Following a Congressional Mandate, the Federal Circuit Streamlines the Patent Litigation Process

William Braunlin, Ph.D. Jonathan DeBlois Jordana R. Goodman Paul Tanpitukpongse

By jlynch. By Brandon Arey, Legal Intern, and Thomas Carey, Chair of our Business Practice Group 

July 2015 IP Update

In three recent cases decided by the Federal Circuit Court of Appeals, jurisdictional issues have limited the options available to patent litigants.  The general effect of the decisions has been to restrict the ability to appeal and, in the case of appeals of proceedings before the Patent Trial and Appeals Board (PTAB), to direct the appellant to the Federal Circuit, eliminating an intermediate level of review by local district courts.

1.  Intellectual Ventures II LLC v. JP Morgan Chase Co. began when IV sued JPMC for infringement of five patents. JPMC moved to have the district court stay further proceedings until it filed petitions for covered business method (“CBM”) review with the PTAB. (CBM review is a type of post-grant review that allows a company accused of infringing a business method patent related to the administration of a financial product or service to challenge the validity of the patent.) Before the district court ruled on its motion for a stay, JPMC filed its CBM review petitions with the PTAB.  The district court denied JPMC’s motion before the PTAB acted on the CBM review petitions. JPMC then asked the Federal Circuit to review the denial.

The America Invents Act (“AIA”) gave the Federal Circuit jurisdiction to hear appeals of this nature when the PTAB has commenced proceedings. In May 2015 the Federal Circuit ruled, however, that filing a petition for a CBM review did not commence a PTAB proceeding for purposes of the AIA. Since at the time the district court denied the motion the PTAB had not acted on the JPMC petitions, proceedings had not commenced and thus the Federal Circuit had no jurisdiction to hear the appeal.

As a result of this case, a business accused of infringing a business method patent and that seeks CBM review will have to wait until the PTAB decides to initiate a proceeding if it wishes to have a right to appeal a district court’s denial of a motion to stay.

2.  Biogen Idec MA Inc. v. Japanese Foundation for Cancer has history dating back to the early 1980’s with a series of patent interference disputes between Walter Fiers (who assigned his patent to Biogen) and Haruo Sugano (who assigned his to JFC) relating to claims to certain DNA sequences. Biogen filed the most recent suit in federal court in Massachusetts in December 2013 to set aside a PTAB decision against Fiers in an interference that was declared earlier that year. (An interference is a pre-AIA proceeding to determine who was the first to invent of two or more competing patent applicants.) The district court concluded it no longer had jurisdiction to hear the appeal from the PTAB after the enactment of the AIA, and transferred the case to the Federal Circuit.

In May 2015, the Federal Circuit agreed with the district court, ruling that the district court had no jurisdiction to hear appeals of patent interferences declared after September 15, 2012, when the AIA was enacted. Before the AIA, the Federal Circuit noted, an appellant had the choice to appeal from a decision of the Board of Patent Appeals and Interferences (now the PTAB) to either a district court or the Federal Circuit. Filing in one jurisdiction waived jurisdiction in the other. However, if the appellant decided to file the action in district court, the adverse party could request to have the appeal heard by the Federal Circuit instead. This could create a jurisdictional war where an appellant could file an appeal in district court, while the adverse party could ask that the same appeal be heard in the Federal Circuit.

In Biogen, the Federal Circuit interpreted the AIA as having taken away district court jurisdiction to hear appeals of interferences declared after September 15, 2012. The original interference at issue in this case was declared on July 16, 2013—after the September 15, 2012 cutoff. Therefore, the Federal Circuit affirmed that the district court lacked jurisdiction to hear the appeal and that transfer to the Federal Circuit was proper. The court then affirmed the decision of the PTAB in favor of Sugano.

The Federal Circuit’s ruling in Biogen has taken away the pre-AIA ability of an appellant to shop for a jurisdiction to hear an interference decision appeal and the possibility of an intermediate level of review. Parties to patent interferences must take any appeal directly to the Federal Circuit.

3.  In Versata Development Group, Inc., v. Michelle K. Lee, Director, U.S. Patent and Trademark Office, the Federal Circuit ruled this month that a party in a CBM review could not appeal from the PTAB’s decision to review. The district court had correctly decided it did not have jurisdiction to hear an appeal of the PTAB’s decision to conduct a CBM review.

The case began with a patent infringement suit filed by Versata against SAP America that resulted in a judgment in favor of Versata. However, before the infringement action had been finally resolved, SAP petitioned the USPTO for a CBM review of the disputed patent. The PTAB granted the petition, but Versata then sued the USPTO in order to set aside the PTAB’s decision to institute a CBM review.

The Federal Circuit, in reaching its decision, again parsed the language of the AIA. Section 18, which provides for CBM reviews, incorporates 324(e) of the Patent Act, which says that a determination by the PTAB to conduct a post-grant review is “final and nonappealable.” The Federal Circuit noted that the final decision in a CBM review is appealable to the Federal Circuit, but that the decision to initiate such a review is not.

In the AIA, Congress sought to simplify the process of litigating patents.  These decisions show that the Federal Circuit has gotten the message.