L&A Federal Circuit Review

November 2015

As part of our ongoing effort to keep clients and friends informed of important legal updates, we are pleased to provide the L&A Federal Circuit Review, a monthly publication highlighting recent Federal Circuit and Supreme Court decisions. Each monthly review summarizes a few decisions and the key takeaways. Please contact your lead L&A attorney for additional details.

R+L Carriers, Inc. v. Qualcomm, Inc., No. 2014-1718 (Damages After Reexamination)

In R+L Carriers, Inc. v. Qualcomm, Inc., the Federal Circuit addressed the standards for determining whether a patent claim was narrowed during reexamination. R+L Carriers sued Qualcomm on a patent relating to methods of consolidating freight into trailers to optimize delivery efficiencies. The claims included the delivery of shipping information to a central terminal while a trailer is en route to the terminal.

While the litigation was pending, R+L Carriers sought ex parte reexamination of the patent-in-suit. The patent survived reexamination, but language was added to all of the claims that required the preparation of “an advanced loading manifest document for another transporting vehicle…” (added language emphasized). Prior to the issuance of the reexamination certificate, Qualcomm sold the business unit that performed the accused method.

Damages for infringement of claims that have undergone reexamination are available only if the reexamined claims are “substantially identical” to the originally-issued claims. 35 U.S.C. § 307(b). To determine whether substantive changes have been made, courts consider “whether the scope of the claims are identical, not merely whether different words are used.” Thus, the claims need not be verbatim to award damages for the infringement period prior to completion of the reexamination.

The district court held that damages were not available prior to the issuance of the reexamination certificate, based on the amended claim language. The court found that although original claim 1 covered both manual and computer-prepared loading manifests, amended claim 1 covered only computer-prepared loading manifests and therefore was not “substantially identical.” The district court reasoned that the term “advance” in amended claim 1 was added to get around the prior art that disclosed manual entry of a loading manifest.

On appeal, the Federal Circuit affirmed the decision, but for different reasons. The Court agreed that the claim scope had substantially changed, making damages for pre-reexamination conduct unavailable. The amended claims resulted in different claims scope “based on a normal claim construction analysis.” The Court relied on the Examiner’s reasons for allowance as identifying subject matter that had been covered by the original claims but that was not covered by the reexamined claims. For example, the examiner explained that the prior art “only discussed loading a ‘manifest for the current shipping vehicle and not an advance loading manifest document for another transporting vehicle.’” (emphasis in original). Thus, “the examiner’s commentary reveal[ed] a method that would be covered by original claim 1 but not [the] amended claim …: the process of preparing a loading manifest ‘for the current shipping vehicle.’”

Key Takeaway: Whether claims amended during reexamination are “substantially identical” depends on whether the claim scope has changed “based on a normal claim construction analysis.” Practitioners should carefully consider any examiner statements in any reasons for allowance to ensure that the intended claim scope is preserved, if possible.

 

Apple, Inc. v. Samsung Electronics Co., Ltd. et al., No. 2014-1802 (Injunctions)

In Apple v. Samsung, the Federal Circuit made injunctive relief easier to obtain in circumstances where an infringing product includes both patented and unpatented features. At the district court, a jury found that Samsung had infringed three Apple patents by using three features on its smart phones: suggesting spellings for words as they are being typed, linking phone numbers in documents to the phone’s dialer, and swiping to unlock the phone.

Typically, to obtain a permanent injunction, the patentee must show (1) it has suffered an irreparable injury; (2) remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) the balance of hardships between the patentee and the defendant favor an injunction; and (4) the public interest is not disserved by the injunction. The district court found that Apple could not meet the first of these factors – irreparable injury – because it could not prove a causal nexus between Samsung’s infringement and Apple’s lost sales. As the infringing features made up only a small part of the thousands of features available on Samsung’s smart phones, Apple could not demonstrate that it was these features that drove sales to Samsung.

The Federal Circuit reversed, finding that the district court’s causal nexus analysis was too stringent. The Court held that irreparable harm is proven when the evidence shows that there is “some connection” between the patented feature(s) and consumer demand for the accused products. The Court identified numerous ways that this connection can be demonstrated, including evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions,” “evidence that the inclusion of a patented feature makes a product significantly more desirable,” and “evidence that the absence of a patented feature would make a product significantly less desirable.” The Court further deemed that Samsung’s copying served as evidence of the desirability of the infringing features.

The Court also explained two types of evidence relating to the inadequacies of remedies at law. First, the “ecosystem effect” refers to the fact that the sale of a single smart phone can have downstream effects on sales of computers, software, accessories and future smartphones and tablets, and that these “lost sales’ are difficult to quantify.  Second, “network effects” are the lost referrals of users to family, friends and coworkers, which are difficult to measure, making monetary damages unlikely to provide an adequate remedy.

Key Takeaway:   This case serves as a push-back on the growing trend of denials of patent injunctions in recent years, and provides an easier path to an injunction where a product includes many features beyond those infringed.

 

Shire, LLC v. Amneal Pharms., LLC, No. 14-1736 (Hatch-Waxman Act Safe Harbor Provision)

In Shire v. Amneal, the Federal Circuit held that the provider of an active pharmaceutical ingredient could not be held liable for inducing patent infringement where the active ingredient is used by another to prepare and file an Abbreviated New Drug Application. In doing so, the court reversed the district court’s decision holding Johnson Matthey Pharma Services liable for induced infringement of Shire’s patents. Shire held several patents covering lisdexamfetamine dimesylate and had FDA approval for the drug Vyvanse® for treatment of ADHD.  Johnson Matthey manufactured the active pharmaceutical ingredient (“API”) L-lysine-d-amphetamine (LDX) and supplied it to several generic competitors, including Amneal. Amneal later filed Abbreviated New Drug Application (“ANDA”) with Paragraph IV certifications, which constitutes patent infringement under the Hatch-Waxman Act. Shire then filed a patent infringement lawsuit against both Amneal and its API provider, Johnson Mathey in federal district court.

At the district court, Amneal was held liable for infringement under 35 U.S.C. 271(e)(2)(B) for filing an ANDA application with the purpose of gaining FDA approval for the sale of lisdexamfetamine dimesylate while the Shire patents were still in force. Johnson Matthey was not held directly liable for infringing the Shire patents but was held liable for induced infringement.

The Federal Circuit affirmed the district court’s ruling with respect to Amneal, but found that Johnson Matthey was protected from infringement liability under the safe harbor provisions of 35 U.S.C. 271(e)(1), which allows for the importation or use of patented compounds “solely for uses reasonably related to the development and submission of information under a Federal law.” The Court reasoned that Johnson Matthey’s act of supplying the defendants with an active ingredient so they could submit their ANDA applications was reasonably related to the submission of information under a federal law.

Key Takeaway: A supplier of an active ingredient is not liable for actively inducing infringement by an ANDA filer because such activity is permissible under 35 U.S.C. § 271(e)(1).

 

Nordock, Inc. v. Systems, Inc., No. 14-1762 (Design Patent Damages)

In Nordock, Inc. v. Systems, Inc., the Federal Circuit confirmed that design patent holders are entitled to an infringer’s total, unapportioned profits or actual damages, whichever is greater. At the district court, Nordock accused Systems of infringing a design patent directed to a lip and hinge plate for a dock leveler, as shown below. The District Court held that Systems’ dock levelers infringed the Nordock patent and that the patent was valid. The jury awarded Nordock reasonable royalty damages and found that Systems total profits on the levelers was $0. At trial, Systems’ expert testified that appropriate damages were $15 per leveler based on either reasonable royalty or Systems’ total profits. The total profits calculation was arrived at by limiting the damages to the value added by the design, rather than profit per leveler, which was admittedly $200-500 per unit sold.  Nordock filed a motion for a new trial on the basis of damages because of the jury failed to award Systems’ total profits.

Design Patent.jpg

On appeal, the Federal Circuit reversed the district court’s decision denying Nordock a new trial for three reasons. First, 35 U.S.C. § 289 provides for recovery of an infringer’s “total profits,” not just the portion of the infringer’s profits attributable to the infringing design. Here, Systems’ calculation of total profits was improper because it attempted to limit profits to those attributable to the design element. Second, no reasonable jury could have found that Systems’ total profits were $0. While the jury could choose which experts to believe with respect to damages, neither side presented evidence supporting total profits of $0. Third, Nordock was entitled to total profits under § 289 if they were greater than 35 U.S.C. § 284 damages and were requested. Accordingly, the jury did not have the discretion to choose between reasonable royalty damages and the infringer’s total profits.

Key Takeaway: Design patent holders are entitled to an infringer’s total, unapportioned profits from infringement or actual damages, whichever is greater.