US Court of Appeals for the Federal Circuit Archives

US Court of Appeals for the Federal Circuit

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

by Christopher M. Bruno | Sep 30, 2021 | Patents

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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No Second Bite at the Apple: Injury Must Be Imminent and Non-Speculative to Support Standing

by McDermott Will & Emery | Apr 15, 2021 | Patents

The US Court of Appeals for the Federal Circuit ruled that a party did not have Article III appellate standing to obtain review of a final ruling of the Patent Trial & Appeal Board because the underlying district court proceedings had been dismissed with prejudice after a settlement and license agreement were reached. Apple Inc. v. Qualcomm Inc., Case Nos. 20-1561; -1642 (Fed. Cir. Apr. 7, 2021) (Moore, J.)

After Qualcomm sued Apple in district court, Apple filed petitions for inter partes review (IPR) of the asserted patent claims. The Board instituted on both petitions but found that Apple did not prove the challenged claims were obvious. Apple appealed the Board’s final written decisions finding non-obviousness.

While the IPR proceedings were pending, the parties settled their litigation worldwide. The settlement included a license to Apple and payment of royalties to Qualcomm. The parties filed a joint motion to dismiss Qualcomm’s district court action with prejudice, which the district court granted.

At the Federal Circuit, Qualcomm argued that Apple waived any argument to establish its appellate standing by failing to address or submit supporting evidence in its opening brief. However, the Federal Circuit exercised its discretion to reach the issue of standing, explaining that the issue of standing was fully briefed, there was no prejudice to Qualcomm, and the question of standing impacted these and other appeals. Qualcomm sought leave to file a sur-reply addressing Apple’s evidence and arguments on standing, and agreed that if its motions to file a sur-reply were granted, it would not suffer any prejudice, and that evaluating the evidence may resolve standing in other pending cases. The Court granted Qualcomm leave to file a sur-reply.

Apple argued that it had appellate standing based on its ongoing payment obligations that conditioned certain rights in the license agreement, the threat that Apple would be sued for infringing the two patents-at-issue after the expiration of the license agreement, and the estoppel effects of 35 USC § 315 on future challenges to the validity of the asserted patents. The Federal Circuit disagreed.

LICENSE RIGHTS

Distinguishing the 2007 Supreme Court case MedImmune v. Genentech (where standing was found based on license agreement payment obligations after analyzing evidence for injury in fact or redressability), the Federal Circuit explained that Apple did not allege that the validity of the patents-at-issue would affect its contract rights and ongoing royalty obligations. The license agreement between the parties involves tens of thousands of patents. Apple did not argue or present evidence that the validity of any single patent (including the two patents-at-issue) would affect its ongoing payment obligations, or identify any related contractual dispute that could be resolved through determining the patents-at-issue’s validity. Accordingly, the Court concluded that Apple failed to establish Art. III standing under MedImmune.

THREAT OF POST-LICENSE SUITS

Apple’s second argument was based on the possibility that Qualcomm might sue Apple for infringing the patents-at-issue after the license expired. The Federal Circuit found the mere possibility of any such suit [...]

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If it’s Not Legit, You Can’t Admit

by Paul Devinsky | Apr 15, 2021 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court ruling of non-infringement based on the inadmissibility of unauthenticated printouts of source code as evidence. Wi-LAN Inc. v. Sharp Elecs. Corp., Case No. 20-1041 (Fed. Cir. Apr. 6, 2021) (Dyk, J.)

In 2015, Wi-LAN brought two separate patent infringement suits against Sharp Electronics and Vizio, both of which alleged direct and induced infringement of various claims of two Wi-Lan patents. The cases were managed in parallel by the district court, but consolidated on appeal. In both cases, the district court entered a stipulation of non-infringement with respect to one of the patents, which “relates generally to multimedia encoders and specifically [to] an integrated multimedia stream multiplexer,” based on Wi-LAN’s concession that it could not prove infringement under the district court’s construction of two claim terms. On appeal, the Federal Circuit had little difficulty concluding that the district court’s constructions were correct and affirming its ruling of non-infringement.

With respect to the other patent, the district court granted summary judgment of non-infringement, holding that Wi-LAN lacked sufficient admissible evidence to prove direct infringement. The involved patent is directed to “methods to display interlaced video on [a] noninterlaced monitor,” also known as “deinterlacing.” The deinterlacing functions of Sharp and Vizio’s televisions reside on each of the television’s “system-on-chip.” To establish that the source code underlying these deinterlacing functions practiced the patented methods, Wi-LAN filed (and subsequently dismissed without prejudice) additional lawsuits against third-party chip manufacturers from which it obtained source code printouts—purportedly reflecting the implementation of the deinterlacing process in a specified list of chips used in Sharp and Vizio’s televisions—along with declarations from employees of the manufacturers purporting to authenticate the source code printouts. The district court held that the source code printouts were inadmissible and that Wi-LAN therefore had failed to raise a genuine issue of material fact as to non-infringement. On appeal, Wi-LAN presented three theories as to why the district court erred in finding this evidence inadmissible, all of which the Federal Circuit rejected.

First, Wi-LAN argued that the source code printouts constituted a business record and thus were admissible as an exception to the hearsay rule under Federal Rule of Evidence 803(6). Specifically, Wi-LAN argued that it properly authenticated the printouts through the declarations of the chip manufacturers’ employees. The Federal Circuit acknowledged that declarations are typically used at summary judgment as a proxy for trial testimony, but explained that they cannot be used that way unless the witness would also be available to testify at trial. Because Wi-LAN conceded that it did not think it would be able to force the chip manufacturers’ employees to testify at trial, the Court found that the declarations could not be used as a substitute for trial testimony to authenticate the printouts and that the printouts therefore were not properly authenticated pursuant to Rule 803(6)(D).

Wi-LAN also argued that the declarations themselves constituted a business record. Because they were procured specifically for the purpose of litigation, however, [...]

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First-to-File Rule Requires That Action Could Have Been Brought in Transferee Forum

by Paul Devinsky | Mar 11, 2021 | Patents

After issuing a rare grant of a mandamus petition directing a district court to stay proceedings until ruling on a pending motion to transfer, the US Court of Appeals for the Federal Circuit denied a subsequent mandamus petition to compel transfer after that district court denied the transfer. In re SK hynix Inc., Case No. 21-114 (Fed. Cir. Feb. 25, 2021) (Taranto, J.) (non-precedential). The Federal Circuit found that the doctrine of forum non conveniens and the first-to-file rule did not establish a basis for transfer because the action could not have initially been brought in the transferee forum and the patentee’s prior filings in that forum did not give consent for subsequently filed actions.

Netlist and SK hynix are competitors in the memory semiconductor space. Netlist sued SK hynix for patent infringement in the US District Court for the Western District of Texas. SK hynix moved to transfer the case to the US District Court for the Central District of California. With no ruling after eight months (while the case continued to move forward), SK hynix sought mandamus from the Federal Circuit to compel the district court to transfer the case. The Federal Circuit declined to transfer the case and instead stayed the district court proceedings until the district court ruled on the transfer motion. The district court then denied the transfer motion, rejecting SK hynix’s arguments that the doctrine of forum non conveniens and the first-to-file rule required transfer to the Central District of California. The district court also advanced the Markman hearing and trial dates. SK hynix again sought mandamus from the Federal Circuit to compel transfer and requested a stay of the district court proceedings because of the advanced Markman and trial dates.

Applying Fifth Circuit law, the Federal Circuit denied the mandamus petition, concluding that SK hynix had not shown that the district court clearly abused its discretion in denying the transfer motion. On the forum non conveniens issue, the Court found no clear abuse in the district court’s determination that SK hynix did not meet the threshold conditions for transfer under 28 USC § 1404(a), namely that the action “might have been brought” in the Central District of California or that, in the alternative, all the parties had consented to that venue for the action. As to the “might have been brought” inquiry, the Court found that the district court properly focused on whether the action might have been brought against SK hynix America, a domestic entity subject to the venue requirements of 28 USC § 1404(b) and headquartered in the Northern District of California, rather than SK hynix, a foreign entity not subject to the same venue requirements. The Court also found that SK hynix did not differentiate between the foreign and domestic SK hynix entities in its transfer motion. This was not an action that might have been brought against SK hynix in the Central District of California because SK hynix America lacked sufficient presence there to confer venue under [...]

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Corresponding Structure Necessary to Support ‘Module’ Claim Element

by Paul Devinsky | Mar 11, 2021 | Patents

In determining whether a claim element invoked 35 USC § 112, ¶ 6, the US Court of Appeals for the Federal Circuit concluded that “module” was a nonce term and required sufficient corresponding structure in the patent specification to avoid indefiniteness under 35 USC § 112, ¶ 2. Rain Computing, Inc. v. Samsung Electronics Co., Ltd., Case Nos. 20-1646, -1656 (Fed. Cir. Mar. 2, 2021) (Moore, J.)

Rain sued Samsung for infringement of a patent directed to a method for delivering software application packages to user terminals over a network. The claims at issue included an element that recited a “user identification module configured to control access [to] software application packages.” The district court determined that the “user identification module” was a means-plus-function term subject to 35 USC § 112, ¶ 6, but that the specification disclosed sufficient corresponding structure such that the term was not indefinite. Rain appealed the judgment of non-infringement.

Reviewing de novo, the Federal Circuit first addressed whether the claim language invoked § 112, ¶ 6. While there is a rebuttable presumption that ¶ 6 does not apply to claims lacking “means” language, the Court noted that “module” does not provide any indication of structure and is a well-known substitute for “means.” No other claim language, including the “user identification” prefix, imparted any structure onto the term. For purposes of claim construction, the specification also did not impart any structure to the claimed user identification module. Rain argued that amendments and examiner arguments during prosecution were proof of sufficient structure, and that, as the examiner noted, a means-plus-function term cannot be nested within a method claim. The Federal Circuit disagreed, noting that the examiner’s statement that a means-plus-function claim element cannot be nested within a method step was simply incorrect as a matter of law. Thus the Court found that “user identification module” was a means-plus-function claim term.

Citing to its 2015 en banc ruling in Williamson v. Citrix Online, the Court turned to the term’s construction under §112, ¶ 6, applying the same two-step process it used just a few weeks earlier in Synchronoss Technologies v. Dropbox. In the first step, the Court simply used the district court’s undisputed finding that the function was “to control access to . . . software packages to which the user has a subscription.” In the second step, the Court attempted to identify corresponding structure in the specification. Here the Court noted that structure in a specification corresponds only if there is a clear link or association, and that the specification must also disclose an actual algorithm when the function is performed by a general-purpose computer.

The Federal Circuit concluded that the district court erred in finding that the disclosure of a storage device provided sufficient structure, explaining that such devices are nothing more than general purpose computers not capable of performing the access control function without specialized software—an algorithm. Rain’s patent specification disclosed no such algorithm, without which the “user identification module” lacked sufficient structure. Thus [...]

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Ahoy There: If License Terms Not Clearly Intended to Be a Condition Precedent, It’s a Covenant

by Paul Devinsky | Mar 4, 2021 | Copyrights

The US Court of Appeals for the Federal Circuit held that the US Court of Federal Claims erred by failing to consider defendant’s non-compliance with the terms of an implied license, vacating the claims court’s finding of non-infringement and remanding the case for a calculation of damages. Bitmanagement Software GmbH v. U.S., Case No. 20-1139 (Fed. Cir. Feb. 25, 2021) (O’Malley, J.) (Newman, J., concurring).

Bitmanagement Software filed suit against the US government for infringement of its copyrighted graphics-rendering software, BS Contact Geo. The claims court found that Bitmanagement had established a prima facie case of copyright infringement based on the US Navy’s copying of the software onto all computers in the Navy Marine Corps Intranet, but found that the Navy was not liable for infringement because Bitmanagement had granted the Navy an implied license to make such copies. Bitmanagement appealed, arguing that:

The claims court erred in finding an implied-in-fact license between the parties.
An implied-in-fact license was precluded as a matter of law.
Even if an implied-in-fact license existed, the claims court erred by failing to consider whether the Navy had complied with the terms of the license.

The Federal Circuit did not disturb the claims court’s findings with respect to the existence of an implied license authorizing the Navy to make copies of Bitmanagement’s software.

The Federal Circuit further declined to apply its preclusion rule as set forth in Seh Ahn Lee, i.e., that “the existence of an express contract precludes the existence of an implied-in-fact contract dealing with the same subject matter,” because the Navy and Bitmanagement never actually entered into an express contract with one another. Rather, both parties entered into express contracts with a third party, Planet 9, through which they intentionally chose to conduct their business. The express contracts “do not capture or reflect the discussions that occurred between the Navy and Bitmanagement directly,” nor do they cover the topic of the implied license between the parties, “i.e., the license to copy BS Contact Geo onto all Navy computers.”

With respect to Bitmanagement’s claim that the Navy failed to comply with the terms of the implied license, the Court considered whether a term requiring the Navy’s use of Flexera, a license-tracking software, was a condition that limited the scope of the license, or merely a covenant. The Court explained that a term of a license is presumed to be a covenant—addressable only in contract—rather than a condition, unless it is clear that the term was intended to be a condition precedent. Accepting the lower court’s factual findings that “Bitmanagement agreed to [the] licensing scheme because Flexera would limit the number of simultaneous users of BS Contact Geo, regardless of how many copies were installed on Navy computers,” the Court found that the required use of Flexera was a condition of the license. The Court found there was no reason Bitmanagement would have entered into an implied license that allowed mass copying of its software without the use of Flexera because, absent [...]

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Chill: Full Recoupment of Investment Not a Bar to Equitable Intervening Rights

by A. Shane Nichols | Mar 4, 2021 | Patents

The US Court of Appeals for the Federal Circuit affirmed the district court’s grant of summary judgment of equitable intervening rights, protecting an alleged infringer from liability for activity that would otherwise infringe patent claims that were substantively and substantially altered during re-examination of the patent. John Bean Technologies Corp. v. Morris & Associates, Inc., Case No. 20-1090, -1148 (Fed. Cir. Feb. 19, 2021) (Reyna, J.)

John Bean and its only domestic competitor, Morris, manufacture chillers for processing poultry. John Bean told its customers that Morris’s competing chillers infringed John Bean’s patent. Morris sent John Bean a letter demanding that it stop making infringement allegations, and identifying prior art that Morris contended rendered the patent invalid. John Bean never responded to Morris’s demand letter, and Morris continued to manufacture and sell its competing poultry chillers.

Eleven years later, John Bean submitted its patent for ex parte re-examination. During reexamination, John Bean’s only original claims were substantively and substantially amended. After its reexamination certificate issued, John Bean sued Morris for infringement.

In 2016, the district court granted Morris’s motion for summary judgment with respect to the affirmative defense of equitable estoppel. The Federal Circuit reversed on appeal, holding that equitable estoppel did not apply because Morris’s unanswered demand letter related solely to the patent’s original claims and not to the altered and new claims that Morris was accused of infringing in the later-filed suit.

On remand, the district court granted Morris’s motion for summary judgment that John Bean’s infringement claims were barred by equitable intervening rights. The district court weighed seven factors in analyzing Morris’s equitable intervening rights defense and found that Morris engaged in substantial preparation prior to the re-examination, including years of research and development, and the conversion of almost two-thirds of its business to selling the accused chillers. The district court also found that John Bean acted in bad faith by failing to dispute Morris’s contentions of invalidity until after Morris had built its business manufacturing and selling the chillers accused of infringement. John Beam appealed.

Under 35 USC § 252, a court has the discretion to permit an accused infringer to continue to manufacture and sell an otherwise infringing product if the accused infringer made substantial preparation to commercialize the product prior to the re-examination of the patent. The policy rationale underlying equitable intervening rights is that the public has a right to use anything that is not specifically claimed in the original patent. John Bean’s suit only accused Morris of infringing claims that were added or substantially altered during re-examination.

In the present appeal, John Bean argued that the district court improperly weighed several of the equitable intervening rights factors. In particular, John Bean argued that the district court failed to give sufficient weight to the fact that Morris had already recouped the cost of its substantial preparations through sales of its otherwise infringing chiller, and was thus not entitled to the equitable remedy Morris sought from the court.

The Federal Circuit rejected John Bean’s [...]

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Doesn’t Scan: Skin Cancer Detection Device Just Combination of Familiar Elements

by Paul Devinsky | Feb 25, 2021 | Patents

The US Court of Appeals for the Federal Circuit overturned a finding of non-obviousness of certain claims relating to a device for the detection of skin cancer, finding that the Patent Trial & Appeal Board erred in applying the law of obviousness. Canfield Scientific, Inc. v. Melanoscan, LLC, Case No. 19-1927 (Fed. Cir. Feb. 18, 2021) (Newman, J.)

Canfield Scientific filed a petition for inter partes review challenging the validity of claims of a Melanoscan patent as obvious in view of several prior art references. After the Board upheld the validity of the challenged claims, Canfield appealed.

The device disclosed in the patent is “an enclosure fitted with cameras and lights arranged in a manner that allows for imaging of [all or part] of non-occluded body surfaces in order to detect health and cosmetic disease.” The two challenged independent claims both required:

An enclosure configured to receive a person or portion thereof, wherein the enclosure defines a specified imaging position for placing the person or portion thereof within the enclosure
A plurality of imaging devices, wherein the plurality of imaging devices are vertically spaced relative to each other, a plurality of the imaging devices are located on opposite sides of the centerline of the specified imaging position
A plurality of light sources spaced relative to each other and peripheral to the plurality of imaging devices.

Canfield listed four references in support of its obviousness argument—Voigt, Hurley, Crampton and Daanen. Voigt disclosed an enclosure containing cameras and lights for analyzing and measuring images on the skin of a patient. Voigt did not disclose imaging devices (cameras) vertically and laterally spaced and on opposite sides of the center line. Instead, Voigt taught positioning the subject along the wall and positioning the cameras in a single direction.

Hurley, Crampton and Daanen each taught placement of a subject in the center of the enclosure, with cameras arranged vertically, laterally and on opposite sides of the centerline.

Canfield argued that the combined teachings of the prior art would have reasonably suggested the subject matter of the challenged claims. The Board found this argument unpersuasive, concluding that “Voigt’s rear wall would have blocked the view of the two rear-facing cameras, and Voigt’s horizontally adjustable sliders would have partially blocked the views of the remaining cameras.” Thus a person of skill in the art would not have been motivated to combine “the unmodified Voigt system with Hurley’s arrangement of imaging devices.” The Board did not discuss Crampton or Daanen.

The Federal Circuit disagreed with the Board’s conclusion and stated that the references showed the subject being imaged placed against a wall in Voigt, and centrally placed within the framework in Hurley, Crampton and Daanen. The references showed the cameras laterally and vertically spaced to each other about a center line. Citing the seminal Supreme Court KSR obviousness decision, the Federal Circuit noted that “[t]he combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable [...]

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Impossible; Cloud Storage Patent Claims Invalid for Indefiniteness or Not Infringed

by Paul Devinsky | Feb 25, 2021 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s determination that three patents directed to data synchronization were indefinite as lacking sufficient disclosed structure to support a means plus function claim element, as impossible in terms of claim scope or not infringed. Synchronoss Technologies, Inc. v. Dropbox. Inc., Case Nos. 19-2196, -2199 (Fed. Cir. Feb. 12, 2021) (Reyna, J.)

Synchronoss filed suit against Dropbox for infringement of three patents relating to synchronizing data across multiple devices connected via internet, a synchronization agent management server, and transferring media data to a network coupled device. As to the first patent, the district court found that Dropbox did not infringe because the claims, as construed, required hardware, whereas Dropbox’s accused product existed entirely in software. The district court then found that all of the claims of the second patent were invalid as indefinite under § 112, paragraph 6, since various claim terms, including “user identifier module,” did not correspond to adequate structure in the specification. Finally, the district court found that the third patent was invalid under § 112 for including within its scope an impossibility, namely, “generating a [single] media file” that “compris[es] a directory of digital media files.” Synchronoss appealed all three findings.

The Federal Circuit first addressed the claim that the district court found to include impossible scope. The Court agreed with the district court, noting that Synchronoss’s expert admitted that it was impossible for a media file to contain a directory of media files. The Court rejected Synchronoss’s argument that a person of ordinary skill in the art would understand that the invention actually meant something different, and noted that Synchronoss’s proposal would result in re-writing the claims to preserve their validity.

The Federal Circuit next addressed the claim including the means plus function element found to contain terms lacking adequate structure antecedent in the specification. The Court applied a two-step process to construe the “user identifier module” term, first identifying the claimed function and then determining whether the specification disclosed sufficient structure for performing the claimed function. Adopting Synchronoss’s position that the claimed function was “identifying a user,” the Court found that the specification did not disclose sufficient structure corresponding to the claimed user identifier module. The Court noted that although Dropbox’s expert identified more than 20 different possible structures that could perform the claimed function, “it is not enough that a means-plus-function claim term correspond to every known way of achieving the claimed function; instead, the term must correspond to ‘adequate’ structure disclosed in the specification such that a person of ordinary skill in the art would be able to recognize and associate the structure with the claimed function.”

Finally, the Federal Circuit addressed the district court’s finding of non-infringement. At the district court, Synchronoss proposed a construction of the claim term “device” to include “software . . . residing on . . . hardware” and conceded that its claims could not cover “software completely detached from hardware.” The Court concluded that the [...]

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2G or Not 2G: Patent License Applies to Future Generation Wireless Networks

by Thomas DaMario | Feb 18, 2021 | Patents

In interpreting a patent license agreement originally drafted in the era of third generation (3G) cellular networks, the US Court of Appeals for the Federal Circuit found that the license agreement covered subsequent wireless network generations, affirming a district court decision that infringement claims were barred by the license agreement and the doctrine of patent exhaustion. Evolved Wireless, LLC v. HTC Corp., Case Nos. 20-1335, -1337, -1339, -1340, -1363 (Fed. Cir. Jan. 26, 2021) (Dyk, J.) However, the Court vacated-in-part the district court’s decision and remanded for findings based on supplemental evidence of the license’s termination.

In order for cellular wireless networks to work properly, each component within the network must operate according to a shared set of standards. Early generation wireless networks were specific to a particular geographic location. Subsequent “generations” became harmonized according to global standards set by international organizations. Despite some harmonization, two separate 3G standards existed, known as WCDMA and CDMA2000. The fourth generation (4G) addressed this dichotomy by harmonizing newer technologies into a single standard known as Long Term Evolution (LTE). Nonetheless, devices exist that may be compatible with one or more 3G or 4G standards. These are referred to as “single-mode” or “multi-mode” devices depending on their compatibility characteristic. Patents that cover one or more technologies necessary for standards harmonization are referred to as standard-essential patents (SEPs) and must be licensed on fair, reasonable and non-discriminatory terms.

LG Electronics developed a patent that describes a method for handing over a mobile device from one cell tower to another under the LTE standard. LG subsequently declared the patent to be essential to the LTE standard and granted a license to Qualcomm, a developer and supplier of wireless components. LG then sold the patent to TQ Lambda, which sold it to Evolved Wireless. Evolved filed infringement lawsuits against various mobile device manufacturers, all of which incorporated Qualcomm components in their accused products. Because the patent remained subject to the LG-Qualcomm license, the central question was whether the accused products fell within the scope of the license agreement.

The license agreement did not identify specific patents, but granted Qualcomm and its customers the right to use LG’s patents that are “technically or commercially necessary to make, sell, or use a ‘subscriber unit,'” defined in the license as “a Complete CDMA Telephone or a CDMA Modem Card, and any subsequent generation products.” The district court found that the accused products were covered by the license agreement and granted summary judgment in favor of the defendants under the theory that the license agreement authorized Qualcomm’s use of the patent and that the doctrine of patent exhaustion precluded an infringement action against Qualcomm’s customers (i.e., the defendants). Evolved appealed.

On appeal, Evolved argued that the accused products did not meet the definition of “subscriber units” and that it had submitted supplemental evidence that the license had been terminated that the district court had ignored. Evolved argued that that term “subsequent generation products” in the license did not include products that [...]

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