The Intellectual Property Year in Review

December 2016

By: Regina McCarthy

Intellectual property (“IP”) litigation was popular in 2016, as the Supreme Court and the Court of Appeals for the Federal Circuit made new law and clarified laws for IP practitioners and owners. Below are ten key decisions from the past year.

1.  Willful patent infringement is easier to prove

The Supreme Court in Halo Electronics made it easier to prove willful patent infringement by striking down the Federal Circuit’s heightened standard. Previously, the Federal Circuit in In re Seagate Tech. required clear and convincing evidence that an infringer acted despite an objectively high likelihood that its actions constituted infringement of a patent. The Supreme Court held that Seagate’s standard was unduly rigid because it required proof of objective recklessness in every case. Section 284 of the Patent Act grants judges broad discretion in determining willful infringement and enhanced damages. Halo Electronics, Inc. v. Pulse Electronics, Inc, 136 S.Ct 1923 (2016).

2.  The Patent Office’s decision to institute an inter partes review is not appealable

The Supreme Court held in Cuozzo that the American Invents Act barred appellate review of the Patent Office’s decision regarding whether or not to institute inter partes review. According to the Court, the express language of the statute is clear on its face – “whether to institute an inter partes review . . . shall be final and non-appealable.” However, the Court did indicate that decisions would nevertheless be appealable if they present a constitutional question or other unique circumstances, which were not presented in Cuozzo’s case. The Court also affirmed that the “broadest reasonable interpretation” standard is the correct claim constructions standard for AIA reviews. Cuozzo Speed Techs., LLC v. Lee, 136 S.Ct. 2131 (2016).

3.  “Total profits” for design patent infringement may require award of profits on just a component of the product to which the patented design is applied.

The Supreme Court decided its first design patent case in more than a century. At issue was the award of “total profits” to Apple, based on Samsung’s infringement of several design patents relating to Apple’s iPhone. The Patent Act entitles a design patent owner to the “total profits” realized from infringement, under 35 U.S.C. § 289. This remedy has long been interpreted to result in award of all of the infringer’s profits for the sale of the accused product. However, the Supreme Court overruled this interpretation, holding that the profits at issue in § 289 are directed to the article of manufacture to which the design is applied. In some cases, the article of manufacture may be less than the entire thing being sold. The case was remanded to the Federal Circuit to craft rules for determining the article of manufacture “to which the design is applied.” Samsung Electronics, Ltd., v. Apple, Inc., 2016 WL 7078449, —- S.Ct. —- (2016).

4.  Estoppel provision of the AIA may not apply to grounds not instituted in an inter partes review petition

The Federal Circuit suggested in dicta that the estoppel provision of the AIA would not attach for any grounds in an inter partes review petition on which the PTAB did not institute review. Therefore, defendants may not be barred from asserting in district court litigation grounds for invalidity on which the Board did not institute IPR. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., No. 15-1116 (Fed. Circ. Mar. 23, 2016).

5.  Specific improvements in the way computers operate found to be eligible subject matter under Alice

The Federal Circuit held that claims related to a “self-referential” database were not directed to an abstract idea. The Court found no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice. The claims were directed to a specific improvement in the way computers operate, embodied in the self-referential table, and were not directed to an abstract idea within the meaning of Alice. Enfish, LLC v. Microsoft Corp., No. 2015-1244 (Fed. Cir. May 12, 2016).

 6.  The presence of functional language in an apparatus claim does not invalidate the claim as indefinite

The presence of functional language in an apparatus claim will not render the claim indefinite if it is clear that the language merely reflects the capability of the claimed structure, and not an action that must be performed to infringe the claims. UltimatePointer, L.L.C. v. Nintendo Co., No. 15-1297 (Fed. Cir. Mar. 1, 2016).

7.  Patent exhaustion does not apply to patented products first sold outside of the U.S., or inside the U.S. with lawful restrictions

Lawful and clearly communicated restrictions on the use and resale of a patented article will not exhaust patent rights within the United States. Further, sales of a patented article outside the borders of the U.S. will not exhaust patent rights in that article within the U.S. While this is the current state of the law, these rules may change as the Supreme Court granted writ of certiorari to reconsider the issue of patent exhaustion. Lexmark Int’l, Inc. v. Impression Products, Inc., No. 14-1617 (Fed. Cir. Feb. 12, 2016)(en banc).

8.  Communications between a patent agent and a client concerning patent prosecution matters are privileged

The Federal Circuit established a nationwide patent-agent privilege this year. Clients now have greater freedom to work with patent agents without being concerned with waiving privilege. In Re Queen’s University at Kingston, 2015-145 (Fed. Cir. March 7, 2016).

9.  Prosecution history estoppel may apply to non-amended patent claims

The Federal Circuit held that prosecution history estoppel bars an applicant from later obtaining claim scope that had been rejected by an examiner and withdrawn. UCB, Inc. v. Yeda Research and Development Co., No. 15-1957 (Fed. Cir. Sep. 8, 2016).

10.  Functional elements are given weight in design patent claim construction

The Federal Circuit confirmed that the construction of claims having functional elements involves identifying the functional elements and the ornamental aspects of those elements. A claim having many functional, and few ornamental, characteristics will likely be viewed as having a very narrow claim scope, but the Court will not construe such a design as having no scope at all. A design patent containing functional elements is entitled to some patent scope, and functional elements should not be omitted completely from design patent claim construction. Sport Dimension, Inc. v. The Coleman Co., No. 15-1553 (Fed. Cir. April 19, 2016).