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In This Issue
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The
Federal Circuit Affirms District Court Award of Attorneys’ Fees under 35
U.S.C. § 285
·
District
Court Invalidates Inventory Control Patent Under 35 U.S.C. § 101
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The Federal
Circuit Affirms District Court Award of Attorneys’ Fees under 35 U.S.C. § 285
The Court of Appeals for the Federal Circuit (“Federal Circuit”)
affirmed the award of attorneys’ fees by the U.S. District Court for the
District of Delaware under 35 U.S.C. § 285 against Bayer in Bayer CropScience AG v. Dow Agroscience.
Bayer brought the underlying action against Dow alleging infringement
of patents directed to dmmg gene
soybeans genetically engineered to tolerate herbicide, and Dow responded that
it was sublicensed under the patents-in-suit by virtue of its business partnership
with M.S. Technologies (“M.S. Tech”), which had a license from Bayer. On summary judgment, Bayer argued that M.S.
Tech’s license was limited to non-commercial exploitation of the
patents-in-suit, while Dow argued that the license to M.S. Tech conveyed
broad rights, including rights to commercialize under the
patents-in-suit. The parties stipulated
English law governed the agreements, such that the background and surrounding
circumstances of the contract’s formation were to be considered in
interpreting the license agreement, after hearing evidence, the District
Court (i) adopted Dow’s interpretation of the agreement, (ii) held that Dow
was indeed broadly licensed under the patents-in-suit, and (iii) entered
summary judgment of noninfringement, which the Federal Circuit affirmed.
After the Federal Circuit’s affirmance on the license question, the case
was remanded to the District Court to resolve Dow’s motion to declare the
case exceptional and award attorneys’ fees under 35 U.S.C. § 285. After a two-day hearing, the Magistrate
Judge issued a Report and Recommendation finding the case exceptional and
awarding attorneys’ fees, which the District Court Judge adopted. In so doing, the Judge observed, inter alia, that Bayer’s witnesses and
documentation contradicted Bayer’s arguments, and that “Bayer’s conduct in
litigating this case in the face of evidence that contradicted its contorted
reading of the Agreement was objectively unreasonable.” The Judge further observed that the award
of attorneys’ fees was appropriate because the “positions Bayer took to
support their contract interpretation arguments were directly contradicted by
the record evidence Bayer had obtained through early discovery and Bayer
should have made every effort to discover before filing suit,” and that “had
Bayer done any due diligence, it would have learned that no witness supported
Bayer’s construction of the Agreement and this case should never have been
filed.” The District Court lastly
opined that Bayer’s motion for
preliminary injunction against Dow was “frivolous and unnecessarily increased
the costs of the litigation.”
The Federal Circuit started with “Section 285 of the Patent Act [which]
provides: ‘The court in exceptional cases may award reasonable attorney fees
to the prevailing party.’ 35 U.S.C. § 285. In Octane Fitness, the Supreme Court clarified what constitutes an
exceptional case:
[A]n
‘exceptional’ case is simply one that stands out from others with respect to
the substantive strength of a party’s litigating position (considering both
the governing law and the facts of the case) or the unreasonable manner in
which the case was litigated. District courts may determine whether a case is
‘exceptional’ in the case-by-case exercise of their discretion, considering
the totality of the circumstances.
Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). After Octane Fitness, a fee seeking party
must show that it is entitled to § 285 fees by a ‘preponderance of evidence,’
id. at 1758 - a ‘change in the law
lower[ing] considerably the standard for awarding fees,’ Oplus Technologies, Ltd. v. Vizio, Inc., 782 F.3d 1371, 1374
(Fed. Cir. 2015).”
The Federal Circuit further opined that, in examining the totality
of the circumstances, the District Court applied the correct legal standard under
Section 285, and properly set forth the “reasons why Bayer’s positions on the
merits and litigation tactics coalesced in making this case, in its judgment,
exceptional.”
The Federal Circuit also rejected Bayer’s argument that the District
Court’s fee award was erroneous because “Bayer had an objectively reasonable
case on the merits” on the following grounds (i) the “Supreme Court rejected
such a rigid approach in Octane Fitness,
holding that whether a party’s merits position was objectively reasonable is
not dispositive under § 285” and (ii) “[i]nstead, … adopted a holistic and
equitable approach in which a district court may base its discretionary
decision on other factors, including the litigant’s unreasonableness in
litigating the case, subjective bad faith, frivolousness, motivation, and
‘the need in particular circumstances to advance considerations of
compensation and deterrence.’”
The Federal Circuit lastly observed that the District Court
considered factors beyond the merits of the infringement case (e.g., Bayer’s
litigation conduct) in declaring the case exceptional, given the Bayer
executive’s testimony that Bayer did not retain commercial rights in the M.S.
Tech license because “it was relatively black and white certainly in my mind
that we were divesting these assets.”
District Court Invalidates Inventory
Control Patent Under 35 U.S.C. § 101
The U.S.
District Court for the Eastern District of North Carolina recently
invalidated U.S. Patent No. 6,477,503 (“the ‘503 patent”) as being directed
to unpatentable subject matter under 35 U.S.C. § 101 in Mankes v. Fandango, LLC et al.
Plaintiff
and inventor Mankes brought suit alleging that the Fandango online
reservation system as operated in conjunction with Regal Entertainment
Group’s ("Regal") local reservation system and box office ticket
sales infringed the ‘503 patent, which is directed to methods to control
inventory when goods and services are sold both through the Internet and at a
physical site, both directly and indirectly.
When
first filed, the District Court stayed the case because the question of indirect
infringement was being addressed by the Supreme Court in Limelight v. Akamai. In
June 2014, the Supreme Court unanimously held that liability for indirect - induced
- infringement only can be found when there is direct patent infringement and
remanded the case back the Federal Circuit (Akamai, 134 S.Ct. 2111 (2014)), and the District Court lifted the
stay in the Mankes action.
Mankes
initially moved to dismiss Fandango’s counterclaims, and Defendants filed a
motion for judgment on the pleadings, which the District Court granted. The District Court, however, held Mankes’
motion to dismiss in abeyance pending briefing, but Fandango voluntarily
dismissed the counterclaims before the merits of Mankes’ motion were
addressed.
Mankes
appealed the judgment on the pleadings. While the parties were briefing the appeal,
the Federal Circuit issued its en banc
decision in the remand from the Supreme Court, which clarified the legal
standards underlying the District Court’s grant of Defendants’ motion for
judgment on the pleadings. Akamai, 797 F.3d 1020 (Fed. Cir. 2015)
(en banc). The Federal Circuit specifically held that
when more than one actor is involved in practicing the steps of a claimed method,
a single entity will be liable for others’ performance of method steps, and
ultimately direct infringement, “where that entity directs or controls the
others' performance" or "where the actors form a joint enterprise.”
In
view of its intervening en banc
ruling in Akamai, the Federal
Circuit vacated the District Court’s grant of judgment on the pleadings in
the Mankes’ infringement action, and remanded the case for further
proceedings. Mankes, thereafter, filed
a Second Amended Complaint alleging infringement under the new Akamai standard.
In
August 2016, Fandango and Regal moved to dismiss the Second Amended Complaint,
under Federal Rule of Civil Procedure 12(b)(6), on the grounds that the ‘503
patent claims were directed to an abstract idea which is not patent eligible subject
matter under 35 U.S.C. § 101.
Under Section
101, patentable subject matter comprises “any new and useful process,
machine, manufacture, or composition of matter, or any new and useful
improvement thereof,” and the Supreme Court has long held that "[l]aws
of nature, natural phenomena, and abstract ideas" are excepted from §
101 and thus, are not patent-eligible. Alice
Corp. Pty. Ltd., v. CLS Bank Int'l, 134 S.Ct. 2347, 2354 (2014.)
The
Supreme Court has set out a two-question analysis for determining whether
claims are directed to patent-eligible subject matter. The first question asks whether the claims
are directed to an abstract idea, and the second question looks to whether
there is "an element or combination of elements that is sufficient to
ensure that the patent in practice amounts to significantly more than a
patent upon the ineligible concept itself." Although the Supreme Court has not defined
the precise contours of what constitutes an abstract idea, in Alice, an "intermediated
settlement" was directed to an abstract idea, and in Bilski, a method of hedging risk was
directed to an abstract idea.
In analyzing
the first question, the District Court found that the asserted claims of the
‘503 patent, which recited methods for
practicing a reservation system in which an "event vendor uses a local
event server to allocate, control, and reserve their inventory at their place
of business," while making available inventory accessible for purchase
by consumers on the Internet, were directed to an abstract idea, i.e., allocating,
tracking, and controlling inventory. The
District Court also specifically held that the concept of allocating,
tracking, and controlling inventory is a fundamental business and economic
practice in commerce.
In
analyzing the second question, the District Court found that the asserted
claims did not recite an inventive concept, such that the asserted claims did
not claim significantly more than an ineligible abstract idea.
Mankes
argued that, notwithstanding the District Court’s conclusions, the ‘503
patent claims were patentable because the claimed methods improved computer-based
inventory management. Specifically, Mankes
argued that the "claims recite the specific manner in which the local
event server and active reservation server interact to enable local control
of all inventory." The District
Court rejected Mankes’ argument holding that the ‘503 patent claims did not (i)
improve the performance of the computer system, (ii) require modification of the
conventional use of the computer or Internet, or (iii) otherwise use computer
servers or the Internet in a non-conventional combination or arrangement. The District Court held that, rather, the
‘503 patent claims merely recited a method for allocating, tracking and
communicating inventory information between two servers, which is not patentable
under Section 101.
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