Welcome to Skilled in the Art. I'm law.com IP reporter Scott Graham. Here's what I've got cooking today:

• Two patent lawyers are aiming to put the Fresenius finality rule back in play.

• Belated Led Zeppelin copyright argument falls flat at Ninth Circuit.

• Korean cookie stick maker loses sanction battle but wins trademark war.

As always, you can email me your feedback and follow me on Twitter.

Seeking New Rules for Race to the Courthouse

Rob Greenspoon and Andrew Dhuey want to restart a debate on finality.

Six years ago, at the dawn of AIA trials, the Federal Circuit ruled in Fresenius USA v. Baxter International that, so long as any part of a district court patent infringement judgment remains pending at trial or on appeal, a subsequent decision from the Patent Trial and Appeal Board canceling the patent can unwind that judgment. After all, the court reasoned, why should a plaintiff be allowed to recover damages if a patent has been conclusively found invalid by the PTO?

The Fresenius rule has been controversial within the Federal Circuit. Four judges dissented from denial of en banc review in the case, and five dissented in a case posing a similar issue in 2015. "There are problems with a system which permits defendants to snatch victory from the already closed jaws of defeat," Judge Kimberly Moore wrote in the 2015 case.

The rule has lain mostly dormant since then, save for the occasional cries of pain from patent owners who prevail on validity at district court, only to see their judgment wiped out at the PTAB sometimes years later while their appeals poke along.

Now Greenspoon, of Flachsbart & Greenspoon, and Berkeley solo Dhuey think they have a vehicle to get the issue before the full court at last. Non-practicing entity Chrimar Systems asserted four power-over-ethernet patents against ALE USA, formerly Alcatel-Lucent, in the Eastern District of Texas in a 2016 trial. Represented by Thompson & Knight, Chrimar persuaded jurors that all 16 of its challenged patent claims were valid, and recovered $343,000 in damages, $100,000 in costs and ongoing royalties.

On appeal the Federal Circuit affirmed on virtually everything: validity, damages and on infringement of three of the four patents. The appellate court remanded the case because it disagreed about the construction of a single claim term affecting one of the patents, raising the possibility that one year could be knocked off the ongoing royalties.

Chrimar dismissed the one patent, forswore the royalties, and gave ALE a covenant not to sue on it. The judgment was now final, Chrimar argued earlier this year, and it should collect its $443,000 and remaining three years of royalties.

If it sounds like Chrimar was in a hurry, it's because other tech companies had invalidated its four patents at the PTAB in 2017 and 2018. Meanwhile, ALE kept the Texas case going by filing another appeal, saying that while Chrimar gave up royalties on that one patent, it didn't issue covenants to ALE's customers, and that if Chrimar sued them ALE could be required to reimburse under indemnity agreements. "Chrimar did not 'throw in the towel,'" ALE's attorneys at Jackson Wallace wrote.

The Federal Circuit ruled last month that ALE's appeal was legitimate. And because the PTAB had by now invalidated all the patents (with the Federal Circuit affirming), Chrimar's jury award went bye-bye.

 

Rob Greenspoon, left, and Andrew Dhuey

 

Now Greenspoon and Dhuey are stepping in. They plan to file a petition for en banc rehearing next week. It will argue that the Supreme Court itself said in 2015 that under the Restatement (Second) of Judgments, "when an issue of act or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment" that determination is conclusive between the parties.

As Greenspoon puts it, "a pair of metaphorical handcuffs" should go around the party that loses a final judgment of validity in district court. Subsequent PTAB decisions may render a patent unenforceable against the rest of the world, but not against the party "that shot and missed" in district court, he says.

He said Chrimar v. ALE USA illustrates the steps accused infringers will take to postpone finality. "The question of whether the case was still pending was what caused the case to be pending," he quips.

En banc review is a steep uphill battle, especially in the Federal Circuit. But Greenspoon and Dhuey believe they're starting out with five votes. Judge Kathleen O'Malley has called the Fresenius rule a "stingy view of finality." Moore has written that the rule incentivizes litigants to waste judicial resources. Judges Pauline Newman, Evan Wallach and Jimmie Reyna have signed their dissents from denial or written their own.

Two of the court's 12 active judges haven't directly addressed the issue yet. Judge Kara Stoll joined the court after it issued its two major decisions, and Judge Raymond Chen was recused from both.

Dhuey and Greenspoon teamed up once before in similar circumstances. They persuaded the court to take en banc Lighting Ballast Control v. Philips, a case that challenged the standard of appellate review for claim construction. They lost 6-4, but teed up the issue for the Supreme Court, which partly revised the standard the following year in a separate case, leading ultimately to a winning outcome for Greenspoon and Dhuey's client.

Stare decisis was the challenge back then. Even though many Federal Circuit judges had been critical of the claim construction standard, it wasn't enough to persuade them to overturn a longstanding precedent.

Dhuey and Greenspoon argue that stare decisis is less salient here, where the Fresenius rule is only seven years old, and companies aren't relying on it to make business decisions. "No accused infringer trades away their shot at validity in district court in hopes of a later PTAB cancellation," Dhuey said.

Hey, I Forgot to Mention: My Opponent Should Be Sanctioned

No, Led Zeppelin and Davis Wright Tremaine partner Peter Anderson won't be sanctioned for making what his opponent calls "a breathtakingly false statement" during arguments to the Ninth Circuit last month.

Plaintiff attorney Francis Malofiy represents the estate of a songwriter whose work the '70s super group allegedly copied into its classic song Stairway to Heaven. Malofiy wrote to the court earlier this month to dispute this statement from Anderson during the Sept. 23 argument: "I'd first like to respond to some of things counsel said. At no point in this case—in discovery, at trial, or in the original briefing—did Plaintiff ever take the position that the deposit copy was in error."

Malofiy says that was "knowingly false" because he argued (and lost) at summary judgment that the copy of Randy Wolfe's song Taurus on deposit with the Copyright Office "does not reflect the entirety of the musical composition." Anderson subsequently cited that issue in a motion in limine, Malofiy says. The deposit copy issue is important because Malofiy wants the en banc court to endorse a 2000 precedent in which the court gave "broad and deferential treatment" to errors in such copies.

Anderson wrote back to the court Monday, saying that the time for Malofiy to make that claim was his rebuttal argument three weeks ago. Anderson explained he had been responding to Malofiy's implicit claim during arguments that Wolfe's music label had caused some sort of error in the deposit copy. Malofiy's motion is "just another instance of plaintiff's litigation misconduct noted by the District Court," Anderson wrote. "Plaintiff's sanctions motion is itself sanctionable."

The Ninth Circuit declined to sanction either side on Tuesday.

Photo: David Tonelson/Shutterstock.com

 

Take That, Ya Pocky Puck

A $33,000 sanction hammer did drop in a trademark dispute over cookie sticks in New Jersey last week, my ALM colleague Charles Toutant reports.

U.S. Magistrate Judge Leda Dunn Wettre issued the sanctions against Lotte International America Corp. The Korean-owned company probably doesn't mind, though, as it just won a big round in an intense rivalry with Japanese snack food rival Ezaki Glico.

Lotte, which is represented by McDermott Will & Emery, was sanctioned for improperly supplementing an expert witness' report just moments before her deposition was scheduled to start. Ezaki Glico was represented by Hogan Lovells and Lerner, David, Littenburg, Krumholz & Mentlik.

Ezaki Glico says it earns $15 million a year in the U.S. selling its chocolate-covered cookie sticks. It's been marketing Pocky since 1966 in Japan and 1978 in the United States, the company says. It accused Lotte's Pepero cookie stick of infringing the distinctive look of its product.

U.S. District Judge Madeline Cox Arleo granted summary judgment for Lotte in August, ruling that the configuration of the cookie stick is functional and therefore can't be registered with the PTO.

IP Lateral: Baker Botts

Baker Botts has added Jonathan Patchen, a commercial and business trial lawyer who focuses on trade secrets and technology disputes, to the firm's San Francisco office.

"Jonathan is a trial-tested litigation partner with the finest credentials and deep experience in complex civil and trade secret litigation," Baker Botts Managing Partner John Martin said in a written statement.

Patchen comes to the firm from S.F. Litigation boutique Taylor & Patchen. He previously had worked at Covington & Burling.

IP Lateral: Mathys & Squire

European IP boutique Mathys & Squire has added German patent attorney Andreas Wietzke from German firm Bals & Vogel. He will be the second partner in the firm's Munich office, which opened in July.

"We are pleased to welcome Andreas to our new office," said Gerold Fiesser, head of the firm's Munich office, in a written statement. "His background in engineering, software, telecommunications and medical devices, as well as his experience in the IP industry and at the German Patent & Trade Mark Office, will increase our ability to provide a high level IP service to Mathys & Squire's UK and international client base."

That's all from Skilled in the Art today. I'll see you all again on Friday.