Joff Wild

The US courts issue any number of decisions each year that have an impact on patent owners and their ability to generate value from the rights they hold. Currently, the Cuozzo case is grabbing everyone’s attention, but there are some recent Federal Circuit judgments that also merit consideration. Chicago-based Global IP Law Group has identified three such, all of which have been handed down this year. Here they are:

Lexmark International Inc v Impression Products Inc (2016 WL 559042 (Fed Cir Feb 12, 2016) (En Banc))

This decision may have been the most significant of those handed down by US courts in the first quarter of the year. It clarifies an intricate and much-misunderstood area of patent law - exhaustion of US patent rights by foreign sales.  In this case, the patentee sold patented printer cartridges abroad.  The accused infringer acquired used cartridges, reconfigured them and imported those products into the US. The patentee sued. 

Issue: (i) Whether a US patentee may restrict downstream used and resale goods by lawfully and clearly communicating single-use/no-resale restrictions at the time of sale, and (ii) whether selling or authorising sale of a product abroad exhausts the US patent rights in the product.

Holding: (i) Yes, a patentee selling a US patented article abroad may place lawful restrictions on downstream resale and reuse.  Patentee may bring a claim against a buyer that violates these clearly communicated restrictions—patentee does not exhaust its Section 271 infringement rights.  (ii) No, foreign sale of a US patented article, when made with US patentee’s approval, does not exhaust US patent rights in the article sold, even when the sale was silent on the reservation of rights.  Foreign markets under foreign sovereign control are not equivalent to the US markets under US control in which a US patentee’s sale presumptively exhausts its rights in the article sold. However, “[a] buyer may still rely on a foreign sale as a defense to infringement, but only by establishing an express or implied license—a defense separate from exhaustion, as Quanta holds—based on patentee communications or other circumstances of the sale.” 

As a result of this decision, sales of patented products abroad by the patent owner or a licensee do not exhaust the patent rights in those products. Subsequent importation of those products to the US may infringe US patent rights and therefore be subject to licensing fees or litigation.  This holding is particularly significant for products sold and assembled abroad into consumer electronics and then imported into the US.

Nuance Communications Inc v ABBYY USA Software House Inc (2016 WL 692497 (Fed Cir Feb 22, 2016))

US courts, particularly in recent years, have aggressively pushed patentees to streamline cases by limiting the number of patent claims at issue during the course of the case.  An open question is whether subsequent decisions by the court can impact those withdrawn claims.

Issue:  Whether the district court may properly enter final judgment as to patents that were part of the original complaint, but were removed after a voluntary narrowing of the case where patentee did not expressly reserve its rights with respect to those patents.

Holding: Yes.  Patentee must timely notify the disctrict court to reserve its rights to the dropped patents. Patentee in this case argued that its due process rights were violated by ruling on the dropped patents.  The court disagreed, however, based on patentee’s voluntary narrowing of the case and failure to object to the court’s procedure to limit the number of claims and patents at trial.

After this decision, any patent litigant must explicitly reserve rights to patents it drops during the course of the case.

Blue Calypso v Groupon Inc (2016 WL 791107 (Fed Cir March 1, 2016))

The impact of post-grant proceedings like inter partes review (IPR) and covered business methods (CBM) review has been dramatic. The courts are now dealing with implementation issues, such as what type of judicial review is appropriate for these types of proceedings.

Issue: Whether the Federal Circuit may review the Patent Trial and Appeal Board’s decision that a patent is an unpatentable CBM.

Holding:  Yes. The court reiterated its holding in Versata II that the Federal Circuit has authority to review whether a patent claim is a CBM.

The determination relates to the board's authority to issue a final decision, not whether to institute CBM review. “[B]ecause we have jurisdiction to review the Board's final decisions in CBM reviews, see AIA § 18(a)(1); 35 USC § 329, the AIA does not preclude us from reviewing the Board's conclusion that the challenged patent claims are 'covered business methods' that lack any 'technological invention.'”   The Federal Circuit reviews the Board’s reasoning under the arbitrary and capricious standard and its factual determinations under the substantial evidence standard.