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Guest post by Mark Lemley[1]& Tyler Robbins[2]

This blog post provides a brief summary of four of the most significant patent cases decided by the Federal Circuit last year. It covers cases concerning assignor estoppel, transfer, venue, and the application of the Appointments Clause of the U.S. Constitution to administrative patent judges.

Hologic, Inc. v. Minerva Surgical, Inc. (Fed. Cir. April 22, 2020), cert. granted

In this appeal from the District of Delaware, the Federal Circuit held that assignor estoppel does not prevent an alleged infringer from challenging the validity of patent claims in inter partes review but may nonetheless preclude validity challenges in parallel court proceedings.[3]

Hologic’s ’183 and ’348 patents disclose “procedures and devices for endometrial ablation.”[4] Both patents list Csaba Truckai as an inventor.[5] Truckai assigned his interests in the patents to NovaCept, a company he co-founded in 1993.[6] After a series of acquisitions, Hologic acquired NovaCept and was assigned the patents.[7] Truckai later left the company and founded another company, Minerva, that developed an endometrial ablation system (“EAS”).[8] Hologic sued Minerva for infringing the ’183 and ’348 patents by developing and using the EAS.[9] Minerva then filed petitions for inter partes review, asserting the patents were obvious in view of the prior art.[10] The Patent Trial and Appeal Board (“PTAB”) ultimately reviewed the ’183 patent claims and found them unpatentable for obviousness.[11] Hologic appealed the decision and eventually the Federal Circuit affirmed, but in the meantime the infringement suit continued in district court.[12] The district court granted Hologic’s motion for summary judgment on the issue of assignor estoppel preventing Minerva from challenging the validity of the patent claims in district court.[13] At trial, the jury found Minerva had infringed the patents and awarded Hologic lost profits and royalties.[14] Hologic then moved for a permanent injunction to prevent Minerva from further infringing the ’183 patent, but the district court denied the motion after the Federal Circuit affirmed that the ’183 patent was invalid in the appeal from the IPR proceeding.[15] The district court ultimately awarded Hologic the prejudgment damages for Minerva’s infringement of the ’348 patent, noting the Federal Circuit’s decision concerning the ’183 patent does not affect the district court’s finding of assignor estoppel on the ’348 patent.[16] Both Hologic and Minerva appealed.[17]

On appeal, Hologic argued assignor estoppel precludes Minerva from avoiding liability for the ’183 patent due to the Federal Circuit’s decision that the patent was invalid.[18] The Federal Circuit disagreed.[19] “[A]though estopped parties cannot challenge the validity of the patent at issue, assignor estoppel does not limit their ability to defend themselves in other ways, including arguing that the patentee is itself collaterally estopped from asserting a patent found invalid in a prior proceeding.”[20] Therefore, assignor estoppel does not prevent Minerva from using the Federal Circuit decision’s concerning the ’183 patent’s invalidity to avoid liability for infringement.[21] The court recognized “the seeming unfairness” of Minerva using inter partes review to circumvent assignor estoppel.[22] Nonetheless, the court asserted “the doctrine of assignor estoppel does not bar an assignor from filing a petition for IPR.”[23]

On cross-appeal, Minerva argued assignor estopped did not preclude it from challenging the validity of the ’348 patent.[24] The Federal Circuit was not persuaded, finding the district court had not abused its discretion and further agreed with the district court that “the equities weigh in favor of [assignor estoppel’s] application in this case.”[25]

Judge Stoll, who wrote the majority opinion, also wrote “additional views” in which she noted the oddity of treating assignor estoppel differently in different forums, and raised the possibility that the Federal Circuit might need to rationalize the decisions en banc.

The Supreme Court granted certiorari in late 2020, and a decision is expected in 2021. The Court is likely to eliminate or significantly scale back the doctrine of assignor estoppel. That will make it easier to invalidate bad patents, and also make it easier for inventors to take new jobs and start new companies.[26]

In re Adobe Inc. (Fed. Cir. July 28, 2020)

In this decision, the Federal Circuit granted a petition for Writ of Mandamus to direct the Western District of Texas to grant a motion to transfer because the district court had abused its discretion by improperly weighing the factors for transfer.[27]

SynKloud sued Adobe for infringement of six patents in the Western District of Texas.[28] Adobe filed a motion to transfer venue to the Northern District of California.[29] Adobe argued SynKloud had no connection to Texas and that the Northern District of California would be more convenient because its headquarters, including the likely witnesses, as well as the patents’ inventor are there.[30] Despite acknowledging the Northern District of California was perhaps more convenient and weighing only the congestion factor in favor of retaining the case, the district court denied Adobe’s motion to transfer.[31] Adobe petitioned the Federal Circuit for a writ of mandamus to direct the district court to grant the motion to transfer.[32]

The Federal Circuit granted Adobe’s petition, holding the district court’s ruling was a clear abuse of discretion.[33] The district court had not properly weighed the factors of convenience of the transferee venue or cost of attendance for willing witnesses of transferee, both of which favored transfer.[34] Denying transfer based “solely on its perceived ability to more quickly schedule a trial” was an error.[35] The factor concerns the difference in congestion between the two venues, not, as the district court had reasoned, the court’s ability to set a schedule.[36] Yet, even if the district court was correct in its interpretation of the congestion factor, giving the factor dispositive weight was itself an error.[37]

One judge — Judge Albright in the Western District of Texas — now accounts for more than 20% of all patent cases filed in the country. This decision, along with two others granting mandamus to reverse Judge Albright’s venue decisions in the last six months, suggests that the Federal Circuit may be willing to intervene to prevent Judge Albright from keeping cases with no plausible connection to his district.

In re Google LLC (Fed. Cir. February 13, 2020)

In this case from the Eastern of Texas, the Federal Circuit held the venue was not appropriate because a “place of business” generally requires an employee or agent be conducting business there.[38]

Google was sued in the Eastern District of Texas by Super Interconnect Technologies (“SIT”).[39] SIT argued the venue was appropriate because Google had committed the alleged infringement there and has a “regular and established place of business” there, including several Google Global Cache (“GGC”) servers and the business activities of providing video advertising to residents there.[40] However, Google does not own the GGC servers located in the Eastern District of Texas.[41] Rather, Google contracted with ISPs in the area to host the servers in their data centers.[42] The district court denied Google’s motion to dismiss for improper venue.[43]

Google petitioned the Federal Circuit for a writ of mandamus ordering the district court to dismiss the case.[44] Despite denying a writ of mandamus by Google in a case the previous year from the same district with similar facts, the court decided mandamus was now appropriate.[45]

According to Supreme Court precedent, the court could issue a writ of mandamus if three conditions were met: “(1) the petitioner must have no other adequate means to attain relief; (2) the petitioner must show that the right to mandamus is clear and indisputable, and (3) the court must be satisfied that the writ is appropriate under the circumstances.”[46] The court noted the circumstances had changed in three ways since the last decision: (1) “there are now a significant number of district court decisions that adopt conflicting views on the basic legal issues presented in this case”; (2) “experience has shown that it is unlikely these issues will be preserved and presented to this court through the regular appellate process”; and (3) “additional district court decisions have crystallized and brought clarity to the [unaddressed] issues.”[47]

The issues concerning the court were whether server racks can be a “place of business” and whether a “regular and established place of business” requires “the regular presence of an employee or agent of the defendant conducting the business.”[48] The court refused to hold real property is required for a defendant to have a physical “place of business.”[49] According to the court, it is possible for “leased shelf space or rack space” to be a “place.”[50] However, the court agreed with Google on the second issue based on the plain text of the statute for patent infringement action saying “agent or agents engaged in conducting such business.”[51] The court concluded “a ‘regular and established place of business’ requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged ‘place of business.’”[52]

The record was clear that Google had no employee conducting business in the district and the ISPs did not qualify as agents because Google had no interim control over them.[53] Therefore, the court concluded the Eastern District of Texas was not the proper venue and directed the district court to either dismiss or transfer the case.[54] The court was careful to note, however, that it did not hold presence of a “human” agent is required for a “regular and established place of business” and left open the possibility of a machine being an “agent.”[55]

This venue decision seems to put another nail in the coffin of venue in the Eastern District of Texas after TC Heartland. But the offhand suggestion at the end of the opinion that software may be an “agent” “in” the district could open an entirely new can of worms.

Arthrex, Inc. v. Smith & Nephew, Inc. (Fed. Cir. October 31, 2019), cert. granted

In this appeal from the Patent Trial and Appeal Board (“PTAB”), the Federal Circuit vacated and remanded, holding that the appointment of Administrative Patent Judges’ (“APJ”) by the Secretary of Commerce violates the Appointments Clause of the U.S. Constitution.[56]

Arthrex’s ’907 patent involves a “knotless suture securing assembly.”[57] In an inter partes review of the patent, a panel of three APJs found the claims patent ineligible. Arthrex appealed, arguing the APJs are principal officers who must be appointed by the President and confirmed by the Senate, but were not.[58]

On appeal, the Federal Circuit agreed. The Appointments Clause stipulates the President, with the advice and consent of the Senate, must nominate “Officers of the United States,” but Congress may vest the appointment of “inferior Officers … in the President alone, in the Courts of Law, or in the Heads of Departments.”[59] The “principal officers,” those who must be appointed by the president, are those who “exercise significant authority pursuant to the laws of the United States.”[60]

Three factors help distinguish principal from inferior officers: “(1) whether an appointed official has the power to review and reverse the officers’ decision; (2) the level of supervision and oversight an appointed official has over the officers; and (3) the appointed official’s power to remove the officers.”[61] The Federal Circuit reasoned the second factor weighed towards APJs being inferior officers because The Director of the PTO has “authority to promulgate regulations governing inter partes review procedure and to issue policy interpretations which the APJs must follow.”[62] However, the first and third factors weighed towards APJs being principal officers because they “have substantial power to issue final decisions on behalf of the United States without any review by a presidentially-appointed officer” and “are not removeable without cause.”[63] Further, the Court noted APJs “do not have limited tenure, limited duties, or limited jurisdiction” and “wield significantly more authority than their Examiner-in-Chief predecessors”[64] Given these considerations, the Federal Circuit concluded APJs are principal officers and, thus, “the current structure of the board violates the Appointments Clause.”[65]

The Federal Circuit next considered whether the constitutionality issue may be addressed through severance.[66] They concluded the “narrowest remedy” is severing the statutory removal restrictions for APJs.[67] Nonetheless, for this case, the Federal Circuit vacated and remanded the Board’s decision because it “was made by a panel of APJs that were not constitutionally appointed at the time the decision was rendered.”[68] The Federal Circuit further held Arthrex was entitled to a hearing by a new panel of APJs on remand.[69]

The Supreme Court granted certiorari and heard argument March 1. A decision is expected by June 2021. If the Supreme Court agrees that the PTAB is unconstitutional, as seemed likely at oral argument, it will throw thousands of patent cases into disarray. Much will then turn on whether it also agrees with the Federal Circuit’s unusual remedy of rewriting the employment statute. If not, and if the Court does not come up with a narrower remedy, Congress will have to get involved, opening the prospect of broader legislation that might undo many aspects of patent reform.

Mark Lemley is the William H. Neukom Professor at Stanford Law School and a Partner at Durie Tangri LLP. He teaches intellectual property, patent law, trademark law, antitrust, the law of robotics and AI, video game law, and remedies. He also litigates and counsels clients in all areas of intellectual property, antitrust, and internet law. Tyler Robbins is a third year student at Stanford Law School.

  1. William H. Neukom Professor, Stanford Law School; Partner, Durie Tangri LLP. ↑

  2. J.D. expected 2021, Stanford Law School. ↑

  3. Hologic, Inc. v. Minerva Surgical, Inc., 957 F.3d 1256 (Fed. Cir. 2020) ↑

  4. Id. at 1260 (citing U.S. Patent Nos. 6,872,183 and 9,095,348). ↑

  5. Id. at 1261. ↑

  6. Id. ↑

  7. Id. ↑

  8. Id. at 1262. ↑

  9. Id. ↑

  10. Id. ↑

  11. Id. ↑

  12. Id. ↑

  13. Id. at 1263. ↑

  14. Id. ↑

  15. Id. ↑

  16. Id. at 1264. ↑

  17. Id. ↑

  18. Id. ↑

  19. Id. ↑

  20. Id. at 1265 (quoting Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 150 F.3d 1374, 1379 (Fed. Cir. 1998) (internal quotations omitted). ↑

  21. Id. ↑

  22. Id. ↑

  23. Id. (citing Arista Networks, Inc. v. Cisco Sys., Inc., 908 F.3d 792, 804 (Fed. Cir. 2018)). ↑

  24. Id. at 1267. ↑

  25. Id. ↑

  26. See Mark A. Lemley, Rethinking Assignor Estoppel, 54 Hous. L. Rev. 513 (2016). ↑

  27. In re Adobe Inc., 2020 U.S. App. LEXIS 23803 (July 28, 2020). ↑

  28. Id. ↑

  29. Id. at *2. ↑

  30. Id. ↑

  31. Id. at *4-*5. ↑

  32. Id. at *1. ↑

  33. Id. at *6. ↑

  34. Id at *7-*8. ↑

  35. Id. ↑

  36. Id. (citing Parsons v. Chesapeake & Ohio Ry. Co., 375 U.S. 71, 73 (1963)). ↑

  37. Id. ↑

  38. In re Google LLC, 949 F.3d 1338 (Fed. Cir. 2020). ↑

  39. Id. at 1339. ↑

  40. Id. ↑

  41. Id. at 1340. ↑

  42. Id. ↑

  43. Id. at 1341. ↑

  44. Id. ↑

  45. Id. at 1342 ↑

  46. Id. (quoting Cheney v. U.S. Dist. Court for D.C., 542 U.S. 367, 380 (2004)) (internal quotations and citations omitted). ↑

  47. Id. at 1342-43. ↑

  48. Id. ↑

  49. Id. (citing In re Cray, Inc., 871 F.3d 1355, 1363 (Fed. Cir. 2017)). ↑

  50. Id. ↑

  51. Id. at 1344. ↑

  52. Id. (citing 28 U.S.C. § 1694; 54 Cong. Ch. 395, 29 Stat. 695 (1897)). ↑

  53. Id. at 1345 (citing Restatement (Third) of Agency § 1.01 cmt. f(1)). ↑

  54. Id. at 1347. ↑

  55. Id. ↑

  56. Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019). ↑

  57. Id. at 1324 (citing U.S. Patent No. 9,179,907B2). ↑

  58. Id. at 1327. ↑

  59. U.S. Const. art. II, § 2, cl. 2. ↑

  60. Arthrex, 941 F.3d at 1327-28. (quoting Buckley v. Valeo, 424 U.S. 1, 125-26 (1976)) (quotations and alterations omitted). ↑

  61. Id. at 1329 (citing Edmond v. United States, 520 U.S. 651, 662-63 (1997)). ↑

  62. Id. at 1332. ↑

  63. Id. at 1331-34. ↑

  64. Id. at 1335. ↑

  65. Id. ↑

  66. Id. ↑

  67. Id. at 1337-39. ↑

  68. Id. at 1339. ↑

  69. Id. (citing Lucia v. S.E.C., 138 S. Ct. 2044 (2018)). ↑