2022: Patent Litigation Mid-Year Review

Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., 595 U.S. __ (2022).

Unicolors, Inc. is a Los Angeles, California-based fabric and garment production company that services both clothing and print manufacturers. As part of its business operations, in 2011, Unicolors created and copyrighted a series of artistic designs for use on fabrics as two-dimensional artwork called EH101. In 2015, H&M, a retail clothing store, began selling a jacket and skirt combination with an art design called “Xue Xu.” Shortly thereafter, Unicolors brought suit against H&M in federal district court alleging copyright infringement on the basis that H&M’s Xue Xu pattern was an identical copy to its EH101.

H&M argued Unicolors’ copyright was invalid on the basis that Unicolors improperly registered 31 separate works in a single copyright. The district court rejected H&M’s argument, reasoning that invalidation of a copyright required an intent to defraud, and there was no evidence presented to support such a claim. The district court further opined that Unicolors’ application was not inaccurate because the separate designs were published the same day. H&M appealed to the U.S. Court of Appeals for the Ninth Circuit, which reversed the district court ruling, finding the district court’s ruling created an intent to defraud requirement, where no such requirement actually existed. The Ninth Circuit further held the district court failed in its obligation to refer the case to the Copyright Office as required by 17 U.S.C. § 411(b)(2).

The U.S. Supreme Court granted Unicolor’s petition for appeal, and reversed the Ninth Circuit’s holding, finding that in certain circumstances, a lack of factual or legal knowledge can excuse an inaccuracy in a copyright registration as long as inaccuracy was not known prior to filing.

It is too early to tell the impact of the Court’s decision, however, some patent litigators believe the court’s ignorance standard may create a substantial burden for infringement defendants seeking to invalidate patent applications filed by lay people.

Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., 25 F.4th 998 (Fed. Cir. 2022)

In Nippon, the Federal Circuit issued a precedential ruling enforcing a forum selection clause in a mutual confidentiality agreement that bound the parties to adjudication outside of the Patent Trial and Appeal Board (PTAB), where existing case law forbid parties from adjudicating issues outside of the PTAB. Nippon, a manufacturer and seller of pharmaceuticals and foodstuffs, and Sarepta, a global biotech company engaged in the development of genetic medicine. Nippon and Sarepta agreed to enter into a marketing deal that included a clause directing any patent infringement or invalidity cases to be litigated within the District of Delaware, and no party would be allowed to bring suit in other jurisdictions or the U.S. Patent and Trademark Office (PTO).

Prior to the decision in Nippon, the Federal Circuit rejected previous attempts by private parties to select a forum outside the Patent Trial and Appeal Board (PTAB) to adjudicate issues arising between the parties of the contract. The Federal Circuit’s ruling is significant, as it allows practitioners the flexibility to choose between the PTAB, where litigation tends to move more quickly due to more restrictive discovery rules and trials that are conducted by technically trained patent judges, as opposed to federal district courts, where discovery is less limited and trials are conducted in front of a jury consisting of members of the public.

In addition to new the establishment of new legal precedents, several courts around the country reversed a number of high-dollar damages awards.

California Institute of Technology vs. Broadcom Limited, 25 F.4th 976 (Fed. Cir. 2022).

In Broadcom, the Federal Circuit reversed a $1.1 billion verdict awarded to Cal Tech against Apple, Inc. in a case involving Wi-Fi chips used in Apple’s iPhones and other devices. The district court agreed to apply a two-tier damages theory presented by valuation experts provided by CalTech, which sought different royalty rates from each of the infringers (Broadcom and Apple), even though the liability arose from the same technology in the Wi-Fi chips.

In addition to tossing Cal Tech’s damages award, the Federal Circuit reversed its prior decision in Shaw Industries v. Automated Creel Systems, 87 F.3d 1293 (Federal Circuit 2016), where the court held that estoppel, the act of barring a claim which could have been brought but was not, applied to claims and grounds asserted in the inter partes review petition before then PTAB in addition to all grounds not stated in the petition that could have reasonably been asserted. In so doing, the Federal Circuit has put all litigants on notice that a party should put its best arguments forward or risk forfeiture of those claims.

Roche Diagnostics Corporation v. Meso Scale Diagnostics, LLC, 30 F.4th 1109 (Fed. Cir. 2022).

In April, the Federal Circuit reversed a $137 million judgement awarded to Meso for Roche Diagnostics’s infringement of one patent and inducing infringement on three other patents involving immunoassays, a biochemical test that measures the presence or concentration of a small molecule in a solution using an antibody or antigen.

In addition to reducing significant damages, the Roche court drew notoriety for the manner in which it analyzed induced infringement (the act of asking or inducing another to infringe upon an existing patent) and willfulness as being intertwined. The court reasoned that because Roche was unable to prove Meso acted intentionally, it also failed to prove Meso made affirmative acts to induce infringement. Prior to Roche, the courts analyzed the issue under two separate inquiries. First, the court would consider whether a patent had been directly or indirectly infringed. If so, the court would then consider whether the infringement was willful. If willfulness could be proven, the injured party could receive treble damages. While it is too early to tell, the Roche court may be signaling an attempt clarify and stabilize the award of damages where it has become increasingly common for damages awards to be reversed on or reduced on appeal.

Arthrex, Inc. v. Smith and Nephew, Inc., 35 F.4th 1328 (Fed. Cir. 2022).

Finally, one of the most notable decisions to come out in the first half of 2022 was the Federal Circuit’s decision in Arthrex, Inc. v. Smith and Nephew, Inc. The Arthrex decision clarified an important question that was left unresolved by the Supreme Court in United States v. Arthrex, Inc., 594 U.S. ___ (2021), which required the USPTO to revise the current inter partes review system (a new trial proceeding conducted by the PTAB to review the patentability of one or more claims in a patent pursuant to a limited ground under certain federal statutes, and only on the basis of prior art consisting of patents or printed publications). Writing for the majority, Justice Roberts agreed with Arthrex, stating that the appointment of PTAB judges required Presidential nomination and Senate approval.

In the wake of that ruling, however, the leader of the USPTO, Drew Hirshfeld, a commissioner of patents, was performing the duties of the director, but had not been appointed by the president or confirmed by the Senate. Arthrex argued that Hirshfeld lacked the authority to conduct rehearings under the new process, but the Federal Circuit rejected that argument, holding that Hirshfeld’s actions did not violate the Appointments Clause because he was merely performing the functions and duties of the Director of the PTO on an interim basis while that office was vacant, and did so under the prior director’s standing directive.

Had the court ruled Hirshfeld’s acts were unconstitutional, the rulings of a number of rehearings decided by Hirshfeld would have been called into question, as would the acts of any future interim directors. As it stands, the Arthrex ruling settles the question of whether an interim director may assume the role and responsibilities of the director absent the appointment requirements outlined by then Supreme Court.

 2022 has proved to be an eventful year in patent litigation, and there are still a number of pending cases on court dockets waiting to be resolved. From pharmaceutical patents impacted by the Covid-19 pandemic, to questions over NFT ownership and the breadth of the Patent-Eligibility Doctrine, the second-half of 2022 could have a significant impact on patent litigation going forward.