As discussed in an earlier
article, the final decision in the first covered business
method review (CBM) in SAP America, Inc. v. Versata Data
Development Group, PTAB Case CBM2012-00001, presents many issues
of first impression regarding the scope of AIA trials. Most
recently, the Federal Circuit refused SAP's attempts to
overturn a $391 million jury award for patent infringement based on
a subsequent finding of unpatentability by the PTAB.
Versata sued SAP alleging infringement of U.S. Patent No.
6,553,350, which covers a method and apparatus for pricing products
and services. A jury found SAP liable for infringement and awarded
$391 million for lost profits and reasonable royalty. The Federal
Circuit affirmed the jury verdict on infringement and damages on
appeal, but remanded the case as to the injunction.
During the pendency of the appeal, SAP filed a petition for CBM
Review to challenge the validity of several claims of the '350
patent. The PTAB agreed with SAP's petition and ultimately
determined that the challenged claims encompass unpatentable
abstract ideas.
SAP then tried to rely on the PTAB's decision to vacate the
jury verdict. The District Court refused, reasoning, inter
alia, that "[t]o hold that later proceedings before the
PTAB can render nugatory that entire process, and the time and
effort of all of the judges and jurors who have evaluated the
evidence and arguments would do a great disservice to the Seventh
Amendment and the entire procedure put in place under Article III
of the Constitution."1
Undeterred, SAP appealed to the Federal Circuit. In response,
Versata moved to dismiss the appeal or summarily affirm the
District Court's final judgment and subsequent Federal Circuit
affirmance.2 The Federal Circuit sided with Versata and
determined that SAP's effort to overturn the jury verdict was
"without merit." Id.
Comparing the outcome in Versata with the Federal
Circuit's ruling in Fresenius USA v. Baxter Int'l.,
Inc., shows the importance of timing.3 In
Fresenius, a finding of patent invalidity during a
concurrent ex parte reexamination proceeding was
sufficient to overturn a court's finding of patent validity
where judgment had not yet been entered. The Federal Circuit upheld
the USPTO's invalidity decision, because a court's validity
decision is not "final" for purposes of res
judicata until judgment is entered, and once claims are
invalidated by the PTO, the patentee "no longer has a cause of
action." The Federal Circuit denied a rehearing en
banc, and the Supreme Court denied certiorari.
Fresenius and Versata can be reconciled if the timing
of the PTO's decision is considered relative to the progress of
the litigation: in Fresenius, the judgment had not yet
been entered; in Versata, judgment had been
entered.4
Thus, under current Federal Circuit precedent, the timing of a PTAB
decision (and correspondingly, the timing of a petition) is vitally
important. For patent litigation where the district court does not
stay the case in favor of an AIA trial, the Versata and
Fresenius decisions may mean that depending on the speed
of the litigation and the ultimate entry of judgment, a finding of
unpatentability in an AIA trial may or may not trump a district
court's finding of patent validity. That said, given the two
different panel decisions in front of the Federal Circuit,
litigants may have to wait for an en banc decision to get
any real certainty on the issue.
Footnotes
1 Versata Software, Inc. v. SAP America, Inc., Case 2:07cv153-RSP (Order dated April 21, 2014).
2 See Versata Computer Industry v. SAP AG, per curiam opinion dated June 18, 2014, 2014-1430 (Fed. Cir. 2014)./p>
3 Fresenius USA, Inc. v. Baxter Int'l, Inc., 721 F.3d 1330, 1335 (Fed. Cir. 2013), cert. denied, 134 S. Ct. 2295 (U.S. 2014).
4 See Versata Software, Inc. v. SAP America, Inc., Case No. 2:07cv153-RSP (April 21, 2014 Order).
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