Federal Circuit Finds Patent Exhaustion From Sale of Keurig Coffee Machines

In Tempo Lighting, Inc. v. Tivoli, LLC, the Federal Circuit vacated the decision of the U.S. Patent Office Patent Trial and Appeal Board that had reversed the Examiner’s rejection of most of the claims of the patent at issue. While the decision touches on a few important legal issues, this ten year reexamination proceeding illustrates the need to impose a statutory deadline for completing post grant proceedings in order to make them a more viable alternative to district court litigation.

The Patent at Issue

The patent at issue was Tivoli’s U.S. 6,554,446, filed January 3, 2000 and granted April 29, 2003.

As summarized in the Federal Circuit decision, Tivoli sued Tempo for patent infringement in February of 2004, Tempo requested inter partes reexamination of the ’446 patent, and the district court stayed the infringement suit pending the outcome of the reexamination proceeding.

The Reexamination Proceeding

The Examiner rejected claims 1-3 and 6-13 as obvious. Tivoli’s arguments at the Board focused on the Examiner’s interpretation of claim language reciting a  material that is “inert to light.” Although this term was explained during the original prosecution to mean that the material “is non-photoluminescent and not activated to glow by absorbing ambient light,” the reexamination Examiner interpreted it to mean that the material “does not react, e.g., by degrading, when exposed to light.”

The Board agreed with Tivoli that the Examiner’s claim construction was erroneous, but still relied on the Examiner’s findings that the primary references did not teach this claim limitation. The Federal Circuit determined that this made the “Board’s reasoning … deficient,” and suggested that on remand the “PTO .. make new factual findings under the proper claim construction.”

Permissive Cross-Appeal 

The Board had refused to consider Tempo’s alternative arguments for invalidity, finding that its failure to cross-appeal constituted a waiver of those arguments. The Federal Circuit determined that “the Board’s refusal rest[ed] on a clearly erroneous interpretation” of the applicable regulation, 37 CFR §41.61(b).

That rule provides in relevant part:

[A] requester who has not filed a notice of appeal may file a notice of cross appeal with respect to any final decision favorable to the patentability, including any final determination not to make a proposed rejection, of any original, proposed amended, or new claim of the patent.

The Federal Circuit noted that a “threshold condition” for a requester cross-appeal under this rule is a “final decision favorable to … patentability,” which did not occur here, since the Examiner had rejected the challenged claims. The court also noted that the rule is permissive, and does not require requesters to file cross-appeals. To the contrary, the Federal Circuit noted that “where claims have already been adjudicated invalid, a cross-appeal regarding additional invalidity arguments is generally improper,” although Tempo still could “defend the [E]xaminer’s final decision on any ground supported by the record.” Thus, the court held that “the Board erred by not considering Tempo’s additional arguments.”

The Reexamination Timeline 

The Federal Circuit summarizes the reexamination timeline as follows:

• March 2005: Examiner issues first Office Action
• May 2005: Tivoli files response
• June 2005: Tempo files comments
• November 2007: Examiner issues order directing Tempo to revise its proposed rejections
• December 2007: Tempo files response with proposed rejections
• May 2008: Examiner issues Office Action adopting some of proposed rejections
• May 2009: Examiner issues Action Closing Prosecution
• June 2010: Examiner issues Right of Appeal Notice
• October 2010: Tivoli and Tempo complete briefing at the Board
• February 2012: Board issues decision
• March 2012: Tempo files Request for Rehearing
• September 2012: Board denies rehearing

And now it is February 2014, and the Federal Circuit has remanded the case back to the Patent Office to start over again!

Faster Resolution By Inter Partes Review 

As of September 16, 2012, inter partes reexamination was replaced by inter partes review. Parties appalled by the 10-year pendency of the inter partes reexamination in this case will understand why it was important to impose a statutory deadline for completing new post-grant proceedings in order to make them a more viable alternative to district court litigation.