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Pre-Markman Claim Construction Is OK, Within Limits

by Sydney E. McDermott | Oct 31, 2024 | Patents

In an appeal stemming from the denial of a preliminary injunction and dismissal of the complaint, the US Court of Appeals for the Federal Circuit clarified its precedent and explained that a district court may construe claims at the motion to dismiss Rule 12(b)(6) stage, but only to the extent necessary to decide the motion. UTTO Inc. v. Metrotech Corp., Case No. 23-1435 (Fed. Cir. Oct. 18, 2024) (Prost, Taranto, Hughes, JJ.)

UTTO sued Metrotech in the US District Court for the Northern District of California for patent infringement and tortious interference with prospective economic advantage under California law. UTTO also moved for a preliminary injunction. The asserted patent describes and claims methods for detecting and identifying “buried assets,” which refers to underground utility lines. The district court denied the preliminary injunction because of UTTO’s failure to show a likelihood of success on the merits for infringement based on the district court’s construction. The district court adopted a construction of the term “group” as requiring at least two data points per buried asset. The district court then dismissed the original complaint for failure to state a claim on which relief could be granted but allowed UTTO to amend, explaining that infringement of the claims as construed at the preliminary injunction stage was not pled.

UTTO then filed an amended complaint, which the district court also dismissed, noting that UTTO failed to plead facts supporting infringement of other limitations under the claim construction issued at the preliminary injunction stage. The district court again granted UTTO leave to amend, which UTTO did. But the district court dismissed that third complaint as well, this time with prejudice, citing the claim construction in its order at the preliminary injunction stage.

On appeal, UTTO (citing 2018 Federal Circuit precedent Nalco v. Chem-Mod) challenged the district court’s claim construction and its reliance on a claim construction in an order denying summary judgment to dismiss a complaint. The Federal Circuit explained that claim construction by a district court “to resolve . . . particular claim construction issues in [a] case” may be necessary and is not categorically barred at the Rule 12(b)(6) stage. The Court explained that there is a “logical relationship of claim construction” between “infringement and the normal function of courts deciding whether to grant a Rule 12(b)(6) motion.” An infringement analysis first requires an analysis of the scope and meaning of the claims asserted and then the “properly construed claims” are compared to the accused device or method. Often, claims are construed based on intrinsic evidence alone, which the Federal Circuit concluded “is not different in kind from the interpretation of other legal standards, which is proper and routine in ruling on a motion under Rule 12(b)(6).” As an example, the Court cited its routine dismissals under Rule 12(b)(6) in connection with motions under 35 U.S.C. § 101.

The Federal Circuit cautioned that not all claim construction issues need to be construed at the Rule 12(b)(6) stage, but only those issues necessary to decide a [...]

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IRS Issues Final Rules on Intangible Property Repatriations

by Brian Moore | Oct 31, 2024 | Uncategorized

With the allure of tax incentives for foreign derived intangible income and an increase in foreign audits scrutinizing transfer pricing, bringing intellectual property (IP) back to the United States is increasingly attractive. Newly issued final IP repatriation regulations make the tax consequences of repatriating previously offshored IP more predictable and eliminate the risk of potential double taxation.

On October 10, 2024, the US Department of the Treasury and the Internal Revenue Service (IRS) released final regulations under § 367(d) regarding the tax consequences of certain IP repatriations. The final regulations largely follow the proposed regulations issued in May 2023, with minor modifications. These regulations apply to IP repatriations that occur on or after October 10, 2024.

Background on § 367(d)

Section 367(d) and the corresponding regulations were designed to prevent US companies from avoiding US tax by transferring valuable IP to foreign affiliates. Generally, when a US person transfers IP to a foreign corporation in a nonrecognition transaction, the transfer is treated as a sale in exchange for payments contingent on the productivity, use, or disposition of the IP. This means that the US transferor is deemed to receive annual royalty payments over the useful life of the IP, reflecting the income that would have been generated by the IP.

Prior to the release of the latest regulations, the § 367(d) regime provided “subsequent transfer” rules that could result in an immediate income inclusion of the remaining deemed royalty amount if the US transferor transferred the stock of the transferee foreign corporation, or the transferee foreign corporation transferred the IP. However, the prior regulations did not clearly address the tax implications when the IP was repatriated back to the US, leading to uncertainty and potential double taxation. The final regulations clarify the treatment of repatriated IP under § 367(d). The regulations are generally taxpayer friendly and are expected to reduce the tax burden on US companies repatriating IP.

Key Provisions of the Final Regulations

Termination of Annual Royalty Inclusions

The final regulations terminate the deemed royalty inclusions when the IP is repatriated and certain conditions are met. The US transferor is no longer required to include deemed royalty payments in its income if the transferee foreign corporation transfers the IP to a qualified domestic person (QDP), which could be the original US transferor, a successor US transferor, or a related US person, provided the person is subject to US tax. To benefit from the termination of deemed royalty inclusions, the US transferor also must comply with specific reporting requirements, including providing detailed information about the repatriation transaction to the IRS.

Gain Recognized by the US Transferor

The US transferor must recognize gain equal to the fair market value of the IP at the time of repatriation. The amount of gain recognized by the US transferor depends on whether the IP is “transferred basis property.” If the IP is transferred basis property, the gain recognized is the amount the foreign corporation would have recognized if its adjusted basis [...]

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If Provider Knew Product Would Be Used to Infringe, It Is a Contributor

by Lois D. Mermelstein | Oct 24, 2024 | Copyrights

In a case brought by a group of record labels against an internet service provider (ISP) for contributory copyright infringement of more than 1,400 songs, the US Court of Appeals for the Fifth Circuit ruled that the provider, which knew how its product would be used by subscribers, could be contributorily liable for its subscribers’ actions, but that because the record companies registered albums – not individual songs – with the US Copyright Office, statutory copyright damages were not available for each infringed song. UMG Recordings, Inc. et al. v. Grande Communications Networks, LLC, Case No. 23-50162 (5th Cir. Oct. 9, 2024) (Higginson, Higginbotham, Stewart, JJ.)

The plaintiffs are a group of major record labels, while the defendant, Grande Communications Network, is a large ISP. To combat copyright infringement among individuals using peer-to-peer file-sharing networks such as BitTorrent, the plaintiffs used a third-party company, Rightscorp, to identify infringing conduct by engaging with BitTorrent users, documenting that conduct, and using the information to notify ISPs of its findings so that the ISPs could take appropriate action. However, for nearly seven years Grande did not terminate subscribers for copyright infringement but merely notified them of a complaint. In the district court, a jury found Grande liable for contributory copyright infringement of more than 1,400 of the plaintiffs’ sound recordings. The jury found that the infringement was willful and awarded nearly $47 million in statutory damages. Grande appealed.

The Fifth Circuit explained that to prove direct infringement by Grande’s subscribers, the plaintiffs had to show “(1) that Plaintiffs own or have exclusive control over valid copyrights and (2) that those copyrights were directly infringed by Grande’s subscribers.” To meet the elements of secondary liability for subscribers’ conduct, “Plaintiffs had to demonstrate (3) that Grande had knowledge of its subscribers’ infringing activity and (4) that Grande induced, caused, or materially contributed to that activity.”

In analyzing the fourth element, the Fifth Circuit noted that previous Supreme Court cases involving a single moment of sale (Sony Corp. of America v. Universal City Studios (1984) and Metro-Goldwyn-Mayer Studios v. Grokster (2005)) did not control because the plaintiffs’ theory of liability was “not based on Grande’s knowledge about its subscribers’ likely future activities after the moment of sale, but rather on Grande’s knowledge of its subscribers’ actual infringements based on its ongoing relationship with those subscribers.” Further, unlike Twitter v. Taamneh (2023) (a case in which family members of an ISIS terrorist attack victim alleged that US social media companies aided and abetted ISIS by permitting the group’s members to use the platforms for ISIS’s purposes), here the “direct nexus between Grande’s conduct and the tort at issue permits an inference that Grande’s knowing provision of internet services to infringing subscribers was actionable.”

The district court’s jury instructions – that Grande could be contributorily liable if Grande could have “take[n] basic measures to prevent further damages to copyrighted works, yet intentionally continue[d] to provide access to infringing sound recordings,” were not erroneous, as Grande had access to [...]

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Jurisdiction “Found”: Navigating E-Commerce Boundaries in Copyright Disputes

by Cecilia Choy, Ph.D. | Oct 24, 2024 | Copyrights

In a copyright case, the US Court of Appeals for the Tenth Circuit determined that the district court had jurisdiction over two Chinese companies that consented to jurisdiction in any judicial district in which a third-party e-commerce company could be “found.” The Tenth Circuit concluded that whether an e-commerce company is “found” in a district for purposes of jurisdiction is determined based on whether its officers or agents carry out the company’s business there, not on the manner in which it does business. DP Creations, LLC v. Adolly.com, Case No. 23-4126 (10th Cir. Oct. 15, 2024) (Tymkovich, Bacharach, Carson, JJ.)

As background, the Digital Millenium Copyright Act (DMCA) “preserve[d] strong incentives for service providers and copyright owners to cooperate and detect and deal with copyright infringements that take place in the digital networked environment.” After a copyright owner notifies a service provider of an infringement, the service provider can avoid liability for a subscriber’s copyright infringement if the service provider expeditiously moves or disables access to the allegedly infringing material and notifies the subscriber of such actions taken. Under Section 512(g)(3)(D) of the DMCA, a subscriber with an address outside the United States may have the material replaced by submitting a written counter-notification to the service provider that includes a statement that the “subscriber consents to the jurisdiction of the Federal District Court . . . for any judicial district in which the service provider may be found.”

DP Creations, d/b/a Bountiful Baby, is a copyright owner for reborn doll sculptures. Bountiful Baby notified a third-party e-commerce company (service provider) that two Chinese companies (subscribers), including Adolly, were selling counterfeit copies of reborn dolls through the e-commerce company. The e-commerce company took down the infringing materials, and Adolly submitted counter-notifications, including consent to personal jurisdiction in “any judicial district in which [the e-commerce company] may be found and agreeing to accept service of process from” Bountiful Baby. Bountiful Baby subsequently filed a copyright infringement action in the District of Utah. After the Chinese companies failed to respond, the district court denied the motion for entry of default judgment against the defendants for lack of personal jurisdiction. In construing the scope of jurisdiction under § 512(g)(3)(D), the district court used Black’s Law Dictionary to understand the plain meaning of “found” and required Bountiful Baby to show that the e-commerce company did business in Utah such that it was subject to suit and service of process there. Bountiful Baby appealed.

Because § 512(g)(3)(D)’s phrase “may be found” is not defined in the statute, the Tenth Circuit (like the district court) undertook to construe the ordinary meaning of the phrase. The Court decided against using the definition found in Black’s to construe the meaning of “found” as it relates to service of process on corporations that are not a subscriber of the involved service provider. The Court concluded that in cases where the service provider is not a resident of the forum state and potentially not “at home” in the forum state, Black’s [...]

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No Need to Call for Backup at the PTAB (Sometimes)

by Sydney E. McDermott | Oct 24, 2024 | America Invents Act

The US Patent & Trademark Office (PTO) published a final rule entitled, Expanding Opportunities to Appear Before the Patent Trial & Appeal Board; 89 Fed. Reg. 82172 (Oct. 10, 2024).

The new rule, set to take effect on November 12, 2024, will apply to America Invents Act (AIA) proceedings, which, until now, have required that a party designate lead counsel and backup counsel. Lead counsel was required to be a registered practitioner, and non-registered practitioners could be backup counsel upon a showing of good cause.

The PTO filed a notice of proposed rulemaking on February 21, 2024, in which it proposed amending the regulations to allow the Board to permit a party to proceed without separate backup counsel as long as lead counsel is a registered practitioner. The PTO also proposed to allow a non-registered practitioner admitted pro hac vice to serve as either lead or backup counsel for a party as long as a registered practitioner was also counsel of record for that party, and to allow a non-registered practitioner who was previously recognized pro hac vice in an AIA proceeding to be considered a Board-recognized practitioner and eligible for automatic pro hac vice admission in subsequent proceedings via a simplified and expedited process.

Citing the benefits of flexibility where good cause is shown while ensuring parties are well represented, the PTO has now issued a final rule that will allow parties to proceed without backup counsel. The PTO noted that a party may demonstrate good cause, for example, by demonstrating lack of financial resources to retain both lead and backup counsel. However, the Board will question any claim of lack of financial resources where a party has also elected to pursue litigation involving the challenged patents in other forums. As a result, this rule is more likely to benefit patentees than patent challengers. The PTO also explained that the good cause analysis will center on the party, not on the counsel’s preferences. For example, the PTO is unlikely to find good cause where the lead counsel is a solo practitioner who prefers to work alone.

The PTO also issued a final rule simplifying the process for attorneys who were previously admitted to practice before the Board pro hac vice to gain admission for subsequent matters and to do so without a fee. Any attorney seeking subsequent pro hac vice admission must file a declaration or affidavit stating that all the requirements set out by the Board are met. Opposing counsel also has the opportunity to object.

Finally, the PTO rejected an amendment that would allow non-registered attorneys to serve as lead counsel.

No Leave, No Appeal: UPC Court of Appeal Denies Request for Discretionary Review

by Dr. Laura Katharina Woll, LL.M. | Oct 24, 2024 | EU Update, Patents

The Court of Appeal (CoA) of the Unified Patent Court (UPC) ruled that if a party wishes to appeal against a procedural order, and leave to appeal has not already been granted in the order, the party must first apply to the Court of First Instance for leave to appeal. Only if such an application is rejected is it then possible to request a discretionary review by the CoA (pursuant to Rule 220.3 of the UPC Rules of Procedure (RoP)). Suinno Mobile & AI Technologies Licensing Oy v. Microsoft Corporation (_586/2024, APL_ 54732/2024) (UPC CoA Oct. 9, 2024) (Simonsson, Standing J.)

In the proceedings between Suinno and Microsoft before the UPC Central Division Paris (Court of First Instance in these proceedings), the latter ordered the claimant, Suinno, to provide security for costs. There was no indication in the order that it could be appealed.

Suinno did not request that the Court of First Instance grant leave to appeal, but instead directly lodged a request for discretionary review of the order with the CoA.

The CoA deemed this request inadmissible and dismissed the appeal. The standing judge (see Rules 345.5 and .8 of the RoP) noted that the Court of First Instance had neither granted nor denied leave to appeal and the first instance order did not contain any reference to Article 73 of the Agreement on a Unified Patent Court (UPCA) and Rule 220.2 of the RoP, contrary to Rule 158.3 of the RoP.

However, this did not relieve Suinno from its obligation to request a grant of leave to appeal from the Court of First Instance. Absent an express grant or refusal of a grant, there is no implied grant of leave to appeal, notwithstanding that the Court of First Instance did not mention the possibility of requesting leave to appeal. The CoA cited Rule 158 of the RoP but noted that the absence of the indication referring to Article 73 of the UPCA and Rule 220.2 of the RoP cannot be understood as an implied grant.

Practice Note: A discretionary review by the CoA pursuant to Rule 220.3 of the RoP is only permissible if the Court of First Instance has expressly granted or expressly refused to grant leave to appeal, which is in line with other CoA decisions on this issue (See, e.g., CoA, Order of August 21, 2024; UPC_CoA_454/2024, APL_44552/2024, para 21; Order of October 15, 2024, CoA_UPC 01/2024, ORD_41423/2024 in the main proceedings ACT_588685/2023, UPC_CFI_440/2023, para 6).

Even if, contrary to the RoP, a first instance decision of the UPC does not contain any indication that an appeal may be filed in accordance with the UPCA and the RoP (but is silent on the issue of appeal in general), there is no positive effect for a party wishing to appeal the decision; it is still necessary to request a grant of leave to appeal from the Court of First Instance. [...]

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Clear Vision: Keyword Search Term Purchase Doesn’t Blur Trademark Lines

by Eleanor B. Atkins | Oct 17, 2024 | Trademarks

Addressing the issue of trademark infringement based on the purchase of search advertising keywords, the US Court of Appeals for the Second Circuit joined the consensus view and upheld a district court decision finding that the mere purchase of a search advertising keyword containing another’s trademark does not by itself constitute trademark infringement. 1-800 Contacts, Inc. v. JAND, Inc., Case No. 22-1634 (2d Cir. Oct. 8, 2024) (Chin, Carney, Lee, JJ.)

1-800 Contacts is an established online retailer for contact lenses. JAND (doing business as Warby Parker) was originally an online retailer for eyeglasses and began selling contact lenses online as well in 2019. As a newcomer to the market of online contact lenses, Warby Parker purchased search advertising keywords that included 1-800 Contacts’ trademarks. This practice is known as search keyword advertising, and it is a type of marketing that allows parties to purchase certain terms from search engines that, when used as a search query, result in the paying party’s advertisements appearing above the organic search results as part of the “paid results.”

1-800 Contacts sued Warby Parker for engaging in this practice, alleging that the purchase and use of 1-800 Contacts’ trademarks constituted trademark infringement and unfair competition under federal and New York state law. The district court disagreed, granting Warby Parker’s motion for judgment on the pleadings and finding that 1-800 Contacts’ trademarks and the “Warby Parker” trademark were entirely dissimilar. 1-800 Contacts appealed.

1-800 Contacts argued that Warby Parker purchased search engine keyworks consisting of 1-800 Contacts’ trademarks to use them in connection with an adverting campaign designed to mislead consumers. 1-800 Contacts alleged that the purchase of these keywords resulted in consumer confusion because users searching for “1-800 contacts” would receive Warby Parker’s “ambiguous ads that generate source, sponsorship or initial interest confusion.” 1-800 Contacts further alleged that the webpage that was linked to Warby Parker’s advertisements “magnified this confusion” because it mimicked the look and feel of 1-800 Contacts’ website.

The Second Circuit noted that two types of consumer confusion were at issue in the case: sponsorship confusion, which occurs when consumers believe “the mark’s owner sponsored or otherwise approved the use of the trademark,” and initial-interest confusion. To sufficiently plead internet-related initial-interest confusion, “a showing of intentional deception [is necessary] . . . because consumers diverted on the Internet can more readily get back on track that those in actual space.”

The Second Circuit reviewed the eight-factor Polaroid test to assess whether 1-800 Contacts sufficiently pled a likelihood of confusion. The Court agreed with the district court that certain factors, including the strength of the mark, the competitive proximity of the products, the relative quality of the products, and good faith, favored 1-800 Contacts. However, other factors, including, most importantly, the similarity of the marks, favored Warby Parker: “Here, the pleadings failed to plausibly allege that Warby Parker used 1-800’s Marks anywhere during the search advertising process outside of its purchase at the initial, permissible keyword auction. . . . Thus, the [...]

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What a Croc! False Claim That Product Feature Is Patented Can Give Rise to Lanham Act Violation

by Karen Gover | Oct 17, 2024 | Trademarks

The US Court of Appeals for the Federal Circuit reversed and remanded a grant of summary judgment on a false advertising claim, concluding that a cause of action under Section 43(a) of the Lanham Act can arise when a party falsely claims to hold a patent on a product feature and advertises that feature in a misleading way. Crocs, Inc. v. Effervescent, Inc., Case No. 2022-2160 (Fed. Cir. Oct. 3, 2024) (Reyna, Cunningham, JJ.; Albright, District J., sitting by designation).

Crocs, the well-known maker of molded foam footwear, sued several competitor shoe distributors for patent infringement in 2006. The case was stayed pending an action before the International Trade Commission but resumed in 2012 when Croc added competitor U.S.A. Dawgs as a defendant to the district court litigation. The case was stayed twice more, from 2012 to 2016 and 2018 to 2020. In between those stays, in May 2016, Dawgs filed a counterclaim against Crocs and 18 of its current and former officers and directors, alleging false advertising violations of Section 43(a) of the Lanham Act. 15 U.S.C. § 1125(a). The individual defendants were later dismissed from the action.

Dawgs claimed that Crocs deceived consumers and damaged its competitors by falsely describing its molded footwear material, which it calls “Croslite,” as “patented,” “proprietary,” and “exclusive.” Dawgs alleged that it was damaged by Crocs’ false advertisements and commercial misrepresentations because Crocs suggested that its competitors’ footwear material was inferior. Croslite is in fact not patented, as Crocs conceded.

Crocs argued in its motion for summary judgment that Dawgs failed as a matter of law to state a cause of action under Section 43(a) because the alleged advertising statements were directed to a false designation of authorship of the shoe products and not to their nature, characteristics, or qualities, as Section 43(a)(1)(B) requires. The district court agreed. Applying the Supreme Court’s 2003 decision in Dastar Corp. v. Twentieth Century Fox Film Corp. and the Federal Circuit’s 2009 decision in Baden Sports, Inc. v. Molten USA, Inc., the district court granted summary judgment to Crocs. It reasoned that falsely claiming to have “patented” something is similar to a false claim of authorship or inventorship, not to the types of false advertising prohibited by the Lanham Act. Dawgs appealed.

Dawgs argued that the district court’s application of Dastar and Baden to the circumstances of its case was inapposite, and the Federal Circuit agreed. In Dastar, the petitioner copied a television series in the public domain, made minor changes, and sold it as a video set, passing it off as its own. The Supreme Court held that a false claim of authorship does not give rise to a cause of action under the Lanham Act. Similarly, in Baden, the Federal Circuit found that a basketball manufacturer’s false suggestion that it was the author of the “innovative” “dual-cushion technology” in its basketballs did not give rise to a false advertising claim under the Lanham Act.

In this case, however, the Federal Circuit reasoned that Croc’s false [...]

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Don’t Tread on Illinois’ Absolute Litigation Privilege

by Connor M. Larson | Oct 17, 2024 | Trademarks

Addressing when Illinois law’s “absolute litigation privilege” bars certain counterclaims, the US Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment finding that the plaintiff lacked a valid trade dress and reversed the district court’s decision that declined to apply the absolute litigation privilege as a complete defense to all of the alleged infringer’s counterclaims. Toyo Tire Corp v. Atturo Tire Corp., Case No. 22-1817 (Fed. Cir. Oct. 4, 2024) (Moore, Clevenger, Chen, JJ.) (nonprecedential).

Toyo and Atturo are competitors in the tire design business. After perceiving widespread copying of its tire designs, Toyo filed a district court action asserting design patent infringement and trade dress infringement against Atturo. Atturo asserted counterclaims, including false designation of origin under the Lanham Act and several state law counterclaims. The district court eventually dismissed with prejudice Toyo’s design patent infringement claims and proceeded with just the trade dress infringement claim.

A primary issue in the case was the description of the asserted trade dress. In its complaint, Toyo identified its trade dress merely as “the overall appearance” of its line of tires. Over the course of discovery, disputes arose concerning Toyo’s failure to distinctly describe its asserted trade dress. Toyo answered an interrogatory that requested this information with a non-limiting definition. The district court compelled Toyo to provide a more specific answer, which Toyo did by providing highlighted images.

Toyo’s fact witness was subsequently deposed under Fed. R. Civ. P. 30(b)(6) and gave answers that were inconsistent with Toyo’s interrogatory response. This led the district court to compel more testimony on what exactly the asserted trade dress contained, and which tire features met the definition of the trade dress, and which did not. On the advice of counsel, the corporate witness declined to answer more than 100 different questions. Toyo’s inability to describe its trade dress continued into expert discovery. When it served its expert reports, Toyo introduced yet another aspect of its trade dress – that the trade dress only included two-dimensional aspects. Toyo introduced this new argument to support the requirement that to qualify as trade dress the designated feature must be nonfunctional.

Atturo moved for sanctions. In granting the sanctions, the district court barred Toyo from asserting only the two-dimensional aspects of the trade dress, precluding Toyo from continually shifting its position because doing so “would effectively lead to trial by ambush.” Having struck the only argument that could save the trade dress from invalidity, the district court granted summary judgment of invalidity on both functionality and lack of secondary meaning.

Trial then proceeded only on Atturo’s counterclaims. The jury returned a verdict in favor of Atturo on six of the counterclaims, awarding $10 million in compensatory damages and $100 million in punitive damages. The district court set aside the jury verdict as it related to counterclaims of defamation and liability under the Illinois Deceptive Trade Practices Act. Both parties appealed.

The Federal Circuit affirmed the district court’s issuance of discovery sanctions, and the grant of [...]

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No Matter How You Slice and Dice It, Conclusory Evidence Can’t Support Entire Market Value Damages

by Sydney E. McDermott | Oct 10, 2024 | Patents

The US Court of Appeals for the Federal Circuit concluded that the entire market value rule was not applicable where conclusory expert testimony was the only evidence that a product’s infringing features drove consumer demand, and therefore reversed. Provisur Techs., Inc. v. Weber, Inc., Case No. 23-1438 (Fed. Cir. Oct. 2, 2024) (Moore, C.J.; Taranto, Cecchi, JJ.)

Provisur sued Weber in the Western District of Missouri over three patents related to slicing and packaging meats and cheeses. The jury determined that Weber willfully infringed several claims of the three asserted patents and awarded damages. Following the trial, Weber moved for judgment as a matter of law (JMOL) on the issues of infringement and willfulness, and a new trial on infringement, willfulness, and damages. The district court denied Weber’s motion in its entirety. Weber appealed.

The Federal Circuit affirmed the district court’s judgment with respect to two of the asserted patents but reversed the infringement finding on the sole asserted claim of the third patent. Provisur’s infringement theory was that the consumer could program the device to infringe the limitations of the claim. However, at trial, Provisur provided no evidence that it was actually possible for the consumer to configure the device to practice the claim or that any consumer had ever done so. Some of the software necessary to be configured in an infringing manner was not accessible to the consumer. Instead, only Weber service technicians could access it. Provisur also proffered no evidence that the devices had ever actually been configured to infringe the claims, instead only offering evidence that the claims could have been infringed.

Next, the Federal Circuit assessed willfulness. Weber’s primary argument was that the district court improperly allowed expert testimony in violation of 35 U.S.C. § 298, which states that a party’s failure “to obtain the advice of counsel with respect to any allegedly infringed patent . . . may not be used to prove that the accused infringer willfully infringed the patent.” Provisur’s expert, who testified about industry standards for intellectual property management, “did not distinguish between legal and non-legal services when testifying about consulting a third party.” The Court concluded that that portion of the testimony was inadmissible and the remaining evidence could not support a finding of willfulness.

Finally, the Federal Circuit addressed the damages issue, specifically focusing on the reasonable royalty award. The infringing features were subparts of a larger accused product – which had many non-infringing features. The accused product contained multiple separate machines unrelated to the alleged invention.

Provisur’s royalty award was predicated on its use of the entire market value rule, where the base to which the royalty rate is applied is the cost of the entire accused product as opposed the cost of just the infringing part. The Federal Circuit noted that the entire market value rule is an acceptable theory, but it requires a showing that the infringing part “is the basis for customer demand.”

Provisur’s damages expert used the entire market value rule in calculating the [...]

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