Patent Docs

Bio-Rad Laboratories, Inc. v. International Trade Comm. (Fed. Cir. 2021)

By Kevin E. Noonan --

Last week, the Federal Circuit affirmed imposition of an exclusion order under 19 U.S.C. § 1337 (Section 337 of the Tariff Act of 1930) by the Federal Trade Commission against 10X Genomyx (an intervenor in this appeal) over importation of patented microfluidic chips, in Bio-Rad Laboratories, Inc. v. International Trade Commission.  (10X Genomyx obtained a similar exclusion order against Bio-Rad in a case appealed last month; see "Bio-Rad Laboratories, Inc. v. Int'l. Trade Comm".)

In this action, Bio-Rad filed a complaint against 10X Genomyx alleging that importation of certain microfluidics chips infringed claims of U.S. Patent Nos. 9,500,664, 9,636,682, and 9,649,635.  Representative claims set forth in the opinion are these:

The '664 patent:

1.  A system for forming a plurality of sample-containing droplets suspended in a back- ground fluid, comprising:
    a substrate having a bottom surface and a top surface;
    a sample well, a background fluid well, and a droplet well each having an upper region protruding from the top surface of the substrate;
    a network of channels formed in the bottom sur- face of the substrate and fluidically interconnecting the sample well, the background fluid well, and the droplet well; and
    a droplet generation region defined by the network of channels and configured to generate sample-containing droplets suspended in the background fluid;
    wherein the droplet generation region is de- fined by the intersection of a first channel, a second channel, and a third channel;
    wherein the first channel is configured to transport sample-containing fluid from the sample well to the droplet generation region, the second channel is configured to transport background fluid from the background fluid well to the droplet generation region, and the third channel is configured to transport sample-containing droplets from the droplet generation region to the droplet well; and
    wherein the substrate and the upper region of each well are injection molded as a single piece.

The '682 patent:

14.  A system for generating droplets, comprising:
    a device including a row of sample wells each configured to receive sample-containing fluid, a row of continuous-phase wells each configured to receive continuous-phase fluid, and a row of droplet wells, the device also including a corresponding channel network for each sample well, the channel network including a droplet-generation region and fluidically connecting the sample well to one of the continuous-phase wells and one of the droplet wells;
    a holder for the device;
    a gasket configured to be attached directly to the holder, such that the gasket extends over each sample well, each continuous-phase well, and each droplet well; and
    an instrument configured to
        (a) receive an assembly including the device, the holder, and the gasket,
        (b) engage the gasket with a manifold, and
        (c) apply positive pressure and/or negative pressure to the device via the manifold, such that sample-containing fluid flows from each sample well to the corresponding droplet-generation region, continuous-phase fluid flows from each continuous-phase well to the corresponding droplet-generation region, and sample-containing droplets flow from each droplet-generation region to the corresponding droplet well.

The '635 patent:

1.  A system to form and concentrate an emulsion, comprising:
    a device including a sample well configured to receive sample-containing fluid, a continuous-phase well configured to receive continuous-phase fluid, and a droplet well, the device also including a channel network having a first channel, a second channel, and third channel that meet one another in a droplet-generation region; and
    an instrument configured to operatively receive the device and to create
        (a)    a first pressure differential to drive sample- containing fluid from the sample well to the droplet-generation region via the first channel, continuous-phase fluid from the continuous-phase well to the droplet-generation region via the second channel, and sample-containing droplets from the droplet-generation region to the droplet well via the third channel, such that the droplet well collects an emulsion including sample- containing droplets disposed in continuous-phase fluid, and
        (b)    a second pressure differential to decrease a volume fraction of continuous-phase fluid in the emulsion, after the emulsion has been collected in the droplet well, by selectively driving continuous-phase fluid, relative to sample-containing droplets, from the droplet, from the droplet well via the third.

(wherein the text in italics and boldface is the claim term at issue).

The technology at issue was related to microfluidics chips for performing bioanalytic assays using small amounts of sample contained in microdroplets, defined in the opinion as "a contiguous amount of one type of fluid that is encapsulated within a different fluid," wherein "the inner fluid is aqueous or water-based, while the outer fluid is oil" in typical embodiments.  Generally, the sample is contained in the aqueous inner fluid.  An advantage of this arrangement was that each sample could be subject to chemical reactions in its own droplet (a "mini-test tube" according to the '664 patent) and that a larger number of chemical reactions can be performed in parallel.  Such reactions are performed on microchips as claimed in the patents-at-issue (the opinion noting that such microchips were known in the art at the priority dates of these patents).

As set forth in the opinion, the named inventors of the asserted patents previously worked for a company (QuantaLife, Inc.) that was thereafter acquired by Bio-Rad.  These inventors had agreed in their employment contracts with QuantaLife to promptly assign to the company their rights to the provisional applications that matured into the three patents-in-suit, which they assigned to Bio-Rad after the acquisition.  These inventors later left Bio-Rad and formed 10X Genomics, where they developed the technology asserted by Bio-Rad to infringe the patents-in-suit.  Two embodiments of these chips were at issue in this case:

• GEM Chips, having "input wells for three different materials—gel beads, sample, and oil—and one output well to collect droplets.  The microfluidic channels on the GEM Chips intersect each other such that the gel bead and sample fluid are mixed at a first intersection, the resulting mixture enters into a microfluidic channel referred to as a 'singulation channel,' and the mixture then mixes with the oil at a second intersection."

• Chip GB, which 10X Genomyx utilizes "to generate droplets that are used to make the gel beads that are packaged with the GEM Chips and sold to customers.  The Chip GB contains one input well that holds an aqueous monomer solution, a second input well that holds oil, and channels from each of the wells that intersect each other to allow for the formation of droplets that are collected in a droplet well.  Over time, the monomers within each droplet polymerize, and the droplet becomes a gel bead."

Responsive to Bio-Rad's complaint, an Administrative Law Judge (ALJ) granted summary determination that the doctrine of assignor estoppel precluded 10X Genomyx from challenging the validity of the asserted patents.  The ALJ then construed the claims with regard to the term "droplet-generation region" to mean "the intersection of (1) a sample-containing dispersed phase fluid inlet channel, (2) a continuous phase fluid inlet channel, and (3) a droplet outlet channel."  The parties agreed that the term "sample" meant "a compound, composition, and/or mixture of interest, from any suitable source(s)."

Under this construction, the ALJ determined that 10X Genomyx's GEM Chips infringed the three patents, but that while the GB Chips infringed the claims of the '682 and '635 patents they did not infringe asserted claims 1 and 14 of the '664 patent because the monomer solution used with those chips was not a "sample" under the agreed-upon construction.  The Commission reviewed the ALJ's findings and adopted them, that the GEM chips infringed the three asserted patents (either literal, induced, or contributory infringement) but that the GB chips did not literally infringe the '644 patent.  The parties appealed each of the adverse determinations against them.

The Federal Circuit affirmed, in an opinion by Judge Lourie, joined by Judges Newman and Dyk.  With regard to Bio-Rad's appeal, the panel addressed two assertions that the ALJ erred.  The first was that because the GB chips did not involve a sample they did not have structures corresponding to "a 'sample well,' a sample channel, sample-containing droplets, or the claimed 'droplet generation region.'"  Second, Bio-Rad argued that due to the structural nature of the elements of the claims (wells and channels), infringement could not depend on what was in those wells and channels.  The "sample" limitation was assessed based on the parties' agreed-upon definition (which was taken from the '664 specification), and the Federal Circuit found no error in the ALJ relying on witness testimony that what was encapsulated in 10X Genomyx's GB Chip was not a sample under the agreed-upon definition but rather was "an input for a reagent production process" (emphasis in opinion).  This determination was also consistent with distinctions made in the '664 specification regarding the differences between a sample ("something that the customer cares about and wants to analyze") and a reagent ("which 'are of no interest'").  And this interpretation was also consistent with exemplified samples ("blood and plasma, and research samples such as culturued [sic] cells or bacteria") and reagents, defined as ""a compount [sic], set of compounds, and/or composition that is combined with a sample in order to perform a particular test(s) on the sample")(emphasis in opinion).  Bio-Rad's challenge was on these definitions, which they argued imported unsupported additional limitations into the claim term and were based on faulty conclusions (such as the monomer being "of no interest" under circumstances where "10X care-fully designed the monomer solution with particular concentrations of ingredients to serve as a gel bead precursor solution").  The Court agreed with the Commission and 10X Genomyx that Bio-Rad's arguments in this regard were directed to the Commission's factual determinations, and that under the Administrative Procedures Act the Commission's factual determinations were entitled to deference and "substantial evidence" review (which Bio-Rad did not satisfactorily challenge).  In this regard, the opinion states that "[t]he compelling factor here is the distinction between 'samples' and 'reagents'" as set forth (and relied upon by the Commission) in the '644 patent specification.  And, in particular, the panel did not find that consideration of the term "of interest" in construing the meaning of the claims and applying that construction to 10X Genomyx's GB chips imported any untoward subjectivity to the analysis.

Turning to Bio-Rad's second argument, the Federal Circuit considered this argument to "fail[]" for several substantive and procedural reasons.  The opinion states that it is "not clear" that Bio-Rad made this argument before the Commission, and accordingly should be precluded from presenting it on appeal in the first instance, citing Interactive Gift Express, Inc. v. CompuServe Inc., 256 F.3d 1323, 1346 (Fed. Cir. 2001).  Even if this procedural hurdle had been overcome, the panel asserted Bio-Rad would not prevail because its argument rested on "rewriting the claims in an oversimplified form and removing all limitations that differentiate the recited structures from each other."  The opinion illustrates this defect in Bio-Rad's argument by comparing the description of what is claimed in their brief with the actual claims, saying that the former "is not remotely close to what the claim says" it is.  "Inventors are masters of their claims, and the words they use to describe and claim their invention are decisive and binding," said the Court, and in the panel's view the '664 inventors did not claim their invention as broadly as it would need to have been claimed for Bio-Rad to prevail in its infringement argument here.  It was the inventors' decision "to characterize the wells and channels based on the material contained within them," according to the Court, and this choice cannot be "escaped" by recourse to the principle that "apparatus claims cover what a device is, not what a device does."  See Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, 1468 (Fed. Cir. 1990) (emphasis in original opinion).

10X Genomyx's appeal challenged the Commission's determination that its GEM chips infringed the asserted claims of the three patents-in-suit.  The first of two challenges by 10X Genomyx was based on whether their GEM chips contained the "droplet-generating region" required by the claims.  10X Genomyx's other challenge was directed to whether the evidence supported the Commission's determination regarding indirect infringement.  The challenge regarding whether GEM chips comprised the "droplet-generating region" was on claim construction, where 10X Genomyx asserted this alternative construction of the term:

[T]he intersection of the sample input channel that receives the dispersed phase fluid from the sample well, the oil input channel that receives the continuous-phase or background fluid from the oil well, and the droplet outlet channel that outputs to the droplet well, at which droplets are generated.

Bio-Rad (and the Commission) countered that 10X Genomyx had waived this argument three times:  "first, by failing to propose it in the parties' Joint Claim Construction Chart; second, by failing to seek review by the Commission of the ALJ's waiver finding; and third, by failing in its principal brief to ask this court to overturn the ALJ's waiver finding."  The Court was not convinced, citing instances in the record (including that the construction proposed here was identical to 10X Genomyx's initial construction asserted before the ALJ and maintained before the Commission), and that this consistent assertion of its construction did not constitute waiver that would preclude 10X Genomyx from making its alternative claim construction argument on appeal.

Nevertheless, on the merits, the panel found that the ALJ had correctly construed the term, based on the plain meaning of the claims and the specifications of the patents-in-suit.  The Court held that 10X Genomyx's proposed alternative construction would impermissibly impose requirements on the claimed invention not supported by the intrinsic evidence.  The Court also rejected 10X Genomyx's argument that the ALJ erred by applying the doctrine of assignor estoppel to preclude it from challenging construction based on the prior art, for the simple reason that the Court found evidence in the record that the ALJ had permitted these art-based challenges and that they had failed (which is not the same thing).  The opinion states that the ALJ had properly construed the claims using the intrinsic evidence under Phillips v. AWH Corp., 415 F.3d 1303, 1312–15 (Fed. Cir. 2005) (en banc), and the fact that prior art considerations did not make their way into the Commission's opinion (which the Court termed "less relevant arguments") did not indicate error.

With regard to the Commission's finding of indirect infringement, the Federal Circuit recognized 10X Genomyx's argument to be a factual one (was there enough evidence presented to support the determination?) that is entitled to the substantial evidence standard of review.  The facts at issue revolved around whether 10X Genomyx had knowledge of the patents (on contrast with the priority applications, where such knowledge was not in doubt).  In finding that the Commission's determination was supported by substantial evidence, the opinion states that "10X's various arguments attempt to distract from the reality of this case: named inventors of the asserted patents sold their company and patent rights to Bio-Rad, worked for Bio-Rad for a short time, left Bio-Rad to start a new company, and launched new products that have been determined to infringe the patents they assigned to Bio-Rad."  In addition, the opinion states that 10X Genomyx's arguments "largely attack the ALJ's credibility determinations and weighing of the evidence" (which fails the substantial evidence challenge), particularly with regard to the ALJ's credibility determinations of the witnesses (including the named inventors).  And regarding the existence of non-infringing uses relevant to the Commission's contributory infringement determination, the Court rejected 10X Genomyx's assertion of "hypothetical" systems (which 10X Genomyx asserted were relevant due to the statutory language that an accused product be "suitable" for non-infringing use) as being contrary to precedent (for which the panel sets forth examples including Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1330–31 (Fed. Cir. 2010), and Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d 1354, 1363 (Fed. Cir. 2006).  In sum, because "[i]t is not within [the Court's] purview to reweigh the evidence or to question the ALJ's credibility determinations" the Court affirmed the Commission's infringement determinations against 10X Genomyx.

Over the past six weeks, 10X Genomyx has obtained an exclusion order against Bio-Rad's importation of certain of their microfluidic chips over 10X Genomyx's patents and Bio-Rad in this case has obtained an exclusion order against 10X Genomyx's importation of certain of their microfluidic chips over Bio-Rad's patents.  The relationship and history between the companies argues against settlement, but under these circumstances settlement seems a sensible solution for both parties (depending of course on the relative market share and competitive positions of the parties excluded goods).

Bio-Rad Laboratories, Inc. v. International Trade Comm. (Fed. Cir. 2021)
Panel: Circuit Judges Newman, Lourie, and Dyk
Opinion by Circuit Judge Lourie

GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2020)

What Quantum of Culpable Conduct Is Required for an ANDA Applicant to Induce Infringement?

By Kevin E. Noonan --

The back-and-forth, (almost) cat-and-mouse-like competition between branded innovator and generic drug makers sanctioned under the Hatch-Waxman Act has been on-going for over thirty years.  As part of this regime, Congress has provided a pathway for generic drug companies to obtain FDA approval for less than all the indications a branded drug has obtained, using a "carve out" strategy resulting in a so-called "skinny label."  This has raised the possibility of "off-label" use, where physicians prescribe the generic drug for an indication not approved for the generic drug but known to be clinically appropriate from the innovator's approval for the product.  The extent to which a generic drug company can use this strategy to avoid liability for inducing infringement was tested in the Federal Circuit's recent decision in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc.

The matter arose in litigation over GSK's Coreg^® product (carvedilol) for treatment of hypertension (the initial approved indication; U.S. Patent No. 4,503,067), congestive heart failure (CHF) (the subject of U.S. Patent No. 5,760,069) and left ventricular dysfunction following myocardial infarction (LVD-MI).  The '069 patent recites a method of treating CHF with a combination of carvedilol and "one or more of an angiotensin-converting enzyme ("ACE") inhibitor, a diuretic, and digoxin."

Teva's ANDA was filed with a Paragraph III certification over the '067 patent and a Paragraph IV certification over the '069 patent.  The FDA tentatively approved Teva's generic product for "treatment of hypertension and heart failure" which Teva launched on expiration of the '067 patent.  Teva's label indicated that the product was approved treatment of LVD-MI and hypertension and announced that FDA had given its product an "AB rating" (which the opinion explained "allow[s] users to determine quickly whether the Agency has evaluated a particular approved product as therapeutically equivalent to other pharmaceutically equivalent products").  Thereafter, FDA required Teva to amend its label to be identical to the GSK label for Coreg®, which introduced treatment of heart failure into the approved treatments recited in Teva's label.

GSK filed for reissue of the '069 patent which was duly granted by the U.S. Patent and Trademark Office as Reissue Patent No. RE40,000; claim 1 is representative of the invention as claimed in the '000 reissue patent:

1.  A method of decreasing mortality caused by congestive heart failure in a patient in need thereof which comprises administering a therapeutically acceptable amount of carvedilol in conjunction with one or more other therapeutic agents, said agents being selected from the group consisting of an angiotensin converting enzyme inhibitor (ACE), a diuretic, and digoxin,
    wherein the administering comprises administering to said patient daily maintenance dosages for a maintenance period to decrease a risk of mortality caused by congestive heart failure, and said maintenance period is greater than six months.

(Where the italicized portion of the claim represents the modifications introduced in prosecution of the reissue application.)

GSK filed suit against Teva for inducement of infringement based on the Teva label, based on direct infringement by physicians prescribing the drug for the label indications.  Teva argued that it had "carved out" the indication for CHF pursuant to 21 U.S.C. § 355(j)(2)(A)(viii), resulting in a "skinny label" with regard to this indication.  Thereafter, FDA compelled Teva to amend its label to include that indication.  In addition, Teva argued that it could be liable for inducement only if GSK could show that Teva had "directly communicated with the direct infringers and 'caused' them to directly infringe the method in the '000 patent."  In a jury instruction the court informed the jury that circumstantial evidence could be used to satisfy this burden.

The jury found that Teva induced infringement of the '000 reissue patent both before and after the label amendment (albeit infringing several claims after but not before that change).  The District Court granted Teva's motion for judgment as a matter of law (JMOL) on the basis that GSK had not "caused" physicians to prescribe their product for the infringing uses.  Because proof of such causation was required, according to the District Court, its absence precluded the jury from basing its decision on substantial evidence.  The Court relied on the "many sources of information available to prescribing physicians" other than Teva's label (including paradoxically GSK's label and promotion of its Coreg® product) in finding this evidentiary deficiency.  Also, the Court based its decision on physician testimony that their prescribing behavior relied on "guidelines and research, as well as their own experience" and not Teva's label.  "In sum," the Court said, "substantial evidence [did] not support the jury's finding on causation, and therefore [did] not support its verdict that Teva is liable for induced infringement, during both the skinny and full label periods."  This appeal followed.

The Federal Circuit reversed, in an opinion by Judge Newman joined by Judge Moore; Chief Judge Prost provided a lengthy, comprehensive dissent.  The panel majority relied on the Supreme Court's decision in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011), that copying is evidence of inducement, as applied in to generic drugs (which are required by regulatory statutes to "copy") in Eli Lilly & Co. v. Teva Parenteral Meds., Inc., 845 F.3d 1357, 1369 (Fed. Cir. 2017), and Sanofi v. Watson Labs. Inc., 875 F.3d 636, 645 (Fed. Cir. 2017) (as well as the earlier precedent of AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1060 (Fed. Cir. 2010), and Mentor H/S, Inc. v. Med. Device All., Inc., 244 F.3d 1365, 1379 (Fed. Cir. 2001)).  The majority also found compelling evidence from Teva's website regarding its product's AB rating with GSK's Coreg® product and other promotional content, as well as testimony from GSK's witnesses regarding physician reliance on information from generic drug makers.

Less persuasive to the Federal Circuit majority was Teva's evidence regarding "deliberately omit[ting]" reference to CHF in its skinny label, particularly in light of the continued promotion of the product by Teva in a manner not consistent with complete exclusion of the CHF indication (albeit without express inclusion of that indication).

The panel majority opined that the District Court erred in applying the correct legal standard, stating that "precedent makes clear that when the provider of an identical product knows of and markets the same product for intended direct infringing activity, the criteria of induced infringement are met."  Considering this precedent, the majority held that "[t]here was ample record evidence of promotional materials, press releases, product catalogs, the FDA labels, and testimony of witnesses from both sides, to support the jury verdict of inducement to infringe the designated claims for the period of the '000 reissue patent."  The opinion cites Vanda Pharm. v. West-Ward Pharm. Int'l Ltd., 887 F.3d 1117, 1129 (Fed. Cir. 2018), and Sanofi for the principle that the label's contents can be evidence of inducement to infringe.

The majority also takes its opportunity to address (briefly) the Chief Judge's dissent, stating that it is not proper for the appellate court to "find facts afresh" nor to engage in policy arguments regarding FDA approval standards.  In the majority's view, "[t]he implications of the dissent's position are vast, and if enforcement of patents on new discoveries varies with the extent to which the patentee has profited from past discoveries, this is a policy matter for Congress, not a factor in judicial review of jury verdicts."

The majority's opinion concludes by considering Teva's objections to the bases for the District Court's damages instructions and calculations, affirming because they concluded that "the jury instructions are in conformity to law."

Chief Judge Prost dissented based, as the majority noted, on her objections to the quanta of evidence adduced and policy consequences should the majority's position be sustained.  The Chief begins by referencing the need, in her view, for balance between the incentives patents provide for pharmaceutical innovation and the public's need for access to that innovation once the patent term has expired, noting that this was one motivation for Congress to establish the generic drug approval system.  In the Chief's view the majority's decision undermines these policy goals by finding Teva induced infringement by marketing its generic drug produce for unpatented uses (emphasis in dissent) using its skinny label.  The dissent sets out the opinion that Teva acted just as Congress intended when it enacted the skinny label provisions, by waiting (using its Paragraph III certification) until GSK's patent had expired before launching its product for unpatented indications.  And Teva's inclusion on its label of the CHF indication (recited in GSK's '000 reissue patent) was compelled by FDA; even then according to the dissent "there was still no inducement via the full label."  The Chief Judge believes that:

The district court got it right: no evidence established that Teva actually caused the doctors' infringement for either label.  No communication from Teva encouraged doctors to use generic carvedilol to practice the patented method.  And no evidence showed that doctors relied on Teva's label.  Indeed, GSK's own expert admitted that he had not read Teva's label before prescribing generic carvedilol.  Rather than suggest inducement, the record established that doctors relied on other sources of information, not Teva, in making their decision to prescribe carvedilol.  And in any case, the record showed that the switch from Coreg® to generic carvedilol occurred "automatically," often without doctors' knowledge at all.

The dissent not only disagrees with the majority's decision, but recognizes that "it nullifies Congress's statutory provision for skinny labels—creating liability for inducement where there should be none," contrary to Congressional intent and "slowing, rather than speeding, the introduction of low-cost generics."

After stating her opinion, the Chief Judge spends the rest of her lengthy dissent (at 33 pages much longer than the majority opinion) setting forth the following subjects:  1. The Statutory Background; 2. The Factual n Procedural Background; 3. [That] The Majority Nullifies Congress's Provision for Skinny Labels; and 4. [That] The Majority Misapplies the Law and Misconstrues the Facts.  The bulk of the Chief's arguments are in the third and fourth sections of her dissent (as commented upon by the majority).  Regarding the Chief's opinion that the majority engaged in judicial nullification of the skinny label option enacted by Congress, the Chief stated that:

To hold [that Teva infringes based on its label], as the Majority does, undermines Congress's provision for skinny labels by substantially nullifying section viii.  According to the Majority, a generic company that carves out from its label a patented method of use can nonetheless be found to infringe that patented method based on the content of the FDA-approved label.  See Maj. 16.  By finding inducement based on Teva's skinny label, which was not indicated for—and did not otherwise describe—the patented method, the Majority invites a claim of inducement for almost any generic that legally enters the market with a skinny label.  That is directly contrary to Congress's intent," citing Caraco Pharm. Labs., Ltd. v. Novo Nordisk, 566 U.S. 399 (2012) (emphasis in dissenting opinion).

The Chief also found Federal Circuit precedent contrary to the majority's opinion in Takeda Pharmaceuticals U.S.A. v. West-Ward Pharmaceutical Corp., 785 F.3d 625 (Fed. Cir. 2015), and Warner-Lambert v. Apotex Corp., 316 F.3d 1348 (Fed. Cir. 2003).  And rather than finding anything nefarious in Teva's carveout, the Chief opined that Teva "was acting in accordance with Congress's goals for it" as sanctioned by the Supreme Court in Caraco Pharm.

Chief Judge Prost's disapproval of the majority's application of the law to the facts revisited the jury's determination and the District Court's consideration that the jury lacked substantial evidence to support its verdict of induced infringement, unavoidably at least considering if not finding facts afresh as the majority noted in their opinion.

While not expressly discussed by either the majority or the dissent, there is a hint that the majority was concerned with generic drug companies improperly relying on the skinny label strategy to profit from "off-label use" by physicians for the very indication excluded by the skinny label carveout.  The majority extended the scrutiny regarding this stratagem perhaps farther than it can reliably be stretched, not requiring the level of promotion of the carved out indication that would be expected to attract inducement liability.  And the dissent argued strongly regarding the impropriety of the policymaking consequences of the majority's decision usurping Congress's role in deciding the extent to which a generic drug company can use the skinny label strategy to avoid infringement inducement liability.  It is likely that (at a minimum) the Court will hear this case en banc; perhaps less likely but certainly within the realm of possibility is Supreme Court review in light of the important policy considerations raised by the majority and even more strongly by Chief Judge Prost's dissent.

GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2020)
Panel: Chief Judge Prost and Circuit Judges Newman and Moore
Opinion by Circuit Judge Newman; dissenting opinion by Chief Judge Prost

HZNP Medicines LLC v. Actavis Laboratories UT, Inc. (Fed. Cir. 2019)

By Kevin E. Noonan --

The Federal Circuit earlier this week affirmed a District Court's decision invalidating almost all of the claims asserted against an ANDA filer, in HZNP Medicines LLC v. Actavis Laboratories UT, Inc.  Nevertheless, because a claim was held invalid and infringed, the proposed generic compound is delayed from coming to market.

The case arose as ANDA litigation over HZNP Medicines' osteoarthritis drug, PENNSAID® 2%.  After Actavis (nee Watson Labs) sent HZNP its Paragraph IV letter HZNP filed suit (asserting somewhat prolixically) twelve Orange Book-listed patents:  U.S. Patent Nos. 8,217,078; 9,132,110; 8,618,164; 9,168,304; 9,168,305; 8,546,450; 9,101,591; 8,563,613; 9,220,784; 8,871,809; 8,252,838; and 9,066,913.  These patents formed two groups as considered by the Federal Circuit:  the first group comprising the '450, '078, '110, and '164 patents, directed to methods of using diclofenac formulations for treating osteoarthritis, particularly in the knee.  Claim 10 of the '450 patent was deemed illustrative:

10.  A method for applying topical agents to a knee of a patient with pain, said method comprising:
    applying a first medication consisting of a topical diclofenac preparation to an area of the knee of said patient to treat osteoarthritis of the knee of said patient, wherein the topical diclofenac preparation comprises a therapeutically effective amount of a diclofenac salt and 40–50% w/w dimethyl sulfoxide;
    waiting for the treated area to dry;
    subsequently applying a sunscreen, or an insect repellant to said treated area after said treated area is dry, wherein said step of applying a first medication does not enhance the systemic absorption of the subsequently applied sunscreen, or insect repellant; and
    wherein said subsequent application occurs during a course of treatment of said patient with said topical diclofenac preparation.

The remaining asserted patents (the '838, '591, '304, '305, '784, '613, '809, and '913 patents) constituted the second group; claim 49 of the '838 patent is illustrative of what is claimed in these patents:

49.  A topical formulation consisting essentially of:
    1–2% w/w diclofenac sodium;
    40–50% w/w DMSO;
    23–29% w/w ethanol;
    10–12% w/w propylene glycol;
    hydroxypropyl cellulose; and
    water to make 100% w/w, wherein the topical formulation has a viscosity of 500–5000 centipoise.

The District Court found all but one of the asserted claims to be invalid for indefiniteness based on its construction of three claim terms:

• "the topical formulations produced less than 1% of impurity A after 6 months at 25 and 60% humidity" was indefinite for failing to provide any definition for "impurity A";
• "the formulation degrades by less than 1% over 6 months" was indefinite because there were no means specified for evaluating indefiniteness; and
• (most curiously) "consisting essentially of" was indefinite because "the parties disputed what were "basic and essential" properties of the claimed formulations and thus the scope of what additional components could be added in excess of the recited elements was indefinite.

With regard to the District Court's assessment of the "basic and essential" properties of the claimed formulations, the Court recognized five properties:  "(1) better drying time; (2) higher viscosity; (3) increased transdermal flux; (4) greater pharmacokinetic absorption; and (5) favorable stability."  The Court limited its determination to the first, "better drying time" property, and found it to be indefinite because the specification set forth two methods for measuring this property gave inconsistent results.  This persuaded the District Court that the skilled worker would not know which measurement method to use, which precluded the skilled artisan from having the "reasonable certainty" required under Nautilus, Inc. v. Biosig Instruments, Inc., 572 U.S. 898, 910 (2014), for the "consisting essentially of" term to be indefinite.  In response to HZNP's motion for reconsideration (which the District Court denied), the Court further found the "favorable stability" property to be indefinite because "the specification failed to provide the requisite guidance" for deterring stability.

Consequently, the District Court granted summary judgment of noninfringement, either literal or for inducement, in favor of Actavis.  The basis for this decision regarding inducement was a comparison of HZNP'S and Actavis' formulation label.  While HZNP's claimed method required the practice of three steps ("(1) application of the medication to knee, (2) waiting for the area to dry, and (3) application of sunscreen, insect repellant, or a second topical medication"), the labels differed because "Horizon's claimed method requires application of a second topical agent whereas [both] the [HZNP and Actavis] label merely permits, without encouraging, post-product application of sunscreen, insect repellant, or a second topical medication."

The parties went to trial on the sole remaining claim, claim 12 of the '913 patent, reciting a method of treatment comprising administering the claimed formulation twice daily.  Actavis stipulated that if valid its ANDA product would infringe, but argued the claim was obvious.  The prior art Actavis relied upon was HZNP's earlier PENNSAID® 1.5% product, which Actavis asserted had deficiencies known in the prior art ("frequent application and vulnerability to run-off") and the changes HZNP made in the formulation would have been reasonably expected to address these known deficiencies (and that the changed components were also known in the art, being merely "obvious optimizations of result-effective variables that produced a predictable result").  The District Court agreed with HZNP, that "the field of topical pharmaceutical formulations is complex and unpredictable" and that the litany of changes required to change the 1.5% formulation to the claimed 2.0% formulation would not have been obvious.  The parties appealed.

The Federal Circuit affirmed, in an opinion by Judge Reyna joined by Chief Judge Prost; Judge Newman concurred-in-part and dissented-in-part.  Regarding the judgment of invalidity for indefiniteness, the majority agreed that HZNP's failure to identify "impurity A" was fatal to the invalidated claims, rejecting HZNP's argument that the skilled worker would have understood, from sources like pharmacopeias, the identity of this impurity from how diclofenac was known to degrade under the conditions set forth in the specification.  Relying on the claim language, the majority found no basis for assuming that the skilled worker would have identified impurity A as being a diclofenac degradation product to the exclusion of other sources of this impurity in the formulation.  The extrinsic evidence was properly considered by the District Court to be unavailing, according to Judge Reyna and the Chief Judge, because the specification merely disclosed the results of the analytical methods but did rely on the data present in pharmacopeias to identify the impurity.  The District Court and the majority here linked its finding that "impurity A' was indefinite to support the further finding that the term "degrades" was indefinite ("Since "impurity A" is indefinite, it logically follows that another term, such as the "degrades" term, which relies on "impurity A" for its construction, must also be indefinite.")

The panel majority's explanation of why it affirmed the District Court's finding that "consisting essentially of" was indefinite was more involved.  While recognizing that this transition phrase "has a distinct meaning within our jurisprudence," the majority also agreed with the District Court that the indefiniteness question implicates the nature of the "basic and novel" properties of the formulation consisting of the expressly recited components; the phrase permits the claims to encompass formulations "consisting of only the specified materials and those that do not materially affect the basic and novel properties of the claimed invention."  Using the specification as a guide, the majority agreed that the District Court properly identified five basic and novel properties.  The majority then concluded that the indefiniteness standard enunciated by the Nautilis Court properly applied to those properties, rejecting HZNP's contention that the standard applied only to the elements recited in the claims:

By using the phrase "consisting essentially of" in the claims, the inventor in this case incorporated into the scope of the claims an evaluation of the basic and novel properties.  The use of "consisting essentially of" implicates not only the items listed after the phrase, but also those steps (in a process claim) or ingredients (in a composition claim) that do not materially affect the basic and novel properties of the invention.  Having used the phrase "consisting essentially of," and thereby incorporated unlisted ingredients or steps that do not materially affect the basic and novel properties of the invention, a drafter cannot later escape the definiteness requirement by arguing that the basic and novel properties of the invention are in the specification, not the claims.  Indeed, this contravenes the legal meaning associated with the phrase "consisting essentially of."  And a holding to the contrary would promote the innovation-discouraging "zone of uncertainty" that the Supreme Court has warned against.

The majority then set forth a discussion illustrating the distinctions between applying these principles in claim construction and the ultimate question of infringement, concluding that the Court's jurisprudence directs "courts evaluating claims that use the phrase "consisting essentially of" may ascertain the basic and novel properties of the invention at the claim construction stage, and then consider if the intrinsic evidence establishes what constitutes a material alteration of those properties."  Here, the majority held that the District Court properly applied these rubrics in coming to the conclusion that the term "consisting essentially of" was indefinite based on the "basic and novel" feature of better drying time.

Coming to questions of infringement, the panel majority affirmed the District Court's holding that practice of Actavis' product according to its label did not induce infringement.  Inducement here would require the instruction in Actavis' label to perform the three distinct steps, whereas the District Court held, and the Federal Circuit majority agreed that, only the first step, applying the inventive formulation, was required to be performed.

Finally, regarding the District Court's holding that Actavis had not shown by clear and convincing evidence that claim 12 of the '913 patent was obvious, the majority here found no clear error in the District Court's reliance on expert testimony regarding the differences between the 1.5% and claimed 2% varieties of PENNSAID^® and affirmed.

Judge Newman's dissent was based on the majority's indefiniteness determinations regarding the transition phrase "consisting essentially of" and whether the Actavis label induced infringement, characterizing the majority's opinion in the former to be "departures from long-established law and long-understood practice" and in the latter to be "contrary to statute and precedent."  With regard to the majority's decision regarding the term "consisting essentially of," Judge Newman believes the majority's decision to be "not correct as a matter of claim construction, it is not the law of patenting novel compositions, and it is not the correct application of section 112(b)."  Judge Newman faults the majority for incorporating method steps (better drying time) or properties (increased stability) into indefiniteness determinations of composition of matter claims.  And Judge Newman does not believe that Actavis established invalidity by clear and convincing evidence.  But the Judge's principal concern was that the majority's decision will "cast countless patents into uncertainty."  Finally, the Judge believes that the possibility that some patients may not follow Actavis' label instructions is not a proper basis for absolving them from infringement liability.

HZNP Medicines LLC v. Actavis Laboratories UT, Inc. (Fed. Cir. 2019)
Panel: Chief Judge Prost and Circuit Judges Newman and Reyna
Opinion by Circuit Judge Reyna; opinion concurring in part and dissenting in part by Circuit Judge Newman

NeuroGrafix v. Brainlab, Inc. (Fed. Cir. 2019)

By Kevin E. Noonan --

One person's attempt at judicial economy can be another person's impermissible shortcut, and when it arises in the context of a summary judgment motion of noninfringement, it can amount to legal (or at least procedural) error on appeal.  Such is the case in NeuroGrafix v. Brainlab, Inc., decided last week by the Federal Circuit in the context of multidistrict litigation over magnetic image resonance (MRI) technology.

The case at bar arose when NeuroGrafix sued Brainlab for infringement of U.S. Patent No. 5,560,360; because NeuroGrafix concomitantly sued several other entities using (or producing) MRI technology, the cases were consolidated in the District of Massachusetts for pretrial activities.  The '360 patent is directed to "methods and systems for creating detailed images of neural tissues by using diffusion tensor imaging (DTI)" (a particular application of MRI technology).  As explained in the opinion, certain biological tissues behave differentially with regard to water diffusion.  Water diffusion in white matter in brain, for example, is anisotropic, meaning that diffusion along one axis (the long axis of an axon) is easier than diffusion along the cross-sectional axis.  Gray matter is isotropic; water diffusion rates cannot be distinguished based on direction.  These differences provide the basis for the claimed invention, wherein "pulsed magnetic field gradients are applied in two orthogonal (perpendicular) directions in a region containing the nerve tissues for which a precise image is sought."  In some tissues the directions to be interrogated are known from the nature of the tissue, while in others informative perpendicular directional pairs are determined empirically.  The differences noted above between isotropic and anisotropic tissues (or portions of tissues) "can be identified and visually differentiated from the surrounding structures by determining the areas of greater relative anisotropy."

This technology was claimed in representative claim 36 of the '360 patent:

36.  A method of utilizing magnetic resonance to determine the shape and position of a structure, said method including the steps of:
    (a) exposing a region to a magnetic polarizing field including a predetermined arrangement of diffusion-weighted gradients, the region including a selected structure that exhibits diffusion anisotropy and other structures that do not exhibit diffusion anisotropy;
    (b) exposing the region to an electromagnetic excitation field;
    (c) for each of said diffusion-weighted gradients, sensing a resonant response of the region to the excitation field and the polarizing field including the diffusion-weighted gradient and producing an output indicative of the resonant response; and
    (d) vector processing said outputs to generate data representative of anisotropic diffusion exhibited by said selected structure in the region, regardless of the alignment of said diffusion weighted gradients with respect to the orientation of said selected structure; and
    (e) processing said data representative of anisotropic diffusion to generate a data set describing the shape and position of said selected structure in the region, said data set distinguishing said selected structure from other structures in the region that do not exhibit diffusion anisotropy.

NeuroGrafix sued based on direct infringement (35 U.S.C. § 271(a)) and inducement of infringement (35 U.S.C. § 271(b)), and Brainlab counterclaimed for a declaratory judgment of invalidity.  After consolidation, the Massachusetts Court granted-in-part Brainlab's motion for summary judgment that NeuroGrafix was estopped by an earlier settlement agreement with one of Brainlab's suppliers (Siemens) and for NeuroGrafix's literal infringement allegations against individual medical practitioners, for failure to provide any of the exemplary medical practitioner defendants had actually used Brainlab's products.  After NeuroGrafix's unsuccessful attempt to amend its complaint to name Brainlab as a literal infringer, the Massachusetts Court granted Brainlab's second summary judgment motion of noninfringement "that users of the software do not commit direct infringement and therefore Brainlab could not be liable for induced infringement."  The basis for the purported lack of literal infringement was that users of Brainlab's product do not satisfy the "selected structure" limitation and the "do not exhibit the diffusion anisotropy" limitation.  With regard to the former limitation, Brainlab argued that the process of "selection" meant that a user knows the "existence and location" of whatever structure was interrogated before practicing the other limitations of the claimed methods.  Brainlab's product was not used in this way, according to its motion, but rather its software "automatically generates all tracts that intersect a certain volume, like a tumor, if they meet certain criteria," and those tracts "are not visible until after [its] software has been run."  Brainlab also argued that this limitation applied only to peripheral nerves, while its software was limited in application to brain.  Finally with regard to the anisotropy limitation, its construction required zero diffusion anisotropy which is not a property of gray matter in the human brain upon which its MRI-based methods were directed.

These arguments convinced the MDL Court, which granted summary judgment, although rejecting all of Brainlab's arguments.  Instead, the Court determined Brainlab was entitled to summary judgment because NeuroGrafix had not shown any evidence that users used the software in an infringing matter (there being "nothing in the record showing that either Brainlab or any of its customers actually uses [its software] in the manner hypothesized by Neuro[G]rafix").  The Court also held that it was possible to use Brainlab's software in ways that did or did not infringe.  Finally, the Court (albeit in a footnote) held that Brainlab did not induce infringement (outside Brainlab's "no induced infringement without literal infringement" argument) because NeuroGrafix had not provided evidence to permit the Court to infer "an affirmative intent to infringe."

NeuroGrafix moved for reconsideration before the MDL Court as well as the District Court after remand to consider Brainlab's counterclaim of invalidity.  That District Court (Northern District of Illinois) denied the motion, dismissed Brainlab's counterclaim, and entered judgment.  This appeal followed.

The Federal Circuit reversed, in an opinion by Judge Taranto joined by Judges Newman and O'Malley.  The basis for this decision was essentially procedural:  the MDL Court had granted summary judgment for NeuroGrafix's purported evidentiary failures under circumstances where NeuroGrafix, as non-movant, had no burden to produce evidence because Brainlab argued its software was incapable of infringing (based on its construction of the "selected structure" limitation).  The opinion cites the several iterations of this argument in Brainlab's motion, arguments, and expert testimony.  In opposition, NeuroGrafix had argued that Brainlab's software could be practiced in an infringing manner, asserting Brainlab's advertisements, and the MDL Court eventually agreed that Brainlab's software could be used in an infringing and non-infringing manner.  "That showing was sufficient for NeuroGrafix to defeat summary judgment," according to the Federal Circuit's opinion, because it raised a genuine issue of material fact and "[e]vidence of actual infringing uses" were not necessary.  After all, the opinion recites, "[a] court cannot grant summary judgment on a ground that was neither asserted by the movant nor made the subject of judicial action under Rule 56(f) that gave the nonmovant proper notice of the ground and of the obligation 'to come forward with all of her evidence,'" citing Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986).  "The MDL court's ruling was contrary to those basic principles in that it granted summary judgment against NeuroGrafix for its failure to come forward with evidence to answer a non-infringement ground that had not been asserted and of which it had not been given proper notice," according to the opinion.

That the Court's grounds for reaching this decision are substantially procedural is further evidenced by it mentioning, in the next judicial breath, that NeuroGrafix cannot sustain a claim for literal infringement based merely on Brainlab's software being "capable of" infringing; NeuroGrafix must establish uses of the software that actually infringes," according to the opinion.  As for the MDL court (and the impermissibility of judicial economy as the basis for its decision), the opinion states:

[T]he motion being considered by the district court in this case was one structured and limited by the movant.  The court was not free to look down the road and consider what the non-movant might need to establish to survive a differently structured, well-supported motion.

For similar reasons, the opinion disapproved the MDL Court's "apparent holding that Brainlab's advertisements and manual do not induce infringement as a matter of law."  Brainlab's argument, that "Brainlab cannot induce infringement of the asserted claims of the '360 patent" because "[a]bsent direct infringement, there can be no induced infringement" does not support the MDL Court's conclusion that "the relevant Brainlab materials merely suggested that an infringing use was possible rather than instructing how to use the software in an infringing manner," according to the panel, and "[t]o the extent that this conclusion was an independent basis for the MDL court's grant of summary judgment," the Federal Circuit reversed the lower court's summary judgment grant.

But while the judicial economy sauce may not be proper for the MDL Court goose, it is perfectly appropriate for the Federal Circuit gander with regard to the proper construction of the claim term "selected structure."  The judicial logic to this dichotomy is supported by the logic that, ultimately the question can come before the Court for de novo review so the question might as well be decided now.  Based on the evidence before it (and in the absence of any claim construction below), the panel concluded that "to 'select[] [a] structure' is simply to choose it as a subject for placement into the claimed process that starts with exposing a region to a magnetic field, proceeds to sensing a resonant response, and continues as claimed."  The Court based this construction on the plain meaning of the claim, the use of the term "select" in the specification, and the Court's perception of how the MDL Court considered the meaning of this term in rejecting Brainlab's argument that the selected structure needed to be known beforehand.  While laboring on this construction, the opinion also rejects claim construction arguments asserted by both parties.  For Brainlab, the panel rejected the argument that "tracks all fibers in an area cannot perform the method, because the tracking is not limited to a particular selected structure" as being inconsistent with the plain meaning of claim 36.  For NeuroGrafix, the panel rejected its "always infringes" contention that "selected structure" is equivalent to "region," which the opinion states "is the polar opposite of Brainlab's never-infringes contention, and [] is equally wrong" and "contradicts the claim language" because claim 36 uses these terms distinctly differently.

NeuroGrafix v. Brainlab, Inc. (Fed. Cir. 2019)
Panel: Circuit Judges Newman, O'Malley, and Taranto
Opinion by Circuit Judge Taranto

Additional Disclaimer: MBHB represented NeuroGrafix before the U.S. District Court for the Northern District of Illinois.  To the extent that this case summary contains any opinions, the opinions would be of Dr. Noonan and not NeuroGrafix or MBHB.

Life Technologies Corp. v. Promega Corp. (2017)

By Donald Zuhn --

Earlier today, in Life Technologies Corp. v. Promega Corp., the Supreme Court reversed a determination by the Federal Circuit that there are circumstances in which a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States, holding instead "that a single component does not constitute a substantial portion of the components that can give rise to liability under §271(f)(1)."

The Federal Circuit had earlier determined in Promega Corp. v. Life Technologies Corp. that substantial evidence supported a jury's finding that Life Technologies infringed U.S. Patent No. RE37,984 ("the Tautz patent") under 35 U.S.C. § 271(f)(1), and therefore had reversed the District Court's grant of judgment as a matter of law (JMOL) of noninfringement.  The Tautz patent, which is owned by Max-Planck-Gesellschaft zur Förderung der Wissenschaften E.V. and exclusively licensed to Promega, claims a kit for testing at least one STR locus that contains: (1) a mixture of primers; (2) a polymerizing enzyme such as Taq polymerase; (3) nucleotides for forming replicated strands of DNA; (4) a buffer solution for the amplification; and (5) control DNA.  Life Technologies manufactures genetic testing kits that provide components for carrying out a multiplex amplification of STR loci from DNA samples, wherein the kits contain (1) a primer mix; (2) Taq polymerase; (3) PCR reaction mix including nucleotides; (4) a buffer solution; and (5) control DNA.

In 2010, Promega sued Life Technologies for infringement of the Tautz patent (as well as four other patents owned by Promega), alleging that Life Technologies had sold kits that were not covered by the license agreement between the parties (the license agreement limited Life Technologies' use of the patents-in-suit to activities related to legal proceedings, i.e., live forensic investigations conducted by police officers).  The parties moved for summary judgment on infringement and invalidity, with the District Court determining that Life Technologies' sales outside the license agreement's field of use were infringing.  Following trial, the jury returned a verdict of willful infringement.  Life Technologies then moved for JMOL and the District Court granted the motion, finding that Promega had failed to present sufficient evidence to sustain a jury verdict under § 271(f)(1), and vacated the finding of infringement.

On appeal, the Federal Circuit reversed the District Court's grant of JMOL of noninfringement.  The panel was divided as to the finding of infringement under § 271(f)(1), but the divide centered on another aspect of the statute.  With regard to the issue of whether infringement under § 271(f)(1) requires that at least two components be supplied from the U.S., the Federal Circuit held "that there are circumstances in which a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States," and "based on the facts of this particular case . . . conclude[d] that substantial evidence supports the jury's verdict that LifeTech is liable for infringement under § 271(f)(1) for shipping the Taq polymerase component of its accused genetic testing kits to its United Kingdom facility."

The Supreme Court granted certiorari to determine whether a party that supplies a single component of a multicomponent invention for manufacture abroad can be held liable for infringement under § 271(f)(1).  As the Court pointed out in its opinion, Life Technologies manufactured all but one component of its kits in the United Kingdom -- manufacturing Taq polymerase in the United States and then shipping the Taq polymerase to its United Kingdom facility to be combined with the other four components of the kit.

The Court began by noting that § 271(f)(1) reads as follows (with emphasis added):

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

According to the Court, "[t]he threshold determination to be made is whether §271(f)(2)'s requirement of 'a substantial portion' of the components of a patented invention refers to a quantitative or qualitative measurement."  Life Technologies argued that § 271(f)(1) establishes a quantitative threshold, and Promega countered that a "substantial portion" of the components includes a single component if that component is sufficiently important to the invention.

In answering the threshold inquiry, the Court noted that the Patent Act does not define the term "substantial," and that the ordinary meaning of the term was of "little help," since "[a]ll agree the term is ambiguous and, taken in isolation, might refer to an important portion or to a large portion."  However, when the Court looked at the context in which the term appears in the statute, that context pointed to a quantitative meaning.  In particular, the Court indicated that the terms "all" and "portion" in the statute convey a quantitative meaning.  The Court also noted that "there is nothing in the neighboring text to ground a qualitative interpretation."

The Court declined Promega's invitation to adopt a "case-specific approach" in which the factfinder would have to decipher whether the components at issue are a "substantial portion" under either a qualitative or quantitative test, stating that "[h]aving determined the phrase 'substantial portion' is ambiguous, our task is to resolve that ambiguity, not to compound it by tasking juries across the Nation with interpreting the meaning of the statute on an ad hoc basis."  Moreover, the Court noted that:

[C]onsidering the qualitative importance of a component . . . might just as easily complicate the factfinder's review.  Surely a great many components of an invention (if not every component) are important.  Few inventions, including the one at issue here, would function at all without any one of their components.  Indeed, Promega has not identified any component covered by the Tautz patent that would not satisfy Promega's "importance" litmus test.  How are courts—or, for that matter, market participants attempting to avoid liability—to determine the relative importance of the components of an invention?  Neither Promega nor the Federal Circuit offers an easy way to make this decision.

Having determined that the term "substantial portion" refers to a quantitative measurement, the Court next turned to the question of whether, as a matter of law, a single component can ever constitute a "substantial portion" so as to trigger liability under § 271(f)(1).  In answering that question in the negative, the Court noted that § 271(f)(1) consistently refers to "components" in the plural, stating that "[t]ext specifying a substantial portion of 'components,' plural, indicates that multiple components constitute the substantial portion."  The Court therefore held that "one component does not constitute 'all or a substantial portion' of a multicomponent invention under §271(f)(1)," adding that to resolve the question presented, the Court did not need to define how close to "all" of the components "a substantial portion" must be.

Having found that the phrase "substantial portion" in § 271(f)(1) has a quantitative, not a qualitative, meaning, and further, that § 271(f)(1) does not cover the supply of a single component of a multicomponent invention, the Court reversed the judgment of the Federal Circuit and remanded the case since only a single component of the patented invention at issue was supplied from the United States.

Life Technologies Corp. v. Promega Corp. (2017)
Opinion of the Court by Justice Sotomayor, joined by Justices Kennedy, Ginsburg, Breyer, and Kagan; joined as to all but Part II-C by Justices Thomas and Alito;
Opinion concurring in part and concurring in the judgment by Justice Alito, joined by Justice Thomas;
Chief Justice Roberts took no part in the decision of the case.

Eli Lilly & Co. v. Teva Parenteral Medicines, Inc. (Fed. Cir. 2017)

By Kevin E. Noonan --

From the nadir of the Supreme Court's allegations that the Federal Circuit "fundamentally misunderstood" the law of inducing infringement in Limelight Networks, Inc. v. Akamai Technologies, Inc., the nation's specialized patent appellate court has crafted a two-prong test for assessing when the actions of more than a single actor amount to literal infringement sufficient to support a determination of inducement.  Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015) (en banc).

The case came to the Court from ANDA litigation between Eli Lilly and Teva and other ANDA filers over infringement under 35 U.S.C. § 271(e)(2) of U.S. Patent No. 7,772,209.  The claims were directed to methods for administering pemetrexed disodium (sold by Eli Lilly as Alimta^®) after pretreatment with folic acid and vitamin B12.  Claims 1 and 12 are representative as set forth in the opinion:

1.  A method of administering pemetrexed disodium to a patient in need thereof comprising administering an effective amount of folic acid and an effective amount of a methylmalonic acid lowering agent followed by administering an effective amount of pemetrexed disodium, wherein the methylmalonic acid lowering agent is selected from the group consisting of vitamin B12, hydroxycobalamin, cyano-10-chlorocobalamin, aquocobalamin perchlorate, aquo-10-cobalamin perchlorate, azidocobalamin, cobalamin, cyanoco- balamin, or chlorocobalamin.

12.  An improved method for administering pemetrexed disodium to a patient in need of chemotherapeutic treatment, wherein the improvement comprises:
    a)  administration of between about 350 μg and about 1000 μg of folic acid prior to the first administration of pemetrexed disodium;
    b)  administration of about 500 μg to about 1500 μg of vitamin B12, prior to the first administration of pemetrexed disodium; and
    c) administration of pemetrexed disodium.

(Where the italicized limitations were specifically at issue.)  Here, the patient practices the step of the claim involving administering folic acid (which is available as a pill), and the physician administers B12 and pemetrexed by injection.  The question of whether the existence of two actors (patients and physicians) practicing the claims creates a divided infringement situation that would vitiate literal infringement was clearly contemplated throughout the litigation, during the course of which the Federal Circuit and Supreme Court were considering the question.  That both actors performed their individual steps of the claimed method was not disputed, but its effects on infringement liability, and whether Teva could be liable for inducing infringement was central to the dispute between the parties.

As the litigation progressed, defendants conditionally stipulated to induced infringement subject to being able to litigate the issue if (as it turned out) the Supreme Court reversed the Federal Circuit's contemporaneous standard.  The District Court proceeded on the invalidity issues and held Eli Lilly's claims not to be invalid on obviousness and obviousness-type double patenting grounds nor were indefinite.  After the Supreme Court's Akamai decision, the parties relitigated the infringement issues.  The District Court used the label as evidence of infringement, wherein under FDA regulations Teva's label comprising instruction for administration of the drug would be identical to Eli Lilly's label.  Based on this determination, the District Court found defendants had induced infringement, and this appeal followed.

The Federal Circuit affirmed, in an opinion by Chief Judge Prost joined by Judges Newman and Dyk.  The opinion recognized the Supreme Court's overriding teaching that induced infringement requires a finding that literal infringement had occurred.  Moreover, inducement also requires an intent to induce, which requires that the alleged infringer "knew or should have known" that her actions would induce infringement.  In order for more than one actor to practice the steps of a claimed method and for literal infringement to lie, the Supreme Court-approved standard is that either one of the actors works at the "direction or control" of the other actor, or the actors form a joint enterprise.  With regard to the question of "direction or control," the panel set forth the revised Akamai standard operationalized as a two-prong test.  The first prong of that test is whether one actor "'conditions participation in an activity or receipt of a benefit' upon anothers' performance of one or more steps of a patented method," and the second prong is whether that actor "'establishes the manner or timing of that performance,'" citing the Court's Akamai decision following remand from the Supreme Court (italics in opinion).  The District Court held that the first prong was satisfied because folate administration was a precondition for the physician administering B12 and the drug, and that the second prong was satisfied because the physician prescribed the dose and administration schedule to the patient.

With regard to the District Court's decision on the first prong, the Federal Circuit held that this determination was supported by the evidence of record.  Contrary to Teva's argument that reduction of toxicity was not conditioned by a patient taking folate, the opinion states that what was conditioned was whether the physician administered the drug to the patient (i.e., a physician would only administer the drug if a patient had taken the prescribed amount of folate at the proper schedule):

What is relevant is whether the physician sufficiently directs or controls the acts of the patients in such a manner as to condition participation in an activity or receipt of a benefit—in this case, treatment with pemetrexed in the manner that reduces toxicities—upon the performance of a step of the patented method and establishes the manner and timing of the performance [italics in opinion].

The panel also noted that the District Court's conclusions on this point were supported by the Physician Prescribing Information and Patient Information comprising the FDA-approved label as well as expert testimony (wherein both parties' experts agreed on the importance of folate pre-administration).  Finally on this point, the panel stated that such "conditioning" did not require that a legal obligation be imposed on one of the parties or that the step comprise an "unavoidable technological prerequisite to participation."

With regard to the second prong, the District Court and the panel relied upon the product label.  This information comports with the dosage amounts and frequencies encompassed by the asserted claims.  Expert testimony supported the finding that it was the physician who prescribed folate (in administered amount and frequency) to the patient.

Taken as a whole, the panel found no reversible error in the District Court's factual determinations.

The panel then turned to whether Eli Lilly had established that defendants exhibited the requisite intent to induce infringement, which required evidence of specific intention and acts and not mere knowledge of the patent in suit.  The District Court once more relied on the generic product label (identical to Eli Lilly's label).  The District Court and the Federal Circuit rejected Teva's argument that the label was not sufficient to provide specific evidence of inducement, because it purportedly did not show how physicians (the direct infringer) do act rather than as they may act.  The panel's reaction to that argument was that "[t]he question is not just whether [those] instructions describ[e] the infringing mode, . . . but whether the instructions teach an infringing use such that we are willing to infer from those instructions an affirmative intent to infringe the patent," citing Takeda Pharm. USA, Inc. v. West-Ward Pharm. Corp. and that "it is irrelevant that some users may ignore the warnings in the proposed label," citing AstraZeneca LP v. Apotex, Inc.  Also relevant to the panel's decision was that the label (in both the Physician Prescribing Information and Patient Information) emphasized how important folate administration was for reducing toxicity associated with administration of the drug.  This portion of the opinion concludes "[i]n sum, evidence that the product labeling that Defendants seek would inevitably lead some physicians to infringe establishes the requisite intent for inducement."

With regard to the invalidity issues, the opinion first considered Teva's indefiniteness contentions.  The factual basis for these were that the term "vitamin B12" was indefinite, because there were various species of the vitamin (claimed as vitamin B12, hydroxycobalamin, cyano-10-chlorocobalamin, aquocobalamin perchlorate, aquo-10-cobalamin perchlorate, azidocobalamin, cobalamin, cyanocobalamin, or chlorocobalamin); the District Court found that the term meant cyanocobalamin based on expert testimony.  The panel noted that it does not defer to this expert testimony because satisfaction of the statute is a question of law.  But the opinion does note that the question of how the skilled worker would understand the term is a question of fact reviewable for clear error, and found no such error in the District Court's finding (a definition that was supported even by defendant's expert).  Upon consideration of how the term was used in the claims, and despite some apparent inconsistency in claim language, the Federal Circuit agreed that the skilled worker would have understood the meaning of the term.

With regarding to obviousness, the panel referenced the District Court's "thorough opinion" that the prior art did not motivate the skilled worker to practice the claimed method, and specifically that the skilled artisan would not have been motivated to "(1) use folic acid pretreatment with pemetrexed; (2) use vitamin B12 pretreatment with pemetrexed; or (3) use the claimed doses and schedules of folic acid and vitamin B12 pretreatments with pemetrexed."  The focus of these determinations was that the art did not show any correlation between pemetrexed toxicity and vitamin B12 deficiency (although there was evidence of a correlation with folate deficiency).  Expert testimony from both sides established that there was no recognition in the art that vitamin B12 deficiencies were associated with cancer treatment with antifolate compounds.  Nor was there evidence from the art that B12 would have been routinely administered (or that its administration schedules would have been routine) in cancer treatment.  The panel made similar determinations in affirming the District Court's finding that the claims of the '209 patent were not invalid under the obviousness-type double patenting doctrine.

Eli Lilly benefited in this case by having prevailed at the District Court, in large part due to the burden of finding clear error to overcome the District Court's decision.  But the opinion does set forth an affirmation of the Court's two-prong test for finding that more than one actor can perform the steps in a claimed method sufficient to satisfy the unitary standard for finding literal infringement.

Eli Lilly & Co. v. Teva Parenteral Medicines, Inc. (Fed. Cir. 2017)
Panel:  Chief Judge Prost and Circuit Judges Newman and Dyk
Opinion by Chief Judge Prost

Supreme Court Preview -- Life Technologies Corp. v. Promega Corp.

By Andrew Williams --

On Tuesday, December 6, the Supreme Court will hear oral arguments regarding the interpretation of 35 U.S.C. § 271(f)(1), with the pertinent section highlighted:

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

The sole question that will be decided by the Supreme Court in the Life Technologies Corporation v. Promega Corporation case is:

Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C.§ 271(f)(1), exposing the manufacturer to liability for all worldwide sales.

Because the statutory language also concerns "active inducement," and LifeTech supplied the component in question to itself, albeit outside the United States, the petitioner had also posed the question whether a single entity can actively induce itself.  The Court, however, did not take up this issue.  Interestingly, Chief Judge Prost had dissented-in-part from the Federal Circuit opinion, but only to this second issue regarding inducement (see "Promega Corp. v. Life Technologies Corp. (Fed. Cir. 2014)").  As such, her separate comments did not impact the Supreme Court's decision to hear this case.

The technology at issue centers on the existence of "short tandem repeats" ("STR") of DNA in the human genome that can be used create a DNA "fingerprint" unique to an individual.  For example, the sequence ATT (adenine-thymine-thymine) can be differently repeated at a particular location depending on the individual.  While no particular "allele" is sufficient to differentiate one person from all others, the analysis of multiple alleles can be.  Therefore, STR profiling can be used in many fields, such as forensic science.  The various loci can be amplified using the polymerase chain reaction ("PCR") to make detectable amounts of DNA.  It is additionally beneficial to amplify more than one loci simultaneously in a reaction, which is referred to as "multiplexing."  The patented technology concerns multiplexing PCR.

The patent that is at issue in this case is directed to a kit for use in such a multiplexing reaction, which contains (1) a mixture of primers; (2) a polymerizing enzyme such as Taq polymerase; (3) nucleotides; (4) a buffer solution; and (5) control DNA.  LifeTech sells kits with all of these components.  However, only the Taq polymerase is manufactured in the United States, and is subsequently shipped overseas to a facility in the United Kingdom for assembly.  These kits are sold world-wide.  The District Court ruled on summary judgement that LifeTech's sales of its STR kits for uses other than forensic investigations conducted by police officers fell outside of a license field-of-use.  The damages calculation that went to the jury included both U.S. sales under 35 U.S.C. § 271(a) and kits made and sold outside the U.S. under 35 U.S.C. § 271(f)(1).  The District Court subsequently granted LifeTech's JMOL motion, finding that Promega failed to present sufficient evidence to sustain the jury verdict under both of these statutory sections.

In considering the same question that is before the Supreme Court, the Federal Circuit held "that there are circumstances in which a party may be liable under 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States."  Therefore, the Court concluded that there was substantial evidence for the jury's verdict.  The Federal Circuit took the position that the second reference to "such components" in the statute references "the components of the patented invention," not that which much be supplied.  Therefore, the dictionary definition of "substantial," which is "important" or "essential," and the definition of "portion," which is a "section or quantity within a larger thing; a part of a whole," can include a "single important or essential component . . . ."  Moreover, the Court pointed out that the Dictionary Act, at 1 U.S.C. § 1, instructs that "words importing the plural [can] include the singular."

The Federal Circuit also addressed the previous Supreme Court case interpreting § 271(f)(1):  Microsoft v. AT&T Corp., 550 U.S. 437 (2007).  In that case, the exported product was a "master version" of software for an operating system that was copied and installed outside the United States.  The Supreme Court held that abstract software code was not a "component" as referenced in the statute, and that copies made outside the United States were not "supplied" for the purposes of the infringement analysis under this section.  The Federal Circuit pointed out that the Supreme Court was actually considering the export of a single "component" -- the master version.  And, even though the Court held that such a master version was not a § 271(f)(1) component, it did not make any pronouncement that a single component could not satisfy this statutory section.  In fact, the Federal Circuit went as far as to say that the Court could have found, or otherwise instructed, that infringement under this section requires more than one component.  But the Supreme Court did not.  Therefore, the Federal Circuit rested on its ordinary reading of the statute.

Before the Supreme Court on Tuesday, LifeTech is arguing that "a substantial portion of the components" cannot be satisfied by a single component.  In making its argument, LifeTech also looked to the plain text, but focused on the proximity of the phrase "substantial portion" to the term "all," which necessitates a quantitative meaning.  In other words, the argument goes, the statute is referring to the number of components supplied, not their subjective importance.  Moreover, because § 271(f)(2) refers to infringement for exporting a single U.S. component that is especially made or adapted for infringement, subsection (1) must refer exclusively to multi-component infringement.  LifeTech also pointed out that the Microsoft case warned against giving "§271(f) an expansive interpretation," because the presumption should be that United States patent law "governs domestically but does not rule the world."  Finally, LifeTech pointed out that 271(f)(1) was enacted in response to the Supreme Court's decision in Deepsouth Packing Co. v. Laitram Corp., and was intended to prevent the circumvention of U.S. patent law by supplying disassembled parts, leaving only the trivial step of assembly outside of the borders.  Because the Federal Circuit's interpretation would go beyond that goal, LifeTech asserted that the decision should be reversed.

Promega is arguing that the Federal Circuit was correct in its interpretation of the statute.  First, Promega asserted that there is nothing in the statute that suggests that a single component cannot be very important to the overall invention.  Therefore, the analysis should be both a quantitative and qualitative one, where consideration is given to both amount and importance.  Promega characterized LifeTech's proffered interpretation as "a rigid, bright-line rule," likely in view of the Supreme Court's disdain for such rules.  It also focused on the legislative history, but noted that Congress was more concerned was preventing U.S. manufacturers from evading U.S. patent law, and therefore was more focused on the "intent" of the infringer more than the quantity of components.  Moreover, there is no danger of "unduly expansive liability for innocent U.S. suppliers of commodity components," because there is still "specific intent required to establish active inducement."  Finally, Promega pointed out that the Microsoft case was inapposite because in that case, a "U.S. made-master was never actually used in an infringing device."  In contrast, according to Promega, every kit in the present case is "powered" by a Taq polymerase made in the U.S.  This case does not implicate the presumption against extraterritoriality, Promega asserted, because the conduct occurs here in the U.S.

Not surprisingly, there was amicus interest in this case, with positions on both sides of the issue.  The United States government filed an amicus brief in support of petitioner LifeTech, as did the company Agilent Technologies, the Federation of German Industries (known as Bundesverband der Deutschen Industrie e.V.), and a collection of Intellectual Property Professors (although only five such professors attached their names to the brief).  In contrast, the Wisconsin Alumni Research Foundation and the New York Intellectual Property Law Association filed amicus briefs in support of Promega.  Finally, two intellectual property organizations, the IPO and the AIPLA, filed amicus briefs in support of neither party.  Nevertheless, both of these organizations argued that the statute should be interpreted to allow a single component to result in liability under 271(f)(1).  Therefore, even though these organizations did not support Promega, the outcomes they both advocated would benefit the respondent.

We will continue to report on this case as the Supreme Court considers the issue.

LifeNet Health v. LifeCell Corp. (Fed. Cir. 2016)

By Kevin E. Noonan --

The complexities that can be attendant on defending against an infringement allegation, and the possibility that a straightforward path to non-infringement can be complicated by claim construction even for terms construed using their plain meaning, are illustrated in the Federal Circuit's opinion affirming a jury verdict of infringement in LifeNet Health v. LifeCell Corp.

The suit involved LifeNet's ("Net") allegation that LifeCell's ("Cell") sales of "[p]lasticized soft tissue grafts for transplant" for "medical, orthopedic, dental, and cosmetic surgery applications" infringed its U.S. Patent No. 6,569,200.  These grafts provide an alternative to freeze drying the tissue for transplantation (which was conventional art practice); instead, the water in the tissue is replaced with "biocompatible plasticizers" including, inter alia, glycerol.  Using the claimed grafts avoids rehydration from a freeze-dried state that raised problems in the art.

Claim 1 of the '200 patent is representative:

1.  A plasticized soft tissue graft suitable for transplantation into a human, comprising:
    a cleaned soft tissue graft having an internal matrix; and
    one or more plasticizers contained in said internal matrix;
    said one or more plasticizers are not removed from said internal matrix of said plasticized soft tissue graft prior to transplantation into a human.

Relevant to the Court's decision, the italicized limitation in the claim was added during prosecution to overcome prior art (Cavallaro reference, U.S. Patent No. 5,718,012) that disclosed using plasticizers to strengthen collagen threads but required that the plasticizer be removed before use.

The specification of the '200 patent states that while the glycerol or other plasticizer can be removed prior to implantation the removal step isn't required.  The physician has options:

(1) "direct implantation of the grafts without further processing following removal from the packaging";

(2) "implantation following a brief washing in sterile isotonic saline to remove any remaining traces of plasticizer associated with the immediate surfaces of the grafts"; or

(3) "implantation following an extended (approximately 1 hour) washing with sterile isotonic saline to remove as much plasticizer as possible."

Cell's accused infringing soft tissue grafts were preserved in a plasticizer ("Solution E") wherein the graft was soaked in saline for at least 2 minutes prior to use, a treatment that removes "significant amounts" of the plasticizers.

The District Court's claim construction was directed to the limitation (added during prosecution) that the plasticizers were "not removed" from the graft prior to use.  Net argued that some, but not all, of the plasticizer could be removed, while Cell argued that none of the plasticizer could be removed if infringement would lie.  According to the opinion, Cell argued that the term required that "no processing steps are taken, before transplantation into a human that result in any amount of the one or more plasticizers being taken out of the internal matrix of the plasticized soft tissue graft," while Net argued that the term meant the grafts were used "without complete replacement of the plasticizer or plasticizers in the internal matrix of the tissue graft prior to direct implantation into a human."  The District Court construed the claim using the plain meaning of the term, that "not removed" means 'no plasticizers are removed prior to transplantation.'"  To a jury, Cell presented evidence that "as much as 50% of the plasticizer in [its] products is removed during the [] saline rinse" in arguing its products did not infringe.  Net countered that the graft comprises an internal matrix from which the plasticizer is not removed by Cell's rinse (as required by the claim and based on expert testimony) and thus the limitation is met and Cell's accused articles infringed.  A jury decided that Cell infringed the asserted claims of the '200 patent, found Cell had not established its invalidity defenses, and awarded Net almost $34 million.  Cell appealed.

The Federal Circuit affirmed, in an opinion by Chief Judge Prost, joined by Judges Reyna and Chen.  Cell presented five arguments on appeal:  1) the jury (rather than the court) improperly resolved a dispute regarding the meaning of "not removed" in the claim; 2) no matter how the term is construed, Cell cannot be liable for direct infringement, because it is the physician or technician that prepares a graft for transplantation, not the company; 3) the claims are indefinite for reciting a "method of use" limitation in a claim to an apparatus, citing IPXL Holdings, LLC v. Amazon.com, Inc., 430 F.3d 1377 (Fed. Cir. 2005); 4) the District Court misconstrued the term "plasticized soft tissue graft" which, if properly construed, renders its products non-infringing; and 5) the claims are anticipated by U.S. Patent No. 4,357,274 or obvious over this reference and the knowledge of one having ordinary skill in the art.

Cell's claim construction argument regarding the meaning of the term "not removed" was that the legal dispute about the term's meaning was wrongly presented to the jury (insofar as the jury was required to determine the plain meaning of this term), citing O2 Micro International Ltd. v. Beyond Innovation Technology Co., 521 F.3d 1351 (Fed. Cir. 2008).  The Federal Circuit held that Cell had not requested further construction at trial and thus had not properly raised an O2 Micro issue.  The panel recognized that this term related to two types of removal:  how much of the plasticizer was removed, and from where it was removed (i.e., the "degree" of removal versus the locus of removal at the "internal matrix" of the tissue).  The opinion further recognized that Cell's argument on appeal was that the internal matrix was the same as the tissue graft, so that removal of the plasticizer from the "gaps and voids" of the tissue was the same as removal from the internal matrix.  Unfortunately for Cell, the Federal Circuit found that Cell did not "timely request modification of the district court's claim construction" and, moreover, argued throughout that the issue was one of fact rather than being a claim construction question.  On the merits, the Court noted (in a footnote) that the term was properly construed according to its plain meaning in light of disclosure in the specification, including that the graft could be briefly rinsed or washed for one hour prior to transplantation; presumably, these treatments also resulted in no removal of the plasticizer from the internal matrix.  Finally, on this issue the Court rejected Cell's attacks on Net's experts' trial testimony and particularly purported contradictions contained therein.  Accordingly, the Court held that there was substantial evidence supporting the jury's finding of infringement.

On the question of divided infringement or inducement of infringement, the panel held that "the non-removal limitation clarifies that the recited plasticizer has not been removed and, because the plasticizer is biocompatible, can remain in the internal matrix of the tissue graft during transplantation, i.e., it need not ever be removed."  As a limitation related to characterizing properties of the graft, rather than reciting a method step, the practice of this element required no action by a third party, and the Court affirmed the jury's finding of literal infringement liability on this basis (and the District Court's refusal to grant JMOL).

With regard to the IPXL issue (that it is improper for a claim to recite "method of use" limitations in a claim to an apparatus), the Court's determination regarding the non-removal limitation on the divided infringement question (that it recited a property of the tissue graft and not an affirmative limitation regarding steps to remove the plasticizer from the graft) was dispositive:  under this reading of challenged claims 1-4 there was no mixing of apparatus and method claims and thus the claims were not indefinite.

Cell's challenge to the District Court's construction of the term "plasticized soft tissue graft" was based on its assertion that in addition to interpreting the term to mean that the "water of hydration" in the tissue had been replaced by the plasticizer, the Court should have required that the graft was "'dehydrated' in the sense that the tissue can only have 'low residual moisture.'"  The Federal Circuit agreed with Net's position that the term "dehydration" "merely means that some of the water has been replaced with plasticizer," consistent with the District Court's construction and based on specific disclosure in the specification.

Finally with regard to Cell's invalidity arguments, the panel found substantial evidence supporting the jury's finding that the '274 patent did not anticipate the '200 patent's claims.  Specifically, based on conflicting expert testimony, the Court was persuaded that while the '200 patent disclosed methods for avoiding "significantly altering" the mechanical properties of the tissue graft, the methods disclosed in the '274 patent resulted in significant alternation of the mechanical properties of the tissue.  "The ultimate issue on this record was a classic factual dispute that the jury was free to resolve in LifeNet's favor," according to the opinion, citing Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1361 (Fed. Cir. 2012).  Cell's obviousness arguments were similarly unpersuasive and the Federal Circuit upheld the District Court's denial of JMOL or a new trial on this issue.

LifeNet Health v. LifeCell Corp. (Fed. Cir. 2016)
Panel: Chief Judge Prost and Circuit Judges Reyna and Chen
Opinion by Chief Judge Prost

Top Five Stories of 2015

By Donald Zuhn --

After reflecting upon the events of the past twelve months, Patent Docs presents its ninth annual list of top patent stories.  For 2015, we identified twenty stories that were covered on Patent Docs last year that we believe had (or are likely to have) the greatest impact on patent practitioners and applicants.  In previous posts, we counted down stories #20 to #16, stories #15 to #11, and stories #10 to #6, and today we count down the top five stories of 2015.  As with our other lists (2014, 2013, 2012, 2011, 2010, 2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.  In addition, we will be offering a live webinar on the "Top Patent Law Stories of 2015" on January 21, 2016 from 10:00 am to 11:15 am (CT).  Details regarding the webinar, which will focus on a handful of the most important stories, can be found here.

5.  Federal Circuit Decides Akamai v. Limelight on Remand

Nearly ten years ago, Akamai Technologies, Inc. sued Limelight Networks, Inc. in the U.S. District Court for the District of Massachusetts, alleging infringement of U.S. Patent No. 6,108,703.  The claimed invention of the '703 patent is directed to delivering electronic data using a content delivery network (CDN), the CDN purporting to facilitate faster delivery of the data by separating the content of a website onto multiple servers.  The content that requires greater network capacity (such as photos and videos) can be assigned to servers (be "tagged") that provide this content at faster speeds.  Limelight operates a CDN, with Limelight carrying out three of the four claimed steps (i.e., distributing, resolving, and returning) and contractually requiring its customers to carry out the fourth claim step (i.e., tagging).  At trial, the District Court granted Limelight's motion for judgment of non-infringement as a matter of law (in view of the Federal Circuit's decision in Muniauction, Inc. v. Thomson Corp., where the Court held that direct infringement of a claimed method requires that a single entity perform every step of the claim (the single entity rule), which requirement could be satisfied if the steps of the claimed method are performed by multiple parties provided that a single defendant exercises "control or direction" over the entire process).  On appeal, a Federal Circuit panel affirmed, but the en banc Court reversed and remanded for further proceedings.  In a June 2014 appeal, the Supreme Court reversed the Federal Circuit finding that Limelight had infringed the '703 patent, holding that a defendant is not liable for inducing infringement under 35 U.S.C. § 271(b) when no one party has directly infringed the patent under § 271(a).  In June of 2015, the Federal Circuit, hearing Akamai on remand, decided that "because Limelight . . . did not perform all of the steps of the asserted method claims . . . and because the record contains no basis on which to impose liability on Limelight for the actions of its customers who carried out the other steps, Limelight has not directly infringed the '703 patent under § 271(a)."  In dissent, Judge Moore opined that the single entity rule "is a recent judicial creation inconsistent with statute, common law, and common sense."  In August, the en banc Court decided that there was substantial evidence to support the jury finding that Limelight directly infringed the '703 patent, and therefore the Court reversed the District Court's grant of Limelight's motion for judgment of non-infringement as a matter of law.  The en banc opinion signals a move away from the restrictive Muniauction joint infringement framework to something that resembles a "totality of the circumstances" test.  However, the en banc decision is not the end of the line for the parties, since the en banc Court noted that there were remaining issues in both the appeal and cross-appeal.  Another trip back to the Supreme Court for Akamai may be in the offing.

For information regarding this and other related topics, please see:

• "Eli Lilly and Company v. Teva Parenteral Medicines, Inc. (S.D. Ind. 2015)," September 1, 2015
• "Federal Circuit Delivers En Banc Opinion in Akamai v. Limelight," August 13, 2015
• "Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015)," June 21, 2015

4.  Hi-Tech Fallout from Alice Corp. v. CLS Bank Int'l

As the fallout from the Supreme Court's Alice Corp. v. CLS Bank Int'l case makes its way through the federal courts and the U.S. Patent and Trademark Office, applicants and patentees continue to struggle with the implications of the decision.  Alice provided a two-part test for patent-eligibility under 35 U.S.C. § 101, requiring that one first determine whether the claim at issue is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to something more than the judicial exclusion.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "something more."  Notoriously unclear and difficult to apply in practice, when employed by courts, the Alice test has resulted in the vast majority of claims under review being found patent-ineligible under § 101.  Similar statistics are the case for the Patent Trial and Appeal Board (PTAB).  As a result, any court or PTAB decisions finding that claims meet the requirements of Alice are useful clues for applicants and patentees.  For instance, drawing analogies between one's claims that those that a judicial body has found patent-eligible can be persuasive to patent examiners in the USPTO, as well as to other judicial bodies.  In addition, since late last year, a theme of many 35 U.S.C. § 101 disputes has been whether claims under review are more like those in Ultramercial Inc. v. Hulu LLC or DDR Holdings, LLC v. Hotels.com.  In Ultramercial, the Federal Circuit held that claiming a disembodied method that merely uses general-purpose technology (i.e., the Internet) fails to meet the requirements of § 101, while in DDR Holdings, the Court stated that claims that are necessarily rooted in computer technology (e.g., one that changes the technology itself rather than just using it) are patent-eligible.  Patentees attempt to draw analogies between their claims and those of DDR, while defendants attempt the same with those of Ultramercial.

For information regarding this and other related topics, please see:

• "01 Communique Laboratory, Inc. vs. Citrix Systems, Inc. (N.D. Ohio 2015)," December 30, 2015
• "Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC (Fed. Cir. 2015)," December 29, 2015
• "'Software' Claims Reciting No Structural Components and Having Questionable Novelty Struck Down under 35 U.S.C. § 101," November 23, 2015
• "MacroPoint, LLC v. FourKites, Inc. (N.D. Ohio 2015)," November 10, 2015
• "PTAB Issues Questionable 101 Decision," October 26, 2015
• "PTAB Finds Two Sets of Claims to Be Not Abstract," September 24, 2015
• "Versata Development Group, Inc. v. SAP America, Inc. (Fed. Cir. 2015)," July 15, 2015
• "Internet Patents Corp. v. Active Network, Inc. (Fed Cir. 2015)," June 23, 2015
• "OIP Technologies, Inc. v. Amazon.com, Inc. (Fed. Cir. 2015)," June 12, 2015
• "Ultramercial v. WildTangent -- Petition for Writ of Certiorari," June 3, 2015
• "Allvoice Developments US, LLC v. Microsoft Corp. (Fed. Cir. 2015)," May 15, 2015
• "Ultramercial Requests En Banc Review," January 19, 2015

3.  Federal Circuit Decides Amgen v. Sandoz

In July, the Federal Circuit, in a seriously fractured decision, construed the provisions of the Biologics Price Control and Innovation Act (BPCIA) in Amgen v. Sandoz.  In doing so, the Court limited the information available to biologic drug makers regarding a competitor's application for a biosimilar product (adopting Sandoz's argument).  On the other hand, the decision extended the statutory exclusivity period enjoyed by innovator biologic drug makers relating to when the biosimilar applicant can enter the marketplace (as Amgen argued).  In October, the Federal Circuit denied petitions for rehearing and rehearing en banc filed by both parties.  Amgen had petitioned for rehearing on the panel's decision that the District Court correctly determined that the provisions of the BPCIA requiring disclosure to the reference product sponsor of a biosimilar applicant's application and relevant manufacturing information was optional rather than mandatory.  Sandoz petitioned for rehearing on the panel's decision that the District Court had erred in deciding that the 180-day notice of commercial marketing for the biosimilar product could not be given to the reference product sponsor prior to FDA approval of their biosimilar application.

For information regarding this and other related topics, please see:

• "Federal Circuit Denies En Banc Petition in Amgen v. Sandoz," October 16, 2015
• "Amgen v. Sandoz Update -- En Banc Rehearing Petitions Filed," September 10, 2015
• " Federal Circuit Lifts Injunction Against Sandoz," September 2, 2015
• ""Don't Stop the Dance"[*] -- The Dissents-in-Part from Amgen v. Sandoz," July 23, 2015
• "Amgen v. Sandoz (Fed. Cir. 2015)," July 22, 2015
• "Federal Circuit Decides Amgen v. Sandoz (in an opinion that will make neither party happy)," July 21, 2015
• "Amgen v. Sandoz -- Federal Circuit Oral Argument," June 7, 2015
• "Amgen Wins Injunction against Neupogen® Biosimilar Pending Appeal," May 6, 2015
• "Amgen v. Sandoz Update -- Amgen's Continuing Efforts to Obtain Preliminary Injunction," April 28, 2015
• "Amgen v. Sandoz Update -- BIO Files an Amicus Brief at the Federal Circuit," April 21, 2015
• "Amgen Receives No Help from the FDA -- A Biosimilar Update," April 15, 2015
• "The Tyranny of the Judiciary," March 23, 2015
• "Gotta Dance? Apparently Not -- A Biosimilar Update," March 19, 2015

2.  USPTO Expands on Subject Matter Eligibility Guidance

In December 2014, the U.S. Patent and Trademark Office published Interim Guidance regarding the examination of claims for subject matter eligibility under 35 U.S.C. § 101.  Early last year, the USPTO provided a promised set of examples of patent-eligible and patent-ineligible claims relating to the abstract idea exception to 35 U.S.C. § 101, in light of Alice Corp. v. CLS Bank.  Some of the new examples are hypothetical claims designed to illustrate the contours of § 101.  The USPTO also kicked off 2015 by holding a forum on the Office's Alexandria campus, where Office representatives discussed the Interim Guidance and received additional input from the public regarding that guidance.  In July, the Office updated its subject matter eligibility guidance, with the update providing recommendations and resources for examiners in addition to those in the Interim Guidance.  In the update, the Office also addressed several broad themes from comments it received on the Interim Guidance.  The update did not, however, provide any materials related to interpreting the metes and bounds of § 101 with regard to natural products or diagnostic methods.

For information regarding this and other related topics, please see:

• "Comments on the USPTO's Subject Matter Eligibility Guidance -- BSA," November 5, 2015
• "Comments on the USPTO's Subject Matter Eligibility Guidance -- The ABA," November 3, 2015
• "July 2015 Update on Subject Matter Eligibility," August 25, 2015
• "Biotech-specific Subject Matter Eligibility Materials Delayed," July 30, 2015
• "New Update on Subject Matter Eligibility to be Published on July 30th," July 29, 2015
• "Interim Guidance Status Check," June 15, 2015
• "A Modest Proposal (or Two)," April 22, 2015
• "Microorganisms, Funk Brothers, Chakrabarty and TRIPS," April 7, 2015
• "USPTO Holds Forum on Interim Guidance -- Part III," February 19, 2015
• "USPTO Holds Forum on Interim Guidance -- Part II," February 18, 2015
• "USPTO Holds Forum on Interim Guidance -- Part I," February 3, 2015
• "USPTO Issues Post-Alice Abstract Idea Examples," January 28, 2015

1.  Federal Circuit Decides Ariosa v. Sequenom and Denies Rehearing En Banc

In June, the Federal Circuit decided Ariosa Diagnostics, Inc. v. Sequenom, Inc., affirming the District Court's decision granting Ariosa's summary judgment motion for invalidity on the grounds that the claims of of U.S. Patent No. 6,258,540 were patent ineligible.  Although the Federal Circuit appreciated that the inventors had found cell-free fetal DNA (cffDNA) in maternal plasma or serum "that other researchers had previously discarded as medical waste," the panel stated that "[a]pplying a combination of known laboratory techniques to their discovery," the inventors "implemented a method for detecting the small fraction of paternally inherited cffDNA in maternal plasma or serum to determine fetal characteristics, such as gender."  In affirming the District Court decision, the opinion concluded that "[t]he method . . . begins and ends with a natural phenomenon," and "[t]hus, the claims are directed to matter that is naturally occurring."  Judge Linn noted in his concurring opinion, which in a rational world would have been a dissent, that he joined the majority "only because [he is] bound by the sweeping language of the test set out in Mayo Collaborative Services v. Prometheus Laboratories, Inc."  Sequenom responded to the decision by filing a petition for rehearing en banc in August, arguing that the panel's decision was inconsistent with the Supreme Court's decisions in Diamond v. Diehr, 450 U.S. 175 (1981), Mayo v. Prometheus Laboratories, 132 S. Ct. 1289 (2012), and Association for Molecular Pathology v. Myriad Genetics, 133 S. Ct. 2107 (2013, and that the panel's decision poses a threat to patent protection in multiple fields of invention.  However, despite the filing of twelve amicus curiae briefs in support of Sequenom's petition, the Federal Circuit declined to rehear en banc the panel decision in December.  The patent community now awaits the deadline for petitioning for certiorari.

For information regarding this and other related topics, please see:

• "Ariosa v Sequenom -- A Path to the Supreme Court?" December 14, 2015
• "Federal Circuit Denies Rehearing En Banc in Ariosa v. Sequenom," December 2, 2015
• "Natera Responds to Sequenom's Petition for Rehearing En Banc," October 25, 2015
• "Ariosa Diagnostics Responds to Sequenom's Petition for Rehearing En Banc," October 21, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: JYANT Technologies, Inc.," September 29, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: NYIPLA," September 28, 2015
• "On Ariosa and Natural Products," September 27, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Novartis AG," September 23, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Paul Gilbert Cole," September 22, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Bioindustry Association," September 20, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: WARF, Marshfield Clinic, and MCIS, Inc.," September 17, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: BIO and PhRMA," September 16, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Amarantus Bioscience Holdings, Personalis, Inc., and Population Diagnostics, Inc.," September 15, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Coalition for 21st Century Medicine," September 14, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: IPO," September 8, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: Professors Lefstin and Menell," September 6, 2015
• "Amicus Briefs in Support of Sequenom's Petition for Rehearing En Banc: 23 Law Professors," September 3, 2015
• "Amici Support Sequenom's Petition for Rehearing En Banc," August 28, 2015
• "Sequenom Requests Rehearing En Banc," August 18, 2015
• "Ariosa Diagnostics V Sequenom and Isis Innovation -- A European View," July 2, 2015
• "Ariosa Diagnostics, Inc. v. Sequenom, Inc. (Fed. Cir. 2015)," June 22, 2015

Eli Lilly and Company v. Teva Parenteral Medicines, Inc. (S.D. Ind. 2015)

District Court Finds Lilly Patent Infringed Based on Inducement of Infringement by Single Actor

By Donald Zuhn --

Last week, in Eli Lilly and Company v. Teva Parenteral Medicines, Inc., Judge Tanya Walton Pratt of the U.S. District Court for the Southern District of Indiana determined that Eli Lilly and Company had shown by a preponderance of the evidence that U.S. Patent No. 7,772,209, owned by Lilly, would be infringed by the ANDA products for which Defendants Teva Parenteral Medicines, Inc.; Teva Pharmaceuticals USA, Inc.; APP Pharmaceuticals, LLC; Barr Laboratories, Inc.; and Pliva Hrvatska D.O.O. sought approval to market (opinion).  The District Court indicated that its finding of infringement was "based upon inducement of infringement by a single actor, the physician administering pemetrexed disodium in accordance with the claimed methods" of the '209 patent.

Claims 1 and 12 of the '209 patent recite:

1.  A method for administering pemetrexed disodium to a patient in need thereof comprising administering an effective amount of folic acid and an effective amount of a methylmalonic acid lowering agent followed by administering an effective amount of pemetrexed disodium, wherein the methylmalonic acid lowering agent is selected from the group consisting of vitamin B12, hydroxycobalamin, cyano-10-chlorocobalamin, aquocobalamin perchlorate, aquo-10-cobalamin perchlorate, azidocobalamin, cobalamin, cyanocobalamin, or chlorocobalamin.

12.  An improved method for administering pemetrexed disodium to a patient in need of chemotherapeutic treatment, wherein the improvement comprises: a) administration of between about 350 μg and about 1000 μg of folic acid prior to the first administration of pemetrexed disodium; b) administration of about 500 μg to about 1500 μg of vitamin B12, prior to the first administration of pemetrexed disodium; and c) administration of pemetrexed disodium.

Claims 9, 10, 12, 15, 18, 19, and 21 of the '209 patent were asserted by Lilly with respect to Defendants' ANDA products.  Claims 9 and 10 depend indirectly from claim 1 and claims 15, 18, 19, and 21 depend indirectly or directly from claim 12.

The District Court noted that the '209 patent covers the method of administering a chemotherapy drug, pemetrexed disodium, with vitamins, which Lilly markets under the trade name ALIMTA®.  The Court also noted that Defendants' product labeling for their proposed generic versions of ALIMTA® instructs physicians to follow exactly the claimed regimen, since Defendants' ANDA products will be required to be distributed with identical labeling as that for ALITMA®.  Experts for both Lilly and the Defendants agreed that following the labels, physicians would administer vitamin B12 by injection and administer pemetrexed disodium by infusion, but that patients, at the instruction of the physician, would obtain and take the folic acid.  Thus, the issue at trial was whether the steps of the claimed methods could be attributed to a single actor, the physician, thus supporting a finding that Defendants would induce infringement of the asserted claims.

In a separate trial on validity, the Defendants had failed to show by clear and convincing evidence that the asserted claims were invalid.  Although the Defendants had appealed that ruling to the Federal Circuit, both parties jointly moved to remand the appeal in order to litigate the issue of infringement in light of the Supreme Court's decision in Limelight Networks, Inc. v. Akamai Techs., Inc., in which the Supreme Court reversed the Federal Circuit's decision, and remanded the case to the Federal Circuit.  In an en banc per curiam opinion, the Federal Circuit set forth the law of divided infringement under 35 U.S.C. § 271(a).  The District Court noted that "for purposes of this case, the Court must apply this most current articulation of the law of divided infringement as stated by the Federal Circuit in its most recent ruling."

In finding for Lilly, the District Court observed that "[a]lthough the instant case involves the administration of a medical treatment, the factual circumstances are sufficiently analogous to those in Akamai to support a finding of direct infringement by physicians under § 271(a), and thus inducement of infringement by Defendants under § 271(b), under the legal standard recently set forth by the Federal Circuit."  The Court was not persuaded by the Defendants' argument that the actions of the patient in taking folic acid prior to pemetrexed treatment cannot be attributed to the physician because the physician does not physically place the folic acid into the patients' mouth, and because patients are instructed to obtain folic acid, either by prescription or over the counter, and take it on their own.  According to the Court, whether patients actually take the folic acid was irrelevant to the issue of infringement, and "the only relevant question is whether the actions of the patient in taking folic acid as instructed may be attributable to the physician as a single actor."  With respect to this question, the Court pointed out that "[t]he physician, based upon the patented method, directs the manner and timing of the patient’s ingestion of folic acid -- 400 to 1000 μg of folic acid for at least five days out of the seven days prior to and during pemetrexed administration -- and the patient is required to do so to receive the full benefit of the treatment."  The Court therefore concluded that:

Lilly has shown, by a preponderance of the evidence that, in accordance with Defendants' proposed labeling, the physician directs or controls the patient's administration of folic acid such that the performance of all the claimed steps, including the administration of folic acid, can be attributed to a single person, i.e. the physician.  The evidence showed that physicians specify both the "manner and timing" in detail, including prescribing an exact dose of folic acid and directing that it be ingested daily.

Standard Essential Patents Unenforceable on Theory of Indirect Infringement

Standard Essential Patents Unenforceable on Theory of Indirect Infringement

By Joseph Herndon --

A recent decision by the Federal Circuit in JVC Kenwood Corp. v. Nero, Inc., decided August 17, 2015, involves nuanced details of standard-essential patents, but arrived at a common sense result:  either the patents at issue are standard-essential and thus licensed by defendant, or plaintiff cannot solely rely on the licensed technology standards to show infringement.

Here, JVC Kenwood Corporation ("JVC") sued Nero, Inc. and Arcsoft, Inc. for contributory and induced infringement ("indirect infringement") of certain JVC patents directed to various uses of DVD and Blu-ray optical discs.  The charge of indirect infringement is based on Nero's sale of software to end users of DVD and Blu-ray discs, who allegedly directly infringe the JVC patents.

Patents at Issue and Infringement Allegations

There are six JVC Patents are at issue, directed to aspects of optical discs and specific structures, methods, or systems used with optical discs such as "jump reproduction" -- e.g., fast-forwarding, fast-rewinding, etc., methods of recording moving picture data on a recording medium (i.e., burning data to DVDs and Blu-Ray discs), and methods of controlling whether certain kinds of content, such as a "R" rated movie on a DVD, should be played according to preconditions (i.e., implementation of parental controls) (see, e.g., U.S. Patent No. 6,522,692).

The record describes two licensing pools for optical disc technology including the DVD Patent Licensing Group (also called DVD6C), and One Blue LLC for Blu-ray technology.  JVC is a member of both groups, and the Patents in suit are included in both pools, and thus, are considered standard-essential patents for this technology.

For the DVD6C pool, the DVD6C license for DVD Patents "extends only to the structure, features and functions of a DVD Product used to practice those DVD Standard Specifications or +R/+RW Standard Specifications applicable to that DVD Product and for which the DVD Patents are Essential."  The DVD Standard Specifications are a series of documents setting forth the technical qualifications for standards-compliant products.  They are published by the DVD Forum, an international association tasked with defining the DVD Specifications.

The One Blue patent licensing arrangement is similar.  One-Blue licenses can be obtained for specific categories of Blu-ray products, and "applies only to the extent the structure, features and functions of a BD Registered Product are used to practice" the applicable standards.

Some of JVC's infringement contentions include that when end-users use Nero software with blank optical discs to record moving picture data, they directly infringe by practicing a specified "method of recording moving picture data on a recording medium," of one of the JVC patents.  JVC also alleged that "when the end-user then uses Nero software to reproduce (playback) the moving picture data and to fast forward (or fast reverse) through the content, the end-user directly infringes" claims of the JVC patents.  Still further, JVC alleged that when an end-user uses Nero software to perform the parental/regional control functions as recited in the claims, the end-user directly infringes claims of the JVC patents.

For all six standard-essential JVC Patents, JVC alleged that since Nero's software customers are direct infringers, Nero is liable for induced or contributory infringement as provider of the software.

JVC attempted to prove indirect infringement by showing that Nero is a licensed member of the DVD Format/Logo Licensing Corporation ("DVD FLLC"), the licensing agent for the DVD Forum, which is responsible for licensing the Format Books setting forth the DVD standards specifications and the DVD logo.  JVC stated that Nero is bound by the terms of the DVD FLLC license agreement, which requires all products manufactured or sold by the licensee to comply with the standards set forth in the Format Books.  JVC's theory of infringement is based on a standards-compliance theory of infringement, in that, since Nero's software necessarily complies with the standards specifications, use of Nero's software by end users for the purposes described in any of the Patents (which are standards-compliant), directly infringes the relevant Patent.

District Court Result

The District Court held that direct infringement of the patented systems, methods, and apparatuses, as alleged by JVC, is negated by the "extensive licensing program, both as part of the DVD6C and One Blue patent pools as well as through JVC's individual licensing program."  The District Court generally observed that licensees cannot be infringers.

The District Court held that JVC is "barred from asserting claims of direct infringement against end users for use of Nero software with DVD and Blu-ray optical discs made or sold by a party whose products have been expressly released from claims of infringement by JVC with regard to the Patents."  The District Court also held that, absent direct infringement, Nero cannot be liable for indirect infringement.

The District Court found that because Nero has shown an extensive licensing program, both as part of the DVD6C and One Blue patent pools as well as through JVC's individual licensing program, there cannot be infringement without specific allegations and evidence showing use of unlicensed optical discs.

Federal Circuit Result

JVC appealed and argued that licensees to the DVD6C pool only receive a license to those patents related to particular products, selected by the licensee, which "practice the DVD Standard Specifications" applicable to the licensee's products, citing the DVD6C License Agreement.  Thus, JVC tried to argue that Nero's license, as a member of DVD FLLC, varied from the standards-essential patent license.

The Federal Circuit shot down JVC's arguments, and noted that, based on the proffered evidence of infringement, summary judgment of non-infringement was properly granted.  JVC cited no "specific allegations and evidence" of any unlicensed discs.

The Federal Circuit thus affirmed the District Court's ruling, and further stated that on JVC's premise that these Patents are essential and are directly infringed by users of Nero software, it was JVC's burden to proffer at least plausible evidence in support of its position that unlicensed optical discs were in use.  JVC offered no evidence of specific unlicensed discs.

The Federal Circuit noted that JVC cannot have it both ways -- either the Patent is essential and licensed or JVC cannot solely rely on compliance with the standards to show infringement as it has chosen to do.

While JVC may have slipped up by overlooking evidentiary procedures, or possibly was unable to prove that any unlicensed discs exist, the result here seems to come out as common sense (i.e., licensed patents cannot be infringed).  This decision is further important to provide support for the notion that such licensed patents also cannot be indirectly infringed.  While the result is not so broad, it does help support companies who have obtained licenses from later attacks of indirect infringement via use by end users.  Downstream assertion of standard-essential patents, or two bites at the apple for patent holders (a first against companies as licensees and a second against the companies as indirect infringers) is not likely to be allowed by the Federal Circuit.

Patent Exhaustion

An alternative holding was advanced by the District Court, however, regarding patent exhaustion.  The District Court applied Quanta and stated that "here, [JVC] has suggested no reasonable use for the [licensed DVD and Blu-ray optical discs] other than . . . practice[ing] the [JVC] Patents."

The Federal Circuit declined to opine directly on this issue for a few reasons.  Notably, the Federal Circuit found that the District Court clearly and effectively determined that infringement had not been shown on JVC's theory and argument of the case, and thus, any further holding of patent exhaustion would have been redundant for purposes of assertion of the patents.  In addition, the Federal Circuit found that the "sketchy record, contradictory arguments, and undeveloped facts before us" did not enable them to expand the theory of patent exhaustion to reach this case.  Thus, with facts material to the issue of patent exhaustion being insufficiently developed to warrant summary judgment on that alternative ground, the District Court's ruling with respect to patent exhaustion was vacated.

It was further noted that in arguing that the District Court improperly applied the criteria of patent exhaustion, JVC also negated its own theory of infringement (e.g., if the Patents represent a "substantial embodiment" of the optical discs as sold -- as JVC argued in support of infringement -- then the Patents are exhausted on sale of the discs).  This contradiction, and lack of details in evidence led the Federal Circuit to punt on the issue of patent exhaustion.

JVC Kenwood Corp. v. Nero, Inc. (Fed. Cir. 2015)
Panel: Circuit Judges newman, Dyk, and Reyna
Opinion by Circuit Judge Newman

Federal Circuit Delivers En Banc Opinion in Akamai v. Limelight

By Kevin E. Noonan & Michael Borella --

The Federal Circuit handed down a unanimous en banc decision today regarding the interplay between literal infringement and induced infringement in Akamai Technologies Inc. v. Limelight Networks, Inc.  On remand from a disapproving reversal by the Supreme Court, the en banc court took notice of the "opportunity" provided in this case to "revisit the § 271(a) question" in view of the High Court's opinion that there was "the possibility that [the Federal Circuit] erred by too narrowly circumscribing the scope of § 271(a)" in its earlier opinion.  Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111, 2119, 2120 (2014).  The per curiam opinion announces that the Court now "unanimously set forth the law of divided infringement under 35 U.S.C. § 271(a)" and that, in this case there was substantial evidence to support the jury finding that Limelight directly infringed U.S. Patent No. 6,108,703.  Accordingly, the Federal Circuit reversed the District Court's grant of Limelight's motion for judgment of non-infringement as a matter of law.

To recap, the case arose in 2006, when Akamai sued Limelight in district court alleging infringement of U.S. Patent No. 6,108,703.  The '703 patent is assigned to the Massachusetts Institute of Technology ("MIT") and is exclusively licensed to Akamai.

Claim 34 of the '703 patent recites:

A content delivery method, comprising:
    distributing a set of page objects across a network of content servers managed by a domain other than a content provider domain, wherein the network of content servers are organized into a set of regions;
    for a given page normally served from the content provider domain, tagging at least some of the embedded objects of the page so that requests for the objects resolve to the domain instead of the content provider domain;
    in response to a client request for an embedded object of the page:
    resolving the client request as a function of a location of the client machine making the request and current Internet traffic conditions to identify a given region; and
    returning to the client an IP address of a given one of the content servers within the given region that is likely to host the embedded object and that is not overloaded. [Emphasis added]

The claimed invention is directed to delivering electronic data using a content delivery network (CDN).  It purports to facilitate faster delivery of the data by separating the content of a website onto multiple servers.  The content that requires greater network capacity (such as photos and videos) can be assigned to servers ("tagged") that provide this content at faster speeds.  The remaining content can be provided by non-specialized servers.  Other independent claims further recited a step of serving the embedded object from one of the content servers.

Limelight operates a CDN, and content providers are its customers.  Limelight carries out three of the four claimed steps (the distributing, resolving, and returning steps), but did not tag components of its customers' websites -- instead, Limelight contractually required its customers to do their own tagging, if those customers wanted to exploit the faster servers.  The relevant language of the contract stated "Customer [i.e., content provider] shall be responsible for identifying via the then current [Limelight] process all [URLs] of the Customer Content to enable such Customer Content to be delivered by [Limelight]," and "Customer shall provide [Limelight] with all cooperation and information necessary for [Limelight] to implement the [Content Delivery Service]."

At trial, the jury found that Limelight and its customers jointly and directly infringed '703 patent under 35 U.S.C. § 271(a), and awarded $40 million in damages.  Following this verdict, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp.  In Muniauction, the Court held that direct infringement of a claimed method requires that a single entity perform every step of the claim (the "single entity rule").  But, this requirement is satisfied if steps are performed by multiple parties provided that a single defendant exercises "control or direction" over entire process.  Thus, neither party is liable for infringement if they perform all of the steps, but merely engage in an arms-length relationship to do so.

Limelight moved for judgment of non-infringement as a matter of law (JMOL) in view of Muniauction, and the District Court granted the motion, holding that because (i) no single entity performed all of the claimed steps, and (ii) the contractual relationship between Limelight and its customers did not rise to the level of "control or direction" there was no liability.  On appeal, a Federal Circuit panel affirmed, but the Court reheard the case en banc, reversed, and remanded the case for further proceedings.  Particularly, the en banc majority reasoned that Limelight and its customers did not directly infringe, but "the evidence could support a judgment in its favor on a theory of induced infringement [under 35 U.S.C. § 271(b)]" because "inducement does not require that the induced party be an agent of the inducer or be acting under the inducer's direction or control."  The Court, however, also stated that "here can be no indirect infringement without direct infringement."

In a June 2014 appeal, the Supreme Court took issue with this apparent contradiction, and held that a defendant is not liable for inducing infringement under 35 U.S.C. § 271(b) when no one party has directly infringed the patent under § 271(a).  The High Court reversed the Federal Circuit finding that Limelight had infringed the '703 patent and sent the case back to the Federal Circuit for reconsideration.

On remand, a Federal Circuit panel considered whether Limelight has infringed under § 271(a).  Judge Linn authored the opinion of the court, joined by Chief Judge Prost with Judge Moore dissenting.  According to the majority, Limelight was not liable for direct infringement "because Limelight . . . did not perform all of the steps of the asserted method claims . . . and because the record contains no basis on which to impose liability on Limelight for the actions of its customers who carried out the other steps, Limelight has not directly infringed the '703 patent under § 271(a)."  The majority confirmed that "direct infringement liability of a method claim under 35 U.S.C. § 271(a) exists when all of the steps of the claim are performed by or attributed to a single entity -- as would be the case, for example, in a principal-agent relationship, in a contractual arrangement, or in a joint enterprise."  Here, there was no liability "[b]ecause this case involves neither agency nor contract nor joint enterprise" and "[e]ncouraging or instructing others to perform an act is not the same as performing the act oneself."

In dissent, Judge Moore disagreed.  She believed that "§ 271(a) includes joint tortfeasor liability." Characterizing the majority's rule as creating "a gaping hole in what for centuries has been recognized as an actionable form of infringement," she opined that the single entity rule "is a recent judicial creation inconsistent with statute, common law, and common sense."

The Court reheard the appeal en banc and arrived at the decision handed down today.  In its opinion, the per curiam court set out the basics, that only if a single tortfeasor performed all the steps in a claimed method would direct infringement lie and liability be found.  However, the Court recognized that situations (like the one at bar) could arise where no one tortfeasor can be fairly said to directly infringe by practicing all the steps of a claimed method.  However, according to the opinion, "an entity [is] responsible for others' performance of method steps in two sets of circumstances: (1) where that entity directs or controls others' performance, and (2) where the actors form a joint enterprise."  This holding leads to an assessment of whether a single entity "directs or controls the acts of another."

Turning to vicarious liability law for enlightenment (while recognizing that the circumstances under which vicarious liability arises are not entirely analogous to the question before the court), the opinion states that infringement liability can arise when the infringing acts are those of an agent or the subject of a contract for their performance.  Applying these principles to the Limelight situation, the Court held that joint infringement may apply "when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner and timing of that performance," relying on Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005).  And this question, according to the opinion, is one of fact (i.e., for a jury) that is to be reviewed under the "substantial evidence" standard.

The opinion also considers the other situation where direct infringement can be found through the actions of two or more actors who have formed a "joint enterprise."  Under these circumstances, each joint tortfeasor can be held responsible for the actions of the other "as if each is a single actor."  Such a joint enterprise is found only on proof of four elements:

(1) an agreement, express or implied, among the members of the group;
(2) a common purpose to be carried out by the group;
(3) a community of pecuniary interest in that purpose, among the members; and
(4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.

(citing the Restatement (Second) of Torts, § 491).  This is also a question of fact for the jury and subject to review using the substantial evidence standard.

The Court's synthesis of these legal principles is directed to the question of "whether all method steps can be attributed to a single entity" and is "not limited solely to principal-agent relationships, contractual arrangements, and joint enterprise, as the vacated panel decision held."  This approach is also consistent with the Supreme Court's admonishments in its opinion regarding the extent to which the Federal Circuit did and did not understand what constituted literal infringement under § 271(a).  But the en banc court also acknowledged "other factual scenarios [that] may arise warranting attributing others' performance of method steps to a single actor," consistent with the fact-based nature of the inquiry.

Applying these principles to the case before the Court, the en banc opinion held that "[t]he jury heard substantial evidence from which it could find that Limelight directs or controls its customers' performance of each remaining method step, such that all steps of the method are attributable to Limelight."  This control was found by the panel in Limelight's conditions imposed on its customers to perform certain steps (the "tagging" and "serving" steps) of the claimed method under conditions where Limelight determined the "manner or timing" of such performance.  These conditions include Limelight's requirement that its customers sign a "standard contract" containing the requirement for tagging and serving content.  After discussing the content of these contractual provisions, the Court concluded "if Limelight's customers wish to use Limelight's product, they must tag and serve content.  Accordingly, substantial evidence indicates that Limelight conditions customers' use of its content delivery network upon its customers' performance of the tagging and serving method steps."

With regard to the "manner and timing" question, the Court held that there was substantial evidence that Limelight was in control of that, too.  This evidence was found in Limelight's "welcome letter" that instructed each customer how to use Limelight's services.  These instructions included "step-by-step" instructions on how to tag content, under circumstances where failure to follow "these precise steps" will make Limelight's services unavailable.  Further, "Limelight's engineers assist with installation and perform quality assurance testing [and] remain available if the customer experiences any problems."

Taking these (and other facts) into consideration, the en banc court held that "Limelight's customers do not merely take Limelight's guidance and act independently on their own.  Rather, Limelight establishes the manner and timing of its customers' performance so that customers can only avail themselves of the service upon their performance of the method steps."

This opinion signals a move away from the restrictive Muniauction joint infringement framework to something that resembles a "totality of the circumstances" test.  Arguably, after today, joint infringement will be able to be established in more scenarios.  But the burden of doing so may be higher, as a multitude of factors may need to be considered.

This is not the end of the line for the parties, however.  As the opinion notes, because there are remaining issues in both the appeal and cross-appeal, the matter will be once more before the panel.  Perhaps more troubling for Akamai, however, is the following language from the Supreme Court's 2014 opinion:

[T]here has simply been no infringement of the method [of the '703 patent], because the performance of all the patent's steps is not attributable to any one person.

[W]here there has been no direct infringement, there can be no inducement of infringement under §271(b).

[T]he reason Limelight could not have induced infringement under §271(b) is not that no third party is liable for direct infringement; the problem, instead, is that no direct infringement was committed [emphasis in opinion].

These statements suggest that, insofar as the Court considered the issue of direct infringement, the Justices had decided it did not arise from the behavior relied upon by the en banc court in arriving at its decision today.  Which suggests that another trip back to the Supreme Court may be in the offing.

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015)
Before Chief Judge Prost and Circuit Judges Newman, Lourie, Linn, Dyk, Moore, O'Malley, Reyna, Wallach, and Hughes
Per curiam opinion

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015)

By Diego F. Freire and Michael Borella --

1.  Background

In 2006, Akamai Technologies ("Akamai") sued Limelight Networks, Inc. ("Limelight") in the U.S. District Court for the District of Massachusetts, alleging infringement of U.S. Patent No. 6,108,703.  The '703 patent is assigned to the Massachusetts Institute of Technology ("MIT") and is exclusively licensed to Akamai.

Claim 34 of the '703 patent recites:

A content delivery method, comprising:
    distributing a set of page objects across a network of content servers managed by a domain other than a content provider domain, wherein the network of content servers are organized into a set of regions;
    for a given page normally served from the content provider domain, tagging at least some of the embedded objects of the page so that requests for the objects resolve to the domain instead of the content provider domain;
    in response to a client request for an embedded object of the pagel;
    resolving the client request as a function of a location of the client machine making the request and current Internet traffic conditions to identify a given region; and
    returning to the client an IP address of a given one of the content servers within the given region that is likely to host the embedded object and that is not overloaded. [Emphasis added.]

The claimed invention is directed to delivering electronic data using a content delivery network (CDN).  It purports to facilitate faster delivery of the data by separating the content of a website onto multiple servers.  The content that requires greater network capacity (such as photos and videos) can be assigned to servers ("tagged") that provide this content at faster speeds.  The remaining content can be provided by non-specialized servers.

Limelight operates a CDN, and content providers are its customers.  Limelight carries out three of the four claimed steps (the distributing, resolving, and returning), but did not tag components of its customers' websites -- instead, Limelight contractually required its customers to do their own tagging, if those customers wanted to exploit the faster servers.  The relevant language of the contract stated "Customer [i.e., content provider] shall be responsible for identifying via the then current [Limelight] process all [URLs] of the Customer Content to enable such Customer Content to be delivered by [Limelight]," and "Customer shall provide [Limelight] with all cooperation and information necessary for [Limelight] to implement the [Content Delivery Service]."

At trial, the jury found that Limelight and its customers jointly and directly infringed '703 patent under 35 U.S.C. § 271(a), and awarded $40 million in damages.  Following this verdict, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp.  In Muniauction, the Court held that direct infringement of a claimed method requires that a single entity perform every step of the claim (the "single entity rule").  But, this requirement is satisfied if steps are performed by multiple parties provided that a single defendant exercises "control or direction" over entire process.  Thus, neither party is liable for infringement if they perform all of the steps, but merely engage in an arms-length relationship to do so.

Limelight moved for judgment of non-infringement as a matter of law (JMOL) in view of Muniauction, and the District Court granted the motion, holding that because (i) no single entity performed all of the claimed steps, and (ii) the contractual relationship between Limelight and its customers did not rise to the level of "control or direction" there was no liability.  On appeal, a Federal Circuit panel affirmed, but the en banc Court heard the case, reversed, and remanded the case for further proceedings.  Particularly, the en banc majority reasoned that Limelight and its customers did not directly infringe, but "the evidence could support a judgment in its favor on a theory of induced infringement [under 35 U.S.C. § 271(b)]" because "inducement does not require that the induced party be an agent of the inducer or be acting under the inducer's direction or control."  The Court, however, also stated that "there can be no indirect infringement without direct infringement."

In a June 2014 appeal, the Supreme Court took issue with this apparent contradiction, and held that a defendant is not liable for inducing infringement under 35 U.S.C. § 271(b) when no one party has directly infringed the patent under § 271(a) (see "Limelight Networks, Inc. v. Akamai Technologies, Inc. (2014)").  Thus, the high court reversed the Federal Circuit finding that Limelight had infringed the '703 patent.  On remand, the Federal Circuit considered whether Limelight has infringed under § 271(a).  Judge Linn authored the opinion of the court, and was joined by Chief Judge Prost.  Judge Moore dissented.

2.  The Outcome

Ultimately, the majority ruled that "because Limelight . . . did not perform all of the steps of the asserted method claims . . . and because the record contains no basis on which to impose liability on Limelight for the actions of its customers who carried out the other steps, Limelight has not directly infringed the '703 patent under § 271(a)."  The majority confirmed that "direct infringement liability of a method claim under 35 U.S.C. § 271(a) exists when all of the steps of the claim are performed by or attributed to a single entity -- as would be the case, for example, in a  principal-agent relationship, in a contractual arrangement, or in a joint enterprise."  Here, there was no liability "[b]ecause this case involves neither agency nor contract nor joint enterprise."

In dissent, Judge Moore disagreed.  She believes that "§ 271(a) includes joint tortfeasor liability."  Characterizing the majority's rule as creating "a gaping hole in what for centuries has been recognized as an actionable form of infringement," she opined that the single entity rule "is a recent judicial creation inconsistent with statute, common law, and common sense."

Instead, the majority found that "[e]ncouraging or instructing others to perform an act is not the same as performing the act oneself and does not result in direct infringement [as] § 271 has separate subsections addressing induced and contributory infringement."  In coming to this conclusion, the majority relied heavily on the structure of § 271, noting that "[w]hen a party participates in or encourages infringement but does not directly infringe a patent, the normal recourse under the law is for the court to apply the standards for liability under indirect infringement."  But, "indirect infringement requires, as a predicate, a finding that some party is directly liable for the entire act of direct infringement."

Akamai attempted to argue that "an accused infringer 'directs or controls' a third party if the accused infringer goes beyond loosely providing instructions and specifically tells a third party the step or steps to perform."  The majority disagreed based on the organization and legislative history of the statute.  Notably, "§ 271(a) includes only the principles of vicarious liability, as embodied in the single entity rule."  Despite being presented with "numerous conflicting theories of joint liability that existed in the common law prior to 1952, Congress enacted specific rules for inducement and contributory liability in § 271(b) and (c), respectively."  The majority also explained its disagreement with the dissent's argument -- "[w]hile the dissent believes this leaves a 'gaping hole,' it is not our position to legislate or contravene Congress' choice -- right or wrong -- by importing other theories of joint liability into § 271(a)."  Particularly, "the dissent advocates holding a customer jointly and severally liable for patent infringement based on its performance of a single step of a claimed method, even when it has no knowledge of the patent."

3.  The Majority's Reasoning

The majority carried out its substantive analysis of the case in three steps.  First, in reviewing the statutory scheme of § 271, the majority pointed out that patent infringement is not a creation of common law but a tort defined by statute.  While § 271(a) is "a declaration of what constitutes infringement," subsections (b) and (c) codify the doctrines of inducement and contributory infringement respectively.  The Court states that "in this way, Congress carefully crafted subsection (b) and (c) to expressly define the only ways in which individuals not completing an infringing act under § 271(a) could nevertheless be liable."  And "[t]he fact that Congress chose to impose some forms of secondary liability, but not others, indicates a deliberate congressional choice with which the courts should not interfere."

The majority then addressed the dissent's argument (which was also promulgated by Akamai) that the word "whoever" in § 271(a) is plural and therefore undermines the single entity rule.  In the majority's view, despite "whoever" being plural, more than one entity can be independently liable for direct patent infringement if each entity practices every step of the claim.  Furthermore, interpreting § 271(a) to include actors who do not independently infringe would make § 271(b) and (c) redundant.  In the majority's view, such a construction contravenes the canon against surplusage in statutes.

Second, the majority analyzed divided infringement case law, which is rooted in traditional principles of vicarious liability.  This case law sets forth the single entity rule and that "multiple actors could together infringe a patent only if one controlled the other(s)."  Particularly, "when a contract mandates the performance of all steps of a claimed method, each party to the contract is responsible for the method steps for which it bargained . . . [h]owever, this type of contractual arrangement will typically not be present in an arms-length seller-customer relationship."  Still, "the concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper claim drafting [because] a patentee can usually structure a claim to capture infringement by a single entity."

Third, the majority found errors in the notion of importing joint tortfeasor liability into § 271(a).  It acknowledged that "liability exists under traditional principles of vicarious liability, such as where a mastermind directs or controls another to perform all steps of a claimed method."  But, the majority indicated that the dissent departed from the common law limits on joint tortfeasor liability in order to import this law into § 271(a).  Particularly, "actors whose innocent actions coordinate to cause harm generally are not subject to liability at common law," but would be under the dissent's interpretation.  Further, the common law "requires both parties to know the others' actions to act in concert" such that liability is found.  Thus, "when parties act independently for their own benefit, such as in arms-length seller-customer relationships," the necessary concerted action between the parties is missing.  Additionally, for liability under § 271(a), the dissent would require the parties to know that their joint conduct would cause damage.  This is inconsistent with the statute and the Supreme Court's precedent that "a direct infringer's knowledge or intent is irrelevant."

The majority further indicated that the dissent's reasoning would lead to unexpected results.  In one scenario, "a customer who performs a single step of a patented method by merely using a product as intended would . . . liable for direct infringement."  Doing so would fill the "gaping hole" left open by divided infringement, but open a much larger door where innocent customers would be liable for patent infringement for their simple actions.

Lastly, the majority pointed out that the dissent's position would conflict with the long established rule that "a dependent claim cannot be infringed unless the independent claim from which it depends is also infringed."  Applying this logic a hypothetical set of claims in which an independent claim recites a replicating step and a dependent claim adds a tagging step, "the dissent's rule . . . would result in a party that performs the tagging step but not the replicating step being liable for infringing [the dependent claim] while not being liable for infringing the broader claim from which it depends."

The majority concluded by pointing out that "Limelight's customers decide what content, if any, they choose to have delivered by Limelight's CDN and only then perform the [tagging step]."  This "form contract does not obligate Limelight's customers to perform any of the method steps."  Based on this interpretation, it was not established that "Limelight's customers were acting as agents of or otherwise contractually obligated to Limelight or that they were acting in a joint enterprise."

4.  Conclusion

As the law regarding divided infringement currently stands, it is possible to use a contract between a company and its customer to avoid infringement of a patented method when those parties split carrying out the patented steps.  The fact pattern of this case provides a recipe for doing so.  As a result, it is more critical than ever that claim drafters focus method claims so that their steps are likely to be carried out by a single entity.  For example, Claim 34 of the '703 patent could be written as "for a given page normally served from the content provider domain, obtaining a tagged representation of at least some of the embedded objects of the page . . . ."

Still, this case may not be at an end.  The dissent's final argument was that an en banc action is required to do what the majority proposes, as it is at odds with binding precedent from a previous panel.  On June 12th, Akamai requested such an en banc review.

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015)
Panel: Chief Judge Prost and Circuit Judges Linn and Moore
Opinion for the court by Circuit Judge Linn; dissenting opinion by Circuit Judge Moore

Commil USA, LLC v. Cisco Systems, Inc. (2015)

By Kevin E. Noonan --

The Supreme Court handed down its decision in Commil USA, LLC v. Cisco Systems, Inc. today and in doing so reprised several themes that have emerged over the past decade of the Court's activist approach to patent law.  The Court reversed the Federal Circuit (albeit technically that court's decision was vacated) and in the process chastised the Federal Circuit for misinterpreting both patent law and the Court's decision in Global-Tech Appliances, Inc. v. SEB S.A. (2014).  The Court also reiterated its belief that patent law is replete with dichotomies (here, between infringement and invalidity), consistent with its "Goldilocks" views regarding the effects of too much versus too little patent protection.  And, somewhat bizarrely the Court takes the time to venture into the policy issues surrounding abusive patent litigation seemingly unrelated to the issues before the Court.  (To be fair, the Court "sides" with the patentee in its decision, which runs contrary to the general trend but this may be considered the exception that probes the rule rather than any great epiphany by the Court.)

To recap, the technology in this case relates to Commil's patents for implementing short-range wireless networks.  "The technical details of Commil's patent are not at issue," according to the Court (which must be a relief -- there is something endearingly quaint about how the Court describes the technology:

So it suffices to say, with much oversimplification, that the patent is for a method of implementing short-range wireless networks.  Suppose an extensive business headquarters or a resort or a college campus wants a single, central wireless system (sometimes called a Wi-Fi network).  In order to cover the large space, the system needs multiple base stations so a user can move around the area and still stay connected.  Commil's patent relates to a method of providing faster and more reliable communications between devices and base stations.

And the opinion refers to the Federal Circuit opinion for a discussion of the claims.  The case comes to the Court after the Federal Circuit reversed the District Court for ruling that Cisco's evidence that it had a "good faith belief" that Commil's claims were invalid was inadmissible for rebutting liability for inducing infringement.  The  question before the Court, whether a good-faith belief in invalidity is a defense to induced infringement, was taken for consideration after five of the twelve Federal Circuit judges framed that issue in their dissent to the en banc court's decision not to consider the question itself.

The Court's opinion was written by Justice Kennedy joined by all the Justices except the Chief Justice, who joined Justice Scalia's dissent, and Justice Breyer who did not participate in the decision.  In addition, Justice Thomas joined the majority only with regard to the Court's decision on the question presented (Section II-B) and its foray into abusive patent litigation policy (Part III).  The holding is simple:  "A defendant's belief regarding patent validity is not a defense to an induced infringement claim."  But of course the more interesting aspect of the decision is the Court's reasoning in arriving at its decision.

From the outset, the Court states that this conclusion is not limited to inducing infringement under 35 U.S.C. § 271(b) but extends to literal infringement under § 271(a) (a strict liability tort) and contributory infringement under § 271(c) (like inducement, a tort that requires knowledge of the existence of the patent).  Before arriving at this question, however, the Court (in Part II-A) revisits its decision in Global Tech, motivated according to the opinion by Commil's argument, supported by the Department of Justice as amicus, that all that is required to satisfy the intent prong of the test for inducement is knowledge of the patent.  In particular, Commil and the government argued that intent does not require that the accused infringer knew she was infringing, and the Court rejects this interpretation of its Global Tech decision.  The opinion cites language in the Global Tech opinion to the effect that "liability for induced infringement can only attach if the defendant knew of the patent and knew as well that 'the induced acts constitute patent infringement.'"  The Court illustrates this with a hypothetical:  under the government's view, "even if the defendant reads the patent's claims differently from the plaintiff, and that reading is reasonable, he would still be liable because he knew the acts might infringe.  Global-Tech requires more.  It requires proof the defendant knew the acts were infringing" (emphasis added).

Turning to the question before the Court, the opinion asserts that "[t]he question the Court confronts today concerns whether a defendant's belief regarding patent validity is a defense to a claim of induced infringement.  It is not.  The scienter element for induced infringement concerns infringement; that is a different issue than validity."  Moreover, "because infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b)."  The opinion cites Cardinal Chemical Co. v. Morton Int'l, Inc.:  "A party seeking a declaratory judgment of invalidity presents a claim independent of the patentee's charge of infringement."  508 U. S. 83, 96 (1993).  Invalidity doesn't make the acts non-infringing; it eliminates any liability for them according to the Court, and when infringement is the issue, the patent's validity is not the question to be confronted, the opinion citing Cardinal Chemical Co.  The Court perceives a dichotomy at play in these questions:  "in Deposit Guaranty Nat. Bank v. Roper, 445 U. S. 326 (1980), the Court explained that an accused infringer 'may prevail either by successfully attacking the validity of the patent or by successfully defending the charge of infringement'" and this choice (for this Court) makes questions of an accused infringer's subjective (albeit "good faith") belief in whether a patent claim is invalid irrelevant to the question of whether she intends to infringe.

The Court finds evidence of Congress's intent to raise this dichotomy in the structure of the Patent Act:

[T]he issues of infringement and validity appear in separate parts of the Patent Act.  Part III of the Act deals with "Patents and Protection of Patent Rights," including the right to be free from infringement.  §§251– 329.  Part II, entitled "Patentability of Inventions and Grants of Patents," defines what constitutes a valid patent.  §§100–212.

And in this regard, the Court also notes that non-infringement and invalidity are "two separate defenses" governed by separate sections of the statute and that they can be asserted separately as further evidence of this statutory dichotomy.

The Court then makes the strongest patent-affirming statement it has made in any case over the past decade, when the opinion voices concern with the presumption of validity, which is "a 'common core of thought and truth' reflected in this Court's precedents for a century," citing Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1, 8 (1934).  "[I]f belief in invalidity were a defense to induced infringement," according to the opinion, "the force of that presumption would be lessened to a drastic degree, for a defendant could prevail if he proved he reasonably believed the patent was invalid."  This would be a way to "circumvent the high bar Congress is presumed to have chosen:  the clear and convincing standard," citing Microsoft Corp. v. i4i Ltd. Partnership, (2011).

In reference to Justice Scalia's arguments in dissent (without ever referencing that there is a dissent), the majority states that it does not dispute Scalia's logic that one cannot infringe an invalid patent, calling the rubric "a simple truth, both as a matter of logic and semantics."  But that isn't the issue as the majority sees it:

[T]he questions courts must address when interpreting and implementing the statutory framework require a determination of the procedures and sequences that the parties must follow to prove the act of wrongful inducement and any related issues of patent validity.

The Court then quotes Judge Newman from her dissent:  "[v]alidity and infringement are distinct issues, bearing different burdens, different presumptions, and different evidence."  720 F. 3d, at 1374 (opinion of Newman, J.).

The opinion also states that the "orderly administration of the patent system" requires that infringement and invalidity be considered separately, and thus the District Court was correct in ruling evidence of Cisco's belief that Commil's claims were invalid was inadmissible.  The jurisprudential point:  "invalidity is not a defense to infringement, it is a defense to liability" and thus "a belief as to invalidity cannot negate the scienter required for induced infringement."

The Court also considers the availability of other avenues to show invalidity -- declaratory judgment actions, citing MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118, 137 (2007), inter partes review under the AIA (§ 316) or ex parte reexamination (§ 302) (which is what Cisco actually did) as alternative ways for an accused infringer to raise challenges to invalidity, the majority agreeing that claims found to be invalid cannot be infringed (versus permitting mere good faith belief to be enough).

The Court finds an analogy between tortious interference with contract and whether the contract is invalid, which is irrelevant as a defense, or perhaps more aptly, trespass on property without knowledge that the trespasser had no legal right to enter a property not being sufficient to eliminate liability for the trespass.

Just when an opinion by this Court gives the impression that the Court has decided to cabin its role in patent law within its Constitutional boundaries of interpreting the Patent Act and deciding whether Congress has exceeded the limitations on its exercise of the patent power under Article I, along comes Part III of the opinion to shatter the illusion.  Here, the Court takes on the issue of "patent trolls," citing Justice Kennedy's concurring opinion in eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388, 396 (2006) (which if memory serves was not the question the Court addressed in eBay).  Broaching this issue in this case shows the political nature of the Court's patenting opinions and its penchant for espousing policy. Here, this takes the guise of the castigating practice of pursuing "frivolous" lawsuits that "may assert vague claims of infringement, and may be designed to obtain payments that are based more on the costs of defending litigation than on the merit of the patent claims," citing testimony before Congress by the Federal Trade Commission.  These questions have nothing to do with the question before the Court, which the Court admits:

No issue of frivolity has been raised by the parties in this case, nor does it arise on the facts presented to this Court.  Nonetheless, it is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded.  If frivolous cases are filed in federal court, it is within the power of the court to sanction attorneys for bringing such suits.  Fed. Rule Civ. Proc. 11.

And:

It is also within the district court's discretion to award attorney's fees to prevailing parties in "exceptional cases."  35 U. S. C. §285; see also Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___–___ (2014) (slip op., at 7–8).

The justification is that:

These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity.

Which seems a thin reed to support this frolic and detour from the question before the Court.

Justice Scalia dissents, in an opinion joined by Chief Justice Roberts (both of whom dissented in FTC v. Actavis on the question of the presumption of validity), making a very simple point:  "[o]nly valid patents confer [a] right to exclusivity -- invalid patents do not," citing FTC v. Actavis, Inc. (2013).  Accordingly:

Because only valid patents can be infringed, anyone with a good-faith belief in a patent's invalidity necessarily believes the patent cannot be infringed.  And it is impossible for anyone who believes that a patent cannot be infringed to induce actions that he knows will infringe it.  A good-faith belief that a patent is invalid is therefore a defense to induced infringement of that patent.

Commil USA, LLC v. Cisco Systems, Inc. (2015)
Opinion of the Court by Justice Kennedy, joined by Justice Ginsburg, Alito, Sotomayor, and Kagan, and joined as to Parts II-B and III by Justice Thomas; dissenting opinion by Justice Scalia, joined by Chief Justice Roberts; Justice Breyer took no part in consideration or decision of the case.