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Blame the Lawyer: In Exceptional Case, Plaintiff’s Attorney Liable for Court and Appellate Fees

By David Mlaver on Apr 1, 2021
Posted In Patents

The US Court of Appeals for the Federal Circuit affirmed an award of attorneys’ fees against a plaintiff and his counsel, and further granted defendants’ motion for appellate attorneys’ fees and double costs where plaintiff had brought baseless claims, engaged in litigation misconduct and brought a frivolous appeal. Pirri v. Cheek, Case No. 20-1959 (Fed. Cir. Mar. 22, 2021) (non-precedential) (per curiam).

When Plaintiff saw Defendant present her patented idea for “online dating in reverse” on the television show “Shark Tank,” he knew that she had gotten the idea from his therapist, Richards, who had betrayed his confidence. Through his counsel, Plaintiff sued Richards as well as Defendant, her company and her co-inventors (whom he never served) (collectively, Cheek) for joint inventorship of the patent (Richards was not a named inventor), and several state law claims, including breach of fiduciary duty, fraud, conversion and unjust enrichment. At the initial pretrial conference, Plaintiff voluntarily dismissed some of the state law claims and the joint inventorship claim against Richards. The district court dismissed the remaining state law claims as “obviously time-barred,” leaving only the joint inventorship claim against Cheek. Defendant moved for Rule 11 sanctions, which the district court denied.

Plaintiff sought leave to amend the complaint to add several new defendants and claims, but the district court denied the motion as futile. Notwithstanding the dismissal of Richards from the suit, Plaintiff subpoenaed Richards’s employment records, but withdrew the subpoena when Richards moved to quash. Plaintiff requested a discovery extension, which the Court denied as relating to irrelevant material. Just before the close of discovery, Plaintiff moved for voluntary dismissal with prejudice. Defendant opposed the dismissal motion in order to seek fees, and the district court denied the motion. Six days later, Plaintiff renewed the motion for dismissal, arguing that the previous denial of Rule 11 sanctions collaterally estopped a fees award. Again, Defendant opposed, and the Court denied the motion.

Two months later, the district court held a pre-summary-judgment conference, before which it ordered Plaintiff to file a letter indicating whether and why he would oppose summary judgment. After declining on several occasions to concede summary judgment or identify any evidence supporting his claims, Plaintiff finally consented to summary judgment for Defendants, which the district court granted.

The district court later granted Defendant’s motion for fees, finding that the case was exceptional. Because Plaintiffs’ counsel had prepared, signed and filed all the relevant submissions, the district court held counsel jointly and severally liable for the award.

Plaintiff appealed, and Defendant moved for appellate fees and double costs.

The Federal Circuit affirmed the fee award, finding no abuse of discretion, and further found that the appeal was frivolous as argued in part because Plaintiff’s counsel distorted the factual and legal bases for the fees award and “leveraged inapposite legal doctrines to make arguments that can only be described as baffling.” The Court concluded that “[w]hen an appeal is frivolous as argued, we may hold a party’s counsel jointly and severally liable.”

Set Phase to Subject Matter Ineligible: More Accurate Haplotype Phase Method Still Abstract

By Amy Mahan on Apr 1, 2021
Posted In Patents

In an appeal from a final rejection of a pending application, the US Court of Appeals for the Federal Circuit held that claims directed to methods for determining “haplotype phase” were correctly rejected as subject matter ineligible. In Re: Board of Trustees of The Leland Stanford Junior University, Case No. 20-1288 (Fed. Cir. Mar. 11, 2021) (Reyna, J.)

This case was consolidated for the purposes of oral argument with In Re: The Board of Trustees of the Leland Stanford Junior University, Case No. 20-1012 (Stanford Part I). Both cases relate to methods of determining “haplotype phase” (a scientific way of describing the methodology for determining from which parent a particular allele (or gene) is inherited).

Stanford Part I related to a claimed method that utilized “linkage disequilibrium data” and “transition probability data” to increase the number of haplotype predictions made. In Stanford Part I, the Federal Circuit held that this claimed method for increasing the number of haplotype predictions made did nothing more than recite a haplotype phase algorithm and instruct users to “apply it,” similar to the claimed subject matter prohibited by Alice.

The claims at issue in this appeal were directed toward a method of improving the accuracy and efficiency of haplotype predictions, which involves “building a data structure describing a Hidden Markov Model,” and then “repeatedly randomly modifying at least one of the imputed initial haplotype phases” to automatically recompute the parameters of the Hidden Markov Model until the parameters indicate that the most likely haplotype phase is found. In addition to these mathematical steps, the claims recited the steps of receiving genotype data, imputing an initial haplotype phase, extracting the final predicted haplotype phase from the data structure and storing it in computer memory.

The examiner and then the Patent Trial & Appeal Board found that this claimed improved process was directed toward patent-eligible subject matter—a mathematical algorithm. Stanford appealed.

Applying the two-step Alice framework, the Federal Circuit first determined whether the claims were directed to an abstract mathematical calculation and thus directed to patent-ineligible subject matter under 35 USC § 101.

Stanford argued that the claimed process was not directed to a patent-ineligible abstract idea, but instead represented an improvement on a technological process—namely, an improvement in the efficiency of haplotype phase predictions that this mathematical algorithm could yield. The Federal Circuit found that Stanford had forfeited this argument by failing to raise it before the Board.

Stanford separately argued that another claimed advantage was that the claim steps resulted in more accurate haplotype predictions, rendering the claimed invention a practical application rather than an abstract idea. The Federal Circuit disagreed, explaining that the improvement in computational accuracy alleged here did not qualify as an improvement to a technological process, but rather was an enhancement to the abstract mathematical calculation of haplotype phase itself.

Next, under step two of the Alice inquiry, the Federal Circuit found that the claims did not include additional limitations that, when taken as a whole, provided an [...]

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The Road Less Traveled: IPR Denial Decisions Appealable via Mandamus

By Amol Parikh on Mar 24, 2021
Posted In Patents

The US Court of Appeals for the Federal Circuit concluded that while it did not have jurisdiction to consider the direct appeal of a Patent Trial & Appeal Board decision denying institution, it could review the decision under its mandamus jurisdiction. Mylan Laboratories Ltd. v. Janssen Pharmaceutica, N.V., Case No. 20-1071 (Fed. Cir. Mar. 12, 2021) (Moore, J.)

In 2019, Janssen sued Mylan in district court for infringement of one patent. Less than six months later, Mylan petitioned the Board for inter partes review (IPR) of that patent. Opposing institution, Janssen argued that the IPR would be an inefficient use of Board resources because of two co-pending district court actions (one involving Mylan and one involving a third party) that implicated the same validity issues as the IPR petition. Janssen also argued that those district court actions would likely reach final judgment before any IPR final decision. The Board agreed with Janssen. Mylan appealed and also requested mandamus relief.

On appeal, Mylan argued that the Board’s determination to deny institution based on the timing of a separate district court action that did not involve Mylan undermined constitutional and due process rights.

Before addressing the merits of the appeal, the Federal Circuit addressed two jurisdictional questions: whether it had jurisdiction over Mylan’s direct appeal and whether it had jurisdiction over the mandamus request. As to the first question, the Court relied on its decision in St Jude Medical v. Volcano, finding that decisions denying institution are not subject to review on direct appeal. As to the second question, the Court concluded that judicial review was available in extraordinary circumstances, and particularly in situations involving denial of petitions. The Court stated that “[t]o protect our future jurisdiction, we have jurisdiction to review any petition for a writ of mandamus denying institution of an IPR.”

Having found that it had jurisdiction, the Federal Circuit turned to the merits. The Court explained that when a mandamus petition challenges a decision denying institution, it will be especially difficult to satisfy the requirements for mandamus because the relevant statute bestows the Board with significant discretion. The Court concluded that there is no reviewability of a Board denial of institution except for colorable constitutional claims. The Court found that Mylan lacked a clear and indisputable right to relief and also failed to state a colorable claim for constitutional relief since it did not identify a deprivation of “life, liberty or property” necessary to a procedural due process claim. The Court also found that there were no substantive due process claims since there is no fundamental right to have the Board consider whether to institute on an IPR petition based only upon co-pending litigation to which petitioner is a party. The Court thus denied Mylan’s petition.

No Estoppel in the Name of Different Interests and Claims

By Jiaxiao Zhang on Mar 17, 2021
Posted In Patents

The US Court of Appeals for the Federal Circuit found that 35 USC § 314(d) did not bar its review of a Patent Trial & Appeal Board determination that a petitioner was not estopped from maintaining inter partes review (IPR) proceedings since the alleged estoppel-triggering event occurred post-institution. Uniloc 2017 LLC v. Facebook Inc., Case Nos. 19-1688, -1689 (Fed. Cir. Mar. 9, 2021) (Chen, J.)

Facebook and WhatsApp (collectively, Facebook) filed two IPR proceedings challenging certain claims of Uniloc’s patents. Apple also filed a petition challenging a subset of claims of the patent. Facebook subsequently filed a third petition that was substantively identical to Apple’s petition and also filed a motion to join Apple’s IPR. LG Electronics filed petitions identical to Facebook’s three petitions and also filed motions to join Facebook’s IPRs. The Board instituted Facebook’s third petition and granted Facebook’s motion to join Apple’s IPR. The Board then instituted Facebook’s original IPRs and ordered the parties to “brief the applicability, if any, of 35 U.S.C. § 315(e)(1)” against Facebook, in light of the soon-to-be-issued final written decision for Apple’s IPR. At the time, LG’s petition and motion to join Facebook’s IPRs had not been decided.

In response to the Board’s order, Facebook argued that it should not be estopped under § 315 from challenging the patentability of any claim upon the issuance of a final written decision in Apple’s IPR. Facebook argued that if the Board did find it estopped, Facebook should be able to continue as a petitioner against one of the claims, which it never challenged, in Apple’s IPR. Facebook also argued that if LG’s IPR petition was granted and LG was joined as a party to its first IPR, the IPR should proceed as to all challenged claims (regardless of whether Facebook was found estopped) because LG was not a party in Apple’s IPR. Uniloc responded, arguing that once the Board issued a final written decision in Apple’s IPR, Facebook would be estopped as to all claims challenged in its first IPR and the Board must terminate that proceeding. Uniloc also argued that allowing LG to join the IPR would create inefficiency and confusion.

The Board ultimately instituted LG’s IPR petitions and granted LG’s motion to join Facebook’s IPRs. In its Patent Owner Responses to the original Facebook IPR petitions, Uniloc argued that LG should be barred from maintaining the first Facebook IPR once the Board issued a final written decision in the Apple IPR because LG was estopped as a real party in interest (RPI) or privy to Facebook. A few months later, the Board issued a final written decision in the Apple IPR upholding the patentability of all challenged claims. The Board’s decision in the first Facebook IPR found that Facebook was estopped under § 315(e)(1) as to claims also challenged in Apple’s IPR, but not other claims since § 315(e)(1)’s estoppel provisions apply only to grounds that the petitioner raised or reasonably could have raised “with respect to that claim.”

In its final [...]

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Method for Determining Haplotype Phase Found Subject Matter Ineligible

By Amy Mahan on Mar 17, 2021
Posted In Patents

In an appeal from a final rejection of a pending application, the US Court of Appeals for the Federal Circuit held that claims directed to methods for determining “haplotype phase” were correctly rejected under 35 USC § 101 as subject matter ineligible. In Re Board of Trustees of The Leland Stanford Junior University, Case No. 20-1012 (Fed. Cir. Mar. 11, 2021) (Reyna, J.)

Haplotype phase is a scientific way of describing the methodology of determining from which parent a particular allele (or gene) is inherited. The representative claim involved (i) receiving allele data, (ii) receiving pedigree data, (iii) determining an inheritance state based on the allele data, (iv) receiving transition probability data; (v) receiving linkage disequilibrium data and then- determining a haplotype phase based on the pedigree data, the inheritance state for the information described in the allele data, the transition probability data and the population linkage disequilibrium data; and storing the haplotype phase in a computer system and providing the stored haplotype phase in response to a request.

Steps (i) through (iii) were known in the art for determining haplotype phase. The crux of the improved process depended on steps (iv) and (v). The additional data provided as “linkage disequilibrium data” and “transition probability data” allegedly enable haplotype phase to be inferred in regions of the gene where “inheritance state” may be uninformative. The additional data in the claimed method resulted in an increase in the number of haplotype phase predictions made.

The examiner, and then the Patent Trial & Appeal Board, found that the claimed process was directed toward patent eligible subject matter—a mathematical algorithm. Stanford appealed.

Applying the two-step framework established by the 2014 Supreme Court decision in Alice Corp. v. CLS Bank, the Federal Circuit first determined that the claims were directed to an abstract mathematical calculation under Alice step one.

Under step two of the Alice inquiry, the Federal Circuit found that the claims did not include additional limitations that, taken as a whole, provide an inventive concept that transforms the abstract idea into patent eligible subject matter. The Court reasoned that the representative claim “recites no steps that practically apply the claimed mathematical algorithm; instead [the claim] ends at storing the haplotype phase and ‘providing’ it ‘in response to a request.'” These steps alone were not enough to transform the abstract idea into patent eligible subject matter.

Stanford argued that the claimed process was directed to patent eligible subject matter and represented an improvement on a technological process—namely, an improvement in the number of haplotype phase predictions that this mathematical algorithm could yield. The Federal Circuit was unpersuaded that the pending claims did anything other than “merely enhance[] an ineligible concept.”

The Federal Circuit concluded that the claims only recited the conventional haplotype phase algorithm and then instruct: “apply it,” similar to the claimed subject matter prohibited by the Supreme Court in Alice. Accordingly, the Court affirmed the Board’s decision.

Doctrine of Equivalents Analysis Should Not Be Simple Binary Comparison

By Cecilia Choy on Mar 17, 2021
Posted In Patents

The US Court of Appeals for the Federal Circuit remanded a district court’s claim construction and grant of a defendant’s summary judgment motion of non-infringement under the doctrine of equivalents, finding that a reasonable juror could find that the accused products performed substantially the same function in substantially the same way to achieve substantially the same result as the claimed invention. Edgewell Personal Care Brands, LLC v. Munchkin, Inc., Case No. 20-1203 (Fed. Cir. Mar. 9, 2021) (Moore, J.)

Edgewell manufactures and sells the “Diaper Genie,” a diaper pail system with a replaceable cassette placed inside the pail for soiled diaper collection, forming a wrapper around the diapers. Munchkin marketed a refill cassette as compatible with Edgewell’s pails. Edgewell’s two patents at issue relate to improvements in the cassette. After claim construction, Edgewell asserted literal infringement of one patent and infringement under the doctrine of equivalents of the other patent. The district court granted Munchkin’s summary judgment motion of non-infringement against both patents. Edgewell appealed.

Edgewell’s first patent is directed to a cassette with a clearance at its bottom portion. The claim construction dispute turned on whether the claims required a clearance space after the cassette was installed. The district court construed the claim to require a space and to require that the claimed “clearance” cannot be filled by an unclaimed interfering member. The district court granted Munchkin summary judgment because Munchkin’s refill cassette had no space after the cassette was installed. The Federal Circuit reversed, explaining that an “apparatus claim is generally to be construed according to what the apparatus is, not what the apparatus does.” The Court found that without an express limitation, “clearance” should be construed to cover all uses of the claimed cassette. The Court determined that the specification and purpose of the “clearance” supported the notion that the claim does not require a clearance after insertion.

The second patent is directed to a cassette with a cover that includes a “tear-off” section. The district court’s construction of an annular cover was of a single, ring-shaped cover. Munchkin’s cassettes each include a two-part cover, and the district court granted Munchkin’s motion for summary judgment of non-infringement. Although the Federal Circuit agreed with the claim constructions, the Court found that the district court erred in granting summary judgment to Munchkin under the doctrine of equivalents for claim element vitiation on the basis that “annular cover” and “tear-off” limitations §§would be rendered meaningless.

The vitiation doctrine ensures that applying the doctrine of equivalents “does not effectively eliminate a claim element in its entirety.” The Federal Circuit found that the district court erred in evaluating this element as a binary choice—single-component structure versus a multi-component structure. Instead, the Court explained that the district court should have evaluated the evidence to determine whether a reasonable juror could find that the accused products perform substantially the same function, in substantially the same way, achieving substantially the same result as the corresponding claim elements. Edgewell’s expert opined that Munchkin’s products performed the [...]

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First-to-File Rule Requires That Action Could Have Been Brought in Transferee Forum

By Hala Mourad on Mar 11, 2021
Posted In Patents

After issuing a rare grant of a mandamus petition directing a district court to stay proceedings until ruling on a pending motion to transfer, the US Court of Appeals for the Federal Circuit denied a subsequent mandamus petition to compel transfer after that district court denied the transfer. In re SK hynix Inc., Case No. 21-114 (Fed. Cir. Feb. 25, 2021) (Taranto, J.) (non-precedential). The Federal Circuit found that the doctrine of forum non conveniens and the first-to-file rule did not establish a basis for transfer because the action could not have initially been brought in the transferee forum and the patentee’s prior filings in that forum did not give consent for subsequently filed actions.

Netlist and SK hynix are competitors in the memory semiconductor space. Netlist sued SK hynix for patent infringement in the US District Court for the Western District of Texas. SK hynix moved to transfer the case to the US District Court for the Central District of California. With no ruling after eight months (while the case continued to move forward), SK hynix sought mandamus from the Federal Circuit to compel the district court to transfer the case. The Federal Circuit declined to transfer the case and instead stayed the district court proceedings until the district court ruled on the transfer motion. The district court then denied the transfer motion, rejecting SK hynix’s arguments that the doctrine of forum non conveniens and the first-to-file rule required transfer to the Central District of California. The district court also advanced the Markman hearing and trial dates. SK hynix again sought mandamus from the Federal Circuit to compel transfer and requested a stay of the district court proceedings because of the advanced Markman and trial dates.

Applying Fifth Circuit law, the Federal Circuit denied the mandamus petition, concluding that SK hynix had not shown that the district court clearly abused its discretion in denying the transfer motion. On the forum non conveniens issue, the Court found no clear abuse in the district court’s determination that SK hynix did not meet the threshold conditions for transfer under 28 USC § 1404(a), namely that the action “might have been brought” in the Central District of California or that, in the alternative, all the parties had consented to that venue for the action. As to the “might have been brought” inquiry, the Court found that the district court properly focused on whether the action might have been brought against SK hynix America, a domestic entity subject to the venue requirements of 28 USC § 1404(b) and headquartered in the Northern District of California, rather than SK hynix, a foreign entity not subject to the same venue requirements. The Court also found that SK hynix did not differentiate between the foreign and domestic SK hynix entities in its transfer motion. This was not an action that might have been brought against SK hynix in the Central District of California because SK hynix America lacked sufficient presence there to confer venue under [...]

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

By David Mlaver on Mar 11, 2021
Posted In 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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Corresponding Structure Necessary to Support ‘Module’ Claim Element

By Colin J. Stalter on Mar 11, 2021
Posted In Patents

In determining whether a claim element invoked 35 USC § 112, ¶ 6, the US Court of Appeals for the Federal Circuit concluded that “module” was a nonce term and required sufficient corresponding structure in the patent specification to avoid indefiniteness under 35 USC § 112, ¶ 2. Rain Computing, Inc. v. Samsung Electronics Co., Ltd., Case Nos. 20-1646, -1656 (Fed. Cir. Mar. 2, 2021) (Moore, J.)

Rain sued Samsung for infringement of a patent directed to a method for delivering software application packages to user terminals over a network. The claims at issue included an element that recited a “user identification module configured to control access [to] software application packages.” The district court determined that the “user identification module” was a means-plus-function term subject to 35 USC § 112, ¶ 6, but that the specification disclosed sufficient corresponding structure such that the term was not indefinite. Rain appealed the judgment of non-infringement.

Reviewing de novo, the Federal Circuit first addressed whether the claim language invoked § 112, ¶ 6. While there is a rebuttable presumption that ¶ 6 does not apply to claims lacking “means” language, the Court noted that “module” does not provide any indication of structure and is a well-known substitute for “means.” No other claim language, including the “user identification” prefix, imparted any structure onto the term. For purposes of claim construction, the specification also did not impart any structure to the claimed user identification module. Rain argued that amendments and examiner arguments during prosecution were proof of sufficient structure, and that, as the examiner noted, a means-plus-function term cannot be nested within a method claim. The Federal Circuit disagreed, noting that the examiner’s statement that a means-plus-function claim element cannot be nested within a method step was simply incorrect as a matter of law. Thus the Court found that “user identification module” was a means-plus-function claim term.

Citing to its 2015 en banc ruling in Williamson v. Citrix Online, the Court turned to the term’s construction under §112, ¶ 6, applying the same two-step process it used just a few weeks earlier in Synchronoss Technologies v. Dropbox. In the first step, the Court simply used the district court’s undisputed finding that the function was “to control access to . . . software packages to which the user has a subscription.” In the second step, the Court attempted to identify corresponding structure in the specification. Here the Court noted that structure in a specification corresponds only if there is a clear link or association, and that the specification must also disclose an actual algorithm when the function is performed by a general-purpose computer.

The Federal Circuit concluded that the district court erred in finding that the disclosure of a storage device provided sufficient structure, explaining that such devices are nothing more than general purpose computers not capable of performing the access control function without specialized software—an algorithm. Rain’s patent specification disclosed no such algorithm, without which the “user identification module” lacked sufficient structure. Thus [...]

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Chill: Full Recoupment of Investment Not a Bar to Equitable Intervening Rights

By Shane Nichols on Mar 4, 2021
Posted In Patents

The US Court of Appeals for the Federal Circuit affirmed the district court’s grant of summary judgment of equitable intervening rights, protecting an alleged infringer from liability for activity that would otherwise infringe patent claims that were substantively and substantially altered during re-examination of the patent. John Bean Technologies Corp. v. Morris & Associates, Inc., Case No. 20-1090, -1148 (Fed. Cir. Feb. 19, 2021) (Reyna, J.)

John Bean and its only domestic competitor, Morris, manufacture chillers for processing poultry. John Bean told its customers that Morris’s competing chillers infringed John Bean’s patent. Morris sent John Bean a letter demanding that it stop making infringement allegations, and identifying prior art that Morris contended rendered the patent invalid. John Bean never responded to Morris’s demand letter, and Morris continued to manufacture and sell its competing poultry chillers.

Eleven years later, John Bean submitted its patent for ex parte re-examination. During reexamination, John Bean’s only original claims were substantively and substantially amended. After its reexamination certificate issued, John Bean sued Morris for infringement.

In 2016, the district court granted Morris’s motion for summary judgment with respect to the affirmative defense of equitable estoppel. The Federal Circuit reversed on appeal, holding that equitable estoppel did not apply because Morris’s unanswered demand letter related solely to the patent’s original claims and not to the altered and new claims that Morris was accused of infringing in the later-filed suit.

On remand, the district court granted Morris’s motion for summary judgment that John Bean’s infringement claims were barred by equitable intervening rights. The district court weighed seven factors in analyzing Morris’s equitable intervening rights defense and found that Morris engaged in substantial preparation prior to the re-examination, including years of research and development, and the conversion of almost two-thirds of its business to selling the accused chillers. The district court also found that John Bean acted in bad faith by failing to dispute Morris’s contentions of invalidity until after Morris had built its business manufacturing and selling the chillers accused of infringement. John Beam appealed.

Under 35 USC § 252, a court has the discretion to permit an accused infringer to continue to manufacture and sell an otherwise infringing product if the accused infringer made substantial preparation to commercialize the product prior to the re-examination of the patent. The policy rationale underlying equitable intervening rights is that the public has a right to use anything that is not specifically claimed in the original patent. John Bean’s suit only accused Morris of infringing claims that were added or substantially altered during re-examination.

In the present appeal, John Bean argued that the district court improperly weighed several of the equitable intervening rights factors. In particular, John Bean argued that the district court failed to give sufficient weight to the fact that Morris had already recouped the cost of its substantial preparations through sales of its otherwise infringing chiller, and was thus not entitled to the equitable remedy Morris sought from the court.

The Federal Circuit rejected John Bean’s [...]

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