Federal Circuit Review | October 2012

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The Federal Circuit Review is a monthly newsletter featuring the latest case summaries handed down from the U.S. Court of Appeals for the Federal Circuit.

In this issue:

Evidence of Deliberate Decision to Withhold Reference Required for Inequitable Conduct

Licensee Bears Burden of Proving Non-Infringemet in Some Circumstances

No Inequitable Conduct for Failure to Disclose Litigation Involving Parent of Application

Mere Possibility of Allegedly Infringing Activity Insufficient for Declaratory Judgment Jurisdiction

Doctrine of Equivalents Is Available for “Substantially All” Limitation

Court Finds Broadest Reasonable Interpretation of Claim Unreasonable

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Federal Circuit Review | October 2012

  1. 1. Federal Circuit Review VOLUME 2 | ISSUE 10 OCTOBER 2012Evidence of Deliberate Decision to Withhold Reference Requiredfor Inequitable ConductIn 1St Media, LLC. v. Electronic Arts, Inc., Appeal No. 2010-1435, the Federal Circuit reversed the district court’s finding ofinequitable conduct.1st Media sued EA for patent infringement, and EA asserted an inequitable conduct defense. During prosecution of the patent,the inventor and his attorney learned of three material references while prosecuting other matters but did not submit them to theUSPTO. Prior to the Therasense decision, the district court found the patent unenforceable due to inequitable conduct.The Federal Circuit reversed. Applying the Therasense standard, the Court found that the district court did not cite any evidenceof a deliberate decision to withhold the references from the USPTO or any evidence that would support such an inference. TheFederal Circuit also clarified that “knowledge of the reference and knowledge of materiality alone are insufficient after Therasense toshow an intent to deceive. Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing,or anything else that might be considered negligent or even grossly negligent.” Rather, a deliberate decision to withhold a knownmaterial reference from the USPTO must be shown to sustain a charge of inequitable conduct.Licensee Bears Burden of Proving Non-Infringement in SomeCircumstancesIn Medtronic Inc. v. Boston Scientific Corp., Appeal Nos. 2011-1313 and -1372, the Federal Circuit reversed the district court’sjudgment of non-infringement and validity of asserted patents.Medtronic, a licensee of the patents-in-suit, filed a declaratory judgment of non-infringement against the patentee while payingroyalties into escrow to maintain the license in good standing. The patentee was prevented from counterclaiming for infringementby the license. The district court ruled that the patentee bore the burden of proving infringement, and held that the patents werevalid, but not infringed. Both parties appealed. In This Issue • Evidence of Deliberate Decision to Withhold • Mere Possibility of Allegedly Infringing Reference Required for Inequitable Conduct Activity Insufficient for Declaratory Judgment Jurisdiction • Licensee Bears Burden of Proving Non-Infringemet in Some Circumstances • Doctrine of Equivalents Is Available for “Substantially All” Limitation • No Inequitable Conduct for Failure to Disclose Litigation Involving Parent of Application • Court Finds Broadest Reasonable Interpretation of Claim Unreasonable
  2. 2. The Federal Circuit reversed, holding that in the limited circumstance when an infringement counterclaim by a patentee is foreclosedby the continued existence of a license, a licensee seeking a declaratory judgment of non-infringement and of no consequent liabilityunder the license bears the burden of persuasion. The Federal Circuit clarified that only when the patentee affirmatively claimsinfringement, through a counterclaim or complaint, does it carry the burden of persuasion. The Federal Circuit also reversed thedistrict court’s holding that the claims were limited to congestive heart failure because the patentee neither specifically defined theclaim terms to be so limited, nor disavowed their otherwise broad scope.No Inequitable Conduct for Failure to Disclose LitigationInvolving Parent of ApplicationIn Outside The Box Innovations, LLC. v. Travel Caddy, Inc., Appeal No. 2009-1171, the Federal Circuit reversed the districtcourt’s judgment of unenforceability of patents at issue and vacated its judgment of invalidity for obviousness.In a declaratory judgment action, the district court found that the parent patent and its child were invalid because the patentee hadimproperly paid small entity fees and failed to disclose that the parent patent was in litigation during prosecution of the child patent.The district court further determined that certain claims of the patents at issue were invalid as obvious after excluding testimony ofthe patentee’s technical expert. The district court excluded the testimony because the technical expert lacked the legal expertiseneeded to provide expert testimony on obviousness.The Federal Circuit reversed and vacated. Regarding inequitable conduct, the Federal Circuit found no clear and convincing evidenceof intent to deceive the Patent Office by deliberately withholding information about the patentee’s entity status or the pendinglitigation. Moreover, since no challenge was made in the litigation to the validity of the parent patent during prosecution of the childpatent, the Federal Circuit found no clear and convincing evidence that the patentee withheld material information. Regardingobviousness, the Federal Circuit vacated and remanded because the testimony of a technical expert may not be excluded becausehe is not a lawyer.Judge Newman dissented in part, arguing that the panel should have also reversed because the district court improperly found thata misstatement of small entity status is per se material to patentability for inequitable conduct.Mere Possibility of Allegedly Infringing Activity Insufficient forDeclaratory Judgment JurisdictionIn Matthews International Corp. v. Biosafe Engineering, LLC., Appeal No. 2012-1044, the Federal Circuit affirmed the districtcourt’s dismissal of a complaint for declaratory judgment.Matthews offered to sell a device which under some, but not all, operational parameters may infringe a method patent of Biosafe.Biosafe allegedly notified Matthews’ customers of the possibility that the use of Matthews’ device may infringe Biosafe’s patents.Matthews had sold three devices, but its customers had taken no steps toward direct infringement as they had not yet installedthe devices or determined the parameters under which the devices would operate. Matthews sought a declaratory judgment ofnoninfringement, invalidity and unenforceability, as well as state-law tortious interference. The district court granted Biosafe’smotion to dismiss Matthews’ complaint.The Federal Circuit Affirmed. Matthews’ complaint lacked immediacy and reality. There was no evidence as to when an act ofalleged infringement would occur or what the details of that act would be. Thus, Matthews’ complaint was a request for an advisoryopinion on merely contemplated activity. Regarding tortious interference, the Federal Circuit held that Matthews had failed to pleadthe bad faith element necessary to support its state-law claim. 2 knobbe.com
  3. 3. Doctrine of Equivalents is Available for “Substantially All”LimitationIn Pozen Inc. v. Par Pharmaceutical, Inc., Appeal Nos. 2011-1584, -1585, and -1586, the Federal Circuit affirmed the district court’sfinding of no invalidity for obviousness or written description, as well as its finding of infringement under the doctrine of equivalents.Pozen sued three defendants based on their ANDA filings for a combination of two drugs in a single bilayer tablet for treatingmigraines. One of the claims at issue required that “substantially all” of the first drug was in one layer of the tablet and “substantiallyall” of the second drug was in the other layer. Based on a definition of “substantially all” in the specification, the district courtconstrued the term to mean “at least 90%, and preferably 95%” of the drug. The district court found that the defendants’ productsinfringed under the doctrine of equivalents, even though defendants’ ANDA products contained only 85% of the first drug in onelayer, with the other 15% in the other layer. The district court also found other asserted claims not invalid as obvious or lackingwritten description support.The Federal Circuit affirmed, explaining that the doctrine of equivalents is not foreclosed with respect to claimed ranges and thatPozen had never stated that “at least 90%, and preferably 95%” should be an absolute floor. Thus, a reasonable person coulddetermine that a tablet layer with 85% of the drug is within the scope of the doctrine of equivalents of “substantially all.” Regardingobviousness, the court found that the prior art did not teach the claimed benefits of the combination, even if the use of the drugsin combination was suggested by the art. Finally the court agreed that support for limitations reciting a “therapeutic package” and“finished pharmaceutical container” with “labeling” directing use for migraines was found in the disclosure of pharmaceutical dosageforms and methods of treatment since one of skill in the art would know that drugs are not simply handed out to patients and that theFDA requires labels for pharmaceutical products.Judge Clevenger dissented in part, arguing that it was error for the district court to put boundaries on the “substantially all” claimlanguage and subsequently ignore them in its analysis.Court Finds Broadest Reasonable Interpretation of ClaimUnreasonableIn In re Abbott Diabetes Care Inc., Appeal Nos. 2011-1516 and -1517, the Federal Circuit vacated the Board’s decisions as topatentability and remanded for the Board to apply the correct claim construction.In affirming the Examiner’s rejection of anticipation or obviousness, the Board construed “electrochemical sensor” to include externalwires and cables. The Board reasoned that even though the specification criticizes the external cables and wires of the prior artsensors, and none of the disclosed embodiments included external cables or wires, the absence of an express limiting statementmeant that the broadest reasonable interpretation of “electrochemical sensor” included cables or wires.The Federal Circuit reversed, construing “electrochemical sensor” to exclude external wires and cables. The specification’s onlymention of external cables and wires was to disparage their use in prior art sensors, and the primary purpose of the invention wasto provide a system that would not substantially restrict movements and activities of a patient. Further, the claim used terms like“coupled” and “received” with respect to connections with the electrochemical sensor, which the court found entirely consistent withand supportive of the specification’s exclusive depiction of a sensor without external cables or wires. Thus, this was not an instancewhere the specification needed to disavow an embodiment that would otherwise be covered by the claims. 3 knobbe.com
  4. 4. Knobbe Martens Offices Orange County San Diego San Francisco Silicon Valley Los Angeles Riverside Seattle Washington DC© 2012 Knobbe Martens Olson & Bear LLP, a Limited Liability Partnership including Professional Corporations. All rights reserved. The information contained in thisnewsletter has been prepared by Knobbe, Martens, Olson & Bear, LLP and is for general informational purposes only. It does not constitute legal advice. While every efforthas been made to ensure the accuracy of the information contained in this newsletter, Knobbe Martens Olson & Bear LLP does not guarantee such accuracy and cannot beheld liable for any errors in or any reliance upon this information. Transmission of this newsletter is neither intended nor provided to create an attorney-client relationship,and receipt does not constitute an attorney-client relationship. You should seek professional counsel before acting upon any of the information contained in this newsletter. Who We Are Over 95% of our litigators hold technical degrees, including electrical engineering, computer science, mechanical engineering, chemistry, chemical engineering, biochemistry, biology, and physics. Many of our litigators are former Federal Circuit or district court clerks. With eight offices, Knobbe Martens represents clients in all areas of intellectual property law. • Exclusive practice in the area of intellectual property since 1962 • M ore than 250 lawyers, many of whom have advanced degrees in various technologies • I nternationally recognized leaders in IP across a vast spectrum of technology areas knobbe.com 4

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