Federal Circuit Update (November 2017)

November 30, 2017

This November 2017 edition of Gibson Dunn’s Federal Circuit Update discusses the recent Friedman Lecture on Appellate Advocacy by Judge Alan Lourie, the two pending Federal Circuit cases before the Supreme Court that consider issues regarding inter partes review proceedings, and the Federal Circuit’s en banc procedures.  This Update also provides summaries of the two pending en banc cases involving judicial review of timeliness determinations in inter partes review proceedings and attorneys’ fees for litigation involving the PTO.  Also included is a summary of the recent en banc decision regarding motions to amend in inter partes review proceedings and a pair of decisions relating to patent venue and patent eligibility.

Federal Circuit News

On November 17, 2017, Judge Alan Lourie spoke at the Friedman Memorial Lecture on Excellence in Appellate Advocacy put on by the Federal Circuit Bar Association.  In his remarks, Judge Lourie chiefly addressed the Supreme Court’s recent reversal of a number of Federal Circuit decisions, such as TC Heartland LLC v. Kraft Foods Group Brands LLC.  Judge Lourie stated that the Federal Circuit “should not be affronted” by these reversals, as they have not necessarily occurred because the appellate court was “wrong.”  Instead, these reversals may be attributed to factors such as changes in technology and the Supreme Court’s apparent desire “to limit the continued existence of long-established rules specific to patent law, that set it apart from general law.”  Finally, Judge Lourie stated that he believes the Federal Circuit has been and continues to serve its purpose of providing uniformity in patent law.

Supreme Court.  The Supreme Court has heard oral argument on two cases from the Federal Circuit this term:

Case Status Issue
Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 Argued on
Nov. 27, 2017
Constitutionality of inter partes review under Article III and the Seventh Amendment
SAS Institute Inc. v. Matal, No. 16-969 Argued on
Nov. 27, 2017
The number of claims that must be addressed by the Patent Trial and Appeal Board in a final written decision during inter partes review

Upcoming En Banc Federal Circuit Cases

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

The PTAB instituted an inter partes review proceeding against Wi-Fi One’s patent.  Wi-Fi One argued that Broadcom was time-barred under 35 U.S.C. § 315(b) from seeking review because Broadcom was in privity with time-barred district court litigants.  The PTAB disagreed, determining that Wi-Fi One did not establish that Broadcom had sufficient control over district court litigation to support a privity finding.  On appeal, the Federal Circuit held that it does not have jurisdiction to review the PTAB’s determination that Broadcom was not time-barred, holding that the Supreme Court’s decision in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), did not implicitly overrule prior Federal Circuit precedent on the issue (decision available here).  To date, two amicus briefs have been filed in support of Wi-Fi One (WesternGeco LLC and 3DS Innovations, LLC), eight amicus briefs have been filed in support of neither party (Jeremy Cooper Doerre, New York Intellectual Property Law Association, Federal Circuit Bar Association, Intellectual Property Owners Association, Boston Patent Law Association, Professors of Patent and Administrative Law, American Intellectual Property Law Association, and Biotechnology Innovation Organization), and three amicus briefs have been filed in support of Broadcom (Oracle, Intel, and Apple).  Oral argument was heard on May 4, 2017.

Question presented:

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

Nantkwest, Inc. v. Matal, No. 16-1794 (Fed. Cir.):  Whether the PTO can recover attorneys’ fees in litigation under 35 U.S.C. § 145.

After the PTAB affirmed the examiner’s rejection of Nantkwest’s patent application, Nantkwest appealed to the United States District Court for the Eastern District of Virginia under 35 U.S.C. § 145.  The PTO prevailed on the merits of the appeal and moved to recover both attorneys’ fees and expert fees.  Section 145 provides that “[a]ll the expenses of the proceedings shall be paid by the applicant.”  Applying this provision, the district court granted the PTO’s request for expert fees, but rejected the PTO’s request for attorneys’ fees.  A panel of the Federal Circuit reversed the district court’s holding as to attorneys’ fees, holding that “[a]ll expenses of the proceedings,” under § 145, authorizes an award of attorneys’ fees.  (Decision available here.)  Following the entry of judgment, however, the Federal Circuit sua sponte ordered that the panel decision be vacated and that the case be reheard en banc.  To date, no amicus briefs have been filed, and oral argument has not yet been scheduled.

Question presented:

Did the panel in NantKwest, Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017) correctly determine that 35 U.S.C. § 145’s “[a]ll the expenses of the proceedings” provision authorizes an award of the United States Patent and Trademark Office’s attorneys’ fees?

Federal Circuit Practice Update

The Federal Circuit’s Internal Operating Procedure No. 14 governs which judges may vote on whether to take a case en banc, and which judges may participate in the en banc.  Consistent with 28 U.S.C. § 46(c), the composition of the en banc court generally consists of all active judges who are not recused and not disqualified, as well as any senior judge who participated in the panel decision that is now being reviewed by the en banc court.  IOP #14.7.  The decision of whether to rehear a case en banc is made by the active judges and panel judges.  IOP #14.2.  As such, judges sitting by designation on a panel may vote on whether to take a case en banc, but may not participate in the en banc itself.  Decisions for hearings en banc are only made by active judges.  IOP #14.1.  Therefore, it is possible that a highly contentious issue in an en banc case might turn on the composition of the original panel.

By way of illustration, the en banc court issued its decision in Aqua Products, Inc. v. Matal (PTO), 2015-1177, on October 4, 2017 (summary of the decisions below).  The decision consisted of five written opinions (Judge Stoll did not participate):

  • An opinion by Judge O’Malley, in which Judges Newman, Lourie, Moore, and Wallach joined, and Judges Dyk and Reyna concurred in the result;
  • An opinion by Judge Moore, in which Judges Newman and O’Malley joined;
  • An opinion by Judge Reyna, in which Judge Dyk joined, and Chief Judge Prost and Judges Taranto, Chen, and Hughes joined in part;
  • An opinion by Judge Taranto, in which Chief Judge Prost and Judges Chen and Hughes joined, and Judges Dyk and Reyna joined in certain respects; and
  • An opinion by Judge Hughes, in which Judge Chen joined.

The original panel consisted of Chief Judge Prost, Judge Reyna, and Chief District Judge Stark, sitting by designation.  Judge Stark did not participate in the en banc proceedings because he was sitting by designation.  But if a senior judge had been on the panel instead of Judge Stark, he or she would have been permitted to participate in the en banc proceedings.  And if that judge had joined only Judge O’Malley’s opinion, then no part of Judge Reyna’s opinion or Judge Taranto’s opinion would have commanded a majority of the court’s vote.

Key Case Summaries (October – November 2017)

In re Aqua Prods., Inc., No. 15-1177 (Fed. Cir. Oct. 4, 2017) (en banc):  Allocation of the burdens of persuasion and production when a patent owner moves to amend in an inter partes review proceeding. 

The PTAB instituted an inter partes review proceeding against Aqua’s patent, which relates to automated swimming pool cleaners.  Aqua moved to amend the challenged claims to distinguish the cited prior art.  The PTAB, however, denied Aqua’s motion, determining that Aqua failed to carry its burden of showing patentability of the proposed substitute claims over the prior art of record.  On appeal, the PTO intervened to defend the PTAB’s decision.  A panel of the Federal Circuit affirmed, but the court subsequently granted Aqua’s petition for rehearing en banc.

Sitting en banc, the Federal Circuit issued five separate opinions: a lead opinion written by Judge O’Malley, concurring opinions by Judges Moore and Reyna, and dissenting opinions by Judges Taranto and Hughes.  A majority of the Federal Circuit held that the PTO has not set forth an interpretation of 35 U.S.C. § 316(e)—titled “Evidentiary Standards”—that is entitled to deference under Chevron.  The court further held that § 316(e) is ambiguous as to the allocation of the burden of persuasion of establishing the unpatentability of substitute claims, but that the most reasonable interpretation is that the petitioner bears the burden of persuasion.  A majority also held that 35 U.S.C. § 316(d) and 37 C.F.R. § 42.121 place a default burden of production on the patentee.  As to whether the PTAB can sua sponte raise patentability challenges to a substitute claim, a majority concluded that the record before the court did not present the “precise question,” and thus opted not to answer it.  The Federal Circuit thus vacated the PTAB’s denial of Aqua’s motion to amend and remanded for the PTAB to reconsider the motion without placing the burden of persuasion on the patent owner.

Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC, Nos. 16-2531, 16-2532 (Fed. Cir. Nov. 1, 2017): Importance of claim scope in 101 eligibility determinations.

Two-Way Media sued Comcast alleging infringement of four patents.  The patents all involved IP multicasting, which provided a way to transmit a packet of information to multiple recipients.  Comcast moved for judgment on the pleadings, arguing that the claims were ineligible under 35 U.S.C. § 101.  Two-Way Media argued that the motion was premature because claim construction was necessary to evaluate the claims, but Two-Way Media also provided proposed claim constructions for certain terms.  Two-Way Media also asked the district court to take judicial notice of expert reports and testimony from other cases addressing the novelty and nonobviousness of the claimed inventions.  The district court adopted Two-Way Media’s proposed claim constructions for its analysis of the motion but denied Two-Way Media’s request to take judicial notice of the expert materials because the evidence was irrelevant to an eligibility analysis under § 101.  The district court then found the claims patent ineligible under § 101, and Two-Way Media appealed.

The Federal Circuit (Reyna, J.) affirmed.  The court separated its analysis of the four patents into two groups.  In analyzing step 1 for the first set, the court explained that the representative claim required the functional results of converting, routing, controlling, monitoring, and accumulating records, but the claim did not describe how to achieve those results “in a non-abstract way.”  The court concluded that the claim constructions proposed by Two-Way Media did not change the analysis because the constructions “recite only conventional components” and were not directed to a scalable network architecture—as argued by Two-Way Media—that improved the functioning of the system.

Turning to step two, the court held that the claimed elements did not provide an inventive concept to render the claims patent eligible.  The court concluded that, although the specification described the system architecture as a technological innovation, the representative claim failed to recite the purportedly innovative system architecture.  The court explained: “[t]he main problem that Two-Way Media cannot overcome is that the claim—as opposed to something purportedly described in the specification—is missing an inventive concept.”  The court therefore found the representative claim ineligible, even though the specification purportedly described an innovative system architecture, because the claim did not cover the same scope as described in the specification.  The court also rejected Two-Way Media’s argument regarding its evidence of novelty and nonobviousness because such evidence was not material to the eligibility analysis.

The court similarly found the second set of patents ineligible under § 101.  According to the court, the district court did not err in citing to the preamble of the patents to determine the “focus” of the claims.  The court noted that the claims were broader than the claims in the first set of patents and were similarly directed to abstract ideas.  The claims also suffered from the same problem as the representative claim of the first set of patents: the claims did not cover an inventive concept, such as the purportedly innovative system architecture, despite the specification’s discussion of that architecture.

In re Micron Techs., Inc., No. 2017-138 (Fed. Cir. Nov 15, 2017): The venue defense in TC Heartland was not previously “available” to defendants and thus not waived under Rule 12.

In 2016, the President and Fellows of Harvard College filed a patent infringement case in the District of Massachusetts against Micron Technologies, which is incorporated in Delaware.  Under the then-prevailing view of venue articulated in V.E. Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1575 (Fed. Cir. 1990), venue would have been proper.  As such, Micron, like many defendants, did not object to venue with a motion under Rule 12(b)(3).

After the Supreme Court’s TC Heartland decision earlier this year, venue under 28 U.S.C. § 1400(b) on the basis of where Micron resides became improper, as the Court determined that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statue” (here, Delaware, not Massachusetts).  The Supreme Court, however, stated that this determination was not a “change” of law, but rather an articulation of what the law always had been (notwithstanding the Federal Circuit’s view in V.E. Holding).

Accordingly, when Micron brought a post-TC Heartland motion objecting to venue, the district court held that Micron had waived its venue objection by not raising it in its initial Rule 12 motion, there being no change of law to make waiver inapplicable.  See Rule 12(g)(2), (h)(1)(A).  Other district courts, however, have reached different conclusions, holding that the venue defense stated in TC Heartland was not previously available, and thus waiver does not apply.

In Micron, the Federal Circuit resolved the split, holding that, as a matter of “common sense” the venue objection was not “available” until after TC Heartland.  Writing for the panel, Judge Taranto explained:  “[B]efore then, it would have been improper, given controlling precedent, for the district court to dismiss or to transfer for lack of venue.”  Given that the Federal Circuit’s controlling V.E Holding decision precluded district courts from adopting a venue defense or objection of this type, “the defense or objection was not ‘available’ to the movant.”

Nevertheless, the panel held that waiver by operation of Rule 12 “is not the sole basis” on which a district court might rule that a defendant had forfeited an otherwise valid venue defense.  Citing a district court’s inherent authority, the panel noted that a court could find forfeiture of a venue objection if not timely raised, barring defendants from taking a “tactical wait-and-see” approach and foregoing earlier opportunities to raise the defense.

Upcoming Oral Argument Calendar

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


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

Blaine H. Evanson – Los Angeles (213-229-7228, bevanson@gibsondunn.com)
Blair A. Silver – Washington, D.C. (202-955-8690, bsilver@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:
Mark A. Perry – Washington, D.C. (202-887-3667, mperry@gibsondunn.com)
James C. Ho – Dallas (214-698-3264, jho@gibsondunn.com)
Caitlin J. Halligan – New York (212-351-4000, challigan@gibsondunn.com)
Nicole A. Saharsky – Washington, D.C. (202-887-3669, nsaharsky@gibsondunn.com)

Intellectual Property Group:
Josh Krevitt – New York (212-351-4000, jkrevitt@gibsondunn.com)
Wayne Barsky – Los Angeles (310-552-8500, wbarsky@gibsondunn.com)
Mark Reiter – Dallas (214-698-3100, mreiter@gibsondunn.com)


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