Federal Circuit Review - May 2021

| Irfan LateefDaniel Kiang

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May 2021 Federal Circuit Newsletter (Japanese)
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Court Grants Relief From Judgment After Witness Lies About the Bed of Its Own Making

In Cap Export, LLC v. Zinus, Inc., Appeal No. 20-2087, the Federal Circuit held that a judgment and injunction were properly set aside pursuant to FRCP 60(b)(3) when it was discovered that the patentee’s president and testifying technical expert lied about knowledge of prior art during his deposition and the defendant had no reason to suspect the fraud. 

Cap Export sought a declaratory judgment of invalidity and non-infringement for a patent owned by Zinus that was directed to an unassembled bedframe having parts stored within a compartment in the headboard.  Zinus counterclaimed, alleging infringement.  Cap Export deposed Zinus’s president, who was also serving as its testifying technical expert, and asked him if he had ever seen a bed that was shipped disassembled in one box (which the witness denied knowledge of) and whether he could think of any piece of furniture that was shipped disassembled with components that were contained within another component (to which the witness identified a cabinet with shelves).  Zinus ultimately succeeded in obtaining a motion for partial summary judgment of no invalidity, and Cap Export stipulated to infringement and a permanent injunction.  Thereafter, Zinus asserted the same patent against another company and Cap Export, which was monitoring the docket, discovered a prior-art invoice signed by Zinus’s president for a bed whose components were packed inside a zippered compartment in the headboard.   Cap Export moved to vacate the final judgment and injunction on grounds of “fraud…, misrepresentation, or misconduct by an opposing party” under FRCP 60(b)(3).  The district court granted the motion and Zinus appealed. 

The Federal Circuit affirmed.  Because this was a procedural issue, the Federal Circuit analyzed the decision under Ninth Circuit precedent, which required that the fraud prevent the losing party from fully and fairly presenting its defense and “not be discoverable by due diligence before or during the proceedings.”  After noting that the Ninth Circuit’s requirement of diligence was at odds with the plain language of the rule, the Federal Circuit determined that due diligence in discovering fraud does not require the losing party to investigate the fraud unless there is a reason to suspect fraud.  It then determined that there was no reason for Cap Export to suspect the fraud under the circumstances, relying on the district court’s finding that the witness had made an affirmative misrepresentation concerning his knowledge of “highly material prior art” and had offered a “wholly implausible” explanation for his deposition testimony.  Thus, the district court did not abuse its discretion in granting the motion to vacate. 


Free Stream Gets Caught in the Section 101 Sandbox

In Free Stream Media Corp. v. Alphonso Inc., Appeal No. 19-1506, the Federal Circuit held that patent claims were directed to an abstract idea where the claims failed to recite any structure or concrete actions for achieving the claimed advance and the claimed advance did not the improve the operability of computing devices.  

Free Stream Media Corp. sued Alphonso Inc. for patent infringement.  Alphonso filed a motion to dismiss, arguing that certain asserted claims were patent ineligible under § 101 because they were directed to the abstract idea of tailored advertising.  Free Stream disagreed, characterizing the claims as directed to a specific improvement, namely, delivering relevant content (e.g., targeted advertising) from one device to a second device through a “security sandbox,” a security mechanism constraining the actions that applications on a device may take.  The district court rejected Alphonso’s argument and denied its motion to dismiss, finding at step one of the Alice test that the asserted claims were not directed to an abstract idea.  Free Stream appealed certain other issues to the Federal Circuit and Alphonso cross-appealed the denial of its motion to dismiss.

The Federal Circuit reversed the district court’s denial of Alphonso’s motion to dismiss and held the claims patent-ineligible.  At step one of the Alice test, the Federal Circuit held that the claims were directed to an abstract idea.  The Federal Circuit provided two rationales for this.  First, it found that the claims recited a functional result (i.e., passing relevant information through the security sandbox) amounting to a technological improvement in the abstract without reciting any concrete structures or actions that would achieve the functional result.  Second, the Federal Circuit found that Free Stream had not explained how its alleged claimed advance made any improvement to computer technology beyond providing a user with targeted content using generic processes and machinery.  In the Federal Circuit’s view, the alleged technological advance merely used a computer as a tool to achieve the abstract idea of providing targeted advertising to a mobile device user.  At step two of the Alice test, the Federal Circuit held that the asserted claims failed to recite an inventive concept.  The Federal Circuit found that the claims simply recited the use of generic features and routine functions to implement the underlying idea of bypassing a security sandbox and providing targeted content to a client device.  


Repeated and Specific Litigation Threats Constituted Sufficient Minimum Contacts

In Trimble Inc. v. Perdiemco LLC, Appeal No.19-2164, the Federal Circuit held that repeated email, phone and letter communications threatening patent-infringement litigation and negotiating a potential licensing arrangement with a company in the forum state were sufficient for personal jurisdiction. 

PerDiemCo accused Trimble of infringing 11 patents relating to electronic logging devices and geofencing.  PerDiemCo had only a single employee, owner Robert Babayi, who operated the business out of Washington, D.C.  PerDiemCo also rented office space in Marshall, Texas.  However, Babayi has never visited the Texas location.  PerDiemCo sent various letters and other communications to Trimble, a company headquartered in California, regarding claims of patent infringement and a potential licensing arrangement. 

After three months of communications, Trimble sought a declaratory judgment of non-infringement in the Northern District of California.  The Northern District of California dismissed the action based on lack of personal jurisdiction over PerDiemCo.  In particular, the district court relied on the Federal Circuit’s decision in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc.  In Red Wing, the Federal Circuit stated that “[a] patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement.”  Trimble appealed.

Federal Circuit distinguished the Red Wing case because “PerDiemCo’s actions went far beyond ‘solely . . . informing a party who happens to be located [in California] of suspected infringement.’”  PerDiemCo “amplified its threats of infringement as the communications continued, asserting more patents and accusing more of Trimble and ISE’s products of infringement,” including going so far as to identify counsel retained for the infringement suit and informing Trimble of its intended litigation venue.  Additionally, the court walked through several decisions subsequent to Red Wing that clarified its scope and brought consistency to personal-jurisdiction determinations in the context of patent litigation.  The Federal Circuit stated that Red Wing does not stand for the proposition that patent enforcement letters can never provide the basis for jurisdiction in a declaratory judgment action. 

The Federal Circuit held that the noninfringement action related to PerDiemCo’s three-month-long period of contacts with California “easily satisfied” the minimum contacts or purposeful availment requirement.  The court reversed the district court’s order and remanded the case for further proceedings. 


Choose Your Words Carefully: Inventors Are masters of Their claims, and the Words They Use to Describe and Claim Their Invention Control

In Bio-Rad Laboratories, Inc. v. Itc, Appeal No. 20-1475, the Federal Circuit held that patentees cannot escape the bounds of their claims by promoting oversimplified characterizations of those claims. 

Bio-Rad brought an ITC action against 10X Genomics over the importation of certain microfluidic chips.  The ITC found that some 10X products infringed Bio-Rad asserted patents, and both parties appealed.  Bio-Rad argued on appeal that, because the structural limitations recited in its claims were all included in 10X’s products, the ITC should have found infringement of all asserted patents.  

The Federal Circuit affirmed the ITC after finding that Bio-Rad’s structural limitations argument was premised on rewriting the claims in an oversimplified form and removing all limitations that differentiate the recited structures from each other.  The Federal Circuit stated that the inventors chose to characterize the invention based on its materials contained in the wells, channels and other recited structures, not the structures themselves, and that Bio-Rad could not escape that choice by pointing to the general proposition of law that “apparatus claims cover what a device is, not what a device does.”  The Federal Circuit noted that it would be improper to disregard almost all of the words of the claim simply because the claim limitations are structural.