Written by Peter E. Heuser, Schwabe, Williamson & Wyatt, P.C.

This was a busy week for precedential cases at the Circuit. In AIA v. Avid, the Circuit rules that there is no right to a jury trial as to requests for attorney fees under § 285. In Romag v. Fossil, a majority rules that the district court erred in applying Octane Fitness in deciding whether to award attorney fees, both as to the patent and the trademark sides of the case. Homeland v. Whirlpool involves a reversal of an IPR determination of patentability where the Board failed to construe a critical claim term. A panel confirms the ability of a public interest organization to participate in an IPR appeal as the appellee in Personal Audio v. Electronic Frontier Foundation, distinguishing cases like Consumer Watchdog where the organization was appellant. In Amgen v. Hospira, an appeal of the denial of a motion to compel is dismissed for lack of jurisdiction, and a writ of mandamus is denied.

Pete

AIA America, Inc. v. Avid Radiopharmaceuticals, Fed. Cir. Case 2016-2647 (August 10, 2017)

The Circuit rejects AIA’s argument that it has a right to a jury trial as to its requests for attorney fees under § 285. AIA sued Avid for infringement of patents directed to research technologies stemming from the discovery of “Swedish mutation,” a genetic mutation associated with early-onset familial Alzheimer’s disease. Avid, in response, alleged that AIA lacked standing to assert the patents because Ronald Sexton, AIA’s founder, and Dr. Mullan, the purported sole inventor, orchestrated a scheme to appropriate for themselves inventions from Imperial College (Imperial) in London and the University of South Florida (USF).

As part of a jury trial on AIA’s standing, an alleged co-inventor Dr. Hardy testified about the conspiracy by which he, Dr. Mullan, and Mr. Sexton denied Imperial and USF rights in the Swedish mutation. The jury determined that Dr. Hardy was a co-inventor so the district court determined that AIA lacked standing to assert the patents.

Avid subsequently moved for attorney’s fees. The district court allowed the parties to submit extensive briefing, evidence, and declarations on the issue of fees. After holding a hearing in which AIA was allowed to present arguments in opposition to the motion, the court awarded fees in the amount of about $4 million. AIA appealed on the basis that it was not permitted to try the attorney fee issue to a jury. Specifically, AIA argues that when an award of attorney’s fees is based in part or in whole on a party’s state of mind, intent, or culpability, only a jury may decide those issues.

According to the panel, the Seventh Amendment preserves the right to a jury trial for “suits at common law.” The phrase “suits at common law” refers to suits in which only legal rights and remedies were at issue, as opposed to equitable rights and remedies. A two-step inquiry determines whether a modern statutory cause of action involves only legal rights and remedies. First, the court must compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, the remedy sought must be examined to determine whether it is legal or equitable in nature. The Supreme Court has stressed the second step of this test is the more important of the two.

Turning to the first step, the nature of the claim, the panel holds that English courts have allowed claims for attorney’s fees in both the courts of law and equity. But when brought in the courts of law, judges, not juries, determined attorney’s fees. Therefore, since either a judge in the court of law or an equity court would determine attorney’s fees, this implies that attorney’s fees generally do not involve legal rights.

As to the second step, the nature of the remedy, the fact that the relief sought is monetary does not necessarily make the remedy “legal.” When attorney’s fees are themselves part of the merits of an action, they are regarded as a “legal” remedy. For example, a lawyer’s fee claim against a client is a question for the jury, and a claim for attorney’s fees under a contractual indemnification provision is a contractual “legal right” that is also a question for the jury. In contrast, when attorney’s fees are awarded pursuant to a statutory prevailing party provision, they are regarded as an “equitable” remedy because they raise issues collateral to and separate from the decision on the merits. Since Avid sought fees as a prevailing party under § 285, the attorney’s fees in this action are properly characterized as an equitable remedy.

Despite the foregoing, AIA argued that if a decision on attorney’s fees involves considerations of a party’s state of mind, intent, and culpability, then those questions must be presented to a jury under the Seventh Amendment. AIA, however, has pointed to no cases finding that once an issue is deemed equitable, a Seventh Amendment right to a jury trial may still attach to certain underlying determinations. Nor does AIA’s argument fit within the Supreme Court’s framework of when the right to a jury trial attaches to a claim.

Read the full opinion

Romag Fasteners, Inc. v. Fossil, Inc., Fed. Cir. Case 2016-1115, -1116, -1842 (Aug. 9, 2017)

The majority of a split panel vacates and remands a case in which Romag sued Fossil for patent and trademark infringement involving magnetic snap fasteners for wrist watches. The district court had awarded $2.5 million in attorney fees under the Patent Act but denied fees under the Lanham Act. The majority finds that the district court erred in applying Octane Fitness, both as to the patent and the trademark sides of the case.

Romag prevailed in the district court, which awarded attorney fees under § 285 because Fossil did not “withdraw [anticipation and obviousness] defenses with prejudice until after trial,” and Fossil’s “patent invalidity defense of indefiniteness bordered on frivolous.” The district court declined to consider Romag’s litigation conduct as part of the totality of circumstances because it had already sanctioned Romag for the timing of Romag’s infringement suit and Romag’s misconduct in its TRO filing. Specifically, Romag was aware of Fossil’s infringement in May of 2010 but did not move for a TRO until three days before Black Friday (the Friday after Thanksgiving), and because its moving papers contained misleading representations. Romag had been sanctioned in connection with the TRO, so the district court concluded that it saw “no need to further sanction Plaintiff by denying an award of fees in this case.” With respect to the Lanham Act, the district court found that “in the absence of bad faith, fraud, or willfulness on part of the Defendants, this case is not ‘exceptional’ within the meaning of the Lanham Act and Plaintiff is not entitled to recover its reasonable attorney’s fees.”

The panel’s opinion first addresses failure to award attorney fees under the Lanham Act and concludes that the case should be remanded for the district court to apply the Octane Fitness test rather than the “bad faith, fraud, or willfulness” test it did apply, since the pertinent language of the Lanham Act is the same as the Patent Act.

Turning to the award of attorney fees under § 285, as to Fossil’s failure to formally withdraw its anticipation and obviousness invalidity defenses until after the close of evidence, the majority finds that both the district court and plaintiff were aware, at least as of the pre-trial conference, that Romag was going to withdraw those defenses. The majority also notes that the district court made no finding that Fossil’s defenses of anticipation and obviousness were objectively unreasonable.

A prior district court judge hearing the case granted summary judgment for Romag as to Fossil’s indefiniteness defense. However, the majority takes issue with the trial judge later taking the position that Fossil’s indefiniteness defense “bordered on frivolous, … was entirely meritless and was raised for improper purposes.” Also, instead of considering Romag’s behavior in connection with the TRO, which should have weighed against an award of attorney fees as part of the Octane Fitness “totality of the circumstances” test, the district court failed to consider such behavior because it had already sanctioned Romag. In view of the foregoing, the majority has no trouble ruling that the award of fees under § 285 needs to be vacated and remanded.

Judge Newman dissents as to the remand on the § 285 award, arguing that the majority ignores the highly deferential review required by Highmark, and instead substitutes its interpretation of the events that the trial judge experienced first-hand.

Read the full opinion

Homeland Housewares, LLC v. Whirlpool Corp., Fed. Cir. 2016-1511 (August 4, 2017)

A divided panel reverses an IPR decision of patentability, holding that the Board failed to construe the key term of the claims at issue, which, broadly construed, renders the patent invalid as anticipated.

The patent at issue is directed to a feature in a household blender in which the motor automatically and repeatedly slows down to permit the contents to settle between the blender blades and then speeds back up to chop the settled materials. It was admittedly well known that one using a blender could manually pulse between a high speed and a low speed to achieve a pattern of movement that introduces the entire contents of the reservoir into contact with the rotating blades. A prior art patent to Wulf acknowledges the frustrations in manually performing this process, and teaches a blender that is programmed to automatically accomplish predetermined functions and routines.

At issue is a clause of the claim reciting: “a deceleration phase, where the speed of the cutter assembly is reduced from the operating speed to a predetermined settling speed indicative of the items in the container having settled around the cutter assembly, which is less than the operating speed and greater than zero.” The Board declined to construe “settling speed” even though the parties disagreed on its construction, and concluded that the Whirlpool patent was not anticipated by Wulf because its disclosures did not meet the “settling speed” limitation.

The majority first rules that a construction of this term is necessary to a validity determination and then rejects the constructions proposed by both parties. Instead, the majority applies the broadest reasonable interpretation to conclude that “a predetermined settling speed” is a speed that is slower than the operating speed and permits settling of the blender contents. According to the majority, this is consistent with the ordinary and customary meaning of the words of the claim, and with the specification, and represents a midpoint between the two opposing constructions.

The Board also found that because Homeland left the testimony of Whirlpool’s expert witness unrebutted, it was unwilling to discount the testimony that Wulf does not anticipate. However, the majority notes that “we must disregard the testimony of an expert that is plainly inconsistent with the record, or is based on an incorrect understanding of the claims. That is the situation here, where the expert makes several incorrect statements with respect to the record, and in one respect, adds an additional claim requirement.”

In her dissent, Judge Newman is critical of the majority’s dismissal of the admittedly unrebutted expert testimony supportive of validity, and states that the majority’s rejection of the Board’s finding is based on an incorrect understanding and an unduly broad construction of the claims, an unwarranted enlargement of the references, and oversteps the Circuit’s appellate role.

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Personal Audio, LLC v. Electronic Frontier Foundation, Fed. Cir. Case 2016-1123 (August 7, 2017)

The Circuit affirms an IPR determination of obviousness of Personal Audio’s patent directed to podcast apparatus technology in which episodes are received and controlled. In doing so, the panel confirms the ability of a public interest organization to participate in an IPR appeal as the appellee.

The opinion first deals with the issue of whether, under the Circuit’s 2014 Consumer Watchdog v. Wisconsin Alumni Research Foundation case, EFF has standing to participate in the appeal. In that case the Circuit ruled that, while anyone has the right to file an IPR, in order to have the right to appeal an adverse determination the appellant must have standing, and a non-profit organization described as representing the public interest does not have a sufficient stake in the outcome to have standing. However, in the present appeal the party invoking judicial review is Personal Audio, that patent owner. According to the opinion: “With Article III satisfied as to the appellant, EFF is not constitutionally excluded from appearing in court to defend the PTAB decision in its favor.”

The panel affirms the Board’s construction of “episode” as being “a program segment, represented by one or more media files, which is part of a series of related segments, e.g., a radio show or a newscast.” Personal Audio argued on appeal that this construction improperly excludes the temporal limitation that episodes in the series issue over time. However, the panel rules that the Board’s construction is consistent with the specification, pointing out that the specification describes an “episode” as a “program segment” and that the specification uses news stories as examples of “program segments.” The panel also affirms that, based on this broad construction, the Board’s findings that both Compton/CNN and Patrick/CBC disclose “episodes” are supported by substantial evidence.

Comment: The ruling granting appellee EFF standing will be welcomed not only by public interest organizations but also by investors in competitive companies whose investments might appreciate if a blocking patent is invalidated. The most recent Circuit decision went against such organizations. Specifically, in Phigenix v. ImmunoGen, 845 F. 3d 1168 (Fed. Cir. 2017), the Circuit rejected the argument of a research and licensing organization that the estoppel provision in 35 U.S.C. ‎§ 315(e)(1)‎ provides sufficient injury to support appellant standing.

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Amgen Inc. v. Hospira, Inc., Fed. Cir. Case 2016-2179 (August 10, 2017)

The Circuit dismisses an appeal for lack of jurisdiction and denies a writ of mandamus as to the denial of a motion to compel discovery in a patent infringement action governed by the Biologics Price Competition and Innovation Act (BPCIA). Amgen attempted to obtain more information from Pfizer’s Hospira unit about its proposed biosimilar of the anemia drug Epogen®, but the Circuit determines that Amgen is not entitled to uncover the information in this fashion.

The panel first addresses whether it has jurisdiction over this appeal. Ordinarily, an appeal ‎must be from a final judgment that ends the litigation on the merits and leaves nothing for the ‎court to do but execute the judgment. The collateral order doctrine provides a narrow exception ‎to this general rule. To come within the small class of decisions excepted from the final-‎judgment rule by the collateral order doctrine, the order must conclusively determine the ‎disputed question, resolve an important issue completely separate from the merits of the action, ‎and be effectively unreviewable on appeal from a final judgment.

Here, it appears that the district ‎court’s discovery order may satisfy the first two conditions of being an appealable collateral ‎order. The issue is whether the district court’s order is “effectively unreviewable” on appeal from a final judgment. ‎The panel notes that Congress has not provided interlocutory review, but that simply ‎means that immediate appeal is not available. However, the lack of immediate appeal does not render such orders “effectively ‎unreviewable” or distinguish them from run-of-the-mill discovery disputes. The Circuit therefore ‎lacks jurisdiction over Amgen’s appeal under the collateral order doctrine.

Amgen has also pursued a writ of mandamus. According to the panel, mandamus is a drastic remedy reserved for the most extraordinary causes. A party seeking mandamus must have no other adequate means to attain the desired relief and must demonstrate that its right to the writ’s issuance is clear and indisputable. Amgen is seeking information to determine if certain of its patents were infringed, arguing that it risked sanctions by filing suit without such information. The panel rules that there were other ways for Amgen to get the information, such as by putting Hospira on notice of the infringement, and thereby acquire information from Hospira as to any bases of noninfringement. The panel thus rules that Amgen has not established a clear and indisputable right to discovery of the information it seeks.

Read the full opinion

This article was originally published on Schwabe, Williamson & Wyatt's Ideas Fuel Industries Section

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