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Federal Circuit Review - February 2022

| Irfan LateefDaniel Kiang

February 2022 Federal Circuit Newsletter (Japanese)

February 2022 Federal Circuit Newsletter (Chinese)

 

Ordered To Agree: Binding Settlement Agreement Provision Found Despite Absence of Singular, Executed Agreement

In Plasmacam, Inc. v. Cncelectronics, LLC Appeal No. 21-1689, the Federal Circuit held that an agreement on the meaning of a term in settlement negotiations may create a binding, enforceable agreement as to that term, despite the absence of a finalized settlement agreement as to all terms.

PlasmaCam sued CNCElectronics, LLC (“CNC”) for patent infringement. On December 20, 2019, the parties exchanged a series of emails before eventually agreeing to settle the case. The parties then exchanged specific drafts of the settlement agreement, primarily disputing the products to be covered by a covenant not to sue and the terms of the mutual release.  The parties eventually agreed to CNC’s definition of the covered products but could not agree on the terms of the mutual release.  PlasmaCam then moved to enforce the settlement agreement as outlined in the parties’ December 20, 2019 email exchange.  In its reply brief, PlasmaCam informed the court that the parties had reached agreement on the scope of the mutual release.  However, PlasmaCam’s reply brief also included PlasmaCam’s definition of covered products, and not CNC’s definition that the parties had previously agreed on.  The court ultimately enforced PlasmaCam’s definition of the covered products.  CNC appealed. 

On appeal, the Federal Circuit noted that the term to which the parties assented is a factual question reviewed for clear error.  The Federal Circuit then found clear error existed because there was mutual agreement on the definition of the covered products, even though there was no agreement on the mutual release term at that time. The Federal Circuit reversed and remanded to the district court to enter an order using CNC’s definition of the covered products. 

Judge Newman dissented, arguing that there could not be a piecemeal “agreement” to one provision in a settlement agreement, since this would run afoul of the settled contract principle of mutual assent.

 

Conclusory Statements About Prior Art Combinations Not Enough to Defeat Preliminary Injunction

In BLEPHEX, LLC v. MYCO INDUSTRIES, Inc. Appeal No. 21-1149, the Federal Circuit held that conclusory statements about how a skilled artisan would combine embodiments in a prior art reference are insufficient to defeat a preliminary injunction motion.

BlephEx filed suit against Myco for infringement of one claim of its patent related to treating blepharitis. The district court entered a preliminary injunction enjoining Myco from all domestic sales of its accused product. Myco appealed to the Federal Circuit, challenging the district court’s conclusion that Myco had failed to show a substantial question of validity and arguing that the preliminary injunction failed to preserve the status quo between the parties.

The Federal Circuit found no clear error in the district court’s determinations regarding anticipation and obviousness. Myco argued that a reference that disclosed the claim limitations in two separate embodiments may anticipate even if it lacks discussion of the actual combination so long as one skilled in the art would be able to implement the combination. The Federal Circuit rejected this argument, explaining that Myco agreed that the ordinary level of skill in the art was extremely high (a doctorate and several years of experience treating blepharitis), but that Myco only provided supposition about what a skilled artisan would do. The Federal Circuit determined that this was insufficient evidence to show that a skilled artisan would have combined the two embodiments.  Similarly, the Federal Circuit rejected Myco’s single-sentence obviousness argument—which the Federal Circuit noted was so sparse that Myco may have forfeited the argument—as Myco failed to present evidence showing what a skilled artisan would have been motivated to do.

As to Myco’s argument that the district court’s injunction failed to preserve the status quo, the Federal Circuit found that Myco was wrong in asserting that the status quo should be considered as a time before BlephEx’s patent was issued.  Instead, the proper time period for evaluating the status quo was when BlephEx’s patent was granted and could be enforced.

 

Claims Survive IPR Challenge Under Narrow Construction Because It Was the Broadest Reasonable Interpretation  

In Quanergy Systems, Inc. v. Velodyne Lidar Usa, Inc. Appeal No. 20-2070, the Federal Circuit held that, even under the broadest reasonable interpretation standard, a claim term’s narrowed construction to refer to a specific detection method was proper in view of its exclusive use in the written description as referring to the specific method as well as its foundational relationship to the claims.  

Quanergy filed two petitions for inter partes review challenging claims relating to a laser imaging detection and ranging (“lidar”) system. Velodyne marketed products incorporating time-of-flight (ToF) lidar systems that derive distance from the time it takes for light to return to a detector. In both petitions, Quanergy argued that the claims were obvious over prior art that derived distance from the location of the detection of reflected light.  Despite applying the broadest reasonable construction to the term “lidar,” the PTAB construed the term to mean ToF lidar and concluded that the challenged claims were not obvious over the prior art’s description of lidar that relied upon location of detection rather than time to detection.  Additionally, the PTAB found that objective indicia of nonobviousness outweighed any presumed showing of obviousness and emphasized a nexus between this evidence and Velodyne’s marketed products.  Quanergy appealed to the Federal Circuit, arguing, inter alia, that the PTAB erred in its claim construction and presumption of a nexus.

The Federal Circuit affirmed the PTAB’s decision. With respect to the PTAB’s construction of “lidar,” the Federal Circuit reasoned that it was proper for the PTAB to interpret this term as ToF lidar because the written description focused “exclusively” on pulsed ToF lidar and such a method was “foundational to the claimed invention.”  Furthermore, the Federal Circuit rejected the argument that this limited the term to a preferred embodiment because the written description introduced ToF lidar right from the start and the concept underlay the entire description. 

The Federal Circuit also held that substantial evidence supported the PTAB’s conclusion that the prior art did not disclose or suggest ToF lidar and concluded that substantial evidence supported the PTAB’s presumption of a nexus and “thorough” analysis of objective indicia of nonobviousness.  The Federal Circuit agreed with the PTAB that Velodyne’s products embodied the claimed invention, that a presumption of nexus was proper, and that Quanergy did not rebut this presumption with its “skeletal, undeveloped argument to the Board.”    

 

Federal Circuit Overrules Shaw and Broadens IPR Estoppel in District Court Proceedings 

California Institute of Technology v. Broadcom Inc. and Apple Inc.

Before Lourie, Linn, and Dyk (concurring/dissenting).  Appeal from the District Court for the Central District of California

Summary: IPR estoppel in district court proceedings applies to all grounds which reasonably could have been included in the petition; a two-tier damage award providing a higher royalty for the same device at a different points in the supply chain was not permitted in the absence of compelling evidence.

Caltech sued Broadcom and Apple, alleging that Broadcom’s wireless chips incorporated into Apple products infringed patents relating to wireless data transmission.  In co-pending proceedings, Broadcom and Apple filed multiple petitions for inter partes review (IPR), yet failed to demonstrate that the asserted claims would have been obvious.  Before the district court, Broadcom and Apple also argued that the asserted claims would have been obvious over new combinations of prior art not asserted in the IPR proceedings.  The district court granted summary judgment of no invalidity on prior art grounds for all patents, interpreting 35 U.S.C. § 315(e)(2) and its IPR estoppel provision as precluding Broadcom’s and Apple’s prior art arguments at trial because they reasonably could have been raised in their IPR petitions.  The jury found infringement of all three patents and the district court denied Apple and Broadcom’s JMOL and new trial motions.  With respect to damages, Caltech proposed a two-tier damage theory that sought a different royalty rate against Broadcom and Apple despite liability arising from the same accused technology in the same chips.  Broadcom and Apple appealed.      

The Federal Circuit affirmed the district court’s summary judgment findings of no invalidity based on IPR estoppel.  Relying on the Supreme Court’s decision in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), that it is the petition and not the institution decision that defines the scope of the IPR, the Federal Circuit overruled its prior holding in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), without en banc proceedings to clarify that “estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the petition.”  The Federal Circuit reasoned that under the current regime, extending the estoppel provision to include grounds not in the petition is the only plausible reading of “reasonably could have raised.”

Regarding damages and the two-tier model that Caltech presented, the Federal Circuit rejected Caltech’s argument that separate royalty rates for Broadcom and Apple regarding the same chips were proper because the chips were used at different levels of the supply chain.  The Federal Circuit reasoned that in the absence of compelling evidence, “a higher royalty is not available for the same device at a different point in the supply chain.”  The Federal Circuit further explained that there was no factual basis to conclude that Broadcom and Apple would have engaged in separate negotiations leading to vastly different royalty rates for the same chips.  Accordingly, the Federal Circuit vacated the jury’s damage award and remanded for a new trial on damages.  The Federal Circuit also, inter alia, affirmed the district court’s denial of JMOL concerning non-infringement with respect to two asserted patents, but vacated the jury verdict of infringement for a final patent and remanded for a new trial due to  the district court’s failure to properly instruct the jury regarding the construction of the claims. 

Judge Dyk disagreed with the majority’s conclusions regarding literal infringement, reasoning that expert testimony did not support infringement under the district court’s claim construction, and would have reversed the denial of JMOL for each of the patents at issue.

 

Preliminary Negotiation or Commercial Offer for Sale?

In Larry G. Junker v. Medical Components, Inc. Appeal No. 21-1649, the Federal Circuit held that a letter containing specific delivery conditions, risk allocations and payment terms may constitute a commercial offer for sale despite being sent in response to a “request for quotation.”

Larry Junker sued Medical Components, Inc. for infringement of a design patent related to a catheter sheath. The parties filed cross-motions for summary judgment as to the issue of whether a letter sent before the critical date of the patent was a commercial offer for sale. In granting Mr. Junker’s motion for summary judgement of no invalidity, the district court determined that the letter was not a definite offer based on the multiple uses of the term “quotation.” After a bench trial, the court found infringement and awarded Mr. Junker damages.

The Federal Circuit reversed the district court’s grant of summary judgment of no invalidity. While acknowledging that the term “quote” can support a finding that a communication is not a definite offer, the Federal Circuit held that the mere presence of the term is not dispositive. The terms of a communication must be considered in their entirety when determining if the communication constitutes an offer for sale or merely an invitation to negotiate. In this case, the Federal Circuit found that the letter constituted an offer for sale because it contained pricing, delivery condition, and risk allocation terms—all terms necessary for an offer. The Court also noted that the letter was addressed specifically to one recipient, signaling that it was not an unsolicited price quotation. The presence of the necessary terms for an offer outweighed that the letter used the word “quote” on multiple occasions, was missing some quantity and product terms, and was sent in response to a “request for quotation.”