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The majority then considered the four statutory factors set forth in AIA '18(b)(1). It held that the first factor ' whether a stay would lead to simplification of issues ' and the fourth factor ' whether a stay will reduce the burdens of litigation ' weighed in favor of a stay. The majority noted that the district court had improperly reviewed the PTAB's decision when denying the stay. The PTAB had determined that all of the asserted claims are more likely than not to be unpatentable, so the CBM review could dispose of the litigation entirely. Id. at 13.

The second factor ' regarding timing ' favored a stay, because the litigation was still in its infancy. There was no error in waiting until the PTAB made its decision to institute CBM review before the district court ruled on the motion to stay. Id. at 19.

Regarding the third factor ' whether a stay would result in undue prejudice for one party or a tactical advantage for the other ' the majority concluded that VirtualAgility's delay in filing suit against Defendants and its failure to move for a preliminary injunction weighed against its claims of undue prejudice. Id. at 23. Thus, the majority held that the third factor at best only weighed slightly against a stay.

In her dissent, Judge Newman argued that the Federal Circuit should give respect for the district court's decision regarding a motion to stay, and the correct standard of review should be abuse of discretion. Judge Newman would have upheld the district court's denial of a stay.

'

Fed. Circ. Vacates'Injunction and Civil'Contempt Sanction after'USPTO Cancels Claim At Issue

On July 25, 2014, a divided panel of the Federal Circuit issued a majority opinion, authored by Judge Dyk and joined by Judge Prost, and a dissent authored by Judge O'Malley, in ePlus, Inc. v. Lawson Software, Inc., Cases No. 2013-1506 and 2013-1587.

In 2009, ePlus sued Lawson for patent infringement in the Eastern District of Virginia. At the district court, an injunction was entered against Lawson after the court found that five claims were valid and a jury found that all five claims were infringed. In a first appeal, the Federal Circuit held that only claim 26 was valid and infringed, and remanded for the district court to modify the injunction. On remand, the district court modified the injunction and found Lawson in civil contempt for violating the injunction. Lawson appealed both rulings. Separately, the USPTO canceled claim 26 in a reexamination proceeding, and the Federal Circuit upheld that ruling.

The majority first vacated the injunction itself. Because the PTO found claim 26 invalid and the Federal Circuit affirmed that decision, claim 26 'no longer confers any rights that support an injunction against infringement.' Slip Op. at 11. An injunction must be vacated following a final judgment that the asserted patent is invalid.

Next, the majority vacated the civil contempt award. '[C]ompensatory civil contempt remedies must be set aside when the injunction on which they are based is set aside because the patent is [] invalid.' Id. at 14. The majority explained that if Lawson had been found guilty of criminal contempt, those penalties would not have been set aside, but the rule for civil contempt is that 'the right to remedial relief falls with an injunction which events prove was erroneously issued.' Id. at 12. Thus, the majority vacated the civil contempt sanctions. However, the majority also noted that it did not address whether civil contempt sanctions would survive if the district court's injunction had been final when the sanctions were imposed. The district court's modified injunction was not final when the USPTO canceled claim 26, because the scope of relief had yet to be determined; the Federal Circuit had earlier remanded the case to the district court to reconsider the injunction, and Lawson had appealed the modified injunction resulting from the remand. Id. at 16-18.

In her dissent, Judge O'Malley argued that the injunction should have been considered final when it was first entered by the district court, because Lawson failed to appeal the validity of claim 26. Furthermore, in the first appeal, the Federal Circuit did not vacate the injunction or direct the district court to 'revise or reconsider' the injunction; it only directed the district court to 'consider' necessary changes to the injunction. Thus, Judge O'Malley would have let stand the civil contempt ruling for past violations of the injunction, because the injunction was final well before claim 26 was cancelled by the PTO.

Fed. Circ. Finds Potential'Antitrust Violations by Patent Owner in ANDA Case

On Aug. 6, 2014, a divided panel of the Federal Circuit issued a majority opinion, authored by Judge Bryson and joined by Judge Moore, and a dissent authored by Judge Newman, in Tyco Healthcare Group LP v. Mutual Pharm. Co., Case No. 2013-1386. The case involved patents for the drug temazepam, specifically 7.5 g formulations of temazepam having a specific surface area between 0.65 and 1.1 m2/g.

In November 2006, Mutual filed an ANDA seeking approval for a generic version of temazepam, in which Mutual represented that its product would have a specific surface area of not less than 2.2 m2/g. In response, Tyco filed an action alleging that Mutual's ANDA infringed Tyco's patents under 35 U.S.C. '271(e)(2)(A). Mutual then raised antitrust counterclaims, which were stayed pending the infringement claims.

The district court first ruled that Mutual did not infringe Tyco's patent. Tyco immediately filed a citizen petition with the FDA, urging it to change the criteria for evaluating the bioequivalence of Mutual's temazepam. The FDA eventually approved Mutual's ANDA and denied Tyco's citizen petition. The district court later granted summary judgment of invalidity of Tyco's patent claims. In a first appeal, the Federal Circuit upheld the invalidity of those claims. The district court then lifted the stay on the antitrust counterclaims and granted summary judgment for Tyco on those counterclaims.

Ordinarily, a party is exempt from antitrust liability for bringing a lawsuit against a competitor ' a principle known as 'Noerr-Pennington immunity.' However, the immunity does not apply if a party engages in 'sham litigation,' which exists when a suit: 1) is 'objectively baseless'; and 2) is 'motivated by a desire to interfere directly with the business relationships of a competitor.' Slip Op. at 8.

Regarding Tyco's infringement arguments, the majority remanded the issue for the district court to reconsider. The court explained that it would not be 'objectively baseless' for Tyco to allege infringement if Tyco had evidence that Mutual's commercial product would infringe despite there being no infringement by the hypothetical product specified in Mutual's ANDA. Id. at 10. Even though Tyco argued that it used a higher outgassing temperature than Mutual to measure specific surface area, evidence suggested a higher outgassing temperature would increase, instead of decrease, specific surface area. The majority noted that this would make it less likely for Mutual's product to infringe Tyco's claims.

Regarding Tyco's validity arguments, the majority affirmed the district court's grant of summary judgment for Tyco. The court explained that 'it will be a rare case in which a party's assertion of its patent in the face of a claim of invalidity will be so unreasonable as to support a claim' of sham litigation, because patents have a strong presumption of validity. Id. at 12. The majority found that Tyco met its burden of production and its validity arguments were not objectively baseless. Id. at 14.

Regarding Tyco's citizen petition, the majority found that the sham litigation exception to Noerr-Pennington immunity is not limited to litigation and could apply to administrative petitions. The court then looked at the evidence in the record and found that there was enough evidence for a reasonable fact-finder to conclude that Tyco's citizen petition satisfied both elements of the 'sham litigation' test. Id. at 16, 18. The Federal Circuit remanded for the district court to consider this issue and also to consider whether Mutual suffered antitrust injury.

Finally, regarding Mutual's argument that Tyco was stripped of immunity for filing suit with knowledge that the patent was obtained through fraud on the PTO, the majority found that the evidence at most showed Tyco was aware of relevant prior art, and that was not enough to strip it of its immunity. Id. at 20. The Federal Circuit affirmed the district court's judgment in favor of Tyco.

In her dissent, Judge Newman argued that the majority improperly inserted antitrust issues into issues of infringement, validity, and government communications. She argued that remanding the case to consider Tyco's infringement arguments would needlessly reopen fact-finding proceedings, when no additional evidence should be necessary because the reasonableness of an antitrust claim is determined as of when the complaint is filed. She also argued that the majority improperly imposed a 'burden of production' on patentees, which creates new antitrust liability for patentees. Finally, she argues that Tyco accurately reported information to the FDA in a citizen petition, and such a communication could not be an antitrust violation.

Jeff Ginsberg is a Partner, and Gary Yen is an Associate, in the New York office of Kenyon & Kenyon LLP.

Fed. Circ. Reverses Denial Of Motion To Stay Post-Grant Review of Covered Business'Method Patent

'On July 10, 2014, a divided panel of the Federal Circuit issued a majority opinion, authored by Judge Moore and joined by Judge Chen, and a dissent authored by Judge Newman, in VirtualAgility, Inc. v. Salesforce.com, Inc., Case No. 2014-1232. In the case, Defendants sought a stay of VirtualAgility's patent infringement suit pending post-grant review of the validity of the asserted claims under the Transitional Program for Covered Business Method Patents (CBM review). The district court denied Defendants' motion to stay the suit, but the Federal Circuit reversed.

In addressing the applicable standard of review, the majority first noted that even under the more stringent abuse of discretion standard, the denial of a stay must be reversed. See, Slip Op. at 5.

The majority then considered the four statutory factors set forth in AIA '18(b)(1). It held that the first factor ' whether a stay would lead to simplification of issues ' and the fourth factor ' whether a stay will reduce the burdens of litigation ' weighed in favor of a stay. The majority noted that the district court had improperly reviewed the PTAB's decision when denying the stay. The PTAB had determined that all of the asserted claims are more likely than not to be unpatentable, so the CBM review could dispose of the litigation entirely. Id. at 13.

The second factor ' regarding timing ' favored a stay, because the litigation was still in its infancy. There was no error in waiting until the PTAB made its decision to institute CBM review before the district court ruled on the motion to stay. Id. at 19.

Regarding the third factor ' whether a stay would result in undue prejudice for one party or a tactical advantage for the other ' the majority concluded that VirtualAgility's delay in filing suit against Defendants and its failure to move for a preliminary injunction weighed against its claims of undue prejudice. Id. at 23. Thus, the majority held that the third factor at best only weighed slightly against a stay.

In her dissent, Judge Newman argued that the Federal Circuit should give respect for the district court's decision regarding a motion to stay, and the correct standard of review should be abuse of discretion. Judge Newman would have upheld the district court's denial of a stay.

'

Fed. Circ. Vacates'Injunction and Civil'Contempt Sanction after'USPTO Cancels Claim At Issue

On July 25, 2014, a divided panel of the Federal Circuit issued a majority opinion, authored by Judge Dyk and joined by Judge Prost, and a dissent authored by Judge O'Malley, in ePlus, Inc. v. Lawson Software, Inc., Cases No. 2013-1506 and 2013-1587.

In 2009, ePlus sued Lawson for patent infringement in the Eastern District of Virginia. At the district court, an injunction was entered against Lawson after the court found that five claims were valid and a jury found that all five claims were infringed. In a first appeal, the Federal Circuit held that only claim 26 was valid and infringed, and remanded for the district court to modify the injunction. On remand, the district court modified the injunction and found Lawson in civil contempt for violating the injunction. Lawson appealed both rulings. Separately, the USPTO canceled claim 26 in a reexamination proceeding, and the Federal Circuit upheld that ruling.

The majority first vacated the injunction itself. Because the PTO found claim 26 invalid and the Federal Circuit affirmed that decision, claim 26 'no longer confers any rights that support an injunction against infringement.' Slip Op. at 11. An injunction must be vacated following a final judgment that the asserted patent is invalid.

Next, the majority vacated the civil contempt award. '[C]ompensatory civil contempt remedies must be set aside when the injunction on which they are based is set aside because the patent is [] invalid.' Id. at 14. The majority explained that if Lawson had been found guilty of criminal contempt, those penalties would not have been set aside, but the rule for civil contempt is that 'the right to remedial relief falls with an injunction which events prove was erroneously issued.' Id. at 12. Thus, the majority vacated the civil contempt sanctions. However, the majority also noted that it did not address whether civil contempt sanctions would survive if the district court's injunction had been final when the sanctions were imposed. The district court's modified injunction was not final when the USPTO canceled claim 26, because the scope of relief had yet to be determined; the Federal Circuit had earlier remanded the case to the district court to reconsider the injunction, and Lawson had appealed the modified injunction resulting from the remand. Id. at 16-18.

In her dissent, Judge O'Malley argued that the injunction should have been considered final when it was first entered by the district court, because Lawson failed to appeal the validity of claim 26. Furthermore, in the first appeal, the Federal Circuit did not vacate the injunction or direct the district court to 'revise or reconsider' the injunction; it only directed the district court to 'consider' necessary changes to the injunction. Thus, Judge O'Malley would have let stand the civil contempt ruling for past violations of the injunction, because the injunction was final well before claim 26 was cancelled by the PTO.

Fed. Circ. Finds Potential'Antitrust Violations by Patent Owner in ANDA Case

On Aug. 6, 2014, a divided panel of the Federal Circuit issued a majority opinion, authored by Judge Bryson and joined by Judge Moore, and a dissent authored by Judge Newman, in Tyco Healthcare Group LP v. Mutual Pharm. Co., Case No. 2013-1386. The case involved patents for the drug temazepam, specifically 7.5 g formulations of temazepam having a specific surface area between 0.65 and 1.1 m2/g.

In November 2006, Mutual filed an ANDA seeking approval for a generic version of temazepam, in which Mutual represented that its product would have a specific surface area of not less than 2.2 m2/g. In response, Tyco filed an action alleging that Mutual's ANDA infringed Tyco's patents under 35 U.S.C. '271(e)(2)(A). Mutual then raised antitrust counterclaims, which were stayed pending the infringement claims.

The district court first ruled that Mutual did not infringe Tyco's patent. Tyco immediately filed a citizen petition with the FDA, urging it to change the criteria for evaluating the bioequivalence of Mutual's temazepam. The FDA eventually approved Mutual's ANDA and denied Tyco's citizen petition. The district court later granted summary judgment of invalidity of Tyco's patent claims. In a first appeal, the Federal Circuit upheld the invalidity of those claims. The district court then lifted the stay on the antitrust counterclaims and granted summary judgment for Tyco on those counterclaims.

Ordinarily, a party is exempt from antitrust liability for bringing a lawsuit against a competitor ' a principle known as 'Noerr-Pennington immunity.' However, the immunity does not apply if a party engages in 'sham litigation,' which exists when a suit: 1) is 'objectively baseless'; and 2) is 'motivated by a desire to interfere directly with the business relationships of a competitor.' Slip Op. at 8.

Regarding Tyco's infringement arguments, the majority remanded the issue for the district court to reconsider. The court explained that it would not be 'objectively baseless' for Tyco to allege infringement if Tyco had evidence that Mutual's commercial product would infringe despite there being no infringement by the hypothetical product specified in Mutual's ANDA. Id. at 10. Even though Tyco argued that it used a higher outgassing temperature than Mutual to measure specific surface area, evidence suggested a higher outgassing temperature would increase, instead of decrease, specific surface area. The majority noted that this would make it less likely for Mutual's product to infringe Tyco's claims.

Regarding Tyco's validity arguments, the majority affirmed the district court's grant of summary judgment for Tyco. The court explained that 'it will be a rare case in which a party's assertion of its patent in the face of a claim of invalidity will be so unreasonable as to support a claim' of sham litigation, because patents have a strong presumption of validity. Id. at 12. The majority found that Tyco met its burden of production and its validity arguments were not objectively baseless. Id. at 14.

Regarding Tyco's citizen petition, the majority found that the sham litigation exception to Noerr-Pennington immunity is not limited to litigation and could apply to administrative petitions. The court then looked at the evidence in the record and found that there was enough evidence for a reasonable fact-finder to conclude that Tyco's citizen petition satisfied both elements of the 'sham litigation' test. Id. at 16, 18. The Federal Circuit remanded for the district court to consider this issue and also to consider whether Mutual suffered antitrust injury.

Finally, regarding Mutual's argument that Tyco was stripped of immunity for filing suit with knowledge that the patent was obtained through fraud on the PTO, the majority found that the evidence at most showed Tyco was aware of relevant prior art, and that was not enough to strip it of its immunity. Id. at 20. The Federal Circuit affirmed the district court's judgment in favor of Tyco.

In her dissent, Judge Newman argued that the majority improperly inserted antitrust issues into issues of infringement, validity, and government communications. She argued that remanding the case to consider Tyco's infringement arguments would needlessly reopen fact-finding proceedings, when no additional evidence should be necessary because the reasonableness of an antitrust claim is determined as of when the complaint is filed. She also argued that the majority improperly imposed a 'burden of production' on patentees, which creates new antitrust liability for patentees. Finally, she argues that Tyco accurately reported information to the FDA in a citizen petition, and such a communication could not be an antitrust violation.

Jeff Ginsberg is a Partner, and Gary Yen is an Associate, in the New York office of Kenyon & Kenyon LLP.