2015 AIPLA IP Practice in Europe CommitteeJune, 2015

Phil Swain

Foley Hoag LLP

Boston, MA - USA

Teva v. Sandozand other recent decisions

and implications for US litigation

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Disclaimer: The purpose of this presentation is to provide educational and informational content and is not intended to provide legal services or advice. The opinions, views and other statements expressed by the presenter are solely those of the presenter and do not necessarily represent those of AIPLA or of AIPPI-US.

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Supreme Court calls for greater deference to trial court claim construction

Overrules Federal Circuit precedent of treating all aspects of claim construction as purely legal questions to be reviewed de novo

Federal Circuit must now apply deferential “clear error” standard of review to findings of fact underlying trial court claim construction

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.

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Disputed claim term “molecular weight”

Defendants argued terms could have three meanings, and therefore was indefinite

Trial court heard evidence from parties’ experts, rejected indefiniteness defense, and construed “molecular weight” to mean “average molecular weight”

Federal Circuit reviewed claim construction under de novo standard of review, and reversed trial court’s ruling

Held that “molecular weight” was indefinite and claim was invalid

Teva background facts

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No “patent law” exception to the “clear command” of Rule 52(a) which requires a “clear error” standard of review of

factual determinations underlying a trial court’s claim construction

consideration of extrinsic evidence regarding background science or meaning of term in the relevant art during relevant time is analogous to evidence concerning trade usage in contract disputes

practical considerations also support deferential reviewo trial judge has comparatively greater opportunity

to gain familiarity with scientific principles at issue and can make credibility determinations about dueling experts

Supreme Court’s reasoning in Teva

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There are distinctions between intrinsic and extrinsic evidence when trial court considers only intrinsic evidence (patent claims,

specification, file history) – legal determination and de novo review

but when trial court makes subsidiary fact findings based on extrinsic evidence, those findings are subject to the “clear error” standard

Federal Circuit erred in reviewing de novo the trial court’s conclusion, based on disputed expert testimony, as to how a person of skill in the art would understand a figure in the specification

Justice Thomas dissent asserted that the majority decision undermined the public notice function of patents, because the ultimate meaning of a patent claim should not depend on the specific evidence presented in a particular case “clear error” review would also undermine uniformity and lead

to costly satellite litigation over what constitutes a subsidiary fact

Supreme Court’s reasoning in Teva (2)

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Gives litigants incentive to shift focus in claim construction from intrinsic evidence (usually treated as

dispositive) to extrinsic evidence warranting factual findings (which will be given greater deference on appeal)

In Markman hearings, expect increased reliance on expert testimony additional claim construction briefing on fact issues submission of proposed findings of fact longer claim construction hearings extensive battles over whether a contested issue is

one of fact or law

Teva’s implications for US patent litigation

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Supreme Court reverses Federal Circuit holding that defendant/accused inducer’s good faith belief of invalidity “may negate requisite intent for induced infringement”

Belief as to patent invalidity “cannot negate the scienter required for induced infringement”

Thus defendant who believes patent is invalid may still be liable for inducing infringement if it turns out patent was valid

Commil USA, LLC v. Cisco Systems, Inc.

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Commil owned patent on wireless networks, sued Cisco for infringement, including induced infringement

Jury found direct infringement, but no liability for inducement in first trial, but judge granted new trial on that issue

In second trial, on inducement only, judge excluded Cisco’s evidence of “good faith belief that Commil patent was invalid” Jury returned verdict for Commil and awarded $63.7 million

Federal Circuit vacated and remanded the infringement holding “It is axiomatic that one cannot infringe an invalid patent” evidence of an infringer’s good faith belief in invalidity may

negate the requisite intent for induced infringement no principled difference between good-faith belief of

invalidity and non-infringement for purposes of intent to induce infringement

Commil background facts

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Inducer must have knowledge that the induced acts constitute infringement

The intent necessary to find inducement liability is the intent to infringe therefore belief it is not causing customer to infringe

is relevant to show lack of intent but belief about invalidity in not relevant to that

intento because invalidity is not a defense to infringement,

it is a defense to liability Practical reasons to reject good faith belief of invalidity

defense accused inducers can attempt to invalidate through

declaratory judgment, PTAB, reexamination, or defense in patent infringement suit

Good faith invalidity defense would make patent litigation more costly

Court reasoning in Commil

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Acknowledged problem of frivolous patent suits to obtain nuisance value settlements

Urged lower courts to “sanction attorneys for bringing such suits” using Rule 11 and section 285 of patent statute

These safeguards militate in favor of maintaining the separation between infringement and validity This “dichotomy means that belief in invalidity is no

defense to a claim of induced infringement”

Justice Scalia’s dissent asserts that barring the defense of perceived invalidity “increases the in terrorem power of patent trolls”

Commil’s comments on “patent trolls”

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For defendants re-affirms the importance of the good-faith belief of

non-infringement defense to inducement claims accused infringer should develop evidence of that

belief, such as opinion of counsel, and reliance on that belief

party evaluating a patent may conclude it would not infringe if construed narrowly, and would be invalid if construed broadlyo opinion should address both issues under different

claim constructions, even if invalidity opinion no defense to inducement

For patent owners If patent drawn to method claims, no need to contend

with invalidity belief defenseo may benefit some patents of questionable validity

Implications of Commil

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Direct/divided infringement steps out of the limelight in its return to the Federal Circuit

No direct infringement of method claim under section 271(a) of patent statute unless single actor performs all steps of the method

or performs some of the steps and controls actions of others who perform the rest

Section 271(a):

“Whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”

Akamai Technologies, Inc. v. Limelight Networks, Inc.

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Limelight performed all steps of Akamai’s patented method, except “tagging” step, which was done by customers Limelight provided instructions to customers in manual Contract explained the customers would have to

perform tagging in order to use service, but did not mandate the tagging

In 2014, the Supreme Court had ruled that Limelight was not liable for indirectly infringing Akamai’s patent because Federal Circuit did not rule there was 271(a) direct infringement Akamai’s argument that Federal Circuit is “too narrowly

circumscribing” 271(a) law did not change requirements of 271(b)

On remand, Federal Circuit left its existing standard intact

Akamai’s procedural history and background

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Direct/divided infringement occurs only if all steps are performed or attributed to a single entity As would be the case, for example, in principal-agent

relationship, or a contractual arrangemento Contractual arrangement must mandate the performance

of the claimed method Legislative history of 1952 Patent Act eliminated liability for

tortious types of infringing behavior, and imposed liability for the acts of others based only on vicarious liability

Judge Moore dissent asserted majority opinion left gaping loophole in infringement law”o Direct infringement should be found under broader set of

circumstances where one party directs or controls the actions of

another to infringe where two parties act in concert to perform the claimed

method pursuant to a common goal, plan, or purpose o But recognized this will require en banc action

Federal Circuit reasoning in Akamai

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For accused infringers Divided infringement defenses remain viable

For patent owners avoid construction of claims in litigation that could

require multiple actors to perform all the steps of patented method

In prosecution, avoid drafting or issuing method claims that requiring multiple actors

For all Stay tuned for en banc review and return to the

Supreme Court

Akamai’s implications

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Thank you for your attention

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