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December 11, 2019 |
Supreme Court Holds That The PTO’s Recovery Of “Expenses” Under The Patent Act Does Not Include Attorney’s Fees

Click for PDF Decided December 11, 2019 Peter v. NantKwest, Inc., No. 18-801 Today, the Supreme Court unanimously held that a provision in the Patent Act requiring the Patent and Trademark Office to recover all “expenses” from a patent applicant who challenges the denial of a patent application does not permit the recovery of attorney’s fees. Background: Section 145 of the Patent Act allows a patent applicant to challenge an adverse decision of the Patent and Trademark Office (“PTO”) in federal district court. The applicant, however, must pay the PTO “[a]ll the expenses of the proceedings” regardless whether the applicant prevails. 35 U.S.C. § 145.  NantKwest sued the PTO Director under Section 145 to challenge the denial of its patent application. After the district court granted summary judgment to the PTO and the Federal Circuit affirmed, the PTO moved for reimbursement of “expenses” under Section 145. For the first time in the 170-year history of Section 145, the PTO sought reimbursement for the pro rata salaries of its in-house attorneys and a paralegal who worked on the case. The district court declined the PTO’s request, holding that the word “expenses” in Section 145 is not clear enough to rebut the “American Rule”—the background principle that each party is responsible for its own attorney’s fees. On appeal, the Federal Circuit initially concluded that the PTO was entitled to attorney’s fees, but on rehearing en banc, affirmed the district court’s decision and denied the PTO’s fee request. Issue: Whether the Patent Act provision requiring a patent applicant to pay “[a]ll the expenses of the proceedings” incurred by the PTO in an action under 35 U.S.C. § 145 authorizes the PTO to recover the salaries of its in-house legal personnel. Court’s Holding: No. The term “expenses of the proceedings” in Section 145 does not encompass the salaries of the PTO’s in-house legal personnel because that language is not a clear enough indication of congressional intent to overcome the background American Rule presumption against fee shifting. “[T]he term ‘expenses’ alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption.” Justice Sotomayor, writing for the unanimous Court What It Means: The Court’s ruling means that unsuccessful challengers under Section 145 of the Patent Act should not be required to pay the attorney’s fees of PTO lawyers and legal staff, thus limiting the possible costs of litigating actions under Section 145. A statutory provision providing for the recovery of “expenses” alone generally does not authorize the recovery of attorney’s fees. The Court’s holding also likely prevents the PTO from collecting attorney’s fees from applicants challenging the denial of trademark registration under 15 U.S.C. § 1071(b)—the Lanham Act’s similarly worded analogue to Section 145. Beyond the Lanham Act, the collateral consequences of the Court’s holding are likely to be limited.  At oral argument, the PTO stated that it was aware of no other federal cost-shifting provision that uses the word “expenses” standing alone. More broadly, the Court’s opinion reaffirms that the American Rule presumption against fee shifting applies to all statutes, even those (like Section 145) that require expenses or costs to be shifted to unsuccessful litigants. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com Howard S. Hogan +1 202.887.3640 hhogan@gibsondunn.com

November 26, 2019 |
California Supreme Court 2019 Round-Up

Click for PDF Spearheaded by Daniel M. Kolkey, a former Associate Justice on the California Court of Appeal, Third Appellate District, and former Counsel to the Governor of California, Gibson Dunn’s California Appellate Practice Group has prepared the attached California Supreme Court Round-Up, which previews upcoming cases and summarizes select opinions issued by the Court.  This edition includes opinions handed down from January through November 2019, organized by subject.  Each entry contains a description of the case, as well as a substantive analysis of the Court’s decision.  The Round-Up provides a resource for busy practitioners seeking an in-depth, timely, and objective report on the California Supreme Court’s actions. To view the Round-Up, click here. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the California Supreme Court, or in state or federal appellate courts in California.  Please feel free to contact the following lawyers in California, or any member of the Appellate and Constitutional Law Practice Group. Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Daniel M. Kolkey – San Francisco (+1 415-393-8420, dkolkey@gibsondunn.com) Julian W. Poon – Los Angeles (+1 213-229-7758, jpoon@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Michael Holecek – Los Angeles (+1 213-229-7018, mholecek@gibsondunn.com) Jennafer M. Tryck – Orange County (+1 949-451-4089, jtryck@gibsondunn.com)

November 12, 2019 |
Law360 Names Nine Gibson Dunn Partners as 2019 MVPs

Law360 named nine Gibson Dunn partners among its 2019 MVPs and noted that Gibson Dunn was one of two law firms with the most MVPs this year.  Law360 MVPs feature lawyers who have “distinguished themselves from their peers by securing hard-earned successes in high-stakes litigation, complex global matters and record-breaking deals.” The list was published on November 12, 2019. Gibson Dunn’s MVPs are: Richard J. Birns, a Private Equity MVP [PDF] – Rich is a partner in the New York office and Co-Chair of the Sports Law Practice Group. He focuses his practice on U.S. and cross-border mergers, acquisitions, divestitures, joint ventures and financings for both corporations and leading private equity firms.  He also advises private investment funds on a variety of corporate issues, including securities law and shareholder activism matters.  He has extensive experience advising clients on significant transactional matters in media, sports and entertainment. Michael P. Darden, an Energy MVP [PDF] – Mike is Partner-in-Charge of the Houston office and Chair of the Oil & Gas practice group. His practice focuses on International and U.S. oil and gas ventures (including LNG, deep-water and unconventional resource development projects), international and U.S. infrastructure projects, asset acquisitions and divestitures, and energy-based financings (including project financings, reserve-based loans and production payments). Scott A. Edelman, a Trials MVP [PDF] – Scott is a partner in the Century City office and Co-Chair of the Media, Entertainment and Technology Practice Group. He has first-chaired numerous jury trials, bench trials and arbitrations, including class actions, taking well over 25 to final verdict or decision. He has a broad background in commercial litigation, including antitrust, class actions, employment, entertainment and intellectual property, real estate and product liability. Theane Evangelis, a Class Action MVP [PDF] – Theane is a partner in the Los Angeles office, Co-Chair of the firm’s Class Actions Practice Group and Vice Chair of the California Appellate Practice Group. She has played a lead role in a wide range of appellate, constitutional, media and entertainment, and crisis management matters, as well as a variety of employment, consumer and other class actions. Mark A. Kirsch, a Securities MVP [PDF] – Mark is Co-Partner-in-Charge of the New York office. His practice focuses on complex securities, white collar, commercial and antitrust litigation. He is routinely named one of the leading litigators in the United States. Joshua S. Lipshutz, a Cybersecurity MVP [PDF] – Josh is a partner in the Washington, D.C. and San Francisco offices. His practice focuses primarily on constitutional, class action, data privacy, and securities-related matters.  He represents clients before the Supreme Court of the United States, the Ninth Circuit Court of Appeals, the California Supreme Court, the Delaware Supreme Court, the D.C. Court of Appeals, and many other state and federal courts. Jane M. Love, a Life Sciences MVP [PDF] – Jane is a partner in the New York office. Her practice spans four areas: patent litigation, Patent Office trial proceedings including inter partes reviews (IPRs), strategic patent prosecution advice and patent diligence in transactions. She is experienced in a wide array of life sciences areas such as pharmaceuticals, biologics, biosimilars, antibodies, immunotherapies, genetics, vaccines, protein therapies, blood factors, medical devices, diagnostics, gene therapies, RNA therapies, bioinformatics and nanotechnology. Matthew D. McGill, a Sports & Betting MVP – Matthew is a partner in the Washington, D.C. office. He has participated in 21 cases before the Supreme Court of the United States, prevailing in 16.  Spanning a wide range of substantive areas, those representations have included several high-profile triumphs over foreign and domestic sovereigns. Outside the Supreme Court, his practice focuses on cases involving novel and complex questions of federal law, often in high-profile litigation against governmental entities. Jason C. Schwartz, an Employment MVP [PDF] – Jason is a partner in the Washington, D.C. office and Co-Chair of the Labor & Employment Practice Group. His practice includes sensitive workplace investigations, high-profile trade secret and non-compete matters, wage-hour and discrimination class actions, Sarbanes-Oxley and other whistleblower protection claims, executive and other significant employment disputes, labor union controversies, and workplace safety litigation.

November 5, 2019 |
Appointment of Administrative Patent Judges Held Unconstitutional

Click for PDF On October 31, 2019, the United States Court of Appeals for the Federal Circuit held that the statutory scheme of appointing Patent Trial and Appeal Board (PTAB) Administrative Patent Judges (APJs) violates the Appointments Clause of the United States Constitution. The court in Arthrex, Inc. v. Smith & Nephew, Inc., No. 18-2140, 2019 WL 5616010 (Fed. Cir. Oct. 31, 2019), ruled that APJs are “principal officers” because neither the Secretary of Commerce nor the Director of the PTO (the two executive branch officials who appoint and monitor APJs) “exercises sufficient direction and supervision over APJs to render them inferior officers.” Id. at *4. APJs are appointed by the Secretary of Commerce, whereas the Constitution requires principal officers to be appointed by the President with the advice and consent of the Senate. To cure the identified constitutional violation, the Arthrex court held that the Director of the PTO must be permitted to remove APJs without cause. This, the court held, allows APJs to be prospectively classified as inferior officers (and hence, appropriately appointed by the Secretary of Commerce). Without reaching the merits of the appeal before it, the Arthrex panel vacated and remanded the Board’s decision that twelve of Arthrex’s patent claims were anticipated. This decision could have substantial impact on pending proceedings before the PTAB as well as pending appeals from PTAB final written decisions and related district court actions. I. The Federal Circuit’s Decision Set forth below is a summary of the governing Supreme Court case law interpreting the Appointments Clause, the Federal Circuit’s decision that the APJs are principal officers under the Appointments Clause, and the court’s severance analysis and imposed remedy. The Appointments Clause. The Appointments Clause provides in pertinent part that the President shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . all . . . Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments. U.S. Const. art. II, § 2, cl. 2. The Supreme Court applies a two-part framework to identify “Officers of the United States,” who are subject to the Appointments Clause, and to distinguish them from mere “employees,” who are not. First, “an individual must occupy a ‘continuing’ position established by law to qualify as an officer.” Lucia v. SEC, 138 S. Ct. 2044, 2051 (2018) (quoting United States v. Germaine, 99 U.S. 508, 511 (1878)). Second, the individual must “exercis[e] significant authority pursuant to the laws of the United States.” Id. (quoting Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam)). In Buckley v. Valeo, the Supreme Court held that members of the Federal Election Commission qualified as officers of the United States because they exercised “extensive rulemaking and adjudicative powers,” including the authority to enforce campaign finance law through civil lawsuits and to disqualify candidates for federal office. 424 U.S. at 110–12, 126. In Freytag v. Commissioner, 501 U.S. 868 (1991), the Court held that Special Trial Judges appointed by the Chief Judge of the Tax Court were officers by virtue of their “significant authority” to “take testimony, conduct trials, rule on the admissibility of evidence, and . . . enforce compliance with discovery orders.” Id. at 881–82. Most recently, in Lucia v. SEC, the Court held that Administrative Law Judges (ALJs) of the Securities and Exchange Commission were officers of the United States, because the ALJs were essentially indistinguishable from—“near carbon-copies of”—the Special Trial Judges addressed in Freytag. 138 S. Ct. at 2052. For that reason, the Court found it unnecessary to elaborate on the “significant authority” test applied in Buckley and Freytag, although several Justices wrote separately to suggest modifications of the standard. See id. at 2056 (Thomas, J., joined by Gorsuch, J., concurring); id. at 2057 (Breyer, J., concurring in the judgment in part and dissenting in part); id. at 2064 (Sotomayor, J., joined by Ginsburg, J., dissenting). The Supreme Court also has addressed the Appointments Clause’s further distinction between principal officers (who must be appointed by the President and confirmed by the Senate) and inferior officers (whose appointment Congress may vest elsewhere). “Generally speaking, the term ‘inferior officer’ connotes a relationship with some higher ranking officer or officers below the President: Whether one is an ‘inferior’ officer depends on whether he has a superior,” meaning that one’s “work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” Edmond v. United States, 520 U.S. 651, 662–63 (1997). Thus, the Court held in Edmond v. United States that judges of the Coast Guard Court of Criminal Appeals are inferior officers “by reason of the supervision over their work exercised by the General Counsel of the Department of Transportation in his capacity as Judge Advocate General and the Court of Appeals for the Armed Forces.” 520 U.S. at 666. Although these superiors did not exercise “complete” control over the judges’ work, the Court found two factors particularly significant: the superiors had the power to “remove a Court of Criminal Appeals judge from his judicial assignment without cause,” and the judges had “no power to render a final decision on behalf of the United States unless permitted to do so by other Executive officers.” Id. at 664–65. The Court more recently applied the same approach to members of the Public Company Accounting Oversight Board in Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010). “Given that the [Securities and Exchange] Commission is properly viewed, under the Constitution, as possessing the power to remove Board members at will, and given the Commission’s other oversight authority,” the Court in Free Enterprise Fund had “no hesitation in concluding that under Edmond the Board members are inferior officers.” Id. at 510. In the past, the Supreme Court emphasized that it had “not set forth an exclusive criterion” or a “definitive test” to distinguish principal from inferior officers. Edmond, 520 U.S. at 661. Besides control and supervision by a superior, other factors indicating inferior status may include an individual’s “limited duties,” “narrow” jurisdiction, and “limited” tenure. Id. (citing Morrison v. Olson, 487 U.S. 654, 671–72 (1988)). In Free Enterprise Fund, however, the Court’s analysis rested exclusively on the control-and-supervision question that Edmond identified as “[g]enerally” controlling. 561 U.S. at 510. Some have read the Court’s cases since Edmond as implicitly repudiating the previous multifactor approach. See, e.g., NLRB v. SW Gen., Inc., 137 S. Ct. 929, 947 n.2 (2017) (Thomas, J., concurring); Aurelius Inv., LLC v. Puerto Rico, 915 F.3d 838, 860 n.15 (1st Cir.), cert. granted, 139 S. Ct. 2738 (2019); Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 684 F.3d 1332, 1337 (D.C. Cir. 2012), cert. denied, 133 S. Ct. 2735 (2013). For now, control and supervision appear to be the predominant criteria that distinguish inferior officers under the Appointments Clause. In particular, the precedents in this area have often focused on the ability to remove subordinates from office: “[t]he power to remove officers, we have recognized, is a powerful tool for control.” Edmond, 520 U.S. at 664. Even beyond the question of principal or inferior officer status, the availability of removal has broad implications rooted in the separation of powers. For example, the Supreme Court in Free Enterprise Fund interpreted Article II’s vesting clause to prohibit the statutory institution of “multilevel protection from removal,” which would restrict the President’s “ability to remove a principal officer, who is in turn restricted in his ability to remove an inferior officer, even though that inferior officer determines the policy and enforces the laws of the United States.” 561 U.S. at 484. Here, as in the Appointments Clause cases, removal is ultimately important as a means to ensure accountability: “The President cannot ‘take Care that the Laws be faithfully executed’ if he cannot oversee the faithfulness of the officers who execute them.” Id. APJs as Principal Officers. The Arthrex panel had little trouble concluding that APJs are officers of the United States, like the Special Trial Judges in Freytag and the ALJs in Lucia, because they exercise significant authority to conduct inter partes review and issue final written decisions on patentability. Indeed, no party disputed that conclusion. Arthrex, 2019 WL 5616010, at *3. The more difficult question was whether APJs are “principal” or “inferior” officers. Congress vested appointment of APJs in the Secretary of Commerce—the Head of a Department under the Appointments Clause—in consultation with the Director of the PTO. 35 U.S.C. § 6(a). As a result, the APJs’ appointment is constitutional only if APJs are inferior officers (because, if they are principal officers, presidential nomination and Senate confirmation would be required). But the panel held that, “in light of the rights and responsibilities in Title 35, APJs are principal officers.” Arthrex, 2019 WL 5616010, at *3. Applying the Supreme Court’s precedents in Edmond and Free Enterprise Fund, the panel noted that “[t]he only two presidentially-appointed officers that provide direction to the PTO are the Secretary of Commerce and the Director,” and concluded that “[n]either of those officers individually nor combined exercises sufficient direction and supervision over APJs to render them inferior officers.” Id. at *4. As the panel read the governing precedents, “[t]he extent of direction or control in that relationship is the central consideration, as opposed to just the relative rank of the officers, because the ultimate concern is ‘preserv[ing] political accountability.’” Arthrex, 2019 WL 5616010, at *4 (second alteration in original) (quoting Edmond, 520 U.S. at 663). In particular, the panel understood Edmond as “emphasiz[ing] three factors” that are “strong indicators of the level of control and supervision appointed officials have over the officers and their decision-making”: (1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers. Arthrex, 2019 WL 5616010, at *4. The panel borrowed this three-part formulation from the D.C. Circuit’s decision in Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board, which applied the test to hold that Copyright Royalty Judges are principal officers under Edmond. 684 F.3d at 1338–40. In Arthrex, the panel determined that the first and third control-and-supervision factors supported the conclusion that APJs are principal officers, while the second did not. As to the first factor, “[n]o presidentially-appointed officer has independent statutory authority to review a final written decision by the APJs before the decision issues on behalf of the United States.” Arthrex, 2019 WL 5616010, at *4. Although the Director may influence or control various aspects of the process of inter partes review, that official conspicuously lacks “sole authority to review or vacate any decision by a panel of APJs.” Id. at *5. That distinction made Arthrex “critically different from the [situation] in Edmond,” where superior officers possessed authority to reverse and order review of decisions by the military judges at issue, who had “no power to render a final decision on behalf of the United States unless permitted to do so by other Executive officers.” Id. at *5 (internal quotation omitted). The Arthrex panel accordingly counted the first factor in support of the conclusion that APJs are principal officers. On the other hand, the second factor weighed in favor of finding the APJs to be inferior officers, because, in the panel’s view, the PTO Director “exercises a broad policy-direction and supervisory authority over the APJs.” Arthrex, 2019 WL 5616010, at *5. That authority includes powers to issue policy directives guiding APJs’ decisionmaking, designate PTAB decisions as precedential and hence binding on future APJ panels, institute inter partes review, designate the panel of judges to decide each review, and adjust APJs’ pay. Id. at *5–6. The Arthrex panel deemed this oversight comparable to the supervisory authority exercised over the military judges in Edmond and the Copyright Royalty Judges in Intercollegiate. However, the third factor reinforced the Arthrex panel’s conclusion that APJs are principal officers. The governing statute provided that APJs “may be removed ‘only for such cause as will promote the efficiency of the service,’” meaning that none of their superiors possessed “unfettered removal authority” over them. Arthrex, 2019 WL 5616010, at *7 (quoting 5 U.S.C. § 7513(a)). The government, which had intervened in the case, argued that the governing statute implicitly granted the Director the power to “de-designate” APJs assigned to particular panels, as a corollary to the statutory power to designate inter partes panel membership in the first instance. But the Arthrex panel expressed reluctance to read the statute as granting that power, which it feared “could create a Due Process problem.” Id. at *6 & n.3. In any event, the panel held that the existence of such authority “would not change the outcome,” because “[t]he Director’s authority to assign certain APJs to certain panels is not the same as the authority to remove an APJ from judicial service without cause”—a much more “powerful” form of control, present in Edmond and lacking here. Id. On balance, the Arthrex panel concluded that the relative lack of effective control and supervision over APJs qualified them as principal officers. The panel acknowledged the possible relevance of other factors beyond the three-part test distilled from Edmond, but found such factors “completely absent here”: “the APJs do not have limited tenure, limited duties, or limited jurisdiction.” Arthrex, 2019 WL 5616010, at *8. In sum, like the Copyright Royalty Judges in Intercollegiate, “the control and supervision of the APJs is not sufficient to render them inferior officers.” Id. “As such, they must be appointed by the President and confirmed by the Senate; because they are not, the current structure of the Board violates the Appointments Clause.” Id. Severance and Remedy. Having concluded that the PTAB’s statutory structure violated the Appointments Clause, the Arthrex panel turned to the question of severability. The panel concluded that the “narrowest viable approach to remedying the violation” was to rule the statutory provision of for-cause removal to be unconstitutional as applied to APJs. Arthrex, 2019 WL 5616010, at *9. Specifically, the panel held unconstitutional the application to APJs of 35 U.S.C. § 3(c), which subjects PTO officers and employees to the provisions of title 5 of the United States Code, including the for-cause removal provision in 5 U.S.C. § 7513(a). For-cause removal generally prevents the President or principal officer from removing a subordinate officer for mere differences of opinion on policy, and thus limits the President or principal officer’s ability to control the subordinate. The government had suggested several other possible ways to cure the constitutional violation, but the panel rejected them as untenable under the statutory language and the Supreme Court’s severability precedents. The panel characterized its severability holding as “follow[ing] the Supreme Court’s approach in Free Enterprise Fund” and the D.C. Circuit’s approach in Intercollegiate, both of which cured constitutional violations by “sever[ing] the problematic ‘for-cause’ restriction from the statue rather than holding the larger structure . . . unconstitutional.” Arthrex, 2019 WL 5616010, at *9. As the D.C. Circuit had held in Intercollegiate, the Arthrex panel determined that giving the APJs’ superiors at-will removal power “was enough to render the [APJs] inferior officers,” and so legitimize, prospectively, their appointment by the Secretary (a Department Head) under the Appointments Clause on a prospective basis. Id. “Because the Board’s decision in this case was made by a panel of APJs that were not constitutionally appointed at the time the decision was rendered,” the panel “vacate[d] and remand[ed] the Board’s decision without reaching the merits.” Arthrex, 2019 WL 5616010, at *11. The panel also held that on remand “a new panel of APJs must be designated and a new hearing granted.” Id. at *12. In so doing, the panel cited the remedial holding of Lucia, which directed a new hearing before a different ALJ in part because “Appointments Clause remedies are designed . . . to create ‘[]incentive[s]’ to raise Appointments Clause challenges.” Lucia, 138 S. Ct. at 2055 (alterations in original) (quoting Ryder v. United States, 515 U.S. 177, 183 (1995)). Under Lucia, the panel reasoned, “the remedy is not to vacate and remand for the same Board judges to rubber-stamp their earlier unconstitutionally rendered decision.” Arthrex, 2019 WL 5616010, at *12. However, the panel clarified that the underlying decision to institute the inter partes review “is not suspect” on remand, because the identified constitutional violation did not undermine the Director’s institution authority under 35 U.S.C. § 314. Arthrex, 2019 WL 5616010, at *12. The panel also stated that it saw “no error in the new panel proceeding on the existing written record,” but left “to the Board’s sound discretion whether it should allow additional briefing or reopen the record in any individual case.” Id. In this, the panel once more followed the example of the D.C. Circuit, which permitted the remand in Intercollegiate to proceed on the existing record. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 796 F.3d 111, 116–21 (D.C. Cir. 2015). II. Further Potential Appellate Proceedings in Arthrex Rehearing. Because the government is an intervenor in Arthrex, the Federal Rules of Appellate Procedure give the parties 45 days to file petitions for panel rehearing or rehearing en banc. See Fed. R. App. P. 35(c), 40(a)(1); see also Federal Circuit Rule 40(e). The government cannot file such a petition without the Solicitor General’s approval. See 28 C.F.R. § 0.20(b). But the Department of Justice has already suggested that a petition for rehearing en banc may be forthcoming. In a number of pending cases, the government’s lawyers have asked the Federal Circuit to refrain from issuing a final decision until the court resolves “any petitions for rehearing that the parties in Arthrex may choose to file.” See, e.g., Citation of Supplemental Authority for Intervenor United States, Image Processing Techs. v. Samsung Elecs. Co., No. 19-1408 (Fed. Cir. Nov. 1, 2019), ECF No. 52. Certiorari. The parties also may seek a writ of certiorari from the Supreme Court. If there is no petition for rehearing en banc, the parties will have 90 days from the date of judgment to petition for certiorari. Sup. Ct. R. 13.1. But if a petition for rehearing is filed, the 90-day clock will run from the date of the Federal Circuit’s denial of rehearing or, if rehearing is granted, the subsequent entry of judgment. Sup. Ct. R. 13.3. Upon application by the aggrieved party, the Circuit Justice responsible for the Federal Circuit—Chief Justice Roberts—can extend the time to file a petition for up to 60 additional days. Sup. Ct. R. 13.5. While the grant rate for certiorari petitions is below 1%, the Supreme Court in recent years has shown an increased appetite for cases presenting Appointments Clause challenges. See Aurelius Inv., LLC v. Puerto Rico, 139 S. Ct. 2736 (2019); Lucia v. SEC, 138 S. Ct. 2044 (2018); Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010). Challenges to Panel Decision. If the government seeks rehearing or certiorari review, it is likely to focus on at least two aspects of the panel’s decision. (The private parties may also raise these or other arguments.) First, the government seems likely to challenge the panel’s conclusion that APJs are “principal” officers, rather than “inferior” officers. The distinction is significant because, as noted, if APJs are inferior officers, then their existing appointments by the Head of a Department would have been constitutional. Second, the government may argue that even if APJs are principal officers who were not appointed consistent with the Appointments Clause, the objecting party is not entitled to a new inter partes review hearing because it did not raise the issue before the Board. The government, through the Solicitor General, also may question the panel’s conclusion that severing the removal restrictions for APJs transformed them from principal officers to inferior officers for purposes of compliance with the Appointments Clause. The Supreme Court has not expressly held that the judicial remedy of severance can transform a principal officer into an inferior officer, and the severability remedy remains controversial. See, e.g., Murphy v. NCAA, 138 S. Ct. 1461, 1485, 1487 (2018) (Thomas, J., concurring) (expressing “my growing discomfort with our modern severability precedents” because they are “in tension with longstanding limits on the judicial power”). To be sure, the government itself recommended this severability remedy to the panel in Arthrex. However, it is unclear to what extent the Solicitor General will agree with that remedy if the case is reheard by the Federal Circuit or argued to the Supreme Court. In the Lucia case, for example, the Solicitor General expressly disagreed with positions taken by lawyers from the Securities and Exchange Commission on the constitutionality of the ALJ appointments. See 138 S. Ct. at 2050. III. Impact on Pending Cases As discussed in more detail below, the Arthrex decision could have substantial impacts on pending proceedings before the PTAB as well as pending appeals from PTAB final written decisions. Preservation and Waiver. The Arthrex panel held that a party need not have presented an Appointments Clause challenge to the Board in order for the court to consider it, because “‘[a]n administrative agency may not invalidate the statute from which it derives its existence and that it is charged with implementing.’” 2019 WL 5616010, at *2, *11 (citation omitted). Nevertheless, given the large number of cases that are potentially affected by the Arthrex decision, the Federal Circuit has tried—and may further try—to limit the impact of its holding. In a precedential, per curiam order, for example, a panel of the Federal Circuit has ruled that an Appointments Clause challenge under Arthrex is forfeited if it is not raised in a party’s opening brief. See Customedia Techs., LLC v. Dish Network Corp., No. 19-1001, 2019 WL 5677704, at *1 (Fed. Cir. Nov. 1, 2019). The government has also already raised concerns about the Federal Circuit’s post-Arthrex remand of another case, in which the government was not a party and so could not contest the issue. See Uniloc 2017 LLC v. Facebook, Inc., No. 18-2251, 2019 WL 5681316 (Fed. Cir. Oct. 31, 2019) (unpublished). Additionally, it remains to be seen whether the Federal Circuit might treat inter partes review petitioners differently than patent owners, given that the former voluntarily availed themselves of the PTAB forum. Cf. CFTC v. Schor, 478 U.S. 833, 850 (1986) (holding that party had “effectively agreed” to an adjudication before an administrative agency, rather than a court, when he “chose to avail himself of the” administrative process). However, to the extent the court tries to draw a bright-line rule, barring parties from raising Appointments Clause challenges that were not raised in their opening briefs before the court of appeals, the court may be in some tension with the Supreme Court’s decisions in Freytag v. Commissioner, 501 U.S. 868, 878–79 (1991), and Glidden Co. v. Zdanok, 370 U.S. 530, 535–36 (1962) (plurality opinion). In both cases, the Supreme Court indicated that structural constitutional challenges to officers could be considered on appeal even if the issue was not raised below. See Freytag, 501 U.S. at 878 (declining to find waiver despite petitioners’ “failing to raise a timely objection to the assignment of their cases to a special trial judge” and “consenting to the assignment”). PTAB Proceedings. The panel did not “see [any] constitutional infirmity” in the Director’s decision to institute inter partes review. Arthrex, 2019 WL 5616010, at *12. That is because, according the panel, the institution decision is within the Director’s—not the APJs’—authority. Id. (citing 35 U.S.C. § 314). Accordingly, the Arthrex decision may have a limited impact on cases that have not yet been instituted. That said, once a case is instituted, parties may wish to raise an Appointments Clause objection before the Board. It is not yet clear whether the “remedy” adopted by the panel will, after rehearing en banc or certiorari review, ultimately be found to cure the constitutional infirmity. Moreover, the government may continue to argue that a Board-level objection is required to preserve an Appointments Clause challenge. Thus, parties to PTAB proceedings should, in appropriate cases, consider raising their challenges before the Board. For cases that are further along, however, whether before or after a final written decision, parties may have an opportunity to seek a new panel of APJs, present issues to the new panel that they had lost before the original panel (e.g., discovery motions), and request another oral argument before the new panel. The panel in Arthrex noted that “we see no error in the new panel proceeding on the existing written record but leave to the Board’s sound discretion whether it should allow additional briefing or reopen the record in any individual case.” 2019 WL 5616010, at *12. If APJs subject to Appointments Clause challenge have participated in the proceedings, then parties may be entitled to fresh consideration from adjudicators who, from the beginning, were not operating under a constitutional infirmity. Federal Circuit Proceedings. Generally speaking, “arguments not raised in the opening brief are waived.” SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed. Cir. 2006). Thus, in cases pending before the Federal Circuit, the best practice is to raise an Appointments Clause challenge in the opening brief or in a motion filed prior to the opening brief. See Uniloc, 2019 WL 5681316, at *1 (“In light of [Arthrex and] . . . the fact that Uniloc has raised an Appointments Clause challenge in its opening brief in this case, . . . [the PTAB decision] is vacated . . . .”). A party, however, that did not raise an Appointments Clause challenge in its opening brief may have other opportunities to attack the Board’s decision on Appointments Clause grounds. To be sure, the Federal Circuit, in Customedia Technologies, held that an Appointments Clause challenge is forfeited if it is not included in the opening brief. 2019 WL 5677704, at *1. But the parties in that case did not brief—and the court, therefore, did not address—the Supreme Court’s decisions in Freytag and Glidden, which suggest that structural errors, such as Appointments Clause issues, can be raised at any time in appropriate cases. With direct briefing on Freytag and Glidden, then, parties may be able to open an opportunity to press the Appointments Clause issue in reply briefs, notices of supplemental authority, petitions for rehearing, and the like. District Court Proceedings. Inter partes reviews often occur in parallel with district court litigation concerning the same patent. And district courts frequently entertain requests to stay the district court proceedings pending inter partes review. See, e.g., British Telecomms. PLC v. IAC/InterActiveCorp, No. 18-cv-366, 2019 WL 4740156, at *2 (D. Del. Sept. 27, 2019); InVue Sec. Prods. Inc. v. Vanguard Prods. Grp., Inc., No. 18-cv-2548, 2019 WL 3958272, at *1 (M.D. Fla. Aug. 22, 2019). Although the test varies by jurisdiction, district courts typically consider three factors in determining whether to grant such a stay: “(1) ‘whether the stay will simplify issues in question in the litigation,’ (2) ‘whether the stay will unduly prejudice the nonmoving party or present a clear tactical disadvantage to the nonmoving party,’ and (3) ‘whether the proceedings before the court have reached an advanced stage, including whether discovery is complete and a trial date has been set.’” Peloton Interactive, Inc. v. Flywheel Sports, Inc., No. 18-cv-390, 2019 WL 3826051, at *1 (E.D. Tex. Aug. 14, 2019) (internal quotation omitted). District courts that had been, before Arthrex, inclined to lift a stay and re-open a case after the PTAB issued its final written decision may now be hesitant to do so before all the Arthrex appeals are exhausted. Unless the party proposing to lift a stay can show a new form of prejudice arising from a delay caused by Arthrex, the district court may determine that the likelihood of vacatur and remand justifies extending the stay through appeal. In district court proceedings following the issuance of a final written decision by the PTAB, estoppel generally applies to any invalidity issue that the petitioner “raised or reasonably could have raised during that inter partes review.” 35 U.S.C. § 315(e)(2). Parties in this situation, however, should take note of Audatex North America, Inc. v. Mitchell International, Inc., which is scheduled for argument at the Federal Circuit on December 4. In that case, the appellant argues that a decision of the PTAB in a covered business method review is not binding on a district court because APJs are principal officers under the Appointments Clause, rendering a decision by a panel of APJs unconstitutional. Because the Federal Circuit already has held in Arthrex that APJs are principal officers (prior to the remedy provided in Arthrex), the Federal Circuit in Audatex will need to address whether a decision of the PTAB that was made by unconstitutionally appointed APJs is binding on a district court. This decision could have further implications for parties involved in district court litigation following an inter partes review or covered business method review proceeding, including whether estoppel will apply in the district court under 35 U.S.C. § 315(e)(2). Additional Litigation. Interested parties should expect and be prepared for rapid developments in this area. The Arthrex decision leaves a host of unanswered questions in its wake. And it contains a number of subsidiary holdings that can be challenged from both sides. Litigants are already seeking to broaden the scope of the Arthrex decision. For example, in Polaris Innovations Ltd. v. Kingston Technology Company, No. 18-1768 (Fed. Cir. argued Nov. 4, 2019), Polaris argued that the Arthrex panel did not go far enough in resolving the constitutional infirmity of the APJs. According to Polaris, because the Director of the PTO cannot review the APJs’ decisions, and because the court cannot itself authorize such a review, the “only remedy” is to declare the entire system constitutionally flawed and “let Congress fix it.” These and other challenges may push the Arthrex decision even farther, and could potentially cast doubt on the Director’s authority to institute inter partes review at all (a power unquestioned by the panel). Among other areas, parties should expect litigation regarding questions such as: Where to draw the line between principal and inferior officers; Limits on courts’ power to sever statutory removal protections; Whether severance can “convert” a principal officer into an inferior officer; Whether institution decisions are less “suspect” than final written decisions; Effects on post grant review and covered business method proceedings in addition to inter partes review; Whether an entirely new hearing is required as opposed to reconsideration of the paper record; Whether other rulings by unconstitutionally appointed APJs (e.g., evidentiary rulings) must be vacated; The role, if any of the de facto officer doctrine and ratification by constitutional actors; Whether decisions by unconstitutional APJs are subject to collateral attacks; Whether, and under what circumstances, decisions by unconstitutionally appointed APJs have estoppel effects in district court; Effects on pending PTAB proceedings; Effects on proceedings that are concluded but have not yet yielded a final written decision; Preservation, forfeiture, and waiver; Whether Federal Circuit panels have discretion to reach Appointments Clause issues not raised in an appellant’s opening brief; The availability of remands to the PTAB following a determination of unconstitutionality; The availability of inter partes review and stays in the event the Supreme Court grants review; and Potential challenges to the appointment of ALJs in other agencies. Finally, it is also possible that Congress or the President could take action to address these issues outside of litigation, although the other branches may wait until the Supreme Court weighs in before acting. In the aftermath of Lucia, for example, the President responded to the Supreme Court’s decision by issuing an Executive Order, E.O. 13843, exempting ALJs from competitive service selection procedures. * * * Arthrex is a major decision that will likely produce serious repercussions across a wide range of cases. Further review is a significant possibility, either from the en banc Federal Circuit or the Supreme Court, and it may be some time before the courts work out the full ramifications of the panel decision. It also remains to be seen whether the Federal Circuit will accede to requests, by the government or other parties, to stay other PTAB proceedings in the meantime. For example, the Federal Circuit notably declined to pause PTAB proceedings pending the Supreme Court’s decisions in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), and Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018). Interested parties are advised to monitor the case and consult experienced patent appellate counsel to navigate this developing situation. Gibson Dunn has significant experience in this area, including winning the landmark Supreme Court decision in Lucia. Any of the following partners would be pleased to discuss Arthrex and its implications with you: Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Brian M. Buroker – Washington, D.C. (+1 202-955-8541, bburoker@gibsondunn.com) Blaine H. Evanson – Orange County, CA (+1 949-451-3805, bevanson@gibsondunn.com) Lucas C. Townsend – Washington, D.C. (+1 202-887-3731, ltownsend@gibsondunn.com) Please also feel free to contact the following leaders of the firm’s Appellate and Constitutional Law, Intellectual Property or Life Sciences practice groups: Appellate and Constitutional Law Group: Allyson N. Ho – Dallas (+1 214-698-3233, aho@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) Life Sciences Group: Jane M. Love – New York (+1 212-351-3922, jlove@gibsondunn.com) Ryan A. Murr – San Francisco (+1 415-393-8373, rmurr@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 4, 2019 |
Federal Circuit Update (November 2019)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update first summarizes the Federal Circuit’s far-reaching decision last week that the appointment of Administrative Patent Judges to the PTAB is unconstitutional. We then review pending petitions for certiorari to the Supreme Court in cases appealed from the Federal Circuit, as well as recent filings for en banc review and other news. Recent precedential decisions are also summarized, reflecting the Federal Circuit’s view of patent eligibility, obviousness requirements for methods of medical treatment, PTAB discretion to reverse IPR institution, PTO calculation of term extensions, and design patent protection. Top News—Appointment of Administrative Patent Judges Held Unconstitutional On October 31, the Federal Circuit held that appointment of PTAB Administrative Patent Judges (APJs) violates the Appointments Clause, U.S. Const., art. II, § 2, cl. 2. In Arthrex, Inc. v. Smith & Nephew, Inc., No. 18-2140 (Fed. Cir. Oct. 31, 2019), a Federal Circuit panel (Moore, J., joined by Reyna and Chen, JJ.) ruled that APJs are “principal officers” because neither the Secretary of Commerce nor the Director of the USPTO (the two executive branch officials who appoint and monitor APJs) “exercises sufficient direction and supervision over APJs to render them inferior officers.” APJs are appointed by the Secretary of Commerce, whereas the Constitution requires principal officers to be appointed by the President with the advice and consent of the Senate. To cure the identified constitutional deficiency, the Arthrex panel severed the provisions of the Patent Act that limit the PTO’s ability to remove APJs from the Board, thus allowing them to be removed without cause. In the panel’s view, this severance allows APJs to be prospectively classified instead as inferior officers (and hence, appropriately appointed by the Secretary of Commerce). Without reaching the merits of the appeal before it, the Arthrex panel vacated and remanded the Board’s decision that twelve of Arthrex’s patent claims were anticipated. The panel reasoned that, because the panel had not been constitutionally appointed, patentability had to be decided by a new tribunal of properly appointed APJs. The Arthrex decision could have substantial impacts on pending proceedings before the PTAB as well as pending appeals from PTAB final written decisions. Gibson Dunn will be preparing a standalone analysis considering these issues in more detail. Other Federal Circuit News Supreme Court: In October, the Supreme Court held oral argument in Peter v. NantKwest Inc., which involves the issue of whether the “expenses” that the government may charge a litigant includes time that in-house government attorneys spend on the litigation. The government argued that “expenses” is a broad term that should reach everything that the PTO spends. NantKwest argued that the word “expenses” is not specific enough to overcome the presumption against forcing a party to pay the other side’s attorney’s fees. The Justices seemed skeptical of the government’s position, for example, questioning the recent shift from the government’s longstanding view that it was not entitled to those fees, and referring to the government’s current position as a “radical departure.” Case Status Issue Amicus Briefs Filed Peter v. NantKwest Inc., No. 18-801 Argument on October 7, 2019. Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. § 145 encompasses the personnel expenses the PTO incurs when its employees and attorneys, defend § 145 litigation. 11 Thryv, Inc., fka Dex Media, Inc. v. Click-To-Call Techs., LP, No. 18-916 Set for argument on December 9, 2019 Whether 35 U.S.C. § 314(d) permits appeal of the PTAB’s decision to institute an inter partes review upon finding that § 315(b)’s time bar did not apply. 9 Romag Fasteners Inc. v. Fossil Inc., No. 18-1233 Petition for certiorari granted on June 28, 2019. Whether, under Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a). 5 Noteworthy Petitions for a Writ of Certiorari: The Supreme Court is currently considering a number of potentially impactful cases, in particular in the area of patent eligibility under 35 U.S.C. § 101. The Court asked for the Solicitor General’s views in three cases, HP v. Berkheimer, Hikma v. Vanda, and Google v. Oracle. HP Inc. v. Berkheimer (No. 18-415): Question presented: “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” On January 7, 2019, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States. Mark Perry of Gibson Dunn continues to serve as co-counsel for HP in this matter. Hikma Pharmaceuticals USA Inc. v. Vanda Pharmaceuticals Inc. (No. 18-817): Question presented: “whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.” On March 18, 2019, the Supreme Court invited the U.S. Solicitor General to express the views of the United States. Atlanta Gas Light Co. v. Bennett Regulator Guards Inc. (No. 18-999): Questions presented: “(1) whether the Federal Circuit erred in concluding that it had jurisdiction to review the PTAB’s decision to institute IPR of a patent over the patent owner’s objection that it was time-barred; and (2) whether the Federal Circuit erred in rejecting the “longstanding principle that a dismissal without prejudice leaves the parties as if a suit had never been brought, splitting the circuits.” Garmin USA, Inc., et al. v. Cellspin Soft, Inc., No. 19-400: Question presented: “Whether patent eligibility is a question of law for the court that can be resolved on a motion to dismiss, notwithstanding allegations in a complaint that the asserted claims are inventive.” Power Analytics Corporation v. Operation Technology, Inc., No. 19-43: Question presented: “Has the Federal Circuit correctly implemented the standards for patent eligibility set forth in 35 U.S.C. § 101 and Alice v. CLS Bank?” Google LLC v. Oracle America, Inc., No. 18-956: Questions presented: “(1) Whether copyright protection extends to a software interface; and (2) whether, as the jury found, the petitioner’s use of a software interface in the context of creating a new computer program constitutes fair use.” On September 27, 2019, the Solicitor General formally recommended that the Supreme Court deny certiorari. The office disagreed with Google’s arguments that the declaring code that organizes Java programming interfaces cannot be copyrighted, although it did state that the correctness of the Federal Circuit’s fair use decision is “not free from doubt.” Noteworthy Denials of Petitions for a Writ of Certiorari: On October 7, 2019, the Supreme Court denied certiorari in a number of patent cases, including a number of cases presenting Berkheimer questions (Glasswall Solutions Ltd. v. Clearswift Ltd., No. 18-1448, StrikeForce Tech., Inc. v. SecureAuth Corp., No. 19-103). Other cases of note in which certiorari was denied include: Acorda Therapeutics, Inc. v. Roxane Labs., Inc., No. 18-1280) (whether objective indicia of non-obviousness may be discounted where the development of the invention was allegedly blocked by the existence of a prior patent). Hyatt v. Iancu, No. 18-1285 (whether MPEP § 1207.04 violates patent applicants’ statutory right of appeal following a second rejection). Senju Pharma. Co., Ltd. v. Akorn, Inc., No. 18-1418 (whether 35 U.S.C. § 144 precludes the Federal Circuit from resolving appeals from the PTO through a Rule 36 judgment; whether the PTAB must consider all relevant evidence, including any objective indicia, when assessing whether a patent is invalid under U.S.C. § 103). Noteworthy Federal Circuit En Banc Petitions: Celgene Corp. v. Peter, Nos. 18-1167 et al.: As noted in our August 2019 update, a Federal Circuit panel (Prost, C.J., joined by Bryson and Reyna, JJ.) held that retroactive application of the AIA’s IPR proceedings to patents that issued before the AIA was enacted is not an unconstitutional taking. Celgene has now petitioned for en banc review. The Court requested that the PTO respond to Celgene’s petition, and the response is due November 19, 2019. In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018), Supreme Court held that IPR proceedings did not violate Article III or the Seventh Amendment. Id. at 1370. But the Supreme Court expressly left open the question of whether retroactive application of the AIA is constitutional, adding that its opinion should not be “misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.” Id. at 1379. Thus, if en banc review is denied, Celgene may petition for certiorari. Other Federal Circuit News: On October 22, 2019, Judge Wallach spoke at the Federal Circuit Historical Society’s fall lecture at the Dolley Madison House. Judge Wallach is the author of The Law of War in the 21st Century and a recognized expert in the law of war. He served on active duty as an Engineer Reconnaissance Sergeant in the U.S. Army from 1969 to 1971, and as an Attorney/Advisor to the International Affairs Division of the Judge Advocate of the Army at the Pentagon. Judge Wallach discussed various types of war and the means and methods of warfare, and in particular whether cyber warfare covers recent Russian activities directed at the American political system. The second portion of Global Series 2019 took place in Honolulu, Hawaii, on October 14–16. The Series 2019 Session is an outreach of Global Series partners, the Federal Circuit Bar Association, EPLAW, and others. It focused on global challenges in world innovation, IP, and trade systems, and responding to emerging national and international issues in these sectors. Key Case Summaries (August 2019–October 2019) American Axle & Manuf., Inc. v. Neapco Holdings LLC, No. 18-1763 (Fed. Cir. Oct. 3, 2019): Mechanical engineering claims relying on broad, functional language are ineligible. The asserted patent recited claims to methods of making drive-shaft assemblies with internal liners designed to reduce vibrations in the resulting assemblies. While the patent disclosed a few embodiments, the claims were not so limited. Instead, the claims relied on functional language to cover any means of achieving their functional result. On summary judgment, the district court held the patent ineligible under § 101, finding it to merely claim the result of laws of nature governing damping, and otherwise employing only “routine, conventional” additional steps. The Federal Circuit panel majority (Dyk, J., joined by Taranto, J.) affirmed. The majority reasoned that problems with vibration and natural laws that governed dampening were “well known” in the art. The claims were not limited to specific liners or dampening solutions, but rather claimed “achieving that result, by whatever structures or steps happen to work.” Other elements did not convey eligibility as they offered only “conventional additions” or limited “the use of a natural law or mathematical formula to a particular process.” Judge Moore dissented, arguing that the inquiry should instead be framed in terms of an enablement failure. American Axel reaffirms the relevance of eligibility even in the context of mechanical devices or methods. MyMail, Ltd. v. ooVoo, LLC, Nos. 18-1758, -59, (Fed. Cir. Aug. 16, 2019): Disputed claim construction must be decided before an eligibility determination is made. The asserted patents recited methods of using server or network instructions to update “toolbars” on users’ computers without involving the users. The parties disagreed over the construction of “toolbar.” The district court then held that the claims recited the abstract idea of “using communications networks to update software stored on computers” while adding only conventional, generic components such as “Internet-connected computers and servers.” The court dismissed at the pleading stage on eligibility grounds without addressing construction. The Federal Circuit panel majority (Reyna, J., joined by O’Malley, J.) vacated and remanded. According to the majority, “the district court’s failure to address the parties’ claim construction dispute [was] error.” The majority refused to decide “in the first instance” eligibility based on the patentee’s more technical proposed construction, as doing so “may” implicate factual questions such as whether the claimed combination was then “routine” or “conventional.” Judge Lourie dissented, arguing that the claims were “clearly abstract,” regardless of construction. OSI Pharma, LLC v. Apotex Inc., No. 18-1925 (Fed. Cir. Oct. 4, 2019): Method of treating cancer not obvious where prior art lacks specific efficacy data. Generic drug manufacturer Apotex petitioned to cancel OSI’s patent claims to methods of treating non-small cell lung cancer with its erlotinib drug, Tarceva. The PTAB held that OSI’s method was obvious over prior art disclosing erlotinib to treat cancer in mammals and stating that it appears to have “good anti-cancer activity … in patients with non-small cell lung cancer.” The Federal Circuit panel (Stoll, J., joined by Newman and Taranto, JJ.) reversed. The panel reasoned that “[c]ancer treatment is highly unpredictable,” with less than 1% of non-small cell lung cancer treatments succeeding in Phase II trials. In the panel’s view, the prior art lacked substantial evidence of a reasonable expectation of success and offered “no more than hope” because it did “not disclose any data or other information about erlotinib’s efficacy.” The panel caveated, however that neither efficacy data nor “absolute predictability” are always required. BioDelivery Scis. Int’l v. Aquestive Therapeutics, Inc., Nos. 19-1643, -44, -45 (Fed. Cir. Aug. 29, 2019): PTAB has discretion to reverse IPR institution decisions. The PTAB instituted three of BioDelivery’s IPR petitions on some but not all grounds. After SAS Institute, Inc. v. Iancu, the Federal Circuit vacated and remanded the reviews back to the PTAB. On remand, rather than proceed to review on all petitioned grounds, the Board reversed its institution decision and decided not to proceed with review at all. BioDelivery appealed, arguing that reviews were instituted and that this decision could not be reconsidered. The Federal Circuit majority (Reyna, J., joined by Lourie, J.) dismissed the appeal. According to the panel majority, the Board “possess[es] inherent authority to reconsider their decisions … regardless of whether they possess explicit statutory authority to do so.” Although 35 U.S.C. § 314(d) states that the decision “whether to institute … shall be final and nonappealable,” the majority did not interpret the word “final” as meaning that the Board itself could not change its mind. Rather, it meant that the institution decision could not be appealed. And since institution decisions cannot be appealed, the panel dismissed the appeal. Judge Newman dissented. Mayo Found. for Med. Edu. & Research v. Iancu, No. 18-2031 (Fed. Cir. Sept. 16, 2019): Time in an interference during continued examination does not qualify for term extension. During prosecution, Mayo filed a Request for Continued Examination. Time spent in continued examination is exempted from the calculation that determines term extension under 35 U.S.C. § 154. As such, in post-1995 applications, the time spent in continued examination reduces the effective term of the patent. Several months into Mayo’s continued examination, an interference was declared, which lasted for two years. Mayo argued that the interference ended the continued examination because interferences must be declared between otherwise patentable inventions. According to Mayo, the interference period should thus be credited for term extension. The PTO calculated that continued examination did not end until the post-interference notice of allowance, thus negating over two years of potential term extension. On appeal, the district court agreed. The Federal Circuit panel majority (Lourie, J., joined by Dyk, J.) affirmed, holding that a declaration of interference is not the same as a notice of allowance because examination can continue after an interference is decided. Judge Newman dissented, arguing that delay from the interference was caused by PTO procedures and should not be attributed to the patentee. Curver Luxembourg, SARL v. Home Expressions Inc., No. 18-2214 (Fed. Cir. Sept. 12, 2019): Design claim limited to article of manufacture specified in the design patent. The asserted design patent claimed an “ornamental design for a pattern for a chair” as illustrated in the patent’s figures. The patentee sued a home goods manufacturer whose storage baskets featured a similar design. The district court dismissed the suit because the accused products did not apply the claimed pattern to a chair as stated in the patent. The Federal Circuit panel (Chen, J., joined by Hughes and Stoll, JJ.) affirmed. The panel held that the claim language specifying the particular article of manufacturer for the design limited the claim. The panel noted that the Federal Circuit “has never sanctioned granting a design patent for a surface ornamentation in the abstract such that the patent’s scope encompasses every possible article of manufacture to which the surface ornamentation is applied.” Thus, the claimed design could not be disaggregated from the article of manufacture listed in the claim. Update: Amgen Inc. v. Sandoz Inc., Nos. 18-1551 (Fed. Cir. Sept. 3, 2019). In our last update, we noted that the Amgen panel stated that the doctrine of equivalents “applies only in exceptional cases.” In granting rehearing in part, the panel has now removed that statement from its opinion. 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 – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) 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: Allyson N. Ho – Dallas (+1 214-698-3233, aho@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 4, 2019 |
U.S. News – Best Lawyers® Names Gibson Dunn Law Firm of the Year in Antitrust and Appellate

U.S. News – Best Lawyers® awarded Gibson Dunn its 2020 Law Firm of the Year for Antitrust Law and Appellate Practice. Additionally, the Firm earned Tier 1 rankings in 137 practice area categories in its 2020 Best Law Firms survey. Overall, the firm earned 172 rankings in nine metropolitan areas and nationally. The rankings were announced on November 1, 2019.

October 25, 2019 |
The National Law Journal Names Gibson Dunn to Appellate Hot List

The National Law Journal named Gibson Dunn to its 2019 Appellate Hot List, which recognizes 25 firms that “won key matters before the U.S. Supreme Court and federal courts of appeals.” The Appellate Hot List was published on October 25, 2019.

October 15, 2019 |
The 2018 Supreme Court Term Belonged to the Chief Justice

Orange County partner Blaine Evanson and summer associates Raquel Sghiatti and Nicholas Barba are the authors of “The 2018 Supreme Court Term Belonged to the Chief Justice,” [PDF] published in the Orange County Lawyer in August 2019.

October 10, 2019 |
The First Monday

Orange County partner Blaine Evanson and Los Angeles associate Lauren Blas are the authors of “The First Monday,” [PDF] published in the Daily Journal on October 7, 2019.

October 7, 2019 |
Supreme Court Round-Up (October 2019)

As the Supreme Court begins its 2019 Term, Gibson Dunn’s Supreme Court Round-Up provides summaries of the questions presented in the cases that the Court will hear this Term as well as other key developments on the Court’s docket.  Gibson Dunn presented 3 oral arguments during the 2018 Term, and was involved in 12 additional cases as counsel for amici curiae.  To date, the Court has granted certiorari in 44 cases for the 2019 Term, and Gibson Dunn is counsel for a party in 5 of those cases. Spearheaded by former Solicitor General Theodore B. Olson, the Supreme Court Round-Up keeps clients apprised of the Court’s most recent actions.  The Round-Up previews cases scheduled for argument, tracks the actions of the Office of the Solicitor General, and recaps recent opinions.  The Round-Up provides a concise, substantive analysis of the Court’s actions.  Its easy-to-use format allows the reader to identify what is on the Court’s docket at any given time, and to see what issues the Court will be taking up next.  The Round-Up is the ideal resource for busy practitioners seeking an in-depth, timely, and objective report on the Court’s actions. To view the Round-Up, click here. Gibson Dunn has a longstanding, high-profile presence before the Supreme Court of the United States, appearing numerous times in the past decade in a variety of cases.  During the Supreme Court’s 5 most recent Terms, 9 different Gibson Dunn partners have presented oral argument; the firm has argued a total of 13 cases in the Supreme Court during that period, including closely watched cases with far-reaching significance in intellectual property, separation of powers, and federalism.  Moreover, although the grant rate for certiorari petitions is below 1%, Gibson Dunn’s certiorari petitions have captured the Court’s attention:  Gibson Dunn has persuaded the Court to grant 28 certiorari petitions since 2006. *   *   *  * Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following attorneys in the firm’s Washington, D.C. office, or any member of the Appellate and Constitutional Law Practice Group. Theodore B. Olson (+1 202.955.8500, tolson@gibsondunn.com) Amir C. Tayrani (+1 202.887.3692, atayrani@gibsondunn.com) Jacob T. Spencer (+1 202.887.3792, jspencer@gibsondunn.com) Allison K. Turbiville (+1 202.887.3797, aturbiville@gibsondunn.com)

September 25, 2019 |
Blaine Evanson Elected to California Academy of Appellate Lawyers

Orange County partner Blaine Evanson was elected as a member to the California Academy of Appellate Lawyers, “an election-only organization devoted to excellence in appellate practice.” The election was announced on September 23, 2019. Blaine Evanson has represented clients on a wide variety of appellate matters in the Supreme Court of the United States and federal and state appellate courts around the country.  He has briefed several dozen appeals in almost every federal court of appeals and many state appellate courts, and he has argued several appeals in the Ninth Circuit and California’s Courts of Appeal.

September 9, 2019 |
Law360 Names Seven Gibson Dunn Lawyers as 2019 Rising Stars

Seven Gibson Dunn lawyers were named among Law360’s Rising Stars for 2019 [PDF], featuring “attorneys under 40 whose legal accomplishments transcend their age.”  The following lawyers were recognized: Washington D.C. partner Chantale Fiebig in Transportation, San Francisco partner Allison Kidd in Real Estate, Washington D.C. associate Andrew Kilberg in Telecommunications, New York associate Sean McFarlane in Sports, New York partner Laura O’Boyle in Securities, Los Angeles partner Katherine Smith in Employment and Century City partner Daniela Stolman in Private Equity. Gibson Dunn was one of three firms with the second most Rising Stars. The list of Rising Stars was published on September 8, 2019.

September 3, 2019 |
New York Court of Appeals Round-Up & Preview (September 2019)

The New York Court of Appeals Round-Up & Preview summarizes key opinions in civil cases issued by the Court over the past year and highlights a number of civil cases of potentially broad significance that the Court will hear during the coming year, beginning in September 2019.  The cases are organized by subject. From September 2018 through August 2019, the Court issued 106 decisions.  Looking ahead, the Court has scheduled 12 cases for argument in September 2019 (both civil and criminal) — with the session’s first cases being argued on the afternoon of September 4 — and 13 cases for argument in October 2019 (both civil and criminal). The Court has not yet scheduled argument for the remaining cases currently on its docket. To view the Round-Up, click here. New York-based members of the firm’s renowned Appellate and Constitutional Law Group have deep experience in front of New York State and federal courts of appeal, and a record of success in constitutional and other challenges to government action. They are often brought into a case at the onset to help craft the legal strategy, working seamlessly with our trial lawyers to take a matter from its inception all the way to the U.S. Supreme Court, if necessary. This integrated approach distinguishes Gibson Dunn from its competitors and is key to the wide recognition the firm receives. *   *   *  * Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the New York Court of Appeals, or any other state or federal appellate courts in New York.  Please feel free to contact any member of the firm’s Appellate and Constitutional Law practice group, or the following lawyers in New York: Mylan L. Denerstein (+1 212-351-3850, mdenerstein@gibsondunn.com) Akiva Shapiro (+1 212-351-3830, ashapiro@gibsondunn.com) Genevieve B. Quinn (+1 212-351-5339, gquinn@gibsondunn.com) Patrick Hayden (+1 212-351-5235, phayden@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 15, 2019 |
Gibson Dunn Lawyers Recognized in the Best Lawyers in America® 2020

The Best Lawyers in America® 2020 has recognized 158 Gibson Dunn attorneys in 54 practice areas. Additionally, 48 lawyers were recognized in Best Lawyers International in Belgium, Brazil, France, Germany, Singapore, United Arab Emirates and United Kingdom.

August 13, 2019 |
Federal Circuit Update (August 2019)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update summarizes the Supreme Court’s recent decisions in cases appealed from the Federal Circuit as well as key filings for certiorari or en banc review. Recent Federal Circuit news and practice changes are also noted. Recent precedential decisions are also summarized concerning the Federal Circuit’s identification of a presumption of patent eligibility, narrowing of the doctrine of equivalents, rejection of Fifth Amendment and sovereign immunity challenges to IPRs, and clarification of time-bar restrictions on IPRs, of Article III standing to appeal, and of the scope of design patents. Federal Circuit News Supreme Court: In June and July, the Supreme Court issued decisions in both a patent and a trademark case as noted below. The Court also granted certiorari in two more patent cases and one trademark case. Case Status Issue Amicus Briefs Filed Peter v. NantKwest Inc., No. 18-801 Set for argument on October 7, 2019. Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. § 145 encompasses the personnel expenses the PTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation. 11 Dex Media Inc. v. Click-To-Call Techs., LP, No. 18-916 Petition for certiorari granted on June 24, 2019. Whether 35 U.S.C. § 314(d) permits appeal of the PTAB’s decision to institute an inter partes review upon finding that § 315(b)’s time bar did not apply. 3 Romag Fasteners Inc. v. Fossil Inc., No. 18-1233 Petition for certiorari granted on June 28, 2019. Whether, under Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a). 0 Recent Supreme Court Decisions: Return Mail Inc. v. United States Postal Service (No. 17-1594) (Vote: 6-3, Author: Justice Sotomayor): The Court’s majority held that the government is not a “person” capable of instituting AIA review proceedings. The Court reasoned that, absent an express definition in the statute, “longstanding interpretive presumption” directed that a “person” does not include the sovereign, and “thus excludes a federal agency like the Postal Service.” The majority rejected the government’s view that other references to “person” in the AIA “appear” to include the government or that Congress intended “person” to include the government due to its “longstanding history with the patent system.” Justice Breyer dissented, joined by Justices Ginsburg and Kagan. Iancu v. Brunetti, No. 18-302 (Vote: 6-3, Author: Justice Kagan): A Court’s majority affirmed the Federal Circuit’s holding that the Lanham Act’s prohibition on registration of immoral or scandalous trademarks violates the First Amendment. As the majority explained, the immoral or scandalous bar discriminates on the basis of viewpoint and thus collides with First Amendment doctrine. The majority reasoned that the Lanham Act permits marks “that champion society’s sense of rectitude and morality, but not marks [deemed immoral] that denigrate those concepts.” Likewise, it “allows registration of marks when their messages accord with … society’s sense of decency or propriety,” but not “scandalous” marks that “defy” that sense. Thus, the “facial viewpoint bias in the law results in viewpoint-discriminatory application.” Justice Alito concurred, with Justices Breyer, Sotomayor and Chief Justice Roberts each filing opinions concurring in part and dissenting in part that the “scandalous” portion of the provision could be instead susceptible to a narrower construction. Chief Justice Roberts wrote that “scandalous” could, for example, be read narrowly to bar only marks that are “obscene, vulgar, or profane.” Noteworthy Petitions for a Writ of Certiorari: Acorda Therapeutics, Inc. v. Roxane Labs., Inc. (No. 18-1280): Question presented: “whether objective indicia of nonobviousness may be partially or entirely discounted where the development of the invention was allegedly ‘blocked’ by the existence of a prior patent, and, if so, whether an ‘implicit finding’ that an invention was ‘blocked,’ without a finding of actual blocking, is sufficient to conclude that an infringer has met its burden of proof.” Acorda is represented by Ted Olson, Thomas Hungar, and Amir Tayrani of Gibson Dunn. HP Inc. v. Berkheimer (No. 18-415): Question presented: “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” On January 7, 2019, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States. Mark Perry of Gibson Dunn continues to serve as co-counsel for HP in this matter. Hikma Pharms. USA Inc. v. Vanda Pharms. Inc. (No. 18-817): Question presented: “whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.” On March 18, 2019, the Supreme Court invited the U.S. Solicitor General to express the views of the United States. Atlanta Gas Light Co. v. Bennett Regulator Guards Inc. (No. 18-999): Questions presented: (1) whether the Federal Circuit erred in concluding that it had jurisdiction to review the PTAB’s decision to institute IPR of a patent over the patent owner’s objection that it was time-barred; and (2) whether the Federal Circuit erred in rejecting the “longstanding principle that a dismissal without prejudice leaves the parties as if a suit had never been brought, splitting the circuits.” Federal Circuit En Banc Review: Athena Diagnostics, Inc. v. Mayo Collaborative Services, No. 17-2508 (Fed. Cir. July 3, 2019) (denying petition 7-5): Although Athena’s petition was denied, the Federal Circuit’s response is remarkable for its eight separate opinions, each calling for Supreme Court guidance or legislative intervention to clarify the application of § 101 to novel medical diagnostics. Athena’s disputed claim covered a diagnostic method directed to neurotransmission disorders by examining the presence of naturally occurring MuSK antibodies in bodily fluids. Following the Supreme Court’s ruling in Mayo Collaborative Servs. v. Prometheus Labs., Inc., the Federal Circuit held Athena’s claim to be ineligible because the correlation between MuSK and neurological disease was “a law of nature.” But, as the panel observed, the result may have been different if the claim had been drafted as a method of treatment instead: “claiming a new treatment for an ailment, albeit using a natural law, is not claiming the natural law.” As Judge Moore summarized, all 12 judges reviewing Athena’s en banc petition agreed that its diagnostic should be patent-eligible. The seven judges who voted to deny the petition (Lourie, Reyna, Chen, Hughes, Prost, Taranto, and Dyk) held that the Supreme Court’s decision in Mayo left no room for eligibility, but indicated that Mayo should be revisited by the Supreme Court or Congress. The five dissenting judges found the diagnostic distinguishable from that in Mayo. Other Federal Circuit News: The annual Federal Circuit Bench and Bar Conference took place June 12–15, 2019 at the Broadmoor in Colorado Springs, CO. Next year’s conference will take place in Puerto Rico. On July 30, 2019, former Chief Judges of the Federal Circuit, Paul Michel and Randall Rader, joined a letter with others, including academics and former USPTO officials, urging Congress to pass legislation reforming the “patent eligibility doctrine.” The jurists noted the “extreme uncertainty about how patent examiners or judges will apply the Alice-Mayo framework that was recently created by the Supreme Court.” This letter responded to a letter from the American Civil Liberties Union and other organizations that opposed legislative reform efforts. The retired jurists argued that the ACLU and other’s view was “profoundly mistaken and inaccurate” and that draft legislation, if enacted, would not “authorize patenting products and laws of nature, abstract ideas, and other general fields of knowledge.” The judges and their co-signees stated that such legislative reform would not “eliminate constitutional and statutory bars to patenting laws of nature, abstract ideas, and general fields of knowledge,” and instead “is vitally important to sustain U.S. global leadership in innovation, resulting in increased jobs, economic growth, and a flourishing society.” Federal Circuit Practice Update Change to Electronic Filing Procedures During Weather-Related Closures: The Federal Circuit has announced that, effective October 1, 2019, it will no longer automatically consider weather-related closures as legal holidays for the purposes of Federal Appellate Rule of Procedure 26. In the event of inclement weather closing the courthouse, the Clerk’s office will continue to accept and process electronic filings based on the original electronic filing deadlines. Paper filings due on the date of a weather-related closure would be deemed timely filed if received by the next day the Clerk’s Office is open. The Federal Circuit’s notice can be found here. Key Case Summaries (May 2019–July 2019) Cellspin v. Fitbit, Nos. 18-1817 et al. (Fed. Cir. Jun. 25, 2019): A presumption of patent eligibility exists, just as there is a presumption of validity. Cellspin sued Fitbit and others, asserting multiple patents reciting claims related to connecting digital cameras to mobile devices. Fitbit and other defendants moved to dismiss under Rule 12, alleging lack of patentable subject matter under § 101. The district court granted the motion. The Federal Circuit (O’Malley, J., joined by Lourie and Taranto, JJ) vacated and remanded. Although the panel agreed the patents were directed to an abstract idea, the court followed its precedent in Berkheimer v. HP and held that the district court failed to credit Cellspin’s factual allegations in its pleadings. “Accepting the allegations … as true, we cannot conclude that the asserted claims lack an inventive concept” under step two of the Alice inquiry. The court ruled that patents “are presumptively valid” under § 282, and that this presumption includes § 101, making this the first Federal Circuit precedent to acknowledge a presumption of eligibility. Amgen Inc. v. Sandoz Inc., Nos. 18-1551, -52 (Fed. Cir. May 8, 2019): The doctrine of equivalents applies “only in exceptional cases.” Amgen sued Sandoz under the Biologics Price Competition and Innovation Act, alleging that Sandoz’s biosimilar application infringed, inter alia, Amgen’s patent to a method of preparing purified biologics. Amgen’s U.S. Patent 8,940,878 required a three-step, three-solution process that included specifically “washing” and “eluting” the desired protein. Sandoz’s accused process, however, used only one step, without washing or eluting steps. The district court granted summary judgment of non-infringement. Amgen appealed, asserting among other arguments that infringement should have been found under the doctrine of equivalents. The Federal Circuit (Lourie, J., joined by O’Malley and Reyna, JJ.) affirmed, rejecting Amgen’s view that a one-step method could be “insubstantially different from a claimed three-step, three-solution process” even if it achieved “the same result (protein purification).” The panel held that Amgen’s patent recited a specific sequence of steps, which could not be avoided by equivalents. The panel declared that the doctrine of equivalents “applies only in exceptional cases,” a more restrictive view than previously articulated, suggesting potential future narrowing of the doctrine. Celgene Corp. v. Peter, Nos. 18-1167 et al. (Fed. Cir July 30, 2019): The retroactive application of IPR proceedings to pre-AIA patents is not a Fifth Amendment taking. Celgene sells thalidomide, an immunomodulatory drug that causes severe birth defects. In response to an IPR, the Board held certain of Celgene’s claims to systems for prescription safety to be unpatentable. In addition to appealing the Board’s determinations, Celgene asserted that the retroactive application of an IPR to pre-AIA patents constituted an unconstitutional taking. The Federal Circuit (Prost, CJ., joined by Bryson and Reyna, JJ.) disagreed. According to the panel, patentees always had the expectation that their patents’ validity could be challenged in district court. And, when Celgene filed for its patents, ex parte reexamination had existed for two decades. Inter partes reexamination was also available when Celgene filed for one of its patents. Celgene’s pre-AIA patents were thus granted subject to existing judicial and administrative avenues for reconsidering validity. The court concluded that IPR proceedings do not significantly differ substantively or procedurally from pre-AIA challenges to effect a taking. Regents of the Univ. of Minn. v. LSI Corp., Nos. 18-1559 et al. (Fed. Cir. June 14, 2019). State sovereign immunity does not protect state-owned patents from IPR challenges. The University of Minnesota sued LSI among others for patent infringement and LSI and others petitioned for IPR. Before institution, the patentee filed a motion to dismiss based on sovereign immunity. An expanded panel of the PTAB concluded that sovereign immunity did apply to IPR proceedings but that the patentee waived its immunity by filing suit against the petitioners. The Federal Circuit (Dyk, J., joined by Wallach and Hughes, JJ.) affirmed, but held that sovereign immunity does not apply to IPRs. This followed the Federal Circuit’s recent decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., holding that IPRs were not barred by tribal immunity. The panel concluded that “differences between tribal and state sovereign immunity [did] not warrant a departure from the reasoning in Saint Regis.” Parallel to the analysis in Saint Regis, the court concluded that an IPR is more like an agency enforcement action, where sovereign immunity is not implicated, than like a private civil suit. Power Integrations, Inc. v. Semiconductor Components Indus., LLC d/b/a ON Semiconductor, No. 18-1607 (Fed. Cir. June 13, 2019)—Real-party-in-interest relationships arising after filing but before institution are considered for the § 315(b) statutory time-bar. In 2009, Power Integrations sued Fairchild Semiconductor for infringement. In late 2015, ON entered an agreement to merge with Fairchild. In March 2016 while the merger was pending, ON filed for an IPR against the patent being litigated against Fairchild. The merger closed later that year and, shortly after, the Board instituted the IPR. In its institution decision, the Board focused its § 315(b) analysis on whether ON and Fairchild were in privity when the petition was filed, holding that the mere agreement to merge did not create privity for the purpose of § 315(b). On appeal, the Federal Circuit (Prost, CJ, joined by Reyna and Stoll, JJ) reversed, holding that the “decision under § 315(b) is whether to institute or not.” The statute “specifically precludes institution, not filing” when time-barred parties are in privity. Thus, “relationships that may arise after filing but before institution [are] relevant to the § 315(b) time-bar.” AVX Corp. v. Presidio Components, Inc., 18-1106 (Fed. Cir. May 13, 2019)—Competitor standing is insufficient for Article III standing to appeal an IPR decision. Presidio and AVX are competitors in the market for electronic capacitors, and Presidio has repeatedly sued AVX for patent infringement. AVX preemptively filed an IPR against one of Presidio’s patents, although AVX did not yet have plans for a potentially infringing product. The Board held some claims unpatentable, but found AVX failed to meet its burden on others. AVX appealed, but the Federal Circuit (Taranto, J, joined by Newman and O’Malley, JJ) dismissed for lack of standing. The panel rejected AVX’s argument that the Board’s decision “reduces AVX’s ability to compete with Presidio” because, without plans for a product covered by the disputed claims, AVX had no “present or nonspeculative interest” in practicing the patent. As such, the panel held that AVX lacked Article III standing to appeal the Board’s decision. Automotive Body Parts Ass’n v. Ford Global Techs., No. 18-1613 (Fed. Cir. July 23, 2019): Showing that a design’s “aesthetic appeal” pleases consumers does not render it functional. Ford asserted that members of the Automotive Body Parts Association infringed its design patents, and the Association brought a declaratory action, alleging that the designs are primarily functional. The Association argued that car owners seeking to repair Ford trucks would desire replacement parts that matched the original part’s design. The district court rejected the Association’s arguments as effectively seeking to “eliminate design patents on auto-body parts.” The Federal Circuit (Stoll, J., joined by Hughes and Schall, JJ) affirmed, rejecting that consumer preference for replacement “hoods and headlamps that restore [a vehicle’s] original appearance” itself is a functional benefit. The court refused to apply the “aesthetic functionality” doctrine of trademark law to design patents, holding that, even if there is a “consumer preference for a particular design,” that aesthetic appeal “is inadequate to render that design functional.” 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 – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) 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: Allyson N. Ho – Dallas (+1 214-698-3233, aho@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 13, 2019 |
Getting the Deal Through: Appeals 2019

Washington, D.C. partner Mark Perry and Los Angeles partner Perlette Jura are the contributing editors of “Appeals 2019,” a publication examining Appellate law and procedure between jurisdictions around the globe, published by Getting the Deal Through in June 2019.  Perry and Jura are the authors of the “Global Overview” and the “United States” chapters of the book, and London partners Patrick Doris and Doug Watson and associate Daniel Barnett are the authors of the “United Kingdom” chapter.

July 2, 2019 |
Supreme Court Round-Up (July 2019)

Following the close of the Supreme Court’s 2018 Term, Gibson Dunn’s Supreme Court Round-Up provides summaries of the Court’s opinions, the questions presented in cases that the Court will hear next Term, and other key developments on the Court’s docket.  Gibson Dunn presented 3 oral arguments during the 2018 Term, and was involved in 12 additional cases as counsel for amici curiae.  To date, the Court has granted certiorari in 41 cases for the 2019 Term, and Gibson Dunn is counsel for a party in 4 of those cases. Spearheaded by former Solicitor General Theodore B. Olson, the Supreme Court Round-Up keeps clients apprised of the Court’s most recent actions.  The Round-Up previews cases scheduled for argument, tracks the actions of the Office of the Solicitor General, and recaps recent opinions.  The Round-Up provides a concise, substantive analysis of the Court’s actions.  Its easy-to-use format allows the reader to identify what is on the Court’s docket at any given time, and to see what issues the Court will be taking up next.  The Round-Up is the ideal resource for busy practitioners seeking an in-depth, timely, and objective report on the Court’s actions. To view the Round-Up, click here. Gibson Dunn has a longstanding, high-profile presence before the Supreme Court of the United States, appearing numerous times in the past decade in a variety of cases.  During the Supreme Court’s 5 most recent Terms, 9 different Gibson Dunn partners have presented oral argument; the firm has argued a total of 20 cases in the Supreme Court during that period, including closely watched cases with far-reaching significance in the class action, intellectual property, separation of powers, and First Amendment fields.  Moreover, although the grant rate for certiorari petitions is below 1%, Gibson Dunn’s certiorari petitions have captured the Court’s attention:  Gibson Dunn has persuaded the Court to grant 28 certiorari petitions since 2006. *   *   *   * Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following attorneys in the firm’s Washington, D.C. office, or any member of the Appellate and Constitutional Law Practice Group. Theodore B. Olson (+1 202.955.8500, tolson@gibsondunn.com) Amir C. Tayrani (+1 202.887.3692, atayrani@gibsondunn.com) Brandon L. Boxler (+1 202.955.8575, bboxler@gibsondunn.com) Andrew G.I. Kilberg (+1 202.887.3759, akilberg@gibsondunn.com)

June 28, 2019 |
Supreme Court Sends 2020 Census Citizenship Question Back to the Department of Commerce, Citing Contrived Rationale

Click for PDF Decided June 27, 2019 Department of Commerce v. New York, No. 18-966 Yesterday, the Supreme Court held that the Secretary of Commerce’s decision to reinstate a citizenship question on the 2020 census violates the Administrative Procedure Act because the Secretary’s stated rationale—though reasonable and reasonably explained—was contrived. Background: To apportion Members of the House of Representatives among the States, the Constitution requires an “Enumeration” of the population every ten years, “in such Manner” as Congress “shall by Law direct.” Congress enacted the Census Act and delegated to the Secretary of Commerce the task of conducting the census “in such form and content as he may determine.” 13 U.S.C. § 141(a). In every census between 1820 and 1950, all households were asked about citizenship or place of birth. Since 1950, however, only some households have been asked these questions. Last year, the Secretary of Commerce announced that the 2020 census would reinstate a question about citizenship in order to collect data to aid the government in enforcing the Voting Rights Act. A group of state and local governments filed suit, alleging that the Secretary’s decision violates the Enumeration Clause and the Administrative Procedure Act. The district court dismissed the Enumeration Clause claim, but authorized discovery outside the administrative record on the other claims. The district court then held that the Secretary’s decision was not supported by the evidence before him, rested on a pretextual basis, and violated the Census Act.  The Secretary appealed directly to the Supreme Court. Issue:  Did the Secretary’s decision to reinstate a citizenship question on the 2020 census violate the Administrative Procedure Act?   Court’s Holding:  Yes. Although the Secretary’s decision was reasonable and supported by the evidence, the district court was warranted in remanding the case to the agency because the Secretary’s stated rationale was contrived. “Reasoned decisionmaking under the Administrative Procedure Act calls for an explanation for agency action. What was provided here was more of a distraction.” Chief Justice Roberts, writing for the majority What It Means: A majority of the Court—the Chief Justice and Justices Ginsburg, Breyer, Sotomayor, and Kagan—agreed that the Secretary’s explanation was contrived.  This aspect of the Court’s decision creates a potentially significant new basis for challenging discretionary administrative actions, at least where there is strong evidence of pretext in the administrative record. The Court acknowledged the general rule that judges generally avoid inquiring into “executive motivation,” but relied on a “narrow exception” that permits such inquiry “[o]n a strong showing of bad faith or improper behavior.” Though the Court could point to “no particular step” in the administrative process that was “inappropriate or defective,” it reasoned that “the Secretary began taking steps to reinstate a citizenship question about a week into his tenure,” yet did not identify a need for census data to enforce the Voting Rights Act until much later. The Court also held that the Secretary’s decision did not violate the Enumeration Clause.  That provision affords Congress “virtually unlimited discretion” in conducting the census. Congress, in turn, has properly “delegated its broad authority over the census to the Secretary.”  Here, the Chief Justice joined with Justices Thomas, Alito, Gorsuch, and Kavanaugh to form a 5-4 majority. Justice Thomas wrote an opinion concurring in part and dissenting in part, which Justices Gorsuch and Kavanaugh joined.  He viewed the Court’s holding as “an unprecedented departure from our deferential review of discretionary agency decisions”—one that, “if taken seriously as a rule of decision . . . would transform administrative law.” The Court’s decision was notable because it marked “the first time ever” that the Court has “invalidated an agency action solely because it questions the sincerity of an agency’s otherwise adequate rationale.”  Justice Thomas worried that the Court “has opened a Pandora’s box of pretext-based challenges in administrative law.” Given the nature of decisionmaking in the Executive Branch, “[o]pponents of future executive actions can be expected to make full use of the Court’s new approach.” Justice Breyer wrote an opinion concurring in part and dissenting in part, which Justices Ginsburg, Sotomayor, and Kagan joined. Justice Breyer believed that even if the Secretary’s rationale was not contrived, his decision still violated the Administrative Procedure Act because the evidence “indicated that asking the question would produce citizenship data that is less accurate, not more.” Justice Alito also wrote separately because he would have held that the Secretary’s decision was “committed to agency discretion by law” and thus not subject to judicial review.  “To put the point bluntly,” Justice Alito wrote, “the Federal Judiciary has no authority to stick its nose into the question whether it is good policy to include a citizenship question on the census or whether the reasons given by Secretary Ross for that decision were his only reasons or his real reasons.” As always, Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Administrative Law & Regulatory Practice Eugene Scalia +1 202.955.8206 escalia@gibsondunn.com Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 26, 2019 |
Reinforcing Limits On Its Use, Supreme Court Upholds Auer Deference In Veterans Affairs Dispute

Click for PDF Decided June 26, 2019 Kisor v. Wilkie, No. 18-15 Today, the Supreme Court reaffirmed that an agency’s reasonable interpretation of its own ambiguous regulations is entitled to deference. Background: In 1982, the Department of Veterans Affairs (“VA”) denied a Vietnam War veteran’s claim for benefits after concluding that the veteran did not suffer from post-traumatic stress disorder (“PTSD”). When the veteran again sought benefits in 2006, the VA changed course, this time awarding benefits after concluding that the veteran did suffer from PTSD. This case arises out of a disagreement as to whether the veteran was also entitled to retroactive payments under a VA regulation permitting such payments when the VA fails to consider “relevant” records—in this case, records describing the veteran’s combat experience. The VA contends that the newly submitted records are not “relevant” because they do not go to the reason for its 1982 denial of benefits, i.e., that the veteran did not have PTSD.  Citing both Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), and Auer v. Robbins, 519 U.S. 452 (1997)—which require federal courts to defer to an agency’s reasonable interpretation of its own ambiguous regulations—the Federal Circuit deferred to the VA’s interpretation of “relevant,” and affirmed the VA’s denial of retroactive payments. Issue: Should the Supreme Court overrule Bowles v. Seminole Rock & Sand Co, 325 U.S. 410 (1945), and Auer v. Robbins, 519 U.S. 452 (1997), which require courts to defer to an agency’s reasonable interpretation of its own ambiguous regulations?  Court’s Holding:  No.  If, after exhausting the traditional tools of construction, a court concludes that a regulation is genuinely ambiguous, that the agency’s interpretation is reasonable, and that the context of the agency interpretation entitles it to controlling weight, a court must defer to the agency’s interpretation. “Auer deference retains an important role in construing agency regulations.  But even as we uphold it, we reinforce its limits.” Justice Kagan, writing for the Court What It Means: Although four justices would have overruled Auer, the majority declined to do so.  Nonetheless, the Court “reinforce[d]” the limits on when such deference can be deployed.  These limits are robust:  “When it applies, Auer deference gives an agency significant leeway to say what its own rules mean. . . .  But that phrase ‘when it applies’ is important—because it often doesn’t.” First, a court may not afford Auer deference unless the regulation is genuinely ambiguous.  This requires exhausting “all the ‘traditional tools’ of construction,” as even “hard interpretative conundrums . . . can often be solved.”  Second, a court must conclude that the agency’s reading of the ambiguous regulation is “reasonable,” which the Court emphasized “is a requirement an agency can fail.”  Finally, a court must “make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight.”  In undertaking this inquiry, courts should consider a variety of factors, including whether the agency’s interpretation constitutes the agency’s “official position,” whether the interpretation “implicate[s]” the agency’s “substantive expertise,” and whether the interpretation reflects a “fair and considered judgment,” as compared to a “convenient litigating position.” The Court’s discussion of stare decisis could have repercussions in other cases, as well. The Court highlighted three reasons for declining to overrule Auer and Seminole Rock.  First, those precedents have long been applied by lower courts. Second, overruling the precedents would cast doubt on many settled constructions of rules.  And third, Congress remains free to alter the effect of Auer and Seminole Rock through legislation. As Justice Gorsuch’s opinion concurring in the judgment states, “the majority retains Auer only because of stare decisis.” The Court did not foreclose the possibility of revisiting other questions involving deference to agencies, including the Chevron doctrine under which courts generally defer to agency interpretations of ambiguous statutes. As the Chief Justice’s concurring opinion makes clear, “[i]ssues surrounding judicial deference to agency interpretations of their own regulations are distinct from those raised in connection with judicial deference to agency interpretations of statutes enacted by Congress.” For this reason, the Chief Justice does “not regard the Court’s decision today to touch upon the latter question,” a point with which Justice Kavanaugh agreed in his own opinion concurring in the judgment. As always, Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Administrative Law & Regulatory Practice Eugene Scalia +1 202.955.8206 escalia@gibsondunn.com Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 26, 2019 |
Supreme Court Upholds Dormant Commerce Clause Challenge To Tennessee’s Durational Residency Requirement For Liquor Retailers

Click for PDF Decided June 26, 2019 Tennessee Wine & Spirits Retailers Association v. Thomas, No. 18-96  Today, the Supreme Court struck down Tennessee’s 2-year durational residency requirement for obtaining retail liquor licenses, holding that it discriminates against interstate commerce in violation of the dormant Commerce Clause. Background: Tennessee law imposes a two-year residency requirement for applicants seeking to obtain a one-year license to sell liquor in the state, and a ten-year residency requirement for licensees seeking to renew their retail liquor license.  Two new applicants, Total Wine and the Ketchum family, sought to obtain retail liquor licenses in Tennessee.  Though neither satisfied the durational residency requirements, Tennessee’s Alcoholic Beverage Commission (the “Commission”) recommended that the licenses be approved.  Then, in response to a threatened lawsuit, the Commission sought a declaratory ruling from a federal district court on the constitutionality of the durational-residency requirements.  The district court held that the durational residency requirements violated the dormant Commerce Clause, notwithstanding the 21st Amendment’s express reservation of power to each state to regulate the importation and distribution of liquor into the state.  A divided panel of the Sixth Circuit affirmed. Issue: Does the 21st Amendment empower states, consistent with the dormant Commerce Clause, to regulate liquor sales by granting retail or wholesale licenses only to individuals or entities that have resided in-state for a specified time? Court’s Holding: No.  Tennessee’s 2-year durational residency requirement for retail liquor store license applicants violates the dormant Commerce Clause and is not rescued by the 21st Amendment.  The requirement discriminates against out-of-state applicants and is not justified by any legitimate state interest. “The aim of the [21st Amendment] was not to give States a free hand to restrict the importation of alcohol for purely protectionist purposes.” Justice Alito, writing for the majority What It Means: The Court’s decision reaffirms the line of cases, including Bacchus Imports v. Dias (1984) and Granholm v. Heald (2005), upholding certain dormant Commerce Clause challenges to state liquor laws.  These decisions represent a retreat from the prevailing view in the years following the repeal of Prohibition and the adoption of the 21st Amendment that states have plenary power to regulate liquor within their borders. In striking down the durational residency requirement for retailers, the Court explained that Section 2 of the 21st Amendment was meant to constitutionalize the basic understanding of the extent of the states’ power to regulate alcohol that prevailed under statutes passed by Congress before Prohibition.  The Court concluded that this standard gives states leeway in adopting alcohol-related public health and safety measures, but does not allow them to adopt purely protectionist restrictions on commerce in alcoholic beverages. The Tennessee Wine and Spirits Retailers Association argued that the durational residency requirement ensures that retailers are amenable to direct process of state courts, gives the State an opportunity to determine an applicant’s fitness to sell alcohol, and guards against undesirable non-residents moving into the State for the primary purpose of operating a liquor store.  The Court concluded, however, that the requirement is ill-fitted to those goals, and the goals could be achieved through less protectionist measures. Importantly, the Court reaffirmed that the 21st Amendment allows states to require a so-called “three-tier system.”  The three-tier system generally separates (and separately regulates) the production, distribution, and retail levels.  The Court emphasized that the three-tier system was not “[a]t issue in this case,” and confirmed that “States ‘remai[n] free to pursue’ their legitimate interest in regulating the health and safety risks posed by the alcohol trade” via the three-tier system. The dissent agreed with the arguments made by Gibson Dunn’s amicus brief, explaining that the 21st Amendment “embodied a classically federal compromise” that “allowed the States to regulate alcohol ‘unfettered by the Commerce Clause.’”  Justice Gorsuch, joined by Justice Thomas, maintained that under the terms of that compromise, “Tennessee’s law . . . would seem perfectly permissible.” The Court’s decision may make it more difficult for states to ensure that liquor retailers have sufficient ties to the communities they serve.  The decision will likely result in additional dormant Commerce Clause challenges to other aspects of state liquor regulation. As always, Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Miguel A. Estrada +1 202.955.8257 mestrada@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.