Latest Federal Court Cases - December 2019 #2

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PATENT CASE OF THE WEEK

Peter v. Nantkwest, Inc., Appeal No. 2018-801 (Sup. Ct. Dec. 11, 2019)

This week the Supreme Court answered a long-simmering question concerning the extent to which a person who brings a civil litigation pursuant to 35 U.S.C. § 145 is liable for the salaries of Patent Office employees as “expenses” of bringing the action.

Pursuant to Section 145, an applicant who is dissatisfied with a decision by the Patent Office rejecting a patent may file an action in district court to contest that decision. Such a procedure allows that applicant to present new evidence not presented to the PTO. However, the Patent Act requires all applicants who avail themselves of this process to pay “[a]ll the expenses of the proceedings.”

Nantkwest chose this path, unsuccessfully. The district court granted summary judgment for the PTO, and the Federal Circuit affirmed. The PTO moved for reimbursement of its expenses, including, for the first time in the 170-year history of Section 145, the pro rata salaries of the attorneys and a paralegal who worked on the case for the PTO. The district court denied the PTO’s motion to this extent. A divided panel of the Federal Circuit reversed in a decision we covered here. The en banc Federal Circuit voted sua sponte to rehear the case and reversed the panel in a decision we covered here.

The Supreme Court now affirms the decision of the en banc Federal Circuit court in a unanimous decision penned by Justice Sotomayor, holding that “expenses” under Section 145 does not include pro rata PTO attorney and paralegal salaries.

The Court relied heavily on the American Rule, by which each party pays its own attorneys’ fees unless a statute or contract provides otherwise. The government argued that the American Rule was inapplicable because that rule only applied where a party is the prevailing party in the litigation. Section 145, however, is not a “prevailing party” statute—“expenses” are paid by the applicant regardless of who prevails in the district court. The Supreme Court disagreed, relying on precedent where the American Rule had been applied to fee shifting statutes that applied to nonprevailing parties.

Having decided that the American Rule presumptively applies, the Court analyzed whether the statute showed an intention to depart from that Rule. The Court held that the statute, which used the word “expenses” rather than “fees” showed no such intention. In so holding, the Court looked to past precedent and similar uses of the word “expenses” in statutes and court cases, along with the history of the Patent Office.

Accordingly, a party that files a lawsuit pursuant to Section 145 will not be liable for pro rata attorney or paralegal salaries spent defending the action.

The opinion can be found here.

ALSO THIS WEEK

Techtronic Industries Co. Ltd v. International Trade Commission, Appeal No. 2018-2191 (Fed. Cir. Dec. 12, 2019)

In this appeal from a final determination of the U.S. International Trade Commission (“Commission”), the Federal Circuit disagreed with the Commission’s claim construction of a patent for a garage door opener wall console containing a passive infrared detector, reversing the Commission’s finding of infringement and, accordingly, vacating its remedial orders. At issue was whether Appellant’s garage door opener wall console, which did not include a passive infrared detector, infringed upon the patent. The case turned on whether the patent holder had implicitly disavowed wall consoles without a passive infrared detector from the scope of the patent’s claims. The court was not persuaded by the patent holder’s argument that portions of the patent’s specification described the invention broadly, arguably included wall consoles without detectors within the scope of the claims. Instead, the court found the patent claims implicitly disavowed wall consoles without a detector from the scope, because (a) the background section of the patent claimed the invention sought to improve upon the “deficiencies” in the prior art by moving the detector from the ceiling unit to the wall console, and (b) the claims “consistently represent[ed] the invention as the placement of the detector in the wall console.” The court noted the prosecution history of the patent “shed little light” on the issue of implicit disavowal, holding there is “no requirement that the prosecution history reiterate the specifications’ disavowal.” Since the prosecution history “lacked any indication” the patent holder did not intend to disavow the detector placement claims, the court reversed the Commission’s claim construction and its determination of infringement, and, consequently, vacated its remedial orders.

The opinion can be found here.

Intellectual Ventures I LLC v. Capital One Financial Corporation, Appeal No. 2018-1367 (Fed. Cir. Dec. 11, 2019)

This week, the Federal Circuit denied Capital One’s petition for panel rehearing of a case we previously reported, which related to anti-trust issues that Capital One was collaterally estopped from arguing a second time. See here. In its petition for rehearing, Capital One relied largely on a Fourth Circuit opinion, Tuttle v. Arlington County School Board, 195 F.3d 698 (4th Cir. 1999), arguing that Tuttle was inconsistent with the Court’s rationale regarding collateral estoppel. The Court disagreed, explaining that unlike the two proceedings at issue in Tuttle, which were “quite different” and “not integrally related,” the two antitrust claims in the district court proceedings were essentially the same and were not separate and distinct from one another. Moreover, the proceedings here were co-pending, unlike the proceedings in Tuttle. The Court thus found that Tuttle was not inconsistent and denied the petition for rehearing.

The opinions can be found here and here.

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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