Posts in Litigation

The U.S. Court of Appeals for the Federal Circuit (CAFC) decided an appeal by Henny Penny Corporation (HPC) on September 12 involving HPC’s inter partes review (IPR) petition of U.S. Patent 8,497,691 (the ‘691 patent) at the U.S. Patent and Trademark Office’s (USPTO’s) Patent Trial and Appeal Board (PTAB). The PTAB held that claims 1-3, 5-12, 17-21, and 23 of the ‘691 patent were patentable as nonobvious. The CAFC affirmed this finding. HPC, a competitor of Frymaster, petitioned for IPR of the ‘691 patent and the PTAB held that the claims were patentable and were not obvious. In its appeal, HPC argued that the PTAB abused its discretion in disregarding certain HPC arguments about how to incorporate a TPM sensor into a deep fryer. It also argued that the PTAB erred in concluding that the deep fryer system claimed in the ‘691 patent was not obvious. The CAFC reviewed the appeal in line with Consol. Edison Co. v. NLRB, which states that a finding is supported by substantial evidence if a reasonable mind might accept the evidence as adequate to support the finding. In considering the PTAB’s decision to disregard certain HPC arguments as improper, the CAFC considered whether the decision was 1) clearly unreasonable, arbitrary, or fanciful; 2) based on an erroneous conclusion of law; 3) rested on clearly erroneous fact finding; or 4) involved a record that contains no evidence on which the board could rationally base its decision.

The normally staid world of intellectual property law was buzzing last year about one of the biggest trade secret cases and largest punitive damages awards in American history. The case involves automated valuation models (AVMs), which are computer models typically generated by machine learning—a form of artificial intelligence—and used to estimate property values by analyzing the property’s attributes, comparable properties, and the like. Jaws dropped last March when a Texas jury awarded HouseCanary, a Silicon Valley company specializing in residential real estate data and analytics, more than $700 million in compensatory and punitive damages after accepting its claims that it possessed AVM-related trade secrets that were allegedly misappropriated by Amrock (formerly Title Source), one of the nation’s largest appraisal and title service companies. The jury’s verdict might lead you to believe that Amrock is guilty of one of the most blatant and outrageous intellectual property thefts in history. But when you look closer, it is the jury’s verdict that is outrageous and nearly impossible to justify. I say that not only as a lawyer, but also as someone who built AVMs much like those at issue here before attending law school.

On August 30, a number of amicus briefs were filed in the FTC v. Qualcomm appeal in the U.S. Court of Appeals for the Ninth Circuit. The appeal stems from a May 2019 order finding Qualcomm liable for anticompetitive behavior and issuing “sweeping” injunctive relief. Following Judge Koh’s ruling, her opinion has been called “disastrous,” an “utter failure,” and “based on scant evidence,” and further been accused of “mangling” antitrust law. The Ninth Circuit, in granting a partial stay of the injunction, noted there were “serious questions on the merits” of Judge Koh’s decision. Three of the amicus briefs in particular point out the errors in Judge Koh’s opinions that have given rise to these “serious questions.” Retired Federal Circuit Chief Judge Paul Michel filed an amicus brief focusing primarily on patent law issues, including the smallest salable patent-practicing unit (SSPPU) concept and reasonable royalty calculation. The International Center for Law & Economics (ICLE) and Scholars of Law and Economics filed an amicus brief arguing that Judge Koh’s decision “is disconnected from the underlying economics of the case” and will cause serious harm to antitrust law. Finally, a number of Antitrust and Patent Law Professors, Economists, and Scholars filed an amicus brief highlighting how antitrust overreach, as they allege is present here, will harm innovation and arguing that the district court failed to engage in the level of real-world economic analysis as is required by this case.

Last week during IPWatchdog’s Patent Masters Symposium, former Federal Circuit Chief Judge Paul Michel sat down with me to discuss the state of the U.S. patent system and best options/ predictions for moving forward. He began by lamenting that “the courts have failed and failed and failed” with flawed rulings such as Helsinn v. Teva, which Michel characterized as “completely illogical”, and Impression Products, Inc. v. Lexmark International, Inc. To boot, the Supreme Court has refused to take any patent eligibility cases, and the Federal Circuit has managed to make the harm and illogic of the SCOTUS rulings even worse, Michel said. In fact, they’ve “expanded on the bad rulings of the SCOTUS.” Part of the problem may lie in a misunderstanding of the true intent of the patent system, according to Michel. “The real point of the patent system is to incentivize innovation, not to encourage creative people. Creative people will create no matter what. Investment is extremely risky and costly—if the incentive to invest shrinks, and there is evidence that it has, we are in trouble.” Below, Michel offers more of his thoughts on the current patent landscape, including what to expect from pending legislation and why he is cautiously optimistic that change is coming soon.

Tesla recently filed two lawsuits for theft of trade secrets. In March, the auto maker sued several former employees and the two companies they joined, Zoox and Chinese EV automaker Xiaopeng. The trade secrets involved their driverless vehicle technology. Haliburton just sued a former employee for stealing information, getting a patent on it, and then trying to sell it back to Haliburton. Phillips is suing a former employee for stealing secrets that will give competitors a “decades long head start.” Waymo, Google’s self-driving car program, settled with Uber for theft of trade secrets. The settlement was reported by CNN Business to be a portion of Uber’s equity, estimated at $245 million. In In August, the United States Attorney’s Office (USAO) for the Northern District of California charged former Google employee Anthony Levandowski with 33 counts of theft and attempted theft of trade secrets from Google under 18 U.S.C. § 1832 of the Economic Espionage Act (EEA). These cases, and many more like them, involve employees leaving and taking trade secrets with them. Employees come and go, but they shouldn’t take your valuable secrets. You can stop them if you have systems in place, but you have only yourself to blame if you don’t.

This week in Other Barks & Bites: the Federal Circuit issued precedential decisions regarding secondary considerations of non-obviousness, limits to design patents and collateral estoppel of antitrust claims in patent cases; the CASE Act moved out of the House Judiciary Committee towards a floor vote; AIPLA reported increasing prices for trade secret and pharmaceutical patent lawsuits; the PTAB designated a pair of precedential decisions that limit IPR institutions; the DOJ identified two foreign nationals in GE Aviation trade secret case; LeBron James and Ohio State University lost their respective trademark bids; USPTO Director Iancu talked about balancing innovation and preventing hold-up in the SEP context; Google agreed to a $1 billion fine over European tax evasion; and the UKIPO reported lower patent application filing levels for 2018.

On the afternoon of Wednesday, September 11, the Senate Judiciary Committee’s Subcommittee on Intellectual Property convened a hearing titled Innovation in America: How Congress Can Make Our Patent System STRONGER. The hearing focused on the STRONGER Patents Act, a piece of legislation that has been reintroduced into both houses of Congress, the Senate portion of which has been co-sponsored by the Senate IP Subcommittee’s Ranking Member, Senator Chris Coons (D-DE), fellow Subcommittee members Mazie Hirono (D-HI) and Dick Durbin (D-IL), Judiciary Committee member John Kennedy (R-LA) and Senators Tom Cotton (R-AR) and Kevin Cramer (R-ND). Sources at IPWatchdog’s Patent Masters Symposium this week said that the bill still faces many obstacles to passage. However, according to Senator Coons’ Office, the bill has wide bipartisan support in the House as well. The panel for the hearing was evenly split between supporters and detractors of the proposed law, and most of the discussion focused on the injunctive relief and inter partes review (IPR) provisions of the bill.

In the past 10 months, the issue of proving negative claim limitations has cropped up on appeals to the Federal Circuit. At least three panels of the Federal Circuit have addressed the issue, to one degree or another. Each panel has contributed, to some extent, to an understanding of the law. In dealing with the issue, each panel cited no precedent for doing so. Curiously, all three decisions were designated as nonprecedential. The negative claim limitations issue is one that is almost certain to recur. Perhaps the next time the issue comes up, the decision ought to be precedential, and therefore, binding.

Commissioner Christine Wilson of the U.S. Federal Trade Commission (FTC) addressed the IPWatchdog Patent Masters Symposium on Tuesday, September 10, emphasizing three main points in her keynote: that Judge Lucy Koh’s decision in FTC v. Qualcomm was flawed, that antitrust analyses should be more focused on dynamic, rather than static effects, and that, despite the latter point, antitrust authorities routinely try and fail to integrate dynamic effects into antitrust law. She was clear up front that her views did not necessarily match those of her fellow commissioners. First, Wilson reiterated the ideas expressed in her May 28 op-ed for the Wall Street Journal, which she summarized by saying that U.S. District Court for the Northern District of California Judge Lucy Koh’s opinion in the FTC v. Qualcomm case “creates bad law and bad policy.” Wilson explained that Koh in her lengthy analysis took the opportunity to “radically expand a company’s legal obligation to help its competitors” by reviving a “discredited” 1985 Supreme Court case, Aspen Skiing Co. v. Aspen Highlands Skiing Corp. “My opposition to the court’s opinion does not stem from any desire to help or protect Qualcomm,” Wilson said. “I am focused on applying and preserving sound antitrust principles and this decision scares me.”

To seek relief in Federal Court, a plaintiff must demonstrate a personal, legally protectable interest in the outcome of the dispute for which relief is being sought, i.e., must demonstrate standing. The legally protectable interest may be under threat because of a government conduct. In patent disputes, the plaintiff may be an inter partes review (IPR) petitioner who has challenged a patent and is dissatisfied with the final written decision of the Patent Trial and Appeal Board (PTAB) regarding upholding of patent claims by the PTAB. Here, the decision upholding the claims would be the government conduct complained of. The dissatisfied petitioner may appeal to the Federal Circuit and, to prove standing, allege that it is injured because the decision upholding the claims reduces its ability to compete with the patent owner. If the petitioner has no current interest in practicing the claims, would it have standing? No, it would not, according to the Federal Circuit in Avx Corporation v. Presidio Components, Inc. 2018-1106 (Fed. Cir. May 13, 2019) (“Avx Corp.”), where this scenario played out. The court explained that although “competitor standing” can be found to challenge government actions in certain situations, this was not one of them, as the petitioner was unable to demonstrate any present or nonspeculative interest in engaging in conduct even arguably covered by the claims at issue. Avx Corp. at 9.

In his luncheon keynote address to attendees of IPWatchdog’s Patent Master’s Symposium: “Standard Essential Patents: Striking a Balance Between Competition and Innovation” on Tuesday, former Federal Circuit Chief Judge Randall Rader drove home a point made by multiple speakers during the event that the concept of “patent hold-up”—in which innovator companies use SEPs to hold up implementer companies from getting products to market via anti-competitive practices—is “one of the largest misnomers in our discipline.” Earlier in the day, David Kappos, former Director of the USPTO, explained that— although he signed off on the Joint Policy Statement, that it was thoughtfully and heavily negotiated and edited, and that he felt at the time that it was a good document and a compromised agreement—he stepped back after Delrahim’s announcement last year and has now reconsidered his view. “I was defending the IP system given everything we knew at the time,” Kappos said. “I didn’t think the guidelines were anti-innovation; I thought they were balanced. But in stepping back, I realized—between 2013 and 2019 we’ve learned a lot. Multiple empirical studies have shown us that the phenomena on which we based the guidelines— hold-up and royalty stacking — aren’t occurring. There is no evidence of our predictions.”

On September 5,  the U.S. Court of Appeals for the Federal Circuit (CAFC) held that state sovereignty principles asserted by the Board of Regents of the University of Texas System (UT) do not give UT the right to bring suit in an improper venue. The appeal clarifies once again that sovereign immunity may be used only as a shield, not a sword. UT argued that Boston Scientific Corporation’s request that the case be transferred to the District of Delaware should be reversed because venue was proper in the Western District of Texas since a state has the right to sue a nonresident in a forum of its choosing where personal jurisdiction is satisfied. It argued that the federal patent venue statute cannot override this sovereign right. UT also argued that the District of Delaware lacks jurisdiction because UT never consented to suit in Delaware, nor did it waive its sovereignty in Delaware or abrogate its sovereignty by statute. The CAFC disagreed with the above, holding that state sovereignty does not allow states to bring patent infringement suits in an improper venue, as is the case where BSC does not have a place of business in Texas. It also held in Regents of University of Cal. V. Eli Lilly & Co. that sovereign immunity does not apply where the state acts only as the plaintiff, and therefore the right of UT to choose the forum does not apply because the Eleventh Amendment only applies to suits against a state, not by a state.

Recently, the Federal Circuit reversed, vacated and remanded a decision of the U.S. District Court for the District of Colorado that granted Mushkin, Inc.’s (“Mushkin’s”) motion to dismiss Anza Tech.’s (“Anza”) complaint seeking damages for alleged patent infringement occurring between March 2011 and April 2012 because the claim for damages was time-barred by the six-year statute of limitations in the Patent Act, 35 U.S.C. § 286. See Anza Tech., Inc. v. Mushkin, Inc., No. 2019-1045, 2019 U.S. App. LEXIS 24432 (Fed. Cir. Aug. 16, 2019) (Before Prost, Chief Judge, Newman and Bryson, Circuit Judges) (Opinion for the Court, Bryson, Circuit Judge). In its determination of whether newly alleged claims, based on separate patents, relate back to the date of the original complaint, the Federal Circuit considered: (1) the overlap of parties, (2) the overlap in the accused products, (3) the underlying science and technology, (4) time periods, and (5) any additional factors that might suggest a commonality or lack of commonality between the two sets of claims.

If you’re reading this blog, then you likely are an avid follower of the Section 101 saga. The most recent episode in this saga, Chamberlain v. Techtronic at the Federal Circuit, is about so much more than a garage door operator being an abstract idea. It’s about the fact that we still have no clue what’s supposed to happen in the 2A and 2B steps of the judicially-created Alice/Mayo test. The Chamberlain panel applied the Alice/Mayo test completely backwards compared to what the Berkheimer panel said. First, the question of improvement was assessed in Chamberlain’s “Step One” (or 2A). Not only that, the panel then immediately went on to find that “(t)he specification admits that the act of transmitting data wirelessly is ‘well understood in the art,’ and no other changes to the generically claimed movable barrier operator are recited in the asserted claims or described in the specification.” 

Courts construe, administer, and apply the Federal Rules of Civil Procedure so as “to secure the just, speedy and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. Large patent portfolios have contributed to the increase in numbers of unwieldy cases that assert many patents and claims. A court presiding over such a case usually makes every…