Federal Circuit Review - October 2013

by Knobbe Martens
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Late Payment of Patent Maintenance Fees Not Inequitable Conduct

In Network Signatures Inc, v. State Farm Mutual Automobile Insurance Co., Appeal No. 12-1492, The Federal Circuit reversed summary judgment of inequitable conduct regarding late payment of patent maintenance fees.

The Naval Research Laboratory (NRL) manages the asserted patent.  The NRL permitted the patent to lapse for nonpayment of the 7.5-year maintenance fee.  Two weeks after the lapse, the NRL received an inquiry from the predecessor to Network Signatures, Inc. about licensing the patent.  The NRL petitioned the Patent Office to accept delayed payment of the fee, the Patent Office granted the petition, and the NRL duly licensed the patent.  Network Signatures sued State Farm Mutual Automobile Insurance Co. (“State Farm”) for infringing the patent.  In defense, State Farm asserted that the patent was permanently unenforceable on the ground that the NRL patent attorney had engaged in inequitable conduct by “falsely representing” to the Patent Office that the NRL’s non-payment of the maintenance fee was “unintentional.”  The district court granted summary judgment of inequitable conduct and held the patent unenforceable.

The Federal Circuit reversed, finding no inequitable conduct on the part of the NRL patent attorney.  To prove inequitable conduct, the challenger must show by clear and convincing evidence that the patent applicant (1) misrepresented or omitted information material to patentability and (2) did so with specific intent to mislead or deceive the Patent Office.  The Patent Office provides a standard form for late payment of maintenance fees that includes a bald statement that the delay was “unintentional,” without requesting further detail.  The Federal Circuit found that the NRL attorney acted promptly upon learning of commercial interest in the patent and complied with the standard Patent Office procedure for delayed payment.  Therefore, the Federal Circuit found that there was no clear and convincing evidence of withholding material information with the intent to deceive the Patent Office.  

In a dissenting opinion, Judge Clevenger disagreed with the reversal of summary judgment of inequitable conduct, stating that the NRL attorney’s failure to explain to the Patent Office the factual circumstances of the “unintentional” delay was material to the question of inequitable conduct.  He recommended a remand to the district count on intent and affirmance of materiality.

In Rambus, Inc. v. Rea, Appeal No. 12-1634, the Federal Circuit affirmed the Board of Patent Appeals and Interference’s claim construction and determination of invalidity as to some claims, and remanded with respect to obviousness as to other claims.

Rambus owned a patent relating to using both falling and rising edges of a clock signal in a circuit.  During inter partes reexamination of Rambus’s patent, a central reexamination unit examiner rejected certain claims for anticipation and/or obviousness.  The Board affirmed the rejections, and Ramus appealed.

The Federal Circuit affirmed the Board’s claim construction and findings of anticipation, finding that “external clock signal” only requires the clock to be periodic during the data input phases (and not during all system operations) and that “write request” can be construed to refer to either a one-bit signal or a sequence of multiple bits.  

The Federal Circuit found, however, that the Board had erred in its obviousness analysis by improperly placing the burden on the patentee to prove the claims were not obvious, and by relying on a new ground of rejection, since it was undisputed that the Examiner’s reasoning was clearly erroneous.

The Federal Circuit further found that the Board erred in its treatment of objective evidence of non-obviousness.  Rambus presented evidence of long-felt need and industry praise through an article in the Microprocessor Report and a press release issued by Micron.  The Board did not address any of this evidence.  The Board also erroneously found that Rambus’s evidence relating to high-speed memory systems was not commensurate with the scope of the claims.  Objective evidence of non-obviousness need only be “reasonably commensurate with the scope of the claims,” and a patentee is not required to produce objective evidence of non-obviousness for every potential embodiment of the claim.  The Board rejected the evidence of licensing by competitors and argued that competitors may have many reasons for taking licenses which are not related to non-obviousness. The Federal Circuit found there was no evidence to support the Patent Office’s assertion that the commercial value of the licenses stemmed from other reasons.  The Board also found that Rambus’s evidence of secondary considerations lacked of nexus because a key feature of the claims was “not novel,” that is, disclosed in the prior art.  However, because the obviousness inquiry relates to the “invention as a whole,” the Federal Circuit found that the Board erred by not parsing the evidence that relates to the prior art from the evidence that relates to Rambus’s patented design.


Claims Held Invalid and Not Entitled to Safe-Harbor from Double Patenting

In St. Jude Medical, Inc. v. Access Closure, Inc., Appeal No. 12-1452, the Federal Circuit reversed the district court’s ruling that a patent at issue was protected by 35 U.S.C. § 121 from double-patenting-based invalidity, and affirmed the district court’s ruling that other patents at issue are non-obvious and not shown to be invalid.

A jury found that ACI infringed claims of St. Jude Medical’s patent, but that these claims were invalid for double-patenting in light of a sibling patent.  At a bench trial, the district court overturned the jury’s finding of invalidity based on application of the safe-harbor provision of 35 U.S.C. § 121.  ACI appealed the district court’s application of the safe harbor.

On appeal, ACI argued that the claims were not entitled to safe-harbor protection, because those claims crossed the “line of demarcation” between the distinct inventions set forth in a restriction requirement issued during the patent’s prosecution.  That Examiner’s Action required restriction between two inventive groups, and also required an election among three species.  ACI argued that the restriction between inventions established the “line of demarcation,” and because both the patent and a sibling patent claimed the same inventive group, the patent was not entitled to safe harbor protection.  The Federal Circuit majority disagreed, holding that the species election was a requirement for restriction under 35 U.S.C. § 121 because no generic claim was presented.  The Federal Circuit found that the patent was invalid for double patenting over the sibling patent, which was not filed as a result of the restriction requirement because it failed to abide by the line of demarcation among the species.

In a concurring opinion, Judge Lourie disagreed with the finding that an election of species constitutes a requirement for restriction under 35 U.S.C. § 121, criticizing the majority for commingling those “restrictions.”  He agreed with ACI that no safe harbor existed because the patent included claims to both inventive groups identified in the restriction requirement.


System Claims Held Invalid for Reciting Ineligible Subject Matter

In Accenture Global Services, GmbH v. Guidewire Software, Inc., Appeal No. 11-1486, the Federal Circuit affirmed the district court’s grant of summary judgment, holding that the asserted system claims recite patent ineligible subject matter.

Accenture sued Guidewire alleging infringement of a patent directed to systems and methods for handling insurance-related tasks.  Guidewire moved for summary judgment of invalidity under 35 U.S.C. § 101 for claiming non-patent-eligible subject matter.  The district court granted the motion, holding that limitations of both the system claims and method claims did not significantly distinguish the claims from the abstract idea. Accenture appealed the district court’s decision with regards to the system claims.

The Federal Circuit affirmed. The Federal Circuit used the analysis framework outlined in CLS Bank International v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc), in holding that the system claims are patent ineligible.  The Federal Circuit held that Accenture did not point to any limitations of the system claims that offered a meaningful limitation over the method claims previously judged to be patent ineligible.  Also, the Federal Circuit held that, when analyzed on their own, the system claims did not contain substantial limitations to the system claims’ abstract ideas.  When comparing the system claims to the method claims, the Federal Circuit asserted that, because the system claims and the method claims contain only minor differences in terminology but require performance of the same basic process, they should rise and fall together.  When analyzing the system claims on their own, the Federal Circuit asserted that the system claims only contain generalized software components arranged to implement an abstract concept on a computer, and so do not limit the abstract concept in a meaningful way.

Judge Rader dissented, stating that, because the system claims require a specific combination of computer components, the system claims do contain patent eligible subject matter.  Further, Rader questioned the Federal Circuit’s reliance upon CLS Bank, which was a plurality opinion, and the Federal Circuit’s assertion that Accenture’s appeal of only the invalidation of the system claims estopped Accenture from arguing that limitations shared between the method and system claims do contain patent-eligible subject matter.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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