WSG Article: Latest Federal Court Cases, 2/7/22

Latest Federal Court Cases, 2/7/22

February, 2022 - W. Tyler Hall

The Federal Circuit issued numerous precedential opinions last week, two of which answered long simmering questions about inter partes reviews (IPRs). Below we discuss a case addressing whether admissions of prior art in the patent itself can be considered as prior art in an IPR. Our Case of the Week reversed Federal Circuit precedent concerning the scope of IPR Estoppel. It also addressed the appropriateness of two reasonable royalty rates applied to two different defendants within the same supply chain.

California Institute of Technology v. Broadcom Limited, Appeal Nos. 2020-2222, 2021-1527 (Fed. Cir. Feb. 4, 2022)

Our Case of the Week concerned heavily-litigated patents owned by the California Institute of Technology relating to error correction technology in computer chips.

IPR Estoppel Issue

Apple had filed multiple IPR petitions challenging the validity of the claims at issue. The Patent Trial and Appeal Board (PTAB) ultimately found that Apple failed to prove invalidity. At the district court, Apple asserted that the claims were invalid over new combinations of the prior art not asserted in the IPR proceedings. The district court granted summary judgment declaring that IPR estoppel applied pursuant to 35 U.S.C. § 315(e)(1), which says that “The petitioner in an inter partes review . . . may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

Apple appealed, citing the Federal Circuit’s precedential opinion in Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016). In Shaw, the Federal Circuit held that IPR “does not begin until it is instituted.” The Court reasoned that if it “does not begin until it is instituted,” grounds not raised in a petition were necessarily not raised “during the IPR.” Accordingly, only the grounds that were actually considered “during” the instituted IPR were subject to the IPR estoppel provision.

On appeal, the Federal Circuit reversed its opinion in Shaw and reversed. Shaw was decided based on an earlier understanding of the scope of IPRs. The Federal Circuit had previously held that the PTAB need not grant review of all claims and grounds in the petition. Thus, Shaw’s holding was premised on the understanding that there could be a difference between the grounds on which an IPR was requested and the grounds that were actually litigated during the IPR process. This resulted in an understanding that only those grounds that were successfully adopted as a basis for the IPR could be the basis of IPR estoppel. To the extent the PTAB did not allow review based on other grounds, courts held that the petitioner “reasonably could [not] have raised” them “during that inter partes review.”

But following Shaw, the Supreme Court held in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), that IPRs must be granted based on all grounds asserted in the petition or not at all. See our write-up of SAS here. This fundamentally changed the view of implementation of IPRs. SAS removed the distinction that previously formed the basis of the narrow application of IPR estoppel. As a result, the panel in this case reversed Shaw based on the intervening precedent of SAS. It held that IPR estoppel applies to any grounds raised in the petition for IPR or any grounds that could have been raised in the petition for IPRs.

Damages Issue

At trial, CIT asserted a two-tier damages model based on separate hypothetical negotiations with Broadcom and its customer, Apple. CIT’s experts both opined that Broadcom and Apple would have engaged in separate hypothetical negotiations with CIT, with no “cross-talk” between them. Premised on this argument, the jury awarded $270 million for Broadcom’s infringement and $838 million for Apple’s infringement.

The Federal Circuit reversed, holding “there is nothing in the record to suggest that Broadcom and Apple would have been willing to negotiate in this artificial way rather than to more conventionally negotiate a single license at a single rate for the same chips. Neither of Cal-tech’s experts offered any factual basis to conclude that Broadcom and Apple would have been willing to engage in separate negotiations leading to vastly different royalty rates for the same chips.”

Other Issues

The Court also decided several other issues, largely affirming the district court in cursory opinions that the patents were not abstract concepts subject to 35 U.S.C. § 101, that the district court’s claim constructions were largely correct, that there was infringement, and that the damages verdict did not improperly invoke issues of extraterritoriality. Judge Dyk dissented on the issue of infringement.

The opinion can be found here.

By Nika Aldrich

ALSO THIS WEEK

Apple Inc. v. Wi-Lan Inc., Appeal Nos. 2020-2011, -2094 (Fed. Cir. Feb. 4, 2022)

In this case, the Federal Circuit weighed in on multiple issues following an $85.23 million jury verdict against certain Apple iPhone models for infringement of two Wi-LAN patents relating to bandwidth allocation and signal modulation methods used in 4G LTE wireless networking. Apple appealed certain of the district court’s claim constructions, its denial of judgment as a matter of law (JMOL) of non-infringement, and its denial of a new trial on damages. Wi-LAN cross-appealed the district court’s grant of a new trial on damages following an initial damages award of $145.1 million, as well as its grant of partial summary judgment of non-infringement for iPhones incorporating chips sold by Intel, which had a license to the asserted patents from Wi-LAN. The Federal Circuit generally agreed with the district court’s holdings supporting infringement, but vacated and remanded for a new trial on damages.

On claim construction, Apple appealed the district court’s construction of “subscriber unit” and “subscriber station” terms in the claim preambles, arguing that they should be limited specifically to customer premises equipment (CPE) because the patentee had acted as its own lexicographer by using CPE interchangeably with the disputed claim terms, and because CPE was the only disclosed embodiment of those terms. The Federal Circuit disagreed, finding that the specifications at most described CPE as a type of subscriber unit or station, but that the terms were not used interchangeably, and that there was no manifest language of exclusion (e.g., describing “the invention” as comprising CPE) limiting the terms to that embodiment. As such, the Federal Circuit affirmed the district court’s construction of those terms.

Apple argued that even under this broader construction, the accused iPhones did not contain a “subscriber unit” or “subscriber station” as described in the claims, and that the district court erred in denying its post-trial motion for JMOL of non-infringement. The Federal Circuit disagreed, finding that expert testimony had provided substantial evidence supporting the jury’s finding of infringement, and affirmed the JMOL denial.

On the licensing issue, it was undisputed that iPhones containing Intel chipsets sold to Apple during the term of an Intel/Wi-LAN license agreement did not infringe. However, the district court had found that the agreement also granted Intel a perpetual license to the asserted patents following expiration of the license period, and so had granted summary judgment of non-infringement as to iPhones containing Intel chipsets sold to Apple following the expiration of that term. Wi-LAN cross-appealed on this issue, and the Federal Circuit agreed with Wi-LAN that the license agreement unambiguously provided for a term-limited license and that the district court had misconstrued the survival clause at issue. As such, the Court reversed the district court’s summary judgment of non-infringement as to that subset of accused products.

On damages, a jury had initially awarded $145.1 million to Wi-LAN based on its expert’s testimony that a difference in sound quality between calls placed using Voice over Long-Term Evolution (VoLTE) and Skype (a non-infringing alternative) was attributable to the patented technology, which Wi-LAN’s damages expert relied on in determining a reasonable royalty. The district court had determined that Wi-LAN’s expert improperly conflated VoLTE technology as a whole (which Wi-LAN admittedly did not invent) with the specific methods claimed in Wi-LAN’s patents, and had granted Apple a new trial on damages. Wi-LAN cross-appealed on this issue and argued that the original award should be reinstated, but the Federal Circuit found no abuse of discretion and affirmed the grant of a new trial.

At the second trial, Wi-LAN’s expert shifted to a “comparable licenses” theory of damages relying on several other Wi-LAN licenses containing the asserted patents, which supported the $85.23 million award at issue in Apple’s appeal. Apple had again moved for a new trial on damages, arguing that Wi-LAN’s expert had now failed to properly apportion the value of the asserted patents in light of the hundreds of other patents contained in the bundled licenses on which Wi-LAN relied. The Federal Circuit agreed with Apple on this point, found that the district court had abused its discretion in denying Apple’s motion for a new trial, and remanded for a new trial on damages consistent with its opinion.

The opinion can be found here.

By Jason A. Wrubleski

Quanergy Systems, Inc. v. Velodyne Lidar USA, Inc., Appeal Nos. 2020-2070, -2072 (Fed. Cir. Feb. 4, 2022)

In an appeal from an IPR proceeding, the Federal Circuit affirmed that the disputed claims were not unpatentable as obvious, addressing issues of claim construction and obviousness. The patent related to a laser-based measurement system used for helping autonomous cars sense their surroundings. Concerning claim construction, the Court found that the PTAB’s claim construction was consistent with the testimony of both parties. Concerning the PTAB’s obviousness analysis, Quanergy first asserted that the claims at issue were disclosed by prior art. The Court disagreed, explaining that the Board’s findings were supported by substantial evidence and noting that both parties’ experts’ testimony supported such a conclusion. Second, Quanergy “challenge[d] the Board’s presumption of a nexus between the claimed invention and Velodyne’s evidence of unresolved long-felt need, industry praise, and commercial success.” Again, the Court affirmed, explaining that “[s]ubstantial evidence support[ed] the Board’s presumption of a nexus.” The Court further specified that “Velodyne provided ‘ample evidence’ that its commercial products ‘embod[ied] the full scope of the claimed invention, and that the claimed invention [was] not merely a subcomponent of those products.’”

The opinion can be found here.

By Annie White

BlephEx, LLC v. Myco Industries, Inc., Appeal Nos. 2021-1149, -1365 (Fed. Cir. Feb. 3, 2022)

In an appeal from the U.S. District Court for the Eastern District of Michigan, the Federal Circuit addressed whether the district court erred by granting a preliminary injunction in favor of plaintiff BlephEx, LLC, where, among other things, defendant Myco Industries, Inc. argued that it presented a substantial question of validity. The Federal Circuit affirmed the district court’s decision. The Federal Circuit rejected Myco’s main argument that the patent at issue—which disclosed a swab attached to an electromechanical device for eye care professionals to use to clean patients’ eyelid margins and eyelashes—was anticipated by a published patent application. Figure 2 of the Nicharmin Application showed a wand contacting a portion of the eyelid margin. Figure 3 of the Nicharmin Application showed a hand-held device with an applicator used to chafe the eyelid margin. Because neither figure showed a swab operably connected to an electromechanical device where the swab contacts a portion of the eyelid margin as required by the patent at issue, the Federal Circuit rejected Myco’s argument that Figures 2 and 3 depict the same anticipating embodiment.

In addition to Myco’s anticipation argument, the Federal Circuit also rejected Myco’s arguments that the patent at issue is invalid as obvious, that the preliminary injunction improperly upset the status quo, and that the preliminary injunction is overbroad.

The opinion can be found here.

By Mario E. Delegato

Plasmacam, Inc. v. Cncelectronics, LLC, Appeal No. 2021-1689 (Fed. Cir. Feb. 3, 2022)

In an appeal from a district court order enforcing one party’s draft of a purported settlement agreement, the Federal Circuit remanded because a different draft of the agreement more accurately reflected the parties’ agreement. Plasmacam, Inc. (Plasma) sued CNCElectronics, LLC, et al. (CNC) for infringing a patent. After the parties notified the lower court that they had agreed to settle, the court ordered the parties to submit a final written settlement agreement. The parties exchanged numerous draft settlement agreements, but were unable to agree on a key term. The lower court adopted Plasma’s interpretation of the agreement. The Federal Circuit reversed, holding that Plasma’s agreement to one of the terms was conditioned on the parties agreeing on any release language, not on CNC agreeing to Plasma’s specific release language. Because the record showed a mutual agreement on release language, Plasma was deemed to have accepted CNC’s definition of a key term, such that Plasma’s release would apply to CNC’s past, present, and future products. Judge Newman dissented, pointed out that the parties agreed multiple times that they had not reached an agreement, and that nothing in the record suggested Plasma ever intended to agree to CNC’s demand for full immunity from suit for all possible new infringing CNC products. Judge Newman said there was no clear error in the lower court’s ruling.

The opinion can be found here.

By Tyler Hall

Qualcomm Incorporated v. Apple Inc., Appeal Nos. 2020-1558, -1559 (Fed. Cir. Feb. 1, 2022)

In an appeal from an IPR proceeding, the Federal Circuit considered the role of applicant admitted prior art (AAPA). In one of the Qualcomm patents challenged by Apple, the patent specification acknowledged that a prior art reference taught most elements of the challenged claims. Apple cited this AAPA in combination with a prior art patent to argue obviousness of the challenged claims. The PTAB rejected Qualcomm’s argument that the AAPA could not be considered because is not a “patent or printed publication” under § 311(b) of the Patent Act, and found the claims unpatentably obvious. On Qualcomm’s appeal, the Federal Circuit put a finer point on the question, finding that while AAPA may be considered in an IPR, it may not provide the basis of a ground in an IPR. Based on this ruling, the Federal Circuit remanded to the Board to determine whether the AAPA impermissibly formed a basis for Apple’s IPR challenge.

The opinion can be found here.

By Scott D. Eads