United States: How To Win On Appeal – Steptoe's Federal Circuit Update: April 2021

Why Are Decisions Reversed and Vacated?

In this series of monthly updates, we summarize decisions where the Federal Circuit reversed or vacated PTAB or trial court rulings, which can provide guidance on how to succeed on appeal.

Quick takeaways:

• A district court must articulate an explanation for excluding expert testimony.
• If a means-plus-function term claims a function that cannot be performed by a general-purpose computer without special programming, such as an algorithm, then the specification must disclose that special programming, or the claim will be invalid for indefiniteness.
• Evidence that repeated application of a treatment yields a claimed performance result does not warrant summary judgment of infringement of a claim that requires the performance result after a single application. Nor is evidence that a product "usually" contains an ingredient sufficient to warrant summary judgment of infringement where the claims require that ingredient.
• When a district court takes no action on a motion to transfer for months, with no indication of an impending resolution, mandamus is appropriate to require a prompt ruling on the motion to transfer, with all other proceedings stayed.
• Where a party sets forth evidence of the knowledge required for induced infringement and the opposing party does not contest the issue, it is error for the judge to sua sponte rule that the requisite knowledge is not proven.
• A claim term should not be construed to read in a limitation that excludes disclosed embodiments, particularly where the purpose of the claimed structure can be served without that limitation. Further, infringement under the doctrine of equivalents is not a rigid choice; rather it can be supported by detailed explanation that the accused products perform the same claimed function in the same way, achieving the same claimed results.
• A reference patent does not constitute § 102(e) prior art when the Board's cited basis for anticipation refers only to the portions of the reference conceived by the inventor of the patent at issue.

Finalrod IP, LLC v. John Crane, Inc., Case No. 20-1865 (Fed. Cir. Mar. 1, 2021)

In this nonprecedential opinion, the Federal Circuit vacated a district court's decision regarding the inadmissibility of expert testimony. The plaintiffs ("Superod") sued John Crane, Inc., for patent infringement, and the district court granted John Crane's Daubert motion to exclude Superod's technical expert from testifying as to whether John Crane's accused products met several disputed limitations of the asserted patents. Following that decision, the parties stipulated to a final judgment of noninfringement. Superod appealed to challenge the district court's ruling on the Daubert motion.

The Federal Circuit cited regional circuit law holding that a district court excluding expert testimony "must articulate with reasonable specificity the reasons why it believes the testimony is insufficiently reliable" and that a district court abuses its discretion when it "fails to provide any analysis or explanation for its decision." Here, the Federal Circuit determined the district court failed to articulate such an explanation. The Federal Circuit therefore vacated the district court's exclusion of the expert testimony and remanded for the district court to examine the admissibility of that testimony again and "give reasons for its decision."

Rain Computing, Inc. v. Samsung Elec. Co., Ltd., Case No. 20-1646 (Fed. Cir. Mar. 2, 2021)

The district court ruled that the asserted claims of Rain's patent were not invalid as indefinite but also ruled that Samsung did not infringe the asserted claims. Rain appealed the judgment of noninfringement, and Samsung cross-appealed the judgment that the asserted claims are not indefinite.

The Federal Circuit agreed with the district court that the claimed "user identification module" was a means-plus-function term, since "module" is a well-known nonce word that can operate as a substitute for "means." Further, the Federal Circuit noted that a means-plus-function term can be nested in a method claim.

To construe the means-plus-function term "user identification module" and determine whether it is indefinite requires (1) identifying the claimed function and (2) determining what structure, if any, disclosed in the specification corresponds to the claimed function. The term is indefinite if no such structure was disclosed in the patent.

The Federal Circuit agreed with the district court that the function of the claimed "user identification module" was to "control access." The district court had found that computer-readable media and storage devices disclosed in the specification provided sufficient structure corresponding to that function. The Federal Circuit disagreed. The panel held that the computer-readable media and storage devices amounted to nothing more than general-purpose computers, which could not perform the "control access" function absent some special programming, i.e., an algorithm.

Since nothing in the claim language or the specification provided an algorithm to achieve the claimed function of the means-plus-function term, the Federal Circuit held that the means-plus-function term lacked sufficient corresponding structure and thus rendered the claim indefinite. The Federal Circuit therefore reversed the district court's judgment that the asserted claims were not indefinite and dismissed Rain's appeal regarding noninfringement as moot.

Olaplex, Inc. v. L'Oréal U.S., Inc., Case No. 19-2280 (Fed. Cir. Mar. 4, 2021)

 The district court granted the patent owner's, Olaplex's, motion for summary judgment of direct and indirect infringement and issued a permanent injunction against the accused infringer, L'Oréal. While the Federal Circuit affirmed the district court's claim construction and agreed that certain claim limitations were met, it vacated and remanded the infringement decision because genuine questions of material fact remained regarding infringement under that claim construction.

The asserted claims related to hair treatment, requiring applying a mixture with a first active agent and then applying a second active agent. Certain dependent claims also required the treatment to decrease hair breakage by at least 5%, 10%, or 20%, respectively. Olaplex relied on L'Oréal's marketing materials and internal testing to show that the accused products caused a 70% reduction in hair breakage, which the district court found sufficient to meet the limitations of the dependent claims. The Federal Circuit disagreed because the marketing materials and the internal testing involved repeated applications of bleach and maleic acid, but the claims required specific breakage reductions following a single application. Therefore, there was a question of material fact concerning whether L'Oréal's accused products met the breakage-reduction limitations of the dependent claims. 

The claims as construed also required the use of a bleach powder comprising at least a persulfate and an alkalizing agent. Olaplex contended that the use of persulfate in bleach powders was common knowledge, but Olaplex's cited evidence qualified that statement with "usually." The Federal Circuit held that this qualification raised a question of fact as to whether L'Oréal's bleach powders include a persulfate. Moreover, although Olaplex had presented evidence that L'Oréal sold bleach powders containing a persulfate, Olaplex had not demonstrated that L'Oréal used those particular bleach powders in its internal breakage testing, casting further doubt on whether the products met the claimed performance standards. Moreover, Olaplex had not shown that any accused direct infringers actually used L'Oréal's bleach powder with a persulfate as part of the accused treatment method. Therefore, the Federal Circuit held that questions of material fact concerning the bleach powder limitation precluded summary judgment of infringement.

The Federal Circuit assigned error with regard to an additional class of L'Oréal products that were applied to the hair by customers at home, days or weeks after the salon stylists applied the first two products. Although the claimed "subsequent" application of the product did not impose a specific time limit, the Federal Circuit noted that the claims already encompass application of two products in a single visit, and so it would be unreasonable, at least on the summary judgment record, to extend performance of the claimed method to further encompass the self-application of a third product. This conclusion was bolstered by the fact that the claims called for applying a "second active agent," while the product in question would have been a "third, not second, active agent formulation." Therefore, the Federal Circuit vacated the order of summary judgment as to the at-home products.

In re TracFone Wireless, Inc., Case No. 21-118 (Fed. Cir. Mar. 8, 2021)

TracFone petitioned for a writ of mandamus directing the district court to transfer the case, or in the alternative, to stay proceedings until such time the district court rules on TracFone's motion to transfer. The Federal Circuit granted the petition. 

Precis filed this patent infringement suit against TracFone in April 2020. TracFone promptly moved to dismiss the case based on improper venue. Shortly after the venue motion was fully briefed, the district court issued a scheduling order for discovery, a Markman hearing set for the end of 2020, and trial. 

After three months without action on the venue motion from the district court, TracFone moved to stay all proceedings pending resolution of its venue motion. TracFone further requested a ruling on its venue motion prior to the scheduled Markman hearing. The district court did not rule on TracFone's stay motion and carried on with the Markman hearing as scheduled. TracFone petitioned for a writ of mandamus in March 2021. 

The Federal Circuit has addressed similar circumstances in previous cases and explained that lengthy delays in resolving transfer motions can frustrate the intent of § 1404(a) by forcing defendants "to expend resources litigating substantive matters in an inconvenient venue while a motion to transfer lingers unnecessarily on the docket." District courts therefore must give promptly filed transfer motions "top priority" before resolving the substantive issues in the case. Even though the panel noted this case was "strikingly similar" to SK Hynix—indeed it involved the same judge, Judge Albright of the Western District of Texas—the Federal Circuit noted that unlike in SK Hynix where a hearing on the transfer motion had been scheduled, the district court in this case had taken no action to suggest it was proceeding towards quick resolution of the motion at all. 

Accordingly, the Federal Circuit granted the petition for writ of mandamus and ordered the district court to issue its ruling on the motion to transfer within 30 days and to stay all proceedings. 

Edgewell Personal Care Brands v. Munchkin, Inc., Case No. 20-1203 (Fed. Cir. Mar. 9, 2021)

Edgewell sold the "Diaper Genie," a diaper pail system that collected soiled diapers and used a replaceable "cassette" to wrap around the diapers. Munchkin sold refill cassettes that it marketed as compatible with Edgewell's Diaper Genie. Edgewell sued, asserting that Munchkin's products infringed two patents that Edgewell held concerning diaper pails, the '420 patent and the '029 patent. After the district court issued a claim construction order, Munchkin moved for, and the district court granted, summary judgment of noninfringement of the '420 patent and the '029 patent. The Federal Circuit disagreed with the district court on both decisions. 

The '420 patent was directed to a cassette with a "clearance" located in a bottom portion of the cassette, which the specification indicated was to prevent installing the cassette upside down. The parties agreed that Munchkin's cassettes included a clearance standing alone. The question was whether the claims required a clearance after the cassette was installed, which Munchkin's cassettes lacked. The district court construed the claims to require a clearance after installation and so granted summary judgment of noninfringement. The Federal Circuit disagreed. The panel compared the numerous embodiments disclosed in the specification and noted that in most of the embodiments a complementary structure in the pail engaged with the clearance of the cassette when properly installed, while that structure would prevent upside down installation. That purpose could be served whether or not a clearance remained after installation. Indeed, requiring such a clearance would have been "at odds with many of the disclosed embodiments." Therefore, the Federal Circuit concluded the district court erred in its construction of "clearance" and so vacated the district court's grant of summary judgment of noninfringement of the '420 patent and remanded. 

Apart from its substantive arguments on the "clearance" term in the '420 patent, Munchkin also contended that Edgewell failed to properly raise that issue on appeal, because Edgewell challenged only the district court's summary judgment order, not its initial claim construction ruling. The Federal Circuit rejected Munchkin's argument, noting that the district court's summary judgment order resolved a further claim construction issue that had not been addressed by the original construction. So Edgewell had not forfeited the argument. 

The '029 patent was directed to a cassette with a ring-shaped cover that extended over tubing, claimed as an "annular cover," and the claims further required a "tear-off" section that allowed access to the tubing. The district court construed "annular cover" as a single structure including a top portion and an inner portion, and it construed the "tear-off" section as part of the same structure. Munchkin's accused cassettes included only a two-part cover. Under the district court's construction, then, Edgewell limited its infringement theory to the doctrine of equivalents. The district court held that Munchkin's two-part cover could not infringe under the doctrine of equivalents because that would vitiate the single-structure construction of that limitation. The Federal Circuit disagreed. Although the panel agreed with the district court's construction, it held that the district court erred in applying that construction as a binary choice between a single-component structure and a multi-component structure, rather than allowing for the inquiry into whether, under the evidence, a reasonable juror could find that the accused products perform substantially the same function, in substantially the same way, achieving substantially the same result as the claims. 

And Munchkin's witnesses had indeed provided detailed analysis of the function-way-result test that a jury could credit, notwithstanding Munchkin's two-part structure. This detailed testimony, the Federal Circuit held, raised a sufficient question of fact to preclude summary judgment of noninfringement under the doctrine of equivalents. Accordingly, the Federal Circuit reversed the judgment of noninfringement of the '029 patent and remanded. 

Caterpillar Prodotti Stradali v. ITC, Case No. 19-2445 (Fed. Cir. Mar. 15, 2021

 Wirtgen filed a complaint against Caterpillar at the International Trade Commission (ITC) for violation of Section 337 based on Caterpillar's importation and sale of road-milling machines that allegedly infringed Wirtgen's patents. The ITC found violations with respect to Wirtgen's '530 and '309 patents but found no violation with respect to Wirtgen's '641 patent. Specifically, the ITC concluded that Caterpillar did not induce infringement of the '641 patent. Caterpillar appealed the violation findings, and Wirtgen cross-appealed the no-violation finding. In a nonprecedential decision, the Federal Circuit affirmed the violation findings on Caterpillar's appeal, but vacated the ITC's determination of no violation on Wirtgen's cross-appeal. 

In determining that there was no induced infringement of the '641 patent, the ITC had found that Wirtgen presented no evidence of the knowledge required for induced infringement, i.e., that Caterpillar knew of the patent and knew that the actions it allegedly induced were infringing. 

The Federal Circuit disagreed. The Federal Circuit recognized that Caterpillar never disputed Wirtgen's allegations regarding the requisite knowledge. Further, the panel reviewed Wirtgen's cited evidence directly and concluded that the "only reasonable understanding" was that it showed the requisite knowledge. The ITC had wholly overlooked Wirtgen's evidence and, despite no contest on the point by Caterpillar, decided sua sponte that Wirtgen had not proved the requisite knowledge. The Federal Circuit ruled that the ITC's finding was not reasonable and not supported by substantial evidence, and the Federal Circuit therefore reversed this finding and vacated the ITC's determination of no induced infringement. 

Judge O'Malley of the Federal Circuit authored a separate concurring opinion agreeing with the majority's judgment but reiterating her opinion that Section 337 does not give the ITC authority over products that infringe method of use claims under a theory of induced infringement only after importation, as she had stated in her dissent from the en banc decision in Suprema, Inc. v. Int'l Trade Comm'n, 796 F.3d 1338, 1354 (Fed. Cir. 2015) (en banc) (O'Malley, J., dissenting).

 Ethicon LLC v. Intuitive Surgical Inc., Case, No. 20-1600 (Fed. Cir. Mar. 15, 2021)

 PTAB found unpatentable several challenged claims of the '658 patent, which identified Shelton as the sole inventor. It also denied Ethicon's contingent motion to amend to substitute new proposed claims, finding Ethicon's substitute claims anticipated under § 102(e) over a reference patent, "Shelton I", that named Shelton as one of the three inventors. The Federal Circuit affirmed the determination with regard to the challenged claims but reversed as to anticipation of the new proposed claims. 

On appeal, Ethicon argued that Shelton I could not constitute prior art to the proposed substitute claims because Mr. Shelton was the sole inventor responsible for conception of the portions of Shelton I that the Board relied on to find Ethicon's proposed substitute claims anticipated. Therefore, according to Ethicon, Shelton I was not invented "by another" for purposes of identifying prior art under 35 U.S.C. § 102(e). 

To decide whether a reference patent was invented "by another," the Board first must determine what portions of the reference patent were relied on as prior art to anticipate the claim limitations at issue. See Duncan Parking Technologies, Inc. v. IPS Group Inc., 914 F.3d 1347 (Fed. Cir. 2019). The Federal Circuit found the Board did not correctly identify the portions of Shelton I that Intuitive relied on to anticipate the proposed substitute claims. Specifically, Mr. Shelton's declaration identified certain paragraphs of Shelton I as containing concepts conceived by the other two inventors, but Intuitive's response to the motion to amend did not rely on those paragraphs as providing the anticipating disclosure. Rather, the panel noted, Intuitive's claim chart mapped the proposed new claims to a completely separate range of paragraphs in Shelton I—contrary to the Board's recitation of Intuitive's position. Thus, contrary to the Board's finding, Mr. Shelton's declaration did not admit the other two named inventors contributed to the disclosures Intuitive relied on.

The panel further rejected Intuitive's "post-hoc" defense of the Board's decision. Intuitive contended that the Board's express references to certain figures in Shelton I as anticipatory implicitly encompassed references to every paragraph describing those figures, including some that Mr. Shelton attributed to the other inventors—even though Intuitive had not expressly advanced those paragraphs as part of its anticipation theory. The Federal Circuit rejected this effort as an "attempt to bootstrap additional material into the anticipating disclosure" that Intuitive presented. 

For this reason, the Federal Circuit reversed the Board's finding that Shelton I constituted § 102(e) prior art that anticipated the proposed substitute claims and remanded for the Board to consider any alternative invalidity grounds.

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