L&A Federal Circuit Review

April 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.

B&B Hardware, Inc. v. Hargis Indus., Inc., No. 13-352 – 2015-03-24 (Issue Preclusion)

In B&B Hardware, the Supreme Court held that a Trademark Trial and Appeal Board (“TTAB”) decision may give rise to issue preclusion in district court proceedings. B&B Hardware opposed Hargis Industries’ application to register the SEALTITE trademark for metal fasteners. The TTAB sustained B&B’s opposition and refused Hargis’s application, finding that Hargis’s application was likely to cause confusion with B&B’s own registered trademark for SEALTIGHT in connection with fasteners. B&B also sued Hargis for trademark infringement in federal court and argued that the TTAB’s determination was conclusive on the question of whether Hargis’s trademark was confusingly similar to B&B’s. The district court disagreed, holding that TTAB proceedings could not have preclusive effect against an Article III court. On appeal, the Eighth Circuit affirmed the district court on the basis that the TTAB used slightly different factors to evaluate likelihood of confusion.

The Supreme Court reversed the Eighth Circuit’s decision, holding that a TTAB determination could give rise to issue preclusion in subsequent district court proceedings. Issue preclusion may apply except when it is evident that Congress intended otherwise. In this case, there was no evident reason why Congress would not want TTAB decisions to have preclusive effect and the district court and TTAB proceedings were similar enough to satisfy the ordinary elements of issue preclusion.

Key Takeaway: Agency determinations, including decisions by the TTAB and PTAB, may give rise to issue preclusion in district court litigation. Litigants may be able to preclude certain issues in litigation based on successful proceedings before a federal agency on a similar question of law.

Oplus Techs., Ltd. v. Vizio, Inc., No. 2014-1297–2015-04-10 (Attorneys’ Fees)

In Oplus Technologies the Federal Circuit reversed a district court’s denial of reasonable attorneys’ fees. After granting Vizio’s motion for summary judgment of no infringement, the district court issued an opinion cataloging numerous instances of Oplus’s litigation misconduct. The district court held that Oplus provided only a tenuous basis for jurisdiction in the Northern District of Illinois and improperly moved to have the case returned to Illinois after it was transferred to California. Oplus also sought discovery to which it was not entitled, offered contradictory expert evidence, misrepresented its factual and legal support, disavowed its own expert’s statements when they were cited by opposing counsel, and attempted to mislead the court. Despite
recognizing the exceptional nature of Oplus’s conduct, the district court nevertheless denied Vizio’s motion for attorneys’ fees under both 35 U.S.C. § 285 and 28 U.S.C. §1927.

The Federal Circuit acknowledged that the Supreme Court’s decision in Octane Fitness, LLC v. ICON Health &
Fitness, Inc.
,134 S. Ct. 1749 (2014), lowered the standard for awarding fees considerably. The Federal Circuit found that the district court’s opinion detailed serious misconduct, but provided no sound basis to decline awarding fees. Given the lack of explanation for denying an award of attorneys’ fees, the Federal Circuit held that the district court abused its discretion.

Key Takeaway:While the award of attorneys’ fees under Section 285 is left to the sound discretion of the district court, the district court must provide a sound basis for the denial of fees.

Automated Merchandising Systems, Inc. v. Crane, Co., No.14-1728 – 2015-04-10 (Final Agency Action)

In Automated Merchandising, the Federal Circuit affirmed the Patent Office’s decision refusing to terminate four inter partes reexaminations. Automated Merchandising Systems (“AMS”) asked the PTO to terminate the reexaminations after AMS and Crane reached a settlement on the validity of the patents in a co-pending litigation. By statute, estoppel applies to reexaminations once a court enters final judgment that a “party has not sustained its burden of proving the invalidity of any patent claim.” The PTO refused to terminate the reexaminations because the district court never determined, on the merits, that Crane failed to meet its burden on validity. The PTO also stated that its refusal to terminate the proceeding was “a final agency action.” AMS appealed the PTO’s refusal to terminate the reexaminations to the district court, which held that “§ 317(b) did not require termination of the reexaminations.” The Federal Circuit affirmed the district court decision. However, the Federal circuit did not affirm § 317(b)’s inapplicability, but rather held that a “refusal to terminate pending reexaminations … is not a ‘final agency action’” subject to review under the Administrative Procedure
Act.

Key Takeaway: PTO decisions are not considered “final” for purposes of appeal to the Federal Circuit until the PTO’s decision-making process has been completed. As a result, parties cannot appeal the PTO’s decision not to terminate a reexamination prior to completion of the reexamination.

Kennametal, Inc. v. Ingersoll Cutting Tool Company, No. 14-1350 – 2015-03-25 (Anticipation)

In Kennametal, the Federal Circuit affirmed the PTAB’s decision that claim 1 of U.S. Patent No. 7,244,519 was
anticipated during an inter partes reexamination. Ingersoll originally petitioned the PTO for reexamination on the grounds that the claim was both anticipated and/or obvious by a single prior art reference. The challenged claim covered a cutting tool with “a cemented carbide substrate” and “at least one physical vapor deposition coating” or “PVD.” The prior art reference disclosed in its claims “a coated cutting insert” with a “substrate comprising a tungsten carbide-based material” and “a hard refractory coating.” While the prior art reference did not specifically claim PVD coating, the specification explained that “one or more layers of a coating … may be
applied by physical vapor deposition (PVD).” Based on this separate disclosure, the Examiner concluded that prior art disclosed all of the limitations of the challenged claim, but that the limitations were not “arranged or combined in the same way as in the claim.” Thus, according to the Examiner, the claims were obvious over the prior art, but not anticipated by the prior art. Kennametal appealed the obviousness rejection to the PTAB and Ingersoll cross-appealed the refusal to find anticipation.

On appeal, the PTAB found that the Examiner erred in not adopting Ingersoll’s argument that the claims were anticipated by the prior art. The Board found that, although the claims of the prior art failed to disclose a PVD coating, the specification disclosed potentially using PVD as a coating method. Because the claim of the prior art referred generally to “a hard refractory coating,” this provided a specific hook back into the prior art disclosure relating to how that coating is applied. Therefore, the Board held that the limitations of the challenged claims were all disclosed in a single prior art reference and “arranged as in the claim.”

The Federal Circuit affirmed the Board’s decision, but with somewhat different reasoning. The Federal Circuit clarified that “a prior art reference can anticipate a claim even if it ‘d[oes] not expressly spell out’ all the limitations arranged or combined as in the claim, if a person of skill in the art, reading the reference, would ‘at once envisage’ the claimed arrangement or combination.” (citing In re Petering, 301 F.2d 676, 681 (C.C.P.A.1962). The court therefore held that prior art’s clear disclosure of PVD coating was sufficient to enable one of ordinary skill in the art to “at once envisage” the limitations being arranged as in the challenged claims.

Key Takeaway: A reference can anticipate a claim even if it does not expressly spell out all the limitations arranged or combined as in the claim, if a person of skill in the art would at once envisage the claimed
arrangement or combination.