Federal Circuit Rules Unreasonable Patent Delay Isn’t Fair Play

The Federal Circuit has affirmed a district court’s ruling that a patent owner had engaged in a calculated scheme to delay patent issuance to maintain an extraordinarily long period of patent coverage.

The case is Personalized Media Comms., LLC v. Apple Inc.

In 2015, Personalized Media Communications (PMC) sued Apple alleging that Apple FairPlay infringed a decryption-related claim of PMC’s U.S. Patent No. 8,191,091 (the “091 patent”).

FairPlay is a digital rights management technology that Apple uses on its computers, mobile phones, and other devices. For example, it prevents illegally copying songs on iTunes. FairPlay was launched with the Apple Music store in 2003.

The case went to trial and a jury awarded PMC over $308 million in reasonable-royalty damages.

However, the district court held a bench trial on remaining issues and found the ’091 patent unenforceable based on prosecution laches.

The district court found that PMC “engaged in an unreasonable and unexplained delay amounting to an egregious abuse of the statutory patent system.”

The district court cited the 2021 Federal Circuit decision in Hyatt v. Hirshfeld, in which the patentee filed 381 GATT-Bubble applications. PMC had filed 328 GATT-Bubble applications.

As the Federal Circuit explained,

During negotiations of the Agreement on Trade-Related Aspects of Intellectual Property (“TRIPS Agreement”) at the Uruguay Round of the General Agreement on Tariff and Trade (“GATT”), the U.S. agreed to change the term of U.S. patents from 17 years following the date of issuance to 20 years following the patent’s priority date. … In the months leading up to the law change, the U.S. Patent and Trademark Office (“PTO”) saw an enormous influx of so-called “GATT Bubble” applications as applicants sought to take advantage of the existing law providing a patent term keyed from issuance.

As Reuters noted, PMC’s ‘091 patent is what’s sometimes called a “submarine” patent:

The submarine strategy, involving protracted delays for maximal payoff, was mostly used before 1995, the year when the law changed to base the length of patent protection on when an application was filed instead of when the patent was issued. At that time, the PTO also didn't publish pending patent applications, and applicants could delay a patent from being issued until a market developed relating to the invention — when the "submarine" would emerge.

Surviving submarine patents are rare and will become even rarer the farther we get from 1995.

Even before the GATT Bubble, said the district court,

PMC had an express prosecution policy of pursuing one application at a time and filing a continuation as the prior application reached issuance—with the sole purpose to delay issuance of PMC’s patents in order to extend PMC’s patents’ terms.

Also, noted the Federal Circuit,

Similar to Hyatt, “PMC’s applications . . . were ‘atypically long and complex,’ containing over 500 pages of text and over 22 pages of figures... And PMC filed each of its applications with a single claim, then subsequently amended the claims, sometimes to recite identical language across different applications. …The court further explained that, like in Hyatt, “[o]ver time, PMC [] greatly increase[d] the total number of claims” in the range of 6,000 to 20,000 claims.

In addition, found the district court, “PMC waited eight to fourteen years to file its patent applications and at least sixteen years to present the asserted claims for examination.”

The result was that “PMC’s prosecution conduct made it virtually impossible for the PTO to conduct double patenting, priority, or written description analyses.”

PMC allegedly further tried to muddy the waters with “vast prior art disclosure, which included references having little-to-no relevance….”

The district court concluded that “the only rational explanation for PMC’s approach to prosecution is a deliberate strategy of delay” and that “PMC’s actions were a conscious and egregious misuse of the statutory patent system.”

Simply complying with the statutory requirements and US Patent and Trademark Office (USPTO) regulations wasn’t enough, said the court. An applicant, it said, must also prosecute its applications in an equitable way.

Prosecution laches is an equitable affirmative defense to a claim of patent infringement that may render a patent unenforceable where a patentee’s conduct “constitutes an egregious misuse of the statutory patent system.”

Prosecution laches requires proving two elements:

(1) the patentee’s delay in prosecution must be unreasonable and inexcusable under the totality of circumstances and

(2) the accused infringer must have suffered prejudice attributable to the delay.

The district court majority found that Apple was prejudiced by PMC’s delay. Apple had already begun developing FairPlay by 2003, the year that PMC first added the technology at issue to the ’091 patent’s predecessor. The ‘091 patent was only issued in 2012 – seven years after FairPlay existed in the form accused of infringing the PMC patent.

The district court faulted PMC for waiting until 2003—sixteen years after the priority date of the ’091 patent and nearly eight years after PMC filed its 328 GATT-bubble applications— to include the encryption and decryption limitations to the patent claims.

The Federal Circuit agreed, finding that

the record shows that PMC institutionalized its abuse of the patent system by expressly adopting and implementing dilatory prosecution strategies, specifically to ambush companies like Apple many years after PMC filed its applications.

An accused patent infringer can establish the prejudice element of laches by proving that it “invested in, worked on, or used the claimed technology during the period of delay.”

The district court found that in 2011, while PMC was in pre-suit license negotiations with Apple, PMC reintroduced a previously-rejected claim in another patent application. PMC didn’t mention that other application or claim to Apple during negotiations. PMC was able to get the claim quickly granted, assert that claim against Apple, and obtain a damages award.

PMC, said the court, was acting like a patent holder a hundred years earlier in the case of Victor Talking Mach. Co. v. Thomas A. Edison, Inc.:

implementing its express strategy of delay to “reserve [its] patent till the trade independently develops, and then [] pounce upon it for a full term.”

The court said this strategy was part of “PMC’s original plans: to prosecute its patents serially over time and keep them hidden until infringement was engrained and widespread.”

Judge Stark dissented from the majority decision because he concluded that Apple wasn’t prejudiced during the time PMC unreasonably delayed issuance of its patent. He said that all of PMC’s unreasonable actions happened before 2000 and thus before Apple started to develop FairPlay.