Federal Circuit Review - February 2021

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Evidence Supports Prior Art’s Public Accessibility but Not the Board’s Adoption of an Unpresented Theory of Anticipation

In M & K Holdings, Inc. v. Samsung Electronics Co.,Ltd., Appeal No. 20-1160, the Federal Circuit held that title-searchable publications shared on a prominent standards-setting organization’s website are printed publications. The Board committed procedural error by adopting a theory of anticipation that could not be reconciled with petitioner’s theory of obviousness.

Samsung requested inter partes review of M&K’s patent related to compressing video files. Samsung’s petition relied upon references “WD4-v3,” “Park” and “Zhou,” which were generated in connection with the work of a joint task force (“JCT-VC”) of representatives from technology companies, universities and research institutions who establish industry standards for high-efficiency video coding. Rather than challenge the substance of Samsung’s petition, M&K argued that these references were not printed publications under 35 U.S.C. § 102 for lack of public accessibility. The Board disagreed, finding that JCT-VC was a prominent organization, the references were discussed at JCT-VC meetings, and they were posted on the organization’s public website before the priority date of the challenged patent. Consequently, the Board found all challenged claims unpatentable, including a finding that claim 3 was anticipated by WD4-v3 despite Samsung only asserting that claim 3 was obvious.

The Federal Circuit affirmed the Board’s findings regarding public accessibility of the references, but vacated the determination that claim 3 was anticipated. Regarding public accessibility, M&K only disputed whether the references could have been located by exercising reasonable diligence. The Federal Circuit, however, noted a wealth of evidence in the Board’s opinion on this topic, such as the discussion of the references at conferences, the prominent status of JCT-VC, word of mouth knowledge of the JCT-VC website, and title-search functionality for locating references on this website. While M&K made much of the website’s landing page lacking search functionality or even an indication of a document repository, the Federal Circuit rejected these arguments in concluding that the dispositive question was whether a user of the website could have located the references through reasonable diligence.

The Federal Circuit held that the Board committed procedural error in finding anticipation of claim 3. Samsung only asserted that claim 3 was obvious over WD4-v3, Park and Zhou—not anticipated by WD4-v3 as the Board found—and Samsung expressly stated that WD4-v3 did not disclose one of the limitations. Because M&K was not on notice that the Board might adopt an anticipation theory of unpatentability for claim 3, the Federal Circuit vacated and remanded for further analysis.

No Patent Eligibility Reward for Customer Loyalty Program Computer System

In Cxloyalty, Inc. v. Maritz Holdings Inc., Appeal No. 20-1307, the Federal Circuit held that a claim implementing an abstract idea using conventional techniques is patent ineligible.

CxLoyalty petitioned for covered business method (“CBM”) review of claims of Maritz’s patent relating to a computerized system that permits a customer of a loyalty program to redeem loyalty points for rewards offered by vendors without the need for human interaction.

The Board concluded that the original claims were patent ineligible but that Maritz’s proposed substitute claims were patent eligible. At step one of the two-step framework for evaluating patent eligibility, the Board determined that the original and substitute claims were directed toward “facilitating, or brokering, a commercial transaction” between “a purchaser using a first form of value (i.e., a rewards program participant using points in whole or in part) and a seller transacting in a second form of value (i.e., a vendor system which transacts purchases in currency,” which the Board concluded was a “fundamental economic practice long prevailing in commerce” and, therefore, an abstract idea. At step two, the Board concluded that the original claims were patent ineligible because they merely recited “generic and conventional computer components . . . and functionality for carrying out” the abstract idea, but that the substitute claims were patent eligible because, based primarily on Maritz’s expert’s testimony, they contained an inventive concept.

On appeal, the Federal Circuit concluded that both the original and substitute claims were directed to patent ineligible subject matter. At step one, the Federal Circuit agreed with the Board, concluding that because the original and substitute claims were directed to transfers of information relating to a longstanding commercial practice, the claims were directed to an abstract idea. At step two, the Federal Circuit determined that the original and substitute claims were directed toward nothing more than applying the foregoing abstract idea using techniques, whether considered individually or as an ordered combination, that were well understood, routine, and conventional. Maritz argued that its expert’s testimony established that the invention was a technological solution to a technological problem. The Federal Circuit disagreed, reasoning that the expert testimony was conclusory and that the purportedly solved technological problem of connecting the loyalty awards system with those of third-party vendors while keeping the overall nature of the transaction hidden was not a technological problem requiring a solution that improved the performance of the computer system itself. Moreover, the claims did not recite a solution to the problem Maritz identified. Accordingly, the Federal Circuit affirmed the Board’s determination that the original claims were patent ineligible and reversed the Board’s determination that the substitute claims were patent eligible.

If You Buy The Whole Company, You Can Fight Its Legal Battles

In Mojave Desert Holdings, LLC v. Crocs, Inc., Appeal No. 20-1167, the Federal Circuit held that the purchaser or assignee of all assets and interests of the requester of inter partes reexamination could substitute itself at the PTAB as the real-party-in-interest and could assume the original requester’s Article III standing to appeal.

Crocs sued U.S.A. Dawgs in district court for infringement of Crocs’s design patent. U.S.A. Dawgs filed a third-party request for inter partes reexamination of Crocs’s patent, which led to a finding that Crocs’s patent was anticipated. Crocs appealed to the Patent Trial and Appeal Board (“PTAB”). During the PTAB appeal, U.S.A. Dawgs filed for Chapter 11 bankruptcy and sold all its assets and interests to Dawgs Holdings. U.S.A. Dawgs continued to exist for the purpose of winding up. Later, Dawgs Holdings assigned all rights and interests to Mojave, including all claims in the reexamination and the district court.

Months later, Mojave filed a petition with the PTAB to substitute itself as the real party in interest in the reexamination. The PTAB expunged and dismissed Mojave’s petition, saying the sale and assignment agreements were insufficient to establish Mojave as the real-party-in-interest, Mojave lacked standing in the reexamination, and the petition was not timely filed within the 20-day period found in 37 C.F.R. § 41.8(a). The PTAB reversed the examiner’s rejection of Crocs’s patent, and U.S.A. Dawgs appealed.

The Federal Circuit reversed the PTAB decision on substitution, holding that the sale and assignment agreements properly transferred all of U.S.A. Dawgs’s assets, including the interest in the reexamination. The Federal Circuit also rejected Crocs’s argument that Mojave’s petition was untimely, noting 37 C.F.R. § 41.8(a) was designed to detect conflicts of interest and is not directly related to substitutions. Finally, the court rejected Crocs’s argument that Mojave lacked standing to appeal, holding that as U.S.A. Dawgs’ successor-in-interest, Mojave met the Article III requirements for standing. The court granted Mojave’s substitution on appeal without remanding to the PTAB.

It’s Not All About the Benjamins: Recoupment of Monetary Investment is Not the Only Consideration for Equitable Intervening Rights

In John Bean Technologies Corp. v. Morris & Associates, Inc., Appeal No. 20-1090, the Federal Circuit held that recoupment of monetary investment is not the sole factor a court must consider, nor a factor that must be weighed more heavily, when determining entitlement to a defense of equitable intervening rights.

In 2002, Morris and Associates, Inc. (“Morris”) sent a demand letter to John Bean Technologies Corp. (“Bean”), asserting that Bean’s patent was invalid and citing prior art in support. Bean did not respond. In 2014, Bean amended claims of the same patent and received a reexamination certificate. Bean filed an infringement suit against Morris six weeks later. Morris filed a motion for summary judgment asserting that Bean’s patent infringement claims were barred by equitable intervening rights and the district court granted the motion. Bean appealed to the Federal Circuit, claiming the district court abused its discretion by improperly weighing the equitable intervening rights factors.

The Federal Circuit rejected Bean’s argument that monetary recoupment of investments made prior to the grant of reissue should be deemed sufficient to defeat the grant of the equitable remedy and affirmed the district court’s decision. The Federal Circuit noted that recoupment is not the sole objective, nor the sole factor under 35 U.S.C. §252 as it relates to protection of “investments made or business commenced,” and that the equitable intervening-rights analysis is broader. The Federal Circuit agreed with the district court’s finding that Bean engaged in bad faith by not disputing Morris’s belief that the patent was invalid in 2002, and instead allowing Morris to build up its business for over a decade based on the accused product before requesting reexamination. The Federal Circuit also agreed that Morris’s investment was more than just financial because it included research, development, promotion and good will for over a decade.

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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