Patent Case Summaries July 22, 2020

Patent Case Summaries | Week Ending July 17, 2020

A weekly summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit and the opinions designated precedential or informative by the Patent Trial and Appeal Board.

Packet Intelligence LLC v. NetScout Systems, Inc., et al., No. 2019-2041 (Fed. Cir. (E.D. Tex.) July 14, 2020). Opinion by Lourie, joined by Hughes. Opinion concurring-in-part and dissenting-in-part by Reyna.

Following a jury verdict and bench trial, the district court entered judgment (i) that NetScout willfully infringed; (ii) that no asserted claim was invalid under 35 U.S.C. §§ 101, 102(a), or 102(f); (iii) awarding damages for pre-suit and post-suit infringement, and (iv) awarding enhanced damages and an ongoing royalty of 1.55% for future infringement. The Federal Circuit determined that the district court erred in denying NetScout’s motion for judgment as a matter of law on pre-suit damages, and thus reversed the pre-suit damages award and vacated the court’s enhancement. It affirmed the district court’s judgment in all other respects.

The patents-in-suit disclose methods for monitoring packets exchanged over a computer network. On appeal, NetScout argued that its products do not infringe because the claims require “correlating connection flows into conversational flows” and its products never join connection flows together. The Federal Circuit disagreed that the claims require joining connectional flows into conversational flows and, in any event, held that the expert testimony presented at trial constituted substantial evidence to support the jury’s infringement verdict.

Next, NetScout argued that the patents are invalid under § 101 because they cover ineligible subject matter, and are invalid under § 102(f) for failure to name joint inventors. Regarding § 101, the majority determined that the claims are not directed to an abstract idea because “the focus of the claims is a specific improvement in computer technology: a more granular, nuanced, and useful classification of network traffic.” Addressing inventorship, the Federal Circuit agreed with the district court that the jury was permitted to weigh competing expert testimony.

Finally, NetScout asserted that Packet Intelligence is not entitled to pre-suit damages because its licensees had failed to mark their patent-practicing products. Under Arctic Cat v. Bombardier Recreational Products, the accused infringer “bears an initial burden of production to articulate the products it believes are unmarked ‘patented articles’ subject to the marking requirement,” and the burden then shifts to the patentee “to prove that the identified products do not practice the patent-at-issue.” Considering that standard, the Federal Circuit held that the district court’s jury instruction placed an improper burden on NetScout. Additionally, even though certain of the patents had only method claims not subject to the marking requirement of § 287, the Federal Circuit held that Packet Intelligence “cannot circumvent § 287 and include those products in its royalty base simply by arguing that NetScout’s infringement of related method claims drove sales.” The Federal Circuit thus ruled that “NetScout is entitled to judgment as a matter of law on this issue.”

Judge Reyna dissented in part, disagreeing with the majority’s conclusion on patent eligibility. In Judge Reyna’s view, “the claims are directed to the abstract idea of identifying data packets as belonging to ‘conversational flows’ rather than discrete ‘connection flows.’” The relevant inquiry “is not whether the patent as a whole teaches a concrete means for achieving an abstract result, but whether such a concrete means is claimed.” Thus, Judge Reyna stated that “while the claimed implementations of this idea may ultimately contain inventive concepts that save the claims, it was clear error for the district court to base its finding of inventiveness on the abstract idea itself and its attendant benefits.”

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Dana-Farber Cancer Institute, Inc. v. Ono Pharmaceutical Co., et al., No. 2019-2050 (Fed. Cir. (D. Mass.) July 14, 2020). Opinion by Lourie, joined by Newman and Stoll.

The Federal Circuit affirmed the district court’s judgment that two researchers, Drs. Freeman and Wood, should be deemed joint inventors alongside Dr. Honjo on several patents related to Nobel-prize winning immunotherapy for cancer treatment.

The patent claims are directed to a method of treating cancer by administering antibodies targeting specific receptor-ligand interactions on T cells. Dr. Honjo discovered the existence of an inhibitory receptor on T cells, PD-1. Dr. Honjo later collaborated with Drs. Freeman and Wood regarding the PD-1/PD-L1 pathway. That association ended in 2001.

Following a bench trial, the district court found that Drs. Freeman and Wood made several significant contributions to the conception of the claimed inventions, qualifying them as inventors.

On appeal, the Federal Circuit explained that “a joint invention is simply the product of a collaboration between two or more persons working together to solve the problem addressed.” A joint inventor must “(1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art.”

Ono Pharmaceutical challenged Dr. Freeman’s and Dr. Wood’s roles on various grounds, including that their contributions “were made public and were hence in the prior art before the alleged conception.” The Federal Circuit was not swayed, stating: “Inventorship of a complex invention may depend on partial contributions to conception over time, and there is no principled reason to discount genuine contributions made by collaborators because portions of that work were published prior to conception for the benefit of the public.”

After analyzing “the extensive factual determinations made by the district court,” the Federal Circuit concluded that the court’s determinations “were not clearly erroneous, and the court made no errors of law.”

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Mayborn Group, Ltd., et al. v. ITC, No. 2019-2077 (Fed. Cir. (ITC) July 16, 2020). Opinion by Lourie, joined by Linn and Wallach.

The Federal Circuit affirmed the International Trade Commission’s decision denying a petition to rescind a general exclusion order prohibiting importation of infringing products.

The owner of a patent for a spill-proof beverage container filed an ITC complaint against several respondents. Mayborn was not a respondent, but the complainants notified Mayborn of the investigation and Mayborn took no action during the proceedings. The Administrative Law Judge (ALJ) found infringement and imposed a general exclusion order barring importation of infringing goods by any entity, ruling that it was “difficult to gain information about the entities selling infringing self-anchoring beverage containers,” making it “nearly impossible to identify the sources of the[] products.” The Commission agreed with the ALJ and issued the general exclusion order.

Mayborn then petitioned the Commission to rescind the order, arguing that the patent-at-issue is invalid. The Commission denied the petition, ruling that Mayborn’s discovery of prior art after the issuance of a general exclusion order is not a changed condition under 19 U.S.C. § 1337(k)(1) and is thus not a proper basis for a petition to rescind or modify an exclusion order. Mayborn appealed.

Before reaching the merits, the Federal Circuit first considered the Commission’s challenge to Mayborn’s standing to appeal. The Commission argued that Mayborn lacked standing because it continues to import the accused products and thus lacks the requisite injury. The Federal Circuit disagreed, ruling that Mayborn satisfied Article III standing requirements: “Mayborn’s injuries stem from its risk of infringing the ’850 patent, the consequences of which are heightened by the existence of the general exclusion order.”

On the merits, the Federal Circuit agreed with the Commission that “Mayborn’s invalidity challenge is not a permissible basis for it to petition for rescission or modification of the general exclusion order.” The Commission correctly denied Mayborn’s petition for two independent reasons. First, the Commission may adjudicate patent validity only “when an invalidity defense is raised by a respondent in the course of an investigation or an enforcement proceeding pursuant to § 1337(b).” Here, that did not occur because Mayborn was not a party to the proceeding. Second, § 1337(k)(1)—which allows for rescission or modification of an exclusion order based on “changed conditions of fact or law, or the public interest”—“does not permit an end-run around this rule.” The court ruled that “a petitioner’s invalidity challenge is not, on its face, a changed condition under § 1337(k)(1) and is thus not a proper basis for a petition to rescind or modify an exclusion order.”

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Apple Inc. v. Fintiv, Inc., No. IPR2020-00019 (PTAB May 13, 2020) (designated informative on July 13, 2020). Opinion by Horner, joined by Fink and Pettigrew.

The Patent Trial and Appeal Board may exercise its discretion under 35 U.S.C. § 314(a) to decline to institute IPR where there is an ongoing parallel district court litigation. In an earlier Precedential Order in this IPR, the Board set forth six factors that “balance considerations of system efficiency, fairness, and patent quality when a patent owner raises an argument for discretionary denial due to the advanced state of a parallel proceeding”:

  1. whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
  2. proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
  3. investment in the parallel proceeding by the court and the parties;
  4. overlap between issues raised in the petition and in the parallel proceeding;
  5. whether the petitioner and the defendant in the parallel proceeding are the same party; and
  6. other circumstances that impact the Board’s exercise of discretion, including the merits.

The Board applied these factors in deciding to deny institution. The first factor was neutral, since neither party had requested a stay of the district court case. The second and third factors weighed “somewhat in favor of discretionary denial.” A district court trial was scheduled to begin two months before the Board’s deadline to reach a final decision, and the parties had invested effort in the district court case but “further effort remains to be expended” before trial.

Next, both the fourth and fifth factors weighed in favor of discretionary denial. The “identical claims are challenged based on the same prior art” in both the IPR and district court case, “and the fact that Petitioner raises additional contentions in the District Court is irrelevant.” Also, per the fifth factor, the Petitioner and defendant in the district court case were the same party.

Finally, for the sixth factor, the Board explained that “a full merits analysis is not necessary as part of deciding whether to exercise discretion not to institute, but rather the parties may point out, as part of the factor-based analysis, particular ‘strengths or weaknesses’ to aid the Board in deciding whether the merits tip the balance one way or another.” Here, the Board’s “initial inspection of the merits” suggested that Petitioner’s challenges contain certain weaknesses, which taken as a whole, do not outweigh other factors in favor of discretionary denial.

Based on the circumstances, the Board agreed with the Patent Owner that “instituting a trial would be an inefficient use of Board resources,” and therefore the Board exercised its discretion to deny institution under § 314(a).

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Sand Revolution II, LLC v. Continental Intermodal Group – Trucking LLC, No. IPR2019-01393 (PTAB June 16, 2020) (designated informative on July 13, 2020). Opinion by Flax, joined by Weidenfeller and Moore.

In a prior decision, a divided Patent Trial and Appeal Board denied institution of Sand Revolution’s IPR petition under 35 U.S.C. § 314(a). The Petitioner sought rehearing based on new evidence of record and supplemental briefing. The Board granted the Petitioner’s request, ruling that “the application of discretion to deny [institution] under 35 U.S.C. § 314(a) is not warranted when we apply the factors set forth in” the Board’s precedential decision in Apple Inc. v. Fintiv, Inc.

The Board addressed the six factors relevant to a determination whether to deny institution under § 314(a).

The first factor was neutral, as no stay was requested in the related district court litigation. The second factor weighed “marginally in favor” of institution because the district court trial date was uncertain, the parties had moved to extend the district court deadlines multiple times, and the tentative trial date was in relatively close proximity to the expected final decision in the IPR.

The third factor weighed “marginally, if at all, in favor of exercising discretion to deny institution” because the parties had not invested substantially in the merits of the invalidity positions in the district court case.

The fourth factor weighed “marginally in favor of” institution. The patentability issues in the IPR were “a subset of the issues in the district court case.” Also, the Petitioner had stipulated that if the IPR is instituted, the Petitioner would not pursue the same grounds in the district court case, which the Board found “mitigates to some degree the concerns of duplicative efforts between the district court and the Board, as well as concerns of potentially conflicting decisions.”

The fifth factor weighed in favor of discretionary denial, as the parties were the same in both proceedings. Finally, the Board found that the sixth factor favored institution, as the Petitioner had “set forth a reasonably strong case for the obviousness of most challenged claims.”

Taking “a holistic view of whether efficiency and integrity of the system are best served by denying or instituting review,” the Board “decline[d] to deny institution under § 314(a).” The Board therefore granted the Petitioner’s request for rehearing, considered the merits of the petition, and instituted the IPR.

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