Federal Circuit Review - June 2020
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Non-Infringement Need Not Be “Actually Litigated” To Shield Accused Products From Infringement Liability In Subsequent Actions
In In Re Personal Web Technologies LLC, Appeal No. 19-1918, the Federal Circuit ruled that the Kessler doctrine is not limited to cases involving a finding of non-infringement; it applies to cases that are dismissed with prejudice.
PersonalWeb Technologies LLC (“PersonalWeb”) sued dozens of Amazon’s customers alleging infringement of several related patents. Amazon intervened and sought declaratory judgment that PersonalWeb’s lawsuits against Amazon’s customers were precluded as a result of a prior lawsuit PersonalWeb brought against Amazon, which was dismissed with prejudice. The district court agreed with Amazon that PersonalWeb’s infringement actions against Amazon’s customers were barred as a result of the dismissal of the prior action. PersonalWeb appealed to the Federal Circuit.
On appeal, PersonalWeb challenged the district court’s decision on two grounds. First, PersonalWeb argued that claim preclusion does not apply to the actions against Amazon’s customers because the prior action involved a different feature of Amazon’s S3 system and, thus, constituted a different cause of action. The Federal Circuit noted, however, that the particular feature of Amazon’s S3 system in the customer cases was identified in the infringement contentions in the prior action. Further, every alleged act of infringement in the customer cases was based on the use of the same Amazon S3 product that was accused of infringement in the prior action. The Federal Circuit therefore rejected this argument.
Second, PersonalWeb argued that the with-prejudice dismissal of the prior action against Amazon did not constitute an adjudication of noninfringement and therefore is not sufficient to trigger the Kessler doctrine. The Federal Circuit explained that the Kessler doctrine “‘fills the gap’ left by claim and issue preclusion, by ‘allowing an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment in a patent action where circumstances justify that result.’” PersonalWeb argued that since the prior action was dismissed before there was any adjudication “no issues” were actually litigated and the Kessler doctrine does not apply. Since “no issues” were actually litigated in the prior action, PersonalWeb argued, Amazon is not an “adjudged non-infringer.” The Federal Circuit rejected PersonalWeb’s characterization of the Kessler doctrine and explained that issues of non-infringement or invalidity do not need to have been litigated in order for the Kessler doctrine to be properly invoked.
Having rejected PersonalWeb’s arguments on appeal, the Federal Circuit affirmed the district court’s dismissal of the customer cases.
No Specific Threat of Infringement Litigation Needed to Establish Standing for IPR Appeal
In Adidas AG v. Nike, Inc., Appeal No. 19-1787, the Federal Circuit ruled that a patent challenger can establish standing to appeal a final written decision in an IPR by showing that its past, present, or anticipated future activity would give rise to a possible infringement suit, even if the patentee has not specifically alleged infringement.
Adidas requested inter partes review of two Nike patents directed to methods of manufacturing footwear. The Board held that Adidas had not proven the challenged claims unpatentable. Adidas appealed.
Nike alleged that Adidas lacked standing to appeal, arguing that Adidas could not establish the requisite injury in fact because Nike had not sued or threatened to sue Adidas for infringing the challenged patents. The Federal Circuit disagreed.
The Federal Circuit found that (1) Nike had asserted one of the challenged patents against a third-party product similar to Adidas’ footwear, (2) Adidas and Nike are direct competitors, and (3) in the past Nike had accused Adidas of infringing one of its patents and expressed its intent to protect Nike’s rights against further infringement. Accordingly, the Federal Circuit held that Adidas had standing.
On the merits, the Federal Circuit found that the Board did not err in its obviousness analysis and thus affirmed the decisions below.
Preamble Found Limiting Where It Supplied Antecedent Basis For Other Claim Limitations
In Shoes By Firebug LLC v. Stride Rite Children’s Group, Appeal No. 19-1622, in similar claims of two related patents, one preamble was limiting because it supplied antecedent basis for a subsequent structural claim limitation, and another preamble that supplied no antecedent basis was not limiting.
Firebug sued Stride Rite for infringing two patents related to footwear illumination systems. In response, Stride Rite petitioned for inter partes review of all asserted claims. After instituting review, the Board held the challenged claims unpatentable as obvious. Firebug appealed, arguing that the Board erred by construing the preambles of the challenged independent claims as non-limiting. Specifically, Firebug asserted that the term “textile” in the preamble phrase “internally illuminated textile footwear” limited the claims and distinguished them from the prior art.
Addressing the first patent, the Federal Circuit noted that the body of the independent claim reintroduced “a footwear” immediately after the preamble and the claim recited a structurally complete invention without the preamble. Thus, the preamble was not limiting. In contrast, the independent claim of the second patent did not reintroduce “footwear” after the preamble and instead relied on the preamble phrase “textile footwear” for antecedent basis in a subsequent structural claim limitation. Thus, the preamble in the second patent was limiting.
Although the Board erred by construing the second preamble as non-limiting, the Federal Circuit deemed the error harmless because the Board found that the prior art also disclosed the use of “textile” footwear, and that finding was supported by substantial evidence. Thus, the Federal Circuit affirmed the Board’s decisions on both patents.
Federal Circuit Affirms Use of Common Sense for Obviousness Determination
In B/E Aerospace, Inc. v. C&D Zodiac, Inc., Appeal No. 19-1935, the Federal Circuit ruled that common sense was properly invoked in an obviousness determination because it was accompanied by reasoned analysis and supporting evidence.
C&D Zodiac filed petitions for inter partes review of patents owned by B/E Aerospace. The challenged claims recited space-saving modifications to the walls of aircraft enclosures (e.g., lavatories). The claims required (a) a first recess accommodating a seatback and (b) a second recess accommodating a seat support (e.g., rear seat leg). Zodiac argued that the challenged claims were obvious even though none of the asserted prior art references disclosed the second recess.
The Board found that the prior art taught the first recess, and skilled artisans would have added the second recess because it was an obvious application of a known technology. The Board also found that it would have been a matter of common sense to incorporate the second recess.
B/E appealed, arguing that the Board’s obviousness determination was improper because the asserted prior art references did not disclose the second recess. The Federal Circuit found that modifying the prior art to include the second recess would have been nothing more than a predictable application of known technology. A skilled artisan would have seen the benefit of the first recess and applied a variation of the first recess to create the second recess. The Federal Circuit added that the Board’s use of common sense was proper because it was accompanied by reasoned analysis and evidence showing that lower recesses were a well-known solution for providing space for seat supports.
