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Federal Circuit Review - June 2018

Wednesday, July 11, 2018
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A Complaint Identifying Infringing Products and the Patents Allegedly Infringed, Accompanied by Statements that the Products Meet All Elements of at Least One Claim of the Asserted Patents, May be Sufficient to Meet the Iqbal/Twombly Pleading Standard

 

In Disc Disease Solutions Inc. v. VGH Solutions, Inc., Appeal No. 2017-1483, the Federal Circuit held that the plaintiff’s complaint, which attached the plaintiff’s asserted patents, identified the accused products by name and with photos, and alleged that the accused products met each and every element of at least one claim of the asserted patents, was sufficient to survive a motion to dismiss under Iqbal/Twombly because, given the simplicity of the technology, the defendant was provided fair notice of infringement.

Disc Disease sued VGH for infringement of two patents directed to spinal brace technology.  The following day, amendments to the Federal Rules of Civil Procedure took effect, abrogating Rule 84 and Form 18.  VGH filed a motion to dismiss under 12(b)(2) and 12(b)(6), and the district court granted VGH’s motion to dismiss with prejudice.  The district court concluded that the abrogation of Rule 84 and Form 18 applied to Disc Disease’s complaint, and therefore the “Iqbal/Twombly” standard applied.  The district court held that Disc Disease’s complaint did not meet the Iqbal/Twombly standard because it merely alleged that certain VGH’s products “meet each and every element of at least one claim” of Disc Disease’s patents, and failed to explain how the products infringe. 

On appeal, Disc Disease argued that the district court improperly applied the Iqbal/Twombly pleading standard because Form 18 was in effect on the date the original complaint.  The Federal Circuit, however, reversed and remanded for different reasons.  The Federal Circuit instead held that Disc Disease’s allegations were sufficient under Iqbal/Twombly.  The Court reasoned that for at least a simple technology such as this, the complaint appropriately identified the three accused products—by name and by attaching photos of the product packaging as exhibits—and alleged that the accused products met “each and every element of at least one claim of the [asserted patents], either literally or equivalently.”  Such disclosures and allegations were sufficient to provide VGH fair notice of infringement of the asserted patents.

 


 

Foreign Corporations May Be Sued in Any District Where They Are Subject to Personal Jurisdiction

 

In In Re: HTC Corporation, Appeal No. 2018-130, the Federal Circuit held that the patent venue statute, 28 U.S.C. § 1400(b), does not apply to foreign corporations, which may be sued in any district where they are subject to personal jurisdiction.

HTC Corporation and its U.S. subsidiary HTC America, Inc. were sued for patent infringement in the District of Delaware.  HTC Corporation is a Taiwanese corporation with its principal place of business in Taiwan.  HTC America, Inc. is a Washington corporation with its principal place of business in Seattle, Washington.  HTC Corporation and HTC America filed a motion to dismiss for improper venue under Rule 12(b)(3) or, in the alternative, to transfer the case to the Western District of Washington under 28 U.S.C. §§ 1404(a) or 1406(a).  The district court found that venue in Delaware was improper as to HTC America, but was proper as to HTC Corporation.  The plaintiffs dismissed their suit against HTC America without prejudice, and HTC Corporation petitioned the Federal Circuit for a writ of mandamus directing the District of Delaware to vacate its order denying HTC Corporation’s motion to dismiss for improper venue.

A writ of mandamus is only issued when (1) the petitioner has no other adequate means to attain the relief desired; (2) the petitioner demonstrates a “clear and indisputable” right to the issuance of the writ; and (3) the issuing court is satisfied that the writ is appropriate under the circumstances.  Addressing the first element, the Federal Circuit stated that the petitioner had an adequate remedy to reverse the adverse venue ruling – an appeal from final judgment.  The court held that it is not enough to argue that hardship or even an unnecessary trial will result from delay.  The court distinguished motions under Rule 12(b)(3) and § 1406(a), which are based on venue being improper, from those under § 1404(a), which condition transfer on “the convenience of parties and witnesses, in the interest of justice.”  The court explained that the aggrieved party in the latter situation ordinarily does not have an adequate remedy by direct appeal after final judgment because a reversal on venue grounds would require the parties and witnesses to appear in a second trial, which would rarely promote the convenience of the parties and witnesses.

The Federal Circuit also addressed the second element of the mandamus standard, and found that Delaware was a proper venue for a suit against HTC Corporation.  The district court had found venue proper in Delaware under the “long-established rule” that suits against foreign corporations are outside the scope of special and general federal venue laws and may be brought in any judicial district where the defendant is subject to personal jurisdiction.  The Federal Circuit agreed, and explained that applying the patent venue statute to foreign corporations would create a venue gap for certain defendants where a federal court has jurisdiction, but no proper venue to exercise jurisdiction exists.  The court found that neither the patent venue statute, nor the 2011 Federal Courts Jurisdiction and Venue Clarification Act, showed a clear legislative intent to alter the established rule that venue laws do not protect alien defendants, or to create a venue gap for certain defendants.  Since HTC Corporation had other adequate means to attain the desired relief and venue in Delaware was proper, the Federal Circuit denied the petition for writ of mandamus.

 


 

Post-Grant-Review Petitioner Had Article III Standing to Appeal PTAB Decision

In Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, Inc., Appeal No. 2017-1487, the Federal Circuit held that a post-grant-review (PGR) petitioner had standing to appeal an unfavorable PTAB final written decision, where the petitioner intended to file an ANDA for the patented product as soon as possible and the patent owner filed a declaratory-judgment action seeking to terminate a contract between the parties early.

Altaire and Paragon entered an agreement whereby Paragon would pursue FDA approval for a drug developed and manufactured by Altaire.   Without approval or participation from Altaire, Paragon filed a drug patent application that eventually issued as the ’623 patent.  Altaire sued Paragon for breach of contract and Paragon counterclaimed for, among other things, a declaratory judgment giving Paragon the right to terminate the contract early.  Altaire petitioned the PTAB for post-grant review, arguing that the claims were obvious over certain drug lots that Altaire manufactured before the patent’s priority date. The PTAB instituted PGR but determined that Altaire failed to prove obviousness. In reaching this conclusion, the PTAB determined that Altaire failed to timely qualify its declarant as an expert, and the PTAB did not consider the declarations or Altaire’s test data submitted therewith. 

On appeal, the Federal Circuit first addressed Altaire’s standing to appeal the PTAB’s decision.  Under the parties’ agreement, Altaire could not manufacture a competing (infringing) product until the agreement was terminated. The Federal Circuit found that because Altaire intended to file an ANDA for the product once the parties’ agreement terminated, and because Paragon was actively seeking a declaratory judgment that it could terminate the agreement early, injury to Altaire was inevitable.  Altaire’s injury was compounded by the likelihood that it would be estopped from arguing that the patent was obvious on the same grounds it had argued in the PGR proceeding. The Federal Circuit held that Altaire had Article III standing to appeal the PTAB’s decision. The Federal Circuit then found that the PTAB abused its discretion by failing to consider the declarations and test data submitted by Altaire.  Critically, the regulation governing submission of technical test data (37 C.F.R. § 42.65(b)) does not require submission by an expert.

Judge Schall dissented on the standing issue.  He stated that standing requires that the appellant allege an injury that is actual and imminent, not conjectural and hypothetical. Because Altaire cannot infringe the patent until the agreement is terminated, the case lacked the requisite immediacy for standing. Judge Schall also stated that estoppel “does not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit.”

 


 

Federal Circuit Focuses on Location of Allegedly Infringing Acts, Rather than Contract Language, In Finding Personal Jurisdiction Over a Foreign Corporation



In M-I Drilling Fluids UK Ltd. v. Dynamic Air Ltda., Appeal No. 2016-1772, the Federal Circuit found specific personal jurisdiction over a foreign corporation proper when the foreign corporation allegedly committed acts that infringe a U.S. patent on a U.S.-flagged ship, regardless of whether the contract from which those acts arose specifies where the acts should take place. 

M-I Drilling Fluids UK Ltd. and M-I LLC (together, “M-I”) sued Dynamic Air Ltda. (DAL) for patent infringement in the District of Minnesota based on allegedly infringing acts committed on U.S.-flagged ships in international waters.  DAL is a Brazilian corporation with its principal place of business in Brazil.  DAL is a subsidiary of Dynamic Air Inc. (DAI), a Minnesota corporation with its principal place of business in Minnesota.  The allegedly infringing acts arose out of a contract for DAL to perform work for another Brazilian company, wherein the contract did not identify the ships on which DAL would be required to make installations.  DAL moved to dismiss, arguing that the court lacked specific personal jurisdiction over DAL under Federal Rule of Civil Procedure 4(k)(2).  The district court found that because the contract did not specify the location of the work being performed and that the choice of ship was due to unilateral activity of the other Brazilian company, DAL did not purposefully avail itself of the privilege of conducting activities within the U.S. and therefore dismissed the case for lack of specific personal jurisdiction.

The Federal Circuit found that the district court erroneously focused on the contract, rather than the allegedly infringing acts.  Because DAL installed allegedly infringing systems on U.S.-flagged ships and continued to maintain those systems, the Federal Circuit found that specific personal jurisdiction over DAL comported with due process and reversed the district court’s dismissal.  The Federal Circuit assumed for purposes of this appeal that U.S.-flagged ships constitute U.S. territory because DAL had assumed this fact in its motion in the district court.

 


 

For the Purposes of the Patent Venue Statute, a Corporation Resides Only in the Single Judicial District Where it Maintains a Principle Place of Business, or the Judicial District in Which its Registered Office is Located



In In Re: BigCommerce, Inc., Appeal No. 2018-122, the Federal Circuit held that a corporation incorporated in a state having multiple judicial districts “resides,” for purposes of the patent venue statute, only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.

Diem and Express Mobile each filed patent infringement suits against BigCommerce in the District Court for the Eastern District of Texas.  BigCommerce is incorporated in the State of Texas and lists its registered office as being located in Austin, Texas, where it is also headquartered.  Austin lies in the Western District of Texas.  It was undisputed that BigCommerce has no place of business in the Eastern District of Texas.

In light of the Supreme Court’s decision in TC Heartland, which reaffirmed that a domestic defendant corporation “resides” under the patent venue statute, 28 U.S.C. § 1400(b), only in its state of incorporation, BigCommerce moved to dismiss Diem’s case and transfer Express Mobile’s case, arguing that it resides only in the Western District of Texas.  In both cases, the district court concluded that venue in the Eastern District of Texas was proper, and explained that a domestic corporation incorporated in a state having multiple judicial districts “resides in each such judicial district for venue purposes.”

The Federal Circuit granted BigCommerce’s petitions for Writ of Mandamus and vacated the order denying the motion to dismiss in Diem’s case and the order denying the motion to transfer in Express Mobile’s case.  The Federal Circuit noted that different district courts have come to different conclusions about whether a corporation “resides” under § 1400(b) in every judicial district within its state of incorporation when the state has more than one judicial district.  The Federal Circuit held, however, that the express language of § 1400(b) indicates that Congress did not intend for residence to include all judicial districts.  Instead, a domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of  § 1400(b) only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.

 

 

 

Meet the Knobbe Martens Attorneys

Irfan Lateef brings a wide range of experiences to helping clients achieve their goals. He works tirelessly to provide the right result in litigation, negotiation, risk management,...
Daniel Kiang is an associate in the firm's Orange County office, with a focus on patent litigation.  Daniel earned his J.D. from the UCLA School of Law in 2015, where he was a...
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