Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Here's what's crossing my radar screen today:

• The PTAB appears to be closing the IPR doors to government contractors.
 • The Federal Circuit seems sympathetic to the PACER fee appeal—to a point.
 • Memo to district judges: Don't cite PTAB statistics as reasons for granting "exceptional case" attorneys fees.

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

 

U.S. Can't Bring IPRs. Nor Can Its Contractors.

We're from the government, and we're here to blow up your IPR.

That's my takeaway from Microsoft v. Science Applications International Corp., a PTAB decision made public Monday that's gonna make it tough for government contractors to bring IPRs.

The case involves SAIC patents on heads-up displays for night vision goggles. SAIC alleges the government stole the technology from it and sued in the Court of Federal Claims in 2017. As I reported last year, the government tried but failed to get the patents declared ineligible under Section 101.

The U.S. Supreme Court ruled last June that the U.S. government is not a "person" who can bring an IPR. So in July, Microsoft, which is contracting with the government to implement the technology, filed IPRs attacking the patents. But the PTAB has now ruled that Microsoft's contractual relationship, combined with its intervention in the CoFC case, puts it in privity with the government. Institution denied.

The kicker: "Even if Petitioner and the government were not in privity, we would exercise our discretion to deny review to avoid any concerns that the government is obtaining a benefit to which it is not permitted under Return Mail," the PTAB held. Administrative Patent Judges Miriam Quinn, Kamran Jivani and Jason Repko signed the opinion.

In other words, Ropes & Gray partner Scott McKeown notes on the firm's Patents Post Grant blog, even if government contractors bring timely claims, "it seems as though the PTAB will not be receptive to such disputes as a matter of discretion."

My own quick takes:

➤ It was only a year ago that the PTAB was cheerfully accepting IPR petitions from the federal government. The government told the Supreme Court in Return Mail that it has "the same interest as any other (actual or potential) infringement defendant in avoiding both the costs and other burdens of litigation" and in invalidating weak patents. For the PTAB to now say it will exercise its discretion under Section 314(a) to reject government contractors' petitions, even if they're not in privity, is quite an about-face on a policy level.

➤ Does PTO Director Andrei Iancu know of and endorse this decision, which could cost the federal government many millions of dollars? After all, in a post-Arthrex world, the PTO director is supposed to enjoy effective supervisory control over PTAB decisions.

McKeown seems to think the answer to that question is yes. He speculates that the PTAB will designate SAIC as a precedential opinion.

➤ Maybe the government should band together with a handful of its contractors to form a nonprofit third party, perhaps call it Patents United, and encourage (but not direct or control!) the nonprofit to bring IPRs against patents that threaten the government.

The win in SAIC v. Microsoft goes to a Pepper Hamilton team led by partners William D. Belanger and Gunnar Leinberg, plus associates Bryan Smith, Edwin Merkel, and Andrew Zappia. Microsoft was represented by Sidley Austin.

Federal Circuit Judge Todd Hughes (Photo: Diego Radzinschi/ALM)

 

Will the Federal Circuit Defer to John Roberts' Reasonable Interpretation of PACER Statute?

PACER users may be getting a break on fees—possibly even a refund—courtesy of the Federal Circuit. The court sounded sympathetic Monday to at least part of a putative class action brought by three nonprofits that argue courts are overspending the 10-cent per page revenues.

A Justice Department attorney argued that the court has no authority to review the judiciary's accounting and expenditures under the Little Tucker Act, but Judges Raymond Clevenger and Todd Hughes pushed back hard.

Clevenger said in essence that DOJ is seeking a blank check for the Judicial Conference to charge a fee, even if it's "knowingly, blatantly illegal," and leaving PACER users with no remedy.

Alisa Klein of DOJ's Civil Division appellate staff said Congress, not the courts, supervise the judiciary's accounting and expenditures. "We're not going to depose the chief justice and the judges of the judicial conference" about how they might have allocated fees under the plaintiffs' theory, she said.

That didn't seem to phase Clevenger, who continued firing hypotheticals at Klein. Suppose "we're redecorating all judges' offices with gold plate" and paying for it with PACER fees, he said. "There's absolutely no remedy?"

But it didn't sound as if PACER users will get back all, or even most of their fees. Clevenger and Hughes sounded as if they mostly agreed with U.S. District Judge Ellen Huvell, who ruled in 2018 that much of the roughly $150 million the judiciary collects each year can be used to pay for the federal case management and electronic filing system, known as CM/ECF.

Hughes and Clevenger pointed out that without electronic case filing, there wouldn't be many documents for the public to access. "You can't have PACER without it," Clevenger told Deepak Gupta of Gupta Wessler, who represents The National Veterans Legal Services Program, the National Consumer Law Center and Alliance for Justice.

Gupta argued that the suit seeks damages only from 2010 forward, and by then the CM/ECF system had been built. But CM/ECF needs regular maintenance and updates, Clevenger said. And Hughes said he's not sure that PACER fees must be strictly limited to the marginal cost of disseminating records to users.

The court sounded likely to send the case back to Huvell for discovery and possibly a bench trial (just a hunch: the plaintiffs will proceed without deposing the chief justice). And the 10 cent fee will get knocked down by a few pennies.

My ALM colleague Jacqueline Thomsen has further details here.

One other fun fact: There's a chance the case could make law on whether the Judicial Conference is entitled to the same Chevron deference due the executive branch.

Clevenger said the case is "sort of like the law before Chevron," but Klein disagreed.

"You wouldn't give less deference to the Judicial Conference than you would an executive agency," Klein said. "In fact, Judge Huvell applied a Chevron framework."

"What???" Clevenger said. (The word "Chevron" does not actually appear in Huvell's summary judgment order.)

Klein tried to explain. "Chevron is just the gloss, an assumption about when Congress delegates to a part of the government to administer a scheme, that they get deference," she said.

"Really?" Clevenger said. "Justice Scalia has just rolled over twice, right?"

Exceptionally weak?

 

The Million-Dollar Fee Fight Over Sippy Cups

Munchkin v. Luv N' Care. Could there be a more warm and fuzzy case name? I mean, how nasty could an IP dispute over locking sippy cups be? To U.S. Magistrate Judge John McDermott, both the trademark and patent claims Munchkin Inc. brought against competitor Luv N' Care Ltd. were exceptional and merited a $1.1 million fee award.

McDermott wrote that Munchkin's trademark claims were so weak that the company dismissed them with prejudice. And when prosecuting its patents, it didn't disclose prior art that Munchkin had raised in a separate suit. Even after the PTAB began IPR proceedings, Munchkin persisted "in all out litigation" despite statistics showing an 85% cancellation rate at the PTAB, McDermott wrote. Lathrop GPM partner Travis McAllon said McDermott's decision "sets a new low bar for exceptional case findings under Octane Fitness." There were no adverse rulings, no sanctions, no admonitions," he said. And if McDermott's own claim construction had carried the day—rather than the PTAB's—the patents would still be valid today, he told the court.

The high standard of review makes it tough to overturn a fee award at the Federal Circuit. But this sounded as if it might be one of those rare cases.

"What's the basis for awarding fees on the trademark?" Judge Timothy Dyk asked Husch Blackwell senior counsel Edward Manzo, representing Luv N' Care.

"I think that it was a terribly weak case," Manzo said.

"Because?" Dyk asked.

Manzo pointed to the side-by-side logos in the briefing, saying there was "no chance" Munchkin could have prevailed on its trademark claims. Plus, Munchkin withdrew the claims.

"Any time someone withdraws a claim, they're going to get slapped with attorneys fees?" Judge Raymond Chen asked.

"Not always," Manzo said.

Under further probing from Dyk, Manzo conceded that the PTAB had not found Munchkin's arguments frivolous.

"Then how can you award fees for the PTAB proceeding if what they were doing was non-frivolous?" Dyk demanded.

"All I said was that there was no finding of that," Manzo clarified. "I believe that their case at the PTAB was frivolous, personally."

Finally, Dyk homed in on McDermott's citing of PTAB trial statistics.

"What does the win rate have to do with anything? Why did the district court cite that? What are we supposed to get out of that?" Dyk asked.

Manzo recovered enough to make a cogent pitch. He pointed to the totality of the circumstances, including "the weakness of the trademark case, the weakness of the patent case, the immediacy of finding these two references, the successful IPR, and then finding out that Munchkin was aware of this prior art" that it hadn't told the PTO about.

IP Laterals – DLA Piper

DLA Piper has added three attorneys to its Patent Litigation practice and Life Sciences sector. Ellen Scordino joins in Boston and Susan Krumplitsch in Silicon Valley as partners, while April Abele Isaacson joins in San Francisco as of counsel.

Scordino and Krumplitsch previously practiced at Cooley. Isaacson was in house at Impax Laboratories following a stint at Goodwin Procter. Each brings experience representing pharmaceutical, biotechnology, chemical and medical device companies in patent litigation and other IP matters.

"Ellen, Susan and April bring an incredible combination of experience to the firm, including having served as lead trial counsel in Hatch-Waxman litigation and other life sciences patent litigation," said Ann Ford, global co-chair and US chair of DLA Piper's Intellectual Property and Technology practice.

IP Lateral – Barnes & Thornburg

Stephen C. Smith has joined Barnes & Thornburg as a partner in Chicago from Brinks Gilson & Lione.

Smith was a supervisor and engineer at a naval power plant facility before embarking on his legal career, which includes counseling a wide range of clients on patent-related issues. "Steve has a unique background outside of the legal profession that enables him to deeply understand and empathize with our clients' most pressing concerns, as well as counsel them through their greatest intellectual property challenges," said Julia Gard, chair Barnes & Thornburg's Intellectual Property Department.

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