There are numerous IP related review requests before the Supreme Court as its 2017-2018 term begins on October 2, 2017. Several petitions seeking review of IP issues have been filed with the Court. The Court will be hearing oral arguments in the upcoming term on the constitutionality of AIA trials in Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712. For more on the list, please click here.
On September 21, 2017, the Federal Circuit vacated the Eastern District of Texas court's denial of a motion to transfer holding that venue is proper under 28 USC 1400(b) only if all three requirements are satisfied--a physical place in the district, which is a regular and established place of business, and it's the place of the defendant. In re Cray Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017). According to the court, the "place" of business need not be a formal office or store but there must be a "physical, geographical location in the district from which the business of the defendant is carried out."
Raytheon, a Washington corporation, sued Cray for patent infringement in ED Texas. Cray filed a motion to transfer arguing that it did not "reside" in the district under TC Heartland and didn't have a "regular and established place of business" in the district as it had only two employees in the district and both worked remotely from their homes. The district court denied the motion concluding that the activities of Cray's sales executive were similar to the In re Cordis employees and therefore, Cray had a regular and established place of business in the district and venue was proper under 1400(b). Cray filed a writ of mandamus with the Federal Circuit.
On appeal, the panel vacated the district court's denial on the motion to transfer finding that the district court had misapplied the venue statute without considering the statutory language of 1400(b). Writing for the panel, Judge Lourie acknowledged that the "regular and established place of business" has been addressed only in In re Cordis in the context of a writ of mandamus. According to the court, "regular and established place of business" depends on the facts of the case and all three requirements--a physical place in the district, which is a regular and established place of business, and it's the place of the defendant--must be satisfied. While a formal office or store is not required, the term "place" means that there must be a physical, geographical location in the district from which the defendant carries out its business. The term "regular and established" refers to a stable and permanent location for a meaningful time period. An employee's home doesn't satisfy the requirement if the employee can move home out of the district without employer's approval. The place of business must be of the defendant, i.e., whether the defendant owns or leases the place, whether the defendant conditioned employment on employee's continued residence in the district, whether defendant is using it as a distribution center for storing inventory, whether defendant's literature, marketing or advertisements are stored in the location. Considering these factors, the Court concluded that Raytheon failed to prove that the home of Cray's sales executive was a regular place of business of Cray.
Order granting the writ of mandamus and directing transfer of the case from ED Texas to WD Wisconsin is available here.
On September 8, 2017, Allergan created a stir in the media when it announced that it had transferred all the patents for its eye drug Restasis to the Native American tribe Saint Regis Mohawk Tribe, which then granted Allergan back an exclusive license. As part of the deal, the tribe will get $13.75 million and potentially $15 million in annual royalties. The move by Allergan enables the tribe to raise sovereign immunity as a defense against IPR petitions filed against the Restasis patents. It also brings to focus the controversy surrounding the inter partes review (IPR) and the constitutionality of such IPRs. Although the Allergan-St. Regis deal was widely reported in the press, several parties have successfully used sovereign immunity as a shield against IPRs.
The Eleventh Amendment, as interpreted by the U.S. Supreme Court, grants immunity to the States against certain adjudicative proceedings brought against them by private parties. The defense of sovereign immunity has already been raised in cases where the patent owner is a state university. The PTAB upheld a defense of sovereign immunity asserted by the University of Florida and dismissed three IPR petitions filed by Covidien. Covidien LP v. Univ. of Florida Research Foundation Inc., IPR2016-01274, -01275, -01276 (PTAB Jan. 25, 2017). In its determination that sovereign immunity defense applies to IPRs, the Board relied on the Supreme Court's decision in Fed. Mar. Comm'n v. South Carolina State Ports Auth., 535 U.S. 743 (2002) and concluded that the University was an "arm of the State" under Manders v. Lee, 338 F.3d 1304 (11th Cir. 2003). Subsequently, a different PTAB panel reached the same conclusion and found that the University of Maryland could raise the sovereign immunity defense to the IPR proceeding even though it exclusively licensed the patents to a commercial entity. NeoChord, Inc. v. Univ. of Maryland, IPR2016-00208 (PTAB May 23, 2017).
USPTO released the PTAB statistics end of July 2017. The data reveals that a total of 7,306 petitions were filed under AIA and 92% of those petitions were IPRs. A total of 1,650 petitions were filed thus far this year and the majority of those petitions were in electrical/computer (60%), and mechanical and business methods (21%). Institution of the petitions was at an all time low of 63% with the highest rate of institution in the art area of mechanical and business methods (70%), closely followed by electrical/computer arts (69%). Fourteen percent (14%) of the petitions settled prior to institution and twenty-three percent (23%) after institution. In the 1,674 final written decisions, 65% of all instituted claims were found to be unpatentable.
Detailed report is available here.
The US Patent and Trademark Office released a testing version of the Citation List, as part of the Global Dossier Initiative, a service that provides a list of relevant citations in related applications that share a common priority claim. The Citation List can also be used to view all references cited in the patent family of an application.
On September 18, 2017, the PTAB designated an expanded panel's decision on follow-on petitions as informative. General Plastic Indus. Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB Sept. 6, 2017) (Paper 19). In this case, General Plastic filed a first set of five petitions seeking IPR of two patents and each of the petitions were denied. Petitioner filed follow-on petitions against the same patents and PTAB denied institution based on 35 USC 314(a). Petitioner sought rehearing arguing that the follow-on petitions aren't limited to one petition per challenged patent under 35 USC 311 or 314; follow-on petitions should be analyzed under 35 USC 325(d) instead of 314(a); and that the PTAB misapplied the Nvidia decision.
In Nvidia, the Board enumerated the following factors that it considers when exercising its discretion to denying institution of an IPR: (1) whether the same petitioner previously filed a petition directed to the same claims of the same patent; (2) whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it; (3) whether at the time of filing of the second petition the petitioner already received the patent owner's preliminary response to the first petition or received the Board's decision on whether to institute review in the first petition; (4) the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition; (5) whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent; (6) the finite resources of the Board; and (7) the requirement under 35 USC 316(a)(1) to issue a final determination not later than 1 year after the date on which the Director notices institution of review. Nvidia Corp. v. Samsung Elec. Co., IPR2016-00134 (PTAB May 4, 2016). Applying these factors, the follow-on petitions were denied.
In its request for rehearing, the Petitioner argued the following: (a) Board ignored the overarching purpose of Section 6 of AIA; (b) Section 325(d) recognizes possibility of subsequent petitions; (c) section 325(d) controls over the more general statutory section 314(a); (d) denial of first-filed petition shouldn't be fatal where follow-on petitions attempt to cure a substantive and material defect in the first-filed; (e) Nvidia doesn't include a factor addressing patent owner's resources and PTAB erred in considering it. In finding the Petitioner's arguments as not persuasive, the expanded panel upheld the denial of follow-on petitions finding that the multiple, staggered petition filings were an inefficient use of the IPR process and the Board's resources, that six of the seven Nvidia factors weighed against institution, and that Petitioner failed to explain why a reasonably diligent search couldn't have uncovered the newly applied prior art or whether there were any changed circumstances that reasonably justified its new prior art searches and associated filing of follow-on petitions.
On September 13, 2017, the Federal Circuit affirmed the decision of the federal district for the Northern District of California holding that equitable estoppel to compel arbitration is limited to narrow situations. Waymo LLC v. Uber Tech., Inc., et al., No. 2017-2130 (Fed. Cir. Sept. 13, 2017). Waymo alleged, among others, that defendants Uber, Ottomotto, and Otto Trucking violated trade secret laws by employing Levandowski. Defendants filed a motion to compel arbitration based on the grounds that Levandowski's employment agreements with Waymo contained arbitration clauses and that Waymo relied on these agreements to prove its claims against the defendants. Waymo denied any such reliance. In denying the motion to compel arbitration, the district court found that equitable estoppel does not apply here as Waymo didn't rely on the agreements. In affirming the district court's decision, the Federal Circuit reasoned that California precedence requires that equitable estoppel to compel arbitration be applied only when the issues of the complaint are intimately intertwined with the non-party agreement containing the arbitration clause.
Full text of the opinion is available here.
On September 11, 2017, Chief Judge Stark of the Delaware federal district court issued two decisions providing guidelines for addressing venue challenges in patent cases. Boston Sci. Corp. et al. v. Cook Grp. Inc. et al., No. 1:15-cv-00980 (D. Del.); Bristol-Myers Squibb Co. et al. v. Mylan Pharms., Inc., No. 17-379 (D. Del.).
Burden of Proof. Third Circuit law applies to burden of proof as it is a procedural, non-patent issue and accordingly, the moving party bears the burden of proof in a venue challenge.
Physical Presence. While no fixed space in the sense of a formal office or store is necessary, some physical presence is nevertheless required for a regular and established place of business. Litigation activity is a relevant consideration and frequent participation in Hatch-Waxman litigation creates a regular and established place of business.
Venue is Fact Intensive. Venue is a fact intensive inquiry and depends on the circumstances of each case.
TC Heartland an Intervening Change. Defendants are permitted to pursue venue challenges even if they did not object to venue in their pleadings or in the years before TC Heartland issued because TC Heartland effected an intervening change in law creating an exception to the waiver rule.
On September 7, 2017, the Federal Circuit, in a split decision, affirmed the district court's summary judgment of obviousness despite substantial and compelling evidence of objective indicia of non-obviousness. Intercontinental Great Brands LLC v. Kellogg N.Am. Co., No. 2015-2082, -2084 (Fed. Cir. Sept. 7, 2017). The Federal Circuit agreed with the district court's finding that significant copying, increased sales volume, customer and industry praise, and long-felt need were not enough to overcome the prima facie obviousness.
Kraft sued Kellogg claiming that Kellogg infringed its patent directed to a re-sealable food package that keeps cookies fresh. The district court determined that a person of ordinary skill in the art would have been motivated to combine the known elements of "frame" and "rigid re-sealable sushi tray" because the lack of a "convenient opening and reclosing arrangement" was a known problem for cookie packaging. The district court also acknowledged the substantial and compelling evidence of objective indicia of non-obviousness--Kraft's sales volume increase of 4% after new packaging, evidence of positive consumer feedback, survey results praising the invention, industry awards for innovative packaging technology, and Kellogg's intentional copying of its packaging. However, the district court granted summary judgment motion finding that the prima facie case of obviousness was too strong.
On appeal, the dispute was the procedure used to determine obviousness under KSR namely, that the district court considered only the first three factors when assessing the prima facie case and then moved on to the fourth factor to decide if secondary considerations would overcome the prima facie obviousness. The majority of the panel agreed with the district court's analysis stating that its analysis fulfills KSR's requirement that the approach to determining obviousness be expansive and flexible. Dissenting in part, Judge Reyna expressed his concern that if "such significant evidence does not make a difference in this case, it is hard to imagine a situation in which it would."
Full text of opinion is available here.
The District of Delaware is the second federal district court after the E.D. Texas to deny a motion for improper venue under the second prong of 28 USC 1400(b) when it denied Apple's MTD for improper venue. Prowire LLC v. Apple, Inc., 1-17-cv-00223 (D. Del. Aug. 9, 2017) (Order, Kearney, J., Dkt. 46). In this case, Apple argued that one retail store in the district is insufficient to establish a "permanent and continuous presence" that meets the "regular and established place of business" test. In rejecting Apple's position, Judge Kearney noted that Apple "sells the alleged infringing technology to consumers on a daily basis."
As various federal district courts try to grapple with the Supreme Court's decision in TC Heartland, we can expect patent owners to challenge motions to dismiss for improper venue by contending that defendant has a regular and established place of business within the district.
Disclaimer: The content in this blog is solely for informational purposes and does not constitute legal advice.