The Ultimate Reasonable Royalty Award Must be Based on the Incremental Value that the Patented Invention Adds

In Exmark Manufacturing Company Inc. v. Briggs & Stratton Power Products Group, LLC., [2016-2197](January 12, 2018) the Federal Circuit vacated summary judgment that claim 1 of U.S. Patent No. 5,987,863 is not anticipated or obvious, affirmed summary judgment that claim 1 was not indefinite, reversed the denial of a new trial on damages and several evidentiary rulings related to damages, vacated the finding of willfulness; and affirmed the denial of Briggs’ laches defense.

Regarding the denial of summary judgment of invalidity, the Federal Circuit found that the district court denied the motion because “examined four times by the PTO, and each time the PTO held the claims of the ’863 patent to be patentable.”  While facially logical, this is not legally correct, the Federal Circuit held that

a reexamination confirming patentability of a patent claim alone is not determinative of whether a genuine issue of fact precludes summary judgment of no invalidity.  Surviving a reexamination does not warrant ipso facto summary judgment that a patent is not invalid. Holding otherwise would improperly give complete deference  and preclusive effect to the PTO’s patentability determination, foreclosing challenges to patent validity in district court based on the same prior art.

This holding is supported by Federal Circuit precedent that that a district court is never bound by an examiner’s finding in an ex parte patent application proceeding.  To the extent that an ex parte reexamination is entitled to deference, it comes from the presumption of validity of an issued patent.

The Federal Circuit found that the district court’s denial of summary judgment went beyond giving substantial weight to the reexamination proceedings.  The Federal Circuit found that the district court’s summary judgment was based solely on the fact that the patentability of claim 1
was confirmed following multiple reexaminations — the district court made no other findings regarding the elements of anticipation or obviousness to determine whether a genuine issue of material fact precluded summary judgment.

The Federal Circuit said that is must be furnished with sufficient findings and reasoning to permit meaningful appellate scrutiny.  These were lacking so the Federal Circuit vacated the district court’s summary
judgment of no invalidity and remanded with instruction for the district court to consider the entire record and reach its own independent conclusion on validity.

On the issue of definiteness, Briggs complained that Briggs contends that the patent does not explain how to objectively determine whether a
baffle portion is straight enough or long enough to be “elongated and substantially straight” as required by the claim.  The Federal Circuit disagreed, holding no numerical precision is required when using such terms of degree.  All that is required is some standard for measuring the term of degree.

The Federal Circuit also found that the function of the elongated and substantially straight baffle portions provided further guidance regarding
the scope of the claim language. The Federal Circuit noted that functional language can promote definiteness because it helps bound the scope of the claims by specifying the operations that the claimed invention must undertake.

With respect to damages, Briggs complained first that Exmark improperly determined a royalty rate without properly identifying a royalty base to apportion the value of the patentee’s invention in comparison to the value of the whole, and second that at Exmark’s expert did not adequately explain how she arrived at her proposed 5% royalty rate.  The Federal disagreed that the Exmark needed to apportion the value of the baffle from the other features of the mower through the royalty base rather than the royalty rate, noting that apportionment can be achieved, by careful selection of the royalty base to reflect the value added by the patented feature; by adjustment of the royalty rate so as to discount the value of a product’s non-patented features; or by a combination thereof.  The essential requirement is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.

While the Federal Circuit agreed with Exmark on the apportionment question, and agreed with Briggs that Exmark’s damages expert’s opinion was inadmissible as it failed to adequately tie the expert’s proposed reasonable royalty rate to the facts of this case. Exmark’s expert concluded with little explanation the parties would have agreed to a 5% reasonable royalty rate; nowhere in her report, however, did she tie the relevant Georgia-Pacific factors to the 5% royalty rate or explain
how she calculated a 5% royalty rate using these factors.  The Federal Circuit vacated the damages award and remand for a new trial on
damages.

The Federal Circuit held that the district court abused its discretion by holding that prior art is relevant to damages only to the extent that the prior art was commercialized, stating that the fact that some prior art mowers were not commercialized does not make them immaterial to determining the extent to which the claimed subject matter provides utility and advantages over the prior art.  but affirmed the district court’s exclusion of other types of mower, and of Exmark’s delay in bringing suit.

On the award of damages for willful infringement,  the Federal Circuit found that the District Court’s precluding Briggs from presenting any evidence regarding the validity of the claim or how closely the prior art tracked the claim was error.  The Federal Circuit said that to the extent that decision excluded evidence relevant to Briggs’ state of mind at the time of the accused infringement,  however, it does not comport with the standard articulated in Halo, which mandates that willfulness is an issue for the jury, not the district court.  The Federal Circuit vacated the jury’s finding of willful infringement, vacated the district court’s enhanced damages award, and remanded for the district court to determine whether a new trial on willfulness is necessary.

Finally, on this issue of laches, the Federal Circuit agreed with the district court that in light of SCA Hygiene Products Briggs cannot assert laches as a defense.

 

Vocabulary: Infundibuliform

Today’s A.Word.A.Day from wordsmith is infundibuliform, a neat word for funnel-shaped.  The word has been used in at least two dozen patents and in the claims of five: 6,276,549, 4,747,343, 4,416,404, 4,288,982,  4,054,970.  In U.S. Patent No. 4,747,343, claim 6 is directed to the  infundibuliform shape of the end of an auger, which is described in the specification:

One can imagine circumstances where a fancy word like infundibuliform might enhance the prestige of an invention, but for most applications good old “funnel-shaped” is probably the best choice

Anticipation Analysis Indisputably Allows for Some Flexibility; Substantial Evidence Still Supports Finding of No Anticipation

In Microsoft Corp v. Biscotti, Inc., [2016-2080, 2016-2082, 2016-2083] (December 28, 2017), the Federal Circuit affirmed the Board’s determination in the IPR’s that Microsoft failed to show by a  preponderance of the evidence that the challenged claims of U.S. Patent No. 8,144,182 were anticipated or obvious.

The challenged patent related to “tools and techniques for providing video calling solutions” and relates to real-time video conferencing where two or more users communicate, over a network, in a conference that includes video and audio of each participant.

Microsoft appeared to challenge the standard of review of anticipation, so the Federal Circuit began by reiterating that anticipation is a question of fact subject to substantial evidence review.  Noting that the Board correctly articulated the anticipation standard, the Federal Cricuit considered whether the Board properly applied that standard. ,   anticipate the claimed invention, a prior art reference must disclose all elements of the claim within the four corners of the document, and it
must disclose those elements arranged as in the claim, the Federal Circuit.  Noting that the Board may have used wording such as  “identically” more liberally than it should have because an anticipation analysis indisputably allows for some flexibility, the Federal Circuit found that the Board’s analysis did not suffer from a misapplication of the anticipation standard.  The Federal Circuit found that the Board therefore did not require word-for-word similarity or perfection, and explicitly considered whether a POSA would “at once envisage” the combination of the claimed invention given the disconnected teachings of the reference.

However even though the Board articulated the correct standard, and applied the correct standard, this did not mean that the Board’s analysis was correct.  Microsoft argued that the Board read the prior art too narrowly, limiting certain disclosures to particular embodiments, and not applying them to all disclosed embodiments.  The Federal Circuit said although Microsoft’s arguments were not unreasonable, it does not review this question de novo; anticipation is a question of fact, reviewed for substantial evidence.  In light of this deference, the Federal Circuit affirmed the Board’s decision.

The Federal Circuit found that Microsoft’s brief on appeal with respect to one claim was more detailed and contained substantial new arguments regarding anticipation, and rejected them because they were not presented in the Petition.

 

Dear Santa . . .

Dear Santa:

I’ve been a good patent lawyer this year, and always comply with Rule 56.  For all of the inventors we represent, I was hoping that this Christmas you would bring:

  1. A new 35 USC §101.  The Supreme Court broke the one we had.  We need a law that protects all inventions, and doesn’t exclude a whole class of inventions merely because they can be reduced to a simple-sounding concept.  A method that includes at least one non-mental step is not abstract.  It may not be novel, it may not be non-obvious, but it is not abstract.  Likewise, a product or machine is never abstract.
  2. A new  35 USC §102.  Although  the one we have is just a few years old, it never worked right.  The most fundamental concept of any patent system is prior art, yet we don’t have clarity about what is or what is not prior art.  Does a sale or use have to be disclosing or is the fact that the sale or use is known enough?  Does “secret” prior art apply to obviousness?  These are things we need to know.
  3. A new 35 USC §311 that is more fair to patent owners.  Inter Partes Review may be here to stay, but the process can be unfair to patent owners.  There is no standing requirement — a petition can be filed even if the patent owner has not asserted or even threatened to assert the patent.  A patent owner can be subjected to multiple proceeding, sometimes simultaneously, and even if the patent owner wins there is essentially no estoppel against relitigating validity in the courts.  Even after litigation is started, an accused infringer can use Inter Partes Review to change the claim construction (BRI) and the burden of proof (preponderance).  What happened to the presumption of validity.  You and your elves have a lot of work to fix this.
  4. If it fits in your bag, how about a presumption in favor of an injunction? The Constitution promised exclusive rights, but the Supreme Court seems to think otherwise.  How about limiting claims to what is disclosed and enabled in their accompanying specification, instead of invalidating claims to important inventions under §112?

Thanks, Santa, and Merry Christmas!

No Need to be your Own Lexicographer

The word of the day for December 14 from  Wordsmith.org is ensiform, meaning sword-shaped, which is a potentially useful work for patent prosecutors, and in fact has been useful to at least a few:

U.S. Patent No. 9,061,129:Col. 15: 21-25.  U.S. Patent No. 5,489,406:

Col. 3, lns. 36-47.  Lastly, U.S. Patent No. 5,460,842:

Col. 8, lns. 7-18 is a virtual thesaurus for words describing stabby things.  The English language is so rich in descriptive words that patent drafters don’t always have to make up their own.

 

 

October 9, 2017

Back when crossing an ocean to an unknown destination in a 62 foot  boat was something worthy of praise, the life and travels of Christopher Columbus were celebrated, including in this patented badge and plaque.

       

Hypothetical Claim in Doctrine of Equivalents Analysis Cannot Narrow Claim Scope

In Jang v. Boston Scientific Corp., [2016-1275, 2016-1575](September 29, 2017), the Federal Circuit affirmed the district court’s denial of Jang’s motion for JMOL, its vacatur of the jury verdict of infringement under the doctrine of equivalents, and its entry of judgment of non-infringement.

At issue was U.S. Patent No. 5,922,021 on coronary stents, which the jury found not literally infringed, but infringed under the Doctrine of Equivalents.  The Federal Circuit noted that the district court must uphold a jury’s verdict if it is supported by substantial evidence, which is evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary conclusion, and in the Ninth Circuit reverses the denial only if the record lacks any evidence supporting the verdict or if the district court made a mistake of law.   The Federal Circuit noted that Jang failed to persuade the district court that BSC’s non-infringement arguments were legally erroneous, and that it was similarly unpersuaded.

On the Doctrine of Equivalents, the Federal Circuit noted that a doctrine of equivalents theory cannot be asserted if it will encompass or “ensnare” the prior art.  This is true even if a jury has found equivalence as to each claim element.  The Federal Circuit explained that a hypothetical claim analysis is a practical method to determine whether an equivalent would impermissibly ensnare the prior art. The Federal Circuit agreed with the district court that Jang’s hypothetical claims were improper because they both expaneded and narrowed the scope of the actual claims, and such narrowing is not permitted.  While use of a hypothetical claim may
permit a minor extension of a claim to cover subject matter that is substantially equivalent to that literally claimed, one cannot, in the course of litigation and outside of the PTO, cut and trim, expanding here, and narrowing there, to arrive at a claim that encompasses an accused
device, but avoids the prior art.

The Federal Circuit explained that when utilizing the hypothetical
claim tool, that burden starts with proposing a proper hypothetical claim that only broadens the issued asserted claims, and said that Jang cannot  transfer the responsibility of defining the range of equivalents to which he is entitled to the district court.  Jang failed to meet this burden, and thus the district court thus correctly vacated the jury verdict of infringement under the doctrine of equivalents.

 

 

 

 

Federal Court Lacked Jurisdiction over DJ for Non-Infringement; Where Defendant Did not Own the Patent

In First Data Corp. v. Inselberg, [2016-2677, 2016-2696] (September 15, 2017), the Federal Circuit affirmed the district court’s dismissal of plaintiff’s declaratory judgment and defendant’s counterclaims.

The ownership dispute regarding Inselberg’s patent portfolio stemmed from a $500,000 loan that Interactive received from Bisignano, which  Inselberg personally guaranteed, and for which Interactive granted Bisignano a security interest in the portfolio of patents it owned at the time.  Inselberg and Interactive defaulted on the loan from Bisignano, and Inselberg and Bisignano entered into an agreement that purported to
convey Interactive’s patent portfolio to Bisignano.

Inselberg claimed that the assignment to Bisignano was invalid, and that Bisignano and First Data were infringers.  Bisignano and First Data brought a declaratory judgment action of non-infringement in Federal Court, and Inselberg brought an action in state court attacking the assignment to Bisignano, which Bisignano removed to Federal Court.  However the district court found that the rights at issue in the case were ownership rights turning on questions of state law, and remanded the case to state court, finding that there was no federal cause of action unless and until Inselberg recovers the patents.

The Federal Circuit agreed with the district court, and further found that the case was not ripe for adjudication Inselberg’s claim rests upon a contingent future event, that may not occur as anticipated or may not occur at all.  The Federal Circuit further found that the decision to remand was based on 28 U.S.C. § 1447(c), and thus Section 1447(d) precluded it from reviewing the district court’s remand order.

 

 

 

 

Accused Trade Secret Thief Failed to Make Uber Showing Required for Writ of Mandamus

In Waymo LLC v. Uber Technologies, Inc., [2017-2235, 2017-2253] (September 13, 2017), the Federal Circuit denied intervenor  Levandowski’s petition for a writ of mandamus.  Waymo alleges
that its former employee, Levandowski, improperly downloaded thousands of documents related to Waymo’s driverless vehicle technology and then left Waymo to found Ottomotto, which Uber subsequently acquired.  Before the acquisition closed, counsel for Ottomotto and Uber (but not counsel for Mr. Levandowski) jointly retained a law firm to investigate  Ottomotto employees previously employed by Waymo, including Mr. Levandowski.  Waymo sought to obtain the report, which the court permitted, and Levandowski unsuccessfully attempted to block with a write of mandamus.  The Federal Circuit said that a petitioner has to show three things to be entitled to the writ:

First, the party seeking issuance of the writ must have no other adequate means to attain the relief he desires—a condition designed to ensure that the writ will not be used as a substitute for the regular appeals process. Second, the petitioner must satisfy the burden of showing that his right to issuance of the writ is clear and indisputable. Third, even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate
under the circumstances.

The Federal Circuit found that Levandowski failed the first test — establishing he had no other adequate remedy.  While Levandowski argued that an appeal after the disclosure was in effect no remedy, the Federal Circuit concluded that a post-judgment appeal by either Uber or Levandowski would suffice to protect the rights of Levandowski and ensure the vitality of attorney-client privilege.  The Federal Circuit went on to find that Levandowski failed to show that his right to issuance of the writ was clear and indisputable.  Finally, the Federal Circuit said that  Levandowski had not persuaded it to exercise its discretion here and overrule the District Court.