223-1. Federal Circuit Holds “Competitor Standing” Insufficient for Article III Standing when an IPR Appellant has no Concrete Plans to Produce a Potentially-Infringing Product

The United States Court of Appeals for the Federal Circuit recently dismissed an appeal from the Patent Trial and Appeal Board for lack of standing. AVX Corporation challenged the Board’s final decision uploading claims of a patent owned by Presidio Components. Presidio challenged AVX’s standing to appeal. The Court addressed AVX Corporation’s arguments based on the preclusive effects of 35 U.S.C. § 315(e) and “competitor standing.” The Court dismissed the first argument, as the issue was not briefed, and found the second argument to be overly speculative. See AVX Corp. v. Presidio Components, Inc., No. 2018-1106, 2019 U.S. App. LEXIS 14120 (Fed. Cir. May 13, 2019) (Before Newman, O’Malley, and Taranto, Circuit Judges) (Opinion for the Court, Taranto, Circuit Judge).

Presidio Components, Inc. (“Presidio”) is the owner U.S. Patent No. 6,661,639 (“the ’639 patent), which is directed to “single-layer ceramic capacitors.” AVX Corporation (“AVX”) petitioned for inter partes review of Claims 1-21 of the ’639 patent, asserting obviousness under 35 U.S.C. § 103. Although AVX was a direct competitor of Presidio, AVX did not manufacture or sell a capacitor within the scope of the claims of the ’639 patent. The Patent Trial and Appeal Board (“Board”) found Claims 13-16 and 18 invalid but found the remainder of the claims valid as nonobvious (the “upheld claims”). AVX appealed the Board’s decision as to the upheld claims.

In its opening brief on appeal, AVX submitted a declaration from its general counsel attempting to establish constitutional standing to appeal the Board’s decision. The declaration pointed to AVX’s $31 million research and development expenditures and its policy to apply for and hold “U.S. patents relating to capacitors.” The declaration also noted the litigious history between the two companies: four patent infringement cases in the past decade. In one case, AVX was enjoined from producing a certain capacitor. The general counsel also stated the injunction cost “AVX substantial good will in presenting its customers with alternative products,” and “even the threat of a permanent injunction can dissuade customers from choosing a particular capacitor.” He also stated “AVX would be ‘materially hindered’ if the Board decision stood and were given estoppel effect under 35 U.S.C. § 315(e), which would preclude AVX from repeating, in future litigation, the obviousness challenges to the ’639 patent that the Board reviewed and rejected in this IPR.”

The Court first addressed the issue of constitutional standing by reasserting the requirements of “(1) an ‘injury in fact,’ (2) ‘a causal connection between the injury and the conduct complained of,’ and (3) a likelihood that ‘the injury will be redressed by a favorable decision.’” Quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). “An injury in fact is ‘actual or imminent, not conjectural or hypothetical.’” Id. at 560. A party does not need standing to file an inter partes review petition, as the right is granted by statute, and the “Article III requirements do not apply to administrative agencies.” A party that does not have Article III standing, therefore, may not have an avenue to appeal the Board’s final decision in the IPR. “[I]n IPR appeals, ‘an appellant must… supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in a federal court,’ by creating a necessary record in this court, if the record before the Board does not establish standing.” Quoting JTEKT Corp. v. GKN Automotive Ltd., 898 F.3d 1217, 1220 (Fed. Cir. 2018).

AVX’s arguments for standing proceeded in two parts. First, AVX argued “the statutory estoppel provision, 35 U.S.C. § 315(e), would prevent it from asserting the same challenges—the merits of which will not have been reviewed by an Article III court if [the Court finds] no standing—if Presidio asserts those claims against AVX in the future.” A petitioner cannot initiate another PTO proceeding to any challenge to a patent that the petitioner “raised or reasonably could have raised” in the first IPR. See 35 U.S.C. § 315(e)(1). The estoppel provision also states that a petitioner “may not assert either in a civil action arising in whole or in part under section 1338 of title 28… that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” See 35 U.S.C. § 315(e)(2). AVX argued that this means it could not reassert the invalidity challenges, including in any defense or counterclaim, in any district court proceedings.

The Court first noted that they have previously held that the estoppel provision is insufficient to create Article III standing. See Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168, 1175−76 (Fed. Cir. 2017). The Court next noted that it has not decided whether the estoppel provision would, indeed, have preclusive effect in district court proceedings if AVX did not have the opportunity to appeal the Board’s decision. The Court, however, noted that it did not need decide if AVX’s argument is persuasive, as the parties had not briefed the issue:

AVX assumes estoppel as a predicate for its standing argument and Presidio has evidently decided not to give up a possible future estoppel argument. If, in the future, a live controversy over the upheld claims arises between Presidio and AVX, and if either an infringement action or declaratory judgment action involving those claims is filed in district court, AVX can, in such an action, test whether § 315(e) bars it from raising the obviousness challenges that the Board reviewed and rejected.

The Court then turned to AVX’s second argument, namely that the Board’s decision “reduces AVX’s ability to compete with Presidio.” AVX relied on other, non-patent cases that discuss “competitor standing” to challenge government actions. The Court addressed several cases where it previously addressed the concept of “competitor standing.” In the cases cited, the Court noted how “government actions that ‘alter competitive conditions’ may give rise to injuries that suffice for standing.” Citing Clinton v. City of New York, 524 U.S. 417, 433 (1998) (emphasis in opinion). The D.C. Circuit has also addressed “competitor standing,” and the D.C. Circuit made clear that “not every alleged possible competitive harm suffices: standing has been found where the plaintiff/appellant challenges a government action that ‘provides benefits to an existing competitor or expands the number of entrants in the petitioner’s market, not an agency action that is, at most, the first step in the direction of future competition.’” Quoting New World Radio, Inc. v. FCC, 294 F.3d 164, 172 (D.C. Cir. 2002). In all cases cited finding standing based on competition, the “government action nonspeculatively threatened economic injury to the challenger by the ordinary operation of economic forces.”

Here, the government action was to uphold the claims of a patent, which does not address prices or introduce new competitors. “A patent claim could have a harmful competitive effect on a would-be challenger if the challenger was currently using the claimed features or nonspeculatively planning to do so in competition.” The Court noted, however, that the record did not indicate that AVX was developing a new capacitor that would be within the scope of the upheld claims. The assertions that possible litigation could “‘reduce customers’ goodwill says nothing about the concrete interest required for” Article III standing. The Court cited several cases where a competitor did not have “concrete plans” to produce a product within the scope of the claims and found AVX to be similarly situated.

Accordingly, the Court held that AVX’s estoppel and “competitor standing” arguments did not create the requisite Article III standing to appeal. The Court dismissed the appeal.

Competitor standing may be sufficient to create Article III standing for an IPR appellant, but a nonspeculative injury must be present, which may include concrete plans to create a potentially-infringing product.

223-2. The Federal Circuit Fails to Meaningfully Address Appellants’ Argument that § 315(e)(2) Bars Raising Winning IPR Arguments in District Court Litigations; Simply Finding the Argument Unpersuasive

The Federal Circuit recently affirmed the Board’s Final Written Decision invalidating the patent-in-suit and dismissed three other appeals stemming from IPRs of the same patent-in-suit. After reviewing and affirming the PTAB’s obviousness analysis, the Federal Circuit, in a footnote, concluded that “Appellants’ assertion that the District Court erred by considering an obviousness challenge that was barred by 35 U.S.C. § 315(e)(2)” was unpersuasive. BTG Int’l Ltd. v. Amneal Pharm. LLC, Nos. 2019-1147, 2019-1148, 2019-1323, 2019-1324, 2019-1325, 2019 U.S. App. LEXIS 14241 (Fed. Cir. May 14, 2019) (Before, Moore, Wallach, and Chen, J.) (Opinion for the court, Wallach, J.).

Appellants BTG International Limited et al. (“BTG”) owned the patent-in-suit that disclosed the treatment of prostate cancer. More specifically, the patent disclosed the administration of a therapeutically effective amount of a CYP17 inhibitor, such as abiraterone, with a therapeutically effective amount of at least one additional therapeutic anti-cancer agent.

BTG sued Appellees Amneal Pharmaceuticals LLC et al. (“Amneal”) in the U.S. District Court for the District of New Jersey, asserting that Amneal’s Abbreviated New Drug Applications (“ANDA”) for the generic version of BTG’s abiraterone product ZYTIGA® infringes the patent-in-suit. Subsequently, Appellees Amerigen Pharmaceuticals, Inc. and Amerigen Pharmaceuticals Limited (collectively, “Amerigen”); Appellees Mylan Pharmaceuticals Inc. and Mylan Inc. (collectively, “Mylan”); and Appellees Wockhardt Bio AG, Wockhardt USA LLC, and Wockhardt Ltd. (collectively, “Wockhardt”) filed three separate inter partes review (“IPR”) petitions with the USPTO. They alleged that the asserted claims of the patent-in-suit would have been obvious under 35 U.S.C. § 103 (2006).

BTG raised on appeal and at oral argument that 35 U.S.C. § 315(e)(2), often referred to as the America Invents Act’s (“AIA”) estoppel provision, applied equally to those petitioners who invalidated a patent at the PTAB as to those who fail – thereby preventing the presentation of the same arguments in a district court litigation. Section 315(e)(2) reads, in relevant part, “[t]he petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) … may not assert either in a civil action arising in whole or in part under section 1338 of title 28… that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” The USPTO had filed an amicus brief supporting BTG’s arguments, in part, contending that district courts should be barred from considering winning IPR arguments that persuaded the Board to invalidate a patent. Commentators suggested that during oral argument the Federal Circuit was already looking to avoid the question of §315(e)(2) applicability to winning arguments all together.

Ultimately, the Federal Circuit limited BTG’s arguments to claim construction issues and via a brief footnote found all other arguments including those directed to the §315(e)(2) bar unpersuasive.

The Court affirmed the Board’s decision, invalidating that the patent-in-suit’s claims as obvious and dismissed the related appeals of Amerigen, Mylan, and BTG.

The Federal Circuit failed to meaningfully address the Section 315(e)(2), the AIA estoppel provision, and its applicability to barring the raising of winning IPR arguments in district court litigations. However, the Federal Circuit did indicate that the argument was unpersuasive.

223-3. Despite the Lower Court’s Misapplication of the Legal Standard for a Motivation to Combine, the Federal Circuit Upholds Novartis’ Claims as Nonobvious

The Federal Circuit affirmed the decision of the U.S. District Court Delaware finding claims 1–3 of U.S. Patent No. 8,410,131 (“the ’131 patent”) nonobvious. In particular, while the district found there would have been a motivation to “pursue” the claimed pharmaceutical compound everolimus, it ultimately determined West-Ward “failed to prove by clear and convincing evidence that a POSA would have been motivated to select everolimus.” Furthermore, the district court determined that the asserted prior art would not have provided a person of ordinary skill in the art with a reasonable expectation that the claimed compound would successfully treat renal cancer. The Federal Circuit ultimately disagreed with the district court’s motivation to combine analysis but found no clear error in the reasonable expectation of success analysis, thus affirming the district court’s holding of nonobvious. See Novartis Pharms. Corp. v. West-Ward Pharms. Int’l Ltd., No. 2018-1434, 2019 U.S. App. LEXIS 14122 (Fed. Cir. May 13, 2019) (Before Stoll, Plager, and Clevenger, J.) (Opinion for the Court, Still, J.).

Novartis Pharmaceuticals Corp. and Novartis AG (collectively, “Novartis”) own the ’131 patent, which claims methods of using the compound everolimus to treat advanced renal cell carcinoma (“RCC”), or cancer of the kidneys. Everolimus is the active ingredient in Novartis’s Afinitor product. The case arose when West-Ward’s predecessor in interest filed an Abbreviated New Drug Application (“ANDA”) seeking to manufacture and sell generic versions of Afinitor, and Novartis sued for patent infringement in response. In turn, West-Ward alleged the claims of the ’131 patent were invalid over the prior art.

At the time of the priority date of the ’131 patent (February 19, 2001), advanced RCC carried a poor prognosis, and was unpredictable and difficult to treat. However, mTOR inhibitors, a class of compounds in which everolimus belongs, were known in the art to have a variety of beneficial properties, including antimicrobial, immunosuppressive, and antitumor activities. It was also known in the prior art that advanced RCC tumors are highly vascularized and require angiogenesis—the process through which new blood vessels are formed—to grow.

At the district court, West-Ward argued claims 1–3 would have been obvious over a reference to an mTOR inhibitor, temsirolimus, (Hidalgo 2000 or Hutchinson) and an everolimus patent (U.S. Patent No. 5,665,772 or U.S. Patent No. 6,004,973), in view of the general knowledge in the art.

Regarding the motivation to combine, the Federal Circuit found that the district court erred in its analysis of whether there was a motivation to combine. The district court found a POSA “would have been motivated to pursue everolimus as one of several potential treatment options for advanced solid tumors, including RCC.” According to the Federal Circuit, this finding should have ended the motivation to combine inquiry. The district court, however, went further by requiring West-Ward to “prove by clear and convincing evidence that a POSA would have been motivated to select everolimus.” The Federal Circuit held the district court erred in applying this heightened standard. More specifically, the Federal Circuit noted, “our case law does not require that a particular combination must be the preferred, or the most desirable, combination described in the prior art in order to provide motivation for the current invention.” In re Fulton, 391 F.3d 1195, 1200 (Fed. Cir. 2004); see also Bayer Healthcare Pharm., Inc. v. Watson Pharm., Inc., 713 F.3d 1369, 1376 (Fed. Cir. 2013). The Federal Circuit further noted that the district court either conflated its analysis or applied lead compound analysis, which requires clear and convincing evidence to determine whether a person of ordinary skill in the art “would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts.” However, because the claims of the ’131 patent are directed to a method of using everolimus, the lead compound analysis was inapplicable. The proper inquiry would have been whether a person of ordinary skill would have been motivated to modify the prior art disclosing use of temsirolimus to treat advanced RCC with the prior art disclosing everolimus. Under the proper standard, the Federal Circuit held a motivation to combine existed.

With respect to the district court’s analysis of reasonable expectation of success, the Federal Circuit found no clear error. Specifically, the Federal Circuit found that, after reviewing the evidence of record, the district court properly “determined that the molecular biology of advanced RCC was not fully understood, recognized the limitations in the temsirolimus phase I data, and found that such data did not provide a person of ordinary skill with a reasonable expectation of success.” Accordingly, the Federal Circuit affirmed the district court’s decision.

Lead compound analysis is inapplicable to method claims specifying treatment of an ailment by using a compound. Furthermore, a motivation to combine without a reasonable expectation of success is insufficient to render claims obvious.

223-4. IPRs Finding Unpatentable Bradium Technologies’ “Optimized Image Delivery over Limited Bandwidth Communication Channels” Patents Upheld on Appeal

The Federal Circuit reviewed the PTAB’s finding that two of Bradium Technologies patents were unpatentable as obvious in two IPR proceedings brought by Microsoft. The Court ultimately concluded that there was no error during claim construction and substantial evidence supported the Board’s decision. Thus, the Court affirmed the finding of unpatentability. See Bradium Techs. LLC v. Iancu, Nos. 2017-2579, 2017-2580, 2019 U.S. App. LEXIS 14121 (Fed. Cir. May 13, 2019) (Before Moore, Reyna, and Chen, Circuit Judges) (Opinion for the Court, Reyna, Circuit Judge).

The two patents at issue were “broadly directed to retrieving large-scale images over network communication channels in low-bandwidth conditions and to displaying such images on client devices with limited processing power.” An image server, in the preferred embodiment, created a series of derivative copies of an original image that were then prioritized by a client device, which issued image requests based on the user’s field of view (to enable a 3D field of view), the image data in turn transmitted from the image server to the client device based on priority. The priority was at least in part based on the resolution of the images, with lower resolution images being generally prioritized to provide “at least low resolution . . . available for rendering” and with higher-resolution images prioritized for the user’s closer fields of view because the closer field of view are the “image[s] that the user is actively observing”.

The IPRs relied on two prior art references and turned on the construction of “limited bandwidth communications channel.” Bradium proposed a construction of “a wireless or narrowband communications channel.” Microsoft argued no construction was needed. The Board agreed, noting that experts on both sides agreed that “limited bandwidth” and “narrowband” were synonymous and that the term is not limited to wireless channels. The Board adopted the plain and ordinary meaning, which it concluded was “a communications channel whose bandwidth is limited.” The Board then concluded that the primary reference alone or at least in view of the secondary reference disclosed the disputed claim limitations.

On appeal, Bradium argued the Board’s construction was improper because the claim channel must be “substantially permanently limited in bandwidth due to technical constraints on the channel itself.” The Court rejected this argument because the specification language Bradium pointed to as supporting is construction (“limited bandwidth conditions may exist due to either the direct technological constraints dictated by the use of a low bandwidth data channel or indirect constraints imposed on relatively high-bandwidth channels by high concurrent user loads”) actually support the Board’s construction because the language “makes clear that limited bandwidth may result from either ‘the direct technological constraints’ on a channel or ‘indirect constraints’ such as ‘high concurrent user loads.’” (emphasis in original). The Court also rejected a second argument seeking to distinguish the independent claims by the problems they solve (i.e., a “limited bandwidth computer device” instead of a channel) because “the same causes of bandwidth limits may affect both limited bandwidth communications channels and limited communication bandwidth devices.”

Bradium also challenged whether the prior art disclosed four claimed features. Bradium first argued that the primary reference could not disclose limited bandwidth channels because it was “designed to be used exclusively with high-speed broadband networks” and its “standard VRML browser embodiment” did not support the Boards’ findings and in fact taught away from limited bandwidth use. The first argument relied on Bradium’s rejected narrower construction, and thus was rejected by the Court. The second argument was also rejected because the prior art supported uses with Java and in certain limited bandwidth situations, and thus did not teach away. The Court rejected Bradium’s second unpatentability argument because it was not presented to the Board. The third challenge was whether the primary reference taught a “prioritization value” when it taught “prioritizing certain image tiles over others.” The Court agreed with the Board that the reference did teach prioritization values because “Bradium fail[ed] to explain how prioritization implemented on a computer can be accomplished without associating some value with a request to track its priority.” The Court also noted that the references teaching of algorithms “fairly suggest to a person of ordinary skill in the art that a prioritization value is thus associated with [prioritization] requests.” The fourth disputed feature involved “queuing the update data parcels on the remote computer based on an importance of the update data parcel as determined by the remote computer.” Bradium challenged whether the references disclosed ranking the images “in a single request” and whether the remote computer accomplishes queuing (versus the client computer). The Court rejected these arguments because there was substantial evidence to support the Board’s findings that queues are “ubiquitous data structures in computer science” and the primary references’ “predict-and-pre-fetch algorithm similarly discloses ranking and queuing based on importance,” as well as the Boards’ finding that the secondary reference’s “background view composer, which is located on its server,” makes a queuing decision.

A limitation from the specification should not be read into a claim unless the specification manifests a clear intent by the patentee to redefine the plain and ordinary meaning of a term. And, the Court seems inclined to find that “ubiquitous” computer functions should not be reasons for finding unpatentability where they are the only feature allegedly not contained in the prior art.