Federal Circuit Update (November 2016)

November 30, 2016

This November 2016 edition of Gibson Dunn’s Federal Circuit Update discusses pending updates to the Federal Circuit Rules of Practice and the upcoming holiday schedule at the Federal Circuit.  Also included are summaries of the pending en banc case involving motions to amend claims during inter partes review as well as a series of key recent decisions, including an en banc decision focusing appellate review only on issues meaningfully raised by the parties on appeal, the definition of a covered business method patent, disavowal of claim scope, ineligibility under § 101, and pleading standards for joint infringement.

Federal Circuit News 

The Court will close at 2:00 p.m. on Friday, December 23, 2016 and Friday, December 30, 2016.  However, electronic filing and the night drop box for paper filing will be available until midnight for filings due on December 23 and December 30.

Upcoming En Banc Federal Circuit Cases

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

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

Questions Presented:

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

Federal Circuit Practice Update

New amendments to the Federal Rules of Appellate Procedure ("FRAP") will take effect on December 1, 2016.  Among these changes, the revised Rules reduce the number of pages permitted for briefs as well as reduce the time allowed to respond to electronic filings.  The changes apply to all appellate proceedings commenced after December 1, 2016 as well as pending proceedings "insofar as just and practicable."  The Federal Circuit, however, will be simultaneously amending its own Rules of Practice with revisions that will effectively undo several of the upcoming FRAP amendments.  Federal Circuit practitioners should look to the final implementation of the Local Rules to confirm the impact of the upcoming FRAP amendments on Federal Circuit filings. 

No Added Three-day Response Period with Electronically Served Documents–Revised Rule 26(c) eliminates the three-day extension for responses to documents served by electronic means, including those served via CM/ECF.  Responses to papers served electronically will now be due as if service were made by hand.  This mirrors the revision to Federal Rule of Civil Procedure 6(d) as well as existing Federal Circuit Rule 26. 

Tolling Deadline for Appeal–Revised Rule 4(a)(4)(A) clarifies the tolling effect of post-judgment motions in district court proceedings on the time to file an appeal, which runs "from the entry of the order disposing of the last such remaining motion."  The revised rule clarifies that, unless a motion is filed "within the time allowed" under the FRCP, it does not toll the deadline to file an appeal.  According to the Committee Notes, this is the intended result even if a motion’s later filing is permitted by court order or party consent.  This resolves a circuit split on this issue. 

Amicus Briefing Related to Rehearing–Newly drafted Rule 29(b) clarifies timing requirements for filing briefs in connection with a request for panel rehearing or rehearing en banc.  These deadlines are similar to the existing timing requirements for merits filings.  The Federal Circuit, however, proposes omitting the specific timing requirements for amici filings related to rehearing requests from the FRAP amendment.  

Changes in Word Count Limits

  • Merits–Revised FRAP 32(a) reduces the word limit for principal briefs that do not involve a cross-appeal from 14,000 words to 13,000, with reply briefs limited to 6,500 words instead of 7,000.  Similar reductions apply to cross-appeal briefing under revised Rule 28.1(e).  But the proposed revisions to Federal Circuit Rules 28.1 and 32(a) retain the traditional higher limits, thus overriding the impact of the reductions in practice before the Federal Circuit. 
  • Mandamus–Under the revision to FRAP 21(d)(1), mandamus petitions will now be limited to 7,800 words from the prior 30-page limit.  The proposed revisions to the Federal Circuit Rules will not affect this change.  The Federal Circuit will be going one step further, specifying that, if replies are solicited, they must be limited to 3,900 words unless ordered otherwise. 
  • Rehearing–Under revisions to FRAP 35(b) and 40(b), petitions for rehearing or rehearing en banc will now be limited to 3,900 words instead of 15 pages, which applies jointly across panel and en banc petitions even if both are filed separately.  The proposed Federal Circuit Rules do not alter this limit. 
  • Amici–The length for amicus briefs at the merits stage will remain under the revisions as half that permitted in the Rules for principal briefs.  See revised FRAP 29(a)(5).  In light of the above revision to Rule 32(a), however, this limit will now typically be 6,500 words instead of 7,000 words due to the revised lower limit for principal briefs.  Although the Federal Circuit is not planning to modify this aspect of FRAP 29, given that its proposed limit for principal briefs remains at 14,000 words, this suggests that the Federal Circuit may contemplate a 7,000-word limit for amici briefing on the merits.  Revised FRAP 29(b)(4) further limits amici briefing related to rehearings to only 2,600 words, with that limit being left untouched by the Federal Circuit.

Key Case Summaries (Oct. – Nov. 2016)

Apple Inc. v. Samsung Elecs. Co., Nos. 2015-1171, -1195, -1994 (Fed. Cir. Oct. 7, 2016) (en banc):  Appellate review should decide only the issues meaningfully raised by the parties based on the record before the trier of fact.

Apple sued Samsung for infringement of U.S. Patent Nos. 8,074,172; 5,946,647; and 8,046,721 (the ‘172, ‘647, and ‘721 patents).  The district court granted summary judgment of infringement of the ‘172 patent.  A jury found that the ‘647 and ‘721 patents were infringed and not invalid, and found the ‘172 not invalid.  The district court denied Samsung’s motion for JMOL and entered judgment in favor of Apple.  On appeal, a panel of the Federal Circuit reversed the district court’s denial of JMOL, holding that the ‘647 patent was not infringed and that the ‘172 and ‘721 patents were invalid as obvious over the prior art.

The Federal Circuit granted Apple’s petition for rehearing en banc to "affirm [the Federal Circuit’s] understanding of the appellate function as limited to deciding issues raised on appeal by the parties, deciding these issues only on the basis of the record made below, and as requiring appropriate deference be applied to the review of fact findings."

In a prior appeal, the Federal Circuit construed the "analyzer server" limitation in the ‘647 patent to mean "a server routine separate from a client that receives data having structures from the client" and concluded that Samsung’s devices did not infringe this standalone program limitation.  The en banc court, however, reasoned that claim construction was not appealed, and thus the panel improperly changed the construction of "analyzer server" to add such a "standalone" requirement and affirmed the judgment of infringement. 

At trial, Samsung argued that the asserted claim of the ‘172 patent would have been obvious, and there was conflicting expert testimony on this point.  The en banc court found that the jury could have reasonably found Apple’s expert testimony more credible.  Moreover, the en banc court found that Samsung did not, on appeal, meaningfully contest Apple’s evidence of objective indicia supporting nonobviousness.  The en banc court explained that "as an appellate court, it is beyond our role to reweigh the evidence or consider what the record might have supported, or investigate potential arguments that were not meaningfully raised."  As a result, the en banc court affirmed the district court’s holding that Samsung failed to establish by clear and convincing evidence that the asserted claim of the ‘172 patent would have been obvious.   

Unwired Planet, LLC v. Google Inc., No. 2015-1812 (Fed. Cir. Nov. 21, 2016): Definition of a covered business method ("CBM") patent. 

Google petitioned for CBM review of a patent owned by Unwired.  The challenged patent describes a system and method for restricting access to a wireless device’s location information.  A user may set "privacy preferences" that determine when "client applications" may access his or her wireless device’s location information.  The "client applications" can be associated with merchants who may wish to transmit advertisements to nearby wireless devices.  The PTAB instituted CBM review, finding that the subject matter recited in at least one claim of the patent was "incidental or complementary" to the financial activity of service or product sales.  In its final written decision, the PTAB found the challenged claims to be ineligible under 35 U.S.C. § 101.   

The Federal Circuit (Reyna, J.) vacated the PTAB’s decision, holding that the PTAB relied on an incorrect definition of a CBM patent.  According to the court, "CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses ‘in the practice, administration, or management of a financial product or service.’  AIA § 18(d)."  The court reasoned that recitations of activities that are "incidental or complementary" to financial activity are insufficient to establish that a patent is a CBM patent.  Although a floor statement by Senator Schumer indicated that the statutory definition of a CBM patent was intended to cover activities "incidental or complementary" to financial activity, these statements are not legally binding.  Moreover, the court reasoned that the application of the "incidental or complementary" language rendered superfluous the limits Congress placed on the definition of a CBM patent.     

Poly-America, L.P. v. API Industries, No. 2016-1200 (Fed. Cir. Oct. 14, 2016): Disavowal of claim scope based on statements in patent specification and prosecution history. 

Poly-America sued API Industries for infringement of certain claims of U.S. Patent No. 8,702,308 in Delaware district court.  The ‘308 patent claims improved structural designs for garbage bags, specifically relating to the drawstring seal.  The patent described a bag in which the two halves of the drawstring were sealed together at points inside the outer edge of the bag–thus creating a natural tapering effect at the top of the bag.  At claim construction, the parties disputed the term "short seal," which referred to the drawstring seal (as opposed to the seal on the outer edges of the bag).  While the patent envisioned a tapered top, thereby requiring that the "short seals" be closer together than the seals creating the outer edges of the bag, there was nothing in the claim language itself requiring this limitation.  Relying on the specification and prosecution history, the district court determined that the seal must be inside the outer edges of the bag, thus creating a tapering effect.  Poly-America thereafter stipulated to non-infringement and appealed. 

On appeal, the Federal Circuit (Reyna, J.) affirmed the district court’s construction, reasoning that the patentee disavowed claim scope covering a short seal flush with the edge of the bag.  The court confirmed that, while disavowal requires "clear and unequivocal evidence," the disavowal "need not be explicit."  The court identified three separate instances of disavowal.  First, the patentee disavowed the claim scope by describing "the present invention" as having a tapered top in the specification.  Second, the patentee disavowed the claim scope when it criticized non-tapered bags as being difficult to secure over trash receptacle lips.  Third, during prosecution, the patentee overcame an examiner’s rejection by arguing that the prior art had a bag with uniform width, and that the patentee’s claims required a tapered bag.  In light of each of these disavowals, the court agreed with the district court’s construction that the short seal must occur inside the outer seal of the bag, thereby creating a tapering effect. 

Intellectual Ventures I LLC v. Symantec Corp., Nos. 2015-1769, -1770, -1771 (Fed. Cir. Sep. 30, 2016): Ineligibility under § 101 for claims directed to screening and routing emails and scanning for computer viruses. 

Intellectual Ventures ("IV") asserted claims from three patents against Symantec and Trend Micro, accusing their anti-spam and anti-malware software.  The district court held that claims in two of the asserted patents were directed to ineligible subject matter under § 101, but held the asserted claim in the third patent to be eligible. 

The Federal Circuit (Dyk, J.) affirmed the district court as to the claims directed to ineligible subject matter, and reversed the district court as to the claim it found to be eligible.   

The court determined that the first patent was directed to the abstract idea of filtering emails–akin to a person throwing away paper mail without opening it because it is from an unwanted source.  Turning to step 2 of Alice, the court held that the novelty of the claims "is of no relevance" in determining eligibility.  The court held that the claims did not improve the functioning of the computer itself, and held the claims to ineligible for patenting. 

As to the second patent, the court explained that it was directed to the abstract process of routing email.  The court analogized the routing of emails to corporate mailrooms, in which mail is routed or action is taken based on predefined rules.  As to step 2 of Alice, the court explained that the specification acknowledges that the method described in the claims can operate on generic computers performing generic functions, again holding the claims to be ineligible for patenting. 

The third patent was directed to computer virus screening, which the court held to be an abstract idea as of the filing of the patent:  "By itself, virus screening is well-known and constitutes an abstract idea."  Turning to step 2 of Alice, the court explained that the asserted claim merely recites "the performance of an abstract concept in the environment of the telephone network."  The court reasoned that the virus screening claims did not improve or change the way computers function, and held the claims to be ineligible. 

Judge Mayer concurred in the decision making two points:  "(1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent."  Judge Stoll dissented as to the third patent.  She argued that the asserted claim, as an ordered combination, used a non-conventional and non-generic arrangement of virus-screening components, which improved the overall network security and usability.   

Lyda v. CBS Corp., No. 2015-1923 (Fed. Cir. Sept. 30, 2016): Rule 8 pleading standards for joint infringement. 

Inventor Edwin Lyda sued CBS for infringement of patents related to methods for polling live audiences and "obtaining real time responses."  The claims included elements carried out by audience members and third-party data collectors, necessarily resulting in a claim for joint/divided infringement.  Accordingly, Lyda’s amended complaint alleged "the participation of people under the control or direction of an independent contractor engaged by the Defendant CBS" to perform claimed steps, with the contractor in turn "[a]pparently under the control of Defendant CBS."  CBS successfully sought dismissal for failure to meet Rule 8 pleading requirements under the Supreme Court’s Twombly/Iqbal standard.  

As is often the case, the challenged pleading nominally recited allegations covering each patent element, and nominally recited that the various entities were operating under the "control" of the defendants.  But, as the Supreme Court directed in Twombly and Iqbal, a pleading must allege sufficient facts to support its claims without relying on "threadbare recitals of the elements" or "mere conclusory statements."  The Federal Circuit (Stoll, J.) here reaffirmed that to meet this standard in pleading patent infringement "requires pleading facts sufficient to allow a reasonable inference that all steps of the claimed method are performed."  The court affirmed the district court’s conclusion that Lyda’s generic pleading alleged only conclusions that CBS directed or controlled entities performing claim steps, as is required for a claim for joint infringement. 

Although, here, the underlying pleadings were filed during the viability of now-abrogated Form 18, the court confirmed that the minimalist Form 18 did not apply to claims of joint infringement.  The court also upheld the trial court’s local practice of allowing a plaintiff to either amend its pleading in response to a motion to dismiss or oppose the motion, but not both.

Upcoming Oral Argument Calendar

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

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

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

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

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

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

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