IP News

Kilopass subsequently sued Sidense for infringement of several patents covering non-volatile memory cells. The district court granted Sidense summary judgment of noninfringement, noting that a named inventor of Kilopass' patent had admitted that Kilopass had considered using Sidense's design, but had rejected it. See, Kilopass, 2012 WL 3545286, at *9-10. Kilopass appealed, and while the appeal was pending, Sidense moved for attorney's fees under 35 U.S.C. '285. The district court denied the motion noting that Kilopass had “performed substantial pre-filing investigation” and obtained “opinions from two different law firms.” Kilopass, 2012 WL 6599428, at *3. Sidense appealed.

The Federal Circuit ruled that the district court erred to the extent it required Sidense to prove that Kilopass had actual knowledge that their claims were baseless. See , Slip Op. at 13. Citing Highmark, Inc. v. Allcare Health Management, 687 F.3d 1300 (Fed. Cir. 2012), the panel stated that subjective bad faith requires proof only that the lack of foundation for the claim was either known or so obvious that it should have been known to the party asserting the claim. Thus, the standard for defendants seeking to recover attorney's fees under '285 is recklessness. Slip Op. at 15.

Further, the Federal Circuit found that the district court erred in focusing solely evidence of Kilopass' subjective intent and failing to consider the objective merits of Kilopass' claims. Id. For this reason the Federal Circuit vacated the district court's judgment and remanded with instructions to pay particularly attention to the objective merits of Kilopass' claims. Id. at 17. However, the Federal Circuit rejected Sidense's assertion that it should not be required to show objective bad faith at all, stating that while the argument had merit, as a panel, “[w]e must, and do, apply our current law, which requires proof of objective baselessness and subjective bad faith as a prerequisite for exceptionality'.” Id. at 22. The Federal Circuit also rejected Sidense's assertion that it should not be required to prove bad faith by clear and convincing evidence, again noting the merit of the argument, but stating that as a panel, they were not empowered to change current law. Id. at 25. Finally, the panel rejected Sidense's request to overrule Brooks Furniture Manufacturing v. Dutailier, Inc., 393 F.3d 1378 (Fed. Cir. 2005), and allow fee shifting when a patentee has filed a suit having little likelihood of success, under circumstances where it would be unjust for the prevailing defendant to bear its own fees. The panel noted that defendants who could not prove objective baselessness and subjective bad faith have numerous other routes to attorney's fees under '285.

In concurrence, Chief Judge Rader endorsed Sidense's proposals that objective baselessness should be sufficient to shift attorney's fees, and that the burden should be preponderance of the evidence. Concurring Op. at 1. In addition, Judge Rader stated his belief that the court should return to “the rule that a district court may shift fees when, based on the totality of the circumstances, it is necessary to prevent a gross injustice.” Id. at 2. This, according to Judge Rader, would better comport with legislative intent, U.S. Supreme Court precedent, and application of identical fee shifting language in the Lanham Act.

Federal Circuit Confirms that Prosecution History Estoppel Applies to Design Patents

On Jan. 8, 2014, a panel of Judges Dyk, Mayer, and Chen issued a unanimous opinion, authored by Judge Dyk, in Pacific Coast Marine Windshields Ltd. v. Malibu Boats, LLC, No. 2013-1199. In this case of first impression, the Federal Circuit held that prosecution history estoppel applies to design patents, but reversed the district court's grant of summary judgment of non-infringement, finding that the accused infringing design was not within the scope of the subject matter surrendered during prosecution.

In 2006, the owner of Pacific Coast filed a design patent claiming “an ornamental design of a marine windshield with a frame, a tapered coroner post with [and without] vent holes, ' and with [and without] a hatch'.” Slip Op. at 2-3. The application contained a number of designs with different vent hole and hatch configurations. During prosecution, the examiner made a restriction requirement, and the patentee elected a design with four circular holes in the corner posts. Among the designs not elected were ones with two rectangular or oval holes.

In 2011, Pacific Coast sued Malibu, alleging, inter alia, that Malibu manufactured boats with windshields that infringed Pacific Coast's design patent. The accused design contained three trapezoidal holes in the corner posts. The district court granted Malibu's motion for summary judgment on the grounds of prosecution history estoppel. The district court found that during prosecution, the patentee had surrendered designs reflected in the canceled claims and drawings in order to obtain the patent. While the court noted that the accused design had one more vent hole than the surrendered embodiment, it was “still clearly within the territory surrendered between the original claim and the amended claim.” Id. at 6.

On appeal, the Federal Circuit noted that, while district courts have long recognized prosecution history estoppel in design patents, it was a case of first impression for the Federal Circuit. Id. at 7. For design patents, infringement does not require literal identity, thus intertwining the concepts of literal infringement and infringement under the doctrine of equivalents. Id. at 8. That being the case, the panel noted that the doctrine of prosecution history estoppel would serve the same public notice function as with utility patents. Id. at 11. The Federal Circuit affirmed the district court's findings that the patentee had surrendered claim scope for the purpose of securing the patent. However, the Federal Circuit disagreed with the district court, finding that because the patentee had only surrendered the windshield design with two holes, Malibu's three-hole design did not fall within the scope of the surrendered two-hole design. Id. at 15-16. For that reason, the doctrine of prosecution history estoppel did not bar Pacific Coast's infringement claim, and the case was remanded for further proceedings.

FDCA Does Not Preempt State Unfair Competition Claims

On Dec. 30, 2013, a Federal Circuit panel of Judges Rader, Moore, and Wallach, issued a unanimous opinion, authored by Judge Moore, in Allergan, Inc. v. Athena Cosmetics, Inc., No. 2013-1286. In it, the Federal Circuit affirmed the district court's grant of summary judgment, and held that Allergan's California Unfair Competition Law (UCL), Business and Professions Code '17200-17210 claim was not preempted by the federal Food, Drug, and Cosmetic Act (FDCA), but vacated and remanded the district court's entry of a nation-wide injunction as overbroad.

Both Allergan and Athena sell eyelash products containing prostaglandin derivatives. Allergan's product, Latisse, is an FDA-approved prescription drug, while Athena's RevitaLash line is neither FDA approved nor regulated. Allergan sued Athena for patent infringement and for violation of California's UCL, for competing unfairly by selling RevitaLash without approval from the FDA or the California State Department of Health Services. The district court issued a final claim construction order, and the parties stipulated to summary judgment of non-infringement to preserve their right to appeal that issue. The district court denied Athena's motion for a judgment on the pleadings that the FDCA preempts Allergan's UCL claim. Allergan moved for summary judgment that RevitaLash products at issue qualify as new drugs that lack the requisite approval, giving rise to a UCL violation. The district court granted summary judgment and entered a permanent injunction. Athena appealed.

Allergan contested the Federal Circuit's jurisdiction, arguing that the appeal presented no patent issues. However, the Federal Circuit found that it did have jurisdiction, because the district court entered a summary judgment ruling of non-infringement after issuing a claim construction order. Accordingly, the parties' relationship to one another was not left as if the claims of the patent had never been filed, and the Federal Circuit retained jurisdiction.

Next, the court turned to whether the FDCA preempted Allergan's UCL claim. Athena argued that Allergan's claim interfered with the FDA's discretionary authority as to whether to regulate an article in interstate commerce as a drug. Allergan responded that the FDCA contains express preemption provisions for medical devices and non-prescription drugs, but not for prescription drugs. Citing Wyeth v. Levine, 555 U.S. 555 (2009), Allergan argued that there is no implied preemption where simultaneous compliance with state and federal law is possible, and state law is not an obstacle to the realization of federal goals. Slip Op. at 7-8. The Federal Circuit agreed with Allergan. The court found no clear congressional purpose to preempt state-law causes of action regarding prescription drugs, and that the California Health Code was not an obstacle to realizing federal objectives. Id. at 8-9.

The Federal Circuit affirmed the district court's grant of summary judgment, finding that there was no genuine dispute that Athena's products were drugs. However, the Federal Circuit agreed with Athena, that the district court had abused its discretion in entering an injunction that regulated any and all out-of-state conduct. While the FDA may have authority to enforce the FDCA nationally, a California court enforcing the California UCL may not. See, id. at 15-16. As such, the Federal Circuit vacated the permanent injunction and remanded with instructions to limit the scope of the injunction to California.

Jeffrey S. Ginsberg is a Partner and Wyatt Delfino is an Associate in the New York office of Kenyon & Kenyon LLP.

Federal Circuit Takes Hard Look at a More Permissive Standard for Fee-shifting

On Dec. 26, 2013, a Federal Circuit panel of Judges Rader, Lourie, and O'Malley, issued an opinion, authored by Judge O'Malley, in Kilopass Technology, Inc., v. Sidense Corp., No. 2013-1193, vacating and remanding the district court's denial of Sidense's motion seeking an award of attorney's fees under 35 U.S.C. '285. Chief Judge Rader joined, and wrote separately in concurrence.

Kilopass and Sidense are competitors in the non-volatile memory cell market. In 2005, Kilopass reviewed a patent application from Sidense and found the disclosed memory cell to be similar to one of Kilopass' patents, but missing key features. Kilopass sought the opinions of two different law firms, both of which opined that Sidense's memory cell did not infringe literally, and that any doctrine of equivalents argument would require more information.

Kilopass subsequently sued Sidense for infringement of several patents covering non-volatile memory cells. The district court granted Sidense summary judgment of noninfringement, noting that a named inventor of Kilopass' patent had admitted that Kilopass had considered using Sidense's design, but had rejected it. See, Kilopass, 2012 WL 3545286, at *9-10. Kilopass appealed, and while the appeal was pending, Sidense moved for attorney's fees under 35 U.S.C. '285. The district court denied the motion noting that Kilopass had “performed substantial pre-filing investigation” and obtained “opinions from two different law firms.” Kilopass, 2012 WL 6599428, at *3. Sidense appealed.

The Federal Circuit ruled that the district court erred to the extent it required Sidense to prove that Kilopass had actual knowledge that their claims were baseless. See , Slip Op. at 13. Citing Highmark, Inc. v. Allcare Health Management, 687 F.3d 1300 (Fed. Cir. 2012), the panel stated that subjective bad faith requires proof only that the lack of foundation for the claim was either known or so obvious that it should have been known to the party asserting the claim. Thus, the standard for defendants seeking to recover attorney's fees under '285 is recklessness. Slip Op. at 15.

Further, the Federal Circuit found that the district court erred in focusing solely evidence of Kilopass' subjective intent and failing to consider the objective merits of Kilopass' claims. Id. For this reason the Federal Circuit vacated the district court's judgment and remanded with instructions to pay particularly attention to the objective merits of Kilopass' claims. Id. at 17. However, the Federal Circuit rejected Sidense's assertion that it should not be required to show objective bad faith at all, stating that while the argument had merit, as a panel, “[w]e must, and do, apply our current law, which requires proof of objective baselessness and subjective bad faith as a prerequisite for exceptionality'.” Id. at 22. The Federal Circuit also rejected Sidense's assertion that it should not be required to prove bad faith by clear and convincing evidence, again noting the merit of the argument, but stating that as a panel, they were not empowered to change current law. Id. at 25. Finally, the panel rejected Sidense's request to overrule Brooks Furniture Manufacturing v. Dutailier, Inc., 393 F.3d 1378 (Fed. Cir. 2005), and allow fee shifting when a patentee has filed a suit having little likelihood of success, under circumstances where it would be unjust for the prevailing defendant to bear its own fees. The panel noted that defendants who could not prove objective baselessness and subjective bad faith have numerous other routes to attorney's fees under '285.

In concurrence, Chief Judge Rader endorsed Sidense's proposals that objective baselessness should be sufficient to shift attorney's fees, and that the burden should be preponderance of the evidence. Concurring Op. at 1. In addition, Judge Rader stated his belief that the court should return to “the rule that a district court may shift fees when, based on the totality of the circumstances, it is necessary to prevent a gross injustice.” Id. at 2. This, according to Judge Rader, would better comport with legislative intent, U.S. Supreme Court precedent, and application of identical fee shifting language in the Lanham Act.

Federal Circuit Confirms that Prosecution History Estoppel Applies to Design Patents

On Jan. 8, 2014, a panel of Judges Dyk, Mayer, and Chen issued a unanimous opinion, authored by Judge Dyk, in Pacific Coast Marine Windshields Ltd. v. Malibu Boats, LLC, No. 2013-1199. In this case of first impression, the Federal Circuit held that prosecution history estoppel applies to design patents, but reversed the district court's grant of summary judgment of non-infringement, finding that the accused infringing design was not within the scope of the subject matter surrendered during prosecution.

In 2006, the owner of Pacific Coast filed a design patent claiming “an ornamental design of a marine windshield with a frame, a tapered coroner post with [and without] vent holes, ' and with [and without] a hatch'.” Slip Op. at 2-3. The application contained a number of designs with different vent hole and hatch configurations. During prosecution, the examiner made a restriction requirement, and the patentee elected a design with four circular holes in the corner posts. Among the designs not elected were ones with two rectangular or oval holes.

In 2011, Pacific Coast sued Malibu, alleging, inter alia, that Malibu manufactured boats with windshields that infringed Pacific Coast's design patent. The accused design contained three trapezoidal holes in the corner posts. The district court granted Malibu's motion for summary judgment on the grounds of prosecution history estoppel. The district court found that during prosecution, the patentee had surrendered designs reflected in the canceled claims and drawings in order to obtain the patent. While the court noted that the accused design had one more vent hole than the surrendered embodiment, it was “still clearly within the territory surrendered between the original claim and the amended claim.” Id. at 6.

On appeal, the Federal Circuit noted that, while district courts have long recognized prosecution history estoppel in design patents, it was a case of first impression for the Federal Circuit. Id. at 7. For design patents, infringement does not require literal identity, thus intertwining the concepts of literal infringement and infringement under the doctrine of equivalents. Id. at 8. That being the case, the panel noted that the doctrine of prosecution history estoppel would serve the same public notice function as with utility patents. Id. at 11. The Federal Circuit affirmed the district court's findings that the patentee had surrendered claim scope for the purpose of securing the patent. However, the Federal Circuit disagreed with the district court, finding that because the patentee had only surrendered the windshield design with two holes, Malibu's three-hole design did not fall within the scope of the surrendered two-hole design. Id. at 15-16. For that reason, the doctrine of prosecution history estoppel did not bar Pacific Coast's infringement claim, and the case was remanded for further proceedings.

FDCA Does Not Preempt State Unfair Competition Claims

On Dec. 30, 2013, a Federal Circuit panel of Judges Rader, Moore, and Wallach, issued a unanimous opinion, authored by Judge Moore, in Allergan, Inc. v. Athena Cosmetics, Inc., No. 2013-1286. In it, the Federal Circuit affirmed the district court's grant of summary judgment, and held that Allergan's California Unfair Competition Law (UCL), Business and Professions Code '17200-17210 claim was not preempted by the federal Food, Drug, and Cosmetic Act (FDCA), but vacated and remanded the district court's entry of a nation-wide injunction as overbroad.

Both Allergan and Athena sell eyelash products containing prostaglandin derivatives. Allergan's product, Latisse, is an FDA-approved prescription drug, while Athena's RevitaLash line is neither FDA approved nor regulated. Allergan sued Athena for patent infringement and for violation of California's UCL, for competing unfairly by selling RevitaLash without approval from the FDA or the California State Department of Health Services. The district court issued a final claim construction order, and the parties stipulated to summary judgment of non-infringement to preserve their right to appeal that issue. The district court denied Athena's motion for a judgment on the pleadings that the FDCA preempts Allergan's UCL claim. Allergan moved for summary judgment that RevitaLash products at issue qualify as new drugs that lack the requisite approval, giving rise to a UCL violation. The district court granted summary judgment and entered a permanent injunction. Athena appealed.

Allergan contested the Federal Circuit's jurisdiction, arguing that the appeal presented no patent issues. However, the Federal Circuit found that it did have jurisdiction, because the district court entered a summary judgment ruling of non-infringement after issuing a claim construction order. Accordingly, the parties' relationship to one another was not left as if the claims of the patent had never been filed, and the Federal Circuit retained jurisdiction.

Next, the court turned to whether the FDCA preempted Allergan's UCL claim. Athena argued that Allergan's claim interfered with the FDA's discretionary authority as to whether to regulate an article in interstate commerce as a drug. Allergan responded that the FDCA contains express preemption provisions for medical devices and non-prescription drugs, but not for prescription drugs. Citing Wyeth v. Levine, 555 U.S. 555 (2009), Allergan argued that there is no implied preemption where simultaneous compliance with state and federal law is possible, and state law is not an obstacle to the realization of federal goals. Slip Op. at 7-8. The Federal Circuit agreed with Allergan. The court found no clear congressional purpose to preempt state-law causes of action regarding prescription drugs, and that the California Health Code was not an obstacle to realizing federal objectives. Id. at 8-9.

The Federal Circuit affirmed the district court's grant of summary judgment, finding that there was no genuine dispute that Athena's products were drugs. However, the Federal Circuit agreed with Athena, that the district court had abused its discretion in entering an injunction that regulated any and all out-of-state conduct. While the FDA may have authority to enforce the FDCA nationally, a California court enforcing the California UCL may not. See, id. at 15-16. As such, the Federal Circuit vacated the permanent injunction and remanded with instructions to limit the scope of the injunction to California.

Jeffrey S. Ginsberg is a Partner and Wyatt Delfino is an Associate in the New York office of Kenyon & Kenyon LLP.