Injunction does not include obligation to recall already sold products from the market – "Razor Blades II," Higher Regional Court Dusseldorf I-15 W 9/18 

The judgement of the Higher Regional Court Dusseldorf in "Razor Blades II" deals with the scope of obligations following an injunction under German law. In the fields of unfair competition and trademark law, the Federal Supreme Court recently rendered several decisions holding that a defendant faced with an injunction has an obligation not only to cease and desist from future offers and sales but also to request commercial customers (which have already been supplied) to refrain from further sales and distribution.

In Razor Blades II, the Higher Regional Court Dusseldorf, the leading German appeals court for patent matters, stated that it disagrees with this line of cases from the Federal Supreme Court for patent matters. Many have argued that injunctions in patent cases should have the same consequences as trademark and unfair competition cases, so the deviation in Razor Blades IIhas made this decision noteworthy. In an earlier judgment in this same case (we reported about this judgement in our May patent update, Higher Regional Court Dusseldorf, I-15 U66/17 – "Razor Blades"), the plaintiff obtained an injunction that prohibited defendants from offering, placing on the market, importing, or possessing patent-infringing razor blade units. In response to this judgment, the defendants refrained from further engaging in infringing acts themselves and informed their commercial customers (drugstores and retail chains) about the aforementioned injunction. The plaintiff, however, did not consider this sufficient and initiated enforcement proceedings, on the grounds that the injunction also obligated defendants to ask their customers to refrain from further distribution and to offer to take back the infringing products.

In Razor Blades II, the Higher Regional Court affirmed the lower court's rejection of the plaintiff's request. According to the court, an injunction may require more than refraining from committing infringing acts. However, the court found that in the field of patent law, an injunction does not impose an obligation on the defendant to recover infringing goods which have already left the infringer's business or an obligation to offer to take back the infringing goods. Such obligations, according to the court, are exclusively reserved for the recall provision in paragraph 140a III of the German Patent Act. According to paragraph 140a III, the patent owner can call for recall and removal of the infringing goods from the distribution channel. This claim may not be confused with the claim for a mere injunction according to paragraph 139 I of the act, as the requirements are different. In particular, a claim to recall infringing goods requires a proportionality assessment, which would otherwise be undermined if the obligation were automatically tied to an injunction. If the plaintiff did not assert the claim to recall, this claim could not be enforced by way of the cease and desist order in enforcement proceedings.

There now appears to be conflicting case law regarding injunctions for trademark and unfair competition cases, as compared to patent cases. This may create legal uncertainty for defendants trying to determine the scope of their obligations when faced with an injunction and cease-and-desist order. It remains to be seen whether the Federal Supreme Court will follow this approach for patent cases, once it has the chance to rule on this question.

Tribal sovereign immunity cannot shield patents from IPR challenges – St. Regis Mohawk Tribe v. Mylan Pharma., Inc., Federal Circuit (20 July 2018)

The Federal Circuit ruled that Native American tribal sovereign immunity does not apply to preclude patent challenges at the PTAB. This saga over tribal immunity began in 2016, when certain drug manufacturers filed inter partes reviews (IPRs) at the Patent Trial and Appeal Board (PTAB) challenging various patents owned at that time by Allergan Inc, relating to Allergan's dry eye treatment Restasis. While the IPRs were pending, Allergan entered into an agreement with the Saint Regis Mohawk Tribe, through which ownership of the dry eye treatment patents was transferred from Allergan to the tribe, with a license-back to Allergan allowing it to, among other things, make and sell the patented medication. After this deal between Allergan and the tribe, the tribe moved to dismiss the IPRs on the basis of tribal sovereign immunity. The PTAB denied the motion, and the Federal Circuit affirmed.

The Federal Circuit acknowledged the existence of tribal sovereign immunity in some contexts, as affirmed by the Supreme Court in past cases. But, it held that the immunity "does not extend to actions brought by the federal government."

More particularly, the court said tribal sovereign immunity "does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action." The court concluded that IPRs are more like an agency enforcement action than a civil suit brought by a party, and therefore tribal immunity is not implicated. One judge on the panel, in a concurring opinion, described how the history of IPRs illustrate further how the proceedings are not adjudications between two parties. The judge pointed out a core tenant of IPRs: a strong public interest in reviewing potentially invalid patents, given the restraints and challenges examiners face during the examination phase. This has been a highly monitored case throughout the year, and it is unlikely to have concluded. Indeed, the tribe and Allergan filed a petition for the Federal Circuit to rehear the case en banc; briefing on that petition is underway.

PTO updates: PTAB trial practice guide (10 August 2018)

The PTO recently published its first major update to its PTAB "Office Patent Trial Practice Guide." The trial practice guide outlines procedures and rules to IPRs, covered business methods (CBMs), and post-grant reviews (PGRs) before the PTAB. The updates apply to numerous areas of PTAB practice, but the following are some of the more notable changes:

Expert evidence: The update to the trial practice guide expressly states that expert testimony "cannot take the place of a disclosure in a prior art reference, when that disclosure is required as part of the unpatentability analysis." Expert testimony has generally been allowed to help supplement evidence and provide context in a PTAB proceeding, but the trial practice guide update prohibits using such testimony to fill in any gaps that might exist in the alleged invalidity grounds. This has been typical of PTAB practice, but the trial practice guide update has now memorialized it as formal procedure. Thus, petitioners will need to remember to ensure their proposed grounds for invalidity are supported by record evidence and only bolstered by expert testimony, as opposed to relying solely on expert testimony to prove a proposed ground.

Sur-replies: The update provides that sur-replies to principal briefs will normally be authorized by the scheduling order issued at institution. The institution of sur-reply briefing essentially replaces the previous practice of filing "observations on cross-examination." In practice, this will now allow patent owners to file a sur-reply to a petitioner's reply (in support of the petitioner's petition) and petitioners to file a sur-reply in response to a patent owner's reply (in support of the patent owner's motion to amend claims). Sur-replies may not be accompanied by new evidence, other than deposition transcripts of the cross-examination of any witness put up in support of a reply brief. And, sur-replies can only respond to arguments made in reply briefs.

Challenging admissibility – Motions to exclude and motions to strike: The update clarifies that motions to exclude are for excluding inadmissible evidence, whereas motions to strike are for striking new arguments or evidence going beyond the allowable scope. Prior to this update, a formal mechanism was not in place to deal with situations where parties raise new, outside-of-the-scope arguments or belatedly presented evidence. The update now officially sanctions motions to strike as the appropriate procedural mechanism by which to challenge the introduction of such arguments and evidence.

Dismissed lawsuits still trigger one-year PTAB time bar – Click-to-Call Techs. v. Ingenio, Inc., Federal Circuit (16 August 2018)

The full Federal Circuit held that patent suits that are voluntarily dismissed still trigger the clock on the U.S. Patent and Trademark Office's (PTO's) one-year bar for filing post-grant challenges. Under the America Invents Act (AIA), an IPR cannot be instituted if the petition is filed more than one year after the date the petitioner is served with a complaint alleging infringement. In the present case, LLC filed an IPR petition challenging a patent owned by Click-to-Call, Technologies LP; the PTAB reviewed and invalidated that patent. Click-to-Call appealed and argued that the PTAB should have never taken the case from the outset because the one-year bar had lapsed, based on a lawsuit filed against's predecessor twelve years before the IPR petition was filed.

In hearing the IPR, the PTAB said that the one-year bar was not triggered because the earlier lawsuit was voluntarily dismissed without prejudice. The PTAB viewed this event as "leaving the parties as though the action had never been brought," and thus not triggering the clock on the one-year bar. On appeal, the Federal Circuit held that this reasoning was incorrect. It noted that the AIA text clearly focuses only on the date the accused infringer is properly served with a complaint as the event triggering the clock on the one-year bar—nothing after that is taken into consideration. Accordingly, the Federal Circuit vacated the PTAB's finding of invalidity, stating that the PTAB never had jurisdiction to hear the IPR.

A key takeaway from the case is to be aware of patent owners who file suit and then later voluntarily dismiss without prejudice. In such situations, although the initial litigation may terminate, the patent owner may still be able to re-file a second complaint. Importantly, however, according to this case the clock will still be running for the accused infringer to file an IPR, if desired, within the one-year window. Thus, if served with a complaint for infringement, whether to file an IPR should remain a consideration, even if the patent owner later dismisses the case, to avoid being precluded from later challenging the patent outside of the one-year period.

PTAB instructed to view "Printed Publications" more liberally – Various cases, Federal Circuit (August 2018)

Parties challenging a patent in an IPR or other post-grant proceeding at the PTAB are permitted to raise grounds of invalidity based on prior art patents and prior art "printed publications." In the traditional sense, "printed publications" have typically included published textbooks, technical papers, reports, or the like. Case law has established a more general definition that a "printed publication" is any document that has been disseminated or otherwise made available to the public, to the extent that persons interested and ordinarily skilled in the subject matter or art, exercising reasonable diligence, can locate it. Over the past several months, the Federal Circuit has answered whether various particular references qualified as "printed publications."

In one case, the question for the court was whether materials distributed to people at a meeting, such as a trade show or conference, qualify as "printed publications." More specifically, an IPR petitioner challenged patents based on its own sales catalogs. Hundreds of the sales catalogs had been distributed at a trade show, but the PTAB ruled the catalogs were not "printed publications." That PTAB decision was appealed, and the Federal Circuit reversed, stating that the PTAB interpreted what qualifies as a "printed publication" too narrowly. The Federal Circuit took a similar approach to other cases in recent months, ruling that the following also qualified as "printed publications" or ordering the PTAB to reconsider the question:

  • Materials from a Food and Drug Administration meeting.
  • A video and slide presentation shown to surgeons at various conferences.

Based on these recent cases, the Federal Circuit appears to be approaching the question of whether a reference constitutes a "printed publication" with an open-minded approach, assessing multiple factors. Some of the factors that could be considered are: size and nature of the gathering, meeting, conference, or trade show; expertise of the intended audience; whether there are any restrictions on attendance; and whether there were any restrictions on the dissemination of materials provided (i.e., whether is an expectation that the materials be kept confidential). The Federal Circuit decisions appear to suggest this issue is fact specific and will vary case-by-case, but might generally apply a broader interpretation of what qualifies as a "printed publication" in future cases.

Federal Circuit cracks down on identifying real parties in interest – Applications in Internet Time, LLC v. RPX Corp., Federal Circuit (9 July 2018)

Defensive patent groups, such as RPX Corp. and Unified Patents, are entities that companies can "subscribe" to that challenge the validity of patents. Many companies have leveraged the services of such groups to help prevent or mitigate costly and lengthy patent litigation. As a result, these defensive patent groups have become active participants in PTO post-grant proceedings. Recently, however, the Federal Circuit set aside PTAB decisions to which RPX was a party. The court scrutinized whether the real parties in interest (e.g., the companies engaging RPX) had been properly identified at the outset of the PTAB proceedings. The court set aside two IPR decisions and returned the proceedings to the PTAB to determine whether RPX was acting on behalf of another unnamed party when it filed its IPR challenges.

The Federal Circuit focused on unmasking potentially unnamed real parties in interest to determine whether the one-year time bar had expired for any unnamed real party in interest. The court's concern was that a client of RPX had been accused of infringement by the patent owner more than one year prior to the filing of RPX's IPRs. According to the court, if RPX acted as a mere proxy for that client, then the client would have been a real party in interest. As such, the client's one-year time bar would apply to RPX. In sending the case back to the PTAB, the Federal Circuit commented that the PTAB had used an "unduly restrictive" test to determine whether any underlying client of RPX was a real party in interest. The court stated that real party in interest determinations require a flexible approach "that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner."

Companies that are members of defensive patent groups should take note of this decision. If named in a lawsuit as an alleged patent infringer, the one-year time bar on filing an IPR begins to run. Thus, if a defensive patent group files an IPR as proxy, it is possible the one-year time bar may still begin to toll, particularly if the named defendant in the underlying litigation has significant interaction with the patent group, discussion about the asserted patents, and involvement in the strategy and finances of filing a patent challenge at the PTO. On 7 September 2018, RPX requested a rehearing en banc of the Federal Circuit decision.

Still no hearing date for German UPCA complaint, while UK announces intention to stay in UPC system after leaving the EU

The constitutional complaint against a German law that ratified the Unified Patent Court Agreement (UPCA) still remains unscheduled before the German Federal Court (FCC). The FCC has decided a number of other cases on its 2018 docket, but has not yet taken action on the Unified Patent Court (UPC) case. That the court has handled other cases, however, could be an indication that it is working toward finally hearing the UPC case. Meanwhile, in a whitepaper addressing several Brexit-related topics, the United Kingdom expressed its intention to stay in the UPC and Unitary Patent System after it leaves the European Union. In that whitepaper, the United Kingdom further declared its intention to work with other UPC-contracting states to make sure the UPCA can continue on what the United Kingdom has called a "firm legal basis." That said, the undecided German constitutional complaint continues to add uncertainty to the United Kingdom's participation in the UPC system. If the UPC came into force before 29 March 2019, then the United Kingdom would still be an EU member state. In that case, the necessary amendment and adoption of relevant provisions of the UPCA could likely be achieved much more easily than if the UK had already withdrawn (which would require it to request participation as a non-member state). The level of effort and complexity necessary to realize an involvement of the United Kingdom post-Brexit, therefore, may hinge on a swift decision of the German constitutional complaint by the FCC.

"Catching up" With FRAND-obligations during infringement proceedings only possible if SEP owner requests stay of proceedings – "Wireless Station," Regional Court Mannheim 7 O 28/16

In its recently published judgment titled "Wireless Station," the Regional Court Mannheim dealt with the question of whether a standard essential patent (SEP) owner can "catch up" on its fair, reasonable, and non-discriminatory (FRAND) obligations under ZTE v. Huawei, when infringement proceedings are already pending.

In the famous European Court of Justice (ECJ) decision, ZTE v. Huawei, the ECJ set out various steps which a SEP owner needs to follow before being entitled to an injunction or a recall of infringing products from an accused infringer (or standard "implementer"). These steps include, notably, notifying the standard implementer of the infringement and — once the standard implementer had shown a willingness to take a license under FRAND terms — to send a FRAND license offer to the standard implementer. Various discussions have evolved in German courts on whether the SEP owner needs to achieve these steps prior to starting court proceedings for patent infringement, or whether it may start court proceedings first and then "catch up" with these steps before the first instance hearing.

In its recently published decision, the District Court Mannheim sought to implement the guiding principle of current FRAND case law, balancing the interests of both parties involved. In the case, the claimant, a SEP owner, conducted licensing negotiations with the defendant prior to the trial. During the negotiations, the SEP owner provided claim charts regarding the asserted patent and offered the defendant a license. For the amount of the license, the SEP owner asserted a blanket amount per unit while referring to an expert opinion that — according to the claimant — assessed the value of the SEP portfolio. This expert opinion, however, was not made available to the defendant. The matter became litigious as the defendant rejected the licensing offer.

The court found that the SEP owner could not enforce its claim due to a violation of its FRAND obligations. According to the court, the SEP owner did not comply with its obligation to provide the defendant with the necessary information during licensing negotiations before the legal action. As the SEP owner's expert opinion that assessed the value and amount of the license was not made available to the defendant, the SEP owner failed to comply with its obligations under the principle of transparency. Only if the defendant had access to all information available, to assess whether the offer made by the SEP owner was, in fact, fair and non-discriminatory, would both parties be able to negotiate on an even "playing field" and without undue pressure. The SEP owner did subsequently provide the defendant with the necessary information. The court found, however, that complying with unfulfilled obligations at a time when infringement proceedings are already in process was not acceptable. Therefore, according to the court, a SEP owner may fulfill FRAND obligations when a matter has already gone to trial only if a negotiation environment, without the pressure of an infringement proceeding, is re-established. To re-establish such a negotiation environment similar to pre-trial negotiations, the SEP owner has to request a stay of the infringement proceedings with the court. A defendant that is willing to take a license under FRAND conditions will likely agree to such a request to stay the proceedings. The decision is not yet legally binding and awaits confirmation by the Higher Regional Court Karlsruhe.

Higher Regional Court of Dusseldorf rules on the scope of a private right of prior use – "Protective Covering for Radio Systems," Higher Regional Court Dusseldorf, I-15 U 49/16

The Higher Regional Court Dusseldorf has issued a decision (I-15 U 49/16 – Protective covering for radio systems) on the scope of a private right of prior use, a right that is set out in Sec. 12 of the German Patent Act. In its decision, the court established a framework for determining allowable prior use by manufacturing suppliers, and overruled an earlier decision of the District Court Dusseldorf. Sec. 12 of the German Patent Act requires a prior user to have possession of an invention and to have been using the invention within Germany on or before the priority date of the patent. The types of activities that may constitute an allowable "prior use" are set out in Sec. 9 and 10 of the German Patent Act and include, for example, manufacturing, offering for sale, marketing, or preparation for such uses in the near future. Thus, in general under the German Patent Act, a company is entitled to the prior use defense if it can show use of a patented invention in Germany before the priority of an asserted patent covering the same invention. This defense allows companies to continue their "prior use" of a later-patented invention to satisfy the needs of their own business.

In the decision issued by the Higher Regional Court Dusseldorf, the court first emphasized that the scope of the private right of prior use is limited to the particular embodiments possessed and practiced by the prior user before the priority date of the asserted patent. Sec. 12 of the German Patent Act is an exception to the general provisions protecting patent owners. Keeping this in mind, the court referred to a prior decision of the Federal Supreme Court (Federal Supreme Court, X ZR 32/99 – Bending device), which held that modifications to a previously-used embodiment are not authorized under Sec. 12 if they cause a first time literal realization of the patent-protected claim. The court clarified, however, that a modification of a previously-used embodiment would fall under Sec. 12 if a person skilled in the art would have arrived at the modified embodiment without any inventive activity prior to the disclosure of the patent.

Based on this, the court ruled that a manufacturing supplier that had been manufacturing all parts of an embodiment of the invention before the priority date of the asserted patent had a "prior use" right to manufacture the entire assembled device, so long as assembly of the individual parts by a customer would have been predictable and easily and reliably performed. In other words, where customers have engaged in a "prior use" of assembling component pieces provided by a manufacturer, the manufacturer is also entitled the same private right of prior use. In the light of the foregoing, the court also ruled that an indirect use of process claims in the form of indirect patent infringement within the meaning of Sec. 10 of the German Patent Act would therefore also entitle the manufacturing supplier to a direct use under Sec. 9 of the German Patent Act.

The decision appears to clarify the scope of the private right of prior use, in particular when it comes to manufacturing suppliers. Regarding the rationale for its decision, the court repeatedly maintained that an assembly of components provided by the manufacturing supplier would not result in a stronger interference in the rights of the patent owner. This ruling appears to be based upon the premise that a supplier having a private right of prior use under Sec. 12 is able to provide the "prior use" embodiments to its customers (without limitation to existing customers) without infringing any rights of the patent owner. Therefore, the patent owner would not be exposed to any stronger interference in its rights if the manufacturing supplier is entitled to assemble the device itself. This holding runs contrary to some opinions in certain legal literature, so it will be interesting to see whether an appeal to the German Federal Supreme Court will be lodged, and if so, how the Federal Supreme Court will decide upon these topics.

German Federal Patent Court on reimbursement of costs for legal representatives in utility model cancellation proceedings – "Double Representation and Travel Expenses in Utility Model Cancellation Proceedings," Federal Patent Court of Germany, 35 W (pat) 3/15 

In a recent decision, the German Federal Patent Court ruled on reimbursement of costs for double representation (i.e., representation by both a patent attorney and an attorney-at-law in proceedings that are "one and the same"), following the conclusion of a utility model cancellation proceeding. In Germany, utility models are sometimes referred to as "small patents." They are the same as patents in that they protect technical inventions. They are different in that they are granted upon a formal examination without a review for novelty and inventiveness, and they have a lifetime of only 10 years. Defendants accused of infringing a utility model can file a cancellation request with the German Patent and Trademark Office (GPTO), which is a typical defense strategy. When there are parallel proceedings, parties are often represented by an attorney-at-law for the infringement proceeding and a patent attorney for the cancellation proceeding. Since infringement proceedings depend on the outcome of the cancellation proceedings, attorneys-at-law also support cancellation proceedings. Therefore, there is a "double representation" in the cancellation proceedings.

In the case in question, the winning party of a utility model cancellation proceeding applied to have fees for both its patent attorney and attorney-at-law reimbursed. Referencing old case law, the GPTO rejected the request for reimbursement for the attorney-at-law's fees, as they were viewed as generally unnecessary for the cancellation proceeding. In review of that decision, the Federal Patent Court reversed. It held that the winning party of a utility model cancellation proceeding is entitled to apply for reimbursement of the statutory fees (not the actually occurred fees) for the patent attorney and for the attorney-at-law, if parallel infringement proceedings are pending. The court reasoned that there is no decisive difference between utility model cancellation proceedings and patent invalidity proceedings (in which double representation can usually be reimbursed), and acknowledged a need for coordination between patent attorneys and attorneys-at-law both when parallel proceedings are pending. The decision continues the court's one-year-old case law, and abandons its somewhat contradictory previous case law that allowed the winning party to seek only statutory fees for the patent attorney.

It remains to be seen whether the Federal Patent Court will adhere to this case law and whether the German Supreme Court will confirm it.