Federal Circuit Review - June 2021

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Bulk-Filed Patent Applications Claiming Distant Priority Trigger Prosecution Laches

In Hyatt v. Hirshfeld, Appeal No. 18-2390, the Federal Circuit held that the PTO met its burden to prove prosecution laches for bulk-filed patent applications claiming priority to applications more than six years old.

Gilbert Hyatt filed district-court lawsuits against the PTO under 35 U.S.C. § 145 to obtain patents on four rejected applications. Mr. Hyatt had filed those four patent applications during the months leading up to June 8, 1995, when the measure of patent term in the U.S. changed from the date of issuance to the date of application. During that time, Mr. Hyatt had bulk-filed a total of 381 applications. Each of the 381 applications originally had a small set of claims. Mr. Hyatt later filed amendments that increased the number of claims to about 300 per application.

The four applications at issue in the district-court lawsuit claim priority to applications filed in the 1970s and 1980s, which pre-date the applications by a range of 12 to 25 years. From 2003 to 2012, the PTO stayed the examination of many of Mr. Hyatt’s applications pending litigation. Around 2013, the PTO resumed examination of Mr. Hyatt’s applications and created an art unit dedicated to examining Mr. Hyatt’s applications. The examiners took approximately four to five months to write their first office actions, each of which spanned hundreds of pages. Over the course of five years, the PTO spent more than $10 million examining claims in Mr. Hyatt’s patent applications and Mr. Hyatt paid about $7 million in fees. Mr. Hyatt filed the district-court lawsuits to obtain patents on the four applications at issue after the Board of Patent Appeals and Interferences affirmed rejections of claims in those applications.

In the district-court lawsuit, the PTO asserted that prosecution laches bars issuance of patents from the four applications at issue. Prosecution laches requires proving (a) unreasonable and inexcusable delay under the totality of circumstances and (b) prejudice attributable to the delay. After conducting bench trials, the district court concluded that the PTO failed to carry its burden of proving prosecution laches and ordered the PTO to issue patents on claims of the four applications at issue. The PTO appealed.

The Federal Circuit found that the district court misapplied the legal standard for prosecution laches, reasoning that the district court failed to consider the totality of the circumstances and focused on the PTO’s conduct, while discounting Mr. Hyatt’s. The Court noted that the PTO’s conduct may be considered in the totality of circumstances, but its delay cannot excuse the applicant’s own delay in prosecution. The Court further held that the evidence and arguments that the PTO presented at trial were sufficient to shift the burden to Mr. Hyatt on the issue of prosecution laches. In this regard, the Federal Circuit noted that Mr. Hyatt’s delay exceeded six years and therefore raises a presumption of prejudice. The Court concluded that the PTO carried its burden of proving that Mr. Hyatt engaged in a “clear abuse” of the PTO’s patent examination system that contributed to delay in the four applications at issue. The Federal Circuit therefore vacated the district court’s decision on prosecution laches and remanded to provide Mr. Hyatt an opportunity to present evidence on that issue.


Federal Circuit Confirms That an Applicant’s Statements During Prosecution Can Narrow the Scope of the Claims  

In Speedtrack, Inc. v. Amazon.com, Inc., Appeal No. 20-1573, the Federal Circuit held that where an applicant repeatedly distinguishes the claimed invention from the prior art based on the absence of a particular feature, the claims are properly construed as excluding that feature.    

SpeedTrack sued various retail website operators for patent infringement, asserting claims directed to methods of using a computer filing system.  The claimed filing system allows users to assign user-created “category descriptions” to files and to filter files by selecting one or more category descriptions.  During prosecution, applicants distinguished the claimed invention from the prior art by emphasizing the absence of predefined field-and-value relationships, which applicants characterized as “hierarchical.”   
The district court adopted SpeedTrack’s proposed construction of “no predefined hierarchical relationship,” but subsequently issued a clarifying order, specifying that field-and-value relationships are hierarchical and disclaimed from the scope of the claims.  SpeedTrack stipulated to non-infringement under the district court’s clarified construction, and the district court entered a final judgment of non-infringement.  SpeedTrack appealed the district court’s clarified construction. 

The Federal Circuit affirmed the district court’s claim construction and final judgment of non-infringement.  The Federal Circuit agreed with the district court that the applicants disavowed predefined hierarchical field-and-value relationships during prosecution through their remarks and claim amendment. SpeedTrack argued that its prosecution statements merely disclaimed predefined hierarchical relationships among values (i.e., among category descriptions), not hierarchical relationships between fields and values.  The Federal Circuit disagreed, emphasizing that applicants repeatedly distinguished the claimed invention from a “hierarchical” prior art system that used predefined field-and-value relationships.  The court highlighted the paradoxical nature of SpeedTrack’s argument, under which the claims would cover the prior art system that applicants specifically distinguished during prosecution. 

SpeedTrack further argued that there could be no clear and unmistakable disclaimer of claim scope because disclaimer was not expressly found in previous litigation and reexamination proceedings involving the same patent.  The Federal Circuit rejected this argument, noting that there was no indication that the patent office addressed the issue of disclaimer during reexamination and the parties in the previous litigation stipulated to a construction of “no predefined hierarchical relationship.”  The Federal Circuit likewise dismissed SpeedTrack’s argument that the district court’s issuance of a second claim construction order undermined a finding of clear and unmistakable disclaimer.  The Federal Circuit explained that the district court’s second order merely articulated the impact of the court’s construction on field-and-value systems.   


Federal Circuit Lacks Jurisdiction Over Standalone Antitrust Claim Concerning an Unenforceable Patent

In Chandler v. Phoenix Services LLC, Appeal No. 20-1848, the Federal Circuit ruled that it lacked subject matter jurisdiction over a standalone Walker Process antitrust claim concerning an unenforceable patent because such a cause of action did not inherently present a substantial issue of patent law.

Chandler asserted a Walker Process antitrust claim against Phoenix, alleging that Phoenix was continuing to enforce a patent the Federal Circuit had ruled unenforceable by listing the patent on its website.  Although noting that a Walker Process claim requires, inter alia, proving that the antitrust defendant obtained the patent by knowing and willful fraud on the patent office and maintained and enforced the patent with knowledge of the fraudulent procurement, the Federal Circuit held that it lacked subject matter jurisdiction over Chandler’s appeal.  The Federal Circuit explained that, although Walker Process antitrust claims may relate to patents in the colloquial use of the term, the appellate court’s jurisdiction over cases arising under patent law only extends to those cases where (1) federal patent law creates the cause of action or (2) the plaintiff’s right to relief necessarily depends on the resolution of a substantial question of federal patent law.  The Federal Circuit concluded that neither prong was met.  For example, federal patent law did not create the cause of action because Chandler’s allegations arose under the Sherman Act.  Additionally, the Federal Circuit explained that Chandler failed to raise any federal patent law question, let alone a substantial question of federal patent law, that had not already been addressed in the previous Federal Circuit case holding the patent-at-issue unenforceable.  Accordingly, the Federal Circuit found that it lacked subject matter jurisdiction and transferred the case to the regional circuit.

A Digital Camera Claimed at a High Level of Generality Is Ineligible as an Abstract Idea 

In Yu v. Apple, Appeal No. 20-1760, an apparatus claim reciting a digital camera with conventional components is patent ineligible as directed to the abstract idea of using a digital camera to take two pictures and enhance one picture with the other picture.

Yanbin Yu and Zhongxuan Zhang filed a patent infringement suit against Apple and Samsung alleging infringement of claims concerning a digital camera.  The district court granted the defendants’ motion to dismiss, concluding that the asserted claims were patent ineligible under §101 because they were directed to the abstract idea of taking two pictures and enhancing one with the other and because they failed to recite anything other than conventional limitations.  

The Federal Circuit affirmed the dismissal, noting that the idea and practice of using multiple pictures to enhance each other was well known and that the claim recited conventional camera components at a high degree of generality while reciting basic component functions.  The Federal Circuit also pointed to the specification as being consistent with this conclusion, for it identified a “great need for a generic solution that makes digital cameras capable of producing high resolution images without [high] cost.” Additionally, the Federal Circuit observed a mismatch between the breadth of the asserted claims and more specific embodiments described in the specification, stating that “the focus of the claimed advance is the abstract idea and not the particular configuration discussed in the specification that allegedly departs from the prior art.”  The Federal Circuit also concluded that the claims did not include an inventive concept for the claimed configuration that added “sufficient substance to the underlying abstract idea of enhancement.”

Judge Newman dissented, arguing that a digital camera is a mechanical and electronic device of defined structure and not an abstract idea.  

NCAA Rules Limiting Education-Related Benefits Violate Antitrust Laws

In National Collegiate Athletic Association v. Alston, Appeal No. 20-512, the Supreme Court held that the NCAA’s restrictions on education-related benefits to student athletes do not pass antitrust scrutiny; the compensation restrictions were properly subjected to a “rule of reason” analysis.

In the underlying district court case, current and former student athletes (the “Plaintiffs”) filed a class action against the NCAA and eleven Division I conferences (the “NCAA”) alleging various NCAA rules restricting compensation of student-athletes violated §1 of the Sherman Act because the rules limited the compensation Plaintiffs could receive in exchange for their athletic services.  The district court upheld NCAA rules limiting athletic scholarships to the full cost of attendance and limiting other compensation related to athletic performance, but enjoined NCAA rules limiting education-related benefits offered by schools or conferences to student athletes, such as graduate/vocational school scholarships, payments for tutoring, and paid post-eligibility internships.  In reaching these conclusions, the court undertook a rule of reason analysis, a fact-specific assessment of market power and structure that assesses whether the anti-competitive effects of the challenged restraints outweigh the pro-competitive benefits.  Both parties appealed to the Ninth Circuit, and the Ninth Circuit affirmed.  The NCAA appealed to the Supreme Court.

The Supreme Court affirmed in a unanimous opinion.  First, the Court rejected the NCAA’s argument that the lower courts should have used the less rigorous “quick look” review instead of the “rule of reason” analysis.  The Court rejected the NCAA’s argument that it was exempt from a rule of reason review because it was a joint venture necessitating collaboration among its members, finding that its joint-venture status did not warrant “quick look” approval in view of the NCAA’s admitted monopsony power and harm to competition.  Second, the Court rejected the NCAA’s argument that National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984), expressly approved limits on student-athlete compensation.  Rather, Board of Regents merely did not condemn the NCAA’s broadcasting restraints as per se unlawful because some horizontal restraints on competition are essential to the NCAA’s ability to offer its product.  Third, the Court rejected the NCAA’s argument that it and its member schools are not subject to the rule of reason analysis because they are not commercial enterprises, but instead serve the societally important non-commercial objective of maintaining amateurism in college sports.  The Court has regularly refused offer special dispensation from the Sherman Act for restraints of trade that serve important social objectives beyond enhancing competition.  Fourth, the Court disagreed with the NCAA’s argument that the district court required the NCAA to show that the NCAA’s rules constituted the least restrictive means of preserving consumer demand. Instead, the district court found that the NCAA’s restraints were “patently and inexplicably” stricter than necessary to achieve the procompetitive benefits the league had demonstrated.  Fifth, the Court rejected the NCAA’s argument that the district court “impermissibly redefined” the NCAA’s product by rejecting the NCAA’s definition of amateurism.  A party cannot re-label a restraint as a product feature and declare it “immune from §1 scrutiny.”  Moreover, the district court found the NCAA did not have a consistent definition of amateurism. Lastly, the Court rejected the NCAA’s argument that the injunction improperly micromanaged the NCAA’s business because the district court extended the NCAA considerable leeway and flexibility.  


Assignors Can Challenge Validity so Long as They Do Not Contradict Assignment Representations

In Minerva Surgical, Inc. v. Hologic, Inc., Appeal No. 20-440, the Supreme Court held that assignor estoppel applies when and only when the assignor’s invalidity assertions contradict explicit or implicit representations made when assigning the patent.

Csaba Truckai invented a device to treat uterine bleeding that used a moisture-permeable applicator head.  Truckai filed a patent application for his invention and assigned it and future continuations to Novacept, which was later acquired by Hologic.  Truckai left Novacept and founded Minerva Surgical, where he developed a supposedly improved device with an applicator head that, unlike his earlier invention, was moisture-impermeable.  Hologic filed a continuation application with claims that encompassed applicator heads regardless of permeability and sued Minerva after that patent issued.  Minerva argued that the continuation patent was invalid because impermeable applicator heads were not disclosed in the written description.  Hologic responded that Truckai (and by extension Minerva), as the assignor, could not challenge the validity of the assigned patents under the doctrine of assignor estoppel.  The district court and the Federal Circuit agreed that assignor estoppel prevented Minerva from arguing the continuation was invalid.  The Supreme Court granted certiorari. 

At the Supreme Court, Minerva argued assignor estoppel should be eliminated or alternatively constrained.  First, Minerva argued that the 1952 Patent Act abrogated assignor estoppel by providing that invalidity of the patent “shall be” a defense in any action involving infringement.  The Court rejected that argument, holding assignor estoppel was a background principle of patent adjudication undisturbed by Congress and noting that Minerva’s statutory interpretation would foreclose many other well-established preclusion doctrines in patent cases.  Second, Minerva argued that earlier Supreme Court decisions “eliminated” assignor estoppel.  Disagreeing, the Court noted those cases policed the boundaries of the doctrine but did not eliminate it.  Third, Minerva argued assignor estoppel should be eliminated on policy grounds because it prevented the invalidation of “bad patents.”  The Court rejected this argument as outweighed by the “unfair dealing” resulting from an assignor challenging the validity of a patent he or she had, at least implicitly, represented was valid. The Court therefore upheld assignor estoppel.

The Court also addressed the limits of assignor estoppel.  The doctrine applies only when the assignor’s invalidity assertions contradict her explicit or implicit representations of validity.  The Court offered three examples where contradiction would be absent. First, if an employee prospectively assigns all inventions in an employment contract before any inventions have been created, the employee has made no representation via the assignment, and the assignment therefore does not give rise to estoppel.  Second, the Court stated that a subsequent change in law can render an assignor’s warranty of validity irrelevant.  If the change in law makes a difference, the assignor is not precluded from relying on the change to argue invalidity.  Third, the Court clarified that when the asserted claims are materially broader than the claims of the assigned patent, the assignor has not warranted the asserted claims’ validity and thus does not contradict himself by challenging their validity.  This might occur, for example, if the assignor assigned a patent application, rather than an issued patent, and the issued patent’s claims were materially broader than those in the assigned application.  Noting the parties disputed whether this last example applied, the Court vacated the judgment and remanded to the Federal Circuit to address whether the asserted continuation claims were materially broader than those originally assigned.

In a dissent joined by Justices Thomas and Gorsuch, Justice Barrett stated the question for the Court was whether the Patent Act of 1952 incorporated assignor estoppel.  In her view, the Patent Act did not incorporate this doctrine because (1) assignor estoppel was not “so well settled” that the Court could presume Congress “knew of and endorsed” the doctrine, and in any event, Congress materially changed the assignment statute by specifying that patents have the attributes of personal property; and (2) contrary to the majority opinion, assignor estoppel lacked the pedigree necessary to be treated as a “background principle” that Congress is presumed to have legislated in light of.

Justice Alito also dissented, stating the Court could not decide whether assignor estoppel applied without first deciding whether Westinghouse, the primary Supreme Court decision recognizing assignor estoppel, should be overruled.  Neither the majority nor the principal dissent addressed this issue.  In Justice Alito’s view, the patent statute does not expressly provide for assignor estoppel and the majority opinion failed to cite precedent supporting its holding.  Justice Alito also disagreed with the principal dissent’s analysis of Congressional abrogation; in his view, Justice Barrett relied on too lax a standard for Congressional abrogation of Supreme Court precedent.  According to Justice Alito, since the Court would not decide whether Westinghouse should be overruled, the Court should have dismissed the petition as improvidently granted.


Fed Circuit Orders Cases Transferred Where the Plaintiff Sought to “Manipulate Venue” 

In In re: Samsung Elecs., Co., Ltd. Appeal No. 21-139, the Federal Circuit held that manipulation of venue through pre-litigation actions can lead to transfer of venue.

Ikorongo Technology LLC (“Ikorongo Tech”), a North Carolina LLC, assigned rights to sue for patent infringement occurring in the Western District of Texas to Ikorongo Texas LLC (“Ikorongo Texas”).  Both Ikorongo Tech and Ikorongo Texas are owned by the same five individuals who run both businesses out of the same North Carolina office.  Ten days after the assignment, Ikorongo Texas filed patent-infringement suits against Samsung Elecs., Co., Ltd. and LG Electronics U.S.A., Inc. in the Western District.  An amended complaint named Ikorongo Texas and Ikorongo Tech as co-plaintiffs.

Samsung and LG separately moved under Section 1404(a) to transfer the cases to the Northern District of California.  The district court denied the motions, concluding that Samsung and LG failed to establish that the complaints “might have been brought” in California because Ikorongo Texas’ patent rights were limited to Texas.  Samsung and LG each petitioned the Federal Circuit for writs of mandamus to transfer the cases to California, and the Federal Circuit considered the writs together.

Analyzing whether the complaints “might have been brought” in the Northern District of California, the Federal Circuit noted that prior case law discouraged the manipulation of jurisdiction and venue through pre-litigation actions.  Here, the Federal Circuit stated that the assignment from Ikorongo Tech to Ikorongo Texas, and even the existence of Ikorongo Texas, appeared to be for the sole purpose of securing venue in Texas.  The Federal Circuit concluded that the presence of Ikorongo Texas was “plainly recent, ephemeral, and artificial—just the sort of maneuver in anticipation of litigation that has been routinely rejected.”  It reasoned that, without this manipulation, Ikorongo Tech could have filed suit in California and that, thus, the complaints “might have been brought” there.  The Federal Circuit accordingly vacated the district court’s orders and granted the writs to transfer the cases to the Northern District of California.

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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