Federal Circuit Review - July 2021

| Irfan LateefDaniel Kiang

July 2021 Federal Circuit Newsletter (Japanese)
July 2021 Federal Circuit Newsletter (Chinese)


District Court’s Pleading Standard Returns an Error Code in PS4 Battle

In Bot M8 LLC v. Sony Corporation Of America, Appeal No. 20-2218, the Federal Circuit held that the district court’s view that infringement allegations were not plausible because they tracked the claim language too closely presented an overly burdensome pleading standard.

Bot M8 LLC (“Bot M8”) asserted a series of patents related to gaming machines against Sony Corporation of America, Sony Corporation, and Sony Interactive Entertainment LLC (“Sony”) and their PS4 gaming console. The asserted patents included U.S. Patent Nos. 8,078,540 (“the ’540 patent”), 8,095,990 (“the ’990 patent”), 7,664,988 (“the ’988 patent”), and 8,112,670 (“the ’670 patent”).  At a case management conference, the district court suggested Bot M8 should file an amended complaint with specific factual allegations related to infringement.  Bot M8 agreed, and filed a first amendment complaint.  Sony moved to dismiss the amended complaint for failing to state a claim, and the district court granted Sony’s motion because, in the court’s view, the allegations tracked the claim language too closely without sufficiently pleading factual support.  The court denied Bot M8’s motion for leave to submit a second amended complaint.  Bot M8 appealed. 

On appeal, the Federal Circuit affirmed-in-part and reversed-in-part the district court’s dismissal of Bot M8’s amended complaint.  The Federal Circuit explained that a plaintiff cannot assert a plausible claim for infringement by reciting the claim elements and merely concluding that the accused product has those elements. Instead, there must be some factual allegations that articulate why it is plausible that the accused product infringes the patent claim.  Regarding the ’540 patent, the Federal Circuit agreed with the district court that Bot M8’s conflicting allegations rendered infringement of certain claim limitations impossible, and thus did not state a claim for infringement.  Likewise, for the ’990 patent the Federal Circuit affirmed dismissal because Bot M8’s allegations merely recited claim elements without sufficient supporting factual allegations.  The Federal Circuit, however, disagreed that Bot M8’s allegations for the ’988 and ’670 patents were so conclusory as to justify dismissal.  Instead, the Federal Circuit cautioned that Bot M8 need not prove its case at the pleading stage.  While recognizing Bot M8’s pleadings closely tracked the claim language, the Federal Circuit held the pleadings were supported by sufficient plausible factual allegations to survive a motion to dismiss.  The Federal Circuit also held the district court did not err by suggesting that Bot M8 file an amended complaint during the case management conference when no motion to dismiss was pending, because a court can dismiss an inadequate complaint on its own initiative.  The Federal Circuit also upheld the district court’s denial of Bot M8’s motion for leave to file a second amended complaint because Bot M8’s reasons for delay—that anti-hacking statutes restrained its earlier reverse engineering efforts—conflicted with Bot M8’s prior representation to the court that it had already “torn down” the accused product and was “happy to” include its reverse engineering results in its first amended complaint.  Because Bot M8 did not do so, the Federal Circuit agreed a second amended complaint would be untimely.



Federal Circuit Holds That Art Teaches Away From Its Own Disclosure

In Chemours Company Fc, LLC v. Daikin Industries, Ltd., Appeal No. 20-1289, the Federal Circuit held that a reference may teach away from modifying a particular embodiment to include features disclosed elsewhere in the same reference.

Daikin requested inter partes review of two of Chemours’ patents directed to insulating communication cables by pulling wires through melted polymers flowing at a flow rate. The PTAB found the challenged claims invalid as obvious, holding that it would have been obvious to modify an embodiment found in a prior art reference to use the claimed flow rate because the claimed flow rate was disclosed elsewhere in the same reference. 

On appeal, the Federal Circuit reversed, finding that the prior art reference taught away from using the claimed flow rate in the relevant embodiment. The Federal Circuit also held that the Board legally erred by requiring evidence of market share to prove commercial success of the patented invention. Instead, the Federal Circuit found that evidence of sales alone could be enough.  

Judge Dyk dissented in part, stating that the prior art did not sufficiently teach away from the claimed flow rate.



The PTAB’s Sua Sponte Claim Construction Was Procedurally Improper 

In Qualcomm Incorporated V. Intel Corporation, Appeal No. 20-1589,  the Federal Circuit held that a party should be given notice and an opportunity to respond before the PTAB sua sponte departs from an uncontested claim construction by omitting an agreed-upon claim feature whose presence in the prior art was a central dispute in the proceeding. 

Intel initiated six inter partes reviews of a Qualcomm patent related to increasing bandwidth and decreasing circuitry components.  In each proceeding the undisputed claim construction required a signal to increase user bandwidth.  Moreover, the International Trade Commission had previously adopted such a construction of the same claim term in a parallel investigation. During oral argument before the PTAB, one judge asked two questions of Intel related to the necessity of the agreed-upon construction, but the panel failed to ask Qualcomm any questions about the bandwidth requirement. The next day the PTAB ordered additional briefing on the construction of a different claim term yet gave no hint of considering an alternate construction concerning increased bandwidth. The PTAB then issued final written decisions holding the challenged claims obvious.  In doing so, the PTAB adopted a construction of the claims that omitted any requirement that the claimed signal increase bandwidth. 

The Federal Circuit vacated and remanded, holding that the PTAB failed to give Qualcomm adequate notice and opportunity to respond to the PTAB’s sua sponte elimination of an agreed-upon feature of the claims. Throughout the proceedings, Qualcomm argued that the prior art did not disclose the increased bandwidth requirement.  Given that this was an undisputed feature of the claims already adopted by a separate agency, the Federal Circuit observed that it was difficult to imagine either party anticipating that this agreed-upon matter of claim construction was a moving target.  Thus, it was unreasonable for the PTAB to eliminate the agreed-upon feature without providing Qualcomm notice and an opportunity to be heard on the issue.