Mere Potential for Future Appeal Does Not Prevent Triggering Estoppel of Inter Partes Reexamination When Party Fails to Seek Relief in the First Instance

In Virnetx Inc. v. Apple Inc., Appeal Nos. 2017-1591, -1592, -1593, the Federal Circuit determined that failure to petition for certiorari on the issue of invalidity triggers estoppel of parallel inter partes reexamination proceedings even if Federal Circuit remands on other non-validity issues.

VirnetX sued Apple for infringement of its patents relating to secure communication links. Apple filed requests for inter partes reexamination of two of the asserted patents (“Apple reexams”). At the district court, the jury found the asserted claims infringed and not invalid and Apple appealed. The Federal Circuit affirmed the jury’s finding of no invalidity but vacated the infringement finding for the two patents at issue and remanded. Apple did not file a request for rehearing or a petition for writ of certiorari on the invalidity or infringement issues. After the Federal Circuit’s decision, VirnetX petitioned the Board to terminate the Apple reexams based on the estoppel provision of pre-AIA § 317(b), which provides that once a “final decision” has been entered that “the party has not sustained its burden of proving invalidity” then a reexamination requested by that party “may not thereafter be maintained.” The Board denied the petition and affirmed the Examiner’s finding that the claims were unpatentable. VirnetX appealed the Board’s decision.

The Federal Circuit affirmed the Board’s decision in part, vacated in part, and remanded. Regarding the issue of whether § 317(b) estoppel applied, the Federal Circuit rejected Apple’s argument that there was no “final decision” of the issue of validity because Apple may choose to file a petition for certiorari of the other non-validity issues to be decided on remand and, when doing so, Apple may also ask the Supreme Court to consider the invalidity issues from the first appeal. While acknowledging that the Supreme Court would have the ability to hear issues raised on the first appeal, the court reasoned that its earlier decision, Fairchild (Taiwan) Corp. v. Power Integrations, Inc., 854 F.3d 1364 (Fed. Cir. 2017), implicitly foreclosed Apple’s argument with regards to § 317(b) estoppel. The court explained that Fairchild held that “all appeals” regarding issues of validity had terminated despite the fact that other issues in that case were remanded and thus remained pending for potential appeal. In addition, the court reasoned that the statutory text and purpose of § 317(b) does not support Apple’s position since the statute requires a final decision only on the issue of whether a party has “sustained its burden of proving invalidity,” and Apple’s position would essentially require a final decision on all issues. Thus, the court found that § 317(b) estoppel applied to the Apple reexams and vacated and remanded with instructions to terminate Apple reexams with respect to the claims considered at trial. Regarding the claims not subject to estoppel, the court rejected VirnetX’s “kitchen sink approach” and affirmed the Board’s finding that the claims not subject to estoppel were unpatentable.

Judge Reyna dissented in part, distinguishing Fairchild because it did not consider the possibility of Supreme Court review on a second appeal.

Jurisdiction Over Foreign Entities and Foreign Sovereigns

In Genetic Veterinary Sciences v. Laboklin GmbH & Co. KG, Appeal No. 2018-2056, the Federal Circuit determined that if a foreign entity is not subject to jurisdiction in any state’s courts of general jurisdiction, but the claims against the entity arise under federal law and the exercise of jurisdiction comports with due process, then personal jurisdiction may exist over the foreign entity in any federal court in the U.S. The court also held that a foreign sovereign which engages in licensing a U.S. patent and/or threatens enforcement of the patent may be subject to jurisdiction of U.S. courts under the commercial-activity exception to the doctrine of sovereign immunity.

The University of Bern (“University”), a public university of the Swiss Confederation, is the owner of a U.S. patent. The University granted an exclusive license for the patent to German company Laboklin. The license agreement required Laboklin to commercialize the invention in North America. The agreement also required the University and Laboklin to work together to enforce the patent. Laboklin subsequently granted sub-licenses to the patent to entities in California and Michigan. With the University’s consent, Laboklin sent a cease-and-desist letter to Paw Prints Genetics (“PPG”), a Washington state corporation, alleging infringement of the U.S. patent and related German and European patents. PPG then brought suit against Laboklin and the University in the Eastern District of Virginia, requesting a declaratory judgment of patent ineligibility under Section 101. Laboklin and the University moved to dismiss the complaint for lack of personal jurisdiction and subject matter jurisdiction. After an evidentiary hearing, the district court found that it could properly exercise personal and subject matter jurisdiction over the defendants. At the conclusion of trial, the court issued a judgment as a matter of law that the asserted claims in the patent were patent-ineligible under Section 101. Laboklin and the University appealed the district court’s findings on personal and subject matter jurisdiction.

The Federal Circuit first addressed Laboklin’s argument that the district court lacked personal jurisdiction over Laboklin because Laboklin lacked sufficient contacts with the forum. Courts may exercise personal jurisdiction pursuant to FRCP 4(k)(2) over a nonresident if (1) the claim arises under federal law, (2) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and (3) the exercise of jurisdiction comports with due process. In determining whether the exercise of jurisdiction comports with due process, the forum is the United States rather than just the state in which the district court sits. Here, the parties agreed that the present claim arose under federal patent law, and that the nonresident company Laboklin was not subject to jurisdiction in any state’s courts of general jurisdiction. Thus, the only question was whether the exercise of jurisdiction comported with due process. The Federal Circuit found that the exercise of jurisdiction comported with due process because Laboklin directed its activities at residents of the U.S. by licensing the patent commercially in the U.S. and by sending a cease-and-desist letter in the U.S. Laboklin availed itself of the benefits of U.S. laws through these licensing and enforcement activities. Therefore, the Federal Circuit affirmed the district court’s finding of personal jurisdiction over Laboklin.

Next, the Federal Circuit addressed the appellants’ argument that the district court lacked personal and subject-matter jurisdiction over the University because it is a foreign sovereign. Although a foreign state is presumptively immune from the jurisdiction of U.S. courts, a foreign state is not immune if it engages in commercial activity in the U.S. Prior Federal Circuit precedent established that obtaining and enforcing a U.S. patent constitutes commercial activity. Thus, the University’s acts of obtaining a U.S. patent and enforcing the patent in collaboration with Laboklin constituted commercial activity, triggering the exception to the sovereign-immunity doctrine. Therefore, the Federal Circuit affirmed the district court’s finding of personal and subject-matter jurisdiction over the University.

A “Substantially Equivalent” Disclosure May Satisfy the Written Description Requirement

In Nalpropion Pharmaceuticals, Inc. v. Actavis Laboratories FL, Inc., Appeal No. 2018-1221, the Federal Circuit held that a “substantially equivalent” disclosure may satisfy the written description requirement, where the equivalent disclosure relates only to resultant parameters rather than operative claim steps.

Nalprion filed suit against Actavis for patent infringement related to an application to market a generic version of Contrave®. In response, Actavis challenged one patent as invalid for lack of adequate written description. The challenged patent was directed to a method of treating overweight or obesity, and was drawn to use of a specific dosage of active agents that achieve a specific dissolution profile. Actavis argued that the claimed dissolution profile required the use of one dissolution method (“USP 2”), while the data in the specification was obtained using a different method (“USP 1”). Actavis further challenged two other patents as invalid as obvious. The district court held each claim not invalid and infringed. Actavis appealed.

The Federal Circuit affirmed the district court’s findings on written description, holding that the district court did not clearly err in finding that the inventors had possession of the invention. The Federal Circuit explained that the patent recited a method of treating overweight or obesity by carrying out specific, positive steps, and that the claimed dissolution profile related only to the measurement of resultant parameters (the dissolution data resulting from the formulation), not to the operative steps (the administration of the formulation). Thus, irrespective of the method of measurement (USP 1 or 2) used, the specification showed that the inventors possessed the invention of treating overweight or obesity. There was also no error in the district court’s finding of “substantially equivalence” between the USP 1 and USP 2 methods. The Federal Circuit recognized that, as a general matter, the written description requirement cannot be satisfied by equivalent disclosures. But, here, where the equivalence related only to resultant dissolution parameters, rather than to operative claim steps, and was supported by the district court’s fact finding, the district court did not err in finding the patent was not invalid for lack of written-description support. The Federal Circuit then went on to reverse the district court’s holding of obviousness of the two other patents.

Chief Judge Prost dissented in part, disagreeing that the dissolution clause did not relate to operative claim steps and stating that the majority’s holding that a “substantially equivalent” disclosure may satisfy the written description requirement is inconsistent with the Federal Circuit’s precedent.

A District Court May Not Ignore a Claim Construction Dispute Raised During a Section 101 Challenge

In MyMail, Ltd. v. ooVoo, LLC, Appeal Nos. 2018-1758, 2018-1759, the Federal Circuit determined that if the parties litigating a § 101 challenge at the pleading stage raise a claim construction dispute, the district court must either adopt the non-moving party’s construction or resolve the dispute to whatever extent is needed to conduct the § 101 analysis.

MyMail sued ooVoo and IAC Search & Media (collectively, “Defendants”) for patent infringement. The asserted patent claimed methods of modifying toolbars that are displayed on Internet-connected devices. Defendants each filed a motion for judgment on the pleadings, asserting that MyMail’s patents were directed to patent-ineligible subject matter under § 101. MyMail opposed both motions, arguing that the claimed inventions were patent-eligible based in part on a construction of the term “toolbar” rendered in an earlier proceeding involving one of the same patents. Defendants opposed that construction. The district court did not construe “toolbar” or otherwise address the parties’ claim construction dispute. Instead, the court granted the motions, holding the MyMail patents invalid under § 101.

The Federal Circuit found that the district court erred by declining to address the parties’ claim construction dispute before adjudicating patent eligibility. The Federal Circuit explained that “[d]etermining patent eligibility requires a full understanding of the basic character of the claimed subject matter” and, “[i]f the parties raise a claim construction dispute at the Rule 12(c) stage, the district court must either adopt the non-moving party’s constructions or resolve the dispute to the extent needed to conduct the § 101 analysis.” The Federal Circuit therefore vacated and remanded the case for further proceedings.

Judge Lourie dissented, arguing that the MyMail patent claims were abstract regardless of claim construction and that the Federal Circuit therefore should have affirmed the district court’s decision.

Terms of Degree With Objective Boundaries Are Not Indefinite 

In Guangdong Alison Hi-Tech Co. v. ITC, Appeal No. 2018-2042, the Federal Circuit determined that a term of degree is not indefinite so long as the written description provides objective boundaries.

Aspen Aerogels, Inc. (“Aspen”) filed a complaint with the International Trade Commission alleging that Guangdong Alison Hi-Tech Co. (“Alison”) was importing certain composite aerogel insulation materials that infringe Aspen’s patents. Alison argued Aspen’s claims were invalid as indefinite because they contained the phrase “lofty . . . batting.” The ALJ rejected this argument and construed the phrase to mean “[a] fibrous material that shows the properties of bulk and some resilience (with or without full bulk recovery),” a definition taken directly from the specification. The ALJ noted that the “bulk” and “resilience” aspects were further explained in the specification. Upon Alison’s petition, the Commission affirmed the ALJ’s construction and declined to review the ALJ’s indefiniteness determination. Alison appealed to the Federal Circuit.

On appeal, Alison argued that “lofty . . . batting” is an indefinite term of degree that lacked a precise boundary. While the Federal Circuit agreed that “lofty . . . batting” was a term of degree, the panel concluded that the written description provided sufficient objective boundaries to avoid indefiniteness. Thus, the Federal Circuit affirmed the Commission’s finding that the claims were not indefinite and, having rejected Alison’s remaining invalidity arguments, affirmed the Commission’s final determination.

The Sometimes Limiting Effect of “Wherein” Clauses 

In Allergan Sales, LLC v. Sandoz, Inc., Appeal No. 2018-2207, a “wherein” clause was limiting because it was material to patentability.

Allergan Sales, LLC and Allergan, Inc. (collectively, “Allergan”) sued Sandoz, Inc. and Alcon Laboratories, Inc. (collectively, “Sandoz”), alleging that Sandoz’s Abbreviated New Drug Application (“ANDA”) for a generic version of Allergan’s Combigan® drug infringed three of Allergan’s patents. The district court granted Allergan a preliminary injunction, and Sandoz appealed.

The independent claims at issue recited both an efficacy “wherein” clause (“wherein the method is as effective as the administration of 0.2% w/v brimonidine tartrate monotherapy three times per day”) and a safety “wherein” clause (“wherein the method reduces the incidence of one o[r] more adverse events selected from the group consisting of conjunctival hyperemia, oral dryness, eye pruritus, allergic conjunctivitis, foreign body sensation, conjunctival folliculosis, and somnolence when compared to the administration of 0.2% w/v brimonidine tartrate monotherapy three times daily”). The district court construed the “wherein” clauses as limiting.

Sandoz appealed and argued that the “wherein” clauses merely stated the intended results of administering Combigan® and the recited results were not material to patentability. The Federal Circuit noted that the shared specification of the patents at issue demonstrated that the increased efficacy and safety of Allergan’s claimed methods were material to patentability. Allergan also relied on the efficacy and safety of the claimed methods when responding to the Examiner’s rejection during prosecution. Furthermore, the Examiner explicitly relied on the “wherein” clauses to explain that the claims in the patents at issue were novel and non-obvious over the prior art.

The only issue in dispute regarding the grant of a preliminary injunction was whether the “wherein” clauses were limiting. Thus, the Federal Circuit affirmed the district court’s grant of Allergan’s motion for preliminary injunction.

Judge Prost issued a concurring opinion. While she agreed with the affirmance of the district court’s decision, she believed the plain language of the claim compelled a rejection of Sandoz’s position that the “wherein” clauses were mere statements of intended results.