Federal Circuit Review - December 2013

by Knobbe Martens


Apple Awarded Permanent Injunction

In Apple Inc. v. Samsung Electronics Co., Appeal No. 13-1129, the Federal Circuit vacated denial of a permanent injunction with respect to Apple’s utility patents and affirmed denial of a permanent injunction with respect to Apple’s design patents and trade dress. 

In 2011, Apple sued Samsung for infringing utility and design patents and diluting Apple’s iPhone trade dress. Samsung filed counterclaims. The jury returned a verdict for Apple of more than $1 billion in damages, a portion of which was later set aside. After trial, Apple moved to enjoin Samsung from importing or selling infringing products or “any other products not more than colorably different from an Infringing Product as to a feature or design found to infringe.” Apple also sought to enjoin the sale of any products found to dilute Apple’s trade dress. 

The Federal Circuit affirmed in part and vacated in part. The Federal Circuit affirmed the denial of Apple’s request for a permanent injunction with respect to Apple’s design patents and trade dress. The Federal Circuit vacated the denial of injunctive relief with respect to Apple’s utility patents. 

Regarding irreparable harm, the Federal Circuit confirmed the district court’s application of a causal nexus requirement in the permanent injunction context. The district court erred in its treatment of survey evidence that showed consumers would be willing to pay a significant price premium in relation to the cost of the product. The Federal Circuit vacated the portion of the district court’s irreparable harm findings with respect to Apple’s utility patents. Regarding inadequacy of legal remedies, the district court abused its discretion by failing to analyze relevant differences between licensing to Samsung, Apple’s primary competitor, and Apple’s past licensing behavior. The Federal Circuit found no clear errors of judgment with respect to the balance of hardships and public interest factors. 

Patent Rights Exhausted 

In Lifescan Scotland, Ltd. v. Shasta Technologies, LLC, Appeal No. 13-1271, the Federal Circuit reversed the district court’s grant of a preliminary injunction, because Defendants established that Shasta’s customers’ purchase of LifeScan’s blood glucose meters exhausted the patent rights in LifeScan’s method patent for comparing measurements in blood glucose monitoring systems. 

LifeScan sued Shasta for indirect patent infringement of LifeScan’s patent directed to a method of comparing the measurements in a blood glucose monitoring system. The blood glucose monitoring system consisted of an electrochemical meter and disposable test strips. Shasta, which did not sell blood glucose meters, competed with LifeScan in the market for test strips. Accordingly, LifeScan alleged that the users of Shasta’s test trips would be the direct infringers. Shasta argued that it had a substantial defense based on the doctrine of patent exhaustion under Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008). Specifically, Shasta argued that LifeScan’s sale and distribution of its meters exhausted LifeScan’s rights under its method patent because the meters substantially embodied the invention. The district court rejected Shasta’s argument and granted LifeScan’s motion for a preliminary injunction, finding that patent exhaustion only applies to a “sale” in which the patentee receives “consideration” in exchange for a patented product and not where, as here, LifeScan distributes some of its meters for free. With regards to those meters that did qualify as a sale, the district court still concluded that patent exhaustion did not apply because the patent “is a method patent that requires both a meter and a test strip for an individual to practice it.” 

The Federal Circuit reversed, concluding that Shasta established a patent exhaustion defense as a matter of law. The Federal Circuit looked, in particular, to the patent abstract, specification, and the prosecution history to find that LifeScan’s meters substantially embodied the methods claimed in the patent. The Federal Circuit found that the inventive concept was in the meters alone because the meters “control” and “carry out” the inventive functions of the method claims. The Federal Circuit further stated that, although the specification described the strips, the claims covering the strips were not ultimately allowed. Accordingly, the Federal Circuit refused to extend the patent’s exclusive rights to bar the use of the meters with strips manufactured by Shasta, as such a bar would prevent the use of the meters for their contemplated function. Lastly, the Federal Circuit held that patent exhaustion applies to all authorized transfers of title in property, irrespective of whether the transfer is a gift or a sale. 

Invention Priority Awarded Despite Errors in Conception 

In Sanofi-Aventis v. Pfizer Inc., Appeal No. 12-1345, the Federal Circuit affirmed a decision from the Board of Patent Appeals and Interferences (the “Board”) awarding priority of invention to Pfizer, despite Pfizer’s lack of a completely correct nucleotide sequence by Sanofi’s benefit date. 

Sanofi appealed a decision from the Board awarding priority of invention to Pfizer. On appeal, the Federal Circuit reviewed the Board’s rulings of law for correctness and factual findings for support by substantial evidence. 

Sanofi was awarded a priority date of December 6, 1995. Since Pfizer’s filing date is March 1, 1996, Pfizer bore the burden of proving a date of conception earlier than the Sanofi date. Pfizer presented evidence that it had isolated and identified the desired cDNA before the Sanofi date. However, due to sequencing errors, Pfizer did not then have a completely accurate analysis of the entire nucleotide sequence. The Board held that Pfizer had established conception of the subject matter when it selected, isolated, and obtained the desired IL-13bc full-length polynucleotide and verified that it was the desired product, regardless of whether the fully correct sequencing of the polynucleotide was complete. On appeal, Sanofi argued that conception of the claimed cDNA could not be established for priority purposes until the fully correct nucleotide sequence was determined and that, because Pfizer’s sequence analysis before the Sanofi date contained errors as to 8 of the 1143 nucleotides, Pfizer cannot be credited with conception. 

The Federal Circuit affirmed, concluding that the Board correctly based conception and reduction to practice on the possession of the isolated DNA segment that was shown to have the desired properties. The Federal Circuit noted that the issue was not identification of the operative DNA by full nucleotide analysis, but isolation of the operative DNA and identification by distinguishing properties of the isolate. The precedent cited by Sanofi does not hold, as Sanofi asserts, that conception requires the complete and correct sequencing of the isolated DNA. The Federal Circuit further noted that, in a variety of circumstances, conception was found although the complete nucleotide sequence was not known. Furthermore, for proteins and polynucleotide species, although a sequence is the gold standard for identifying the species with precision, it is not the only way to identify the composition precisely. The Federal Circuit concluded that Pfizer, upon selecting, isolating and characterizing the IL-13bc, was able to define the IL-13bc so as to distinguish it from other materials and to define how to obtain it.

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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