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Patent Owners Beware: Serial Filings, Rent-Seeking May Be Grounds for Adverse Fee Award

The US Court of Appeals for the Federal Circuit vacated and remanded a district court’s denial of attorney’s fees to an accused infringer, finding the district court did not properly consider the Patent Owner’s manner of litigation, including the history of plaintiff’s actions in other jurisdictions and the broader context of its litigation practices. Elec. Commc’n Techs., LLC v. ShoppersChoice.com, LLC, Case No. 19-2087 (Fed. Cir. July 1, 2020) (Wallach, J.).

Following a finding by a Florida district court that a patent asserted by Electronic Communication Technologies (ECT) was ineligible under 35 U.S.C. § 101, ShoppersChoice filed a motion for attorney’s fees, citing ECT’s use of standardized demand letters and repeated infringement actions seeking nuisance-value settlements. ShoppersChoice also informed the district court of a recent award of attorney’s fees against ECT in the Central District of California (the True Grit decision) for conduct relating to the same asserted patent. The district court denied ShoppersChoice’s motion, finding that the case was not exceptional and that ECT’s litigation position was not so obviously weak. ShoppersChoice appealed.

The Federal Circuit reviewed the district court’s denial of attorney’s fees under the abuse of discretion standard, analyzing whether the district court made “a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings” and whether it provided a “concise but clear explanation of its reason[ing].” The Court explained that “a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285.” The Court found that the district court failed to conduct this analysis and erred by not considering ECT’s manner of litigation and the broader context of ECT’s litigation practices. Addressing the True Grit decision, the Federal Circuit noted that the California district court provided a detailed account of the nuisance value rent-seeking practices of ECT (and other affiliated shell companies), but ultimately found that the court failed to conduct an adequate inquiry into ECT’s litigation conduct.

The Federal Circuit thus vacated the attorney’s fee award and remanded the case, directing the district court to consider both ECT’s manner of litigation and the objective unreasonableness of its claims.

Practice note: While the California District Court’s decision is not binding in the Florida court, the Federal Circuit made clear that a court cannot ignore developments in other jurisdictions in connection with § 285 fee determinations.




PTO Proposes Standardization of the Patent Term Adjustment Statement Regarding Information Disclosure Statements

The US Patent & Trademark Office (PTO) announced on July 12, 2022, that it intends to revise the rules pertaining to patent term adjustment to require that the patent term adjustment statement regarding information disclosure statements (IDS) be submitted on a PTO form. The PTO believes that the use of the form will streamline prosecution and be more accurate and efficient by eliminating the need for a manual review of the patent term adjustment statement.

The regulations in 37 CFR 1.704(c)(1) through (14) establish the circumstances that constitute an applicant’s failure to engage in reasonable efforts to conclude processing or examination of an application and the resulting reduction of any patent term adjustment. 37 CFR 1.704(d)(1) also provides a safe harbor for filing IDS. Filing only an IDS in compliance with §§ 1.97 and 1.98 or a request for continued examination with only a compliant IDS is not considered a failure to engage in reasonable efforts to conclude prosecution (processing or examination) of the application under 37 CFR 1.704(c)(6), (8), (9) or (10) if it is accompanied by the required statement. The statement required to accompany the paper or request for continued examination must affirm that each item of information contained in the IDS meets one of the following requirements:

  • It was first cited in any communication from a patent office in a counterpart foreign or international application or from the PTO, and this communication was not received by any individual designated in § 1.56(c) more than 30 days prior to the filing of the IDS.
  • It is a communication that was issued by a patent office in a counterpart foreign or international application or by the PTO, and this communication was not received by any individual designated in § 1.56(c) more than 30 days prior to the filing of the IDS.

The PTO proposes adding new paragraph (d)(3) to 37 CFR 1.704(d), which requires filers to submit the patent term adjustment statement under 37 CFR 1.704(d)(1) on a form PTO/SB/133 to derive the safe harbor benefit under 37 CFR 1.704(d). Form PTO/SB/133 includes the required statement described above. Filers who submit a 37 CFR 1.704(d)(1) patent term adjustment statement without using the form PTO/SB/133 and filers who submit the form PTO/SB/133 with any modification to the patent term adjustment statement will not receive the benefit of the safe harbor under 37 CFR 1.704(d). Under such circumstances, the IDS or the request for continued examination, with no submission other than an IDS, will be treated as unaccompanied by a patent term adjustment statement under 37 CFR 1.704(d)(1).

Comments on the proposed rule must be received by September 12, 2022, to ensure consideration.




PTO Updates DOCX Filings, Delays Surcharge Fee

The US Patent & Trademark Office (PTO) recently announced that the surcharge fee for patent applications that are not filed in DOCX format will not go into effect until January 1, 2023. During the period before non-DOCX filings are hit with the surcharge fee, the PTO is encouraging applicants to begin filing patent applications in DOCX format (87 Fed. Reg. 25226). To address concerns some applicants have raised and to allow applicants to get acclimated to the process of filing applications in DOCX format, the PTO is providing applicants with the option to submit an applicant-generated PDF version of their application along with the DOCX file(s) when filing an application in the Patent Center without having to pay additional fees, such as application size fees.

Applicants who choose to submit an applicant-generated PDF with the validated DOCX file(s) will be able to rely on the applicant-generated PDF if a discrepancy occurs during the filing process. Once the non-DOCX filing surcharge fee officially goes into effect, applicants who submit an applicant-generated PDF with the validated DOCX file(s) will need to pay the surcharge fee and any other additional fees as a consequence for filing the applicant-generated PDF. This new document description is called “Auxiliary PDF of application,” and the corresponding document code is AUX.PDF.

The PTO advises:

Applicants are strongly encouraged to review their applications, including the USPTO-generated PDF, shortly after filing the application to identify any errors or discrepancies in the record, as discussed above. The applicant should file any necessary petition to correct the record early in prosecution and promptly after discovering any errors or discrepancies.




Judge Albright Issues Another Round of Updated Patent Rules for WDTX

As previously reported, Judge Albright issued standing orders for his patent cases. On March 7, 2022, Judge Albright issued another set of rules applicable to his large portfolio of patent cases in the Western District of Texas, with some modifications to his prior rules.

This round of new orders includes the following:

  • In the “Amended Standing Order Regarding Coronavirus (COVID-19) and Other Court Proceedings,” Judge Albright stated that all non-pretrial conference hearings will default to video conference unless otherwise requested by the parties.
  • Under the “Standing Order Governing Proceedings (OGP) 4.0—Patent Cases,” defendants must serve preliminary invalidity contentions seven weeks after the case management conference, with the below requirements:
    • The contentions must be in chart form identifying where in the prior art references each element of the asserted claims is found.
    • The contentions must identify limitations that defendants contend are indefinite or lack written description under § 112.
    • The contentions must identify any claims that defendants contend are directed to ineligible subject matter under § 101. This requirement has additional sub-requirements. The § 101 contentions must “(1) identify the alleged abstract idea, law of nature, and/or natural phenomenon in each challenged claim; (2) identify each claim element alleged to be well-understood, routine, and/or conventional; and (3) to the extent not duplicative of 102/103 prior art contentions, prior art for the contention that claim elements are well-understood, routine, and/or conventional.” The defendants must also produce all prior art referenced in the invalidity contentions and technical documents (which includes software) sufficient to show the operation of the accused products.
  • If there is a discovery dispute, the new rules require the requesting party to send an email with a maximum of 500 words for one issue, or a combined 1,000 words for multiple issues, to opposing counsel. The responding party has three business days to respond with an email with the same word limitations. Judge Albright encouraged use of a table to organize the disputed issues and provided an example.
  • The orders include additional rules for venue discovery, including a requirement that venue or jurisdictional discovery be completed no later than 10 weeks after the filing of an initial venue motion. The Federal Circuit recently decided against Judge Albrights’ justification of venue using car dealerships.
  • A separate “Standing Order Regarding Notice of Readiness for Patent Cases” provides an example Case Readiness Status Report with further guidelines on timing.



The PTO Isn’t Playing Around: More Sanctions for Improper Trademark Filings

The US Patent & Trademark Office (PTO) continues to uphold its promise to combat fraud and “protect the integrity of the U.S. trademark register” with initiatives to investigate and sanction actions before the PTO that appear to violate the Trademark Rules of Practice or the PTO website terms of use. The latest effort comes in the form of a January 25, 2022, sanctions order signed by the commissioner for trademarks against Abtach, 360 Digital Marketing and Retrocube based on evidence that each of the respondents engaged in an “egregious scheme to deceive and defraud both the PTO and individual applicants in more than 5,500 trademark applications, including engaging in the unauthorized practice of law and intentionally providing false, fictitious, or fraudulent information to the PTO in violation of the PTO’s rules of practice in trademark matters.” According to the sanctions order, the respondents were each given an opportunity to respond to a show cause order issued in November 2021, but the PTO received no responses from the noticed parties.

In the sanctions order, the PTO outlined the activities of the three respondents, which appear to operate as separate entities but are ultimately controlled by Abtach, a Pakistan-based company that is also under investigation by Pakistan’s Federal Investigation Agency for criminal fraud. The PTO’s use of the word “egregious” to describe the respondents’ actions might be an understatement. The sanctions order describes how the respondents set up dozens of websites to hold themselves out as providers of logo designs and low-cost trademark application filing services while forging documents that appear to be issued by the PTO, artificially modifying official PTO documents, threatening customers with legal action if they did not file for registration of their logos through the respondents, intentionally filing applications with errors to delay and increase the cost of the prosecution process, submitting invalid verifications and declarations and demanding payments for unnecessary services or fraudulently inflated fees. The respondents took these actions while failing to employ any US-licensed lawyers to do this work before the PTO.

In determining appropriate sanctions, the PTO considers several factors, including whether the conduct was willful or negligent, whether it was part of a pattern of activity or an isolated event, whether it infected the entire record or was limited to a single submission, whether it was intended to injure a party, what effect it has on the PTO and what is needed to deter similar conduct by others. In this case, the PTO found that the respondents had orchestrated a “widespread, intentional and coordinated effort to defraud both applicants and the USPTO.” Finding the respondents’ activities to be both willful and fraudulent, and to have harmed thousands of applicants while also delaying proceedings in the PTO and “eroding trust in the U.S. trademark registration process,” the PTO ordered termination of all trademark applications and proceedings submitted by the respondents. The PTO will also flag any issued registrations as being subject to a sanctions order. To the extent any victims of the respondents have [...]

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Notice Under § 287 Means Knowledge of Infringement, Not Knowledge of Patent

The US Court of Appeals for the Federal Circuit reversed a district court’s finding of liability for infringement that occurred prior to the filing of the action, explaining that notwithstanding the defendant’ admission that it was aware of the asserted patent, the actual notice requirement of § 287(a) is only satisfied when the recipient is informed of the identity of the patent and the activity that is believed to be an infringement. Lubby Holdings LLC v. Chung, Case No. 19-2286 (Fed. Cir. Sept. 1, 2021) (Dyk, J.) (Newman, J., dissenting in part).

Lubby Holdings sued Henry Chung for infringement of its patent relating to leak-resistant vaping products. Lubby sought damages for alleged pre-filing sales based on alleged compliance with the marking requirement of § 287. Chung raised the issue of whether Lubby’s products were properly marked as required by § 287(a), pointing to one of Lubby’s products as an example. At trial, Chung moved for judgment as a matter of law (JMOL) under Fed. R. Civ. Pro. 50(a), arguing that Lubby did not meet its burden to show that it complied with the § 287 marking requirement. The jury ultimately found Chung liable for direct infringement and awarded Lubby almost $900,000. Chung renewed his motion for JMOL under Rule 50(b) and moved for a new trial under Rule 59(a). After both motions were denied, Chung appealed.

Chung argued that there was no evidence that Lubby complied with the marking or notice requirements of § 287. Lubby argued that Chung did not meet his initial burden to point to products that were sold unmarked.

The Federal Circuit explained that under § 287(a), a patentee must properly mark its articles that practice its own invention, or the patentee is not entitled to damages for patent infringement that occurred before “actual notice” was given to an alleged infringer. The Court noted that once Chung met the “low bar” burden bar under Artic Cat to “articulate the products he believed were unmarked patented articles, the burden of proving compliance with the marking requirement is on the patentee.” The Court explained that Chung met this burden by specifically pointing to Lubby’s J-Pen Starter Kit. The Court continued that the burden shifted to Lubby, and Lubby failed to present any evidence that its products were properly marked or that its products did not practice its invention. As a result, Lubby could only recover damages for the period after Chung was provided with “actual notice.”

The Federal Circuit explained that actual notice under § 287(a) requires that the recipient be informed “of the identity of the patent and the activity that is believe to be an infringement, accompanied by a proposal to abate the infringement.” The Court further explained that it is irrelevant whether the defendant knew of the patent or knew of its own infringement. As applied to this case, the Court found that it was not relevant that Lubby told Chung that he could not use the patented technology, or that Chung [...]

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USPTO Conducting Patent Eligibility Jurisprudence Study

At the request of Senators Thom Tillis (R-NC), Marie Hirono (D-HI), Tom Cotton (R-AR) and Chris Coons (D-DE), the US Patent & Trademark Office (USPTO) is undertaking a study on the current state of patent eligibility jurisprudence in the United States and how the current jurisprudence has impacted investment and innovation, particularly in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods and pharmaceutical treatments. On July 9, 2021, the USPTO issued a Federal Register Notice seeking public input on these matters to assist in preparing the study. The deadline for submitting written comments is September 7, 2021.

The Federal Register Notice included 13 concerns on which comments were requested:

  1. Explain how the current state of patent eligibility jurisprudence affects the conduct of business in your technology areas, and identify your technology areas.
  2. Explain what impacts you have experienced as a result of the current state of patent eligibility jurisprudence in the United States. Include impacts on as many of the following areas as you can, identifying concrete examples and supporting facts when possible:
    1. patent prosecution strategy and portfolio management;
    2. patent enforcement and litigation;
    3. patent counseling and opinions;
    4. research and development;
    5. employment;
    6. procurement;
    7. marketing;
    8. ability to obtain financing from investors or financial institutions;
    9. investment strategy;
    10. licensing of patents and patent applications;
    11. product development;
    12. sales, including downstream and upstream sales;
    13. innovation and
    14. competition.
  3. Explain how the current state of patent eligibility jurisprudence in the United States impacts particular technological fields, including investment and innovation in any of the following technological areas:
    1. quantum computing;
    2. artificial intelligence;
    3. precision medicine;
    4. diagnostic methods;
    5. pharmaceutical treatments and
    6. other computer-related inventions (e.g., software, business methods, computer security, databases and data structures, computer networking, and graphical user interfaces).
  4. Explain how your experiences with the application of subject matter eligibility requirements in other jurisdictions, including China, Japan, Korea, and Europe, differ from your experiences in the United States.
  5. Identify instances where you have been denied patent protection for an invention in the United States solely on the basis of patent subject matter ineligibility, but obtained protection for the same invention in a foreign jurisdiction, or vice versa. Provide specific examples, such as the technologies and jurisdictions involved, and the reason the invention was held ineligible in the United States or other jurisdiction.
  6. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to modify or shift investment, research and development activities, or jobs from the United States to other jurisdictions, or to the United States from other jurisdictions. Identify the relevant modifications and their associated impacts.
  7. Explain whether the state of patent eligibility jurisprudence in the United States has caused you to change business strategies for protecting your intellectual property (e.g., shifting from patents to trade secrets, or vice versa). Identify the changes and their associated impacts.
  8. Explain whether you have changed your behavior with regard to filing, purchasing, licensing, selling, or maintaining patent applications and patents in the United States as a result of [...]

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Submarine Sunk: Patent Prosecution Laches Pops GATT Bubble

Addressing for the first time whether the US Patent & Trademark Office (PTO) can assert prosecution laches as a defense in a civil action brought under 35 U.S.C. §145, the US Court of Appeals for the Federal Circuit held that the PTO could assert prosecution laches as a defense against four patent applications in a case where the plaintiff delayed presenting the claims for these applications over a period of at least 10 years. Hyatt v. Hirshfeld, Case Nos. 2018-2390; -2391; -2392; 2019-1038; -1039; -1049; -1070 (Fed. Cir. June 1, 2021) (Reyna, J.)

Gilbert Hyatt is well known for having built a prolific patent application portfolio based on nearly 400 initial filings made just before the United States changed from an issuance-based patent exclusivity system to a filing-based patent exclusivity system under the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). By 2003, those 400 initial filings had exploded into 45,000 independent claims. Hyatt’s applications were so labor intensive that the PTO developed a separate examining unit specifically dedicated to their review. Many of these applications have been rejected.

After the PTO finally rejected four of Hyatt’s computer software patent applications, in 2005 Hyatt filed a § 145 action in the district court. Throughout the litigation, the PTO argued that Hyatt had routinely delayed prosecuting his patent applications and never complied with his verbal agreement with the PTO to streamline each application to apply for only one invention. Ultimately, after a five-day bench trial, the district court found that the PTO failed to prove it had taken sufficient action to advance prosecution of Hyatt’s applications. The PTO appealed.

Resolving the threshold issue on appeal of whether prosecution laches is even available to the PTO in a § 145 action, the Federal Circuit explained that the right to assert laches as an affirmative defense flows naturally from the PTO’s rights to reject applications based on laches and defend such rejections on appeal in the Federal Circuit on the same grounds. Any other conclusion, the Court recognized, would create incongruence and undermine the PTO’s authority. Such a defense is available even if raised for the first time in the district court, as “§145 actions open the door to new evidence.”

The Court found significant errors in the district court’s application of prosecution laches law. First, the Federal Circuit held that the district court too narrowly focused on the PTO’s specific conduct without considering the totality of the circumstances, including delays caused by Hyatt’s sweeping amendments and prosecution of other patent applications, as well as the relative costs and burdens of examining Hyatt’s gargantuan application portfolio. The Court was particularly critical regarding the district court’s assignment of blame to the PTO in its attempts to manage the unwieldy task before it.

After reviewing the evidence presented by the PTO, the Federal Circuit found that the PTO had amassed significant evidence of Hyatt’s delay of prosecution of his applications—i.e., “patterns of prosecution conduct [that] created a perfect storm that overwhelmed the [...]

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2G or Not 2G: Patent License Applies to Future Generation Wireless Networks

In interpreting a patent license agreement originally drafted in the era of third generation (3G) cellular networks, the US Court of Appeals for the Federal Circuit found that the license agreement covered subsequent wireless network generations, affirming a district court decision that infringement claims were barred by the license agreement and the doctrine of patent exhaustion. Evolved Wireless, LLC v. HTC Corp., Case Nos. 20-1335, -1337, -1339, -1340, -1363 (Fed. Cir. Jan. 26, 2021) (Dyk, J.) However, the Court vacated-in-part the district court’s decision and remanded for findings based on supplemental evidence of the license’s termination.

In order for cellular wireless networks to work properly, each component within the network must operate according to a shared set of standards. Early generation wireless networks were specific to a particular geographic location. Subsequent “generations” became harmonized according to global standards set by international organizations. Despite some harmonization, two separate 3G standards existed, known as WCDMA and CDMA2000. The fourth generation (4G) addressed this dichotomy by harmonizing newer technologies into a single standard known as Long Term Evolution (LTE). Nonetheless, devices exist that may be compatible with one or more 3G or 4G standards. These are referred to as “single-mode” or “multi-mode” devices depending on their compatibility characteristic. Patents that cover one or more technologies necessary for standards harmonization are referred to as standard-essential patents (SEPs) and must be licensed on fair, reasonable and non-discriminatory terms.

LG Electronics developed a patent that describes a method for handing over a mobile device from one cell tower to another under the LTE standard. LG subsequently declared the patent to be essential to the LTE standard and granted a license to Qualcomm, a developer and supplier of wireless components. LG then sold the patent to TQ Lambda, which sold it to Evolved Wireless. Evolved filed infringement lawsuits against various mobile device manufacturers, all of which incorporated Qualcomm components in their accused products. Because the patent remained subject to the LG-Qualcomm license, the central question was whether the accused products fell within the scope of the license agreement.

The license agreement did not identify specific patents, but granted Qualcomm and its customers the right to use LG’s patents that are “technically or commercially necessary to make, sell, or use a ‘subscriber unit,'” defined in the license as “a Complete CDMA Telephone or a CDMA Modem Card, and any subsequent generation products.” The district court found that the accused products were covered by the license agreement and granted summary judgment in favor of the defendants under the theory that the license agreement authorized Qualcomm’s use of the patent and that the doctrine of patent exhaustion precluded an infringement action against Qualcomm’s customers (i.e., the defendants). Evolved appealed.

On appeal, Evolved argued that the accused products did not meet the definition of “subscriber units” and that it had submitted supplemental evidence that the license had been terminated that the district court had ignored. Evolved argued that that term “subsequent generation products” in the license did not include products that [...]

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Patent Extension Requires Board or Court Reversal, Multiple Examiner Actions Not Enough

The US Court of Appeals for the Federal Circuit affirmed a grant of summary judgment for the Director of the US Patent and Trademark Office (PTO), holding that the statutory language authorizing so-called “C-delay” patent term adjustment requires an adverse patentability finding that is reversed by a court or the Patent Trial & Appeal Board. Chudik v. Hirshfeld, Case No. 20-1833 (Fed. Cir. Feb. 8, 2021) (Taranto, J.) C-delay adds to a patent’s term to account for delay experienced during appellate review of an adverse patentability finding. C-delay does not apply when the examiner reopens examination after final rejection (in this case, four times over an 11-year period) because appellate review is not triggered when an examiner, and not the Board or a court, undoes a final unpatentability decision by reopening examination.

Chudik filed a patent application, and the examiner rejected all pending claims as unpatentable. Chudik declined to appeal, instead filing a request for continued examination. Over the next eight years, the examiner issued four more final rejections. After each rejection, Chudik filed a notice of appeal and opening brief, and after each notice of appeal, the examiner reopened prosecution rather than answering the appeal. The patent finally issued more than 11 years after Chudik filed the application. The PTO added time to the term of the patent for A-delay (where the PTO fails to meet certain prescribed deadlines) and B-delay (each day that the patent application’s pendency extends beyond three years), but not C-delay.

The C-delay provision of the Patent Act provides for a patent term adjustment where the delay is due to “appellate review by the [Board] or by a Federal Court in a case in which the patent was issued under a decision in the review reversing an adverse determination of patentability.” Chudik challenged the PTO’s calculation of the patent extension, arguing that he was entitled to C-delay patent term adjustment for the time his four notices of appeal were pending in the PTO. Chudik argued that the C-delay provision’s “appellate review” included the examiner’s decision to undo her final action through a reopening of prosecution. The PTO rejected that argument, concluding that the C-delay provision did not apply because the Board’s jurisdiction over the appeals never attached and no Board or reviewing court reversed an adverse determination of patentability.

Chudik then sued the PTO director in federal district court, again arguing that “appellate review” referred to the Board’s entire review process, starting when the notice of appeal is filed. Chudik also argued that “a decision in the review reversing an adverse determination of patentability” covered an examiner’s own decision, through a reopening of prosecution. Although characterizing it as “based on a reasonable construction of statutory text,” the court rejected Chudik’s challenge. Applying Chevron, the district court held that the PTO’s position must be affirmed because that position was reasonable. Chudik appealed to the Federal Circuit.

The Federal Circuit affirmed the district court’s decision, finding that the PTO’s interpretation of the C-delay provision’s statutory language was [...]

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