Category Archives: Damages

Software Innovations Make Non-Abstract Improvements to Computer Technology

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In Finjan, Inc., v. Blue Coat Systems, Inc., [2016-2520] (January 10, 2018), the Federal Circuit affirmed subject matter eligibility of U.S. Patent No. 6,154,844; affirmed infringement of the U.S. Patent Nos. 6,154,844 and 7,418,731;  affirmed the award of damages of $ 6 million for U.S. Patent No. 7,418,731 and $1.6 million for U.S. Patent No. 7,647,633,  reversed the denial of JMOL of non-infringement of U.S. Patent No.  6,965,968 and vacated the corresponding damage award.

Regarding subject matter eligibility of U.S. Patent No. 6,154,844, the Federal Circuit started at Step 1 of the Alice test, finding that the ’844 patent is directed to a method of providing computer security by scanning a downloadable and attaching the results of that scan to the downloadable itself in the form of a “security profile.”  While the Federal Circuit noted that in Intellectual Ventures I LLC v. Symantec Corp. it held that virus screening is well-known and constitutes an abstract idea, the Federal Circuit said that in the present case “the claimed method does a good deal more.”  The Federal Circuit framed the question as “whether
this behavior-based virus scan in the ’844 patent constitutes an improvement in computer functionality,” and found that it does.  The Federal Circuit said that its cases confirm that software-based innovations can make “non-abstract improvements to computer technology” and be deemed patent-eligible subject matter at
step 1.

The Federal Circuit also rejected the challenge that even if the claimed idea is new, it is still abstract, noting that the claims recite more than a mere result. Instead, the Federal Circuit found that they recite specific steps—generating a security profile that identifies suspicious code and linking it to a downloadable—that accomplish the desired result.

Regarding infringement of the ’844 and ’731 patents, the Federal Circuit found that the JMOL of non-infringement for the first time raised issues of claim construction, which it cannot do: “it is too late at the JMOL stage to argue for or adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.” The Federal Circuit found the verdict of infringement of these patent was supported by substantial evidence.  Regarding the ‘968 the Federal Circuit agreed with the defendant that the patentee failed to introduce substantial evidence of infringement.

Regarding damages for infringement of the ’844 patent, the Federal Circuit agreed that the patentee failed to apportion damages to the infringing functionality, stating that “[w]hen the accused technology does not make up the whole of the accused product, apportionment is required.”  The Federal Circuit said that the patentee must give evidence
tending to separate or apportion the infringer’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or
speculative.  The patentee argued that it based the royalty on the “smallest, identifiable technical component” but the Federal Circuit held that this does not insulate them from the essential requirement that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.  Noting that reversal of the denial of JMOL could result in a situation in which Finjan receives no compensation for Blue Coat’s infringement of the ’844 patent, the Federal Circuit remanded to the district court to determine whether Finjan has waived the right to establish reasonable royalty damages under a new theory and whether to order a new trial on damages.  This aspect of the decision caused the district judge in the middle of a trial relating to the same patent to declare a mistrial, and reschedule the infringement and damages cases.

Regarding damages for infringement of the ’731 and ’633 patents, the Federal Circuit held that the awards were supported by substantial, if conflicting, evidence.

This is a rare Step 1 victory for a software inventor, and although the decision will no doubt be cited by hopeful applicants and patent owners, it does not bring any clarity to what it means to claim an abstract idea.

Patent Owner Has Burden to Prove Marking Once Infringer Identifies Unmarked Products

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In Arctic Cat Inc. v. Bombardier Recreational Products Inc., [2017-1475] (December 8, 2017), the Federal Circuit affirme the district court’s denial
of judgment as a matter of law as to obviousness, the
jury’s royalty rate, willfulness, treble damages, and award of an ongoing
royalty to Arctic Cat, but vacated the court’s denial of judgment as a matter of law as to marking and remand for further consideration limited to that issue.

The case involved U.S. Patent Nos. 6,568,969 and 6,793,545 directed to thrust steering systems for personal watercraft.  At trial, the jury found both patents not invalid, awarded a royalty for past infringement of $102.54 per unit, and based upon the jury’s finding of willful infringement, the district court trebled damages.  The district court also awarded an ongoing royalty of $205.08 per unit.

On the obviousness finding the Federal Circuit said that it presumes the jury found that an ordinarily skilled artisan would not have been motivated to combine the prior art as appellant proposed, and that if
such a fact finding is supported by substantial evidence, it cannot not reverse it. The Federal Circuit noted that appellant devoted much of its argument to re-litigating its case and its evidence rather than addressing the evidence that could have supported the jury’s finding of no motivation to combine. The Federal Circuit said that it does not reweigh the evidence and reach its own factual determination regarding motivation. The question on appeal is only whether substantial
evidence supports the jury’s presumed finding, and the Federal Circuit found substantial evidence did support the finding.

As to objective indicia of non-obviousness, the patent owner argued the claimed invention received industry praise and satisfied a long-felt need. The Federal Circuit again presumed the jury found in favor of patentee, and the Federal Circuit cannot reverse these presumed findings if they are supported by substantial evidence, which the Federal Circuit found they were.

As to the marking issue,  the Federal Circuit said that the patent owner patentee bears the burden of pleading and proving it complied with § 287(a)’s marking requirement, because if a patentee who makes, sells, offers for sale, or imports the patented articles has not given notice of its right”by marking the articles pursuant to the marking statute, it is not entitled to damages before the date of actual notice.  A patentee’s licensees must also comply with §287, because the statute extends to persons making or selling any patented article for or under the patentee.  The Federal Circuit add that recognizing that it may be difficult for a patentee to ensure his licensees’ compliance with the
marking provisions, its has held that where third parties are involved, courts may consider whether the patentee made reasonable efforts to ensure compliance with the marking requirements.

In the present case, the patent owner Arctic Cat licensed patents to Honda, and the agreement specifically stated Honda “shall have no obligation or requirement to mark” its licensed products.  However, While Honda sold products in the U.S. without marking them, Arctic Cat contended they were not covered by the patent and thus should not have been marked.

Arctic Cat and Bombardier disputed whether the products Honda sold were patented articles that were required to be marked, as well as who had the burden of proof.  There was a split in the Circuits on the burden of proof, which the Federal Circuit resolved by holding that 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 Federal Circuit said that this was a low bar, and that the alleged infringer need only put the
patentee on notice that it or its authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent. The Federal Circuit said that the alleged infringer’s burden is a burden of production, not one of persuasion or proof.  The Federal Circuit said that  once the alleged infringer meets its burden of production, however, the patentee bears the burden to prove the products identified do not practice the patented invention.

The Federal Circuit declined to determine the minimum showing
needed to meet the initial burden of production, but found that it was satisfied.  The Federal Circuit did say that alleged infringer need not produce claim charts to meet its initial burden of identifying products, because it is the patentee who bears the burden of proving that it satisfied the marking requirements and thus the patentee who would have to prove that the unmarked products identified by the infringer do not fall within the patent claims. The Federal Circuit concluded that the district court erred in placing this burden upon BRP and vacated and remanded on the issue of marking.

On the pre-judgment and post-judgment royalty rates, the Federal Circuit found no error, noting that a difference in the rates may be justified by the change in the parties’ legal relationship and other factors.  Finally the Federal Circuit affirmed the district court on the issue of willfulness and enhanced damages.

 

 

Patent Owner Reminded that All or Nothing Approach to Damages has Two Possible Outcomes

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In Promega Corp. v. Life Technologies Corp., [2013-1011, 2013-1029, 2013-1376] (November 13, 2017), the Federal Circuit on remand from the Supreme Court, reaffirm its holdings on the enablement, licensing, and active inducement, and on reexamination of its reversal of the district court’s grant of Life’s motion for judgment as a matter of law (JMOL) that
Promega failed to prove its infringement case under 35 U.S.C. § 271(a), affirmed the district court, and on reexamination of its vacatur of the district court’s denial of Promega’s motion for a new trial on damages and infringement, the Federal Circuit affirmed the district court.

Life filed a renewed motion for JMOL pursuant to FRCP 50(b), arguing that Promega “failed to prove the applicable damages for patent infringement” and was therefore entitled to no damages, which the district court granted because Promega evidence could not support a finding that all of the accused products were sold or imported into the United States, even when all reasonable inferences were drawn in Promega’s favor.  The Federal Circuit originally reversed, based upon its construction of §271(a) that all of Life’s products infringed.  On remand, the Federal Circuit, after noting that Promega waived reasonable royalty damages and sought only lost profits damages, found that Promega failed to meet its burden of proof.

Promega moved for a new Trial arguing for the first time that the
evidence could support a damages award based on a subset of worldwide sales. The district court denied Promega’s motion. The district court reiterated that Promega had waived any argument based on a subset of
worldwide sales by failing to respond to Life’s argument on this issue in its JMOL briefing.  The Federal Circuit originally vacated the district court’s action, but on remand found that under the law of the case doctrine,
the district court properly exercised its discretion by relying on its waiver finding from its JMOL ruling to support its decision to deny Promega’s motion for a new trial.  Further, the Federal Circuit approved the district court’s reliance on 7th Circuit precedent that a party may not
introduce evidence or make arguments in a Rule 59 motion that could or should have been presented to the court prior to judgment.  The Federal Circuit said that If Promega wanted to argue that the evidence at trial supported a damages calculation based on anything other than worldwide sales, it should have raised such an argument at trial and in response to
Life’s Rule 50(b) motion, which specifically attacked Promega’s damages case on that very ground.  The Federal Circuit observed that Promega did not, choosing instead to continue to solely pursue an all-or-nothing damages strategy.  The Federal Circuit said:

When a plaintiff deliberately takes a risk by relying at trial exclusively on a damages  theory that ultimately proves unsuccessful, and, when challenged, does not dispute that it failed to present an alternative case for damages, a district court does not abuse its discretion by declining to give that plaintiff  multiple chances to correct deficiencies in its arguments or the record.

Because it held that Promega is not entitled to any damages, the Federal Circuit affirmed the district court’s denial of Promega’s motion for enhanced damages under § 284. The Federal Circuit also affirmed the district court’s denial of Promega’s motion for a permanent injunction, given that the patent had expired.  Further, finding that Promega cannot be the “prevailing party” in this litigation under 35 U.S.C. § 285, the Federal Circuit affirmed the district court’s denial of Promega’s motion for
an exceptional case finding.

 

 

Sitback, Make the Popcorn, and Watch, Patent Owners, You Have Six Years to Bring Your Infringement Claim

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In SCA Hugiene Products Aktiebolag v. First Quality Baby Products, LLC, [15–927] (March 21, 2017), the Supreme Court reversed the Federal Circuit and held that laches cannot be invoked as a defense against a claim for damages brought within 35 U.S.C. §286’s six-year limitations period.

The Supreme Court followed the reasoning in Petrella v. Metro-Goldwyn-Mayer, Inc., where it eliminated the laches defense for copyright infringement claims brought within the Copyright Act’s 3-year limitations period.  The Court said that a statute of limitations reflects a Congressional decision that timeliness is better judged by a hard and fast rule instead of a case-specific judicial determination. The Court further said that applying laches within a limitations period specified by Congress would give judges a “legislation-overriding” role that exceeds the Judiciary’s power.

Although the Copyright Statute 17 U.S.C. §507(b) is worded as a true statute of limitations, requiring action “within three years after the claim accrued,” while the Patent Statute 35 U.S.C. §286 is a damages limitation, barring recovery of damages “more than six years prior to the filing of the complaint,” the Supreme Court found the statutes similar enough to apply the reasoning of Petrella.

The Supreme Court also rejected the Federal Circuit’s interpretation of 35 U.S.C. §282 as retaining a laches defense to patent infringement.

In closing, the Supreme Court indicated that the Doctrine of Equitable Estoppel may still be available, and in fact may apply to SCA Hugiene Products’ claims, but that laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.

Among Other Things, the Federal Circuit Affirms Viability of Assignor Estoppel

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In Mentor Graphics Corporation v. EVE-USA, Inc., [2015-1470, 2015-1554, 2015-1556] (March 16, 2016), the Federal Circuit:

  • affirmed the jury verdict of infringement of U.S. Patent Nos. 6,240,376, the denial of JMOL, and the award of $36,000,000 in damages, and that that assignor estoppel bars Synopsys from challenging the validity of the patent.
  • reversed summary judgment that U.S. Patent No.
    6,132,109 is indefinite.
  • affirmed summary judgment that U.S. Patent No. 7,069,526 lacks patent-eligible subject matter.
  • vacated the motion in limine precluding Mentor from
    presenting evidence of willful infringement.
  • reversed summary judgment that U.S. Patent No. 6,947,882 lacks
    written description.
  • reverse summary judgment that Mentor’s infringement allegations
    regarding U.S. Patent Nos. 6,009,531 and 5,649,176 are barred by
    claim preclusion.

Regarding Assignor Estoppel, the Federal Circuit rejected Synopsys argument that the Supreme Court abolished the doctrinal underpinnings of assignor estoppel in Lear, Inc. v. Adkins.

Regarding the Damage Award, the Federal Circuit noted that the facts of this case are remarkably simple for a patent damages appeal and Synopsys does not dispute any of them.

The jury found, and Synopsys does not dispute on appeal, that Mentor
satisfied all of the Panduit factors with regard to the sales to Intel for which the jury awarded lost profits:
(1) there was a demand by Intel for the patented product; (2) there were no non-infringing alternative emulator systems acceptable to Intel; (3) Mentor had the manufacturing and marketing capability to satisfy Intel’s demand; and, (4) Mentor established the amount of profit it would
have made if Synopsys had not infringed.  Synopsys argued that the lost profits shuold be apportioned to cover only the patentee’s inventive contribution.  The Federal Circuit agreed with Synopsys that apportionment is an important component of damages law generally, and we believe it is necessary in both reasonable royalty and lost
profits analysis.  However, the Federal Circuit said that Panduit’s requirement that patentees prove demand for the product as a whole and the absence of non-infringing alternatives ties lost profit damages to specific claim limitations and ensures that damages are commensurate with the value of the patented features.

Regarding indefiniteness, the Federal Circuit said that “a method for displaying the results of synthesized circuit analysis visually near the
HDL source specification that generated the circuit” was not indefinite.The Federal Circuit held that the term “near” informs a person of ordinary skill in the art about the scope of the invention with
reasonable certainty, noting that a skilled artisan would understand “near” requires the HDL code and its corresponding circuit analysis to be displayed in a manner that physically associates the two.

Regarding patentable subject matter, the Federal Circuit held that claims containing “machine-readable medium” renders the claimed
subject matter invalid under 35 U.S.C. § 101.  The specification defined machine-readable medium as including carrier waves, found to be unpatentable in In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007).

With respect to willful infringement, the Federal Circuit found the district court erred in barring evidence of willful infringement.  Specificaly, the Federal Circuit rejected a rigid rule that post-filing willful infringement cannot be presented unless the party moves for a preliminary injunction.

With respect to written description, the Federal Circuit found that there was adequate written description.  The Federal Circuit found that the very language of claim 1 which the court held was not supported by the specification was present in the originally-filed claims. Original claims are part of the original specification and in many cases will satisfy the written description requirement.

Finally, with respect to claim preclusion, the Federal Circuit said that claim preclusion does not bar later infringement allegations with respect to accused products that were not in existence at the time of the previous actions for the simple reason that claim preclusion requires that in order for a particular claim to be barred, it is necessary that the claim either was asserted, or could have been asserted, in the prior action.

 

Complaints About Claim Construction Irrelevant Without a Showing of How it Would Make a Difference

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In Comcast IP Holdings I LLC v. Sprint Communications Company LP, [2015-1992] (March 7, 2017) the Federal Circuit affirmed a $7.5 million dollar award for infringement of U.S. Patent Nos. 8,170,008,
7,012,916, and 8,204,046 directed to the use of computer network
technology to facilitate a telephone call.

Sprint complained about the construction of “switched telecommunication system” but the Federal Circuit failed to show how is construction would result in a different result.  Moreover, the Federal Circuit found that the claim language and the specification did not support Sprint’s proposed construction.

Sprint also complained that there was insufficient that its met the “call destination” and “identifier of a second party” limitations of the claims, which were given their plain and ordinary meaning because neither party requested a claim construction.  The Federal Circuit found that Sprint was essentially proffering a claim construction argument in the guise of a challenge to the sufficiency of the evidence of infringement.”

Finally, Sprint complained about the construction of “parsing,” arguing that the district court failed to apply disclaimers made by the patent owner during prosecution. But the Federal Circuit again found that Sprint failed to show how this affected the outcome.  However the Federal Circuit ultimately agreed with the district court’s construction.

The Federal Circuit also affirmed the award of prejudgment interest from the date of the earliest patent, finding that would be the date of negotiation of the undifferentiated reasonable royalty.

 

Licenses in Prior Settlement Agreements May be Relelvant to Reasonable Royalty Damages

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In Prism Technologies v. Sprint Spectrum L.P., [2016-1456, 2016-1457] (March 6, 2016) the Federal Circuit affirmed a $30 million judgment entered after a jury verdict against Sprint Spectrum L.P. lfor infringement of U.S. Patent Nos. 8,127,345 and 8,387,155.

Sprint raised several arguments why the district court should have granted JMOL, including error in admitting a prior settlement agreement with AT&T regarding the patents. Sprint claimed it was an abuse of discretion under FRE 403 to admit the Settlement Agreement, but the Federal Circuit disagreed.

The Federal Circuit said that a license agreement entered into in settling an earlier patent suit sometimes is admissible in a later
patent suit involving the value of the patented technology, and sometimes is not. A settlement involving the patented technology can be probative of the technology’s value if that value was at issue in the earlier case. The reason is simple: such a settlement can reflect the assessment by interested and adversarial parties of the range of plausible litigation outcomes on that very issue of valuation.  However the Federal Circuit recognized that for various reasons a
settlement may be pushed toward being either too low, as
in Hanson, or too high, as in LaserDynamics, relative to
the value of the patented technology at issue in a later
suit.  However the Federal Circuit also recognized that for various reasons a settlement may be pushed toward being either too low or too high relative to the value of the patented technology at issue in a later suit.  The Federal Circuit said that what is needed for assessing the probativeness and prejudice components of the Rule 403 balance, then, is consideration of various aspects of the particular litigation settlements offered for admission into evidence.

The Federal Circuit said that the mere fact that the license resulted from litigation does not automatically mean that the prejudice outweighs probativeness side, noting that Sprint itself relied upon settlement agreements (although with lower royalty rates).  The Federal Circuit found that the circumstances of the AT&T Settlement Agreement affected the Rule 403 assessment in ways that support
the district court’s admission of the Agreement.  The Federal Circuit noted that the AT&T Settlement was made after the entire case had been tried, so the entire record was developed, enhancing the reliability of the parties assessment of the value of the settlement.  The Federal Circuit found not abuse of discretion in admitting the AT&T settlement agreement.

The Federal Circuit also rejected per se rules suggested by Sprint for excluding settlement agreements.  The Federal Circuit noted the inconsistency of Sprint’s position, before Prism and AT&T settled, Sprint affirmatively urged the admission of various Prism licenses
resulting from patent-litigation settlements, and even moved to exclude the damages testimony of Prism’s expert on the ground that he failed to rely on such settlement agreements. Sprint contended that those agreements were “reliable marketplace evidence of the value of the patents-in-suit” and therefore “‘highly probative as to
what constitutes a reasonable royalty for those patent rights because such actual licenses most clearly reflect the economic value of the patented technology in the marketplace.’”  When Sprint first opposed admission of the AT&T settlement agreement, it did not invoke any categorical rule, which the Federal Circuit found was a strategic choice so that Sprint could urge for the admission of lower rate licenses while opposing higher rate licenses.