Federal Circuit Review | April 2017

| Irfan LateefDaniel Kiang

Patentee’s Unnecessarily Broad Prosecution Disclaimer Affirmed by Federal Circuit

In Technology Properties Limited LLC v. Huawei Technologies Co., Ltd., Appeal Nos. 2016-1306, -1307, -1309, -1310, -1311, the Federal Circuit vacated a portion of a district court’s claim construction because the district court erred in applying prosecution disclaimer to limit the scope of the claims.

The district court construed a claim limitation for an “oscillator.”  The claim was narrowly construed based on statements made by the patentee during prosecution to overcome two prior art references, Magar and Sheets.  The term “oscillator” was construed to have a “frequency [that] is not fixed” based on prosecution statements that distinguished Magar, and was construed to “not require a control signal” based on prosecution statements that distinguished Sheets.  In light of the narrow construction, the parties stipulated to non-infringement, and the patentee appealed.

The Federal Circuit agreed with the district court’s Magar-based application of prosecution disclaimer.  The patentee made clear and unmistakable statements throughout the prosecution history that the claimed oscillator was distinguishable over Magar’s fixed-frequency oscillator.  Therefore, the Federal Circuit affirmed the district court’s narrow construction of “oscillator” as having a frequency that is not fixed.  The Federal Circuit noted the patentee likely disclaimed more than was necessary to overcome the examiner’s rejection, but explained that the scope of what is surrendered by prosecution disclaimer is not limited to what is absolutely necessary to avoid a prior art reference. 

However, the Federal Circuit disagreed with the district court’s Sheets-based application of prosecution disclaimer.   The patentee made statements that the claimed oscillator was distinguishable over Sheets’ particular use of a control signal.  But these statements did not extend to any use of a control signal.  Therefore, the district court erred by holding that the patentee disclaimed any use of a control signal, and the Federal Circuit vacated the district court’s claim construction and remanded the case.



Federal Circuit Upholds District Court’s Admission of Prior Settlement Agreement as Evidence of Reasonable Royalty

In Prism Technologies LLC v. Sprint Spectrum L.P., Dba Sprint PCS, Appeal Nos. 2016-1456, 2016-1457, The Federal Circuit rejected Sprint’s challenges to the denial of its motion for a new trial.  The Federal Circuit also rejected Prism’s challenge to the denial of a motion for accounting and ongoing royalties.

Prism, the owner of two patents related to wireless telecommunications technologies, sued Sprint, AT&T, and a number of other telecom companies.  AT&T settled with Prism just before closing arguments at trial.  Before its own trial, Sprint moved to exclude the AT&T settlement agreement on the basis that the agreement was not comparable to a hypothetical license and that its admission would be unfairly prejudicial under FRE 403.  The district court denied the motion and admitted the AT&T settlement agreement.  A jury found that Sprint infringed both of Prism’s patents. 

Sprint appealed, inter alia, the admission of the AT&T settlement agreement.  It argued that the district court abused its discretion in declining to exclude the settlement agreement under FRE 403.  Prism, on the other hand, argued that the settlement agreement was properly admitted for its probative value on the amount of reasonable royalty damages.  The Federal Circuit explained that, in order to assess the probativeness of a prior settlement agreement, various aspects (e.g., timing, potential for enhanced damages, probability of losing on validity or infringement) needed to be considered.  In particular, the Federal Circuit noted that the AT&T agreement covered a number of patents at issue in the Sprint case, that Prism provided evidence attributing settlement amounts to each patent, and that the late timing of the settlement enhanced the reliability of the settlement amount and reduced the likelihood that cost-avoidance was the primary purpose for settlement.  Accordingly, the Federal Circuit held that the district court did not abuse its discretion in admitting the AT&T settlement agreement.



Federal Circuit Finds Patent Claims Directed to an Inertial Tracking System Patent Eligible Under Step One of Alice

In Thales Visionix Inc., v. United States, Appeal No. 2015-5150, the Federal Circuit found claims directed to an inertial tracking system patent eligible under step one of the Alice analysis because the claims sought to protect the application of physics to an unconventional configuration of inertial sensors

Thales claimed an inertial tracking system for tracking the motion of an object relative to a moving reference frame.  The invention disclosed a configuration in which the object’s inertial sensors calculate position relative to the frame of the moving platform itself, thereby requiring fewer measured inputs and reducing calculation error.  TVI sued the United States and asserted that the helmet-mounted display system in F-35 jets infringes its claims.  On a motion for judgment on the pleadings, the Court of Federal Claims found the patent claims invalid under Section 101.  Thales appealed.

The United States argued that the claims were directed to patent-ineligible subject matter under 35 U.S.C. 101 because they are (1) directed to the abstract idea of using laws of nature governing motion tracking two objects, and (2) provide no inventive concept beyond the abstract idea.  The Federal Circuit rejected those arguments.  The court found the claims at issue nearly indistinguishable from Diehr.  In Diehr, the rubber-curing method improvements were based on a well-known mathematical equation to reduce production errors.  Here, the claimed invention was also utilizing mathematical equations to reduce errors.  Considering the invention as a whole and noting multiple advantages of the claimed system, such as increased accuracy, simpler hardware, and easier installation, the Court found the claims were more than merely directed to an abstract idea.  Finding the mathematical equations to be only a consequence of the arrangement of the sensors and the unconventional choice of reference frame, the court found that the claims were seeking to protect the application of physics to the unconventional configuration of sensors as disclosed.



Supreme Court Eliminates Laches Defense For Patent Infringement

In SCA Hygiene Products v. First Quality Baby Products, No. 15-927, the Supreme Court held that laches is not a defense against a claim for damages brought within the six-year limitations period provided by § 286 of the Patent Act.

SCA sent First Quality a letter in 2003 alleging infringement of its patent.  First Quality responded with a communication alleging that SCA’s patent was invalid.  Communications between the parties ceased for nearly seven years.  In 2010, SCA sued First Quality for infringement.  The district court granted summary judgment in favor of First Quality based on laches and equitable estoppel.  The Federal Circuit panel held that SCA’s claims were barred by laches.  The Federal Circuit reheard the case en banc in light of the Supreme Court’s Petrella decision, and reaffirmed that SCA’s claims were barred by laches.

The Supreme Court applied its reasoning from the recent copyright case, Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. _ (2014), where the Court held that laches cannot defeat a damages claim brought within the three-year period prescribed by the Copyright Act’s statute of limitations.  Similar to the Copyright Act, section 286 of the Patent Act prescribes a six-year limitations period for recovering damages for patent infringement.  The Court determined that Congress enacted the six-year statute of limitations to directly address the issue of timeliness for patent infringement claims.  The Court reasoned that judges applying laches within the six-year limitations period would effectively override congressional judgement on timeliness for bringing suit.  The Court held that laches cannot be invoked as a defense against a claim for damages brought within the six-year limitations period specified in the Patent Act.

In dissent, J. Breyer focused on the same language from § 286 as the en banc Federal Circuit opinion.  Section 286 allows for “except[ions] provided by law,” which J. Breyer argued include unenforceability due to laches under § 282.