Damages for Some Foreign Uses are Available, Provided you Prove Your Case

In BrumField v. IBG LLC, [2022-1630] (Fed. Cir. 2024), the Federal Circuit affirmed the district court judgment that U.S. Patent Nos. 6,766,304 and 6,772,132 were valid and infringed, and U.S. Patent Nos. 7,676,411 and 7,813,996 were invalid under 35 U.S.C. § 101. The patents describe assertedly improved graphical user interfaces for commodity trading and methods for placing trade orders using those interfaces.

The Federal Circuit agreed that the asserted claims of the ’411 and ’996 patents claim ineligible subject matter. The Court said that are directed to abstract ideas, and they add nothing (no inventive concept) that transforms them into claims to eligible subject matter. The asserted claims are directed to abstract ideas, and they add nothing (no inventive concept) that transforms them into claims to eligible subject matters.

The claims focus on the receipt and display of certain market information (bids and offers) in a manner that newly helps users see the information for use in making trades. But the combination of receipt and display of information, even of a particular type, and use of the information to engage in the funda-mental economic practice of placing an order, are abstract ideas.Further, nothing in the claims, understood in light of the speci-fication, calls for anything but preexisting computers and displays, programmed using techniques known to skilled artisans, to present the new arrangement of information.

With respect to the damage award, TT argued that the district court should have applied the extraterritoriality analysis articulated by the Supreme Court in WesternGeco, rather than more restrictive principles the district court drew from Power Integrations. The district court was reluctant to conclude, on its own, that WesternGeco displaces Power Integrations as the required framework of analysis for this case, involving 35 U.S.C. § 271(a) and a reasonable royalty. the Federal Circuit agreed with TT, but concluded that, even under the WesternGeco framework, the evidence offered by TT’s expert was properly excluded.

Damage Award Must Reflect Apportionment of Incremental Value of Invention

In Omega Patents, LLC. v. CalAmp Corp., [2020-1793, 2020-1794] (September 14, 2021), the Federal Circuit affirmed the judgment of infringement of the asserted claims of U.S. Patent No. 8,032,278, but vacated and remanded for a new trial on damages. The Federal Circuit also vacated the jury’s finding of direct infringement of U.S. Patent No. 6,756,885.  The patents relate generally to multi-vehicle-compatible systems that can remotely control various vehicle functions (for example, remote vehicle starting), and read the status of various vehicle devices (for example, battery health).

CalAmp appealed (1) the district court’s denial of JMOL that CalAmp’s customers did not directly infringe the ’885 patent (and in the alternative, CalAmp requests that we vacate the direct-infringement finding); (2) the district court’s denial of JMOL and a new trial on CalAmp’s infringement of the ’278 patent; and (3) the district court’s denial of remittitur and a new trial as to damages for the ’278 patent. Omega cross-appealed the district court’s de-termination of the ongoing royalty rate for infringement of the ’278 patent.

The Federal Circuit vacated the finding of direct infringement by CalAmp’s customers of the ‘885 patent because Omega’s decision not to appeal the final judgment of non-induced infringement frustrated the CalAmp’s right to appeal, and pointing out that the question of whether CalAmp’s customers directly infringed the asserted claims of the ’885 patent is moot.

The Federal Circuit also found that the district court properly denied JMOL and an new trial on the issue of infringement of the ‘278 patent.  CalAmp argued that that the district court improperly permitted Omega’s technical expert, Joseph McAlexander, to testify beyond the scope of his expert report.  The Federal Circuit found that the report “provided enough notice to CalAmp to adequate prepare its case, and noted that CalAmp deposed the expert in line with is ultimate trial testimony.

CalAmp also argued that Omega presented an improper “device code” theory to the jury upon which the jury relied and that Omega failed to present evidence that two claim limitations were met.  The Federal Circuit disagreed, and pointed out that there was adequate evidence of direct infringement.  The Federal Circuit further found that Omega failed to object to the allegedly improper evidence of infringement, waiving any objection thereto.  Finally, given the instructions that were given to the jury, the Federal Circuit said it must assume that the jury verdict rested on a proper theory.

On the issue of damages, CalAmp argued that the district court erroneously precluded its damages expert from testifying in rebuttal, and that Omega’s damages theory was legally flawed.  The Federal Circuit agreed that it was error to preclude CalAmp’s expert from testifying on rebuttal, simply because his direct testimony was excluded, and this exclusion was not appealed.  The Federal Circuit found that law of the case did not apply to preclude other testimony from the excluded expert.

The Federal Circuit concluded that ultimately, a new trial on damages was warranted. The jury awarded a $5.00-per-unit royalty for CalAmp’s infringement of the ’278 patent, and CalAmp argued that the $5.00 royalty figure  does not reflect apportionment and that Omega failed to show the incremental value of the ’278 patent (or that the patented improvement drove demand for the entire accused product), rendering the jury’s damages award unsustainable.  The patentee must in every case give evidence tending to separate or apportion the patentee’s damages between the patented feature and the unpatented features.  No matter what the form of the royalty, a patentee must take care to seek only those damages attributable to the infringing features.  Where multi-component products are involved, 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.

Omega argued that because its claims included all the elements of the accused device, no apportionment was needed.  Citing Exmark v. Briggs & Stratton, the Federal said that even when the claims are directed to a product as a whole, the patent owner was still required to “apportion or separate the damages between the patented improvement and the conventional components of the multicomponent product” to ensure that the patent owner was compensated for the patented improvement.

Turning to the merits of apportionment, the Federal Circuit concluded that Omega did not present sufficient evidence to the jury to sustain its damages award for infringement of the asserted claims of the ’278 patent. First, it said that Omega failed to show that its patented improvement drove demand for the entire product. Second, in the alternative, it said that Omega failed to show the incremental value that its patented improvement added to the product as apportioned from the value of any conventional features. Lastly, the Federal Circuit rejected Omega’s comparable-licenses theory, finding that flat fee licensing did not address “built-in apportionment” between the patented improvements and the conventional features of the accused products.  The Federal Circuit likewise concluded that Omega failed to show built-in apportionment based on specific the license agreements presented to the jury.   

It is Irrelevant Whether Infringer Knew About the Patent; The Focus is Whether Patentee Gave Notice

In Lubby Holdings LLC v. Chung, [2019-2286] (September 1, 2021), the Federal Circuit affirmed in part, reversed in part, the district court, and remanded for a new trial to determine the number of infringing products sold after the commencement of this action and for the determination of a reasonable royalty rate for the sale of these units.

Chung was found liable for infringing U.S. Patent No. 9,750,284 and the district court awarded damages of $863,936.10.  Chung argued that the district court erred in awarding damages for the sales of infringing products prior to the commencement of this action, which is the date Chung received actual notice of the ’284 patent under 35 U.S.C. § 287.

During trial, Chung moved for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) as to damages, arguing that Lubby did not meet its burden to prove that it complied with 35 U.S.C. § 287’s marking requirement. The jury ultimately returned a verdict finding Chung liable for direct infringement of the ’284 patent and awarding in reasonable royalty damages. After trial, Chung renewed his motion for judgment as a matter of law under Rule 50(b), which was denied because “there was sufficient evidence to support the jury’s verdict at the close of trial.”

On appeal the Federal Circuit noted that Chung did not properly raise the issue of his direct infringement liability in his Rule 50(a) motion and raised it only in his Rule 59(a) motion, so its review was under the substantially constrained abuse-of-discretion standard of review applicable to Rule 59(a) motions.  Because there was evidence to support the finding that Chung made, offered to sell, and sold the accused devices, the finding of infringement had to be affirmed.  Chung argued that he could not be liable for infringement based on acts that he took on behalf of his company, unless it was appropriate to pierce the corporate veil.  The Federal Circuit said that this was not the standard: “Corporate officers can be personally liable for their own acts of infringement, even if those acts were committed in their corporate capacity.”  The Federal Circuit explained that a corporate officer cannot be found derivatively liable for the corporation’s infringement without piercing the corporate veil. However, a person is personally liable for his own tortious actions, even if committed as a corporate officer.

On the issue of “notice,” the Federal Circuit said that the patentee bears the burden of pleading and proving he complied with § 287(a)’s marking requirement. The burden of proving compliance with marking is and at all times remains on the patentee, but an alleged infringer who challenges the patentee’s compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to § 287.   The alleged infringer’s burden is a burden of production, not one of persuasion or proof, and once the alleged infringer meets its burden of production, the patentee bears the burden to prove the products identified do not practice the patented invention.  The Federal Circuit found that Chung cleared this low bar, and plaintiff bore the burden of provide the products Chung identified did not practice the patented invention.  Because plaintiff failed to establish that it marked the products as required by § 287, it can recover damages only for the period that it provided actual notice to Mr. Chung, i.e. the date it filed suit.  The Federal Circuit rejected the argument that Chung had actual notice of the issuance of the patent, stating that “notice that the ’284 patent issued does not equate to actual notice under § 287.  The actual notice requirement of § 287(a) is satisfied when the recipient is informed of the identity of the patent and the activity that is believed to be an infringement, accompanied by a proposal to abate the infringement, whether by license or otherwise.  It is irrelevant under § 287 whether the defendant knew of the patent or knew of his own infringement. The correct approach to determining notice under § 287 must focus on the action of the patentee, not the knowledge or understanding of the infringer.”

Damage Expert Testimony Limited by Unreliability, Failure of Disclosure, and Failure to Apportion

In MLC Intellectual Property, LLC v. Micron Technology, Inc., [2020-1413] (August 26, 2021), the Federal Circuit affirmed the district court’s orders precluding MLC’s damages expert from characterizing certain license agreements as reflecting a 0.25% royalty, opining on a reasonable royalty rate when MLC failed to produce key documents and information directed to its damages theory when requested prior to expert discovery, and opining on the royalty base and royalty rate where the expert failed to apportion for non-patented features.

MLC sued Micron for infringing certain claims of U.S. Patent No. 5,764,571, entitled “Electrically Alterable Non-Volatile Memory with N-bits Per Cell,” which describes methods of programming multi-level cells.

Micron filed a motion in limine to preclude Mr. Milani from mischaracterizing the Hynix and Toshiba agreements as reflecting a 0.25% royalty rate. In addition, Micron moved to strike portions of Mr. Milani’s expert report under Rule 37 of the Federal Rules of Civil Procedure as being based on facts, evidence, and theories that MLC disclosed for the first time in Mr. Milani’s expert report. Micron had asked for MLC’s damages theories—as well as any facts, evidence, and testimony regarding any applicable royalty rate—during fact discovery in its Interrogatory Nos. 6 and 22 and during a Rule 30(b)(6) deposition of a corporate designee. Finally, Micron filed a Daubert motion, seeking to exclude Mr. Milani’s reasonable royalty opinion for failure to apportion out the value of non-patented features. The district court granted all three motions.

As to the first motion, the district court reasoned that Mr. Milani’s “testimony about the Hynix and Toshiba licenses containing a 0.25% royalty rate is not ‘based on sufficient facts or data’ and is not ‘the product of reliable principles and methods.’”  On appeal, the Federal Circuit noted that as a gatekeeper, the district judge was required to “ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.”  The Federal Circuit found no abuse of discretion on the exclusion of evidence, noting that instead of resting on an accepted scientific theory or technique, Mr. Milani’s testimony was is not sufficiently tethered to the evidence presented.

As to the second motion, the court concluded that “MLC never disclosed the factual underpinnings of its claim that the Hynix and Toshiba licenses ‘reflect’ a 0.25% royalty rate, and that pursuant to Rule 37(c)(1), this failure is a separate and independent basis for excluding evidence and argument that those licenses contain such a rate.”  The court said that because the information relied upon was never disclosed by MLC, MLC may not rely on this evidence to assert that the Hynix and Toshiba licenses ‘reflect’ a 0.25% rate.”  On appeal the Federal Circuit noted that under Rule 37(c)(1), when “a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.”  After examining the discovery responses, the Federal Circuit found that the district court did not abuse its discretion in finding that MLC did not properly disclose its claim that the Hynix and Toshiba licenses reflect a 0.25% rate, as well as the extrinsic documents relied on by Mr. Milani to show that the Hynix agreement reflects a 0.25% royalty rate.

As to the third motion, the district court held that Mr. Milani’s failure to apportion for non-patented technologies rendered his analysis unreliable and excludable.  On appeal, the Federal Circuit agreed that Mr. Milani did not properly apportion either the royalty base or the royalty rate to account for the patented technology, noting that it has repeatedly held that when the accused technology does not make up the whole of the accused product, apportionment is required.

Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Licensee’s Failure to Mark Licensed Products Limits Patent Owner’s Recovery

In Arctic Cat inc. v. Bombardier Recreational Products Inc., [2019-1080] (February 19, 2020), the Federal Circuit affirmed the district court’s determination that the patent owner was not able to recover pre-suit damages for infringement of U.S. Patent U.S. Patent Nos. 6,793,545 and 6,568,969 because the licensee did not mark covered products with the patent number.

On a previous appeal, the Federal Circuit held that once an alleged infringer identifies products that it believes are unmarked patented articles subject to the notice requirements of § 287, the patentee bears the burden of proving that the identified products do not practice the claimed invention.

On remand, Arctic Cat conceded that it could not show that the licensee’s products did not practice the asserted claims, but nonetheless moved for summary judgment that it is entitled to presuit damages because the damages limitations §287 only apply while the patentee is active making, using, and selling unmaked products, and not to the period when its licensee has ceased selling the accused products. Arctic Cat also argued that the jury’s finding of willful infringement is sufficient to demonstrate actual notice under § 287.

As to Arctic Cat’s first argument, the Federal Circuit held that the cessation of sales of unmarked products does not excuse noncompliance with the notice requirement of § 287 such that a patentee may recover damages for the period after sales of unmarked products ceased but before the filing of a suit for infringement.

The Federal Circuit noted that in American Medical Systems, 6 F.3d at 1537, it interpreted § 287 to allow a patentee who had sold unmarked products to begin recovering damages after the patentee began marking — so that a patentee who had sold unmarked products would have an incentive to begin marking, contrary to the objective of the statute. The Court said that where a party merely stops selling unmarked products but takes no action to remedy prior noncompliance or to provide notice that the articles were actually patented, it has not complied with the notice requirement of § 287 and cannot recover damages for any period prior to the filing of its complaint.

The Federal Circuit made quick work of Arctic Cat’s second argument — that the finding of willfulness dispensed with the need to show notice — pointing out that in In Amsted Indus. Inc. v. Buckeye Steel Castings Co. it held that the determination whether a patentee provided actual notice under § 287 “must focus on the action of the patentee, not the knowledge or understanding of the infringer,” and that “[i]t is irrelevant . . . whether the defendant knew of the patent or knew of his own infringement.”

The Federal Circuit reiterated that willfulness, as an indication that an infringer knew of a patent and of its infringement, does not serve as actual notice as contemplated by § 287.

Patent marking has, including by licensees, was made considerably easier by the AIA which permits “virtual” patent marking. Rather than let a licensee negotiate out a marking provision, patent owners should require their licessees to include a URL to patent information in order to protect subsequent damage claims against infringers.

When There is a Dispute Regarding the Proper Scope of the Claims, the Court must Resolve that Dispute

In Omega Patents, LLC v. Calamp Corp., [2018-1309] (April 8, 2019), the Federal Circuit affirm the judgment of no invalidity, affirm-in-part, reverse-in-part, vacate-in-part, and remand the judgment as to direct infringement, and vacated the remainder of the judgment and remanded for a new trial on indirect infringement, compensatory damages, willful infringement, enhanced damages, and attorney’s fees, in a case involving U.S. Patent Nos. 6,346,876, 6,756,885, 7,671,727, and 8,032,278 on multi-vehicle compatible systems that can remotely control various vehicle functions such as remote vehicle starting.

After a trial, a jury found all asserted claims to be not invalid and infringed, and the jury also found that CalAmp willfully infringed a valid patent, and awarded Omega $2.98 million in compensatory damages, which the district court trebled for willfulness, awarded attorney’s fees to Omega, added damages for post-verdict sales and pre-judgment interest, for a total of $15 million, with an on-going royalty rate of $12.76 per unit.

Although CalAmp appealed the construction of several claim terms, the Federal Circuit found that these terms had no impact on the prior art actually introduced at trial, and CalAmp had failed to identify to the district court any other prior art that would be impacted by the claim construction ruling. Thus, the Federal Circuit declined CalAmp’s invitation to speculate as to how additional prior art may have been rendered irrelevant under the court’s claim construction. While CalAmp’s challenge to the district court’s claim construction was preserved under Federal Rule of Civil Procedure 51 for purposes of challenging the jury instructions, CalAmp failed to satisfy the requirements of Federal Rule of Civil Procedure 46 by not seeking admission into evidence of, or at least specifically identifying, the additional prior art.

On the issue of direct infringement, several of the claims required “a transmitter and a receiver for receiving signals from said transmitter.” However the Federal Circuit found that the evidence at trial only showed that the “transmitter” transmits signals to a “receiver” on a cell tower, which can then relay that information to CalAmp’s servers, and the “receiver” receives signals from a “transmitter” on the cell tower. The Federal Circuit agreed that CalAmp did not provide all of the elements of the system, as was entitled to JMOL on direct infringement of these claims.

On the issue of induced infringement, the Omega argued that CalAmp’s customers directly infringed when they used CalAmp’s products. The Federal Circuit noted that for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it, and said there was evidence from which the jury could infer that customers controlled and used the system and received the required benefits. Based on the record, the Federal Circuit conclude that this theory does not warrant setting aside the jury verdict.

The induced infringement of some of the claims depending on the construction of “vehicle device,” which the district court refused to construe, defaulting to the ordinary meaning. The Federal Circuit said that when the parties raise an actual dispute regarding the proper scope of the claims, the court, not the jury, must resolve that dispute. The Federal Circuit added that the court is not absolved of this duty to construe the actually disputed terms just because the specification of the patent defines the term. Even if the parties had agreed to the construction, the Federal Circuit said that the district court was still obligated to give that construction to the jury in its instructions. The Federal Circuit said: in the absence of guidance in the form of proper claim construction, the jury lacked a yardstick by which to measure the arguments and evidence on this issue and assess whether Omega’s infringement theory was a valid one. In particular the Federal Circuit could not discern if the jury found infringement of the claims at issue based upon a theory of infringement inconsistent with the proper construction. Therefore, the Federal Circuit set aside aside the jury’s verdict of infringement, and ordered a new trial.

On the issue of induced infringement, CalAmp argued that the jury’s verdict could not be sustained because the verdict form given to the jury (proposed by CalAmp) did not provide written questions on the issue of inducement. CalAmp argued that the absence of such questions on induced infringement precluded the jury from awarding damages on that basis, but the Federal Circuit said that one cannot use the answers to special questions as weapons for destroying the general verdict. The Federal Circuit concluded that induced infringement was properly before the jury, and, thus, CalAmp was not entitled to JMOL of no induced infringement on that basis.

However CalAmp also complained about the district court’s exclusion of testimony as to CalAmp’s state of mind substantially prejudiced CalAmp’s ability to present its defense for indirect infringement. The Federal Circuit found that this exclusion deprived CalAmp of the opportunity to support its defense that there was no inducement because it reasonably believed it did not infringe the patents at the time CalAmp launched the products at issue. The Federal Circuit vacated the jury’s findings as to indirect infringement and remand for a new trial.

On the issue of damages, the Federal Circuit found that although the infringement of the one claim that was sustained, this was not enough to support a damage award based upon all of the products, and thus the Federal Circuit vacated the compensatory damage award.

On the issue of enhanced damages for willful infringement, the jury was asked whether it had found CalAmp willfully “infringed a valid patent,” without specifying which patent or patents or which claim or claims were willfully infringed. Based on the vacation of several findings of infringement the Federal Circuit could not determine which patents or claims, so the finding of willfulness had to be vacated as did the resulting enhanced damages and attorney’s fees award by the district court, both of which were explicitly based on the willful infringement finding.

Many lessons form this case, including insisting on a claim construction of disputed terms, and being extremely careful drafting jury verdict forms.

Reasonable Royalty Cannot Include Non-Infringing Activities

In Enplas Display Device Corporation v. Seoul Semiconductor Company, Ltd., [2016-2599](November 19, 2018), the Federal Circuit affirmed the district court’s judgment that claim 20 of U.S. Patent No. 6,007,209 and the asserted claims of U.S. Patent No. 6,473,554 are not anticipated; affirmed the district court’s denial of JMOL of no inducement; but reversed the denial of JMOL that the damages award was not supported by substantial evidence, and remanded.  The ’209 and ’554 patents are directed to methods of back lighting display panels, particularly LED displays used in televisions, laptop computers, and other electronics.

On the anticipation of the ‘209 patent, Emplas argued that because an inventor of the ‘209 patent testified that the prior art reference did not exclude mounting light sources as required by the claim, there was an issue of fact for the jury.  The Federal Circuit disagreed, saying that this was not enough for anticipation.  Anticipation requires that a single reference disclose each and every element of the claimed invention, while at most, the testimony suggests that the reference could have been modified to include light sources on the bottom wall.  The Federal Circuit said that “Prior art that must be modified to meet the disputed claim limitation does not anticipate the claim.”

On the anticipation of the ‘554 patent the Federal Circuit noted that it came down to conflicting expert testimony about the prior art,  and that “when there is conflictingtestimony at trial, and the evidence overall does not make only one finding on the point reasonable, the jury is permitted to make credibility determinations and believe the witness it considers more trustworthy.”  Because the jury’s verdict was based upon the reference itself as well as expert testimony, it was supported by substantial evidence.

On the issue of induced infringement, the Federal Circuit noted that in order to succeed on a claim of inducement, the patentee must show, first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement.  Mere knowledge of infringement is insufficient. Liability for inducement can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement.  Although the text of §271(b) makes no mention of intent, the Court infers that at least some intent is required, so both specific intent and action to induce infringement must be proven.

Although it was a close case, the Federal Circuit concludedthat there was substantial evidence whereby both Enplas’ knowledge and intent to induce infringement could be reasonably found.  The Federal Circuit noted that Enplas also did not dispute that it was informed that the product it manufactured, co-developed, and sold to SSC was covered by SSC’s patents, and that Enplas knew its customers sold televisions in the US and other countries.  SSC had sent Enplas a pre-suit letter,informing it that SSC had found infringing lenses made with Enplas parts in televisions sold in the United States. Further Enplas provided its customers with product specifications that recommended infringing configurations for its accused lenses.  The Federal Circuit said that it has held that providing instructions to use a product in an infringing manner is evidence of the required mental state for inducing infringement.

Enplas argued that this evidence did not establish that it knew its lenses would be incorporated in U.S. televisions and that in any event mere knowledge was not enough to establish specific intent. The Federal Circuit agreed that mere knowledge of possible infringement is not enough, there was circumstantial evidence that would allow a jury to reasonably find that Enplas had knowledge of the patents and of its customers’ infringing activity and that it intended to induce their infringement, and affirmed the denial of JMOL.

Finally on the issue of damages, Enplas argued that the only evidence supporting the $4 million award was testimony from SSC’s damages expert that explicitly and improperly included non-infringing devices in the royalty calculation.  Enplas filed a Daubert motion regarding this testimony, that the district court deferred, and a motion in limine regarding this testimony, which the district court denied.  SSC’s expert testified that the parties would have negotiated a premium freedom to operate” license to avoid the need to test and negotiate licenses for additional or future potentially infringing lenses that Enplas might sell, and to determine this premium that Enplas would pay, SSC’s expert assessed the volume of sales of all non-accused lenses made by Enplas, which the expert estimated from Enplas’ website.

The Federal Circuit agreed with Enplas, noting a reasonable royalty cannot include activities that do not constitute patent infringement, as patent damages are limited to those “adequate to compensate for the infringement.”

Lack of Written Opinion Leaves Infringer Exposed in the Crosswalk

In Polara Engineering Inc. v. Campbell Company, [2017-1974, 2017-2033] (July 10, 2018), the Federal Circuit affirmed in part, vacated in part, and remanded the district court’s determination that claims 1-4 of U.S. Patent No. 7,145,476 on accessible pedestrian signal systems were valid and willfully infringed, and awarding enhanced damages.

Cambell argued on appeal that the claims were invalid of prior public uses and over the prior art.  Regarding the public uses, the Federal Circuit noted that an inventor who seeks to perfect his discovery may conduct extensive testing without losing his right to obtain a patent for his invention—even if such testing occurs in the public eye.  A use may be experimental if its purpose is to test claimed features of the invention or to determine whether an invention will work for its intended purpose.  The Federal Circuit found that that substantial evidence supported the jury’s finding of experimental use that negates application of the public use bar, noting that testing to perfect features inherent to the claimed invention, such as durability qualifies as experimental, and that in any event the testing did relate to claimed features.  While there was evidence that the testing involved commercial features, rather than claimed features, the Federal Circuit could not say that the jury’s finding of experimental use lacked substantial evidentiary support.

Regarding invalidity over the prior art, the Federal Circuit agreed that Campbell was estopped from arguing that the district court erred in its claim construction instruction
because the court adopted Campbell’s proposed construction of “digital data signals.”  The Federal Circuit found substantial evidence for the jury’s implied fact finding.

On the issued of enhanced damages, the Federal Circuit noted that enhanced damages are designed as a “punitive” or “vindictive” sanction for egregious
infringement behavior, and found that substantial evidence supports
the jury’s finding of willful infringement.  The Federal Circuit said that the jury reasonably could have found that Campbell intentionally copied the ’476 patent despite a significant known risk that its two-wire AAPS would infringe the ’476 patent, having been advised by counsel that there were “areas of potential conflict.”  While Campbell argued that it relied upon competent opinion of counsel,  the Federal Circuit said that Campbell “has not pointed to any documentary or third-party evidence showing it received an opinion of counsel,” and the jury was entitled not to credit the testimony that there was such an opinion.  While Campbell’s challenge that the jury instruction did not specify the time period during which Campbell’s conduct was willful may have had merit, Campbell waived this challenge by agreeing to a simple yes or no instructions.

Finally, on the amount of enhanced damages (the district court used a multiplier 2 1/2), the Federal Circuit said that the district court awarded almost the maximum amount
of enhanced damages, but did not adequately explain its basis for doing so, and failed to even mention Campbell’s public use defense, which presented a close question in
this case.  The Federal Circuit found that the district court may have erred in its consideration of Campbell’s public use defense, and vacated the award of enhanced damages and remanded.

On-Going Royalty Should Consider the Fact that Patentee Won

In XY, LLC v. Trans Ova Genetics, L.C., [2016-2054, 2016-2136] (May 23, 2018), the Federal Circuit affirmed the district court on all issues except the ongoing royalty rate, which the court vacated and remanded for recalculation in accordance with its opinion.

XY’s patents relate to the sorting of X- and Y- chromosome-
bearing sperm cells for selective breeding purposes.  XY licensed Trans Ova under these patents, but purported to terminate the licenses for breach.  XY then sued Trans Ova for patent infringement, later adding counts for breach of contract  and unjust enrichment.  Trans Ova counter claimed for invalidity, monopolization, and breach of contract.

The Federal Circuit affirmed summary judgment on Trans Ova’s antitrust counterclaims, and the denial of post trial motions on the breach of contract issues. The Federal Circuit found no abuse of discretion in the in
denying Trans Ova’s motion for a new trial on the issue of patent invalidity,finding the issue as to one patent mooted by its concurrent affirmance of a PTAB decision invalidating the patent.  Because XY did not appeal the failure to award damages, the Federal Circuit dismissed as moot, Trans Ova’s appeal of the finding of willfulness.

The district court calculated an ongoing royalty rate for gross sales by averaging the jury’s 15% rate with the 10% rate in XY’s prior licenses to
arrive at a rate of 12.5%. For reverse sorting services, the district court awarded an ongoing royalty rate of 2%, half of the jury’s rate for those services.  A district court’s methodology for calculating an ongoing royalty  is reviewed under the abuse of discretion standard. See ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1332 (Fed. Cir. 2012).

In Amado v. Microsoft Corp., the Federal Circuit held that there is a “fundamental difference” between “a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement.” When calculating an ongoing royalty rate, the district court should consider the change in the parties’ bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability.  When patent claims are held to be not invalid and infringed, this amounts to a “substantial shift in the bargaining position of the parties.  District courts to consider changed economic circumstances, such as changes related to the market for the patented products.

The Federal Circuit found that the district court focused on pre-verdict factors that were either irrelevant or less relevant than post-verdict  factors. In particular, the district court awarded an ongoing royalty based on an average between the jury’s reasonable royalty for past infringement (15%) and the rate established in the parties’ pre-suit license Agreement (10%).  The Federal Circuited noted that the jury considered and rejected the 10% pre-suit license rate.  The Federal Circuit said that the district court’s focus should have been on XY’s improved bargaining position and any other changed economic factors, rather than XY’s behavior in the past.  Instead, the district court identified
no economic factors that would justify the imposition of rates that were lower than the jury’s.