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

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

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

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

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

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

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

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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Patent Owner’s Disavowal of Appeal from District Court’s Noninfringement Judgment Moots IPR Appeal

Addressing the standard for mootness in inter partes review (IPR) proceedings following a district court noninfringement judgment, the US Court of Appeals for the Federal Circuit held that a petitioner’s IPR appeal was moot after the patent owner decided not to appeal the final judgment of noninfringement. ABS Global, Inc. v. Cytonome/ST, LLC, Case No. 19-2051 (Fed. Cir., Jan. 6, 2021) (Stoll, J.) (Prost, C.J., dissenting in part).

In June 2017, Cytonome/ST filed a complaint against ABS asserting infringement of six patents, including the patent of interest in this case. ABS filed a petition for IPR of all claims of the patent. In April 2019, the Patent Trial and Appeal Board (PTAB, the Board) issued its final written decision invalidating certain claims of the patent. Two weeks later, the district court granted ABS partial summary judgment, holding that the accused products did not infringe any of the asserted patent’s claims. In June 2019, ABS appealed the PTAB’s final written decision. In a briefing before the Federal Circuit, Cytonome/ST’s counsel filed an affidavit stating that Cytonome/ST “has elected not to pursue an appeal of the district court’s finding of non-infringement as to the patent and hereby disclaims such an appeal.” In June 2020, the district court entered final judgment, including as to non-infringement of the patent.

The Federal Circuit dismissed ABS’ appeal of the PTAB’s final written decision on the ground that the appeal was moot in view of the district court’s non-infringement judgment. The Court characterized the question as one under the voluntary-cessation doctrine. In the context of intellectual property infringement cases, the voluntary-cessation doctrine requires the property owner claiming mootness to prove that the “allegedly wrongful behavior could not reasonably be expected to recur,” i.e., that it will not assert the intellectual property right against the same accused products again. If it does, the burden shifts to the accused infringer to show that it “engages in or has sufficiently concrete plans to engage in activities” that would not be covered by the property owner’s non-assertion decision.

Applying the doctrine, the Federal Circuit concluded that Cytonome/ST could not reasonably be expected to assert infringement of the patent against ABS because ABS had already secured a district court judgment that the accused products do not infringe and Cytonome/ST disclaimed any appeal of the non-infringement judgment. In effect, ABS was insulated from liability for infringement, including for future infringement for products that are “essentially the same” as ABS’ currently accused products pursuant to the Kessler doctrine. Further, the Court found that ABS had not demonstrated it could reasonably expect Cytonome/ST to sue it for infringement of the patent in the future as ABS had not shown it had current or concrete future plans to engage in activities not covered by Cytonome/ST’s disavowal: “Cytonome’s disavowal of its right to appeal the summary judgment of noninfringement ‘estops Cytonome from asserting liability against ABS for infringement of the…patent claims in connection with the accused products, thereby allowing ABS to make, use, and sell those products [...]

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Can’t Hide Behind Minor Clerical Error to Escape Willful Infringement Verdict

The US Court of Appeals for the Federal Circuit affirmed a district court decision correcting a clerical error in a claim. Pavo Solutions LLC v. Kingston Technology Company, Inc., Case Nos. 21-1834 (Fed. Cir. June 3, 2022) (Lourie, Prost, Chen, JJ.)

The Pavo patent is generally directed to a “flash memory apparatus having a single body type rotary cover.” CATR Co., later substituted by Pavo, sued Kingston for infringing the Pavo patent. Supported by the patent specification and prosecution, the district court judicially corrected the claim language in its claim construction order to read “pivoting the cover with respect to the flash memory main body,” not “pivoting the case with respect to the flash memory main body” (change emphasized). Pavo’s damages expert, Bergman, presented a profit-based model of reasonable royalty damages, relying on an earlier settlement agreement between CATR and IPMedia to arrive at a profit split of 18.75%, amounting to 40 cents/unit for Kingston. The jury returned a verdict of willful infringement and awarded Pavo a 20% reasonable royalty.

Judicial Correction

The Federal Circuit addressed and affirmed three issues on appeal, the first being that the district court approximately corrected an obvious minor clerical error in the claims. Correction is appropriate “only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” In deciding whether a particular correction is appropriate, a court “must consider how a potential correction would impact the scope of a claim and if the inventor is entitled to the resulting claim scope based on the written description of the patent.”

The Federal Circuit decided that the error was clear from the full context of the claim language, supported by the specification, and did not broaden the claim scope. Additionally, the correction was not subject to reasonable debate. Judicial correction “is merely giving to it the meaning which was intended by the applicant and understood by the examiner.” Kingston’s alternative correction would just reverse the order in which the structural components appear in the claim.

The prosecution history also did not suggest a different interpretation of the claim. The applicant and the examiner consistently characterized the claims as describing pivoting the case within the cover, which both the Patent Trial & Appeal Board (Board) and the court recognized. Each reviewing body understood the nature and scope of the invention consistent with correcting “case” to “cover.” Kingston argued that the Board denied the applicant’s request to correct the language, but the denial was on procedural grounds.

Willfulness

Second, the Federal Circuit determined that Kingston could form requisite intent to support a willful infringement verdict despite its arguments that it reasonably relied on not infringing the claims as originally written, and it could not anticipate that a court would later correct the claims. However, “reliance on an obvious minor clerical error in the claim language is not a defense to willful infringement.” By definition, [...]

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Time Bar Dismissal Saves Patent Found Unpatentable

The US Court of Appeals for the Federal Circuit dismissed an appeal, finding it lacked appellate jurisdiction to review a Patent Trial & Appeal Board (Board) decision to vacate an institution decision of inter partes review (IPR) based in part on the Board’s time bar evaluation. Atlanta Gas Light Co. v. Bennet Regulator Guards, Inc., Case No. 21-1759, (Fed. Cir., May 13, 2022) (Lourie, Stoll, JJ.) (Newman, J. dissenting)

This is the third time this case has been before the Federal Circuit. On July 18, 2012, Bennett served Atlanta Gas with a complaint alleging infringement of its patent. The district court dismissed the complaint without prejudice. More than two and a half years after service of the complaint, Atlanta Gas filed an IPR petition. Bennett argued that Atlanta Gas’s IPR petition was time barred, but the Board disagreed, instituted review of all claims and found every claim unpatentable in a final written decision. After receiving the final decision, Bennett sought sanctions for Atlanta Gas’s failure to notify the Board of Atlanta Gas’s changed parentage. On appeal, the Federal Circuit vacated the Board’s final written decision, finding the IPR time barred under 35 U.S.C. §315(b). (Bennett Regulator Guards, Inc. v. Atlanta Gas Light Co.). The Supreme Court thereafter issued its decision in Thryv, Inc. v. Click-To-Call Tech, where it held that time bar determinations are not reviewable. On remand from the Supreme Court, the Federal Circuit affirmed the Board’s unpatentability decision, did not address the time bar decision and remanded the case back to the Board to finalize its order on sanctions (Bennett II). On remand, the Board vacated its institution decision in light of the US Patent & Trademark Office’s (PTO) changed policy on time bar evaluations and declined to award the requested sanctions. Atlanta Gas appealed.

The Federal Circuit dismissed the appeal for lack of jurisdiction. Atlanta Gas argued that the Board’s decision was a final sanctions decision that is reviewable under 28 U.S.C. § 1295(a)(4)(A) and that any portion of the Board’s determination beyond the sanctions award violated the Court’s mandate in Bennett II. Bennett countered that the Court lacked jurisdiction under 35 U.S.C. § 314(d) and the Supreme Court’s Thryv decision and that the Board’s decision was not inconsistent with the Bennett II mandate. The Court agreed, concluding that it lacked jurisdiction because the Board’s decision was based in part on its time bar evaluation and, therefore, was not purely a sanctions decision. Additionally, the Court found that the time bar determination was within the scope of the mandate, albeit mooting its determination of unpatentability.

Judge Newman dissented. In her view, the sanctions order was the only issue on appeal. She also pointed out the inconsistency with the Bennett II mandate, noting the contradiction in the Federal Circuit currently mooting the unpatentability decision with the Bennett II decision finding the patent unpatentable. She explained that denial of appellate review could be seen as authorizing the Board to vacate its final decisions [...]

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