L&A Federal Circuit Review

December 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.

The ITC Lacks Jurisdiction Over Importation of Digital Data

ClearCorrect Operating, LLC v. International Trade Commission, No. 2014-1527

In ClearCorrect Operating, LLC v. International Trade Commission, the Federal Circuit held that the ITC does not have jurisdiction over the importation of digital data. The ITC’s jurisdiction is limited to tangible “articles,” which does not extend to digital data.

Align Technology requested that the ITC investigate ClearCorrect Operating, LLC and ClearCorrect Pakistan (Private), Ltd. for trade violations under Section 337 of the Tariff Act (19 U.S.C. § 1337).  Align Technology alleged ClearCorrect infringed its patents by importing digital models used to create orthodontic appliances, which were then manufactured in the United States. The ITC determined it had jurisdiction over electronically imported data under Section 337. It further found ClearCorrect Pakistan practiced the asserted method claims in Pakistan and that the importation of the resulting digital models by ClearCorrect Operating into the U.S. constituted a trade violation.

On appeal, the Federal Circuit reversed the ITC, holding that digital data did not constitute an “article” within the scope of Section 337. Congress unambiguously intended “articles” to mean material things, and not electronically transmitted digital data. According to the Federal Circuit, its interpretation of “articles” was supported by the literal text, the context in which the text is found within Section 337, and the text’s role in the statutory scheme.

Key TakeawayThe ITC’s jurisdiction over imported “articles” does not include electronically transmitted digital data. Practitioners dealing with cases of alleged patent infringement by the importation of digital data should consider bringing infringement claims in U.S. federal court under 35 U.S.C. §271 rather than in ITC under 19 U.S.C. § 1337. 

Constitutionality of Inter Partes Review Upheld by the Federal Circuit

MCM Portfolio LLC v. Hewlett-Packard Co., No. 2015-1091

In Momenta Portfolio LLC v. Hewlett-Packard Co., the Federal Circuit held that the Patent Office’s inter partes review procedure does not violate Article III or the Seventh Amendment of the U.S. Constitution.

Hewlett-Packard petitioned the Patent Office to review a patent assigned to MCM Portfolio LLC in accordance with Patent Trial and Appeal Board’s inter partes review procedure). The Board granted that petition, and MCM filed a Patent Owner’s Response arguing, in relevant part, that the PTAB’s review proceedings violated Article III and the Seventh Amendment of the U.S. Constitution. The PTAB rejected MCM’s arguments, and issued a Final Written Decision invalidating the challenged claims as obvious to one of ordinary skill in the art under Section 103 of the Patent Act (35 U.S.C. § 103).

MCM contended that a patent constituted private property, and therefore a patent owner could not be deprived of that right without t a trial by jury in an Article III court.

The Federal Circuit rejected MCM’s argument, and held that the PTAB had the constitutional authority to determine the validity of a patent. A patent is a public right, created by federal statute, and therefore Congress had the authority to delegate the adjudication of that right to an administrative agency. The Court distinguished patents from truly private rights, or rights created by state law, which can only be adjudicated in Article III courts with the protections of the Seventh Amendment.

Key Takeaway:  The Federal Circuit broadly supports Congress’s authority to delegate adjudication of patent rights to administrative agencies without running afoul of the protections of either Article III of the U.S. Constitution, or the Seventh Amendment. Neither the Federal Circuit, nor the PTAB, are likely to seriously entertain any future challenges to the Constitutionality of the Board’s authority to adjudicate patents.

Federal Circuit Reversal Invalidates Claims Confirmed by PTAB in Inter Partes Review

Belden Inc. v. Berk-Tek LLC, Nos. 2014-1575, -1576

In Belden Inc. v. Berk-Tek LLC, the Federal Circuit invalidated two claims of a challenged patent previously upheld in inter partes review by the Patent Trial and Appeal Board. Belden is the first case reversing a PTAB determination finding claims not invalid.

Berk-Tek filed a petition seeking inter partes review of all 6 claims of U.S. Patent No. 6,074,503, assigned to Belden. The PTAB instituted review on all claims, and issued a final written decision invalidating claims 1-4 as obvious over the prior art under Section 103 of the Patent Act (35 U.S.C. § 103), but confirming claims 5 and 6. Both parties appealed.

The Federal Circuit affirmed the PTAB’s decision invalidating the first four challenged claims, but reversed the Board’s finding that claims 5 and 6 were not invalid. With respect to claims 5 and 6, the Federal Circuit agreed with the Board that all of the limitations of the claims were disclosed by a combination of two prior art references. However the Federal Circuit disagreed with the Board’s finding that a person of ordinary skill in the art would not have been motivated to combine the references. While the Federal Circuit will uphold such a factual determination if it is supported by substantial evidence, the Court found the evidence of invalidity was too one sided to justify the Board’s decision. On the basis of the evidence available to the board, all six claims of the ’503 Patent were invalid as obviousness.

Key Takeaway:  For the first time, the Federal Circuit has reversed a PTAB determination that claims were not invalid. This decision confirms that IPR petitioners may still prevail despite a negative ruling by the PTAB.