Federal Circuit Review | April 2023
Who Bears the Burden of Proof for IPR Estoppel?
In Ironburg Inventions Ltd. v. Valve Corp., Appeal No. 21-2296, the Federal Circuit held that the patentee has the burden of proving that invalidity grounds not raised in a petition for inter partes review could reasonably have been raised.
Valve, accused of infringing Ironburg’s patent, asserted four grounds of invalidity before the District Court. Two of the four grounds were previously presented in Valve’s petition for IPR, which was instituted on other grounds but not instituted on the two grounds Valve later presented in the District Court. Valve did not previously assert the other two of the four grounds. The District Court held that Valve was estopped from asserting all four grounds of invalidity because each of the grounds was “raised or reasonably could have been raised” in the IPR, as stated in 35 U.S.C. § 315(e)(2). For the first two grounds of invalidity, the District Court relied on the recent Federal Circuit opinion in Cal. Inst. of Tech. v. Broadcom Ltd., 25 F.4th 976, 991 (Fed. Cir. 2022), which noted that issues asserted in a petition, though not instituted by the PTAB, were nevertheless “raised” in the IPR. For the second pair of grounds of invalidity, the District Court implicitly placed the burden on Valve to show that it could not have reasonably raised those issues in the petition. Specifically, the District Court found that Valve did not provide the requisite evidence to show that a skilled searcher would not have been reasonably expected to find the relevant pieces of prior art.
The Federal Circuit reversed and remanded with respect to the pair of grounds not previously asserted by Valve. The Federal Circuit held that the burden of proof falls on the patentee, as “the party asserting and seeking to benefit from the affirmative defense of IPR estoppel.” The Court noted that this is “consistent with the general practice that a party asserting an affirmative defense bears the burden to prove it.” Thus, a patentee like Ironburg bears the burden to prove that the underlying prior art that supports the invalidity grounds put forth by the patent challenger could have been reasonably raised during the IPR (e.g., because a skilled and diligent searcher could reasonably have been expected to discover the relevant prior art).
The Federal Circuit affirmed the District Court’s decision with respect to the pair of grounds Valve raised in its IPR (though those grounds were not instituted), relying on Cal. Inst. of Tech. The Federal Circuit also affirmed the District Court’s holdings regarding other challenged issues, including issues of indefiniteness, willful infringement, and damages.
In Bertini v. Apple Inc., Appeal No. 21-2301, the Federal Circuit held that tacking a mark for one good or service does not grant priority for every other good or service in the trademark application.
Apple filed a trademark application for the mark APPLE MUSIC for services, including the production and distribution of sound recordings and live musical performances. Musician Charlie Bertini opposed Apple’s application based on a likelihood of confusion with Bertini’s common law mark APPLE JAZZ, which Bertini had used in connection with festivals and concerts since 1985 and with distributing sound recordings since the 1990s. Apple began using the mark APPLE MUSIC in 2015 when it launched its music streaming service, but argued that it was entitled to an earlier 1968 priority date based on trademark rights it purchased from Apple Corps (The Beatles’ record label). Apple argued that it should be allowed to “tack” its use of APPLE MUSIC for live musical performance onto Apple Corps’ use of the mark APPLE for gramophone records to obtain an earlier priority date. The Board found that Apple had priority based on Apple Corps’ continuous use since as early as 1968 and dismissed Bertini’s opposition.
On appeal, the Federal Circuit held that tacking a mark for one good or service does not grant priority for every other good or service in the trademark application, and thus the Board erred by permitting Apple to claim absolute priority for all of the services listed in the application based on a showing of priority for only one service. The Federal Circuit also clarified that while the new and old goods or services do not need to be identical for tacking to apply, the new goods or services must be “within the normal evolution of the previous line of goods or services.” The Court noted that while cassettes and compact discs may be deemed as within the limited scope, no consumer would find Apple's live musical performances are within the normal product evolution of gramophone records. Thus, the Federal Circuit reversed the Board’s dismissal of Bertini’s opposition.
In Salazar v. At&T Mobility LLC, Appeal No. 21-2320, the Federal Circuit held that while the indefinite article “a” means “one or more” in open-ended claims, use of the term “said” indicates that the portion of the claim limitation is a reference back to the previously claimed term, and thus may require a single claim element to be capable of performing all the recited functionality.
Salazar sued AT&T for infringement of U.S. Patent No. 5,802,467, which describes technology for wired and wireless communications. The claims recite “a microprocessor for generating . . . , said microprocessor creating . . . , a plurality of parameter sets received by said microprocessor . . . , [and] said microprocessor generating . . . .” At claim construction, the district court construed the claim language to mean “one or more microprocessors, at least one of which is configured to perform the generating, creating, retrieving, and generating functions.” The district court reasoned that use of the term “said” required that “at least one microprocessor must satisfy all the functional (and relational) limitations.” Consequently, the jury found the accused products did not infringe the ‘467 patent.
On appeal, Salazar argued that the district court erred by interpreting the claim language as requiring a single microprocessor that could perform all of the later recited “generating,” “creating,” and “retrieving” functions.
The Federal Circuit determined that while “claim language that introduces a claim element using an indefinite article and further defines the element with subsequently recited functionality” may allow for more than a single instance of the claim element, use of “said” “may nonetheless require that a single instance of the element be capable of performing all the recited functionality.” The Federal Circuit agreed that “while the claim term ‘a microprocessor’ d[id] not require there be only one microprocessor, the subsequent limitations referring back to ‘said microprocessor’ require[d] that at least one microprocessor be capable of performing each of the claimed functions.” The Federal Circuit therefore affirmed the finding of non-infringement.
AT&T also appealed the district court’s denial of its motion for summary judgment on the issue of claim preclusion and the district court’s determination that the patent was not anticipated. The Federal Circuit did not reach the claim preclusion issue because it affirmed non-infringement. With respect to AT&T’s anticipation argument, the Federal Circuit held that AT&T waived this argument by failing to move for judgment as a matter of law under FRCP 50.
In Arbutus Biopharma Corporation v. Modernatx, Inc., Appeal No. 20-1183, the Federal Circuit held that Arbutus’ patent was anticipated by an earlier Arbutus patent that incorporated the same references to describe methods of producing stable nucleic acid lipid particles (SNALPs).
Moderna petitioned for IPR of Arbutus’ U.S. Patent No. 9,404,127. The ’127 Patent is directed to methods of making and administering SNALPs having non-lamellar morphology. The morphology of the SNALP depends on the (1) lipids used for making the formulations and (2) the process used to form the SNALP, both of which are described by references incorporated into the ’127 Patent. Moderna argued that the ’127 Patent was anticipated by Arbutus’ U.S. Patent No. 8,058,069. The Board determined that the ’069 patent explicitly disclosed most of the limitations of Claim 1 of the ’127 Patent, inherently disclosed the remaining limitation (the “Morphology Limitation”) of Claim 1, and disclosed the limitations of the dependent claims. Accordingly, the Board found all claims of the ’127 Patent anticipated by the ’069 patent. Arbutus appealed.
The Federal Circuit affirmed the Board’s decision. The Federal Circuit acknowledged that the ’069 Patent did not explicitly teach the Morphology Limitation. However, the Federal Circuit found that the ’127 and ’069 patents disclose the same five formulations with almost identical wording and rely on the same incorporated references (the ’031 and ’025 publications) to describe two processes for forming the SNALPs. Thus, the ’069 patent inherently disclosed the Morphology Limitation by disclosing formulations and processes that “would naturally result in a composition having the claimed morphological property.” Notably, the Federal Circuit found that the ’069 patent provided a “limited number” of formulations and processes that would need to be followed to arrive at a SNALP meeting the Morphological Limitation of Claim 1. Regarding the ’127 Patent’s dependent claims, the Federal Circuit agreed such claims were anticipated by the ’069 patent and the references it incorporates. Thus, the Federal Circuit affirmed the Board’s finding that the ’069 patent anticipated the ’127 Patent’s claims.
In Healthier Choices Management Corp. v. Philip Morris Usa, Inc., Appeal No. 22-1268, the Federal Circuit held that a plaintiff can sufficiently disavow statements contained in attachments to a complaint by making specific, targeted contentions in the complaint to contradict such statements.
Healthier Choices Management Corp. (“HCM”) sued Philip Morris, alleging that Philip Morris’ IQOS system, an electronic nicotine delivery system, infringed its patent for an electronic nicotine delivery device and method of partial combustion. The IQOS system is marketed as a “heat-not-burn” system, whereby tobacco is heated at a low enough temperature to avoid combustion. HCM alleged that the IQOS system does in fact initiate combustion.
HCM attached Philip Morris’ Modified Risk Tobacco Product Application (MRTPA) as an exhibit to its complaint. Philip Morris moved to dismiss, arguing that the MRTPA contradicted HCM’s infringement claims by demonstrating that the accused IQOS system did not initiate a combustion reaction. The district court granted Philip Morris’ motion, and HCM moved for leave to file an amended complaint. The district court denied HCM’s motion, finding that neither the original complaint nor the amended complaint plausibly alleged that the IQOS system initiated a combustion reaction. Thus, HCM had no claim for infringement. The district court also granted Philip Morris’ motion for attorneys’ fees. HCM appealed.
The Federal Circuit reversed the district court’s decision, vacated the award of attorneys’ fees, and remanded the case. The Federal Circuit acknowledged that if a complaint contains conclusory allegations contradicted by concrete statements in an exhibit, the statements in the exhibit control. However, HCM’s original complaint disavowed the statements contained in the MRTPA by making specific contentions contradicting the MRTPA’s claims. The Federal Circuit held that “no magic words” were required to disavow exhibits, and HCM’s detailed allegations, including discussions of Philip Morris’ testing process and the presence of combustion markers, were sufficient to contradict contrary statements in the MRTPA. The Court also held that HCM’s amended complaint presented an even stronger case, as all citations to the MRTPA were removed, the MRTPA was removed as an exhibit, and the amended complaint was supported by a declaration from HCM’s technical expert. By including specific statements disavowing the MRTPA, the Federal Circuit concluded that HCM’s original and amended complaints were sufficient to state a claim for patent infringement.
The Federal Circuit also advised the district court to conduct a Markman hearing and obtain briefing on the definition of “combustion” on remand, noting that such steps could resolve the issue of infringement on summary judgment.
In Sanderling Management Ltd. v. Snap Inc., Appeal No. 21-2173, the Federal Circuit held that the district court properly found that digital imaging processing method claims were patent ineligible under 35 U.S.C. §101.
Sanderling Management Ltd. (“Sanderling”) sued Snap Inc. in the Northern District of Illinois, asserting infringement of three patents that share a common specification. The patents each claim methods of using distribution rules to load digital image branding functions to users when certain conditions are met. Snap moved to dismiss, alleging the claims were invalid under 35 U.S.C. §101 for being directed to patent-ineligible subject matter. The case was subsequently transferred to the Central District of California, where the court granted Snap’s motion to dismiss. Sanderling appealed.
The Federal Circuit affirmed the district court’s decision that the asserted claims were patent ineligible. Regarding step one of the two-part Alice test, Sanderling analogized its claims to those in McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir. 2016), and argued that the District Court erred by reading the claims at too high of a level of abstraction. The Federal Circuit disagreed and distinguished McRO because the patents in McRO were not directed to an abstract idea, but provided “a combined order of specific rules that rendered information into a specific format.” The Federal Circuit explained that the “distribution rule” of the asserted patents “merely receives, matches, and then distributes the corresponding function based on the user’s location,” which is a much more generic set of steps than McRO’s specific claim language. Thus, the Federal Circuit affirmed the finding that the claims were directed to an abstract idea under step one of Alice. The Federal Circuit also found that the district court did not err by deciding Snap’s motion without claim construction because Sanderling did not propose constructions for the terms it wanted construed or explain how any such constructions would make a difference to the Alice analysis.
Regarding step two of the Alice test, the Federal Circuit held that the asserted claims’ “distribution rule” was not an inventive concept because it was the application of the abstract idea using common computer components. The Federal Circuit also rejected Sanderling’s argument that factual disputes should have precluded Snap’s motion to dismiss from being granted. The Federal Circuit found that Sanderling failed to timely identify any specific factual disputes. Further, the Federal Circuit found there was no evidence that the district court failed to presume the patents were valid, and noted that courts are not required to defer to the Patent Office’s eligibility determination because patent eligibility is an issue that is reviewed de novo.
Additionally, the Federal Circuit affirmed the district court’s denial of Sanderling’s motion to amend its complaint because the proposed amendment contained only conclusory allegations that would not have cured the original complaint’s deficiencies.
In Ucb, Inc. v. Actavis Laboratories Ut, Inc., Appeal No. 21-1924, the Federal Circuit held that the district court legally erred by applying an incorrect anticipation framework but correctly found that a patent claiming a ratio range was obvious over prior art disclosing overlapping range.
UCB sued Actavis for patent infringement after Actavis submitted an Abbreviated New Drug Application (ANDA) directed toward UCB’s drug Neupro®. The asserted patent was directed to a new version of Neupro® that provided longer shelf stability at room temperature than the original Neupro® formula, which was the subject of UCB’s earlier but unrelated “Muller” patents. Specifically, the asserted patent improved upon the original Neupro® formula by increasing the ratio of rotigotine to polyvinylpyrrolidone (PVP). However, the range of rotigotine-to-PVP ratios claimed in the asserted patent overlapped with those disclosed in the Muller patents. The district court found that the asserted claims were both anticipated and obvious in view of the range of ratios disclosed by the Muller patents. UCB appealed both findings.
Regarding anticipation, the Federal Circuit found legal error in the district court’s analysis. The Muller patents undisputedly disclosed a range of ratios overlapping with the claimed range. Thus, the Federal Circuit explained, the district court should have applied the traditional framework for analyzing overlapping ranges, which requires assessing whether the claimed range is critical to the operability of the claimed invention. Because the district court’s analysis relied on the “immediately envisage” line of cases instead of the traditional framework for overlapping ranges, the Federal Circuit found legal error.
Regarding obviousness, the Federal Circuit affirmed the district court’s findings. The Federal Circuit agreed that a presumption of obviousness applied because the Muller patents disclosed ranges of ratios overlapping with the claimed range. The Court also agreed that the Muller patents were usable prior art because they reflected the state of the art at the time of the asserted patent. The Federal Circuit further agreed that another reference did not teach away because it did not criticize, discredit, or otherwise dissuade a skilled artisan from investigating the claimed range of ratios.
The Federal Circuit also affirmed the district court’s findings of no unexpected results and weak evidence of commercial success. The Federal Circuit agreed that the finding of no unexpected results was supported by evidence that a skilled artisan would expect the claimed ratio range and the prior art’s range to provide drug stability in a similar way. The Court also emphasized that any difference in stability between the claimed range and the prior art range was one of degree (e.g., more stability), which was less persuasive than a difference in kind (e.g., a new property). The Federal Circuit also agreed there was weak evidence of commercial success because the prior art Muller patents operated as blocking patents that dissuaded competitors from developing the drug formulation claimed in the asserted patent.