In This Issue
· Federal Circuit Reverses District Court
Finding of No Invalidity
· Federal
Circuit Affirms Dismissal of Declaratory Judgment Action
· Federal
Circuit Limits Award Of Costs Relating To Electronic Discovery
· Federal
Circuit Vacates Denial Of Motion For Attorneys’ Fees
· Federal
Circuit Vacates In Part ITC Exclusion Order
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Federal Circuit Reverses District
Court Finding of No Invalidity
In Galderma Labs L.P. v. Tolmar, Inc. (Appeal No.
2013-1034), the Federal Circuit reversed the district court’s finding that
claims of the asserted patents were not invalid as obvious.
Tolmar filed an Abbreviated New Drug Application (“ANDA”) with the FDA, seeking to
market a generic version of Galderma’s topical acne
treatment, Differin Gel 0.3%. The district court held that although the
prior art disclosed the treatment with the active ingredient from 0.1% to 1%,
the claims of the Galderma patent were not obvious
as the prior art taught away from the use of concentrations over 0.1%, there
were unexpected results, and there was evidence of commercial success.
The Federal Circuit noted that the district court erred in
framing its obviousness analysis. The
district court required Tolmar to show motivation
to triple the concentration of the active ingredient from 0.1% to 0.3%, but
the law does not require a showing of motivation to alter a prior art
commercial embodiment. The requirement
to prove a claim obvious is to show that “the differences between the claimed
invention and the prior art are such that the claimed invention as a whole
would have been obvious before the effective filing date of the claimed
invention to a person having ordinary skill in the art to which the claimed
invention pertains.”
The Federal Circuit cited Novo Nordisk A/S v. Caraco Pharm. explaining that “where there is a range disclosed in the prior art, and the
claimed invention falls within that range, the burden of production falls
upon the patentee to come forward with evidence that (1) the prior art taught
away from the claimed invention; (2) there were new and unexpected results
relative to the prior art; or (3) there are other pertinent secondary
considerations.”
(1) The district court found that the prior art taught
away from a selection of 0.3% active ingredient due to “dose-dependent increases in side effects,”
however, the Federal Circuit explained that a prior art expression of a
preference for an alternative that does not “criticize, discredit, or
otherwise discourage investigation into the invention claimed” does not teach
away.
(2) The district court found that the tolerability of the
0.3% solution as compared to that of the 0.1% solution was an unexpected
result as a skilled artisan in the field would have expected a “significant
increase in side effects,” when tripling the concentration. The Federal Circuit agreed that the result
was unexpected, but held that it was not “probative of nonobviousness”
as it was different in degree rather than kind.
(3) The district court found evidence of commercial
success in the quick market capture of Differin Gel
0.3% and in Tolmar’s application to market a
generic version to profit from the invention. The Federal Circuit noted that others could not enter the market due
to a blocking patent and this weakened the inference of nonobviousness and that “the mere fact that generic pharmaceutical companies seek approval
to market a generic version of a drug, without more, is not evidence of
commercial success that speaks to the non-obviousness of patent claims.” It found that the “commercial success of Differin Gel 0.3% is of minimal probative value,” and
that the “district court erred in adjudging this factor as confirming its
conclusion of nonobviousness.”
The Federal Circuit therefore reversed the district
court’s findings of no invalidity.
Federal Circuit Affirms Dismissal of
Declaratory Judgment Action
In Futurewei Technologies, Inc. v. Acacia Research
Corp. (Appeal No. 2013-1090), the Federal Circuit affirmed the district
court’s dismissal of a complaint for declaratory judgment.
Access
Co., Ltd. owns the five patents at issue. Access entered into an exclusive license agreement with Acacia Patent
Acquisition LLC (“APAC”), a wholly owned subsidiary of Acacia Research
Corporation. The agreement gave APAC “the exclusive right to grant sublicenses,
to sue for and collect past, present and future damages and to seek to obtain
injunctive or any other relief for infringement of” specified patents. The
agreement also provided that APAC could not enforce the patents against
Access’s customers and end-users. APAC
subsequently assigned its rights to SmartPhone, a
wholly owned subsidiary.
In
April of 2012, SmartPhone sued Futurewei and Huawei (“Huawei”) in the Eastern District of Texas for infringement of
the patents. The next day Huawei filed
complaints in the Central District of California against Access, APAC and SmartPhone seeking declaratory judgment of noninfringement and invalidity of the patents, that the
parties to the agreement intended Huawei to benefit from the agreement as a
third party beneficiary (ten year customer of Access), that SmartPhone is bound by the agreement, and that APAC and SmartPhone are acting as corporate alter egos. The California district court dismissed the
complaints for differing reasons including the “first to file rule”, failure
to state a claim, and Federal Rule of Civil Procedure 13(a) (“FRCP13”)
regarding compulsory counterclaims. Huawei appealed the dismissal of the claims that the parties intended Hawei to benefit from the agreement as a third party and
that APAC and SmartPhone are acting as corporate
alter egos.
The
Federal Circuit affirmed the district court dismissal of the claims, but on
other grounds. The Federal Circuit
applied the district court use of the “first to file” rule to the remaining
complaints citing Merial Ltd. v. Citla Ltd. that “When two actions that sufficiently overlap are filed in
different federal district courts, one for infringement and the other for
declaratory relief, the declaratory judgment action, if filed later,
generally is to be stayed, dismissed, or transferred to the forum of the
infringement action.” Although
exceptions are made for “judicial and litigant economy, and judicial and
effective disposition of disputes,” the same provisions of the license
agreement are, or could be, at issue in the
first-filed action in Texas and Huawei is a Texas corporation. The Federal Circuit noted that the
non-infringement and invalidity issues will be litigated in the Texas case
and separating the third-party-beneficiary and alter ego issues “cannot serve
the objective of efficiency” even where questions of California contract law
may apply.
Although
the Federal Circuit utilized the “first-to-file” rule in affirming the
dismissal of the alter ego claim it was supported by the district court’s
finding that it was a compulsory counterclaim under FRCP13. The Ninth Circuit applies the “logical
relationship test,” and a “logical relationship exist when the counterclaim
arises from the same aggregate set of operative facts as the initial claim.” The Federal Circuit found a strong logical
relationship between Huawei’s alter ego claim, SmartPhone’s right to enforce the patents, and Huawei’s defense as an Access customer, all
of which arise from the license agreement.
The
Federal Circuit therefore affirmed the dismissal of the complaints under the
first to file rule.
Federal Circuit Limits Award Of Costs
Relating To Electronic Discovery
In CBT Flint Partners, LLC v. Return Path, Inc., (Appeal No. 2013-1036),
the Federal Circuit overturned in part a district
court award of electronic discovery costs. Specifically, CBT lost in
the district court, and the district court ruled that CBT should have to pay
the defendants their “costs.” The Federal Circuit held that the district
court erred in its interpretation of the statutory provision governing the
taxation of costs under 28 U.S.C. § 1920(4).
The
district court awarded the defendants all electronic discovery costs
including those associated with project management, keyword searching, and
ensuring compliance with the Federal Rules. The Federal Circuit held
that recoverable costs under section 1920(4) are those costs necessary to
duplicate an electronic document in as faithful and complete a manner as
required by rule, by court order, by agreement of the parties, or otherwise. To the extent that a party is obligated to
produce (or obligated to accept) electronic documents in a particular format
or with particular characteristics intact (such as metadata, color, motion,
or manipulability), the costs to make duplicates in such a format or with
such characteristics preserved are recoverable as “the costs of making copies
. . . necessarily obtained for use in the case.” But only the costs of
creating the produced duplicates are included, not a number of preparatory or
ancillary costs commonly incurred leading up to, in conjunction with, or
after duplication.
The
Federal Circuit stated that the creation of “load files” would be covered to
the extent that those files contain information required by the requested
production. Also, the costs of copying
responsive documents to production media would be recoverable. With respect to source code, covered costs
include the costs incurred in providing a secured computer for the time the
requester is entitled to access to it, installing on the secured computer
whatever review software the requester requires, and copying the source code
files to the secured computer. However, costs incurred in planning,
preparation, coordination, and communications associated with those tasks would
not be recoverable.
Federal Circuit Vacates Denial Of Motion For Attorneys’
Fees
In Kilopass Technology, Inc. v. Sidense Corp. (Appeal No. 2013-1193), the Federal Circuit vacated and remanded the
district court’s denial of a motion seeking an award of attorneys’ fees under
35 U.S.C. § 285.
The
district court granted summary judgment in favor of Sidense,
holding that it did not infringe Kilopass’s patents. The Federal Circuit summarily
affirmed that decision under Federal Circuit Rule 36. While that appeal was pending, Sidense filed a motion in the district court seeking an
award of attorneys’ fees under 35 U.S.C. § 285. The district court denied the motion and Sidsense appealed.
The
district court rejected Sidense’s request for fees
based solely on Sidense’s purported failure to
establish subjective bad faith. The
Federal Circuit held that subjective bad faith only requires proof that the
lack of objective foundation for the claim was either known or so obvious
that it should have been known by the party asserting the claim. Actual knowledge of baselessness is not
required. A defendant need only prove
reckless conduct to satisfy the subjective component of the § 285 analysis. |