In re: Volkswagen Group of America, Inc. and In re: Hyundai Motor America, Appeal Nos. 2022-108, -109 (Fed. Cir. Mar. 9, 2022)

In the most recent of multiple mandamus rulings issued by the Federal Circuit in relation to Western District of Texas Judge Alan D. Albright’s transfer decisions, the Court entered another mandamus decision—this time concerning the theory that car dealerships may be considered a car distributor’s “place of business” for patent venue purposes under 28 U.S.C. § 1400(b).  For our write-ups of other, related cases on Judge Albright’s transfer decisions, see here.

The case involved patent infringement complaints brought in the Western District of Texas by plaintiff StratosAudio, Inc. against petitioners Volkswagen and Hyundai, car distributors whose U.S. branches are incorporated in New Jersey and California, respectively.  In denying the petitioners’ improper venue motions, the district court found that independently owned and operated Volkswagen and Hyundai dealerships in the Western District of Texas were petitioners’ “regular and established place[s] of business” for purposes of § 1400(b), relying on franchise agreements between the dealerships and petitioners that imposed certain restrictions and requirements on the dealerships’ operations.

In vacating the district court’s orders, the Federal Circuit relied heavily on its precedential decision in In re Google LLC, 949 F.3d 1338 (Fed. Cir. 2020), our write-up of which is available here.  Under Google, a finding that a defendant has a regular and established place of business for venue purposes 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.’”  Id. at 1345.  In this case, Stratos did not argue that petitioners’ employees themselves worked out of the dealerships, or that any particular dealership employees were petitioners’ agents, but that by virtue of their franchise agreements, the dealerships themselves were agents of Volkswagen and Hyundai.

The Federal Circuit found that this was a misapplication of established agency law.  The Court referred to its holdings in Google that an agency relationship requires the principal to have a right to direct or control the agent’s action, and specifically that the principal must have a right of “interim control” over the agent’s operations, which may result in a narrow scope of agency applying only to certain areas of operation.  Here, while the franchise agreements contained provisions requiring the dealerships, inter alia, to perform warranty work on vehicles using specified tools and to comply with certain distributor standards relating to sales, the Court found those provisions insufficient to establish an agency relationship because they did not give the distributors “interim control” over how day-to-day repair and sales operations are conducted.

The Federal Circuit distinguished cases relied on by the district court which, among other things, declined to dismiss cases because an agency relationship could plausibly exist between a franchisor and franchisee.  In this case, the Court found that Stratos failed to carry its burden to prove that an agency relationship in fact existed, and the district court’s orders denying transfer were therefore in error and an abuse of discretion.

The opinion can be found here.

ALSO THIS WEEK

Hoyt Augustus Fleming v. Cirrus Design Corporation, Appeal No. 2021-1561 (Fed. Cir. Mar. 10, 2022)

In an appeal from the Patent Trial and Appeal Board (the Board) the Federal Circuit addressed the Board’s findings that the challenged claims were unpatentable as obvious and denying appellant’s motion to amend.  The Federal Circuit held that the patent at issue—which described a ballistic parachute systems on aircrafts—was indeed unpatentable as obvious.  The Court reasoned that a person of ordinary skill in the art would have been motivated to combine prior art that consisted of a pilot’s operating handbook describing a manually operated parachute system with prior art detailing a device for programming industry standard autopilots to allow for the operation of any aircraft.  The Federal Circuit also affirmed the Board’s denial of appellant’s motion to amend the claims because substantial evidence supported the Board’s finding of a lack of written description.

The opinion can be found here.

Broadcom Corporation v. International Trade Commission, Appeal No. 2020-2008

Renesas Electronics Corporation v. Broadcom Corporation, Appeal Nos. 2021-1260, -1362

Broadcom Corporation v. Renesas Electronics Corporation, Appeal No. 2021-1511 (Fed. Cir. Mar. 8, 2022)

In this consolidated appeal of an International Trade Commission (ITC) decision and two inter partes reviews (IPRs), the Court of Appeals for the Federal Circuit affirmed both ITC decision and both IPRs.  Broadcom Corporation brought an ITC action against Renesas and other companies for violation of 19 U.S.C. § 1337, based on importation of products alleged to infringe Broadcom’s ’583 Patent and ’752 Patent.  Renesas filed IPRs to invalidate these two patents based on obviousness.  The Federal Circuit affirmed the ITC’s Section 337 analysis with respect to the ’538 Patent.  Because Broadcom could not point to any actual article it sold embodying by the ’538 patent, Broadcom failed the technical prong of the domestic industry requirement for a Section 337 violation.  Because Broadcom failed the domestic industry requirement, the Federal Circuit did not need to consider the ITC’s infringement analysis of the ’538 Patent.  The Federal Circuit affirmed the PTAB’s decisions with respect to both the ’538 and ’752 Patents, finding no fault in the Board’s reasoning and that substantial evidence supported its findings.  Because the Federal Circuit affirmed the PTAB’s conclusion that claim 5 of the ’752 Patent was invalid for obviousness, the Federal Circuit did not need to consider the ITC’s same determination regarding the ’752 Patent.

The Federal Circuit offered one piece of advice to the Board and ITC, of which practitioners can take note: Because § 103 addresses what “would have been” obvious, obviousness should be discussed in the past tense (“would have been obvious”) rather than present tense (“is” or “are” obvious).

The opinion can be found here.

Apple Inc. v. MPH Technologies OY, Appeal Nos. 2021-1532, -1533, -1534 (Fed. Cir. Mar. 9, 2022)

In an appeal from three inter partes review proceedings, the Federal Circuit Court affirmed that the disputed claims were not unpatentable as obvious, addressing issues of claim construction and obviousness.  The patents at issue related to improved secure messaging between arbitrary hosts utilizing IP security protocols.  Concerning claim construction, the Court found that the Board’s claim construction was consistent with the plain meaning of the claim language and the written descriptions.  Concerning the Board’s obviousness analysis, the Court affirmed, explaining that the Board’s conclusion was supported by substantial evidence.

The opinion can be found here.