Federal
Circuit Reverses Order Denying Stay
In VirtualAgility
Inc. v. Salesforce.com, Inc. (Appeal No. 2014-1232), the Federal Circuit reversed
the district court’s order denying defendants’ motion for a stay of the
district court proceedings pending CBM review.
In January 2013, VirtualAgility sued the defendants
alleging infringement of U.S. Patent No. 8,095,413 (‘413 patent). On May 24,
2013, defendant Salesforce filed a petition with the Patent Trial and Appeal
Board (PTAB) for post-grant review of all claims of the ‘413 patent under the
CBM program. On May 29, 2013, defendants filed a motion to stay district
court proceedings pursuant to AIA § 18(b)(1). In
November 2013, the PTAB granted-in-part Salesforce’s petition based on its
conclusion that all claims of the ‘413 patent are directed to a covered
business method, and are more likely than not patent-ineligible under 35
U.S.C.
§ 101 and invalid under § 102.
In January 2014, the district court denied defendants’ motion
to stay the case pending CBM review. Defendants
filed an interlocutory appeal, and also filed motions to stay the district
court proceedings pending the disposition of the appeal.
The Federal Circuit noted that the statute (AIA §
18(b)(1)) instructs the district court to consider four factors when deciding
whether to grant a stay: (1) whether a stay, or the denial thereof, will
simplify the issues in question and streamline the trial; (2) whether
discovery is complete and whether a trial date has been set; (3) whether a
stay, or the denial thereof, would unduly prejudice the nonmoving party or
present a clear tactical advantage for the moving party; and (4) whether a
stay, or the denial thereof, will reduce the burden of litigation on the
parties and on the court.
The Federal Circuit, in a split decision, found that three
of the four factors weighed heavily in favor of a stay: simplification of the
issues and streamlining
of the trial, whether discovery
is complete and a trial date has been set, and reduction of the burden of litigation
on the parties and the court. The Federal Circuit also found that the undue
prejudice factor, at best, weighed slightly in favor of denying a stay. On
this record, the Federal Circuit concluded that the district court abused its
discretion when it denied the stay.
Federal Circuit Affirms Dismissal For
Lack Of Standing
In Stauffer v.
Brooks Brothers Group, Inc. (Appeal No. 2013-1180), the Federal Circuit
affirmed the dismissal of Mr. Stauffer’s suit for lack of standing due to the
elimination of the qui tam provision in the false-marking statute.
The basis of Mr. Stauffer’s allegation was that Brooks
Brothers had violated the false-marking statute by marking its bow ties with
patent numbers that had expired more than a half century ago. However, before
reaching the merits of the suit and before enactment of the AIA, the district
court dismissed the suit for lack of standing, finding that Mr. Stauffer
failed to satisfy the constitutional requirement of an “injury in fact.” On
appeal, the Federal Circuit held that, if Mr. Stauffer’s allegations were
correct, the United States had suffered an “injury in fact” and that
therefore Mr. Stauffer, as an assignee of the government’s damages claim,
satisfied the requirement of showing standing. The case was the remanded.
While the case was pending, the AIA was enacted. The AIA
made three significant changes to the false-marking statute: it eliminated
the statute’s qui tam provision; it
expressly stated that marking a product with an expired patent is not a
violation of the statute; and it provided that the amendments apply to all
pending cases.
After
enactment of the AIA, Mr. Stauffer conceded that the amendments eliminated
his standing and left him with no claim for relief on the merits. He
contended, however, that applying the amendments retroactively violated the
Constitution’s separation of powers. In response to the district court’s
order to show cause why his case should not be
dismissed, Mr. Stauffer argued that the retroactive application of the
amendments usurped the President’s pardon power. According to Mr. Stauffer,
Brooks Brothers committed a criminal act by falsely marking its bow ties with
expired patent numbers. By eliminating Brooks Brothers’ criminal liability, Mr.
Stauffer claimed, Congress effectuated a pardon -a right exclusively granted
to the President. Mr. Stauffer also argued that the amendments to the
false-marking statute violated the common-law qui tam principle that prohibits use of a pardon to vitiate a qui
tam action once it has commenced. The district court again dismissed Mr.
Stauffer’s suit for lack of standing.
The
Federal Circuit held the AIA amendments did not constitute an impermissible
pardon, but were “better characterized as repealing a law, an action
undoubtedly within Congress’s power.” The Federal Circuit affirmed the dismissal
of Mr. Stauffer’s suit for lack of standing due to the elimination of the qui
tam provision in the false-marking statute.
Federal Circuit Affirms Summary Judgment
That Claims Were Patent Ineligible
In Digitech Image
Technologies, LLC v. Electronics for Imaging, Inc. (Appeal No. 2013-1600),
Digitech asserted a patent directed to the generation and use of an “improved
device profile” that describes spatial and color properties of a device
within a digital image processing system.
Digitech filed infringement suits against 32 defendants
asserting claims directed to a “device profile” or to methods for generating
a “device profile.” Several defendants filed summary judgment motions seeking
to invalidate the asserted claims of under 35 U.S.C. § 101. The district
court granted the defendants’ motions and found that all of the asserted
claims were subject matter ineligible. The district court found that the
“device profile” claims were directed to a collection of numerical data that
lacks a physical component or physical manifestation. The district court thus
concluded that a “device profile” is nothing more than information and does
not fall within one of the categories of eligible subject matter under
section 101. The district court further concluded that the asserted method
claims for generating a device profile encompass the abstract idea of
organizing data through mathematical correlations. The district court thus
concluded that the asserted method claims were also ineligible under section
101.
On appeal, the Federal Circuit stated that the device
profile described in the patent was not a tangible or physical thing and thus
does not fall within any of the categories of eligible subject matter.
Rather, the independent claims describe a device profile as a collection of
information; specifically, a description of a device dependent transformation
of spatial and color information.
The Federal Circuit held that the device profile, as
claimed, is a collection of intangible color and spatial information, and
therefore did not encompass eligible subject matter as required by section
101 and is not patent eligible. The
Federal Circuit accordingly upheld the district court’ grant of summary
judgment that the claims were patent ineligible.
Federal Circuit Vacates Injunction And
Contempt Sanctions
In ePlus, Inc. v.
Lawson Software, Inc. (Appeal No. 2013-1506), the Federal Circuit vacated
an injunction and civil contempt sanctions.
ePlus sued Lawson for infringement
and the district court found two of the asserted system claims and three of
the asserted method claims not invalid, and a jury found that Lawson
infringed those claims. In an earlier appeal, the Federal Circuit reversed in
part on the ground that the system claims were invalid and that two of the
asserted method claims were not infringed. The Federal Circuit affirmed only
the infringement verdict as to one method claim—claim 26—of the ’683 patent.
On remand, the district court modified the injunction in one respect and
found Lawson in civil contempt for violating the injunction. Lawson appealed
both the injunction and contempt order. During the pendency of Lawson’s
appeals, the PTO completed a reexamination of the ’683 patent and determined
that claim 26 was invalid. In a
separate appeal, the Federal Circuit affirmed the PTO’s invalidity determination,
and the PTO cancelled claim 26.
The issues raised on appeal were (1) whether an injunction
can continue after the PTO has cancelled the only claim on which the
injunction was based; and , (2) whether civil
contempt remedies based on the violation of an injunction are appropriate
when the injunction has been overturned on direct appeal.
The Federal Circuit, following its Fresenius decision, held that the district court’s injunction and
contempt orders could not stand. The
case was vacated and remanded with instructions to dismiss. |