Federal Circuit Review - February 2023

| Irfan LateefDaniel Kiang

February 2023 Federal Circuit Newsletter (Japanese)

February 2023 Federal Circuit Newsletter (Chinese)

Arthrex Again? Federal Circuit Says, “No More!”

In Cywee Group Ltd. v. Google LLC, Appeal No. 20-1565, the Federal Circuit held that, while the Appointments Clause requires that the USPTO Director have the power to review the USPTO’s patentability decisions, it does not guarantee procedural rights to litigants, such as the right to seek Director review of deadline extension decisions.

In June 2018, Google filed two petitions for IPR challenging certain claims of CyWee’s patents. The Board timely instituted IPR on all challenged claims for each petition. After institution, the Board extended the statutory one-year deadline for final written decisions by one month pursuant to 35 U.S.C. § 316(a)(11), due to joinder of parties. The Board ultimately determined that the challenged claims were unpatentable for obviousness. In March 2020, CyWee launched their first appeal to the Federal Circuit, challenging, among other things, the constitutionality of the appointment of the Board’s APJs under the Appointments Clause. The Federal Circuit rejected the initial Appointment Clause challenge as foreclosed by existing Federal Circuit precedent.

Eleven days after the Federal Circuit issued its mandate, the Supreme Court held that the APJ’s power to render patentability decisions unreviewable did violate the Appointments Clause in United States v. Arthrex, 141 S. Ct. 1970 (2021) (“Arthrex”). The Federal Circuit recalled its mandate, and CyWee requested rehearing with the Acting Director of the USPTO, the Commissioner for Patents. Once the Commissioner denied rehearing, CyWee appealed again.

CyWee argued that the Director must be able to perform review of the Board’s decisions within the statutory deadlines applicable to those decisions (three months for institution decisions, one year for final written decisions). The Federal Circuit rejected this argument, determining that the relevant statutes setting the deadlines were silent on the timing of further Director review. CyWee also argued that the Board lacked authority to extend the one-year deadline for final written decisions without providing a right to review by the Director. The court determined that the extension authority was properly delegated and noted that the Appointments Clause was not intended to guarantee procedural rights to litigants, like the right to seek rehearing from the Director.

Claim Construction Should Not Limit Claims to Disclosed Examples or Render Words Superfluous

In SSI Techs., LLC v. Dongguan Zhengyang Electronic Mechanical Ltd., Appeal No. 21-2345, the Federal Circuit held that the district court correctly construed the claim of one patent in view of the prosecution history but erred in construing a second patent by limiting the claimed “filter” to specification examples.

SSI filed suit against DZEM, alleging infringement of two patents. The patents describe sensors for determining the characteristics of fluid in a fuel tank or other container. DZEM asserted invalidity and tortious interference counterclaims. The district court granted DZEM’s motion for summary judgment of noninfringement and dismissed its invalidity counterclaims. The district court also granted summary judgment to SSI on DZEM’s tortious interference counterclaim.

For the ’153 patent, the district court relied on the prosecution history in construing “a dilution of the fluid is detected while the measured volume of the fluid decreases” to require that the measured fluid volume be considered in the claimed contaminant determination. For the ’038 patent, the district court construed “filter” to mean “a porous structure defining openings, and configured to remove impurities larger than said openings from a liquid or gas passing through the structure.” The district court also found that SSI forfeited an argument that DZEM infringed the ’038 patent under the doctrine of equivalents. SSI appealed these issues. DZEM cross-appealed on other issues.

Regarding the ’153 patent, the Federal Circuit affirmed the district court’s construction. The Federal Circuit agreed that the prosecution history showed an intent to capture an error-detection capability that required considering the measured fluid volume. The court further found that the claim language supported the district court’s construction because another construction would have rendered the word “measured” superfluous. Regarding the ’038 patent, the Federal Circuit rejected the construction of “filter” adopted by the district court because that construction improperly limited the claim to examples in the specification. The Federal Circuit adopted SSI’s construction and thus vacated and remanded all summary judgment rulings on the ’038 patent. The Federal Circuit also held that SSI had not forfeited its doctrine of equivalents argument for the ’038 patent because the parties addressed that issue in their summary judgment briefs, including with testimony from SSI’s expert.

Further, the Federal Circuit affirmed the district court’s dismissal of invalidity counterclaims for the ’153 patent because there was no apparent risk of future actions against DZEM. The Federal Circuit also affirmed the grant of summary judgment on the tortious interference counterclaim because it agreed that SSI’s infringement claims were not “objectively baseless.”

Inventor Penalized for Demonstration at the “Super Bowl” of Trade Shows

In Minerva Surgical Inc. v. Hologic Inc., Appeal No. 21-2246, the Federal Circuit held that demonstration of a working prototype at an industry trade show triggered a public use bar.

Minerva sued Hologic for patent infringement. Hologic moved for summary judgment that the asserted claims were invalid under the public use bar of pre-AIA 35 U.S.C. § 102(b). Hologic argued that Minerva demonstrated functional prototypes that included the patented technology at a trade show more than a year before filing for the patent. The district court granted the motion, finding that the invention was “in public use” and “ready for patenting” before the critical date.

On appeal, Minerva argued that its “mere display” of the prototypes did not rise to the level of public use. The Federal Circuit disagreed, pointing out the importance and public nature of the event, described by the inventor as “the Super Bowl of the industry.” The court also cited detailed feedback Minerva received from sophisticated attendees who were allowed to scrutinize the prototypes and see how they worked. Finally, the court noted that public use does not require close observation or physical handling by the public, so long as at least one member of the public recognizes and understands the invention.

The Federal Circuit also found the invention was ready for patenting because Minerva had reduced the invention to practice when it created prototypes embodying the claims that worked for the invention’s intended purpose. The court characterized Minerva’s later work to improve the design as mere refinements or fine tuning, which are not required for the invention to be ready for patenting. The fact that the prototypes were not ready for FDA approval was similarly dismissed by the court as not required.

A Leap of Good Faith: When Cries of “They Copied Us” Cannot Be Stopped

In Line-Netics, LLC v. Nu Tsai Capital LLC, Appeal No. 23-1146, the Federal Circuit held that courts cannot enjoin speech by patentholders to third parties alleging infringement where there is an objectively reasonable basis for the allegations.

Line-Netics sued Nu Tsai Capital (d.b.a. Holiday Bright Lights, “HBL”) for patent infringement. Line-Netics also sent notices to HBL’s customers, alleging, among other things, that HBL was infringing two Line-Netics patents. HBL filed state-law counterclaims, including for tortious interference and defamation, and moved to enjoin Line-Netics from sending such notices.

The district court granted a preliminary injunction forbidding Line-Netics from making statements suggesting HBL is a patent infringer. Because federal patent law and the First Amendment preempt “state-law liability for a patentholder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation,” bad faith was a prerequisite to this injunction. The district court found Line-Netics acted in bad faith because its allegations of infringement were “objectively baseless,” for a variety of reasons.

The Federal Circuit rejected each of the district court’s reasons for finding that the infringement allegations were “objectively baseless,” by identifying arguments indicating that the allegations were “at least reasonable.” Therefore, the Federal Circuit found that the district court abused its discretion by issuing the injunction.