L&A Federal Circuit Review

January 2016

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.

Federal Circuit Defers to PTAB Finding of Obviousness in Inter Partes Review

Merck & Cie v. Gnosis S.P.A., No. 2014-1779

In Merck, the Federal Circuit held that an explicit finding of a reasonable expectation of success in combining prior art references need not be made by the Patent Trial and Appeal Board in an inter partes review.

Gnosis filed a petition for inter partes review of the claims of a Merck patent related to methods of treating elevated homocysteine levels. The PTAB found that all of the elements of the claims could be found in three prior art references, and that there was motivation to combine the references. Although Merck argued that there was prior art teaching away from the combination of the references and provided objective indicia of non-obviousness, the PTAB concluded that Merck’s evidence of non-obviousness was not sufficient to overcome the evidence provided by Gnosis. The PTAB invalidated all challenged claims.

On appeal, the Federal Circuit found that the PTAB’s determinations with respect to the prior art were supported by “substantial evidence,” and affirmed. The Court rejected Merck’s argument that the Board never made an express finding that a person skilled in the art would have had a reasonable expectation of success combining the three prior art references. Although under KSR International Co. v. Teleflex Inc. the reason to combine known elements in the prior art “should be made explicit,” there does not need to be “an explicit statement . . . in every case.” Here, a reasonable likelihood of success could be implied because the Board rejected Merck’s argument that the prior art “taught away” from the proposed combination.

Judge Newman dissented from the majority opinion, criticizing the substantial evidence standard of review. She argued that Congress intended inter partes review to improve the quality of patents, and the substantial evidence standard undermined that intent by asking the Federal Circuit to consider only whether a decision reasonably could have been reached, not whether it was correct.

Key Takeaway: The Federal Circuit continues to show great deference to the factual determinations of the PTAB, even where such findings are not made explicit. However, Judge Newman’s dissent suggests some judges question whether the PTAB is subject to sufficient scrutiny.

Disparagement of Prior Art May Disavow Claimed Subject Matter

Openwave Systems, Inc. v. Apple Inc., No. 2015-1108

In Openwave Systems, the Federal Circuit upheld the district court’s decision that repeated disparagement of an embodiment in a patent specification was sufficient to exclude that embodiment from the claim scope.

Openwave Systems sued Apple for infringing claims of three U.S. patents relating to mobile device technology. At issue was whether the claim term “mobile device” covered a mobile device containing small “microcontrollers” that facilitate communication between the mobile device and a network server or a mobile device containing more robust “computer modules.” The district court held that the patent specifications contained a number of statements disavowing a mobile device containing computer modules, and entered final judgement of no infringement.

The Federal Circuit found that the specification clearly contained repeated remarks that disparaged, and therefore, disclaimed mobile devices that contain computer modules. While there is a “high bar to finding disavowal of claim scope through disparagement in the specification,” the Federal Circuit concluded that the claims could not be read to include mobile devices containing computer modules in view of the repeated disparagement of that embodiment. The Federal Circuit affirmed the district court’s claim construction and final judgement of no infringement.

Key Takeaway: Disparaging statements of the prior art or potential embodiments in a patent specification may limit the scope of the issued patent claims.

“Non-Disparagement” Clause in Trademark Act Held Unconstitutional on First Amendment Grounds

In re Tam, No. 2014-1203

The Federal Circuit, sitting en banc, ruled that the portion of Section 2(a) of the Trademark Act, barring registration of any mark that may “disparage . . . persons, [] institutions, beliefs or national symbols,” was unconstitutional.

Simon Shiao Tam sought to register a trademark for his band, “The Slants.” Mr. Tam argued that the name was an attempt to “reclaim” a derogatory term for persons of Asian descent. While the PTO did not dispute Mr. Tam’s intentions, it refused registration of the mark under Section 2(a) because it could be offensive to a “substantial composite of persons of Asian descent.”

The non-disparagement clause in Section 2(a) was enacted in 1946 as a part of an overhaul of federal trademark law. A form of the clause had existed since the 1905 inception of the federal trademark program. Long standing Federal Circuit precedent had held that the clause did not invoke the First Amendment at all because the Act only barred federal registration of an offensive mark, not the right to use it.

The Federal Circuit reversed the PTO’s decision, holding that portion of Section 2(a) unconstitutional on its face. Judge Moore, for the majority, found that the section was a viewpoint-based restriction of speech, subject to strict scrutiny. Because it was directed at the expressive aspects of speech, the clause could not be reviewed under a lower-scrutiny standard for commercial speech. The Court rejected arguments by the government that the clause could be saved from strict scrutiny either because it concerned speech by the government, or speech made in connection with a government subsidy. The Federal Circuit held that the clause invoked the First Amendment because it tended to suppress speech, even if it did not ban any speech outright.

Judges O’Malley and Wallach concurred with the majority opinion. Judges Lourie, Reyna and Dyk filed separate dissents.

Key Takeaway: The Federal Circuit’s substantial departure from established precedent may have broad implications. While this case concerned only the non-disparagement clause of Section 2(a), that section also bars the registration of scandalous or immoral matter. Those clauses are unlikely to survive Federal Circuit review under this precedent.