed] on a previously argued rationale as to why the prior art disclosures are insubstantially distinct from the challenged claims,” and did not constitute a new rationale.⁵⁷⁴ The Federal Circuit further stressed that its decision “should not be viewed as changing or challenging PTAB’s practice of limiting the scope of replies pursuant to its regulations.”⁵⁷⁵

B. Reexamination

Prior to the advent of the AIA post-grant proceedings in September 2012, a party could challenge the validity of certain patents in inter partesreexamination proceedings. One issue that arises from reexaminations and other PTO invalidation proceedings is the extent to which a jury can be made aware of the details of the PTO proceeding. In 01 Communique Laboratory, Inc. v. Citrix Systems, Inc.,⁵⁷⁶ the Federal Circuit addressed the use of testimony regarding a reexamination proceeding during the district court trial.⁵⁷⁷ The district court stayed the litigation pending resolution of a request for inter partes reexamination filed in March 2008 against the asserted patent by Citrix.⁵⁷⁸ In October 2013, the PTAB confirmed the patentability of the asserted claims over various prior art references,⁵⁷⁹ and the Federal Circuit affirmed.⁵⁸⁰ The district court denied Citrix’s motion to exclude evidence pertaining to the PTO reexamination proceedings and held that the reexamination could be used in a limited manner at trial, but Citrix could not be identified as the party that requested the reexamination because “it would be unfairly prejudicial to Citrix to attribute the reexamination request to Citrix or to indicate that it was Citrix that advanced certain arguments in the reexamination process.”⁵⁸¹ The district court was concerned that the jurors might put undue weight on the fact that Citrix advanced arguments that were rejected by the PTAB, even though the PTAB uses a different standard and does not have the benefit of the full array of evidence that would be presented to the jury.⁵⁸² The Federal Circuit held that the lower court did not abuse its discretion by allowing the PTO reexamination record to be used and not informing the jury about the Citrix party that requested the reexamination.⁵⁸³

C. Anticipation and Obviousness

Most of the 226 PTAB appeal decisions issued in 2018 dealt with reviewing the PTAB’s findings on anticipation or obviousness. Anticipation is a question of fact. Obviousness is a question of law based on underlying factual findings, including the scope and content of prior art references and the existence of a reason to combine those references. The Federal Circuit reviews agency findings of fact for support by substantial evidence in the agency record, and agency rulings of law are reviewed for correctness in accordance with law.⁵⁸⁴ Most of the Federal Circuit’s decisions do not warrant extended discussion because they dealt with case-specific disputes about underlying facts. In the majority of these cases, the Federal Circuit affirmed the PTAB’s decision.⁵⁸⁵ However, the Federal Circuit did vacate the PTAB’s decision in a few cases.⁵⁸⁶ Several PTAB decisions fell short of the requirement that the PTAB “explicate its factual conclusions, enabling the [Federal Circuit] to verify readily whether those conclusions are indeed supported by ‘substantial evidence’ contained within the record.”⁵⁸⁷

In re Hodges⁵⁸⁸ was a rare case in which the Federal Circuit reversed the PTAB, rather than vacating and remanding for further proceedings.⁵⁸⁹ During prosecution, the examiner rejected the claims as anticipated by the Rasmussen reference, the Frantz reference, and as obvious over the combination of Rasmussen and Frantz.⁵⁹⁰ The Federal Circuit found that the PTAB’s anticipation determinations based on Rasmussen and Frantz were unsupported by substantial evidence and reversed both decisions.⁵⁹¹ Regarding Rasmussen, the court reversed the PTAB’s determination because the only finding supported by substantial evidence in Rasmussen pertains to the claim limitation at issue.⁵⁹² After finding that the PTAB’s construction of “signal” was unreasonably broad, the court reversed the PTAB’s determination on the Frantz rejection because the only permissible factual finding was that Frantz did not disclose a “signal” under an reasonable construction—a position supported by the PTO’s refusal to defend the PTAB’s Frantz determination on appeal.⁵⁹³ Finding that the “obviousness determinations involved ‘potentially lawful but insufficiently or inappropriately explained’ factual findings,” the Federal Circuit vacated the obviousness determination and remanded for further factual findings and explanation.⁵⁹⁴

Judge Wallach, writing separately, concurred in the decision to reverse the Frantz and obviousness decisions but dissented with respect to the Rasmussen decision because “the majority goes too far in reversing the PTAB’s anticipation finding.”⁵⁹⁵ The dissent noted that Federal Circuit precedent has identified two “rare circumstances”⁵⁹⁶ where the Federal Circuit may reverse the PTAB’s ultimate patentability determinations: when the PTAB has committed legal error and no further factual findings are required and when the PTAB made erroneous factual findings and “only one permissible factual finding” exists.⁵⁹⁷ The dissent argued that by departing from the default rule that deficient agency decisions should be vacated and remanded, the majority improperly acted as the factfinder.⁵⁹⁸

The Federal Circuit addressed the reliance on “ordinary creativity” or “common sense” during obviousness inquiries in DSS Technology Management, Inc. v. Apple Inc.⁵⁹⁹ Noting that common sense and common knowledge have their proper place in the obviousness inquiry if explained with sufficient reasoning, the court stressed that “there are at least three caveats to note in applying ‘common sense’ in an obviousness analysis.”⁶⁰⁰ First, common sense is typically invoked to provide a known motivation to combine, not to supply, a missing claim limitation; second, common sense is invoked to fill in a missing limitation only when “the limitation in question was unusually simple and the technology particularly straightforward”; third, “references to ‘common sense’—whether to supply a motivation to combine or a missing limitation—cannot be used as a wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.”⁶⁰¹ In this case, the Federal Circuit found that the requisite reasoned analysis and evidentiary support was not present.⁶⁰² The court then reversed rather than vacating and remanding because the only proffered evidence, the testimony of Apple’s expert, was conclusory and unspecific and the court could not glean a more reasoned explanation from the record.⁶⁰³ Judge Newman dissented and argued that the PTAB’s decision was adequately explained, and regardless, the proper remedy was remand and “not [cementing] this inadequacy into a final judgment for the opposing party.”⁶⁰⁴

Ericsson Inc. v. Intellectual Ventures I LLC⁶⁰⁵ was another case where the Federal Circuit reversed the PTAB’s invalidity determinations, rather than vacating and remanding.⁶⁰⁶ The PTAB ruled that the challenged independent claim was neither anticipated nor obvious because the petitioner had “not demonstrated, by a preponderance of the evidence, that any of claims 1–16” were anticipated or obvious over the applied prior art reference.⁶⁰⁷ The PTAB did not separately analyze the challenged dependent claims.⁶⁰⁸ The Federal Circuit found that the PTAB’s determinations were not supported by substantial evidence.⁶⁰⁹ Specifically, the court held that the testimony of Intellectual Ventures’ expert’s contradictory statements in the reference were unsupported opinions and therefore “not substantial evidence.”⁶¹⁰ Judge Wallach dissented and argued that “[t]he majority improperly steps out of the appellate role and substitutes its own interpretation of the evidence for the PTAB’s.”⁶¹¹

In Polaris Industries, Inc. v. Arctic Cat, Inc.,⁶¹² the Federal Circuit vacated the PTAB’s obviousness determination as to a set of claims because “the PTAB’s analysis of these claims was inadequate.”⁶¹³ The court found that the PTAB’s analysis applied an improper framework to assess patentee’s teaching away argument, specifically improperly disregarding teachings of a reference as ill-defined “subjective preferences,” focusing on what a skilled artisan would have been able to do, rather than what a skilled artisan would have been motivated to do and encouraging the fact-finder to discard evidence relevant to teaching-away and motivation to combine.⁶¹⁴ On remand, the court instructed the PTAB to analyze whether the reference teaches away from the claims “under the framework that our case law has articulated.”⁶¹⁵

In re Durance⁶¹⁶ also involved an appeal of the examiner’s rejection during prosecution.⁶¹⁷ However, Durance addressed PTO procedure during examination and appeal. After the examiner issued a final rejection of the claims as obvious, the applicant appealed the rejection to the PTAB.⁶¹⁸ In the examiner’s answer, the examiner set forth a new structural-identity argument but did not designate the argument as a new ground of rejection.⁶¹⁹ The applicant challenged the examiner’s rejections of the structural identity.⁶²⁰ The PTAB affirmed the examiner’s obviousness rejection and disregarded applicant’s reply brief arguments finding that the arguments did not respond to arguments raised in the answer.⁶²¹ The Federal Circuit disagreed and found that if the examiner’s answer included arguments raised for the first time; an applicant may address those in its reply.⁶²² Here, the applicant’s reply brief was responsive to the examiner’s answer and included citations indicating the new arguments to which the applicant was responding.⁶²³ The Federal Circuit vacated the PTAB’s decision and remanded for the PTAB to consider the arguments made in the reply brief.⁶²⁴

Secondary considerations were also at issue in several PTAB appeals decided in 2018. In Polaris Industries, Inc. v. Arctic Cat, Inc.,⁶²⁵ the Federal Circuit vacated the PTAB’s finding of obviousness of a set of claims because the PTAB improperly rejected its unrebutted evidence of commercial success.⁶²⁶ The patentee provided evidence that its product, covered by the claimed invention, was a commercial success.⁶²⁷ When the patentee shows that the asserted objective evidence is tied to a specific product and that product “embodies the claimed features, and is coextensive with them,” the court presumes a nexus between the commercial success and the claims.⁶²⁸ In this case, the PTAB refused to give substantial weight to the patentee’s undisputed evidence because it characterizes the evidence as conclusory.⁶²⁹ The Federal Circuit instructed the PTAB to assess the import of patentee’s evidence on remand “after presuming that a nexus between the claims and the commercial success” of the product exists, unless and until that presumption is adequately rebutted.⁶³⁰

1. Printed publication

One ancillary issue that often arises in prior art challenges is whether the petitioner has adequately established that the asserted reference is a printed publication. Many of the Federal Circuit’s anticipation and obviousness decisions involving non-patent literature such as catalogs, conference presentations, and technical reports turned on this issue. GoPro, Inc. v. Contour IP Holding LLC⁶³¹ addressed the issue of whether a prior art product catalog was a printed publication.⁶³² In its final written decision, the PTAB determined that the 2009 GoPro Catalog, asserted as prior art, did not qualify as a prior art printed publication and therefore the petitioner failed to establish that the challenged claims were unpatentable.⁶³³ The petitioner provided evidence that the GoPro Catalog was distributed at the Tucker Rocky annual dealer trade show, attended by vendors and dealers.⁶³⁴ The PTAB concluded that petitioner did not establish “that the GoPro Catalog was disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art and exercising reasonable diligence could have located it.”⁶³⁵ Specifically, a “person ordinarily skilled in the art would not be interested in the dealer show because it was not an academic conference or camera industry conference, but rather a dealer show for action sports vehicles like motorcycles, motorbikes, ATVs, snowmobiles, and watercraft.”⁶³⁶ The Federal Circuit disagreed, holding that the “case law regarding accessibility [was] not as narrow as the PTAB interprets it.”⁶³⁷ The Federal Circuit noted that “the GoPro Catalog was disseminated with no restrictions and was intended to reach the general public.”⁶³⁸ Because trade shows, like conferences, are “directed to individuals interested in the commercial and developmental aspects of products,”⁶³⁹ the Federal Circuit reasoned that “The fact that the dealer show is focused on action sports vehicles is not preclusive of persons ordinarily skilled in the art from attending to see what POV digital cameras were being advertised and displayed.”⁶⁴⁰ The court found that, based on the record evidence, the petitioner met the burden of proving that the GoPro Catalog was a printed publication.⁶⁴¹ Because the PTAB did not consider the merits of the obviousness claim, the PTAB vacated and remanded.⁶⁴²

The issue of public availability of a catalog was addressed by the Federal Circuit again in Nobel Biocare Services AG v. Instradent USA, Inc.⁶⁴³ The court noted that “[b]ecause there are many ways in which a reference may be disseminated to the interested public, ‘public accessibility’ has been called the touchstone in determining whether a reference constitutes a ‘printed publication.’”⁶⁴⁴ To support the public accessibility of the catalog, petitioner provided the International Trade Commission testimony of the inventor who testified that he distributed the catalog at the International Dental Show conference in March 2003 without requiring a confidentiality agreement.⁶⁴⁵ The petitioner also submitted two declarations to corroborate the testimony of the inventor; one of the declarants both received and retained a copy of the catalog in his files.⁶⁴⁶ “Corroboration is required of any witness whose testimony alone is asserted to invalidate a patent, regardless of his or her level of interest.”⁶⁴⁷ Sufficiency of corroboration in prior invention or public use cases is assessed based on a number of factors including, for example, the relationship between the corroborating witness and the alleged prior user, the time period between the event and trial, and the interest of the corroborating witness.⁶⁴⁸ The Federal Circuit found that the petitioner’s corroboration was legally sufficient and rejected the argument that the testimony of one witness cannot be corroborated by the testimony of another witness.⁶⁴⁹ The date on the catalog matched the date the witnesses testified it was publicly available, and this constituted further corroboration of public accessibility as of that date.⁶⁵⁰ The Federal Circuit determined that substantial evidence supported the PTAB’s finding that the catalog was publicly accessible prior to the critical date of the challenged patent.⁶⁵¹

In Medtronic, Inc. v. Barry,⁶⁵² the Federal Circuit addressed the issue of whether a video demonstration and slide presentation presented to spinal surgeons at various industry meetings and conferences were “printed publications.”⁶⁵³ The PTAB found that the video and slides were not prior art.⁶⁵⁴ The Federal Circuit vacated the PTAB’s determination and found that the PTAB did not fully consider all the relevant factors such as the size and nature of the meetings, whether the meetings were open to people interested in the subject matter of the material disclosed, and whether there was “an expectation of confidentiality between the distributor and the recipients of the materials.”⁶⁵⁵

Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC⁶⁵⁶ addressed whether FDA advisory committee “materials were sufficiently accessible to the public to constitute prior art.”⁶⁵⁷ The obviousness grounds presented by petitioner in the six IPR proceedings at issue in this case relied on four documents, collectively referred to as the Advisory Committee Art (ACA materials): “(1) the FDA advisory committee meeting transcript and slides; (2) an FDA preliminary clinical safety review of Xyrem®; (3) a Xyrem® briefing booklet; and (4) a video and transcript regarding a proposed distribution system for Xyrem®.”⁶⁵⁸

The Federal Circuit found that substantial evidence supported the PTAB’s finding that the ACA materials were publicly accessible.⁶⁵⁹ First, the notice in the Federal Register, a reference that those of ordinary skill in the art would be motivated to examine, widely disseminated the ACA materials through a hyperlink to a public FDA website where the ACA materials were accessible.⁶⁶⁰ Second, “the ACA materials were available online for a substantial time before the critical date of the patents in suit.”⁶⁶¹ Third, “the ACA materials were distributed via public domain sources with no possible expectation that the materials would remain confidential or not be copied.”⁶⁶² The Federal Circuit further noted “if accessibility is proved, there is no requirement to show that particular members of the public actually received the information.”⁶⁶³

Acceleration Bay, LLC v. Activision Blizzard Inc.⁶⁶⁴ addressed the public accessibility of a technical report loaded on the website of a university.⁶⁶⁵ The parties did not dispute that the report had been uploaded to the university’s Computer Science and Engineering Technical Reports Library’s website prior to the critical date.⁶⁶⁶ The dispute focused on whether the technical report was publicly accessible.⁶⁶⁷ “‘[P]ublic accessibility’ requires more than technical accessibility.”⁶⁶⁸ Because there was no evidence that the report was disseminated to the public, “the PTAB focused on whether an interested skilled artisan, using reasonable diligence, would have found” the report on the Technical Reports Library website.⁶⁶⁹ “The website allowed a user to view a list of technical reports indexed only by author or year.”⁶⁷⁰ This evidence suggests that an artisan may have located the report by skimming through potentially hundreds of titles, most containing unrelated subject matter.⁶⁷¹ Because the technical report was not indexed in a meaningful way and the website’s advanced search form was deficient, the Federal Circuit found that the PTAB did not err in finding that the report was not publicly accessible and therefore not a printed publication.⁶⁷²

2. Priority benefit

The issue of properly claiming priority benefit arises in several contexts in PTAB proceedings. For example, a petitioner often must establish benefit to an earlier application to use the prior application’s filing date to support a proposed ground of unpatentability. Similarly, a patent owner may attempt to establish priority benefit to an earlier application to avoid a prior art rejection. A petitioner may also attack a patent owner’s priority benefit claim in order to use a prior art reference that pre-dates the patent’s filing date but post-dates the earlier application. The Federal Circuit addressed a wide range of priority benefit issues in 2018.

In Droplets, Inc. v. E*TRADE Bank,⁶⁷³ the Federal Circuit affirmed the PTAB’s finding that the challenged patent was not entitled to the benefit of a provisional application.⁶⁷⁴ Regulation 1.78, which implements the priority benefit statutory provisions of 35 U.S.C. § 119(e) and § 120, “requires that an application contain a specific reference to each prior-filed application to which the application seeks to claim priority,” including each prior-filed application’s application number and familial relationship.⁶⁷⁵ Further, the specific reference “must be included in an application data sheet . . . or the specification must contain . . . such reference in the first sentence(s) following the title.”⁶⁷⁶ The challenged patent in this case claimed priority benefit to its immediate parent patent (“the ‘838 patent”) and to a provisional application (“the ‘917 patent”) which was not co-pending at the time the challenged patent was filed.⁶⁷⁷ The ‘838 patent was a continuation of another patent (“the ‘745 patent”) that properly claimed priority benefit to the ‘917 provisional application.⁶⁷⁸ The challenged patent incorporated the ‘838 patent by reference but did not include an explicit recitation of the benefit claim from the ‘838 patent to the ‘745 patent. The issue on appeal was whether the challenged patent is entitled to claim benefit of the ‘917 provisional by virtue of the incorporation by reference of the ‘838 patent.⁶⁷⁹ The Federal Circuit determined that the statutory “specific reference” requirement does not contemplate incorporation by reference because “[t]o require the public to search for an unstated priority claim through incorporated materials would create uncertainty and would require the type of guess-work that the statute is meant to avoid.”⁶⁸⁰

Hologic, Inc. v. Smith & Nephew, Inc.⁶⁸¹ addressed priority benefit in the context of written description support.⁶⁸² The challenged patent claimed priority to a patent cooperation treaty (PCT) application (the “Emanuel PCT”), which was nearly identical to the specification of the challenged patent.⁶⁸³ During the inter partes reexamination, the examiner found that the challenged patent could not claim priority to the Emanuel PCT because the disclosure in the Emanuel PCT of only a “fibre optics bundle” did not provide adequate written description support for the broad genus of “light guides.”⁶⁸⁴ The examiner then rejected the claims as obvious over the Emanuel PCT in combination with a secondary reference.⁶⁸⁵ The PTAB reversed the examiner’s rejection and found that the Emanuel PCT provided written description support for the claimed “light guide.”⁶⁸⁶ The Federal Circuit affirmed the PTAB’s finding and held that substantial evidence supported the PTAB’s finding.⁶⁸⁷ The parties did not dispute that a “fibre optics bundle” is a type of light guide and that various types of light guides were well-known in the art.⁶⁸⁸ Therefore, from the intrinsic evidence, a PHOSITA, reviewing the Emanuel PCT, would have understood the inventor had possession of the claimed light guide.⁶⁸⁹ The court also found that “prior patents reflecting the state of the art at the time of the invention and expert testimony regarding that evidence support the PTAB’s findings.”⁶⁹⁰

Natural Alternatives International, Inc. v. Iancu⁶⁹¹ addressed priority claims in a patent family.⁶⁹² The challenged patent was the eighth applications in a family of applications directed to increasing athletes’ endurance.⁶⁹³ While the fourth application was pending, the patent owner filed a provisional application.⁶⁹⁴ The fifth application in the family was amended after filing to claim priority only to the provisional application.⁶⁹⁵ The sixth through eighth applications issued claimed priority benefit of the fifth through first applications and the provisional application.⁶⁹⁶ The patent owner did not dispute that it waived priority to the fourth through first applications in the fifth application but argued that the sixth application maintained priority back to the first application.⁶⁹⁷ On appeal, the PTAB determined that when the eighth application was filed, the fifth application was not entitled to benefit of the fourth application through first applications and affirmed the examiner’s rejection based on the patent that issued from the first application.⁶⁹⁸

The Federal Circuit rejected patent owner’s argument that priority properly vested by virtue of meeting all the requirements of § 120.⁶⁹⁹ Noting that the patent owner’s vesting argument conflates properly claiming priority and demonstrating entitlement to priority, the Federal Circuit found that the PTAB did not err in its priority determination because the fifth application lacked priority to the first application, and the eighth application’s priority claim to the first application (via the fifth application) did not satisfy all of § 120’s requirements.⁷⁰⁰

3. Printed matter doctrine

Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP Ltd.⁷⁰¹ expanded the scope of the printed matter doctrine beyond printed matter to include mental steps.⁷⁰² The challenged claims in Praxair “generally require supplying a medical provider with a cylinder of nitric oxide gas and providing the medical provider with certain prescribing information relating to the harmful side effects of nitric oxide for certain patients identified” with left ventricular dysfunction.⁷⁰³ During claim construction for claims 1–8 and 10, the PTAB interpreted the provided information, evaluating, and recommending “claim limitations to be either printed matter or purely mental steps not entitled to patentable weight” because the “limitations lacked a functional relationship to the other claim limitations.”⁷⁰⁴ However, for claim 9, the PTAB interpreted the “in accordance with” language to mean “based on, or as a result of” and thereby established a functional relationship to the remaining limitations of the claim.⁷⁰⁵

Patentee, Mallinckrodt, challenged the application of the printed matter doctrine to claims 1–8 and 10–11.⁷⁰⁶ The Federal Circuit applied a two-step framework for printed matter analysis. First, a determination must be made whether the claim limitation is directed to printed matter.⁷⁰⁷ A claim limitation is directed to printed matter if it claims the content of information.⁷⁰⁸ Mallinckrodt argued that the PTAB erred by concluding that claim limitations reciting metal steps were not entitled to patentable weight.⁷⁰⁹ The Federal Circuit rejected this argument finding that “[b]ecause claim limitations directed to mental steps may attempt to capture informational content, they may be considered printed matter lacking patentable weight in an obviousness analysis.”⁷¹⁰ Here, the court found that the claims were directed to printed matter.⁷¹¹ “If a claim limitation is directed to printed matter, then the next step is to ascertain whether the printed matter is functionally related to its ‘substrate.’”⁷¹² In this case, the Federal Circuit found that the PTAB did not err in finding that the recitation of “providing pharmaceutically acceptable nitric oxide gas” in the preamble did not create a functional relationship between the printed matter and the remaining claim limitations.⁷¹³

Judge Newman wrote separately concurring in the judgment but disagreeing “with the court’s view of the ‘printed matter doctrine’ and its application to ‘information’ and ‘mental steps.’”⁷¹⁴ Judge Newman argued that unprinted matter or a mental step “does not become ‘printed’ if it carries information, nor even if it requires thinking.”⁷¹⁵ Judge Newman also disagreed with the majority’s analysis, which first applied the “printed matter doctrine” to remove some limitations from the claim, then reviewed what is left of the claim.⁷¹⁶

4. Swearing behind a reference

In Apator Miitors ApS v. Kamstrup A/S,⁷¹⁷ the Federal Circuit addressed the requirements for swearing behind a reference in a post-grant proceeding. The court noted that an inventor can “swear behind a reference by proving he conceived his invention” prior to the reference’s effective filing date in and, after that date, diligently reduced his invention to practice.⁷¹⁸ When a party seeks to prove conception through an inventor’s testimony, the party must proffer evidence, “in addition to [the inventor’s] own statements and documents,” corroborating the inventor’s testimony.⁷¹⁹ “Conception is a question of law predicated on subsidiary factual findings, one of which is the sufficiency of corroboration.”⁷²⁰

In this case, patentee filed a declaration from the inventor, Mr. Drachmann, in which he declared he conceived of the invention prior to the applied reference’s filing date.⁷²¹ The patentee further filed e-mails and drawings as independent evidence to corroborate the inventor’s testimony.⁷²² The PTAB rejected the patentee’s attempt to swear behind the applied reference and found the challenged claims unpatentable at final written decision.⁷²³ The Federal Circuit affirmed, finding that substantial evidence supported the PTAB’s finding that Apator had not established conception prior to the effective filing date of the applied reference.⁷²⁴ The Federal Circuit noted that the evidence proffered by patentee “is stuck in a catch-22 of corroboration” because the e-mails and drawings can only provide the necessary corroboration with testimony from Mr. Drachman.⁷²⁵ The court found that Mr. Dachmann’s unwitnessed emails and drawing were insufficient on their own to corroborate his testimony.⁷²⁶

D. Inventorship

In re VerHoef⁷²⁷ involved an appeal of the PTAB affirmance of the examiner’s rejection of all application claims as unpatentable under 35 U.S.C. § 102(f), which provides that one cannot obtain a valid patent if “he did not himself invent the subject matter sought to be patented.”⁷²⁸ Conception and inventorship are questions of law that the Federal Circuit reviews de novo, premised on underlying factual findings that the Federal Circuit reviews for substantial evidence.⁷²⁹ The application at issue was directed to a dog mobility device.⁷³⁰ The applicant, VerHoef, conceded that the essential feature of the claims was conceived and suggested by a veterinarian.⁷³¹ The Federal Circuit rejected VerHoef’s argument that he should be declared sole inventor because he maintained “‘intellectual domination’ and control” of the work.⁷³² The Federal Circuit agreed with the PTO that the veterinarian was a joint inventor because she contributed an essential feature of the claimed invention.⁷³³

E. Patent Term Adjustment

Actelion Pharmaceuticals, Ltd. v. Matal⁷³⁴ addressed patent term adjustments under 35 U.S.C. § 154, which accounts for any undue delays in patent examination caused by the PTO.⁷³⁵ One such delay is an “A delay,” which arises when the PTO fails to meet statutory deadlines for events that occur during prosecution, such as providing notice to the applicant of the rejection of a claim or taking action on an applicant’s reply to such a rejection.⁷³⁶ The dispute in the appeal was the PTO’s “A delay” calculation.⁷³⁷

Actelion filed a first PCT application on July 16, 2009 and a second PCT application on July 15, 2010, claiming priority to the first PCT.⁷³⁸ On January 12, 2012, four days before the thirty month priority date (January 16, 2012), Actelion filed an application (the ‘619 application). This was a national stage application of the second PCT application, claiming priority from the July 16, 2009 priority date.⁷³⁹ With the application filing, Actelion filed a preliminary amendment stating that “[a]pplicant earnestly solicits early examination” but did not check the box on Form 1390 indicating “an express request to begin national examination procedures.”⁷⁴⁰ On April 26, 2013, the PTO issued a restriction requirement which undisputedly ended the accrual of “A delay.”⁷⁴¹ The PTO later issued an issue notification providing a grant of forty-one patent term adjustment days.⁷⁴² Actelion filed a request for recalculation and in response the PTO reduced the PTA to forty days.⁷⁴³ Actelion then filed suit against the PTO in the Eastern District of Virginia pursuant to § 154(b)(4).⁷⁴⁴

The Federal Circuit affirmed the district court’s grant of summary judgment to the PTO.⁷⁴⁵ The Federal Circuit found that Actelion’s remark that it “earnestly solicits early examination and allowance of these claims” was insufficient to communicate to the PTO an “express request” pursuant to § 371(f) under either the pre- or post-Technical Corrections Act⁷⁴⁶ statute.⁷⁴⁷ The Federal Circuit also found no error with the PTO’s determination that because January 16, 2012 was a national holiday, the national stage for the ‘675 patent commenced on January 17, 2012, the next workday.⁷⁴⁸

F. Federal Circuit Procedures

The Federal Circuit dismissed a cross-appeal in Droplets, Inc. v. E*TRADE Bank as improper.⁷⁴⁹ Both Droplets and E*TRADE argued that 35 U.S.C. § 141(c) language that a party who is dissatisfied with the final written decision of the PTAB may appeal permits a party to appeal not only the outcome but alternative invalidity grounds.⁷⁵⁰ The Federal Circuit disagreed, stressing that it is a well-established rule that as an appellate tribunal, the Federal Circuit reviews judgments, not opinions.⁷⁵¹ Further, a cross-appeal is only proper when acceptance of the argument advanced “would result in a reversal or modification of the judgment rather than an affirmance.”⁷⁵² In this case, because the PTAB “entered a judgment of invalidity as to all challenged claims, there is no basis for a cross-appeal as to additional grounds for invalidity.”⁷⁵³

Xitronix Corp. v. KLA-Tencor Corp.⁷⁵⁴ involved the appellate jurisdiction of the Federal Circuit.⁷⁵⁵ The appeal arises solely from a Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp.⁷⁵⁶monopolization claim under the Sherman⁷⁵⁷ and Clayton⁷⁵⁸ Acts alleging fraud on the PTO.⁷⁵⁹ The Federal Circuit declined to exercise jurisdiction and transferred the case to the United States Court of Appeals for the Fifth Circuit.⁷⁶⁰ Because Federal Circuit jurisdiction extends to cases in which patent law is a necessary element of one of the well-pleaded claims, the only question for the appeal was “whether the monopolization allegation ‘necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.’”⁷⁶¹ The Federal Circuit found that in this case there was nothing unique to patent law about the allegations of false statements made to the PTO.⁷⁶²

In In re Power Integrations, Inc.,⁷⁶³ the Federal Circuit denied the petitions for a writ of mandamus filed by the petitioner in four denied IPRs.⁷⁶⁴ In each proceeding, the PTAB found that none of the applied references were shown to be prior art and therefore denied institution.⁷⁶⁵ Petitioner requested rehearing and the PTAB denied the request for rehearing, filing a detailed opinion explaining its decision.⁷⁶⁶ Section 314(d) of Title 35 entitled “No Appeal,” specifies that “[t]he determination by the Director whether to institute an IPR under this section shall be final and nonappealable.”⁷⁶⁷ Faced with this statutory prohibition on appeal, the petitioner did not directly appeal but sought to obtain review of the non-institution decision through petitions for mandamus covering all four of the PTAB’s orders.⁷⁶⁸ To gain the remedy of mandamus, the petitioner must show that its right for a writ of mandamus is “clear and indisputable,” and that there are no “adequate alternative legal channels” for relief.⁷⁶⁹ The Federal Circuit held that mandamus does not lie in this case because the present case involves no issues extraneous to the application of patent law principles of unpatentability based on printed publications, nor does it involve any “shenanigans” on the part of the PTAB that might justify appellate review or review by mandamus.⁷⁷⁰ The court however noted that the decision “is not to say that mandamus will never lie in response to action by the agency relating to the non-institution of inter partes review.”⁷⁷¹

In Hamilton Beach Brands, Inc. v. F’Real Foods, LLC,⁷⁷² the Federal Circuit refused to consider patent owner’s argument, framed as an alternative basis for affirmance of the PTAB’s decision because patent owner did not file a cross-appeal.⁷⁷³ In this case, patent owner, f’real, filed and served a complaint alleging infringement of the challenged patent in October 2014.⁷⁷⁴ However, at the time, the patents were assigned to a holding company (Rich Products Corporation) and not to f’real; therefore, f’real moved to voluntarily dismiss the complaint without prejudice.⁷⁷⁵ In January 2016, f’real, joined with Rich Products, filed a new complaint asserting infringement of the challenged patent.⁷⁷⁶ In May 2016, more than one year after the service of the first complaint, petitioner filed an IPR petition challenging the asserted claims.⁷⁷⁷ The PTAB determined that the petition was not subject to the one-year bar of § 315(b) because f’real lacked standing to file the original complaint and therefore the complaint was not a “proper federal pleading.”⁷⁷⁸ In view of the Federal Circuit’s decision in Click-to-Call, f’real argued that the one-year time-bar of § 315(b) applies, and the PTAB lacked jurisdiction to institute and asked the Federal Circuit to dismiss the IPR petition.⁷⁷⁹ The Federal Circuit refused.⁷⁸⁰ Although framed as an alternative basis to affirm the PTAB’s decision, the Federal Circuit determined that f’real’s argument, if it had merit, would require vacatur of the PTAB’s decision and a remand for dismissal of the petition.⁷⁸¹ Because acceptance of the argument would require a modification of the PTAB’s decision, a cross-appeal was required and because f’real did not file a cross-appeal, the Federal Circuit did not reach the § 315(b) issue.⁷⁸²

G. Attorneys’ Fees and Sanctions

In Bennett Regulator Guards, Inc. v. Atlanta Gas Light Co.,⁷⁸³ the Federal Circuit considered the PTAB’s power to issue sanctions and to accept late filings.⁷⁸⁴ Late in the IPR trial, but before the final written decision was issued, Atlanta Gas’s parent company, AGL Resources Inc., merged with another company and changed its name.⁷⁸⁵ Atlanta Gas did not notify the PTAB of the merger or the name change, and the PTAB did not know of the changes when it issued its final decision.⁷⁸⁶ Shortly after issuance of the final written decision, the patent owner notified the PTAB of petitioner’s changed corporate parentage and sought sanctions for petitioner’s nondisclosure.⁷⁸⁷ Because the merger created a conflict, one member of the panel recused himself and the reconstituted panel authorized patent owner to move for the “costs and fees” it had incurred between the date of the final written decision and the PTAB’s grant of sanctions.⁷⁸⁸ At the time of the Federal Circuit decision, the PTAB had not ruled on the sanction motion.⁷⁸⁹ Because the PTAB has not quantified any sanctions, pendent jurisdiction would be required to decide the challenges to the PTAB’s sanction order.⁷⁹⁰ The Federal Circuit extends pendent jurisdiction only reluctantly and only to issues “inextricably intertwined” with or necessary to resolution of issues already before the court.⁷⁹¹ The court declined to exercise pendent jurisdiction in this case and remanded the issue to the PTAB to consider its order given the outcome of the appeal.⁷⁹²

Section 145 actions in which the applicant files a civil action against the Director of the PTO in the United States District Court for the Eastern District of Virginia are rare.⁷⁹³ However, in 2018, the Federal Circuit addressed the issue of whether applicants who invoke § 145 are required to pay PTO’s attorneys’ fees.⁷⁹⁴ The Federal Circuit split on the issue with a strong dissent by Chief Judge Prost combined with the Fourth Circuit’s position in Shammas v. Focarino,⁷⁹⁵ Shammas involved 15 U.S.C. § 1071(b)(3), a trademark analogue to § 145, and with its split from the majority in Nantkwest, creates the possibility that this issue could ultimately be decided by the Supreme Court.⁷⁹⁶

In Nantkwest, Inc. v. Iancu,⁷⁹⁷ the en banc court addressed the issue of whether applicants who invoke § 145 are required by statute to pay “[a]ll the expenses of the proceedings” incurred by the office in defending the PTAB’s decision, including the PTO’s attorneys’ fees.⁷⁹⁸ The majority of the court determined that it did not because the American Rule⁷⁹⁹prohibits courts from shifting attorneys’ fees from one party to another absent a “specific and explicit” directive from Congress.⁸⁰⁰

The Patent Act⁸⁰¹ provides two mutually exclusive options for judicial review of an adverse PTAB decision.⁸⁰² The applicant may appeal directly to the Federal Circuit under § 141, or the applicant may file a civil action against the director of the PTO in the United States District Court for the Eastern District of Virginia under § 145.⁸⁰³ A § 145 challenge is more expansive involving the possibility of discovery, new evidence, motions practice, and a trial.⁸⁰⁴ An applicant proceeding under § 145 is responsible for his own expenses and fees but also the PTO’s “expenses of the proceeding.”⁸⁰⁵ The majority noted that previously the PTO relied on the “expenses” provision to recover travel expenses to attend depositions, court reporter fees, and reasonable fees for expert witnesses but “[f]or more than 170 years, however, the PTO never sought—and no court ever awarded—attorneys’ fees under § 145 or its predecessor.”⁸⁰⁶

The majority first determined that the American Rule, providing that “[e]ach litigant pays his own attorney’s fees, win or lose,” applies to § 145.⁸⁰⁷ The American Rule serves as the “basic point of reference” whenever a court “consider[s] the award of attorney’s fees” and may only be displaced by an express grant from Congress.⁸⁰⁸ The majority then found that § 145’s statement that “[a]ll the expenses of the proceedings shall be paid by the applicant” lacks the “specific and explicit” congressional authorization required to displace the American Rule.⁸⁰⁹ The majority reviewed Congress’s usage of the terms “expenses” and “attorneys’ fees” in other statutes and judicial usage of statute and concluded that these demonstrated that the ordinary meaning of “expenses” does not include attorneys’ fees.⁸¹⁰

Chief Judge Prost, joined by Judges Dyk, Reyna, and Hughes, dissented.⁸¹¹ The dissent argued the plain text of § 145 provides the answer—when it says “[a]ll the expenses of proceeding shall be paid by the applicant” it means the applicant must pay all the expenses of the proceeding.⁸¹² The dissent noted that the PTO used salaried government lawyers to assist in defending and therefore these lawyers incurred expenses because the time they devoted to this case was not available for other work.⁸¹³ The dissent concluded that the language of § 145 evinces Congress’s “specific and explicit” intent to depart from the American Rule and to impose upon the applicant payment of all the expenses of the proceeding, including the PTO’s personnel expenses.⁸¹⁴

VI. Remedies

Both the Supreme Court and the Federal Circuit took on the issue of damages in patent infringement cases. In one of the most significant cases of the year, the Supreme Court ruled in WesternGeco LLC v. ION Geophysical Corp.⁸¹⁵ that a patent owner can collect lost profits based on foreign sales. The Federal Circuit’s damages cases primarily address the issue of apportionment of damages which is a central component of every patent damages case.

In FastShip, LLC v. United States,⁸¹⁶ the Federal Circuit affirmed the Court of Federal Claims’s determination of infringement but modified the damages award.⁸¹⁷ FastShip, LLC sued the United States in the Court of Federal Claims alleging infringement by two of the Navy’s Freedom-class Littoral Combat Ships (LCS).⁸¹⁸ After finding infringement of the asserted claims, the Court of Federal Claims determined that one of the accused ships was not “manufactured” for purposes of 28 U.S.C. § 1498.⁸¹⁹ The case turned on the meaning of “manufactured” in § 1498, which was a matter of first impression.⁸²⁰ The Federal Circuit interpreted “manufactured” in accordance with its plain meaning, such that a product is “manufactured” when it is made to include each limitation of the thing invented and is therefore suitable for use.⁸²¹ Applying this interpretation, the Federal Circuit found that the ship was not manufactured prior to the expiration of the patent.⁸²² The court further agreed with both parties that the Court of Federal Claims miscalculated the total royalty base and modified the damages award accordingly.⁸²³

A. Apportionment

Finjan, Inc. v. Blue Coat Systems, Inc.⁸²⁴ dealt with apportionment of damages.⁸²⁵ When the accused technology does not make up the whole of the accused product, the patentee must separate or apportion the infringer’s profits and the patentee’s damages between the patented feature and the unpatented features.⁸²⁶ The patentee’s apportionment evidence “must be reliable and tangible, and not conjectural or speculative.”⁸²⁷ Finjan apportioned its damages base to a specific feature that was the “smallest salable patent-practicing unit” of the infringing product.⁸²⁸ However, because the feature also contained non-infringing features, the Federal Circuit found that additional apportionment was still required.⁸²⁹ The Federal Circuit also found that Finjan’s royalty rate was unsupported by substantial evidence.⁸³⁰ Despite finding that “Finjan failed to present a damages case that can support the jury’s verdict,” the Federal Circuit remanded to the district court to determine whether Finjan waived the right to establish a reasonable royalty under a new theory and whether to order a new trial on damages.⁸³¹

In Exmark Manufacturing Co. v. Briggs & Stratton Power Products Group, LLC,⁸³² the Federal Circuit vacated the jury’s damages award and remanded for a new trial on damages.⁸³³ Briggs & Stratton Power Products Group argued that the damages expert should have apportioned or separated the value of the improvement from the other features of the mower through the royalty base rather than the royalty rate.⁸³⁴ The Federal Circuit disagreed noting that apportionment can be addressed in a variety of ways, including “by careful selection of the royalty base to reflect the value added by the patented feature [or] . . . by adjustment of the royalty rate so as to discount the value of a product’s non-patented features; or by a combination thereof.”⁸³⁵ Here, using the accused mower sales as a royalty base, an apportioning through the royalty rate is an acceptable methodology provided that patent owner adequately and reliably apportions between the improved and conventional features of the accused mower.⁸³⁶ The Federal Circuit found that the expert opinion of the patent owner’s damages expert was inadmissible because it failed to adequately tie the expert’s proposed royalty rate to the facts of the case and concluded that the district court abused its discretion in denying patent owner’s motion for a new trial on damages.⁸³⁷ The Federal Circuit further determined that “the district court abused its discretion by holding that prior art is relevant to damages only to the extent that the prior art was commercialized.”⁸³⁸

In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc.,⁸³⁹ the Federal Circuit addressed the entire market value rule.⁸⁴⁰ In this case, the damages verdict rested on Power Integrations’ reliance on the entire market value rule, which “allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for consumer demand.”⁸⁴¹ “If the product has other valuable features that also contribute to driving consumer—demand, patented or unpatented— then the damages for patent infringement must be apportioned to reflect only the value of the patented feature.”⁸⁴² The Federal Circuit found that the evidence presented by Power Integrations was insufficient as a matter of law to invoke the entire market value rule, vacated the jury award of $139.8 million in damages, and remanded for a new trial.⁸⁴³

The Federal Circuit vacated the district court’s determination of the ongoing royalty rate in XY, LLC v. Trans Ova Genetics, L.C.⁸⁴⁴ After a jury found defendant willfully infringed the asserted patents and that the asserted patents were not invalid, patent owner filed a motion seeking an award of an ongoing royalty as an equitable remedy for defendant’s future infringement.⁸⁴⁵ Noting that defendant admitted that it intended to continue to practice the asserted patents, the district court determined an ongoing royalty would be appropriate.⁸⁴⁶ The district court observed that the jury effectively adopted the fifteen royalty rate on gross sales and the four percent royalty rate for reverse sorting services proposed by patent owner’s damages expert at trial, and “every one of XY’s prior licenses include[d] a [ten percent] royalty rate, which tend[ed] to prove that [ten percent] [was] XY’s established royalty.”⁸⁴⁷ Based on these observations, the district court calculated an ongoing royalty rate for gross sales by averaging the jury’s 15% percent rate with the 10% rate in the prior licenses to arrive at 12.5% and calculated for services by taking half of the 4% royalty rate.⁸⁴⁸ The Federal Circuit disagreed with the district court, which focused on pre-verdict factors “that were either irrelevant or less relevant than post-verdict factors” such as prior agreements between the parties.⁸⁴⁹ The court found that the district court’s focus should have been on patent owner’s improved bargaining position and any other changed economic factors rather than patent owner’s past acts.⁸⁵⁰ The Federal Circuit remanded for the district court to recalculate the ongoing royalty rate.⁸⁵¹

B. Enhanced Damages

Under 35 U.S.C. § 284, a “court may increase the damages up to three times the amount found or assessed.” In Halo Electronics, Inc. v. Pulse Electronics, Inc.,⁸⁵² the Supreme Court described § 284 “as providing that ‘punitive or increased damages’ could be recovered ‘in a case of willful or bad-faith infringement.’”⁸⁵³ However, a finding of willful infringement does not require the district court to award enhanced damages.⁸⁵⁴ In Polara Engineering Inc. v. Campbell Co.,⁸⁵⁵ the Federal Circuit vacated the district court’s decision to award enhanced damages because the district court did not adequately explain its basis for doing so.⁸⁵⁶ Applying the factors listed in Read Corp. v. Portec, Inc.,⁸⁵⁷ the district court determined that five of the nine Read factors favored an award of enhanced damages, two of the factors weighed against enhancement, and two of the factors were neutral.⁸⁵⁸ The Federal Circuit determined that the district court’s observation that “obviousness was a close call” and that the “other invalidity theories were weaker” was insufficient to determine why the district court viewed the closeness of the Read factor as neutral.⁸⁵⁹ The Federal Circuit remanded instructing “the district court to provide a more complete explanation, including a discussion of the public use defense, in exercising its discretion. We express no view on whether damages should be enhanced or, if so, by what amount.”⁸⁶⁰

C. Attorneys’ Fees—Exceptional Cases

Raniere v. Microsoft Corp.⁸⁶¹ dealt with the contours of exceptional case requirements.⁸⁶² Raniere sued Microsoft and AT&T for patent infringement and asserted five patents against AT&T and two against Microsoft.⁸⁶³ Raniere assigned all rights in the patents to Global Technologies, Inc. (GTI), and later Raniere executed a document on behalf to GTI that purportedly transferred the asserted patents from GTI to himself.⁸⁶⁴ Microsoft moved to dismiss the suit for lack of standing.⁸⁶⁵ After discovery on the issue of standing and a hearing, the district court concluded that Raniere was unlikely to be able to cure the standing defect and dismissed the case with prejudice.⁸⁶⁶ The Federal Circuit affirmed.⁸⁶⁷ While the merits appeal was pending, Microsoft and AT&T filed a motion seeking attorney fees and costs pursuant to 35 U.S.C. § 285.⁸⁶⁸

In exceptional cases, a district court may award reasonable attorney fees to the prevailing party.⁸⁶⁹ An exceptional case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”⁸⁷⁰ The Federal Circuit rejected Raniere’s argument that a dismissal with prejudice, without adjudication of a patent infringement claim, precludes a finding that a defendant has prevailed.⁸⁷¹ First, the court noted that under the Supreme Court’s holding in CRST Van Expedited, Inc. v. Equal Employment Opportunity Commission,⁸⁷² “a defendant need not obtain a favorable judgment on the merits in order to be a ‘prevailing party.’”⁸⁷³ Other circuits have interpreted CRST to mean that, if a defendant prevails on a jurisdictional issue, it may be a prevailing party.⁸⁷⁴ Second, the court found that even without the benefit of CRST, defendant was a prevailing party because the district court dismissed Raniere’s infringement suit “with prejudice,” which was tantamount to a decision on the merits.⁸⁷⁵ The Federal Circuit also affirmed the district court’s conclusion that the case was exceptional based on Raniere’s behavior throughout the litigation employing “a pattern of obfuscation and bad faith” which caused the defendants to incur significant fees and costs to oppose Raniere’s positions.⁸⁷⁶

The Federal Circuit in In re Rembrandt Technologies LP Patent Litigation⁸⁷⁷ affirmed the district court’s exceptional case determination but vacated the fee award.⁸⁷⁸ The court deemed the case exception for three reasons: (1) Rembrandt improperly compensated its fact witnesses; (2) Rembrandt engaged in (or failed to prevent) widespread document spoliation over a number of years; and (3) Rembrandt should have known that the asserted patents that were revived after abandonment were unenforceable.⁸⁷⁹ After noting that the “district court’s remarkably terse orders shed little light on its justifications for its decisions on these fact-intensive issues,” the Federal Circuit could not say that any of the district court’s findings were based “on an erroneous view of the law or on a clearly erroneous assessment of the evidence.”⁸⁸⁰ Regarding the fee award, the Federal Circuit held that the district court failed to establish a “causal connection” between the misconduct and the fee award.⁸⁸¹ The Federal Circuit vacated the fee award and remanded for the district court to determine how much of the claimed fee award Rembrandt should pay based on the misconduct associated with the exceptional case determination.⁸⁸²

In Energy Heating, LLC. v Heat On-the-Fly, LLC,⁸⁸³ the Federal Circuit vacated the district court’s denial of motions for attorneys’ fees under § 285 and remanded for further proceedings on the issue.⁸⁸⁴ After finding inequitable conduct, the district court declined to award fees stating that the patentee “reasonably disputed facts with its own evidence and provided a meritorious argument against a finding of inequitable conduct.”⁸⁸⁵ However, the court noted that under Therasense, Inc. v. Becton, Dickinson & Co.,⁸⁸⁶ inequitable conduct requires a specific intent to deceive, and “to meet the clear and convincing evidence standard, the specific intent to deceive must be ‘the single most reasonable inference able to be drawn from the evidence.’”⁸⁸⁷ Because the district court’s reasoning contradicted Therasense, the Federal Circuit was unsure whether the court’s basis for denial rested on a misunderstanding of the law or an erroneous fact finding and remanded to the district court for reconsideration.⁸⁸⁸

The Federal Circuit affirmed the district court’s denial of the accused infringer’s motion for attorney fees in Stone Basket Innovations, LLC v. Cook Medical LLC.⁸⁸⁹ After plaintiff filed its infringement case, the accused infringer filed an IPR petition challenging all claims of the asserted patent.⁸⁹⁰ The PTAB instituted trial, and the patent owner subsequently requested an adverse judgment.⁸⁹¹ After the PTAB granted adverse judgment, the patent owner moved to dismiss the patent litigation with prejudice.⁸⁹² The district court determined that the case was not exceptional and found that the record did not demonstrate that patent owner “willfully ignored the prior art or failed to evaluate its case” or that patent owner’s “actions were . . . objectively unreasonable in light of the circumstances.”⁸⁹³ The Federal Circuit rejected the accused infringers’ argument that its invalidity contentions placed patent owner on clear notice of the asserted patent’s invalidity because the contentions were based on prior art considered by the examiner with no further explanation.⁸⁹⁴ The inventor’s deposition testimony regarding the novelty of a single claim element also did not make the case exceptional because invalidity is established by considering the patent claim as a whole.⁸⁹⁵ Finally, the Federal Circuit found that the district court was within its discretion to factor in the accused infringer’s litigation conduct because conduct of the parties is a relevant factor under the totality-of-the-circumstances inquiry in Octane Fitness, LLC v. ICON Health & Fitness, Inc.⁸⁹⁶ Here, the accused infringer failed to inform patent owner that it believed it was being subjected to exceptional litigation behavior or demand that the case be dismissed.⁸⁹⁷

D. Double Recovery

Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc.⁸⁹⁸ dealt with the issue of double recovery.⁸⁹⁹ At trial, the jury found the defendant liable for trade secret misappropriation and patent infringement.⁹⁰⁰ The Federal Circuit vacated the patent infringement damages, holding that the patent award represented an impermissible double recovery because although the jury awarded only a portion of the proposed patent royalty, the patent award covered sales that were part of the trade secret misappropriation disgorgement award.⁹⁰¹

E. Injunction

To obtain a permanent injunction, a party succeeding on the merits of patent infringement, must show (1) irreparable injury in the absence of an injunction, (2) inadequacy of compensatory remedies at law, (3) a balance of hardships favoring an injunction, and (4) consistency of an injunction with the public interest.⁹⁰²

Texas Advanced Optoelectronic Solutions⁹⁰³ dealt with the first element from eBay, Inc. v. MercExchange, LLC.⁹⁰⁴ The district court found that Texas Advanced Optoelectronic Solutions (TAOS) had not shown irreparable harm because TAOS requested a reasonable royalty as compensation for past infringement and a reasonable royalty should be adequate to compensate TAOS for future infringement.⁹⁰⁵ The court found that a request for relief in the form of a reasonable royalty may be relevant to the irreparable harm and inadequacy of compensation elements of eBay but it does not mean there do not exist the kinds of hard-to-measure harms that can justify injunctions to prevent them before they occur.⁹⁰⁶ The Federal Circuit therefore vacated the district court’s denial of an injunction and remanded for further consideration of the request.⁹⁰⁷

MACOM Technology Solutions Holdings, Inc. v. Infineon Technologies AG⁹⁰⁸ was another 2018 case involving injunctions. Nitronex (predecessor to MACOM) obtained several patents related to gallium nitride (GaN) which it later sold to Infineon’s predecessor (International Rectifier Corporation).⁹⁰⁹ As part of the sale, the parties executed a license agreement defining a “Field of Use” characterized by GaN-on-silicon technology and licensing MACOM to practice the patents within the “Field of Use only.”⁹¹⁰ Infineon notified MACOM that it believe MACOM breached the agreement by making and selling GaN-on-silicon-carbide technology and subsequently terminated the agreement.⁹¹¹ MACOM sued Infineon asserting contract claims, a claim for declaratory judgment of non-infringement of the licensed patents, and a declaratory judgment that the agreement was wrongly terminated and remains in effect (wrongful termination claim).⁹¹² MACOM also moved for a preliminary injunction based on the wrongful termination claim.⁹¹³ The district court granted the preliminary injunction invalidating the termination of the agreement, barring Infineon from designing, developing, making, using offering to sell, selling or servicing products in the exclusive field that practice the licensed patents, and prohibiting Infineon from granting licenses or sublicenses to the licensed patents.⁹¹⁴

To obtain a preliminary injunction in the Ninth Circuit, a party must show that: (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest.⁹¹⁵ The Federal Circuit rejected Infineon’s argument that the district court erred in finding that MACOM showed a likelihood of success on its wrongful termination claim because Infineon’s termination of the agreement was not wrongful.⁹¹⁶ The Federal Circuit determined that the district court did not err in finding that MACOM could likely establish that its activity outside the agreement’s licensed Field of Use did not breach the implied covenant of good faith and fair dealing.⁹¹⁷ The Federal Circuit also rejected Infineon’s second argument that the district court erred in finding that MACOM was likely to suffer irreparable harm.⁹¹⁸ The Federal Circuit determined that the district court did not rely only on Infineon’s marketing in finding irreparable harm; it also relied on the commercial benefits of the agreement’s exclusivity.⁹¹⁹ The Federal Circuit then concluded “that a sufficient causal nexus exists between Infineon’s termination of the Agreement and this harm to MACOM that the district court identified.”⁹²⁰ Infineon also challenged the content of the injunction.⁹²¹ The Federal Circuit vacated the first sentence which enjoined Infineon from undertaking certain activities concerning products in the exclusive field because it lacked the specificity required by Rule 65(d).⁹²² The court found that the injunction prohibited infringing acts—but without reference to any particular, adjudicated infringing product.⁹²³ The Federal Circuit also vacated the second sentence which enjoined Infineon from granting particular licenses or sublicenses because it ordered specific performance of a provision without a showing of a breach.⁹²⁴

VII. District Court

A. Procedural

01 Communique Laboratory, Inc. v. Citrix Systems, Inc.⁹²⁵ affirmed the district court’s denial of patentee’s, 01 Communique Lab, motion for a new trial.⁹²⁶ On appeal, Communique argued that it was “entitled to a new trial on the issues of infringement and damages because Citrix resorted to ‘a well-known defendant’s trick,’ known as the ‘practicing the prior art defense.’”⁹²⁷ The Federal Circuit agreed that there is no “‘practicing the prior art’ defense to literal infringement”⁹²⁸ but noted that a litigant is not precluded from arguing that if a claim term must be broadly interpreted to read on an accused device, then this broad construction will read on the prior art.⁹²⁹ The Federal Circuit further noted that “when an accused product and the prior art are closely aligned, it takes exceptional linguistic dexterity to simultaneously establish infringement and evade invalidity.”⁹³⁰ That was exactly the problem faced by Communique in this case. The Federal Circuit found that the arguments by Citrix did not rest on an improper “practicing the prior art” defense but instead correctly recognized that claim terms must be construed the same way for both invalidity and infringement.⁹³¹ The court further rejected the argument that Citrix’s comparisons were “devastatingly prejudicial to the integrity of the trial” because the jury instructions made “abundantly clear” that in assessing infringement the jury was not to compare the accused product to the prior art.⁹³²

In SimpleAir, Inc. v. Google LLC,⁹³³ the Federal Circuit vacated the district court’s order dismissing SimpleAir’s complaint under Rule 12(b)(6) as barred by issue preclusion and the Kessler⁹³⁴ doctrine.⁹³⁵ SimpleAir initiated a series of patent infringement lawsuits asserting one or more patents from a family of patents against Google over a six-year period.⁹³⁶ The asserted patents are children linked to the same parent by continuation applications, and therefore, share a common specification with the parent.⁹³⁷ During prosecution of the asserted patents, SimpleAir filed terminal disclaimers over the parent application to overcome an obviousness-type double patenting rejection.⁹³⁸ To date, the litigations have resulted in three judgments of non-infringement in Google’s favor.⁹³⁹

In this case, SimpleAir’s fourth infringement case, the district court held that the present case and the previous cases involved the same claim or cause of action. The Court reasoned that the asserted patents shared the same title and specification with the previously adjudicated patents and that the filing of a terminal disclaimer to overcome the PTO’s obviousness-type double patenting rejections indicated that the PTO believed the content of the patents in suit to be patentably indistinct from the earlier patents.⁹⁴⁰ Notably, the district court never compared the claims of the asserted patents with the claims of the previously adjudicated patents.⁹⁴¹

The Federal Circuit found that the district court erred by presuming that a terminally disclaimed continuation patent presents the same cause of action as a parent patent based on the filing of the terminal disclaimer alone.⁹⁴² Although a terminal disclaimer is a strong clue that the claims in a continuation lacked a patentable distinction over the parent, that strong clue does not give rise to the presumption that a patent subject to a terminal disclaimer is patentably indistinct from its parent patent.⁹⁴³ The court further noted that its cases “foreclose the inference that filing a terminal disclaimer functions as an admission regarding the patentability of the resulting claims.”⁹⁴⁴ The court vacated the district court’s order and remanded to the district court to determine whether the asserted claims are patentably distinct from the previously adjudicated claims.⁹⁴⁵

B. Pleading Standard

In Disc Disease Solutions, Inc. v. VGH Solutions, Inc.⁹⁴⁶ and Nalco Co. v. Chem-Mod, LLC,⁹⁴⁷ the Federal Circuit addressed the pleading standard for patent infringement claims.⁹⁴⁸ In Disc Disease, the Federal Circuit reversed the district court’s grant of a motion to dismiss plaintiff’s complaint for failure to state a claim.⁹⁴⁹ The plaintiff filed a complaint alleging patent infringement that specifically identified the accused products and alleged the products meet “each and every element of at least one claim” of the asserted patents, “either literally or equivalently.”⁹⁵⁰ The following day, amendments to the Federal Rules of Civil Procedure took effect, abrogating Rule 84 and Form 18.⁹⁵¹ The district court subsequently granted defendants motion to dismiss the complaint finding that the complaint did not satisfy the Iqbal and Twombly⁹⁵² plausibility standard.⁹⁵³ The Federal Circuit disagreed holding that plaintiff’s allegations provided the defendant fair notice of infringement of the asserted patents and therefore were sufficient under the plausibility standard of Iqbal and Twombly.⁹⁵⁴

In Nalco, the Federal Circuit reversed the district court’s dismissal of Nalco’s amended complaint for failure to state a claim for direct infringement, indirect infringement, and infringement under the doctrine of equivalents.⁹⁵⁵ Regarding direct infringement, the court found that defendant’s arguments “boil[ed] down to objections to Nalco’s proposed claim construction for ‘flue gas’” based on alleged admissions made during an inter partes reexamination which was a dispute not suitable for resolution on a motion to dismiss.⁹⁵⁶ Regarding indirect infringement, the court concluded that the complaint alleged facts that plausibly showed that defendants specifically intended their customers to infringe and that defendants knew the customers’ action constitute infringement.⁹⁵⁷ Regarding infringement under the doctrine of equivalents, the court found that Nalco’s claim adequately stated a claim for infringement by explicitly incorporating the detailed infringement contentions explaining its doctrine of equivalents claim.⁹⁵⁸

C. Motion to Amend Complaint

In Aatrix Software, Inc. v. Green Shades Software, Inc.,⁹⁵⁹ the Federal Circuit reversed the district court’s denial of Aatrix’s motion for leave to file a second amended complaint.⁹⁶⁰ “A district court should freely give leave to amend a complaint ‘when justice so requires,’”⁹⁶¹ but may deny a motion to amend on numerous grounds such as “undue delay, undue prejudice to the defendants, and futility of the amendment.”⁹⁶² Noting that the district court “gave no reason for its denial of Aatrix’s motion to amend,” the Federal Circuit found that the proposed second amended complaint contained allegations that, taken as true, would have directly affected the district court’s patent eligibility analysis.⁹⁶³ Specifically, the proposed amended complaint alleged facts directed to inventive concepts in the claimed invention and would be useful for Alice/Mayo step two that requires consideration of whether the claims contain an “inventive concept” sufficient to transform the claimed abstract idea into a patent-eligible application.⁹⁶⁴

D. Declaratory Judgment Jurisdiction

In AbbVie Inc. v. MedImmune Ltd.,⁹⁶⁵ the Federal Circuit affirmed the district court’s dismissal of a declaratory-judgment action.⁹⁶⁶ The declaratory judgment action concerned a 1995 development and licensing agreement entered into by predecessors to AbbVie and MedImmune, licensing AbbVie to practice the challenged patent and requiring AbbVie to pay royalties on sales of certain antibodies “until the last to expire of [certain] Patents or the expiry of fifteen years from the date of first commercial sale of a product by [AbbVie’s predecessor) . . . (whichever is later).”⁹⁶⁷ AbbVie brought the declaratory-judgment action seeking only a declaration that the challenged claim is invalid.⁹⁶⁸ AbbVie contended that a declaration of the patent’s invalidity would constitute its expiration for purposes of the 1995 agreement and cause its royalty obligations to expire in January 2018.⁹⁶⁹ The district court dismissed the complaint on two alternative grounds: first, because AbbVie does not practice the challenged patent, it is in not at risk of an infringement suit, and second, deciding the invalidity question would not resolve the parties’ ultimate dispute.⁹⁷⁰

The Federal Circuit disagreed with the district court’s first ground for dismissal holding that a contractual dispute, if properly presented, could be the subject of a declaratory judgment action regardless of whether a party was at risk of an infringement suit.⁹⁷¹ However, AbbVie did not seek a declaration of its contractual obligations, only a declaration of invalidity that would not resolve the parties’ contractual dispute.⁹⁷² The agreement between the parties was governed by British law and it is an open question whether the British courts would consider the invalidation of a patent to be tantamount to its expiration for purposes of the agreement.⁹⁷³ Without resolution to this question, the contractual dispute would persist.⁹⁷⁴ Because “a litigant may not use a declaratory judgment action to obtain piecemeal adjudication of defenses that would not finally and conclusively resolve the underlying controversy,” the Federal Circuit affirmed the district court’s second ground for dismissal.⁹⁷⁵

AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc.⁹⁷⁶ also dealt with a declaratory judgment action.⁹⁷⁷ AIDS Healthcare Foundation provides medical care to persons afflicted with AIDS, including providing antiviral drugs such as the tenofovir alafenamide fumarate (“TAF”) products that Healthcare buys from defendants.⁹⁷⁸ Healthcare sought a declaratory judgment of invalidity of five patents “to clear out the invalid patents” so it “would have the ability then to partner with generic makers and purchase TAF as soon as it could become available on expiration of the five-year New Chemical exclusivity set forth in 21 U.S.C. § 355(j)(5)(F)(ii).”⁹⁷⁹ Notably, no potential generic producer had filed an ANDA for any TAF-containing products at the initiation of this action, for TAF’s new chemical entity period of exclusivity foreclosed such a filing until November 2019.⁹⁸⁰ The district court granted defendants’ motion to dismiss for lack of a case or controversy in terms of the Declaratory Judgment Act.⁹⁸¹ The Federal Circuit affirmed.

A plaintiff seeking a declaratory judgment bears the burden of demonstrating that a case or actual controversy existed at the time the declaratory action was filed.⁹⁸² That requires a showing of injury-in-fact, connection between the challenged conduct and the injury, and redressability by the requested remedy.⁹⁸³ “The foundation of a declaratory action is that the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”⁹⁸⁴ Here, the Federal Circuit found that plaintiff had not met the immediacy and reality requirement because there was no present infringement, no threat of or possibility of infringement litigation, and no meaningful preparation to infringe.⁹⁸⁵ The court also rejected Healthcare’s argument that its actions created liability for inducing infringement because there was no direct infringement.⁹⁸⁶ The Federal Circuit also found that an adverse economic interest is not itself an adverse legal interest, and the absence of a covenant not to sue infringers did not create a justiciable case or controversy.⁹⁸⁷ Regarding Healthcare’s argument that public policy is served by invalidation of invalid patents, the Federal Circuit noted that “the Hatch-Waxman Act is already a balance of several policy interests, seeking to preserve the patent incentive to invent new drugs, while enabling validity challenge by ANDA filers before actual infringement occurs.”⁹⁸⁸

E. Personal Jurisdiction and Venue

The Federal Circuit addressed three petitions for writ of mandamus on the issue of venue under the patent venue statue.⁹⁸⁹ In re HTC Corp.⁹⁹⁰ addressed where foreign companies can be sued for patent infringement.⁹⁹¹ HTC Corp. petitioned for writ of mandamus directing the U.S. District Court for the District of Delaware to vacate its order denying-in-part HTC’s motion to dismiss for improper venue and dismiss the complaint.⁹⁹² HTC Corp. is a Taiwanese corporation with its principal place of business in Taiwan, and its wholly owned U.S. based subsidiary, HTC America, is a Washington corporation with its principal place of business in Seattle, Washington.⁹⁹³ The Delaware district court found that venue was not proper as to HTC America but was proper as to HTC Corp.⁹⁹⁴ Following the order, plaintiffs voluntarily dismissed their suit against HTC America without prejudice.⁹⁹⁵ HTC Corp. filed a mandamus petition seeking dismissal for improper venue.⁹⁹⁶

“A writ of mandamus is a drastic remedy available only in extraordinary circumstances.”⁹⁹⁷ “The following conditions must be met for the court to issue a writ: (1) the petitioner must have no other adequate means to attain the relief desired; (2) the petitioner must demonstrate a “clear and indisputable” right to the issuance of the writ; and (3) “even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances.”⁹⁹⁸ The Federal Circuit found that the first condition was not met because “unlike a defendant challenging the denial of a § 1404(a) transfer motion, a defendant aggrieved by the denial of an improper venue motion has an adequate remedy on appeal from a final judgment.”⁹⁹⁹ Specifically, if after judgment venue is determined to have been improper, and the improper venue objection was not waived, HTC Corp. “will be entitled to assert it on appeal and, if the objection is sustained, obtain from [the appeals] court an order vacating the judgment . . . and directing the remand of the action to the [appropriate venue].”¹⁰⁰⁰ The court explained that “[g]iven the availability of adequate relief on appeal, mandamus review of improper venue decisions is generally inappropriate.”¹⁰⁰¹

The Federal Circuit also held that HTC Corp. failed to demonstrate the second condition: that its right to a writ was clear and indisputable.¹⁰⁰² Relying on the Supreme Court’s decision in Brunette Machine Works, Ltd. v. Kockum Industries, Inc.,¹⁰⁰³ the Federal Circuit reaffirmed the “long-established rule that suits against aliens are wholly outside the operation of all the federal venue laws, general and special.”¹⁰⁰⁴ The court explained its belief that Congress did not intend the 2011 amendments to 28 U.S.C. § 1391(c)¹⁰⁰⁵ to “upend the centuries-old understanding that the venue laws (as opposed to requirements of personal jurisdiction) do not restrict the location of suits against alien defendants.”¹⁰⁰⁶ The Federal Courts Jurisdiction and Venue Clarification Act of 2011 made only one minor change to the alien-venue rule, limited to venue protection to alien natural persons having permanent resident status.¹⁰⁰⁷ The Federal Circuit rejected HTC Corp.’s argument that Brunette creates a “loophole” for a plaintiff to forum shop, noting that HTC Corporation’s interpretation creates “a far more unsatisfactory loophole—a complete inability for a patent owner to bring its infringement claims against alien defendants that fall outside the non-residence-based clause of § 1400(b).”¹⁰⁰⁸

The Federal Circuit clarified the issue of where a domestic corporation “resides” under § 1400 when its state of incorporation has more than one judicial district in In re BigCommerce, Inc.¹⁰⁰⁹ Plaintiffs, Diem and Express Mobile, each filed patent infringement suits against BigCommerce in the District Court for the Eastern District of Texas.¹⁰¹⁰ BigCommerce is incorporated in the state of Texas and is registered and headquartered in Austin, Texas, which is in the Western District of Texas.¹⁰¹¹ It was undisputed that BigCommerce had no place of business in the Eastern District of Texas.¹⁰¹² BigCommerce moved to dismiss the Diem case and transfer the Express Mobile case, arguing that under the Supreme Court’s decisions in TC Heartland¹⁰¹³ and Stonite Products,¹⁰¹⁴ it resides only in the Western District of Texas.¹⁰¹⁵ In both cases, the district court held that “a domestic corporation resides in the state of its incorporation and if that state contains more than one judicial district, the corporate defendant resides in each such judicial district for venue purposes.”¹⁰¹⁶ BigCommerce petitioned for a writ of mandamus in both cases.¹⁰¹⁷

The Federal Circuit found that mandamus was warranted because different district courts have come to different conclusions about whether a corporation “resides” under § 1400(b)¹⁰¹⁸ in every judicial district within its state of incorporation when the state has more than one judicial district.¹⁰¹⁹ After considering the plain meaning and legislative history of § 1400(b), the Federal Circuit held that

for purposes of determining venue under § 1400(b) in a state having multiple judicial districts, a corporate defendant shall be considered to ‘reside’ only in the single judicial district within that state where it maintains a principal place of business, or, failing that, the judicial district in which its registered office is located.¹⁰²⁰

The Federal Circuit determined that in this case venue is proper under the resides prong of § 1400(b) only in the Western District of Texas.¹⁰²¹

In In re ZTE (USA) Inc.,¹⁰²² the Federal Circuit granted ZTE’s petition for a writ of mandamus, vacated the order denying ZTE’s motion to dismiss, and remanded for reconsideration.¹⁰²³ The Federal Circuit found that the case presented two basic and undecided issues relating to proper judicial administration: whether Federal Circuit or regional circuit law governs the burden of proof for determining the propriety of venue under § 1400(b), and on which party the burden rests.¹⁰²⁴ On the first issue, the Federal Circuit held that Federal Circuit law governs the placement of the burden of persuasion on the propriety of venue under § 1400(b).¹⁰²⁵ On the second issue, the Federal Circuit held as a matter of Federal Circuit law that, upon motion by the defendant challenging venue in a patent case, the plaintiff bears the burden of establishing proper venue.¹⁰²⁶ Because the district court incorrectly assigned the burden of proof on venue to ZTE and failed to fully consider all relevant factors, the court vacated the order denying the motion and remanded for reconsideration.¹⁰²⁷

M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda.¹⁰²⁸ addressed personal jurisdiction over a foreign entity.¹⁰²⁹ Patent owner sued defendant in the U.S. District Court for the District of Minnesota, alleging infringement of five patents.¹⁰³⁰ Dynamic Air Ltda. (DAL) is a foreign entity organized under the laws of Brazil with a principal place of business in Brazil.¹⁰³¹ DAL is a subsidiary of Dynamic Air Inc. which is a Minnesota corporation with its principal place of business in Minnesota.¹⁰³² Between October 2011 and January 2012, the Brazilian state-owned oil company Petroleo Brasilerio S.A. (Petrobas) requested bids for installation of systems on ships, and DAL subsequently won the bid.¹⁰³³ DAL installed the allegedly infringing system on PTAB two U.S. flagged ships.¹⁰³⁴ The district court dismissed the case for lack of personal jurisdiction under Rule 12(b)(2), finding that although the alleged infringing activities took place on U.S.-flagged ships that are themselves U.S. territory, the contract between Petrobras and DAL did not identify the ships on which DAL would be required to make installations.¹⁰³⁵ Therefore, DAL did not purposefully avail itself of the privilege of conducting activities within the United States because its contacts were exclusively due to the unilateral activity of Petrobras.¹⁰³⁶

Reviewing the issue de novo¹⁰³⁷ under Federal Circuit precedent, the Federal Circuit reversed the dismissal for lack of jurisdiction and remanded for further proceedings.¹⁰³⁸ The sole issue on appeal was whether the exercise of personal jurisdiction over DAL comports with due process.¹⁰³⁹ After finding that DAL’s activities were purposefully directed at the United States and the claim of patent infringement arose out of those contacts, the burden shifted to DAL to present a compelling case that the presence of some other consideration would render jurisdiction unreasonable.¹⁰⁴⁰ In assessing whether exercise of personal jurisdiction over a defendant would be reasonable and fair, the Federal Circuit considers five due process factors: (1) the burden on the defendant; (2) the forum’s interest in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the states in furthering fundamental substantive social policies.¹⁰⁴¹ Because the exclusive licensee of the asserted patents, and therefore one of the allegedly injured parties is a U.S. domiciliary, the Federal Circuit determined that it has a paramount interest in obtaining convenient and effective relief in a U.S. court.¹⁰⁴² Because the exclusive licensee is a U.S. plaintiff trying to enforce its U.S. patents for alleged infringing activity in a U.S. territory, the court found that the first three factors strongly favor exercising specific personal jurisdiction over DAL.¹⁰⁴³ Regarding the final two factors, concerned “with the potential clash of substantive social policies between competing fora and the efficiency of a resolution to the controversy,” the forum here is the entire United States so no competing forum is available and the court had “no reason to believe that the [f]ederal [g]overnment’s interest in its foreign relations policies with Brazil will be hindered by allowing the district court to exercise personal jurisdiction” over DAL.¹⁰⁴⁴ Judge Reyna wrote in concurrence providing additional reasoning why the exercise of personal jurisdiction here does not offend traditional notions of fair play and substantial justice.¹⁰⁴⁵

F. Standing

Advanced Video Technologies LLC v. HTC Corp.¹⁰⁴⁶ affirmed the district court’s dismissal of plaintiff’s infringement complaints for lack of standing because plaintiff did not have full ownership of the asserted patent.¹⁰⁴⁷ The sole issue in the appeal was whether a co-inventor of the patent transferred her ownership interests in the patent under the terms of an employment agreement.¹⁰⁴⁸ The Federal Circuit analyzed whether any of three provisions of the employment agreement effected a transfer of ownership rights from the co-inventor: a “will assign” provision, a trust provision, and a quitclaim provision.¹⁰⁴⁹

The “will assign” provision provided that the co-inventor “will assign to the Company” all her right, title, and interest in any inventions.¹⁰⁵⁰ The Federal Circuit agreed with the district court that the “will assign” language “invoked a promise to do something in the future and did not effect a present assignment” and did not create an immediate assignment of the co-inventor’s rights.¹⁰⁵¹ The trust provision provided that the co-inventor “will hold in trust for the sole right and benefit of the Company.”¹⁰⁵² The Federal Circuit found that even if the co-inventor’s interests in the invention were immediately placed in trust, “it does not follow that those interests were automatically, or ever, actually transferred out of trust in favor of [the company].”¹⁰⁵³ Because under California trust law, a trust beneficiary “generally is not the real party in interest,” “may not sue in the name of the trust,” and “has no legal title or ownership interest in the trust assets,”¹⁰⁵⁴ the plaintiff cannot maintain a patent infringement suit where the co-inventor is not a party nor can she be involuntarily joined as a plaintiff in the pending suit.¹⁰⁵⁵ Finally, the “quitclaim assignment” providing that the co-inventor “waive and quitclaim to the Company any and all claims” served to waive the co-inventor’s rights to interests in any patent rights that she assigned under the agreement.¹⁰⁵⁶ Because no patent rights were ever assigned, the Federal Circuit found that the quitclaim provision did not affect an assignment of the patent from the co-inventor.¹⁰⁵⁷

Judge O’Malley concurred because binding precedent “compels the result.”¹⁰⁵⁸ However, Judge O’Malley wrote separately to express her belief that the binding precedent “that a non-consenting co-owner or co-inventor can never be involuntarily joined in an infringement action pursuant to Rule 19 of the Federal Circuit Rules of Civil Procedure is incorrect.”¹⁰⁵⁹ Judge Newman dissented because the employment agreement “placed ownership of the employee’s inventions with the employer” and therefore the co-inventor had no ownership interest in the asserted patent.¹⁰⁶⁰

James v. j2 Cloud Services, LLC¹⁰⁶¹ addressed standing in the correction-of-inventorship context.¹⁰⁶² Plaintiff filed a correction-of-inventorship claim alleging that he is the sole inventor of a patent that lists two different individuals as inventors.¹⁰⁶³ The patent was originally assigned to JFAX, the company owned by the listed inventors, and subsequently assigned to Advanced Messaging Technologies, Inc. (AMT).¹⁰⁶⁴ The defendant in this case, j2, has an exclusive license to the patent.¹⁰⁶⁵ At the time of the invention, the plaintiff worked for GSP Software, which entered into a contract with JFAX to develop software to provide fax-to-email, email-to-fax, and voicemail-to-email functionalities.¹⁰⁶⁶ The plaintiff admitted that he assigned all copyrights in code and compiled software to JFAX but denied assigning any patent ownership or inventorship rights.¹⁰⁶⁷ The district court dismissed the case finding that the plaintiff lacked Article III standing because he “fail[ed] to allege facts sufficient to show that he has an ownership or financial interest in the . . . patent.”¹⁰⁶⁸ The Federal Circuit disagreed and reversed.

The Federal Circuit concluded that if the plaintiff were to prevail on his allegations that he was the sole inventor and that sole inventorship entails sole ownership, he would have stood to gain concretely.¹⁰⁶⁹ Such gain would be directly related to the merits of the claim and would redress the injury of being deprived of allegedly rightful ownership which, absent other facts, would be sufficient to give plaintiff Article III standing.¹⁰⁷⁰ The case therefore turned on whether the plaintiff assigned his patent rights to JFAX under either the software development agreement or by the “hired-to-invent doctrine.”¹⁰⁷¹ The Federal Circuit found that the software development agreement was amenable to the construction that it does not assign, or promise to assign, patent rights that would otherwise accrue to the plaintiff as an inventor.¹⁰⁷² At the present stage of the litigation, the Federal Circuit concluded that the agreement must be construed in plaintiff’s favor and therefore does not deprive plaintiff of constitutional standing.¹⁰⁷³ The court also determined that the “hired-to-invent” rule, recognizing that an employer may “claim an employee’s inventive work where the employer specifically hires or directs the employee to exercise inventive faculties,” was inapplicable.¹⁰⁷⁴ Unlike prior cases applying the rule, the agreement for engagement of services in this case was between two artificial legal entities, and the inventor was not personally a party to either.¹⁰⁷⁵

G. Jury Instructions

Flexuspine, Inc. v. Globus Medical, Inc.¹⁰⁷⁶ involved the impact of the jury’s failure to heed a “stop instruction” in the jury verdict form.¹⁰⁷⁷ In Flexuspine, the verdict form instructed the jury to address the questions of invalidity and damages only if they made an affirmative finding of infringement.¹⁰⁷⁸ However, after finding no infringement, the jury indicated that the claims were also found invalid and wrote “0” for the damages amount.¹⁰⁷⁹ After the district court instructed the jury to re-execute the verdict form consistent with the instructions therein, the jury found the claims not to be infringed and left the questions of invalidity and damages unanswered.¹⁰⁸⁰ The district court dismissed the defendant’s Rule 59(e) motion requesting that the judgment be amended to include the jury’s invalidity verdict as well as the defendant’s invalidity counterclaims, rendering the Rule 50(b) motion for judgment as a matter of law on invalidity moot.¹⁰⁸¹

The Federal Circuit rejected defendant’s contention that the district court was not authorized to direct the jury to further consider its answers and verdict because the “jury’s answers to the validity and damages questions ‘had to conflict’ with the jury’s answer of no infringement” because the verdict form predicated the answers to those questions on an affirmative response to the infringement question.¹⁰⁸² The Federal Circuit also rejected the defendant’s argument that the district court’s dismissal of its invalidity counterclaims violated defendant’s Seventh Amendment right to a jury claim.¹⁰⁸³ Because defendant failed to object to the verdict form, the issue of invalidity was submitted to the jury as an affirmative defense, not a counterclaim.¹⁰⁸⁴ Therefore, the district court did not deprive defendant of its right to a jury trial outright, “it merely declined to submit its counterclaims to this jury.”¹⁰⁸⁵ Finally, the Federal Circuit affirmed the district court’s dismissal of the Rule 50(b) claim, finding that a “district court judge faced with an invalidity counterclaim challenging a patent that it concludes was not infringed may either rehear the claim or dismiss it without prejudice.”¹⁰⁸⁶

Conclusion

The Supreme Court and Federal Circuit resolved many cases in 2018 that significantly impacted the practice of patent law. The next year will bring further clarity from the Supreme Court and Federal Circuit on the issues ranging from Article III standing, IPR real party in interest, on-sale bar, and fair, reasonable, and on-discriminatory royalties for standards-essential patents. And as always, we expect the Federal Circuit and PTO to provide more guidance on the contours § 101 in 2019.

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