Texas Patent Litigation Monthly Wrap-Up - August 2021

Personalized Media Communications, LLC v. Apple, Inc., No. 2:15-cv-01366-JRG-RSP (E.D. Tex. August 2021)

Following a jury trial on March 22, 2021, and a bench trial on June 22, 2021, and citing to the Federal Circuit's recent decision in Hyatt v. Hirshfeld, 998 F.3d 1347 (Fed. Cir. 2021), the Personalized Media court held that the asserted patent U.S. Pat. No. 8,191,091 (the "'091 Patent") is unenforceable under the doctrine of prosecution laches. The court overturned the jury's unanimous verdict to issue this ruling.

The Procedural History and Facts of the Case

This case has a protracted procedural history. The lawsuit was filed in July of 2015 and asserted two patents: U.S. Patent Nos. 8,191,091 and 8,559,635 (the "'635 Patent") (collectively the "Asserted Patents"). In February 2017, Apple filed inter partes review of the Asserted Patents. The PTAB initially invalidated all asserted claims of both patents, but the Federal Circuit reversed as to several claims of the '091 Patent. Thus, the court severed the asserted claims of the '635 Patent, but lifted the stay as to the '091 patent and set it for trial. The court also set Apple's equitable counterclaims and affirmative defenses of inequitable conduct, unclean hands, and prosecution laches for a bench trial. Apple later informed the court that it would no longer purse its inequitable conduct counterclaim. After the jury trial in March, 2021, the jury found unanimously that Apple infringed at least one of the claims 13, 14, 15, or 16 of the '091 Patent.

In its fact findings, the court noted that PMC and its inventors prosecuted their patent applications "serially." PMC's witness acknowledged in deposition that its prosecution strategy in the 1980s was to file continuation applications "as late as the law allowed," and one of the reasons behind this strategy was to ensure the seventeen year patent term would start "as late as possible" under 35 U.S.C. §154(c). Additionally, one of the documents uncovered in the litigation showed that PMC contemplated a strategy "to keep the PMMC[1] patents hidden while industry infringement is quietly monitored. PMMC could then roll out the patents to the industry at an appropriate time in the future, after the PMMC technology has been widely adopted." Another document intended for investors showed that "the Company had deliberately chosen not to publicize widely its technologies or plans." PMC even went as far as noting Apple as one of the "natural candidates for participating in the commercialization of PMMC's technologies." Based on these facts, the court found that PMC's patent strategy had two main features: 1) PMC would prosecute its patents serially, such that it could obtain protection for at least 30 to 50 years; and 2) PMC would keep its patent portfolio hidden until after the claimed subject matter is widely adopted in the industry.

In 1995, the Congress passed the Uruguay Round Agreements Act, and amended 35 U.S.C. §154(c) to provide for patent terms that end 20 years from the filing date of the earliest application to which priority is claimed. Before the June 8, 1995 deadline for the new rule to take effect, patent owners rushed to the PTO to file patent applications. PMC, in particular, filed 328 continuation applications claiming priority to the 1981 '510 application or the 1987 '096 application. PMC initially included one claim per application, and gradually increase the total number of claims over time, quite a few of which were conceded to be "placeholder" claims. Furthermore, PMC also submitted to the PTO thousands of prior art references, many of which "bore little relevance to disclosed inventions." Some were not even relevant to the inventive subject matter: for example, one was directed to a beehive, and one was a business card. The PTO rejected most of these applications on double patenting grounds. In 1998 and 1999, PMC and PTO examiners met several times to consolidate its applications.

However, the PTO continued to "grapple with obstacles" in advancing PMC's various patent applications. For example, in 2001, an examiner issued a notice of abandonment accusing PMC and its prosecution counsel of misconduct and prosecution laches. However, the notice of abandonment was withdrawn by the PTO. In 2002, another office action characterized PMC's arguments and submissions as "straw men," "lame,"" "repugnant," "NONSENSE," "mystifying," "careless," "an unnecessary drain on already limited PTO resources," "contorted," and "reading like the directions to a treasure hunt." This second office action was never repudiated by the PTO.

Finally, after a lengthy prosecution process that involved several reexaminations and stays, the PTO issued a total of 101 patents to PMC that claimed priority to its 1981 and 1987 specifications. The '091 Patent is one of them.

The Law of Prosecution Laches

Prosecution laches is an equitable affirmative defense to patent infringement. As explained by the Federal Circuit, prosecution laches may ""render a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances." 998 F.3d at 1359-60. Specifically, "[a]n applicant must therefore not only comply with the statutory requirements and PTO regulations but must also prosecute its applications in an equitable way that avoids unreasonable, unexplained delay that prejudices others." Id.

Proof of prosecution laches includes two elements: (a) that the patentee's delay in prosecution was "unreasonable and inexcusable under the totality of the circumstances," and (b) that the accused infringer or public suffered prejudice attributable to the delay. Hyatt, 998 F.3d at 1362. To establish prejudice, an accused infringer must show evidence of intervening rights, that "either the accused infringer or others invested in, worked on, or used the claimed technology during the period of delay." Cancer Research, 625 F.3d at 731.

Additionally, "in the context of a §145 action, the PTO must generally prove intervening rights to establish prejudice, but an unreasonable and unexplained prosecution delay of six years or more raises a presumption of prejudice, including intervening rights." Hyatt, 998 F.3d at 1370. The court held that this presumption does not apply to Apple because in this case, prosecution laches is raised as a defense to infringement, while the Federal Circuit's holding was limited to a §145 action.

The court held that the evidentiary standard should be "clear and convincing" when the enforceability of an issued patent is challenged for prosecution laches. The court found the facts in Hyatt "remarkably similar" to those in this case. For example, in both cases, even though the PTO suspended prosecution of the patent owners' numerous applications, "such is directly attributable to the manner in which [the patent owner] prosecuted its applications in the first place." Viewing the prosecution history of PMC's prosecution of its patent applications "in their totality," the court found that Apple had presented "clear and convincing evidence of an unreasonable and unexplained delay."

As for the second element, Apple proved that it started developing the accused instrumentality in 2003, when the patent applications were stuck in lengthy prosecution processes. The court thus found that Apple had presented "clear and convincing evidence" that it worked on, invested in, and used the claimed technology during the period of delay, and was therefore "prejudiced by PMC's dilatory prosecution."

[1] PMMC is PMC's predecessor