Federal Circuit in Visual Memory Struggles with Alice Test (Part Two)

In Part One of this post, I summarized the Federal Circuit’s recent ruling on patent eligibility in Visual Memory LLC v NVIDIA Corp. In this second part I look at Judge Hughes’ dissent and the majority’s response to Hughes.


Judge Hughes believed the claims could not be described at a lower level of abstraction than categorical data storage. Hence, he agreed with the district court’s conclusion of patent-ineligibility. According to Hughes, there was no description for how to implement the programmable operational characteristic (POC) of the claim and everything else in the claim described only generic computer components. The lack of a description for the POC was critical to the Alice inquiry, according to Hughes. Because without a description for how to implement the POC the ‘740 patent required “someone else to supply the innovative programming effort.” For this reason the POC was not “properly described as directed to an improvement in computer systems.” Instead, the claim was directed to the abstract idea of categorical data storage.

Hughes thus found the majority’s assessment of the ‘740 patent flawed because the lack of description for a POC was not properly factored into the majority’s directed-to inquiry under Step 1 of Alice. Hughes felt the appropriate way to assess the claim’s level of abstractness was to focus on the lack of a technical description for this term, then reach a conclusion of ineligibility on this basis. This emphasis on assessing a claim’s abstractness in light of an accompanying technical description, or lack thereof, when applying the Alice test, is apparent when Hughes contrasts the Enfish claims with the ‘740 patent claims:

We knew the “claims [in Enfish were] directed to a specific implementation of a solution to a problem,” . . . because the specification contained a four-step algorithm for implementing the claimed self-referential table . . . .

Here, the ’740 claims are not directed to a specific means or method of implementing a “programmable operational characteristic.” . . . The claim does not provide any specific limitations on the “programmable operational characteristic,” making it a purely functional component. The “programmable operational characteristic” is nothing more than a black box for performing the abstract idea of storing data based on its characteristic, and the patent lacks any details about how that is achieved.

Majority’s Response to Hughes

The majority reached its decision of patent eligibility with less regard to the description provided for the POC because, in the majority’s view, this description was not the pertinent factor to consider under Step 1 of the Alice test. According to the majority, Step 1 of Alice was concerned with the innovation envisioned by the inventors and whether that innovation, as reflected in the claims and Specification, is patent-eligible or something that qualifies as an abstract idea. This view is revealed in the majority’s response to Hughes:

. . . [T]he dissent assumes that the “innovative” effort in the ’740 patent lies in the ’740 patent lies in the programming required for a computer to configure a programmable operational characteristic of a cache memory. This assumption is inconsistent with the patent specification itself. The specification makes clear that the inventors viewed their innovation as the creation of “a memory system which is efficiently operable with different types of host processors,” . . . [B]oth the specification and the claims expressly state that this improved memory system is achieved by configuring a programmable operational characteristic of a cache memory based on the type of processor connected to the memory system. . . . Configuring the memory system based on the type of processor connected to the memory system is the improvement in computer technology to which the claims are directed. Alice requires no more from the claims or the specification to support our conclusion that the claims are not directed to an abstract idea.

In the majority’s view, the claims were focused on configuring a memory system based on the type of processor connected to the memory system, not how to configure that memory system using a POC. A lack of description for the POC, therefore, was not that relevant because the POC was not the “innovation” to which the claims were directed-to.


The exchange between majority and dissent in Visual Memory may be summed up as a difference of  opinion between, on the one hand, the relative importance of what the inventors considered an innovation and, on the other hand, the patent specification’s detailed description, or lack thereof, when deciding what claims are directed-to under Step 1 of Alice. The majority placed greater importance than the dissent on what the inventors saw as the innovation. The dissent was less willing to narrow the Alice inquiry to what the inventors considered innovative. Instead, the dissent found it more important to decide whether claims are patent-eligible based on the level or quality of the patent’s detailed description accompanying the claims.

The opinions expressed by the divided court in Visual Memory highlight a real, substantive dispute over how to apply Step 1 of Alice and challenge the view held by some commentators that the Federal Circuit’s eligibility decisions are panel-dependent. The contrasting views on eligibility expressed by the dissent and majority will have to be followed closely for future cases.


Federal Circuit in Visual Memory Struggles with Alice Test (Part One)

In a rare reversal of a district court’s patent-ineligibility holding, the Federal Circuit found the claims at issue in Visual Memory LLC v NVIDIA Corp. patent-eligible under Step 1 of the Supreme Court’s two-part eligibility test in Alice v. CLS Bank.  The Federal Circuit found that the claims (directed to computer memory) were, for purposes of the Alice test, analogous to the claims reviewed under the Court’s patent-favorable decisions in Enfish v. Microsoft [1] and Thales v. United States. [2]

Step 1 of the two-part Alice test asks whether the claims are directed to an abstract idea. If the claim is focused on a new and useful improvement, and not merely something that qualifies as an abstract idea, the claim is patent-eligible. The Enfish and Thales claims were eligible under Step 1 because they were focused on a new and useful improvements. The court in Visual Memory believed the claims were similarly focused on a new and useful improvement, but not by unanimous decision. Notably, the author of the Enfish decision, Judge Hughes, dissents in Visual Memory.

The ‘740 Patent

U.S. Patent 5,953,740 describes a computer memory system having a cache memory resource configurable to operate efficiently with different processor types. The memory system includes three separate caches, each possessing a “programmable operational characteristic.” When the system is turned on, information about the connected processor self-configures the programmable operational characteristic, which determines the type of information (non-code data, code data or both) stored in each of the caches.

Federal Circuit

The district court found the ‘740 patent claims ineligible as directed to the abstract idea of categorical data classification.  The Federal Circuit reversed. Relying on Enfish and Thales as “guideposts” on eligibility, the Court noted the claim phrases “having one or more programmable operational characteristics . . . defined through configuration by . . . [a] computer based on the type of . . . processor” and “determ[ing] a type of data stored by said cache” and the related benefits of the claimed memory system, as described in the specification. The Court then sums up its opinion: “[a]s with the Enfish self-referential table and the motion tracking system in Thales, the claims here are directed to a technological improvement: an enhanced computer memory system.” Quoting Enfish, the Court further said the claims focus on a “‘specific asserted’ improvement in computer capabilities” instead of “on a process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a tool.” And, like the patents at issue in Enfish and Thales, the specification discussed the advantages offered by the technological improvement.

In Part Two of this post I will turn to Hughes’ dissent and the majority’s response to Hughes, then conclude with thoughts on longer term implications for the Alice test gleaned from this exchange.

[1] See Why Fed. Circ. Treated Software Claims Differently In Enfish for my insights on this decision, which is commonly cited as precedent for Step 1 of the Alice eligibility test.

[2] See Patent Eligibility And Fed. Circ. F-35 Helmet Case for my insights on this decision, which relates to patent-eligibility for inventions that rely on mathematical algorithms to solve technology problems.

Weekly Data Privacy Alert – 14 August 2017

Please click here to read the latest data privacy alert from the Squire Patton Boggs Data Privacy & Cybersecurity team. This week’s alert covers news from Germany and the UK.


  • Berlin Data Protection Officer Warns Against Biometrical Face Recognition


  • Islington Council Fined due to Parking Ticket Website Security Breach
  • ICO Fines TalkTalk for Failing to Protect Customers’ Data

For more information on any of these items, or data privacy issues generally, please feel free to call any of the of the following individuals:

Annette Demmel (Germany)

Caroline Egan (Birmingham)

Francesca Fellowes (Leeds)

District Court Non-Infringement Ruling Does Not Warrant Rescinding USITC Exclusion Order

In yet another decision concerning how rulings in parallel, patent challenge proceedings impact Section 337 investigations, the U.S. International Trade Commission (ITC) has refused to rescind an exclusion order issued against a defaulted party despite a district court’s summary judgment ruling that it did not infringe the patent.

The investigation is Certain Beverage Brewing Capsules, Components, Thereof, and Products Containing Same, Inv. No. 337-TA-929 (Enforcement and Rescission Proceeding).  As reported in our prior posts (here and here), the products under investigation were reusable beverage capsules designed to replace the prior art cup-shaped cartridge (such as the Keurig “K-Cup”) with a reusable capsule version.  The ITC issued remedial orders against certain respondents who had been defaulted for failing to participate in the investigation.  The complainant subsequently filed a complaint with the ITC seeking enforcement of the orders that were allegedly being violated by ongoing importation of infringing products.

After a hearing before an administrative law judge (ALJ), the ALJ recommended that the remedial orders be temporarily rescinded based on an intervening grant of summary judgment of non-infringement in a declaratory proceeding brought by a defaulted respondent (Eko Brands) in the U.S. District Court for the Western District of Washington.  The ALJ determined that the district court’s decision represented a “substantial change in circumstances” and that ITC precedent supported temporary rescission of the remedial orders pending appeal and permanent rescission if the district court’s decision was affirmed on appeal.

In its August 15 decision reviewing the ALJ’s determination, the Commission sharply disagreed.  According to the Commission’s opinion, its precedent only supported rescission “based on another tribunal’s ruling that a subject patent is invalid.”  The Commission reasoned that

[a] district court patent invalidity ruling is substantially different from a noninfringement ruling.  An invalidity ruling precludes other tribunals from finding that the patent is infringed . . . [whereas] [a] noninfringement ruling with respect to certain products [before the court] . . . does not preclude a later ruling that other products do infringe.

The Commission also declined to exercise its statutory authority to rescind a remedial order based on “grounds which would permit relief from a judgment or order under the Federal Rules of Civil Procedure.”  19 U.S.C. § 1337(k)(2).  The Commission observed that the cases in which a court provided relief from judgment under Federal Rule of Civil Procedure 60 also involved findings of patent invalidity and unenforceability rather than noninfringement.  Finally, the Commission noted that “Eko intentionally defaulted as a matter of strategy” and, citing other federal cases, should “suffer[] the consequence of that choice.”

While it may be argued that the Commission’s decision is most important for underscoring the possible adverse consequences of defaulting in a Section 337 proceeding, it is also a significant addition to the string of recent cases concerning the ITC’s power to enforce and/or stay its remedial orders in light of intervening decisions by other tribunals.  For example,

  • in Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939, the ITC partially suspended an exclusion order based on a final IPR decision by the PTAB that had invalidated one of the patents at issue in that Section 337 proceeding (see our prior post); but,
  • in Certain Network Devices, Related Software and Components Thereof (II), Inv. No. 337-TA-945,  the ITC denied a stay of a remedial order in a case in which both patents at issue were found unpatentable by the PTAB in final IPR decisions, reasoning that the PTAB’s decisions do not become final until the USPTO issues a certificate canceling the claims; and,
  • in Certain Network Devices, Related Software, and Components Thereof, Inv. No. 337-TA-944 (Enforcement Proceeding), a proceeding involving alleged violations of a cease and desist order, the ITC required an ALJ to reconsider his noninfringement findings on a redesigned product even though U.S. Customs and Border Protection had also found that the redesigned products were noninfringing (see our prior post).

Currently, in another enforcement proceeding, in which an ALJ recommended a record penalty of $37 million for violation of a cease and desist order (Certain Marine Sonar Imaging Devices, Inv. No. 337-TA-921) (see our prior post), the ITC is considering the impact of an intervening ruling by the Federal Circuit finding the claims at issue invalid.  In that case, the staff of the ITC’s Office of Unfair Import Investigations (OUII) has argued in a recent brief that while not controlling, the Federal Circuit’s decision in ePlus, Inc. v. Lawson Software, Inc., 789 F.3d 1349 (Fed. Cir. 2015) (addressing civil contempt sanctions for violation of an injunction when the Federal Circuit had affirmed the USPTO’s cancellation decision in a reexamination proceeding) is “persuasive authority that no civil penalty should be assessed for violation of the cease and desist orders.”  However, given that the OUII staff views have been at odds with those of the Commission in several of these recent cases, it is not clear that the Commission will necessarily adopt this reasoning.  Either way, the Commission’s decision will add still more substance to this important but fluid area of Section 337 law.


Weekly Data Privacy Alert – 7 August 2017

Please click here to read the latest data privacy alert from the Squire Patton Boggs Data Privacy & Cybersecurity team. This week’s alert covers news from the European Union, France, Germany and the UK.


  • Advocate General Considers Handwritten Exam Scripts to be Personal Data


  • State Council Rules on Rights of Complainants in Relation to Sanctions Given by the CNIL


  • Conference of Data Protection Commissioners Releases Interpretation Guidelines for GDPR
  • Data Protection Authorities Release Paper on Data Processing for Marketing Purposes
  • Schleswig-Holstein Data Protection Commissioner Presents Activity Report for 2015 and 2016
  • German Federal Labour Court Considers Employee Monitoring Unlawful and Information Gained from Monitoring Inadmissible at Court


  • Employees Warned About Illegally Sharing Other People’s Personal Information
  • ICO Fines Price Comparison Website for Ignoring Customers’ Marketing Email Opt-outs
  • New Information Commissioner Publishes First Annual Report

For more information on any of these items, or data privacy issues generally, please feel free to call any of the of the following individuals:

Annette Demmel (Germany)

Caroline Egan (Birmingham)

Francesca Fellowes (Leeds)

Stephanie Faber (France)

USPTO Continues Outreach on Patent Subject Matter Eligibility with Recap of Roundtable Discussions

The United States Patent and Trademark Office (“USPTO”) recently released a Report summarizing the comments received during two roundtable discussions that the USPTO hosted in 2016 on patent subject matter eligibility. Since 2010, the U.S. Supreme Court has issued four major decisions that have transformed subject matter eligibility law, and the USPTO has responded with a variety of measures that attempt to ensure that 35 U.S.C. § 101 is implemented in a way that is fair to all stakeholders while remaining consistent with the decisions of the judiciary. The Report provides an extensive discussion on the origin and development of patent eligibility through 2010, summarizes how patent eligibility is approached internationally, and then recaps the remarks received during the roundtable discussions.

The Report provides a breakdown of viewpoints in support of the decisions issued by the U.S. Supreme Court, as well as those that are opposed. The Report notes that one of the most popular benefits mentioned was the ability for defendants in litigation to use the new patent eligibility framework as a tool for invalidating claims asserted by a patent assertion entity (PAE). For example, defendants now have a greater chance of having an infringement lawsuit dismissed during the pleading stage by demonstrating that the asserted patent recites a judicial exception without additional elements that are sufficient to amount to significantly more than the judicial exception. According to some commentators, this results in defendants avoiding the need to spend thousands of dollars to litigate the dispute through trial, especially for small- and mid-sized businesses that could otherwise be pressured into settling the lawsuit with the PAE.

The Report also includes comments that pointed to the recent court decisions as a natural, intended function of the judiciary, and called for the courts, particularly the Federal Circuit, to continue focusing on determining whether a technological improvement or solution exists in the patent eligibility analysis. Others praised the decisions as serving to invalidate overly broad patents that should never have been issued under other statutory requirements, such as anticipation or definiteness. Although not its intended purpose, 35 U.S.C. § 101 is viewed by some as a test of last resort, and an effective tool for the courts and defendants to fight back against overly broad patents. The Report also notes that a group of stakeholders praised the courts for considering whether claims are directed to a specific way of achieving a result, rather than merely claiming the result itself.

The Report also summarizes those viewpoints that took exception with the recent court decisions. Specifically, commentators opined that the Supreme Court’s decisions are either wholly unsupported by the Constitution, or conflict with Congress’s legislative authority to define the line between eligible and ineligible subject matter. Others commented that life sciences and computer-related technologies have been heavily affected by the recent court decisions surrounding subject matter eligibility because many of the innovations in these areas are closely linked to judicial exceptions. The Report also notes that several commentators felt that the judicial exceptions – abstract idea, law of nature, and natural phenomenon – have expanded to the point of swallowing the eligibility rule. Finally, some stakeholders felt that the two-step eligibility analysis established in the Supreme Court’s decisions in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) and Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) is inconsistent and confusing, and creates an unpredictable environment during both prosecution and litigation.

The USPTO also considered several recommendations on how to move forward in addressing the changes to subject matter eligibility. Most simply, some commented that the judiciary should continue to develop the case law unimpeded, and that similar developments, such as obviousness under KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), took years to resolve, albeit successfully. The Report also notes some requests for a more consistent application of the Mayo/Alice decisions by USPTO examiners, and for the USPTO to release additional guidance and examples in the life sciences.

Finally, the Report mentions requests for Congress to pass legislation to amend 35 U.S.C. § 101 of the Patent Act to define the boundaries of subject matter eligibility, as well as to define terms such as “abstract idea” and “law of nature.” One suggestion was for Congress to require a “technological or useful arts test” instead of the two-part Mayo/Alice test. Other suggestions were for Congress to explicitly enumerate all exceptions to patent eligibility, or even eliminate eligibility as a statutory condition for patentability altogether.

As more decisions are handed down from the courts that refine the boundaries of subject matter eligibility, the proactive approach taken by the USPTO—exemplified by its 2016 roundtables—should continue to guide stakeholders through the changing area of subject matter eligibility.  (For more information on the roundtables, please see our November and December 2016 blogs).

No grey areas in the Supreme Court’s interpretation of trade mark criminal offences

In an important ruling, the UK Supreme Court has confirmed that the criminal offence provisions in S92(1) of the Trade Marks Act 1994 (TMA) apply to grey market goods as well as counterfeit goods.

S92(1) TMA makes it an offence to apply to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark, or to sell (or keep with a view to selling) goods bearing such a sign, in each case without the consent of the trade mark owner and with a view to gain or with intent to cause loss.

In this case, the appellants were alleged to have been involved in importing into the EU and selling clothes and shoes bearing the trade marks of well-known fashion brands. Some of the goods were counterfeit (fakes) as they had been manufactured by people who were neither the trade mark owner nor authorised by the owner to make them. Some of the goods, however, had been manufactured with the trade mark owner’s consent under contract, but subsequently sold without its consent. These are known as grey market goods. Grey market goods come about in various ways. For example, they might be rejects (where the trade mark owner has licensed a factory to manufacture clothing on its behalf but has subsequently rejected some of those goods because of their poor quality), or overruns (where goods are manufactured to the trade mark owner’s order but in excess of the required amount). The rejects or overruns then find their way onto the market. The Supreme Court was asked to rule on whether the criminal offences in S92(1) distinguish between the two different provenances or apply equally to both counterfeits and grey market goods.

Continue Reading

USITC Remands ALJ’s Enforcement Decision to Address Infringement Issues

In an August 4, 2017 Notice, the US International Trade Commission announced that it has determined to review an administrative law judge (ALJ)’s initial determination in the enforcement proceeding in Certain Network Devices, Related Software, and Components Thereof, Inv. No. 337-TA-944 (Enforcement Proceeding).  The Commission’s notice could lead to additional rulings by the presiding ALJ (Shaw) that may prove to be important markers for enforcement actions under Section 337.

The enforcement proceeding in Network Devices was initiated based on a complaint filed by the complainant in the original proceeding, alleging that respondent had violated the Commission’s order to cease and desist from importing and selling products found to infringe U.S. Patent No. 7,162,537 (the ‘537 patent).  Prior to the filing of the enforcement complaint, the respondent had obtained an initial letter ruling from U.S. Customs and Border Protection that its products containing redesigned software did not infringe the ‘537 patent, and Customs later issued a final ruling to the same effect.  In an initial determination issued on June 20, 2017 (made public July 17, 2017), Judge Shaw held that there had been no violation of the cease and desist order based on a finding that the accused products did not infringe the asserted patent claims.  He also considered, but rejected, respondent’s argument that the contempt-based “colorable differences” test is the appropriate test for determining whether the cease and desist order had been violated.

The Commission’s Notice finds fault with the ALJ’s decision and remands the investigation to him to address certain issues identified by the Commission.  Specifically, the Notice states that

The final EID includes analysis comparing the redesigned products to products found to infringe in the underlying investigation to conclude that the redesigned products do not infringe the ‘537 patent. However, this analysis, while addressing the parties’ arguments, does not address the issue of whether the language of the claims reads on the redesigned products. See e.g., EID at 14-20. For example, the EID does not provide a clear application of the claim limitations to the redesigned products or find that the limitations were not met for other reasons (e.g., waiver).

The Notice then directs the ALJ to issue a final remand enforcement determination that will:

(1) address literal infringement in terms of whether the asserted claims, as construed, read on the redesigned products, and make appropriate findings, and further, if necessary, modify any other affected findings, including findings under the doctrine of equivalents; (2) consider and address, if necessary, the alleged inconsistency between the EID’s finding for what constitutes a “client subsystem” and the EID’s findings for the “managing subsystem”; and (3) identify which accused products are addressed in the EID.

The Commission mandated no deadline for the remand proceeding.  That said, the remand is likely to be closely watched because the ALJ’s resolution of the issues to be addressed on remand could also provide important guidance on Section 337 enforcement proceedings that may apply more generally beyond the specific facts of this case.

Illinois District Court Continues Trend Toward Broader Interpretation of IPR-Estoppel

The America Invents Act of 2011, which ushered in a new regime for post-grant patent challenges at the U.S. Patent and Trademark Office (PTO), provides that any patent challenger initiating an inter partes review (IPR) proceeding at the PTO “may not assert” an invalidity ground in a patent case in U.S. district court or in the U.S. International Trade Commission that it “raised or reasonably could have raised during that inter partes review.”  35 U.S.C. § 315(e)(2).  Despite its seeming simplicity, however, the proper scope of this so-called “IPR-estoppel” provision has bedeviled the district courts since the new post-grant proceedings became effective in 2012.  A recent decision of the U.S. District Court for the Northern District of Illinois –Oil Dri Corp. v. Nestle Purina Petcare Co., No. 1-15-cv-01067 (N.D. Ill., Aug. 2, 2017)—joins the seeming trend of decisions interpreting the estoppel provision more broadly, while at the same time doing a yeoman’s job of sorting through the case law thicket and of organizing and summarizing the rationales used to support the various holdings of other courts.

For example, a principal issue in IPR-estoppel disputes has involved the situation in which the challenger had petitioned the PTO for inter partes review on multiple grounds, but only some of those grounds were instituted by the PTO.  In Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), the Federal Circuit held that estoppel does not apply to non-instituted grounds, since those are not grounds that “could have been” raised “during” an IPR because an IPR does not begin until the proceeding is instituted.  Despite this holding, some litigants convinced district courts that it was either limited to the specific type of non-instituted grounds at issue in Shaw (grounds that were “redundant” of other instituted grounds) or that Shaw’s holding did not apply to estoppel in civil litigation because the Shaw court was not addressing Section 315(e)(2) but rather its sister provision (Section 315(e)(1)) that provides for estoppel against the petitioner in subsequent IPR proceedings.

The Illinois court does away with these arguments.  It gave no credence to the argument that estoppel only applies to invalidity grounds that were not instituted because of redundancy.  And, it found “difficulty seeing how the relevant portion of Shaw is dicta” as to one statutory subsection when Shaw was construing the entire section as a whole.  The Court described its conclusion as supported by “due process and fairness” concerns, noting that if estoppel applied to non-instituted grounds, “it would deprive the petitioner of a full opportunity to be heard on the estopped ground to no fault of the petitioner, who properly raised the invalidity contention with the PTAB.”  The result was that the Court refused to estop the defendant from asserting obviousness based on two references individually even though the PTAB had instituted an IPR based on the same two references in combination.  The Court reasoned that the PTAB had explicitly declined to institute on those references standing alone, and that the PTAB’s statement in its final decision that had it considered those references standing alone they would not render the challenged claims unpatentable was “dicta” that did not alter the conclusion that those grounds were not subject to estoppel.  According to the Court, the PTAB’s “explicit exclusion” distinguished this case from two recent cases that found estoppel in similar circumstances:  Advanced Micro Devices, Inc. v. LG Elecs., Inc., No. 14-cv-01012-SI, 2017 WL 2774339, at *6 (N.D. Cal. June 26, 2017) and Biscotti Inc. v. Microsoft Corp., No.13-CV-01015-JRG-RSP, 2017 WL 2526231, at *7–8 (E.D. Tex. May 11, 2017).

Next, the Illinois court addressed the thornier question of whether IPR-estoppel applies to grounds that “reasonably could have” been, but were not, included as challenged grounds in the IPR petition.  In the case before it, the plaintiff had moved to exclude certain of defendant’s invalidity contentions as estopped on this basis.  The Court noted that the district courts are split into two camps, with some courts holding that because an IPR does not begin until after institution, only invalidity grounds actually instituted by the PTAB can be estopped, while others have concluded that estoppel applies to grounds that could reasonably have been asserted in the IPR petition.  The Illinois Court then placed itself firmly in the latter camp, concluding that the statutory language and the purpose of IPR to “provide an efficient alternative to litigation” supported this choice.  The Court also noted that whereas estopping a party on “noninstituted (but petitioned-for) grounds—which the PTAB declines to fully consider—deprives a party of ‘a full and fair opportunity to be heard on the estopped ground’. . . [estopping] a party [who] fails to raise a claim that it reasonably could have raised . . . is both fair—as the party could only blame itself” and also “common” in civil litigation.

Finally, the Illinois court, citing precedent, held that the standard for determining whether non-petitioned art could reasonably have been raised in the IPR petition is whether a “skilled searcher conducting a diligent search reasonably could have been expected” to discover it.  The Court found that the defendant had admitted that a patent search “may have identified” four of the seven references that plaintiff’s declarant (a registered patent agent with “significant experience” searching patents) contended would have been located by an experienced searcher.  The defendant was therefore estopped under Section 315(e)(2) from asserting these four references in litigation.  The court reserved the issue of the three remaining, disputed references until the next status hearing.

USITC Will Not Bar Hoverboards

In a much-anticipated ruling, the U.S. International Trade Commission (ITC) has declined to issue an exclusion order barring hoverboards from the U.S. market, finding that the popular consumer items did not infringe the claims of the patent asserted against them.

The investigation, captioned Certain Motorized Self-Balancing Vehicles, Inv. No. 337-TA-1000, was instituted in May 2016 based on a complaint filed on behalf of Razor USA LLC of Cerritos, California and Inventist, Inc. and Shane Chen, both of Camas, Washington.  The notice of institution named twenty-eight companies, most of whom allegedly imported the infringing product, and others (such as the Internet supersite, Alibaba) who were allegedly indirectly involved in importation.  Only eight of these companies remained in the case through the hearing before Chief Administrative Law (ALJ) Judge Bullock.  The others were either terminated from the investigation based on consent orders or were found in default for failing to appear.

On May 26, 2017, the ALJ issued his decision.  He found that Alibaba is not an agent of the other respondents and therefore is not within the jurisdiction of section 337.  The ALJ also found that none of the respondents’ accused products infringe the patent, but that all of the defaulting respondents’ accused products infringe the asserted patent based on taking the allegations in the complaint as true.  Finally, the ALJ held that the Complainants’ own products did not practice the asserted claims of the patent; therefore, the so-called “technical prong” of Section 337’s domestic industry requirement (that there be a U.S. industry in “articles protected by the patent”) was not satisfied.

On review, the Commission took no issue with the ALJ’s findings that the Complainants’ products did not practice the patent or that the products of the non-defaulting respondents do not infringe.  However, the Commission vacated the ALJ’s infringement findings regarding the defaulting respondents.  The Commission’s Notice explained that Section 337 provides specific “conditions and procedures applicable for issuing a default remedy” but that the finding that Complainants failed to satisfy the domestic industry requirement mooted any need to consider remedies against the defaulting respondents.  In other words, absent a domestic industry, there was no statutory right to a remedy, and the defaulting respondents’ products therefore could not be barred.  As for Alibaba, the Notice states that the Commission is taking no position on the ALJ’s finding that the Commission has no jurisdiction over Alibaba.  By taking no position, the Commission has immunized the question of jurisdiction over Alibaba from any appeal because the Federal Circuit will not review an issue on which the Commission takes no position.