After Medmmune Transfer Considerations are Relevant to Discretionary Jurisdiction Over Declaratory Judgment Actions

Micron Technology Inc. v. MOSAID Technologies, Inc., [2007-1080 ] (February 29, 2008) [RADER, Newman, Dyk] The Federal Circuit reversed and remanded the district court's dismissal of a declaratory judgment action for lack of subject matter jurisdiction.
BRIEF: Micron filed a declaratory action seeking a declaration of noninfringement of fourteen MOSAID patents. The next day, MOSAID filed an infringement action against Micron asserting seven patents. MOSAID filed a motion to dismiss for lack of subject matter jurisdiction under Article III of the United States Constitution or the Declaratory Judgment Act, 28 U.S.C. § 2201. The district court granted that motion, finding no jurisdiction under the reasonable apprehension of suit test. The district court also held that even if subject matter jurisdiction were established, it would exercise its discretion and still decline to hear the case.
LOF: A district court's grant of a motion to dismiss for lack of subject matter jurisdiction presents a question of law that this court reviews without deference. In dismissing, the district court relied on the first factor of the pre-MedImmune declaratory judgment test. The district court noted MOSAID's pattern of serial litigation, but ultimately decided that "MOSAID's conduct was not sufficient to give rise to a reasonable apprehension of litigation against Micron."
The Supreme Court set forth the correct standard for jurisdiction over a declaratory judgment action:

[T]hat the dispute be definite and concrete, touching the legal relations having adverse legal interests and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.

In place of the reasonable threat of imminent suit test, the Supreme Court required a showing of "whether the facts alleged under all the circumstances show that there is a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." The Federal Circuit found that the record supports a judgment that the dispute between Micron and MOSAID is a case and controversy within the purview of declaratory judgment jurisdiction. In addition to threatening letters, and MOSAID's past behavior, MOSAID's recent public statements and annual reports also confirm its intent to continue an aggressive litigation strategy. The Federal Circuit said that The record evidence at the time of the filing in the California district court strongly suggested that MOSAID would sue Micron soon, and in fact that suit, filed only one day later, was actually pending in Texas at the time that the California district court made its ruling. The Federal Circuit concluded that the parties in this dispute are really just contesting the location and right to choose the forum for their inevitable suit.
A district court, when deciding whether to exercise its discretion, should decide whether hearing the case would serve the objectives for which the Declaratory Judgment Act was created. When these objectives are served, dismissal is rarely proper. Becuase the district court applied the wrong standard, and the Federal Circuit perceived that the exercise of jurisdiction would serve the objectives of the Declaratory Judgment Act. The Federal Circuit said that the relaxation of declaratory judgment standards is accompanied by unique challenges, including forum-seeking races to the courthouse between accused infringers and patent holders. Thus, in cases such as this with competing forum interests, the trial court needs to consider the "convenience factors" found in a transfer analysis under 28 U.S.C. § 1404(a).
The Federal Circuit said that the district court judge faced with reaching a jurisdictional decision about a declaratory judgment action with an impending infringement action either filed or on the near horizon should not reach a decision based on any categorical rules (e.g. the first-filed suit rule). The court weighing jurisdiction must consider the real underlying dispute: the convenience and suitability of competing forums. Where as here the discretionary determination is presented after the filing of an infringement action, the jurisdiction question is basically the same as a transfer action under § 1404(a). The convenience and availability of witnesses, absence of jurisdiction over all necessary or desirable parties, possibility of consolidation with related litigation, or considerations relating to the interest of justice must be evaluated to ensure the case receives attention in the most appropriate forum. The Federal Circuit noted that robust consideration of these factors will reduce the incentives for a race to the courthouse because both parties will realize that the case will be heard or transferred to the most convenient or suitable forum. The Federal Circuit went on to indicate that the Northern District of California was the more appropriate forum for the dispute between Micron and MOSAID. The Federal Circuit said that the trial court applied a standard for declaratory judgment jurisdiction that the Supreme Court has altered, resulting in an error of law. Moreover, the trial court needed to evaluate the "convenience factors" before effectively transferring the case to another jurisdiction. Applying the relevant convenience factors, it would be an abuse of discretion to transfer the action. Accordingly, the Federal Circuit reversed and remanded back to the district court.

Claim Differentiation Can BE Overcome by the Written Description or Prosecution History

Regents of the University of California v. Dakocytomation California, Inc., [2006-1334, -1452] (February 28, 2008) [LOURIE, Mayer, Prost] The Federal Circuit concluded that the district court correctly construed the term "heterogeneous mixture of labeled unique sequence nucleic acid fragments," erred in its construction of "morphologically identifiable cell nucleus," and erred by concluding that appellants were barred by the doctrine of prosecution history estoppel, it affirmed in part, reversed in part, and remanded for further proceedings.

BRIEF: The district court interpreted "heterogeneous mixture of labeled unique sequence nucleic acid fragments" based upon its belief that the patentee's earlier patent was prior art, but then corrected its decision after plaintiff pointed out that the patent in suit was a divisional from the parent, the district court then adopted the same construction because otherwise the patent would be invalid for double patenting. Although this, too, was incorrect, because the patentee had filed a terminal disclaimer, the Federal Circuit still found that the district court's construction was correct. The Federal Circuit said the district court correctly evaluated the prosecution history and determined the proper claim construction, and agreed that the patentees disclaimed embodiments that include repetitive sequences during the prosecution of the patent.

The Federal Circuit said that it is a truism that the claims of a patent define the invention that is claimed, but the prosecution history can often inform the meaning of the claim language by demonstrating how the inventor understood the invention and whether the inventor limited the invention in the course of prosecution, making the claim scope narrower than it would otherwise be. The Federal Circuit noted that the language "unique sequence" was added during prosecution, and although the patentees did not expressly state whether the "unique sequence" limitation was added in response to any particular rejection, given the patentees’ arguments accompanying the amendment, as well as previous statements patentees made during the prosecution of the parent application, the term "unique sequence" was clearly added to overcome the enablement rejection. Noting that in the parent application the applicant said that embodiments involving the removal of repetitive sequences would be pursued in a separate application. The addition of "unique sequence" to the heterogeneous mixture limitation, coupled with the patentees’ statements during prosecution, evince a clear intent to limit the claims of the patent to those embodiments in which the repetitive sequences have been excluded from the heterogeneous mixture in order to disable the hybridization capacity of repetitive sequences. The patentee relied upon AK Steel Corp. v. Sollac and Ugine, for the proposition that "dependent claims are presumed to be of narrower scope than the independent claims from which they depend" under the doctrine of claim differentiation. The Federal Circuit found the argument unpersuasive, however, because presumptions are rebuttable. While it is true that dependent claims can aid in interpreting the scope of claims from which they depend, they are only an aid to interpretation and are not conclusive. The presumption created by the doctrine of claim differentiation is not a hard and fast rule and will be overcome by a contrary construction dictated by the written description or prosecution history. The Federal Circuit found that the prosecution history overcomes the presumption; the correct construction of "heterogeneous mixture" is one that excludes repetitive sequences, notwithstanding the presence of certain dependent claims that do not exclude them. The Federal Circuit therefore affirmed the grant of summary judgment of non-infringement.

The Federal Circuit then turned to summary judgment that certain products did not infringe under the doctrine of equivalents. The Federal Circuit said that a narrowing amendment made to satisfy any requirement of the Patent Act may give rise to an estoppel. The presumption of surrender, however, may be rebutted if the patentee can demonstrate that: (1) the alleged equivalent would have been unforeseeable at the time the narrowing amendment was made; (2) the rationale underlying the narrowing amendment bore no more than a tangential relation to the equivalent at issue; or (3) there was some other reason suggesting that the patentee could not reasonably have been expected to have described the alleged equivalent. LOF: Whether the district court erred in its application of prosecution history estoppel to limit the effect of the doctrine of equivalents is also a question of law that is reviewed de novo. The Federal Circuit analyzed whether the amendment was merely tangential. The inquiry into whether a patentee can rebut the Festo presumption under the ‘tangential’ criterion focuses on the patentee’s objectively apparent reason for the narrowing amendment. Prosecution history estoppel will not bar the doctrine of equivalents when the reason for the narrowing amendment was peripheral, or not directly relevant, to the alleged equivalent. The prosecution history therefore reveals that in narrowing the claim to overcome the prior art rejections, the focus of the patentees’ arguments centered on the method of blocking—not on the particular type of nucleic acid that could be used for blocking. Indeed, the "nucleic acid" limitation was never narrowed during prosecution and was not at issue in the office action rejecting the claims, the Examiner Interview Summary Record, or the patentees’ remarks accompanying the amendment. The Federal Circuit concluded that appellants have met their burden of showing that the amendment did not surrender the equivalent in question because the narrowing amendment was only tangential to the accused PNA equivalent, i.e., the peptide nucleic acid. The Federal Circuit found that the court erred in concluding that appellants were precluded by estoppel from asserting that defedant's products infringe under the doctrine of equivalents.

District Courts Have the Authority to Prospectively Amend Their Permanent Injunictions in Light of eBay

Amado v. Microsoft Corp., [2007-1236, -1255] (February 26, 2008) [LINN, Bryson, Clevenger] The Federal Circuit affirmed the district court extension of the stay stay of the permanent injunction, dissolving the permanent injunction, and denying Microsoft’s motion for relief from judgment, but reversed the award of $0.12 per infringing unit sold during the stay of the permanent injunction, and vacated and remanded the case because recent Supreme Court action may affect post-verdict damages.
SIGNIFICANCE: A district court can reconsider and modify a permanent injunction if appropriate on the application of traditional equitable factors.
Post judgment damages should not necessarily reflect any increase for willfulness that might have been appropriate for pre-judgemenet damages.
BRIEF: A district court’s decision granting, denying, or modifying an injunction in a patent case is reviewed for abuse of discretion. In order to prevail on appeal on an issue of damages, an appellant must convince us that the determination was based on an erroneous conclusion of law, clearly erroneous factual findings, or a clear error of judgment amounting to an abuse of discretion. Finding that a district court’s interpretation of its order is entitled to deference unless the interpretation is unreasonable or is otherwise an abuse of discretion, the Federal Circuit affirmed the district court's interpretation of its injunction while an appeal is pending included a petition for certiorari.
Regarding the extension of the stay, the Federal Circuit noted that district courts possess broad equitable authority to modify injunctions. This broad authority, coupled with the wide discretion to manage the order in which they address issues pending before them, necessarily vests district courts with the authority to extend the stay of an injunction, particularly under these circumstances where it is done to preserve the status quo while motions affecting that injunction are under advisement.
Amado argues that because the eBay decision was handed down before our decision in Amado I, albeit after the completion of briefing, and because the permanent injunction was included within our mandate in Amado I, the mandate rule foreclosed
Regarding the dissolution of the permanent injunction, the Federal Circuit rejected Amado's argument that the district court "improperly concluded that eBay eliminated the presumption of irreparable harm that follows a judgment of validity and infringement." because the district court was within its discretion to find an absence of irreparable harm based on the evidence presented at trial. Microsoft argued that the propriety of the permanent injunction was not an issue in the earlier appeal, and thus was not within the scope of the mandate. Alternatively, Microsoft argued that eBay is an intervening decision and is thus an exception to the mandate rule. The Federal Circuit explained that a decision is generally considered to be intervening when it comes between an appellate decision and the proceedings on remand. A decision is not intervening, however, if the parties have a reasonable opportunity to raise an issue with respect to that decision prior to issuance of the appellate mandate. Whether eBay constitutes an intervening decision, and forecloses application of the mandate rule, turns on whether Microsoft had a reasonable opportunity to claim the decision’s benefit prior to our issuance of the Amado I mandate. The Supreme Court’s decision in eBay was handed down on May 15, 2006—after the completion of briefing but prior to oral argument in Amado I. Following issuance of the decision, it was incumbent upon Microsoft, if it desired to do so, either to alert this court that the recently-decided case affected its position on appeal or to explicitly reserve the right to seek retrospective relief from the injunction on remand, which it did not do, even when questioned as to its position at oral argument. Because Microsoft had a reasonable opportunity to raise an issue with respect to eBay prior to issuance of our mandate, and, indeed, expressly declined that opportunity, eBay is not an intervening decision and thus does not preclude application of the mandate rule. The mandate rule provides that issues actually decided on appeal—those within the scope of the judgment appealed from, minus those explicitly reserved or remanded by the court—are foreclosed from further consideration. Thus, an issue that falls within the scope of the judgment appealed from but is not raised by the appellant in its opening brief on appeal is necessarily waived. The Federal Circuit said that the proper inquiry is whether the district court’s grant of the permanent injunction was within the scope of the judgment appealed from in Amado I, and found that it was. Thus, the mandate rule operates as a bar to the district court’s reconsideration of the initial issuance of the injunction. However, the Federal Circuit said that while the mandate rule would prevent the district court from dissolving the injunction ab initio, it does not preclude the district court from modifying, or dissolving, the injunction if it determines that it is no longer equitable. The Federal Circuit found that that the district court was well within its discretion in this case to reconsider the prospective application of the permanent injunction on remand in light of the Supreme Court’s decision in eBay. The Federal Circuti also concluded that the district court’s ultimate decision to dissolve the injunction was not an abuse of discretion, when, after applying the traditional four-factor test, it determined that an injunction was no longer equitable under the circumstances.
The last issue in the case was the amount of damages to be paid from the escrow created when the permanent injunction was stayed. The Federal Circuit rejected Amado's argument that it was entitled to the entire $2.00 per unit escrowed, because that was just an amount to ensure that Amado would be made whole, not the amount determined appropriate to compensate Amado. The Federal Circuit also rejected the $0.12 per unit actually awarded because it represented the trebled royalty the district court imposed for willfully infringing sales. The Federal Circuit remanded the case for the district court to set an appropriate royalty rate.

Substantial Questions About Validity; Not Likelihood of Success, Defeat Preliminary Injunction

Erico International Corporation v. Vutec Corporation, [2007-1168](February 19, 2008) [RADER, Newman, Dyk] The Federal Circuit vacated a preliminary injunction because the defendant raised substantial questions about the validity of plaintiff's U.S. Patent No. 5,740,994 on a fastener for wires and cables.
SIGNIFICANCE: A showing of a substantial question of invalidity to defeat a preliminary injunction requires less proof than a clear and convincing showing of invalidity needed to invalidate the patent.
BRIEF: The Federal Circuit noted that the decision to grant a preliminary injunction is based on four factors: (1) the likelihood of the patentee's success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest. To show a likelihood of success on the merits, plaintiff must show a likelihood that defendant infringes a valid claim of the patent. Conversely to defeat a preliminary injunction, the defendant must show a substantial question of invalidity to avoid a showing of likelihood of success. In the present case, defendant raised three defenses: (1) inequitable conduct in obtaining the patent, (2) on-sale bar under 35 U.S.C. § 102(b), and (3) obviousness under 35 U.S.C. § 103. The Federal Circuit said that validity challenges during preliminary injunction proceedings can be successful, that is, they may raise substantial questions of invalidity, on evidence that would not suffice to support a judgment of invalidity at trial. In other words, a defendant need not prove actual invalidity. On the contrary, a defendant must put forth a substantial question of invalidity to show that the claims at issue are vulnerable. Thus, a showing of a substantial question of invalidity requires less proof than the clear and convincing standard to show actual invalidity.
Judge Newman in dissent stated: "My colleagues have applied an incorrect criterion. The correct criterion is not whether there is a "substantial question"; it is whether the defendants have shown that they are likely to succeed on the merits, on the standards and burdens of proof as would prevail at trial."

Does the Specification Adquately Disclose to One of Ordinary Skill the Structure Corresponding to a Means Plus Function Limitation

Aristocrat Technologies Australia PTY LTD., v. Multimedia Games, Inc., [2007-1375](February 22, 2008)[LOURIE, Schall, Bryson] NON-PRECEDENTIAL The Federal Circuit reversed summary judgment that that U.S. Patent 4,817,951 was invalid for indefiniteness.
BRIEF: The ’951 patent is entitled "Player Operable Lottery Machine Having Display Means Displaying Combinations of Game Result Indicia," and describes and claims a machine similar to a slot machine that provides a paperless version of an instant lottery. The district court granted summary judgment that claim 1 was invalid for indefiniteness because the specification of the patent failed to disclose necessary structure corresponding to several of the means-plus-function limitations in the claim. The Federal Circuit said that claim construction of a means-plus-function limitation includes two steps. First, the court must determine the claimed function. Second, the court must identify the corresponding structure in the written description of the patent that performs that function. LOF: The review of indefiniteness under 35 U.S.C. § 112, paragraph 2, proceeds as a question of law without deference. The Federal Circuit found that there were material facts in dispute, and reversed and remanded the determination that the claims were invalid for indefinite.
The Federal Circuit instructed the district court that a presumption applies that a claim limitation that includes the word "means" is intended to invoke means-plus-function treatment. However, that presumption may be rebutted (1) if the claim limitation recites no function corresponding to the means or (2) if the claim limitation itself recites sufficient structure for performing the recited function. The Federal Circuit also rejected the argument that subsidiary means plus function clauses provided sufficient structure to take "control means" out of the province of 35 USC § 112, ¶ 6, not because such clauses could not define structure, but because they did not define structure for performing the functions of the control means. The Federal Circuit said that "Here, it is not clear that the structures allegedly associated with the subsidiary means as a whole are capable of performing all of the functions associated with the parent means." COMMENT: However the Federal Circuit has not previously required that the recited structure perform all of the functions of the recited means to remove it from means plus function treatment. Turning to the definiteness requirement, the Federal Circuit said that the specification must disclose some structure for a means-plus-function limitation. However, the law does not require that structure be explicitly identified as long as a person of ordinary skill in the art would understand what structure is identified in the specification. The Federal Circuit remanded the case for the district court to determine whether the specification adequately disclosed the structure to a person of ordinary skill in the art.

The Overriding Concern of the On-Sale Bar is Commercialization Beyond the Statutory Term

Atlanta Attachment Company v. Leggett & Platt, Incorporated, [2007-1188] (February 21, 2008) [MAYER, Dyk, Prost] The Federal Circuit reversed summary judgment that Leggett & Platt infringed claim 32 of U.S. Patent No. 6,834,603, and that the patent was neither invalid because of the on-sale bar of 35 U.S.C. § 102(b), obviousness, or a violation of the best mode and written description requirements, nor unenforceable due to inequitable conduct, finding that the patent was invalid because of the on-sale bar.
SIGNIFICANCE: The Federal Circuit says that the experimental use exception does not apply where there has been a commercial sale or offer for sale, which begs the question.
BRIEF: The Federal Circuit began by noting that our patent laws deny a patent to an inventor who applies for a patent more than one year after making an attempt to profit from his invention by putting it on sale. 35 U.S.C. § 102(b). The Federal Circuit said that an invention is so barred when it was both the subject of a commercial offer for sale before the critical date and ready for patenting at the time of the offer. The overriding concern of the on-sale bar is an inventor’s attempt to commercialize his invention beyond the statutory term.
To meet the first, commercial offer, prong, the offer must be sufficiently definite that another party could make a binding contract by simple acceptance, assuming consideration. Neither profit, revenue, nor even an actual sale is required for the use to be a commercial offer under section 102(b) – an attempt to sell is sufficient if it rises to an offer upon which a contract can be made merely by accepting it. Although the third prototype was never actually delivered to Sealy, it was indeed sold to Sealy because Atlanta Attachment sent Sealy an invoice for the machine (an offer), and Sealy paid for the machine (an acceptance).
Atlanta Attachment argued that its sales to Sealy were experimental, because they were prototypes submitted to determine if the invention fit Sealy’s requirements. The Federal Circuit said that experimentation conducted to determine whether the invention would suit a particular customer's purposes does not fall within the experimental use exception. The Federal Circuit also noted that Atlanta Attachment did not retain control over the prototype. While not the lodestar test in all cases, we have also said that it is important, and sometimes dispositive.
Atlanta Attachment was not experimenting within the contemplation of the experimental use doctrine when it sold its invention to Sealy because Sealy performed the testing and because Atlanta Attachment did not have control over the alleged testing to establish experimentation.
The Federal Circuit further found that a quotation to provide the product in commercial quantities quotation constitutes an offer for sale that cannot avoid the on-sale bar via the experimental use exception. An offer to mass produce production models does not square with experimentation under any standard; it is commercial exploitation.
Regarding the second prong of the Pfaff test, the Federal Circuit said that there are at least two ways to meet the ready for patenting prong: prior to the critical date the device was reduced to practice, or there is proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention. The Federal Circuit said that an invention is reduced to practice when it works for its intended purpose, and an invention is said to work for its intended purpose when there is a demonstration of its workability. The Federal Circuit found that the third prototype demonstrated the workability and utility of the invention as claimed. The Federal Circuit rejected Atlanta Attachments arguments that it was still developing the claimed invention, noting that later refinements do not preclude reduction to practice, and thus it is improper to conclude that an invention is not reduced to practice merely because further testing is being conducted. The Federal Circuit said that while improvements were possible and ultimately manufactured in the fourth prototype, these deficiencies in the third prototype did not prevent reduction to practice of the invention actually claimed. Therefore, because the third prototype was both the subject of a commercial offer for sale before the critical date and was reduced to practice at the time, the claim is invalid due to the on-sale bar of section 102(b).

District Court Tried Too Hard to Resist Importing Limitations from the Specification

The Chamberlain Group, Inc. v. Johnson Controls Interiors LLC, [2007-1314, 1467](February 19, 2008)[RADER, Clevenger, and DYK] The Federal Circuit reversed the the district court’s claim construction, vacated the preliminary injunction, and remanded the case.
BRIEF: Chamberlain’s exclusive licensee with respect to development of radio frequency transmitters for sale to automotive original equipment manufacturers, sued Lear Corp. charging Lear’s Car2U transmitter with infringement of claim 4 of the ’544 patent. Johnson Controls appealed. Although it is unacceptable to import limitations into a claim from the written description, the specification is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term. At issue was the term "binary coded trinary number". The Federal Circuit explained the district court's interpretation, and then said: "The district court commendably strove to follow this court’s rules for claim construction. . . . In this regard, the trial court weighed the intrinsic evidence along with the extrinsic evidence and properly sought to avoid importing a limitation from the specification into the claims . . .. Nonetheless, this court discerns that the ’544 patent specification gives particular limiting meanings to the language in the claims. Specifically, the ’544 patent used "binary code" to mean "binary number." While the district court’s construction may represent an ordinary or customary reading of "binary code," the ’544 patent restricts "binary code" to a narrower meaning." The Federal Circuit determined that the errors in claim construction will fundamentally influence the likelihood of success in proving infringement. Thus, Federal Circuit vacated the preliminary injunction and remanded.

The Specification is More Helpful thatn Technical Treatises and Prior Art Patents

Nazomi Communications, Inc. v. ARM Holdings, PLC, [2007-1190](February 19, 2008) [SCHALL, Rader, Prost] The Federal Circuit affirmed summary judgment of non-infringement of U.S. Patent No. 6,332,215.
BRIEF: The district court issued an order construing the single claim term "instructions,"and based on that construction, Nazomi conceded that ARM’s products do not infringe the ’215 patent, and the district court granted ARM’s motion for summary judgment of non-infringement. The invention claimed in the ’215 patent is a hardware accelerator that converts stack-based Java bytecode instructions into register-based “native” instructions that are executable by a register-based central processing unit (CPU). The district court construed the term "instructions" as "either a stack-based instruction that is to be translated into a register-based instruction, or a register-based instructions [sic] that is input to the CPU pipeline," and that in either case, the court found that the instruction "must be upstream of the decode stage of the CPU pipeline" and "cannot mean the control signals that are the output of the decode stage." The Federal Circuit found that the focus on "instructions" was not quite correct and that it was "registered based native instructions" that was used in the claims. Given the clear, specific meaning attributed to "native instructions" and "register-based instructions" in the ’215 patent, we do not find it particularly helpful to consult the technical treatises and prior art patents on which Nazomi relies. The Federal Circuit concluded that one of ordinary skill in the art, reading the claims of the ’215 patent in light of the written description and prosecution history, would attribute a meaning to the claim term "register-based instructions" that does not encompass those signals.

Reconsideration of the Patentability of Methods

In re Bilski, [2007-1130](February 14, 2008) [PER CURIAM] The Federal Circuit granted a rehearing en banc.
BRIEF: The Federal Circuit granted a rehearing en banc, and directed the parties to address five questions:
(1) Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
(2) What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
(3) Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
(4) Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101?
(5) Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

Co-Inventor's Employment Agreement May Have Transferred Rights to Employer

DDB Technologies, L.L.C., v. MLB Advanced Media, L.P., [2007-1211](February 13, 2008) [DYK, Newman, Clevenger] The district court dismissed for lack of jurisction and the Federal Circuit held that that the district court erred in denying DDB’s request for jurisdictional discovery, and remanded for limited jurisdictional discovery and for further consideration of the district court’s jurisdiction based on that discovery.
BRIEF: The jurisdicational issues is whether plaintiff owned the patent in suit, in view of the employement agreement one of the inventors (Barstow) had with Schlumberger. Immediately before the close of discovery, MLBAM entered into negotiations with Schlumberger to acquire any interest that Schlumberger had in the patents in suit. Several months later Schlumberger and MLBAM entered into an agreement that assigned to MLBAM all of Schlumberger’s rights and interest in the patents in suit and granted MLBAM a retroactive license to practice under those patents. The distrit court granted MLBAM's motion to dismiss. The court found that the patents in suit fell within the scope of Barstow’s employment agreement because they were both "suggested by" and "related to" his work for Schlumberger.
Because the language of the employment agreement provided for an automatic assignment of Barstow’s rights, the court rejected DDB’s statute of limitations, waiver, estoppel, and laches defenses. The court also held that the equitable defenses were not available because Barstow had not complied with the disclosure requirements of Paragraph 3 of the employment agreement. Having concluded that Schlumberger, and thereafter MLBAM, was a co-owner of the patents, the court determined that it lacked subject matter jurisdiction because DDB had not joined Schlumberger and could not join MLBAM.
If the assignment under the agreement was automatic, then DDB's assertion of acquiescence and estoppel would not apply. Although state law governs the interpretation of contracts generally, the question of whether a patent assignment clause creates an automatic assignment or merely an obligation to assign is intimately bound up with the question of standing in patent cases, and the Federal Circuit has accordingly treated it as a matter of federal law. The Federal Circuit said whether an assignment of patent rights in an agreement is automatic, requiring no further act on the part of the assignee, or merely a promise to assign depends on the contractual language. If the contract expressly grants rights in future inventions, no further act is required once an invention comes into being, and the transfer of title occurs by operation of law. Contracts that merely obligate the inventor to grant rights in the future, by contrast, may vest the promisee with equitable rights in those inventions once made, but do not by themselves "vest legal title to patents on the inventions in the promisee. The Federal Circuit noted that
Paragraph 4 of Barstow’s employment agreement with Schlumberger stated that Barstow “agrees to and does hereby grant and assign” all rights in future inventions falling within the scope of the agreement to Schlumberger. The Federal Circuit agreed with the district court that this contractual language was not merely an agreement to assign, but an express assignment of rights in future inventions.
The Federal Circuit the tunred to the question whether the employment agreement covered the patents in suit because they “relate in any way to the business or activities” of Schlumberger, or “are suggested by or result from” Barstow’s work for Schlumberger. The Federal Circuit found that those issues were governed by state (Texas) law. The Federal Circuit held that DDB was not entitled to a jury trial on this question. The Fedearl Circuit rejected DDB’s argument that the district court erred by holding a preliminary hearing, rather than awaiting jury trial on the merits, to resolve the jurisdictional issues.
However, the Federal Circuit said that the limited jurisdictional discovery requested by DDB clearly was relevant to the existence of subject matter jurisdiction. The employment agreement is ambiguous as to what is "related to" or "suggested by" Barstow’s work for Schlumberger, because resort to extrinsic evidence, for example, as to the nature of Schlumberger’s business or to that of Barstow’s work, is necessary to determine whether the provision applies. Under both Texas contract law and general contract law, when a contract is ambiguous, conduct of the parties which indicates the construction that the parties themselves placed on the contract may be considered in determining the parties’ true intent. The Federal Cirucit said that in general it gives substantial deference to a district court’s decisions on issues of discovery. However, under the circumstances of this case, given the central relevance of the information sought in discovery, the Federal Circuit found that it was an abuse of discretion for the district court to deny DDB jurisdictional discovery, including document and deposition requests.

Adding a Limitation While Removing Others is Still a Narrowing Amendment for Puproses of Prosecution History Estoppel

International Rectifier Corp. v. IXYS Corp., [2007-1063, -1141, -1165] (February 11, 2008) [LINN, Dyk, Prost] The Federal Circuit reversed summary judgment of infringement because infringement as to each asserted claim was foreclosed either by the combination of our mandate in the prior appeal and the jury verdict or by prosecution history estoppel.
SIGNIFICANCE: An amendment that narrows a claim on any way is a narrowing amendment for purposes of prosecution history estoppel
BRIEF: The threshhold question was whether the Federal Circuit had jurisdiction. The Federal Circuit held that a motion to stay the permanent injunction was equivalent to a notice of appeal. With respect to the merits, the Federal Circuit declined to rely on its previous mandate, and reach the question of prosecution history estoppel, which could affect future cases. Prosecution history estoppel limits the broad application of the doctrine of equivalents by barring an equivalents argument for subject matter relinquished when a patent claim is narrowed during prosecution. LOF: The Federal Circuit reviews issues relating to the application of prosecution history estoppel de novo. IXYS argued that IR added the "adjoining" limitation in order to overcome rejections under 35 U.S.C. § 112, paras. 1–2. IR argued that prosecution history estoppel does not apply to its addition of the term “adjoining” because the resulting change in claim language was broadening, not narrowing, and evening if broadening, the amendment in question is only tangentially related to the asserted equivalent. The Federal Circuit found that the amendment was narrowing, because the term excludes structures that might have been covered by the original claim language, and one cannot argue that an amendment is broadening merely because it eliminated some claim limitations. The Federal Circuit also rejected the argument that the amendment was tangential, noting that IR’s decision to claim that structure using the limiting term “adjoining,” whether or not required to overcome the rejection, cannot be described as only tangentially related to the equivalency of a structure with non-adjoining regions. With the amended language, IR recited precisely the structure it disclosed, and thereby overcame the examiner’s § 112 rejection. The Federal Circuit found that the other issues were covered by its previous mandate, and reversed the district court.

Failure to Find Replacement Counsel Results in Dismissal for Failure to Prosecute

Rocky Mountain Technology Engineering Company, LLC, v. Hutchens Industries, Inc, [2007-1473](February 8, 2008) [DYK, Gajarsa, Linn] NON-PRECEDENTIAL The Federal Circuit affirmed the dismissal of the action for plaintiff's failure to prosecute.
BRIEF: Applying the law of the local circuit because the issue of dismissal was not peculiar to patent law, the Federal Circuit noted that before dismissing an action with prejudice under Rule 41(b), in the Tenth Circuit a district court "ordinarily should consider" a nonexhaustive list of five factors: "(1) the degree of actual prejudice to the other party; (2) the amount of interference with the judicial process; (3) the litigant’s culpability; (4) whether the court warned the party in advance that dismissal would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions." The Federal Circuit found no error in the district court's actions. Because the district court explicitly considered most of the relevant factors and the record as to each of the five factors supports dismissal, the Federal Circuit concluded that the court did not abuse its discretion in dismissing the case with prejudice.

Avoid Claim Limitations That Suggest How the Element is Made

Miken Composites, L.L.C., v. Wilson Sporting Goods Co., [2006-1628] (February 6, 2008) [LINN, Newman, Schall] The Federal Circuit affirmed summary judgment of non-infringement of U.S. Patent No. 5,415,398.
SIGNIFICANCE: Don't claim a structure with a functional term when you don't want to be limited to the function.
BRIEF: The patent was directed to a bat, comprising: a hollow tubular bat frame and an insert positioned within the frame. At issue wsa the meaning of "insert", as defendant's device had an inner element around which the outer element was formed. Miken argued that its inner element was not an insert, because it was not "inserted" into anything. A determination of non-infringement, either literal or under the doctrine of equivalents, is a question of fact. Thus, on appeal from a grant of summary judgment of non-infringement, we must determine whether, after resolving reasonable factual inferences in favor of the patentee, the district court correctly concluded that no reasonable jury could find infringement. The Federal Circuit noted that nothing in the claims or specification indicates, explicitly or implicitly, that the inventor used the term insert in a novel way or intended to impart a novel meaning to it. To the contrary, the claims and written description of the patent consistently used the term "insert" in the sense of its ordinary meaning as "something inserted or intended for insertion. The Federal Circuit said that had the patentee, who was responsible for drafting and prosecuting the patent, intended something different, it could have prevented this result through clearer drafting. The issue would have been different if the claims contained the language argued in Wilson’s briefs, but they do not. It is the language of the claims not the argument that governs.
The Federal Circuit also saw no reason to depart from the ordinary meaning of the terms, noting that in Nystrom, it held that the broadening of the ordinary meaning of a term in the absence of support in the intrinsic record indicating that such a broad meaning was intended violates the principles articulated in Phillips v. AWH. Based on Phillips, a claim term should not be read to encompass a broader definition "in the absence of something in the written description and/or prosecution history to provide explicit or implicit notice to the public—i.e., those of ordinary skill in the art—that the inventor intended a disputed term to cover more than the ordinary and customary meaning revealed by the context of the intrinsic record." The Federal Circuit affirmed the judgment of non-infringement.

Attorneys Fees and Costs Under An Agreement are Not Limited by Statute

Monsanto Company v. David, [2007-1104](February 5, 2008) [LOURIE, Bryson, Moore] The Federal Circuit affirmed that the ’605 patent was infringed, but because portions of the damages award were clearly erroneous, we affirmed in part, vacated in part, and remanded.
BRIEF: The trial court held that David had willfully infringed the ’605 patent and breached the Technology Agreement by planting saved seed from a prior year’s crop. A damages award of $226,214.40 was entered in favor of Monsanto. The court further awarded Monsanto an additional $10,000 in enhanced damages in lieu of treble damages, and attorney fees in the amount of $323,140.05, costs in the amount of $164,608.03 pursuant to the Technology Agreement, or alternatively in the amount of $30,542.99 pursuant to 28 U.S.C. § 1920, and prejudgment interest in the amount of $63,026.95, for a total of $786,989.43.
The Federal Circuit said that it reviews the district court’s damages decision for an "erroneous conclusion of law, clearly erroneous factual findings, or a clear error of judgment amounting to an abuse of discretion."
The Federal Circuit agreed with Monsanto that the district court’s decision to award attorney fees was not an abuse of discretion. David knew that saving seed was a violation of the Technology Agreement, yet he did so anyway. He attempted to cover up his infringement and deceive Monsanto. This Federal Circuit said this was not a case of a farmer unknowingly infringing a patent, rather it was a case of a farmer with apparent disregard for patent rights, license agreements, and the judicial process. Accordingly, the Federal Circuit agreed with the district court that this is an "exceptional" case, and found that awarding of attorney fees was within the discretion of the district court. The Federal Circuit also rejected David’s argument that the attorney fees and costs stipulated to in the Technology Agreement are limited by statute. 35 U.S.C. § 285 awards attorney fees to patent holders like Monsanto, but the Technology Agreement here also does. Having violated the Technology Agreement, there is no reason why its attorney fee provision cannot be enforced. Similarly, 28 U.S.C. § 1920 does not set maximum costs around which private parties may not contract, it merely limits the amount that federal courts may tax as costs in the absence of "explicit statutory or contractual authorization to the contrary." The Federal Circuit did find that the award of costs under both the Agreement and under § 1920 would be duplicative. The Federal Circuit also rejected David's challenges the reasonable royalty rate, rejecting the use of the technology fee under the Agreement. The Federal Circuit agreed with David that the court erred in calculating the amount of infringement, and remanded for further calculation.

No Mandamus for You. Come Back Next Year.

In Re Roche Mollecular Systems, Inc., [Misc. 854] (February 1, 2008)[FRIEDMAN, MAYER, Newman] The Federal Circuit denied a Petition for Mandamus.
SIGNIFICANCE: Mandamus is not appropriate to stop what a subsequent appeal can fix.
BRIEF: Stanford sued Roche for patent infringement. On cross motions for summary judgment, the district court determined that Roche was barred from asserting (1) that it was the owner of the patents, (2) that it had a license, and (3) that Stanford lacked standing. Roche petitioned for a writ of mandamus to direct the district court to vacate its summary judgment order and to enter judgment in favor of Roche. The remedy of mandamus is available only in extraordinary situations to correct a clear abuse of discretion or usurpation of judicial power. A party seeking a writ bears the burden of proving that it has no other means of attaining the relief desired, and that the right to issuance of the writ is "clear and indisputable. That a petitioner may suffer hardship, inconvenience, or an unusually complex trial does not provide a basis for a court to grant mandamus. The Federal Circuit held that "Roche has not shown that it cannot obtain the relief it seeks by review after final judgment. Thus, mandamus relief is not appropriate."

A Patentee Who Chooses Broad Claim Language Must Make Sure the Claims Are Enabled

Sitrick v. Dreamworks, LLC., [2007-1174](February 1, 2008)[MOORE, Michel, Rader] The Federal Circuit affirmed the district court's judgment that Sitrick's U.S. Patent Nos. 5,553,864 and 6,425,825 were invalid for lack of enablement and indefiniteness.
SIGNIFICANCE: A Patentee who chocses broad claim lanaguage must make sure the broad claims are fully enabled.
BRIEF: The patents in suit relate to combining a user's audio with a preexisting videogame or movie. The district court granted summary judgment that because integration wtih movies was not enabled, the claims were invalid. The Federal Circuit said the full scope of the claimed invention must be enabled. The rationale for this statutory requirement is straightforward. Enabling the full scope of each claim is "part of the quid pro quo of the patent bargain." The Federal Circuit warned that a patentee who chooses broad claim language must make sure the broad claims are fully enabled." The scope of the claims must be less than or equal to the scope of the enablement to ensure that the public knowledge is enriched by the patent specification to a degree at least commensurate with the scope of the claims.
Because the asserted claims are broad enough to cover both movies and video games, the Federal Circuit said that the patents must enable both embodiments: "Even if the claims are enabled with respect to video games—an issue we need not decide—the claims are not enabled if the patents do not also enable for movies." The Federal Circuit said that an enablement analysis begins with the disclosure in the specification, and found that neither patent specification in this case teaches how the substitution and integration of a user image would be accomplished in movies. Finding clear and convincing evidence of the lack of enablement, the Federal Circuit affirmed, and did not have to reach the other issues of the appeal, except to not that plaintiff's objection to the transfer of venue below had been waived.