Federal Circuit Finds No Due Process Violation Stems from Inconsistent Positions on Patent Ownership at PTAB, ITC

Today, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a pair of precedential decisions involving appeals from U.S. federal agency determinations on the patent rights of North Carolina-based energy demand response developer Causam Enterprises. The Federal Circuit affirmed the invalidation of Causam’s patent rights and mooted further infringement proceedings after finding that inconsistent positions on patent ownership taken by respondent ecobee in alternative forums did not present a constitutional due process issue.

At issue in Causam’s appeals from the Patent Trial and Appeal Board (PTAB) and the U.S. International Trade Commission (ITC) is U.S. Patent No. 10394268, Method and Apparatus for Actively Managing Consumption of Electric Power Over an Electric Power Grid. Causam asserted the ‘268 patent, which protects techniques for actively controlling electric power load management for individual customers, in Section 337 proceedings at the ITC. ecobee, one of the ITC respondents, filed a petition for inter partes review (IPR) proceedings at the PTAB to challenge the ‘268 patent’s validity, naming Causam as the owner. At the ITC, ecobee argued that Causum didn’t own the ‘268 patent due to a prior assignment by the inventor.

Causam contended that the PTAB could not maintain the proceeding post-institution given ecobee’s inconsistent position on patent ownership. However, the PTAB found that it could properly consider ecobee’s IPR petition because Causam asserted before the Board that it was the owner of the ‘268 patent.

Article III Standing Satisfied, But No Right to Pursue Due Process Claim

The Federal Circuit found that Causam satisfied the Article III standing threshold, giving the appellate court jurisdiction to consider Causum’s PTAB appeal. Noting that it has adopted the summary judgment evidentiary standard for determining Article III standing in appeals from federal agencies developed by the D.C. Circuit in Sierra Club v. Environmental Protection Agency (2002), the Federal Circuit found that Causam’s undisputed claim of patent ownership within the record satisfied the summary judgment standard.

Although Causam established Article III standing, the Federal Circuit found that the patent owner lacked the right to assert its constitutional due process claim. Causam contended that the PTAB erred by failing to make a finding on the proper owner of the ‘268 patent. The Federal Circuit, however, ruled that such a due process violation could only be asserted by whoever claimed to be the true owner of the ‘268 patent. Although close relationships between the litigant and party claiming ownership could allow the litigant to assert such a due process claim, Causam’s ownership claim to the ‘268 patent makes it adversarial to any such party.

Further, Causam never squarely asked the Board to determine the issue but rather argued that the requirements of IPR petitions codified at 35 U.S.C. § 112 had not been met. As the Federal Circuit remarked in a footnote, while Causam’s argument was nixed by the third-party-standing rule, its appeal would have faced further issues of unreviewability of Direction institution decisions under the Supreme Court’s application of 35 U.S.C. § 314(d) in cases including Cuozzo Speed Technologies v. Lee (2016).

Moving on to the patentability merits, the Federal Circuit rejected Causam’s argument that the PTAB erred in construing a limitation requiring the claimed method to generate measurement and verification data corresponding to reductions in consumed power. While Causam maintained that the proper construction required those steps to occur during a demand response event, the appellate court found that nothing in the claim language temporally restricted the claimed steps such that the measurement and verification data couldn’t be generated before the event. The Federal Circuit also pointed out that Causam’s proposed construction would exclude specification embodiments of the method that measure power consumption when devices are activated or after power savings events have ended.

No Assignment Due to Legal Distinction for Continuations-In-Part

Although affirming the PTAB’s invalidation mooted Causam’s ITC appeal, that decision’s discussion of the ‘268 patent’s ancestry was highly pertinent to the patent ownership issues at play in either case. Causam is listed as the patent owner of record in assignment documents filed by the inventor of the ‘268 patent with the U.S. Patent and Trademark Office in 2017. At the ITC, ecobee had argued that Causam did not own the ‘268 patent pursuant to a 2007 assignment of the parent patent application by the inventor to non-party America Connect, a position with which the ITC’s administrative law judge (ALJ) agreed upon initial determination.

However, the Federal Circuit found that the ‘268 patent derived from a continuation-in-part stemming from the parent patent application. Although the 2007 agreement with America Connect assigned continuations, the Federal Circuit noted that a continuation-in-part is legally distinct as it can include new matter and need only repeat a substantial portion of the parent. The legal consequence of this distinction is that while assigning a parent is effective as to continuations, such assignments are ineffective for continuations-in-part. “Knowing that, an assignee might wish to contract with respect to continuations-in-part differently or separately from continuations,” the Federal Circuit ruled.

In reaching this conclusion, the Federal Circuit rejected Causam’s interpretation of University of West Virginia Board of Trustees v. VanVoorhies (2003) as excluding assignments of “second generation” patents. The Federal Circuit called this a misreading, noting that VanVoorhies used this term to describe different stages of development for the underlying technology. On the other hand, intervenor ecobee had argued that assignments of inventions encompass continuations-in-part under Regents of the University of New Mexico v. Knight (2003). Knight found that a continuation-in-part was assigned, but critically that case involved several agreements between the parties involving broad assignment language.

Image Source: Deposit Photos
AuthorDevon
Image ID: 213063766