U.S. + Germany Patent Update – November 2018 (English, 日本語 & 한국어)

IN THIS ISSUE

• PTAB Denies Institution as Duplicative Due to Earlier IPR Challenge by Different Petitioner – Shenzhen Silver Star Intelligent Tech. v. iRobot Corp. (5 September 2018)
• German Federal Patent Court on Filing Auxiliary Requests With Narrower Claims in Patent Nullity Proceedings – “Satellite Based Paging System with Location Transmission,” Federal Patent Court of Germany, 6 NI 69/16 (EP)
• USPTO Announces Proposal to Change System for Seeking Amendments in PTAB Proceedings (25 October 2018)
• Federal Supreme Court on Enforcing a Claim of Information and Rendering of Account in Preparation of Damages Claims – “Tool Handle,” Federal Supreme Court, X ZR 76/18 (25 September 2018)
• USPTO Begins Using Same Claim Construction Standard as District Courts (13 November 2018)
• Decision of German Federal Constitutional Court on German UPCA Complaint Coming Soon?
• Judge Takes Broad View of New Foreign Lost Profits Standard – Power Integrations, Inc. v. Fairchild Semiconductor (4 October 2018)
• No Personal Jurisdiction Over Foreign Defendant Based on Ownership of U.S. Subsidiary and U.S.-Based Development of Accused Products – Univ. of Mass. Medical Sch. v. L’Oréal S.A. (13 November 2018)

Spotlight

German Federal Patent Court on Filing Auxiliary Requests With Narrower Claims in Patent Nullity Proceedings – “Satellite Based Paging System with Location Transmission,” Federal Patent Court of Germany, 6 NI 69/16 (EP)

Under German law, once the opposition period for a patent has expired, the only way to invalidate a patent is to start nullity proceedings at the German Federal Patent Court (GFPC). Unlike other jurisdictions, during nullity proceedings in Germany, the patent owner is allowed to defend its patent with the claims as granted or with narrower claims. Typically, such narrower claims are filed as so-called “auxiliary requests.” In nullity proceedings, the patent owner defends the granted claims and clarifies that the auxiliary requests (i.e., narrower claims) should only be reviewed by the GFPC if the GFPC finds the granted claims invalid.

Nullity proceedings before the GFPC always end with an oral hearing (trial). A few months before the oral hearing, the GFPC normally issues in writing a preliminary opinion on issues that will presumably be of particular significance to its final decision. The preliminary opinion is based on written submissions made by the parties. The GFPC regularly sets a deadline within which the parties may submit final comments in response to the preliminary opinion. The same deadline is also set for the submission of additional prior art by the nullity plaintiff, as well as of auxiliary requests by the patent owner.

In the case in question, the GFPC stated in its preliminary opinion that a specific prior document submitted by the plaintiff several months earlier was not relevant to an attack on novelty and inventive step. Therefore, the nullity defendant/patent owner did not comment further on this document in its final comments in response to the preliminary opinion. The nullity plaintiff, however, insisted that the document was relevant in its submission. At the beginning of the oral hearing, the GFPC pointed out that, contrary to what the court had stated in its preliminary opinion, it now considered the document to be relevant to inventive step. In response, the patent owner filed further auxiliary requests with narrower claims at the oral hearing.

The GFPC, however, rejected these new auxiliary requests as delayed pursuant to Section 83 (4) of the German Patent Act. The GFPC held that if the new auxiliary requests were admitted, this would require the postponement of the oral hearing, as the plaintiff would have had to initiate a new prior art search to respond. According to the GFPC, the nullity defendant could have reacted to the prior art document with new auxiliary requests, since the submission of the document by the nullity plaintiff occurred a few months earlier and, at the latest, within the time limit set by the GFPC after issuing its preliminary opinion. The nullity defendant did not sufficiently explain its delay. In particular, the GFPC held, somewhat surprisingly, that changing its position from the one in the preliminary opinion did not justify filing new auxiliary requests during the hearing. One of the reasons for this position was that the patent owner already had sufficient reason to file its auxiliary requests after the nullity plaintiff had clung to its position that this piece of prior art was relevant, even after the preliminary opinion issued. The GFPC, however, also stated that, in general, a patent owner should not rely on the preliminary opinion, which is quite far reaching.

This decision shows that the parties are generally obligated to present all facts, prior art, and auxiliary requests relevant to the proceedings in a complete and timely manner. In particular, when submitting new auxiliary requests, the patent owner should not rely on the GFPC’s preliminary opinion, but should protect its patent by submitting new auxiliary requests within the time limit set by the GFPC—not during the oral hearing.

Dr. Steffen Steininger and Dr. Teresa Christof

U.S. Patent Updates

PTAB Denies Institution as Duplicative Due to Earlier IPR Challenge by Different Petitioner – Shenzhen Silver Star Intelligent Tech. v. iRobot Corp. (5 September 2018)

The Patent Trial and Appeal Board (PTAB) denied institution of an inter partes review (IPR) petition by Shenzehn Silver Star Intelligent Technology (Silver Star) on the ground that it was duplicative of an earlier-filed IPR filed by a different petitioner. Patent Owner iRobot Corp. (“iRobot”) originally filed complaints in the ITC and district court, alleging infringement of a robot obstacle detection patent against Silver Star and others. One of the other co-defendants, Shenzhen Zhiyi Technology Co., Ltd. (Zhiyi), was the first to file an IPR challenging the patent-in-suit; Zhiyi filed its petition on 8 September 2017. iRobot filed a preliminary response in December 2017, and the PTAB denied institution on 12 March 2018. Silver Star waited for iRobot to respond to Zhiyi’s petition, and then filed its IPR against the patent-in-suit on 8 March 2018. Silver Star asserted some of the same prior art that Zhiyi did, but added new prior art to form different grounds for invalidity.

The PTAB has the discretion to institute or deny IPR petitions, and in reaching a decision, it considers a non-exclusive list of factors, known as the “General Plastic” factors. In considering these, the PTAB decided the balance of factors weighed in favor of denying Silver Star’s petition. In particular, the factors weighing most strongly against Silver Star were: (a) “whether at the time of filing of the second petition the petitioner already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition” and (b) “the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition.”

In the past, the PTAB has denied what it has deemed to be duplicative petitions filed by the same petitioner, but this case presented a more unique circumstance of denying a second IPR file by a different petitioner. In a concurring opinion, one of the PTAB judges suggested that co-defendants in a litigation should file IPR petitions around the same time. That judge went so far as to say there should even be a rebuttable presumption that the later-filed petition will be denied if filed after patent owner files its preliminary response to the first-filed IPR. In view of this, it is important, if in a multiple-defendant litigation, to consider coordinating IPR strategy with other defendants. Or, at the very least, it is important to stay apprised of co-defendant IPR activity and timing of any filings.

Joseph Raffetto and Corey Leggett

USPTO Announces Proposal to Change System for Seeking Amendments in PTAB Proceedings (25 October 2018)

The United States Patent and Trademark Office (PTO) published a “Request for Comments” on its new proposed procedure for motions to amend claims in PTAB proceedings. The PTO has proposed a 2-phase procedure for making claim amendments. In the first phase, the PTAB would issue a preliminary ruling on whether proposed amended claims are valid prior to the final decision, and, in a second phase, patent owners could revise their motion in response.

The second phase of the proposed process is a key difference from the previous system. If implemented, this will represent a significant new option for patent owners which do not have pending continuations at the time of a PTAB challenge. The PTO seeks written comments on or before 14 December 2018, after which it may modify or finalize new rules for the amendment process. The PTO has specifically asked for comments regarding the proposed timelines for the 2-phase amendment process, how to allocate the burden of persuasion regarding patentability of substitute claims, and the mechanics of motion practice for the new process.

Contributors: Joe Raffetto and Corey Leggett

USPTO Begins Using Same Claim Construction Standard as District Courts (13 November 2018)

The PTO recently published the final rule changing the claim construction standard to be applied in PTAB proceedings on 10 October 2018. The new rule took effect on 13 November 2018. The new rule requires the PTAB to adopt the Phillips standard for claim construction in all PTAB proceedings, discarding the old “broadest reasonable interpretation” (BRI) standard that has been used since the creation of PTAB proceedings in 2012. The Phillips standard is the same standard used in district court litigation, so there is thought that this new rule will harmonize PTAB and district court litigation.

There has been some debate as to whether there are actually any effective differences between the BRI and Phillips standards—namely, whether BRI, as has been applied by the PTAB, actually results in broader claim constructions. It is not clear that on a large scale there has been a noticeable difference. In any event, having different standards has arguably given the PTAB more “cover” vis-à-vis appeals of its claim construction rulings, and allowed the PTAB to ignore parallel claim construction decisions in other forums. In addition to changing the standard, the new PTAB rule states that prior claim constructions by a district court or the ITC “will be considered,” which appears to signal a further effort to harmonize claim construction. Indeed, creating greater consistency and harmony between the PTAB and the ITC and federal courts was one of the PTO’s stated objectives for this new rule.

While it remains to be seen whether the PTAB’s application of the Phillips standard will significantly impact the merits of PTAB proceedings, another consideration worth monitoring is the impact this rule change will have on near-term filing strategy. Given that the rule just recently took effect, it is possible litigants may be more hesitant to file IPRs in the short term, opting to monitor how the PTAB applies the Phillips standard. In certain circumstances, parties may be able to have a district court decide claim construction, then file an IPR and urge for the PTAB to merely accept the district court’s claim construction order.

Contributors: Joe Raffetto and Corey Leggett

Judge Takes Broad View of New Foreign Lost Profits Standard – Power Integrations, Inc. v. Fairchild Semiconductor (4 October 2018)

A district court judge in Delaware issued a broad opinion allowing patent owner Power Integrations, Inc. (Power Integrations) to seek worldwide damages in an upcoming retrial. This decision has been viewed by some as an expansive view of the recent Supreme Court decision, WesternGeco v. Ion Geophysical. In that case, the Supreme Court held that patent owners can recover profits lost outside of the U.S. due to patent infringement. WesternGeco presented a unique set of circumstances, however, in that it dealt with a specific statutory provision that makes it an act of infringement to ship components from the U.S. to be combined into an infringing product abroad.

In Power Integrations, the judge allowed Power Integrations to seek foreign lost profits for any type of infringement. The judge reasoned that while WesternGeco concerned only a specific type of infringement (one where the infringing act actually occurs outside of the U.S.), the decision nonetheless has “equal applicability” to the direct infringement allegations at-issue in Power Integrations. The judge in Power Integrations immediately certified the issue for appeal, which gives the Federal Circuit the chance to rule on the scope of WesternGeco’s damages standard. Practitioners should take note of this decision, as it arguably expands that standard. If the judge’s ruling is upheld, it could result in a significant increase in damages awards because it would allow patent owners to seek worldwide damages regardless of the type of infringement.

Contributors: Joseph Raffetto and Corey Leggett

No Personal Jurisdiction Over Foreign Defendant Based on Ownership of U.S. Subsidiary and U.S.-Based Development of Accused Products – Univ. of Mass. Medical Sch. v. L’Oréal S.A. (13 November 2018)

A magistrate judge in Delaware recommended dismissal of a patent infringement case for lack of personal jurisdiction over a foreign defendant. Patent owner University of Massachusetts Medical School and its exclusive licensee sued L’Oréal S.A., a French corporation headquartered in France, and its wholly-owned U.S. subsidiary, L’Oréal USA, for infringement of skin treatment patents.

Unless a defendant is in its “home” jurisdiction (i.e., incorporated or headquartered in the jurisdiction), the plaintiff has the burden of proving personal jurisdiction over the defendant by showing that the defendant has sufficient contacts with the jurisdiction, or that defendant has voluntarily conducted activities in the jurisdiction. In this case, plaintiff pointed to the following as evidence of L’Oréal S.A.’s contacts with Delaware: (1) the manufacture and sale of the accused products in Delaware; (2) research and development of the accused products in the U.S.; and (3) ownership and enforcement of U.S. patents in the U.S.

On the first point, the magistrate judge found L’Oréal S.A. was not responsible for introducing the accused products into the U.S. market (in particular, in Delaware); instead the accused products were made and sold by L’Oréal USA. Similarly, on the second point, the research and development activities were not sufficiently tied to L’Oréal S.A., as opposed to L’Oréal USA. And, lastly, on the third point, the magistrate held that “ownership of a United States patent, without more, cannot support the assertion of personal jurisdiction” over a foreign company in any state. More generally, the magistrate clearly distinguished between the foreign parent company and the U.S. subsidiary in evaluating jurisdiction, holding that a “mere ownership of a subsidiary does not justify the imposition of liability on the parent.”

Based on the foregoing, the magistrate recommended dismissing the case against L’Oréal S.A. for lack of personal jurisdiction, but keeping the case against L’Oréal USA. This case generally applies well-established precedent, but it is notable for foreign parent companies. To the extent a defendant can dismiss action against the parent, it can streamline the litigation by eliminating certain procedural aspects involving the parent, such as more intrusive discovery, which may make litigation more efficient.

Contributors: Joe Raffetto and Corey Leggett

German Patent Updates

Federal Supreme Court on Enforcing a Claim of Information and Rendering of Account in Preparation of Damages Claims – “Tool Handle,” Federal Supreme Court, X ZR 76/18 (25 September 2018)

The Federal Supreme Court has issued a decision (X ZR 76/18, 25 September 2018– “Tool handle”) on the enforcement of a claim of information and rendering of account according to Sec. 140b German Patent Act. In its decision, the Court emphasized an overriding interest of the patent holder in the enforcement of the claim for information and rendering of accounts over the threat of irreparable harm to the patent infringer.

In the first and second instance proceedings before the District Court Manheim and the Higher Regional Court Karlsruhe, the defendant was ordered to cease and desist from any further infringing activities, to provide information, and to render account for past infringing activities. Such rendering account is typically requested by patent owners because they need the requested information to calculate their damages claims against an infringer. The information includes precise data regarding names of suppliers, purchase prices, and manufacturing costs, as well as names of purchasers and sales prices.

In the case at hand, the patent owner enforced its claims for rendering account against the infringer. The infringer then filed an appeal to the Federal Supreme Court, requesting to stop the enforcement temporarily and arguing that it should not be forced to disclose arguably confidential data to the patent owner. The infringer argued instead that information should be provided only to an auditor bound by obligations of confidentiality, which should then only be allowed to pass on the minimum information to the patent owner. The Federal Supreme Court dismissed this request as unfounded, and upheld the enforceability of the judgement rendered by the Higher Regional Court Karlsruhe. The Court decided that an infringer is obligated under Sec. 140b German Patent Act to render accounts to the patent owner directly. The Court held that the general concept underlying the law was that the interest of the patent holder in obtaining the distribution channels and names and addresses of purchasers of infringing products overrides the infringer’s confidentiality interests (BGH, Decision dated 20 December 1994, X ZR 56/93 – “Clothes Hanger”). Sec. 140b para. 7 German Patent Act explicitly provides for a right to enforce certain rights requiring rendering of an account, even by way of a preliminary injunction. The risk that the infringer suffers irreparable harm due to enforcement of a (non-final) rendering account decision is outweighed by the interest of the patent holder to enforce his legal rights, according to the Federal Supreme Court.

Pursuant to Sec. 140b para. 4 German Patent Act, a temporary stop of enforcement can be ordered only in exceptional circumstances where the rendering account is particularly disproportionate. Based on the “Clothes Hanger” decision, such disproportionality may occur if the patent owner’s legitimate interest is rather small—e.g., in the situation of a one-time infringement. The Federal Supreme Court emphasized in this case that such a circumstance of disproportionality may not occur even if the patent has expired. In that situation, even though the patent holder would no longer be able to file future-oriented claims, expiration of the patent would not lead to a small legitimate interest of the patent holder, as set out in Clothes Hanger. And further, if the patent infringer also supplies customers with other, non-infringing products this combination is insufficient to assume disproportionality.

This decision has strengthened the position of patent holders and has emphasized that the interest of the patent owner in obtaining an account based on Sec. 140b German Patent Act generally outweighs the confidentiality interests of the infringer.

Contributors: Dr. Steffen Steininger and Tobias Kempter

Decision of German Federal Constitutional Court on German UPCA Complaint Coming Soon?

While the German Federal Court (FCC) has still not officially announced when it will issue a decision regarding the constitutional complaint against the German law that ratified the Unified Patent Court Agreement (UPCA), rumors about a possible decision in December are circulating the German patent community. The FCC, however, officially has not acknowledged a decision date at this point. Across the channel, in the meantime, two UK patent practitioners argued before the House of Lord’s EU Justice Sub-Committee in favor of a UK participation in the Unitary Patent system during the transitional period agreed upon in a withdrawal agreement following Brexit and beyond that period. During this transitional period, until at least the end of 2020, the UK would in essence be treated as an EU member state, which would give the start of the UPC system a serious chance. That said, the undecided German constitutional complaint continues to add uncertainty to the UK’s participation in the UPC system. If the UPC becomes effective before 29 March 2019, then the UK would be an EU member state for the purposes of the UPC. In that case, the necessary amendment and adoption of relevant provisions of the UPCA could likely be achieved much more easily than if the UK had already withdrawn (which would require it to request participation as a non-member state). The level of effort and complexity necessary to realize inclusion of the UK post-Brexit, therefore, still hinges on a swift decision of the German constitutional complaint by the FCC, independently from a viable UK withdrawal agreement.

Contributors: Dr. Steffen Steininger and Philipp Simon

Authored by Joe Raffetto and Steffen Steininger