Federal Circuit Review | March 2017
Federal Circuit Remands IPR Final Decision For Inadequate Obviousness Analysis, Sidesteps Issue of Proper Claim Construction Standard
In Personal Web Technologies, LLC v. Apple, Inc., Appeal No. 2016-1174, the Federal Circuit held that when making a determination of obviousness in an IPR, the PTAB must make findings, supported by evidence and explanation, that (1) the cited prior art discloses all of the elements of the challenged claims and (2) that a person of ordinary skill in the art (“POSA”) would have been motivated to combine the cited prior art with a reasonable expectation of success.
Apple petitioned for inter partes review of a Personal Web Technologies (“PWT”) patent directed towards naming files based on mathematical functions. The Board instituted review and held the claims unpatentable as obvious over Apple’s cited references.
At the Federal Circuit, PWT asserted that the Board had not adequately supported its conclusion that the claims were obvious, arguing that the Board had not supported its finding that the cited references disclosed all the elements of the claims or its finding that a POSA would have been motivated to combine the references with a reasonable expectation of success. The Federal Circuit agreed, holding that the Board’s decision had several flaws. First, the Board’s decision cited one reference as disclosing a certain element of the claims, whereas Apple’s petition relied solely on the other reference. This discrepancy was not addressed by the Board. In addition, the Board’s decision did not explain how a cited passage from a reference met a claim limitation. Finally, the Board found the combination of cited references “would have allowed for” a POSA to arrive at the claimed invention. The Federal Circuit explained that the mere possibility of combining prior art references does not establish obviousness—a motivation to combine and a reasonable expectation of success are necessary. Based on these inadequacies, the Federal Circuit vacated the Board’s obviousness determination and remanded for reconsideration.
The Federal Circuit also declined to decide whether the broadest-reasonable-interpretation (“BRI”) or the district court claim-construction standard should be applied in an IPR when the patent at issue expires after the Final Written Decision but while a rehearing request is pending before the Board. Instead, the Federal Circuit held that the Board’s claim construction was correct under either standard because the meaning of the claim language was plain from the face of the claims. The Federal Circuit pointed out that the new 18-month rule allowing a party to request a district court-type construction, 37 C.F.R. § 42.100(b), did not apply because the rule was not in effect for this IPR and, in any event, the time from filing the petition to expiration of the patent exceeded 18 months.
Federal Circuit Rejects Non-Practicing Entity’s Claim That Being Forced to Litigate in California Was Unfair
In Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, Appeal No. 2015-1919, the Federal Circuit held that to exercise specific personal jurisdiction, a court must find (1) sufficient minimum contacts between the party and the forum state, and (2) it is “reasonable and fair” to do so. In particular, the Federal Circuit found it was reasonable and fair to exercise jurisdiction over a party that sent notice letters into the forum state, visited the forum state to discuss its infringement contentions, and had previously litigated in the forum state.
Papst, a German non-practicing entity, sent several notice letters to Xilinx alleging patent infringement. After Xilinx failed to respond, Papst sent representatives to Xilinx’s headquarters in California to discuss its infringement contentions. No agreement was reached, and Xilinx filed a declaratory judgment action in the Northern District of California seeking a declaration of non-infringement and invalidity. The District Court dismissed the suit for lack of personal jurisdiction. Xilinx appealed.
Papst did not dispute that its actions, including sending notice letter to Xilinx and visiting Xilinx in California satisfied the minimum contacts requirement. Instead, Papst argued that exercise of personal jurisdiction was not “reasonable and fair.” It is presumptively reasonable to exercise jurisdiction where minimum contacts have been established. To defeat jurisdiction, a party must show a “compelling case” under Burger King, that jurisdiction is unreasonable. The five Burger King factors include: (1) the burden on the defendant, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental substantive social policies.
Papst focused its argument on the first factor, relying on Redwing’s holding that although warning letters satisfy the requirements of minimum contacts, such letters cannot satisfy the fairness prong. Redwing explained that to require a defendant to answer in a distant foreign forum when its only contacts were efforts to give proper notice of its patent rights placed an undue burden on the defendant. The Court rejected Papst’s argument, finding that the burden on the defendant was minimal. Papst is a non-practicing entity residing outside of the United States, and has done more than merely send a notice letter into California, including traveling to California to discuss infringement contentions and a licensing offer. Papst even chose to file seven patent infringement lawsuits in California in the past.
Accordingly, the Federal Circuit held that exercising specific personal jurisdiction over Papst in California was proper.
Covered Business Method Patents Must Include at Least One Claim Containing a Financial Activity Element
In Secure Axcess, LLC v. PNC Bank National Association, et al., Appeal No. 2016-1353, the Federal Circuit held that method claims do not fall under CBM review where the claims are only incidental to a financial activity. A CBM patent requires that the claim contains a financial activity element.
The Federal Circuit reversed the Board’s conclusion that the patent at issue is a CBM patent. The court held that the Board misinterpreted the statutory definition of a covered business method patent under AIA § 18(a)(1)(E) and improperly broadened the scope of the statute. The AIA defines a CBM patent as one which “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service . . . .” AIA § 18(d)(1). The Federal Circuit clarified that for a patent to fall within CBM review, it must include a claim that contains a financial activity. Specifically, at least one claim, when properly construed in light of the written description, must contain a finance-related activity. The Federal Circuit cited to Versata, 793 F.3d 1306 (Fed. Cir. 2015), Blue Calypso, 815 F.3d 1331 (Fed. Cir. 2016), and SightSound, 809 F.3d 1307 (Fed. Cir. 2015) as exemplary cases where the patents at issue were held to be within the CBM provision.
In this case, the claims were directed to “systems and methods for authenticating a web page.” The claims’ only connection to a financial activity was that the invention could be used, for example, on a commercial or bank website. Accordingly, the Federal Circuit held that the method and apparatus claimed by the patent were not subject to CBM review.
No Infringement Under 271(f)(1) for Supply of Single Component
In Life Technologies v. Promega, the Supreme Court held that the supply of a single component of a multicomponent invention for combination abroad does not give rise to liability under 35 U.S.C. § 271(f)(1) because the phrase “substantial portion” in that provision refers to a quantitative measurement, and a single component cannot constitute a “substantial portion” under the statute.
Life Technologies licensed from Promega rights to practice patent claims directed to kits for genetic testing in certain fields of use worldwide. Life Technologies manufactured one component of the kit, the Taq polymerase enzyme, in the United States, and shipped it to the United Kingdom. The Taq polymerase was then assembled with the four other components of the kit, which had been manufactured in the UK. When Life Technologies sold kits outside the licensed fields of use, Promega sued under §271(f)(1) of the Patent Act, which prohibits the supply from the United States of “all or a substantial portion of the components of a patented invention” for combination abroad. While a jury returned a verdict of infringement, the District Court entered judgment as a matter of law in favor of Life Technologies. The Federal Circuit reversed, holding that a single important component could constitute a “substantial portion” of the components of an invention under §271(f)(1), and found the Taq polymerase to be such a component. Life Technologies appealed, and the Supreme Court granted certiorari.
The Court found that the reference to a “substantial portion” in §271(f)(1) referred to a quantitative measurement rather than a qualitative one. The context of the statute points to a quantitative meaning of the term “substantial,” in part because the neighboring words “all” and “portion” convey a quantitative meaning. Additionally, a qualitative reading would render the modifying phrase “of the components” unnecessary. The Court further found that a single component could not constitute a “substantial portion” for the purpose of triggering §271(f)(1) liability. The Court contrasted the plural use of “components” in §271(f)(1) with §271(f)(2), which permits liability for overseas supply of “any component of a patented invention that is especially made or especially adapted for use in the invention” from the United States. Reading §271(f)(1) to cover a single component would “leave little room for §271(f)(2),” which refers in the singular to “any component.” The Court thus reversed and remanded to the Federal Circuit.
