Federal Circuit Review - August 2021

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It’s No Secret That a Related Company’s Physical Presence in a Jurisdiction May Not Be Enough For Proper Venue

In Andra Group, LP v. Victoria’s Secret Stores, LLC, Appeal No. 20-2009, The Federal Circuit held that an entity’s physical presence in a jurisdiction does not automatically confer jurisdiction over related corporate entities.

Andra Group, LP (“Andra”) sued Victoria’s Secret Stores, L.L.C., Victoria’s Secret Stores Brand Management, Inc., Victoria’s Secret Direct Brand Management, LLC, and L Brands, Inc. (collectively, “Victoria’s Secret”) for patent infringement in the District Court for the Eastern District of Texas. The Eastern District of Texas granted Victoria’s Secret Stores Brand Management, Inc., Victoria’s Secret Direct Brand Management, LLC, and L Brands, Inc. (collectively, the “Non-Store Defendants”) motion to dismiss for improper venue on the grounds that they lacked a regular and established place of business in the district.  Andra appealed.

On appeal, Andra argued that the Non-Store Defendants had a regular and established place of business in the district by: (1) having an agency relationship with the Victoria’s Secret Stores’ employees in its retail locations in the district, and (2) ratifying Victoria’s Secret’ Stores’ locations as their own places of business.  Upon review of the facts, the Court determined that the Non-Store Defendants did not have the right to direct or control the Victoria’s Secret Stores’ employees, and thus, an agency relationship was not established.  Further, the Court determined that Andra could not prove that the Non-Store Defendants had “actually engage[d] in business from [the retail locations],” and thus, the Court found that the Non-Store Defendants did not ratify the Victoria’s Secret Stores’ locations as their own.

Accordingly, the Court did not find either of Andra’s arguments persuasive and affirmed the lower court’s ruling.

 

One Abstract Idea + Another Abstract Idea = An Abstract Idea

In Re PersonalWeb Technologies LLC, Appeal No. 20-1543, the Federal Circuit held that a patent directed to a medley of mental processes with no inventive concept is patent ineligible under 35 U.S.C. § 101.

PersonalWeb sued EMC, VMware, Facebook, Google, and YouTube for patent infringement of three patents.  The patents are directed to data-processing systems that assign unique names to data items based on the data’s content, referred to as content-based identifiers.  The defendants moved for judgment on the pleadings that the patents were patent ineligible under 35 U.S.C. § 101.  The district court found that the patents were directed to a three-step process of 1) receiving a content-based identifier, 2) comparing that content-based identifier against something else such as another content-based identifier or a request for data, and 3) providing access to, denying access to, or deleting data. The district court found that the claims were patent ineligible under 35 U.S.C. § 101 after applying the two-step framework in Alice.

The Federal Circuit affirmed. The Federal Circuit held that each step of the claimed three-step process was an abstract idea of a mental process.  Although step one in Alice looks at the claims as a whole, the Federal Circuit held that adding one abstract idea to another abstract idea merely amounts to yet another abstract idea.  Proceeding with step two in Alice, the Federal Circuit held that any improvements purported by PersonalWeb that could transform the claim into a patent-eligible application were merely restatements of the abstract ideas of the claims themselves.  As such, the claims failed step two by lacking an inventive concept that was significantly more than the abstract idea itself.  The Federal Circuit agreed with the district dourt that there was nothing inventive about any claim details, individually or in combination, that was not itself abstract.

 

The Obviousness of Preamble Limitations Can be a Real Headache for Patent Challengers

In Eli Lilly And Company v. Teva Pharmaceuticals, Appeal No. 20-1876, the Federal Circuit held that in claims for methods of using apparatuses or compositions, statements of intended purpose in a preamble tend to be limiting.

Lilly filed petitions for IPR against three Teva patents directed to methods for alleviating migraines. The Board concluded that Lilly had failed to show that the challenged claims would have been obvious over the asserted references.  While the Board found that Lilly had shown that the prior art disclosed every element of the challenged claims, and a motivation to combine the prior art, Lilly had not shown that a skilled artisan would have had a reasonable expectation of success in combining the references. Lilly appealed.

On appeal, Lilly argued that the Board incorrectly found that Teva’s preambles were limiting because a preamble that contains only a statement of purpose cannot as a matter of law be a claim limitation. The Federal Circuit disagreed, and explained that unlike apparatus and composition claims, claims to methods of using apparatuses or compositions are not directed to what the method “is,” but typically rely entirely on what the method “does.” And what a method does is usually recited in its preamble. Thus, statements of intended purpose in methods of using apparatuses or compositions tends to result in a conclusion that such preamble language is limiting.

Lilly also argued that the Board had imposed a heightened standard – one that required efficacy data - in its analysis of whether the prior art references would have given a skilled artisan a reasonable expectation of success. The Federal Circuit disagreed that the Board imposed such a standard. The Federal Circuit also made clear that a showing of a reasonable expectation of success need not rely on clinical data, nor must it include a demonstration of certainty that the treatment would be successful in every instance.

 

Presumption of Nexus Between Claims and Commercial Products May Not Apply When Unclaimed Features Are Critical

In Teva Pharmaceuticals v. Eli Lilly And Company, Appeal No. 20-1747, the Federal Circuit held that the presumption of nexus analysis requires the fact finder to consider the unclaimed features of the stated products to determine their level of significance and their impact on the correspondence between the claim and the products.

Eli Lilly challenged three patents directed to humanized antagonist antibodies in IPRs. The PTAB held that the challenged claims in all three patents were unpatentable as obvious over various cited references. 

The Federal Circuit affirmed the PTAB’s decision after finding substantial evidence supported the PTAB’s finding of a motivation to combine the teachings of the references, and that potential safety and efficacy concerns would not have dissuaded a skilled artisan from making the claimed antibodies to study their therapeutic potential.

The Federal Circuit also affirmed the PTAB’s finding of no presumption of nexus between the challenged claims and the commercial products even though the PTAB articulated an incorrect standard. The Federal Circuit noted that the nexus-presumption analysis requires the fact finder to consider the unclaimed features of the stated products to determine their level of significance and their impact on the correspondence between the claim and the products.  In this case, the PTAB correctly found that a nexus was not presumed because the unclaimed features were critical to the functionality of the commercial products.

 

Twisting a Nose of Wax While Splitting Hairs

In Commscope Technologies LLC v. Dali Wireless Inc., Appeal No. 20-1817, the Federal Circuit held that when a party distinguishes technology in the prior art to preserve validity, that same technology may not simultaneously be grounds for infringement when in an accused product.

CommScope filed suit against Dali alleging infringement of five of CommScope’s patents. Dali counterclaimed, alleging CommScope infringed two of Dali’s patents.  The jury rendered verdicts of infringement, no invalidity, and damages for both parties.  CommScope and Dali each appealed following the district court’s denial of their respective motions for judgment as a matter of law, a new trial, and attorney’s fees.

Dali’s ‘521 patent at issue described a system and method for digital predistortion of signals. Specifically, the patent described an operating mode requiring: “switching a controller off to disconnect signal representative of the output of the power amplifier.” The district court construed this term to mean “[s]witching a controller to a nonoperating state to disconnect signal representative of the output of the power amplifier.”

First, the Federal Circuit rejected Dali’s challenge to the district court’s claim construction, noting that an argument made only in a footnote is forfeited.  Even if the argument had been properly raised, it was insufficiently developed.  Seeing no meaningful challenge from Dali, the Federal Circuit adopted the district court’s construction.

Second, the Federal Circuit turned to noninfringement, finding that Dali cited no evidence showing that the switch, the controller, or a combination of the two are put into a “nonoperating state” in the accused product.  Moreover, CommScope argued that Dali did not dispute testimony from CommScope’s expert that both the switch and controller are continuously operating; instead, it merely explained why that operation infringed.  The Federal Circuit rejected Dali’s argument that this distinction was “splitting hairs.”

Third, the Federal Circuit determined that Dali’s infringement argument could not stand in light of its arguments of no anticipation.  Dali distinguished the prior art by arguing that the patent required “a controller that controls a switch and places itself and the switch in a non-operating state in order to disconnect the output from the training circuit.”  However, in its argument that CommScope’s technology infringed the patent, Dali argued that “CommScope’s premise that the controller itself must be turned off is . . . literal nonsense.”  The Federal Circuit found the case fell squarely within the principle that “a patent may not, like a nose of wax, be twisted one way to avoid anticipation and another to find infringement.”  Accordingly, the Federal Circuit reversed the denial of CommScope’s motion for JMOL of noninfringement and affirmed the denial of CommScope’s motion for JMOL of invalidity.

 

Lack of Specificity in the Specification Creates Patent Eligibility Issues

In Universal Secure Registry LLC v. Apple Inc., Appeal No. 20-2044, the Federal Circuit held that a patentee’s reference to existing known methods and techniques in a specification, without providing technical details or unexpected results, may present patentable subject matter vulnerabilities during litigation.

Universal Secure Registry LLC (“USR”) filed suit against Apple and Visa alleging infringement of all claims of 4 USR patents. In response, Apple and Visa alleged that the claims should be dismissed based on Section 101.  USR’s 4 patents were directed to securing electronic payment transactions.  The district court found that all of them claimed patent-ineligible subject matter.  USR appealed to the Federal Circuit.  In making the Alice 2-step inquiry for each patent, the Federal Circuit concluded that each one failed both steps.

In its analysis, the Federal Circuit cited a line of cases involving authentication technology and noted, regarding user authentication, that “patent eligibility often turns on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.” The court stated that generic combinations of known techniques with expected additive increases in functionality were generally insufficient to overcome Alice-based arguments.

According to the court, USR’s first patent had claims “directed to a method for enabling a transaction between a user and a merchant,” and thus failed Alice step 1.  As for step 2, the court found that the specification acknowledged that the key step of generating time-varying codes for authentication is “conventional and long-standing” – with the patent citing use of commercially available authentication cards from security vendors that utilize a similar authentication scheme.

USR’s second patent had similar deficiencies. The court found that the invention was directed to the abstract idea of collecting and examining data to authenticate the user’s identity, and that the claims were a collection of “conventional actions in a generic way.” The court determined that there was no inventive concept sufficient to satisfy Alice step 2, since the patent merely suggested the combination of known security techniques that did not achieve more than the expected sum of the security provided by each technique.  The specification similarly cited known security techniques such as commercially available authentication cards and bar codes found on checks.

Likewise, USR’s third and fourth patents were found to be directed to the abstract idea of “multi-factor authentication of a user’s identity using two devices to enable a transaction.”  For both patents, the court reasoned that the claims “lacked specificity” in providing a technical solution to existing authentication or security applications.  For one of the patents, the court reasoned that “no description of a specific technical solution by which the biometric information is generated, or by which the authentication information is transmitted,” was sufficient to render the claims abstract under Alice.  While for the other patent, the claims were likewise abstract for failing to disclose specific technical improvements, and that “the claimed invention merely combines conventional authentication techniques… to achieve an expected cumulative higher degree of authentication integrity.”

 

Billion Dollar Verdict Erased by Inadequate Description of Functional Claims

In Juno Therapeutics, Inc. v. Kite Pharma, Inc., Appeal No. 20-1758, the Federal Circuit held that knowledge of a common general structure and the disclosure of two representative species is insufficient to support the written description of a functionally claimed genus when the claimed function results from specific structures and the specification does not provide distinguishing characteristics for structures that achieve the claimed function and those that do not.

Juno sued Kite for patent infringement of claims to a genus of chimeric T cell receptors having a functionally defined binding element and broadly defined binding targets.  As part of its defense, Kite argued that the asserted claims were invalid for lack of written description because they covered “millions of billions” of possible candidates, only a fraction of which would satisfy the functional claim language, and the two embodiments disclosed in the specification were not representative. Juno, in turn, argued that potential candidates were well-known and possessed common structural features such that the two working examples were representative.  Returning a verdict worth over $1.2 billion in damages, the jury found that Kite failed to prove that the asserted claims were invalid for lack of written description.  Kite moved for judgment as a matter of law of inadequate written description, which the district court denied. 

On appeal, the Federal Circuit reversed, holding that no reasonable jury could have found that the patent satisfied the written description requirement.  Reiterating the standard from Ariad, the Federal Circuit emphasized that genus claims using functional language concerning binding “must demonstrate that the applicant has made a generic invention that achieves the claimed result and do so by showing that the applicant has invented species sufficient to support a claim to the functionally-defined genus.”  Walking through the evidence, the Federal Circuit explained that even accepting that there were known candidates for both targets and binding elements, the specification lacked a disclosure that would distinguish the binding elements that would actually bind to a selected target from those that were incapable of binding.  The Federal Circuit also noted that the common structure between the two examples and other candidates that Juno argued was insufficient here when a change to the amino acid sequence within the same general common structure would change the binding target and the specification failed to provide distinguishing characteristics for such structures.  Thus, substantial evidence did not support the jury verdict, and the claims were invalid for want of written description

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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