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Patent Infringement Verdict Nixed over Judge’s Stock Ownership

by Jodi Benassi | Jul 14, 2022 | Patents

The US Court of Appeals for the Federal Circuit reversed a district court’s opinions and orders and remanded the case for further proceedings before a different district court judge because the original judge had failed to divest all financial interests in the case. Centripetal Networks, Inc. v. Cisco Systems, Inc., Case No. 21-1888 (Fed. Cir. June 23, 2022) (Dyk, Taranto, Cunningham, JJ.)

Centripetal sued Cisco for patent infringement. The original district court judge presided over a 22-day bench trial, which included a more than 3,500-page record, 26 witnesses and more than 300 exhibits. The court heard final arguments on June 25, 2020. While the case was still pending before the district court, the judge learned that his wife owned Cisco stock, valued at $4,687.99. The district court judge notified the parties on August 12, 2020, that he had discovered that his wife owned 100 shares of Cisco stock. He stated that his wife purchased the stock in October 2019 and had no independent recollection of the purchase. He explained that at the time he learned of the stock, he had already drafted a 130-page draft of his opinion on the bench trial, and virtually every issue had been decided. He further stated that the stock did not—and could not have—influenced his opinion on any of the issues in the case. Instead of selling the stock, which might have implied insider trading given his knowledge of the forthcoming order, the judge placed it in a blind trust. Under the terms of the trust, the judge was to be notified when the trust assets had been completely disposed of or when their value became less than $1,000.

Centripetal had no objections. Cisco, however, filed a motion for recusal under 28 U.S.C. § 455(a) and (b)(4). The judge ordered Centripetal to file a response. On October 2, 2020, the court denied Cisco’s motion for recusal. On October 5, 2020, the court issued a 167-page opinion and order containing the judge’s findings that Cisco willfully infringed the asserted claims of the patents-at-issue and awarded Centripetal damages of more than $755 million, pre-judgment interest of more than $13 million and a running royalty of 10%. Cisco moved for amended findings and judgment under Rule 52(b) or a new trial under Rule 59(a)(2). The court denied both motions. Cisco appealed the district court’s findings and asserted that the judge was required to recuse himself under 28 U.S.C. § 455(b) absent divestiture under § 455(f) (the only exception to the bright line rule that a federal judge is disqualified based on a known financial interest in a party).

On appeal, the Federal Circuit addressed two issues: whether the district court judge was relieved of his duty to recuse under § 455(b)(4) because his wife had divested herself of her interest in Cisco under § 455(f), and, if the requirements of § 455(f) were not satisfied, a determination as to the proper remedy.

The Federal Circuit analyzed whether placement of the stock in a blind trust satisfied the [...]

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A Goldilocks Dilemma: What is the “Right Amount” When Pleading Patent Infringement Cases?

by Christopher M. Bruno | Jul 22, 2021 | Patents

Addressing the issue of pleading requirements for patent infringement cases, the US Court of Appeals for the Federal Circuit clarified that patentees need not prove their case at the pleading stage on an element-by-element basis but can plead themselves out of court by presenting facts that are inconsistent with their infringement claims. Bot M8 LLC v. Sony Corp. of Am., Case No. 20-2218 (Fed. Cir. July 13, 2021) (O’Malley, J.)

Bot M8 filed suit against Sony and alleged that Sony’s PlayStation 4 and PlayStation network infringed Bot M8’s asserted patents, which are all generally directed to casino, arcade and video games. The asserted patents describe an “authentication mechanism to verify that a game program has not been manipulated,” a “gaming machine [that stores] gaming information and a mutual authentication program on the same medium,” a “gaming device with a fault inspection system,” and a “gaming machine that changes future game conditions based on players’ prior game results.”

The district court sua sponte instructed Bot M8 to file an amended complaint, “specifying ‘every element of every claim that [Bot M8] say[s] is infringed’” and to reverse engineer Sony’s products to prove its case. Bot M8 did not challenge the district court’s order and agreed to file claim charts. Following Bot M8’s service of the first amended complaint, Sony filed a motion to dismiss, which the district court granted. On an unrelated patent, both parties filed summary judgment motions. The district court entered final judgment in favor of Sony, and Bot M8 subsequently appealed both the dismissals and the grant of summary judgment.

On appeal, the Federal Circuit emphasized that “patentees need not prove their case at the pleading stage” and thus found that the district court had erred by misapplying Iqbal and Twombly. Apparently exasperated by the need to reiterate the proper pleading standard, the Court emphasized that “[a] plaintiff is not required to plead infringement on an element-by-element basis.”

While reaffirming a standard favorable to patentees, the Federal Circuit explained that for a complaint to pass muster under Iqbal and Twombly, it still must provide sufficient factual allegations to “articulate why it is plausible that the accused product infringes the patent claim.” Thus, “a patentee may subject its claims to early dismissal by pleading facts that are inconsistent with the requirements of its claims.” The Court explained that Bot M8’s allegations conflicted with claim 1 of Bot M8’s patent. Whereas that claim required a motherboard separate from the authentication and game programs, Bot M8’s claim charts expressly alleged that “[t]he authentication program for the PlayStation 4 hard drive, operating system, and games is stored on PlayStation 4 . . . Serial Flash Memory” and that “[t]he PlayStation 4 motherboard contains flash memory.” According to the Court, it was “not even possible, much less plausible” for Bot M8 to prevail because of this inconsistency between Bot M8’s allegations and its patent with respect to the location of the authentication and game programs relative to the motherboard. By pleading “too much rather [...]

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Federal Circuit Puts Patent Infringement Award/Injunction Back in the Box

by Jodi Benassi | May 13, 2021 | Patents

The US Court of Appeals for the Federal Circuit, exploring the use of Federal Rule of Civil Procedure 60(b)(3) under Ninth Circuit law, affirmed a district court’s ruling setting aside a monetary damages judgment and an injunction for fraudulent misrepresentations by a corporate patent owner’s president concerning prior art. Cap Export, LLC, et al. v. Zinus, Inc., et al., Case No. 20-2087 (Fed. Cir. May 5, 2021) (Dyk, J.)

In 2016, Cap Export sued Zinus seeking a declaratory judgment that claims of a patent owned by Zinus were invalid and not infringed. Zinus countersued, alleging that Cap Export infringed its patent covering a bed frame that can be packed into the headboard for compact shipping (known as a “bed in a box”). Zinus filed a motion for partial summary judgment of no invalidity of certain claims, and the court allowed Cap Export to depose Zinus’s then-president and “testifying technical expert,” Colin Lawrie. During the deposition, Lawrie denied knowledge of the existence of prior art. The district court concluded that the claims were not invalid and entered a judgment and permanent injunction against Cap Export.

Shortly thereafter, Zinus sued another company for patent infringement, and Cap Export discovered an exhibit on the docket describing a sale to Zinus of a bed that had all of the components of the bed (except the headboard) packed inside a zippered compartment in the headboard. Cap Export contacted the third party that sold the prior art beds to Zinus and obtained an invoice bearing the signature of Lawrie, the same witness who denied knowledge of such beds during his deposition. Cap Export moved to vacate the judgment and injunction on the grounds of fraud and misrepresentation under Rule 60(b)(3). After the district court granted the motion, Zinus appealed.

The Federal Circuit analyzed the issue under Ninth Circuit law, which requires evidence that the verdict was obtained through fraud, misrepresentation or other misconduct, and that the conduct prevented the losing party from fully and fairly presenting its defense. Ninth Circuit law further requires that the fraud was not discoverable by due diligence before or during the proceedings. Zinus argued that Cap Export’s counsel should have discovered the emails if they had exercised due diligence and propounded standard document requests for a patent case. Cap Export did not dispute that its written discovery served on Zinus did not specifically seek prior art and that it did not depose the inventor of the patent. Cap Export also did not dispute that although Lawrie’s deposition was taken, it was not taken under Federal Rule of Civil Procedure 30(b)(6).

The Federal Circuit explained that the issue was not whether Cap Export’s conduct fell below the standard of care for attorneys practicing patent litigation, but rather whether a reasonable company in Cap Export’s position should have had reason to suspect the fraud—i.e., that Lawrie had testified falsely—and, if so, whether it took reasonable steps to investigate. The Court found no showing that there was reason to suspect that Lawrie’s statements were [...]

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Bad Faith Required to Prevent Speech Regarding Potential Patent Infringement

by Lisa P. Rumin | Apr 15, 2020 | Patents

The US Court of Appeals for the Federal Circuit found that a district court abused its discretion in granting a preliminary injunction enjoining a patent holder from making claims of patent infringement without finding that those infringement claims were made in bad faith. The Federal Circuit reversed, vacated and remanded the district court’s decision. Myco Indus., Inc. v. BlephEx, LLC, Case No. 2019-2374 (Fed. Cir. Apr. 3, 2020) (O’Malley, J.).

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A Mixed Bag on New Rules – Juggling Copyright Preclusion and Patent Infringement

by McDermott Will & Emery | Jan 15, 2020 | Copyrights, Patents

Addressing issues of copyright and patent infringement, the US Court of Appeals for the Federal Circuit found that the Federal Insecticide, Fungicide, and Rodenticide Act did not preempt copyright protection and that patent infringement under 35 U.S.C. § 271(g) does not require that the claimed process be performed by a single entity. Syngenta Crop Protection, LLC v. Willowood, LLC, Case Nos.18-1614, -2044 (Fed. Cir., Dec. 18, 2019) (Reyna, J.).

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Free Speech Shines Bright, Illuminates Patent Owner’s Right to Allege Infringement

by Anisa Noorassa | Mar 2, 2023 | Patents

The US Court of Appeals for the Federal Circuit reversed a district court’s preliminary injunction prohibiting a patent owner from communicating its view that a competitor infringed, finding that the speech restriction was improper because the infringement assertions were not objectively baseless. Lite-Netics, LLC v. Nu Tsai Capital LLC, Case No. 23-1146 (Fed. Cir. Feb. 17, 2023) (Lourie, Taranto, Stark, JJ.)

Lite-Netics and Nu Tsai Capital d/b/a Holiday Bright Lights (HBL) compete in the market for holiday string lights. Both companies use similar magnetic mechanisms that allow users to secure the end of the lights. Lite-Netics owns several patents that describe and claim magnetically secured decorative lights. In June 2017, Lite-Netics sent a cease-and-desist letter to HBL demanding that it stop selling lights alleged to infringe Lite-Netics’s patents. After remaining silent for five years, Lite-Netics sent another cease-and-desist letter in April 2022 demanding that HBL either explain why its products did not infringe the Lite-Netics patents or stop selling the products.

When HBL refused to stop selling the allegedly infringing products, Lite-Netics sent communications to HBL’s customers notifying them of their infringement claim and threatening “all legal rights and remedies” to stop the sale of HBL’s products. Lite-Netics then filed a lawsuit against HBL for infringement of the patents. HBL asserted counterclaims, including tortious interference with business relationships, defamation under Nebraska law and bad faith patent-infringement communications. HBL also sought a preliminary injunction to prevent Lite-Netics from publishing further accusatory statements. Finding that HBL would likely succeed on its tortious interference and defamation claims and that Lite-Netics’ infringement allegations were “objectively baseless,” the district court granted the preliminary injunction. Lite-Netics appealed.

The Federal Circuit reversed the district court, finding that in cases where an injunction restricts a party’s rights to First Amendment protected speech about its federal patent rights, federal law preempts state tort law. The Court explained that federal law requires a higher “bad faith” standard of proof for a preliminary injunction that would impinge on those federal rights. The Court found that HBL had failed to show that Lite-Netics’s allegations and the publication of its allegations were made in bad faith or that those allegations were objectively baseless. The Court therefore reversed and remanded to the district court for further proceedings.

ANDA Filing Alone Insufficient for Induced Infringement of Method Patent

by Tessa Kroll | Jan 5, 2023 | Patents

The US Court of Appeals for the Federal Circuit upheld a district court’s findings of invalidity and noninfringement in a Hatch-Waxman case involving two sets of method patents directed to modulating dosages of pirfenidone, a drug used to treat idiopathic pulmonary fibrosis (IPF). The Court found that the first set of patents were obvious over the prior art and standard medical practice, while the second set were not directly infringed in light of actual physician prescription practice. Genentech, Inc. v. Sandoz Inc., Case No. 22-1595 (Fed. Cir. Dec. 22, 2022) (Newman, Lourie, Prost, JJ.) (Newman, J., dissenting).

Sandoz submitted two abbreviated new drug applications (ANDAs) for approval to market a generic version of pirfenidone, which Genentech sells under the brand name Esbriet®. Genentech sued Sandoz under the Hatch-Waxman Act, asserting that Sandoz’s generic version would induce infringement of two sets of patents: one directed to modifying dosages of pirfenidone in patients with abnormal liver biomarkers (LFT patents), and the other directed to avoiding adverse interactions in patients also taking fluvoxamine (DDI patents).

The LFT patents are directed to methods of administering pirfenidone to a patient who has exhibited Grade 2 abnormalities in liver function biomarkers alanine transaminase (ALT) and/or aspartate transaminase (AST) in response to pirfenidone. The LFT patents generally recite the following administration options:

Temporarily reducing the dose before returning to the full dose
Maintaining the full dose
Reducing the dose
Temporarily discontinuing pirfenidone before returning to the full dose
Temporarily discontinuing pirfenidone before returning to a reduced dose.

Sandoz’s proposed label included a “Dosage Modification due to Elevated Liver Enzymes” section, which stated that if a patient exhibits grade 2 elevations of ALT and/or AST, “[t]he full daily dosage may be maintained, if clinically appropriate, or reduced or interrupted (e.g., until liver chemistry tests are within normal limits) with subsequent re-titration to the full dosage as tolerated.” Genentech argued that these instructions constituted induced infringement of the LFT patents. The district court disagreed and held that the LFT patents were obvious over the prior art and standard medical practice and that the defendant would not induce infringement because the labels “merely described” the infringing uses but did not recommend them.

The DDI patents are directed to methods for avoiding adverse interactions between pirfenidone and fluvoxamine and generally involve the steps of discontinuing fluvoxamine or modifying the dose of pirfenidone and continuing fluvoxamine. Sandoz’s proposed label warned of the adverse interactions between pirfenidone and fluvoxamine and stated that fluvoxamine should be discontinued prior to administering pirfenidone or the dose of pirfenidone should be reduced. Genentech similarly argued that these instructions constituted induced infringement of its DDI patents, but the district court held that there was insufficient evidence for infringement because Genentech had not shown that a patient would actually be prescribed both pirfenidone and fluvoxamine in practice.

Genentech appealed the district court’s holdings with respect to both the LFT and DDI patents.

LFT Patents

The Federal Circuit first observed that “varying doses in response to the occurrence [...]

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Eighth Circuit Defends Use of Term “Patent Troll,” Vacates Injunction against Infringement Defendant

by Paul Devinsky | Mar 24, 2022 | Patents

The US Court of Appeals for the Eighth Circuit vacated an injunction restraining defendants from engaging in certain allegedly harassing conduct because there was no evidence tying the defendants to the alleged misconduct and reassigned the case to a new district judge to obviate any doubts about the judge’s impartiality. Tumey v. Mycroft AI, Inc., Case No. 21-1975 (8th Cir. Mar. 4, 2022) (Erickson, J.)

Tod Tumey is a lawyer who represents Voice Tech Corporation in patent litigation against Mycroft AI, an open-source network focusing on voice assistance technology. Tumey separately sued Mycroft on his own behalf, alleging that Mycroft retaliated against him for representing Voice Tech by launching or inspiring a series of cyberattacks, hacking attempts and harassing phone calls (“heavy-breathing phone calls”) against Tumey, his law firm and his family.

Mycroft had publicized its involvement in the underlying patent litigation and shared negative views about “bogus patents” and “patent trolls,” including statements that it is “better to be aggressive and ‘stab, shoot, and hang’ them, then dissolve them in acid.” Mycroft posted on its blog links to Tumey’s “confidential correspondence,” as well as documents in the underlying patent infringement lawsuit. Mycroft also posted updates on litigation developments with headlines such as “Mycroft Defeats Patent Trolls … Again … For Now.” The company cautioned patent trolls to “stay away” from Mycroft because “You’ll get your ass kicked,” and posted that “Rather than pay the troll toll, we decided to accept the fight.” In the underlying patent litigation, Voice Tech moved for an order requiring decorous and civil conduct by the parties, including a request that Mycroft cease using the term “patent troll.” The district court granted the order, which Mycroft viewed as sufficiently narrow and limited in scope such that it was willing to comply with the restrictions rather than appeal.

In the case brought on his own behalf, Tumey sought a temporary restraining order or, in the alternative, a preliminary injunction to prevent the cyberattacks, phishing and harassing phone calls that he and his family were experiencing and for which Tumey believed Mycroft was responsible. Mycroft opposed the proposed temporary restraining order (TRO), arguing that there was no evidence to attribute any of the alleged conduct to Mycroft. Mycroft also submitted sworn declarations averring that no one associated with Mycroft was involved in cyberattacks or harassment. The district court set a teleconference on the “Motion for Temporary Restraining Order.” About an hour before the set time for the hearing, Tumey circulated to the court and counsel a new proposed order, now styled as a preliminary injunction (PI). At the hearing, Mycroft objected to converting the request for a TRO to a PI hearing. The district court overruled the objection and heard testimony from several witnesses, including Tumey and that of an expert retained by Tumey who testified that he had not found any forensic evidence to attribute any of the cyberattacks or harassment to anyone associated with Mycroft. When Tumey was asked about the results of the expert’s [...]

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

by Paul Devinsky | Sep 16, 2021 | Patents

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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Knowledge of Patent, Evidence of Infringement Are Necessary, but Not Sufficient, to Establish Willfulness

by Paul Devinsky | Mar 11, 2021 | Patents

Addressing claim construction, enablement, damages and willfulness, the US Court of Appeals for the Federal Circuit found that evidence of a defendant’s knowledge of the asserted patent and proof of infringement were, by themselves, legally insufficient to support a finding of willfulness. Bayer Healthcare LLC v. Baxalta Inc., Case No. 19-2418 (Fed. Cir. Mar. 1, 2021) (Stoll, J.)

Bayer owns a patent on certain recombinant forms of human factor VII (FVIII), a protein that is critical for blood coagulation. Recombinant FVIII is useful as a treatment for coagulation disorders, primarily Hemophilia A. Natural FVIII has a short half-life, making therapeutic administration expensive and inconvenient. Adding polyethylene glycol (a process known as PEGylating) to FVIII at random sites was found to increase the protein’s half-life but reduce its function. Bayer invented FVIII that is PEGylated in a specific region (the B-domain) so that it retains its function and maintains the longer half-life.

After Baxalta developed a PEGylated FVIII therapeutic, Adynovate®, Bayer sued Baxalta for infringement of its patent. During claim construction, the district court construed the claim preamble “an isolated polypeptide conjugate” to mean “a polypeptide conjugate where conjugation was not random,” finding that Bayer had disclaimed conjugates with random PEGylation. The district court also construed “at the B-domain” to mean “attachment at the B-domain such that the resulting conjugate retains functional FVIII activity,” rejecting Baxalta’s proposal of “at a site that is not any amine or carboxy site in FVIII and is in the B-domain” because Bayer had not disclaimed PEGylation at amine or carboxy sites. Before trial, Baxalta moved for clarification of the term “random” in the construction of the preamble, but the district court “again” rejected Baxalta’s argument that Bayer defined “random” conjugation as “any conjugation at amines or carboxy sites.”

Before trial, Baxalta moved to exclude the testimony of Bayer’s damages expert regarding his proposed reasonable-royalty rate. The expert had defined a bargaining range and proposed to testify that the royalty rate should be the midpoint of the range based on the Nash Bargaining Solution. The district court permitted the expert to testify as to the bargaining range but excluded the opinions regarding the midpoint as insufficiently tied to the facts of the case.

After trial, the district court granted Baxalta’s pre-verdict motion for judgment as a matter of law (JMOL) of no willful infringement. Subsequently, the jury returned a verdict that the claims were infringed and not invalid for non-enablement, and awarded damages based on an approximately 18% royalty rate for the period for which the parties had presented sales information. Baxalta moved for JMOL or a new trial on infringement, enablement and damages. Bayer moved for pre-verdict supplemental damages for the period between the presented sales data and the date of judgment, and for a new trial on the issue of willfulness. The district court denied all of Baxalta’s motions and Bayer’s motion for new trial, but granted Bayer’s motion for supplemental damages, applying the jury’s ~18% rate to sales data for the later period. [...]

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