Latest Federal Court Cases - May 2020 #3

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PATENT CASE OF THE WEEK  

Schwendimann v. Arkwright Advanced Coating, Inc., Appeal Nos. 2018-2416, et al. (Fed. Cir. May 5, 2020) (unsealed May 13, 2020)

In this recently unsealed precedential opinion, the Federal Circuit addressed issues concerning standing to file suit in situations where there is a challenge to the sufficiency of an assignment agreement concerning the patents in suit. The Court held that the questions about the effectiveness of an assignment agreement are not relevant to whether a party has standing to sue. The court also held that an agreement to correct an error in a previous assignment agreement was a reformation of the original agreement effective nunc pro tunc to the date of the execution of that original agreement.

Schwendimann was an inventor of the patents in suit, and was an employee of ACT. The patents in suit are all related to a patent application referred to as the ’845 Application. ACT eventually dissolved, owing debts to many, including Schwendimann. To satisfy at least part of this debt, ACT assigned the ’845 Application to Schwendimann, who took over prosecution of the patents. A law firm prepared the necessary assignment documents to submit to the patent office, but errantly submitted incomplete or erroneous documents when it filed them in 2003. Although submitting cover sheets and form documents referencing the ’845 Application, the assignment agreement attached thereto referenced a different patent application, though with handwritten nomenclature that suggested the ’845 Application. The USPTO accepted the filing and recorded Schwendimann as the record owner of the ’845 Application.

In 2011, Schwendimann became aware of the error and sought to rectify the problem. A new assignment agreement was executed.

In April 2011, Schwendimann sued Arkwright for patent infringement based on patents that issued from the ’845 Application. Arkwright moved to dismiss for lack of standing and Schwendimann moved for summary judgment on the same issue. The district court found that the handwritten 2003 document satisfied the requirements of an “instrument in writing” as required by 35 U.S.C. § 261. Following discovery, the court granted summary judgment that Schwendimann was the owner by assignment of the patents in suit as of 2002.

Arkwright appealed, first arguing that Schwendimann did not have standing to bring the lawsuit, owing to the errant assignment documentation. The Federal Circuit affirmed.

First, the Court applied its recent holding in Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225 (Fed. Cir. 2019). In that case, the Court held, based on subsequent Supreme Court precedent, that ownership of a patent is a statutory prerequisite to the right to relief in a patent case, but does not implicate subject matter jurisdiction or standing. Rather, when a party “alleges facts that support an arguable case or controversy under the Patent Act, the court has both the statutory and constitutional authority to adjudicate the matter.” Because Schwendimann alleged that she was the owner, “there is no ‘standing’ issue to be decided in this appeal.”

The Court concluded that there were two relevant questions to be answered: whether Schwendimann was a patentee at the time her action was filed, and whether the assignment agreement satisfied the “written instrument” requirement of Section 261. The Court answered both questions in the affirmative. Looking to state law concerning contract law generally, the Court affirmed that the intent of the parties as of 2002 was to assign all rights to Schwendimann. With respect to the “written instrument” requirement, the Court, again invoking state law, held that the 2011 agreement merely reformed the 2002 writings, and was effective nunc pro tunc to the time of the 2002 agreement.

Judge Reyna dissented. He would have framed the 2011 reformation agreement as an attempt to convey nunc pro tunc standing, which is generally not sufficient.

The Court also affirmed a prejudgment interest award, holding that where the jury awards a lump sum amount, prejudgment interest attaches as of the first infringement.

The opinion can be found here.

ALSO THIS WEEK

Cochlear Bone Anchored Solutions AB v. Oticon Medical AB, Appeal Nos. 2019-1105, -1106 (Fed. Cir. May 15, 2020)

In cross-appeals from inter partes review decisions, the Federal Circuit resolved a number of disputed points in affirming unpatentability of five claims on obviousness grounds. Among others, the Court rejected the patent owner’s argument that a claim preamble was limiting and refused to read a subjective intent element into the claim phrase “specifically adapted to.” The Court also found substantial evidence in the form of expert testimony sufficient to support a motivation to combine references for obviousness purposes.

The PTAB had declined to reach the issue of patentability on three remaining claims because they were means-plus-function claims and no corresponding structure was disclosed in the patent specification. The PTAB held that it could not rule on patentability given uncertainty as to the meaning of the disputed claim terms. The Federal Circuit affirmed as to two of these claims, but reversed and remanded as to the third. The Court found that the third claim did not include a required element in means-plus-function format. That claim instead recited a definite structure in the alternative to the means-plus-function element. The Court noted that while the claim may still be indefinite, it might nonetheless be possible to compare the claim to the prior art sufficient to conduct a patentability analysis, citing its recent decision in Samsung Elecs. America, Inc. v. Prisua Eng’g. Corp., 948 F.3d 1342, 1353 (Fed. Cir. 2020).

The opinion can be found here.

Electronic Comm’n Techs., LLC v. ShoppersChoice.com, LLC, Appeal No. 2019-1587 (Fed. Cir. May 14, 2020)

In this case, the Federal Circuit affirmed a district court’s judgment on the pleadings that an asserted claim was directed to patent-ineligible subject matter and invalid under 35 U.S.C. § 101. The claim at issue was directed to an automated notification system comprising computer components and code to monitor the location of a delivery, inform the recipient in advance of its arrival, provide user-supplied authentication information, and enable the user to select whether to communicate with an operator about the delivery. Applying the two-step inquiry of Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014), the Court found that the claim recited only generic computer components to perform the long-standing business practices of advising customers of the delivery status of their goods, and recording customer information such as a credit card number to be included in subsequent customer communications. As such, the Court found that the claim was directed to an abstract idea and did not pass step one of the two-part Alice test. Because the claim was specified at a high level of generality in functional terms, and merely invoked well-understood components and activity to apply the abstract idea, the Court further found that the claim did not include an inventive concept, and also failed at step two of the Alice inquiry.

The opinion can be found here.

Lanard Toys Limited v. Dolgencorp LLC, Appeal No. 2019-1781 (Fed. Cir. May 14, 2020)

The Court affirmed the United States District Court for the Middle District of Florida’s order granting summary judgement of noninfringement of Lanard’s design patent for a toy chalk holder designed to look like a No. 2 pencil (“D167 patent”). First, applying the holding from Egyptian Goddess, the Court affirmed the district court’s characterization of the scope of the D167 patent as “distinct from [the] prior art [of a pencil] only in the precise proportions of its various elements in relation to each other, the size and ornamentation of the ferrule, and the particular size and shape of the conical tapered end.” Next, the Court compared the allegedly infringing design with the established scope of claims elements in the D167 patent finding “that the design similarities stem from aspects of the design[s] that are either functional or well-established in the prior art.” Finally, the Court agreed that “no reasonable fact finder could find that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design,” and affirmed the district court’s holding of noninfringement. The Federal Circuit also affirmed the district court’s finding on noninfringement of Lanard’s copyright rights and trade dress and that there was no unfair competition since no intellectual property rights were infringed upon.

The opinion can be found here.

Virnetx Inc. v. Cisco Sys., Inc., Appeal No. 2019-1671 (Fed. Cir. May 13, 2020).

In these related orders, the Federal Circuit, on petitions for panel and en banc rehearings filed by Cisco Systems and the Director of the U.S. Patent and Trademark Office, addresses whether the Court erred in extending its Arthrex decision beyond the context of inter partes reviews to a decision on inter partes re-examination. In its opinion on the petition for panel rehearing, the Court explained that, although no discovery is held nor trial conducted in re-examination proceedings, the nature of the two proceedings are otherwise similar, as both involve third-party challenges to claims of an issued patent and, importantly, in both, Administrative Patent Judges exercise significant authority on behalf of the government by issuing final decisions that decide patentability. Further, the Court explained that the Director’s authority over the Patent Trial and Appeal Board’s decisions is not meaningfully greater in the context of a re-examination. and thus Arthrex applies. The Court denied without opinion the petition for en banc 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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