Federal Circuit Review - Issue 38
Federal Circuit Affirms Patent Ineligibility of Myriad BRCA Claims, Leaves Open Potential Patentability of Methods to Screen for Newly Discovered Gene Mutations.
BRCA1- & BRCA2-Based Hereditary Cancer Test Pat. Litig. v. Ambry Genetics Corp., No. 2014-1361, -1366, 2014 U.S. App. LEXIS 23692 (Fed. Cir. Dec. 17, 2014) (Dyk, J.). Click Here for a copy of the opinion.
In another decision concerning patents of Myriad Genetics, the Federal Circuit invalidated six claims in three patents related to breast cancer susceptibility genes, BRCA1 and BRCA2, which produce tumor suppressing proteins. If a mutation is found in either of these genes, then cells are more likely to develop tumors.
In 2013, Myriad sued Ambry Genetics Corporation in the U.S. District Court for the District of Utah alleging infringement of fifteen patents related to BRCA genes. Myriad sought a preliminary injunction, which was denied, and an appeal followed. The preliminary injunction motion asserted six claims in three patents, as follows:
· Claims 16 and 17 of USPN 5,747,282 (“the ‘282 patent”);
· Claims 29 and 30 of USPN 5,837,492 (“the ‘492 patent”); and
· Claims 7 and 8 of 5,753,441 (“the ‘441 patent”).
The ‘282 patent and ‘492 patent claims are directed to “DNA primers”, which are strands of nucleic acid serving as a starting point, or the “ends”, of DNA. The ‘414 patent claims are directed toward a method of screening for an alteration or mutation of a BRAC1 gene. Myriad’s preliminary injunction motion was denied because its asserted claims were likely unpatentable subject matter.
With respect to the ‘282 and ‘492 patents, Myriad argued that DNA primers were patentable because they were not naturally occurring insofar as the claimed primers were either synthetically replicated or “single stranded.” Myriad also argued that the claimed primers served a “fundamentally different function” than primers occurring in nature as part of a DNA strand. The Federal Circuit rejected both arguments. Citing Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013), in which naturally occurring DNA segments were found to be unpatentable under §101, the Federal Circuit found that the claimed DNA primers are identical to the “ends of DNA strands found in nature.” Further, the Court found that the primer of the claims was not performing a different function than its function in nature, as both the claimed and naturally occurring primers function by binding to complementary nucleotide sequences and tapping “the innate ability of DNA to bind to itself.” Finally, the court found that synthetically replicating DNA primers identical to those occurring in nature was insufficient to create patent eligibility.
With respect to the ‘441 patent, the claimed method was for screening a human germline for an alteration of a BRCA1 gene. Citing the recent Supreme Court decision in Alice Corp. v. CLS Bank Int’l, the Federal Circuit applied a two step test asking (1) whether the alleged invention is a patent ineligible concept, and (2) whether the techniques to be used – either alone or in combination with unpatentable elements – transform the nature of the claim into a patent eligible application. As to the first step of the test, the Federal Circuit determined that the method claims would impede research of the BRCA genes given the breath of the claims. The method claims were not restricted in purpose to the detection of cancer, and as such were unpatentable as abstract ideas. As to the second step of the Alice test, the Federal Circuit found that the claimed method did nothing beyond identifying what practitioners already know about screening. However, the Federal Circuit noted the potential patentability of other ‘441 patent screening claims that were not at issue, which were specifically limited to the detection of particular gene mutations that the ‘441 patent inventors had themselves identified.
Court Reverses Premature Dismissal of Trade Secret Misappropriation Claims at the Complaint Stage.
ABB Turbo Systems AG and ABB Inc. v. TurboUSA, Inc., No. 2014-1356, (Fed. Cir. Dec. 17, 2014) (Taranto, J.). Click Here for a copy of the opinion.
ABB Turbo Systems AG and ABB Inc. (collectively ABB) filed a complaint accusing TurboUSA of infringing two of ABB’s turbocharger-related patents. After filing the original complaint, ABB received information suggesting that TurboUSA had misappropriated ABB’s trade secrets in collaboration with a former ABB employee. ABB amended its complaint to add state claims for trade secret misappropriation. TurboUSA filed a 12(b)(6) motion to dismiss these allegations for failure to state a claim on which relief can be granted. The district court granted the motion based on statute-of-limitations grounds and on insufficient allegations of facts to show that ABB reasonably protected its trade secrets according to Florida trade secret statute requirements. ABB appealed.
The Federal Circuit reversed, finding that the district court was premature and relied on judgments about the merits that go beyond what is authorized at the complaint stage. Specifically, the Court found that dismissing a complaint at the pleading stage on statute-of-limitations grounds is ordinarily improper unless it is “apparent from the face of the complaint that the claim is time-barred.” ABB’s amended complaint, however, provided no basis to conclude that it had notice of an actual case or controversy before the three-year statute-of-limitations period. Further, the Court found that ABB’s specific factual allegations of its measures to protect its trade secrets were enough to survive the motion to dismiss, even if the actual proof of those alleged facts seems improbable. The Court concluded that, at the complaint stage, “it is simply not implausible that adequate protections [of ABB’s trade secrets] were in place and yet a series of misappropriations occurred without ABB’s detection.”
Reasonable Royalty Encompasses What an Infringer Would Have Paid in a Hypothetical Negotiation And Is Not Limited by What the Infringer Actually Earned from his Unilateral Infringement Discount.
Aqua Shield v. Inter Pool Cover Team, No. 2014-1263, 2014 U.S. App. LEXIS 24132 (Fed. Cir. Dec. 22, 2014) (Taranto, J.). Click Here for a copy of the opinion.
Aqua Shield sued IPC for infringement of U.S. Pat. No. 6,637,160. The district court in New York denied Aqua Shield’s request for preliminary injunction, and the case was eventually transferred to the District of Utah. Aqua Shield moved for summary judgment of infringement and validity, which the court granted. On issues concerning relief, the court granted a permanent injunction against IPC, found that Aqua Shield failed to prove lost-profit damages or a reasonable royalty, and held that IPC’s infringement was not willful. Upon reconsideration, the court allowed Aqua Shield to recover a reasonable royalty. Using IPC’s profits on past infringing sales as the royalty base and 5% as the royalty rate, premised on a hypothetical arms-length negotiation, the court awarded Aqua Shield $10,800 in damages. Aqua Shield appealed the district court’s royalty award methodology and its ruling of non-willfulness.
The Federal Circuit vacated the district court’s royalty calculation and remanded. In a hypothetical-negotiation, the core question is what the infringer “would have anticipated the profit-making potential of use of the patented technology to be, compared to using non-infringing alternatives.” The infringer’s actual profits during the period of infringement may be relevant, but “only in an indirect and limited way.” Thus, the district court erred in treating IPC’s actual profit as a royalty cap. The district court also “incorrectly replace[d] the inquiry into the parties’ anticipation of what profits would be earned if a royalty . . . were to be paid with an inquiry into what profits were earned when IPC was charging prices without accounting for any royalty.” Because IPC could have raised its price to account for a royalty payment, the district court’s royalty award was incorrect. In other words, an infringer cannot rely on its infringement (lower costs and lower prices) to discount a reasonable royalty award.
To prove willful infringement, a patentee must: (1) show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) demonstrate that this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer. The district court concluded there was no willful infringement because it denied Aqua Shield’s motion for preliminary injunction. The court also relied on IPC’s design-around efforts. After summary judgment finding that IPC’s accused products were infringing, IPC instructed its factory to change its product in a manner it believed would avoid the patent’s claims, and it argued this change was relevant to non-willfulness.
The Federal Circuit observed that denial of a preliminary injunction denial may influence a finding of no willfulness, but this “depends on why the preliminary injunction was denied.” Here, the district court denied a preliminary injunction because of personal jurisdiction questions and because Aqua Shield had insufficient knowledge for IPC’s accused product to show a likelihood of success on the merits. These considerations are irrelevant to the infringement or validity analysis and, and hence to willfulness, because they “cannot reasonably be read to support a conclusion that any substantial basis existed for doubting infringement or validity.” Regarding IPC’s design-around, the Federal Circuit held that whether the IPC’s product changes were actually implemented or whether the resulting products avoided infringement are relevant to willfulness, but are questions yet to be answered. The Federal Circuit therefore vacated and remanded the district court’s non-willfulness decision.
Prior Art Is Available and Not Abandoned When Delays Are Consistent With an On-going Commitment and When A Prior Inventor Resumes Work Before A Later Inventor Conceives The Invention; Broadening Reissue Patents May Be Granted Even When Filed in View of Market Developments.
Fleming v. Escort Inc., No. 2014-1331, -1371, 2014 U.S. App. LEXIS 24419 (Fed. Cir. Dec. 24, 2014) (Taranto, J.). Click Here for a copy of the opinion.
Fleming sued Escort, claiming infringement of two patents related to GPS-muting radar detectors. Radar detectors, used to detect police speed traps, are prone to false positives caused by other sources of radio energy. The patents-in-suit claimed a system and method of muting radar detectors in areas known to cause false positives. At trial, a jury found the patents-in-suit infringed and not invalid, except as to five of the asserted claims, which were found invalid under Pre-AIA § 102(g)(2). Fleming moved for a judgment as a matter of law reversing the jury’s finding of invalidity of several claims. Escort moved for a judgment as a matter of law that the patents were improperly reissued. The district court denied both motions.
The two patents were both broadened by reissue. Fleming filed the reissue applications to pursue broader claims in light of products on the market that were covered by the disclosure, but not the claims. Additionally, he alleged that he had mistakenly written the original claims from the perspective of a programmer, making it difficult to show infringement of the original claims. Fleming also argued at trial for a priority date no earlier than 1999 for both patents.
Escort produced evidence at trial that Orr, an employee of Escort, invented a GPS-muting radar detector before the priority date of Fleming’s patents. Orr first conceived the invention in 1992, and first reduced it to practice in 1996 while working for Cincinnati Microwave. Following reduction-to-practice, Orr continued to work on the invention until February 1997, when his employer went bankrupt and was acquired by Escort. Following the bankruptcy, Orr left for another firm, where he developed cordless telephones. Orr testified that he continued to provide information to Escort about his invention while working for the other firm. In 1998, Escort hired Orr to resume developing GPS-muting radar detectors.
Fleming appealed the jury’s finding of invalidity, alleging that the evidence of prior invention was both insufficiently specific, and uncorroborated. The Federal Circuit rejected these arguments in light of records produced at trial showing Orr’s experiments with GPS muting during his employment with Cincinnati Microwave. Fleming also argued that Orr’s work was unavailable as prior art because he abandoned the invention after it was reduced to practice in 1996. Under Pre-AIA § 102(g)(2), a prior invention is not prior art where an inventor “abandoned, suppressed, or concealed” the invention. Abandonment can be inferred from “unreasonable delay in making the invention publically known.” Work to refine, perfect, or improve the invention after reduction-to-practice does not constitute abandonment. Additionally, a long period of inactivity is not abandonment if the first inventor resumes work on the invention before the second inventor conceives of the invention.
The Federal Circuit held that there had been no abandonment of the invention for two reasons: First, Orr resumed active development of the GPS muting radar detectors at least by 1998, and thus any abandonment would be excused by his renewed development of the invention prior to the priority date of the patents-in-suit in 1999. Second, the evidence presented did not support a finding of abandonment by Orr even if Fleming could show a priority date prior to Orr’s employment with Escort. Specifically, the delay caused by the bankruptcy of Cincinnati Microwave was not unreasonable in light of Orr’s communications with Escort about the invention prior to his employment by Escort in 1998. The Federal Circuit characterized the delay as “consistent with a continuing commitment to pursuing the project to the full extent conditions allowed.”
On appeal, Escort argued that the reissues that resulted in both patents-in-suit were improperly granted because they contained no correctable error. Section 251 requires that a patent contain an error to allow reissue. This may include a patentee “claiming more or less than he had a right to claim in the patent.” While reissues may be used to broaden a patent that is in error, it cannot be used to change deliberate decisions during prosecution that the patentee regrets having made.
Escort argued that since market developments caused Fleming to see “deficiencies” in his claims, there was no error. Fleming simply regretted decisions made during prosecution that made his patent more difficult to enforce. The Federal Circuit disagreed, holding that the market developments which caused Fleming to seek broader claims did not preclude reissue. Instead, those developments merely explained how Fleming came to see the error in the original claims, not evidence of decisions later regretted. Further, a failure to appreciate the full scope of the invention, or the inadequacy of the claims for capturing the full scope of the invention are both classic, permissible reasons for reissue.
The Federal Circuit affirmed the decision of the district court.
The following opinions are not reported in this newsletter:
Stryker Corp. v. Zimmer, Inc., No. 2013-1668, 2014 U.S. App. LEXIS 23965 (Fed. Cir. Dec. 19, 2014) (No willful infringement because defendant did not act recklessly - defendant’s defenses were not objectively unreasonable). Click Here for a copy of the opinion.
Content Extraction & Transmission LLC v. Wells Fargo Bank, No. 2013-1588, -1589, 2014-1112, -1687, 2014 U.S. App. LEXIS 24258 (Fed. Cir. Dec. 23, 2014) (Claims are invalid as patent-ineligible under 35 U.S.C. §101 because they do not amount to “significant more” than the abstract idea of extracting and storing data from hard copy documents using generic scanning and processing technology). Click Here for a copy of the opinion.
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