by Dennis Crouch

In re OATH HOLDINGS, INC. (Formerly Known as Yahoo Holdings, Inc.) (Fed. Cir. 2018)

The outcome of this case is simple: Oath doesn’t have to defend a patent infringement lawsuit in E.D.N.Y. because that location is an “improper venue.”

Under TC Heartland (2017), patent owners in patent cases now have a fairly limited set of options for filing infringement actions.  In particular, a lawsuit against a domestic defendant must be filed either:

1. Where the defendant resides (i.e., its state of incorporation)
2. Where the defendant has a regular and established place of business (i.e., physical building).

TC Heartland falls directly in line with the prior supreme court decision in Fourco Glass (1957).  However, during the interim, the Federal Circuit had expanded its definition of proper venue to include any court that has personal jurisdiction over the defendant.  Thus, for someone who studies only Supreme Court law, TC Heartland was a continuation of an unchanged law. On the other hand, the case was a major shift for those of us whose gaze is directed to the Federal Circuit (and practical district court litigation). The Federal Circuit has identified the latter frame of reference as appropriate — holding that TC Heartland was a change in the law.  In re Micron Technology, Inc., 875 F.3d 1091 (Fed. Cir. 2017).  The Micron decision was important because it prompted district courts to revisit the venue question even if the issue was seemingly waived.

In its decision here, the Federal Circuit holds that Oath/Yahoo should not be considered to have waived the venue issue because it promptly raised the issue immediately following TC Heartland.

There is no dispute that venue in the Eastern District of New York in this case is contrary to § 1400(b). The only question is whether Oath waived or forfeited the right to have the case dismissed on that basis by waiting too long to invoke it. The district court answered yes to that question. The district court’s principal ground for doing so, however, rests on its failure to follow our directly controlling Micron precedent addressing the issue of waiver under Rule 12(g)(2) and (h)(1) as applied to TC Heartland’s rejection of this court’s earlier, longstanding VE Holding precedent. . . .

Micron answers the entire question of waiver under Rule 12(g)(2) and (h)(1) for purposes of this case: there was no such waiver. In what is nearly the only basis for the district court’s denial of Oath’s venue motion, the district court clearly erred in not following the Micron precedent giving that answer. That error warrants mandamus relief.

On remand, the district court is ordered to either dismiss the case or transfer it to a proper venue.

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One tricky aspect of this decision involves the question of “binding precedent.” The Federal Circuit’s patent law precedent is binding on all of the district courts with regard to patent law questions.  However, the Federal Circuit relies upon the law of the various regional circuit courts of appeals when deciding non-patent issues such as  general civil procedure.  Here, although the question of proper venue is a “patent law” question, the patentee argued that the waiver analysis of Micron was an interpretation of First Circuit law and didn’t bind the E.D.N.Y. judge sitting in the Second Circuit.  On appeal, the Federal Circuit rejected that analysis holding that “issues of waiver or forfeiture of patent-venue rights under § 1400(b) and § 1406(a) are likewise governed by our [Federal Circuit] law.” Thus, Micron controls all the district courts.

by Dennis Crouch

The traditional rule of assignor estoppel prevents prior owners of a patent from later challenging the validity of the patent.  The doctrine stems from old property law cases and is based upon the idea is that the assignor “should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.” Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988); see Westinghouse Elec. & Mfg. Co. v. Formica Ins. Co., 266 U.S. 342 (1924). Of course, most ‘assignors’ are inventor-employees who assign away rights well before even conceiving of their inventions.  In his 2016 article, Mark Lemley argued that:

[T]he doctrine is out of touch with the realities of both modern inventing and modern patent law, and that it interferes with both the invalidation of bad patents and the goal of employee mobility.

Mark A. Lemley, Rethinking Assignor Estoppel, 54 Hous. L. Rev. 513 (2016).

In Arista Networks, Inc. v. Cisco Sys., Inc., 2017-1525, 2018 WL 5851331 (Fed. Cir. Nov. 9, 2018), the Federal Circuit was faced with the question of whether assignor estoppel applies to prevent an assignor from later challenging a patent in an inter partes review proceeding. In that framework, the court sided with Lemley and agreed to rethink the doctrine — holding that an inventor is not estopped from challenging his assigned patent in an IPR proceeding.

In this case, the inventor-professor-billionaire David Cheriton was formerly employed as Cisco’s chief product architect.  After inventing an improved “logging module,” Cheriton assigned rights to Cisco who patented the invention. The assignment included several promises , including a promise to “do everything possible to aid said assignee, their successors, assigns and nominees, at their request and expense, in obtaining and enforcing patents for said invention in all countries.”  Cheriton later left Cisco and founded Arista.  At that point, Cisco turned around and sued Arista for infringement.  Arista responded with the IPR challenge.

On appeal, the Federal Circuit began with a consideration of the common law approach — “that assignor estoppel is a well-established common-law doctrine that should be presumed to apply absent a statutory indication to the contrary.”  Although the AIA obviously did not mention the doctrine, the appellate court found that the law had an “evident” statutory purpose that is contrary to the doctrine. In particular, the court focuses on Section 311(a) that states:

(a) In General.— Subject to the provisions of this chapter, a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.

In reading the statute, the court decided that “plain language of this statutory provision is unambiguous. . . The plain language of § 311(a) demonstrates that an assignor, who is no longer the owner of a patent, may file an IPR petition as to that patent. . . . In sum, we conclude that § 311(a), by allowing “a person who is not the owner of a patent” to file an IPR, unambiguously dictates that assignor estoppel has no place in IPR proceedings.”

The legal analysis by the court could fairly be called low quality because it does not content with the many other areas of patent law (and other areas of law) that allow for departures from the statute in order to allow for traditional common law doctrines.  Take for instance, Section 282(b) that provides invalidity as a defense in “any” infringement lawsuit — of course as discussed above the court has held that 282(b) does not eliminate assignor estoppel.

I will note that the appellate panel questioned the ongoing viability of assignor estoppel as it applies in any patent case, but decided to narrowly focus its decision here on IPR proceedings rather than patent law cases as a whole.

by Dennis Crouch

LG Electronics v. Iancu (Fed. Cir. 2018) [ORDER]

In a R.36 Affirmance, the Federal Circuit upheld the PTAB obviousness judgment. The USPTO promptly filed a request for a bill of costs for $387.60.  The Federal Circuit has now rejected that request since the PTO was an intervenor, not a party.

LG Electronics (LG) sued Advanced Micro Devices, Inc. (AMD) for infringement back in 2014 and AMD responded with the filing of this inter partes review (IPR) petition. U.S. Patent 7,664,971. The PTAB found all the challenged claims obvious and LGE appealed, but AMD did not defend the case on appeal since the parties settled the underlying infringement dispute.  At that point, the PTO “exercised its right to intervene” under 35 U.S.C. 143.

The Director shall have the right to intervene in an appeal from a decision entered by the Patent Trial and Appeal Board in a derivation proceeding under section 135 or in an inter partes or post-grant review under chapter 31 or 32.

After affirming on the merits, the PTO asked for its costs Federal Circuit Rule 39.  Under the rule, costs just include copying, service of process, clerk fees, etc. — and here added up to $388.

The Federal Circuit rule states that “if a judgment is affirmed, costs are taxed against the appellant.” However, the rule includes a caveat when costs are “for or against” the US. In that case, costs are assessed “only if authorized by law.”  28 U.S.C. § 2412(a) allows for costs when the Government is a party to litigation.  Here, however, the Government was an intervenor.

This appeal was not brought by or against the United States. It was a dispute arising between two private parties, AMD and LG. The PTO was an intervenor, which, although having a right to intervene, see 35 U.S.C. § 143, had no obligation to intervene. No one asked it to intervene. It was in effect a volunteer. Section 2412(a) is therefore not applicable to this case.

The court found no other particular statute authorizing costs to the government — and thus the court “decline[d] to award costs in these circumstances.”

Havilland v. FX Networks LLC, Supreme Ct. Docket No. 18-453

Olivia de Havilland is a 102-year-old, two-time Academy Award winning best actress, who played Melanie Hamilton in the movie classic, “Gone with the Wind.” Of particular relevance here, she is also a woman who lives her life devoted to high moral and ethical standards.

FX Networks, LLC and Pacific 2.1 Entertainment Group, Inc. appropriated the literal name and identity of Olivia de Havilland, without consent or compensation, to be the narrator of a mini-series, “Feud: Bette and Joan,” devoted to the theme of women actors catfighting, using vulgar language, and backstabbing one another. FX, claiming artistic license, admits that many of the statements and vulgar language attributed to de Havilland were fabricated and knowingly untrue.

The California Court of Appeal reversed the trial judge’s denial of a Motion to Strike, and dismissed Miss de Havilland’s claims, based on a First Amendment defense for docudramas.

The Question for the Court is: Are reckless or knowing false statements about a living public figure, published in docudrama format, entitled to absolute First Amendment protection from claims based on the victim’s statutory and common law causes of action for defamation and right of publicity, so as to justify dismissal at the pleading stage?

IPO holds an annual IP Video contest.  My favorite this year is from Rhys Kroehler who won in the 16-18 year old category. [See them all]

DISCLOSURE: Back in 2013/14 I talked with the attorneys for Cave Consulting about serving as an expert witness for the underlying district court litigation. I ended up not doing any work related to the case. – DC

by Dennis Crouch

Cave Consulting Group, LLC, v. OptumInsight, Inc. (Supreme Court 2018) [20181102114930196_Cave Consulting v. Optuminsight Inc. Petition for Writ]

This pending case before the Supreme Court focuses on fundamental questions of how to interpret patent claim scope. 

Cave Consulting’s U.S. Patent No. 7,739,126 covers a method of determining physician efficiency that includes, inter alia, a step of calculating a “weighted statistic” associated with various “episodes of care.”  The broader claims are not expressly limited to the particular statistic used, while the dependent claims require alternatively require “indirect standardization” (Claim 25) or “indirect standardization” (Claim 26) of the weighting.  To be clear, the specification spends substantial time focusing on indirect standardization in detail, whereas direct standardization is a method known in the prior art.

In its case against Optum (a subsidiary of UnitedHealthcare and my insurance provider), the patentee argued that Optum used the direct-standardization weighting as claimed and a jury found agreed with a $12 million damages award.

On appeal the Federal Circuit shifted claim construction and reversed — holding that the independent claims implicitly excluded direct-standardization weighting. In its holding the court relied upon its precedent in Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1305 (Fed. Cir. 2011) in stating that claims should be construed to “tether the claims to what the specifications indicate the inventor actually invented.”

Optum had argued disclaimer, but could not point toward any “clear and unmistakable” disavowal of scope or lexicographical redefinition of the terms. Rather, the court simply found that the best construction of the claimed “weighted statistic” excluded the traditional direct-standardization weighting.

Cave does not identify, nor do we find, any indication in the ’126 patent’s description that its invention employs direct standardization, and, other than the dependent claims, Cave’s support for including direct standardization comes exclusively from the description of the prior art methods in the background section.

Although there might ordinarily be a claim differentiation argument, the court found it weak here because the aforementioned dependent claims had been added during prosecution.

[I]n view of the specification’s consistently limiting description, we conclude that these interpretive canons, despite the later-added dependent claims, cannot overcome the claim scope that is unambiguously prescribed by the specification.

Now Cave Consulting has petitioned the U.S. Supreme Court to hear the case with the following question presented:

May a court construe a patent claim in a way that contradicts its plain and ordinary meaning by relying on statements in the specification that do not constitute lexicography or disavowal?

Cave Consulting sets up the case as a debate over whether claims control the scope of the rights:

• When there is a conflict between clear and unambiguous claim language and statements in the specification, the claim language wins. White v. Dunbar, 119 U.S. 47, 52 (1886)(“The claim is a statutory requirement, prescribed for the very purpose of making the patentee define precisely what his invention is, and it is unjust to the public, as well as an evasion of the law, to construe it in a manner different from the plain import of its terms.”)
• Howe Mach. Co. v. Nat’l Needle Co., 134 U.S. 388, 394 (1890) (“Doubtless a claim is to be construed in connection with the explanation contained in the specification . . . but, since the inventor must particularly specify and point out [what] he claims as his own invention or discovery, the specification and drawings are usually looked at only for the purpose of better understanding the meaning of the claim, and certainly not for the purpose of changing it, and making it different from what it is.”);
• Cimiotti Unhairing Co. v. Am. Fur Ref. Co., 198 U.S. 399, 410 (1905) (“In making his claim the inventor is at liberty to choose his own form of expression, and while the courts may construe the same in view of the specifications and the state of the art, they may not add to or detract from the claim.”);
• Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 510 (1917)(“It is to the claims of every patent, therefore, that we must turn when we are seeking to determine what the invention is . . . .”);
• Smith v. Snow, 294 U.S. 1, 11 (1935) (“We may take it that, as the statute requires, the specifications just detailed show a way of using the inventor’s method, and that he conceived that particular way described was the best one. But he is not confined to that particular mode of use, since the claims of the patent, not its specifications, measure the invention.”);
• Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 336 U.S. 271, 277 (1949) (refusing to narrow the unambiguous claim language based on the specification, noting that the Court has “frequently held that it is the claim which measures the grant to the patentee.”).

As you can see, this is an important area of jurisprudence that the Supreme Court has discussed on multiple occasions — increasing the odds of certiorari.

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Richard Brophy and Marc Vander Tuig of Armstrong Teasdale filed the petition on behalf of Cave Consulting.

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I’ll note here that it is cases like this that discourage patentees from including any background section at all.

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• We have a new USPTO deputy director LAURA PETER.  Ms. Peter has been a registered patent practitioner since 1989 — working primarily in house for the past two decades. Most recently she was Deputy General Counsel at A10 Networks. She was also GC at Immersion Corp — by that point the company was really just enforcing its patents on haptic feedback game controllers. (See recent case) In 2010 Peters was the republican candidate for the California State House of Representatives — she won the primary but lost to the Democratic incumbent in the general election.
• Ms. Peter’s Reg. No. is 33,545.  The most recent PTO registration number belongs to Mr. Noble Woo with Reg. No. 77,596 (Registered 11/5/18). Congratulations Mr. Woo!
• The Patent Public Advisory Committee (PPAC) will hold its next meeting on November 8 (AGENDA). You can either attend in person at the USPTO or watch via web stream.
• The USPTO is continuing its excellent STEPP program for registered patent practitioners (STEPP = Stakeholder Training on Examination Practice and Procedure).  The next training is January 15-17 in Dallas. [More Info | Apply to Attend]
• In January we’ll see a major shift on the House Judiciary Committee — this is important because patent legislation generally goes through that committee. Hank Johnson (D-Ga) is expected to take over as ranking member of the IP Subcommittee. Although Johnson does not have extensive IP experience, he is known as an effective legislator.  Bob Goodlatte (R-Va) and Darrell Issa (R-Ca) are retiring from the House.

FTC v. Qualcomm (N.D. Cal. 2018)

In an important decision, Judge Koh granted partial summary judgment for the Federal Trade Commission (FTC) that will require Qualcomm to license its Standard-EssentialPatents (SEPs) for 3G Mobile (and other) communication standards on fair, reasonable, and nondiscriminatory (FRAND) terms.  [FTC v Qualcomm]

Qualcomm agreed that it was subject to its prior FRAND commitment, but argued that it only applied to “complete devices like cellular handsets” and not to components like modem chips.  In other words, Qualcomm was happy to license to its chip customers, but not to its competitors. This decision follows other cases, including Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012) where the 9th Circuit held that “FRAND commitments include an obligation to license to all comers, including competing modem chip suppliers.”

The FTC sued Qualcomm alleging unfair competition under Section 5 of the FTCA — alleging that the failure to license represented anti-competitive behavior.

Although this particular issue is resolved, the case is moving forward on other antitrust allegations — including allegations that Qualcomm used its market dominance to negotiate higher royalties and terms, including exclusivity requirements, from handset makers.

Claim interpretation: What would happen if we had a new rule that all parts of a claim were seen as limiting, not just the “body” and the “preamble” sometimes?

by Dennis Crouch

Hollister Inc. v. Zassi Holdings, Inc., 2018 U.S. App. LEXIS 30085 (11th Circuit 2018) [Hollister Inc. v. Zassi Holdings_ Inc._ 2018 U.S. App][Hollister Inc. v. Zassi Holdings_ Inc._ 2016 U.S. Dist]

This case before the 11th Circuit involves a patent sale with a hidden prior license.  Hollister bought two pending patent applications from Zassi.  As part of the transaction, Zassi and its founder (Peter von Dyck) represented that the rights were “free and clear of any licenses.”

Later, when Hollister sued two competitors, Bard and ConvaTek, for infringement it learned that Zassi had already licensed the technology to ConvaTek.  Thus, while Bard paid $6 million for a license, the case against ConvaTek was dismissed.   Hollister Inc. v. ConvaTec Inc., 2011 U.S. Dist. LEXIS 66638 (N.D. Ill. June 21, 2011), aff’d without opinion, Hollister Inc. v. ConvaTec Inc., 470 F. App’x 904 (Fed. Cir. 2012).

Hollister then turned back to Zassi and von Dyck and sued for damages associated with the undisclosed license to ConvaTek.  The jury sided against Zassi and von Dyk for breach of warranty of title and fraud.  As a twist, however, the court awarded no damages.  Using a case-within-a-case analysis, the district court found that ConvaTek’s actions were infringing, but-for the prior license.  Hollister relied upon its license to Bard as a mechanism to calculate a reasonable royalty damage amount for ConvaTek as the “best, most comparable, most reliable evidence.”  However, the district rejected the argument — finding that the settlement with Bard had now foundational basis other than being the amount the parties agreed upon.  In other words, Hollister provided no objective economic approach showing the $6 million settlement was a reasonable royalty.

Hollister’s failure to explain how the parties calculated the lump-sum in the Bard agreement or to prove that the $6.65 million amount represented a reasonable royalty, upon which its damages theory in this case depends, is a failure of proof.

The district court similarly refused to give credence to the $5.9 million that ConvaTek paid to Zassi for the prior license.  The problem was that these settlements didn’t have an associated economic story. Without an objective economic story, the district court suggested it was left in the wind without any grounding for assigning a royalty amount.

Given no other tools to arrive at a reasonable royalty, the Court cannot invent one out of thin air, particularly given that the Federal Circuit requires sound economic proof of the nature of the market and likely outcomes in order to prevent the hypothetical from lapsing into pure speculation. (quoting Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302 (Fed. Cir. 2002)).

As a result of the lack of proof, the district court awarded ZERO dollars in damages.

On appeal, the Eleventh Circuit has reversed — finding the whole approach here suspect.  The problem is that the damages for fraud should be calculated as of the bargain back in 2006 — here though the district court looked at damages as of the 2010 lawsuit against ConvaTek.

This was error; it is too speculative to treat the amount that ConvaTec would have paid as a royalty for a license in 2010 as establishing the value of a license four years earlier. This is particularly true because in 2006 a license would have been less valuable due to the fact that no patent had yet been granted for the technology.

Then going on to the proof of damages, the appellate panel found that the evidence Hollister presented was enough to allow to recover at least “some damages in the hypothetical infringement action.”

Even when the patentee’s proof of damages is extremely weak, the proper course is for the court to award nominal damages, not zero damages. . . . Hollister introduced proof that the license ConvaTec negotiated in 2010 had value. . . . Even if Hollister’s proof of a reasonable royalty wasn’t very exact or there were ways that the proof could be challenged, it seems to us that Hollister was still entitled to something more than a royalty of zero.

On remand, the lower court will hold a new trial on damages — focusing on the question of what is the damages for the fraud associated with selling the applications without providing notice that the applications had already been licensed.

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You could conceive of a system where a prior patent license is not good against a subsequent good faith purchaser for value. In fact, the patent law provides a statute on point, but is limited to assignments:

An interest that constitutes an assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

35 U.S.C. 261.  The USPTO will record license agreements. MPEP 301-302. But, there is no general negative consequence that flows from failure to record. (Certain gov’t licenses must be recorded).

by Dennis Crouch

In Berkheimer, the Federal Circuit explained that underlying factual disputes might prevent a motion on the pleadings or summary judgment decision.  In this post, I looked at four recent district court cases that cite Berkheimer.

In iSentium, LLC v. Bloomberg Fin. L.P., 2018 WL 5447503 (S.D.N.Y. Oct. 29, 2018), the district court considered Berkheimer but primarily cited to its statement that “not every § 101 determination contains genuine disputes over the underlying facts material to the § 101 inquiry.”  This was a case where additional facts were not necessary because the claim elements beyond the abstract idea were merely “a combination of elements is well understood, routine and conventional.”

In ECOSERVICES, LLC, Pl., v. CERTIFIED AVIATION SERVICES, LLC, 2018 WL 5629301 (C.D. Cal. Oct. 26, 2018) the district court had an interesting use of Berkheimer.  In the case, the defendant did not file for summary judgment on eligibility but instead waited until post trial to make its eligibility motion.  The district court found no waiver — noting particularly that post trial a good time because of the potential underlying facts that might be developed there. Citing Berkheimer.  In fact, in that case the defendant relied “on trial testimony and the jury’s verdict for part of its argument, [as such] it was reasonable to wait to resolve the § 101 issue until after trial.”

In CardioNet, LLC v. InfoBionic, Inc., 2018 WL 5017913 (D. Mass. Oct. 16, 2018), the court ruled on a 12(b)(6) motion to dismiss. As such, the court limited the potential factual-dispute-inquiry to the allegations made in the complaint.  However, the complaint did not include any particular “non-conclusory factual assertions” to create any dispute.  As such, the court ruled the patent ineligible as a matter of law.

Finally in KROY IP HOLDINGS, LLC, Pl., v. GROUPON, INC., 2018 WL 4905595 (D. Del. Oct. 9, 2018), the magistrate judge refused to recommend dismissal of the case on the pleadings — finding that “questions of fact remain as to whether the asserted claims of the ’660 patent were conventional at the time of the patent, and unresolved issues of claim construction could potentially bear on the analysis.”

The Supreme Court has requested briefing from the US Solicitor General in the pending case of Ariosa Diagnostics, Inc., v. Illumina, Inc., Sct. Docket No. 18-109. The case focuses on core aspects of patent law — what “counts” as prior art.  The petition focuses on the prior art date of unclaimed information found in a published patent application when that information was is also found in a provisional application relied upon as a priority document.

Question Presented: Do unclaimed disclosures in a published patent application and an earlier [unpublished] application it relies on for priority enter the public domain and thus become prior art as of the earlier application’s filing date, or, as the Federal Circuit held, does the prior art date of the disclosures depend on whether the published application also claims subject matter from the earlier application?

In Alexander Milburn Co. v. Davis-Bournonville Co., 270 U.S. 390 (1926), the U.S. Supreme Court provided a portion of the answer — holding that an unclaimed invention found in a later issued patent is “made public property” as of its filing date.  That statement though came as an interpretation of no-longer-active provision that the patentee must be “the original and first inventor.” Rev. Sts. § 4920.  In addition to interpreting a different statute, the court in Milburn also did not consider the priority question.

The relevant statute for this case is pre-AIA 102(e) — which also does not spell out what should happen in this situation — but nothing in the statute suggests to me that we should limit the prior art impact of priority filings to disclosures that are claimed in later patents or patent applications.  However, the Federal Circuit ruled in this case that that a published application can count as prior art as of its provisional filing date — but only as to features actually claimed in the application.  According to the court, features disclosed in the provisional but not claimed in the published application will only be prior art as of their date of public disclosure.

The opposition briefing makes a big deal of the fact that this case focuses on the outgoing pre-AIA statute.  However, I expect that the ruling that the court makes here will carry-over post-AIA. [More on this in an upcoming separate post]

Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications and Gives us a Disturbing Result

Ariosa Diagnostics v. Illumina: Prior Art Date of a Provisional Patent Application