Inter Partes Reexamination Estoppel Attaches On Claim-by-Claim Basis for New Requests and Pending Proceedings

In In re Affinity Labs Of Texas, LLC, Appeal Nos. 2016-1092, 2016-1172, the Federal Circuit held that the estoppel provisions of pre-AIA 35 U.S.C. § 317(b) attach claim-by-claim to new requests for reexamination and maintaining pending proceedings.

Affinity sued Volkswagen for patent infringement and Volkswagen responded with a request for inter partes reexamination of all claims. All claims were also challenged in two additional proceedings: an ex partes reexamination filed by Richard King, and an inter partes reexamination filed by Apple. The three reexaminations were merged. After the district court litigation, two claims were found not invalid. Affinity requested the PTO vacate the merged reexamination proceeding, arguing that the estoppel provision of pre-AIA 35 U.S.C. § 317(b) extends to all parties, not just the district court opponent, and all challenged claims, not just the claims actually litigated. The PTO severed the Volkswagen reexamination, and removed the two claims from the severed proceeding, but the PTO denied Affinity’s request as to the remaining King-Apple reexaminations. The reexamination examiner ultimately rejected the claims as unpatentable, and the PTAB affirmed. Affinity appealed.

Affinity argued that the scope of the estoppel attached claim-by-claim for assessing requests for inter partes reexamination, but attached to the patent as a whole for maintaining a pending inter partes reexamination. The Federal Circuit disagreed with Affinity’s proposed interpretation, and held that estoppel attaches claim-by-claim to both requests for inter partes reexamination and maintaining pending inter partes reexaminations.

What You Say In an IPR May Be Used Against You In a Court of Law

In Aylus Networks, Inc. v. Apple Inc., Appeal No. 2016-1599, the Federal Circuit held that statements made by a patent owner in an IPR, whether before or after institution, can be considered during claim construction in district court litigation and relied upon to support a finding of prosecution disclaimer.

Aylus sued Apple for patent infringement in the Northern District of California. Apple subsequently filed two IPR petitions at the USPTO challenging Aylus’s patent. Aylus filed preliminary responses in both proceedings. In the preliminary responses, Aylus made certain statements about its claims attempting to distinguish the claims from the prior art. The district court determined that Aylus’s statements to the USPTO were clear and unmistakable disclaimers of claim scope, and narrowly construed the claims. Based on this narrow construction the district court granted a motion for summary judgment of non-infringement.

On appeal, the Federal Circuit held that Aylus’s statements from the IPRs could be considered for claim construction and relied upon to support a finding of prosecution disclaimer. The court reasoned that prosecution disclaimer ensures that claims are not “construed one way in order to obtain their allowance and in a different way against accused infringers.” The court determined that a patent owner’s preliminary response is publicly available, an official paper filed with the USPTO, and a document in which the patent owner can define claim terms and otherwise make representations about claim scope. Thus, the extension of prosecution disclaimer to statements made in an IPR, whether before or after an institution decision, ensures that claims are not argued one way in order to maintain patentability and a different way against accused infringers.

Prosecution disclaimer requires clear and unmistakable disavowing actions or statements. The Federal Circuit agreed with the district court that Aylus’s statements from the IPRs were clear and unmistakable disavowals of claim scope. Therefore, the Federal Circuit affirmed the district court’s claim construction and summary judgment of non-infringement.

Supreme Court Limits Patent Venue

In TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, the Supreme Court held that for purposes of the patent venue statute, 28 U.S.C. § 1400(b), a domestic corporation resides only in its state of incorporation.

Kraft sued TC Heartland for infringement of Kraft’s patents in the District of Delaware. TC Heartland is an entity organized under Indiana law and headquartered in Indiana. It had shipped the allegedly infringing products to Delaware, but beyond that had no meaningful presence in the state. TC Heartland moved to transfer the case to its home state of Indiana based on improper venue. The district court ruled, and the Federal Circuit affirmed, that venue was proper in Delaware, finding that the general venue statute of 28 U.S.C. § 1391(c) expanded the definition of “reside” in § 1400(b) to include any district where a defendant is subject to personal jurisdiction.

The Supreme Court reversed and remanded. In Fourco, the Court had previously considered whether § 1400(b)’s use of the word “reside” incorporated § 1391(c)’s broad definition of “residence,” and concluded that it did not. Here, the Court held that the 1988 and 2011 amendments to § 1391(c) did not change the definition of “reside” under § 1400(b) as applied to domestic corporations. Absent clear congressional intent to amend § 1400(b) with the subsequent amendments to § 1391(c), the patent-specific venue provisions of § 1400(b) remained unchanged from the Court’s prior interpretation in Fourco. Accordingly, the Supreme Court ruled that for purposes of § 1400(b), domestic corporations reside only in their state of incorporation.

Supreme Court Rules Patent Rights Are Exhausted on First Sale

In Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189, the Supreme Court held that patent rights are exhausted when a patentee sells a product, regardless of contractual restrictions or location of sale.

Lexmark sued Impression for patent infringement with respect to two groups of laser printer toner cartridges: (1) Lexmark’s “Return Program” cartridges that were sold with contractual restrictions prohibiting reuse and resale of the cartridges, and (2) toner cartridges sold abroad that were imported into the United States. Impression moved to dismiss, asserting that Lexmark’s sales of the cartridges exhausted its patent rights. The District Court granted the motion regarding the Return Program cartridges, but denied the motion with respect to cartridges sold abroad. The Federal Circuit, sitting en banc, held that Lexmark’s sales did not exhaust its patent rights in either group of cartridges.

The Supreme Court reversed and remanded. The Court held that a patentee’s sale of a product exhausts all of its patent rights in that product. The Court explained that the exhaustion rule marks the point where patent rights yield to the common law principle against restraints on alienation. A patentee receives the reward for his invention at the time of sale, and the sale terminates all patent rights in that invention. Lexmark exhausted its patent rights in the cartridges the moment it sold them, however, the contractual restrictions on reuse and resale of the Return Program cartridges may be enforceable under contract law.

Turning to Lexmark’s foreign sales, the Court held that the location of a sale does not affect the exhaustion doctrine. The Court looked to its previous decision in Kirtsaeng v. John Wiley & Sons, Inc. where it held that the first sale doctrine applies to overseas transactions in the copyright context. The Court explained that patent and copyright protections have no extraterritorial operation, and “differentiating the patent exhaustion and copyright first sale doctrines would make little theoretical or practical sense.” Therefore, Lexmark’s patent rights were exhausted regardless of the location of the sale.

Justice Ginsburg dissented in part, reasoning that, although there may be a historical kinship between patent law and copyright law, the Patent Act does not contain an analogue to the Copyright Act’s first sale doctrine. Furthermore, Ginsburg noted that a foreign sale operates independently of the U.S. patent system because of the territoriality of patent law. Therefore, Ginsburg agreed with the Federal Circuit that a foreign sale should not exhaust U.S. patent rights.