Federal Circuit Review | May 2024 | Knobbe Martens
Infringement Judgement is Only Final when there’s Nothing Left to Do but Execute
In Packet Intelligence LLC v. Netscout Systems, Inc., Appeal No. 22-2064, the Federal Circuit held that an infringement judgment is only sufficiently “final” to be immune from a later finding of unpatentability if the litigation has moved to a stage that leaves nothing for the court to do but execute the judgment.
This case was before the Federal Circuit for the second time. Packet sued NetScout in the Eastern District of Texas for infringing various patents. Previously, the district court found that NetScout willfully infringed and that no asserted claim was unpatentable or invalid, and granted pre- and post-suit damages, enhanced damages, and an ongoing royalty for future infringement. In the first appeal, the Federal Circuit affirmed the district court’s infringement and validity determination but reversed the award of some of the monetary damages, remanding the case back to the district court to reconsider damages. During the pendency of the remand, the Patent Trial and Appeal Board issued final written decisions in several 3rd-party IPRs that found all of the claims asserted by Packet against NetScout unpatentable. Packet appealed the Board’s decision. Following issuance of the final written decisions, NetScout moved to dismiss Packet’s infringement case, or in the alternative stay the case pending resolution of Packet’s appeal. The district court denied the motion to dismiss or stay and entered an amended final judgment regarding the litigated issues on remand from the first appeal. NetScout appealed.
After NetScout appealed, the Federal Circuit affirmed the Board’s final written decision of unpatentability in the 3rd-party IPRs. On appeal, the same 3-judge panel determined that Packet’s patent infringement was moot because Packet’s infringement judgment was not sufficiently final to be immune from the unpatentability affirmation. The Federal Circuit explained that an infringement judgment is only sufficiently “final” to be immune from a later finding of unpatentability if the litigation has moved to a stage that leaves nothing for the court to do but execute the judgment. Packet’s infringement judgment was not sufficiently “final” after the Federal Circuit initially affirmed the infringement judgment because the district court had to reconsider the awarded damages on remand, which is more than “nothing … but execute the judgment.” Packet’s infringement judgment was also not sufficiently “final” after the district court issued the amended judgment because NetScout’s appeal was non-frivolous.
Intellectual Tech May Stand Alone
In Intellectual Tech LLC v. Zebra Technologies Corporation, Appeal No. 22-2207, the Federal Circuit held that a patent owner may retain exclusionary rights to demonstrate an injury-in-fact for constitutional standing in an assertion of patent infringement despite agreement providing another party non-exclusive licensing rights.
Intellectual Tech (IT), a subsidiary of OnAsset Intelligence Inc (OnAsset), sued Zebra for patent infringement. Prior to the initiation of the lawsuit, OnAsset granted Main Street Capitol Corp. (Main Street) a security interest in the patent-in-suit, including rights that could be exercised upon default. OnAsset defaulted on its loan and entered into a forbearance agreement with Main Street. At the same time, IT was formed and OnAsset assigned the patent-in-suit to IT. IT entered into a joinder agreement to the loan agreement between OnAsset and Main Street, before subsequently defaulting. The agreements between OnAsset, IT, and MainStreet provided that, upon default Main Street, at its option, could, among other things, “sell, assign, transfer, pledge encumber, or otherwise dispose of” the patent-in-suit. Main Street had not exercised any options to the patent under the agreement at the time of the lawsuit. Zebra initially moved to dismiss for lack of standing, which the district court denied. Zebra renewed its standing motions in the form of a motion for summary judgment for lack of subject-matter jurisdiction. The district court granted the motion for lack of constitutional standing finding that the fact that Main Street could license the patent to Zebra deprived IT of all its exclusionary rights. The district court rejected IT’s attempt to cure standing by joining Main Street because the constitutional standing defects existed at the time of filing and were, therefore, incurable. IT appealed.
On appeal, Zebra asserted that IT lacked exclusionary rights because Main Street’s licensing rights from the agreements were (1) exclusive and thus deprived IT of all exclusionary rights or (2) non-exclusive, but divested IT of all exclusionary rights. First, the Federal Circuit rejected Zebra’s argument that the security agreement granted Main Street exclusive licensing rights without taking further action by Main Street. Rather, the default merely triggered Main Streets options. Second, the Federal Circuit rejected Zebra’s argument that Main Street’s ability to license the patent divested IT of all exclusionary rights. The Federal Circuit held that “a patent owner has exclusionary rights sufficient to meet the injury-in-fact requirement even where, without more, it grants another party the ability to license.” Additionally, the Federal Circuit held that Main Street’s option to assign under the agreement was not a present divestment of IT’s exclusionary rights—the assignment must be evaluated based on the actual transfer of rights, not the mere ability. Accordingly, the Federal Circuit reversed and remanded, finding that IT maintained at least some of its exclusionary rights in the patent and, therefore, suffered injury in fact, despite both IT and Main Street having the ability to license the patent.
The Federal Circuit also noted that it made no determination on whether IT’s legal interest was sufficient to meet the “patentee” requirement for statutory standing under § 281 because the constitutional standing requirement showing an injury in fact is distinct.
The Printed Matter Doctrine: Lost in Communication
In Ioengine, LLC v. Ingenico Inc., Appeal No. 21-1227, the Federal Circuit held that claim limitations requiring communications to be “encrypted” or to deliver “program code” were not subject to the printed matter doctrine.
Ingenico filed petitions for inter partes review challenging the validity of many claims in three of IOENGINE’s patents. Ingenico argued that claim limitations requiring “encrypted communications” and “program code” were entitled to no patentable weight under the printed matter doctrine. The Board agreed with Ingenico, finding that these limitations were subject to the printed matter doctrine because they claimed the content of information being communicated. The Board relied on this finding to determine that claims reciting these limitations were anticipated by prior art. IOENGINE appealed.
The Federal Circuit held that the “encrypted communications” and “program code” limitations were not subject to the printed matter doctrine because they were “not being claimed here for the content they communicate.” According to the Federal Circuit, requiring a communication to be “encrypted” specifies the “form” of the communication rather than its “content.” And requiring a communication to contain “program code” also did not specify the communication’s content. Thus, the Federal Circuit reversed the Board’s anticipation holding as to the claims that recited these limitations.
En Banc Federal Circuit Adopts a New Test for Design Patent Obviousness
In LKQ Corporation v. Gm Global Technology Operations LLC, Appeal No. 21-2348, the Federal Circuit held that sitting en banc, the Federal Circuit overruled the Rosen-Durling test for determining whether a design patent is invalid as obvious, instead adopting “a more flexible” approach.
LKQ Corporation and Keystone Automotive Industries, Inc. (collectively “LKQ”) petitioned for inter partes review of a design patent owned by GM Global Technology LLC regarding an automotive fender.
The Patent Trial and Appeal Board applied the Rosen-Durling test, under which a primary reference “must be ‘basically the same’ as the challenged design claim,” and any secondary references “must be ‘so related’ to the primary reference that features in one would suggest application of those features to the other.” The Board determined that LKQ failed to prove obviousness because it failed to establish that the design of LKQ’s lead reference was “basically the same” as the claimed design. Because it determined that the lead reference did not qualify as a primary reference under the Rosen-Durling standard, the Board never considered whether LKQ’s secondary reference was “so related” to the lead reference “that features in one would suggest application of those features to the other.”
LKQ appealed, and a Federal Circuit panel affirmed the Board’s decision. The Federal Circuit then granted rehearing en banc and vacated the panel opinion.
Sitting en banc, the Federal Circuit overruled the Rosen-During test. The Federal Circuit concluded that the test was at odds with 35 U.S.C. § 103’s “broad and flexible standard” and Supreme Court precedent in KSR and Graham suggesting “a more flexible approach” when determining obviousness. The Federal Circuit laid out a framework for determining design-patent obviousness with reference to the Graham factors.
First, one “consider[s] the ‘scope and content of the prior art’ within the knowledge of an ordinary designer in the field of the design.” The Federal Circuit declined to “delineate the full and precise contours of the analogous art test for design patents.” The court stated that “[p]rior art designs for the same field of endeavor as the article of manufacture will be analogous,” but did “not foreclose that other art could also be analogous.”
Second, one “determin[es] the differences between the prior art designs and the design claim at issue.” The Federal Circuit’s approach “casts aside a threshold ‘similarity’ requirement.” Instead, one “compare[s] the visual appearance of the claimed design with prior art designs . . . from the perspective of an ordinary designer in the field of the article of manufacture.”
Third, one determines “the level of ordinary skill in the pertinent art.” The Federal Circuit declined to “disturb [its] existing precedent regarding the application of secondary considerations such as commercial success, industry praise, and copying to the obviousness analysis in design patents.”
The Federal Circuit “reaffirm[ed]” that the obviousness analysis for design patents “focuses on the visual impression of the claimed design as a whole and not on selected individual features.” The court stated that “the primary and secondary references need not be ‘so related’ such that features in one would suggest application of those features in the other, but they must both be analogous art to the patented design.” Finally, the court explained that “the motivation to combine these references need not come from the references themselves.”
Judge Lourie concurred, stating that the court could have made the Rosen and Durling precedents less rigid rather than overruling them.
Ambiguous Phrase in a Patent Assignment Precludes Summary Judgment Regarding Standing
In Core Optical Technologies, LLC v. Nokia Corporation, Appeal No. 23-1001, the Federal Circuit held that applying California law, the phrase “entirely on my own time” in an employment agreement was found ambiguous and therefore precluded summary judgment of no standing to sue for patent infringement.
Core Optical Technologies, LLC sued Nokia Corporation and others (collectively “Nokia”) for patent infringement. Named inventor Dr. Mark Core had assigned the asserted patent to Core Optical in 2011. Nokia moved for summary judgment that Core Optical lacked standing. Nokia argued that the 2011 assignment was ineffective because Dr. Core had already assigned the patent rights to a third party called TRW Inc. through a 1990 employment-associated agreement. This 1990 agreement automatically assigned to TRW inventions that Dr. Core developed during his employment, but excepted inventions that were developed “entirely on [Dr. Core’s] own time.” Neither party disputed whether Dr. Core conceived of and reduced to practice the invention claimed in the ’211 patent in the course of his PhD research beginning in 1993. During that PhD program, Dr. Core continued to work both as a salaried part-time TRW employee and as a PhD fellow sponsored by TRW. TRW paid Dr. Core’s tuition and fees and provided Dr. Core with wages, a monthly stipend, and full employee benefits. The district court determined that the time Dr. Core spent on his PhD research was not entirely Dr. Core’s “own time.” It granted summary judgment that Core Optical lacked standing. Core Optical appealed.
The Federal Circuit vacated the district court’s judgment. Applying California law, it found that the phrase “entirely on my own time” was ambiguous and could not be conclusively interpreted without further factual development. The Federal Circuit noted conflicting evidence regarding Dr. Core’s use of TRW resources and the extent to which his PhD work, which led to the patent, was conducted independently of his employment. The Federal Circuit remanded for further proceedings to resolve these ambiguities.
Judge Mayer dissented. He opined that the district court correctly granted Nokia’s motion for summary judgment after determining that, as a matter of California law, Dr. Core did not develop the patented invention “entirely on [his] own time.”
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