Patent Litigation: 2021 Mid-Year Review

Patent Litigation: 2021 Mid-Year Review

During the first half of 2021, the number of patent cases filed before the Patent Trial and Appeal Board (PTAB) and Federal district courts have continued to trend upward from Q1 2020, increasing by 4.3% during the first quarter alone. If this rate continues, 2021 should see an increase of more than 1,200 more filings than filed in 2020. Moreover, patent litigation in 2021 has provided several noteworthy decisions, both in terms of the size of damages awarded and in cases establishing new legal precedent. The following cases include an overview of the most noteworthy decisions so far.

 

United States Supreme Court

 

United States v. Arthrex, Inc., 594 U.S. ___(2021).

The first half of 2021 saw the United States Supreme Court issue two opinions in the area of patent law. In United States v. Arthrex, Inc., 594 U.S. ___, the Court was asked by a patent owner (Arthrex et. al.) to order the U.S. Congress to revise the current inter partes review system. In these cases, PTAB judges are asked to rule on the validity of some or all of a patent in a new trial. The patentability of one or more claims in a patent are reviewed only on the basis of prior art, consisting of patents, products, or printed publications. 

Arthrex, a manufacturer of medical devices, is the owner of a patent for a surgical device. Arthrex entered into a dispute with Smith & Nephew, Inc. And ArthroCare Corp., asserting both were infringing on Arthrex’s patent. The case was heard by the PTAB, which held Arthrex’s patent was invalid. Arthrex appealed to the Fifth Circuit Appellate Court, asserting the PTAB judges who decided the case were unconstitutionally appointed. Arthrex stated that the Appointments Clause of the United States Constitution—the section under which PTAB judges are appointed—required the judges to be appointed through the President and confirmed by the Senate. The Fifth Circuit agreed and vacated the PTAB ruling.

Writing for the majority, Justice Roberts also agreed with Arthrex, stating that the appointment of PTAB judges required Presidential nomination and Senate approval. However, the court stopped short of finding the entire proceeding unconstitutional, noting that the Director of the USPTO was vested by Congress with the powers and duties of the PTO, and may review final PTAB decisions and issue decisions on behalf of the Board. 

Pundits have questioned the Court’s decision, noting that the Director of the USPTO is a political appointee, who now has the authority to dispose of vested property rights of patent holders who appeal PTAB decisions without a clear framework for assessing the merits of claims on review. Though, in a response to the Court’s ruling, the USPTO issued a Q&A in an effort to define the review process.

 

Minerva Surgical, Inc. v. Hologic, et. al., 594 U.S. __ (2021).

In another case before the U.S. Supreme Court, Minerva Surgical, Inc. v. Hologic, et. al., 594 U.S. __ , Hologic, Inc. sued Minerva Surgical, Inc. for infringement on two patents related to procedures and devices for endometrial ablation, a treatment for heavy menstrual bleeding. Both patents were issued to the inventor, Csaba Truckai, who assigned his interests to a company that was subsequently acquired by Hologic. Hologic is the current patent holder and licenses the patents throughout the United States.

Truckai later founded a company, Minerva Surgical, Inc., and developed an Endometrial Ablation System (EAS), which later received FDA approval. Hologic sued Minerva, alleging the EAS infringed on its patents, but Minerva countered that the patents were invalid based on a lack of enablement, was not patentable due to prior art, and contained an inadequate written description of the patent. Hologic moved for summary judgment, arguing a patent seller (Truckai) could not attack the validity of the patent that Truckai, himself assigned to Hologic.

The Supreme Court concluded a that a defendant-assignor (Truckai)  can be barred from asserting the defense of invalidity only if the assignor’s claim of invalidity contradicts representations the assignor made when he assigned the patent. The Court’s decision was based on fairness; in essence, an inventor should not be able to argue the invalidity of a patent he previously warranted as valid during a prior assignment.

 

Federeal Circuit Courts

While there were a number of important decisions issued by the Federal Circuit Court of Appeals during the first half of 2021, a few stand out above the others. 

Yu v. Apple, Inc., Ninth Circuit Court of Appeals.

In this case, Yu accused Apple of infringing on multiple patents related to digital camera technology, specifically the improved zoom and portrait mode offered in certain smartphone models. Apple moved to dismiss the suit on grounds that the claims were directed to an abstract idea, and the district court agreed. A split panel in the Ninth Circuit agreed with the district court judge, noting that Yu’s patent was directed to the “abstract idea of taking two pictures and using those pictures to enhance each other in some way.” However, writing in dissent, Justice Newman disagreed with the majority’s characterization of the patent as abstract, concluding the claim was for a “digital camera having a designated structure and mechanism that performs specific functions… not for the general idea of enhancing camera images.”

Yu criticized the District Court’s granting of Apple’s motion to dismiss under FRP 12(b)(6) (failure to state a claim upon which relief can be granted), asserting the district court erroneously made findings of fact regarding the allegations in the complaint as opposed to taking all well-pled facts as true as required by the Federal rules. In rejecting that assertion, the ruling has paved the way for Apple and other phone producers to avoid infringement litigation during pre-trial motions. 

 

PerDiemCo LLC v. Trimble, Inc. Ninth Circuit Court of Appeals.

PerDiemCo, a Texas LLC, sent a cease and desist letter to Innovative Software Engineering, LLC (ISE), an Iowa corporation wholly owned by Trimble, Inc. In its letter, PerDiemCo accused ISE of using electronic logging devices and/or geofencing covered by patents owned by PerDiemCo. The letter informed ISE that PerDiemCo had entered into licensing agreements with previous infringers and offered a non-exclusive license to ISE. Alternatively, if the offer to license was rejected (the carrot approach), the letters included a threat in the form of a draft complaint for patent infringement (the stick approach) with a corresponding claim chart which outlined the evidence of use against each claim element. In all, more than 20 communications were exchanged between the companies.

ISE informed their parent company Trimble, Inc., a Delaware corporation with physical headquarters in California, of the letter, and Trimble attempted to resolve the issue, only to be met with an additional infringement claim accusing Trimble of infringement. PerDiemCo threatened to sue Trimble in the Eastern District of Texas, but Trimble struck first, filing a complaint in the Northern District of California. PerDiemCo moved to dismiss the complaint alleging California did not have personal jurisdiction over PerDiemCo, and the District Court agreed.

On appeal, Trimble argued that the District Court had erred. The Ninth Circuit agreed, concluding that PerDiemCo’s patent license letter campaign conferred personal jurisdiction (the authority of the court to make decisions that affect a person or entity). In doing so, the Court clarified that even cease and desist letters may confer personal jurisdiction because those activities are “purposefully directed” at residents of the forum state, and the underlying nature of the claim (a patent action) did not alter that conclusion. In sum, patent owners seeking to enforce their patents through a broad licensing campaign should proceed with caution, as too much activity directed towards the forum state may subject a patent holder to personal jurisdiction in an unfavorable or inconvenient forum.

 

Biggest Winner: Damages

In addition to these precedential rulings, a jury returned one of the largest ever damages awards in a patent case. 

VLSI v. Intel, Western District of Texas.

On March 2, 2021, jurors in the Western District of Texas Federal Court awarded VLSI $2.18 billion for Intel’s infringement of two patents acquired by VLSI in 2019, both related to increasing the power and speed of computer processors. VLSI sued Intel, claiming nearly 1 billion microchips sold by Intel infringed on the patents held by VLSI. The jury agreed, awarding VLSI the aforementioned considerable damages. Following the verdict, Intel filed a motion to set aside the verdict, alleging several errors had occurred, including the manner in which VLSI’s expert calculated the value of damages suffered by VSLI. Intel is likely to appeal the amount of damages, with most pundits believing the appellate court will ultimately vacate the amount.

 

Final Thoughts

Patent cases have been a hot topic in the first half of 2021. The landscape of patent law has already experienced a variety of important developments in legal precedent, as well as the continuation of large damages doled out by jurors in the District Courts. With numerous petitions pending disposition in the Supreme Court, it will be interesting to see what changes may be coming in the second half of 2021, as well as how the courts will apply these new precedents. 

 

 

The core team of patent consultants at Vitek IP, LLC have analyzed over 20,000 patents, while managing hundreds of buy-side and sell-side transactions for some of the world’s largest companies. Vitek’s founders have over five decades of experience in IP and tech, and have developed sophisticated patent sales and patent acquisitions strategies for some of the world’s largest companies. Vitek’s patent consultancy, brokerage group, and research organization provide clients exceptional guidance navigating the patent landscape. For more information, visit www.vitek-ip.com.