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.”

A Clear Explanation of Reasons Needed for a Fee Award

In Munchkin, Inc. v. Luv N’ Care, Ltd., [2019-1454] (June 8 2020), the Federal Circuit vacated the award of attorneys fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117(a) after Munchin’s dismissal of its patent claims after losing an IPR, and its voluntary dismissal of its non-patent claims.

The Federal Circuit said it generally gives great deference to a district court’s exceptional-case determination, a district court nonetheless must provide a concise but clear explanation of its reasons for the fee award. However when the bases of an attorney’s fee motion rest on issues that had not been meaningfully considered by the district court, a fuller explanation of the court’s assessment of a litigant’s position may well be needed when a district court focuses on a freshly considered issue than one that has already been fully litigated.

The Federal Circuit said that none of these issues was fully adjudicated before the court on the merits, and given the limited arguments Luv N’ Care made in support of its fee motion, it held that the district court abused its discretion in granting the motion and reversed the exceptional-case determination.

It’s Not Always Nice to Share

Joint ownership of a patent creates complications for the joint owners. Pursuant to 35 USC 262 “each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.” This means that each of the joint owners can use the patent or license the patent to someone else, and not have to ask the other joint owners, and not have to share any of the proceed with the other joint owners. A consequence of this statute is that the particular percentage of ownership is irrelevant: the joint owner of 1% of a patent has the same rights as the joint owner of 99% of the patent.

A second problem with joint ownership is splitting the costs of obtaining and maintaining the patent. If one or more of the joint owners doesn’t want to contribute to the costs, the remaining co-owners have to pick up the slack. Even if everyone pays their fair share, what happens if there is disagreement over strategy.

Finally, when it comes time to enforce the patent, the Court of Appeals for the Federal Circuit requires that all of the joint owners participate in the law suit. Moreover the Federal Circuit has indicated that you cannot force joint owners to join a suit.

There are at least two solutions to the problems of shared patent ownership. The first solution is to eliminate shared ownership by forming a entity, such as a limited liability company, to hold all of the patent rights. This allows all of the problems of joint ownership to be resolved by the operating agreement of the entity.

The second solution is to have the joint owners sign an agreement that they will share the costs and benefits of the patent. This solves the problems of joint ownership though a negotiated agreement. Key provisions of such an agreement include:

  • A mechanism for making decisions about prosecution of the patent.
  • A mechanism for making decisions about enforcement of the patent.
  • An apportionment of costs of obtaining, maintaining, licensing, and enforcing patents.
  • A mechanism for addressing joint owners who do not pay their share of costs.
  • An apportionment of revenue from using, licensing, and enforcing the patent.
  • A duty to join in infringement actions.

IPR Attorneys’ Fees are not Awardable under Section 285


In Amneal Pharmaceuticals LLC v. Almirall, LLC [2020-1106] (June 4, 2020), the Federal Circuit denied Almirall’s motion for attorneys fees and costs after Amneal dismissed its appeal from an adverse ruling in an IPR, including fees for conducting the IPR.

The Federal Circuit said that generally, our legal system adheres to the “American Rule” under which “each party in a lawsuit ordinarily shall bear its own attorney’s fees.” However, Section 285 changes this.

The Federal Circuit said that regardless of whether it can award fees for work on appeal from a decision in an IPR, Section 285 does not authorize this court to award fees for work that was done before the agency on appeal from an IPR. 

While PTO Action was Frustrating; Applicants can only Appeal Final Agency Actions

In Odyssey Logistics and Technology Corporation v. Iancu, [2019-1066] (May 22, 2020), the Federal Circuit affirmed the district court that the challenges of Application No. 11/005,678 and 11/465,603 concerned non-final agency actions, and the challenge to the amendments to the Rules of Practice were barred by §2401.

After winning an ex parte appeal in the ‘678 application, the USPTO issued a request for rehearing, arguing that the Board applied the wrong version 35 USC 102(e), Odyssey filed petitions objecting to the rehearing procedure, and requests for re-consideration when those petitions were dismissed. Odyssey eventually made some arguments on the merits “under protest,” but instead of waiting for the Board’s decision on these arguments, Odyssey filed this challenge to the request for re-hearing in the Eastern District of Virginia.

Odyssey appealed the examiner’s rejections of the ’603 application.  And in response to the Examiner’s Answer, Odyssey believed that the answer included new grounds, and filed a petition, requesting that the Technology Center Director designate certain portions of the Asnwer as new grounds of rejection.  Rather than filing a brief replying to the examiner’s answer and waiting to see if the Board would strike certain portions of its reply as improper, Odyssey challenged the dismissal of the petition in the Eastern District of Virginia.

The district court dismissed the first two challenges because Odyssey was challenging actions not yet final before the Board; the Board could provide Odyssey with an adequate remedy, and if not, Odyssey had statutory remedies for appeal under 35 U.S.C. §§ 141 or 145.

The third challenge was to the PTO’s 2011 amendments to its rules of practice in ex parte appeals.  The district court dismissed the third challenge holding that 28 U.S.C. § 2401 barred the claims.

With respect to the first challenge, the Federal Circuit said that until the Board issues its rehearing decision, the PTO has not consummated its decision-making process and Odyssey’s rights and obligations in the ’678 patent have not been determined. Without such final action from the PTO, the APA does not entitle Odyssey to judicial review.

With respect to the second challenge, the Federal Circuit said that the dismissal of Odyssey’s petition to designate new grounds is non-final agency action because the dismissal did not determine any rights or obligations or result in any legal consequences. The Federal Circuit said that until the Board refuses to consider arguments made in Odyssey’s reply brief for exceeding the permissible scope of the brief under 37 C.F.R. § 41.41, the denial of Odyssey’s petition to designate new grounds has not determined any rights or resulted in any legal consequences. The district court was therefore correct to dismiss Count II for lack of finality. With respect to the third challenge, the Federal Circuit found the district court’s decision was unquestionably correct.   The challenged rules were published in the Federal Register on November 22, 2011; Odyssey filed  its  facial  challenge  on January  23,  2018, more than six years later.  The challenge was therefore barred by 28 U.S.C. § 2401.

Claim Terms Construed in the Context of the Entire Patent, including the Specification

In MCRO, Inc., v. Bandai Namco Games America Inc., [2019-1557] (May 20, 2020), the Federal Circuit affirmed summary judgment of noninfringement of U.S. Patent No. 6,611,278, and vacated judgment of invalidity because the specification fails to enable the full scope of the claims and remand for the district court to consider any appropriate further proceedings in light of, among other things, defendants’ offer to withdraw their invalidity counterclaims without prejudice.

With respect to the non-infringement determination, the Federal Circuit said that the district court was correct as a matter of law in ruling that a “vector,” in the context of the ’278 patent must have “3-D magnitude and direction computed by pure subtraction/addition between the neutral and target models, with one vector corresponding to each set of two vertices.” Because the parties agreed that there is no infringement under this construction, the Federal Circuit affirmed the district court’s grant of summary judgment of noninfringement.

The Federal Circuit said that the proper claim construction is based “not only in the context of the particular claim in which the disputed term appears, but in the context of the entire patent, including the specification.”  The Federal Circuit said that the only meaning that matters in claim construction is the meaning in the context of the patent.’” The Federal  Circuit said the specification compels the three-dimensional geometric construction of “vector” adopted by the district court. On the issue of validity, the Federal Circuit agreed that the defendants failed to identify with particularity any method of animation that falls within the scope of the claims that was not enabled. Without any specific examples, the district court’s reasoning is too abstract, too conclusory, to support summary judgment.  The Federal Circuit saw no reason to depart from its usual requirement that the challenger identify specifics that are or may be within the claim but are not enabled. Specifics have always mattered. A fuller set of fact-findings about what is within the scope of the claims is necessary to decide the enablement issue.

More Mischief from Exempting Agency Action from Review: Real Party in Interest in IPR not Reviewable

In ESIP Series 2, LLC v. Puzhen Life USA, LLC, [2019-1659] (May 19, 2020), the Federal Circuit affirmed the institution of the IPR as non-reviewable, and affirmed the Board’s obviousness determination of claims of U.S. Patent No. 9,415,130, which relates to “a novel system and method for combining germicidal protection and aromatic diffusion in enclosed habitable spaces.”

Based on the prior art and expert testimony, the Board determined that the challenged claims would have been obvious.  The Federal Circuit found no error in the Board’s decision to credit the opinion of one expert over another, and would not reweigh evidence on appeal. The Federal Circuit found that substantial evidence supported the Board’s finding that the prior art made the invention obvious. 

Because the Board’s obviousness conclusion was not legally erroneous and the fact findings are supported by substantial evidence, the Federal Circuit affirmed obviousness determination.

 On the issue of whether the Petition properly named the real party in interest, based upon Cuozzo Speed Techs., LLC v. Lee, and Thryv, Inc v. Click-To-Call Techs., LP, the Federal Circuit found we find no principled reason why preclusion of judicial review under §314(d) would not extend to a Board decision concerning the “real parties in interest” requirement of § 312(a)(2).  Accordingly, the Federal Circuit held that  ESIP’s challenge to the Board’s “real parties in interest” determination “raises ‘an ordinary dispute about the application of’ an institution-related statute,” and that § 314(d) precludes its review of that determination.

Federal Circuit to PTAB: Try Harder to Construe Claims in IPR

In Cochlear Bone Anchored Solutions AB, v. Oticon Medical AB, [2019-1105, 2019-1106] (May 15, 2020), the Federal Circuit affirmed the PTAB’s determination that claims 4-6 and 11-12 of U.S. Patent No. 7,043,040, that claims 7-9 were not unpatenable, and vacated and remanded the determination that claim 10 was not unpatentable.

With respect to claims 4-6 and 11-12, Cochlear argued that the preamble “for rehabilitation of unilateral hearing loss” should have been treated as a claim limitation.  The Federal Circuit noted that in general, a preamble limits the invention if it recites essential structure or steps, or if it is necessary to give life, meaning, and vitality to the claim. But preamble language merely extolling benefits or features of the claimed invention does not limit the claim scope without clear reliance on those benefits or features as patentably significant.  A preamble is not limiting where a patentee defines a structurally complete invention in the claim body and uses the preamble only to state a purpose or intended use for the invention.  The Federal Circuit concluded that the preamble was merely a statement of intended use of the claimed hearing aid; it identified no structure for the apparatus claimed. Moreover, this use itself is not an inventive or patentably distinct aspect of the claimed invention, as “rehabilitation of unilateral hearing loss” was a conventional use of prior art bone-anchored hearing aids.  Further, the bodies of the claims contain the only descriptions of the structure for the hearing aid, with no additional structure furnished by the preamble.

With respect to claims 4-5, Cochlear argued that it was error for the Board to conclude that “specifically adapted to” had its ordinary meaning.  The Federal Circuit rejected this argument, noting that to the extent that Cochlear was suggesting that the language requires a particular intent or objective of a hearing-aid designer or manufacturer, this was incorrect.  The Federal Circuit has held that the claim term “adapted to” generally means “made to,” “designed to,” or “configured to” perform the stated function, without introducing a subjective element into the construction of the phrase.  To the extent that Cochlear is suggesting an objective characteristic of the configuration, it has not shown overbreadth of the Board’s ordinary-meaning construction. With respect to claims 7-10, the Board determined that it could not conduct a prior-art analysis of these claims because they contained means-plus-function elements.  The Federal Circuit held that the  Board did not err as to claims 7–9, but did err as to claim 10.  The Federal Circuit claim 10 is different in a crucial respect. It does not contain a required claim element in means-plus-function form. Claim 10 recites a “directivity means comprising at least one directivity dependent microphone and/or signal processing means in the electronic circuitry.  Thus claim 10, unlike the other means-plus-function claims, also describes a stand-alone alternative to the signal processing means: a directivity dependent microphone, which is a clear structure for performing the claimed directivity means.  The Board relied entirely on the presence of the signal-processing-means alternatives in the claim to deem a prior-art analysis impossible, and this was error.  Even if claim 10 is indefinite, such a conclusion would not imply that it is incapable of being compared to prior art to determine if one of its alternatives is anticipated or would have been obvious on the grounds asserted.

Federal Circuit Erases Protection for Chalk Pencil

In Lanard Toys Limited v. Dolgencorp LLC, [2019-1781](May 14, 2020), the Federal Circuit affirmed summary judgment for defedants with respect to Lanard’s claims for infringement of U.S. Patent No. D671167, infringement of Copyright Reg. No. VA 1-794-458, trade dress infringement, and statutory and common law unfair competition.

Defendant’s used the Lanard Chalk Pencil as a “reference sample” in designing its product.

Lanard sued for: (1) copyright infringement; (2) design patent infringement; (3) trade dress infringement; and (4) statutory and common law unfair competition under federal and state law.  On cross motions for summary judgment relating to all claims, and the district court granted Defendants  motion, holding that Defendants’ product does not infringe the D167 patent, that the ’458 copyright is invalid and alternatively not infringed by Ja-Ru’s product, that Ja-Ru’s product does not infringe Lanard’s trade dress, and that Lanard’s unfair competition claims fail because its other claims fail.

Determining whether a design patent has been infringed is a two-part test: (1) the court first construes the claim to determine its meaning and scope; (2) the fact finder then compares the properly construed claim to the accused design.  In comparing the patented and accused design, the “ordinary observer” test is applied—i.e., infringement is found if in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other.  The infringement analysis must compare the accused product to the patented design, not to a commercial embodiment.

On appeal Lanard argued that the district court court erred in its claim construction by eliminating elements of the design based on functionality and lack of novelty. Second, Lanard argued that the court erred in its infringement analysis by conducting an element-by-element comparison rather than comparing the overall designs. Third, Lanard argues that the court used a rejected “point of novelty” test to evaluate infringement.

The Federal Circuit said that where a de-sign contains both functional and non-functional elements, the scope of the claim must be construed in order to identify the non-functional aspects of the design as shown in the patent, and found that the district court followed its claim construction directives “to a tee.”  In an effort to clarify the scope of the protected subject matter, the court considered the functional features of the design, as well as the functional purpose of the writing utensil as a whole, including its proportions, considering the functionality of the “conical tapered piece,” “elongated body,” “ferrule,” “eraser,” “the design’s functional purpose as a writing utensil,” “the general thickness of the design,” and “the circular opening at the tapered end”). The district court meticulously acknowledged the ornamental aspects of each functional element, including “the co-lumnar shape of the eraser, the specific grooved appearance of the ferrule, the smooth surface and straight taper of the conical piece, and the specific proportional size of these elements in relation to each other.

The Federal Circuit noted that the district court considered its instruction that it is helpful to point out “various features of the claimed design as they relate to the accused design and the prior art, and considered the numerous prior art references cited by the examiner on the face of the D167 patent, as well as other designs identified by defendants, all directed to the shape and design of a pencil. The district court thus recognized that “the overall appearance of Lanard’s design is distinct from this prior art only in the precise proportions of its various elements in relation to each other, the size and ornamentation of the ferrule, and the particular size and shape of the conical tapered end.  In so doing, the district court fleshed out and rejected Lanard’s attempt to distinguish its patent from the prior art by importing the “the chalk holder function of its design” into the construction of the claim.

The Federal Circuit said that the court noted that Lanard’s problem was that the design similarities stem from aspects of the design that are either functional or well-established in the prior art.  The district court found that “the attention of the ordinary observer would be drawn to those aspects of the claimed de-sign that differ from the prior art, which would cause the distinctions between the patented and accused designs to be readily apparent.  Based upon the evidence presented, the district court found that no reasonable fact finder could find that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design.

The Federal Circuit rejected Lanard’s argument that Complaint that the district court conducted an element-by-element comparison “in lieu of” a comparison of the overall design and appearance.  The Federal Circuit noted that while the “ordinary observer” test is not an element-by-element comparison, it also does not ignore the reality that designs can, and often do, have both functional and ornamental aspects.  Under the “ordinary observer” test, a court must consider the ornamental features and analyze how they impact the overall design, and the Federal Circuit said that is what the district court did, noting that in comparing the overall design of the patent with the overall design of the defendants’ product, the court necessarily considered how the ornamental differences in each element would impact the ordinary observer’s perception of the overall designs.  The district court refocused its analysis on the correct context—the impact of the ornamental differences on the overall design—and concluded that “the differences between the patented and accused design take on greater significance.

The Federal Circuit also disagreed with Lanard’s contention that the court reinstated the “point of novelty” test in its infringement analysis.   The Federal Circuit said it was true that it has rejected the notion that the “point of novelty” test is a free-standing test for design patent infringement, but added that it has never questioned the importance of considering the patented design and the accused design in the context of the prior art.  The Federal Circuit concluded that the district court correctly balanced the need to consider the points of novelty while remaining focused on how an ordinary observer would view the overall design.

The Federal Circuit concluded that Lanard’s position is untenable because it seeks to exclude any chalk holder in the shape of a pencil and thus extend the scope of the D167 patent far beyond the statutorily protected “new, original and ornamental design.

On the copyright issue, the Federal Circuit agreed with the district court that the chalk holder was a useful article, and agreed with defendants that Lanard failed to identify any feature incorporated into the design of its copyright that is separate from the utilitarian chalk holder and that Lanard is merely attempting to assert copyright protection over the useful article itself.  The Federal Circuit said that Lanard was essentially seeking to assert protection over any and all expressions of the idea of a pencil-shaped chalk holder, but that copyright protection does not extend to an “idea.” 17 U.S.C. § 102(b). On the trade dress issue, the Federal Circuit began by outlining the elements of a claim: To prevail on a claim for trade dress infringement, a plaintiff must prove three things: (1) that the trade dress of two products is confusingly similar; (2) that the features of the trade dress are primarily non-functional; and (3) that the trade dress has acquired secondary meaning.  The district court found that Lanard could not  provide sufficient evidence that the Lanard Chalk Pencil has acquired secondary meaning.   Lanard relied exclusively on defendants’ copying and its own sales as evidence of secondary meaning, and the district court found that the evidence “woefully fails” to show secondary meaning. Lanard never presented evidence or argument that distinguished between end-users versus wholesalers and retail stores, nor evidence of efforts to promote its product through its sales force.  The Federal Circuit found that on this record, the district court correctly granted summary judgment on Lanard’s claim for trade dress infringement.

Claims to System that Reduced Transmission Delays Are Patent Eligible and Not Merely Data Manipulation

In Uniloc USA, Inc. v. LG Electronics USA, Inc., [2019-1835] (April 20, 2020), the Federal Circuit reversed and remanded the district court’s 12(b)(6) dismissal of Uniloc’s patent infringement suit on the grounds that the claims of U.S. Patent No. 6,993,049 were directed to unpatentable subject matter.

The ’049 patent is directed to a communication system comprising a primary station (e.g., a base station) and at least one secondary station (e.g., a computer mouse or key-board). In conventional systems, such as bluetooth networks, two devices that share a common communication channel form ad hoc networks known as “piconets.” Joining a piconet requires the completion of two sets of procedures, namely an “inquiry” procedure and a “page” procedure. The inquiry procedure allows a primary station to identify secondary stations and it allows secondary stations to issue a request to join the piconet. The page procedure in turn allows a primary station to invite secondary stations to join the piconet. Together, it can take several tens of seconds to complete the inquiry and page procedures so that a device joins a piconet and is able to transfer user input to the primary station. Once a piconet is formed, the primary station “polls” secondary stations to determine whether they have data to share over the communication channel.

Because many secondary stations are battery-operated, secondary stations may enter a “park” mode and cease active communications with the primary station to conserve power. A secondary station in parked mode remains synchronized with the primary station, but it must be polled before it can leave park mode and actively communicate with the primary station. In conventional systems, primary stations alternate between sending inquiry messages to identify new secondary stations and polling secondary stations already connected to the piconet, including parked devices, to determine whether they have information to transmit. Therefore, under the conventional polling process, a secondary station could experience delays of tens of seconds both in initially joining a piconet and in transmitting data after entering park mode.

The district court held that the asserted claims are directed to the abstract idea of “additional polling in a wireless communication system,” analogizing the asserted claims to ineligible data manipulation claims in Two-Way Media Ltd. v. Comcast Cable Communications and Digitech Image Technologies, LLC v. Electronics for Imaging, Inc.

The Federal Circuit noted that In cases involving software innovations, this inquiry often turns on whether the claims focus on specific asserted improvements in computer capabilities or instead on a process or system that qualifies an abstract idea for which computers are invoked merely as a tool, and observed that it has routinely held software claims patent eligible under Alice step one when they are directed to improvements to the functionality of a computer or network platform itself. The Federal Circuit held that in accordance with its precedent such as DDR Holdings, Enfish, Visual Memory, and Ancora Technologies, and Data Engine, that the claims at issue are directed to a patent-eligible improvement to computer functionality, namely the reduction of latency experienced by parked secondary stations in communication systems. The Federal Circuit said that the claimed invention therefore eliminates or reduces the delay present in conventional systems where the primary station alternates between polling and sending inquiry messages. Therefore, like the claims in DDR, the claimed invention changes the normal operation of the communication system itself to “overcome a problem specifically arising in the realm of computer networks.”

The Federal Circuit rejected appellee’s argument that the claims weren’t sufficiently directed to the improvement, The Federal Circuit said that the claims at issue do not merely recite generalized steps to be performed on a computer using conventional computer activity. Instead, the Federal Circuit said, they are directed to “adding to each inquiry message prior to transmission an additional data field for polling at least one secondary station, and this change in the manner of transmitting data results in reduced response time by peripheral devices which are part of the claimed system.

The Federal Circuit said that the claimed invention’s compatibility with conventional communication systems does not render it abstract. Nor does the fact that the improvement is not defined by reference to “physical” components. The Federal Circuit said that to hold otherwise risks resurrecting a bright-line machine-or-transformation test, or creating a categorical ban on software patents.

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