The following arguments will be available to the public live, both in-person and through online audio streaming. Access information will be available by 9 AM ET each day of argument at: https://cafc.uscourts.gov/home/oral-argument/listen-to-oral-arguments/.
Monday, December 2, 2024, 10:00 A.M.
Altria Client Services LLC v. R.J. Reynolds Vapor Co., No. 23-1546, Courtroom 402, Panel A
Altria Client Services LLC ("Altria") owns patents covering an e-cigarette device with a replaceable pod assembly. The replaceable pod assembly permits a user to change pods that contain e-vapor liquid more easily, and to reduce leaking of such liquid. R.J. Reynolds Vapor Co. ("Reynolds") makes and sells its "VUSE Alto" product, a pod e-cigarette device. Altria and Reynolds both generally sell products in the tobacco market. Altria sued Reynolds in the Middle District of North Carolina for patent infringement, asserting that its three pod e-cigarette patents were infringed by the VUSE Alto product. At trial, one of Altria's experts opined that, based on two licensing agreements, a 5.25% royalty rate would result from a hypothetical negotiation between Altria and Reynolds. Another Altria expert opined that the technical comparability between the technology at issue and that in the licensing agreements warranted no apportionment of the royalty rate. At the conclusion of a jury trial, a jury found that Reynolds's VUSE Alto product infringed all of Altria's asserted patents and awarded Altria $95 million in damages based on the 5.25% royalty rate. Reynolds moved for judgment as a matter of law (JMOL") regarding the damages award as well as moved for a new trial. The district court denied both of Reynolds's motions. Reynolds now appeals the denial of both motions.
Royalty Rate
Reynolds contends that insufficient evidence supported the jury's finding of a royalty rate of 5.25%. For its support, Reynolds points to the two licensing agreements that Altria's experts used in determining the rate. These agreements provided for licenses to the entire patent portfolio of a nonparty licensor. The licensor was an early participant in the e-cigarette market, and it entered into these two separate agreements: one with Reynolds and one with a subsidiary of Altria. Reynolds argues that these agreements involved fixed payments for the use of the licensor's entire patent portfolio for more than fifteen years; however, the damages for the period of infringement was only three years. Accordingly, Reynolds contends that the determined rate of 5.25% would cause it to pay more than either of these at-least-fifteen-year agreements for liability on a period of only three years of damages. Further, Reynolds notes that only one agreement explicitly mentions the 5.25% rate, which it argues only applies in limited scenarios as a "Variable Annual Payment" or a running royalty. These scenarios in which the 5.25% running royalty applied include transfers of products to third parties for sales outside of the U.S. and sales by later-acquired e-cigarette businesses—both of which, Reynolds contends, never occurred in the instant dispute. Thus, Reynolds contends that there was no evidence of economic comparability of the hypothetical negotiation to these running royalty-triggering scenarios that would warrant the 5.25% rate.
Meanwhile, Altria asserts that it was the jury's job to determine the royalty rate and that the jury heard the same arguments Reynolds currently asserts on appeal but still came to the 5.25% rate. Altria contends that its expert witnesses provided sufficient evidence to support the jury's findings. Specifically, Altria points to its expert testimony regarding the licensing agreements and their economic comparability to the hypothetical negotiation. Thus, Altria asserts that it would be improper for the Federal Circuit to disturb the jury's findings.
Apportionment
When proving reasonable royalty damages, a patentee must apportion damages based on the non-infringing features of an accused product. Apportionment can be "built in" to a prior license looked at for a hypothetical negotiation, where the prior license covers comparable technology. Thus, a patentee would not have to apportion its damages for the non-infringing features of the accused product.
Reynolds challenges the jury's conclusion that the two licensing agreements contained "built-in" apportionment. Reynolds makes multiple arguments in its support. First, Reynolds finds error in the court's admission of Altria's expert testimony. Reynolds argues that the experts failed to substantiate their failure to apportion, valued Altria's asserted patents for non-novel features, and ignored the non-infringing features of the VUSE Alto product. Further, Reynolds argues that, even if the expert testimony is admissible, there was insufficient evidence for built-in apportionment. Reynolds contends that Altria, in analyzing the licensing agreements, failed to show that the licensor's patents' value to the licensees was proportionate to the value of Altria's patents to the VUSE Alto product.
Altria, however, contends that sufficient evidence was presented to the jury, supporting its finding that apportionment was built-in to the compared licensing agreements. Altria notes that Reynolds only points out disagreements in its expert's opinion versus Altria's expert's opinion rather than the admissibility of Altria's expert opinion. Altria argues that both experts proffered opinions regarding the technological comparability and value of the asserted patents to the technology in the licensing agreements and that the jury chose to credit Altria's expert. Thus, Altria maintains that the Federal Circuit should not reweigh the evidence because sufficient evidence supported the jury's findings.
Monday, December 9, 2024, 10:00 A.M.
In re Fisher & Paykel Healthcare Ltd., No. 23-1558, Courtroom 402, Panel K
Fisher & Paykel Healthcare Limited ("FPH") appeals the Patent Trial and Appeal Board's ("the Board") decision finding the claims in FPH's Application No. 15/633,557 ("the '557 application") unpatentable. The '557 application generally relates to corrugated expiratory tubes used in ventilators and other assisted respiratory devices. The tubes described in the '557 application are made entirely from breathable materials that allow water vapor to escape to prevent condensation buildup.
In a Final Office Action, the Examiner found the '557 application's claims unpatentable based on two grounds of obviousness-type double patenting relying on two FPH owned patents claiming expiratory tubes in view of prior art that disclosed corrugated breathing tubes. On appeal, the Board affirmed both rejections. Finding that the claims in the '557 application were disclosed in FPH's other expiratory tube patents, the Board determined that it would have been obvious and a matter of ordinary skill to make the expiratory tubes from exclusively breathable material. FPH's expert testified that a person of skill in the art would not have a reasonable expectation of success in forming expiratory tubes with corrugated breathable material given the high manufacturing cost and the belief that these breathable materials lack structural integrity. The Board found the expert's testimony unpersuasive because, according to the Board, FPH's expert failed to support his testimony with specific limitations in the '557 application and narrowly defined the requisite ordinary skill in the art. Accordingly, the Board issued its Final Written Decision finding the claims in the '557 application to be unpatentable.
On appeal, the Federal Circuit will decide whether the Board erred in affirming both obviousness-type double patenting rejections.
FPH argues that the Board erred in finding the '557 application unpatentable. First, FPH contends that the Board relied on the wrong legal standard in evaluating the '557 application. According to FPH, the Board erred by analyzing the '557 application for double patenting instead of applying the principle of domination, which generally applies when a broader genus claim in one patent reads on a narrower claim of a second patent. Further, FPH asserts that the Board failed to properly weigh its expert's testimony and disregarded the evidence of record. In FPH's view, the Board failed to rebut its expert's testimony, suggesting that the Board was required to consider the expert declaration because it was the only evidence of record. Further, FPH argues that the Board incorrectly discounted its expert's testimony because the Board disagreed with its expert's definition of ordinary skill in the art, which FPH maintains was correct on appeal.
The USPTO counters that the Final Written Decision properly rejected the '557 application as unpatentable under both grounds of double patenting. First, the USPTO maintains that FPH's domination argument was untimely because FPH did not raise the argument in its opening appeal brief to the Board. The USPTO further asserts that the Board applied the appropriate legal standards under a double patenting analysis. Specifically, the USPTO argues that the '557 application was an obvious combination of the earlier patents in view of the prior art, which the USPTO contends supports a rejection for obviousness-type double patenting. Finally, the USPTO argues that it did not abuse its discretion in evaluating FPH's expert, his credibility, and his testimony and finding his declaration to be inconsistent and unreliable.
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