Seed Co. Ltd. v. Westerman

SRINIVASAN, Circuit Judge: This case involves a legal malpractice action arising out of an unsuccessful application for a patent. Seed Company Limited, a Japanese company, is led by Shigeru Tamai. Tamai invented a dispenser of correctional tape enabling users to correct printed documents by rolling white tape over errors. Seed and Tamai hired legal counsel in connection with their patent applications. The effort to obtain a U.S. patent ultimately failed because of counsel’s noncompliance with Patent Office regulations when filing a motion related to the application. As a result of the error, another inventor obtained the patent for the same invention.

Seed and Tamai sued their attorneys, alleging that they had committed malpractice when they submitted filings for the patent application without complying with the Patent Office regulations. The district court first rejected the defendants’ argument that the suit was barred by the statute of limitations. But the court then granted summary judgment in their favor, ruling that they had exercised reasonable professional judgment in concluding (erroneously) that their filings complied with the Patent Office’s rules.

We reverse and remand. We conclude that the statute of limitations had elapsed with respect to the malpractice claims against one group of defendants—those who ceased working on behalf of Seed and Tamai when the law firm engaged in the representation split into two firms. With regard to the remaining defendants—those who continued to represent Seed and Tamai after the breakup of the firm—we find that the statute of limitations poses no bar to the malpractice action. On the merits of the claims against those defendants, we reverse the grant of summary judgment in their favor and remand the case for trial.

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Cuozzo Speed Technologies, LLC v. Lee

Held:

1. Section 314(d) bars Cuozzo’s challenge to the Patent Office’s decision to institute inter partes review. Pp. 7–12.

(a) The text of §314(d) expressly states that the Patent Office’s determinations whether to institute inter partes review “shall be final and nonappealable.” Moreover, construing §314(d) to permit judicial review of the Patent Office’s preliminary decision to institute inter partes review undercuts the important congressional objective of giving the agency significant power to revisit and revise earlier patent grants. Past practice in respect to related proceedings, including the predecessor to inter partes review, also supports the conclusion that Congress did not intend for courts to review these initial determinations. Finally, reading §314(d) as limited to interlocutory appeals would render the provision largely superfluous in light of the Administrative Procedure Act. Pp. 7–9.

(b) The “strong presumption” favoring judicial review, Mach Mining, LLC v. EEOC, 575 U. S. ___, ___, is overcome here by these “ ‘clear and convincing’ ” indications that Congress intended to bar review, Block v. Community Nutrition Institute, 467 U. S. 340, 349. Given that presumption, however, the interpretation adopted here applies to cases in which the challenge is to the Patent Office’s determination “to initiate an inter partes review under this section,” or where the challenge consists of questions closely tied to the application and interpretation of statutes related to that determination. Cuozzo’s claim does not implicate a constitutional question, nor does it present other questions of interpretation that reach well beyond “this section” in terms of scope and impact. Rather, Cuozzo’s allegation that Garmin’s petition did not plead “with particularity” the challenge to claims 10 and 14 as required by §312 is little more than a challenge to the Patent Office’s conclusion under §314(a) that the “information presented in the petition” warranted review. Pp. 9–12.

2. The Patent Office regulation requiring the Board to apply the broadest reasonable construction standard to interpret patent claims is a reasonable exercise of the rulemaking authority granted to the Patent Office by statute. Pp. 12–20.

(a) Where a statute leaves a gap or is ambiguous, this Court typically interprets a congressional grant of rulemaking authority as giving the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute. United States v. Mead Corp., 533 U. S. 218, 229; Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842–843. Here, the statute grants the Patent Office the authority to issue regulations “governing inter partes review,” and no statutory provision unambiguously mandates a particular claim construction standard. The Patent Office’s rulemaking authority is not limited to procedural regulations. Analogies to interpretations of other congressional grants of rulemaking authority in other statutes, which themselves do not unambiguously contain a limitation to procedural rules, cannot magically render unambiguous the different language in the different statutory grant of rulemaking authority at issue. The nature and purpose of inter partes review does not unambiguously require the Patent Office to apply one particular claim construction standard. Cuozzo’s contention that the purpose of inter partes review—to establish trial-like procedures for reviewing previously issued patents—supports the application of the ordinary meaning standard ignores the fact that in other significant respects, inter partes review is less like a judicial proceeding and more like a specialized agency proceeding. This indicates that Congress designed a hybrid proceeding. The purpose of inter partes review is not only to resolve patent-related disputes among parties, but also to protect the public’s “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816. Neither the statute’s language, nor its purpose, nor its legislative history suggests that Congress decided what standard should apply in inter partes review. Pp. 12–17.

(b) The regulation is a reasonable exercise of the Patent Office’s rulemaking authority. The broadest reasonable construction standard helps ensure precision in drafting claims and prevents a patent from tying up too much knowledge, which, in turn, helps members of the public draw useful information from the disclosed invention and understand the lawful limits of the claim. The Patent Office has used this standard for more than 100 years and has applied it in proceedings which, as here, resemble district court litigation. Cuozzo’s two arguments in response are unavailing. Applying the broadest reasonable construction standard in inter partes review is not, as Cuozzo suggests, unfair to a patent holder, who may move to amend at least once in the review process, and who has had several opportunities to amend in the original application process. And though the application of one standard in inter partes review and another in district court proceedings may produce inconsistent outcomes, that structure is inherent to Congress’ regulatory design, and it is also consistent with past practice, as the patent system has long provided different tracks for the review and adjudication of patent claims. The Patent Office’s regulation is reasonable, and this Court does not decide whether a better alternative exists as a matter of policy. Pp. 17–20.

793 F. 3d 1268, affirmed.

BREYER, J., delivered the opinion for a unanimous Court with respect to Parts I and III, and the opinion of the Court with respect to Part II, in which ROBERTS, C. J., and KENNEDY, THOMAS, GINSBURG, and KAGAN, JJ., joined. THOMAS, J., filed a concurring opinion. ALITO, J., filed an opinion concurring in part and dissenting in part, in which SOTOMAYOR, J., joined.

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HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.

The Seagate test is not consistent with §284. Pp. 7–15.

(a) The pertinent language of §284 contains no explicit limit or condition on when enhanced damages are appropriate, and this Court has emphasized that the “word ‘may’ clearly connotes discretion.” Martin v. Franklin Capital Corp., 546 U. S. 132, 136. At the same time, however, “[d]iscretion is not whim.” Id., at 139. Although there is “no precise rule or formula” for awarding damages under §284, a district court’s “discretion should be exercised in light of the considerations” underlying the grant of that discretion. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___. Here, 180 years of enhanced damage awards under the Patent Act establish that they are not to be meted out in a typical infringement case, but are instead designed as a sanction for egregious infringement behavior. Pp. 7–9.

(b) In many respects, the Seagate test rightly reflects this historic guidance. It is, however, “unduly rigid, and . . . impermissibly encumbers the statutory grant of discretion to district courts.” Octane Fitness, 572 U. S., at ___. Pp. 9–13.

(1) By requiring an objective recklessness finding in every case, the Seagate test excludes from discretionary punishment many of the most culpable offenders, including the “wanton and malicious pirate” who intentionally infringes a patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee’s business. Seymour v. McCormick, 16 How. 480, 488. Under Seagate, a district court may not even consider enhanced damages for such a pirate, unless the court first determines that his infringement was “objectively” reckless. In the context of such deliberate wrongdoing, however, it is not clear why an independent showing of objective recklessness should be a prerequisite to enhanced damages. Octane Fitness arose in a different context but is instructive here. There, a two-part test for determining when a case was “exceptional”—and therefore eligible for an award of attorney’s fees—was rejected because a claim of “subjective bad faith” alone could “warrant a fee award.” 572 U. S., at ___. So too here: A patent infringer’s subjective willfulness, whether intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless. The Seagate test further errs by making dispositive the ability of the infringer to muster a reasonable defense at trial, even if he did not act on the basis of that defense or was even aware of it. Culpability, however, is generally measured against the actor’s knowledge at the time of the challenged conduct. In sum, §284 allows district courts to punish the full range of culpable behavior. In so doing, they should take into account the particular circumstances of each case and reserve punishment for egregious cases typified by willful misconduct. Pp. 9–11.

(2) Seagate’s requirement that recklessness be proved by clear and convincing evidence is also inconsistent with §284. Once again, Octane Fitness is instructive. There, a clear and convincing standard for awards of attorney’s fees was rejected because the statute at issue supplied no basis for imposing a heightened standard. Here, too, §284 “imposes no specific evidentiary burden, much less such a high one,” 572 U. S., at ___. And the fact that Congress erected a higher standard of proof elsewhere in the Patent Act, but not in §284, is telling. “[P]atent-infringement litigation has always been governed by a preponderance of the evidence standard.” Id., at ___. Enhanced damages are no exception. P. 12.

(3) Having eschewed any rigid formula for awarding enhanced damages under §284, this Court likewise rejects the Federal Circuit’s tripartite appellate review framework. In Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___, the Court built on the Octane Fitness holding—which confirmed district court discretion to award attorney’s fees—and rejected a similar multipart standard of review in favor of abuse of discretion review. The same conclusion follows naturally from the holding here: Because §284 “commits the determination” whether enhanced damages are appropriate to the district court’s discretion, “that decision is to be reviewed on appeal for abuse of discretion.” Id., at ___. Nearly two centuries of enhanced damage awards have given substance to the notion that district courts’ discretion is limited, and the Federal Circuit should review their exercise of that discretion in light of longstanding considerations that have guided both Congress and the courts. Pp. 12–13.

(c) Respondents’ additional arguments are unpersuasive. They claim that Congress ratified the Seagate test when it reenacted §284 in 2011 without pertinent change, but the reenacted language unambiguously confirmed discretion in the district courts. Neither isolated snippets of legislative history nor a reference to willfulness in another recently enacted section reflects an endorsement of Seagate’s test. Respondents are also concerned that allowing district courts unlimited discretion to award enhanced damages could upset the balance between the protection of patent rights and the interest in technological innovation. That concern—while serious—cannot justify imposing an artificial construct such as the Seagate test on the limited discretion conferred under §284. Pp. 13–15.

No. 14–1513, 769 F. 3d 1371; No. 14–1520, 782 F. 3d 649, vacated and remanded.  

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Online Resources Corp. v. Joao Bock Transaction Sys.

Online Resources Corporation (ORCC) and ACI Worldwide, Inc. (ACI, and collectively, ACI Worldwide) appeal from a March 2, 2015, order and judgment of the district court denying ACI Worldwide’s motion for partial summary judgment and granting partial summary judgment to Joao Bock Transaction Systems, LLC (JBTS). For the reasons stated below, we dismiss for lack of appellate jurisdiction.

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Magnetar Techs. v. Intamin, Ltd.

The panel affirmed the district court’s summary judgment on claims of (1) malicious prosecution of a patent infringement action and (2) monopolization in violation of Section 2 of the Sherman Antitrust Act.

The panel held that under California law, the defendant did not maliciously prosecute the plaintiff for infringement of a magnetic braking system patent because a reasonable attorney could have concluded that the on-sale bar of 35 U.S.C. § 102 did not apply to invalidate the patent.

Affirming the district court’s grant of summary judgment on the plaintiff’s claim that the defendant, along with its European affiliate corporations, used the invalid patent to monopolize the market for magnetic braking systems, the panel held that the plaintiff failed to establish a causal antitrust injury stemming from the defendant’s actions.

On cross-appeal, the panel affirmed the district court’s denial of the defendant’s motion for sanctions under Fed. R. Civ. P. 37 against the plaintiff for bringing a frivolous antitrust action.

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Microsoft, Corp. v. Motorola, Inc.

We live in an age in which the interconnectivity of a wide range of modern technological products is vital. To achieve that interconnection, patent-holders often join together in compacts requiring licensing certain patents on reasonable and non-discriminatory (“RAND”) terms. Such contracts are subject to the common-law obligations of good faith and fair dealing.

At issue in this appeal are two patent portfolios, formerly owned byAppellants Motorola, Inc., Motorola Mobility, Inc., and General Instrument Corp., (“Motorola”), both of which are subject to RAND agreements. Appellee Microsoft, a third-party beneficiary to Motorola’s RAND commitments, sued Motorola for breach of its obligation to offer RAND licenses to its patents in good faith. Motorola, meanwhile, brought infringement actions in a variety of fora to enjoin Microsoft from using its patents without a license.

We previously upheld, in an interlocutory appeal, an antisuit injunction preventing Motorola from enforcing in a German action any injunction it might obtain against Microsoft’s use of certain contested patents. Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012) (“Microsoft I”). We did so after determining that there was, in the “sweeping promise” of Motorola’s RAND agreements, “at least arguably[] a guarantee that the patent-holder will not take steps to keep would-be users from using the patented material, such as seeking an injunction, but will instead proffer licenses consistent with the commitment made.” Id. at 884.

After our decision, a jury determined that Motorola had indeed breached its RAND good faith and fair dealing obligations in its dealings with Microsoft. In this appeal, we address (1) whether the district court overstepped its bounds by determining, at a bench trial preceding the jury trial on breach of contract, a reasonable and non-discriminatory rate, as well as a range of rates, for Motorola’s patents; (2) whether the court erred in denying Motorola’s motions for judgment as a matter of law on the breach of contract issue; (3) whether the court erred in awarding Microsoft attorneys’ fees as damages in connection with Motorola’s pursuit of injunctions against infringement; and (4) whether the district court abused its discretion in two contested evidentiary rulings.

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U.S. Water Servs., Inc. v. ChemTreat, Inc.

In April 2011, while its patent application was pending with the United States Patent and Trademark Office (USPTO), U.S. Water Services, Inc.sued its competitor, ChemTreat, Inc. for misappropriation of trade secrets. On October 18, 2011, the USPTO issued U.S. Patent No. 8,039,244 (’244 patent). Three days before U.S. Water and ChemTreat settled the misappropriation claim, ChemTreat filed counterclaims against U.S. Water, Global Process Technologies, Inc. and Roy Johnson (collectively, counterclaimdefendants) requesting declaratory judgments of noninfringement and invalidity of the ’244 patent. The counterclaim defendants moved to dismiss the counterclaims for lack of subject matter jurisdiction, and ChemTreat moved for summary judgment of noninfringement. The district court denied the counterclaimdefendants’ motion to dismiss and later granted ChemTreat’s subsequent motion for summary judgment as to the noninfringement counterclaim and dismissed the invalidity counterclaim. The counterclaim defendants appeal. We affirm the district court’s well-reasoned judgment.

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Amity Rubberized Pen Co. v. Market Quest Grp.

This is a patent case. Congress has directed that appeals of patent cases shall be heard by the Court of Appeals for the Federal Circuit, and that other circuit courts, including this court, do not have jurisdiction to decide such cases. See 28 U.S.C. § 1295(a)(1). Thus, this appeal should have been filed with the Federal Circuit. Because, however, it was filed with us, we must decide what to do with it. We hold that the interest of justice would be served by allowing this case to be heard by the Federal Circuit, and so order that it be transferred to that court.

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King Drug Co of Florence Inc, v. Smithkline Beecham Corp.

In this appeal from the grant of a motion to dismiss for failure to state a rule-of-reason claim under Sections 1 and 2 of the Sherman Act under Federal Rule of Civil Procedure 12(b)(6), we are asked to determine whether FTC v. Actavis, 133 S. Ct. 2223 (2013), covers, in addition to reverse cash payments, a settlement in which the patentee drug manufacturer agrees to relinquish its right to produce an “authorized generic” of the drug (“no-AG agreement”) to compete with a first-filing generic’s drug during the generic’s statutorily guaranteed 180 days of market exclusivity under the Hatch-Waxman Act as against the rest of the world.

In Actavis, the Supreme Court held that unexplained large payments from the holder of a patent on a drug to an alleged infringer to settle litigation of the validity or infringement of the patent (“reverse payment”) “can sometimes violate the antitrust laws.” Id. at 2227. The Court rejected the near-irrebuttable presumption, known as the “scope of the patent” test, that a patentee can make such reverse payments so long as it is paying potential competitors not to challenge its patent within the patent’s lifetime.

Plaintiffs here, direct purchasers of the brand-name drug Lamictal, sued Lamictal’s producer, Smithkline Beecham Corporation, d/b/a GlaxoSmithKline (“GSK”), and Teva Pharmaceutical Industries Ltd. (“Teva”2 ), a manufacturer of generic Lamictal, for violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2.3 In earlier litigation, Teva had challenged the validity and enforceability of GSK’s patents on lamotrigine, Lamictal’s active ingredient. Teva was also first to file an application with the FDA alleging patent invalidity or nonenforceability and seeking approval to produce generic lamotrigine tablets and chewable tablets for markets alleged to be annually worth $2 billion and $50 million, respectively. If the patent suit resulted in a judicial determination of invalidity or nonenforceability—or a settlement incorporating such terms—Teva would be statutorily entitled to a valuable 180- day period of market exclusivity, during which time only it and GSK could produce generic lamotrigine tablets. (The relevant statute permits the brand to produce an “authorized generic” during the exclusivity period. Mylan Pharm., Inc. v. FDA, 454 F.3d 270, 276-77 (4th Cir. 2006); Teva Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 55 (D.C. Cir. 2005); see also Sanofi-Aventis v. Apotex Inc., 659 F.3d 1171, 1175 (Fed. Cir. 2011).)

After the judge presiding over the patent litigation ruled the patent’s main claim invalid, GSK and Teva settled. They agreed Teva would end its challenge to GSK’s patent in exchange for early entry into the $50 million annual lamotrigine chewables market and GSK’s commitment not to produce its own, “authorized generic” version of Lamictal tablets for the market alleged to be worth $2 billion annually. Plaintiffs contend that this “no-AG agreement” qualifies as a “reverse payment” under Actavis because, like the cash reverse payments the Court there warned could face antitrust scrutiny, GSK’s no-AG commitment was designed to induce Teva to abandon the patent fight and thereby agree to eliminate the risk of competition in the $2 billion lamotrigine tablet market for longer than the patent’s strength would otherwise permit.

We believe this no-AG agreement falls under Actavis’s rule because it may represent an unusual, unexplained reverse transfer of considerable value from the patentee to the alleged infringer and may therefore give rise to the inference that it is a payment to eliminate the risk of competition. As the Court noted, these kinds of settlements are subject to the rule of reason.

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