FEDERAL CIRCUIT DECISIONS FOR WEEK ENDING MARCH 3, 2017

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1 P+S FEDERAL CIRCUIT SUMMARIES VOL. 9, ISSUE 10 FEDERAL CIRCUIT DECISIONS FOR WEEK ENDING MARCH 3, 2017 Knauf Insulation, Inc. v. Rockwell International A/S, No , (February 27, 2017) (Nonprecedential) Patent No. 7,854,980 Key point(s): For inherency in a prior art reference involved in an obviousness analysis, the applicable limitation necessarily must be present or be the natural result of the combination of elements disclosed in the prior art. Facts/Background: Knauf is the assignee of the 980 patent, which relates to packaged mineral fiber insulating material. Specifically, the 980 patent discloses a packaged mineral fiber insulating material that improved on the prior art by using melanoidins instead of formaldehyde to bind the mineral fibers. According to the 980 patent, melanoidins provide the necessary binder strength for use on an industrial scale a quality previously not though possible without using formaldehyde. After the USPTO granted Rockwell s request for inter partes review of the 980 patent, Knauf added claims 21-29, which included specifying the chemical reaction that produced the melanoidins. Claim 26 recited, among other things, an organic thermoset binder, wherein (ii) the binder includes melanoidins produce by a Maillard reaction.... The Examiner confirmed patentability of original claims 1-20 but rejected claims as obvious over two prior art references, including WIPO Pub. No. 2006/ ( Helbing ) that disclosed melanoidins formed by a Maillard reaction. The Examiner found that Helbing did not expressly disclose melanoidin production but rather disclosed a solution with a carbohydrate, an amine, and a polycarboxylic acid, which were the reactants necessary for a Maillard reaction. Knauf cancelled claims and both parties appealed. The Board affirmed the Examiner s finding of inherency, agreeing that Helbing taught all three reactants present in a Maillard reaction and mixed and cured the reactants as required by claims of the 980 patent. The Board stated, because of the identity of the reactants and process steps, there is a factual basis and reason to believe that [Helbing s] binder product would contain melanoidins as required by the claims. The Board rejected Knauf s argument that Helbing s components would result in esterification and thus prevent a Maillard reaction. Knauf appealed. Holding: Affirmed. Although Knauf conceded that Helbing disclosed all three reactants necessary for a Maillard reaction, Knauf argued that the Board erred because Helbing taught only a mere possibility of a Maillard reaction. Knauf also argued, without support, that esterification may proceed to the exclusion of a Maillard reaction. Knauf further emphasized that Helbing disclosed additional reactants beyond Maillard reactants. In rejecting Knauf s arguments, the Federal Circuit stated that there was no dispute that Helbing disclosed esterification but that the record evidence did not show that esterification would necessarily prevent a Maillard reaction. The Federal Circuit further opined that Helbing disclosed a Maillard reaction in competition with esterification. The Federal Circuit held that not only did Helbing disclose the three components of the Maillard reaction, but it disclosed a Maillard reaction and Knauf had not demonstrated that esterification foreclosed a Maillard reaction. Thus, substantial evidence supported the Board s inherency factual finding.

2 Page 2 Icon Health v. Strava, No (Feb. 27, 2017) (Precedential) (2-1) Patent No. 7,789,800 The PTAB cannot solely rely on a party s invalidity arguments, but must make findings of fact that adequately support its legal conclusion. The Federal Circuit will consider previously unraised arguments on appeal if they, inter alia, raise an issue of general impact and were fully briefed by both sides. The PTO may rely on an expert s declaration containing a legal opinion of obviousness so long as the declaration contains underlying facts supporting the legal opinion. Facts/Background: Strava sought inter partes review of claims of Icon s 800 patent, which is directed to controlling an exercise apparatus using a USB compatible remote device. The Examiner found claims obvious over the prior art references. Icon appealed, but the PTAB affirmed. This appeal followed. Holding: Vacated-in-part, Affirmed-in-part, and remanded. Icon appealed the rejection of claims 43, 46, 57-62, 65, 71, 74, 86, and Icon argued that [t]he principal error affecting the reexamination proceedings is Strava s use of an expert to supply legal conclusions of obviousness and the PTAB s reliance on those conclusions. Icon specifically pointed to instances where Strava s expert opined that something would be obvious. Icon also challenged the rejections for lack of substantial evidence or for legal error. At the outset, the Federal Circuit held Icon had not waived the legal conclusion argument failing to raise it at the PTAB. The appellate court explained the issue had been fully briefed on appeal by both parties and the arguments raise an issue of general impact in that the issue could affect the weight afforded to a large number of expert declarations containing similar statements. Turning to the merits of that threshold argument, the Federal Circuit ruled that the PTAB was permitted to rely on the expert s declaration to support its factual findings, explaining that there is no per se prohibition against relying on an expert s declaration in support of factual findings underlying a legal conclusion of obviousness solely because the declaration states that something would have been obvious so long as other aspects of the declaration contain statements related to factual findings. Turning to specific Board rulings, the Federal Circuit vacated the finding of obviousness as to claims and 65, because the PTAB s reliance on Strava s arguments without an independent finding of fact regarding these claims was improper. The Federal Circuit vacated the rejection of claims 46 and 74, because the PTAB did not make explicit findings mapping to claim elements or specify what aspects of the expert declaration it found persuasive: vacated the rejection of claims , because the PTAB s factual finding lacked adequate basis in the record and were not adequately explained. The remaining rejections were affirmed.

3 Page 3 Los Angeles Biomedical v. Eli Lilly, No (Feb. 28, 2017) (Precedential) (2-1) Patent No. 8,133,903 Proof of priority requires written description disclosure in the parent application, not simply information and inferences from uncited references identified in the Specification. Facts/Background: The 903 patent claims a method of arresting or regressing a condition known as penile fibrosis, which entails the long-term administration of drugs known as type 5 phosphodiesterase ( PDE5 ) inhibitors. Previous to the 903 patent, PDE5 inhibitors, such as Viagra and Cialis, were available for on-demand treatment of erectile dysfunction. However, the use of these types of PDE5 inhibitors did not address the long-term cure of underlying tissue fibrosis. According to the patent, it solved a need for adequate non-surgical treatments for tissue fibrosis. Claim 1 is representative and recites a method comprising administering [a PDE5] inhibitor, wherein the PDE-5 inhibitor is administered at a dosage of up to 1.5mg/kg/day for not less than 45 days. After LAB sued Lilly for inducement infringement, based on its marketing of Cialis Lilly petitioned for inter partes review, asserting all claims of the 903 Patent were invalid as obvious. After institution, the Board rejected the 903 patent s priority claim to a provisional application, finding that the provisional application did not disclose the claimed dosage. The Board construed: (1) an individual with at least one of penile tunical fibrosis and corporal tissue fibrosis to mean an individual having symptoms that may be associated with penile fibrosis, such as erectile dysfunction; (2) arresting or regressing to have no limiting role, but merely stating the intended result of administering a PDE5 inhibitor; and, (3) continuous long-term regimen to mean administration of drug over a certain period of time without intermission such that the treatment is therapeutically effective. The Board concluded that the combination of references satisfied the limitations in the 903 patent, as construed, and that the combination provides a reasonable expectation of success in treating erectile dysfunction. LAB appealed. Holding: Vacated and remanded. The Federal Circuit agreed that the 903 Patent was not entitled to the provisional s priority date since the provisional did not disclose the claimed dosage. LAB s reliance on a rat study described in the provisional as disclosing or suggesting the claimed dosage did not establish priority where it would require the person of skill to know the uncited method needed to make the inter-species dosage calculation (and have reason to apply that method) and make assumptions regarding the variables needed for the calculation. Support for priority requires written description disclosure in the parent application, not simply information and inferences from uncited references contained in the written description. The appellate court then held that the Board erred in two of its three constructions. Since erectile dysfunction is merely a symptom that may be, but is not necessarily, associated with penile fibrosis, the Board improperly read having penile tunical fibrosis or corporal tissue fibrosis out of the claim. The construction was thus overly broad and unreasonable in light of the specification. The Board erred in construing the second term as having no patentable weight, holding that the wherein clause defines the minimum duration for the arrest or regression of fibrosis. Finally, the Federal Circuit held that the Board erroneously concluded that the claims were obvious in light of the prior art references, opining that the Board did not determine whether those references showed that it would have been obvious to use long-term continuous treatment with a PDE5 inhibitor to treat penile fibrosis and to achieve the arrest or regression of that condition.

4 Page 4 Eli Lilly v. Los Angeles Biomedical, No (Feb. 28, 2017) (Precedential) (3-0) Patent No. 8,133,903 For anticipation, the issue is not whether a prior art reference suggests the claimed subject matter; rather, but whether one skilled in the art would reasonably understand or infer from a prior art reference that every claim element is disclosed in that reference. Facts/Background: This case involves the same patent as reported immediately above and reports the appeal from a different IPR decision. Claim 1 is representative and recites a method comprising administering [a PDE5] inhibitor according to a continuous long-term regimen to an individual with at least one of a penile tunical fibrosis and corporal tissue fibrosis; and arresting or regressing the at least one of the penile tunical fibrosis and corporal tissue fibrosis, wherein the PDE-5 inhibitor is administered at a dosage of up to 1.5mg/kg/day for not less than 45 days. Here, Lilly based its petition for inter partes review of the 903 patent on anticipation of all claims by the Whitaker reference. Before the Board, Lilly relied on Example 6 of Whitaker, which discusses a set of studies on the use of PDE5 inhibitors to treat erectile dysfunction. The studies included some subjects who took a PDE5 inhibitor greater than 70% of the time over the course of 8 to 12 weeks. The Board held that Whitaker did not anticipate the 903 Patent claims because it did not disclose the limitation requiring the administration of PDE5 inhibitor at a dosage up to 1.5mg/kg/day for not less than 45 days. Specifically, the Board found that the statement that some of the study subjects took the PDE5 inhibitor more than 70% of the time did not constitute a disclosure of daily dosing and that Whitaker s disclosure of chronic administration did not inherently disclose treatment with a PDE5 inhibitor for at least 45 days. Based on its analysis of Whitaker, the Board concluded that Lilly had failed to show, by a preponderance of the evidence, that Whitaker anticipated claim 1 of the 903 patent. This appeal followed. Holding: Affirmed. According to the Federal Circuit, Lilly s argument boiled down to saying that Whitaker s definition of chronic administration anticipates daily administration for 45 days or more because a person of skill in the art would understand that erectile dysfunction (in the absence of therapy) can last longer than 45 days. However, the appellate court held that a fair reading of Whitaker s definition of chronic administration was daily administration for at least three days, and more if the erectile dysfunction persisted, which did not disclose the treatment of penile fibrosis for at least 45 days, particularly in light of the fact that the only daily dosing done in Whitaker lasted at most for three weeks. While Whitaker may suggest long-term daily treatment by noting the beneficial effects of daily treatment in light of Example 6, this was not enough. The Federal Circuit explained that to anticipate, a reference must do more than suggest the claimed subject matter.

5 Page 5 ProBatter Sports, LLC, v. Sports Tutor, Inc., Case No , (March 1, 2017) (Nonprecedential); Patent Nos. US 6,182,649 and US 6,546,924 Key point(s): A showing of obviousness by clear and convincing evidence based on a combination of references requires a showing of which references (and where in those references) the claim limitations are taught, as well as a showing of a motivation to combine the references. Facts/Background: ProBatter owns the 649 and 924 patents, each directed to a pitching machine having a dynamic braking mechanism which allows the machine to interchangeably deliver pitches of different types to different locations at different speeds with less than tensecond intervals between pitches and without the need to manually readjust the machine between pitches. Probatter sued Sports Tutor for infringing claims of the 649 and 924 patents. Sports Tutor then challenged the patents in a series of ex parte reexaminations, two on each patent, during which the district court stayed the litigation. In the first round of reexaminations, the examiner rejected many of the claims as obvious in view of the prior art, but the Board reversed those rejections because a dynamic braking limitation was not disclosed in any allegedly anticipatory reference and there was no motivation to combine the prior art ball-throwing machine references with the prior art dynamic braking reference drawn generally to an electric motor. The examiner rejected Sports Tutor s invalidity challenges in the second round of reexaminations and allowed the asserted claims. The district court then lifted the stay and held a bench trial on invalidity, finding that Sports Tutor did not satisfy its burden to prove invalidity because Sports Tutor never explicitly argued for a particular combination of references or proffered a motivation to combine references. Accordingly, it had failed to make factual findings on the scope and content of the prior art or the differences between the claims and the prior art. Sports Tutor appealed. Holding: Affirmed. The Federal Circuit held that Sports Tutor did not meet its burden to prove the asserted patents were invalid as obvious. Sports Tutor s arguments amounted to an assertion that, during reexamination, the Board s silence as to the examiner s findings on scope and content of the prior art and other Graham factors meant that the Board acquiesced in those findings. Therefore, according to Sports Tutor, all it needed to do to prove obviousness before the district court was to show dynamic braking in the context of a ball-throwing machine. Sports Tutor believed it cured the problem with the reexamination by introducing new prior art teaching dynamic braking in ball-throwing machines, without addressing any of the other claim limitations in the district court. The Federal Circuit held that a showing of invalidity based on clear and convincing evidence demanded greater specificity than that put forth by Sports Tutor. Furthermore, a patent claim composed of several elements is not proved obvious merely by demonstrating that each of its elements was independently known in the prior art.

6 Page 6 Smartflash LLC v. Apple Inc., No (March 1, 2017) (nonprecedential) Patent Nos. 7,334,720; 8,118,221 and 8,336,772 Key point(s): A claim is not transformed into 101 patent-eligible subject matter by merely storing, transmitting, retrieving and writing data to implement an abstract idea on a computer. The test for patent eligibility is not whether the claims provide an advantage over alternatives, but rather whether the claims recite an inventive concept sufficient to transform the nature of the claims. Facts/Background: Plaintiff asserted infringement of four claims from three related patents. The patents are generally directed to a system for providing payment for digital content and then providing the digital content. In the asserted claims, a terminal transmits payment data to a payment validation system, receives validation of the payment, and provides access to data such as multimedia content. The district court denied defendant s summary judgement motion based on invalidity under 101. Applying the Alice two-step framework, the district court first determined that the claims were directed to the abstract idea of conditioning and controlling access to data based on payment. At the second step, however, the district court found that the claims recited specific ways of using memories, data types and use rules, which transformed the abstract idea into a patent-eligible invention. After trial, the defendant moved for JMOL, reasserting 101 invalidity, which the district court again denied. Holding: Reversed. In the first step of the Alice framework, the Federal Circuit agreed that the claims were directed to an abstract idea. Specifically, [t]he asserted claims invoke computers merely as tools to execute fundamental economic practices of controlling access to and retrieving data content based on payment validation. Turning to the second step of Alice, the court considered whether the specific claim limitations storing payment data, transmitting payment validation data, having a terminal retrieve digital content, and writing rules that condition access to the digital content based on payment were sufficient to transform the nature of the claims into patent-eligible subject matter. The appellate court disagreed with the district court, holding that the specific ways of using the memories were nothing more than routine computer activities. That is, merely storing, transmitting, retrieving and writing data to implement an abstract idea on a computer was typical internet activity, similar to the claims found ineligible in Ultramercial and unlike the claims found eligible in DDR Holdings. The patentee argued that specific hardware components reflected specific technical choices that provided an advantage over alternatives. The appellate court dismissed this argument, explaining that the test for patent eligibility is not whether the claims provide an advantage over alternatives, but whether they recite an inventive concept sufficient to transform the nature of the claims. The recited hardware components here were similar to the basic computer components found patent ineligible in Alice. Thus, the claims were invalid as reciting patent-ineligible subject matter.

7 Page 7 Bayer CropScience AG, v. Dow AgroSciences LLC, Nos , (March 1, 2017) (nonprecedential) Patent Nos. 5,561,236, 5,646,024, 5,648,477, 7,112,665, RE44,962 The grounds for disturbing an arbitral award are strictly limited; the challenger must show that the arbitrators exceeded their powers or manifestly disregarded the law. Once a federal court confirms an arbitral award, the award merges into the judgment and the federal rate for post-judgment interest presumptively applies. Facts/Background: Bayer sued Dow for infringement of five patents related to the pat gene, which confers resistance to the herbicide glufosinate. Upon motion, the district court stayed the action pending arbitration. An international arbitral tribunal awarded Bayer approximately $455 million and set a rate for post-award interest. The district court then lifted the stay and confirmed the arbitral award. In so doing, the district court rejected Dow s arguments attacking the award on its merits and denied Dow s motion to clarify that interest from the date of the district court s judgment would accrue at the statutory rate for post-judgment interest rather than the tribunal s higher post-award rate. Dow appealed. Holding: Affirmed as modified. The Federal Circuit held it had jurisdiction under 28 U.S.C. 1295(a)(1) because Bayer s complaint arose under the patent laws. Further, Dow asserted patent law as a necessary basis for certain challenges to parts of the tribunal s award at the district court. However, judicial review of the arbitral award was very limited. Ordinary legal or factual error is not a ground for disturbing an arbitral award like the one at issue here. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention ) and its enabling statute (9 U.S.C ) require that a district court confirm an award unless it finds one of the grounds for refusal or enforcement of the award specified in the New York Convention. These grounds include a finding that the award deals with an issue not falling within the terms of the submission to arbitration, or a finding that enforcement of the award would be contrary to the public policy of the country where enforcement is sought. Dow s arguments failed to meet these high standards. Dow s arguments attacking the arbitral award as counter to US law regarding double patenting and post-patent-expiration royalties were rejected by the Federal Circuit. The district court s decision to confirm the arbitral award was affirmed. The district court, however, abused its discretion in denying Dow s motion to amend the judgment to use the federal statutory rate for post-judgment interest for the period beginning with the entry of the district court s judgment. Under the doctrine of merger, when a valid and final judgment for the payment of money is rendered in favor of the plaintiff, the original claim of the plaintiff is extinguished and a new cause of action on the judgment is substituted for it. The award merges into the judgment and the federal rate for post-judgment interest presumptively applies.

8 Page 8 Skullcandy, Inc., v. CSR Limited, Case No (March 2, 2017) (Nonprecedential) Patent No. 7,187,948 Key point(s): Inconsistent summary statements by the PTAB during claim construction do not constitute error where the PTAB gives a single, explicit construction. Facts/Background: Skullcandy owns the 948 patent directed to an apparatus that allows a user to switch an audio signal from music playback to telephone audio when an incoming call is received. The PTO granted CSR s request for inter partes reexamination. The PTAB affirmed the examiner s decision on patentability and CSR appealed. In a first appeal, the Federal Circuit vacated and remanded the Board s decision because the Board failed to construe the term threshold value in a manner that would permit meaningful appellate review. On remand, the Board construed the claim term, and then reversed the examiner s decision on patentability and rejected claims 1-6 of the 948 patent. Skullcandy appealed. Holding: Affirmed. Skullcandy argued that the Board erred in its construction of threshold value by providing three separate, inconsistent constructions, pointing to summary statements made by the Board. Each summary statement was based on a particular subset of information i.e. extrinsic evidence, specification, and the claim language itself in context. The Federal Circuit ruled that while the Board did make the three summary statements about the term threshold value, the Board ultimately provided only one construction of the term. Moreover, the Board confirmed the single construction in denying Skullcandy s request for a rehearing. The Federal Circuit ruled that the Board s construction of threshold value was not unreasonable and the Board s finding that the prior art discloses a threshold value was supported by substantial evidence.

9 Page 9 Technology Properties Limited v. Huawei Technologies, et al., Case Nos through (March 3, 2017) (Precedential) (3-0) Patent No. 5,809,336 When determining the scope of subject matter a patentee disclaimed, the question is what a person of ordinary skill would understand the patentee to have disclaimed, not what a person of ordinary skill would think the patentee needed to disclaim to overcome a prior art rejection. Facts/Background: Technology Properties sued Huawei for infringement of the 336 patent, which is directed to improving microprocessor performance by decoupling a CPU and I/O clocks. Specifically, the 336 patent used two independent clocks to be used with the CPU: a variable-frequency clock fabricated on the same silicon substrate as the rest of the microprocessor and a fixed-frequency clock located off chip. Claim 6 was representative and recited a central processing unit disposed upon an integrated circuit substrate an entire oscillator disposed upon said integrated circuit substrate and connected to said central processing unit and an external clock, independent of said oscillator. The district court construed an entire oscillator disposed upon said integrated circuit substrate to mean an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a control signal and whose frequency is not fixed by any external crystal. The parties agree to the first half of this construction, but disagree regarding the second. The district court agreed with Huawei that this construction was appropriate because the patentee disclaimed claim scope during prosecution to overcome rejections based on two prior art references (Magar and Sheets). After claim construction, the parties stipulated to non-infringement and Technology Properties appealed. Holding: Vacated and remanded. The Federal Circuit held that during prosecution Technology Properties had disclaimed certain claim scope, ruling that an entire oscillator disposed upon said integrated circuit substrate was an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a command input to change the clock frequency and whose frequency is not fixed by any external crystal. Regarding the Magnar reference, the appellate court reasoned that throughout prosecution, Technology Properties argues that Magnar was distinguishable for two reasons: (1) it discloses a fixed-frequency crystal rather than a variable-frequency ring oscillator, and (2) it requires an external (off-chip) crystal. Thus, the district court s narrowing construction based on Magnar whose frequency is not fixed by any external source properly encapsulated the Technology Properties disclaiming statement. By contrast, the Federal Circuit explained that the district court erred by holding that Technology Properties disclaimed any use of a command signal by the entire oscillator. Instead, the appellate court ruled that Technology Properties had disclaimed a particular use of a command signal using a command signal to change the clock frequency. Specifically, the Technology Properties distinguished Sheets from the 336 patent because Sheets requires a command input to change the clock speed and that none of these statements disclaim an entire oscillator receiving a command input for any purpose. Thus, based on this err, the Federal Circuit vacated the district court s construction and remanded for further proceedings.