Overview
In this series of monthly updates, we summarize decisions where the Federal Circuit reversed or vacated PTAB or trial court rulings, which can provide guidance on how to succeed on appeal.
Quick takeaways:
- Actual notice of patent infringement is required to start damages clock; mere notice of the patent’s existence is insufficient.
- Patent damages require adequate and reliable apportionment between the improved and conventional features of the accused product. Alternatively, damages based on the entire market value of the accused product may be assessed only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts; it is not enough that the feature is valuable, important or even essential to the use of the accused product.
- The Board's analysis that sifts through petitioner's arguments and evidence to piece together information, contrary to its statements in the institution decision, violates the Administrative Procedure Act (APA) because it does not provide the patent owner reasonable notice of its changed position.
- When plaintiff's presence in the district is recent and relatively insubstantial and the activities of its office are largely tied to bringing lawsuits in that court, it is not entitled to significant weight in a motion to transfer decision.
- The Board's analysis that merely reiterates and summarily rejects arguments without explanation violates APA.
- When deciding a motion to transfer, the district court errs in not assigning great weight to party witnesses for the witness-convenience factor and in relying on general presence – rather than the connections between a particular venue and the events that give rise to a suit – to weigh the local interest factor.
- Unreasonable invalidity defenses, lack of a reasonable basis for non-infringement, and unchallenged induced infringement findings are sufficient to support a jury’s finding of willful infringement.
- It is error for the Board to first deny institution of an inter partes review (IPR) based on abusive filing practices but then grant a nearly identical reexamination request.
- The Board errs in finding a petition insufficient when the petition explains that the prior art teaches the required claim limitations and cites support from both the prior art reference and the expert.
Lubby Holdings LLC v. Chung, No. 19-2286, 2021 WL 3889816 (Fed. Cir. Sep. 1, 2021)
Chung appealed the district court judgment that found him liable for patent infringement and awarded damages. The Federal Circuit affirmed the finding of direct infringement but held that the district court erred in awarding damages for sales of infringing products prior to the commencement of the action.
Lubby could recover damages only for the period after it had provided actual notice to Chung. While Chung admitted that he was aware that the asserted patent had issued, this was not sufficient notice to start the damages clock. "For purposes of section 287(a), notice must be of 'the infringement,' not merely notice of the patent's existence or ownership." While Chung signed a nondisclosure agreement and was told not to use Lubby's technology, Lubby did not provide Chung with a specific charge of infringement by a specific accused product or device. That notice only came with the filing of the lawsuit, thus damages could only be awarded after that date.
Because the evidence did not break out sales in a way to establish the number of sales after the filing of the lawsuit, the Federal Circuit remanded for a new trial to determine the number of sales made by Mr. Chung following the filing of the complaint and the appropriate damages award.
Omega Patents, LLC v. CalAmp Corp., 2021 WL 4168153, No. 20-1793 (Fed. Cir. Sep. 14, 2021)
CalAmp appealed a district court decision that it infringed two patents. With respect to the damages levied for infringement of one of the patents, the Federal Circuit found that Omega’s damages theory was legally flawed and remanded for a new trial.
The jury awarded a $5.00/unit royalty for CalAmp’s infringement. The Federal Circuit concluded that Omega did not present sufficient evidence to sustain such an award. A patentee must seek only those damages attributable to the infringing features. Even if the accused products have the same components as those set forth in the asserted claims, the plaintiff still must adequately and reliably apportion between the improved and conventional features of the accused product. Here, the accused products had conventional components that were not the inventive aspects of the patent. Omega failed to show the incremental value of the patented improvement apportioned from the value of any conventional features.
A patentee may assess damages based on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts. Omega failed to make such showing. Omega pointed to testimony that the feature would be important and helpful, but the Federal Circuit found that it was not enough to merely show that the patented improvement was valuable, important or even essential to the use of the accused product.
Apportionment may not be required when a sufficiently comparable license is used as the basis for determining the appropriate royalty. This theory depends on built-in apportionment. Omega's expert testified that under Omega's licensing program, the licensing fee was five dollars per unit whether it’s one patent or 50 patents, and no patent was treated as more valuable than another. But the Federal Circuit held that such testimony did not sufficiently speak to "built-in apportionment" between the patented improvement added to the accused products and the conventional features of the accused products.
At trial, Omega introduced eighteen license agreements. Each of the eighteen proffered licenses involved numerous patents, in contrast to a hypothetical negotiation for a single-patent license. The Federal Circuit held that Omega was required to account for the distinguishing facts when invoking the licenses to value the patented invention, but Omega failed to show that these agreements attributed a $5.00-per-unit royalty to the value of the patent.
Baker Hughes Oilfield v. Hirshfeld, No. 20-1932, 2021 WL 4227709 (Fed. Cir. Sep. 16, 2021)
The IPR petition asserted three grounds of invalidity. Claims 2-6 were challenged in only Ground 3, which argued obviousness over six combinations of prior art. In its decision to institute the IPR, the Board reasoned that the petitioner showed a reasonable likelihood of success on Grounds 1 and 2. Regarding Ground 3, however, the Board made clear it was instituting solely because "an inter partes review may not institute on less than all claims challenged in the petition." The Board stated it would not "sift through the petitioner’s arguments and evidence in order to piece together its best arguments for each of its proposed combinations of references."
But in its final written decision, the Board did just that. It devoted the majority of its analysis to parse the different theories that were confusingly lumped together in Ground 3. The patent owner requested an opportunity to address the theories in Ground 3 and adduce new evidence if the Board were to sift through the arguments and evidence in Ground 3. The Board ignored the request.
The Federal Circuit held that the Board’s conduct violated the Administrative Procedures Act and did not provide the patent owner reasonable notice of its changed position. Accordingly, the Federal Circuit vacated the obviousness determination and ordered the Board to give the patent owner an opportunity to present additional arguments and evidence responding to the obviousness theories on which the Board relied.
In Re Juniper Networks, Inc., No. 21-160, 2021 WL 4343309 (Fed. Cir. Sep. 24, 2021)
After being sued for patent infringement at the Western District of Texas, Juniper moved to transfer the case to the Northern District of California. Judge Alan Albright denied the motion. The Federal Circuit granted Juniper’s petition for a writ of mandamus, finding that several of the most important transfer factors strongly favored the transferee court.
First, the Federal Circuit noted that the relative convenience for and cost of attendance of witnesses was probably the single most important factor in transfer analysis. Juniper identified eleven potential party witnesses located in the Northern District of California, while plaintiff Brazos identified only one party witness in the Western District of Texas. The Federal Circuit rejected the district court's proposition that the convenience-to-the-witnesses factor was attenuated when the witnesses were party employees. The Federal Circuit also rejected the district court's categorical assumption that defendants were likely to call few if any of the proposed party witnesses or prior-art witnesses identified. Therefore, the Federal Circuit held that the district court erred in not giving sufficient weight to the relative convenience of the transferee forum.
Second, the district court erred in applying the local interest factor. The events forming the basis for the infringement claims occurred mainly in the Northern District of California; none occurred in the Western District of Texas. Juniper’s office in Austin (in the Western District) had no connection with the accused products. The Federal Circuit found that gave the transferee venue a greater localized interest, which also favored transfer. Additionally, the Federal Circuit held that Brazos's presence in Waco was not entitled to significant weight, because it was recent and relatively insubstantial – the activities of Brazos’s office were largely tied to bringing lawsuits in that court.
Third, the district court erred in its assessment of the availability of sources of proof. Juniper submitted a declaration that Juniper stored the majority of its relevant documentary evidence at its California headquarters, including records relating to the research, design, source code, marketing, sales, and financial information for the accused products. No Juniper evidence relating to the facts of these lawsuits was located in the Western District of Texas. The district court faulted the declaration as not being specific enough, but the Federal Circuit concluded that the district court’s position was unjustified, finding that the factor also weighed in favor of transfer.
Fourth, the district court erred in concluding that the potential need for recourse to compulsory process weighed against transfer. According to the Federal Circuit, that no party expressly identified any unwilling witness did not weigh against transfer. In fact, because Juniper identified several non-party potential witnesses in the Northern District of California, and Brazos identified none in the Western District of Texas, the Federal Circuit concluded that this fact should be treated as weighing at least slightly in favor of transfer.
Finally, the district court erred in concluding that the court-congestion factor weighed against transfer. The district court based its analysis on scheduled trial dates. The Federal Circuit stated it was improper to assess the court congestion factor based on an aggressive scheduling order for setting a trial date. Beyond that, Brazos was not engaged in the manufacture or sale of products that practiced the asserted patents, and did not need a quick resolution to maintain market position. The Federal Circuit concluded that there was no reason that a more rapid disposition of the case that might be available in Texas was worthy of important weight.
Therefore, the Federal Circuit granted the petition for mandamus and ordered the case transferred to the Northern District of California.
TRUSTID, Inc. v. Next Caller, Inc., No. 20-1950, 2021 WL 4427918 (Fed. Cir. Sep. 27, 2021)
The Board determined certain claims to be unpatentable and other claims not unpatentable. The patent owner appealed, and the petitioner cross-appealed. The Federal Circuit agreed with the Petitioner and vacated the Board's decision with respect to those claims cross-appealed.
In its cross-appeal, Next Caller argued that: (1) the Board disregarded the patent examiner’s findings regarding a prior art reference during the prosecution of the challenged patent; and (2) the Board’s analysis with respect to the prior art’s teachings and motivation to combine was insufficient. Regarding (1), the Federal Circuit held that there was no legal basis for the proposition that the Board must defer to the examiner’s previous findings in deciding the merits of an IPR. Regarding (2), the Federal Circuit agreed with Next Caller that the Board’s analysis was insufficient.
In sum, the Board was obligated to provide an administrative record showing the evidence on which the findings were based, accompanied by its reasoning in reaching its conclusions. Here, the Federal Circuit found that the Board merely partially reiterated and summarily rejected Next Caller’s arguments without explanation. That was not sufficient under the APA and the Federal Circuit’s precedent. Therefore, the Federal Circuit vacated the Board’s non-obviousness determination as to certain claims and remanded for further proceedings.
In Re Google LLC, No. 21-170, 2021 WL 4427899 (Fed. Cir. Sep. 27, 2021)
The Federal Circuit granted Google's petition for a writ of mandamus directing the district court to transfer the case from the Western District of Texas to the Northern District of California.
Google identified a number of potential witnesses located in the Northern District of California, including witnesses who were responsible for developing the accused products and functionalities. But the district court did not assign great weight to those witnesses because they were party witnesses and the party could compel the testimony of its employees. Such position had been rejected by the Federal Circuit in similar cases, and the facts here weighed in favor of transfer.
The district court considered the "cost of attendance for willing witnesses" factor to weigh against transfer primarily due to that four former Google employees and the third-party inventor were located in the northeastern United States. In making that assessment, the district court relied on the Fifth Circuit's "100-mile rule" that the factor of inconvenience to witnesses increased in direct relationship to the additional distance to be traveled. But as the Federal Circuit stated, in light of the purpose underlying the rule, the inquiry should focus on the cost and inconvenience imposed on the witnesses by requiring them to travel to a distant forum and to be away from their homes and work for an extended period of time. In this case, the total travel time in each case was not significantly different. When there were numerous witnesses in the transferee venue and the only other witnesses were far outside the plaintiff's chosen forum, the witness-convenience factor favored transfer.
Although the district court properly weighed the local interest factor in favor of transfer, it was error to hold that Google’s presence in the Western District of Texas lessened the importance of that factor. Because the accused products were designed and developed in California and were not related to Google’s presence in Texas, the local interest factor also weighed strongly in favor of transfer.
The remaining factors did not disfavor transfer. The fact that Google stored documents in electronic form at data centers around the country did not weigh against transfer. Regarding the compulsory process factor, the district court erred by assuming that it was unlikely that prior-art witnesses would be called in the case and not giving weight to the location of those witnesses. The district court found the potential testimony of a former Google executive (located in the Western District) to tip the compulsory-process factor against transfer. But the Federal Circuit found that the likelihood that the former executive would provide relevant evidence was highly speculative. And even without second-guessing the district court's conclusion in that regard, the Federal Circuit held that the district court’s ability to compel him to testify was not entitled to "decisive weight."
With respect to the court-congestion factor, the district court relied on median time-to-trial statistics to support its conclusion. The Federal Circuit concluded that such speculation did not warrant keeping this case in Texas given the striking imbalance favoring transfer based on the other factors.
SRI Int'l, Inc. v. Cisco Systems, Inc., No. 20-1685, 2021 WL 4434231 (Fed. Cir. Sep. 28, 2021)
SRI filed suit against Cisco alleging patent infringement. The jury found that Cisco willfully infringed (SRI I). The district court doubled the damages award. The Federal Circuit vacated and remanded (SRI II). On remand, the district court held that substantial evidence did not support the jury verdict of willful infringement after the date Cisco had received notice (SRI III). SRI appealed the district court's judgment of no willful infringement and to reinstate the district court’s award of enhanced damages.
The Federal Circuit found that substantial evidence supported the jury’s finding of willful infringement after the notice date. SRI presented evidence that Cisco's invalidity defenses were unreasonable and that Cisco did not have any reasonable basis for non-infringement. In addition, the jury found that Cisco induced infringement of the asserted claims – Cisco knew of the patent, acted to encourage its customers to infringe, and knew that its customers’ actions (if taken) would infringe, which was not challenged on appeal. The Federal Circuit found that such unchallenged findings supported the jury’s finding of willful infringement. Accordingly, the Federal Circuit reinstated the jury verdict of willful infringement.
The district court in SRI I awarded double damages. Because the Federal Circuit reinstated the jury’s willfulness verdict, the Federal Circuit likewise restored the district court’s award of double damages from SRI I.
In Re Vivint, Inc., No. 20-1992, 2021 WL 4448620 (Fed. Cir. Sep. 29, 2021)
In 2015, Vivint sued Alarm.com in district court for infringing four patents, including U.S. Patent No. 6,717,513. In response, Alarm.com filed fourteen IPR petitions, three of which challenged the validity of claims in the '513 patent. The Patent Office ultimately declined to institute the IPRs for the ‘513 patent, either because Alarm.com failed to make the threshold showing for institution, or because it was undesirable, incremental petitioning and the Board exercised its discretion to deny institution. More than a year later, Alarm.com requested ex parte reexamination of all claims of the '513 patent, repackaging the arguments raised in the IPR petition. The Patent Office ordered reexamination for all claims of the '513 patent. Ultimately, an examiner rejected all claims of the '513 patent, which was affirmed by the Board. Vivint appealed.
First, Vivint argued that since the ex parte reexamination request repackaged arguments in the IPR petition, it therefore did not present a new question of patentability and failed to meet the statutory requirement to allow reexamination. The Federal Circuit rejected Vivint's argument because by refusing to institute the IPRs, the Patent Office did not address the merits of the patentability arguments. Thus, the Federal Circuit held that the ex parte reexamination was based on substantial new questions of patentability.
Second, Vivint argued that the Patent Office erred by ordering reexamination in the first place. After the reexamination was ordered, Vivint petitioned the Patent Office to dismiss it, arguing that the Patent Office should exercise discretion under § 325(d) to dismiss the proceeding in view of the fact that the Patent Office already declined to institute the IPRs.The Patent Office denied Vivint's petition, relying primarily on its alleged lack of authority to terminate because the petition to dismiss was filed after the reexamination was ordered.
The Federal Circuit disagreed and found that nothing prevented the Patent Office from reconsidering its decision ordering the ex parte reexamination. The Federal Circuit further decided that the Patent Office should not have ordered reexamination, or, at minimum, should have terminated the reexamination once Vivint requested it. The Patent Office cannot deny institution of an IPR based on abusive filing practices but then grant a nearly identical reexamination request that is even more abusive.
The Federal Circuit noted that the ruling was limited, and it was not holding that the Director may never launch a reexamination even when a particular challenger had engaged in improper serial filing.
The Board held all challenged claims unpatentable for obviousness, except for claim 7. For claim 7, the Board deemed AMC’s petition insufficient regarding a prior art’s teaching of a required claim limitation, and also deemed reply material insufficient. The Federal Circuit disagreed, because in the petition, AMC expressly stated that the prior art taught the required claim limitation, explained why, and cited support from both the prior art reference and the expert.
Additionally, the Board abused its discretion in disregarding AMC’s reply material, because AMC's reply responded to the patent owner’s questioning of the sufficiency of the petition and should have been allowed. The Board also determined that even if it were to consider AMC's reply arguments, AMC failed to establish that the prior art reference taught the automatic transfer of an executable questionnaire. The Federal Circuit was unable to discern the basis of the Board’s rejection of AMC's reply analysis.
Therefore, the Federal Circuit vacated the Board’s decision regarding claim 7.