Patent Case Summaries February 9, 2022

Patent Case Summaries | Week Ending February 4, 2022

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.

Qualcomm Inc. v. Apple Inc., et al., Nos. 2020-1558, -1559 (Fed. Cir. (PTAB) Feb. 1, 2022). Opinion by Chen, joined by Taranto and Bryson.

Qualcomm appealed two related IPR decisions finding several claims of a Qualcomm patent unpatentable under 35 U.S.C. § 103. In reaching its patentability finding, the Patent Trial and Appeal Board had relied in part on applicant admitted prior art (AAPA).

Qualcomm argued that the Board’s reliance on AAPA runs afoul of 35 U.S.C. § 311(b), which limits an IPR petitioner to challenge claims as unpatentable “only on a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications.” The Federal Circuit agreed with Qualcomm, ruling that AAPA does not constitute “prior art consisting of patents or printed publications” such that it may form “the basis” of a ground in an IPR. Instead, the court explained, “the ‘patents or printed publications’ that form the ‘basis’ of a ground for inter partes review must themselves be prior art to the challenged patent. That conclusion excludes any descriptions of the prior art contained in the challenged patent.”

The Federal Circuit went on to explain that “it does not follow that AAPA is categorically excluded from an inter partes review.” The court reiterated that, in an IPR proceeding, “it is appropriate to rely on admissions in a patent’s specification when assessing whether that patent’s claims would have been obvious.” For instance, “even though evidence such as expert testimony and party admissions are not themselves prior art references, they are permissible evidence in an inter partes review for establishing the background knowledge possessed by a person of ordinary skill in the art.”

Because the Board erred in concluding that AAPA constitutes “prior art consisting of patents or printed publications” under § 311(b), the Federal Circuit vacated the Board’s decision and remanded for the Board to determine whether the IPR petition nonetheless raised a § 103 challenge “on the basis of prior art consisting of patents or printed publications.”

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BlephEx, LLC v. Myco Industries, Inc., et al., Nos. 2021-1149, -1365 (Fed. Cir. (E.D. Mich.) Feb. 3, 2022). Opinion by O’Malley, joined by Moore and Schall.

BlephEx sued Myco for infringement of a patent relating to an instrument for removing debris from an eye during the treatment of an ocular disorder. BlephEx also sought a preliminary injunction, which the district court granted upon finding that the relevant factors weighed heavily in favor of that relief.

On appeal, Myco first challenged the district court’s finding that Myco failed to demonstrate a substantial question as to the patent’s validity. The district court found that Myco’s asserted prior art reference did not disclose a claim limitation requiring a “swab [] being moved by the electromechanical device.” Myco pointed to two different figures in the reference—one showing a swab, and one showing an electromechanical device—and argued that they described the same embodiment. The district court disagreed, and on appeal, the Federal Circuit determined that the district court did not clearly err in concluding that the figures depict separate embodiments, precluding anticipation.

Regarding obviousness, Myco’s argument before the district court consisted of only a single sentence, unsupported by any evidence or any additional argument explaining Myco’s assertion. The Federal Circuit concluded that “the district court did not clearly err in finding that Myco’s conclusory obviousness argument did not pose a substantial question of validity.”

Myco also argued on appeal that the purpose of a preliminary injunction is to preserve the status quo, and here the injunction upset the status quo. The Federal Circuit ruled that Myco misidentified the status quo. The status quo was not the state of the world before the patent issued as Myco argued, but was the state where the patent had been granted and could be asserted. The Federal Circuit ruled that the district court “appropriately considered the status quo in its analysis.”

Finally, Myco argued that the scope of the preliminary injunction was overbroad because it enjoins all domestic sales of the accused product even though the patent covered only a single method of use. Myco asserted that it presented evidence of potentially noninfringing uses. After analyzing the arguments and evidence, the Federal Circuit determined that the district court did not abuse its discretion when it barred all domestic sales of Myco’s product.

The Federal Circuit thus concluded that “the district court did not abuse its discretion in granting the preliminary injunction, clearly err in its underlying factual findings, or abuse its discretion in setting the scope of the preliminary injunction.”

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Quanergy Systems, Inc. v. Velodyne Lidar USA, Inc., et al., Nos. 2020-2070, -2072 (Fed. Cir. (PTAB) Feb. 4, 2022). Opinion by O’Malley, joined by Newman and Lourie.

Quanergy initiated two IPR proceedings challenging claims in a Velodyne patent related to lidar-based 3D point cloud measuring systems. Such laser-based measurement systems can, for example, help autonomous cars sense their surroundings. The Patent Trial and Appeal Board held that the challenged claims were not shown to be unpatentable as obvious.

The Board made several findings that were relevant to Quanergy’s appeal. The Board construed the term “lidar” to mean “pulsed time-of-flight lidar.” The Board also found that the cited prior art (Mizuno) did not disclose a lidar system as construed, and a skilled artisan would not have used pulsed time-of-flight lidar in Mizuno’s device. Also, the Board found that Velodyne’s objective indicia evidence supported patentability.

In the appeal, the Federal Circuit first affirmed the Board’s construction of “lidar.” The intrinsic record did not “merely indicat[e] that lidar may involve pulsed time-of-flight measurements”; instead, it “focused exclusively on pulsed time-of-flight lidar.”

As to obviousness, the Federal Circuit ruled that substantial evidence supported the Board’s findings that Mizuno neither discloses nor suggests the use of a pulsed time-of-flight lidar system. The Federal Circuit explained that the testimony “of both Velodyne’s and Quanergy’s experts support the Board’s findings.”

Lastly, the Federal Circuit ruled that substantial evidence supported the Board’s analysis of Velodyne’s evidence of unresolved long-felt need, industry praise, and commercial success, as well as the Board’s presumption of a nexus between the evidence and the claims. Quanergy argued that the Board erred by failing to consider unclaimed features, did not provide an adequate basis for dismissing the unclaimed features, and did not consider that the unclaimed features were critical and materially impacted the functionality of Velodyne's products. The Federal Circuit disagreed on all counts. For example, Quanergy’s two-sentence challenge to the demonstrated nexus did not rebut the presumption that a nexus exists. Additionally, Quanergy’s arguments regarding unclaimed features were not presented to the Board and thus were forfeited.

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California Institute of Technology v. Broadcom Ltd., et al., Nos. 2020-2222, 2021-1527 (Fed. Cir. (C.D. Cal.) Feb. 4, 2022). Opinion by Linn, joined by Lourie. Opinion concurring in part and dissenting in part by Dyk.

Caltech sued Broadcom and Apple for infringement of three patents related to circuits that generate and receive irregular repeat and accumulate codes, a type of error correction code designed to improve the speed and reliability of data transmissions. The district court made summary judgment findings of no invalidity based on IPR estoppel and no inequitable conduct. A jury ultimately found infringement of all asserted claims and awarded Caltech damages based on a two-tier damages theory that Caltech presented. Broadcom and Apple appealed.

In the appeal, Broadcom and Apple argued that the district court’s construction of “repeat” was inconsistent with the claim language and the construction given by another judge in a different case. The Federal Circuit disagreed, ruling that the construction was correct and that substantial evidence supported the jury’s verdict on infringement for two of the asserted patents.

For the third asserted patent, the Federal Circuit first upheld the district court’s ruling that claim 13 was patent eligible. The Federal Circuit explained that the claim “does not claim a mathematical formula,” but “is directed to an efficient, improved method of encoding data that relies on irregular repetition.” The mere fact that the claim employed a mathematical formula “does not demonstrate that it is patent ineligible.”

Turning to infringement of the third patent, the Federal Circuit vacated the jury’s verdict of infringement because the district court had refused to instruct the jury that the patent’s “variable number of subsets” limitation requires irregular repetition. The district court’s “sole ground for refusing to instruct the jury of the interpretation” was to avoid “confusing the record on this issue.” The Federal Circuit ruled that “this was error and requires remand for a new trial on infringement.”

Next, the Federal Circuit affirmed the district court’s grant of summary judgment of no invalidity. Broadcom and Apple’s validity challenges relied on grounds that had not been addressed in earlier IPRs, but the district court held that the challenges were barred by estoppel because Broadcom and Apple were aware of the prior art references and reasonably could have raised them in the IPR petitions.

As part of its analysis, the Federal Circuit overruled Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), in light of the Supreme Court’s later decision in SAS Institute v. Iancu, 138 S. Ct. 1348 (2018). Courts had interpreted Shaw as not allowing a petitioner to avoid estoppel as to all arguments that could have been raised in an IPR petition. The Federal Circuit ruled here that “the reasoning of Shaw rests on an assumption that the Board need not institute on all grounds, an assumption that SAS rejected.” The Federal Circuit thus overruled Shaw and clarified “that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.”

The Federal Circuit next turned to the jury’s damages award. Caltech had presented a two-tiered reasonable royalty model based on simultaneous hypothetical negotiations with Broadcom and Apple. Caltech thus employed separate chip-level and device-level hypothetical negotiations, rather than a single hypothetical negotiation. The Federal Circuit deemed this two-tiered damages model “legally unsupportable” because established precedent requires one hypothetical negotiation for the supplier and purchaser in the absence of a compelling showing otherwise, which was not made.

Judge Dyk dissented in part because, in his view, the record did not support the jury’s verdict of infringement for two of the patents. Thus, Judge Dyk would reverse the district court’s denial of JMOL of no literal infringement. In his view, Caltech never established that the accused devices generate “additional bits” as required by the district court’s claim construction for the term “repeat.”

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Apple Inc. v. Wi-LAN Inc., Nos. 2020-2011, -2094 (Fed. Cir. (S.D. Cal.) Feb. 4, 2022). Opinion by Moore, joined by Bryson and Prost.

Apple sued Wi-LAN seeking a declaratory judgment of noninfringement and invalidity of two Wi-LAN patents, and Wi-LAN counterclaimed alleging that certain Apple iPhones infringe. A jury found infringement and awarded Wi-LAN $145.1 million in damages. In post-trial proceedings, the district court granted Apple’s motion for a new trial on damages or, alternatively, a remittitur, because Wi-LAN’s expert had conflated the patented technology with VoLTE generally. The inventors admittedly did not invent VoLTE technology, and thus Wi-LAN’s expert’s testimony “lacked a factual basis and should not have been presented to the jury.” A new trial on damages was held, and the jury awarded Wi-LAN a royalty rate of $0.45 per phone resulting in total damages of $85.23 million.

Apple appealed arguing that the district court erred in construing the terms “subscriber unit” and “subscriber station” to include components of a user device. Apple also argued that the accused iPhones lack a subscriber unit. Lastly, Apple argued that Wi-LAN’s damages expert failed to apportion for the value of the patented technology.

Wi-LAN cross-appealed arguing that the district court erred by interpreting a license agreement between Wi-LAN and Intel as granting a perpetual license for Intel to sell certain chipsets to Apple. Wi-LAN also argued that the district court erred in ordering a new trial on damages and asked the Federal Circuit to reinstate the original damages verdict.

The Federal Circuit affirmed in part, reversed in part, vacated in part, and remanded. First, the court upheld the claim constructions. Focusing on “subscriber unit,” the Federal Circuit ruled that the intrinsic record did not support Apple’s position that the patentee defined “subscriber unit” as CPE (customer premises equipment). Next, the Federal Circuit held that “substantial evidence supports the jury’s finding that the accused iPhones as sold have a subscriber unit.” Lastly, the Federal Circuit agreed with Apple that Wi-LAN’s expert’s damages methodology in the second trial “was flawed, and thus, the district court abused its discretion by denying Apple’s motion for a new trial.” The expert’s “opinion that the asserted patents were key patents [was] untethered to the facts of this case.”

Turning to Wi-LAN’s cross appeal, the Federal Circuit reversed the district court’s finding that the license agreement unambiguously provided Intel a perpetual license to the asserted patents. The Federal Circuit explained that the agreement granted only a limited license that did not extend to chipsets sold after the agreement expired. Finally, the Federal Circuit rejected Wi-LAN’s argument that the district court abused its discretion in granting a new trial on damages, seeing “no reversible error in the district court’s reasoning.”

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