Reasonable Royalty Cannot Include Non-Infringing Activities

In Enplas Display Device Corporation v. Seoul Semiconductor Company, Ltd., [2016-2599](November 19, 2018), the Federal Circuit affirmed the district court’s judgment that claim 20 of U.S. Patent No. 6,007,209 and the asserted claims of U.S. Patent No. 6,473,554 are not anticipated; affirmed the district court’s denial of JMOL of no inducement; but reversed the denial of JMOL that the damages award was not supported by substantial evidence, and remanded.  The ’209 and ’554 patents are directed to methods of back lighting display panels, particularly LED displays used in televisions, laptop computers, and other electronics.

On the anticipation of the ‘209 patent, Emplas argued that because an inventor of the ‘209 patent testified that the prior art reference did not exclude mounting light sources as required by the claim, there was an issue of fact for the jury.  The Federal Circuit disagreed, saying that this was not enough for anticipation.  Anticipation requires that a single reference disclose each and every element of the claimed invention, while at most, the testimony suggests that the reference could have been modified to include light sources on the bottom wall.  The Federal Circuit said that “Prior art that must be modified to meet the disputed claim limitation does not anticipate the claim.”

On the anticipation of the ‘554 patent the Federal Circuit noted that it came down to conflicting expert testimony about the prior art,  and that “when there is conflictingtestimony at trial, and the evidence overall does not make only one finding on the point reasonable, the jury is permitted to make credibility determinations and believe the witness it considers more trustworthy.”  Because the jury’s verdict was based upon the reference itself as well as expert testimony, it was supported by substantial evidence.

On the issue of induced infringement, the Federal Circuit noted that in order to succeed on a claim of inducement, the patentee must show, first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement.  Mere knowledge of infringement is insufficient. Liability for inducement can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement.  Although the text of §271(b) makes no mention of intent, the Court infers that at least some intent is required, so both specific intent and action to induce infringement must be proven.

Although it was a close case, the Federal Circuit concludedthat there was substantial evidence whereby both Enplas’ knowledge and intent to induce infringement could be reasonably found.  The Federal Circuit noted that Enplas also did not dispute that it was informed that the product it manufactured, co-developed, and sold to SSC was covered by SSC’s patents, and that Enplas knew its customers sold televisions in the US and other countries.  SSC had sent Enplas a pre-suit letter,informing it that SSC had found infringing lenses made with Enplas parts in televisions sold in the United States. Further Enplas provided its customers with product specifications that recommended infringing configurations for its accused lenses.  The Federal Circuit said that it has held that providing instructions to use a product in an infringing manner is evidence of the required mental state for inducing infringement.

Enplas argued that this evidence did not establish that it knew its lenses would be incorporated in U.S. televisions and that in any event mere knowledge was not enough to establish specific intent. The Federal Circuit agreed that mere knowledge of possible infringement is not enough, there was circumstantial evidence that would allow a jury to reasonably find that Enplas had knowledge of the patents and of its customers’ infringing activity and that it intended to induce their infringement, and affirmed the denial of JMOL.

Finally on the issue of damages, Enplas argued that the only evidence supporting the $4 million award was testimony from SSC’s damages expert that explicitly and improperly included non-infringing devices in the royalty calculation.  Enplas filed a Daubert motion regarding this testimony, that the district court deferred, and a motion in limine regarding this testimony, which the district court denied.  SSC’s expert testified that the parties would have negotiated a premium freedom to operate” license to avoid the need to test and negotiate licenses for additional or future potentially infringing lenses that Enplas might sell, and to determine this premium that Enplas would pay, SSC’s expert assessed the volume of sales of all non-accused lenses made by Enplas, which the expert estimated from Enplas’ website.

The Federal Circuit agreed with Enplas, noting a reasonable royalty cannot include activities that do not constitute patent infringement, as patent damages are limited to those “adequate to compensate for the infringement.”

Do Over — Different Evidence and Different Evidentiary Standard Allow IPR to Reach Different Conclusion of Validity than ITC

in Nobel Biocare Services AG v. Instradent USA, Inc., [2017-2256] (September 13, 2018), the Federal Circuit affirmed the PTAB’s determination that claims 1-5 and 19 of U. S. Patent No. 8,714,977,directed to dental implants, were anticipated.

The undisputed critical date of the ‘977 patent was May 23, 2003, and Instradent alleged that the claims were anticipated by an ABT “Product Catalog” with the date
“March 2003” on the cover.  The ITC, applying a clear and convincing evidentiary standard, had previously determined that the claims were not anticipated, and the Federal Circuit affirmed.

Meanwhile, Instradent petitioned for IPR.  While the Board adopted the same claim construction as the ITC, and considered the same evidence presented to the ITC, the Board also considered new evidence not considered by the ITC, including the declarations and deposition testimony of Hantman and Chakir that the catalog was available to the industry in March 2003.  The Board determined that a preponderance of the evidence establishes that the ABT Catalog qualifies as a prior art printed publication under 35 U.S.C. § 102(b).

On appeal, the parties disputed whether the ABT Catalog qualifies
as a “printed publication” under § 102(b).  The Federal Circuit said that whether a reference qualifies as a “printed publication” is a legal conclusion based on underlying factual findings, including The parties dispute whether the ABT Catalog qualifies
as a “printed publication” under pre-AIA § 102(b). Whether a reference qualifies as a “printed publication” is a legal conclusion based on underlying factual findings, including whether a reference was publicly accessible. Public accessibility has been called the touchstone in determining whether a reference constitutes a “printed publication.”  A reference will be considered publicly accessible if it was disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence can locate it.

The Federal Circuit noted that it was not bound by its prior affirmance of the ITC’s holding that there was insufficient evidence to find pre-critical date public accessibility, observing that the evidentiary standard in IPRs, “preponderance of the evidence” is different from the higher standard applicable in ITC proceedings.  The Federal Circuit further noted that the Board also had more evidence on this issue than what was before the ITC.  Finally the Federal Circuit said that under the substantial evidence standard, the inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.

The Federal Circuit agreed with Instradent that substantial evidence supported the Board’s finding that the ABT Catalog was publicly accessible prior to the critical date. The Board credited Chakir and Hantman’s testimony that Chakir obtained a copy of the ABT Catalog at the March 2003 IDS Conference and that Hantman retained that copy in
his records thereafter. Furthermore, Hantman’s declaration included excerpts of his copy of the ABT Catalog taken from his files. The Board found that Hantman’s copy of the ABT Catalog and the copy offered as prior art by Instradent in the IPR had identical pages except for some handwriting on the cover of Hantman’s copy.

The Federal Circuit noted that corroboration is required of any witness whose testimony alone is asserted to invalidate a patent, regardless of his or her level of interest.  Corroborating evidence may include documentary or testimonial evidence, and circumstantial evidence can be sufficient corroboration.  The Federal Circuit listed eight factors to be considered in evaluating corroboration:

(1) the relationship between the corroborating witness and the alleged prior user,
(2) the time period between the event and trial,
(3) the interest of the corroborating witness in the subject matter in suit,
(4) contradiction or impeachment of the witness’ testimony,
(5) the extent and details of the corroborating testimony,
(6) the witness’ familiarity with the subject matter of the patented invention and the prior use,
(7) probability that a prior use could occur considering the state of the art at the time,
(8) impact of the invention on the industry, and the commercial value of its practice.

Applying a “rule of reason” analysis to the corroboration requirement, which “involves an assessment of the totality of the circumstances including an evaluation of all pertinent evidence, the Federal Circuit held the corroboration to be sufficient, noting “there are no hard and fast rules as to what constitutes sufficient corroboration, and each case must be decided on its own facts.”

The Federal Circuit rejected the challenges to the claim construction, and affirmed the Board.

 

 

Unreasonably Broad Construction Unlimited by the Specification, Resulted in Incorrect Finding of Anticipation

In TF3 Limited v. Tre Milano, LLC, [2016-2285] (July 13, 2018), the Federal Circuit reversed the PTAB’s decision in IPR2015-00649 that the claims in U.S. Patent No. 8,651,118 on a hair styling device were anticipated, holding that on the correct claim construction, the claims are not anticipated.

The Federal Circuit said that the Board held that two references each shows the same device as claimed in the ’118 Patent, rendering
the claims invalid for anticipation. However, as is apparent, the devices are not the same. The Federal Circuit said that anticipation was
decided on a flawed analysis, whereby the ’118 Patent claims were construed to have a breadth beyond the scope supported by the device described in the ’118 Patent, the Board then holding that the unduly broad ’118 Patent claims read on the two different prior devices
and thus are anticipated.

The Federal Circuit said that the Board declined to construe “the length of hair can pass through the secondary opening,” as set forth in the  specification, instead ruling that in accordance with the broadest reasonable interpretation, “claim 1 does not require that the length of hair is allowed to slide along the elongate member towards and subsequently off its free end.”  The Federal Circuit found that the Board misconstrued the use of “i.e.” in the specification, explaining that the usage “i.e.” (“id est” or “that is”), “signals an intent to define the word to which it refers.”   The Federal Circuit said that the ’118 Patent describes the device as improving curl retention by the structure that “permits a formed curl to be slid off the end of the elongate member without being
uncurled,” and neither of the allegedly anticipating references has such a structure.  The Federal Circuit quoted itself that:

The claims, of course, do not stand alone. Rather, they are part of a fully integrated written instrument, consisting principally  of a specification that concludes with the claims. For that reason, claims must be read in view of the specification, of which they are a part.

The Federal Circuit concluded that it is not reasonable to read the claims more broadly than the description in the specification, thereby broadening the claims to read on the prior art over which the patentee asserts improvement.

The Federal Circuit also noted that the Board construed “free end” to mean “an end of the elongate member that is unsupported when the movable abutment is in the open position,” because given their broadest interpretation, the ’118 Patent claims do not require that the movable abutment operates as described in the specification.  Thus, the Federal Circuit observed, the Board construed the claims as “unlimited by the specification.”  The Federal Circuit observed:

Claims are construed with reference to the specification and prosecution history, for these are the resources by which persons in the field of the invention understand what has been invented.

The Federal Circuit found that the Board’s construction was contrary to the specification, and concluded that The ’118 Patent claims, construed in light of the specification, do not read on the prior art and are not anticipated by the prior art.

 

The Novelty of an Optical Isomer is not Negated by the Prior Art Disclosure of its Racemate

In UCB, Inc. v. Accord Healthcare, Inc., [2016-2610, 2016-2683, 2016-2685, 2016-2698, 2016-2710, 2017-1001] (May 23 2018), the Federal Circuit affirmed the district court’s determination that UCB’s patents on lacosamide, an anti-epileptic drug, were not invalid for obviousness-type double patenting, obviousness, and anticipation.

On the issue of double patenting, the Federal Circuit noted that in chemical cases, the double patenting inquiry is not whether a person of ordinary skill in the art would select the earlier compound as a lead compound, but rather whether the later compound would have been
an obvious or anticipated modification of the earlier compound — the underlying patent in the double patenting analysis need not be prior art to the later claim.  The Federal Circuit found that the district court did not err by focusing its double patenting analysis on the claims’ differences, as well as the claims as a whole.  The Federal Circuit said that proving that a claim is invalid for obviousness-type double patenting “requires identifying some reason that would have led a chemist to modify the earlier compound to make the later compound with a reasonable expectation of success.  Acknowledging that it was a close case, because it discerned no clear error in the district court’s underlying fact finding that there would have been no reasonable expectation of success in making the modifications needed to make the claimed combination, the Federal Circuit agreed with the district court that the asserted claims of the ‘551 patent were patentably distinct from the ’301 patent.

With respect to obviousness, the Federal Circuit applied a lead compound analysis, rejecting the proposition that the test does not apply in purification cases.  The lead compound analysis first determines whether a chemist of ordinary skill would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts, and then determines “whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.  The Federal Circuit found substantial evidence supported the district court’s conclusion that a person of ordinary skill in the art would not have selected either of the proferred lead compounds.

On anticipation, appellants argued that because the prior art disclosed the chemical structure, it it necessarily disclosed the R-enantiomer (lacosamide) recited in claim 9 of the ’551 patent.  The district court concluded that the prior art disclosed neither the R-enantiomer, nor any of its characteristics.  The Federal Circuit noted that the novelty of an optical isomer is not negated by the prior art disclosure of its racemate, and that the references specifically stated that it prepared the racemic amino acid derivatives rather than the individual enantiomers.  Thus, the Federal Circuit found no clear error in the finding of no anticipation.

Board’s Construction of the Claims was Unreasonably Broad and Inconsistent with the Specification

In In re Hodges, [2017-1434] (February 12, 2018), the Federal Circuit reversed the Board’s anticipation determinations, vacate
its obviousness determinations, and remand for further
proceedings.  The application is directed to a valve assembly
for draining contaminants, condensation, and other fluids that adversely affect the efficiency and function of a pressurized system.

The Federal Circuit found that the Board’s Finding that the claims were anticipated was unsupported by substantial evidence.  A prior art reference anticipates a patent’s claim when the four corners of the document “describe every element of the claimed invention, either expressly or inherently, such that a person of ordinary skill in the art could practice the invention without undue experimentation.  At issue was the positioning of a valve in the prior art relative to the claimed invention.  The Board found the positioning “similar,” but the Federal Circuit found that the Board neither supported its assertion of
similarity, nor explained how the positioning of the valve in the prior art would enable a skilled artisan to “practice the invention without
undue experimentation.”

As to anticipation by another reference, the Board affirmed a rejection that a piston stem and piston head collectively constitute the claimed “sensor” because they sense pressure insofar as they move in response to the pressure applied thereto.  The Federal Circuit noted that the Patent Office did not attempt to defend this finding on appeal “for good reason” as the Board’s anticipation finding was predicated on an erroneous construction of “signal,” and the reference did not disclose a sensor.  The Federal Circuit found the Board construction of the claims to be unreasonably broad and inconsistent with the specification.  The Federal Circuit said that under any reasonable construction of “signal,”
the prior art’s piston stem and head combination cannot fairly
be characterized as a sensor that generates a signal.  The Federal Circuit reversed the rejection, not wanting to give the Patent Office “a second chance to reject the claims on grounds that it is unwilling or unable to defend on appeal.”

On the obviousness rejections, the Board concluded in a “single paragraph” that the claims would have been obvious, but did not explain how the reference could be modified.  The Federal Circuit also noted that the Board made no findings on any of the Graham factors.  The Federal Circuit said that the Board must “explicate its factual conclusions, enabling us to verify readily whether those conclusions are indeed supported by ‘substantial evidence’ contained within the record,” but that the Board failed to do so, so the Federal Circuit remanded the case.

 

 

About “About”: “Less Than About 3%” Includes 4%

In Monsanto Technology LLC v. E.I. DuPont De Nemours & Co., [2017-1032] (January 5, 2018), the Federal Circuit affirmed the PTAB’s decision that affirmed reexamination examiner’s rejection of claims of U.S. Patent No. 7,790,953, on Soybean Seed and Oil Compositions and
Methods of Making Same as anticipated by or obvious from U.S. Patent No. 6,426,448.

Monsanto argued that misconstruing the Board misconstrued the “about 3% or less” limitation in the ’953 patent to include progeny with a linolenic acid content of 4%, but the Federal Circuit found that the PTAB “reasonably interpreted” Booth’s parent line containing 4% linolenic acid “to be within the scope of ‘about 3%,’” as recited in claim 1 step (a).  The Federal Circuit found that the claim language was not instructive, so it turned to the the remainder of the specification.  The Federal Circuit noted that Exhibit 9, which purportedly had a linolenic acid content of about 3%, which included a reference that disclosed linolenic acid contents from 2.3% to 4.1%.  Thus the Federal Circuit found that the intrinsic evidence supported finding that a person having ordinary skill in the art would reasonably consider “about 3%” to encompass a range that includes 4%, and that Monsanto’s counterarguments were “unavailing.”

Monsanto further argued that the finding of anticipation was not supported by substantial evidence because the anticipation was not inherent, as the PTAB found.  The Federal Circuit disagreed, saying that inherent anticipation applies because the prior art “necessarily include the unstated limitation.”  Declarations in the record confirmed that the generation identified in the prior art would necessarily result in progeny within the scope of claim 1. Monsanto challenged the PTAB’s reliance on this “non-prior art data” and “secret data” in the declarations, but the Federal Circuit found this was appropriate, saying that Monsanto was confusing prior art with extrinsic evidence used to support what is “necessarily present” in a prior art’s teaching. Extrinsic evidence may be used to interpret the allegedly anticipating reference and to shed light on what it would have meant to a person of ordinary skill in the art. The Federal Circuit said that the declarations did not expand the
meaning of reference or serve as prior art: they demonstrate
what is inherent in the disclosure.  Second the declarations were not improper “secret data” — the were not used as prior art , but merely in support of prior art already of record.  Third, the Federal Circuit offered no rebuttal evidence to the declarations.

The Federal Circuit further affirmed the obviousness determination, noting that PTAB did not rely solely on its finding of inherent anticipation, but explained that explained that a PHOSITA would have been motivated to modify the reference to meet the requirements of the claims.

 

Federal Circuit Affirms Board on Claim Construction, No Anticipation, and Nonobviousness

In HTC Corp. v. Cellular Communications Equipment, LLC [2016-1880] (December 18, 2017), the Federal Circuit affirmed the PTAB’s Final Written Decision, finding no error in the Board’s claim construction, and that substantial evidence supported the Board’s determination that the challenged claims were not invalid.

The IPR involved U.S. Patent No. 7,941,174, which is directed to
methods and apparatuses for a radio communications system where a subscriber station, i.e., a mobile device, is assigned a plurality of codes for transmitting messages.

The Board did not expressly construe the term “message,” nor did HTC did not seek construction of the term.  However, the Federal Circuit found that Board findings establishing the scope of the patented subject matter may fall within the ambit of claim construction, reviewable on appeal.  However the Federal Circuit found HTC’s arguments unpersuasive and inconsistent.

On the asserted anticipation grounds, the Federal Circuit found that substantial evidence supported the Board’s conclusion, and rejected arguments presented by HTC for the first time on appeal.  On the asserted obviousness grounds, the Federal Circuit agreed with the Board’s reading of the prior art, and found that HTC did not point to any evidence in the record that would undermine the Board’s findings on the scope and content of the prior art.

 

Obviousness v. Anticipation: That Which Doesn’t Disclose Still Could Teach

In CRFD Research, Inc., v. Matal, [2016-2198] (December 5, 2017), the Federal Circuit affirmed two Final Written Decisions invaliding claims of U.S. Patent No. 7,191,233 on user-directed transfer of an on-going software-based session from one device to another device, and reversed one Final Written Decision that the claims were not obvious.

What is interesting about this case beyond the fact that a patent owner should have to simultaneously defend three IPR attacks on its patent, the loss of any one of which would be fatal, is the Federal Circuit’s reversal of the Board’s determination that Hulu had not shown the challenged claims to have been obvious.  The Federal Circuit said “the Board erred, both in how it performed its obviousness analysis and in the merits of its determination of nonobviousness.”

The Board concluded that the Bates reference did not anticipate certain challenged claims because it did not meet the claim requirement of “transmission of session history after discontinuation.”  Hulu complained, and the Federal Circuit agreed that the Board improperly
relied on its finding that Bates did not anticipate various asserted claims to support its finding of nonobviousness without considering whether Bates suggests transmission of session history after
discontinuation.  The Federal Circuit said that “Even if a reference’s
teachings are insufficient to find anticipation, that same reference’s teachings may be used to find obviousness.”

Hulu further argued that it would have been obvious, based on Bates, to
transmit session history after session discontinuation.  Hulu argued the obviousness of the claims based upon Bates, but the Board declined to institute on grounds of redundancy.  The Federal Circuit noted that Hulu expressly incorporated this argument as part of other grounds of unpatentability on which the Board instituted trial.  The Federal Circuit found that:

To bar Hulu from pressing an argument it raised in a ground the Board found “redundant” and that it expressly incorporated into other proposed grounds of unpatentability on which the Board instituted would not only unfairly prejudice Hulu, but would also raise questions about the propriety of the Board’s redundancy  decision.

Of course, even if it does “raise questions about the propriety of the Board’s redundancy decision,” that should not be a concern of the Federal Circuit because according to Cuozzo institution decisions are not reviewable.  The Federal Circuit went on to find that Bates did in fact sufficiently teach what it did not exprsessly disclose, and reversed the Board’s determination that the claims were not shown to be obvious.

This case illustrates that some of the mischief that arises from a Board’s finding of redundancy.  The petitioner is allowed to use the arguments in the non-instituted redundant ground to support its position in the instituted grounds — at least if they are sufficiently “incorporated.”  Another problem with redundancy is that the estoppel effect is unclear.  The Federal Circuit has indicated that estoppel does not apply to grounds that are not instituted.  HP Inc. v. MPHJ Tech. Inv., LLC, 817 F.3d 1339, 1347-48 (Fed. Cir. 2016).  If this interpretation applies to grounds denied for redundancy, it means that a patent owner could prevail in the IPR, and later face a challenge based upon the redundant ground — one found by the Board to indistinguishable from the ground on which the patent owner prevailed.

You Need Standing to Appeal and IPR Decision, But Not to Participate in the Appeal

In Personal Audio, LLC v. Electronic Frontier Foundation, [2016-1123] (August 7, 2017), the Federal Circuit affirmed the PTAB’s determination in an IPR that claims 31-35 of U.S. Patent No. 8,112,504, related to a system and apparatus for storing and distributing episodic media files, were unpatentable.

The Federal Circuit first addressed whether the Electronic Frontier Foundation had standing to participate in the appeal after  Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F.3d 1258 (Fed. Cir. 2014), where the Federal Circuit held that a challenger who was not a competitor did not have Article III standing to appeal a PTAB determination of patentability.

However the Federal Circuit concluded that because Personal Audio had standing to appeal the invalidation of its patent claims, the Electronic Frontier Foundation did not need Article III standing to merely participate in the proceeding in which the appellant had standing.

On the merits, the Federal Circuit rejected Personal Audio’s objections to the Board’s claim construction, and affirmed the Board’s decision that the claims were anticipated or obvious.

Board Was Mixed Up Over Blender Patent

In Homeland Housewares, LLC v. Whirlpool Corp., [2016-1511](August 4, 2017), the Federal Circuit reversed the PTAB’s determination that Whirlpool’s U.S. Patent No. 7,581,688 relating to household blender was not anticipated by U.S. Patent No. 6,609,821.

The patent claims a pre-programmed, automated blending cycle designed to blend items “by repeatedly dropping to a speed slow enough to allow the blender contents to settle around the cutter assembly, and then returning to a [higher] speed suitable for processing the contents.”  It was it was well known that a user could manually pulse between a high speed and a low speed to achieve efficient mixing.  Thus, in the words of the Federal Circuit “the claimed automatic blending routine was, in the prior art, done manually.”

Claim 1 provided that during pulsing, “the speed of the cutter assembly is reduced from the operating speed to a predetermined settling speed.” The Federal Circuit noted that the Board failed to explicitly construe “settling speed,” even though the parties disagreed about its meaning.  Whirlpool urged a construction the essentially required an empirical determination of the settling speed, while Homeland urged a construction that that “settling speed” means any comparative low speed less than the operating speed.  The Federal Circuit found that both parties were wrong, and that the broadest reasonable construction of “a predetermined settling speed” is a speed that is slower than the operating speed and permits settling of the blender contents.

With this construction the Federal Circuit found that the Wulf reference’s teaching of  alternating between high and low speeds “permits the material being blended to fall back to the region of the cutting knives” met the claim language.  While the Board credited Whirlpool’s exert testimony because it was unrebutted, the  Federal Circuit said that expert testimony should be disregarded when it is plainly inconsistent with the record.

The Federal Circuit found all of the claims anticipated, and vacated the decision of the Board.