Federal Circuit Review | April 2015
No Recovery Of Lost Profits From Related Companies’ Activities
In WARSAW ORTHOPEDIC, INC. v. NUVASIVE, INC., Appeal Nos. 2013-1576, -1577, the Federal Circuit held that a company was not entitled to lost profits based on the activities of related companies.
Warsaw sued NuVasive for patent infringement. Warsaw argued that, while it did not itself practice the patented technologies, it should recover for three sources of income related to those technologies, including (1) revenue from the sale of certain products to a sister company, which the sister company packaged with patented products into kits; (2) royalties from the sales of other sister companies; and (3) inter-company “true-up” payments (post hoc transfers to ensure that Warsaw receives fair-market value). Warsaw characterized the three sources of incomes as lost profits. The district court sustained the jury’s findings of infringement and damages for past infringement. After trial, Warsaw filed a motion seeking supplemental damages. The district court denied the motion and set ongoing royalty rates for each patent.
The Federal Circuit affirmed the district court on the issues of invalidity and infringement. With respect to damages, the Federal Circuit concluded that, for any particular sale, a patentee is entitled to either a reasonable royalty or lost profits, but not both. Noting that Warsaw failed to prove either a functional relationship between its products and the patented technology, or a lack of an independent function of Warsaw’s products, the Federal Circuit held that the sales of Warsaw’s products were not convoyed sales and that that Warsaw could not recover on such sales as lost profits. The Federal Circuit also held that Warsaw was not entitled to lost profits based on the sales of its sister companies (which remitted money to Warsaw). The Federal Circuit confirmed that lost profits may only come from the lost sale that would have been made by the patentee itself. Similarly, the Federal Circuit held that the “true-up” payments were not recoverable as lost profits because they were derived from sales not made by the patentee.
The Federal Circuit noted Warsaw was still entitled to a reasonable royalty. Nevertheless, because the foundation for the jury’s reasonable royalty rate was unclear and included a lost profits component, the Federal Circuit remanded for a new trial on damages.
Look To Unclaimed Embodiments To Avoid Indefiniteness
In EIDOS DISPLAY, LLC v. AU OPTRONICS CORP., Appeal No. 2014-1254, the Federal Circuit held a claim term was not indefinite when the specification used a similar term to describe a similar but unclaimed embodiment, because the embodiment revealed how a person of ordinary skill in the art would understand the disputed term.
Eidos sued LCD manufacturers for patent infringement. After struggling with a disputed claim term during claim construction and on a motion for summary judgment of noninfringement, the district court ordered briefing on indefiniteness. The district court rejected the parties’ proposed constructions and granted the manufacturers’ motion for summary judgment of indefiniteness.
The Federal Circuit reversed and held the disputed term was not indefinite. The parties did not dispute there was a “well-established practice” regarding the term. Nothing in the patent indicated that a person of ordinary skill in the art would deviate from this practice, and the only use of the term in the specification was consistent with the well-established practice. Although the use was in the context of an unclaimed embodiment, the Federal Circuit held the description nevertheless informed the determination of how a person of ordinary skill in the art would understand the claimed limitation.
No Deference Due To District Court’s Construction When Intrinsic Record Is Clear
In ENZO BIOCHEM INC. v. APPLERA CORP., Appeal No. 2014-1321, the Federal Circuit held that a district court’s factual findings related to extrinsic evidence in a claim construction determination are not given deference on appeal when the claims can be construed based on the intrinsic record alone.
Enzo sued Applera for infringing a patent relating to detecting nucleic acids. The asserted claims recited a nucleic acid structure including groups A and B. In the structure, A “represents at least one component of a signaling moiety” and A and B are attached “through a linkage group that does not substantially interfere with . . . formation of the signaling moiety.” At issue was whether the signaling moiety must have more than one component or whether the signaling moiety may be A alone. After hearing expert testimony, the district court construed the claim language to mean that A is one or more parts of a signaling moiety, including, in some instances, the whole signaling moiety. The jury found that Applera infringed the asserted claims under this construction.
On appeal, the Federal Circuit declined to defer to the district court’s fact finding incident to claim construction because the intrinsic record alone could be used to construe the claims. The Federal Circuit first analyzed the claims’ grammar. To the Federal Circuit, the phrase “at least one component of” indicated the signaling moiety is a multi-component system. Moreover, because the claims state that A does not interfere with the formation of the signaling moiety , then A by itself cannot be the signaling moiety. The Federal Circuit next turned to the specification. The Federal Circuit noted A was described throughout the specification as forming a signaling moiety with other chemicals, never alone. Accordingly, the Federal Circuit concluded the claims do not cover embodiments where A alone is the signaling moiety, and reversed the judgment of infringement.
District Court’s Obviousness Judgment Affirmed Over Same Art Applied In PTO Reexamination
In SENJU PHARMACEUTICAL CO. v. LUPIN LTD., Appeal No. 2013-1630, the Federal Circuit affirmed a district court’s obviousness judgment, even though the PTO previously allowed the claims over the same art after reexamination.
Senju sued Apotex for patent infringement, and the claims were found invalid for obviousness. During litigation, Senju petitioned for reexamination of the patent and the PTO allowed one amended claim and five new claims over the references from the Apotex litigation. Senju then sued Lupin on the reexamined claims and the district court again found the claims invalid for obviousness over the Apotex references.
The Federal Circuit affirmed the obviousness judgment. The Federal Circuit determined that, while the district court may have applied the same references as the Apotex claims, the district court did not rely on the same analysis. Rather, the Federal Circuit held the district court properly analyzed the scope and content of the art, applied the art to the claims, and identified a motivation to combine in the art. Regarding Senju’s arguments of unexpected results relied on during reexamination, the Federal Circuit agreed it was not clear error for the district court to conclude the unexpected results evidence did not withstand scrutiny by Lupin’s experts and the district court.
Judge Newman dissented, stating the district court failed to give deference to the PTO’s finding of validity and unexpected results in the narrowed reexamined claims. She argued the majority used impermissible hindsight because the prior art taught away from the claimed concentrations. Judge Newman also argued various scientific references, the experimental record, and the success of the commercial embodiment all supported a conclusion the claimed subject matter would not have been obvious to a person of ordinary skill at the time of the invention.
Vitiation Does Not Foreclose Doctrine of Equivalents
In CADENCE PHARMACEUTICALS INC. v. EXELA PHARMSCI INC., Appeal No. 2014-1184, the Federal Circuit affirmed a judgment of infringement under the doctrine of equivalents, over arguments of vitiation.
The district court found that Exela infringed Cadence’s patent under the doctrine of equivalents (“DOE”). On appeal, Exela argued that the district court’s scope of equivalents would vitiate a limitation of the claim. The Federal Circuit nevertheless affirmed the infringement judgment and noted that vitiation is not an exception or threshold determination that forecloses DOE. Instead, the determination of DOE depends on a proper assessment of the language of the claimed limitation and the substantiality of whatever differences may exist in the accused structure. Exela also argued that the district court erred in finding infringement because the phrase “optionally,” used in one of the steps in the claims, actually indicates a mandatory step due to statements made in the prosecution history. But the Federal Circuit concluded that the arguments made in the prosecution history did not amount to a clear and unmistakable disavowal of the unambiguous recitation of “optionally.”
Disclosing But Not Actually Performing Embodiment In Prior Art Suffices To Anticipate
In KENNAMETAL, INC. v. INGERSOLL CUTTING TOOL CO., Appeal No. 2014-1350, the Federal Circuit affirmed the PTAB’s judgments of anticipation and obviousness.
Kennametal sued Ingersoll for infringing a patent on physical vapor deposition (PVD) coated cutting tools containing a ruthenium binder. Ingersoll successfully petitioned the PTO for inter partes reexamination of the patent. The PTAB found some of the claims anticipated by a prior art patent to Grab. The PTAB also found all of the claims to be obvious over Grab in view of additional prior art. Kennametal appealed, and the Federal Circuit affirmed.
Regarding anticipation, Kennametal argued that Grab’s disclosure allows an infinite number of options such that the claimed combination would not have been immediately apparent to a skilled artisan. The Federal Circuit determined Grab disclosed all the limitations of Kennametal’s claim, so the question was whether the number of categories and components in Grab is so large that the combination of ruthenium and PVD coatings would not be immediately apparent to one of ordinary skill in the art to establish anticipation. The Federal Circuit concluded a skilled artisan would immediately envisage the claimed combination in light of claim 5 of Grab, which narrowed the number of possible metals to five, one of which was ruthenium. The Federal Circuit also noted that Grab need not disclose “actual performance” of combining the ruthenium binder and PVD coatings to anticipate, as long as the suggestion in Grab enables one of skill in the art to make the combination.
On the issue of obviousness, Kennametal argued the combination of PVD-coating and ruthenium binders achieves a “surprising and unexpected” result. The Federal Circuit found this argument unavailing. The Federal Circuit reasoned that, because Grab discloses all limitations of Kennametal’s claim, it would have been obvious to a skilled artisan that the combination can be achieved with a reasonable expectation of success. “While references that anticipate an invention can, theoretically, still not make it obvious, that is the rare case.”
