When There is a Dispute Regarding the Proper Scope of the Claims, the Court must Resolve that Dispute

In Omega Patents, LLC v. Calamp Corp., [2018-1309] (April 8, 2019), the Federal Circuit affirm the judgment of no invalidity, affirm-in-part, reverse-in-part, vacate-in-part, and remand the judgment as to direct infringement, and vacated the remainder of the judgment and remanded for a new trial on indirect infringement, compensatory damages, willful infringement, enhanced damages, and attorney’s fees, in a case involving U.S. Patent Nos. 6,346,876, 6,756,885, 7,671,727, and 8,032,278 on multi-vehicle compatible systems that can remotely control various vehicle functions such as remote vehicle starting.

After a trial, a jury found all asserted claims to be not invalid and infringed, and the jury also found that CalAmp willfully infringed a valid patent, and awarded Omega $2.98 million in compensatory damages, which the district court trebled for willfulness, awarded attorney’s fees to Omega, added damages for post-verdict sales and pre-judgment interest, for a total of $15 million, with an on-going royalty rate of $12.76 per unit.

Although CalAmp appealed the construction of several claim terms, the Federal Circuit found that these terms had no impact on the prior art actually introduced at trial, and CalAmp had failed to identify to the district court any other prior art that would be impacted by the claim construction ruling. Thus, the Federal Circuit declined CalAmp’s invitation to speculate as to how additional prior art may have been rendered irrelevant under the court’s claim construction. While CalAmp’s challenge to the district court’s claim construction was preserved under Federal Rule of Civil Procedure 51 for purposes of challenging the jury instructions, CalAmp failed to satisfy the requirements of Federal Rule of Civil Procedure 46 by not seeking admission into evidence of, or at least specifically identifying, the additional prior art.

On the issue of direct infringement, several of the claims required “a transmitter and a receiver for receiving signals from said transmitter.” However the Federal Circuit found that the evidence at trial only showed that the “transmitter” transmits signals to a “receiver” on a cell tower, which can then relay that information to CalAmp’s servers, and the “receiver” receives signals from a “transmitter” on the cell tower. The Federal Circuit agreed that CalAmp did not provide all of the elements of the system, as was entitled to JMOL on direct infringement of these claims.

On the issue of induced infringement, the Omega argued that CalAmp’s customers directly infringed when they used CalAmp’s products. The Federal Circuit noted that for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it, and said there was evidence from which the jury could infer that customers controlled and used the system and received the required benefits. Based on the record, the Federal Circuit conclude that this theory does not warrant setting aside the jury verdict.

The induced infringement of some of the claims depending on the construction of “vehicle device,” which the district court refused to construe, defaulting to the ordinary meaning. The Federal Circuit said that when the parties raise an actual dispute regarding the proper scope of the claims, the court, not the jury, must resolve that dispute. The Federal Circuit added that the court is not absolved of this duty to construe the actually disputed terms just because the specification of the patent defines the term. Even if the parties had agreed to the construction, the Federal Circuit said that the district court was still obligated to give that construction to the jury in its instructions. The Federal Circuit said: in the absence of guidance in the form of proper claim construction, the jury lacked a yardstick by which to measure the arguments and evidence on this issue and assess whether Omega’s infringement theory was a valid one. In particular the Federal Circuit could not discern if the jury found infringement of the claims at issue based upon a theory of infringement inconsistent with the proper construction. Therefore, the Federal Circuit set aside aside the jury’s verdict of infringement, and ordered a new trial.

On the issue of induced infringement, CalAmp argued that the jury’s verdict could not be sustained because the verdict form given to the jury (proposed by CalAmp) did not provide written questions on the issue of inducement. CalAmp argued that the absence of such questions on induced infringement precluded the jury from awarding damages on that basis, but the Federal Circuit said that one cannot use the answers to special questions as weapons for destroying the general verdict. The Federal Circuit concluded that induced infringement was properly before the jury, and, thus, CalAmp was not entitled to JMOL of no induced infringement on that basis.

However CalAmp also complained about the district court’s exclusion of testimony as to CalAmp’s state of mind substantially prejudiced CalAmp’s ability to present its defense for indirect infringement. The Federal Circuit found that this exclusion deprived CalAmp of the opportunity to support its defense that there was no inducement because it reasonably believed it did not infringe the patents at the time CalAmp launched the products at issue. The Federal Circuit vacated the jury’s findings as to indirect infringement and remand for a new trial.

On the issue of damages, the Federal Circuit found that although the infringement of the one claim that was sustained, this was not enough to support a damage award based upon all of the products, and thus the Federal Circuit vacated the compensatory damage award.

On the issue of enhanced damages for willful infringement, the jury was asked whether it had found CalAmp willfully “infringed a valid patent,” without specifying which patent or patents or which claim or claims were willfully infringed. Based on the vacation of several findings of infringement the Federal Circuit could not determine which patents or claims, so the finding of willfulness had to be vacated as did the resulting enhanced damages and attorney’s fees award by the district court, both of which were explicitly based on the willful infringement finding.

Many lessons form this case, including insisting on a claim construction of disputed terms, and being extremely careful drafting jury verdict forms.

Infringement Prior to Notice of Patent Could Not be Willful

In SRI International, Inc., v. Cisco Systems, Inc., [2017-2223] (March 20, 2019), the Federal Circuit affirmed the district court’s denial of summary judgment of ineligibility, adopt its construction of “network traffic data,” and affirmed its summary judgment of no anticipation. The Federal Circuit vacated and remanded the district court’s denial of judgment as a matter of law of no willful infringement, and therefore vacate the district court’s enhancement of damages. The Federal Circuit also vacated the district court’s award of attorneys’ fees and remanded for recalculation. Finally, the Federal Circuit affirmed the district court’s award of ongoing royalties on postverdict sales of products that were actually found to infringe or are not colorably different.

The litigation involved U.S. Patent Nos. 6,484,203 and 6,711,615 directed to network intrusion detection. The Federal Circuit rejected Cisco’s assertion that the claims are just directed to analyzing data from multiple sources to detect suspicious activity. The Federal Circuit found that instead, the claims are directed to an improvement in computer network technology. The focus of the claims is on the specific asserted improvement in computer capabilities—that is, providing a network defense system that monitors network traffic in real-time to automatically detect large-scale attacks. The Federal Circuit concluded that the claims are not directed to an abstract idea under step one of the Alice analysis, and thus did not reach step two.

On claim construction, the Federal Circuit held that SRI’s statements in the prosecution history do not invoke a clear and unmistakable surrender of all preprocessing, including decryption, decoding, and parsing. Accordingly, the Federal Circuit agreed with the district court’s construction of “network traffic data” to mean “data obtained from direct examination of network packets.”

On the issue of anticipation, the Federal Circuit held that SRI’s statements in the prosecution history did not invoke a clear and unmistakable surrender of all preprocessing, including decryption, decoding, and parsing. Accordingly, the Federal Circuit agreed with the district court’s construction of “network traffic data” to mean “data obtained from direct examination of network packets.” On this record, the Federal Circuit concluded that summary judgment was appropriate. The prior art did not expressly disclose directly examining network packets as required by the claims—especially not to obtain data about network connection requests.

On the denial of JMOL on the issue of willfulness, the Federal Circuit agreed that the jury’s finding that Cisco willfully infringed the patents-in-suit prior to receiving notice thereof is not supported by substantial evidence and therefore vacated and remanded them. Among other things, SRI argued that Cisco employeees did not read the patent before their depositions, but the Federal Circuit noted that it is undisputed that these Cisco employees were engineers without legal training. Given Cisco’s size and resources, the Federal Circuit said it was unremarkable that the engineers—as opposed to Cisco’s in-house or outside counsel—did not analyze the patents-in-suit themselves. The Federal Circuit also noted that it was undisputed that Cisco did not know of SRI’s patent until SRI sent its notice letter to Cisco, and that this notice letter was sent years after Cisco independently developed the accused systems and first sold them. Under these circumstances the Federal Circuit vacated the finding of willfulness prior to the Notice letter, and remanded for the district court to determine whether the finding of willfulness after the Notice letter was supported by substantial evidence. The Federal Circuit also vacated the award of enhanced damages and remanded for further consideration along with willfulness.

The Federal Circuit vacated the district court’s award of attorneys’ fees under § 285, remanding solely for recalculation. The Federal Circuit found no error in the district court’s determination that the case was exceptional, agreeing that Cisto had “crossed the line in several regards.” However, there were several entries included by mistake, and the Federal Circuit remanded only for removal of attorney hours clearly included by mistake and consequent recalculation of reasonable attorneys’ fees.

Finally, on the issue of on-going royalty, the Federal Circuit found that the district court did not abuse its discretion in awarding a 3.5% compulsory license for all post-verdict sales. Cisco complained that the court was obligated to consider its design-arounds. The Federal Circuit agreed that Cisco was untimely, finding Cisco did not redesign its products until after trial, and Cisco did not file its motion to supplement until after completion of post-trial briefing.

Lack of Written Opinion Leaves Infringer Exposed in the Crosswalk

In Polara Engineering Inc. v. Campbell Company, [2017-1974, 2017-2033] (July 10, 2018), the Federal Circuit affirmed in part, vacated in part, and remanded the district court’s determination that claims 1-4 of U.S. Patent No. 7,145,476 on accessible pedestrian signal systems were valid and willfully infringed, and awarding enhanced damages.

Cambell argued on appeal that the claims were invalid of prior public uses and over the prior art.  Regarding the public uses, the Federal Circuit noted that an inventor who seeks to perfect his discovery may conduct extensive testing without losing his right to obtain a patent for his invention—even if such testing occurs in the public eye.  A use may be experimental if its purpose is to test claimed features of the invention or to determine whether an invention will work for its intended purpose.  The Federal Circuit found that that substantial evidence supported the jury’s finding of experimental use that negates application of the public use bar, noting that testing to perfect features inherent to the claimed invention, such as durability qualifies as experimental, and that in any event the testing did relate to claimed features.  While there was evidence that the testing involved commercial features, rather than claimed features, the Federal Circuit could not say that the jury’s finding of experimental use lacked substantial evidentiary support.

Regarding invalidity over the prior art, the Federal Circuit agreed that Campbell was estopped from arguing that the district court erred in its claim construction instruction
because the court adopted Campbell’s proposed construction of “digital data signals.”  The Federal Circuit found substantial evidence for the jury’s implied fact finding.

On the issued of enhanced damages, the Federal Circuit noted that enhanced damages are designed as a “punitive” or “vindictive” sanction for egregious
infringement behavior, and found that substantial evidence supports
the jury’s finding of willful infringement.  The Federal Circuit said that the jury reasonably could have found that Campbell intentionally copied the ’476 patent despite a significant known risk that its two-wire AAPS would infringe the ’476 patent, having been advised by counsel that there were “areas of potential conflict.”  While Campbell argued that it relied upon competent opinion of counsel,  the Federal Circuit said that Campbell “has not pointed to any documentary or third-party evidence showing it received an opinion of counsel,” and the jury was entitled not to credit the testimony that there was such an opinion.  While Campbell’s challenge that the jury instruction did not specify the time period during which Campbell’s conduct was willful may have had merit, Campbell waived this challenge by agreeing to a simple yes or no instructions.

Finally, on the amount of enhanced damages (the district court used a multiplier 2 1/2), the Federal Circuit said that the district court awarded almost the maximum amount
of enhanced damages, but did not adequately explain its basis for doing so, and failed to even mention Campbell’s public use defense, which presented a close question in
this case.  The Federal Circuit found that the district court may have erred in its consideration of Campbell’s public use defense, and vacated the award of enhanced damages and remanded.