Current Developments in U.S. Patent Law Dimitrios T. Drivas April 8, 2015 Fordham IP Institute: 2C. U.S. Patent Law

U.S. Supreme Court

35 U.S.C. § 285, Exceptional Case Standard for Award – Octane Fitness v. ICON Octane Fitness LLC v. ICON Health & Fitness, Inc., 134 S.Ct (2014)  Decided April 29, 2014 (opinion by Sotomayor, 9-0) 35 U.S.C. § 285  “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”  Federal Circuit Test: – Litigation involves (1) “material inappropriate conduct” or (2) “objectively baseless” and brought in “subjective bad faith.” Federal Circuit decision, 469 F. App’x 57 (Fed. Cir. 2012)  Affirmed district court, 2011 WL (D. Minn. Sept. 6, 2011), that litigation was not objectively baseless and not brought in bad faith.  “No reason to revisit the settled standard for exceptionality.” 469 F. App’x at 65. 2

35 U.S.C. § 285, Exceptional Case Standard for Award – Octane Fitness v. ICON Question Presented  Does the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriate a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants? Supreme Court Decision (9-0) (reversed and remanded)  An “exceptional case” 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.”  District courts have case-by-case discretion to determine whether a case is “exceptional” and should consider the totality of the circumstances.  Burden of proof to show entitlement to fees is not by clear and convincing evidence. 3

35 U.S.C. § 285, Standard of Review – Highmark v. Allcare Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S.Ct (2014)  Decided April 29, 2014 (same day as Octane) Question Presented  Whether a district court’s exceptional-case finding under 35 U.S.C. § 285, based on its judgment that a suit is objectively baseless, is entitled to deference. Holding:  Appellate court should apply abuse-of-discretion standard in reviewing all aspects of a district court’s § 285 determination.  § 285 inquiry is “rooted in factual determinations.”  Opinion by Sotomayor, 9-0 (vacated and remanded). 4

Indefiniteness – Nautilus v. Biosig Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct (2014)  Decided June 2, 2014 (opinion by Ginsburg, 9-0) Federal Circuit Decision, 715 F.3d 891 (Fed. Cir. 2013)  Reversed district court judgment of indefiniteness.  Claim term “spaced relationship,” which refers to the space between the common and live electrodes in a heart rate monitor, was not “insolubly ambiguous.”  “[C]laim language, specification, and the figures illustrating the ‘spaced relationship’ between the live and common electrodes are telling and provide sufficient clarity to skilled artisans as to the bounds of this disputed term.” 715 F.3d at 899.  Rehearing en banc denied; cert granted on Jan. 10,

Indefiniteness – Nautilus v. Biosig Questions Presented  Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations – so long as the ambiguity is not “insoluble” by a court – defeat the statutory requirement of particular and distinct patent claiming?  Does the presumption of validity dilute the requirement of particular and distinct patent claiming? Supreme Court Decision (9-0)  A patent is invalid for indefiniteness if its claims, read in light of the specification and prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.  Overturns “insolubly ambiguous” and “amenable to construction” standard.  Remanded to Federal Circuit. 6

35 U.S.C. § 271(b), Induced Infringement – Limelight v. Akamai Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S.Ct (2014)  Decided June 2, 2014 (opinion by Alito, 9-0) 35 U.S.C. § 271(b)  “Whoever actively induces infringement of a patent shall be liable as an infringer.” Claims at Issue  Method of delivering web content.  Some steps of method claim performed by Limelight, others by its customers. Federal Circuit Decision, 692 F.3d 1301 (Fed. Cir. 2012) (en banc) (6-5)  Limelight found liable under § 271(b) where Limelight performed some steps of the method and induced others to practice remaining steps.  Patentee no longer must show direct infringement by a single entity to prove induced infringement. 7

35 U.S.C. § 271(b), Induced Infringement – Limelight v. Akamai Question Presented  Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one entity has committed direct infringement under 35 U.S.C. § 271(a). Supreme Court Decision (9-0) (reversed and remanded)  An alleged infringer is not liable for inducing infringement pursuant to 35 U.S.C. § 271(b) if no party has directly infringed.  Performance of all steps must be attributable to single entity for direct infringement.  Declines to review Muniauction rule for direct infringement. Federal Circuit on Remand  Rejected Akamai’s request that Federal Circuit decide en banc the issue of direct, joint infringement pursuant to 35 U.S.C. § 271(a).  3-panel Federal Circuit heard oral arguments in September

Patentable Subject Matter – Alice Corp. v. CLS Bank Int’l Alice Corp. v. CLS Bank Int’l, 134 S.Ct (2014)  Decided June 19, 2014 (opinion by Thomas, 9-0) Patents-at-Issue  Claims to computer implemented system, medium, and a method for reducing “settlement risk” in financial transactions. Federal Circuit rehearing decision, 717 F.3d 1269 (Fed. Cir. 2013) (en banc)  Divided court (7-3) affirmed district court and reversed Federal Circuit panel decision.  Asserted method and computer-readable media claims and system claims were not directed to patent-eligible subject matter under 35 U.S.C. § 101.  Question Presented: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court? 9

Patentable Subject Matter – Alice Corp. v. CLS Bank Int’l Supreme Court Decision (9-0) (affirmed)  Because the claims are drawn to ineligible abstract idea, they are not patent eligible under 35 U.S.C. § 101.  Supreme Court Test: (1) determine whether the claims at issue are directed to a patent-ineligible concept; and (2) if so, determine whether claim’s elements, considered both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application.  (1) The abstract idea of mitigating settlement risk is a patent-ineligible concept; and (2) the method claims which merely require generic computer implementation is not enough to transform the abstract idea into patent-eligible invention. Federal Circuit applied Alice at least 5 times in 2014 to invalidate patents under § 101, including Ultramercial v. Hulu, 772 F.3d 709; buySAFE v. Google, 765 F.3d 1350; Content Extraction v. Wells Fargo, 776 F.3d 1343; BRCA1 & BRCA2 v. Ambry Genetics Corp., 774 F.3d 755; and Planet Bingo v. VKGS, 576 Fed. Appx  Upheld patent under Alice test only once (DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245) 10

Appellate Deference to Claim Construction – Teva v. Sandoz Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S.Ct. 831 (2014)  Decided Jan. 20, 2015 (opinion by Breyer, 7-2) Federal Circuit decision, 723 F.3d 1363 (Fed. Cir. 2013)  Reversed district court claim construction.  Patent invalid as indefinite; “average molecular weight” is insolubly ambiguous, despite district court factual findings that a person of ordinary skill would have understood the claim term.  Denied rehearing en banc. Federal Rule of Civil Procedure 52(a)(6)  “Findings of fact, […] must not be set aside unless clearly erroneous […]” 11

Appellate Deference to Claim Construction – Teva v. Sandoz Question Presented  Whether a district court’s factual findings in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Rule 52(a) requires. Supreme Court Decision (7-2) (reversed and remanded)  Federal Circuit must apply a clear error (not de novo) standard of review for district court’s subsidiary factual findings on claim construction.  District judge after deciding factual dispute will interpret claims in light of the facts. Ultimate interpretation is a legal conclusion – reviewed de novo.  If district court reviews only intrinsic evidence – de novo review. Dissent (by Thomas, joined by Alito)  Claim construction does not involve findings of fact and thus, FRCP 52(a)(6) does not apply and the proper standard of review is de novo.  A patent is like a statute rather than a contract. 12

Defense to Induced Infringement – Commil v. Cisco Commil USA, LLC v. Cisco Sys., Inc., No  Cert. petition granted Dec. 5, 2014 (oral argument March 31, 2015) Federal Circuit decision, 720 F.3d 1361 (Fed. Cir. 2013) (2-1)  Global-Tech Appliances Inc. v. SEB S.A., 131 S. Ct (2011) requires knowledge that induced acts constitute infringement for liability under 35 U.S.C. § 271(b) (actual knowledge or willful blindness).  Evidence of good faith belief in invalidity may negate requisite intent.  Rehearing en banc denied, 737 F.3d 699 (Fed. Cir. 2013) (6-5). Question Presented  Whether a defendant’s belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b). 13

Royalties Post-Patent’s Expiration Date – Kimble v. Marvel Kimble v. Marvel Enters. Inc., No  Cert. petition granted Dec. 12, 2014 (oral argument March 31, 2015) 9th Circuit decision, 727 F.3d 856 (9th Cir. 2013)  Royalty provision in settlement agreement held unenforceable after expiration of patent because there was only one royalty rate for both patent and non-patent rights.  Applied Brulotte v. Thys Co., 379 U.S. 29 (1964): any contract requiring royalty payments for an invention after patent expires or when it fails to issue is unenforceable unless contract provides a discount from the patent-protected rate.  Brulotte extends to “hybrid licensing agreement” (i.e., agreements with inseparable patent and non-patent rights). Question Presented  Whether a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se. 14

Federal Circuit 15

Induced Infringement – Suprema v. ITC (en banc) Suprema, Inc. v. Int’l Trade Comm’n, No ITC Exclusion and Cease and Desist Order, Inv. No. 337-TA-720, 2011 WL (Nov. 10, 2011)  Baring importation of optical scanning devices. Background  Patent-in-suit claims methods of finger print imaging and capturing.  Accused products are imported scanners that only infringe when used with domestically developed software, but have substantial non-infringing uses. 16

Induced Infringement – Suprema v. ITC (en banc) Federal Circuit decision, 742 F.3d 1350 (Fed. Cir. 2013)  ITC exclusion order based on violation of Tariff Act may not be predicated on a theory of induced infringement in which direct infringement does not occur until after importation of the articles that the exclusion order would bar.  ITC authority under Section 337 of the Tariff Act “reaches ‘articles that... infringe a valid and enforceable United States patent’ at the time of importation.” 742 F.3d at Federal Circuit grants petition for rehearing en banc, 2014 U.S. App. LEXIS (Fed. Cir. May 13, 2014)  Question presented: Whether the ITC has authority under 19 U.S.C. § 1337 to issue exclusionary orders to remedy induced infringement of method claims where the direct infringement does not occur until after the article is imported into the United States.  Oral arguments held on Feb. 5,

Laches Defense (damages) – SCA Hygiene v. First Quality Baby Products (en banc) SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, No U.S.C. § 286  Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action. Federal Circuit decision, 767 F.3d 1339 (Fed. Cir. Sept. 17, 2014)  Affirms summary judgment of laches, applying Aukerman.  Presumption of laches based on more than six-year delay: – Knowledge of infringing activity in 2003, ex parte reexamination proceedings 2004 – 2008, lawsuit filed in  Presumption not rebutted by patentee. 18

Laches Defense (damages) – SCA Hygiene v. First Quality Baby Products (en banc) Petition for rehearing en banc granted on Dec. 30, 2014:  In light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S.Ct (2014) (and considering any relevant differences between copyright and patent law), should this Court’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitation period established by 35 U.S.C. § 286?  In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief? Same laches issue presented in Reese v. Sprint Nextel Corp., No. 2:13-cv ODW, 2014 U.S. Dist. LEXIS (C.D. Cal. July 24, 2014). 19

Obviousness in View of Unexpected Results – Bristol-Myers Squibb v. Teva 20 Bristol-Myers Squibb Co. v. Teva Pharms. USA, Inc., No Federal Circuit decision, 752 F.3d 967 (Fed. Cir. June 12, 2014)  Baraclude ® (entecavir) used in the treatment of hepatitis B.  Panel affirms summary judgment of obviousness in view of structurally similar prior art compound – prima facie obvious.  No error in selection of lead compound despite later-discovered evidence of toxicity. Rehearing en banc denied (7-4), 769 F.3d 1339 (Fed. Cir. Oct. 29, 2014)  Dyk & Wallach: “This decision properly does not allow consideration of post-invention evidence in the circumstances of this case.”  Newman, Lourie, Reyna, Taranto dissent from denial of petition.  O’Malley: decision “does not foreclose” use of post-invention evidence. Cert petition filed Jan. 20, 2015 (No )  Question Presented: Should courts consider post-filing evidence showing the actual differences between a patented invention and the prior art?

Joinder of Parties – STC v. Intel 21 STC.UNM v. Intel Corp., No Federal Rule of Civil Procedure 19(a)  Involuntary joinder rule in which a party must be joined. Federal Circuit decision (2-1), 754 F.3d 940 (Fed. Cir. June 6, 2014)  Only one of the co-owners of patent brought infringement suit against alleged infringer.  Majority: first co-owner lacked standing to bring the infringement claims without second co-owner voluntarily joining the suit and could not be involuntarily joined pursuant to Fed. R. Civ. P. 19(a).  “[T]he right of a patent co-owner to impede an infringement suit brought by another co- owner is a substantive right that trumps the procedural rule for involuntary joinder under Rule 19(a).”  Dissent (Newman): Fed. R. Civ. P. 19(a) does apply to co-owners of a patent.

Joinder of Parties – STC v. Intel 22 Rehearing en banc denied (6-4), 767 F.3d 1351 (Fed. Cir. Sep. 17, 2014)  Dyk, Moore, & Taranto: “Rule presupposes the existing parties’ substantive entitlement to ‘relief’ from another source of law” – however, patent co-owner has no right to any relief unless the suit is filed with the consent of co-owners.  Newman, Lourie, O’Malley, & Wallach: dissent from denial of petition.  O’Malley: “Rule 19(a) makes no exception for recalcitrant patent owners and we, to date, have not explained from where such an exception derives.” Cert petition filed Dec. 16, 2014  Question Presented: Whether Fed. R. Civ. P. 19(a) permits a patent owner to join an indispensable party to bring an infringement suit. Cert petition denied March 30, 2015

Effect of Claim Amendments – Vederi v. Google 23 Vederi, LLC v. Google, Inc., 744 F.3d 1376 (Fed. Cir. 2014) Federal Circuit decision, 744 F.3d 1376 (Fed. Cir. Mar. 14, 2014)  Reversed district court’s claim construction of “substantially elevations” limitation and vacated judgment of non-infringement.  District court erred in limiting the construction of “substantially elevations” by not sufficiently considering the intrinsic evidence in this case. Cert petition filed Oct. 16, 2014  Question Presented: Whether, when an applicant for a patent amends a claim to overcome the Patent and Trademark Office’s earlier disallowance of the claim, a court should (i) presume that the amendment narrowed the claim and strictly construe the amended claim language against the applicant, as this Court has held; or (ii) presume that the claim scope remained the same and require that any narrowing be clear and unmistakable, as the Federal Circuit has held. Solicitor General invited to file brief on Jan. 12, 2015

Obviousness-Type Double Patenting – Gilead Sciences, Inc. v. Natco Pharma Ltd. 24 Federal Circuit decision, 753 F.3d 1208 (Fed. Cir. Apr. 22, 2014)  Later-issued but earlier-expiring patent may qualify as a reference for purposes of obviousness-type double patenting against earlier-issued, later-expiring patent.  Patent expiration dates should control – not issuance dates.  Rader dissent: subsequent patent claims priority to earlier date and expires first, does not extend the patent term.  Rehearing en banc denied. Cert filed Nov. 26, 2014  Question Presented: Whether, contrary to this Court’s consistent and longstanding precedent and Congress’s intent, the double-patenting doctrine can be used to invalidate a properly issued patent before its statutory term has expired using a second, later-issuing patent whose term of exclusivity is entirely subsumed within that first patent’s term? Cert Petition denied March 9, 2015.

Doctrine of Equivalents – Cadence v. Exela 25 Cadence Pharms. Inc. SCR Pharmatop v. Exela Pharmsci Inc., No , 2014 U.S. App. LEXIS 4700 (Fed. Cir. March 23, 2015)  District court construed claim to require active ingredient be dissolved before deoxygenation.  Claim vitiation: application of doctrine of equivalents would read an express limitation out of the claim.  Affirmed district court’s decision that the timing of the addition of the active ingredient did not matter and the differences between the claimed steps and the allegedly infringing method were insubstantial.  “‘Vitiation’ is not an exception or threshold determination that forecloses resort to the doctrine of equivalents, but is instead a legal conclusion of a lack of equivalence based on the evidence presented and the theory of equivalence asserted.”

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