Federal Circuit Review | January 2015

by Knobbe Martens

RAND Commitment Relevant to Damages

In ERICSSON, INC. v. D-LINK SYSTEMS, INC., Appeal Nos. 2013-1625, -1631, -1632, and -1633, the Federal Circuit affirmed-in-part and reversed-in-part the district court’s judgment of infringement and vacated and remanded the damages award.

Ericsson developed Wi-Fi technology claimed in three patents at issue.  The IEEE adopted the claimed technology as 802.11(n) standards.  The standards require all compliant devices to use the patented technology, and therefore Ericsson had to pledge it would grant licenses to an unrestricted number of applicants on “reasonable and non-discriminatory” (RAND) terms.  D-Link manufactured 802.11(n)-compliant end products incorporating the patented technology.  The district court refused to disturb the jury’s findings of infringement of all the asserted patents or its damages award.  The jury awarded damages of $10 million, or a royalty rate of 15 cents per infringing device, based on the district court’s instruction to consider the 15 factors for determining a licensing royalty established in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).

On the issue of infringement, the Federal Circuit affirmed-in-part and reversed-in-part, holding D-Link infringed two of the asserted patents.  With respect to the damages award, the Federal Circuit vacated and remanded.  Because the patented technology was adopted as a standard, Ericsson was obligated to offer licenses under RAND terms.  Under these terms, Ericsson specifically promised it would “grant a license under reasonable rates to an unrestricted number of applicants on a worldwide basis with reasonable terms and conditions that are demonstrably free of unfair discrimination.”

The Federal Circuit determined many of the Georgia-Pacific factors were irrelevant to this case and even contrary to Ericsson’s RAND obligations.  For example, the fourth factor considers the licensor’s policy to maintain his patent monopoly by not licensing to others.  But because of Ericsson’s RAND commitment, it cannot maintain a monopoly.  Similarly, the fifth factor considers the commercial relationship between the licensor and licensee.  Under the RAND terms, this factor is irrelevant because Ericsson is obligated to offer licenses at a non-discriminatory rate.  Other factors would at least need to be adjusted for RAND-encumbered patents.  For example, the eighth factor accounts for an invention’s “current popularity,” which is likely to be affected by the industry standard.  The Federal Circuit concluded the district court should instead instruct the jury on the actual RAND commitments at issue, and not on irrelevant or misleading factors (such as the fourth, fifth, eighth, ninth, and tenth Georgia-Pacific factors). The Federal Circuit emphasized appropriate Georgia-Pacific factors can be applied, but only when such factors are relevant to the case.

Internet Activity Claims Are Valid Subject Matter

In DDR HOLDINGS, LLC v. HOTELS.COM, L.P., Appeal No. 2013-1505, the Federal Circuit held Internet-activity claims recited patentable subject matter under 35 U.S.C. § 101.

DDR asserted two patents claiming systems and methods for generating a composite web page that combines visual elements of a host website with content of a third-party merchant.  The jury found the patents infringed and not invalid.  The defendant renewed motions for JMOL of invalidity under 35 U.S.C. §§ 101, 102, 103, and 112; the district denied the motions and the defendant appealed.

The Federal Circuit affirmed the denial of JMOL under § 101.  Applying the Supreme Court’s framework of Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), the Federal Circuit noted the claims did not broadly and generically “recite the performance of some business practice known from the pre-Internet world” merely implemented using computers.  “Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”  The Federal Circuit noted the claims “do not attempt to preempt every application of the idea of increasing sales by making two web pages look the same” and instead “recite a specific way to automate the creation of a composite web page,” thereby providing “additional features” under step two of the Alice analysis.

The Federal Circuit reversed the denial JMOL under § 103 for one of the patents and affirmed the denial of all other bases for JMOL.  In affirming the denial of JMOL of invalidity for indefiniteness under § 112, the Federal Circuit noted the defendant admitted at trial it understood the meaning of the disputed term.

In dissent, Judge Mayer opined the claims are invalid under § 101.  The patents claimed the goal of “confusing consumers by making two pages look alike” but in Judge Mayer’s view did not disclose any new technology or “inventive concept” for achieving that goal.

Japanese Company Cannot Withdraw Terminal Disclaimer

In JAPANESE FOUNDATION FOR CANCER RESEARCH v. LEE, Appeal Nos. 2013-1678 and 2014-1014, the Federal Circuit reversed the district court’s grant of summary judgment that the PTO acted arbitrarily and capriciously and abused its discretion when it refused to withdraw a terminal disclaimer. 

The Japanese Foundation for Cancer Research filed a petition to withdraw a statutory disclaimer, arguing it was filed due to mistaken communications between the client, foreign associate, and U.S. attorneys.  The PTO denied the petition.  The Foundation thereafter filed an action in district court appealing the PTO’s decision under the Administrative Procedure Act (“APA”), 5 U.S.C. § 551.  The district court granted summary judgment directing the PTO to withdraw the disclaimer. 

On appeal, the Federal Circuit reversed on two grounds. First, the Federal Circuit found the Foundation’s filing due to miscommunication could not be a “clerical or typographical error” under in 35 U.S.C. § 255, in which relief of correction or withdrawal could be granted.  The Federal Circuit explained the statute applied to “simple mistakes such as obvious misspellings that are immediately apparent.”  In addition, § 255 only grants relief due to an error appearing on the face of the document, not to the filing of the document itself.  Second, the Federal Circuit explained it could only set aside an agency decision under the arbitrary and capricious standard of the APA if the agency abused its discretion by applying an erroneous interpretation of the law.  The PTO’s determination was based on whether the disclaimer satisfied M.P.E.P. requirements.  Furthermore, the PTO had discretion to deny the petition because the PTO is not the forum for resolving miscommunications between attorneys and clients.  Therefore, the Federal Circuit concluded it must defer to the agency’s interpretation of its own procedures and regulations.

Infringement Found For Shipping Components Overseas

In PROMEGA CORP. v. LIFE TECHNOLOGIES CORP., Appeal Nos. 2013-1011, -1029, and -1376, the Federal Circuit reversed the district court’s grant of the plaintiff’s motion for summary judgment that the asserted claims are not invalid for lack of enablement and reversed the district court’s grant of the defendant’s motion for JMOL of noninfringment under 35 U.S.C. § 271(f)(1).

Promega sued LifeTech for infringing four Promega patents and one Tautz patent relating to methods or kits for simultaneously determining the alleles present in a set of “short tandem repeats” (STR) loci from DNA samples. LifeTech manufactures one component of its genetic testing kits in the United States, which it ships overseas to its manufacturing facility in the United Kingdom for assembly.  The district court found the Promega patents enabled but, after trial, granted LifeTech’s motion for JMOL of noninfringement under § 271(f)(1).

The Federal Circuit reversed the district court’s finding of enablement.  The Federal Circuit concluded the unrecited STR loci combinations are part of the claim scope given the unpredictability of the field.  During prosecution, Promega argued the claims were patentable because the prior art did not disclose methods for evaluating the specific sets of STR loci recited in the claims, which was critical because the specific sets could not be determined without undue experimentation. Stating Promega cannot decide to “sing a different tune” for the purposes of infringement, the Federal Circuit held the Promega patents do not enable a skilled artisan to practice the full breadth of the claim scope without undue experimentation.

Regarding infringement of the Tautz patent, the Federal Circuit concluded Congress did not limit a company’s liability under § 271(f)(1) to shipping components overseas to third parties, but also included shipping components overseas to themselves or a foreign subsidiary. Additionally, the Federal Circuit held a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States when the component shipped is a “substantial portion” of the components of the accused products.  Accordingly, the Federal Circuit held LifeTech liable for infringement.

Data Collection Claims Invalid

In CONTENT EXTRACTION & TRANSMISSION, LLC, v. WELLS FARGO BANK, NATIONAL ASSOCIATION, Appeal Nos. 2013-1588, 2013-1589, 2014-1112, and 2014-1687, the Federal Circuit affirmed the district court’s grant of the defendant’s motion to dismiss under FRCP 12(b)(6) because the asserted data collection claims were invalid as directed to an unpatentable abstract idea.  

CET asserted four patents claiming methods for collecting, recognizing, and storing data from a hard copy document, such as a check collected at an ATM.  The representative independent claims included collecting data “using an automated digitizing unit such as a scanner.”  The district court found all of the asserted patents invalid under 35 U.S.C. § 101 and granted a motion to dismiss under FRCP 12(b)(6) based on this ineligibility ground.

The Federal Circuit affirmed the grant of the motion to dismiss.  The Federal Circuit applied the two-step framework of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) and Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) to the representative independent claims.  Under step one, addressing whether the claims were directed to an abstract idea, the Federal Circuit agreed the abstract idea of “data collection, recognition, and storage is undisputedly well-known.”  Under step two, addressing whether the claims were a patent-eligible application of an abstract idea, the Federal Circuit determined “the use of a scanner or other digitizing device to extract data from a document” was a well-known application: the claims merely recited the use of “existing scanning and processing technology to recognize and store data.”

CET argued the dependent claims recited additional steps rendering those claims patent eligible.  The Federal Circuit disagreed and concluded those claims recited “well-known, routine, and conventional functions of scanners and computers.”  Thus, “while these claims may have a narrower scope than the representative claims, no claim contains an ‘inventive concept’ that transforms the corresponding claim into a patent-eligible application of an otherwise ineligible abstract idea.”

Finally, the Federal Circuit concluded the district court properly resolved the motion to dismiss at the pleading stage because, even when construed in a manner most favorable to CET, none of the claims amounted to “‘significantly more’ than the abstract idea of extracting and storing data from hard copy documents using generic scanning and processing technology.”


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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