IP News

As summarized in the Federal Circuit panel's decision, Claim 2 of the '412 patent is directed to a method of controlling and delivering media content from a media server (MS) to a media renderer (MR) using control point logic (CP) located outside a user endpoint (UE) and/or control point proxy logic (CPP) located inside the UE for negotiating delivery of the media. Claim 21 is substantially similar.

In deciding Apple's summary judgment motion, the district court construed the asserted claims to “require that only the CPP logic is invoked to negotiate media content delivery between the MS and the MR, in contrast to claims 1 and 20 which require both the CP and CPP to negotiate media content delivery.” Slip Op. at 6. In arriving at this construction, the district court relied on statements made by Aylus in its preliminary responses to Apple's petitions for IPR, finding the statements akin to prosecution disclaimer. Based on this disclaimer, the district court granted Apple's motion for summary judgment of noninfringement.

Aylus appealed from the district court's claim construction and grant of summary judgment. On appeal, Aylus argued that statements made during an IPR cannot be relied on to support a finding of prosecution disclaimer. Aylus alternatively argued that its statements did not constitute a clear and unmistakable disclaimer of claim scope.

The Federal Circuit panel's decision began by addressing an issue characterized as one of first impression: whether statements made by a patent owner during an IPR proceeding can be relied on to support a finding of prosecution disclaimer during claim construction.

The panel first reaffirmed the doctrine of prosecution disclaimer as promoting the public notice function of the intrinsic record and that prosecution disclaimer can occur through amendment or argument. Id. at 8-9. The panel next cited its precedent extending the doctrine of prosecution disclaimer to post-issuance proceedings, including reissue and reexamination proceedings, and reasoned by analogy that it should also apply the doctrine in IPR proceedings. The panel concluded that: “[e]xtending the prosecution disclaimer doctrine to IPR proceedings will ensure that claims are not argued one way in order to maintain their patentability and in a different way against accused infringers.” Slip Op. at 10.

The panel then responded to Aylus's argument that statements made during an IPR proceeding are distinguishable from other PTO proceedings because an IPR proceeding is adjudicative rather than administrative. The panel rejected this argument, citing the Supreme Court's decision in Cuozzo Speed Technologies v. Lee, 1366 S. Ct. 2131 (June 20, 2016), establishing that IPR proceedings resemble the administrative reexamination of a patent.

The panel next rejected Aylus's argument that statements made in a preliminary response, i.e., before institution, were not “part of an IPR proceeding.” The panel found that, for the purposes of prosecution disclaimer, the difference between the pre and post-institution phases of an IPR is “a distinction without a difference.” Id. at 13. “Regardless of when the statements are made during the proceeding, the public is entitled to rely on those representations when determining a course of lawful conduct” Id. at 14. (internal quotations omitted).

Accordingly, the Federal Circuit panel held “that statements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be considered for claim construction and relied upon to support a finding of prosecution disclaimer.” Slip Op. at 14.

Having established that prosecution disclaimer can apply, the panel then analyzed whether the district court correctly invoked prosecution disclaimer. The panel agreed that Aylus's repeated statements in its preliminary response that claims 2 and 21 “require that … only the control point proxy logic[] be invoked,” and that “only the CPP is invoked,” represent an unequivocal and unambiguous disavowal of the CP logic's invocation. Id. at 16 (internal quotations omitted). Based on this disclaimer, the panel affirmed the district court's claim construction and grant of summary judgment of non-infringement. Id. at 19.

Federal Circuit Decisions Offer Guidance on Award of Attorney Fees under Section 285

On June 5, 2017, a Federal Circuit panel of Judges Newman, Lourie and Moore issued a unanimous opinion, authored by Judge Newman, in Checkpoint Sys, Inc. v. All-Tag Security S.A., Case Nos. 2016-1397. The panel reversed the district court's award of attorney fees under 35 U.S.C. §285.

Checkpoint brought suit in district court against All-Tag for infringement of U.S. Patent No. 4,876,555 (the '555 patent) relating to improved anti-theft tags that are attached to merchandise. At trial, a jury found the '555 patent not infringed, invalid, and unenforceable. Following the verdict, the district court found the case “exceptional” under 35 U.S.C. §285, and awarded defendants attorney fees, costs, and interest.

Checkpoint appealed, and, in a 2013 decision, the Federal Circuit reversed the attorney fee award under the now abrogated “bad faith or objectively baseless” standard. All-Tag sought certiorari, which was granted, and the Supreme Court reversed and remanded for reconsideration in view of its decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). In turn, the Federal Circuit remanded to the district court.

On remand, the district court again held the case to be exceptional, citing as dispositive Checkpoint's improper motivation in bringing the lawsuit “to interfere improperly with Defendants' business and to protect its own competitive advantage,” Checkpoint's inadequate pre-suit infringement investigation, and the failure of Checkpoint's expert to inspect the correct accused product.

Checkpoint appealed the fee award again, arguing that its expert proceeded reasonably in light of the available information, that it had a reasonable, good faith basis for bringing its infringement action, and consequently that the Supreme Court's rulings in Octane Fitness and in Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014), did not support the award of attorney fees. Checkpoint also cited the district court's denial of All-Tag's Daubert and summary judgement motions as further evidence of the reasonableness of the case.

In its decision, the Federal Circuit, quoting Octane Fitness, defined an “exceptional” case as “one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Slip Op. at 5 (quoting Octane Fitness, at 1756.

Under this definition, the panel concluded that the district court erred in its legal analysis and assessment of the evidence. First, the panel faulted the district court for characterizing Checkpoint's other lawsuits against asserted infringers, its market share, and its acquisition of competing producers as showing the improper motive of “protecting its own competitive advantage.” The panel concluded that, while “motivation” to harass or burden an opponent may be relevant to an “exceptional case” finding, Checkpoint's mere motivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an improper motive and is not “exceptional.” Slip Op. at 6.

As further evidence that the case was not exceptional, the panel cited the district court's denial of All-Tag's summary judgment motions, the absence of any finding that the accused products were different from the products tested by Checkpoint's expert, and the absence of any allegation of falsity or fraud or bad faith on the part of Checkpoint or its expert.

Accordingly, the Federal Circuit reversed the district court's award of attorney fees finding that the charge of infringement was reasonable and that the litigation was not brought in bad faith or with abusive tactics. Slip Op. at 9.

Rothschild Connected v. Guardian

Also on June 5, 2017, a Federal Circuit panel of Chief Judge Prost and Judges Mayer and Wallach issued a majority opinion, authored by Judge Wallach, in Rothschild Connected Devices Innovations v. Guardian Protection Servs., Case Nos. 2016-2521. In this case, the Federal Circuit panel reversed the district court's denial of attorney fees under 35 U.S.C. §285.

Rothschild brought a suit in district court alleging that ADS Security, L.P. (ADS) infringed U.S. Patent No. 8,788,090 (the '090 patent). ADS responded with an email to Rothschild alleging that the '090 patent covers patent-ineligible subject matter and that prior art anticipates the asserted claim. ADS offered to settle the case if Rothschild paid ADS for its attorney fees and costs. Rothschild rejected ADS's offer.

ADS then filed a motion for judgment on the pleadings, arguing that the asserted claim 1 of the '090 patent covers patent-ineligible subject matter under §101. ADS also sent Rothschild a notice pursuant to Federal Rule of Civil Procedure 11(c)(2), which included copies of a proposed Rule 11(b) motion for sanctions and prior art that purportedly anticipates claim 1. Pursuant to the “safe harbor” provision of Rule 11(c)(2), Rothschild voluntarily moved to dismiss its action. ADS opposed and filed a cross-motion for attorney fees under §285.

The district court granted Rothschild's motion to dismiss and denied ADS's cross-motion for attorney fees. In denying ADS's cross-motion for fees, the district court found that Rothschild's decision to voluntarily withdraw its complaint within the Rule 11 safe harbor period was reasonable. The district court also found that Rothschild recited facially plausible arguments supporting patent eligibility under §101, and that Rothschild's suits for infringement against other companies did not alone make the case exceptional. ADS appealed the denial of attorney fees.

In its decision, the Federal Circuit panel explained that factors to be considered when making a determination under §285 may include “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Slip Op. 5 (quoting Octane Fitness, at 1756).

In assessing these factors, the panel found that the district court should not have credited Rothschild's assertion that its claims were brought in good faith based on conclusory affidavits in which the affiants admitted they had not analyzed the prior art asserted in ADS's cross-motion.

The panel also concluded that Rothschild had engaged in vexatious litigation, as demonstrated by settlement of the vast majority of its 58 other cases for below the average cost of defending an infringement lawsuit. According to the panel, absent other evidence of reasonable conduct, the “undisputed evidence regarding Rothschild's vexatious litigation warrants an affirmative exceptional case finding here.” Slip Op. at 11.

Finally, the panel concluded that the district court improperly equated Rule 11 with §285. The panel warned that “[w]hether a party avoids or engages in sanctionable conduct under Rule 11(b) is not the appropriate benchmark; indeed, a district court may award fees in the rare case in which a party's unreasonable conduct — while not necessarily independently sanctionable — is nonetheless so exceptional as to justify an award of fees.” Slip Op. at 12 (internal quotations omitted).

Accordingly, the Federal Circuit reversed and remanded to district court for a calculation of attorney fees.

Judge Mayer, in a concurring opinion, agreed with the majority's holding but, citing Octane Fitness, added that he would have additionally awarded fees based on Rothschild's exceptionally meritless claims. According to Judge Mayer, “[n]either nuanced legal analysis nor complex technical inquiry was required to determine that the '090 patent could not be both broad enough to cover the home security products sold by ADS Security, L.P. ('ADS') and narrow enough to withstand subject matter eligibility scrutiny.” Slip Op. at 3 (Mayer, concurring).

*****
Jeff Ginsberg is a Partner of Patterson Belknap Webb & Tyler LLP and Assistant Editor of this newsletter. David Cooperberg is an Associate with the firm.

Federal Circuit Affirms Non-Infringement Decision Based on Prosecution Disclaimer

On May 11, 2017, a Federal Circuit panel of Judges Moore, Linn and Stoll issued a unanimous opinion, authored by Judge Stoll, in Aylus Networks, Inc. v. Apple Inc., Case Nos. 2016-1599. The panel affirmed the district court's grant of summary judgment finding Apple does not infringe the asserted claims of U.S. Patent No. RE 44,412.

Aylus sued Apple for infringement of multiple claims of the '412 patent in district court. Apple then filed two petitions for inter partes review (IPR) of the '412 patent. The PTAB instituted review of all claims except 2, 4, 21, and 23 based on one petition and denied institution based on the other. Following institution, Aylus narrowed its district court action, maintaining its claim of infringement only as to claims 2 and 21. Apple filed for summary judgment of noninfringement as to these claims.

As summarized in the Federal Circuit panel's decision, Claim 2 of the '412 patent is directed to a method of controlling and delivering media content from a media server (MS) to a media renderer (MR) using control point logic (CP) located outside a user endpoint (UE) and/or control point proxy logic (CPP) located inside the UE for negotiating delivery of the media. Claim 21 is substantially similar.

In deciding Apple's summary judgment motion, the district court construed the asserted claims to “require that only the CPP logic is invoked to negotiate media content delivery between the MS and the MR, in contrast to claims 1 and 20 which require both the CP and CPP to negotiate media content delivery.” Slip Op. at 6. In arriving at this construction, the district court relied on statements made by Aylus in its preliminary responses to Apple's petitions for IPR, finding the statements akin to prosecution disclaimer. Based on this disclaimer, the district court granted Apple's motion for summary judgment of noninfringement.

Aylus appealed from the district court's claim construction and grant of summary judgment. On appeal, Aylus argued that statements made during an IPR cannot be relied on to support a finding of prosecution disclaimer. Aylus alternatively argued that its statements did not constitute a clear and unmistakable disclaimer of claim scope.

The Federal Circuit panel's decision began by addressing an issue characterized as one of first impression: whether statements made by a patent owner during an IPR proceeding can be relied on to support a finding of prosecution disclaimer during claim construction.

The panel first reaffirmed the doctrine of prosecution disclaimer as promoting the public notice function of the intrinsic record and that prosecution disclaimer can occur through amendment or argument. Id. at 8-9. The panel next cited its precedent extending the doctrine of prosecution disclaimer to post-issuance proceedings, including reissue and reexamination proceedings, and reasoned by analogy that it should also apply the doctrine in IPR proceedings. The panel concluded that: “[e]xtending the prosecution disclaimer doctrine to IPR proceedings will ensure that claims are not argued one way in order to maintain their patentability and in a different way against accused infringers.” Slip Op. at 10.

The panel then responded to Aylus's argument that statements made during an IPR proceeding are distinguishable from other PTO proceedings because an IPR proceeding is adjudicative rather than administrative. The panel rejected this argument, citing the Supreme Court's decision in Cuozzo Speed Technologies v. Lee , 1366 S. Ct. 2131 (June 20, 2016), establishing that IPR proceedings resemble the administrative reexamination of a patent.

The panel next rejected Aylus's argument that statements made in a preliminary response, i.e., before institution, were not “part of an IPR proceeding.” The panel found that, for the purposes of prosecution disclaimer, the difference between the pre and post-institution phases of an IPR is “a distinction without a difference.” Id. at 13. “Regardless of when the statements are made during the proceeding, the public is entitled to rely on those representations when determining a course of lawful conduct” Id. at 14. (internal quotations omitted).

Accordingly, the Federal Circuit panel held “that statements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be considered for claim construction and relied upon to support a finding of prosecution disclaimer.” Slip Op. at 14.

Having established that prosecution disclaimer can apply, the panel then analyzed whether the district court correctly invoked prosecution disclaimer. The panel agreed that Aylus's repeated statements in its preliminary response that claims 2 and 21 “require that … only the control point proxy logic[] be invoked,” and that “only the CPP is invoked,” represent an unequivocal and unambiguous disavowal of the CP logic's invocation. Id. at 16 (internal quotations omitted). Based on this disclaimer, the panel affirmed the district court's claim construction and grant of summary judgment of non-infringement. Id. at 19.

Federal Circuit Decisions Offer Guidance on Award of Attorney Fees under Section 285

On June 5, 2017, a Federal Circuit panel of Judges Newman, Lourie and Moore issued a unanimous opinion, authored by Judge Newman, in Checkpoint Sys, Inc. v. All-Tag Security S.A., Case Nos. 2016-1397. The panel reversed the district court's award of attorney fees under 35 U.S.C. §285.

Checkpoint brought suit in district court against All-Tag for infringement of U.S. Patent No. 4,876,555 (the '555 patent) relating to improved anti-theft tags that are attached to merchandise. At trial, a jury found the '555 patent not infringed, invalid, and unenforceable. Following the verdict, the district court found the case “exceptional” under 35 U.S.C. §285, and awarded defendants attorney fees, costs, and interest.

Checkpoint appealed, and, in a 2013 decision, the Federal Circuit reversed the attorney fee award under the now abrogated “bad faith or objectively baseless” standard. All-Tag sought certiorari, which was granted, and the Supreme Court reversed and remanded for reconsideration in view of its decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc. , 134 S. Ct. 1749, 1756 (2014). In turn, the Federal Circuit remanded to the district court.

On remand, the district court again held the case to be exceptional, citing as dispositive Checkpoint's improper motivation in bringing the lawsuit “to interfere improperly with Defendants' business and to protect its own competitive advantage,” Checkpoint's inadequate pre-suit infringement investigation, and the failure of Checkpoint's expert to inspect the correct accused product.

Checkpoint appealed the fee award again, arguing that its expert proceeded reasonably in light of the available information, that it had a reasonable, good faith basis for bringing its infringement action, and consequently that the Supreme Court's rulings in Octane Fitness and in Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc. , 134 S. Ct. 1744 (2014), did not support the award of attorney fees. Checkpoint also cited the district court's denial of All-Tag's Daubert and summary judgement motions as further evidence of the reasonableness of the case.

In its decision, the Federal Circuit, quoting Octane Fitness, defined an “exceptional” case as “one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Slip Op. at 5 (quoting Octane Fitness, at 1756.

Under this definition, the panel concluded that the district court erred in its legal analysis and assessment of the evidence. First, the panel faulted the district court for characterizing Checkpoint's other lawsuits against asserted infringers, its market share, and its acquisition of competing producers as showing the improper motive of “protecting its own competitive advantage.” The panel concluded that, while “motivation” to harass or burden an opponent may be relevant to an “exceptional case” finding, Checkpoint's mere motivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an improper motive and is not “exceptional.” Slip Op. at 6.

As further evidence that the case was not exceptional, the panel cited the district court's denial of All-Tag's summary judgment motions, the absence of any finding that the accused products were different from the products tested by Checkpoint's expert, and the absence of any allegation of falsity or fraud or bad faith on the part of Checkpoint or its expert.

Accordingly, the Federal Circuit reversed the district court's award of attorney fees finding that the charge of infringement was reasonable and that the litigation was not brought in bad faith or with abusive tactics. Slip Op. at 9.

Rothschild Connected v. Guardian

Also on June 5, 2017, a Federal Circuit panel of Chief Judge Prost and Judges Mayer and Wallach issued a majority opinion, authored by Judge Wallach, in Rothschild Connected Devices Innovations v. Guardian Protection Servs., Case Nos. 2016-2521. In this case, the Federal Circuit panel reversed the district court's denial of attorney fees under 35 U.S.C. §285.

Rothschild brought a suit in district court alleging that ADS Security, L.P. (ADS) infringed U.S. Patent No. 8,788,090 (the '090 patent). ADS responded with an email to Rothschild alleging that the '090 patent covers patent-ineligible subject matter and that prior art anticipates the asserted claim. ADS offered to settle the case if Rothschild paid ADS for its attorney fees and costs. Rothschild rejected ADS's offer.

ADS then filed a motion for judgment on the pleadings, arguing that the asserted claim 1 of the '090 patent covers patent-ineligible subject matter under §101. ADS also sent Rothschild a notice pursuant to Federal Rule of Civil Procedure 11(c)(2), which included copies of a proposed Rule 11(b) motion for sanctions and prior art that purportedly anticipates claim 1. Pursuant to the “safe harbor” provision of Rule 11(c)(2), Rothschild voluntarily moved to dismiss its action. ADS opposed and filed a cross-motion for attorney fees under §285.

The district court granted Rothschild's motion to dismiss and denied ADS's cross-motion for attorney fees. In denying ADS's cross-motion for fees, the district court found that Rothschild's decision to voluntarily withdraw its complaint within the Rule 11 safe harbor period was reasonable. The district court also found that Rothschild recited facially plausible arguments supporting patent eligibility under §101, and that Rothschild's suits for infringement against other companies did not alone make the case exceptional. ADS appealed the denial of attorney fees.

In its decision, the Federal Circuit panel explained that factors to be considered when making a determination under §285 may include “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Slip Op. 5 (quoting Octane Fitness, at 1756).

In assessing these factors, the panel found that the district court should not have credited Rothschild's assertion that its claims were brought in good faith based on conclusory affidavits in which the affiants admitted they had not analyzed the prior art asserted in ADS's cross-motion.

The panel also concluded that Rothschild had engaged in vexatious litigation, as demonstrated by settlement of the vast majority of its 58 other cases for below the average cost of defending an infringement lawsuit. According to the panel, absent other evidence of reasonable conduct, the “undisputed evidence regarding Rothschild's vexatious litigation warrants an affirmative exceptional case finding here.” Slip Op. at 11.

Finally, the panel concluded that the district court improperly equated Rule 11 with §285. The panel warned that “[w]hether a party avoids or engages in sanctionable conduct under Rule 11(b) is not the appropriate benchmark; indeed, a district court may award fees in the rare case in which a party's unreasonable conduct — while not necessarily independently sanctionable — is nonetheless so exceptional as to justify an award of fees.” Slip Op. at 12 (internal quotations omitted).

Accordingly, the Federal Circuit reversed and remanded to district court for a calculation of attorney fees.

Judge Mayer, in a concurring opinion, agreed with the majority's holding but, citing Octane Fitness, added that he would have additionally awarded fees based on Rothschild's exceptionally meritless claims. According to Judge Mayer, “[n]either nuanced legal analysis nor complex technical inquiry was required to determine that the '090 patent could not be both broad enough to cover the home security products sold by ADS Security, L.P. ('ADS') and narrow enough to withstand subject matter eligibility scrutiny.” Slip Op. at 3 (Mayer, concurring).

*****
Jeff Ginsberg is a Partner of Patterson Belknap Webb & Tyler LLP and Assistant Editor of this newsletter. David Cooperberg is an Associate with the firm.