Fresh From the Bench: Precedential Patent Cases From the Federal Circuit

by Schwabe, Williamson & Wyatt PC

Schwabe, Williamson & Wyatt PC

Our report includes discussions of six of the precedential cases decided in the past week and will include the other three cases in next week’s report. In Aylus v. Apple, the panel finds prosecution disclaimer in a preliminary response by Aylus to Apple’s IPR petition. In a factually interesting case, the Circuit affirms a $2.5 million attorney fee award in a case where Nova unsuccessfully filed an action alleging that in a prior infringement action, Dow committed fraud on the court.

In a first case involving Affinity Labs, the estoppel provision of section 317(b) is found not to require dismissal of an inter partes reexamination because the dismissal of Apple’s district court case was without prejudice. A second Affinity Labs case proceeded to trial, where VW lost as to its challenge to the validity of Affinity’s patent claims. This required dismissal of the pending inter partes reexam under section 317(b) only as to those claims that went to trial and not all of the claims of the patent. In Cisco v. Cirrex, the Circuit finds all of the challenged claims invalid for lack of written description support‎. In AT&T, the Circuit determines that it was appropriate for the Board to maintain an inter partes reexamination despite the reexamination requester filing ‎a petition asking the PTO to deny its reexamination request.

Thanks to my colleague Steve Blair for his help with this week’s report.


Aylus Networks, Inc. v. Apple, Inc., Fed. Cir. Case 2016-1599 (May 11, 2017)

Aylus claimed that Apple’s AirPlay system, which allows users to stream video and music between devices, infringed its patent. The panel affirms summary judgement that Apple’s system does not infringe based upon a prosecution disclaimer by Aylus in its response to Apple’s petitions for IPR.

Apple filed two separate petitions for IPR, and the Board instituted as to some but not all of the challenged claims. Following institution, Aylus filed a notice of voluntary dismissal in the district court, dismissing with prejudice its infringement contentions as to all of the asserted claims except claims 2 and 21, two of the claims that were denied institution in the IPR. Apple filed a motion for summary judgment of noninfringement as to these claims, which was granted based on the district court’s construction of a limitation found in each of the two claims. In construing the critical limitations the district court relied on statements made by Aylus in its preliminary responses to Apple’s petitions for IPR, finding the statements “akin to prosecution disclaimer.” On appeal, Aylus argued that statements made during an IPR cannot be relied on to support a finding of prosecution disclaimer. Alternatively, Aylus argued that its statements did not constitute a clear and unmistakable disclaimer of claim scope.

The panel rejects both arguments, noting first that for prosecution disclaimer to attach, Circuit precedent requires that the alleged disavowing actions or statements made during prosecution be both clear and unmistakable. Such a disclaimer was present here.

According to the panel, the doctrine is rooted in the understanding that “competitors are entitled to rely on those representations when determining a course of lawful conduct, such as launching a new product or designing-around a patented invention.” Ultimately, the doctrine of prosecution disclaimer ensures that claims are not “construed one way in order to obtain their allowance and in a different way against accused infringers.” While normally found in pre-issuance prosecution, the doctrine has been applied by the Circuit in reissue and reexamination proceedings. It follows that we should apply the doctrine in IPR proceedings as well. This will ensure that claims are not argued one way in order to maintain their patentability, and in a different way against accused infringers.

Aylus argues that statements made during an IPR proceeding are unlike those made during a reissue or reexamination proceeding because an IPR proceeding is an adjudicative proceeding as opposed to an administrative proceeding. This argument is belied by the Supreme Court’s recent decision in Cuozzo, where the Court recognized that, in some significant respects, inter partes review is less like a judicial proceeding and more like a specialized agency proceeding. As such, it follows that statements made by a patent owner during an IPR proceeding can be considered during claim construction and relied upon to support a finding of prosecution disclaimer.

The panel also rejects the Aylus argument that its statements were not part of an IPR proceeding because they were made in a preliminary response before the Board issued its institution decision. Regardless of when the statements are made during the proceeding, the panel holds that the public is entitled to rely on those representations when determining a course of lawful conduct, such as launching a new product or designing-around a patented invention. In its response, Aylus told the PTO that there were a number of substantial differences between the challenged claims and the asserted references. Third parties such as Apple should be allowed to rely on these responses when attempting to design around a patent.

Read the full opinion

Nova Chemicals Corp (Canada) v. Dow Chemical, Fed. Cir. Case 2016-1576 (May 11, 2017)

The Circuit affirms a $2.5 million attorney fee award against Nova, holding that the district court did not abuse its discretion in finding the case exceptional because of Nova’s filing of a lawsuit alleging that Dow defrauded the court in a prior case.

In 2005, Dow filed an infringement action in which it was successful in recovering over $61 million in damages from Nova (“the 2010 judgment”). During a supplemental-damages phase of the infringement action, Nova became aware of evidence allegedly showing that Dow had committed fraud on the court in the course of obtaining the 2010 judgment. By then, however, Nova was time-barred from filing a motion under Rule 60(b)(3) to set aside that judgment for fraud or misrepresentation. Accordingly, Nova filed a separate action in equity against Dow (“the equity action”) for relief from the 2010 judgment. Nova alleged two frauds on the court: First, that Dow had misrepresented its ownership of the asserted patents. Nova based this allegation on the testimony of a former Dow tax department employee in an unrelated Louisiana tax case (“the Louisiana action”). Second, Nova alleged that Dow’s counsel knew of a “scheme to mislead the jury” with respect to infringement contending that Dow’s expert had provided conflicting testimony about the accused product during a separate litigation in Canada (the “Canadian action”).

The district court granted Dow’s motion to dismiss the equity action, holding that “there was fundamentally no adequate allegation of the grave miscarriage of justice that is required under the extraordinary circumstances” for setting aside a prior judgment based on fraud. The court noted that the expert’s testimony in the Louisiana action was “immaterial and irrelevant” to Dow’s standing because the terms of the relevant patent transfer agreement were clear on their face. With respect to noninfringement, the district court held that Nova had merely identified arguably inconsistent statements by the expert that neither “plausibly alleged perjury” nor reached any fact that had been in material dispute at trial in the infringement action. Dow subsequently moved in the district court for sanctions, attorney fees, and costs. The court granted Dow’s motion under § 285 and awarded $2.5 million based on the weakness of Nova’s litigating position and the manner in which Nova pursued this case.

Nova argued that the district court committed legal error, and thus abused its discretion, by improperly viewing Nova’s pursuit of the equity action to be an “extreme tactic.” The panel agrees with Nova to the extent that the filing of an action to set aside a prior judgment, without more, does not render a case exceptional per se. Therefore, despite the extraordinary nature of relief that Nova sought, the district court erred to the extent it based its exceptional-case determination on Nova’s filing of the equity action itself.

But, according to the panel, the district court did not base its analysis solely, or even primarily, on the fact that Nova filed an equity action. Rather, it expressly relied on alternative grounds, holding the case to be “exceptional, both in the substantive strength of Nova’s litigating position and in the manner in which the case was litigated.” At a minimum, the court did not abuse its discretion in concluding that the case was exceptional due to the substantive strength of Nova’s litigating position.

Nova’s allegations of fraud in this case mainly rested on purportedly conflicting testimony from the Louisiana action and the Canadian action. But, as explained by the district court, the arguable inconsistencies in those other actions, even if proven, were immaterial to the 2010 judgment because the relevant patent transfer agreement unambiguously supported Dow’s standing. The panel holds that Nova’s allegations of fraud regarding the infringement determination are just as baseless, if not more so, given that the expert’s testimony in the Canadian action was not necessarily inconsistent with his prior infringement testimony and, in any event, did not directly relate to the limitation that had been the focus of the parties’ underlying infringement dispute. The panel holds therefore that the district court did not abuse its discretion in holding that Nova’s litigating position was objectively baseless, and therefore upholds the award of attorney fees.

Read the full opinion

In Re: Affinity Labs of Texas, LLC, Fed. Cir. Case 2016-1173 (May 5, 2017)

The Circuit affirms the invalidity of all of the challenged claims in an appeal of an inter partes reexamination. But before getting to this ultimate issue, the panel evaluates a determination by the Board that the estoppel provision of section 317(b) did not require dismissal of the reexamination. That section requires that the PTO dismiss pre-AIA reexaminations after the party who requested the reexamination receives a final decision against it. Affinity had sued Apple, which petitioned for inter partes reexamination. The parties settled, with Apple’s invalidity counterclaims being dismissed without prejudice. The Board ruled and the Circuit affirms that the dismissal without prejudice does not meet section 317(b)’s required condition for terminating the reexamination. 

When Congress enacted the AIA, it specified that the pre-AIA provisions of the inter partes reexamination statute were to remain applicable to inter partes reexaminations. Therefore, while inter partes reviews are governed by the AIA, inter partes reexaminations are not. Here, the dismissal without prejudice of Apple’s invalidity counterclaims does not reflect a final decision that Apple "failed to sustain the burden of proving the asserted claims’ invalidity." Nor does the dismissal without prejudice prevent Apple from again challenging the validity of the patent in subsequent litigation. The estoppel provision of pre-AIA section 317(b) therefore does not serve as a bar to the inter partes reexamination of the patent.

The patent at issue relates to an audio download method in which content, such as a music file, is made available for download to different devices such as an MP3 player or a computer. The panel reviews the Board’s claim construction under the broadest reasonable interpretation test and concurs with the Board. Since Affinity concedes that with this construction, the challenged claims are unpatentable, the panel affirms the Board’s decision. 

Read the full opinion

In Re: Affinity Labs of Texas, LLC, Fed. Cir. Case 2016-1092, 1172 (May 5, 2017)

The issues were somewhat different in this second case involving an Affinity patent directed to connecting an MP3 player to a car’s sound system. Affinity asserted the patent against Volkswagen and Apple, and the defendants requested inter partes reexaminations. Apple settled prior to trial but VW proceeded to trial and lost, the jury ruling that the patent was both infringed and valid. Affinity moved to dismiss the reexamination, citing section 317(b). Unlike the prior case, the post-trial judgment was with prejudice but the issue before the Circuit was whether the inter partes reexamination should be dismissed as to all claims or only those at issue in the Affinity/VW litigation. 

Independent claims 28 and 35 were found infringed and valid, so claims that depended from those claims were also determined to fall within the estoppel provision of 317(b). However, the panel rules that “the inter partes reexamination statutory scheme consistently reflects a careful, express focus on implementation on a claim-by-claim basis.” In support of its position, the panel references section 311 (requiring a reexam requester to apply the prior art to every claim for which reexamination is requested) and section 315 (prohibiting a challenge to a patent claim which is determined to be valid). 

As noted in the above Affinity case, Apple settled with Affinity as to its counterclaim for invalidity without prejudice, so Affinity’s motion to dismiss as to the claims it challenged is also denied. An individual, Richard King, filed an ex parte reexamination, which was merged into the Apple/Affinity inter partes reexaminations, but because his reexamination was ex parte and not inter partes, section 317(b) is also, by the terms of the statute, inapplicable. 

The panel then proceeds to the Board’s determination of anticipation and obviousness and holds that substantial evidence supports the decisions as to all of the challenged claims.

Read the full opinion

Cisco Systems, Inc. v. Cirrex Systems, LLC, Fed. Cir. Case 2016-1143, 1144 (May 10, 2017)

Cisco’s IPR of Cirrex’s patent resulted in some of the claims being found patentable but a number of the claims being held invalid for lack of written description support. Both parties appealed and the Circuit affirms in part and reverses in part, revising the construction of some of the claims but finding all of the challenged claims invalid under section 112.

The Cirrex patent is directed to fiber optic communication signals. The parties separated the claims into three different groups: the equalization claims, the discrete attenuation claims, and the diverting element claims. All three groups contain claims that depend from claim 1, reproduced below:

1. A cross-connect waveguide system comprising: 

a planar lightguide circuit having one or more optical paths; 

a plurality of optical waveguides coupled to said planar lightguide circuit;

a plurality of filtering devices for feeding light energy into said optical paths of said planar lightguide circuit or receiving light energy from said optical paths of said planar lightguide circuit; and 

a diverting element for feeding first light energy at a predetermined wavelength having first information content away from said planar lightguide circuit, and for feeding second light energy at said predetermined wavelength having second information content into said planar lightguide circuit, wherein said diverting element is remotely configurable and is controlled with optically encoded information.

The Circuit’s 2010 en banc Ariad v. Lilly case states that the written description requirement provides that a patentee must clearly allow persons of ordinary skill in the art to recognize that he invented what is claimed. The level of detail required to satisfy the written description requirement varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology. The panel agrees with Cisco that the claims are directed to subject matter that is indisputably missing from the specification, i.e., the claims “cover a mechanism for acting on individual channels of light within the planar lightguide circuit ('PLC') to discretely attenuate one of several channels” or “a mechanism for acting on individual channels of light within the PLC to make their several intensities equal.” The specification does not meet the quid pro quo required by the written description requirement for the disputed claims because demultiplexing light to manipulate separately the intensities of individual wavelengths of light while the light is still inside the PLC is a technically difficult solution that the specification does not solve, let alone contemplate or suggest as a goal or desired result. Under the correct claim construction for the equalization and discrete attenuation claims, there is no substantial evidence in the record to support the Board’s finding that the pertinent claims have sufficient written description support. 

Substantial evidence supports the Board’s finding of lack of written description support for the diverting element claims. Because the panel affirms the Board’s finding of lack of written description support, it does not reach the Board’s alternate grounds for unpatentability of the diverting element claims.

Read the full opinion

In Re AT&T Intellectual Property II, LLC, Fed. Cir. Case 2016-1830 (May 10, 2017)

In AT&T, the Circuit determines that the Board did not exceed its statutory authority when instituting an ‎inter partes reexamination despite the reexamination requester later filing ‎a petition requesting that the PTO deny its reexamination request, and affirms the Board’s finding of anticipation.‎

AT&T’s patent is directed to digital video data compression. LG petitioned for IPR based on a Yang patent but then determined that Yang did not support its anticipation contention, and filed ‎a petition requesting that the PTO deny its reexamination request. However, it did not ‎withdraw from the reexamination nor did it withdraw its reexamination ‎request. Subsequently, the PTO granted reexamination and both AT&T and LG sought reconsideration, urging withdrawal based on ‎deficiencies in Yang. The PTO denied the reconsideration request, stating that the examiner is ‎required to make a “thorough study of the patent…and investigation of the available prior art…upon a ‎reexamination proceeding” and the reexamination continued. LG subsequently withdrew from the ‎proceedings.

The Circuit holds that because there was a reexamination request and a requester (LG), ‎and that the Board found “a substantial new question of patentability affecting any claim of the patent ‎raised by the request,” the Board acted within its statutory authority by instituting reexamination.‎

As a result of the reexamination, the Board found that the AT&T patent was anticipated by a patent to Krause, which discloses the claim element “mapping a square block of transform coefficients into a one-‎dimensional list.” AT&T contends that Krause’s disclosure of ‎‎“dividing a block of coefficients into regions” and its assertion that “vector coding an entire block at ‎once is difficult” limits the scope of the Krause reference. The Board disagreed and found that Krause ‎generally discloses vector coding of an entire pixel block, that the reference to dividing the block into ‎regions was only a preferred embodiment that did not limit the full disclosure. The ‎Circuit holds that the Board’s finding of anticipation is supported by substantial evidence.‎

Read the full opinion

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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We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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