Patent Case Summaries January 18, 2013

Federal Circuit Patent Case Summaries for the Week Ending January 18, 2013

The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending January 18, 2013. Qin Hai'ou and Wes Achey prepared the summaries in this issue.

Case Summaries

Claim Interpretation: Generally
Infringement: Generally

Parallel Networks, LLC v. Abercrombie & Fitch Co., et al., No. 12-1227 (Fed. Cir. (E.D. Tex.) Jan. 16, 2013). Opinion by Judge Bryson, joined by Prost and Wallach.

The Federal Circuit affirmed the district court’s claim constructions, judgment of noninfringement, and denial of a Rule 59(e) motion, ruling that the accused websites did not infringe and the patentee should have sought to amend its infringement contentions before the entry of summary judgment.

Parallel Networks, LLC (“Parallel”) owns U.S. Patent No. 6,446,111 (“the ’111 patent”), which relates to an applet that couples particularized data with a data manipulation system. The system enables the applet to handle the various characteristics associated with the data included in the applet, and the applet is generated in response to a request representing the user’s desires. Parallel sued 120 different defendants for allegedly infringing the ’111 patent based on the manner in which the defendants’ websites provide applets in response to user requests. The district court ruled that most of the defendants were entitled to summary judgment because the accused sites did not literally infringe Parallel’s claims and it also denied Parallel’s Rule 59(e) motion seeking leave to amend its infringement contentions in order to allege infringement against 45 of the defendants. Parallel appealed the district court’s claim constructions, its noninfringement rulings, and its denial of the Rule 59(e) motion.

The Federal Circuit upheld the district court’s constructions of the terms “executable applet,” “dynamically generated by the server in response to the request,” and “data interface capability.” The Federal Circuit further held that the data manipulation service and the particularized data were both necessary components of the applet as it was initially generated and before it was transferred to the client.

Addressing Parallel’s argument that the district court’s infringement analysis was erroneous, the Federal Circuit upheld the noninfringement determination because the accused websites did not contain the required data manipulation services and no executable or operable applet was generated from the accused websites and transferred from the server to the client as required by the asserted claims.

Finally, the Federal Circuit also upheld the district court’s denial of a motion under Rule 59(e), noting that Parallel was seeking to amend its infringement contentions in order to make arguments that could have been made before the entry of summary judgment. 

Litigation Practice and Procedure: Discovery: Sanctions
Defenses: Fraud and Inequitable Conduct: Materiality
Defenses: Fraud and Inequitable Conduct: Intent to Deceive
Litigation Practice and Procedure: Jurisdiction: Moot or Unripe Issues

Allflex USA, Inc. v. Avid Identification Systems, Inc., No. 11-1621 (Fed. Cir. (C.D. Cal.) Jan. 17, 2013). Opinion by Judge Bryson, joined by Lourie and Clevenger.

The Federal Circuit dismissed the appeal because the Federal Circuit lacked jurisdiction over a sanction issue and because the appellant had failed to show the existence of a legitimate and continuing case or controversy.

Allflex U.S.A., Inc. (“Allflex”) sued Avid Identification Systems, Inc. (“Avid”), seeking a declaratory judgment that six of Avid’s patents were unenforceable due to inequitable conduct and that Allflex was not liable for infringement of any of the patents. Avid counterclaimed, alleging infringement. Only two patents of the original six patents remained at issue, U.S. Patent Nos. 5,214,409 and 5,499,017. These patents relate to radio frequency identification technology used in tags attached to animals or objects to locate them if they are lost.

The parties entered into a settlement agreement after the district court ruled that Avid and its former counsel “should be sanctioned” under Fed. R. Civ. P. 37(c) and granted partial summary judgment in favor of Allflex on its inequitable conduct claim. The settlement agreement provided that Avid would pay Allflex a lump sum, but that Avid would be permitted to appeal three issues—the summary judgment of noninfringement, the finding of materiality as to the undisclosed information about prior public use and offers for sale, and the court’s ruling that Avid and its counsel should be sanctioned. If Avid were to succeed on any of the appealed issues, its settlement payment to Allflex would be reduced by $50,000. Avid appealed the three issues. Allflex declined to file a brief defending the judgment in its favor.

The Federal Circuit held that it lacked jurisdiction over the sanctions issue because there was no monetary or other sanction imposed on Avid or its former counsel, and there had been no final sanctions order for the Federal Circuit to review. The Federal Circuit further noted that an appeal on this issue would have no effect on either party’s legal rights and thus held that the appeal on the sanction issue was moot.

As to the inequitable conduct claim, the district court had ruled that the information Avid failed to disclose to the PTO was material but denied summary judgment with respect to the intent element of inequitable conduct. Under normal circumstances, the inequitable conduct claim would also be considered non-final, and the consequence of the non-finality of the inequitable conduct claim would be that the entire appeal would have to be dismissed. The Federal Circuit held, however, that the district court’s disposition avoided the problem of the non-finality of the inequitable conduct claim. The Federal Circuit noted that the district court dismissed all aspects of the case except for the three issues that Avid sought to preserve for appeal. As to those issues, the district court’s judgment and the settlement agreement made clear it was not contemplated that there would be any further proceedings in the district court either before or after any appellate action in the case.

On appeal, Avid argued that the payment ensured that there was a real controversy between the parties sufficient to rescue the appeal from being dismissed as moot. The Federal Circuit noted that Allflex had obtained a payment of $6.5 million that was not at risk in the appeal, and Avid’s infringement counterclaims had been dismissed with an agreement not to bring a similar action against Allflex for seven years. Indeed, the $50,000 remaining at issue was insufficient to induce Allflex to file a brief or otherwise participate. As such, the Federal Circuit held that the issue was moot because there was no money at stake.  


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