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Commentary Notes Federal Circuit Comment

J.P. Morgan Appeal Dismissed for Lack of Jurisdiction

In Intellectual Ventures II LLC v. J.P. Morgan Chase & Co., 2014-1724 (Fed. Cir. Apr. 1, 2015), the United States Court of Appeals for the Federal Circuit dismissed the bank defendants’ interlocutory appeal for want of jurisdiction. Intellectual Ventures, a known patent troll, filed the suit against J.P. Morgan Chase and several other financial institutions in 2013, alleging infringement of five patents. The defendants, who are represented by renowned law and technology scholar Mark Lemley, filed a motion to stay the case pending the outcome of several CBM review petitions they intended to file. The district court denied the motion, citing, among other things, the plaintiff’s Sixth Amendment right to a speedy trial. In a 2-1 decision, the Federal Circuit dismissed the defendants’ appeal, which was premised solely upon a grant of jurisdiction in §18 of the America Invents Act, a provision which the court said “must be construed narrowly”. Because the Patent Trial and Appeal Board had not yet acted on the defendants’ CBM review petitions, there was not yet a “proceeding” for the purposes of §18, and thus, the court had no jurisdiction to hear the case. The majority found support for this position in the legislative history of the America Invents Act, as well as through an interpretative analogy to the meaning of “proceeding” in 35 U.S.C. §325.

Court Agrees with USPTO: Settlement Agreements Are Not Grounds for Dismissing Patent Validity Challenges

A week after its dismissal of the J.P. Morgan Chase appeal, the Federal Circuit was called to interpret the limits of another statutory grant of interlocutory review rights in Automated Merchandising v. Lee, 2014-1728 (Fed. Cir. Apr. 10, 2015). The court affirmed the rejection of a challenge to the USPTO’s refusal to terminate pending patent reexaminations because the refusal was not a “final agency action” under the Administrative Procedure Act. The dispute originated in a patent infringement suit by Automated Merchandising against Crane Co., which responded by requesting USPTO reexamination of the validity of those patents. The parties settled, prompting Automated to ask the USPTO to terminate the reexaminations. When the agency refused to do so, Automated challenged that decision as a violation of the APA. After an adverse ruling in the district court, the company appealed, naming Michelle Lee, the new director of the USPTO, as the defendant. On de novo arbitrary and capricious review, the Federal Circuit agreed with the USPTO’s position that its refusal to terminate was not a “final agency action” and thus could not be challenged in court. This argument had not been raised below, where the district court had instead ruled that a consent judgment pursuant to a settlement between the parties was not a “judgment on the merits” requiring termination of the reexamination proceedings. Although the court stressed that Automated “has lost no patent rights from the refusal to terminate”, its decision serves as a warning to patent trolls, who will no longer be able to shield suspect patents from invalidation by brokering a settlement.

Attorney Misconduct-Based Fee-Shifting Request Revived in Light of Recent Supreme Court Decision

In Oplus Technologies, Ltd. v. Vizio, Inc., 2014-1297 (Fed. Cir. Apr. 10, 2015), the Federal Circuit remanded the rejection of a request for costs and attorneys’ fees premised upon the plaintiff’s attorneys’ clear misbehavior.The case began as a patent infringement suit initiated by Oplus Technologies against Vizio, which Vizio won on the merits through a summary judgment of noninfringement. Vizio then moved to recover costs and attorneys’ fees, prompting a cascade of findings of “inappropriate, unprofessional, and vexatious” misconduct on the part of Oplus’ Niro Haller & Niro attorneys. Nevertheless, the district court denied Vizio’s fee request on the grounds that “other tools for sanctioning behavior exist and apply to [this] misconduct.” Applying abuse-of-discretion review, the United States Court of Appeals for the Federal Circuit vacated and remanded, calling attention to a U.S. Supreme Court decision — issued after the district court’s decision — “which lowered the standard for assessing entitlement to fees”. The court stressed that Oplus’ “egregious pattern of misconduct” was “exceptional”, and while it did not rescind the district court’s discretion to deny fees, it required that court on remand to “articulate the reasons for its fee decision” should it again find that fees were not warranted.