Federal Circuit Update (March 2017)

March 28, 2017

This March 2017 edition of Gibson Dunn’s Federal Circuit Update discusses summary affirmance at the Federal Circuit, two recent Supreme Court decisions on laches and exhaustion, and the Federal Circuit cases now pending before the Supreme Court.  This update also provides an overview of the process for petitioning for mandamus before the Federal Circuit.  Also included are summaries of the two pending en banc cases involving motions to amend claims during inter partes review and judicial review of timeliness determinations in inter partes review, as well as a two key recent decisions relating to admissibility of settlement agreements in support of a reasonable royalty and eligibility of a patent for covered business method review.

Summary Affirmance Before the Federal Circuit.  The Federal Circuit can summarily affirm an appeal–without an opinion–under Fed. Cir. R. 36.  This has led to some controversy by appellants who would have preferred a written decision or viewed a summary affirmance as a lack of attention by the Court.  On March 3 (as reported here), Judges Kimberly Moore and Kara Stoll addressed the Court’s continued use of Rule 36 judgments as part of a panel discussion at the PTAB Bar Association’s inaugural conference in Washington, D.C.  With respect to the Court’s use of Rule 36 judgments, Judge Moore said:  "I know everybody wants an opinion.  I would love to have enough hours in the day to write every single one of you an opinion.  But sometimes . . . it’s clear why you lose.  I don’t think that anyone that ever comes to an oral argument that I’ve participated in loses and doesn’t know why."  Judge Stoll explained that a Rule 36 judgment should not be viewed as indicating that less time or effort was put into a given case:  "It’s just an indication that the decision below is affirmed . . . It doesn’t mean that the time and effort wasn’t made." 

The Supreme Court.  The Supreme Court issued two important decisions on appeal from the Federal Circuit since our last update: 

In SCA Hygiene Products v. First Quality Baby Products, No. 15-927 (Mar. 21, 2017) (available here), the Supreme Court addressed the availability of laches as defense in patent infringement cases.  In a 7-1 decision written by Justice Alito, the Supreme Court held that laches cannot be invoked as a defense in patent infringement suits that are brought within the Patent Act’s six-year limitations period.  The Court reasoned that because the Patent Act contains a statutory limitations period for recoverable damages, laches cannot further shorten the window for filing suit.  The Court stated that it "would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim."  Justice Breyer dissented, arguing that for more than a century courts have uniformly applied laches in patent damages cases to fill a "gap" in the statutory regime. 

In Life Technologies Corp. v. Promega Corp., No. 14-1538 (Feb. 22, 2017) (available here), the Supreme Court unanimously held that exporting a single component cannot constitute "all or a substantial portion of the components" of a patented invention under U.S.C. § 271(f)(1), and therefore cannot trigger liability for infringement abroad.  Rather, more than one component must be exported to constitute induced infringement.  The Court reasoned that the reference to a "substantial portion" in the statute was a quantitative rather than a qualitative requirement, as a qualitative requirement would render the phrase "of the components" without meaning.  This reading was supported by the plural nature of the word "components" appearing several times in § 271(f)(1), and the singular nature of "component" in § 271(f)(2).

The Supreme Court has also granted certiorari on five cases from the Federal Circuit.  Below is a table summarizing the status of those cases. 

Upcoming En Banc Federal Circuit Cases

In re Aqua Prods., Inc., No. 15-1177 (Fed. Cir.):  Allocations of the burdens of persuasion and production when a patent owner moves to amend in an inter partes review proceeding.

The PTAB instituted an inter partes review proceeding against Aqua’s patent, which relates to automated swimming pool cleaners.  Aqua moved to amend the challenged claims to distinguish the cited prior art.  The PTAB, however, denied Aqua’s motion, determining that Aqua failed to carry its burden of showing patentability of the proposed substitute claims over the prior art of record.  On appeal, the PTO intervened to defend the PTAB’s decision.  The Federal Circuit affirmed, holding that the PTAB properly considered all of the arguments that Aqua had raised and that precedent upheld the PTAB’s approach of allocating to the patentee the burden of showing that the proposed amendments would overcome the prior art of record (decision available here).  Eight amicus briefs have been filed:  three in favor of neither party (American Intellectual Property Law Association, Intellectual Property Owners Association, and Houston Intellectual Property Law Association), three in favor of Aqua Products (Case Western Reserve University School of Law Intellectual Property Venture Clinic and Ohio Venture Association, Pharmaceutical Research and Manufacturers of America, and Biotechnology Innovation Organization), and two in favor of the PTO (Askeladden, L.L.C. and Internet Association et al.).  Oral argument was heard on December 9, 2016.

Questions Presented:

1. When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them?  Which burdens are permitted under 35 U.S.C. § 316(e)?
2. When the petitioner does not challenge the patentability of a proposed amended claim, or the PTAB thinks the challenge is inadequate, may the PTAB sua sponte raise patentability challenges to such a claim?  If so, where would the burden of persuasion, or a burden of production, lie?

Wi-Fi One, LLC v. Broadcom Corp., No. 15-1944 (Fed. Cir.):  The Federal Circuit’s jurisdiction to review the PTAB’s determination that a petitioner is not time-barred under 35 U.S.C. § 315(b). 

The PTAB instituted an inter partes review proceeding against Wi-Fi One’s patent, which is directed to a method for improving the efficiency by which messages are sent from a receiver to a sender in a telecommunications system.  Wi-Fi One argued that Broadcom was time-barred under § 315(b) from seeking review because Broadcom was in privity with time-barred district court litigants.  The PTAB disagreed, finding that Wi-Fi One did not establish that Broadcom had sufficient control over district court litigation to support a privity finding.  On appeal, the Federal Circuit held that it does not have jurisdiction to review the PTAB’s determination that Broadcom was not time-barred, holding that the Supreme Court’s decision in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), did not implicitly overrule prior Federal Circuit precedent on the issue (decision available here).  To date, two amicus briefs have been filed in support of Wi-Fi One (WesternGeco LLC and 3DS Innovations, LLC) and eight amicus briefs have been filed in support of neither party (Jeremy Cooper Doerre, New York Intellectual Property Law Association, Federal Circuit Bar Association, Intellectual Property Owners Association, Boston Patent Law Association, Professors of Patent and Administrative Law, American Intellectual Property Law Association, and Biotechnology Innovation Organization).  Amicus briefs in support of Broadcom must be filed by March 27, 2017.  Oral argument is scheduled for May 4, 2017. 

Question presented:

Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. § 315(b) governing the filing of petitions for inter partes review?

Petitioning for Mandamus Review.  In some instances where the need for appellate review is urgent, but an interlocutory appeal under 28 U.S.C. § 1292 is not available–such as an order requiring disclosure of privileged material that would be particularly injurious–immediate appellate relief may be sought by petitioning for a writ of mandamus.  See, e.g., Cheney v. Dist. Ct. for Dist. of Columbia, 542 U.S. 367, 380 (2004).  Mandamus relief may be granted where:  (1) the petitioner’s "right to issuance of the writ is clear and indisputable"; (2) there is "no other adequate means to attain the relief [the petitioner] desires"; and (3) the "writ is appropriate under the circumstances."  Id. at 380–81 (quotation marks omitted).

A petition for a writ of mandamus filed in the Federal Circuit must not exceed 7,800 words, and a separate supporting brief is not permitted.  FRAP 21(d)(1); Fed. Cir. R. 21(b)(2).  The Federal Circuit may deny the petition without an answer; otherwise, the court must order an answer.  FRAP 21(b)(1).  No answer may be filed by the respondent unless ordered by the court, but if the court does order an answer, the petitioner may also file a reply.  Fed. Cir. R. 21(a)(5), (c).  The reply may not exceed 3,900 words.  Fed. Cir. R. 21(c).

A mandamus petition will be acted upon by the full three-judge motions panel assigned to hear motions that month.  IOP #2 ¶ 4(c); id. ¶ 9.  Although oral argument on a mandamus petition ordinarily is not granted, a motions panel may elect to hear oral argument if the panel deems it necessary.  Id. ¶ 5.

Prism Techs. LLC v. Sprint Spectrum L.P., Nos. 2016-1456, 2016-1457 (Fed. Cir. Mar. 6, 2017):  Admissibility of litigation settlement agreements as evidence in a Georgia Pacific analysis.

Sprint Spectrum sought to use some of Prism’s smaller settlement agreements in its reasonable royalty damages analysis but to exclude Prism from referring to a larger settlement agreement it had with AT&T.  The district court admitted the AT&T settlement into evidence, and the jury ultimately awarded Prism $30 million in damages. 

On appeal, the Federal Circuit (Taranto, J.) confirmed that district courts have "broad discretion" to admit or exclude such settlement licenses and the district court’s verdict, agreeing that litigation settlements could be "probative of the technology’s value" and "reflect the assessment by interested and adversarial parties of the range of plausible litigation outcomes."  The Federal Circuit directed that courts should assess "the probativeness and prejudice components of the Rule 403 balance" by considering the circumstances and facts specific to the settlement.  The Federal Circuit then clarified that the fact that the license results from litigation "does not automatically turn the prejudice side of the Rule 403 balance into one that substantially outweighs the probativeness side."  

The Federal Circuit observed that prior settlements may have a "strong connection" to a case if they cover the same technology.  This would be "especially probative if [the settlement is] reached after the litigation was far enough along" such that the merits were "well explored and well tested."  But, the Federal Circuit also noted that litigation settlements can underestimate value if the patentee discounts for the chance of losing on validity or infringement.  The value may also be affected by the parties’ desire to avoid litigation costs or the risk of enhanced damages.  Similarly, a settlement may not be of comparable scope to the technology at issue–all factors that the panel directed courts to address when determining admissibility.

Secure Axcess, LLC v. PNC Bank Nat’l Assoc., No. 2016-1353 (Fed. Cir. Feb. 21, 2017):  The scope of patents eligible for covered business method review before the PTAB.

Secure Axcess owns U.S. Patent No. 7,631,191, disclosing a "System and Method for Authenticating a Web Page" that serves to confirm ownership of a web page to enhance computer security.  The claims of the ‘191 patent were not expressly limited to use by financial institutions or to the management of a financial product or service.  The specification, however, describes using the invention in the financial area, such as on merchant sites, bank websites, card institutions, and also describes that the invention helps facilitate online commerce transactions.  The claims of the ‘191 patent themselves, however, are not expressly limited to use by financial institutions or to the "management of a financial product or service."  The PTAB instituted CBM review of the ‘191 patent, finding that the ‘191 patent was eligible because claims performed "operations used in the practice, administration, or management of a financial product or service" and had been against "approximately fifty financial institutions."  The PTAB further noted that the patent claims were "incidental to a financial activity." 

The Federal Circuit (Plager, J.) reversed, holding that the statutory definition of a CBM review does not cover patents that are "incidental" or "complementary" to financial activity because AIA Section 18(d)(1) specifically requires the claim expressly contain "a financial activity element."  The ‘191 patent claims were not expressly limited to financial activity and were thus not eligible for CBM review.  The Federal Circuit held that the specification statements (directing use of the invention with financial institutions to facilitate financial transactions) and the litigation history against financial institutions were not relevant.

Judge Lourie dissented, observing that patent claims do not need to recite the ultimate uses or products to which they are applied.  He stated that the ‘191 patent claims "are surely claims to ‘a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service’ . . . . No other applications of the invention are described in the patent."  According to Judge Lourie, the ‘191 patent should not be barred from CBM review simply because the Board "used overly broad language" and also identified the claimed subject matter as "incidental to a financial activity."  

Upcoming Oral Argument Calendar

For a list of upcoming arguments at the Federal Circuit, please click here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert:

Blaine H. Evanson – Los Angeles (213-229-7228, [email protected])
Blair A. Silver – Washington, D.C. (202-955-8690, [email protected])

Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: 

Appellate and Constitutional Law Group:
Mark A. Perry – Washington, D.C. (202-887-3667, [email protected])
James C. Ho – Dallas (214-698-3264, [email protected])
Caitlin J. Halligan – New York (212-351-4000, [email protected])

Intellectual Property Group:
Josh Krevitt – New York (212-351-4000, [email protected])
Wayne Barsky - Los Angeles (310-552-8500, [email protected])
Mark Reiter – Dallas (214-698-3100, [email protected])

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