Stauffer - The panel affirms dismissal of a pre-AIA qui tam action based on improper patent marking despite plaintiff’s arguments that the AIA amendments were unconstitutional because they amounted to a pardon by Congress rather than the President, thus violating the separation of powers doctrine.
VirtualAgility - A majority of the panel reverses as an abuse of discretion the district court’s refusal to stay an infringement case pending post-grant review under the AIA’s business method patent review program.
Retractable Technologies - The Circuit affirms a ruling that Becton Dickinson must pay a $5 million award, despite the fact that the infringement verdict was partially reversed in a prior appeal, since Becton never argued for lower damages in the earlier appeal.
X2Y Attenuators - The Circuit affirms a determination by the ITC that Intel microprocessors used in Apple and HP computers do not infringe X2Y’s patents.
Stauffer v. Brooks Brothers Group, Inc., Fed. Cir. Case 2013-1280 (July 10, 2014)
Stauffer sued Brooks Brothers pro se under the then-extant version of the false-marking statute, 35 USC § 292 based on his contention that Brooks Brothers violated the statute by marking its bow ties with expired patent numbers. In 2011, while the action was pending, the AIA was enacted, making three significant changes affecting Stauffer’s false marking claim: (1) it eliminated the statute’s qui tam provision, changing the law so that only a “person who has suffered a competitive injury” may bring a claim, AIA § 16(b)(2); (2) it expressly stated that marking a product with an expired patent is not a false-marking violation, § 16(b)(3); and (3) it expressly stated that these amendments apply to all pending cases, § 16(b)(4).
After the AIA became law and eliminated the qui tam provision of the false-marking statute, Stauffer argued that the AIA amendments were unconstitutional because they amounted to a pardon by Congress, thus violating the doctrine of separation of powers. He also argued that, by making the elimination of the qui tam provision applicable to pending suits, the statute violated the common law principle that prohibits use of a pardon to vitiate a qui tam action once the action has commenced.
The district court dismissed Stauffer’s suit due to the AIA’s elimination of the false-marking statute’s qui tam provision, and Stauffer appealed. Before turning to the merits of Stauffer’s pardon-power argument, the panel addresses the government’s contention that Stauffer lacks standing to even make such an argument. The Supreme Court has explained that, in order for there to be standing in a case, at a minimum, three requirements must be met: First, the plaintiff must have suffered an “injury in fact”—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
The panel concludes that Stauffer has the necessary standing on appeal to make his arguments. First, Stauffer seeks to establish that Congress carried out an unconstitutional pardon when it amended the false-marking statute to permit marking with expired patent numbers. Second, he seeks to show that Congress could not have constitutionally eliminated the ability of a qui tam plaintiff to enforce false-marking violations. Were he to win on both issues, it is likely rather than speculative that a favorable decision would redress his alleged injury.
Turning to the merits, the panel notes that striking down an Act of Congress as unconstitutional “is the gravest and most delicate duty” which a court may be called upon to perform. The Circuit previously rejected challenges to the constitutionality of the false-marking statute amendments on two different occasions, upholding the constitutionality of the retroactive elimination of the statute’s qui tam provision, and rejecting the argument that qui tam plaintiffs have vested rights in pre-AIA lawsuits.
The panel first addresses Stauffer’s unconstitutional parden argument. Article II, § 2 of the Constitution grants the President the “power to grant reprieves and pardons for offenses against the United States.” According to the panel, rather than granting a pardon, the amendments to the false-marking statute are better characterized as repealing a law, an action undoubtedly within Congress’s power. Indeed, at common law, it has long been held that Congress has the power to repeal a penal provision (whether criminal or civil) and that such repeals are understood to preclude punishment for acts antedating the repeal.
Second, the panel addresses the argument that by making the elimination of the qui tam provision applicable to pending suits, the statute violated the common law principle that prohibits use of a pardon to vitiate a qui tam action once the action has commenced. The panel concludes that there is no such violation, first, because a plaintiff has no vested rights in a lawsuit until final judgment has been entered, and, second, because a litigant like Stauffer does not enter into a contract with the government upon filing a qui tam false-marking claim.
The panel therefore affirms dismissal of Stauffer’s suit.
The recent MadStad Engineering v. USPTO (July 1, 2014) case determined that an inventor and his company did not have standing to challenge the constitutionality of the first-to-file provisions of the AIA because he failed to show actual or imminent injury, fairly traceable to the challenged action. But in that case plaintiff could not show he had incurred additional expense filing patent applications earlier than he otherwise would have, and had not had a patent application rejected based on another application bearing an earlier filing date. Stauffer shows the Circuit’s willingness to permit a plaintiff to challenge constitutionality when plaintiff can demonstrate a legally protectable, actual interest that is fairly traceable to the challenged action of the defendant.
VirtualAgility, Inc. v. Salesforce.com, Fed. Cir. Case 2014-1232 (July 10, 2014)
In an opinion by Judge Moore, a majority of the panel reverses as an abuse of discretion the district court’s refusal to stay an infringement case pending post-grant review of the validity of VA’s asserted claims under the Transitional Program for Covered Business Method Patents (CBM) program.
After VA sued defendants for infringement, Salesforce filed a petition for post-grant review under the CBM program based on its contention that all of the claims were invalid under sections 101, 102 and 103. Defendants then filed a motion to stay district court proceedings pursuant to AIA § 18(b)(1), but while this motion was pending the court issued a scheduling order setting dates for a Markman hearing and trial. Shortly thereafter, the PTAB granted-in-part Salesforce’s petition based on its conclusion that all of the claims are more likely than not patent-ineligible under sections 101 and 102. When the district court denied defendants’ motion to stay the case, defendants filed an interlocutory appeal to the Circuit, and filed motions to stay district court proceedings pending the disposition of this appeal, which was granted by the Circuit.
The panel first determined that it has jurisdiction over this appeal because the AIA provides that a party may take an immediate interlocutory appeal from a district court’s decision granting or denying a motion to stay litigation pending CBM review. The statute instructs the district court to consider the following four factors when deciding whether to grant a stay:
- whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
- whether discovery is complete and whether a trial date has been set;
- whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
- whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
The statute further provides that the Circuit shall review the district court’s decision to ensure consistent application of established precedent, and such review may be de novo. §18(b)(2).
Factors (A) and (D): Simplification of Issues and
Reduced Burden of Litigation
The district court concluded that the first factor— simplification of the issues—was “essentially neutral, if not slightly against” granting a stay because it was “not convinced” by the PTAB’s assessment that cancellation of some or all of the claims during CBM review was “probable.” It found that “the specific circumstances in the instant case present only a limited possibility” of a reduced burden on the court and the parties, so concluded that the fourth factor “weighs only slightly in favor of a stay.”
The majority concludes that the district court clearly erred as a matter of law to the extent that it decided to “review” the PTAB’s determination that the claims of the patent are more likely than not invalid in the posture of a ruling on a motion to stay. Under the statutory scheme, district courts have no role in reviewing the PTAB’s determinations regarding the patentability of claims that are subject to CBM proceedings. Indeed, a challenge to the PTAB’s “more likely than not” determination at this stage amounts to an improper collateral attack on the PTAB’s decision to institute CBM review, and allowing it would create serious practical problems. Congress made post-grant review more difficult to obtain than reexamination by raising the standard from “a substantial new question of patentability,” 35 USC § 303(a) (2012), to “more likely than not . . . unpatentable.” id. § 324(a). Congress clearly did not intend district courts to hold mini-trials reviewing the PTAB’s decision on the merits of the CBM review.
The panel finds it significant that the PTAB determined that all of the claims of the sole asserted patent were more likely than not unpatentable on two separate grounds. CBM review could dispose of the entire litigation: the ultimate simplification of issues. This weighs heavily in favor of granting the stay.
Factor (B): Whether Discovery Is Complete and
Whether a Trial Date Has Been Set
The district court found that the timing factor favored granting a stay because the parties had not yet filed their joint claim construction statement, the deadline to complete fact discovery was more than six months away, and jury selection was not until November 2014. But it concluded that “the benefits of a stay at this relatively early stage of the proceedings are outweighed by various other considerations as discussed elsewhere herein.”
The panel holds that the timing factor heavily favors a stay. While a motion to stay could be granted even before the PTAB rules on a post-grant review petition, no doubt the case for a stay is stronger after post-grant review has been instituted.
Here the stay motion was filed almost immediately after Salesforce filed its CBM petition. The PTAB granted the petition on November 2013. The district court denied the motion to stay in January 2014. The panel sees no error in the district court’s decision to rule on the stay motion after the PTAB rendered its decision on the CBM petition.
Factor (C): Undue Prejudice or Tactical Advantage
The district court concluded that the undue prejudice factor weighed heavily against a stay. It found that, given “credible evidence” that VA and Salesforce were direct competitors, VA would suffer irreparable harm in the form of lost market share and consumer goodwill stemming from the delay in enforcing its patent rights. The majority agrees with the district court that competition between parties can weigh in favor of finding undue prejudice. However, there is no evidence in this record that the two companies ever competed for the same customer or contract. A stay will not diminish the monetary damages to which VA will be entitled if it succeeds in its infringement suit—it only delays realization of those damages and delays any potential injunctive remedy. VA argues that it needs injunctive relief as soon as possible to prevent irreparable harm, but the panel notes that VA did not move for a preliminary injunction and that VA waited nearly a year after the patent issued before it filed suit. These facts weigh against VA’s claims that it will be unduly prejudiced by a stay.
To the extent the district court found that “the added risk of witness loss” could unduly prejudice plaintiff, the panel does not agree that the record supports a conclusion of undue prejudice. VA asserts that one potentially relevant witness is “over 60” and three others are “over 70.” The panel asks: “Since when did 60 become so old?”, and concluded that the record does not support the conclusion that VA would be unduly prejudiced by the stay.
Finally, the court did not find that a stay would give defendants a clear tactical advantage, and the majority agrees. VA had argued that Salesforce’s failure to cite the Oracle and Tecskor prior art in the CBM review showed that they were manipulating the proceeding. Even though the “splitting” of prior art is allowed by statute in the sense that litigation estoppel does not attach to art that could have been, but was not, raised in CBM review, such behavior can still give the movant a tactical advantage. This record does not establish such a clear tactical advantage given the evidence that, at the time Salesforce filed its CBM petition, it did not have the evidence necessary to include the Oracle Projects and Tecskor prior art. Given these circumstances, the majority concludes that there is no clear tactical advantage to defendants of granting the stay.
Since three of the four factors weigh heavily in favor of a stay in this case, and the fourth, undue prejudice, weighs only slightly in favor of denying a stay, a majority of the panel concludes that the district court abused its discretion when it denied the stay.
Judge Newman dissents, noting that the AIA permits but does not require the district court to stay earlier-filed litigation during later-requested post-grant PTO proceedings. Such a stay is not obligatory, but is consigned to the district court’s discretion. During consideration of the proposed post-grant review legislation, she notes that there was extensive debate about the relation between concurrent infringement actions in the courts and post-grant patentability redeterminations in the PTO. After eight years of discussion, the AIA adopted rules for concurrent proceedings in various circumstances. No statute or rule requires the district court to stay ongoing court proceedings after a petition for post-grant review is filed in the PTO. Judge Newman concludes that her colleagues’ contrary ruling is contrary to the legislation and its purpose.
This reversal shows how ready the Circuit to reverse a denial of a stay in favor of PGR because here, while the litigation was in its early stages, the litigation was moving quickly and the PGR was not. Moreover, there was additional prior art that was not cited in the PGR that the defendant was relying on in the litigation. Nonetheless, the majority found denial of the stay to be a clear abuse of discretion.
Retractable Technologies, Inc. v. Becton Dickinson, Fed. Cir. Case 2013-1567 (July 7, 2014)
Becton appeals the district court’s denial of its motion to modify a damages award following the partially successful appeal of the infringement judgment. The panel finds that the mandate rule forecloses the relief sought by Becton, so the district court’s denial of the motion is affirmed.
In 2007, Retractable sued Becton, alleging that Becton’s 1 mL and 3 mL syringes infringed various claims of Retractable’s patents. At trial, Retractable presented its theory that infringement began in 2000 and that a hypothetical negotiation at that time would have resulted in a lump sum payment of $72 million for a ten-year license to practice the patents. Becton countered with a lost profits theory that would have Retractable’s recovery limited to $5 million, or a reasonable royalty would have been no more than $3 million. The jury ultimately found that both the 1 mL and 3 mL syringes infringed. The jury’s verdict form included a number of interrogatories, including Interrogatory No. 6: “If you have found that any of Becton’s accused devices infringe any of the asserted claims of any of the patents-in-suit, then please determine the amount of reasonable royalty damages that would fairly and adequately compensate Retractable for infringement.” The jury responded: “$5,000,000.”
Becton appealed the infringement and validity determinations but neither appealed nor requested a remand of the damages determination in the event the infringement or validity determinations were upset. In that appeal, the Circuit concluded that the district court misconstrued one claim term, and held that the 3 mL syringe could not infringe the asserted claims, but affirmed the judgment that the 1 mL syringe infringed and that the claim at issue was not invalid. Having no basis for a new trial on infringement or invalidity, no remand was ordered.
Becton subsequently filed a motion under Fed. R. Civ. P. 60(b)(5), asking the district court to modify the permanent injunction and the damages award in light of the Circuit’s decision, arguing under the rule that the court may relieve a party from a final judgment when the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable. Becton also argued that independent of Rule 60(b), modification was necessary to conform the judgment to the Circuit’s mandate, contending that the injunction and the damages award must be adjusted to reflect the fact that the lower-selling 1 mL syringe is the only remaining infringing product. The district court concluded that the mandate rule precluded it from revisiting the damages issue because it was within the scope of the original judgment and was not raised in the prior appeal nor remanded to the district court for reconsideration.
Becton’s argument that the damages award must be revisited if either one of the two products at issue is found not to infringe—could have and should have been raised in the previous appeal. Becton contends nonetheless that the district court was free to revisit damages because doing so at least would have been consistent with this court’s mandate. While the district court was certainly free to take action consistent with the mandate, that does not mean that it was likewise free to disturb matters that were within the mandate. “Unless remanded by this court, all issues within the scope of the appealed judgment are deemed incorporated within the mandate and thus are precluded from further adjudication.” Becton’s failure in the prior appeal to raise the issue of remand is critical given the general nature of the jury verdict on damages and Retractable’s lump-sum reasonable royalty theory that was presented to the jury.
According to the panel, the responsibility to review judgments appealed to the Circuit can be properly discharged only if the court assumes that the appellant has fully set forth its attack on the judgment below; only then will the court be able to address with confidence the range of issues determined by the appealed judgment. An issue that falls within the scope of the judgment appealed from but is not raised by the appellant in its opening brief on appeal is necessarily waived. Unless remanded by this court, all issues within the scope of the appealed judgment are deemed incorporated within the mandate and thus are precluded from further adjudication. The damages award was within the scope of the appealed judgment and thus was incorporated into the mandate when Becton failed to raise the issue of a remand to consider parsing damages by product.
Becton contends that the damages award is inconsistent with the mandate, but none of the arguments are persuasive. Becton points out that the 3 mL syringe, whose infringement finding was reversed, far outsold the 1 mL syringe. But there is no way to conclude from this record what the significance of that alleged disparity might have been in the jury’s deliberations. Becton next contends that the district court’s modification of the injunction to remove the 3 mL syringe from its scope is inconsistent with the district court’s refusal to revisit damages and that, had the district court not issued an injunction in the first instance, Becton’s victory on the previous appeal would have had no impact at all. However, the injunction—unlike the verdict—clearly implicated each syringe individually and easily could be parsed. Moreover, a district court has broad equitable authority to modify its own injunction prospectively, authority that is independent of an appellate mandate. To the extent that Becton desired a partial reversal to have greater impact, it had the opportunity to request a remand on damages in the first appeal but did not. For the foregoing reasons, the Circuit affirms the ruling of the district court.
X2Y Attenuators, Inc. v. ITC and Intel Corporation, et al., Fed. Cir. Case 2013-1340 (July 7, 2014)
In an opinion written by Judge Moore, the Circuit affirms the ITC’s claim construction and a determination that Intel and its customers did not infringe X2Y’s patents. The technology at issue relates to structures for reducing electromagnetic interference in electrical circuits. The patented inventions use shielding electrodes to reduce the undesirable buildup of charge, known as “parasitic capacitance,” between electrodes used for conduction.
At the ITC the parties argued the construction of the claim terms “third electrode,” “center electrode,” “first ground plane,” and several other claim terms collectively as “electrode terms” or “center ground plane terms.” The parties disputed whether the electrode terms were limited to the so-called “sandwich” configuration—an arrangement of three electrodes in which a center conductor is flanked by paired differential, or oppositely charged, conductors. While Intel argued that the claims should be limited to the sandwich configuration, X2Y contended that the electrode terms require no construction and should be given their plain and ordinary meanings.
The ITC resolved the dispute in favor of Intel, ruling that proper construction of the electrode terms require a common conductive pathway electrode positioned between paired electromagnetically opposite conductors.
The panel reviews de novo the ITC’s legal determinations, including those relating to claim interpretation. The patents’ statements that the presence of a common conductive pathway electrode positioned between paired electromagnetically opposite conductors is “universal to all the embodiments” and is “an essential element among all embodiments or connotations of the invention” constitute clear and unmistakable disavowal of claim scope. According to the panel, the standard for finding disavowal, while exacting, was met in this case. Specifically, the Circuit has held that labeling an embodiment or an element as “essential” may rise to the level of disavowal. Here, not only does the specification state that the “center common conductive pathway electrode” flanked by two differential conductors is “essential,” but it also spells out that it was an “essential element among all embodiments or connotations of the invention.
The passages quoted above do include the permissive language that “the material having predetermined electrical properties may be one of a number in any of the embodiments.” But the specification further explains that “no matter which material is used, the combination of common ground conductive plates and electrode conductive plates creates a plurality of capacitors to form a line-to-line differential coupling capacitor between and two line-to-ground decoupling capacitors from a pair of electrical conductors.” Thus, although the passage states that the material may vary, it also explains that the general sandwich configuration remains the same because it is a “feature universal” to the invention. This, according to the opinion, is a clear and unmistakable disavowal of claim scope.
Judge Reyna concurs but writes separately to address what he sees as an error in the claim construction approach adopted by the ALJ and the Commission. The error, while significant, did not affect the result affirmed by the Circuit. Specifically, the ALJ and the Commission assumed a specific priority date that X2Y asserted as a defense to an invalidity challenge. The ALJ and the Commission then determined that the scope of the asserted claims was limited by “the invention” disclosed in earlier patents in the priority chain. This was error because the asserted claims derive from multiple continuation-in-part applications, and because the ALJ and the Commission failed to objectively construe the asserted claims before deciding whether the claims were entitled to priority.
The Circuit reiterates what it has recently told us about disavowal of a broad definition in the prosecution history (see Hill-Rom v. Stryker (June 27, 2014)) and in the specification (see Vederi v. Google (March 14, 2014)); that is, there must be a clear and unambiguous disavowal. The X2Y case is a good example of how the careless drafting of a specification can doom a patentee’s claim construction because, other than the limiting language in the specification, X2Y had strong arguments for a broad claim construction.