Troutman Sanders Federal Circuit Review – October 3, 2014

By Troutman Sanders LLP

Oct 6, 2014

Each week, Troutman Sanders’ Federal Circuit review summarizes the Federal Circuit precedential patent opinions from the prior week.

This week:

Prior Art is “Analogous” When It Is Reasonably Pertinent To The Inventor’s Particular Problem
Reexamination Did Not Toll Six-Year Laches Delay, But Equitable Estoppel Was Not Provided
Grant of Litigation Stay Was Proper Despite Collateral Attack On The PTO’s Authority To Initiate The Related Post Grant Review

Prior Art is “Analogous” When It Is Reasonably Pertinent To The Inventor’s Particular Problem.

Scientific Plastic Products, Inc., v. Biotage Ab, No. 2013-1219, 2013-1220, 2013-1221, 2014 U.S. App. LEXIS 17461 (Fed. Cir. September 10, 2014) (Newman, J.). Click Here for a copy of the opinion.

Scientific Plastic sued Biotage for infringing three patents relating to a resealable cartridge for low pressure liquid chromatography (LPLC). Biotage requested inter partes reexamination and the litigation was stayed. The Patent Office cancelled all of the claims of all three patents as obvious and unpatentable, and the Federal Circuit affirmed. The primary issue on reexamination concerned the obviousness of combining the LPLC cartridge shown in the Yamada reference with the pressure-resistant caps of King or Strassheimer, deemed “analogous art” by the patent examiner.

The criteria for determining whether prior art is analogous may be summarized as “(1) whether the art is from the same field of endeavor, regardless of the problem addressed, and (2) if the reference is not within the field of the inventor’s endeavor, whether the reference still is reasonably pertinent to the particular problem with which the inventor is involved.” Slip Op. at 6 (quoting In re Clay, 966 F.2d 656, 658– 59 (Fed. Cir. 1992)). The Patent Office and the Court agreed that the central purpose of the invention was to provide easy access to the contents of an LPLC cartridge without destroying its ability to be sealed and function under LPLC pressures. In these circumstances, it would have been reasonable to look to sealing arrangements for other pressurized systems, i.e. those of King or Strassheimer, even though these references are not within the LPLC field. The inventor’s reasoning in solving the LPLC leakage problem was not used as improper hindsight, because this problem was known, and motivated looking further afield, without needing to use insights from the inventor. The PTO’s obviousness decision was affirmed.

Reexamination Did Not Toll Six-Year Laches Delay, But Equitable Estoppel Was Not Proved.

SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, No. 2013-1564, 2014 U.S. App. LEXIS 17830 (Fed. Cir. Sept. 17, 2014) (Hughes, J.). Click Here for a copy of the opinion.

SCA sued First Quality for infringing U.S. Patent No. 6,375,646, which relates to adult incontinence products. The district court held that SCA’s suit was barred by laches and inequitable estoppel. The Federal Circuit affirmed that SCA delayed its lawsuit for more than six-years, which warranted dismissal for laches. However, given the limited interactions between the parties, the district court’s summary judgment as to equitable estoppel was reversed and remanded.

In October 2003, SCA sent a letter to First Quality that expressly put First Quality on notice as to its possible infringement of the ‘646 patent. First Quality responded by saying it did not infringe an invalid patent, and identified prior art that it said, “reveals the same diaper construction claimed by the ‘646 Patent.” Slip Op. at 3. In July 2004, SCA sought reexamination of the ‘646 patent. The Patent Office confirmed the patentability of the ‘646 claims in March 2007. SCA ultimately brought suit against First Quality in August 2010, three years after the reexamination, and more than six years after its 2003 infringement notice. According to SCA, it took three years after the reexamination to implement new management structures, evaluate outside counsel, and investigate potentially infringing products on the market.

Laches is a discretionary equitable defense to patent infringement that may arise only when an accused infringer proves by a preponderance of evidence that a patentee (1) unreasonably and inexcusably delayed filing an infringement suit (2) to the material prejudice of the accused infringer. Delays exceeding six years are presumed to be unreasonable, inexcusable, and prejudicial. These presumptions can be rebutted by producing contrary evidence. If the patentee meets this burden of production, the accused infringer must prove both elements of laches by a preponderance of evidence. Slip Op. at 5-6 (citations omitted).

The Federal Circuit held that the intervening ex parte reexamination did not toll the laches period, and was not a reasonable excuse for the more than six year delay. The three year delay after the reexamination was not reasonable either. The Federal Circuit did not agree that SCA was required to give notice of the reexamination, because First Quality had notice of SCA’s original claim and reexaminations are public proceedings. Nevertheless, SCA failed to rebut the presumption of unreasonable delay, because it monitored First Quality since 2003, had a substantial corporate intelligence team, was represented by US counsel, was not excused by ignorance of the US patent system, and did not act promptly when the reexamination was concluded. The delay resulted in prejudice to First Quality, which had expanded its business, and First Quality would have taken less risk if SCA had diligently pursued its claim. On these facts, the district court did not abuse its discretion in finding an inexcusable delay that caused harm. However, laches does not automatically follow; it should arise only after balancing all of the pertinent facts and equities, including the length of the delay, the seriousness of the prejudice, the reasonableness of excuses, and the defendant’s conduct or culpability. Here, the district court failed to explicitly balance these equities in its decision, but this was held to be a harmless error. SCA’s evidence of good faith did not outweigh the other considerations and did not prove an abuse of discretion by the court.

Equitable estoppel is a discretionary remedy that differs from laches. It may only arise (1) when a patentee communicated something to an alleged infringed in a misleading way, (2) on which the accused infringer relied, (3) such that he would be materially prejudiced if the patentee asserts a claim that is inconsistent with his earlier communication. The passage of time alone does not create an estoppel. The district court found that SCA’s 2003 notice to First Quality, followed by silence, was a misleading communication. The Federal Circuit disagreed, because there was no clear duty for SCA to speak. Silence and delay must be coupled with other factors, such that the conduct as a whole amounts to misleading inaction. SCA and First Quality had minimal interaction, nor did SCA’s silence constitute an admission that its patent was invalid, particularly when SCA sought reexamination. Thus, the Federal Circuit found there were genuine issues of fact whether SCA’s conduct was actually misleading and whether First Quality actually relied on such conduct that caused it harm. (This is different from harm that results from silence or delay, as in laches, even if there was no reliance.) Since First Quality could have relied on its own opinion that SCA’s patent was invalid, and not on SCA’s silence and delay, the district court’s summary judgment of inequitable estoppel was incorrect.

For these reasons, the district court’s judgment of laches was affirmed; the judgment of equitable estoppels was reversed and remanded.

Grant of a Litigation Stay Was Proper Despite Collateral Attack On The PTO’s Authority To Initiate The Related Post Grant Review

Benefit Funding Sys. LLC & Ret. Capital Access Mgmt. Co. LLC v. Advance Am. Cash Advance Ctrs., 2014 U.S. App. LEXIS 18340 (Fed. Cir. Sept. 25, 2014) (Prost. CJ). Click Here for a copy of the opinion; and click here for Errata.

Benefit Funding sued various defendants for infringing its U.S. Patent No. 6,625,582 for a system and method of converting future retirement benefits into current resources. US Bancorp petitioned the USPTO for post-grant review of the asserted ‘582 claims under the Transitional Program for Covered Business Method Patents (“CBM review”). See America Invents Act, Pub. L. No. 112-29, § 18, 125 Stat. 284, 329–31 (2011) (“AIA”). The defendants then moved to stay the litigations and the district court denied the motions. Later, the USPTO initiated a post grant review, concluding that “it is more likely than not that the challenged claims are unpatentable.” Slip Op. at 3 (citation omitted). The basis for this preliminary finding was that the claims appear to encompass unpatentable subject matter, in violation of 35 U.S.C. § 101. The district court then granted renewed motions to stay, and the patentees made an interlocutory appeal to the Federal Circuit, asking for the stay to be lifted.

Section 18(b) of the AIA provides that a stay may be granted during a CBM review, upon consideration of four factors: whether a stay will simplify the case; whether discovery is complete and a trial is scheduled; whether a stay would be prejudicial to a party; and whether a stay will reduce the burden of litigation for the parties and the court. The district court concluded, and the Federal Circuit agreed, that all four factors favored a stay. The PTO proceedings could make the case moot and could reduce the claims and issues in dispute. The litigation was not far advanced and the PTO proceedings would probably conclude first. There was no prejudice to the patentees from a stay, because the patentees are non-practicing entities, and the negative impact of a stay was overshadowed by the PTO’s decision to initiate the post grant review. A stay would also reduce the burden of litigation.

The Federal Circuit reviewed the district court’s decision under AIA § 19(b)(2), “to ensure consistent application of established precedent, and such review may be de novo.” This is a “more searching review” than the typical “abuse of discretion” standard. The patentees argued there should be no stay because the Patent Office is not authorized to conduct a CBM review on §101 grounds, and therefore, the proceeding will be moot or will not bind the district court,. This argument was rejected, as it was by the district court, as an improper collateral attack on the PTO’s authority to initiate the disputed post grant review. The courts will not second-guess such determinations by the PTO. A challenge to the PTO’s authority may be appropriate in a direct appeal from the PTO’s final decision, but is not proper in an interlocutory appeal from a decision to stay a related lawsuit. Accordingly, the Federal Circuit stated: “we do not address the underlying merits of that attack, namely whether § 101 is a valid ground for CBM review.” Slip Op. at 8. The district court did not abuse its discretion, consistency with precedent was not implicated, and a more searching review was not warranted. The decision to stay the litigation during CBM review was affirmed.

The following opinions are not reported in this newsletter:

Buysafe, Inc. V. Google, Inc., No. 2013-1575, 2014 U.S. App. LEXIS 16987 (Fed. Cir. September 3, 2014) (Asserted claims that are squarely about creating a contractual relationship were invalid, where invocation of computers added no inventive concept, because they cover abstract ideas that are ineligible for patenting under 35 U.S.C. § 101). Click Here for a copy of the opinion.

Epos Technologies Ltd. v. Pegasus Technologies Ltd., No. 2013-1330, 2014 U.S. App. LEXIS 17195 (Fed. Cir. September 5, 2014) (Erroneous claim construction was reversed, i.e. “drawing implement” was not limited to “conventional” embodiments; “given time interval” was not limited to “fixed at a few seconds or less;” “marking implement” was not limited to “a marker tip and not a pen tip;” and “temporary attachment” did not mean something that can be removed from the retrofittable apparatus). Click Here for a copy of the opinion.

Interval Licensing LLC v AOL, Inc. Et Al., No. 2013-1282, 2013-1283, 2013-1284, 2013-1285, 2014 U.S. App. LEXIS 17459 (Fed. Cir. September 10, 2014). (The terms “in an unobtrusive manner” and

“does not distract a user” are indefinite because they are subjective and come with no objective standard to specify their scope; other claim terms were misconstrued and led to erroneous finding of non-infringement). Click Here for a copy of the opinion.

Virnetx, Inc. v. Cisco Systems, Inc., No. 2013-1489, 2014 U.S. App. LEXIS 17748 (Fed. Cir. September 16, 2014) (In context of disputed claims, “domain name” was affirmed to mean “a name corresponding to an IP address” and “secure communication link” was properly interpreted to require both security and anonymity). Click Here for a copy of the opinion.

American Calcar v. American Honda Motor Co., No. 2013-1061, 2014 U.S. App. LEXIS 18417 (Fed. Cir. 2014) (Inequitable conduct affirmed; “but for” material information about prior art vehicle information system that the inventor withheld, and which disclosed features he claimed, a patent would not have been granted; inventor selectively disclosed other information about the same prior art, and the only reasonable inference was that the omitted information was deliberate). Click Here for a copy of the opinion.

EMD Millipore Corp. v. Allpure Techs., No. 2014 U.S. App. LEXIS 18530 (Fed. Cir. 2014) (Summary judgment affirmed; accused product does not have a “removable, replaceable transfer member” when disassembled and does not provide an infringing equivalent; prosecution history bars the doctrine of equivalents because a narrowing amendment affected the transfer member and was not excused). Click Here for a copy of the opinion.

Each week, we succinctly summarize the preceding week of Federal Circuit precedential patent opinions. We provide the pertinent facts, issues, and holdings. Our Review allows you to keep abreast of the Federal Circuit’s activities – important for everyone concerned with intellectual property. We welcome any feedback you may provide.

– Joe Robinson, Ryan Schneider, Bob Schaffer, and Nicole Sullivan.

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