Latest Federal Court Cases - August 2020

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PATENT CASE OF THE WEEK

American Axle & Manufacturing, Inc. v. Neapco Holdings LLC, Appeal No. 2018-1763 (Fed. Cir. July 31, 2020)

In this week’s Case of the Week, the Federal Circuit modified and re-issued its October 3, 2019 opinion in American Axle & Manufacturing, Inc. v. Neapco Holdings LLC et al. following a panel rehearing. The Court’s earlier opinion, which held claims directed to methods of manufacturing a drive shaft assembly patent-ineligible under 35 U.S.C. § 101, had garnered attention from the patent community and biotechnology industry, with the Intellectual Property Owners Association and Biotechnology Innovation Organization (among others) having filed amicus briefs in support of patent owner American Axle’s petition for rehearing. While its earlier opinion had affirmed the district court’s summary judgment determination of Section 101 ineligibility, the Court’s modified opinion affirmed it in part, vacated it in part, and remanded for further proceedings.

At issue was U.S. Patent No. 7,774,911, which claims methods for manufacturing a drive shaft assembly comprising “tuning” a liner to be placed within a hollow shaft member in order to damp undesirable vibrations in the shaft. Such damping was known in the art to be accomplished by altering the mass and stiffness of the liner to attenuate phenomena referred to as “bending mode,” “torsion mode,” and “shell mode” vibrations, and the patent owner claimed to have invented a method of tuning liners to attenuate more than one such “mode” of vibration simultaneously. In its original opinion, the majority had found all of the independent claims to be directed only to applying Hooke’s law—an equation describing the relationship between an object’s mass, stiffness, and vibration frequency—“and possibly other natural laws,” and therefore patent-ineligible under Section 101. Our previous write-up containing more detail on that opinion is available here.

On rehearing, however, the Federal Circuit modified its opinion to separately address independent claims 1 and 22 of the ’911 patent. With respect to claim 22, the majority’s conclusion was unchanged, as that claim specifically claimed “tuning a mass and a stiffness of at least one liner.” The district court had construed this to mean “controlling the mass and stiffness of at least one liner to configure the liner to match the relevant frequency or frequencies,” which neither party contested on appeal. Because “tuning” the liner thus essentially amounted to varying mass and stiffness to achieve a particular vibration frequency, and because the claims recited no particular means or structure for doing so, the majority found that it amounted to a directive to apply Hooke’s law “and nothing more” to achieve the claimed result, and was therefore impermissibly directed to a natural phenomenon under step 1 of the Supreme Court’s Mayo/Alice inquiry. The Court further found that under step 2 of the inquiry, nothing in claim 22 qualified as an “inventive concept” to transform it into patent eligible subject matter, rejecting American Axle’s argument that a liner (as opposed to some other structure) had not previously been used to damp two different vibration modes simultaneously. Noting that “[t]he real inventive work lies in figuring out how to design [the] liner … and no such inventive work is recited in claim 22,” the majority characterized American Axle’s argument as a mere re-assertion that the desired results were an advance. Because claim 22 claimed only the achievement of a result and not any method of achieving it, the majority found that its claim to a natural phenomenon could not itself serve as the “inventive concept.”

However, in its modified opinion, the majority vacated the district court’s decision with respect to claim 1 and its dependent claims, because that claim more generally recited “tuning at least one liner” (as opposed to specifically tuning the mass and stiffness of the liner), and contained an additional limitation of “positioning” the liner within the shaft to achieve specific vibrational damping thresholds. The district court construed this “tuning” limitation to mean “controlling characteristics” of the liner to match a relevant frequency or frequencies, which neither party contested, and the specification suggested that the “characteristics” to be tuned could include variables other than mass and stiffness. As such, the majority found that it could not conclude that claim 1 was merely directed to Hooke’s law and nothing more. While the district court had suggested that the broader concept of “tuning” was also an abstract idea—in addition to a natural phenomenon—the majority found the record insufficiently developed to address this basis, and instead vacated and remanded the judgment as to claim 1 and its dependent claims for the district court to address this eligibility theory in the first instance.

Judge Moore renewed her vigorous dissent, again voicing serious concern with what she argued was a collapsing of the enablement and patent eligibility requirements into a single inquiry to be addressed by district courts as a matter of law. In her modified opinion, Judge Moore also pointed out that unlike in other cases finding patents ineligible for claiming a natural phenomenon, neither the ’911 patent nor its prosecution history mentioned Hooke’s law at any point. She argued that the majority thus created and applied what she described as a new “nothing more” test, determining “as a matter of law” that claim 22 claimed only generic applications of Hooke’s law despite record evidence to the contrary, which she argued was properly the subject of expert testimony, was not appropriate for resolution on summary judgment, and should at least have resulted in remand to give American Axle and the district court the opportunity to apply the new test. Judge Moore also took exception to the majority disregarding the use of a cardboard liner as an inventive concept to instead focus on the reliance on Hooke’s law, and predicted that because all inventions depend to some extent on the operation of unstated natural laws, the majority’s opinion would open the door to Section 101 challenges in practically every patent case.

The opinion can be found here.

By Jason A. Wrubleski

ALSO THIS WEEK

Alacritech, Inc. v. Intel Corporation, Appeal Nos. 2019-1467, -1468 (Fed. Cir. July 31, 2020)

In this appeal from the U.S. Patent Trial and Appeal Board (“PTAB”), the Federal Circuit deals with issues relating to analyzing obviousness in the inter partes review (“IPR”) setting. Intel petitioned the PTAB for IPR of certain claims of a patent owned by Alacritech, which was directed to computer networking systems. The IPR was instituted, and the PTAB issued a final written decision holding that the claims were unpatentable as obvious. Alacritech appealed, arguing that the PTAB’s analysis as to some of the claims was inadequate to support its finding that the asserted prior art taught or suggested the limitations in some of the claims at issue. The Court agreed, and held that the PTAB’s analysis of the prior art was not supported by substantial evidence. First, the PTAB failed to analyze a key aspect of the parties’ dispute, and failed to explain how the prior art teaches or suggests what was claimed by the patent. Second, the PTAB did not explain why it found any of the arguments made by Intel in its petition to be persuasive—rather, it merely cited to relevant portions of the petition without endorsing, adopting, or otherwise suggesting it was persuaded by them. Third, while the PTAB rejected certain arguments made by Alacritech, such rejection did not necessarily support the PTAB’s finding that the asserted prior art teaches or suggests what was claimed. Finally, the Court explained that the “substantial evidence” standard under the Administrative Procedure Act, which rules here, requires that its review of the PTAB’s patentability determination be confined to the grounds upon which the PTAB actually relied. This standard, while deferential, does not relieve the PTAB of its obligation to develop an evidentiary basis for its findings. As such, the Court vacated the PTAB’s obviousness determination as to the claims at issue here and remanded for further proceedings consistent with its opinion.

The opinion can be found here.

By Erin M. Forbes

XY, LLC v. Trans Ova Genetics, LC, Appeal No. 2019-1789 (Fed. Cir. July 31, 2020)

In this appeal, the Federal Circuit reversed a district court conclusion that claims were ineligible for patenting under Section 101, and vacated a district court’s claim-preclusion decision, remanding the case for further proceedings. The patents at issue concern flow cytometry, a technique for sorting and discriminating particles and cells that are only subtly different. This was the second lawsuit brought by XY against Trans Ova for patents concerning similar technologies; however, the patents asserted were different. Trans Ova moved to dismiss based on claim preclusion, and also sought judgment on the pleadings arguing the claims were ineligible as abstract under Section 101. The district court granted both motions. The Federal Circuit reversed on both accounts. With respect to Section 101, the Court analogized the claims to those that were held eligible under Diamond v. Diehr, 450 U.S. 175, 187 (1981), and held that the claims are not abstract. With respect to claim conclusion, the Court held that the district court erred in failing to conduct an appropriate analysis regarding whether the previously-asserted patents cover the same scope as the later-asserted patents.

The opinion can be found here.

By Nika Aldrich

IBSA Institut Biochimique v. Teva Pharmaceuticals USA, Appeal No. 2019-2400 (Fed. Cir. July 31, 2020)

In this appeal, the Federal Circuit affirmed a district court opinion holding that certain claims of a patent directed to pharmaceuticals were invalid as indefinite. The term at issue is “half-liquid”—a term that was not defined in the patent—a translation from the term “semiliquido” in the Italian application from which the U.S. application claimed priority. A translation suggested “semiliquido” translates as “semi-liquid.” The patentee sought claims including both the “semi-liquid” term and the “half-liquid” term. The district court found that these terms thus had different meanings. Combined with insufficient extrinsic evidence concerning the meaning of the term, the district court found the term “half-liquid” to be invalid. The Federal Circuit walked through the claims, the specification, the prosecution history, and extrinsic evidence, and found no error in the district court’s conclusion that the term was indefinite.

The opinion can be found here.

By Nika Aldrich

Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc., Appeal Nos. 2020-1407, -1417 (Fed. Cir. July 31, 2020)

In this appeal, the Federal Circuit affirmed the district court’s denial of a preliminary injunction in a patent infringement suit. Takeda had sued Mylan for infringing a patent covering the drug colchicine. The parties settled such that Mylan was licensed to sell a generic colchicine product after certain events, including triggers based on potential third party litigations against other manufacturers of generic colchicine. After Takeda lost a case against a third party manufacturer, Mylan started selling its generic version of the drug. Takeda sued and sought a preliminary injunction. The district court, applying Delaware contract law, found that the trigger was met by the prior litigation. The Court also found there was no irreparable harm, because money damages would be sufficient to remedy any harm against Takeda. The Federal Circuit largely agreed with the district court’s opinion. Judge Newman dissented. She would have held that an injunction should have issued because the license agreement specifically authorized one.

The opinion can be found here.

By Nika Aldrich

FanDuel, Inc. v. Interactive Games LLC, Appeal No. 2019-1393 (Fed. Cir. July 29, 2020)

In an appeal from an inter partes review, the Court affirmed the PTAB’s holding that FanDuel had failed to prove the claim at issue was invalid due to obviousness. FanDuel appealed, arguing that the Board violated the Administrative Procedures Act and that its finding of nonobviousness was not supported by the evidence of record. FanDuel argued that the Board violated the APA by changing its theory on obviousness without proper notice to FanDuel. According to FanDuel, the Board changed its theory by instituting the IPR on the basis of obviousness, but then ultimately finding the challenged claim to be nonobvious. The Court was not convinced, finding “[t]here is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that [FanDuel] did not provide preponderant evidence that the challenged claim was obvious.” The Court further clarified that the Board may properly consider all evidence and theories against invalidity without Interactive Games raising the theories or submitting evidence in support, because FanDuel, as the petitioner, held the burden of proof and a patent owner’s “response [in an IPR] ordinarily does not narrow the range of issues previously made available to the Board in the petition.” The Court also found that the Board’s decision of validity for nonobviousness was based on substantial evidence, because “[t]he Board reasonably identified a gap between the concept [] being well-known and the beneficial application of that concept to [FanDuel’s] gaming system.” Accordingly, the Court affirmed the Board’s findings.

The opinion can be found here.

By Bazsi Takacs

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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