Heat Technologies, Inc. v. Papierfabrik August Koehler SE (Fed. Cir. 2019)

This case involves an unusual bit of appellate procedure regarding certifying questions for appeal under 28 U.S.C. 1292(b). 

Back in 2018, Heat Tech sued Koehler Paper in N.D. Georgia federal court requesting correction of inventorship under 35 U.S.C. § 256 as well as damages for unjust enrichment and conversion under Georgia state law. U.S. Patent No. 9,851,146.  The basic background of the lawsuit was that Heat Tech’s president (Plavnik) invented the paper-drying mechanism that was then disclosed to Koehler as part of a collaboration evaluation.  In addition, Heat Tech argued that almost all of the information disclosed in Koehler’s patent was included in a prior Heat Tech patent application.

At the district court, Koehler filed a motion to dismiss the case — arguing that Heat Tech’s actual claim is for invalidity and that an inventorship-correction lawsuit is not appropriate when the same alleged facts would invalidate the patent for lack of novelty or obviousness.  The district court denied the motion to dismiss, but agreed to certify the question for appeal to the Federal Circuit — noting some disagreement among the courts on the state of the law.

Question certified by the district court:

Can a claimant obtain relief under 35 U.S.C. § 256 when its inventorship allegations, if taken or proven as true, would necessarily invalidate the subject patent under other provisions of the Patent Act?

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The usual rule is that appellate jurisdiction follows final judgment by a district court. In a motion-to-dismiss situation, the case can be appealed if dismissal is granted — but not if dismissal is denied (because the case will still be pending at the district court).  There are several exceptions, including mandamus actions and appeals of preliminary injunction decisions another exception involves certification of an appeal under Section 1292:

(b) When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order.

The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order.

In reviewing the statute, the Federal Circuit identifies three key requirements for hearing an interlocutory appeal under 1292(b):

1. The appeal must involve “a controlling question of law.”
2. There must be “substantial ground for difference of opinion.”
3. An immediate appeal “may materially advance the ultimate termination of the litigation.”

Further, even when all three elements are met, the appellate court still has discretion to decide whether to permit the appeal.

On appeal now, the Federal Circuit HeatTechDecisionhas denied the 1292(b) petition and effectively indicated that the district court’s decision was correct.  In particular, the appellate panel found no “substantial ground for disagreement” because Section 256 jurisdiction “does not depend on whether the patent may be shown to be invalid.”  Slip op.  The appellate panel noted its lack of prior precedent directly and expressly on-point, but concluded that prior cases compel the answer. For example, in Frank’s Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292 F.3d 1363, 1377 (Fed. Cir. 2002), the court wrote that an inventorship action could be maintained for an unenforceable patent.

by Dennis Crouch

Technology Properties Limited LLC, v.  Huawei Technologies Co., Ltd. (Supreme Court. 2019)

Back in February, the Federal Circuit issued a R.36 affirmance — affirming the lower court’s claim construction and non-infringement finding.  Tech. Properties has now filed a statement of intent to petition for writ of certiorari, now with Ken Starr at the helm and focusing on prosecution disclaimer precedent from the 1880’s along with a constitutional argument.  The patentee writes:

This case presents important questions of constitutional and patent law. The law of prosecution disclaimer, as applied in this case and in other cases, has morphed in a manner inconsistent with the Patent Act. The Federal Circuit’s increasingly anti-textualist methodology also conflicts with this Court’s long-established precedent. The improper expansion of this judicially-created doctrine upsets the balance between the role of the Patent Office and the role of the judiciary, as established by Congress, and injects great uncertainty into the publicnotice function of patents. Congress delegated the examination and issuance of patents to the Patent Office and requires deference to the agency’s decision-making.

The expanded disclaimer doctrine calls into question the Patent Office’s authority to examine and issue patents, and the limited role of the judiciary in reviewing the Patent Office’s determinations. Encouraging litigants and courts to wade through the back-and-forth between the Patent Office and a patent applicant to rewrite the issued claims through imposition of additional limitations under the guise of “claim construction” runs afoul of Congress’s delegation.

The basic argument that the patentee is making here is that patent claims should be adjudged by their terms and buried statements within the prosecution history should not be allowed to enlarge or reduce the patent scope.  You might call this the patent law parole evidence rule:

A patent is a public franchise.  The public and the patentee are entitled to clarity on the boundaries of a patentee’s rights; the claims, which define the metes and bounds of the inventor’s rights, provide that clarity. Gratuitous statements in the file history do not; they are inherently less predictable—illustrated by this case and other recent cases.

That 1880’s case: Goodyear Dental Vulcanite Co. v. Davis, 102 U.S. 222 (1880).

• TechPropertiesPetitionForEnBanc
• 20190627135544235_2019-06-27 FINAL Application to Extend Time to File Petition
• 20190627135603467_2019-06-27 FINAL Addendum to TPLs Application to Extend Time to File Petition

by Dennis Crouch

SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir 2019)  (modified opinion on rehearing)

When the Federal Circuit released its eligibility decision in March 2019, I panned the opinion as a “results-oriented decision [that] unfortunately shades-facts and provides no clarity in its legal analysis of eligibility.”  On petition, the panel has modified its original opinion. Unfortunately, the court did not modify its eligibility analysis, but rather modified a portion of the remand on attorney fees.

At the conclusion of the trial, a jury awarded the patentee SRI $23 million in reasonable royalty damages associated with SRI’s network monitoring patents.  The jury also found that Cisco’s infringement was willful.

The jury awarded SRI a 3.5% reasonable royalty for a total of $23,660,000 in compensatory damages.  The jury also found by clear and convincing evidence that Cisco’s infringement was willful.  The judge then double the compensatory award and also awarded $8 million attorney fees as well as an ongoing compulsory license for any future infringement. (I believe the patents have now expired).

Willful Infringement: The patent act does not expressly identify willfulness as relevant to an infringement lawsuit. However, courts have ruled that willfulness is an underlying requirement for enhanced damages under 35 U.S.C. 284. “Enhanced damages under § 284 are predicated on a finding of willful infringement.”

On appeal here, the Federal Circuit ruled that enhanced damages willfulness should be further apportioned by time.  I.e., enhanced damages cannot be awarded for infringement that occurred prior to the infringer’s willful infringement. Here, the patentee proved infringement going back to 2000, but did not show that Cisco knew of the patent before May 2012 – thus no willfulness. On remand, the district court will need to reconsider the willfulness award to match the court’s temporal apportionment approach.

The court’s approach here is interesting — the jury found the infringement to be willful.  Rather than rejecting the jury verdict, the appellate panel “interpreted” the verdict as finding willfulness as of May 2012 (and finding no willfulness prior to 2012).  Then, the appellate court found error by the district court in enhancing damages for the entire term of infringement.

Attorney Fees: Ordinarily, each party must pay its own trial costs, including attorney fees. However, in patent cases the district court has discretion to award fees to the prevailing party in “exceptional cases.” Here, the district court found that Cisco’s litigation tactics were unduly aggressive:

Cisco pursued litigation about as aggressively as the court has seen in its judicial experience.  While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.

One example – was that Cisco maintained 19 invalidity theories until the eve of trial — then only presented two of them at trial along with defenses that were contrary to both the evidence and prior court rulings. The district court also noted that the willfulness finding by the jury contributed to the decision to award attorney fees.  Because the now-modified willful infringement judgment served as one basis for the enhanced damages, the appellate panel also vacated the enhanced damages for reconsideration on remand.

In its original opinion, the appellate panel had explained that there was sufficient evidence of bad behavior to justify a fee award even without willfulness — and thus had affirmed an award.  In the modified opinion, the court instead vacated the finding of exceptional case — likely because that decision is supposed to be within the discretion of the district court.

[Modified Opinion]

In its petition for rehearing, Cisco had also asked for reconsideration of the eligibility decision.  That portion of the petition was denied.  EFF had filed a petition in support of rehearing, arguing that “the claims here fall squarely within a category of abstract ideas that is now well-established: claims that involve collecting, analyzing, and displaying information without more.”

Network Monitoring and . . .

Relevant claim:

1. A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:

deploying a plurality of network monitors in the enterprise network;

detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from the following categories:

• network packet data transfer commands,
• network packet data transfer errors,
• network packet data volume,
• network connection requests,
• network connection denials,
• error codes included in a network packet;

generating, by the monitors, reports of said suspicious activity; and

automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.

Overview: This post lists a variety of scholarly papers that have been written about the world of Software Law.

Papers: 

• Mark A. Lemley: Software Patents and the Return of Functional Claiming (SSRN)
• Lawrence B. Solum: Models of Internet Governance (SSRN)
• David McGowan: Legal Implications of Open-Source Software (SSRN)
• Michael J. Madison: Legal-Ware: Contract and Copyright in the Digital Age (SSRN)
• Shawn P. Miller: ‘Fuzzy’ Software Patent Boundaries and High Claim Construction Reversal Rates (SSRN)

Send your Software Law updates to grant@patentlyo.com

Westech v. 3M (Fed. Cir. 2019)

Westech sued 3M for patent infringement in W.D.Washington. On motion from 3M, the district court then dismissed the case for improper venue under 28 U.S.C. 1400(b).  Under the statute, infringement cases can only be brought in a judicial district where the defendant either (1) resides (i.e., is incorporated) or (2) infringed the patent and has a regular and established place of business.  Here, the focus is on 3M’s sales activities with vendors, distributors, and sales professionals — and whether those activities constitute a “regular and established place of business.”  Two key precedential cases: In Cray, the Federal Circuit held that a “place of business” must be a “physical place in the district.”  In ZTE, the Federal Circuit held that it is the plaintiff’s burden of establishing proper venue (burden of persuasion).

Westech’s amended complaint states:

3M has one or more regular and established places of business in this judicial district. Furthermore, on information and belief, Defendants maintain contractual relationships with distributors of the infringing products who are located in this judicial district, Defendants have sales representatives located in this judicial district, Defendants represent that they sell products in this judicial district, and Defendants earn substantial sales revenue from sales of the infringing products in this judicial district.

Sufficient for venue? The district court saw these allegations as insufficient and the Federal Circuit has affirmed on appeal.  On point – The asserted facts do not lead to a conclusion that 3M has a physical place of business in the district, and the allegation that 3M has “regular and established places of business” is a legal conclusion not given any weight in the analysis. The court explains:

Simply stating that 3M has a regular and established place of business within the judicial district, without more, amounts to a mere legal conclusion that the court is not bound to accept as true. . . .

A presumption that facts pleaded in the complaint are true does not supplant a plaintiff’s burden to plead specific facts showing that the defendant has a regular and established place of business physically located in the judicial district.

Question of Law: The statements by the court here is a bit oblique, but it may be the first precedent expressly stating that whether the defendant “has a regular and established place of business” in the district is a question of law and not a question of fact.  In Cray, the court indicated that the analysis will be based upon underlying facts: “In deciding whether a defendant has a regular and established place of business in a district . . . each case depends on its own facts.”

by Dennis Crouch

In re Global IP Holdings (Fed. Cir. 2019)

In its reissue application, Global IP asked the PTO to broaden its carpeted-car-floor patent by changing the “thermoplastic” requirement to simply “plastic.”  The PTO rejected the reissue application on written description grounds — noting that the specification only discloses the use of thermoplastics and not parts “formed generally from plastic materials.”  According to the examiner, the broader scope constituted “new matter.”  The PTAB made clear that the, although “plastics” might be enabled and within the skill of someone in the art, the patent document does not show possession of that invention:

[R]egardless of the predictability of results of substituting alternatives, or the actual criticality of thermoplastics in the overall invention,[Global’s] Specification, as a whole, indicates to one skilled in the art that the inventors had possession only of the skins and core comprising specifically thermoplastic.

PTAB Decision.

On appeal, the Federal Circuit has vacated — can you spot the written description error?

In its opinion, the Federal Circuit explained that the level of written description required to show possession “varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology.” Ariad.  Thus, the Board erred by stating that the predictability and criticality made no difference.

Contrary to the Board’s statement, the predictability of substituting generic plastics for thermoplastics … is relevant to the written description inquiry. . . . In addition to predictability, we have held that the criticality or importance of an unclaimed limitation to the invention can be relevant to the written description inquiry.

In other words, a variation predictable to PHOSITA is more likely to covered by the written description (as compared with an unpredictable variation). Likewise, variation of a non-critical component of the invention is more likely to be covered by the written description (as opposed to a component at the point of novelty).

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Note here that in this case the Examiner/Board raised a standard written description challenge. On remand, they might achieve better results by focusing on the heightened written description standard for broadening reissues.

Heightened Written Description Standard for Reissue Patents

by Dennis Crouch

Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC (Fed. Cir. 2019)

In a 7-5 decision, the Federal Circuit has denied Athena’s petition for en banc rehearing on the question of eligibility of diagnostic patents. As discussed below, the en banc denial includes eight (8) separate opinions — all of which call for Supreme Court or Congressional intervention. Judge Moore explains:

This is not a case in which the judges of this court disagree over whether diagnostic claims, like those at issue in Athena, should be eligible for patent protection. They should. None of my colleagues defend the conclusion that claims to diagnostic kits and diagnostic techniques, like those at issue, should be ineligible. The only difference among us is whether the Supreme Court’s Mayo decision requires this outcome.

Athena and its co-petitioners Oxford University and the Max-Planck institute asked the Federal Circuit to address two particular questions:

1. Whether this Court now recognizes a categorical bias against patent claims to methods of diagnosis, an impermissible expansion of the Supreme Court’s narrowly defined judicial exception to patent eligible subject matter under 35 U.S.C. § 101.
2. Whether courts may now exclude claim elements that they deem “conventional” in determining whether the claim is “directed to” patent eligible subject matter, or does Supreme Court authority requiring that claims be assessed “as a whole” still apply in Section 101 analysis.

Athena’s claim at issue covers a method for diagnosing neurotransmission disorders by obtaining “bodily fluid” and running a set of lab tests to identify whether the fluid contains a “MuSK” complex.  I described the patent in a prior post:

Diagnosis: Ineligible

In its original decision, the Federal Circuit found the claim directed to an ineligible preexisting law of nature: “the correlation between the presence of naturally-occurring MuSK autoantibodies in bodily fluid and MuSK-related neurological diseases.” The court found the additional concrete steps in the claim were all “standard techniques in the art” and thus did not rise to a patentable inventive concept.

The en banc denial includes eight (8) separate opinions

• Concurring opinion by Judge Lourie: Although we disagree with the Supreme Court, we are bound by its precedent. Thus, there is no need to revisit this case. (joined by Judges Reyna and Chen)
• Concurring opinion by Judge Hughes:  “[T]his is not a problem that we can solve. As an inferior appellate court, we are bound by the Supreme Court. . . . I, for one, would welcome further explication of eligibility standards in the area of diagnostics patents.” (joined by Chief Judge Prost and Judge Taranto)
• Concurring opinion by Judge Dyk: Section 101 is necessary — sometimes it is the only defense against overbroad patents that would stifle future discoveries.  However, the claims in this case are specific enough and have proven utility an provide the Supreme Court with a good vehicle “to refine the Mayo framework.” (Joined by Judge Hughes, and partially joined by Judge Chen)
• Concurring opinion by Judge Chen: Under Diehr, the claims are patent eligible — but not under Mayo.
• Dissenting opinion by Judge Moore: The claims in this
  case should be held eligible, and they are distinguishable
  from Mayo — especially when that case is read in light of Myriad. (joined by Judges O’Malley, Wallach, and Stoll)
• Dissenting opinion by Judge Newman: Medical diagnostics methods are critically important for society and the patent system should encourage their development.  Mayo does not create any anti-diagnosis rule. (joined by Judge Wallach)
• Dissenting opinion by Judge Stoll:  Although the decision here is foreclosed by Mayo, the court should rehear the case because it is so important. (joined by Judge Wallach)
• Dissenting opinion by Judge O’Malley: The Supreme Court is simply wrong in its statutory interpretation of 35 U.S.C. 101. 

The statements here by the judges have no direct impact on the law and are all 100% dicta.  That said, this collection of opinions is designed to send a powerful signal to both the Supreme Court and – perhaps more importantly to Congress – that all members of the “high patent court” see a major problem with the law as it stands now.

Of some interest – the judges were almost uniformly all careful to focus their attention on medical diagnosis inventions — suggesting a targeted solution that would not extend to business methods and other information-based inventions.

by Dennis Crouch

Innovation Sciences, LLC v. Amazon.com, Inc. (Fed. Cir. 2019)

Eligibility: Of the three patents in suit, the district court found one ineligible under 35 U.S.C. § 101. U.S. Reissue Patent No. 46,140 (asserted claim 17).  The patent claims an use of a “payment server” in an online transaction to enhance transaction security, and the district found “securely processing a credit card transaction with a payment server” to be an unpatentable abstract idea. The key claim step includes the following limitation:

[R]eceiving credit card payment information at the payment server to buy items from a website … “wherein the credit card payment information is received after online communication of the buyer has been switched from the website listing the items to a website supported by the payment server, wherein the switching of the online communication of the buyer is after an indication from the buyer to buy the one or more of the items”

On appeal, the Federal Circuit affirmed the holding — finding that the claim “is directed to the abstract idea of securely processing a credit card transaction with a payment server.”  In reaching that conclusion, the court noted that the claim elements are written in “merely functional, result-oriented terms” — “an idea, having no particular concrete or tangible form.” (quoting Ultramercial).   Further, the recitation of “servers” limited the invention’s use to particular area of existing technology, but did not “render the claims any less
abstract.” (quoting Affinity Labs).

Regarding the wherein clause for switching from a regular server to a payment server, the court explained that the claim is merely directed to the abstract idea of switching — not any particular implementation or system improvement.

In Alice step two, the court explained “[t]here is no inventive concept in the claim’s use of a generic payment server ‘to perform well-understood, routine, and conventional activities commonly used in industry.'”

= = = = =

In the lawsuit, Innovation Services also asserted two other patents with claims that the Federal Circuit explained “are not a model of clarity and stray from the embodiments described in the specification.”

Still, with that framework, the court chose to give the claims their express meaning — broad enough to allow for infringement.  On remand though the court suggests review of the written description and enablement requirements. (“We do not express an opinion as to whether they satisfy the
requirements of § 112.”)

Romag Fasteners, Inc. v. Fossil, Inc., et al., No. 18-1233 (Supreme Court 2019).

The Supreme Court has granted writ of certiorari in the trademark case of Romag Fasteners involving profit disgorgement under 15
U.S.C. § 1117(a).

The statute appears to provide profit disgorgment (i.e., awarding the defendant’s profits) as a regular remedy for trademark infringement although “subject to the principles of equity.” In its decision, the Federal Circuit (following 2nd Circuit law) held that profit disgorgment must be associated with a more-egregious activity – such as willful infringement – before being awarded.  Here, the jury found no willful infringement and so that foreclosed the award of the defendant’s profits.  We are now set-up for the Supreme Court to decide the following question presented:

Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).

Question presented in petition.  The adjudged infringer Fossil provided its alternative question as follows:

Whether the Court should address the standard for an accounting of a defendant’s profits even though (a) regardless of the different formulations of “principles of equity” invoked by lower courts, their application in the overwhelming majority of cases results in an accounting being ordered when the infringement was willful and denied when it was not; and (b) the trial court’s findings in this case bar petitioner from recovering respondents’ profits under either standard applied by the courts of appeals.

The relevant statute itself reads as follows:

When a violation of any right of the registrant of a mark registered in the [PTO], a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

My reading of the statute itself suggests that non-willful infringement can support an award of defendant’s profits, so long as that award is in accord with “the principles of equity.”  And, those principles are not fully defined for this particular question. There is also a question of timing — principles of equity as of when? Are these 18th; 19th; 20th; or 21st century equity principles?

In the patent world, profit disgorgment is permitted as a remedy for design patent infringement.  That remedy is not expressly limited to willful infringement or limited by the principles of equity.  However, the remedy does require on-its-face an “imitation,” which in my mind should be read to require some amount of copying.

Do Not Track Act of 2019: Click Here to View

Overview: Do Not Track Act of 2019 is, in its simplest form, a way to regulate data collected by big tech companies. The bill would require the FTC to create a program that, upon request by the user, sends a “Do Not Track Signal” to websites and online applications. The Do Not Track Act of 2019 is an adaptation of its formers, with the new add on of regulating this for all of the internet activity, not just web browsers. The bill would require the FTC to create a program that, upon request by the user, sends a “Do Not Track Signal” to websites and online applications

Recent Articles:

• Mark Tapscott: Senate Bill Aims At Tech Giant Accountability ( The Epoch Times )
• Will Baird and Jim Harper: The Do Not Track Act: Should Regulators Or Consumers Shape The Information Economy? ( AIE )
• Makena Kelly: Senator Proposes Strict Do Not Track Rules In New Bill ( The Verge )

Send your Software Law updates to grant@patentlyo.com.