• September 9, 2015

By: Nathan T. Harris and Gregory K. Gerstenzang

August Federal Circuit Review

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.

Suprema, Inc. et al. v. International Trade Commission, No. 2012-1170 (en banc) (Induced Infringement)

In Suprema, the en banc Federal Circuit held that the International Trade Commission (ITC) may bar the importation of goods that do not infringe a patent claim at the time of importation, but would infringe after importation as a result of the seller’s inducement. The decision overrules an earlier panel decision that reversed the ITC’s interpretation of its jurisdictional statute, precluding the ITC from asserting jurisdiction over claims based purely on inducement. Suprema, a Korean company, sold fingerprint scanner devices to Mentalix, which imported the scanners into the United States. The scanners were non-functional upon importation, but Suprema then aided Mentalix in writing custom software that, when used in conjunction with the scanners, performed the steps of a patented method for operating such scanners. The court held that Suprema’s inducement was a form of infringement, and therefore supplying scanners as part of the inducement constituted the “importation . . . of articles that . . . infringe a valid and enforceable United States patent” under the language of Section 337 of the Tariff Act of 1930, which governs ITC jurisdiction.

The Federal Circuit began by examining the language of Section 337, noting that if the statute were ambiguous, then the ITC’s interpretation would be upheld as long as it was reasonable. The court found that there was uncertainty as to whether “articles that infringe” is intended to cover induced infringement. The court also noted the disconnect between Section 337’s focus on articles and the patent statute’s focus on infringing acts in 35 U.S.C. § 271.

The court then considered whether the ITC’s interpretation was reasonable. The court examined the statutory language, noting the ITC’s mandate to investigate “the sale within the United States after importation . . . of articles . . . that infringe.” From that language, the court surmised that Congress intended the ITC’s authority to extend to infringing acts occurring after importation. The Federal Circuit also noted Congress’s legislative intent to give the ITC broad enforcement authority to remedy unfair trade practices involving imports. Finally, the court noted its own long history of affirming ITC determinations that induced infringement may violate Section 337, even where the imported goods do not infringe. For those reasons, the Federal Circuit found it reasonable for the ITC to interpret “articles that infringe” to cover induced infringement.

Key Takeaway:

When a seller of articles induces an importer to infringe a patent, the ITC may bar the importation of those articles even if they do not infringe at the time of importation.

Carnegie Mellon Univ. v. Marvell Tech. Grp., No. 2014-1492 (Willful Infringement)

In Carnegie Mellon, the Federal Circuit held that an objectively reasonable, albeit unsuccessful, invalidity defense at trial precludes a finding of willful infringement. Carnegie Mellon owned two patents, dating to 2001, covering improved methods of reading data from storage disks. Marvell became aware of the patents in 2002,

but for several more years continued to manufacture and sell products that performed the patented methods. Carnegie Mellon sued in 2009, and a jury found the patents valid and infringed, rejecting Marvell’s prior-art invalidity arguments and awarding Carnegie Mellon a $0.50 per chip royalty on Marvell’s past and future worldwide sales. The district court then enhanced Carnegie Mellon’s damages award to a total of $1.5 billion on the basis of Marvell’s willfulness.

The Federal Circuit affirmed the findings of validity and infringement, but reversed the willfulness enhancement. The court reasoned that an accused infringer who presents an objectively reasonable invalidity defense has demonstrated that there was not an “objectively high likelihood that its actions constituted infringement of a valid patent”—thereby defeating a required showing for willfulness. The court further held that an accused infringer’s awareness of the invalidity defense at the time of the alleged infringement is immaterial to this objective consideration. The Court also remanded for a new trial on damages, noting the impermissible extraterritorial effect that a worldwide royalty may have. With all of Marvell’s products manufactured overseas, the lower court was ordered to limit royalties to those products imported into the United States, as well as products delivered overseas as part of sales transactions occurring in the United States. This partial reversal and remand by the Federal Circuit reduced Carnegie Mellon’s award to roughly $300 million.

Key Takeaway:

An accused infringer who presents an objectively reasonable invalidity defense cannot be found liable for willful infringement, even if the invalidity defense was unknown to the accused at the time of the alleged infringement.

Akamai Techs, Inc. v. Limelight Networks, Inc., No. 09-1372 (en banc) (Divided Infringement)

In Akamai, the en banc Federal Circuit unanimously vacated a prior panel decision and reinstated a jury verdict of infringement for Akamai. The case involves Akamai’s patents directed to methods for delivering tagged internet media content. Limelight allegedly performed all of the steps of the claimed methods except for a “tagging” step that was performed by Limelight’s customers. The question the court addressed was whether Limelight was liable for infringement under 35 U.S.C. § 271(a), despite the fact that it did not perform all of the claimed method steps, nor did any single actor. The Federal Circuit had previously held that Limelight could be held liable for induced infringement before the Supreme Court reversed and remanded that decision last year. Notably, the Supreme Court held that there could be no induced infringement without direct infringement and there could be no direct infringement unless all of the steps of the asserted method claims were performed by, or attributable to, a single actor.

On remand, the Federal Circuit expanded the instances in which one party could be held vicariously liable for the performance of a subset of the steps of a method claim, beyond the principal-agent, contractual, or joint enterprise relationships previously recognized. The court found that an entity could also be liable for the method steps performed by another actor when the entity directs or controls another’s performance. According to the court, because Limelight “condition[ed] use of the content delivery network” on performance of the method steps at issue, Limelight was liable for direct patent infringement. The court found sufficient evidence of direction and control because Limelight required its users to agree to perform the method steps at issue as part of the agreement to use the Limelight service.

Key Takeaway:

Direct infringement of a method claim can be found in expanded scenarios in which an entity directs or controls another’s performance, for example, by contract.

Amgen, Inc. v. Sandoz, Inc., No. 15-1499 (Biologics Price Competition)

In Amgen, a split Federal Circuit panel vacated a district court judgment for Sandoz, which had sought approval to commercialize its generic version of Amgen’s biologic drug Neupogen®, which stimulates the production of neutrophils (also referred to as “biosimilar”). At the district court, Amgen alleged that Sandoz did not comply with the Biologics Price Competition and Innovation Act of 2009 (BPCIA, 42 U.S.C. § 262), which Amgen argued required disclosure of its Biologics License Application (BLA). Amgen also alleged that Sandoz’s notice of commercial marketing was premature when provided upon the FDA’s acceptance of Sandoz’s BLA.

In the first biosimilar litigation under the BPCIA, the Federal Circuit agreed with Sandoz that disclosure of its BLA and negotiation was optional, in view of provision (l)(9) of the BPCIA, which provides consequences for nondisclosure. However, on the issue of notice, the court sided with Amgen, interpreting the BPCIA as requiring notice within 180 days of commercial marketing after the FDA approval of a license for the biological product. The court found that the use of the words “licensed” in provision (l)(8) of the BPCIA, rather than “subject of,” which is found in other provisions of the statute, supported the interpretation that notice must be provided after FDA approval.

As a consequence of the decision, Sandoz will be able to enter the market with its generic version of Neupogen® as early as September 2, 2015. Both parties have filed cross-petitions for review of the panel decision and Amgen has filed an emergency motion for an injunction pending reconsideration en banc.

Key Takeaway:

Under the BPCIA, a biosimilar applicant is not required to disclose its application to a reference product sponsor or negotiate with them, prior to bringing a patent infringement action. However, a biosimilar applicant cannot provide effective notice of commercial marketing until after FDA has approved its product.

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