Federal Circuit Flash Digest – Cases in Brief

Patent Applicant Appealing a Patent and Trial Appeal Board Decision in District Court Must Pay All Expenses Including Attorney’s Fees

Nantkwest, Inc. v. Matal, No. 2016-1794 (Fed. Cir. June 23, 2017).

In Nantkwest, Inc. v. Matal, No. 2016-1794 (Fed. Cir. June 23, 2017), the Federal Circuit reversed the decision of the District Court for the Eastern District of Virginia which had held that the term “expenses” in 35 U.S.C. § 145 does not include attorney’s fees.

Section 145 provides that a patent applicant dissatisfied with the decision of Patent and Trial Appeal Board (“PTAB”) may appeal directly to the District Court for the Eastern District of Virginia in lieu of the immediate appeal to the Federal Circuit. The statute further provides that the applicant must pay “[a]ll of the expenses of the proceeding.” The Federal Circuit had previously held that this provision applies regardless of the outcome of the proceeding.

The district court construed “expenses” to include costs but not attorney’s fees. The Federal Circuit disagreed. The majority pointed to standard legal dictionaries and treaties that defined “expenses” to include attorney’s fees. This position is buttressed by a Supreme Court decision that holds that “costs” only represent a fraction of “expenses” in a different statute. The ordinary meaning and the Supreme Court’s interpretation of “expenses” lend significant weight to the conclusion that Congress meant to include attorney’s fees in the phrase “all expenses.” Next, the majority rejected the argument that the attorney’s fees of the United States Patent and Trademark Office (USPTO) are not “expenses of the proceedings” because the USPTO would have had to pay the portions of these full-time employees’ salaries regardless of the suit in the district court. The Federal Circuit in the past had awarded salaried attorneys an apportionment of their salaries as fees. The majority also pointed out that Section 145 proceedings impact the USPTO’s resources. The majority thus concluded that “expenses” in Section 145 include attorney’s fees of the appeal in the district court even against the backdrop of the “American Rule” that the prevailing litigant ordinarily cannot collect a reasonable attorney’s fee from the losing party.

Judge Stoll dissented. She believed that the American Rule erected a strong presumption against fee-shifting, and that the language in Section 145 was not explicit enough to overcome that presumption. She pointed to Section 285 as an example where Congress explicitly mentions “attorney’s fees” alongside “expenses,” as to distinguish the two. There are also other statutes showing that Congress did not necessarily view “[a]ll the expenses” to include “attorney’s fees.” Finally, Judge Stoll did not think it would be a good policy to penalize patent applicants for appealing PTAB’s decisions by shifting costs and attorney’s fees to them.

Patently-O also reported on this case.

Courts Must Evaluate Totality of Circumstances When Awarding Attorney’s Fees Under Patent Act

AjudstaCam, LLC v. Newegg, Inc., No. 2016-1882 (Fed. Cir. July 5, 2017), hosted by Justia.com.

The Federal Circuit, in its recent opinion AjudstaCam, LLC v. Newegg, Inc., No. 2016-1882 (Fed. Cir. July 5, 2017), found the District Court for the Eastern District of Texas had abused its discretion in refusing to award attorney’s fees to the prevailing defendant.

AdjustaCam sued Newegg for patent infringement. Just before summary judgment briefing, AdjustaCam voluntarily dismissed its infringement claims with prejudice. Newegg subsequently filed a motion for attorney’s fees pursuant to Section 285 of the Patent Act.

Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”. The Supreme Court clarified this provision in a previous decision by holding that an “exceptional” case is one that stands out from others with respect to either the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated. Newegg first appealed the district court’s decision not to award attorney’s fees prior to this decision. In light of this clarification, the Federal Circuit remanded and required the district court to evaluate the case under the totality of the circumstances based on the entirety of the record.

On Newegg’s second appeal for not awarding attorney’s fees, the Federal Circuit decided that the district court abused its discretion for two reasons. First, the district court ignored the Federal Circuit’s mandate to evaluate the case under a totality of circumstances and instead adopted previous factual findings wholesale. Second, the district court was clearly erroneous in its findings about the substantive strength of AdjustaCam’s position. The Federal Circuit found that AdjustaCam’s suit became baseless after the district court’s Markman order; but AdjustaCame continued to litigate. AdjustaCam made new infringement arguments without disclosing them as new on appeal. It repeatedly served expert reports and declarations at the last minute. It also had a pattern of low and erratic settlements in other patent infringement lawsuits it filed. Taken together, the Federal Circuit found the district court abused its discretion in denying Newegg’s motion for fees.

Patently-O noted that this case is another successful appeal by Prof. Mark Lemley.

Federal Circuit Affirms Exclusive Jurisdiction Over Appeals of Interference Decisions, Vacates Interference Decision for Lack of Written Description

The Board of Trustees of the Leland Stanford Junior University v. The Chinese University of Hong Kong, No. 2015-2011 (Fed. Cir. June 27, 2017).

In The Board of Trustees of the Leland Stanford Junior University v. The Chinese University of Hong Kong, No. 2015-2011 (Fed. Cir. June 27, 2017), the Federal Circuit vacated a Patent Trial and Appeal Board (PTAB) interference decision that the patent claims belonging to the Board of Trustees of the Leland Stanford Junior University (“Stanford”) were unpatentable for lack of written description.

The patents of the two competitors--Stanford and the Chinese University of Hong Kong (CUHK)--concern methods for testing for an abnormal number of chromosomes in a fetus. Both patents look to sequence fetal DNA extracted from maternal blood samples.  Sequencing can be performed by “random” or “targeted” methods. The CUHK patent describes the “random sequencing” method. The specification of Stanford patent discloses sequencing methods using the Illumina sequencing platform, which can perform “targeted sequencing.” The key dispute was whether the Illumina sequencing platform can also perform “random sequencing.” If it does, the CUHK patent would be invalid because of its later filing date.

In the patent interference proceeding, the PTAB found that the language in the written description of the Stanford patent does not preclude the method of “targeted sequencing,” and hence it does not disclose “random sequencing.” But the Federal Circuit pointed out that the key inquiry should have been whether the description might be able to disclose both “targeted sequencing” and “random sequencing.” In addition, PTAB failed to explain the meaning of key sentences and phrases in the specifications, which discussed the sequencing process. It also failed to compare these statements to the claim limitations. As a result, the Federal Circuit held that PTAB’s factual findings lacked substantial evidence supporting them and remanded for further examination.

The Federal Circuit also declined to revisit its prior holding in Biogen MA, Inc. v. Japanese Foundation for Cancer Research AG, 785 F. 3d 648 (Fed. Cir. 2015), hosted by findlaw.com, that the AIA abolished the right of parties to bring civil actions in district court for review of PTAB interference decisions made on or after September 16, 2012. Instead, the Federal Circuit, in Biogen held that it has exclusive jurisdiction over interference decision appeals. As a result, the court held that evidence elicited during district court proceedings may not be considered, since the district court lacks subject matter jurisdiction.

This decision is reported in more detail by JDSupra.