Hudnell Law Group

Seventh Circuit Poised to Rule on Alternative Service by Email on Chinese “Schedule A” Defendants (Maybe)

2026-04-28T13:25:38Z

On February 25, 2026, a panel of the Seventh Circuit held oral argument in the case of Kangol LLC v. Hangzhou Chuanyue Silk Import & Export Co., Ltd., No. 25-2205. The appeal arises out of an unsuccessful attempt to void a default judgment against a Chinese entity in a Schedule A case (click here for a description of Schedule A cases). As fans of Schedule A cases know, however, the juicy issue being litigated across the country is whether and in what circumstances a plaintiff can serve a summons and complaint on a defendant in a Schedule A case by email. In particular, email service raises thorny issues in matters involving defendant entities from countries that have objected to service of process by postal channels, such as China, as I have written about previously. Appellant Hangzhou Chuanyue’s Statement of the Issues framed this as a question of whether (to paraphrase) the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965 (the “Hague Service Convention”) provides for exclusive methods of service of process (when it is applicable), and whether email service is an objected to “postal channel” or otherwise inconsistent with the prescribed methods of the Hague Service Convention. I listened to the hearing to get a sense of what issues seemed to concern the judges on the panel. I do not intend to summarize the back and forth between the panel and the litigants or try to read the tea leaves about how the panel may rule based on its questions. Some of the questions were about practicality. The panel asked Hangzhou Chuanyue’s counsel what impact a ruling in his client’s favor would have on other cases like it. Would it simply create an obligation for a plaintiff to tell a district court what efforts it made to identify a physical address for a defendant? This relates to the threshold question of whether the Hague Service Convention even applies, because it “shall not apply where the address of the person to be served with the document is not known.” (Hague Service Convention, Art. 1.) Another question about the practical impact of the ruling related to whether the Seventh Circuit would be striking out on its own depending on how it rules. The panel asked Kangol’s counsel whether ruling in his client’s favor would create a circuit split. The panel alluded to rulings in the Second and Third Circuits that email service of process is not allowed if the Hague Service Convention applies. In further questioning during Hangzhou Chuanyue’s counsel’s rebuttal time, the panel also inquired about whether an opinion out of the Fifth Circuit was consistent with the Second and Third Circuits on this issue. The panel peppered both counsel with the meaty questions of whether China has objected to service of process by email, and whether a district court may order service by “other means” under Rule 4(f)(3) of the Federal Rules of Civil Procedure without considering whether to apply “internationally agreed means of service” under Rule 4(f)(1) at all. But it is possible that the resolution of this appeal will be anticlimactic if one is awaiting another take on email service from a Court of Appeals. This is because there are other questions at issue in the appeal that if decided adversely to Hangzhou Chuanyue would moot the need to rule on the substance of the Hague Service Convention questions. Kangol is challenging the timeliness of Hangzhou Chuanyue’s motion to void the judgment and asserting that Hangzhou Chuanyue’s conduct waived its right to contest the judgment based on improper service of process. If the Seventh Circuit affirms on either of these grounds, then it will not need to reach the merits of the Hague Service Convention issues.

Federal Circuit Clarifies When Non-Infringing Products Can Form Part of a Royalty Base

2026-04-23T20:46:20Z

On March 6, 2026, the Federal Circuit issued a precedential opinion in the case of Exafer Ltd. v. Microsoft Corporation (No. 24-2296) reversing a district court’s exclusion of the patent owner’s damages expert’s opinion. A patent owner who successfully obtains a verdict of liability is entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.” 35 U.S.C. § 284. The patent owner almost universally presents its case for damages through an expert witness who provides an economic analysis of the rationale for the patent owner’s damages request. Having a damages expert’s opinion excluded is devastating and frequently case dispositive, as it was in this case because the district court also granted a motion for summary judgment based on the absence of a remedy. What was the district court’s reason for excluding the opinion and why did the Federal Circuit say the district court got it wrong? Even if patent litigation is not your primary practice area, given the language of 35 U.S.C. § 284 your intuition is probably telling you that damages for patent infringement should be connected somehow to the invention in the asserted patent. That intuition is correct: “the governing rule is that the ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more.” Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). A key point of tension in patent litigation is over what should form the royalty base. In a case in which the patent owner accuses a device or system of infringing, what parts of it are connected enough to the patented invention so that it would be fair to attribute the economic activity associated with those parts to the patented invention? This tension played out in the district court in this case. Exafer’s expert used revenue associated with virtual machines (“VMs”), components not accused of infringing, as the royalty base. Microsoft objected to the “application of a royalty rate to sales of unaccused VMs,” reasoning that the caselaw “prevents [Exafer] from expanding its patent monopoly to unpatented products.” Exafer Ltd. v. Microsoft Corporation, No. 24-229, slip op. at 7 (Fed. Cir. Mar. 3, 2026). Now this may seem to be a slam dunk. The VMs were not even infringing. How could Exafer think it should get a piece of the VM sales as a royalty? A full treatment of convoyed sales and similar collateral economic issues is beyond the scope of this post. But the general principle is that when there is economic activity generated by infringing a patent, not all that economic activity necessarily relates directly to the sale or use of infringing articles. There could be related economic effects, such as the sale of non-infringing articles that a defendant bundles with the infringing articles, or cost savings that a defendant would not have realized but for its infringing activities. That collateral economic activity can be part of the picture of what the use of the patented invention is worth to the defendant, and therefore what it would have been willing to pay had it sought a license instead of infringing. Analysis of this hypothetical license negotiation forms the core of a patent damages opinion. So, if there was economic activity tied to the VMs that Exafer could attribute to the patents, even if the VMs themselves did not infringe the patents, the VMs could potentially form part of the damages analysis. The Federal Circuit held that Exafer had sufficiently connected the dots between its patents and the VMs. Exafer’s technical expert set up the damages opinion by opining that the network optimization and efficiency improvements achieved by the claimed inventions allowed Microsoft to operate more VMs on a single CPU and thus sell more VMs without the need for additional network infrastructure. Exafer at 8. Exafer’s damages expert used the incremental benefit of increased VM density to construct a damages model based on the additional sale of VM-hours Microsoft was able to realize due to the patented inventions. Id. The Federal Circuit said this was justified because “Microsoft’s own documents demonstrate that [Exafer’s damages expert] Mr. Blok’s VM-hour royalty base was based on a causal connection between the Accused Features of the Azure Platform and VMs.” Exafer at 6. In contrast, the caselaw the district court and Microsoft relied on, Enplas Display Device Corp. v. Seoul Semiconductor Co., 909 F.3d 398 (Fed. Cir. 2018), involved a damages model that included products that “had no causal connection to the accused infringing products such that the royalty base improperly included activities that do not constitute patent infringement.” Exafer at 6 (citation modified). In other words, Enplas does not stand for a blanket rule that a patent owner cannot include non-infringing products in the royalty base. Practice Tips: When representing a patent owner, establishing a technical basis for a causal connection to support this type of analysis may be time intensive, but possibly the least of your worries. Attempts to get discovery of internal financial, marketing, or business analyses of admittedly non-infringing activities will often be met with an accusation that you are “fishing.” The process of gathering this type of information should begin early and be bolstered by as much open source and proprietary information as possible, because it may require motion practice to convince a magistrate or district judge that you are entitled to the requested discovery. When working on the defense side, you must poke holes in the purported technical nexus between the alleged infringing acts and the economic activity due to non-infringing activities. Also push hard for written discovery on the factual basis for a patent owner’s theory that non-accused activities should be part of the royalty base, even when met with an objection that the request is premature because it is the domain of expert opinion. The defendant is entitled to know the facts an expert will base his or her opinion on without waiting for a written report.

Federal Circuit Confirms Broad USPTO Director Discretion In IPR Institution Decisions

2026-03-31T21:00:08Z

Case Overview On February 13, 2026, the United States Court of Appeals for the Federal Circuit issued its precedential decision in Apple Inc. v. Squires, Case No. 2024-1864 (Fed. Cir. Feb. 13, 2026), affirming the Northern District of California’s rejection of an Administrative Procedure Act challenge to the U.S. Patent and Trademark Office (USPTO) Director’s NHK–Fintiv instructions. Apple Inc., Cisco Systems, Inc., Google LLC, and Intel Corporation challenged three sets of instructions issued by the Director of the USPTO to the Patent Trial and Appeal Board (PTAB) governing discretionary denials of inter partes review petitions in light of parallel district court litigation. Two of the instructions were embodied in precedential Board decisions—NHK Spring Co. v. Intri-Plex Technologies, Inc., IPR2018-00752, 2018 WL 4373643 (P.T.A.B. Sept. 12, 2018), and Apple Inc. v. Fintiv, Inc., IPR2020-00019, 2020 WL 2126495 (P.T.A.B. Mar. 20, 2020)—which identified six nonexclusive factors to guide discretionary institution decisions. Slip Op. at 4-5. A third instruction, issued via memorandum, modified the earlier guidance. Id. The plaintiffs contended that the Director was required to promulgate the NHK–Fintiv framework through notice-and-comment rulemaking under the Administrative Procedure Act, 5 U.S.C. § 553. Slip Op. at 3. After an earlier appeal revived the procedural challenge but not the substantive ones, the district court held that the instructions constituted a “general statement of policy” exempt from notice-and-comment requirements. Id. The Federal Circuit agreed. Id. Legal Issue Analysis The central question before the Federal Circuit was whether the challenged instructions were “substantive” or “legislative” rules requiring notice-and-comment rulemaking, or instead “general statements of policy” exempted by 5 U.S.C. § 553(b). Slip Op. at 6. The Court began by reiterating the statutory framework. Section 553 requires notice-and-comment procedures for substantive rules, but expressly exempts “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C. § 553(b). Citing Chrysler Corp. v. Brown, 441 U.S. 281, 301 (1979), the Court emphasized that “[t]he central distinction among agency regulations found in the APA is that between ‘substantive rules’ on the one hand and ‘interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice’ on the other.” Id. The Federal Circuit reaffirmed its own articulation of the standard: “Legislative rules alter the landscape of individual rights and obligations, binding parties with the force and effect of law.”Slip Op. at 12 (citing Stupp Corp. v. United States, 5 F.4th 1341, 1352 (Fed. Cir. 2021)). By contrast, general statements of policy “do not have the force and effect of law” and merely advise the public prospectively how the agency intends to exercise discretionary power. Id. Applying that distinction, the Court concluded that the NHK–Fintiv instructions were not binding on the agency itself. Id. at 13. Critically, “the NHK-Fintiv instructions are not binding on the agency, i.e., on the statutory decisionmaker—the Director.” Id. at 14. The Director, as the official vested with institution authority under 35 U.S.C. § 314(a), retains full authority to decide whether to institute inter partes review and may reverse or supplant Board determinations. Id. This structural feature proved dispositive. The “critical factor,” the Court explained, is “the extent to which the challenged directive leaves the agency, or its implementing official, free to exercise discretion to follow, or not to follow, the announced policy in an individual case.” Id. Because the Director’s discretion remained intact and unreviewable, the instructions could not be said to bind the agency with the force and effect of law. Id. The Court further emphasized that Congress provided “no legal right to institution of an IPR.” Id. at 3. Institution decisions are committed to the Director’s discretion and are insulated from judicial review, at least absent constitutional concerns. Id. at 17. In that context, the challenged guidance concerned a quintessentially discretionary, non-enforcement decision. In language that underscores the breadth of Director discretion, the Court explained that a non-institution decision “leaves a patent challenger’s actual legal rights and obligations unchanged—what they would be if Congress had not enacted the IPR regime.” Id. at 18. Challengers remain free to litigate validity in district court and to pursue reexamination under 35 U.S.C. ch. 30, §§ 301–07. Id. at 19. Apple argued that the practical effect of Fintiv was to reduce the likelihood of institution and therefore to affect substantive interests. Id. at 16. The Court rejected that reasoning, cautioning against equating Article III injury with the “force and effect of law” required for a legislative rule. Id. at 11. The fact that guidance may influence outcomes does not render it binding in the statutory sense contemplated by § 553. Id. at 17. The Federal Circuit also distinguished precedent relied upon by Apple, including American Federation of Labor & Congress of Industrial Organizations v. National Labor Relations Board, 57 F.4th 1023 (D.C. Cir. 2023), and General Electric Co. v. EPA, 290 F.3d 377 (D.C. Cir. 2002). In those cases, the challenged measures were found to bind the agency or directly alter statutory entitlements. Id. at 19-20. Here, by contrast, the instructions neither constrained the Director’s authority nor altered any party’s legal status. Notably, during the pendency of the appeal, the Director rescinded certain guidance and later proposed formal rulemaking that, if adopted, would bind the agency. Id. at 9-10. The Court held that these developments did not moot the case, as the precedential NHK and Fintiv decisions remained in place and could again govern Board action. Id. at 10. Ruling The Federal Circuit affirmed the district court’s judgment, holding that the NHK–Fintiv instructions constitute “a ‘general statement of policy’ exempted from notice-and-comment rulemaking procedures by the express terms of § 553(b).” Id. at 3. Because the instructions neither bind the Director nor alter individual rights and obligations, formal rulemaking was not required. Id. Conclusion and Commentary The practical significance of Apple v. Squires extends well beyond the procedural question presented. As contemporaneous commentary has observed, the decision reinforces that the USPTO Director’s institution discretion is extraordinarily broad, constrained primarily by constitutional limitations or self-imposed rules rather than by the Administrative Procedure Act’s procedural safeguards. By framing the NHK–Fintiv framework as internal “instructions” rather than binding norms, the Federal Circuit has effectively insulated a wide range of discretionary institution policies from notice-and-comment challenges. The Court’s reasoning suggests that unless the Director promulgates a rule that binds the agency itself or alters statutory rights, most guidance concerning institution decisions will fall within the “general statement of policy” exception. For patent challengers, the takeaway is sobering. There is no statutory entitlement to inter partes review, and a denial of institution leaves challengers in substantially the same position they would occupy absent the IPR regime. For patent owners, the decision places them in a stronger position to resist IPR challenges, particularly in parallel litigation scenarios, because the Director retains broad, largely unreviewable discretion to deny institution—and may exercise that discretion through flexible policy guidance rather than formal rules. The decision also brings doctrinal clarity to what is already occurring in practice under Director Squires’ leadership: centralized control over institution decisions, policy-driven decision-making, and an increased reliance on discretionary denial. Apple v. Squires removes key procedural obstacles and confirms that the Director may shape institution practices with limited judicial oversight. For stakeholders, this indicates that the discretionary denial landscape is not only intact—it is now firmly grounded and likely to remain a defining feature of PTAB practice in the near term.

Seventh Circuit Poised to Rule on Alternative Service by Email on Chinese “Schedule A” Defendants (Maybe)

2026-03-31T09:53:13Z

Some of the questions were about practicality. The panel asked Hangzhou Chuanyue’s counsel what impact a ruling in his client’s favor would have on other cases like it. Would it simply create an obligation for a plaintiff to tell a district court what efforts it made to identify a physical address for a defendant? This relates to the threshold question of whether the Hague Service Convention even applies, because it “shall not apply where the address of the person to be served with the document is not known.” (Hague Service Convention, Art. 1.)

Another question about the practical impact of the ruling related to whether the Seventh Circuit would be striking out on its own depending on how it rules. The panel asked Kangol’s counsel whether ruling in his client’s favor would create a circuit split. The panel alluded to rulings in the Second and Third Circuits that email service of process is not allowed if the Hague Service Convention applies. In further questioning during Hangzhou Chuanyue’s counsel’s rebuttal time, the panel also inquired about whether an opinion out of the Fifth Circuit was consistent with the Second and Third Circuits on this issue.

The panel peppered both counsel with the meaty questions of whether China has objected to service of process by email, and whether a district court may order service by “other means” under Rule 4(f)(3) of the Federal Rules of Civil Procedure without considering whether to apply “internationally agreed means of service” under Rule 4(f)(1) at all.

But it is possible that the resolution of this appeal will be anticlimactic if one is awaiting another take on email service from a Court of Appeals. This is because there are other questions at issue in the appeal that if decided adversely to Hangzhou Chuanyue would moot the need to rule on the substance of the Hague Service Convention questions. Kangol is challenging the timeliness of Hangzhou Chuanyue’s motion to void the judgment and asserting that Hangzhou Chuanyue’s conduct waived its right to contest the judgment based on improper service of process. If the Seventh Circuit affirms on either of these grounds, then it will not need to reach the merits of the Hague Service Convention issues.

Result-Oriented Software Claims Fall Short as Federal Circuit Demands Technological Improvement

2026-02-02T03:23:00Z

Case Overview On January 22, 2026, the United States Court of Appeals for the Federal Circuit affirmed the Rule 12 dismissal of a patent infringement action brought by US Patent No. 7,679,637 LLC against Google LLC, holding that the asserted claims were directed to patent-ineligible subject matter under 35 U.S.C. § 101. US Patent No. 7,679,637 LLC against Google LLC, No. 24-1520 (Fed. Cir. Jan. 22, 2026). The patent-in-suit, U.S. Patent No. 7,679,637, is titled “Time-Shifted Web Conferencing” and generally relates to systems that permit participants in a web conference to view or replay portions of a presentation asynchronously, including while a session is still ongoing. The claims describe the recording of multiple data streams, such as video, audio, chat data, documents, and whiteboarding sessions, and allow an observing participant to review previously presented content while a presenter continues to share content live. Slip op. at 2. The patent owner asserted claims 2-5 and 7-9 against Google, alleging infringement through Google’s web-based conferencing and streaming technologies. Google moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the asserted claims were directed to an abstract idea and lacked an inventive concept. The United States District Court for the Western District of Washington granted the motion and denied leave to amend, concluding that amendment would be futile. The patent owner appealed. Court’s Analysis The Federal Circuit, in an opinion authored by Chief Judge Moore and joined by Judges Hughes and Stoll, reviewed the dismissal de novo and applied the familiar two-step framework for patent eligibility articulated in Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014). Slip op. at 5. Alice Step One: Abstract Idea At step one, the Court considered whether the asserted claims were directed to a patent-ineligible abstract idea. The district court had characterized the claims as being directed to “playing back recorded content.” On appeal, the patent owner argued that this description improperly overgeneralized the claims, which it contended were directed to a specific improvement that allowed presentations to be reviewed asynchronously while still in progress. Slip op. at 6. The Federal Circuit rejected this argument. Even assuming a narrower framing, the Court concluded that the claims were directed to “the patent-ineligible abstract idea of allowing asynchronous review of presentations, rather than any specific technological improvement.” Slip op. at 6. Central to this conclusion was the absence of any explanation in the claims as to how the alleged improvement was achieved. Id. Relying on recent precedent, the Court reiterated that in software cases, the step-one inquiry often turns on whether the claims focus on a specific improvement in computer functionality or instead recite results at a high level of abstraction. Id. at 7 (citing International Business Machines Corp. v. Zillow Group, Inc., 50 F. 4th 1371, 1377 (Fed. Cir. 2022)). The Federal Circuit found that the claims merely describe what the claimed system is “arranged to allow” or “able to” do. Id. at 8. The Court emphasized that neither the claims nor the dependent claims “disclose how the claimed results are achieved or embody any specific technological improvement discernible to a skilled artisan.” Id. at 8. Accordingly, the Court agreed with the district court that the claims were directed to an abstract idea. Id. The Court also examined the specification and found it equally unhelpful to the patent owner. Id. The written description acknowledged that the client applications, data streams, and decompression components were conventional and commonly used in the audiovisual field. Id. Rather than describing a technical solution to a technological problem, the specification suggested that the invention merely applied known time-shifting concepts to web conferencing in order to address inefficiencies arising from participants joining late or missing portions of a presentation. Id. at 8-9. In distinguishing eligible software cases, the Federal Circuit contrasted the patent with Contour IP Holding LLC v. GoPro, Inc., where the claims disclosed a specific improvement to camera technology through parallel generation of high- and low-quality video streams. Id. at 9. By contrast, the Federal Circuit found the claims more closely resembled those in Hawk Technology Systems, LLC v. Castle Retail, LLC, which were found ineligible because they manipulated multiple data streams in a result-oriented manner without reciting a concrete technical solution. Id. Alice Step Two: Inventive Concept At step two, the Court considered whether the claims contained an inventive concept sufficient to transform the abstract idea into patent-eligible subject matter. The patent owner argued that two features supplied the requisite inventive concept: the use of two client applications to manipulate multiple data streams, and a “time-scale modification component” that maintained consistent perceived audio quality at different playback speeds. Id. at 10. The Federal Circuit found neither feature persuasive. The Court observed that the step-two arguments largely repeated the same assertions made at step one. Id. As the Court explained, “merely describing the functions of the abstract idea itself, without particularity, is simply not enough.” Id. at 10 (quoting Int’l Bus. Machs., 50 F. 4th at 1382). The Court found that the specification merely recites generic client applications performing their ordinary functions on conventional data streams, which does not supply an inventive concept. Id. With respect to the time-scale modification component, the Court noted that the specification expressly described this feature as conventional and implemented using off-the-shelf algorithms drawn from prior audio playback contexts. Id. at 11. An inventive concept must amount to more than “well-understood, routine, and conventional activity,” and the claimed audio component failed that test. Id. Premature Dismissal and Futility of Amendment The patent owner also argued that dismissal at the pleading stage was improper and that it should have been granted leave to amend. The Federal Circuit rejected both arguments. The Court reiterated that patent eligibility may be resolved on a motion to dismiss where there are no factual allegations that, taken as true, would preclude resolution of the issue as a matter of law. Id. Here, no amendment to the complaint could change what the patent itself conceded regarding the conventional nature of its components. Id. at 12. Because the eligibility defects were rooted in the claims and specification, amendment would have been futile. The Court further rejected arguments that claim construction or conversion of the motion to summary judgment was required, noting that the patent owner had proposed no claim constructions that would alter the section 101 analysis. Id. Ruling The Federal Circuit affirmed the district court’s dismissal under Rule 12(b)(6), holding that claims 2-5 and 7-9 of the patent were directed to an abstract idea and lacked an inventive concept sufficient to confer patent eligibility under 35 U.S.C. § 101. Conclusion and Implications This decision fits squarely within the Federal Circuit’s recent line of cases emphasizing the dangers of result-oriented functional claiming in software patents. The opinion underscores that describing what a system does, even in considerable detail, is not enough if the claims and specification fail to explain how the system achieves a technological improvement. The Court’s analysis also reinforces the increasing willingness of district courts, and the Federal Circuit, to resolve eligibility issues at the Rule 12 stage when the patent itself concedes conventionality. Assertions that a claim involves multiple components, data streams, or sophisticated-sounding features will not carry the day absent a concrete disclosure of technical implementation. For patent applicants and litigants alike, the decision serves as another cautionary reminder that improvements framed in terms of user experience or business efficiency—such as enabling asynchronous participation—must be anchored to a specific technological solution. Without that anchor, complaints asserting software patents are at high risk of early dismissal. In the broader section 101 landscape, the opinion continues a steady trend: software claims that rely on functional language and abstract goals, untethered from technical detail, remain highly vulnerable. As the Federal Circuit’s jurisprudence evolves, this decision confirms that the line between eligible and ineligible subject matter continues to rely more on the substance of the technological disclosure.

Second Circuit Limits Alternative Service by Email on Chinese “Schedule A” Defendants in Case of First Impression

2026-01-05T04:45:54Z

Let’s begin with the bottom line: “In sum, we conclude that email service on the Chinese defendants is prohibited by the Hague Service Convention, and thus improper under Rule 4(f)(3).” Smart Study Co., LTD. v. Acuteye-US, No. 24-313, slip op. at 19 (2nd Cir. December 18, 2025). Now how did we get here? It all began with a typical “Schedule A” case. For those unfamiliar with Schedule A cases, here is a primer: A typical Schedule A case follows a well-worn path: the plaintiff files a complaint, generally under seal and often under a pseudonym. Along with the complaint, the plaintiff also files motions to restrain the defendants' assets held in online marketplace accounts (most defendants are foreign storefronts doing business on popular e-commerce platforms such as Amazon, Etsy, and Walmart) and to enter a temporary restraining order barring further infringement. But these requests are typically not litigated in adversarial fashion, as plaintiffs almost always seek and obtain leave to proceed under seal and ex parte. By the time any defendant appears in the case, it is most often after the defendant's account has been frozen and its funds restricted. Schedule A cases almost exclusively get resolved after the entry of a preliminary injunction, dismissal of some defendants, settlements with others, and a default judgment against the remainder. Eicher Motors Ltd. v. The P'ships & Unincorporated Ass'ns Identified on Schedule “A”, No. 25-cv-0293, slip op. at 1-2 (N.D. Ill. Aug 08, 2025). There is one additional crucial detail: the initial relief via a temporary restraining order and/or preliminary injunction will also typically include a request for alternative service under Rule 4(f)(3) of the Federal Rules of Civil Procedure (which allows service “by other means not prohibited by international agreement”) permitting the defendants to be served the summons and complaint by email or by emailing a link to a website containing the summons and complaint. See, e.g., Smart Study at 10. The Smart Study case followed this typical path, including securing leave to serve the summons and complaint by email. See Smart Study at 10. After dismissing two parties who made an appearance to challenge the preliminary injunction, Smart Study obtained a default judgment against 49 defendants for whom it did not have a physical address. So far there was nothing problematic because under Article I of the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, Nov. 15, 1965 (the “Hague Service Convention”), “[t]his Convention shall not apply where the address of the person to be served with the document is not known.” However, as to two other defendants with known addresses, the district court issued an order to show cause why the action should not be dismissed, ultimately concluding that email service on those defendants was improper under Rule 4(f)(3) and that it thus lacked jurisdiction to enter a default judgment. See Smart Study at 12. As noted above, the Second Circuit affirmed the district court in a case of first impression. The Court noted China’s objection to service of documents by postal channels, which service is permitted by default under Article 10 of the Hague Service Convention if not objected to. The Court further acknowledged the Supreme Court’s admonition that the Hague Service Convention “pre-empts inconsistent methods of service wherever it applies.” Water Splash, Inc. v. Menon, 581 U.S. 271, 273 (2017) (cleaned up). The Court concluded that email service was one such inconsistent method, the implication being that it is inconsistent with China opting out of service by postal channels. See Smart Study at 12. Thus, one cannot serve process on a Chinese defendant under Rule 4(f)(3). Service under Rule 4(f)(2) is also unavailable because it only applies “if there is no internationally agreed means.” See Smart Study at 19-20 & n.3. The Court also ruled that without proper service of process, the district court also lacked personal jurisdiction to enter a default judgment. See Smart Study at 20. What are the implications of Smart Study for parties to Schedule A cases? Due to the absence of caselaw on this issue from other circuits, it is likely to be widely cited in Schedule A litigation around the country. Given that this is the season for New Year predictions, I predict that plaintiffs in these actions will argue that the ruling narrowly applies to jurisdiction to enter a default judgment, and that all other exercises of personal jurisdiction district courts typically employ in these actions is not implicated (including jurisdiction over preliminary injunctive relief). I similarly predict that defendants in these actions (those who appear to defend themselves anyway) will argue that if the district court lacks personal jurisdiction for the purposes of a default judgment, how can it exercise any personal jurisdiction at all absent formal service under the Hague Service Convention?

Federal Circuit Rejects Formalistic Shield to Prosecution History Estoppel

2025-08-06T04:16:27Z

Case Summary On July 18, 2025, the U.S. Court of Appeals for the Federal Circuit reversed a $106 million jury verdict in Colibri Heart Valve LLC v. Medtronic CoreValve, LLC, No. 2023-2153, finding that Colibri’s infringement claim under the doctrine of equivalents was barred by prosecution history estoppel. The case involved U.S. Patent No. 8,900,294 (“the ’294 patent”), which claims a method for implanting a percutaneous replacement heart valve that allows for partial deployment followed by recapture if it is positioned incorrectly. Slip Op. at 2. The ’294 patent issued with an independent claim (claim 1) that recited partial deployment “by pushing out the pusher member from the moveable sheath” to expose the valve. Id. During prosecution, the applicant had also submitted a broader independent claim (claim 39) that described deployment by “retracting the moveable sheath” to partially deploy the replacement heart valve, but that claim was rejected under 35 U.S.C. § 112 for lack of written description and subsequently cancelled. Id. Colibri sued Medtronic CoreValve under 35 U.S.C. § 271(b), alleging inducement of infringement. Id. At trial, Colibri conceded that Medtronic’s Evolut valve systems—utilizing sheath retraction rather than the claimed pushing method—did not literally infringe, as it involved retraction rather than pushing. Id. Instead, Colibri relied on the doctrine of equivalents arguing that Medtronic’s method was insubstantially different from pushing out the pusher member. Id. The district court denied Medtronic’s motion for judgment as a matter of law (JMOL) of noninfringement and the jury found in favor of Colibri, awarding damages exceeding $106 million. Id. at 3. On appeal, however, the Federal Circuit held that Colibri was estopped from asserting its equivalence theory due to its prosecution conduct, namely the cancellation of claim 39 relating to retraction expressly, which covered the method Colibri now sought to recapture through equivalency. Id. Legal Analysis The Federal Circuit disagreed with the district court’s finding that Colibri’s asserted equivalent—Medtronic’s implantation method using both pushing and retracting—was distinct from cancelled claim 39, which recited only retraction. Id. at 17. Colibri had argued that the accused method was materially different from claim 39 because it involved both actions. Id. The Federal Circuit, however, found this distinction unpersuasive. Id. Colibri itself had repeatedly acknowledged that “basic physics” require a pushing force to accompany retraction in valve deployment. Id. at 18. Thus, the Court reasoned that Colibri’s asserted equivalent and the cancelled claim 39 involved the same essential mechanism. Moreover, both the cancelled and issued claims used language indicating that the valve was restrained by the sheath, further reinforcing the technical equivalency. Id. Because Colibri failed to rebut the presumption of estoppel or invoke any recognized exception, the Court held that estoppel applied and precluded Colibri from asserting equivalence based on retraction. Id. The Federal Circuit also agreed that Colibri’s cancellation of claim 39 during prosecution, in favor of pursuing limitations already included in retained claim 34 (which issued as claim 1), constituted a narrowing amendment. Id. at 19. This narrowing gave rise to prosecution history estoppel. Id. The Court emphasized that a narrowing action need not involve a formal amendment to the specific claim asserted; rather, cancelling a broader claim while retaining a narrower one—especially when both cover closely related subject matter—can give rise to estoppel. Id. In the instant case, both claims recited partial deployment of a heart valve, differing only in how deployment occurs: claim 34 (issued claim 1) used “pushing,” while cancelled claim 39 used “retracting.” Id. Relying on Colibri’s own arguments, that both pushing and retracting are involved in real-world valve deployment (based on “basic physics”), the Court concluded that the two claims were substantively intertwined. A person skilled in the art would view the cancelled and retained claims as closely related, such that cancelling one effectively narrowed the scope of the other. Id. at 20. The district court had rejected this estoppel argument on formal grounds—reasoning that because the cancelled and retained claims were independent and not in a dependent relationship, and because Colibri did not amend claim 1, estoppel should not apply. Id. The Federal Circuit rejected that reasoning, stating that substance, not formal claim structure, governs whether estoppel applies. Id. The Court then surveyed precedent to support this view: Citing Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002), the Court noted that estoppel arises when the scope of the patent is narrowed during prosecution, regardless of whether a specific claim is amended or cancelled. Id. at 20.-21. Citing Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131 (Fed. Cir. 2004), the Court noted that estoppel was applied where independent claims were cancelled and dependent claims were rewritten into independent form, even though the rewritten claims were not substantively changed. “‘[T]he fact that the scope of the rewritten claim has remained unchanged will not preclude the application of prosecution history estoppel if, by canceling the original independent claim and rewriting the dependent claims into independent form, the scope of subject matter claimed in the independent claim has been narrowed to secure the patent.’” Id. at 22-23 (citing Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131, 1142 (Fed. Cir. 2004). The court also referenced Keith v. Charles E. Hires Co., 116 F.2d 46 (2d Cir. 1940), where cancellation of one claim in favor of another gave rise to estoppel despite the surviving claim not being amended. In applying these principles to the case, the Federal Circuit held that by cancelling claim 39—directed to retraction—Colibri signaled that it was abandoning that scope. Because both claims described essentially the same deployment step but with different language, cancelling the broader claim (claim 39) while pursuing the narrower (claim 34) constituted a narrowing of the invention’s scope. Id. at 24. Thus, estoppel applied. The Court concluded that Colibri could not now reclaim the territory of the cancelled claim through the doctrine of equivalents. If Colibri wished to protect retraction-based deployment, it should have filed a continuation application. Id. Given the prosecution record and the technological overlap between pushing and retracting, the public-notice function of estoppel demanded that Colibri be precluded from asserting equivalence on that basis. Id. Ruling The Federal Circuit reversed the district court’s denial of Medtronic’s JMOL motion, holding that Colibri’s doctrine of equivalents claim was barred by prosecution history estoppel. Id. at 25. Conclusion and Commentary Colibri reinforces prosecution history estoppel as a potent limitation on the doctrine of equivalents, particularly where applicants cancel claims encompassing similar subject matter they later attempt to recapture. The ruling affirms that even formal claim distinctions—such as independently filed claims rather than amendments—may give rise to estoppel if the underlying disclosures and patent owner statements signal a narrowing of scope. Patent owners should be cautious in advancing equivalence theories in litigation that run contrary to any claim amendments that could be construed as narrowing or that ignore the substantive overlap between cancelled and issued claims. Patent owners should also try to avoid relying on the doctrine of equivalents, through claim construction or otherwise. Further, to preserve flexibility in enforcement, patent owners should consider filing continuation applications or adding dependent claims rather than outright cancelling claims that potentially overlap with other claims. Accused infringers seeking to raise a prosecution history estoppel defense to infringement under the doctrine of equivalents should now consider not just amendments to the asserted claims, but rather scrutinize all potentially relevant claim amendments and cancellations. Accused infringers should focus on the technical overlap between cancelled and issued claims, even if they differ in wording or claim format. A careful reading of the patent prosecution history, combined with a sound understanding of the claimed technology and the patentee’s own positions, may yield a powerful estoppel defense.

Federal Circuit Enforces Gatekeeping Role in Patent Damages Testimony

2025-07-01T03:26:01Z

On May 21, 2025, the United States Court of Appeals for the Federal Circuit, sitting en banc, reversed a $20 million damages award against Google LLC in a patent infringement dispute with EcoFactor, Inc. EcoFactor, Inc. v. Google LLC, No. 2023-1101 (Fed. Cir. May 21, 2025). The Court held that the district court abused its discretion in admitting the testimony of EcoFactor’s damages expert, David Kennedy, and remanded the case for a new trial on damages. The central issue was whether Mr. Kennedy’s testimony satisfied the admissibility requirements under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Court found that it did not. EcoFactor sued Google in the Western District of Texas in January 2020, alleging that Google’s Nest thermostats infringed multiple patents, including U.S. Patent No. 8,738,327, which relates to smart thermostat operation within computer-networked heating and cooling systems. Slip Op. at 3. During pretrial proceedings, Google sought to exclude the testimony of Mr. Kennedy under Federal Rule of Evidence 702 and Daubert, arguing that Mr. Kennedy’s damages analysis—based on an asserted $X per-unit royalty—was not grounded in reliable methodology or sufficient data. Id. The district court denied this motion. Id. At trial, Mr. Kennedy testified that a $X per-unit royalty was appropriate, and the jury ultimately awarded EcoFactor a lump-sum damages amount of $20,019,300. Id. at 3-4. Google filed a motion for judgment as a matter of law (JMOL) on noninfringement and sought a new trial on damages, contending that Mr. Kennedy’s opinion lacked reliability. Both motions were denied by the district court. Id. at 4. A panel of the Federal Circuit initially affirmed the district court’s denial of JMOL. Id. On the damages issue, the panel also affirmed the district court, but with a partial dissent. Id. Google then petitioned for en banc rehearing on whether Mr. Kennedy’s testimony satisfied Rule 702 and Daubert. Id. The Federal Circuit granted en banc review limited to that question and heard oral argument on March 13, 2025. Id. at 4-5. Majority Opinion The Court first examined whether three prior license agreements between EcoFactor and Daikin Industries, Schneider Electric, and Johnson Controls supported Mr. Kennedy’s opinion that those licensees had agreed to a $X per-unit royalty rate. The Court concluded they did not. Id. at 12. Each agreement included a “whereas” clause reciting that EcoFactor believed a $X per-unit royalty was a reasonable basis for the lump-sum payments. Id. at 12-14. Mr. Kennedy interpreted these clauses to mean that the licensees agreed to pay a $X royalty rate. The operative provisions of the Daikin and Schneider agreements, however, expressly disclaimed that the lump sums were based on sales or constituted royalties. Id. at 13-14. The Court found this language directly contradicted Mr. Kennedy’s interpretation, stating, “the license itself therefore directly contradicts any claim that the lump sum is based upon any particular royalty rate or even that it is based upon sales volume.” Id. at 13. The Court emphasized that while these licenses may reflect EcoFactor’s belief as a willing licensor, they did not demonstrate agreement by the licensees to the asserted rate. “The ‘whereas’ recital of each license provides no indication that the licensees agreed to pay the $X rate or shared EcoFactor’s belief that $X constituted a reasonable royalty,” the Court wrote. Id. at 15. As to the Johnson license, it mirrored the Daikin agreement in its recitals. Id. at 14. The $X royalty rate did not appear anywhere else in the Johnson license. Id. The Court held that the “whereas” clauses in the three agreements merely reflected EcoFactor’s unilateral beliefs and did not demonstrate mutual agreement on a $X rate. Id. at 16. Therefore, the three licenses, individually or collectively, could not provide a reliable basis for the expert’s opinion that they reflected industry acceptance of the asserted royalty. Id. Additionally, Mr. Kennedy relied on the testimony of EcoFactor’s CEO, Shayan Habib, who claimed that the lump-sum amounts were calculated by applying the $X rate to the licensees’ estimated sales. Id. at 16-17. Mr. Habib, however, admitted that he had no access to the licensees’ sales data, and there was no documentation substantiating the sales estimates or the royalty derivation. Id. at 17. Mr. Habib admitted that he derived the $X figure from his general industry experience, but provided no documentation or data showing how the licensees’ sales volumes were estimated or factored into the lump-sum amounts. Id. at 17-18. The Court noted, “[Habib’s] testimony amounts to an unsupported assertion from an interested party. His testimony cannot provide a sufficient factual basis for Mr. Kennedy to provide a reliable opinion.” Id. at 18. Furthermore, the Court rejected arguments raised in dissent that non-attorney advisors might have had access to the relevant sales data. Id. The record, however, contained no evidence to support such claims, and the district court had explicitly barred EcoFactor’s expert from relying on that type of undocumented advisor input. Id. At trial, an attempt by Mr. Habib to suggest that confidential financial information had been shared with EcoFactor’s counsel was stricken from the record. Id. at 19. Accordingly, the Court concluded that Mr. Habib’s testimony did not provide a sufficient factual basis under Rule 702 to support Mr. Kennedy’s opinion that prior licensees had agreed to pay a $X per-unit royalty. The Court concluded that Mr. Kennedy lacked a sufficient factual foundation for his testimony under Rule 702. The Court emphasized that the core premise of Mr. Kennedy’s opinion—that EcoFactor’s three prior licensees agreed to pay a $X per-unit royalty—was not supported by reliable evidence. Id. at 20. The Court rejected the notion that Mr. Kennedy’s opinion could be salvaged by the presence of competing interpretations or approximations, noting that this was not a case involving reasonable estimation within a hypothetical negotiation. Id. at 21. Rather, it concerned a concrete factual assertion—whether prior licensees agreed to a specific royalty rate—that Mr. Kennedy treated as fact without sufficient support. Id. Because this unsupported premise was central to Mr. Kennedy’s damages calculation, the Court held that his testimony was inadmissible and that the district court abused its discretion by allowing it. Id. at 22. The Court further determined that the admission of this testimony was prejudicial and not harmless, as it likely influenced the jury’s damages award. Id. Ruling The Federal Circuit reversed the district court’s denial of Google’s motion for a new trial on damages, concluding that Mr. Kennedy’s testimony was inadmissible under Rule 702. The Court found that the testimony rested on a factual premise—licensee agreement to a $X royalty rate—that was not supported by sufficient facts or data. The matter was remanded for a new trial on damages. The Court reinstated prior rulings denying Google’s appeal of JMOL on noninfringement and the district court’s denial of summary judgment. Dissent Judge Reyna, joined by Judge Stark, dissented in part from the Court’s en banc decision to reverse the district court’s denial of Google’s motion for a new trial on damages. Id. at 25. The dissent argued that the majority improperly reframed the issue before the Court and erroneously supplanted the fact-finding role of the jury in violation of Rule 702 and Daubert standards. Judge Reyna objected to the majority’s shift in focus from the question on appeal—whether the district court adhered to Federal Rule of Evidence 702 and Daubert—to a contract interpretation analysis. Id. at 26. He emphasized that the majority had ordered briefing solely on the admissibility of the expert’s damages testimony under Rule 702, not on the meaning of the license agreements. Id. at 25-26. By unilaterally converting the case into one about contract law, Reyna argued, the majority deprived EcoFactor of notice and the opportunity to respond appropriately. Id. at 26. Judge Reyna maintained that Mr. Kennedy had a sufficient factual basis for his testimony, which was supported by: (1) three license agreements containing recitals referencing a $X per-unit rate; (2) testimony from Mr. Habib, who stated that the lump sums were calculated using a $X rate and were based on his industry experience and advisor input, and (3) unchallenged market share data used by Mr. Kennedy to cross-check the lump sums against relative sales volumes. Id. at 27-29. According to Reyna, this evidence was enough to meet Rule 702’s “sufficient facts or data” requirement and at least created a legitimate dispute for the jury to weigh. Id. at 30. Judge Reyna stressed that expert testimony under Rule 702 does not require the factual basis to be undisputed or dispositive. Id. He emphasized that conflicting factual views are for the jury to resolve, not for the judge to exclude under Rule 702. Id. Citing Fifth Circuit law, he reiterated that trial courts are afforded broad discretion in evaluating expert admissibility and that appellate courts should not reverse unless the ruling is “manifestly erroneous.” Id. Judge Reyna criticized the majority for shifting the focus of the en banc proceeding from Rule 702 and Daubert to an unbriefed theory of contract interpretation. Id. at 31. Judge Reyna emphasized that the Court had granted en banc review for a limited purpose: to assess whether the district court properly applied Daubert and Rule 702 in admitting EcoFactor’s damages expert testimony regarding a per-unit royalty rate. Id. The majority, however, recharacterized the case as one involving the legal interpretation of license agreements—a shift that, in Reyna’s view, circumvented the proper legal question. Id. at 32. As a result, EcoFactor was not given fair notice or an opportunity to respond. Id. at 31. Judge Reyna also criticized the majority for improperly dismissing or ignoring evidence in the record that independently supported Mr. Kennedy’s opinion, particularly testimony from Mr. Habib and undisputed market share data. Id. at 32. Judge Reyna argued that the majority engaged in improper credibility determinations by rejecting Mr. Habib’s testimony as “unsupported,” despite the fact that it was admitted without objection and based on personal knowledge. Id. It was not the Court’s role, he argued, to determine which version of the facts to believe. Id. at 33. Judge Reyna also faulted the majority for ignoring Mr. Kennedy’s use of undisputed market share data, which could reasonably support the inference that the lump-sum license amounts were consistent with a $X per-unit rate. Id. at 33-34. Judge Reyna further objected to the majority’s decision to exclude all of EcoFactor’s damages expert’s testimony rather than limiting its exclusion to the portion addressing prior licensees’ agreement to the $X royalty rate. Id. at 34. He emphasized that the majority’s critique centered solely on a narrow aspect of Mr. Kennedy’s analysis—specifically, Georgia-Pacific factor one, which considers royalties received under prior licenses for the same patent. Id. Even if the majority were correct that Mr. Kennedy’s interpretation of those licenses was flawed, Reyna argued that his broader testimony addressed many other Georgia-Pacific factors and that the majority failed to explain why Mr. Kennedy’s testimony needed to be excluded in its entirety. Id. Judge Reyna also contended that even if the admission of Mr. Kennedy’s testimony were erroneous, Google makes no meaningful showing as to how Mr. Kennedy’s opinion that $X was a reasonable royalty rate affected its substantial rights. Id. at 35. The record contained duplicative testimony from Mr. Habib about the $X rate and its basis, and all three license agreements were admitted into evidence without redaction. Id. at 35-36. Judge Reyna noted that the jury’s award was lower than what EcoFactor sought, suggesting that the jury discounted Mr. Kennedy’s analysis. Id. at 37. He criticized the majority for conducting no meaningful harmless-error review and for disregarding Fifth Circuit precedent requiring such analysis before vacating a jury verdict. Id. at 38. Judge Stark, joined by Judge Reyna, dissented in part from the Court’s en banc decision to reverse the district court’s denial of Google’s motion for a new trial on damages. Id. at 39. While he agreed with portions of the majority opinion—namely, affirming the district court’s denial of Google’s motions for summary judgment and for judgment as a matter of law, and affirming the en banc Court’s procedural validity—he took issue with the majority’s handling of Rule 702, its interpretation of the evidentiary record, and its chosen remedy. Id. at 40. He also warned that the decision could be read to require trial courts to resolve factual disputes under the guise of determining admissibility, contrary to Rule 702. Id. at 40. Judge Stark agreed in principle that expert opinions cannot be admitted when based on facts that are unquestionably unsupported by the record. Id. at 41. But he disagreed that this case met that standard. Id. In his view, the vast majority of patent cases, where the relevant evidence the experts are considering can support competing conclusions, the Majority Opinion is inapplicable. Id. Judge Stark expressed concern that the majority’s opinion could be misread as encouraging trial courts to resolve factual disputes under the guise of assessing expert admissibility under Rule 702. Id. He emphasized that the majority concluded the district court abused its discretion by allowing Mr. Kennedy to testify to an opinion “that rested on disputed facts,” a position Stark argued undermines the jury’s role. Id. Stark reiterated that when experts rely on “conflicting sets of facts,” it is not for the trial court to resolve those disputes. Id. at 42. He also referenced the 2000 and 2023 Advisory Committee Notes to Rule 702, both of which affirm that the presence of contested facts does not make an expert opinion inadmissible. Id. Judge Stark pointed out that a reasonable jury could have found that the licensees agreed to pay lump-sum settlements calculated using the $X rate, based on language in the license agreements and testimony from Mr. Habib. Id. at 43. He noted, for instance, that the Schneider agreement’s disclaimer—stating Schneider did not agree the $X rate was reasonable—could be interpreted as acknowledging the use of that rate while disputing its fairness. Id. He also noted that Mr. Habib testified, without objection, that he believed the lump sums were derived from applying the $X rate, based in part on advice from non-attorney advisors who had access to confidential sales data. Id. Judge Stark emphasized that the jury could have reasonably credited that interpretation. Id. at 45. Thus, in his view, the existence of competing interpretations meant the issue should have been left to the jury. Id. He concluded that “the parties’ dispute over whether EcoFactor’s licensees actually agreed to an $X rate does not make Mr. Kennedy’s testimony inadmissible,” and the district court did not abdicate its gatekeeping function by allowing it. Id. Finally, Judge Stark addressed the district court’s failure to provide a detailed rationale for admitting Mr. Kennedy’s expert testimony. Id. at 46. While he acknowledged that the trial court’s lack of explanation “makes our reviewing function unnecessarily difficult,” he disagreed with the majority’s conclusion that this constituted an abuse of discretion warranting reversal. Id. at 47. He pointed out that neither the Fifth Circuit nor the Third Circuit cases cited by the majority require an appellate court to reverse a trial court’s decision solely because it lacked explanation. Id. He further observed that in similar situations, other appellate courts have remanded for further explanation or clarification, rather than ordering a new trial. Id. Judge Stark concluded that even if the district court’s limited explanation were deemed an abuse of discretion, the appropriate remedy would have been to vacate and remand for a more complete gatekeeping analysis—not to mandate a new jury trial on damages. Id. at 48. Conclusion and Commentary The Federal Circuit’s en banc decision signals that trial judges must rigorously scrutinize the factual foundations of expert damages testimony before allowing it to reach the jury. The ruling is poised to recalibrate how courts assess expert opinions, particularly when those opinions derive per-unit royalty rates from lump-sum settlements. The opinion reinforces that Rule 702 imposes substantive gatekeeping duties. Trial courts cannot defer admissibility questions to juries under the guise of assessing weight or credibility when the underlying factual basis is lacking. As the Court emphasized, expert testimony untethered from sufficient facts or data is inadmissible—no matter how plausible it may seem in theory. In practice, the decision will likely heighten scrutiny of damages models built on prior licenses—especially lump-sum agreements that lack explicit per-unit royalty terms, encourage accused infringers to mount more robust Daubert challenges to damages experts, and prompt patent owners and their counsel to develop more rigorous evidentiary support through fact discovery and third-party licensing documentation. Though the outcome turned on the specific content of three license agreements and the testimony of a single expert, the broader message is that damages experts must ground their opinions in verifiable data, and district courts must affirmatively enforce that standard at the admissibility stage.

Federal Circuit Issues First Word on AI Patent Eligibility

2025-04-28T23:19:27Z

On April 18, 2025, the United States Court of Appeals for the Federal Circuit affirmed the dismissal of a patent infringement suit brought by Recentive Analytics, Inc. against Fox Corporation. See Recentive Analytics, Inc. v. Fox Corp., No. 23-2437 (Fed. Cir. Apr. 18, 2025). Recentive had sued Fox on four patents comprising two categories: the “Machine Learning Training” patents (U.S. Patent Nos. 11,386,367 and 11,537,960), which described methods for scheduling live events using machine learning; and the “Network Map” patents (U.S. Patent Nos. 10,911,811 and 10,958,957), which addressed the optimization of broadcaster programming schedules across geographic markets. Slip Op. at 3, 5. Fox moved to dismiss for failure to state a claim on the ground that the patents are ineligible under § 101. Id. at 7. The district court granted the motion finding that Recentive’s patents were directed to ineligible subject matter under 35 U.S.C. § 101. Id. at 9. On appeal, the Federal Circuit applied the familiar two-step test for subject matter eligibility under Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014). Id. at 9-10. At step one, the Court asked whether the claims were directed to an abstract idea. Id. At step two, the Court considered whether the claims contained an “inventive concept” sufficient to transform the abstract idea into patent-eligible subject matter. Id. At step one of the Alice inquiry, the Federal Circuit concluded that the focus of Recentive’s claimed invention, as a whole, was directed to an abstract idea. Id. at 10. The Federal Circuit first observed that Recentive had repeatedly conceded that it was not claiming any novel machine learning techniques. Id. at 11. Both the “Machine Learning Training” patents and the “Network Map” patents simply employed generic machine learning technology in the context of generating event schedules and network maps. Id. The Federal Circuit rejected the argument that features like iterative training or real-time dynamic updating rendered the claims non-abstract. It noted that such features are inherent to the very nature of machine learning itself, and thus did not reflect an improvement to the underlying technology. Id. at 12. Recentive’s own briefing and hearing statements acknowledged that iterative training and updating are conventional aspects of machine learning processes. Id. Moreover, the Federal Circuit scrutinized whether the claims disclosed how the purported results were achieved. It found that the claims merely stated functional objectives—optimizing schedules or network maps—without describing how an improvement was accomplished. Id. at 13. The Federal Circuit distinguished Recentive’s patents from claims found eligible in Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), and Koninklijke KPN N.V. v. Gemalto M2M GmbH, 942 F.3d 1143 (Fed. Cir. 2019). Unlike those cases, which involved a specific implementation of a solution to a problem in the software arts or a specific means or method that solves a problem in an existing technological process, Recentive’s patents merely applied generic machine learning to a new environment—namely, scheduling and network mapping. Id. at 13. The panel further noted that merely applying an abstract idea to a new technological environment or field of use does not transform it into patent-eligible subject matter. Id. at 14. The Court found that scheduling events and generating network maps were long-practiced human activities and that the introduction of machine learning did not alter the basic abstract character of the claims. Id. Additionally, the Court rejected the proposition that improving the speed and efficiency of these manual tasks through the use of conventional machine learning techniques sufficed to render the claims patent-eligible. As the Court explained, generic improvements in speed and efficiency arising from automation are insufficient to confer eligibility under § 101. Id. at 15–16. At step two, the Court found that the patents lacked an inventive concept that would render the abstract ideas patent eligible. The only asserted inventive concept was using machine learning to dynamically generate optimized maps and schedules based on real-time data and update them based on changing conditions. Id. at 16. But this inventive concept amounted to nothing more than claiming the abstract idea itself. Id. The Court found nothing in the claims, whether considered individually or in their ordered combination, that would transform the Machine Learning Training and Network Map patents into something “significantly more” than the abstract idea of generating event schedules and network maps through the application of machine learning. Id. at 17. In short, the Federal Circuit affirmed the district court’s dismissal under Rule 12(b)(6), holding that all four asserted patents were invalid under § 101. The Court found the claims to be directed to abstract ideas without the requisite inventive concept and further held that amending the complaint would have been futile. The Recentive decision represents the Federal Circuit’s first-ever patent eligibility decision involving machine learning. The Federal Circuit confirmed that merely using artificial intelligence (AI) or machine learning to make a task faster or more efficient does not make an invention patent eligible under 35 U.S.C. § 101. The Court emphasized that applying conventional machine learning methods to new data environments without technological innovation constitutes an abstract idea, not a patent-eligible invention. This ruling has particular significance for the burgeoning field of AI. Patent applicants seeking protection for machine learning-based innovations must ensure their claims do more than merely apply conventional algorithms to new datasets. The Federal Circuit’s opinion reiterated that patent eligibility hinges not on the newness of the field of use, but on the technological substance of the claimed advance. Although the Federal Circuit suggested that true technological improvements in AI might qualify for patent protection, it did not provide concrete guidance on what such improvements would look like. As courts begin to grapple with the evolving interface between AI and intellectual property, Recentive serves as a cautionary touchstone that the same fundamental eligibility principles will apply for those seeking to protect AI-based inventions.

PTAB Recalibrates Review: New Discretionary Denial Framework and Pre-Institution Reform

2025-03-31T19:05:24Z

In less than a month, the United States Patent and Trademark Office (“USPTO”) has dramatically reformed its policies and procedures for exercising its discretion to deny institution of AIA post-grant proceedings. Rescission of June 2022 Memorandum on Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation First, on February 28, 2025, the USPTO rescinded its June 2022 memorandum outlining the interim procedure regarding when the Patent Trial and Appeal (“PTAB”) may deny review of patents based on parallel litigation. In a brief email notice, the USPTO advised that parties should instead rely on earlier PTAB precedential decisions for guidance, including the 2020 ruling in Apple Inc. v. Fintiv Inc. that established that the PTAB can choose not to review a patent when related infringement litigation is set to end before the PTAB's decision is due. The notice further advised that any PTAB or Director Review decisions that rely on the June 2022 memorandum are no longer binding or persuasive on the PTAB. Guidance on Rescission of June 2022 Memorandum Second, on March 24, 2025, Chief Administrative Patent Judge Scott Boalick issued a memorandum providing guidance regarding the rescission of the June 2022 memorandum. See https://www.uspto.gov/sites/default/files/documents/guidance_memo_on_interim_procedure_recission_20250324.pdf. According to the Boalick Memo, the rescission restores the PTAB’s reliance on its precedential decisions in Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (P.T.A.B. Mar. 20, 2020), and Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (P.T.A.B. Dec. 1, 2020). Id. at 1. As a result, the PTAB will once again apply the Fintiv framework in cases involving parallel proceedings—an approach that had been curtailed under the June 2022 memorandum. The guidance reaffirms that:

The PTAB may deny institution when an International Trade Commission (“ITC”) final determination is projected to issue before the PTAB’s statutory deadline for a final written decision, due to the risk of duplicative proceedings and increased litigation expense.
A Sotera stipulation—where a petitioner agrees not to pursue in district court or at the ITC any grounds raised or reasonably raisable in an inter partes review (“IPR”) or post-grant review (“PGR”) proceedings—remains “highly relevant,” but is no longer dispositive.
Trial scheduling evidence, including district court median time-to-trial statistics, may be submitted and considered as part of the PTAB’s proximity analysis under Fintiv.
Compelling merits will be factored into the overall discretionary analysis, but, standing alone, will not override other Fintiv

Id. at 2-3. The guidance applies to any case where the PTAB has not yet issued a decision on institution or where a request for rehearing or Director Review remains pending. Past institution decisions will not be reconsidered absent “extraordinary circumstances.” Id. at 2. Interim Processes for PTAB Workload Management Finally, on March 26, 2025, Acting Director of the U.S. Patent and Trademark Office (USPTO), Coke Morgan Stewart, issued a memorandum introducing a bifurcated approach to institution decisions in IPR and PGR proceedings. See https://www.uspto.gov/sites/default/files/documents/InterimProcesses-PTABWorkloadMgmt-20250326.pdf. Under the new procedure, discretionary denial considerations under 35 U.S.C. §§ 314(a) and 324(a) will be reviewed separately from the substantive merits of a petition. The Acting Director, in consultation with at least three PTAB judges, will make an initial threshold determination as to whether institution should be denied for discretionary reasons. Id. at 1. If such denial is deemed appropriate, the petition will be rejected at that stage. Id. If not, the petition proceeds to a merits panel, which will assess the petition under traditional statutory requirements. Id. This interim reform—triggered in part by increasing workload constraints at the PTAB—marks a sharp departure from prior practice, where a single PTAB panel assessed both discretionary and merits considerations concurrently. The policy applies to proceedings where the patent owner’s deadline to file a preliminary response has not yet passed. For those cases, the USPTO will now entertain a separate round of briefing focused exclusively on discretionary denial. The bifurcated process introduced by the USPTO includes a newly established timeline for briefing discretionary denial issues, separate from the existing merits briefing schedule governed by 37 C.F.R. § 42.107(b). The deadlines are as follows:

Patent Owner’s Discretionary Denial Brief: Within two months of the PTAB’s entry of a Notice of Filing Date Accorded, the patent owner may submit a brief outlining the bases for discretionary denial of institution.
Petitioner’s Opposition Brief: The petitioner may file a responsive opposition no later than one month after the patent owner’s brief is filed.

Id. at 2. Both briefs are subject to a 14,000-word limit, consistent with the constraints in 37 C.F.R. § 42.24. Id. A reply brief, if permitted, must not exceed 5,600 words and will only be allowed upon a showing of good cause. Id. The schedule for the patent owner’s preliminary response (“POPR”) addressing the merits of the petition remains unchanged. Id. As before, a POPR must be filed within three months of the notice of the petition’s filing date, and parties may separately request rehearing or Director Review following institution decisions. For proceedings where the deadline for filing a POPR has not yet passed but the time to file a discretionary denial brief under the new procedure has already elapsed, the memorandum permits the patent owner to submit the discretionary denial brief within one month of the memorandum’s issuance date (i.e., by April 26, 2025). Id. at 3. Under the new procedure, parties may present arguments on a broad range of factors relevant to discretionary denial, including, but not limited to:

Parallel Proceedings: Whether the PTAB or another tribunal, such as a district court or the ITC, has already adjudicated—or is likely to adjudicate—the validity or patentability of the challenged claims.
Strength of the Petition: The perceived substantive strength of the unpatentability grounds may be a relevant factor, particularly in cases where the record appears to lack compelling merits.
Reliance on Expert Testimony: The extent to which the petition depends on expert declarations may now serve as an independent basis for discretionary denial, raising new strategic considerations in how petitioners frame their initial filings.
Settled Expectations: The age of the patent and the duration for which the claims have been in force may weigh against institution, particularly where long-standing rights or reliance interests are implicated.
Public Interest Factors: Parties may now argue that compelling economic, public health, or national security considerations either support or weigh against institution.
Administrative Efficiency: The Director will also consider the PTAB’s ability to meet statutory deadlines and manage its existing workload, as authorized by 35 U.S.C. § 316(b).

Id. at 2-3. This expansive list introduces new framing opportunities for both petitioners and patent owners, while also increasing the complexity of the pre-institution phase. Notably, the absence of safe harbors previously available under prior guidance—such as stipulations to avoid Fintiv—suggests that each petition will now be subject to a case-specific, holistic evaluation of discretionary factors. Takeaways The rescission of the June 2022 memorandum and the interim bifurcation of discretionary and merits review in AIA trial proceedings marks a procedural inflection point for PTAB litigation. By rescinding the June 2022 memorandum and reverting to the Fintiv and Sotera standards, the PTAB has signaled a return to case-specific, multifactor balancing without categorical exclusions. This shift revives several contested grounds for discretionary denial and may increase the procedural uncertainty facing petitioners with concurrent district court or ITC proceedings. By centralizing discretionary denial determinations in the hands of the Acting Director—alongside a select panel of judges—and allowing separate briefing, the agency has reoriented the early-phase dynamics of inter partes and post-grant reviews. Practically, the procedural shift erects an additional institutional gate that petitioners must pass through before their challenges are even evaluated on the merits. The expansion of discretionary denial factors—ranging from reliance on expert testimony to the settled expectations of the parties—signals a more expansive and possibly less predictable review framework. Although the Acting Director characterizes these changes as temporary, their implementation coincides with judicial staffing reductions and suggest a structural recalibration in how the USPTO prioritizes administrative efficiency over expansive review. Patent owners may view these developments as a favorable recalibration, offering a renewed opportunity to foreclose institution at an earlier stage and on broader grounds. For petitioners, however, the procedural landscape has become more uncertain and potentially more resource-intensive. Instead of relying primarily on the strength of the petition’s merits, petitioners must now develop full-fledged arguments on why discretionary denial should not apply, without knowing whether the PTAB will ever reach the merits. And they must do so with limited insight into how newly introduced factors will be applied in practice. In the near term, parties should anticipate a period of doctrinal development as the PTAB begins issuing discretionary denial decisions under the new framework. But ultimately, one would expect the USPTO’s new policies to lead to more discretionary denials given the greater scrutiny these issues will receive before any consideration of the merits of a petition and the PTAB’s interest in managing its workload.