Inline Plastics Corp. (“Inline”) filed a lawsuit against Lacerta Group, LLC (“Lacerta”), alleging infringement of several patents related to tamper-resistant containers and methods of making such containers using thermoformed plastic. The district court granted Inline summary judgment of infringement on a subset of claims, but the jury found that the remaining asserted claims were not infringed and that all the asserted claims (including those already held infringed) were invalid. The parties then filed posttrial motions, including Inline’s motion for judgment as a matter of law and Lacerta’s motion for attorneys’ fees under 35 U.S.C. § 285, both of which were denied. Inline appealed on the grounds that it was entitled to judgment as a matter of law of no invalidity and that an error in the jury instructions with respect to the law of obviousness requires a new trial. Lacerta cross-appealed, challenging the district court’s denial of attorneys’ fees and the without prejudice dismissal of certain patent claims Inline voluntarily withdrew during trial.

Issues

1. Whether Inline is entitled to judgment as a matter of law of no invalidity?
2. Whether the district court’s jury instruction on the objective indicia of nonobviousness was legally erroneous and requires a new trial on invalidity?
3. Whether Inline is entitled to a new trial on infringement based on allegedly erroneous claim constructions and allegedly improperly admitted evidence?
4. Whether the district court erred by (1) denying Lacerta attorneys’ fees and (2) by dismissing Inline’s withdrawn patent claims without prejudice (as opposed to with prejudice)?

Holding

1. No, Inline is not entitled to judgment as a matter of law of no invalidity.
2. Yes, the district court’s jury instructions were legally erroneous and sufficiently prejudicial to warrant a new trial on invalidity.
3. No, the district court’s claim construction was proper, and evidence was properly admitted.
4. The district court’s denial of attorneys’ fees and dismissal without prejudice was vacated and remanded.

Reasoning

1. On appeal, Inline made three arguments supporting the assertion that it was entitled to judgment as a matter of law of no invalidity. First, Inline argued that Lacerta’s prior art and expert testimony on obviousness were deficient because four of the six prior art references were before the Patent and Trademark Office (“PTO”) during prosecution and the other two were cumulative or taught away from the proposed combinations. The Federal Circuit rejected these arguments, citing a lack of authority “preclud[ing[ a successful obviousness challenge that rests on PTO-considered references[]” and only conclusory assertions supporting Inline’s arguments on the two remaining prior art references. Inline’s second argument, “that Lacerta did not present legally sufficient evidence of the motivation to combine references[]” was similarly struck down by the Federal Circuit, which credited expert and witness testimony supporting a motivation to combine based on the “nature of the problem to be solved[.]” Finally, Inline argued that the Lacerta’s failure to present expert testimony on Inline’s objective-indicia evidence justifies a finding of no invalidity. However, as explained by the Federal Circuit, “we have never held that the challenger must present its own testimony on objective indicia or else the patentee’s evidence must be credited, much less be credited as dispositive of the obviousness issue.” In other words, the jury was free to attribute little or no weight at all to Inline’s expert testimony on objective indicia even in the absence of expert testimony from the opposing side. Accordingly, the Federal Circuit held that none of Inline’s arguments on appeal supported a reversal of the district court’s denial of judgment as a matter of law.
2. While Inline made several arguments for a new trial on validity, the Federal Circuit only considered one, whether the district court erred in excluding mention in the final jury instructions of certain objective indicia of nonobviousness for which there was evidence. Specifically, Inline presented evidence on industry praise, copying, and licensing, but the jury instructions on objective indicia of nonobviousness did not include any mention of industry praise, copying, or licensing. The Federal Circuit’s ultimate decision to order a new trial on the issue of validity came down to whether such an error was harmless. Finding for Inline, the Federal Circuit reasoned that the error was prejudicial because “[a] reasonable jury could determine that evidence [of industry praise, copying and licensing] moves the needle materially towards nonobviousness[.]” As such, the Federal Circuit vacated the district court’s judgment and remanded for a new trial on the issue of invalidity. 
3. The Federal Circuit also addressed Inline’s arguments that a new trial on infringement was warranted based on improper claim constructions and improperly admitted evidence. Taking up the claim construction argument first, the Federal Circuit rejected Inline’s “extreme view” that the claim construction “permitted the jury to conclude ‘100% inaccessible’ was actually required” even though the claim language does not contain such a requirement. The Federal Circuit explained that the district court’s claim construction was supported by the specification and did not “impose unclaimed structural or functional requirements,” and further, that the district court’s jury instructions emphasized that its claim constructions did not mean that access is impossible. After affirming the district court’s claim construction, the Federal Circuit turned to Inline’s second argument, “that the district court allowed Lacerta to introduce evidence of a Lacerta patent for its relevance to the issues of willfulness and damages and that such evidence had an adverse effect on the jury’s infringement finding.” Noting the lack of “authority establishing that Lacerta’s patent was inadmissible as irrelevant,” in addition to the district court’s limiting instruction “clarifying that the jury should consider Lacerta’s patent only on the issues of willfulness and damages but not on the issue of infringement[,]” the Federal Circuit did not see any reversible error and denied Inline’s request for a new trial on infringement.
4. Lacerta made two arguments on cross-appeal: “that the district court erred by dismissing Inline’s late-withdrawn patent claims without prejudice (instead of with prejudice) and by denying its motion for attorney fees[.]” With respect to the late-withdrawn claims, the Federal Circuit recommended that the district court reevaluate whether the dismissal should be with or without prejudice, particularly in light of the fact that Lacerta “never consented to withdrawal without prejudice,” but ultimately vacated the dismissal and remanded given the “risk that a final judgment on these claims now would adversely affect the further adjudication of the many claims that have to be retried in part.” With respect to the denial of attorneys’ fees, although the Federal Circuit could not identify any reversible error, their ruling ordering a new invalidity trial meant that a threshold requirement (namely, the prevailing party requirement) was no longer met. Thus, the Federal Circuit vacated the attorneys’ fees dismissal, but “permitt[ed] a redetermination of that matter to be made once the remand litigation reaches an appropriately final stage.”

Conclusion

The Federal Circuit affirmed in part, vacated in part, and remanded the case for a new trial on invalidity and damages, and for reconsideration of the dismissal of Inline’s late-withdrawn claims and the denial of attorney fees.

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