Archive for the ‘Federal Circuit’ Category

Federal Circuit Allows PTO to Overrule Court Decision Again

July 30, 2014

The Federal Circuit has again permitted the PTO to overrule a decision by a district court, affirmed on appeal by the Federal Circuit.  As in Fresenius USA, Inc. v. Baxter Int’l, Inc., Judge O’Malley has issued a vigorous dissent.  ePlus, Inc. v. Lawson Software, Inc.

In ePlus, the district court had found a number of asserted claims to not be invalid and a jury had found them to be infringed.  The court had issued an injunction against further infringement.  On appeal, the Federal Circuit reversed on a number of the issues, but affirmed that one of the asserted claims was not invalid and was infringed.  The court remanded the case to the district court to make necessary modifications to the injunction.

On remand, the district court modified the injunction and found the defendant to be in contempt for violating the injunction.  You can probably tell where this is going.  In a reexamination, the PTO ruled that the infringed claim was invalid, the finding of which was affirmed in a separate opinion by the Federal Circuit, while the present appeal was pending.

In the present appeal, due to the PTO overruling the court’s invalidity determination, the divided panel vacated the injunction and the contempt order.

The majority, per Chief Judge Prost, argue that the injunction was not final when the case was remanded to the district court.  Therefore, the injunction and the civil contempt citation based on violation thereof must be vacated.  This result is dictated by Fresenius.

O'MalleyJudge O’Malley agrees with the majority that the ongoing injunction must be set aside once the patent claim upon which it was based is no longer in effect.  Where she differs with the majority is that she doesn’t believe that all penalties for violating the injunction that was in effect for four years should also be erased.

She seeks to distinguish Fresenius on a number of grounds.  First, she notes that the judgment of validity and infringement of the claim at issue was final as between ePlus and Lawson.  The Federal Circuit had affirmed the judgment of the district court on this issue.  

Second, the injunction was in effect.  The remand instructions were different from Fresenius where the court had instructed the district court to “revise or reconsider” the injunction, which was vacated.  In this case, the Federal Circuit did not vacate the injunction, but had merely instructed the district court to “consider” necessary changes to the injunction.  Those changes were made by the district court and are now the subject of the present appeal.  Finally, when challenging a contempt ruling, the challenger cannot challenge the underlying reasons for the injunction; it can only challenge whether it actually violated the injunction.

Next, Judge O’Malley reiterates her view that Fresenius was wrongly decided.  What incentive do district courts have to decide patent cases?  They should simply wait until all matters related to such cases are decided by the PTO.  In this case, as in Fresenius, the district court and Federal CIrcuit’s earlier work (not to mention the jury) seems to have been largely wasted time.

Judge O’Malley further argues that parties have begun reading Fresenius rather broadly and are seeking to reopen what would seem to be final judgments in litigation if the PTO makes a later ruling favorable to infringers.  She seems to be trying to garner support for Supreme Court review by arguing that the Federal Circuit’s view of finality is contrary to the view of the DC Circuit.

Judge Rader to Retire From the Federal Circuit

June 17, 2014

Judge RaderIn a rather bizarre series of events, Randall Rader has gone from chief judge of the Federal Circuit to former judge of the Federal Circuit in just a few weeks.

Prior to his appointment to the bench, Judge Rader served as counsel to the Senate Judiciary Committee, including the Subcommittee on the Constitution and the Subcommittee on Patents, Trademarks, and Copyrights.  In 1988, he became a judge on the US Court of Federal Claims, the court that hears monetary claims against the US government.  In 1990, President Bush elevated Judge Rader to the Federal Circuit.

Judge Rader served on the court with distinction, and also taught patent law and other advanced intellectual property law classes at various law schools in Washington, DC, Virginia, and others.  He is also a co-author of a widely used patent law casebook.  In 2010, he succeeded Judge Paul Michel as the sixth chief judge of the Federal Circuit.

Last month, news emerged that Chief Judge Rader sent an e-mail praising attorney Edward Reines, a partner at Weil, Gotshal & Manges, who argues regularly before the Federal Circuit.  The e-mail heaped praise on Reines and urged him to show the e-mail to others.

Shortly after the e-mail became public, Chief Judge Rader recused himself from a number of cases where he had heard arguments involving Reines.  He also publicly released a letter that he sent to his colleagues where he explained his recusals and apologized for “a breach of the ethical obligation not to lend the prestige of the judicial office to advance the private interests of others.”  He also realized that the e-mail could cause others to think that this attorney could unduly influence the Chief Judge in his judicial duties.

At nearly the same time, Judge Rader announced that he was stepping down as chief judge of the court, although his term was scheduled to run until 2017.  He would remain an active judge, but wished to spend more time teaching, lecturing, and traveling.

A few weeks later, Judge Rader has now announced his retirement from the court, effective June 30.  Although no reference to the e-mail was made in either Judge Rader’s stepping down as chief judge or in his retirement from the bench, one has to assume based on the timing that they are linked.  Judge Rader leaves behind a 24 year legacy of service on the court, including 4 years as chief judge.  That legacy appears somewhat tarnished in light of the ethical breach.

Chief Judge Prost

Judge Sharon Prost succeeded Judge Rader as the seventh chief judge of the Federal Circuit on June 1.  Chief Judge Prost, 63, was appointed to the court by President Bush in 2001 after also serving for 8 years as an attorney for the Senate Judiciary Committee.

Other Members of the Court

The retirement of Judge Rader will present another open seat on the Federal Circuit that has seen a great deal of turn over in recent years.  Several of the other 11 active members of the court are also eligible for retirement or senior status, should they so choose.

Chief Judge Prost, 63, joined the court in 2001 and is eligible for senior status in 2016.

Judge Pauline Newman, 86, joined the court in 1984 and is eligible for senior status.

Judge Alan Lourie, 79, joined the court in 1990 and is eligible for senior status.

Judge Timothy Dyk, 77, joined the court in 2000 and is eligible for senior status.

Judge Kimberly Moore, 46, joined the court in 2006.

Judge Kathleen O’Malley, 58, joined the court in 2010 after serving 16 years as a district court judge.

Judge Jimmie Reyna, 61, joined the court in 2011.

Judge Evan Wallach, 64, joined the court in 2011 after serving 16 years as a judge on the Court of International Trade.  He is eligible for senior status in November.

Judge Richard Taranto, 57, joined the court in 2013.

Judge Raymond Chen, 45, joined the court in 2013.

Judge Todd Hughes, 47, joined the court in 2013.

In addition, Judges H. Robert Mayer, 73, S. Jay Plager, 83, Raymond Clevenger, 76, Alvin Schall, 70, William Bryson, 68, and Richard Linn, 70, continue to serve on the court while in senior status.

Federal Circuit Holds That Claim Construction Should Should Continue to Be Reviewed De Novo

February 21, 2014

The Federal Circuit has issued its long-awaited opinion in Lightning Ballast Control LLC v. Phillips Electronics N.A. Corp.  By a 6-4 decision, the en banc court held that claim construction should remain a matter of law with no deference accorded to the district court judge’s findings on appeal.

Majority Opinion

NewmanJudge Newman wrote the opinion for the court and relied extensively on uniformity and finality as reasons to retain the current system.  She argued that different cases involving the same patent may result in different conclusions as to the meaning of claim terms if the Federal Circuit had to decide the cases with deference to the rulings of the trial court judges.  This would result in increased uncertainty, costs, and litigation.  The public needs to know definitively what a patent claim means.  Thus, the Federal Circuit should rule on the issue for all the world and not just the parties at hand.

Judge Newman’s opinion relies extensively on stare decisis, the principle that courts should adhere to their previous decisions and not overrule them unless absolutely necessary.  She goes on to state that there is no real impetus to overrule the previous case holding that claim construction is a matter of law to be reviewed de novo on appeal and nobody has provided a workable solution if such an impetus did exist.

Finally, Judge Newman spends a great deal of time attempting to rebut the arguments raised by the dissent that the de novo rule is extremely unpopular and leads to tremendous uncertainty in claim construction appeals.  This seems to be a serious factual dispute between the judges in the majority and those in dissent.

Concurrence

lourieJudge Lourie filed a concurring opinion where he made several interesting arguments.  First, he said that there are really not factual disputes with respect to claim construction.  Although there are a number of actors involved in the patent process, such as hired experts that really don’t know what was meant by the patent terms anyway.  Hired scientific experts do not lie, so the judge’s determination of a witness’s credibility is irrelevant.

Next, he argues that, yes, claim construction rulings are considered on appeal de novo, they aren’t really.  The Federal Circuit provides informal deference to the district court judge’s ruling.  The Federal Circuit will affirm the district court when appropriate and reverse when appropriate.  These points are somewhat baffling to me.

Dissent

O'MalleyJudge O’Malley (a former district court judge) wrote at great length and rather scathingly for the four dissenting judges.  She argued that a cursory review of the history of de novo review of claim construction demonstrates its error.  There are clearly determinations of underlying factual issues that are entitled to deference on appeal.

When a case is wrongly decided, as the case that dictated de novo review on appeal was, stare decisis does not require the court to adhere to the erroneous decision.  Indeed, en banc review is precisely for overruling such decisions.

The judges in these opinions seem to have gotten a bit personal.  Judge Newman emphasizes that the rule upheld in this case has been settled for 15 years, while Judge O’Malley indicates that it has been a short time.  Judge O’Malley cites Judge Newman’s views from the earlier decision where Judge Newman criticized the de novo review as ignoring the underlying factual issues involved in claim construction.  Judge O’Malley seems shocked that several members of the majority in today’s opinion, including Judge Newman, were among the harshest critics of the de novo review rule.

The result in this case is indeed shocking.  The overwhelming majority of the patent community recognizes that it makes little sense for judges that are far afield on appeal get to determine whether the trial court correctly determined underlying factual issues related to claim construction.

It is likely that this case is headed to the Supreme Court.

The PTO’s Authority to Overrule Court Decisions

November 7, 2013

The Federal Circuit has denied a petition for rehearing en banc on the question of whether the PTO has the authority to overrule district court and Federal Circuit decisions.  Fresenius USA, Inc. v. Baxter Int’l, Inc.

The saga of this case is entering its second decade.  Fresenius originally sued Baxter for a declaratory judgment that U.S. Patent No. 5,247,434 was invalid.  The district court held otherwise and the Federal Circuit affirmed that decision.

During the pendency of the litigation, the PTO reexamined the patent and found it to be invalid as obvious based on substantially the same prior art used in the litigation.  On appeal, the Federal Circuit relied on the differing burdens of proof between the two proceedings to affirm the PTO’s finding of invalidity.  Judge Newman wrote a vigorous dissent from the panel decision.

The Federal Circuit has now denied a petition to rehear the case en banc by a narrow vote of 6-4 (with Judges Chen and Hughes not participating in the decision).  Judge Dyk, joined by Judge Prost, wrote an opinion concurring in the denial to rehear the case.  His position seems to be that infringement damage awards can be erased upon a finding of invalidity, even years after final court decisions have been affirmed on appeal.

Judge O’Malley, joined by Chief Judge Rader and Judge Wallach, wrote a dissent where they argued that the invalidity determination by the PTO would preclude infringement damage awards going forward, but the finality of the earlier court decisions means that those damage awards cannot be erased by a PTO determination.  That is, the PTO is free to re-judge a patent’s invalidity, even over the same prior art reviewed by the courts, but the PTO is not permitted to overrule a final judicial determination of infringement and damages.

Finally, Judge Newman, who wrote a vigorous panel dissent, wrote another dissent on this issue.  She argued that the PTO is not permitted to overrule court decisions.  That is, she argued that once the courts have finally ruled on an issue such as invalidity over a particular piece of prior art, the PTO is not permitted to second guess the court and issue a different ruling.  Executive agencies are not permitted to overrule Article III court decisions.

This case creates a serious litigation mess.  Accused infringers are encouraged to seek multiple avenues of relief in the hope of winning at the PTO if things aren’t going well in litigation.  This decision seems to suggest that district courts should stay proceedings where there is a parallel PTO proceeding in the case.

Filing a False Declaration Constitutes Inequitable Conduct

October 10, 2013

Earlier this week, the Federal Circuit affirmed a district court’s judgment that a patent was unenforceable due to inequitable conduct.  Intellect Wireless, Inc. v. HTC Corp.

After the Federal Circuit’s opinion in Therasense, it is widely thought to be much more difficult to prove inequitable conduct than under the court’s prior standard that seemed to be a moving target.  In this case, the court made clear that filing a declaration with clearly false statements will still result in an inequitable conduct holding.

In Intellect Wireless, during prosecution of the application that resulted in the patent at issue in the case, the inventor filed a declaration under 37 C.F.R. § 1.131 to ante-date or swear behind a reference.  This means that the inventor sought to remove a piece of prior art by demonstrating an earlier invention date (something that can no longer be done under the AIA’s first-to-file system).

In the declaration, the inventor averred that “the claimed invention was actually reduced to practice and was demonstrated at a meeting . . . in July of 1993.”  In reality, the invention was never actually reduced to practice, i.e., was never actually constructed or made.  The court held that, absent curing the unmistakably false declaration, this alone establishes materiality under the test for inequitable conduct.

To cure a false declaration, the applicant is required to expressly advise the PTO of the misrepresentation and specifically point of the error.  The applicant must point out to the PTO what the correct facts actually are.  This requirement requires the applicant to be quite unequivocal in the correction.

In this case, the court found that the applicant, despite filing additional “corrective” declarations, did not meet this standard.  The corrective declaration further obfuscated the truth by continuing to refer to prototypes and product brochures, when no such prototypes or products shown in the brochures existed.  There were still references to bringing the product to commercialization and to actual reduction to practice.

Furthermore, the court found that the applicant had a specific intent to device the PTO.  The submission of a declaration that included clearly fabricated examples showed the applicant’s intent to deceive the PTO.  This intent was further demonstrated by a pattern of misleading the PTO with false declarations in related patent applications that referred to prototypes that did not exist or that clearly could not perform the claimed functions.

Inequitable conduct is clearly not dead as a defense.  This particular set of facts was particularly egregious.  It continues to demonstrate that candor with the PTO is required under the duty of disclosure.

Senate Finally Confirms Todd Hughes

September 25, 2013

todd_hughes_judge_appeals_courtYesterday, the Senate confirmed Todd Hughes to a seat on the Federal Circuit by a vote of 98-0.  Hughes becomes the first openly gay federal appellate court judge.

The confirmation provides the court with its full allocation of 12 active judges for the first time since Judge Alvin Schall took senior status October 5, 2009.  Along with 6 judges on currently on senior status, the Federal Circuit is now the best equipped it has been in many years.

While Judge Hughes does not have extensive intellectual property experience, he has argued numerous cases at the Federal Circuit while serving as Deputy Director of the Commercial Litigation Branch of the Civil Division at the United States Department of Justice.  He has worked in the Justice Department since 1994 in the Commercial Litigation Branch.  He has extensive experience before the Court of Federal Claims, as well as the Federal Circuit and Court of International Trade.

Federal Circuit Fight Over Patentable Subject Matter Continues

September 10, 2013

Last week, a sharply divided panel of the Federal Circuit ruled that certain claims asserted by Accenture were invalid as not directed to patentable subject matter.  Accenture Global Services GmbH v. Guidewire Software, Inc.

Accenture had appealed a district court’s ruling that the claims of U.S. Patent No. 7,013,284 were invalid as not directed to patentable subject matter.  The district court had ruled that system claims 1-7 were invalid, as were method claims 8-22.  Accenture only appealed the ruling on the system claims, not the method claims.

The system claims were directed to computer programs for handling insurance related tasks.  The system claims include a combination of computer components including an insurance transaction database, a task library database, a client component, and a server component, which includes an event processor, a task engine, and a task assistant.

Majority Opinion

lourieJudge Lourie, joined by Judge Reyna, issued the majority opinion that the system claims were indeed invalid.  He relied extensively on the court’s plurality opinion in CLS Bank.  He argued that CLS Bank set forth a two step process for determining patent eligibility.  First, the court must determine whether the claimed invention falls within one of the statutory classes set forth in § 101.  Then, the court must determine whether the claim falls within one of the judicially-created exceptions, such as being an abstract idea.  Does the claim pose a risk of preempting an abstract idea?  Does the claim contain “additional substantive limitations . . . narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself”?

Next, Judge Lourie argued that the majority of the judges in CLS Bank had reasoned that when the system claims closely track the method claims and do not add additional meaningful limitations, they will rise and fall together.  He seemed to argue that because the method claims were not appealed–and the determination of their ineligibility is therefore conclusive–that Accenture is now estopped from arguing that the system claims are patent eligible.  He then proceeds to dismiss each of the limitations listed above that are not included in the method claims as “minor differences in terminology.”

Accenture also argued for reversal in light of the court’s upholding the claims in Ultramercial v. Hulu.  Interestingly, the panel in that case also included Judge Lourie and Chief Judge Rader.  The difference was that the third member was Judge O’Malley, instead of Judge Reyna.  How much of a difference does panel composition make to the outcome of these cases?  In any event, Judge Lourie distinguished Ultramercial based on the fact that in that case, there had not yet been claim construction or discovery.  The procedural posture of the case must make all the difference.

Dissent

Judge RaderNot surprisingly, Chief Judge Rader issued a vigorous dissent.  He argued against every point that Judge Lourie made.  Every claim can be stripped down to its core and characterized as an abstract idea.  CLS Bank was not a precedential decision, as it did not garner a majority of the court.  Therefore, the court cannot rely on it.

The failure of Accenture to appeal the method claims does not estop it from arguing that the system claims are patent eligible.  No precendent requires such a result.  Parties should be encouraged to narrow issues for appeal, not required to appeal every issue for fear of estoppel.

System and method claims do not necessarily stand or fall together.  They must be analyzed separately, as reaffirmed by Ultramercial.  A nearly unanimous court has rejected this procedure.

Finally, Judge Rader reviewed the claim limitations themselves and would find the claims to be patent eligible.  He notes that through these opinions the court has not provided any guidance on what is and what is not patent eligible subject matter.

Analysis

The patentable subject matter debate is getting ridiculous to the point that it is nearly impossible to advise clients as to what is and what is not patent eligible.  How do you tell your client that it depends on which judges comprise the panel when your case is appealed to the Federal Circuit?  Let’s knock off all the nonsense and use the other provisions of the statute to eliminate patents that are not novel, are obvious, or are abstract.

Supplier’s Offer to Make Product is Invalidating Sale

August 16, 2013

Earlier this week, the Federal Circuit held that a supplier’s offer to make a product more than one year before the patent application was filed is an invalidating sale.  Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc.

Hamilton Beach sued Sunbeam Products for infringement of U.S. Patent No. 7,947,928.  The ‘928 patent claimed as effective filing date of March 1, 2006 (this date was in dispute, but is taken as correct for purposes of the court’s opinion).  Hamilton Beach marketed a commercial embodiment of the ‘928 patent as the Stay or Go® slow cooker.

On February 8, 2005, Hamilton Beach issued a purchase order to its foreign supplier for manufacture of 2,000 Stay or Go® slow cookers to be shipped to its Tennessee facility and billed to its Virginia facility.  On February 25, 2005, the supplier replied, via email, that it received the order and would begin manufacture of the slow cookers once it received Hamilton Beach’s release.  The “release” referred to in the email was in reference to the corporate agreement between Hamilton Beach and the foreign supplier.  Hamilton Beach was required to give a certified review and approval of any final product to the supplier before the supplier could ship the final product.  Hamilton Beach did not respond to this email for several months.

The Federal Circuit held that the message from the foreign supplier to Hamilton Beach was an “offer” to sell the later patented product to Hamilton Beach.  Because Hamilton Beach had sent specifications to the supplier as to the details of the product, it was considered by the court to be “ready for patenting.”  As the offer was made more than one year before March 1, 2006, it met both prongs of the on-sale bar and invalidated the claims of the ‘928 patent.  All it would have taken for the parties to have entered into a binding contract was acceptance of the offer (by providing the release) by Hamilton Beach.

Hamilton Beach argued that the product was not “ready for patenting” as of February 25, 2005.  The court did not do a complete limitation-by-limitation review of the claims to determine whether the product referenced in the offer met each of the claim limitations.  There were a number of problems with the product that were still being worked out.  At that time, the product did not contain a crucial claim limitation and its engineers were still working on perfecting the product.

The court was not convinced.  Hamilton Beach had also marketed the product to its retail customers and provided “a veritable tome” of documents with specifics of the product, including CAD drawings and the like, that showed that the product was “ready for patenting” prior to the critical date.  There was clearly sufficient detail to permit one of ordinary skill in the art to have made and used the invention.

Based on this analysis, the court held the claims to be invalid under the Patent Act’s on sale bar.

Judge Reyna dissented.  He argued that the sale between Hamilton Beach and its supplier was not a “commercial sale.”  Instead, the sale was experimental in nature, as Hamilton Beach was seeking to perfect the product.  It continued to change the product specifications due to a series of design failures that were specifically remedied by one of the claimed features of the patent.  He is also worried about how this case will affect small enterprises and individual inventors who lack the ability to manufacture prototypes in house.  A single offer for experimental purposes may be a bar to obtaining a patent for the new invention.

Raymond Chen Confirmed to Federal Circuit

August 5, 2013

Last week, the Senate finally confirmed PTO Solicitor Raymond Chen to a seat on the Federal Circuit.  The vote was 97-0.  Chen was nominated in February and brings extensive IP experience to the court.

Judge Chen provides the court with 11 active judges, 1 short of its statutory allowance.  DOJ attorney Todd Hughes’ nomination remains outstanding.  The Judiciary Committee reported his nomination favorably in July.

Current Federal Circuit Judges

The senior active judge on the court is Pauline Newman.  Judge Newman, 86, was appointed to the court by President Reagan in 1984.  She hasn’t given any indication that she may retire.

Judge Alan Lourie, 78, has been on the court since 1990.  He is also eligible for senior status.

Chief Judge Randall Rader, 64, would be eligible for senior status in 2014.

Judge Timothy Dyk, 76, has also been on the court since 2000.  He is eligible for senior status.

Judge Sharon Prost, 62, has been on the court since 2001.  She will be eligible for senior status in 2016.

Judges Kimberly Moore, 45, Kathleen O’Malley, 57, and Jimmie Reyna, 60, each have a number of years before they will be eligible for senior status.

Judge Evan Wallach, 64, has been on the court since 2011.  By virtue of his service on the Court of International Trade, he will be eligible for senior status in 2014.

Judge Richard Taranto, 56, joined the court earlier this year.

Judges Mayer, Plager, Clevenger, Schall, Bryson, and Linn continue to serve the court as judges with senior status.

UPDATE: Hughes Nomination Approved by Committee

July 18, 2013

This morning, the Senate Judiciary Committee approved the nomination of Todd Hughes to the Federal Circuit.  He now awaits confirmation by the full Senate.  He joins Raymond Chen, whom the Committee approved in May.

Sen. Dick Durbin (D-IL), who presided over Hughes’s confirmation hearing in June, noted the “historic nature” of the Hughes nomination.  If confirmed, Hughes would be the first openly gay federal appellate court judge.

The confirmation would also give the Federal Circuit its full complement of 12 active judges.

HT:  Hal Wegner.


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