Federal Circuit Review - Issue 272

Troutman Pepper

272-1 Federal Circuit Holds a New Invalidity Challenge at the ITC is not a Change in Condition that Enables the ITC to review the Validity of a Patent or Rescind an Exclusion Order

The Federal Circuit (Court) recently affirmed a decision by the International Trade Commission (ITC) denying a petition to rescind a general exclusion order (GEO) that prevents the importation of “self-anchoring beverage containers.” The Court held that the ITC did not err in finding the Appellants invalidity challenges was not a “changed condition” under 19 U.S.C. § 1337(k)(1). See Mayborn Grp., Ltd. v. ITC, No. 2019-2077, 2020 U.S. App. LEXIS 22077, at *3 (Fed. Cir. July 16, 2020) (Before Lourie, Linn, and Wallach, Circuit Judges) (Opinion for the Court, Lourie, Circuit Judge).

The case began when Alfay Designs, Inc., Mighty Mug, Inc., and Harry Zimmerman (the Complainants) filed a complaint with the ITC against several respondents for infringing U.S. Patent 8,028,850 (’850 patent). The ’850 patent is directed to “self-anchoring beverage containers” that seal to a surface and can be removed from the surface by lifting on the handle. Of particular interest in this case was that Mayborn Group, Ltd. and Mayborn USA, Inc. (Mayborn), who were the Appellants in this case, were not respondents in the complaint. The complaint sought a GEO barring importation of all products that infringe the ’850 patent.

The Complainants eventually procured the GEO, as the ALJ during the investigation at the ITC thought “it was ‘difficult to gain information about the entities selling infringing self-anchoring beverage containers,’ and numerous entities were importing self-anchoring beverage containers, making it ‘nearly impossible to identify the sources of the products.’” After the ITC issued the GEO, the Complainants informed Mayborn of the GEO and that Mayborn was allegedly importing infringing products. Mayborn petitioned the ITC to rescind the GEO, arguing newly found art and invalidity arguments was a change in condition under 19 U.S.C. § 1337(k)(1). The ITC disagreed and Mayborn appealed.

The two issues in this case were (1) whether Mayborn had standing to appeal and (2) whether the new assertion of invalidity was enough to rescind the GEO as a change in condition under § 1337(k)(1).

As for the standing issue, the ITC argued that Mayborn lacks standing because it continues to import products, so it has suffered no injury in fact. The Court disagreed, finding that the three requirements for Article III were satisfied. First, there is a “particularized, concrete injury in fact,” because the ITC at any moment could block the import of the products under the GEO. Also, Mayborn has shown concrete losses as a result of the threats to assert the GEO. Second, the ITC argued that, since the Complainants are the entities threatening to assert the GEO, the harm is not “fairly traceable” to the ITC. The power to enforce the GEO, however, is found with the ITC. Finally, removal of the GEO can address the third prong of standing, “redressability.” Accordingly, the Court held Mayborn had standing to appeal.

As for the merits of the case, or whether the new invalidity challenge is a “change in condition,” Mayborn argued that the ITC failed to adhere to its own regulation, 19 C.F.R. § 210.76, by not addressing the invalidity challenge. The Court discussed the authority of the ITC to adjudicate patent claims. First, validity can only be adjudicated under § 1337(b) when the challenge is raised as a defense. Here, the invalidity challenge was not a defense, as Mayborn was not a party in the original proceeding, so the ITC cannot address the invalidity under subsection (b).

Second, the ITC “may also rescind or modify an exclusion order when ‘the conditions which led to such exclusion . . . no longer exist,’ or when a party previously adjudged in violation of § 1337(a) petitions for a ‘determination that the petitioner is no longer in violation of [Section 337].’” 35 U.S.C. § 1337(k). Mayborn argued that this statute implies that that “public interest” relies on resolving invalidity of patents, relying on the ITC’s interpretive regulation that states a person can petition for rescinding an exclusion order if the person “believes that changed conditions of fact or law, or the public interest, require that an exclusion order . . . be modified or set aside.” 19 C.F.R. § 210.76.

The Court disagreed that the regulation allows a way to back-end an invalidity challenge. The Court noted that the “public interest” description in the regulation “requires a petitioner to show a change in the ‘public interest’ conditions that led the Commission to issue the exclusion order in the first place.” In other words, the statute and regulation require that the public’s interest in the exclusion changes over time. The condition of the alleged invalidity of the patent has not changed over time.

In so holding, the Court affirmed the ITC’s denial of the petition to rescind the GEO.

The ITC may review validity challenges to a patent when the challenges are brought as affirmative defenses. After a general exclusion order is issued, new validity challenges are not a “changed condition” that provides the ITC authority to review the validity of the patent or rescind the exclusion order.

272-2 Federal Circuit Affirms District Court Finding of Joint Inventorship for Nobel-prize Winning Cancer Treatment

The United States Court of Appeal for the Federal Circuit recently affirmed a district court decision finding that Dr. Gordon Freeman and Dr. Clive Wood should be added as co-inventors to U.S. Patents Nos. 7,595,048, 8,168,179, 8,728,474, 9,067,999, 9,073,993, and 9,402,899 for their contributions to the discovery of a novel method of treating cancer. See Dana-Farber Cancer Inst., Inc. v. Ono Pharm. Co., No. 2019-2050, 2020 U.S. App LEXIS 21704 (Fed. Cir. July 14, 2020) (Before Newman, Lourie, and Stoll, Circuit Judges) (Opinion for the Court, Lourie, Circuit Judge).

The case arises out of a longstanding collaboration between Dr. Honjo, a professor at Kyoto University’s medical school who discovered the PD-1 receptor and its effect on antitumor immune response in the early 90s, and Drs. Wood and Freeman. Dr. Honjo would begin collaborating with Dr. Wood in September of 1998 in order to identify a ligand capable of binding to the PD-1 receptor discovered by Dr. Honjo. Nearly simultaneously, in July of 1998, Dr. Freeman was studying a family of ligands and discovered what become known as the PD-L1 ligand that binds to the PD-1 receptor where it is expressed in the body.

It is undisputed that the collaboration between Drs. Honjo, Wood, and Freeman led to a published article in the Journal of Experimental Medicine on October 2, 2000. During the editing of the article, Dr. Freeman added a sentence stating that “PD-L1 was also expressed in cancers and that some tumors may use PD-L1 to inhibit an antitumor immune response.”

In October of 2000, using chemical reagents provided by Dr. Freeman, Dr. Honjo and his colleague Dr. Iwai generated data showing that mouse melanoma tumors expressing PD-L1 grew faster than tumors without the PD-L1 expression. Ono Pharmaceuticals, to whom Dr. Honjo and his colleagues had assigned their interest in the patents-in-suit, contended that October 2000 is the conception date of the novel method for cancer treatment involving the PD-1/PD-L1 pathway. In 2002, Dr. Honjo filed for a patent in Japan, which became the basis for each of the patents-in-suit. Neither the original Japanese patent nor the patents-in-suit list Drs. Wood or Freeman.

Reviewing factual findings for clear error and deciding inventorship de novo as a matter of law, the Federal Circuit found that Ono had misconstrued the test for a joint inventor, finding that Ono’s test for inventorship would require each inventor to have individually created the complete invention to be considered a co-inventor. Rejecting such a heightened inventorship standard, the Federal Circuit reaffirmed that there is no “explicit lower limit” on the level of inventive contribution required for a finding of co-inventorship.

Addressing Ono’s arguments that Dr. Freeman’s and Dr. Wood’s contributions to the PD-1/PD-L1 pathway findings were too speculative, the Federal Circuit explained that verification is not required for conception. Rather, Ono was conflating the conception requirement with reduction to practice. Ono additionally argued that because Dr. Wood’s and Dr. Freeman’s research was published prior to the date of conception, their contributions cannot qualify as a significant contribution to conception of the total invention. The Federal Circuit held that a collaborative enterprise is not negated by a joint inventor disclosing ideas “less than the total invention” to others, especially because the collaborators had a lengthy history of working together prior to the disclosure, and the disclosure happened mere weeks before the conception of the invention described in the patents-in-suit. Ono also made arguments challenging the factual analysis for each of the patents-in-suit, namely challenging the sufficiency of contribution of both Dr. Wood and Dr. Freeman, but the Federal Circuit remained unconvinced, holding that Drs. Freeman and Wood are joint inventors of the patents-in-suit and that their contributions to the invention were significant.

A person need not individually conceive of the complete invention or participate in a particular moment of conception to be deemed a co-inventor. A collaborative enterprise is not negated by a co-inventor’s public disclosure of ideas that are less than the total invention.

272-3 Federal Circuit Reverses District Court’s Award of Pre-Suit Damages Because Licensee Failed to Properly Mark the Patent-Practicing Products

The United States Court of Appeals for the Federal Circuit recently issued a ruling reversing the District Court for the Eastern District of Texas’ award of pre-suit damages to Packet Intelligence and vacating the district court’s enhancement of the pre-suit damages award. See Packet Intelligence LLC v. NetScout Sys., No. 2019-2041, 2020 U.S. App. LEXIS 21705 (Fed. Cir. July 14, 2020) (Before Lourie, Reyna, and Hughes Circuit Judges) (Opinion for the Court, Lourie, Circuit Judge).

Packet Intelligence (Packet) is the owner of three patents directed to an apparatus and method for “monitoring packets exchanged over a computer network.” The specifications of the patents disclose that it can be beneficial to identify and classify sequences of packets exchanged between computers in order to generate analytics used to understand network load and usage. In particular, the patents disclose an apparatus claim directed to a packet monitor for examining packets passing through a connection point on a computer network and method claims directed to a method for performing protocol specific operations on a packet through a connection point on a network.

Packet asserted claims of the various patents against NetScout Systems (NetScout), alleging that NetScout’s “G10” and “GeoBlade” products infringe the asserted claims. The case was tried to a jury at the district court with regards to issues of patent infringement, damages, willfulness, and patent invalidity. Ultimately, the jury found that the asserted claims were willfully infringed by NetScout, rejected NetScout’s invalidity defenses, and awarded damages. The district court then issued findings of fact and conclusions of law rejecting NetScout’s § 101 invalidity defense, while also awarding enhanced damages and on-going royalty payments. Subsequently, NetScout appealed. In particular, NetScout challenged the district court’s findings with regards to issues of (1) infringement, (2) invalidity under § 101, (3) invalidity under § 102, (4) pre-suit damages, and (5) willfulness.

With regards to the NetScout’s challenge of the district court’s finding of infringement, the Federal Circuit ultimately concluded the jury’s verdict of infringement by NetScout did not lack substantial evidence. The Federal Circuit explained that the claim construction provided by Packet was proper, and that under such claim construction, NetScout infringed the asserted claims. Additionally, the Federal Circuit explained that Packet provided sufficient evidence, including expert testimony, that the accused products do infringe the asserted claims.

NetScout additionally asserted the patents are invalid due to ineligible subject matter. Ultimately, the Federal Circuit agreed with the district court’s finding that Packet’s patents are patent eligible. In particular, the Federal Circuit explained that when analyzing the claim under step 1 of the Alice framework, it is determined whether the “focus of the claims is on [a] specific asserted improvement in computer capabilities . . . or, instead, on a process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a tool.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335-36 (Fed. Cir. 2016). Here, the asserted claims attempt to solve the problem of “identifying disjointed connection flows in a network environment,” and the claims provide specific details on how the solution to this problem is achieved. Additionally, the Federal Circuit noted that the specifications of the patents further explain that prior network monitors were unable to identify disjointed connection flows and that the object of the present invention is to solve such problem. Accordingly, the Federal Circuit concluded the claims are not directed to an abstract idea, and thus, did not continue to step 2 of the Alice framework.

Further, NetScout asserted that Packet’s patents are invalid under § 102(f) because Packet did not identify the RMON Working Group as inventors. In particular, NetScout argued that the RMON Working Group invented the “Track Session” probe functionality that “relates connection flows into conversational flows” as claimed in the asserted claims. The district court dismissed NetScout’s motion for a judgment as a matter of law on the issue of inventorship, concluding that the jury’s rejection of NetScout’s § 102 challenge was supported by substantial evidence. Ultimately, the Federal Circuit agreed with the district court. The Federal Circuit noted that both NetScout and Packet relied upon expert testimony to argue their position, and that the jury was permitted to credit one party’s expert testimony over the other. According, it was proper for the jury to credit expert testimony provided by Packet that the “Track Sessions” probe functionality did not meet the limitations recited in the asserted claims, and thus, RMON Working Group did not need to be identified as an inventor.

With regards to pre-suit damages, NetScout argued that it is not subject to any pre-suit damages, because Packet’s licensee did not properly mark its patent-practicing products. Under 35 U.S.C. § 287(a), authorized patented articles that are sold or imported must be properly marked with the appropriate patent numbers. If the patent-practicing products are not marked, the statute bars damages prior to the infringer being notified of the infringement. Here, because “authorized patented articles” includes licensed products, when Packet licensed its products, the licensee was required to properly mark the patent-practicing products. When the district court issued jury instructions regarding the marking requirement, the Federal Circuit had not yet addressed which party bears the burden of proving compliance with the marking statute. Accordingly, the district court issued jury instructions indicating NetScout bore the burden to show that the licensed products practiced the asserted patent directed to the packet monitor apparatus. These jury instructions led the jury to reject NetScout’s marking defense and subsequently award Packet pre-suit damages of $3.5 million.

However, after the verdict from the jury trial, the Federal Circuit held in Artic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350, 1386 (Fed. Cir. 2017) that the alleged infringer “bears an initial burden of production to articulate the products it believes are unmarked ‘patented articles’ subject to [the marking requirement].” The Federal Circuit explained that the initial burden is a low standard to meet, and that the alleged infringer must only “put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the patent.” Once the alleged infringer meets this burden, the patentee must then prove that the products do not actually practice the asserted patent. When applying this newly established framework, the Federal Circuit ultimately reversed the district court’s denial of NetScout’s motion for a judgment as a matter of law due to improper licensee marking. The Federal Circuit explained that NetScout met the preliminary burden of identifying unmarked products that it believed embodied the asserted patent, and that subsequently Packet did not sufficiently rebut NetScout’s argument by showing identified unmarked products did not practice the asserted patent. In particular, the Federal Circuit noted that the inventors removing a reference to the product in the non-provisional application of the asserted patent and the expert testimony regarding a similar, but different product, was not sufficient evidence to satisfy the burden of proving that that the licensed product practiced the claims of the asserted patent.

When the Federal Circuit concluded that the district court erred in denying NetScout’s motion for a judgment as a matter of law due to improper licensee marking, Packet asserted that pre-suit damages can still be granted based on infringement of the method claims in the patents. The Federal Circuit disagreed, explaining that method claims are “not directly infringed by the mere sale of an apparatus capable of performing the claimed process.” Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed. Cir. 1993). Thus, Packet cannot rely on the sales of the software product accused of infringing the patent claiming the apparatus as sales of the method claimed in the other asserted patents.

Lastly, NetScout appeals the district court’s denial of NetScout’s motion for a judgment as a matter of law on willfulness, asserting that the infringement was not willful. In particular, NetScout asserts that its executives did not have knowledge regarding the patents and that its continued infringing behavior indicated the infringement was not willful. Ultimately, the Federal Circuit agreed with Packet that the jury’s willfulness verdict was supported by substantial evidence. The Federal Circuit noted that the jury was able to hear testimony from NetScout’s executives, and thus, the jury was able to decide for itself whether or not to credit the testimony and determine that NetScout willfully infringed.

Accordingly, the Federal Circuit affirmed the district court’s judgement with regards to infringement, validity under §§ 101 and 102, and willfulness, while reversing the district court’s award of pre-suit damages and vacating any enhancement of pre-suit damages.

Judge Reyna dissented-in-part to the majority’s decision. Judge Reyna explained that he would have concluded the asserted patents are ineligible under § 101. In particular, Judge Reyna stated that it was an error for the district court to find the claims were directed to a specific technological solution by considering the claims and the specification together, explaining that “the relevant inquiry for § 101 purposes is not whether the patent as a whole teaches a concrete means for achieving an abstract result, but whether such a concrete means is claimed.”

An alleged infringer bears the initial burden of production to provide evidence of unmarked products. Upon the alleged infringer providing sufficient evidence, the burden shifts to the patentee to prove that it complied with 35 U.S.C. § 287(a) by showing the products were marked or did not need to be marked because the products did not actually practice the patent as claimed. Additionally, direct infringement of method claims to support an award of pre-suit damages is not established solely based on sales of products that infringed apparatus claims.

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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