Patent Case Summaries November 24, 2020

Patent Case Summaries | Week Ending November 20, 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.

SIPCO, LLC v. Emerson Electric Co., et al., No. 2018-1635 (Fed. Cir. (PTAB) Nov. 17, 2020). Opinion by Chen, joined by O’Malley and Reyna. 

On remand from the Supreme Court in light of the Court’s decision in Thryv, Inc. v. Click-to-Call Technologies, LP, the Federal Circuit held that the Patent Trial and Appeal Board’s threshold determination that SIPCO’s patent qualified for CBM review “is a decision that is non-appealable under 35 U.S.C. § 324(e).” The Federal Circuit also held that substantial evidence supported the Board’s conclusion that certain claims of SIPCO’s patent were obvious. 

In Thryv, the Supreme Court held that a Board decision as to whether earlier litigation bars institution of an IPR under § 315(b) is “final and non-appealable” under the “no appeal” provision of § 314(d). Applying that ruling to the CBM proceeding at issue here, the Federal Circuit determined that CBM review is subject to a “similar, materially identical” provision in § 324(e), and a determination that a patent qualifies for CBM review is “expressly and exclusively tied to the decision to institute the proceeding.” Consequently, the Federal Circuit concluded that a Board decision as to whether a patent qualifies for CBM review is non-appealable under § 324(e). 

The Federal Circuit also reviewed the Board’s determination that certain claims of SIPCO’s patent were obvious. Because substantial evidence supported the Board’s determination, the Federal Circuit affirmed. 

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Whitewater West Industries, Ltd. v. Alleshouse, et al., Nos. 2019-1852, -2323 (Fed. Cir. (S.D. Cal.) Nov. 19, 2020). Opinion by Taranto, joined by Dyk and Moore.

Richard Alleshouse and Yong Yeh were named as inventors on three patents relating to water-park attractions, and their company, Pacific Surf Design, was the assignee. Alleshouse’s employer, Wave Loch, had employed him until just before he went into business with Yeh and the patented inventions were conceived. 

The successor of Wave Loch, Whitewater West Industries, sued Alleshouse, Yeh, and Pacific Surf Design for breach of contract and correction of inventorship. Whitewater claimed that under California law Alleshouse was obligated to assign the patents to it under the terms of Alleshouse’s employment contract with Wave Loch. Whitewater also claimed that Yeh was improperly listed as an inventor on each patent. The district court held that Alleshouse’s employment contract was valid under state law and had been breached by Alleshouse, and that Yeh was improperly joined as an inventor.

On appeal, the Federal Circuit determined that the California Business and Professions Code prohibits “invention-assignment provisions that go beyond protection of proprietary information and ensnare post-employment inventions.” The invention-assignment provision in Alleshouse’s employment contract was “unlimited in time and geography” and not limited to situations where trade secret or other confidential information had been used to conceive an invention. Also, Whitewater conceded two significant facts: “first, the inventions at issue were not conceived until after Mr. Alleshouse left his job at Wave Loch; second, Mr. Alleshouse did not use any trade-secret or other confidential information belonging to Wave Loch (now Whitewater) in arriving at the patented inventions.” On that record, the Federal Circuit held that the invention-assignment provision in the employment contract was invalid, so there was no breach of contract. And because there had been no breach of contract, Whitewater’s claim for correction of inventorship also failed. 

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Vectura Ltd. v. GlaxoSmithKline LLC, et al., No. 2020-1054 (Fed. Cir. (D. Del.) Nov. 19, 2020). Opinion by Bryson, joined by Prost and Wallach.

Vectura alleged that GlaxoSmithKline LLC and Glaxo Group Limited (GSK) directly and vicariously infringed a patent relating to the production of “composite active particles” for use in pulmonary administration, such as in dry-powder inhalers. A jury found that the patent was willfully infringed and not invalid, and awarded damages. GSK appealed, raising four issues. 

First, GSK argued that it was entitled to judgment of noninfringement as a matter of law because Vectura failed to present substantial evidence that the accused inhalers use additive material that “promotes the dispersion” of an active material. GSK argued that Vectura had “staked its case on a defective scientific test.” The Federal Circuit ruled that “regardless of any infirmities” in the scientific test, “there was ample other evidence at trial” to support the verdict. 

Second, GSK challenged the district court’s construction of the claim term “composite active particles.” GSK argued that the court should have construed the term in the product claims to require that the composite particles be produced by the “high-energy milling” process described in the specification. The Federal Circuit first noted that “process steps can be treated as part of the product claim if the patentee has made clear that the process steps are an essential part of the claimed invention.” But here, while the patent contained “a few statements suggesting that its high-energy milling is required,” those statements were “outweighed by the numerous statements indicating that high-energy milling is merely a preferred process.” Thus, the Federal Circuit upheld the claim construction.

Third, GSK argued that it was entitled to a new trial on damages because Vectura’s damages theory violated the entire market value rule. GSK complained that Vectura’s expert used total sales of the accused inhalers as a royalty base without first establishing that the patented mixtures drove consumer demand for the inhalers. Vectura and GSK, however, had a licensing history that included a license applying a royalty rate to total sales. Vectura’s damages expert permissibly relied on that prior license as a comparable license. The Federal Circuit thus endorsed the district court’s reasoning that “a party relying on a sufficiently comparable license can adopt the comparable license’s royalty rate and royalty base without further apportionment and without proving that the infringing feature was responsible for the entire market value of the accused product.”

Finally, GSK argued that it was entitled to a new trial on damages because Vectura made improper references during the trial to GSK’s $3.8 billion in U.S. sales for the accused inhalers. The district court found that the effect of the remarks was not so prejudicial as to require a new trial. The Federal Circuit upheld the denial of a new trial, finding “no basis to second-guess the judgment of the experienced trial judge in this regard.”

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Network-1 Technologies, Inc. v. Hewlett-Packard Co., et al., Nos. 2018-2338, -2339, -2395, -2396 (Fed. Cir. (E.D. Tex.) Nov. 20, 2020). Opinion modified and reissued by Prost, joined by Newman and Bryson. 

In an earlier opinion, the Federal Circuit vacated and remanded the district court’s grant of judgment as a matter of law (JMOL) that HP was estopped under 35 U.S.C. § 315(e) from raising obviousness challenges that “reasonably could have been raised” in an IPR. Acting on a petition for panel rehearing filed by Network-1, the Federal Circuit issued a modified opinion. The modified opinion clarified that, on remand, the district court should consider Network-1’s alternative grounds for JMOL, which were based on substantive validity arguments, in addition to considering Network-1’s motion for a new trial. 

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