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Patent Venue Statute Doesn’t Apply to Third-Party Counterclaim Defendant; Acts in Furtherance of Partnership May Be Imputed to Partner for Venue Purposes

by | Mar 24, 2022 |

The US Court of Appeals for the Federal Circuit affirmed a district court’s determination of proper venue, finding that the patent venue statute, 28 U.S.C. § 1400(b), does not apply to a third-party counterclaim defendant and that acts done by separate entities in furtherance of a partnership can be imputed to a partner for purposes of venue determination. The Federal Circuit also affirmed and reversed jury verdicts of adequate written description and patent co-ownership. BASF Plant Sci., LP v. Commonwealth Sci. and Indus. Rsch. Org., Case Nos. 20-1415; -1416; -1919; -1920 (Fed. Cir. Mar. 15, 2022) (Newman, Taranto, Chen, JJ.) (Newman, J., dissenting).

Commonwealth Scientific and Industrial Research Organisation (CSIRO), a research arm of the Australian government, owns six patents directed to the engineering of plants, particularly canola, to produce specified oils not native to the plants. BASF Plant Science is a plant biotechnology company. CSIRO and BASF each explored genetic modification of familiar oilseed crop plants, such as canola, to get them to produce omega-3 long-chain polyunsaturated fatty acids (LCPUFAs), commonly known as “fish oil,” that could be fed to farm-raised fish and are beneficial to human health. In 2007, CSIRO and BASF discussed a focused collaboration and in 2008 entered into a two-year Materials Transfer and Evaluation Agreement (MTEA) to advance that goal. In 2010, following the conclusion of the MTEA, CSIRO partnered with another Australian government entity, Grains Research and Development Corporation, and private company, Nuseed, to commercialize its products. CSIRO granted Nuseed an exclusive license to CSIRO’s LCPUFA technology and patents. In 2011, BASF entered into a commercialization agreement with Cargill. BASF developed a canola seed line that it used to apply for regulatory approvals, which Cargill used in cross-breeding work. As part of the joint project, BASF deposited seeds with the American Type Culture Collection (ATCC) to support BASF’s patent applications.

During this period, BASF and CSIRO entered negotiations for BASF to take a license to CSIRO’s LCPUFA technology, but the negotiations broke down. In 2016, Nuseed sent Cargill a letter identifying multiple CSIRO patents and inviting Cargill to discuss CSIRO’s omega-3 patent portfolio. In April 2017, BASF sued Nuseed in the District of Delaware, seeking a declaratory judgment that BASF did not infringe certain CSIRO patents listed in the 2016 letter. The District of Delaware dismissed the case for lack of jurisdiction.

In 2017, BASF filed a declaratory judgment action in the Eastern District of Virginia against CSIRO, Nuseed and Grains Research (collectively, CSIRO). CSIRO filed an answer and counterclaims asserting infringement of the asserted patents against BASF and Cargill. BASF entered the case as a party and asserted co-ownership of the asserted patents under the MTEA. Cargill moved to dismiss the counterclaims for lack of personal jurisdiction and improper venue. The district court denied the motion, determining that it had personal jurisdiction over Cargill and that venue was proper. Cargill did not dispute that it had a regular and established place of business in the Eastern District of Virginia but argued that it [...]

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Federal Circuit Sends iPhone Patent Dispute Back for Third Damages Trial

by | Feb 17, 2022 |

Considering numerous claim construction, infringement and damages issues related to patents allegedly covering Apple’s iPhones 5 and 6 series technology, a panel of the US Court of Appeals for the Federal Circuit determined that the district court should have held a third trial on damages because the plaintiff’s expert improperly treated the asserted patents as key during his analysis of purportedly comparable license agreements. Apple Inc. v. Wi-Lan Inc., Case No. 20-2011 (Fed. Cir.) (Moore, C.J.; Bryson, Prost, JJ.)

This appeal is the latest iteration of a patent dispute between Apple and Wi-Lan that has lasted eight years and included two trials. The two patents at issue are directed to bandwidth technology that allows a “subscriber unit” rather than the “base station” to allocate bandwidth. At issue in the appeal were numerous challenges from both Apple and Wi-Lan.

The Federal Circuit rejected Apple’s challenge to the district court’s construction of “subscriber unit,” which Apple claimed was limited to “customer premises equipment [CPE]” (e.g., home routers). Although Apple pointed to parts of the specification that suggested that a CPE was a subscriber unit, the Court found that no language met the heavy burden of a clear and unmistakable redefinition of “subscriber unit.” That the sole disclosed embodiment was a CPE did not move the needle, as nothing indicated that the embodiment was limiting.

Next, the Federal Circuit affirmed the jury verdict on liability, finding that substantial evidence supported the jury’s determination that the accused iPhones contained a subscriber unit. The Court found that a jury could conclude from expert testimony that an iPhone allocates bandwidth between two separate connections—voice-over-LTE and data.

Because of the appeal, Apple may now be on the hook for additional infringement liability. The district court had granted Apple summary judgment of noninfringement based on a license agreement between Intel (the maker of Apple’s processor chips in the accused products) and Wi-Lan. According to Apple, this agreement gave Intel a license through patent expiry rather than for the license term. The Federal Circuit rejected that reading of the license between Intel and Wi-Lan, instead finding that the license extended only to pre-termination sales, not in perpetuity as Apple claimed.

Finally, the Federal Circuit found that the district court correctly ordered a new trial on damages after the first trial in the case but erred by not ordering the new trial on damages based on expert testimony admitted at the second damages trial. Regarding the first damages trial, the Court rejected Wi-Lan’s challenge to the district court’s determination that Wi-Lan’s damages expert did not appropriately tie his damages opinion to the benefits of the patented technology. With respect to the second damages trial, the Court found that Wi-Lan’s damages expert gave improper testimony because, without tying his opinion to the facts of the case, he stated that the asserted patents were the “key” drivers of the royalty rates in other license agreements he relied upon—licenses that were to a much larger patent portfolio. Without a sound basis in evidence, [...]

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Federal Circuit Tosses Shaw: IPR Estoppel Applies to All Grounds That Reasonably Could Have Been Raised

by | Feb 17, 2022 |

March 2022 Update: The Federal Circuit has issued an errata to this decision. Read about it here.

Addressing inter partes review (IPR) estoppel after the Supreme Court of the United States’ 2018 decision in SAS Institute, Inc. v. Iancu, the US Court of Appeals for the Federal Circuit overruled its decision in Shaw Industries Group v. Automated Creel Systems, stating that the only plausible reading of 35 U.S.C. § 315(e)(2) estops a party from raising all claims and grounds that reasonably could have been included in the party’s petition for IPR. The Court also rejected the district court’s two-tier damages model as contrary to customary patent damages calculations. California Institute of Technology v. Broadcom Limited, Case Nos. 20-2222; 21-1527 (Fed. Cir. Feb. 4, 2022) (Lourie, Linn, Dyk, JJ.) (Dyk, J., dissenting in part).

Background

California Institute of Technology (Caltech) filed suit against Broadcom and Apple, alleging patent infringement directed to the generation and repetition of information in a wireless data transmission system. Wireless transmission systems generally use data repetition so that the transmitted information may be decoded even when data loss occurs. The patented circuitry discloses a form of irregular data repetition in which portions of the information bits may be repeated a varying number of times.

Apple filed multiple IPR petitions challenging the validity of the claims at issue. The Patent Trial & Appeal Board (Board) concluded in all cases that Apple failed to show that the challenged claims were unpatentable as obvious. At the district court, Apple and Broadcom raised new arguments of obviousness not asserted in the IPR proceedings. The district court granted Caltech’s motion for summary judgment of no invalidity, precluding Apple and Broadcom from raising arguments at trial that they reasonably could have raised in their IPR petitions.

At trial, the district court instructed the jury that “repeat” means “generation of additional bits, where generation can include, for example, duplication or reuse of bits.” Apple and Broadcom argued that the Broadcom chips (which were integrated into Apple devices) did not infringe the asserted claims because they did not repeat information at all. With respect to one of the asserted patents, the district court did not provide a jury instruction relating to its construction that the claim language “information bits appear in a variable number of subsets” requires irregular information bit repetition. The jury found infringement of all asserted claims. Apple and Broadcom filed post-trial motions for judgment as a matter of law (JMOL) and a new trial, both of which the district court denied.

The district court adopted Caltech’s proposed two-tier damages theory, explaining that Broadcom and Apple’s products were different and therefore possessed different values simply because they were “different companies at different levels in the supply chain.” The district court ultimately entered judgment against Broadcom for $288 million and against Apple for $885 million. Broadcom and Apple appealed.

The Appeal

Broadcom and Apple argued that the district court’s construction of “repeat” was inconsistent with the claim language and specification. The Federal Circuit [...]

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Can’t Overturn Jury Verdicts Based on Reasonable Inferences, but Broad Injunction Is Nonstarter Even for Willfully Misappropriated Trade Secrets

by | Jan 6, 2022 |

In a rare appellate trade secret opinion, the US Court of Appeals for the Eleventh Circuit affirmed a district court’s denial of a defendant’s request for a new trial on liability and its refusal of the plaintiff’s requested injunction. It also reversed in part the district court’s denial of judgment as a matter of law (JMOL) on damages for clear error because the plaintiff failed to deduct marginal costs when calculating lost profits. Financial Information Technologies v. iControl Systems, Case No. 20-13368 (11th Cir. Dec. 22, 2021) (Jordan, Newsom, JJ., and Burke, Distr J.).

Competitors Financial Information Technologies (Fintech) and iControl Systems both sell software that processes alcohol sales invoices within 24 hours. Fintech was a lone operator for several years until iControl started servicing the alcohol industry and began selling a very similar product at a lower price point. After Fintech lost its vice president of operations (who was very involved in designing Fintech’s software), a sales representative and several customers to iControl, Fintech filed suit alleging misappropriation of trade secrets. The jury ruled in Fintech’s favor and awarded compensatory and punitive damages. iControl sought a new trial on liability, contending that Fintech’s alleged trade secrets were readily ascertainable and not “secret,” and JMOL on damages since Fintech hadn’t proved lost profits because it hadn’t deducted fixed and marginal costs from its lost revenue calculations. Fintech sought a permanent injunction prohibiting iControl from using either company’s software. The district court denied all three motions, and both parties appealed.

As to the jury verdict, the Eleventh Circuit noted that jury liability findings are generally difficult to overturn, and that the verdict was general and nonspecific regarding which of the seven alleged trade secrets iControl had misappropriated, so Fintech only needed to show evidence under the Florida Uniform Trade Secrets Act (FUTSA) of misappropriation as to one. iControl also did not move for JMOL on liability, and therefore, under the abuse-of-discretion standard of review, the Court could only overturn if “there is an absolute absence of evidence to support the verdict.” However, the Court found that Fintech and its witness presented sufficient evidence at trial to permit a reasonable jury to find that Fintech possessed at least one of the seven alleged trade secrets and that it was misappropriated. The evidence included emails indicating that its former vice president helped iControl discover Fintech’s internal processes to aid software developments, assisted iControl’s chief technology officer in troubleshooting issues in a manner similar to Fintech, shared screenshots of Fintech’s user portal and prompted customers to switch to iControl.

Similarly, the Eleventh Circuit found that the jury reasonably could have inferred from the evidence that iControl schemed to hire Fintech employees to misappropriate Fintech’s software features—an act that demonstrated willfulness.

After assessing the meanings of fixed and marginal costs and the properly fact-intensive revenue and profits figures of the businesses, the Eleventh Circuit agreed that the jury was not required to deduct Fintech’s fixed costs from its revenues to arrive at a proper “actual [...]

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One for All, and All for One . . . Except When It Comes to Patent License Comparability

by | Sep 30, 2021 |

Examining whether portfolio patent licenses can be sufficiently comparable to a single-patent license for the purposes of supporting a patent damages verdict, a split panel of the US Court of Appeals for the Federal Circuit concluded that, at least without accounting for distinguishing features, the answer is no. Omega Patents, LLC v. CalAmp Corp., Case No. 20-1793 (Fed. Cir., Sept. 14, 2021) (Prost, J.)

The most recent decision was the result of a second jury trial, after the Federal Circuit previously ordered a new trial. At issue in this appeal were certain direct-infringement findings, admission of technical expert testimony and the underlying damages determination. Multiple errors were raised regarding the latter, the most significant of which was the court’s apportionment analysis.

At trial, the jury awarded a royalty of $5 per unit to Omega for CalAmp’s infringement of a single patent that covered multi-vehicle tracking units. On appeal, CalAmp contended that patent damages law required apportionment, and that the evidence was insufficient to support apportionment. Judge Prost, joined by Judge Dyk, agreed, while Judge Hughes dissented in part.

First, the Federal Circuit rejected Omega’s argument that apportionment was unnecessary because all parts of the infringing units were covered by the claims. According to the Court, even where all elements of the infringing unit are claimed, a patentee still must approximate the value of the patented features as compared to the conventional, pre-existing elements. Thus, the jury could not, as a matter of law, merely value the entire unit.

Next, the Federal Circuit held that Omega could not rely on the entire-market-value rule to support its damages verdict. That rule permits a patentee to value the infringement where the patented feature drove demand for the entire product. But on the record here, it was undisputed that other conventional elements contributed to sales of the underlying product. At most, the record indicated that the patent technology was important or helpful—which was insufficient to show that it actually drove sales.

Lastly, Omega contended that its royalty was supported by licensing evidence, which included (1) Omega’s president’s testimony that its policy was to license its entire portfolio for a certain amount regardless of the number of patents included at the time of licensing, and (2) 18 license agreements consummated by Omega, some of which included the patent at issue. For both items, the Federal Circuit found evidence of apportionment lacking. To the first claim (i.e., that Omega would not have hypothetically licensed on a patent-by-patent basis), the Court concluded that crediting such testimony would serve as an end-run around the apportionment requirement because it did not approximate the value of the specific patent at issue. So too with the 18 license agreements, many of which identified a portfolio that included almost 50 additional patents. And although the damages expert identified the portfolio feature as distinguishing, the expert’s failure to explain how to separate out the value of the individually asserted patent was fatal.

In dissent, Judge Hughes would have permitted the conventional, more [...]

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Damage Expert Testimony Excluded for Failure to Disclose Evidence and to Apportion

by | Sep 9, 2021 |

The US Court of Appeals for the Federal Circuit affirmed a district court’s decision to preclude a damage expert from characterizing license agreements and opining on a reasonable royalty rate where the sponsoring party failed to produce key documents and to apportion for non-patented features. MLC Intellectual Property, LLC v. Micron Technology, Inc., Case No. 20-1413 (Fed. Cir. Aug. 26, 2021) (Stoll, J.)

MLC sued Micron for infringing claims of a patent relating to programing multi-level memory cells. In his expert report, MLC’s damage expert, Michael Milani, attempted to reconstruct the hypothetical negotiation. Milani opined on two separate approaches to determining the royalty base: A comparable license and the smallest saleable patent practicing unit.

Milani considered each of the Georgia-Pacific factors to determine a reasonable royalty rate. He determined that a Hynix Semiconductor license agreement was relevant, notwithstanding that it required a lump sum payment for a non-exclusive license to a patent portfolio containing the asserted patent rather than a royalty rate. Milani relied on a most favored customer provision that contemplated Hynix paying less for the patents if the licensor granted a license at a royalty rate of less than 0.25% to any new licensee to arrive at his royalty rate. Milani applied this rate to another lump sum agreement MLC had with Toshiba Corporation. To support his opinion, Milani relied on extrinsic evidence, including summaries of negotiations involving the asserted patent and another alleged infringer and letters and memorandums with other licensees—all contemplating a 0.25% royalty rate. Micron moved to exclude Milani’s testimony.

Micron filed a motion in limine to preclude Milani from mischaracterizing the license agreements as reflecting a 0.25% royalty rate. Micron moved to strike portions of Milani’s expert report under Fed. R. Civ. Pro. 37 as based on facts, evidence and theories that MLC disclosed for the first time in its damage expert report. Micron further filed a Daubert motion, seeking to exclude Milani’s reasonable royalty opinion for failure to apportion out the value of non-patented features. The district court granted all three motions.

The district court rejected Milani’s reliance on the most favored customer provision in the Hynix agreement for the 0.25% royalty rate, finding that the provision did not apply the rate to the lump sum nor did it provide any insight into how the lump sum was calculated. The district court also determined that Milani did not base his testimony on sufficient facts or data, and his opinion was not the product of reliable principles and methods. Finally, the district court found that MLC did not disclose the extrinsic evidence relied on by Milani to reflect the 0.25% rate, and therefore MLC could not rely on that evidence. Lastly, the district court determined that there was no evidence supporting Milani’s opinion that the 0.25% rate apportioned non-patented features of the accused products. MLC filed an interlocutory appeal.

The Federal Circuit found that Milani’s testimony relating to the 0.25% royalty rate rested on an inference from the most favored customer clause that went [...]

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Injunctive Relief Available Even Where Laches Bars Trademark Infringement, Unfair Competition Damage Claims

by | Aug 12, 2021 |

The US Court of Appeals for the 11th Circuit affirmed a district court’s conclusion that laches barred an advertising and marketing company’s claims for monetary damages for trademark infringement and unfair competition, but remanded the case for assessment of injunctive relief to protect the public’s interest in avoiding confusion between two similarly named companies operating in the advertising sector. Pinnacle Advertising and Marketing Group, Inc. v. Pinnacle Advertising and Marketing Group, LLC, Case No. 19-15167 (11th Cir. Aug. 2, 2021) (Branch, J.)

Pinnacle Advertising and Marketing Group (Pinnacle Illinois) is an Illinois-based company and owner of two registered trademarks including the name “Pinnacle.” Pinnacle Illinois learned of a Florida-based company operating under almost the same name that was also in the advertising and marketing space—Pinnacle Advertising and Marketing Group (Pinnacle Florida) —through potential clients and a magazine’s accidental conflation of the two unrelated companies. Several years later, Pinnacle Illinois sued Pinnacle Florida for trademark infringement, unfair competition and cybersquatting. Pinnacle Florida filed a counterclaim seeking to cancel Pinnacle Illinois’s trademark registrations and also alleged that Pinnacle Illinois’s claims were barred by the doctrine of laches.

Following a jury trial, the district court granted Pinnacle Florida’s motion for judgment as a matter of law on Pinnacle Illinois’s cybersquatting claim. The jury returned a verdict in favor of Pinnacle Illinois on its claims for trademark infringement and unfair competition, awarding Pinnacle Illinois $550,000 in damages. The district court then granted Pinnacle Florida’s motion for judgment as a matter of law on its laches defense, concluding that Pinnacle Illinois’s trademark infringement and unfair competition claims were barred by laches because it waited more than four years to bring suit after it should have known that it had a potential infringement claim against Pinnacle Florida. The district court also cancelled Pinnacle Illinois’s registrations because it concluded that Pinnacle Illinois’s marks were merely descriptive and lacked secondary meaning. Pinnacle Illinois appealed.

Pinnacle Illinois argued that the district court abused its discretion in finding that Pinnacle Illinois’s claims were barred by laches, and that even if laches did bar Pinnacle Illinois’s claims for money damages, the district court should have considered whether injunctive relief was proper to protect the public’s interest in avoiding confusion between the two companies. Pinnacle Illinois also argued that the district court erred when it cancelled its registrations without regard to the jury’s findings of distinctiveness and protectability or the presumption of distinctiveness afforded to its registered marks.

The 11th Circuit found that the district court did not abuse its discretion in determining that laches barred Pinnacle Illinois from bringing its trademark infringement and unfair competition claims for monetary damages. Pinnacle Illinois sued after the Florida four-year statute of limitations had passed, and the Court found that the company was not excused for its delay because it did not communicate with Pinnacle Florida about the infringement until it filed suit. Pinnacle Florida also suffered economic prejudice because it invested significant time and money, including around $2 million, in developing its business under [...]

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Knowledge of Patent, Evidence of Infringement Are Necessary, but Not Sufficient, to Establish Willfulness

by | Mar 11, 2021 |

Addressing claim construction, enablement, damages and willfulness, the US Court of Appeals for the Federal Circuit found that evidence of a defendant’s knowledge of the asserted patent and proof of infringement were, by themselves, legally insufficient to support a finding of willfulness. Bayer Healthcare LLC v. Baxalta Inc., Case No. 19-2418 (Fed. Cir. Mar. 1, 2021) (Stoll, J.)

Bayer owns a patent on certain recombinant forms of human factor VII (FVIII), a protein that is critical for blood coagulation. Recombinant FVIII is useful as a treatment for coagulation disorders, primarily Hemophilia A. Natural FVIII has a short half-life, making therapeutic administration expensive and inconvenient. Adding polyethylene glycol (a process known as PEGylating) to FVIII at random sites was found to increase the protein’s half-life but reduce its function. Bayer invented FVIII that is PEGylated in a specific region (the B-domain) so that it retains its function and maintains the longer half-life.

After Baxalta developed a PEGylated FVIII therapeutic, Adynovate®, Bayer sued Baxalta for infringement of its patent. During claim construction, the district court construed the claim preamble “an isolated polypeptide conjugate” to mean “a polypeptide conjugate where conjugation was not random,” finding that Bayer had disclaimed conjugates with random PEGylation. The district court also construed “at the B-domain” to mean “attachment at the B-domain such that the resulting conjugate retains functional FVIII activity,” rejecting Baxalta’s proposal of “at a site that is not any amine or carboxy site in FVIII and is in the B-domain” because Bayer had not disclaimed PEGylation at amine or carboxy sites. Before trial, Baxalta moved for clarification of the term “random” in the construction of the preamble, but the district court “again” rejected Baxalta’s argument that Bayer defined “random” conjugation as “any conjugation at amines or carboxy sites.”

Before trial, Baxalta moved to exclude the testimony of Bayer’s damages expert regarding his proposed reasonable-royalty rate. The expert had defined a bargaining range and proposed to testify that the royalty rate should be the midpoint of the range based on the Nash Bargaining Solution. The district court permitted the expert to testify as to the bargaining range but excluded the opinions regarding the midpoint as insufficiently tied to the facts of the case.

After trial, the district court granted Baxalta’s pre-verdict motion for judgment as a matter of law (JMOL) of no willful infringement. Subsequently, the jury returned a verdict that the claims were infringed and not invalid for non-enablement, and awarded damages based on an approximately 18% royalty rate for the period for which the parties had presented sales information. Baxalta moved for JMOL or a new trial on infringement, enablement and damages. Bayer moved for pre-verdict supplemental damages for the period between the presented sales data and the date of judgment, and for a new trial on the issue of willfulness. The district court denied all of Baxalta’s motions and Bayer’s motion for new trial, but granted Bayer’s motion for supplemental damages, applying the jury’s ~18% rate to sales data for the later period. [...]

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Apportionment Unnecessary When Royalty Is Based on Comparable License

by | Dec 3, 2020 |

Rejecting a defendant’s request for a new trial on a variety of grounds, the US Court of Appeals for the Federal Circuit affirmed a damages award and explained that apportionment was unnecessary because a sufficiently comparable license was used to determine the appropriate royalty. Vectura Ltd. v. GlaxoSmithKline LLC et al., Case No. 20-1054 (Fed. Cir. Nov. 19, 2020) (Prost, C.J.)

Vectura owns a patent directed to the production of composite active particles for use in pulmonary administration, such as in dry-powder inhalers. Vectura filed a lawsuit against GlaxoSmithKline (GSK) alleging infringement of the patent by GSK’s Ellipta-brand inhalers. At trial, a jury found the patent valid and infringed, and awarded $90 million in damages. After GSK’s motion for judgment as a matter of law (JMOL) on infringement was denied, GSK appealed.

The Federal Circuit affirmed, rejecting all of GSK’s arguments. The Court rejected GSK’s argument that, based on a claim construction issue, it was entitled to JMOL of non-infringement. The asserted claims of the patent related to “composite active particles” made up of particulate additive material (magnesium stearate) on the surface of a particle of active material, used to promote the dispersion of these particles (in, e.g., inhalers). GSK argued that there was no substantial evidence of improved dispersion because Vectura’s scientific test was technically defective. The Court concluded that this test “generally supported” Vectura’s view and that, in any event, Vectura had provided other evidence—including GSK’s own documents—that the accused inhalers demonstrated improved dispersion.

The Federal Circuit also rejected GSK’s argument that the district court had erroneously construed the claim term “composite active particles” to mean “[a] single particulate entit[y/ies] made up of a particle of active material to which one or more particles of additive material are fixed such that the active and additive particles do not separate in the airstream.” GSK argued that this term required use of the “high energy milling” process referred to in the specification of the patent, but the Federal Circuit disagreed, stating that “[a]lthough the [asserted] patent contains a few statements suggesting that its high-energy milling is required . . . those statements are outweighed by the numerous statements indicating that high-energy milling is merely a preferred process.”

The Federal Circuit further rejected GSK’s argument that Vectura’s damages theory was deficient. Vectura’s damages theory was based on a 2010 license between the parties relating to highly comparable technology. GSK argued that Vectura’s damages theory simply adopted the royalty rate from this prior license wholesale and failed to “show that the patented . . . mixtures drove consumer demand for the accused inhalers before presenting a damages theory based on the entire market value of the accused inhalers.” The Court noted that the case presented a “rather unusual circumstance” in that, while apportionment is ordinarily required where an entire-market-value royalty base is inappropriate, “when a sufficiently comparable license is used as the basis for determining the appropriate royalty, further apportionment may not necessarily be required.” The Court concluded that this was “one [...]

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Too Good to Be True? Federal Circuit Demands Evidence of Reliance on Favorable Ruling, Stipulation

by | Nov 4, 2020 |

The US Court of Appeals for the Federal Circuit held that notwithstanding a stipulation on claim construction, a party may still induce infringement absent proof that it actually relied on the stipulation, and that mere inaction, absent an affirmative act to encourage infringement, cannot be the basis for a claim of inducement. The Federal Circuit also affirmed the district court’s reduction of the jury’s damages award to $0 despite a finding of direct infringement because the plaintiff failed to prove damages. TecSec, Inc. v. Adobe Inc., Case Nos. 19-2192, -2258 (Fed. Cir. Oct. 23, 2020) (Taranto, J.).

TecSec owns several patents on systems and methods for multi-level security for network-distributed files. TecSec sued Adobe (among other defendants) in this now-10-year-old-case, which the Federal Circuit has considered several times. As relevant here, the district court entered a claim construction in 2011 that led to a stipulation of non-infringement, and the Federal Circuit reversed that claim construction in 2013. On remand, the district court barred TecSec from introducing evidence of inducement in the 2011–2013 period on the grounds that it was reasonable for Adobe to have relied on the district court’s ruling and the stipulation. On the new claim construction, Adobe stipulated to one act of direct infringement. Adobe also moved for summary judgment of patent ineligibility, which the district court denied, stating that its rationale supported judgment for TecSec that the patents claimed eligible subject matter. At trial, the jury found that the claims were valid and that Adobe directly infringed but did not induce infringement. The jury awarded TecSec $1.75 million in damages. On Adobe’s post-trial motion, the district court reduced the damages award to $0 because TecSec had not proved inducement and had proved no damages associated with the single act of direct infringement. Both parties appealed.

Inducement

The Federal Circuit reversed the district court’s decision on Adobe’s motion in limine barring inducement evidence for the 2011–2013 period. The district court’s primary rationale for granting the motion had been the reasonableness of Adobe’s reliance on the claim construction order and stipulation of non-infringement. However, the Federal Circuit reasoned that the intent prong of inducement is a subjective inquiry, and that inducement could still be found upon a showing that Adobe subjectively believed that the claim construction order was wrong and would subsequently be reversed.

Jury Instructions

The Federal Circuit next addressed two challenges by TecSec to jury instructions. The first instruction was predicated on three facts: (i) that Adobe had admitted that a certain sequence of steps constituted direct infringement, (ii) that Adobe had performed the steps on at least one occasion, and (iii) that “the parties agree that the one time for which Adobe had admitted infringement . . . occurred before TecSec filed its lawsuit.” The Court found that this instruction was factually accurate and therefore not erroneous. The second instruction explained that inducement required “an affirmative act to encourage infringement,” and that “[e]vidence of mere inaction, or a failure to stop or prevent infringement, does not [...]

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