IP News

The panel first addressed the district court's construction of the “modulation method [] of a different type” limitation, and, relying on the applicant's statement in the prosecution history, affirmed the district court's construction. Next, the panel turned its focus to JMOL on obviousness. Samsung alleged that the Boer reference disclosed the limitation mentioned above, and that the combination of the Boer patent with the Upender article rendered the patents-in-suit invalid for obviousness. The panel concluded that there is “substantial evidence to support the jury's” factual finding that Boer did not teach the limitation. Slip Op. at 12. It subsequently held that there is also substantial evidence to support the jury's finding of no motivation to combine Boer with Upender based on the suggestion in Upender, which compares several communication protocols including the communication protocol claimed in the Rembrandt patents, that the Rembrandt communication protocol is inferior to the one claimed in the Boer patent.

The panel then turned to damages. Samsung argued that the district court erred in allowing the testimony of Rembrandt's damages expert, whom Samsung alleged used a flawed methodology to calculate his proposed reasonable royalty rate, including reliance on Rembrandt's agreements with other companies. Samsung alleged that the district also erred in redacting pertinent information that was necessary for context from the other Rembrandt agreements. The panel found no abuse of discretion by the district court with respect to Samsung's evidentiary disputes. Samsung also argued that the jury's damages award to Rembrandt is not supported by substantial evidence. The panel disagreed with Samsung on substantial evidence support, but remanded the case on the question of Samsung's liability for pre-notice damages.

Lastly, the panel addressed Rembrandt's failure to mark certain patent products. Rembrandt licensed the '580 patent to a third party that sold products covered by asserted claim 40. The agreement did not require the third party to mark its products with the patent number, and the third party did not mark such products. Although claim 40 was initially asserted against Samsung, Rembrandt later withdrew that claim from the case and disclaimed claim 40. The district court denied Samsung's pre-trial motion to limit damages, reasoning that Rembrandt's disclaimer excused this failure to mark as the “disclaimed claim is treated as if it never existed.” Slip Op. at 19 (quoting district court opinion).

The panel criticized the district court's decision as “effectively provid[ing] an end-run around the marking statute and [] irreconcilable with the [marking] statute's purpose” of protecting the public's rights. Slip Op. at 20-21. The marking statute “gives notice to the public of the patent.” Slip Op. at 20 (quoting Wine Ry. Appliance Co. v. Enter. Ry. Equip. Co., 297 U.S. 387, 397 (1936)). While marking is not mandatory, “[i]n the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement.” Slip Op. at 20 (quoting 35 U.S.C. §287(a)). Therefore, the panel observed, the marking statute is concerned with both patent owner's rights and the public's rights, and a patent owner's disclaimer does not “relinquish[] the rights of the public” to notice of the patent. Slip Op. at 21. Thus, the panel held that Rembrandt's disclaimer of claim 40 “cannot serve to retroactively dissolve” the marking requirement and vacated the district court's decision denying Samsung's motion to limit Rembrandt's damages. Slip Op. at 22.

Rembrandt argued in the district court that the marking statute should be considered on a claim-by-claim basis rather than a patent-by-patent basis. As Rembrandt had not brought up this argument on appeal, the panel remanded to the district court on this novel issue.

Federal Circuit Affirms PTAB's Unpatentability Findings Made In an IPR Proceeding Despite Prior Judicial Opinions Upholding Validity

On April 4, 2017, a Federal Circuit panel consisting of Judge Prost, Judge Wallach and Judge Stoll issued a unanimous opinion, authored by Judge Wallach in Novartis AG v. Noven Pharms. Inc., Case Nos. 2016-1678 and 2016-1679. Novartis appealed from final written decisions issued by the U.S. Patent and Trademark Office's Patent Trial and Appeal Board (PTAB) in related inter partes review (IPR) proceedings, in which the PTAB held that prior judicial decisions upholding the validity of certain claims at issue did not control its inquiry, and found the claims at issue unpatentable as obvious over the cited prior art. The Federal Circuit affirmed.

In the underlying IPR proceedings (IPR2014-00549, IPR2014-00550, IPR2015-00265 and IPR2015-00268), Noven and Mylan challenged the patentability of various claims of two related patents: U.S. Patent Nos. 6,316,023 (the '023 patent) and 6,335,031 (the '031 patent). Slip. Op. at 2. The challenged claims are directed to: 1) a pharmaceutical composition comprising an active known as rivastigmine and an antioxidant; and 2) a transdermal device comprising the composition. Slip. Op. at 5. As the panel noted in passing and the underlying final written decisions set forth in more detail, several of the claims found unpatentable in the IPR proceedings were previously found valid in two separate decisions issued by the U.S. District Court for the District of Delaware, including one affirmed by the Federal Circuit on appeal. Slip Op at 5-6; Noven Pharms., Inc. v. Novartis AG, IPR2014-00549, Paper 69 at 3-4 (PTAB Sept. 28, 2015). Central to the PTAB's final written decisions and Novartis's appeal to the Federal Circuit were: 1) the PTAB's conclusion that prior opinions issued by a district court upholding the validity of the challenged claims and the subsequent affirmance by a Federal Circuit panel did not bind the PTAB; and 2) the PTAB's determination that the petitioners demonstrated by a preponderance of the evidence that the challenged claims are unpatentable for obvious over the prior art.

The Federal Circuit first addressed Novartis's argument that prior judicial opinions are binding on the PTAB, rejecting the argument on factual and legal grounds. The panel found that “the parties provided additional evidence that was not before the Delaware District Court [or the Federal Circuit panel]” and observed that “ [i]t is unsurprising that different records may lead to different findings and conclusions.” Slip. Op. at 6-7. Focusing on the legal distinctions, the panel stated that “even if the record were the same, Novartis's argument would fail as a matter of law,” because different evidentiary standards are applicable in an IPR proceeding (i.e., by a preponderance of the evidence) and a district court litigation (i.e., by clear and convincing evidence), and as a result, the PTAB and a district court may properly reach different conclusions on the same record. Slip. Op. at 7-8. Finally, the panel found that the statement made by another panel that “the USPTO 'ideally should not arrive at a different conclusion' if it faces the same evidence and argument as a district court” is aspirational in nature and does not override “a separate review mechanism before the USPTO with its own standards [such as an IPR]” provided by Congress. Slip. Op. at 8, citing In re Baxter Int'l, Inc., 678 F.3d 1357, 1365 (Fed. Cir. 2012). The panel noted that even the Baxter court recognized the fact that Congress provided a reexamination mechanism to third parties who wish to challenge patents, including the challengers who have lost in district court proceedings. Slip Op. at 8.

Finally, the Federal Circuit addressed Novartis's contentions that the PTAB's factual findings regarding the motivation to combine prior art references was not supported by substantial evidence, and found Novartis's arguments unpersuasive. The PTAB rejected Novartis's argument that a skilled artisan “would only have added an antioxidant when required to address a known oxidative degradation problem,” and found substantial evidence in support of the PTAB's finding that the skilled artisan “would not have waited to add an antioxidant until discovering degradation during testing, but would have assessed a compound's structure in advance of testing to determine whether an antioxidant should be added.” Slip Op. at 10. In discussing the testimonial evidence Novartis cited on appeal, the panel observed that the PTAB had considered the proffered evidence and found it irrelevant to the technology at issue, and the panel declined to re-weigh such evidence. Slip Op. at 11.

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Jeffrey S. Ginsberg is the Assistant Editor of this newsletter and a partner with Patterson Belknap Webb & Tyler LLP. Hui Li and Zhiqiang Liu are associates at the firm.

District Court's Decision Retroactively Excusing Failure to Mark Patented Products Vacated By Federal Circuit

On April 19, 2017, a Federal Circuit panel consisting of Judge Taranto, Judge Chen and Judge Stoll issued a unanimous opinion, authored by Judge Stoll, Rembrandt Wireless Techs., LP v. Samsung Elecs. Co., Ltd., Case No. 2016-1729. Samsung appealed from the United States District Court for the Eastern District of Texas. The panel affirmed the district court's claim construction and denial of Samsung's motions for judgment as a matter of law (JMOL) on obviousness and damages, but vacated and remanded the district court's denial of Samsung's motion to limit damages.

Rembrandt Wireless sued Samsung for infringement of U.S. Patent No. 8,023,580 (the '580 patent) and U.S. Patent No. 8,457,228, which include claims directed to “a system and method of communication in which multiple modulation methods are used to facilitate communication among a plurality of modems in a network.” Slip Op. at 3 (quoting the '580 patent). The jury found in favor of Rembrandt on infringement and validity. Samsung filed post-trial JMOLs on obviousness and damages, which were denied, as was Samsung's pre-trial motion to limit damages. Samsung appealed the district court's: 1) claim construction; 2) denial of Samsung's JMOL on obviousness; 3) denial of Samsung's JMOL on damages; and 4) denial of Samsung's motion to limit damages.

The panel first addressed the district court's construction of the “modulation method [] of a different type” limitation, and, relying on the applicant's statement in the prosecution history, affirmed the district court's construction. Next, the panel turned its focus to JMOL on obviousness. Samsung alleged that the Boer reference disclosed the limitation mentioned above, and that the combination of the Boer patent with the Upender article rendered the patents-in-suit invalid for obviousness. The panel concluded that there is “substantial evidence to support the jury's” factual finding that Boer did not teach the limitation. Slip Op. at 12. It subsequently held that there is also substantial evidence to support the jury's finding of no motivation to combine Boer with Upender based on the suggestion in Upender, which compares several communication protocols including the communication protocol claimed in the Rembrandt patents, that the Rembrandt communication protocol is inferior to the one claimed in the Boer patent.

The panel then turned to damages. Samsung argued that the district court erred in allowing the testimony of Rembrandt's damages expert, whom Samsung alleged used a flawed methodology to calculate his proposed reasonable royalty rate, including reliance on Rembrandt's agreements with other companies. Samsung alleged that the district also erred in redacting pertinent information that was necessary for context from the other Rembrandt agreements. The panel found no abuse of discretion by the district court with respect to Samsung's evidentiary disputes. Samsung also argued that the jury's damages award to Rembrandt is not supported by substantial evidence. The panel disagreed with Samsung on substantial evidence support, but remanded the case on the question of Samsung's liability for pre-notice damages.

Lastly, the panel addressed Rembrandt's failure to mark certain patent products. Rembrandt licensed the '580 patent to a third party that sold products covered by asserted claim 40. The agreement did not require the third party to mark its products with the patent number, and the third party did not mark such products. Although claim 40 was initially asserted against Samsung, Rembrandt later withdrew that claim from the case and disclaimed claim 40. The district court denied Samsung's pre-trial motion to limit damages, reasoning that Rembrandt's disclaimer excused this failure to mark as the “disclaimed claim is treated as if it never existed.” Slip Op. at 19 (quoting district court opinion).

The panel criticized the district court's decision as “effectively provid[ing] an end-run around the marking statute and [] irreconcilable with the [marking] statute's purpose” of protecting the public's rights. Slip Op. at 20-21. The marking statute “gives notice to the public of the patent.” Slip Op. at 20 (quoting Wine Ry. Appliance Co. v. Enter. Ry. Equip. Co., 297 U.S. 387, 397 (1936)). While marking is not mandatory, “[i]n the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement.” Slip Op. at 20 (quoting 35 U.S.C. §287(a)). Therefore, the panel observed, the marking statute is concerned with both patent owner's rights and the public's rights, and a patent owner's disclaimer does not “relinquish[] the rights of the public” to notice of the patent. Slip Op. at 21. Thus, the panel held that Rembrandt's disclaimer of claim 40 “cannot serve to retroactively dissolve” the marking requirement and vacated the district court's decision denying Samsung's motion to limit Rembrandt's damages. Slip Op. at 22.

Rembrandt argued in the district court that the marking statute should be considered on a claim-by-claim basis rather than a patent-by-patent basis. As Rembrandt had not brought up this argument on appeal, the panel remanded to the district court on this novel issue.

Federal Circuit Affirms PTAB's Unpatentability Findings Made In an IPR Proceeding Despite Prior Judicial Opinions Upholding Validity

On April 4, 2017, a Federal Circuit panel consisting of Judge Prost, Judge Wallach and Judge Stoll issued a unanimous opinion, authored by Judge Wallach in Novartis AG v. Noven Pharms. Inc., Case Nos. 2016-1678 and 2016-1679. Novartis appealed from final written decisions issued by the U.S. Patent and Trademark Office's Patent Trial and Appeal Board (PTAB) in related inter partes review (IPR) proceedings, in which the PTAB held that prior judicial decisions upholding the validity of certain claims at issue did not control its inquiry, and found the claims at issue unpatentable as obvious over the cited prior art. The Federal Circuit affirmed.

In the underlying IPR proceedings (IPR2014-00549, IPR2014-00550, IPR2015-00265 and IPR2015-00268), Noven and Mylan challenged the patentability of various claims of two related patents: U.S. Patent Nos. 6,316,023 (the '023 patent) and 6,335,031 (the '031 patent). Slip. Op. at 2. The challenged claims are directed to: 1) a pharmaceutical composition comprising an active known as rivastigmine and an antioxidant; and 2) a transdermal device comprising the composition. Slip. Op. at 5. As the panel noted in passing and the underlying final written decisions set forth in more detail, several of the claims found unpatentable in the IPR proceedings were previously found valid in two separate decisions issued by the U.S. District Court for the District of Delaware, including one affirmed by the Federal Circuit on appeal. Slip Op at 5-6; Noven Pharms., Inc. v. Novartis AG, IPR2014-00549, Paper 69 at 3-4 (PTAB Sept. 28, 2015). Central to the PTAB's final written decisions and Novartis's appeal to the Federal Circuit were: 1) the PTAB's conclusion that prior opinions issued by a district court upholding the validity of the challenged claims and the subsequent affirmance by a Federal Circuit panel did not bind the PTAB; and 2) the PTAB's determination that the petitioners demonstrated by a preponderance of the evidence that the challenged claims are unpatentable for obvious over the prior art.

The Federal Circuit first addressed Novartis's argument that prior judicial opinions are binding on the PTAB, rejecting the argument on factual and legal grounds. The panel found that “the parties provided additional evidence that was not before the Delaware District Court [or the Federal Circuit panel]” and observed that “ [i]t is unsurprising that different records may lead to different findings and conclusions.” Slip. Op. at 6-7. Focusing on the legal distinctions, the panel stated that “even if the record were the same, Novartis's argument would fail as a matter of law,” because different evidentiary standards are applicable in an IPR proceeding (i.e., by a preponderance of the evidence) and a district court litigation (i.e., by clear and convincing evidence), and as a result, the PTAB and a district court may properly reach different conclusions on the same record. Slip. Op. at 7-8. Finally, the panel found that the statement made by another panel that “the USPTO 'ideally should not arrive at a different conclusion' if it faces the same evidence and argument as a district court” is aspirational in nature and does not override “a separate review mechanism before the USPTO with its own standards [such as an IPR]” provided by Congress. Slip. Op. at 8, citing In re Baxter Int'l, Inc., 678 F.3d 1357, 1365 (Fed. Cir. 2012). The panel noted that even the Baxter court recognized the fact that Congress provided a reexamination mechanism to third parties who wish to challenge patents, including the challengers who have lost in district court proceedings. Slip Op. at 8.

Finally, the Federal Circuit addressed Novartis's contentions that the PTAB's factual findings regarding the motivation to combine prior art references was not supported by substantial evidence, and found Novartis's arguments unpersuasive. The PTAB rejected Novartis's argument that a skilled artisan “would only have added an antioxidant when required to address a known oxidative degradation problem,” and found substantial evidence in support of the PTAB's finding that the skilled artisan “would not have waited to add an antioxidant until discovering degradation during testing, but would have assessed a compound's structure in advance of testing to determine whether an antioxidant should be added.” Slip Op. at 10. In discussing the testimonial evidence Novartis cited on appeal, the panel observed that the PTAB had considered the proffered evidence and found it irrelevant to the technology at issue, and the panel declined to re-weigh such evidence. Slip Op. at 11.

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Jeffrey S. Ginsberg is the Assistant Editor of this newsletter and a partner with Patterson Belknap Webb & Tyler LLP. Hui Li and Zhiqiang Liu are associates at the firm.