United States: Spotlight On Upcoming Oral Arguments – November 2019

Samsung Electronics America, Inc. v. Prisua Engineering Corp., No. 19-1169, Courtroom 203

During Inter Partes Review (IPR) proceedings before the Patent Trial and Appeal Board, Prisua, the owner of U.S. Patent No. 8,650,591, argued that under IPXL Holdings, LLC v. Amazon.com, Inc., 430 F.3d 1377 (Fed. Cir. 2005), the Board could not apply prior art to claims that are allegedly indefinite as directed to both an apparatus and a method of using the apparatus, and that the Board does not have the statutory authority to cancel claims for indefiniteness in IPR proceedings. Samsung, the challenger, argued that the Board can apply prior art to claims, even when those claims are indefinite. In its decision, the Board found the claims to be indefinite under IPXL, so found Samsung’s burden to present a definite claim construction to prove invalidity not satisfied. The Board therefore declined to decide whether prior art can be applied to the claims. The Board also declined to decide whether it has the authority to cancel indefinite claims in IPR proceedings.

On appeal, Samsung argues that the Board has the authority to cancel claims for indefiniteness because, despite IPR petitions being limited to §§ 102 and 103 grounds, the Board has the inherent power under the statute to construe claims. Therefore, the Board is permitted to cancel claims for indefiniteness, “a straightforward application of claim construction.” Samsung also argues that, if the Board is unable to cancel indefinite claims, it should apply the prior art to the claims because “a person having ordinary skill in the art would [not] be uncertain about the scope of the claims.” Prisua argues that the Board lacks the statutory authority to cancel claims under § 112 and supports this argument by noting that the Supreme Court in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), held that the IPR proceedings are strictly defined by the petition, which cannot include § 112 grounds. Prisua also argues that the Board did not err in finding that Samsung failed to carry its burden to provide a claim construction to which the prior art may be applied.

Wednesday, November 6, 2019

Customedia Technologies, LLC v. DISH Network Corp., No. 19-1001, Courtroom 402

In its Covered Business Method (CBM) petition, DISH argued that U.S. Patent No. 7,840,437 is directed to the abstract idea of “delivering rented audio/video content to a user.” Customedia, the patent owner, argued that DISH’s characterization of the ’437 patent was overbroad and failed to account for key teachings of the claims. In its institution decision, the Board agreed with Customedia that DISH’s characterization was overbroad, so it amended DISH’s assertion to state that the claims are directed to “delivering rented audio/video electronic content to a user.” In its final written decision, the Board found the ’437 patent abstract based on its amendment to DISH’s characterization. The Board also added to its characterization of the ’437 patent four theoretical minimum steps that comprised the ’437 patent’s teachings, which DISH had not mentioned.

On appeal, Customedia argues that it was improper for the Board to sua sponte amend DISH’s characterization of the ’437 patent after the Board found that the claims were not directed to “delivering rented audio/video content to a user,” as DISH had stated in its petition. Customedia also argues that it was improper for the Board to further add the four theoretical minimum steps to DISH’s characterization without giving Customedia notice and an opportunity to respond. DISH argues that the Board’s institution decision is unreviewable under 35 U.S.C. § 314(d) and that the Board acted properly in not limiting its institution decision to “the particular words used in the petition” because it can base its institution decision “on all information in front of it, including the patent owner preliminary response.”

Warsaw Orthopedic Inc. v. Sasso, No. 19-1583, Courtroom 203

Dr. Sasso sued Medtronic and Warsaw (“Medtronic”) in Indiana state court for breach of a contract licensing U.S. Patent Nos. 6,287,313 and 6,562,046. Medtronic moved the Indiana court to remove the breach of contract case, which involved issues of patent claim coverage, to federal district court, based on the district court’s exclusive subject matter jurisdiction over cases arising under patent law. After the Indiana court declined this invitation, Medtronic filed a declaratory judgment action in district court seeking a declaratory judgment that it did not breach the contract because no valid claim of the ’313 and ’046 patents covers products for which Dr. Sasso claims royalties. The Indiana court held trial and entered judgment of breach of contract prior to a decision in the district court, so the district court found under the Wilton-Brillhart doctrine that it should not exercise its discretion to grant declaratory relief because doing so would upset the Indiana court’s judgment. The appeal follows the district court’s decision.

On appeal, Medtronic argues that the district court had exclusive original jurisdiction over the breach of contract case under 28 U.S.C. § 1338(a) because the case arose under federal patent law—the case requires resolving the patent claims’ scope and validity. Therefore, Medtronic argues, the Indiana court’s judgment was rendered without authority, so it should not impede the district court’s exercising declaratory judgment jurisdiction over the contract dispute. Dr. Sasso argues that the Indiana court’s judgment finds breach of contract regardless of valid claim coverage, so the court did not need to decide patent law issues and could exercise its discretion under 28 U.S.C. § 2201, regardless of federal subject matter jurisdiction.

Thursday, November 7, 2019

In re Fote, No. 18-2311, Courtroom 201

Conventional identity protection in a payment system involves a payor passing a check to a third party, which writes a check to the payee. When transferred to an electronic context, this system fails because chain of payment information discloses the payor’s identity to the payee and because the third party is vulnerable to attack. Fote therefore invented a system whereby a broker receives instructions from the payor and instructs the payor’s funding source to instruct a different third party to pay the payee from the third party’s account. During prosecution, the Examiner found that Fote’s acknowledgement that “conventionally, a payer can contract with a third party to make a payment on the payer’s behalf and in the third party’s name” was an admission that the claims are directed to “the abstract idea of electronic fund transfer using a third party.” Fote appealed the rejection to the Board, arguing that the claimed invention fixes a problem present only in the electronic commerce space because electronic communication presents “vulnerabilities unknown and inapplicable to . . . conventional arrangements” and that Fote’s solution to this problem is unique because it breaks up the “chain of transactional transmissions.” In its decision, the Board found the claims directed to an abstract idea and concluded that no aspect of the claim required non-conventional computer functioning.

On appeal, Fote argues that the claimed invention reconfigures the use of a third party in a fund transfer for use with an electronic commerce system. Contrary to the Board’s finding that the claims are directed to “the abstract idea of electronic fund transfer using a third party,” Fote argues that the invention presents a solution to problems that are due to the use of a third party in electronic fund transfers. The Patent Office argues that the Board properly characterized the claims as directed to “the use of a third-party intermediary to securely transfer funds between two parties” because the claim language itself requires only the conventional step of not divulging the payor’s real account information to the payee.

Friday, November 8, 2019

Presidio Components, Inc. v. American Technical Ceramics Corp., No. 18-2380, Courtroom 201

As a result of a trial finding that ATC infringed U.S. Patent No. 6,816,356, the jury awarded lost profits to Presidio based on ATC’s infringing sales. The jury did not calculate a reasonable royalty rate on the infringing sales because it had calculated a lost profit value instead. The district court entered judgment of willful infringement with damages in the amount of the lost profits that the jury had found and entered a permanent injunction. The district court’s permanent injunction ruling relied, in part, on the jury’s lost profit award.

On appeal, the Federal Circuit found the award of lost profits improper, so vacated and remanded the case for a new trial to determine a reasonable royalty rate. The Federal Circuit also vacated the portion of the permanent injunction judgment that relied on the jury’s lost profits award. On remand, the district court stayed the permanent injunction and, in compliance with the Federal Circuit’s mandate, ordered a new trial to determine a reasonable royalty. In response to the stay of the injunction, ATC began selling the products that the jury had found infringed and charged a marked-up rate for these products based on a fee the district court required ATC to pay to Presidio on ongoing sales. In its scheduling order, meanwhile, the court noted that it would not set an ongoing royalty rate on ATC’s infringing sales from after the original trial, but would allow the jury to calculate a single royalty rate, and ordered that it would exclude all evidence relating to these post-trial infringing sales except for the number of units sold. Therefore, the jury was to determine a reasonable royalty rate for all infringing sales—pre- and post-trial—without being permitted to consider the increased price that ATC charged for its post-trial infringing sales. The parties therefore stipulated to an amended judgment subject to an appeal, and the court entered a permanent injunction against future infringing sales.

On appeal, Presidio argues that the district court should have allowed evidence of average sales price, profit, and commercial success of the post-trial infringing sales because this evidence is relevant to the Georgia-Pacific factors used to calculate reasonable royalty rates. Presidio also argues that the district court erred in re-opening the record to permit the jury to determine a reasonable royalty rate for post-trial infringing sales instead of allowing the jury to determine a reasonable royalty for the period covered by the original trial then determining the ongoing royalty rate for the post-trial infringing sales. ATC argues that Presidio failed to meet its burden of demonstrating newly discovered evidence, clear error, or an intervening change in controlling law to modify the district court’s scheduling order. ATC also argues that Presidio’s request for an ongoing royalty is an impermissible attempt to circumvent the Federal Circuit’s mandate, which ordered a new trial to determine a reasonable royalty rate.

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