scope Archives - IP UPDATE

Console Yourself: Patent Owner Bears IPR Estoppel Burden

by James M. Oehler | Apr 13, 2023 | Patents

Addressing for the first time the standard and burden of proof for the “reasonably could have raised” requirement for inter partes review (IPR) estoppel to apply, the US Court of Appeals for the Federal Circuit concluded that a patent owner bears the burden of proving that an IPR petitioner is estopped from using invalidity grounds that a skilled searcher conducting a diligent search reasonably could have been expected to discover. Ironburg Inventions Ltd. v. Valve Corp., Case Nos. 21-2296; -2297; 22-1070 (Fed. Cir. Apr. 3, 2023) (Lourie, Stark, JJ.) (Clevenger, J., dissenting).

Ironburg sued Valve for infringing Ironburg’s video game controller patent. Valve responded by filing an IPR petition in 2016. The Patent Trial & Appeal Board partially instituted on three grounds but declined to institute on two other grounds (the Non-Instituted Grounds), as was permitted prior to the Supreme Court’s 2018 decision in SAS Institute Inc. v. Iancu. Valve did not seek remand pursuant to SAS, which would have allowed the Board to consider the Non-Instituted Grounds. In the district court litigation, Valve alleged invalidity based on the Non-Instituted Grounds and grounds Valve learned of from a third party’s IPR filed after Valve filed its IPR (the Non-Petitioned Grounds). Ironburg filed a motion asserting that Valve was estopped, pursuant to 35 U.S.C. § 315(e)(2), from asserting both the Non-Instituted Grounds and the Non-Petitioned Grounds. The district court granted Ironburg’s motion in full, removing all of Valve’s invalidity defenses. After trial, the jury returned a verdict finding that Valve willfully infringed the patent. Valve appealed.

35 U.S.C. § 315(e)(2) precludes an IPR petitioner from asserting invalidity during a district court proceeding based on “any ground that the petitioner raised or reasonably could have raised during that [IPR].” The Federal Circuit first addressed the legal standard needed to meet the “reasonably could have raised” requirement for IPR estoppel. The Court found that the “skilled searcher” standard used by several district courts is appropriate, as opposed to a higher “scorched earth” search standard. The “skilled searcher” standard is consistent with the § 315(e)(2) statutory requirement of discovering prior art references that “reasonably could have been raised.”

The Federal Circuit next addressed which party has the burden to prove what prior art references a skilled searcher reasonably would, or would not, have been expected to discover. The district court placed the burden on Valve, the party challenging the patent’s validity, and determined that Valve did not show how difficult it was to find the Non-Petitioned Grounds that Valve did not initially uncover. The Court noted that the third party that did find the Non-Petitioned Grounds may have used a “scorched earth” search, which would make its discovery of the Non-Petitioned Grounds irrelevant to estoppel. The Court concluded that the patent owner has the burden of proving what a skilled searcher reasonably would have found because the patent holder is looking to benefit from estoppel. The Court explained that this conclusion is consistent with the practice of placing the burden on the party asserting [...]

Continue Reading

Stryking Noncompete Preliminary Injunction

by Tessa Kroll | Mar 9, 2023 | Trade Secrets

The US Court of Appeals for the Sixth Circuit upheld a district court’s grant of a preliminary injunction restricting a former employee from working for conflicting organizations or communicating with a competitor’s counsel. Stryker Emp. Co., LLC v. Abbas, Case No. 22-1563 (6th Cir. Feb. 16, 2023) (Clay, Bush, JJ.; Sutton, C.J.) The Court found that the preliminary injunction was an appropriate measure to protect the plaintiff’s confidential information that was consistent with the employee’s noncompete agreement.

Stryker develops and manufactures spinal implants and related medical products. From 2013 through mid-2022, Stryker employed Abbas in various roles relating to finance and sales. As part of his job duties, Abbas led sales and finance projects, assisted with Stryker’s litigation efforts, and cultivated relationships with customers, distributors and sales representatives. These responsibilities required Abbas to have access to Stryker’s confidential information and trade secrets.

In April 2022, Abbas entered into a confidentiality, noncompetition and nonsolicitation agreement with Stryker. This agreement prohibited Abbas from disclosing Stryker’s confidential information without its consent and barred Abbas from working for “any Conflicting Organization” in which Abbas could use Stryker’s confidential information to boost the marketability of a “Conflicting Product or Service.” The noncompete provision was time limited to one year following Abbas’s departure from Stryker.

In summer 2021, a competing spinal implant manufacturer, Alphatec, began recruiting Abbas for a finance position. After determining that the finance position was too similar to Abbas’s previous work at Stryker, Alphatec created a new “sales role” that was allegedly “crafted to protect Stryker’s confidential information.” Abbas resigned from Stryker in May 2022 to take the newly created role.

Shortly after Abbas resigned, Stryker sued for breach of contract, misappropriation of trade secrets and violation of the Michigan Uniform Trade Secrets Act. Stryker also requested a no-notice temporary restraining order (TRO) and preliminary and permanent injunctions. The district court granted Stryker’s motion for preliminary injunction prohibiting Abbas from the following:

Working in any capacity for Alphatec or any “Conflicting Organization”
Having any ex parte communications with Alphatec’s counsel or otherwise disclosing information concerning Stryker’s litigation strategies.

Abbas appealed, arguing that the noncompetition portion of the preliminary injunction amounted to an industry-wide ban and that the communication portion impermissibly disqualified counsel.

The Noncompetition Provision

The Sixth Circuit first noted that federal law, rather than state law, defines a court’s power to issue a noncompetition restriction in a preliminary injunction. Under federal law, courts have discretion to craft preliminary injunctions based on the equities of a case and can even “proscribe activities that, standing alone, would have been unassailable.” Applying this standard, the Sixth Circuit reasoned that the preliminary injunction was not overly broad but instead preserved the status quo. First, the district court found that Abbas often worked beyond the scope of his position. Second, the district court agreed to entertain a motion to vacate the injunction if Alphatec created a new position for Abbas that Stryker found acceptable. Third, the injunction merely sought to enforce the noncompetition agreement, which [...]

Continue Reading

Lanham Act Reaches Foreign Defendants’ Extraterritorial Conduct, but Worldwide Injunction Too Broad

by Paul Devinsky | Sep 2, 2021 | Trademarks

The US Court of Appeals for the 10th Circuit upheld a district court’s injunction barring multiple foreign companies from directly or indirectly using a US remote control manufacturer’s trade dress based on the extraterritorial reach of the Lanham Act. However, the Court narrowed the scope of the worldwide injunction to countries where the US company currently markets or sells its products. Hetronic Int’l, Inc. v. Hetronic Germany GmbH, Case Nos. 20-6057, -6100 (10th Cir. Aug. 24, 2021) (Phillips, J.)

Hetronic International is a US company that manufactures radio remote controls for heavy-duty construction equipment. Hetronic Germany GmbH, Hydronic Steuersysteme GmbH, ABI Holding GmbH, Abitron Germany GmbH and Abitron Austria GmbH (collectively, the Distributers) are foreign companies that have distributed Hetronic’s products—mostly in Europe—for almost a decade. Based on an old research and development agreement between the parties, the Distributors concluded that they, not Hetronic, owned the rights to Hetronic’s trademarks and other intellectual property. The Distributors accordingly reverse-engineered Hetronic’s products and began manufacturing and selling their own copycat products, mostly in Europe. The copycat products were identical to Hetronic’s and were sold under the Hetronic brand and the same product names. Hetronic terminated the parties’ distribution agreements, but the Distributers continued to sell their copycat products. The Distributors attempted to break into the US market, selling several hundred thousand dollars’ worth of products before backing off after Hetronic sued. They then focused their efforts on Europe.

Hetronic sued the Distributors, along with their manager and owner Albert Fuchs, under the Lanham Act. The Distributors moved for summary judgment, arguing that the district court lacked subject matter jurisdiction to resolve the Lanham Act claims because the conduct at issue occurred overseas. The Distributors asserted that Hetronic’s claims had to be dismissed because the Lanham Act applied extraterritorially only if a defendant’s conduct had a substantial effect on US commerce, and the Distributors’ conduct did not. The district court rejected that argument and denied summary judgment.

In a separate proceeding initiated by the Distributors in the European Union, the EU Intellectual Property Office (EUIPO) concluded that Hetronic owned all of the disputed intellectual property. Based on the EUIPO proceeding, the district court applied the doctrine of issue preclusion and granted Hetronic summary judgment on the Distributors’ ownership defense. After an 11-day trial, a jury found that the Distributors had willfully infringed Hetronic’s trademarks and awarded Hetronic more than $100 million in damages, mostly for trademark infringement. The district court also entered a permanent injunction prohibiting the Distributors’ infringing activities worldwide. The Distributors appealed.

On appeal, the Distributors accepted that the Lanham Act can sometimes apply extraterritorially but argued that the Lanham Act did not reach their activity as foreign defendants making sales to foreign consumers. Specifically, the Distributors argued that:

The district court erroneously concluded that the Lanham Act applied extraterritorially.
The injunction lacked the specificity required by Fed. R. of Civ. Pro. 65.
The injunction’s worldwide reach was too broad.

The Distributors challenged the district court’s exercise of personal [...]

Continue Reading