PATENT CASE OF THE WEEK
Papst Licensing GMBH & Co. KG v. Samsung Electronics America, Inc., Appeal No. 2018-1777 (Fed. Cir. May 23, 2019)
In a sternly-worded decision this week, the Federal Circuit held claims to be invalid because the patentee dropped a related appeal on the eve of oral argument. The decision, applying principles of issue preclusion, should serve as a cautionary note for practitioners.
Papst owns multiple patents in one family relating to certain computer-related interface devices that can operate without the need for user-installed drivers that are specific to the interface device. After Papst sued several companies for infringement of the various patents in the family, various combinations of companies filed numerous IPRs challenging the validity of those patents. With respect to the patent at issue in this appeal, the PTAB construed a critical claim limitation, and then found the prior art to render the claims obvious based on that construction. In other IPRs, the PTAB construed “a materially identical” claim limitation, and found the same prior art to render the patent claims in two of the other IPRs invalid.
Papst appealed from the decisions in the three IPRs. On appeal, Papst challenged the PTAB’s claim construction of the critical term, and challenged whether the prior art disclosed that term as construed. All three appeals were scheduled to be heard on the same day. After the cases were fully briefed, and shortly before oral argument, Papst dropped two of the three appeals. On that basis, the Federal Circuit held that it need not reach the issues in the third case, because issue preclusion applied.
In short, when Papst dropped the two related appeals, those decisions became final, non-appealable judgments, thus triggering issue preclusion as to the same issues that were still to be argued in the third appeal.
Citing B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015), the Federal Circuit noted that “a tribunal’s resolution of an issue that is only one part of an ultimate legal claim can preclude the loser on that issue from later contesting, or continuing to contest, the same issue in a separate case.” Furthermore, “issue-preclusion principles apply in a court case even when the first ’action’ was before an agency if the agency proceeding meets certain standards.” Finding that the standards were satisfied, the Court held that the final decision by the PTAB, which became final when the appeals were dropped, had preclusive effect as to the essentially identical issues in the remaining case on appeal. The Federal Circuit panel’s annoyance was palpable:
More generally, given the heavy burdens that Papst placed on its adversaries, the Board, and this court by waiting so long to abandon defense of the ’144 patent and ’746 patent claims, Papst’s course of action leaves it without a meaningful basis to argue for systemic efficiencies as a possible reason for an exception to issue preclusion. Papst also has no basis to argue that it tried unsuccessfully to secure an agreement, from Samsung or other petitioners (in this IPR or others), for efficiency-enhancing multi-case-management steps: it did not even ask its adversaries to waive reliance on preclusion. In noting these circumstances, we do not address what if any ultimate legal relevance different circumstances might have in justifying an exception to the important policy of issue preclusion.
The Court then held that the issues between the abandoned appeals and the remaining appeal were materially identical, and that the PTAB’s holding on the issues were essential to the Board’s final decision.
On those bases, the Court held that issue preclusion applied.
For good measure, it also revisited the issue on the merits and found the PTAB’s conclusion to be supported by substantial evidence.
Based on both analyses, the Court affirmed.
The opinion can be found here.
ALSO THIS WEEK
Sony Corporation v. Iancu, Appeal No. 2018-1172 (Fed. Cir. May 22, 2019)
The Federal Circuit vacated and remanded an inter partes review decision of the Patent Trial and Appeal Board, which had found two challenged claims unpatentable as obvious. The claims were directed to “[a]n information reproducing device” and recited “reproducing means for reproducing” certain audio data. The usual requirement is that a computer-implemented means-plus-function limitation be supported by more specific structure than a general purpose computer or microprocessor, such as a particular disclosed algorithm. Notwithstanding, the Board had determined that the limitation was hardware-implemented, not computer-implemented, and that the corresponding structure was “a controller and a synthesizer.” The Board had found such structure to be recited in an asserted prior art reference, and so concluded that the challenged claims were obvious. The Federal Circuit disagreed, finding support in the specification that the “reproducing means” was computer-implemented, and finding the corresponding structure to be a specific flowchart algorithm disclosed in the patent. The Court vacated and remanded for further consideration of whether the prior art disclosed the algorithm of the specification or its equivalent.
Judge Newman dissented, arguing that because the challenged patent had expired, Petitioners had declined to participate in the appeal, and the underlying infringement suit had been settled, there was no longer a “live case or controversy” as required by Article III. In a footnote, the panel majority disagreed, finding that Patent Owner Sony and Commerce Under Secretary Iancu, in his capacity as director of the U.S. Patent and Trademark Office, remained adverse with respect to the live controversy of whether the Board’s decision should be upheld and Sony’s claims found unpatentable.
The opinion can be found here.
Quest Integrity USA, LLC v Cokebusters USA Inc., Appeal No. 2017-2423 (Fed. Cir. May 21, 2019)
This case involves a patent directed to a system and method for displaying inspection data collected from commercial furnaces. The district court entered summary judgment that all five challenged claims were invalid under the on-sale bar of 35 USC §102(b). The Federal Circuit upheld the summary judgment ruling on three claims based on patentee’s pre-critical date performance of all steps of the claimed method for a paying customer. However, the Federal Circuit reversed on the remaining two claims, finding that the district court had abused its discretion in disregarding two inventor declarations under a flawed application of the sham declaration doctrine. The Federal Circuit found that doctrine inapplicable under 3rd Circuit law because the declarations did not directly contradict previous deposition testimony of the declarants, one of the declarations explained the error in earlier deposition testimony, and other evidence of record supported the excluded declaration testimony. Judgment of invalidity on these two claims was reversed because the improperly excluded declarations created an issue of fact as to satisfaction of a single disputed claim limitation.
The opinion can be found here.
