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PTO Proposes Deferred Responses for Subject Matter Eligibility Rejections

In a January 6, 2022, Federal Register notice, the US Patent and Trademark Office (PTO) announced its intention to implement a pilot program to evaluate the effects of permitting applicants to defer responding to subject matter eligibility (SME) rejections in certain patent applications. Under this pilot program, applicants may receive invitations to participate if their applications meet the program’s criteria, including a criterion that the claims in the application necessitate rejections on SME and other patentability-related grounds. An applicant who accepts the invitation to participate in this pilot program must still file a reply addressing all the rejections except SME rejections in every office action mailed in the application but is permitted to defer responding to SME rejections until the earlier of final disposition of the application or the withdrawal or obviation of all other outstanding rejections.

Invitations to participate in the Deferred Subject Matter Eligibility Response pilot program will be mailed during the period between February 1, 2022, and July 30, 2022. The PTO may extend, modify or terminate the pilot program depending on the workload and resources necessary to administer the program, feedback from the public and the program’s effectiveness.

Because satisfaction of non-SME conditions for patentability (e.g., novelty, nonobviousness, adequacy of disclosure and definiteness) may resolve SME issues as well, the pilot program may result in improved examination efficiency and increased patent quality.

An examiner may invite a prospective applicant to participate in the pilot program by including a form paragraph in the first office action on the merits. An applicant receiving an invitation to participate in the pilot program may elect to accept or decline the invitation. If an applicant wishes to participate in the program, they must file a properly completed request form PTO/SB/456 concurrently with a timely response to the first office action on the merits. The request form must be submitted via the PTO’s patent electronic filing systems.

The limited waiver permits the applicant to defer addressing the SME rejections until the earlier of final disposition of the participating application or the withdrawal or obviation of all other outstanding rejections. A final disposition is the earliest of the following:

  • Mailing of a notice of allowance
  • Mailing of a final office action
  • Filing of a notice of appeal
  • Filing of a request for continued examination
  • Abandonment of the application.

Applicants must address the SME rejections in a response to a final rejection or the filing of a request for continued examination.

The public is invited to submit comments, which must be received by March 7, 2022, to ensure consideration.




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Exclusive Licensee Has Constitutional but Not Statutory Standing

The US Court of Appeals for the Federal Circuit vacated the dismissal of an exclusive licensee’s complaint for lack of statutory and constitutional standing, despite affirming that the licensee had no statutory standing where the district court erroneously found no constitutional standing. Univ. of So. Florida Res. Found., Inc. v. Fujifilm Med. Sys. U.S.A., Inc., Case No. 20-1872 (Fed. Cir. Nov. 23, 2021) (sealed opinion issued Oct. 22, 2021) (Stoll, J.)

In April 1997, the University of South Florida (USF) received an invention disclosure related to a workstation-user interface for digital mammography. In September 1997, the inventors, USF and the USF Research Foundation (USFRF) entered into a revenue allocation agreement assigning all rights in the invention to USF. The inventors also entered into a separate assignment agreement in 2002. The patent issued in 2003. The revenue allocation agreement was later followed by a nunc pro tunc license agreement, which recited an effective date of July 1997.

In May 2016, USFRF sued Fujifilm Medical Systems for infringement of the issued patent. USFRF pled that USF assigned its rights in the issued patent to USFRF such that USFRF was “currently the owner” of the patent. In June 2019, Fujifilm moved for summary judgment, arguing that USFRF lacked statutory standing because USF had not fully assigned the patent to USFRF. Five days later, USFRF amended its complaint to state that it was an exclusive licensee (i.e., it was not the assignee).

In May 2020, the district court dismissed the case, finding that USFRF lacked both statutory and constitutional standing. Analyzing the nunc pro tunc license agreement, the district court found a lack of statutory standing because the agreement was silent on (and thus did not transfer to USFRF) the right to sue to enforce the patent. The district court also found that USFRF lacked constitutional standing because USFRF had not established that the invention disclosure number in the license agreement corresponded to the issued patent and had not shown that the nunc pro tunc agreement was signed before the complaint was filed. USFRF appealed.

The Federal Circuit analyzed both statutory and constitutional standing and affirmed the district court’s finding with respect to statutory standing, reasoning that this case was analogous to others in which an exclusive licensee lacked statutory standing because the right to sue was either not transferred or only partially transferred. The Federal Circuit found that the district court had clearly erred with respect to constitutional standing, however. First, the Court held that there had been sufficient evidence tying the invention disclosure identified in the assignment agreement to the issued patent. Second, the Court found that it did not matter when the nunc pro tunc agreement was signed because the original revenue allocation agreement was signed before the complaint was filed and conveyed at least one exclusionary right to USFRF—enough for USFRF to have constitutional standing.

Because “the district court’s dismissal was predicated on constitutional standing,” the Federal Circuit remanded for further proceedings, including determination of whether USFRF may join USF.

[...]

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PTO Publishes Regulations to Implement Trademark Modernization Act

The US Patent and Trademark Office (PTO) recently published its final rules implementing provisions of the Trademark Modernization Act of 2020 (TMA). Most changes are effective as of December 18, 2021, but certain changes (i.e., adjustments to the office action response period) won’t go into effect until December 1, 2022. The new regulations are summarized below.

Ex Parte Proceedings

The TMA created two new ex parte proceedings by which any third party (including the PTO director) can seek to challenge registrations for nonuse: Reexamination and expungement.

One of the TMA’s underlying legislative aims was to clean up the “clutter[ed]” register by removing registrations for marks not properly in use in commerce. These new proceedings offer efficient and less expensive alternatives to a cancellation proceeding before the Trademark Trial and Appeal Board (Board).

Reexamination

Any party (or the PTO director) can file a reexamination action to cancel some or all of the goods or services covered by a use-based registration if the trademark was not in use in commerce in connection with those goods or services before (1) the application filing date when the application was based on Section 1(a) (Use in Commerce), or (2) if the application was filed based on Section 1(b) (Intent to Use), the date the amendment to allege use was filed, or the deadline by which the applicant needed to file a statement of use, whichever is later. A reexamination proceeding must be initiated within the first five years of registration.

Expungement

Similarly, an expungement action can be brought by any party (including the PTO director) seeking to cancel some or all of the goods and/or services from a registration based on the registrant never having used the trademark in commerce in connection with the relevant goods/services. An expungement proceeding must be initiated between the third and 10th year of registration. However, until December 27, 2023, an expungement action can be requested for any registration that is at least three years old, regardless of how long it has been registered.

Requirements for Ex Parte Petitions

The final rules detail the requirements for a petition for expungement or reexamination:

  • A $400 fee
  • The US trademark registration number of the registration being challenged
  • The basis for the petition
  • The name and contact information of the petitioner
  • The name and contact information of the designated attorney, if any
  • A list of the goods and services that are subject to challenge
  • A verified statement of the facts, which should include details of the reasonable investigation of nonuse and a “concise factual statement of the relevant basis for the petition”
  • Copies of the supporting evidence with an itemized index.

A reasonable investigation of nonuse will vary depending on the nature of the goods and/or services but “should focus on the mark disclosed in the registration and the identified goods and/or services, keeping in mind their scope and applicable trade channels.” Also, “[a]s a general matter, a single search using an internet search engine likely would not be [...]

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Federal Circuit Clarifies Venue in Hatch-Waxman Case

Addressing venue in the context of a Hatch-Waxman case, the US Court of Appeals for the Federal Circuit explained that sending a paragraph IV notice letter to a company in the district is insufficient to establish venue. Celgene Corp. v. Mylan Pharmaceuticals Inc., Case No. 21-1154 (Fed. Cir. Nov. 5, 2021) (Prost, J.) The Court affirmed a district court finding that venue was improper since the defendant had not committed any acts of infringement and did not have a regular and established place of business in the district.

Celgene owns patents related to a multiple-myeloma drug that it markets and sells under the brand name Pomalyst. Mylan Pharmaceuticals Inc. (MPI) submitted abbreviated new drug applications (ANDAs) to the US Food & Drug Administration in order to bring a generic version of Pomalyst to market. Celgene filed suit in New Jersey against MPI and its related companies, Mylan Inc. and Mylan N.V. While Celgene is headquartered in New Jersey, MPI is based in West Virginia, Mylan, Inc. is based in Pennsylvania and Mylan N.V. is based in the Netherlands and Pennsylvania. The district court dismissed the case for improper venue (MPI and Mylan, Inc.) and for failure to state a claim (Mylan N.V.). Celgene appealed.

Citing Valeant v. Mylan, the Federal Circuit reiterated that venue for Hatch-Waxman cases must be predicated on past acts of infringement, and “it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context.” Celgene argued that because MPI sent a paragraph IV notice letter from West Virginia to Celgene’s headquarters in New Jersey, acts of infringement occurred in New Jersey. Celgene also argued that since the notice letter was mandatory and the ANDA had to be amended to include proof of delivery, the delivery of the letter was “sufficiently related to the ANDA submission.” The Court disagreed, explaining that venue in Hatch-Waxman cases is focused on the submission of the ANDA itself, including acts involved in the preparation of an ANDA submission. The Court noted these acts must be part of the ANDA submission and that Celgene’s “related to” standard was impermissibly broad. The Court found that since the submission of the ANDA did not take place in New Jersey, venue there was improper.

The Federal Circuit also found that neither MPI nor Mylan, Inc. had a regular and established place of business in New Jersey. Celgene argued both had a regular and established place of business based on places associated with Mylan employees as well as Mylan affiliates. In rejecting these arguments, the Court noted that the employees Celgene pointed to were working remotely from home, and that the employee’s home numbers were contained in business communications. However, the Court noted that there was no indication that the defendants owned, leased or rented the employees’ homes; participated in the selection of the homes; stored inventory there or took any other actions to suggest that they had an intention to maintain a place of [...]

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US Lawyers Aiding Scam Trademark Applications May Face Sanctions

As reported by the US Patent & Trademark Office (PTO) this past summer, since mid-2020 trademark applications from US and foreign applicants have “surged to unprecedented levels.” In December 2020 alone, the PTO received 92,608 trademark applications, an increase of 172% over December 2019. Not only has this extraordinary volume of applications created a backlog and delay in the procedural review of new US trademark application filings, but the PTO is experiencing a notable increase in what it calls “suspicious submissions ranging from inaccurate to fraudulent.”

These illegitimate trademark filings harm the quality and integrity of the trademark register and have significant legal and financial impact on legitimate brand owners whose applications may be blocked by fraudulent filings for marks that are identical or similar to their real brands. Faced with a legal obligation to defend and enforce their trademarks, legitimate brand owners are forced to dispute such illegitimate filings with letters of protest, by filing oppositions or cancellation actions in the Trademark Trial & Appeal Board, and even by taking action in the federal courts. Such enforcement and defensive actions can clog up these forums and force brand owners to take on costs that would not otherwise be necessary, and which may distract from, or reduce the budget for, real trademark disputes.

The PTO outlined various strategies and tools to review, assess, challenge and combat suspicious and fraudulent filings, including aspects of the Trademark Modernization Act of 2020. In 2019, the PTO also implemented a rule requiring any overseas trademark applicant to file with a US lawyer. The requirement for a US lawyer appears to have resulted in many foreign applicants (primarily from China) making up fake names, addresses and bar credentials for the US lawyers named in their applications. Not all named US lawyers are fake, however, as the PTO’s investigations into certain lawyers lodging a high volume of trademark filings for Chinese-based applicants have revealed that some US-based lawyers may be taking on clients from China without conducting proper diligence as to the veracity of the client’s trademark application information. For example, the PTO’s investigation of some potentially illegitimate filings from applicants in China reveal doctored or disingenuous specimens of use, including e-commerce listings for products that may not actually exist or are no longer “in stock” (and likely never were “in stock”).

In September 2021, the PTO’s investigations into US lawyers with a high volume of filings for Chinese applicants resulted in two sanctions orders. The first was issued against a lawyer found to have filed thousands of applications for overseas parties deemed fraudulent by operating as a US-based agent for a centralized “filing gateway” platform located in India. The sanction order includes a 12-month probationary period and required ethics and trademarks classes. The second sanction against a US-based lawyer specifically noted that the lawyer did not do enough to properly review the applications that they signed on behalf of an applicant based in China. It has [...]

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This Case Is Both Hot and Exceptional—Attorneys’ Fees and Inequitable Conduct

In a second visit to the US Court of Appeals for the Federal Circuit, after the Court affirmed a finding of unenforceability due to inequitable conduct based on “bad faith” non-disclosure of statutory bar prior sales on the first visit, the Court affirmed a remand award of attorneys’ fees based on a finding of exceptionality under 35 U.S.C. § 285. Energy Heating, LLC v. Heat On-The-Fly, LLC, Case No. 20-2038 (Fed. Cir. Oct. 14, 2021) (Prost, J.)

In its earlier decision, the Federal Circuit remanded the case after reversing a district court’s denial of attorneys’ fees, finding that while the district court correctly found that Heat On-The Fly (HOTF) committed inequitable conduct in failing to disclose to the US Patent & Trademark Office multiple instances of prior use of the claimed method, the district court failed to articulate a basis for denying attorneys’ fees other than that HOTF articulated substantial arguments (experimental use) against the finding of inequitable conduct.

On remand, the district court found the case “exceptional” because it “stands out from others within the meaning of § 285 considering recent case law, the nature and extent of HOTF’s inequitable conduct, and the jury’s findings of bad faith.” HOTF appealed.

HOTF contended that the district court abused its discretion by relying on the jury’s bad-faith finding because that finding “had nothing to do with the strength or weakness of HOTF’s litigation positions.” Citing the 2014 Supreme Court decision in Octane Fitness, the Federal Circuit rebuffed that argument, explaining that “HOTF made representations in bad faith that it held a valid patent [which] was within the district court’s ‘equitable discretion’ to consider as part of the totality of the circumstances of HOTF’s infringement case.”

HOTF also argued that the district court erroneously relied on the jury verdict in finding exceptionality because, since the jury found that HOTF did not commit the tort of deceit, it could not have engaged in inequitable conduct. The Federal Circuit rebuffed this argument as well, noting that inequitable conduct was tried to the district court—not the jury—resulting in a judgment of unenforceability that the Court affirmed in the prior appeal and that the jury’s finding of no state-law “deceit” had no bearing on inequitable conduct.

The Federal Circuit further explained that HOTF’s assertion that under the Court’s 2020 decision in Electronic Communication Technologies v. ShoppersChoice.com, the district court was not required to affirmatively weigh whether HOTF’s purported “lack of litigation misconduct” was incorrect. Rather, “the manner in which [patentee] litigated the case or its broader litigation conduct” is merely “a relevant consideration.” Under Octane, the test for whether a case is “exceptional” under § 285 is whether it is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”

Finally, the Federal Circuit noted that the district court correctly explained that “[a] finding of inequitable conduct [...]

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Update: Absent Explicit Statutory Language? The American Rule Still Applies

The US Court of Appeals for the Federal Circuit updated its earlier opinion to remove language ascribing motive to a prolific inventor’s actions before the US Patent & Trademark Office (PTO). Hyatt v. Hirshfeld, Case Nos. 020-2321; -2325 (Fed. Cir. Aug. 18, 2021) (modified Oct. 12, 2021) (Hughes, J.)

The original opinion noted that Gilbert Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay.” The modified opinion deletes language in the original opinion ascribing to Hyatt the motive of “in an effort to submarine his patent applications and receive lengthy patent terms.”

The Federal Circuit did not alter its earlier reversal of the district court’s grant of attorneys’ fees to Hyatt (since he was not the prevailing party) or its affirmance of the district court’s denial of the PTO’s request for expert fees (after finding “[a]ll the expenses of the proceedings shall be paid by the applicant” under 35 U.S.C. § 145, not specifically and explicitly shifting expert witness fees). The rest of the text of the opinion remains unchanged.




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Ex Parte Reexamination Not Allowed After Failed IPR Challenge

The US Court of Appeals for the Federal Circuit found that ex parte reexamination was unavailable to a challenger who repeatedly tried and failed to raise the same arguments for the same patent in a prior inter partes review (IPR) proceeding. In re: Vivint, Inc., Case No. 20-1992 (Fed. Cir. Sept. 29, 2021) (Moore, C.J.)

Vivint sued Alarm.com in 2015 for infringement of several patents. In response, Alarm requested that the Patent Trial & Appeal Board (PTAB) institute “a litany of post-issuance review proceedings,” including three separate IPR petitions directed to one of the patents. The PTAB refused to institute two of the petitions because Alarm failed show to a reasonable likelihood that it would prevail on at least one challenged claim and also refused to institute the third petition because it represented an example of “undesirable, incremental petitioning.” According to the PTAB, Alarm had “used prior Board decisions as a roadmap to correct past deficiencies” and allowing such “similar, serial challenges to the same patent” by the same challenger risked, not only harassment of patent owners, but also frustration of congressional intent behind the America Invents Act (AIA).

More than a year later, Alarm filed a request for ex parte reexamination of the patent—a request that used repackaged versions of arguments from its unsuccessful IPR petition. Despite the striking similarity between Alarm’s prior and current arguments, including two out of the four original IPR patentability questions being copied verbatim from the failed petition into the ex parte reexamination request, the PTAB found the petition raised substantial new questions of patentability and ordered reexamination. Vivint responded by seeking dismissal of the ex parte reexamination under 37 C.F.R. § 1.181, arguing that the PTAB has the authority under 35 U.S.C § 325(d) to deny the ex parte reexamination request because that statute applies to ex parte reexaminations and IPRs with “equal force.” The PTAB rejected Vivint’s request, stating that any § 1.181 petition raising a § 325(d) challenge must be filed before reexamination is ordered.

Vivint filed a second § 1.181 petition seeking reconsideration of the § 325(d) issue, arguing that it would have been impossible for Vivint to file the § 1.181 petition before ex parte reexamination was ordered. Vivint also argued that even if the PTAB lacked general authority to terminate the reexamination, it could exercise such authority under the Administrative Procedure Act (APA). Vivint also asserted that the PTAB “acted arbitrarily and capriciously by applying the same law to the same facts and reaching a different conclusion.” The PTAB rejected Vivint’s arguments and denied its second petition, finding that Vivint could have sought a waiver of the rules having to do with the required prior-to-ex parte timing of a § 1.181 petition vis-à-vis institution of ex parte reexamination. The PTAB also noted that ex parte reexamination was not inconsistent with denying the initial IPR. Ultimately, after an examiner issued a final rejection for all claims of the patent, Vivint appealed to the PTAB. The PTAB affirmed and Vivint [...]

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Absent Explicit Statutory Language? The American Rule Still Applies

The US Court of Appeals for the Federal Circuit vacated a district court’s award of attorney’s fees under the prevailing party rule but affirmed the district court’s denial of the US Patent & Trademark Office’s (PTO) request for expert witness fees under 35 U.S.C. § 145. Hyatt v. Hirshfeld, Case Nos. 20-2321;–2325 (Fed. Cir. Aug. 18, 2021) (Hughes, J.). The case involved prolific inventor Gilbert Hyatt and the latest chapter in his battles with the PTO.

Mr. Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “’adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay’ in an effort to submarine his patent applications and receive lengthy patent terms.” After the PTO denied some of his patent applications, Mr. Hyatt elected to pursue a district court appeal under 35 U.S.C. § 145 to challenge the PTO’s decisions. The district court ordered the PTO to issue some of the patents and awarded Mr. Hyatt attorney’s fees as the prevailing party. The PTO spent millions of dollars examining Mr. Hyatt’s applications and sought, under §145, reimbursement of its expert witness fees from the case. The district court denied the PTO’s request for expert witness fees, holding that its shifting of “[a]ll the expenses of the proceedings” to the applicant does not overcome the American Rule presumption against shifting expert fees. The PTO appealed.

The PTO challenged both the award of attorney’s fees and the denial of expert fees. In an earlier appeal by the PTO, the Federal Circuit held that the PTO correctly asserted prosecution laches as a defense against Mr. Hyatt, which “render[s] a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances.” Accordingly, the Court vacated the district court’s decision ordering the issuance of patents, and in this appeal, the Court vacated the district court’s holding that Mr. Hyatt is entitled to attorney’s fees—since he is no longer the prevailing party—and remanded for further proceedings.

According to the statute, in an action under § 145, “[a]ll the expenses of the proceedings shall be paid by the applicant.” However, the Federal Circuit agreed with the district court that the statutory language was not sufficiently explicit to overcome the presumption against fee-shifting under the American Rule and that litigants pay their own fees “unless a statute or contract provides otherwise.” In doing so, the Court looked at statutory phrasing, dictionary definitions (e.g., Black’s and Webster’s), legislative history, relevant case law and similarly phrased statutes to confirm whether expert fees were specifically and explicitly contemplated as being included by US Congress in the statute. The Supreme Court of the United States’ 2019 NantKwest decision (that “expenses” under §145 does not invoke attorney’s fees with enough clarity to overcome the American Rule) guided the Court’s analysis as did [...]

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Federal Circuit Finds Interlocutory Appeal Untimely

Addressing the time limits for filing an interlocutory appeal in patent cases, the US Court of Appeals for the Federal Circuit dismissed such an appeal as untimely, finding that the appellant did not file within 30 days of all liability issues except for a determination of damages being resolved. Mondis Technology Ltd. v. LG Electronics Inc., Case No. 20-1812 (Fed. Cir. Aug. 3, 2021) (Hughes, J.)

Mondis Technology sued LG Electronics for infringement of a patent related to display technology. In a consolidated district court case joining other parties to dispute with LG, a jury found that (1) LG infringed certain claims of the patent owned by Mondis, (2) the patent claims were not invalid and (3) LG’s infringement was willful. The jury awarded $45 million in damages. LG filed multiple post-trial motions relating to infringement, invalidity, willfulness and damages. In September 2019, the district court denied LG’s motions regarding infringement, invalidity and willfulness. Then, in April 2020, the district court granted LG’s motion for a new trial on damages.

Within 30 days of the April 2020 order, LG filed a notice of interlocutory appeal with the Federal Circuit, seeking to challenge the denial of its three post-trial motions.

The Federal Circuit first discussed its jurisdiction to hear interlocutory appeals under 28 U.S.C. § 1292(c)(2), which provides the Court with exclusive jurisdiction over “an appeal from a judgment in a civil action for patent infringement which would otherwise be appealable to the . . . Federal Circuit and is final except for an accounting.” The Court explained that appeals under this section are subject to the time limits of § 2107(a), which in this case would give LG 30 days from the date the judgment became “final except for an accounting.” The Court cited to a previous case in which it held that a judgment is “final except for an accounting” under § 1292(c)(2) when all liability issues have been resolved and only a damages determination remains. The Court further supported its position by citing the Supreme Court of the United States’ 1988 decision in Budinich v. Becton Dickinson in which it found that the merits decision was final after the first post-trial order that resolved all issues except for attorneys’ fees. The Court thus found that all such liability issues were resolved as of the district court’s September 2019 order and that the 30-day clock started at that time.

LG also argued that Rule 4 of the Federal Rules of Appellate Procedure tolled the time to file its appeal. Rule 4(a)(4) provides that “the time to file an appeal runs for all parties from the entry of the order disposing of the last such remaining motion.” The Court disagreed with LG’s characterization, citing a Third Circuit opinion which found that a motion only tolls the time to file interlocutory appeals if the motion relates to the interlocutory judgment. The Court found that Rule 4(a)(4) did toll the time to file the interlocutory appeal but only until motions concerning liability [...]

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