Federal Circuit Review - July 2017
District Court Abused Discretion in Not Finding Case Exceptional
In Rothschild Connected Devices v. Guardian Protection Services, Appeal No. 2016-2521, the Federal Circuit held that a district court abused its discretion in determining that the case was not exceptional, where the plaintiff was willfully ignorant of the prior art and had engaged in a pattern of vexatious litigation to extract nuisance-value settlements.
Rothschild sued ADS for patent infringement. ADS emailed Rothschild alleging that the asserted patent was ineligible under § 101 and anticipated under § 102(a)(1). ADS next filed a motion for judgment on the pleadings raising its § 101 argument. ADS also sent Rothschild a Rule 11 Safe Harbor Notice and a copy of its proposed Rule 11(b) motion for sanctions, citing purportedly anticipatory prior art. Rothschild then moved to voluntarily dismiss, within the safe-harbor period. ADS opposed the motion to dismiss, and cross-moved for attorneys’ fees, alleging Rothschild’s suit was objectively unreasonable. The District Court granted Rothschild’s motion to dismiss, but denied ADS’s cross-motion for attorneys’ fees.
The Federal Circuit reversed the denial of attorney’s fees under § 285, finding that the district court abused its discretion in not finding the case to be exceptional. In particular, the district court failed to consider Rothschild’s willful ignorance of the prior art, evidenced in part by Rothschild’s affidavits stating that neither it nor its counsel conducted an analysis of the prior art cited in the cross-motion for attorneys’ fees, yet it maintained a good faith belief that the asserted patent was valid. There was also no evidence suggesting that Rothschild or its attorneys evaluated the defendant’s products or publicly available information prior to bringing suit. The Federal Circuit also stated that the district court misjudged Rothschild’s conduct in other litigation, stating that undisputed evidence of vexatious litigation against more than 50 other defendants warranted an affirmative exceptional-case finding.
Lastly, the district court erred by conflating Rule 11’s safe harbor provision with a § 285 attorneys’ fee award. Unreasonable conduct does not need to be independently sanctionable under Rule 11 to be exceptional under § 285.
Federal Circuit Holds That “Means” Did Not Invoke Means-Plus-Function Statute
In Skky, Inc. v. Mindgeek, s.a.r.l., Appeal No. 2016-2018, the Federal Circuit held that the use of the word “means” in the claim term “wireless device means” created a presumption that the term was a means-plus-function limitation invoking § 112 ¶ 6, but that presumption was overcome because the claim term recited sufficient structure.
MindGeek filed a petition for inter partes review of Skky’s patent. The challenged claims were directed to a method of transmitting multimedia files to a “wireless device means.” The Board found that “wireless device means” did not invoke § 112 ¶ 6 because the phrase was not associated with a function. Under this construction, the Board found the challenged claims invalid as obvious in view of two references. Skky appealed.
The Federal Circuit affirmed the Board’s finding. The Federal Circuit noted that it is not bound by the examiner’s view that the claim term invoked § 112 ¶ 6. Moreover, the Federal Circuit stated that determining whether a claim term invokes § 112 ¶ 6 does not turn on the mere presence of the word “means.” Instead, the determination turns on whether the claim term is understood by the skilled artisan to designate structure. Here, the term “wireless device” is used in common parlance to designate structure. Despite use of the term “means,” the phrase lacked any associated function. Thus, the presumption that the phrase was a means-plus-function limitation was overcome. Under this construction, the Federal Circuit upheld the Board’s determination of obviousness.
Supreme Court Issues First Decision On Patent Provisions of Biologics Price Competition and Innovation Act of 2009
In Sandoz Inc. v. Amgen Inc. et al., No. 15-1039, the Supreme Court held that: (1) the requirement that a biosimilar applicant provide application materials and manufacturing information to the reference drug manufacturer is not enforceable by injunction under federal law; and (2) the applicant’s required notice of commercial marketing may be made prior to FDA approval.
Sandoz applied to the FDA for approval of a drug that is biosimilar to Amgen’s product under the Biologics Price Competition and Innovation Act of 2009. In its notice, Sandoz refused to provide the application and manufacturing information required by 42 U.S.C. § 262(l)(2)(A). Sandoz also stated that it intended to begin marketing the product commercially immediately upon receipt of approval from the FDA (and at least 180 days from that notice). Amgen sued under § 262(l)(9)(C) and California unfair competition law, seeking an injunction requiring disclosure of the information, and requiring that the 180-day notice begin after FDA approval.
The Federal Circuit affirmed dismissal of Amgen’s state law claims and further held that federal law does not provide for this type of injunctive relief. The Federal Circuit held for Amgen that an applicant must provide notice of commercial marketing only after the FDA has approved the biosimilar.
The Supreme Court affirmed the Federal Circuit’s ruling that injunctive relief is not available under federal law, explaining that the declaratory remedies of § 262(l)(9)(C) are the exclusive federal remedies for a violation of § 262(l)(2)(A). However, the Supreme Court remanded to the Federal Circuit to consider whether an injunction could be available under state law based on a violation of § 262(l)(2)(A) being “unlawful” there.
The Supreme Court then reversed the Federal Circuit on the issue of notice timing, holding that the applicant’s notice of commercial marketing may be given prior to FDA licensure. In interpreting the language of § 262(l)(8)(A), the Court held that the term “licensed” referred back to the biosimilar which is to be commercially marketed and has no grammatical connection to the notice required of the applicant.
Federal Circuit Reverses ITC Indefiniteness Ruling
In One-E-Way, Inc. v. International Trade Commission, Appeal No. 2016-2105, the Federal Circuit reversed a summary determination of indefiniteness of the term “virtually free from interference.”
One-E-Way filed a complaint with the ITC against Sony and other respondents for infringement of two of its patents. Those patents related to wireless digital audio systems that provide users with private listening even when operated within a shared space. Each asserted claim contained the term “virtually free from interference.” At the International Trade Commission, respondents argued that the term did not appear in the asserted patents’ shared specification and is indefinite. The administrative law judge granted summary determination of indefiniteness, invalidating all asserted claims. The Commission affirmed and One-E-Way appealed.
The Federal Circuit reversed, agreeing with One-E-Way’s proposed construction that “virtually free from interference” here means that “eavesdropping cannot occur.” During the prosecution of a related parent application, the applicant explained that a prior art reference “does not teach, disclose, or suggest such a relationship where interference is virtually eliminated (e.g. where eavesdropping cannot occur)…” The Federal Circuit explained that the applicant’s statement was “entirely consistent with the specification” and provided a POSITA with guidance as to the term’s meaning. The ITC and respondents had argued that the statement is irrelevant because it was made in the context of claims that recited “free from interference” rather than “virtually free from interference.” The Federal Circuit disagreed, noting that the statement’s very language employs the term “virtually.” The Federal Circuit explained that the term “virtually” is a term of degree and although applicant did not provide a technical definition for that term, “[f]or the purpose of definiteness, the term is not required to have a technical measure of the amount of interference.” Because a POSITA, viewing the term in light of the specification and prosecution history, would be informed of the scope of the invention with reasonable certainty as required by the Supreme Court’s Nautilus standard, the term satisfies the definiteness requirement.
