WSG Article: Latest Federal Court Cases, 8/30/21

Latest Federal Court Cases, 8/30/21

August, 2021 - Shubeena Chib, Ph.D.?

MLC Intellectual Property, LLC v. Micron Technology, Inc., Appeal No. 2020-1413 (Fed. Cir. Aug. 26, 2021)

For those interested in an important Section 112 written description case, we recommend reading the Juno Therapeutics decision below, one of many significant precedential opinions issued this week. We choose as our Case of the Week another important decision issued this week, on the issue of damages, discovery, and expert disclosures. The case provides a cautionary tale on the failure to disclose damages-related contentions during fact discovery—a situation that frequently arises during patent litigation, where damages theories evolve throughout a case, and some of the relevant information is in the hands of the defendant. The decision also puts guardrails on expert opinions that fail to properly apportion for the patentable features.

MLC sued Micron for infringing a patent concerning computer memory. Specifically, the patent concerns memory chips that can store more than one bit of memory per cell. There had been prior approaches to multiple-level memory cells. The patent claim at issue narrowly recited an “apparatus for programming an electrically alterable non-volatile memory cell having more than two predetermined memory states.”

MLC relied on an expert, Mr. Milani, to provide a damages opinion. Mr. Milani relied largely on license agreements entered into between MLC’s predecessor and third parties, including Hynix, Toshiba, and Samsung.

Micron filed three motions in limine with respect to Mr. Milani’s expert opinions. First, Micron moved to preclude Mr. Milani from providing an opinion that the Hynix and Toshiba agreements reflected a 0.25% royalty rate. Second, Micron moved to strike certain portions of Mr. Milani’s expert report that relied on documents concerning those licenses that were not produced during fact discovery. Third, Micron moved to preclude Mr. Milani from offering any opinions concerning a reasonable royalty because Mr. Milani failed to apportion out the value of non-patented features. The district court granted all three motions and then certified the three damages orders for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). The Federal Circuit granted the petition for interlocutory appeal and affirmed all three rulings. They are taken in turn below.

On the first issue, the Court agreed that the Hynix and Toshiba agreements did not reflect a 0.25% royalty rate, and that Mr. Milani’s opinion concerning such was “not sufficiently tethered to the evidence presented.” The Hynix and Toshiba agreements were actually lump-sum agreements, not running-royalty agreements. There was mention of a 0.25% rate in a most favored customer clause. But the Court held that this rate could not be extrapolated from the lump-sum rate—had a 0.25% rate been applied throughout the term of the license, the lump-sum amount would have been much higher. Accordingly, converting the lump sum to a royalty rate would have resulted in a royalty lower than 0.25%.

The Court referenced its prior opinion in Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), where multiple running-royalty licenses were offered in support of a lump-sum damages award. In that case the Court held that there was insufficient testimony to arrive at the lump-sum award based on the royalty licenses submitted into evidence. “This case involves a similar problem, though in the mirror-image situation where lump-sum agreements are being asserted as a basis to infer a rate for running royalty.” Because there was no “mathematical analysis to derive the 0.25% royalty rate from the lump-sum payments” in those licenses, testimony about that failed to meet evidentiary standards.

On the second issue, the Court agreed that MLC had committed a discovery violation, and that it was appropriate to exclude opinions based on unproduced documents. MLC argued that it was not required to produce all evidence and a royalty rate assessment during fact discovery because the schedule provided a separate period for expert discovery. However, one interrogatory had sought “the factual and legal basis and supporting evidence” for MLC’s damages contentions. MLC identified 93 documents in response. A second interrogatory sought “all facts, evidence, and testimony regarding any applicable royalty rates.” MLC responded that it would rely on the Georgia-Pacific factors, and identified seven documents.

But MLC failed to disclose its reasonable royalty theory or any of the extrinsic evidence that Mr. Milani relied upon in support of his opinion that the Hynix and Toshiba licenses reflected a 0.25% royalty rate, including documents relating to negotiations with Samsung and other licensees. The Federal Circuit affirmed the district court’s decision excluding any reliance on these unproduced documents.

The Court also considered a question that has plagued many a patent litigator: how much disclosure of a royalty rate is required during fact discovery. The Court held that “the district court was within its discretion in determining that, though MLC was not required to disclose its expert opinions during fact discovery, it was still required to disclose (1) its view that the Hynix and Toshiba license agreements reflect a 0.25% royalty rate and (2) the extrinsic evidence Mr. Milani relied on to support that view in response to Micron’s reasonable requests for all facts, evidence, and testimony” concerning its damages theories. The Court spent several pages of its opinion working its way through the Federal Rules and the relevant Local Rules to parse how much discovery is required during fact discovery as opposed to expert discovery, considering questions of privilege along the way. Ultimately, the Court found that parties are largely obligated to answer contention interrogatories at least with respect to facts—which answers may be supplemented as discovery progresses, so that further fact discovery can be taken about damages-related facts as discovery progresses.

Finally, the Court affirmed that Mr. Milani failed to properly apportion either the royalty base or the royalty rate to account for the patented technology. The Hynix license, for example, covered 41 patents, and Mr. Milani made no effort to apportion the value of the patent at issue from the other 40 patents. Also, Mr. Milani’s use of the “smallest saleable patent practicing unit” as a basis of his analysis was insufficient to apportion, since the smallest saleable unit also included non-patented features.

A copy of the opinion can be found here.

By Nika Aldrich

ALSO THIS WEEK

Juno Therapeutics, Inc. v. Kite Pharma, Inc., Appeal No. 2020-1758 (Fed. Cir. Aug. 26, 2021)

In a blockbuster opinion that wiped out a $1.2 billion verdict, the Federal Circuit found Juno’s patents invalid for lack of written description support. Juno sued Kite Pharma for infringement of a patent related to a particular treatment for lymphoma. One of the limitations recited a “binding element.” Dependent claims recited that the “binding element” could be “a single chain antibody,” otherwise known as an scFv. The patent disclosed two scFvs. The Federal Circuit found the disclosure of two scFvs (species) was insufficient to support claims for the entire genus of “single chain antibodies” that could function as a “binding element.” The Court quoted its prior en banc decision in Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336 (Fed. Cir. 2010) (en banc) in stating that “[f]or genus claims using functional language, like the binding function of the scFvs claimed here, the written description ‘must demonstrate that the applicant has made a generic invention that achieves the claimed result and do so by showing that the applicant has invented species sufficient to support a claim to the functionally-defined genus.’” The Court found that “no reasonable jury could find the ’190 patent’s written description sufficiently demonstrates that the inventors possessed the full scope of the claimed invention.”

A copy of the opinion can be found here.

By Nika Aldrich

Universal Secure Registry LLC v. Apple Inc., Appeal No. 2020-2044 (Fed. Cir. Aug. 26, 2021)

In an appeal from a district court decision finding all asserted claims of a patent ineligible under 35 U.S.C. § 101, the Federal Circuit affirmed. Universal Secure Registry (“USR”) sued Apple and Visa (collectively, “Apple”) for infringement of four unrelated patents, all of which were directed to similar technology geared toward securing electronic payment transactions. Apple moved to dismiss for failure to state a claim, arguing that the asserted patents claimed patent-ineligible subject matter. The district court granted Apple’s motion to dismiss, finding that the claims were directed to the abstract idea of “the secure verification of a person’s identity,” and that the asserted patents failed to disclose an inventive concept that would transform this abstract idea into patent-eligible subject matter. The Federal Circuit affirmed, concluding that each asserted patent failed under step one and two of Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014). With regard to Alice step one, the Court found that the asserted patents were all directed to abstract ideas rather than technological solutions to technical problems because they used “combination[s] of conventional components in [ ] conventional way[s] to achieve [ ] expected result[s].” With regard to Alice step two, the Court found that the asserted claims of the patents at issue failed to rise to the level of inventive concepts necessary to convert the claimed systems into patent-eligible subject matter. Accordingly, the Court found that the asserted claims of the patents at issue were ineligible and affirmed the district court’s decision to dismiss for failure to state a claim.

A copy of the opinion can be found here.

In three separate non-precedential opinions issued the same day and the following day, the Federal Circuit dismissed as moot appeals from IPRs concerning the same patents. Those opinions can be found here, here, and here. In a fourth non-precedential opinion, found here, the Court held that a substitute claim proposed in the IPRs also suffered from the same Section 101 problem.

By Annie White

Data Engine Technologies LLC v. Google LLC, Appeal No. 2021-1050 (Fed. Cir. Aug. 26, 2021)

In a second appeal in this case, the Federal Circuit affirmed a district court’s claim construction of the term “three-dimensional spreadsheet”—a term found in the preamble. Previously, the district court found the patent to be invalid under Section 101. On appeal, Data Engine argued the importance of its invention relating to three-dimensional spreadsheets. The Federal Circuit agreed. We wrote up that opinion as our Case of the Week in October 2018 here. On remand, Google asked to reopen claim construction and construe the preamble term “three-dimensional spreadsheet” in view of the Federal Circuit eligibility determination. The district court found it to be limiting, and the Federal Circuit agreed, particularly in light of the first appeal. This is the second opinion in one week where the Court relied on Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001) for the premise that a “patent may not, like a nose of wax, be twisted one way to avoid anticipation and another to find infringement.” Having found the term to be limiting, the Court affirmed the district court’s judgment that Google did not infringe, which was not disputed if the preamble was limiting.

By Nika Aldrich

Commscope Technologies LLC v. Dali Wireless Inc., Appeal Nos. 2020-1817, -1818 (Fed. Cir. Aug. 24, 2021)

In an appeal following a jury verdict on issues of validity and infringement of multiple patents, the Federal Circuit isolated a single patent for a written decision, and reversed. The patent concerned wireless technology. A jury had found it not invalid and infringed based on a particular claim construction. The Federal Circuit affirmed that construction, finding that Dali forfeited its objection by including it only in a footnote in its brief. The Court then also found that Dali had failed to prove infringement based on that construction, identifying a limitation that was not sufficiently matched to a component of the accused devices at trial. The Court also noted an inconsistency between Dali’s positions with respect to that limitation in its infringement analysis and its no-invalidity analysis. The Court quoted its decision in Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001) for the premise that a “patent may not, like a nose of wax, be twisted one way to avoid anticipation and another to find infringement.”

In light of this inconsistency, the Court held that the patent was not anticipated, but also not infringed.

A copy of the opinion can be found here.

By Nika Aldrich