Local Rules, unlike the Pirate Rules, Are More than Mere Guidelines, and Ignoring Them Can Cause a Loss of Rights

In Sowinksi v. California Air Resources Board, [2019-1558] (August 21, 2020), the Court of Appeals for the Federal Circuit affirmed the dismissal of Sowinski’s Complaint for infringement of U.S. Patent No. 6,601,033 on grounds of res judicata.

In 2015 Sowinski sued the California Air Resources Board (“CARB”) and several individual and corporate defendants associated with CARB in California Superior Court for among other things infringement of U.S. Patent No. 6,601,033.  After the case was removed to the United States District Court for the Central District of California, it was dismissed with prejudice and without leave to amend, because Sowinski failed to file a response to defendants’ motion to dismiss.  The dismissal was affirmed by the Federal Circuit. In 2018 Sowinski again filed suit on the ‘033 patent, limiting his damages claim to the period after dismissal of the 2015 action, and the district court dismissed it on grounds of res judicata.

The Federal Circuit said that res judicata arises when the prior case or claim was previously tried and the merits were adjudicated. Sowinski argued that the case was not a final judgment on the merits, because the dismissal was based on the technicality of a local deadline.  However, there is precedent that dismissal for failure to prosecute should be treated as an adjudication on the merits for purposes of preclusion.  Further, FRCP 41(b) states that a dismissal for failure to prosecuting or comply with the FRCP or a court order can operate as an adjudication on the merits.  Thus the Federal Circuit concluded that the district court properly precluded the claim.

As to Sowinski’s claim for damages subsequent to the dismissal, the Federal Circuit noted that preclusion does not apply to new or changed products or methods, but does apply when the accused products or methods are essentially the same.

Although Dr. Sowinski stresses the inequity that he did not obtain resolution of the question of infringement, CARB pointed out that he had the opportunity to do so. The Federal Circuit said that application of preclusion encourages reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other disputes.

Local Rules, unlike the Pirate Rules in Pirates of the Caribbean, are more than mere guidelines, and ignoring them can cause a loss of rights.

Standard-Essentiality is a Question for the Factfinder

In Godo Kaisha IP Bridge 1 v. TCK Communication Technology, [2019-2215] (August 4, 2020), the Federal Circuit affirmed the jury determination of infringement based on patentee’s theory that (1) the patent claims are essential to mandatory aspects of the Long-Term Evolution (“LTE”) standard; and (2) the accused products practice that standard.

Defendant argued in a JMOL that the district court should have decided the question of the claims’ essentiality to the standard in the claim construction context and that the court needed to decide that question as a matter of law. The Federal Circuit found no error in the submission of these questions to the jury in the context of an infringement trial.

The Federal Circuit agreed that standard-essentiality is a question for the factfinder. The Federal Circuit added that determining standard-essentiality of patent claims during claim construction, moreover, hardly makes sense from a practical point of view. Essentiality is, after all, a fact question about whether the claim elements read onto mandatory portions of a standard that standard-compliant devices must incorporate. This inquiry is more akin to an infringement analysis (comparing claim elements to an accused product) than to a claim construction analysis (focusing, to a large degree, on intrinsic evidence and saying what the claims mean).

Institution Decision Not Carved in Stone; Final Written Decision Can Differ

In Fanduel, Inc. v. Interactive Games LLC, [2019-1393] (July 29. 2020), the Federal Circuit affirmed the PTAB’s determination that Fanduel, had failed to prove that claim 6 of U.S. Patent No. 8,771,058 was obvious in view of the asserted prior art.  Fanduel argued that the Board violated the APA by adopting in its final written decision a “new theory”—that the combination of Walker, Carter, and the Slot Payouts Webpage failed to disclose the claimed combination, after instituting on that ground.

The Federal Circuit said that the critical question for compliance with the APA and due process is whether patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at that hearing.  The Federal Circuit added that FanDuel’s argument that it lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition strains credulity.

Moreover, the Federal Circuit failed to see how the Board changed theories at all in this case. The Federal Circuit said that by finding at institution that Fan-Duel had a reasonable likelihood of succeeding in its obviousness challenge to claim 6, despite one reference’s contested prior art status, the Board was not adopting a position on the ultimate import of the three references. The Federal Circuit said that the Board said nothing in its institution decision endorsing FanDuel’s arguments such that later rejecting these arguments would have been a change in theory.

The Federal Circuit said that there is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious. The Federal Circuit observed that this happens with some frequency, and that is has encouraged the Board to “change its view of the merits after further development of the record, if convinced its initial inclinations were wrong.

The Federal Circuit also rejected FanDuel’s suggestion that the patent owner’s failure to put forth rebuttal evidence regarding the substance of the references’ disclosures in any way limited the Board’s ability to decide for itself what the references would teach or suggest to a person of skill in the art.  The Federal Circuit noted that the Petitioner always has the burden of showing invalidity, and that the patent owner does not even have to file a response, and thus, a patent owner’s response, alone, does not define the universe of issues the Board may address in its final written decision.

The Federal Circuit concluded that from the moment FanDuel filed its petition, it was on notice that the Board would decide whether those references taught what FanDuel claimed they taught. That is exactly what the Board ultimately did. No APA violation results from such a course.  The Board’s purported new theory in this case was merely an assessment of the arguments and evidence Fan-Duel put forth in its petition.

On the substantive issues, the Federal Circuit agreed with Board that FanDuel failed to show that claim 6 was obvious.

Patent Owner is Not Always Indispensable

In Gensetix,Inc. v. Baylor College of Medicine, [2019-1424] (July 24, 2020), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded  the dismissal of the suit for failure to join an indispensable party.

Gensetix, Inc. , exclusively licensed U.S. Patent Nos. 8,728,806 and 9,333,248 from the University of Texas, an arm of the state of Texas. Gensetix brought suit, naming the University of Texas as an involuntary plaintiff. The district court determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff, and concluded that the suit could not proceed in UT’s absence.

The Federal Circuit agreed that sovereign immunity prevented UT from being joined as an involuntary plaintiff, noting that sovereign immunity is reflected in (rather than created by) the Eleventh Amendment, and transcends the narrow text of the Amendment itself. Sovereign immunity serves to avoid the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties. The Federal Circuit distinguished cases where the state is the plaintiff, noting that the Eleventh Amendment applies to suits against a state, not suits by a state. Thus, the fact that UT did not voluntarily invoke federal court jurisdiction was dispositive. Accordingly, Rule 19(a)(2) cannot be used to drag an unwilling UT into federal court.

However, the Federal Circuit found that the district court abused its discretion when it dismissed the suit because of the absence of UT. Rule 19(b) provides that, where joinder of a required party is not feasible, “the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). This inquiry involves consideration of four factors: (1) the extent to which a judgment rendered might prejudice the missing required party or the existing par-ties; (2) the extent to which any prejudice could be lessened or avoided (3) whether a judgment rendered in the required party’s absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

The district court found that three out of the four Rule 19(b) factors weighed in favor of dismissing the case. However, the Federal Circuit concluded that the district court abused its discretion by collapsing the multi-factorial Rule 19(b) inquiry into one dispositive fact: UT’s status as a sovereign.

The Federal Circuit said that the proper analysis of the Rule 19(b) factors is far more nuanced than the district court’s. As to the prejudice to UT, the interests of UT and Gensetix are aligned. Despite UT’s sovereign status, given Gensetix’s identical interest in the validity of the patents-in-suit, any prejudice to UT is greatly reduced. There is also no risk of multiple suits be-cause, under the express terms of the parties’ agreement, UT may not sue Baylor once Gensetix has commenced liti-gation. And, as an exclusive licensee with less than all sub-stantial rights in the patents-in-suit, Gensetix cannot enforce its patent rights without the court allowing the suit to proceed in UT’s absence. Given this clear factual record, we conclude that it was an abuse of discretion to find that the suit may not proceed in UT’s absence. Accordingly, we reverse the district court on this point.

Gensetix provides some guidance when licensing from an arm of the state government. To be able to suit without joint the patent owner, the licensee should make sure that their license is exclusive, in all fields, and that the licensee can enforce the patent, and patent owner cannot bring suit once the licensee does. This should tip the balance of the FRCP 19(b) factors in favor of the licensee enforcing the patent.

Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Over-designation of Confidential Information Costs Plaintiff Protection

In Uniloc 2017 LLC v. Apple, Inc., [2019-1922, 2019-1923, 2019-1925, 2019-1926] (July 9, 2020), the Federal Circuit affirmed in part, vacated in part, and remanded, the district court’s denial of Uniloc’s motion to seal.

Uniloc asked the district court to seal most of the materials in the parties’ underlying briefs, including citations to case law and quotations from published opinions. It also requested that the court seal twenty-three exhibits in their entireties. These exhibits included matters of public record, such as a list of Uniloc’s active patent cases.

The Federal Circuit began by pointing to the strong presumption in favor of access to documents filed with a court. The Federal Circuit sorted the motions to seal into two groups: (1) documents with Uniloc’s own purportedly confidential and/or sensitive information and that of its related entities; and (2) documents with purportedly confidential and/or sensitive information of third parties.

As to Uniloc’s information, the Federal Circuit found that because Uniloc failed to comply with local rules setting out the standards for filing documents under seal, and requesting reconsideration, the district court did not abuse its discretion in denying Uniloc’s motions to seal its purportedly confidential information and that of its related entities.

As to third party information, the Federal Circuit noted that the third parties third parties were not responsible for Uniloc’s filing of an overbroad sealing request, and required independent analysis. The Federal Circuit concluded that the district court failed to make findings sufficient to allow it to adequately assess whether it properly balanced the public’s right of access against the interests of the third parties in shielding their financial and licensing information from public view, and vacated and remanded for the district court to consider in the first instance.

Litigants with confidential information should realistically evaluate the information, and only attempt protect genuinely confidential information, and comply with all of the court’s. It is a mistake to assume that the court will give free rein to designate information as confidential.

Board Should Fix Obvious Claim Errors in Order to Make a Decision on the Merits

In Fitbit, Inc. v. Valencell, Inc., [2019-1048] (July 8, 2020), the Federal Circuit vacated the PTAB decision that Claims 3-5 of U.S. Patent No. 8,923,941 were not unpatentable on a method of generating data output containing physiological and motion-related information.

The Board held that claim 3 is not unpatentable, based solely on the Board’s rejection of Fitbit’s proposed construction of the term “application-specific interface (API).” The Board did not review patentability of claim 3 on the asserted grounds of obviousness.

The Federal Circuit agreed with the Board’ s construction, rejecting Fitbit’s broader construction. The Federal Circuit observed however that the difference between an application-specific interface and an application programming interface may have no significance.

The Board did not review the patentability of claim 3, as construed, on the asserted grounds of obviousness. The Board held that, by rejecting Fitbit’s position on the meaning of “application-specific interface (API),” the patentability inquiry ended, and by Final Written Decision the Board held claim 3 not unpatentable.

The Federal Circuit held that the Board erred in holding that since it did not adopt Fitbit’s claim construction, that decided the question of patentability. It was improper to hold claim 3 “not unpatentable” by Final Written Decision, without determination of the asserted grounds of obviousness.

As to claims 4 and 5, the Board held claims 4 and 5 not unpatentable in its Final Written Decision, on the ground that the Board could not determine the meaning of the claims because the term “the application” lacked antecedent basis. The Board did not apply the cited prior art references, on which there were evidence and argument, instead stating that the meaning of the claims were “speculative.”

Both parties agreed that the lack of antecedent basis arose from an error in renumbering the claims, which the Board refused to correct. The Federal Circuit said that although the Board states that the intended meaning of the claims is “subject to reasonable debate,” it perceived no debate. Rather, the parties to this proceeding agree as to the error and its correction. The Board erred in declining to accept the parties’ uniform position and correct the error that claim 4 depend from claim 3. With this correction, the rejection of claims 4 and 5 for absence of antecedent basis for “the application” dis-appears.

The Federal Circuit concluded that the Agency’s treatment of this error as the basis of a Final Written Decision of patentability is not a reasonable resolution, and does not comport with the Agency’s assignment to resolve patentability issues.

The Federal Circuit has previously pressed the PTAB to reach a decision even where the claims were difficult to construe. Here the Court went further to require the Board to fix obvious defects in the claims rather than avoid reaching a decision on the merits.

Common Sense Dooms Airplane Bathroom Patents

In B/E Aerospace, Inc. v. C&D Zodiac, Inc., [2019-1935, 2019-1936] (June 26, 2020), the Federal Circuit affirmed the PTAB’s determination that the challenged claims of U.S. Patent Nos. 9,073,641 and 9,440,742 relating to aircraft lavatories, were not valid for obviousness.

The Federal Circuit tipped its hand early in the opinion, declaring “The technology involved in this appeal is simple” — not a good sign in an obviousness case.

The invention related to maximizing the space in an aircraft lavatory while accommodating passenger seats, by providing recesses for the seat back and for the seat base.

The Federal Circuit said there was no dispute that Betts’s contoured wall design meets the “first recess” claim limitation. Nor do the parties dispute that a skilled artisan would have been motivated to modify the Admitted Prior Art with Betts’s contoured wall because skilled artisans were interested in maximizing space in airplane cabins. The Federal Circuit agreed with the Board’s conclusion that the challenged claims would have been obvious because modifying the Admitted Prior Art/Betts combination to include a second recess for the seat base was nothing more than the predictable application of known technology: a person of skill in the art would have applied a variation of the first recess and would have seen the benefit of doing so.

The Federal Circuit also affirmed the Board’s conclusion that the challenged claims would have been obvious because “it would have been a matter of common sense” to incorporate a second recess in the Admitted Prior Art/Betts combination.

While B/E asserted that the Board legally erred by relying on “an unsupported assertion of common sense” to “fill a hole in the evidence formed by a missing limitation in the prior art,” the Federal Circuit disagreed:

In KSR, the Supreme Court opined that common sense serves a critical   role in determining obviousness. 550 U.S. at 421. As the Court explained, common sense teaches that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.

  

Acknowledging Juneteenth

While there were certainly inventors who were slaves, the patent system was unavailable to them. In an interesting case from 1857, a slave named Ned invented a “double plow and scraper,” which enabled a farmer to plow and scrape both sides of a row of cotton simultaneously. Ned was “owned” by Oscar J.E. Stuart, a lawyer and planter from Mississippi. Stuart tried to patent the invention first in Ned’s name and then in his own, but was denied by the Commissioner of Patents because Ned, as a slave, could not execute the required oath, and neither could Stuart, because he was not the inventor. Stuart, apparently having no sense or irony, complained that it would violate “equal protection” if slave owners could not patent the inventions of their slaves. Read more about this in Frye, Invention of a Slave, 68 Syracuse Law Review 181 (2018)

According to the Report of the Commissioner of Patents for the Year 1857, the invention of a slave could not be patented because a slave inventor could not take the patent oath, and in any event could not receive, own, or transfer a property right. This latter point was actually consistent with the laws in some states (e.g., Louisiana) that prohibited slaves from owner property, even if they could obtain it.

The Confederate States patent laws express permitted the owner to apply to patent the invention of slave, although it is not clear whether any slave owner took advantage of this during the short tenure of the Confederate States Patent Office. This provision may have been initiated by Confederate President’s Jefferson Davis, who, with his older brother Joseph Emory Davis, previously unsuccessfully attempted to get a U.S. patent on an improved propeller invented by Benjamin Thornton Montgomery, then a slave owned by Joseph.

155 years ago today, on June 19th, 1865, Major General Gordon Granger, landed at Galveston, Texas, and with his General Order 3, completed the elimination of slavery in the United States begun by Republican President Abraham Lincoln’s September 22, 1862, Emancipation Proclamation. The inability to get a patent seems trivial in comparison with the injustice of slavery; but this embarrassment of the patent system ended 155 years today.

The Federal Circuit extends the Kessler Doctrine to Dismissals with Prejudice

In In re Personalweb Technologies LLC, [2019-1918] (June 17, 2020), the Federal Circuit affirmed the dismissal of Personalweb’s suits against Amazon’s customers, because they were barred as a result of a prior lawsuit brought by PersonalWeb against Amazon, which was dismissed with prejudice.

The district court held that claim preclusion barred PersonalWeb’s claims regarding acts of infringement occurring prior to the final judgment in the Amazon action, and that the Kessler Doctrine, first adopted by the Supreme Court in Kessler v. Eldred, 206 U.S. 285 (1907), barred PersonalWeb’s claims of infringement after the final judgment in the Amazon action.

The Kessler Doctrine resulted from the Supreme Court’s decision in Kessler v. Eldred, 206 U.S. 285 (1907), to fill the gap left by claim preclusion and issue preclusion. Claim preclusion does not apply to acts of alleged infringement that occur after a final judgment in an earlier suit. Issue preclusion does not apply unless there is (1) a final judgment on the merits, (2) privity of parties, and (3) identity of issues. When neither claim preclusion nor issue preclusion apply, the Kessler doctrine may protect an adjudged non-infringer from repeated harassment for continuing its business.

The Kessler Doctrine had previously only been applied to issues that were actually litigated, but the Federal Circuit expanded the doctrine to include an earlier dismissal with prejudice, which it termed an abandonment of PersonalWeb’s claims without reservation and therefore stands as an adjudication that Amazon was not liable for infringement: “The scope of that right is not limited to cases involving a finding of non-infringement that was necessary to the resolution of an earlier lawsuit, but extends to protect any products as to which the manufacturer established a right not to be sued for infringement.”