To Qualify as a Joint Inventor – HIP, Inc. v. Hormel Foods Corp., 22-1696 (Fed. Cir. 2022)

Maier & Maier

Earlier this year, in an opinion by Judge Lourie the Court of Appeals for the Federal Circuit overturned a district court decision finding that David Howard, a representative of HIP, should be added as a joint inventor on Hormel’s U.S. Patent 9,980,498 (the ‘498 patent). The relevant independent claims, 1 and 5, describe methods of making precooked bacon and meat pieces (respectively) using hybrid cooking systems.

Hormel’s relationship with HIP began in 2007 when they entered into a joint agreement to develop an oven to be used for a two-step cooking process. During the first three months of this process Howard disclosed an infrared preheating concept which became the core issue on appeal. Hormel later moved testing to its own research facility and finalized their process, filing the ‘498 patent thereafter.

HIP suit against Hormel alleged that Howard was either the sole or joint inventor. The district court found him to be a joint inventor based on his contribution of the infrared oven preheating concept which appears in independent claim 5. Hormel raised two issues on appeal, only one of which was necessary for reaching the judgment.

“To qualify as a joint inventor, a person must make a significant contribution to the invention as claimed” based on the Pannu three part test: (1) contribution in some significant manner to the conception of the invention; (2) contribution to the claimed invention that is not insignificant in quality when measured against the dimension of the full invention; and (3) did more than merely explain to the actual inventors some well-known concepts and/or the current state of the art. All three Pannu factors must be met for one to be a joint inventor.

The Court reached its decision based solely on the insignificance of Howard’s contribution in light of the invention in its entirety, negating the second Pannu factor. First, Howard’s infrared preheating contribution is mentioned only once in one of the claims, claim 5, as one of three possible alternative methods. In contrast, the use of microwave ovens as developed by Hormel is featured repeatedly thought the patent. Further, the examples and figures not once describe or depict the use of an infrared oven, again focusing on microwave ovens.

In summary, HIP’s favorable district court ruling that Howard was to be added as joint inventor of the ‘498 patent was overturned based on the overwhelming insignificance of his infrared oven preheating contribution in comparison to the overall invention as described in the patent. Inventors should be on notice that to secure their inclusion as joint inventors their contributions must appear frequently or prominently in both the figures and text of a patent.

Federal Circuit Partially Overturns Invalidation of 4 Software Patents Under §101

Maier & Maier

Inventor Sholem Weisner sued Google LLC for patent infringement of four patents (10,380,202, 10,642,910, 10,394,905 and 10,642,911) in the District Court for the Southern District of New York in 2020. Weisner’s patents all shared the same specification which generally described ways to “digitally record a person’s physical activities and ways to use this digital record.” Google enjoyed an early win when the District Court granted summary judgment finding all claims ineligible under §101. However, on October 13, 2022, the Federal Circuit partially reversed the District Court, specifically finding that the ‘905 and ‘911 patent claims should not have been dismissed for patent ineligibility at this stage. Weisner v. Google LLC, 2021-2228  (Fed. Cir. 2022).

The Federal Circuit found that the District Court correctly dismissed the ‘202 and ‘910 patents for patent ineligibility. The claims in question were directed to the abstract idea of “collecting information on a user’s movements and location history and electronically recording that data.” Specifically, these claims were essentially about “creating a digital travel log”. Weisner argued that the system was an improvement on a computer because it automatically made these recordings and limited “what is recorded to only specific types of interactions that are pre-approved and agreed to by an individual member and a vendor member”. Neither the District Court nor the Federal Circuit found this line of argumentation compelling, noting that “humans have consistently kept records of a person’s location and travel in the form of travel logs, diaries, journals…” purely automating or digitizing a travel log is not sufficient to “bring the claims out of the realm of abstractness.”

With regard to the remaining ‘905 and ‘911 patents the Federal Circuit said, “at step one [of Alice] the district court erred by failing to separately analyze these patents.” While the district court analyzed the remaining patents on the same grounds as the ‘202 and ‘910 the Federal Circuit found that these patents were instead directed to “creating and using travel histories to improve computerized search results” (emphasis added). Specifically, the ‘905 and ‘911 patents recited “a method of enhancing digital search results for a business in a target geographic area using URLs of location histories.” The Federal Circuit still found this was an abstract idea, but much closer than the first two patents.

On Alice step 2 the Federal Circuit found that the ‘905 and ‘911 patents “recite a specific implementation of the abstract idea that purports to solve a problem unique to the internet and that, accordingly, these claims should not have been held ineligible under step two at this stage.” This finding was not based on any new structure or algorithm, in fact Weisner conceded “the patented system uses the same or similar algorithm used by existing search engines.” However, this alone did not “doom the claims”. The allowability was instead found based on “the claims specificity as to the mechanism through which they achieve improved search results”, which was done “through a ‘location relationship’ with a ‘reference individual’ for the ‘905 patent or through the ‘location history of the individual member’ … for the ‘911 patent.” Therefore, the claims recite “a new technique for prioritizing the results of the conventional search,” which in the context of the internet are sufficient to “add significantly more to the abstract idea of using travel histories to improve computerized search results.”

This case, like the Federal Circuits other recent §101 case Cooperative Entertainment v. Kollective Technology, shows that the Federal Circuit is willing to push back on District Court §101 invalidations, especially for software cases where such invalidations are common. Whether this is indicative of a larger trend on how the Federal Circuit views §101 going forward still remains to be seen.

Oracle Corp. v. Click-to-Call Technologies LP

Maier & Maier

Under 315(b) of the AIA (America Invents Act), Inter Partes Review “may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”[1] The Click-to-Call decision revolves around whether the time-bar applies when a complaint has been voluntarily dismissed without prejudice.

In 2001, the patent in this case, U.S. Pat # 5,818,836, had been exclusively licensed to Inforocket, who filed a patent infringement suit asserting the ‘836 patent against Ingenio (then under its previous name, Keen).[2] Ingenio then purchased Inforocket as a wholly-owned subsidiary, and the parties stipulated to dismiss the suit without prejudice.[3] Subsequently the ‘836 patent was acquired by Click-to-Call.  On May 29, 2012, Click-to-Call filed suit asserting the same ‘836 patent against a number of defendents, including Ingenio, leading to the filing of this IPR. [4]

In an opinion designated as precedential by the PTAB, the Board ruled that a voluntary dismissal of a suit creates an exception to the 315(b) time-bar. “The Federal Circuit consistently has interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.”[5] Based on the premise that a voluntary dismissal serves to nullify the existence of a suit, the PTAB held that the one-year time limit for filing an IPR would be nullified along with it.

On appeal, the Federal Circuit disagreed and found that the PTAB committed legal error in its determination.  The Federal Circuit overturned the PTAB ruling. As the decision explains “the provision unambiguously precludes the Director from instituting an IPR if the petition seeking institution is filed more than one year after the petitioner, real party in interest, or privy of the petitioner ‘is served with a complaint’ alleging patent infringement. Simply put, § 315(b)’s time bar is implicated once a party receives notice through official delivery of a complaint in a civil action, irrespective of subsequent events.”[6]

Unlike the 2001 infringement complaint, the PTAB’s precedential time-bar decision has now been entirely nullified.

[1] 35 U.S.C. § 315(b)

[2] Oracle Corp. v. Click-to-Call Technologies LP, IPR2013-00312, Paper 26 at 14 (PTAB Oct. 13, 2013).

[3] Id.

[4] Id.

[5] Id at 17.

[6] Oracle Corp. v. Click-to-Call Technologies LP, Slip Op at 13 (CAFC Aug. 16, 2018).

Tribal Sovereign Immunity: Federal Circuit Stays Proceeding after PTAB Cast Doubt On Patent Defense Strategy

Maier & Maier

Last fall, Maier & Maier highlighted a new defense strategy for Patent Owners against IPR (Inter Partes Review) Petitions in an overview of the ongoing Allergan “Tribal Immunity” Proceeding. In sum, Allergan transferred their patent portfolio to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York, paying them a lump sum and royalties in exchange for retaining an exclusive license for the patent. In doing so, the Tribe became the Patent Owner, availing them of protection from suit under the Eleventh  Amendment.[1] As explained by the Supreme Court, “As a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.”[2]. After the assignment, the Tribe filed a motion to dismiss based on their Tribal Immunity. Just last month, the Patent Trial and Appeal Board (PTAB) denied that motion and set forth an expedited schedule for oral argument on April 3, 2018. The Federal Circuit issued a stay of that proceeding, giving Allergan another opportunity to plead its case for the Tribe’s sovereign immunity.

The PTAB Decision

The PTAB panel primarily based its decision on two findings: 1). Tribal Immunity does not apply to the petition for IPR; and 2). Even if it does, the Tribe is not an indispensable party that the Proceeding could not continue without.

The Board relied on a few factors for the first finding, including an absence of statutory support for applying Tribal Immunity to administrative proceedings like the PTAB and the fact that the PTAB decision would be applied to the patent itself, not the Tribe as the patent holder.

Even if Tribal Immunity applied, the Board ruled that the proceeding would still continue because the Tribe is not an indispensable party. To come to this result, the Board conducted a thorough analysis of the sale to the Tribe and the alleged license back to Allergan. As explained in the decision, the involved parties/ characterization of an agreement as a license compared to a full assignment is not determinative, with precedent relying more heavily on the terms than the label given to it. According to the Board, Allergan’s exclusive right to practice the patent, coupled with the Tribe’s ‘illusory’ rights to enforce it, indicated that the agreement was an assignment and not a license. This in turn makes Allergan an owner and allows the proceeding to continue, as any of the Tribe’s interests could be fully represented by Allergan, tipping the scales in the indispensable party analysis.[3]

The Stay

After the PTAB decision, the Board sua sponte set forth an expedited schedule which would have brought a Final Written Decision by June.[4] Allergan filed an interlocutory appeal of the Board’s decision, requesting a stay of the IPR, which the Federal Circuit has granted. In the stay order, the Federal Circuit declared that “exclusive jurisdiction to resolve the threshold issue of whether these proceedings must be terminated vests in this court, and that the Board may not proceed until granted leave by this court.”[5]

The briefing schedule for the appeal is scheduled to be completed by May 18, 2018, including any amicus briefs, which are sure to be filed. Consequently, the IPR will not be heard anytime soon, and even upon the Federal Circuit’s ruling, the PTAB may not regain jurisdiction immediately. As the order explains, “The stay shall remain in effect until the day after oral argument in the appeals in June 2018.  The court will address whether the stay shall remain in effect or whether it will be lifted at that time based on further consideration of the merits of the appeals.”[6]

Implications

If the PTAB’s decision stands, it is unlikely that the Tribal Immunity defense will be a useful tool for Patent Owners in IPR proceedings. The PTAB ruled both against its application to IPR’s and established an alternate means to continue with the proceedings with the Tribe’s licensee, making the appeal an uphill battle.

Until the appeal is settled, anyone still seeking protection for their patents under Tribal Immunity will need to push the balance of their license agreement farther than Allergan and give the Tribe more than ‘mere royalties’ and an ‘illusory’ right to enforce so that 1). the licensee would not be determined the true owner and 2). the Tribe would not be deemed indispensable.[7]

The board’s decision struck another blow to sovereign immunity defenses, as just this past December the PTAB ruled that State Sovereignty could not be applied to dismiss an IPR proceeding when the Patent Owner has filed an infringement suit asserting the patent. In the Board’s view, the act of bringing suit is as a waiver of the Eleventh Amendment right that would otherwise apply to the proceeding.[8]

As we wait for the IPR to proceed again, you can check for updates at the PTAB’s online E2E tool, or at websites like PostGrant.com which allow for full-text searching and automatic update alerts.

[1] The Eleventh Amendment provides that “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S. Const. amend. XI.  See also Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation.

[2] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[3] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 at 39 (PTAB, February 23, 2018).

[4] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 132 at 4 (PTAB, February 23, 2018)

[5] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2 (Fed. Cir. March 28, 2018).

[6] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2-3 (Fed. Cir. March 28, 2018).

[7] See Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1351 (Fed. Cir. 2016) (“a financial interest . . . without more does not amount to a substantial right.”); see also Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007) (“[T]he fact that a patent owner has retained a right to a portion of the proceeds of the commercial exploitation of the patent, . . . does not necessarily defeat what would otherwise be a transfer of all substantial rights in the patent.”)

[8] Ericsson Inc. v. Telfonaktiebolaget Lm Ericsson, IPR2017-01186, Paper 14 at 4 (PTAB, December 19, 2017).

Federal Circuit Rules on Patent Term Adjustment (PTA) in PCT Cases

Maier & Maier

In Actelion Pharms., Inc. v. Matal, the USPTO granted a Patent Term Adjustment (PTA) of 40 days for Actelion’s patent relating to pyridine derivatives.  The patent at issue was a national stage application filed under the Patent Cooperation Treaty.  Actelion contended that it should have been entitled to either 41 days from the 30-month deadline for filing or 45 days from the application’s actual filing date.

When filing the application, Actelion did not mark the check box on the USPTO form to expressly request early commencement of the national stage examination.  However, Actelion did submit a statement in a Preliminary Amendment that “Applicant earnestly solicits early examination and allowance of these claims.”  The USPTO determined that this statement did not comply with 35 U.S.C. § 371(f), which requires an express request for early commencement.  The Federal Circuit affirmed the USPTO determination, indicating that it is possible to request early commencement without using the optional USPTO form, but that Actelion’s statement failed to expressly request early commencement, particularly since it failed to even referenced § 371(f).

In the alternative, Actelion argued that even if the PTA was calculated from the 30-month deadline, it should have resulted in 41 days rather than 40 days.  The 30-month deadline happened to fall on a federal holiday and therefore examination did not commence until the following day.  Actelion argued that the federal holiday should have been included in the PTA calculation from the 30-month deadline, which would have resulted in 41 days rather than 40 days.  The Federal Circuit agreed with the USPTO calculation of 40 days because PCT regulations prohibited national stage commencement on a federal holiday.  Therefore, the additional day was not “undue delay” caused by the PTO, which would warrant PTA.

The USPTO determination of 40 days was affirmed.  Based on this ruling, it is advisable to ensure that § 371(f) is expressly invoked or the appropriate box is checked when requesting to commence national stage examination at an earlier date.

Federal Circuit Extends §101 to Cover Graphical User Interfaces in Core Wireless v. LG

Maier & Maier

In Core Wireless Licensing S.A.R.L. v. LG Electronics, Inc., 2016-2684, 2017-1922 (Fed. Cir. Jan. 23, 2018), a panel of the U.S. Court of Appeals for the Federal Circuit (Moore, O’Malley, Wallach) upheld patent claims directed to a graphical user interface under 35 U.S.C. §101, concluding that the claims were not directed to a patent-ineligible abstract idea.

Core Wireless brought an action against LG in the Eastern District of Texas alleging infringement of U.S. Patent Nos. 8,713,476 and 8,434,020, having claims dealing with an application summary screen that is displayed while the one or more applications summarized are in an un-launched state. The District Court denied summary judgment based on 35 U.S.C. §101, and LG appealed.

The Federal Circuit began its analysis by determining that the claims of the two patents in question were directed to an “improved user interface,” a non-abstract idea, rather than the abstract idea of an index. Specifically, these claims were “directed to a particular manner of summarizing and presenting information in electronic devices.” For example, claim 1 required “an application summary that can be reached directly from the menu” and further limiting the application summary (such as having the application summary list a limited set of data with each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application) as well as a particular manner of accessing the summary window and certain other limitations.

The Court analogized the case to other cases in which a computer-implemented claim was found eligible, such as Enfish, LLC v. Microsoft Corp., Thales Visionix Inc. v. U.S., Visual Memory LLC v. NVIDIA Corp., and Finjan, Inc. v. Blue Coat Systems, Inc., specifically noting that the claims in each of these cases were found to improve a computer or technological system, and were thus not abstract. (Just like in many of these cases, the Court looked to the patent specifications in order to determine what aspects of a computer the claims were directed toward improving.)

Once the §101 matter was resolved, the Court also heard the issue of non-infringement. This turned, in large part, on the Court’s interpretation of the phrase “unlaunched state” in the claims, which LG had (unsuccessfully) argued in the District Court should refer to a situation in which the applications were “not running” rather than “not displayed.” LG argued that it would not infringe if the applications were required to be “not running.” The court (minus Judge Wallach, who dissented on this point) sided with the District Court, finding that the District Court correctly construed “unlaunched state” as “not displayed.”

Importantly, the claims in this case were considered to be an improvement to computer technology because they improved the ability of a user to use the computer. In order to use prior art systems, users had to “drill down through many layers to get to desired data or functionality [which] could seem slow, complex and difficult to learn, particularly to novice users,” while the claimed invention, by contrast, was much more user-friendly. This effectively adds “user-friendliness” or “usability” to the list of innovations which can be an improvement to computer technology, significantly expanding the list of patent-eligible subject matter.

It has also historically been a little unclear as to how graphical user interface designs can be protected by intellectual property rights. There is a circuit split between the Ninth Circuit and other circuits as to whether GUIs are copyrightable subject matter, and past Federal Circuit jurisprudence as to their patentability has come down on both sides of the line. However, the vast majority of cases (such as, for example, Intellectual Ventures I LLC v. Erie Indemnity Co., Intellectual Ventures I LLC v. Capital One Bank (USA), and Internet Patents Corp. v. Active Network, Inc.) have found GUIs to be ineligible, while the one case that upheld a GUI patent claim (Trading Technologies Int’l v. CQG Inc) was a non-precedential opinion that dealt with an extremely detailed claim. This case provides applicants with a clear model to follow for future applications on interface technology or any similar technology.

IPR Time-Bar Institution Decision Is Appealable

Maier & Maier

In Wi-Fi One, LLC v. Broadcom Corp., 15-1944 – 2018-01-08, the Federal Circuit reviewed whether an inter partes review (IPR) Institution Decision can be appealed based on a time-bar under 35 U.S.C. § 315(b).  Sitting en banc, the Federal Circuit ruled Institution Decisions made under 35 U.S.C. § 315(b) are appealable.

35 U.S.C. § 315(b) states “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

In 2010, the owner of the patents at issue, Ericsson, filed a complaint against three defendants in the Eastern District of Texas.  Broadcom was not a named defendant.  Ericsson prevailed on the infringement claims.  In 2013, Broadcom filed three separate petitions with the Patent Trial and Appeal Board (PTAB) for inter partes review (IPR) against the individual patents at issue.  Wi-Fi One, LLC acquired the patents at issue from Ericsson while the IPRs were pending.  Wi-Fi argued that Broadcom was time-barred from filing the IPRs because Broadcom was in privity with the defendants of the previous lawsuit filed more than 1 year prior.  Wi-Fi filed a motion with the PTAB seeking indemnity agreements, defense agreements, payments, and communications as evidence of such privity.  The PTAB denied Wi-Fi’s motion, instituted the IPR proceedings, and found the claims unpatentable.

Wi-Fi One appealed the Final Written Decisions to the Federal Circuit including arguments that the PTAB’s time-bar determination be overruled.  On appeal, the Federal Circuit affirmed the Decisions relying precedent from Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015), which ruled § 315(b) time-bar determinations are final and nonappealable under 35 USC § 314(d).

Despite this ruling, Wi-Fi again sought relief by petitioning for a rehearing en banc.  This petition was granted.

On January 8, 2018, the Federal Circuit, sitting en banc, ruled that PTAB institution decisions made based the statutory timing provisions of 35 U.S.C. § 315(b) of the America Invents Act are appealable.  In the majority Opinion, Judge Reyna emphasized the “strong presumption” for judicial review, noting “[i]n view of this strong presumption, we will abdicated judicial review only when Congress provides a ‘clear and convincing’ indication that it intends to prohibit review.” Wi-Fi One, LLC v. Broadcom Corp., 15-1944 – 2018-01-08 (citing Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, at 2140 (2016)).

35 U.S.C. § 314(d) states “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”  The en banc Federal Circuit determined the natural reading of “under this section” limits its reach to institution determinations made under § 314.  Since the time-bar provision is found in section 315(b) of the statute and not § 314, the en banc Federal Circuit ruled that 35 U.S.C. § 314(d) did not apply and consequently the institution decision was appealable.  This decision overruled the prior Federal Circuit holding in Achates.

Federal Circuit Opens the Door for IPR Amendments

Maier & Maier

In Aqua Products, Inc. v. Matal, No. 2015-1177 (Fed. Cir. Oct. 4, 2017), an en banc Federal Circuit determined that it was improper for the Patent Trial and Appeal Board (PTAB) to place the burden of establishing the patentability of mid-IPR claim amendments on the patent holder.  Instead, the ruling determined that the burden should be placed on the petitioner to prove any amended claims are unpatentable.
Previous panels of the Federal Circuit had held that, if the patent owner in an inter partes review proceeding (IPR) wanted to amend the claims of the patent, the patent owner was required to show that the amended claims would be patentable over the prior art.
The en banc Federal Circuit in Aqua Products instead held that the AIA’s statutory language in 35 USC §316(e), which places the burden of proving a proposition of unpatentability by a preponderance of the evidence onto the petitioner in an IPR case, would likewise extend to claim amendments. While the en banc court produced five different opinions, a majority of judges held that the statute that establishes the evidentiary standard for IPRs, 35 U.S.C. § 316(e), was ambiguous with regard to whether the burden of persuasion of establishing the unpatentability of substitute claims should be on the petitioner. As such, the court was required to reach step two of Chevron. From this, the court reached two legal conclusions: first, that the PTO has not adopted a rule that is entitled to deference that would place the burden of persuasion on the patent owner, and, second, that in the absence of such a rule entitled to deference, the PTO was not entitled to place that burden on the patent owner.
However, even though this decision is likely to result in many more patents being able to survive the inter partes review process in some form or another, it is unlikely to be a permanent solution. The en banc decision is narrow and makes clear that the Patent Office would have the ability to again place the burden of persuasion for claim amendments back on the patent owner. The Federal Circuit noted that, because a majority of the judges in the en banc proceeding only overturned the PTO’s present amendment practice because they believed that the statute was ambiguous with regard to amendments, if an official interpretation of the statute was made by the Director of the Patent and Trademark office, the court would be required to give deference to it under the Chevron standard. However, to do this, the USPTO would have to first go through proper notice and comment stages for such rule-making.
There are also certain downsides to filing claim amendments for the patent owner. Any amended claim will likely be subject to “intervening rights,” where the change in scope of the claim restricts its applicability to past or present infringement. Because many if not most patents in IPR proceedings will also be involved in concurrent district court litigation, if an IPR can be used to force the patent owner to make an amendment to the asserted claims, the litigation may not be able to continue.

Federal Circuit Clarifies How Venue Under TC Heartland Will Be Applied

Maier & Maier

In In re Cray Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017) the Federal Circuit issued a decision clarifying the Supreme Court’s ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). This Supreme Court case had rejected long-standing patent venue precedent, clarifying that, for the purposes of the patent venue statute, a domestic corporation “resides” only in its state of incorporation. As such, a patent plaintiff is restricted to suing a domestic corporate defendant in its state of incorporation, or in a judicial district where the defendant allegedly has committed acts of infringement and has a “regular and established place of business”.

In the district court decision below, Raytheon Co. v. Cray, Inc., No. 2:15-cv-01554-JRG, 2017 WL 2813896 (E.D. Tex. June 29, 2017), Judge Gilstrap of the Eastern District of Texas had outlined a four-factor test for whether the defendant had a “regular and established place of business” in a district, requiring consideration of the following four factors:

(1) The extent to which a defendant has a physical presence in the district, including but not limited to property, inventory, infrastructure, or people.

(2) The extent to which a defendant represents, internally or externally, that it has a presence in the district.

(3) The extent to which a defendant derives benefits from its presence in the district, including but not limited to sales revenue.

(4) The extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users, or entities within a district, including but not limited to through localized customer support, ongoing contractual relationships, or targeted marketing efforts.

Applying this test, Judge Gilstrap found that venue was proper over the defendant, Cray, in the Eastern District, based on the fact that two sales employees of Cray worked from their homes within the district.

The Federal Circuit somewhat unsurprisingly overturned this determination, holding that venue was improper and the four-factor test was “not sufficiently tethered to [the] statutory language” and thus “fail[ed] to inform each of the necessary requirements of the statute.” Instead, the Federal Circuit set forth its own venue factors under TC Heartland, requiring that each element of a three-prong test be met before venue would be proper. Specifically:

“(1) there must be a physical place in the district;” (that is, there must be some physical, geographical location within the district in which the business of the defendant is carried out)

“(2) it must be a regular and established place of business;” (that is, business must be conducted in more than a sporadic fashion) and

“(3) it must be the place of the defendant” (that is, the defendant corporation rather than a mere employee of the defendant must operate or exercise control over that location).

Applying this test, the Federal Circuit found that the factors were not met, and an employee working from home on their own does not sufficiently “establish or ratify” the place of business as being a place of business of the defendant corporation.

Federal Circuit Rules Trial Court Abused Discretion by Not Awarding Attorney Fees

Maier & Maier

In AdjustaCam v. Newegg, No. 2016-1882 (Fed. Cir. July 5, 2017), the Federal Circuit reversed the denial of attorney fees based on the Octane Fitness standard, determining that the trial court had abused its discretion by not awarding fees.

AdjustaCam (a subsidiary of NPE Acacia Research) had sued Newegg for infringement of U.S. Patent No. 5,855,343 (“the ’343 patent”), which issued in 1999 and is entitled “Camera Clip.” The Markman hearing interpreting the claims in this case had interpreted a limitation of the claims, “rotatably attached,” to mean that each of the camera and support frame would have to rotate around a single axis. Newegg’s allegedly infringing product made use of a ball-and-socket joint, and as such the interpretation necessarily excluded Newegg’s product. AdjustaCam continued to pursue the case.

Newegg moved to dismiss the case with prejudice on the grounds that AdjustaCam’s infringement allegations were objectively baseless, and also demanded attorney’s fees. The court denied the motion and Newegg appealed. While the appeal was pending, the Supreme Court decided Octane Fitness, which clarified the standard for obtaining fees. The Federal Circuit remanded the case in order for the trial court to determine whether it was an “exceptional case” under the new standard.

The trial court reassigned the case to a new judge, who determined that the case was not “exceptional.” The Federal Circuit reversed this, finding that the District Court abused its discretion by failing to evaluate whether the case was exceptional based on the totality of the circumstances. Specifically, the Federal Circuit found that the evidence submitted by AdjustaCam showed that its lawsuit was baseless, that AdjustaCam failed to advance any arguments as to why Newegg’s products could be considered to infringe the claims as interpreted by the Markman order, and that AdjustaCam litigated the case in an “unreasonable manner.” Specifically, AdjustaCam had made “repeated use of after-the-fact declarations,” served a new expert report on Newegg the day of that expert’s deposition, filed a supplemental declaration without disclosing it as new on appeal, and had a pattern of filing cases against multiple defendants in order to settle for less than the cost of litigation.