Federal Circuit Review - September 2018

Knobbe Martens

Knobbe Martens

Federal Circuit Finds Claims Issued from Reexamination Co-Pending with Appeal Ineligible Where the Changes Did Not Affect Section 101 Eligibility

In SAP AMERICA, Inc. v.  InvestPic, LLC, Appeal No. 2017-2081, the Federal Circuit held that where remanding post-reexamination claims that issued during the pendency of an appeal would be futile, the Federal Circuit may address the claims as they emerge from reexamination. 

SAP America, Inc. filed a declaratory judgment action and moved for judgment on the pleadings seeking to invalidate the claims of InvestPic’s patent under 35 U.S.C. § 101.  The district court granted the motion and InvestPic appealed.  The Federal Circuit affirmed the district court’s decision, finding that the claims reciting “statistical analyses of investment information” were directed to patent-ineligible subject matter.  InvestPic filed a petition for rehearing based on the post-reexamination issuance of new and amended claims while the appeal was pending.

The Federal Circuit found that the validity issues relating to the original claims were not moot because some claims remained unchanged in scope and because pre-change damages could potentially have been available.   Concluding that any remand for further consideration of the post-reexamination claims would have been futile, the Federal Circuit reissued and modified its opinion to address the post-reexamination claims. The Federal Circuit found that the post-reexamination claims did not change the finding of invalidity because they merely added details to the abstract ideas in the claims while adding nothing to the non-abstract elements of the claims (conventional computer and display devices). Accordingly, the Federal Circuit maintained its affirmance of the district court’s judgment.

In Appropriate Cases, a Party Advocating That a Claim Limitation That Does Not Recite the Word “Means” Is Subject to 35 U.S.C. §112 ¶ 6 Can Overcome the Presumption Solely by Reference to Intrinsic Evidence

In Diebold Nixdorf, Inc. v. ITC, Appeal No. 2017-2553, the Federal Circuit held that the term “cheque standby unit,” as used in the patent-in-suit, was a means-plus-function term subject to 35 U.S.C. §112 ¶ 6 which lacked corresponding structure disclosed in the specification.

The ITC found that Diebold violated § 337 of the Tariff Act of 1930 by importing components of automated teller machines (“ATMs”) that infringd claims of a patent owned by Hyosung TNS Inc. and Nautilus Hyosung America, Inc.  Diebold appealed.

The Federal Circuit reviewed the legal determinations of the ITC de novo and reversed the ITC’s decision.  The Federal Circuit held that the term “cheque standby unit” recited in the claims at issue was a means-plus-function term subject to 35 U.S.C. § 112 ¶ 6, which lacked corresponding structure disclosed in the specification.  Although the term did not recite the word “means,” the Federal Circuit found that Diebold had overcome the presumption that § 112 ¶ 6 did not apply.  Diebold showed that the term “cheque standby unit” both failed to recite sufficiently definite structure, and recited a function without reciting sufficient structure for performing that function.  Rejecting the ITC’s argument that Diebold had to provide evidence extrinsic to the patent, the Federal Circuit found that Diebold could overcome the presumption solely by reference to evidence intrinsic to the patent.  Diebold’s failure to contradict Hyosung’s expert’s testimony was also not fatal.  Hyosung’s expert did not introduce any evidence to support his assertion that “cheque standby unit” was a term commonly understood by persons of ordinary skill in the art to denote a device or class of devices, nor did he explain with any degree of definiteness what structure or class of structures a person of ordinary skill in the art would have understood the term to encompass.  Examining the intrinsic evidence, the Federal Circuit found that the claims and specification did not recite any structure for the “cheque standby unit,” and ultimately concluded that the claims at issue were invalid for indefiniteness.

A District Court Must Establish a Causal Connection Between Misconduct and an Award of Attorneys’ Fees

In In re: Rembrandt Techs. LP Patent Litigation, Appeal No. 2017-1784, the Federal Circuit held that the district court did not abuse its discretion by concluding that the case before it was exceptional.  The Federal Circuit reached this conclusion because (1) fact witnesses were compensated based on the outcome of the case, (2) relevant documents were destroyed, and (3) asserted patents were improperly revived during prosecution.  The Federal Circuit also held that the district court erred by failing to sufficiently assess which issues the misconduct affected to justify awarding attorneys’ fees, and remanded the issue to the district court to conduct the proper analysis of the fee award.  

Rembrandt Technologies, LLC and Rembrandt Technologies, L.P. (“Rembrandt”) filed suit against dozens of cable companies, cable equipment manufacturers and broadcast networks.  These cases were consolidated in the District of Delaware.  The district court entered judgment against Rembrandt as to all claims.  After final judgment, many of the defendants filed a motion for attorneys’ fees.  The district court determined that the case was exceptional and awarded over $51 million in attorneys’ fees.  

The district court found the case to be exceptional because Rembrandt improperly compensated its fact witnesses based on the outcome of the case, engaged in document spoliation, and should have known that two of the asserted patents had been improperly revived and were therefore unenforceable. 

The Federal Circuit reviewed the exceptional-case determination for abuse of discretion.  The Federal Circuit did not find that any of the district court’s findings were based on an erroneous view of the law or on a clearly erroneous assessment of the evidence.  First, Rembrandt’s agreement with its patent consultants granted them a stake in any litigation involving some of the asserted patents, and it was foreseeable at the time the agreement was signed that the consultants would become fact witnesses in the litigation.  Second, after the original owner of the asserted patents was retained, Rembrandt knew that documents were being destroyed at the original patent owner’s facilities, and that there was a significant risk that relevant documents were being destroyed.  Third, there was evidence that two of Rembrandt’s asserted patents had been intentionally abandoned due to the belief that the inventions lacked commercial value.  However, the patents were later revived based on a statement to the USPTO that the abandonment was unintentional.  Although Rembrandt was not involved in the prosecution, it had access to documents that outlined the strategy for the petitions to revive, and thus Rembrandt at least “should have known” that the revivals had been improper. 

In reviewing the district court’s fee award, the Federal Circuit found that the district court did not even attempt to assess which issues the misconduct affected, and therefore the district court did not establish a causal connection between the misconduct and the awarded attorney fees.  The Federal Circuit remanded to the district court to conduct the proper analysis of the fee award.    

Federal Circuit Affirms That Asserted Claims Directed to a Self-Evolving Generic Index for Organizing Information Stored in a Database Were Invalid Under 35 U.S.C. § 101

In BSG Tech LLC v. BuySeasons, Inc., Appeal No. 2017-1980, the Federal Circuit held that all asserted claims, which were directed to a “self-evolving generic index” for organizing information stored in a database, were ineligible under § 101. 

BSG Tech LLC (“BSG”) sued BuySeasons, Inc. (“BuySeasons”) for infringement of several patents related to systems and methods for indexing information stored in wide-access databases.  The patents relate to indexing software that organizes information about various items using classifications, parameters, and values.  The patents taught a “self-evolving” aspect that enables users to “add new parameters for use in describing items.”  On a motion to dismiss that was converted into a motion for summary judgment, the U.S. District Court for the Eastern District of Texas found that all of the asserted claims were invalid under 35 U.S.C. § 101.  BuySeasons subsequently appealed, and the Federal Circuit affirmed.

Under step one of Alice, the Federal Circuit agreed with the district court that the asserted claims were directed to the abstract idea of considering historical usage information while inputting data. The Federal Circuit found that this was not a method “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of” wide-access databases.  DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014).  Further, the Federal Circuit found that the claims were not saved from abstraction merely because they required a specific database structure that was more specific than a generic computer.  Also, the Federal Circuit stated that the claims did not recite any improvement to the way in which databases store or organize information.

Under step two of Alice, the Federal Circuit also agreed with the district court that the asserted claims lacked an inventive concept.  BSG alleged that the “requirement that users are guided by summary comparison usage information or relative historical usage information” was an unconventional feature.  However, the Federal Circuit found that this language simply restated what was already determined to be an abstract idea.

Breaching a Duty of Disclosure to a Standards-Setting Organization May Constitute Implied Waiver Where the Breach is Egregious or Results in an Unfair Benefit

In Core Wireless Licensing v. Apple Inc., Appeal No. 2017-2102, the Federal Circuit held that breaching a duty of disclosure to a standards-setting organization may constitute implied waiver and render a patent unenforceable if the proposed standard covers a technology claimed in a patent, and the patentee’s misconduct is egregious or results in an unfair benefit.  

Core Wireless sued Apple for patent infringement.  Apple argued that one of the asserted patents, the ’151 patent, was unenforceable due to implied waiver.  The ’151 patent is directed to a novel synchronization feature in telecommunications.  The inventor of the yet-unfiled ’151 patent prepared an invention report which included a proposal to the European Telecommunications Standards Institute (“ETSI”) to modify a standard to use the synchronization feature disclosed in the report.  Contemporaneous with submitting the proposal to the ETSI, the patent applicant filed a Finnish patent application, to which the ’151 patent would claim priority, covering the synchronization feature.  The Finnish patent application was not disclosed until four years later, by which time the proposal had been rejected by ETSI. 

Apple argued that the patent applicant, of whom Core Wireless was the successor-in-interest, breached its obligation to disclose the Finnish patent application to ETSI, and thereby waived its right to enforce the ’151 patent.  The district court rejected Apple’s arguments, finding that there was no duty to disclose the Finnish patent application because the proposal had been rejected, and because the claims in the application had not been finalized by grant.  The district court thus found the ’151 patent not unenforceable, and Apple appealed to the Federal Circuit.

The Federal Circuit vacated the district court’s decision and remanded the case.  A participant in a standards-setting organization may waive its right to assert infringement claims against products that practice the standard.  Specifically, implied waiver can be shown where a patentee breaches a duty of disclosure to the standards-setting organization. Implied waiver should only be applied where the misconduct results in an “unfair benefit,” or in cases of egregious misconduct. The Federal Circuit found the district court’s determination that the patent applicant had no obligation to disclose the patent application to the ETSI was unsupported by evidence—the obligation of disclosure was not dependent on the proposal being accepted, or the claims in the application being granted.  The Federal Circuit thus vacated the district court’s holding of no unenforceability and remanded for the district court to consider whether the patent applicant benefited from the failure to disclose or whether the applicant’s conduct was sufficiently egregious to justify a finding of implied waiver. 

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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