Court Dismisses Complaint and Invalidates Widely Asserted Patents

Knobbe Martens, one of the leading intellectual property law firms in the United States, received an order from the U.S. District Court for the Central District of California in Strikeforce Technologies, Inc. v. SecureAuth Corporation granting SecureAuth’s motion to dismiss StrikeForce’s complaint and invalidating StrikeForce’s asserted patents under 35 U.S.C. § 101.

StrikeForce has asserted one or more of the patents against numerous defendants in Massachusetts, New Jersey, and Virginia, including Gemalto, Inc., Vasco Data Security International, Centrify Corp., Duo Security Inc., Trustwave Holdings, Inc., and Entrust, Inc.

StrikeForce initially asserted three patents against SecureAuth in the Eastern District of Virginia.  Knobbe Martens, on behalf of SecureAuth, convinced the Virginia court to transfer the action to the Central District of California, where SecureAuth’s headquarters is located. 

Knobbe Martens then filed an early motion to dismiss StrikeForce’s complaint on the grounds that the asserted patents were invalid under 35 U.S.C. § 101.  The court granted SecureAuth’s motion and invalidated all 43 asserted claims in StrikeForce’s three asserted patents. 

The court’s decision resolves the dispute at an early stage and is the first to invalidate StrikeForce’s patents, which have been asserted nationwide.  “We are pleased that Knobbe Martens and the SecureAuth team paved the path to invalidating these widely asserted patents,” said Jeff Kukowski, CEO of SecureAuth and Core Security.  “Resolution at an early stage enables us and our industry colleagues to focus on delivering value to our customers instead of on these types of claims.”

About SecureAuth:

SecureAuth and Core Security have merged to create a new category: Identity Security Automation. We bring together advanced network and endpoint threat discovery with a powerful identity and access security platform. Our industry-leading adaptive access control is a better approach to identity protection that minimizes attacker dwell time and organizational response. As one team, we protect over 1500 customers, 750 million devices and 50 million identities. It’s our mission to secure the enterprise across all principal threat vectors with an identity-based approach to the attack lifecycle. To learn more, contact SecureAuth at info@secureauth.com, visit www.secureauth.com, follow us on Twitter (@SecureAuth) and LinkedIn.

About Knobbe Martens:

Consistently ranked among the top intellectual property firms in the nation and worldwide, Knobbe Martens dedicates its practice to all aspects of intellectual property and technology law, including patents, trademarks, copyrights and trade secrets. Knobbe Martens handles intellectual property litigation nationwide, including litigation at the district courts, the appellate courts, the PTAB and the ITC. Knobbe Martens has over 275 attorneys and scientists, including over 125 attorneys dedicated to intellectual property litigation.  The firm has offices in Orange County, California, Los Angeles, New York, San Diego, San Francisco, Seattle, Silicon Valley and Washington, D.C., and enjoys an international reputation for excellence.  More information about the firm can be found at www.knobbe.com.

Where Parties Raise an Actual Dispute Regarding Claim Scope, the Court Must Resolve It

In Nobelbiz, Inc. v. Global Connect, L.L.C., Appeal Nos. 2016-1104, 2016-1105, the Federal Circuit held that where parties raise an actual dispute regarding the scope of the claim language—rather than merely the meaning of the words—the district court must determine the scope of the asserted claims.  

Nobelbiz sued Global Connect, alleging infringement of certain patents.  The parties asked the district court to construe several claim terms.  For instance, NovelBiz argued that a claim required modifying caller identification, such that no original telephone number is necessary.  Conversely, Global Connect asserted that the claim required changing caller data by replacing an original number with a replacement number.  The district court found that the disputed terms should be given their plain and ordinary meaning.  After trial, the jury found the asserted claims infringed.  Defendant Global Connect appealed.  

On appeal, the Federal Circuit held that the district court had the responsibility to determine the scope of the asserted claims.  The Federal Circuit cited its previous decision in O2 Micro, which held “a determination that a claim term … has the plain and ordinary meaning may be inadequate … when reliance on a term’s ordinary meaning does not resolve the dispute.”  Here, the Federal Circuit found that the parties raised an actual dispute regarding the scope of the claim language, and that the district court had the responsibility to resolve the dispute.  Accordingly, the Federal Circuit reversed the district court’s decision and remanded for a new trial.  Nobelbiz petitioned for rehearing en banc, which the Federal Circuit denied.

The Federal Circuit Reaffirms That Inherency Cannot Be Established by Possibilities

In HTC Corporation v. Cellular Communications Equipment, LLC, Appeal No. 2016-1880, the Federal Circuit reiterated that inherent anticipation cannot be proved by showing that a claim limitation is possible in a prior art reference. 

Ten parties filed a petition for IPR challenging certain claims in a patent owned by Cellular Communications Equipment, LLC (CCE).  The Board instituted review and concluded that the petitioners had failed to show that any of the challenged claims were unpatentable.  Two of the petitioners appealed the Board’s decision, challenging the Board’s construction of the term “message” and its conclusions on anticipation and obviousness.

Despite the absence of an express construction of “message” by the Board, the Federal Circuit reviewed the Board’s expression of its understanding of the scope of the claim term.  The Federal Circuit rejected Appellants’ arguments that the Board’s application of “message” improperly excluded certain embodiments, noting that Appellants conceded at oral argument that the Board made no such exclusion.  Accordingly, the Federal Circuit concluded that the Board’s application of the term “message” was correct.  

The Federal Circuit also found that substantial evidence supported the Board’s finding that a prior art reference did not inherently anticipate the claims at issue, declining to consider an argument by Appellants based on CCE’s expert declaration because the argument had not been raised before the Board.  The Federal Circuit found that Appellants failed to show inherent anticipation because they only showed that it was possible for the prior art reference to meet the claim limitation at issue, reiterating prior holdings that the mere fact that a certain thing may result is insufficient to establish inherency.

Finally, the Federal Circuit affirmed the Board’s finding that Appellants had failed to show that combinations of prior art references rendered the challenged claims obvious.  The Federal Circuit found no error in the Board’s decision to afford little weight to the second declaration of HTC’s expert because his second declaration was inconsistent with his first.  In particular, the Federal Circuit found that Appellants failed to point to any evidence in the record that would undermine the Board’s findings on the scope and content of the primary prior art reference.

Third Party’s Actions May Be Attributable to the Accused Infringer When the Third Party Must Perform the Patented Steps to Receive Value from the Accused Infringer

In Travel Sentry, Inc., v. David A. Tropp, Appeal Nos. 2016-2386, -2387, -2714, 2017-1025, the Federal Circuit held that a third party’s acts may be attributed to an accused infringer, for purposes of divided infringement under § 271(a), when the third party must perform patented steps to receive the benefit of the relevant activity.  An accused infringer does not avoid liability merely because the third party is not obligated to perform the patented steps. 

Tropp’s patent claims a method for using a dual-access lock in an airline luggage inspection system.  The patented method includes steps to be performed by a luggage screener, e.g., TSA.  Travel Sentry and the TSA have a written memorandum of understanding concerning TSA’s handling of Travel Sentry’s locks.  Travel Sentry provides master keys to the TSA and trains the TSA on how to identify Travel Sentry’s locks.

The district court granted Travel Sentry’s motion for summary judgment of no direct infringement, finding that “there is simply no evidence that Travel Sentry had any influence whatsoever on . . . the method carried out by the TSA . . . .”  The district court determined that because the TSA faces no consequences for ignoring direction from Travel Sentry, TSA’s voluntary compliance with instructions could not be attributed to Travel Sentry.

The Federal Circuit vacated and found that a reasonable jury could conclude that TSA’s performance of the patented steps is attributable to Travel Sentry.  The court applied its holding in Akamai V that liability under § 271(a) could be found when an alleged infringer “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method” and “establishes the manner or timing of that performance.”  The court emphasized the importance of identifying the relevant “activity,” the types of “benefits” that can satisfy Akamai V, and what is required for one to “condition” a third party’s participation in an activity.  The court held that a reasonable jury could find a) the TSA derived a benefit from employing Travel Sentry’s luggage system (namely, not having to break consumer’s locks); b) this benefit was conditioned upon the TSA’s performance of the patented method; and c) the written agreement between Travel Sentry and the TSA indicates that Travel Sentry established the manner or timing of the performance by the TSA.

IPR Petitioner Bears Burden of Proving That Proposed Amended Claims are Unpatentable 

In Bosch Automotive Service Solutions, LLC v. Matal, Appeal No. 2015-1928, the Federal Circuit held that, in inter partes review, the patent challenger bears the burden of proving that proposed amended claims are unpatentable.  This burden applies equally to indefiniteness challenges.

The Board instituted an inter partes review of Bosch’s patent on grounds of anticipation and obviousness.  Bosch argued the claims were not obvious over the prior art of record, and simultaneously filed a contingent motion to amend with proposed amended claims to be added if the Board found the challenged claims unpatentable.  The Board found all challenged claims unpatentable as anticipated or obvious and denied Bosch’s motion to amend.  In denying the motion, the Board found that some of the proposed amended claims were indefinite, and that Bosch had failed to demonstrate that the proposed amended claims were patentable over the prior art of record.  The Board cited its own 2013 decision where it allocated the burden of proof of patentability to the patent owner in motions to amend claims during inter partes review.  The IPR petitioners did not participate in the appeal and the Director of the USPTO intervened to defend the Board’s decision.  

The Federal Circuit affirmed the Board’s decision that the original claims were unpatentable and vacated the Board’s denial of Bosch’s motion, finding that the Board had impermissibly shifted the burden of proof to Bosch.  The Federal Circuit applied its recent holding in Aqua Products v. Matal, 872 F.3d 1290 (Fed. Cir. 2017), which held that “the patent owner does not bear the burden of proof on the patentability of its proposed amended claims.”  Instead, the petitioner must prove the unpatentability of proposed amended claims by a preponderance of the evidence.  In its final judgment, the Board must justify its findings of unpatentability based on the evidence of record.  The Federal Circuit added that the “burden of proof allocation applies for questions of indefiniteness, as with other questions of unpatentability.”  Because the Board’s written decision expressly stated that Bosch had failed to carry a burden of proof with regard to both indefiniteness and obviousness of the proposed amended claims, the Federal Circuit found that the Board had impermissibly shifted this burden to the patent owner and remanded for further consideration consistent with the Aqua Products decision.

Combinations Do Not Anticipate if a Skilled Artisan Would Not Envision the Claimed Arrangement

In Microsoft Corporation v. Biscotti, Inc., Appeal Nos. 2016-2080, -2082, -2083, the Federal Circuit held that multiple, distinct teachings in a single prior art reference do not anticipate a claimed invention if a skilled artisan would not envision the claimed combination.

Microsoft requested three inter partes reviews of a patent owned by Biscotti directed to video communication systems.  Microsoft argued that a prior art patent anticipated the challenged independent claims and rendered the challenged dependent claims unpatentable for anticipation or obviousness.  The Board’s final written decision found Microsoft did not prove the challenged claims unpatentable.  With respect to the anticipation grounds, the Board concluded that Microsoft improperly mixed embodiments in the prior art patent to account for the independent claim limitations.  With respect to the obviousness grounds, the Board noted that Microsoft did not argue that the prior art patent rendered the independent claims obvious based on the teachings located in different parts of the specification.  Accordingly, the Board concluded that Microsoft did not prove that the dependent claims would have been obvious because of the deficiencies in the underlying independent-claim analysis.

On appeal, the Federal Circuit confirmed that the Board applied the correct anticipation standard: a prior art reference anticipates if 1) within its four corners, it discloses all elements arranged as in the claim; or 2) when it does not expressly disclose all the limitations arranged as in the claim, a person of skill in the art reading the reference nevertheless would “at once envisage” the claimed arrangement.  As to whether the Board’s anticipation analysis was factually correct, the Federal Circuit recognized that the disclosure in the asserted reference lended itself to more than one reasonable interpretation.  But the Federal Circuit stated that, as an appellate court, it defers to the Board’s factual findings on technical issues and held that substantial evidence supported the Board’s interpretation of the reference’s disclosure.  Thus, because the Federal Circuit found substantial evidence to support the Board’s finding that the various portions of the reference were “unrelated to each other,” the Federal Circuit affirmed the Board’s decision that the reference did not anticipate the claims and that the claims were patentable.

In dissent, Judge Newman argued that, because the asserted reference “shows the same components, having the same function, combined in the same way for the same purpose,” the Board erred in its decision, and the asserted reference anticipated the claims of the patent.

Improperly Drafted Employment Agreement Leads to Dismissal of Patent Case Due to Lack of Standing

In Advanced Video Technologies LLC v. HTC Corporation et al., Appeal Nos. 2016-2309, 2016-2310, 2016-2311, the Federal Circuit held that a co-inventor did not transfer ownership interests in a patent under a California employment agreement that included a “will assign” provision, a trust provision, and a quitclaim provision.

Advanced Video sued the defendants for patent infringement.  The district court dismissed the case, finding that Advanced Video lacked standing because a co-inventor had not assigned ownership rights in the patent pursuant to the Employment Agreement and was not a party to the action. 

The Federal Circuit agreed with the district court that the future-tense “will assign” language in the Employment Agreement did not itself effect an assignment.  Furthermore, the trust provision undermined the existence of an immediate assignment because an inventor could not immediately assign patent rights and at the same time hold them in trust.  Even if Advanced Video was a beneficiary of a trust, the Federal Circuit explained that, under California trust law, generally the beneficiary is not the party in interest and may not sue in the name of the trust.  Finally, the quitclaim provision of the Employment Agreement merely waived the co-inventor’s rights to patents that were assigned.  However, as no patent rights were ever assigned, the Federal Circuit found that the quitclaim provision was inapplicable.  Accordingly, Advanced Video did not have full ownership of the patent, and because the co-inventor was not a party to the suits and had not consented to the suits, Advanced Video lacked standing and the district court’s dismissal of the cases was affirmed. 

Judge O’Malley concurred that the judgment was compelled by binding precedent but argued that the precedent serving as the predicate for the case was wrong.  The concurring opinion examined Federal Rule of Civil Procedure 19, case law addressing joinder under Rule 19, and the Patent Act itself, concluding that that Rule 19, which allows for involuntary joinder, should be applied to cases such as the instant case.  The concurring opinion then called for the Federal Circuit to reconsider en banc its precedent that a co-owner or co-inventor cannot be involuntarily joined pursuant to Rule 19. 

Judge Newman dissented, arguing that Advanced Video had full ownership of the patent and standing to sue.  Judge Newman argued that the Employment Agreement, including the “will assign,” trust, and quitclaim provisions, demonstrated a mutual intent and understanding of employer and employee to effect an assignment of patent rights.  Judge Newman also disagreed with the majority’s findings regarding the trust, arguing that the trust vested immediately upon creation of an invention under the Employment Agreement, and that the beneficiary could act on behalf of the trust if the trustee were absent or inactive. 

Damages Must Be Apportioned Between the Patented Improvement and the Conventional Components

In Exmark Manufacturing Company v. Briggs & Stratton Power Products Group, Appeal No. 2016-2197, the Federal Circuit held that reexaminations of patents confirming validity are not dispositive of validity in district court.  Furthermore, when a patent covers the infringing product as a whole, damages must be apportioned between the patented improvement and conventional components, and expert testimony on damages must adequately tie a proposed reasonable royalty to the facts of the case.

Exmark sued Briggs for infringement of a patent directed to a lawn mower having improved flow control baffles.  Three separate reexaminations confirmed the patentability of Exmark’s patent.  The district court, relying solely on the fact that the claim at issue had survived multiple reexaminations, granted summary judgment that the claim was not invalid.  Following a jury award of damages for willful infringement, the district court denied Briggs’s motion for a new trial on damages.

On appeal, the Federal Circuit vacated the district court’s summary judgment of no invalidity.  Although the district court stated it had given the reexaminations “some, though not determinative, weight,” the Federal Circuit disagreed, finding that the conclusory opinion written by the district court offered no other explanation for its determination.  In doing so, the Federal Circuit found the district court had improperly deferred entirely to the PTO and neglected its obligation to reach an independent conclusion.  The higher “clear and convincing” standard of proof in district court does not preclude the district court from reaching a different conclusion on validity than that reached by the PTO.  In particular, because the district court suggested it was adopting a broader claim interpretation than that applied by the PTO during the reexaminations, the district court was required to independently assess validity in view of that construction.

The Federal Circuit also vacated the jury’s damages award.  While the Federal Circuit agreed that it was permissible to apportion damages through the royalty rate rather than the royalty base, it found that Exmark’s expert failed to adequately tie her proposed royalty rate of 5% to the facts of the case.  The Federal Circuit noted that the expert considered the Georgia-Pacific factors, but she failed to explain the extent to which those factors impacted the royalty calculation.  It was not sufficient to analyze the Georgia-Pacific factors without carefully tying those factors to the proposed royalty rate.  Additionally, the expert’s analysis ignored the value added by components covered by other patents as well as non-patented elements such as durability, reliability, and branding.  The Federal Circuit remanded to the district court for new determinations of invalidity and damages, including, if necessary, a new trial on damages.

Final Decision by Board Invalidating a Patent Has Preclusive Effect on Co-Pending IPR

In MaxLinear, Inc. v. CF CRESPE LLC, Appeal No. 2017-1039, the Federal Circuit reiterated that final written decisions by an administrative tribunal can have a preclusive effect.

MaxLinear filed an IPR petition on claims of a CF CRESPE patent.  The Board instituted review on the independent claims and certain dependent claims and ultimately issued a final written decision upholding the patentability of the challenged claims.  In its final written decision, however, the Board limited its analysis to the independent claims and did not separately analyze the dependent claims.  MaxLinear appealed the Board’s decision of patentability.

Pending the appeal, the Board issued final written decisions for two other IPR proceedings concerning the same CF CRESPE patent but considering different prior art and brought by a third party.  In these proceedings, which were subsequently affirmed by the Federal Circuit, the Board held that certain claims of the CF CRESPE patent were unpatentable, including the independent claims that were held patentable in the IPR proceeding that was the subject of this appeal.

The parties agreed that the prior decisions in the other two IPR proceedings that were upheld by the Federal Circuit had a preclusive effect in this proceeding.  The Federal Circuit noted that in light of the decision in B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015), the parties could hardly argue otherwise.  Issue preclusion prevents a party from re-litigating an issue and applies in the administrative context.  Accordingly, the Federal Circuit held that the decisions in the two other IPR proceedings finally resolved the issue of unpatentability of the independent claims.  However, because the Board failed to separately analyze the dependent claims, the Federal Circuit remanded and instructed the Board to consider the patentability of the dependent claims in view of the prior art cited in the other IPR proceedings.  The Federal Circuit noted that collateral estoppel is not limited “to patent claims that are identical” and instructed the Board to decide whether the remaining claims are patentably distinct from the independent claims.

Claims Directed to a Specific Improvement Over Prior Systems for Presenting Information on Small Displays Are Patent Eligible Under § 101

In Core Wireless Licensing S.A.R.L. v. LG Electronics, Inc., Appeal No. 2016-2684, 2017-1922, the Federal Circuit held that claims directed to a specific improvement over prior systems for summarizing and presenting information on display interfaces for electronic devices are patent eligible under 35 U.S.C. § 101.

Core Wireless sued LG alleging infringement of patent claims directed to improved display interfaces, particularly for electronic devices with small screens.  The improved interfaces allow a user to more quickly access data and applications in electronic devices by displaying a limited list of commonly accessed functions and data.  LG moved for summary judgment that the claims constituted patent ineligible subject matter under 35 U.S.C. § 101 because they were directed to the abstract idea of displaying a summary window while an application is unlaunched.  The district court found that the claims were not directed to an abstract idea because the claims recited concepts such as “summary window” and “unlaunched application,” which are specific to devices like computers and cellphones.  The jury found all asserted claims to be infringed and not anticipated.  The district court denied LG’s motions for judgment as a matter of law of non-infringement and anticipation.  LG appealed to the Federal Circuit.  

The Federal Circuit affirmed the district court’s decision.  Concerning § 101, the Federal Circuit noted that the claims recited a specific improvement over conventional user interface methods resulting in an improved user interface for electronic devices.  In its analysis, the Federal Circuit pointed to claim limitations that disclose the specific manner of displaying a limited set of information to the user.  It also highlighted language in the specification indicating that the claims were directed to an improvement in the functioning of computers, particularly those with small screens.  Finding that the asserted claims were not directed to an abstract idea, the Federal Circuit did not proceed to the second step of the Alice inquiry.  Concerning LG’s motions for judgement as a matter of law, the Federal Circuit rejected LG’s argument that the relevant claims were anticipated.  Finally, the Federal Circuit rejected LG’s non-infringement arguments based on the construction of “unlaunched state” as “not running” rather than “not displayed.”

Judge Wallach dissented in part, arguing that the district should have construed “unlaunched state” to mean “not running” as LG proposed, instead of “not displayed.”  In his analysis, Judge Wallach pointed to the distinct and independent meanings of “display” and “launch” as used in the claims as well as the specification.

Editor: Paul Stewart

Federal Circuit Summaries

Before Newman, O’Malley, and Reyna. Appeal from the Patent Trial and Appeal Board.

Summary: When resolving an obviousness challenge, the PTAB cannot invoke “ordinary creativity” of a skilled artisan to supply a missing claim limitation, without reasoned analysis and evidence.

In an IPR proceeding initiated by Apple, the PTAB found all challenged claims—directed to a wireless communication network—were obvious.  On the single limitation at issue, which was not in the prior art, the PTAB found “no persuasive evidence of record that it would have been uniquely challenging or difficult for one of ordinary skill in the art to do so.”

On appeal, the Federal Circuit determined that the PTAB’s final written decision did not sufficiently support the obviousness finding.  The Federal Circuit found that “ordinary creativity” or “common sense,” should only be invoked to fill in a missing claim limitation when that limitation is “unusually simple” and the technology is “particularly straightforward.”  Here this was not the case.  The Federal Circuit went further and determined that the record evidence could not supply the Board with a basis for a more reasoned explanation to support obviousness.  For this reason, the Federal Circuit reversed, rather than remanding to the Board for additional investigation or explanation.

Judge Newman dissented, suggesting that even if the PTAB’s explanation were inadequate, the appropriate appellate action would be to remand.  She noted that a reversal, thus producing a final judgment of patentability is “contrary to the body of precedent, and dilutes the purpose of these post-grant proceedings.”

This case is: DSS TECHNOLOGY MANAGEMENT, INC. V. APPLE INC.

Editor: Paul Stewart

Federal Circuit Summaries

Before Dyk, Bryson, and Reyna.  Appeal from PTAB, remanded from the Federal Circuit, en banc.

Summary: Time-bar does not apply to IPR petitioner through privity with a district court defendant because the evidence did not show (1) that the petitioner had the right to control the district court litigation nor (2) that the district court defendants were real parties in interest in the IPR proceeding.

Ericsson, Inc. sued various defendants in district court for patent infringement.  Although not a defendant, Broadcom was the manufacturer of some of the chips that formed the basis for some of the infringement allegations.  More than a year after Ericsson filed its complaint, Broadcom requested inter partes review of the patent at issue, then owned by Wi-Fi.  Wi-Fi argued Broadcom’s petition was time-barred under 35 U.S.C. § 315(b) because Broadcom was in privity with the district court defendants.  The Board found Wi-Fi failed to prove privity and found the patent at issue invalid.

Wi-Fi appealed, arguing the decision to institute was incorrect because Broadcom’s petition was time barred.  The Federal Circuit panel initially refused to review the Board’s institution decision, citing the Federal Circuit’s prior decision in Achates.  However, the en banc Federal Circuit later remanded this appeal to the panel because it had determined that the Board’s time-bar decisions at the time of initiation could be appealed. 

On remand, Wi-Fi argued that the Board’s privity test, whether the party in question had sufficient control over the prior proceeding, was erroneous because the Supreme Court had adopted a more flexible standard outside the patent context.  Wi-Fi also argued the Board abused its discretion when it refused Wi-Fi additional discovery on Broadcom’s role in the district court litigation.  The Federal Circuit affirmed the Board, concluding that, although Broadcom’s interests were generally aligned with the defendants, the evidence did not show that Broadcom had the right to control the previous litigation.  Nor did the evidence suggest that the defendants were real parties in interest in Broadcom’s IPR.  The court also determined the Board had not abused its discretion by denying Wi-Fi additional discovery because the Board reasonably found that the discovery Wi-Fi requested, including indemnity agreements, would likely not have established control.

Judge Reyna dissented, writing that the Board applied an erroneous standard for establishing privity because it limited its analysis to the “control” ground and ignored the other grounds for establishing privity set forth by the Supreme Court.  Judge Reyna also wrote that indemnity agreements evidenced privity and that the panel should have reversed the Board’s ruling denying Wi-Fi additional discovery.

This case is: WI-FI ONE, LLC v. BROADCOM CORP.

Editors: John Sganga, Joe Cianfrani, Boris Zelkind

Patent Judgments & Awards

On March 22, 2018, a Texas federal court awarded patent infringement damages totaling over $8 million and ongoing royalties in a case involving multiple patents related to voice over IP technology. The damages award is based on a jury trial that was conducted in January 2016, where the jury found Metaswitch Networks liable for infringing Genband’s seven patents.  During trial, Genband requested $9,076,000 in damages based on past sales.  In contrast, Metaswitch argued that if infringement was found, damages should be $2,084,024.  Additionally, Metaswitch argued that it was entitled to a royalty-free license as five of the patents were part of a royalty-free pool.  Genband prevailed and the jury awarded $8,168,400, which is exactly 90% of Genband’s request.  After an appeal to the Court of Appeals for the Federal Circuit, Judge Gilstrap was again asked to consider the damages award.  Genband requested that the court determine a royalty rate for (1) products sold for the few months before the jury verdict as no sales data was available at trial; (2) products sold post-verdict and pre-final judgment; and (3) in lieu of a permanent injunction (which was denied), for the court to set an ongoing royalty rate for continued infringement of products in categories (1) and (2) above.  Genband requested an ongoing royalty rate 2.5 times the implied jury awarded rate of 90% of Genband’s requested rate.  Although the court declined to increase the rate by that amount, the court noted some facts that supported increasing the ongoing royalty rate, including the increased market share of Metaswitch and Metaswitch’s status as Genband’s biggest competitor.  The court awarded an ongoing royalty 1.5 times the implied jury rate.  See detailed chart below.

The case is Genband US LLC v. Metaswitch Networks Corp., et al., Civil Action No. 14-cv-00033 (E.D. Tex.)

Editors: John Sganga, Joe Cianfrani, Boris Zelkind

Patent Judgments & Awards

In April 2018, a jury in the Eastern District of Texas awarded VirnetX Inc. (“VirnetX”) a total of more than $500,000,000 in its patent infringement suit against Apple Inc. (“Apple”).  The four patents-in-suit were directed to secure communication links such as Virtual Private Networks (VPN) and Domain Name Services (DNS).  This decision is the result of eight years of litigation between VirnetX and Apple, which included multiple trials.  In the original case, Apple I, a jury found that the Virtual Private Network On Demand (“VOD”), which allows an Apple user to automatically connect to a VPN, and FaceTime, as used in various Apple products, infringed VirnetX’s patents.  

While the original jury verdict was on appeal, VirnetX filed a second case against Apple, alleging that the redesigned versions of VOD and FaceTime, used in Apple’s iPhone, iPod Touch, and iPad products, infringed VirnetX’s patents.  At the second trial, which consolidated the damages issue from the first case with the second case directed to the redesigned VOD and FaceTime, the jury awarded over $600 Million in damages, with approximately $290,000,000 attributed to the redesigned versions of VOD and FaceTime.  The royalty rate for the redesigned versions equaled approximately $1.20 per device.  At the conclusion of the second trial, Apple requested a new trial for just the products using the redesigned VOD and FaceTime; the court granted Apple’s request. 

At the new trial, which concluded in April, the jury again concluded that Apple’s redesigned VOD and FaceTime infringe VirnetX’s patents.  The parties fought over an appropriate royalty rate, pointing to VirnetX’s royalty bearing licenses with various companies including Aastra, Mitel, NEC, Siemens, Avaya, and Microsoft.  The jury awarded VirnetX $502,567,709.00, based on sales of over 400 million Apple devices.  However, the victory for VirnetX may be short lived, as the asserted claims were determined to be unpatentable in recent post-grant Patent Office proceedings.  The appeal of the Patent Office’s decision to invalidate the asserted patent claims is pending.

Editor: Paul Stewart

Federal Circuit Summaries

Before Reyna, Linn, and Hughes. Petition for Writ of Mandamus from the District Court for the Eastern District of Texas.

Summary: A corporation incorporated in a state having multiple judicial districts “resides” for purposes of the patent venue statute only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.

Diem and Express Mobile each filed patent infringement suits against BigCommerce in the District Court for the Eastern District of Texas.  BigCommerce is incorporated in the State of Texas and lists its registered office as being located in Austin, Texas, where it is also headquartered. Austin lies in the Western District of Texas.  It was undisputed that BigCommerce has no place of business in the Eastern District of Texas.

In light of the Supreme Court’s decision in TC Heartland, which reaffirmed that a domestic defendant corporation “resides” under the patent venue statute, 28 U.S.C. § 1400(b), only in its state of incorporation, BigCommerce moved to dismiss Diem’s case and transfer Express Mobile’s case, arguing that it resides only in the Western District of Texas. In both cases, the district court concluded that venue in the Eastern District of Texas was proper, explaining that a domestic corporation incorporated in a state having multiple judicial districts “resides in each such judicial district for venue purposes.”

The Federal Circuit granted BigCommerce’s petitions for Writ of Mandamus and vacated the order denying the motion to dismiss in Diem’s case and the order denying the motion to transfer in Express Mobile’s case. The Federal Circuit noted that different district courts have come to different conclusions about whether a corporation “resides” under § 1400(b) in every judicial district within its state of incorporation when the state has more than one judicial district. The Federal Circuit held, however, that the express language of § 1400(b) indicates that Congress did not intend for residence to include all judicial districts.  Section 1400(b) limits venue in patent cases to “the judicial district where the defendant resides.”  Thus, a domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of  § 1400(b) only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.

This case is: IN RE: BIGCOMMERCE, INC.

Partner Perry Oldham was quoted in, "MelRok is seeking patent protection in early stage energy Internet of things industry," an article posted by The Patent Investor. 

Excerpt: "MelRok LLC, the energy Internet of things startup developing software to allow utilities and buildings to efficiently monitor, communicate and control multiple energy systems and devices, recently received a new patent focused on solar energy systems, and is looking for a CEO who can lead it to profitability in the next six months to a year."

Read full article here >>   (Subscription Required)

Federal Circuit Summary

Before O’Malley, Mayer, and Reyna.  Appeal from the U.S. District Court for the District of Delaware.

Summary: A case may be exceptional if: (1) fact witnesses are compensated based on the outcome of the case, (2) relevant documents are destroyed, or (3) asserted patents were improperly revived during prosecution.  However, an award of attorneys’ fees must have some causal connection to the misconduct. 

Rembrandt Technologies, LLC and Rembrandt Technologies, L.P. (“Rembrandt”) filed suit against dozens of cable companies, cable equipment manufacturers and broadcast networks.  These cases were consolidated in the District of Delaware.  The district court entered judgment against Rembrandt as to all claims, determined that the case was exceptional and awarded over $51 million in attorneys’ fees.  The district court found the case to be exceptional because Rembrandt improperly compensated its fact witnesses based on the outcome of the case, engaged in document spoliation, and should have known that two of the asserted patents were improperly revived and thus unenforceable.

The Federal Circuit reviewed the exceptional case determination for abuse of discretion.  The Federal Circuit did not find that any of the district court’s findings were based on an “erroneous view of law or clearly erroneous assessment of the evidence.” First, Rembrandt’s agreement with its patent consultants granted them a stake in any litigation involving some of the asserted patents, and it was foreseeable at the time the agreement was signed that the consultants would become fact witnesses in the litigation. Second, after the original owner of the asserted patents was acquired, Rembrandt knew that documents were being destroyed at the original patent owner’s facilities and there was a significant risk that relevant documents were being destroyed.  Third, there was evidence that two of Rembrandt’s asserted patents were intentionally abandoned due to the belief that the inventions lacked commercial value.  However, the patents were later revived based on a statement to the USPTO that the abandonments were unintentional. Although Rembrandt was not involved in the prosecution, it had access to documents that outlined the strategy for the petitions to revive, and thus Rembrandt at least “should have known” that the revivals were improper.

The Federal Circuit determined that the district court’s fee award did not have a causal connection to the misconduct.  In fact, the Federal Circuit found that the district court did not even attempt to assess which issues the misconduct affected, and thus remanded to the district court to conduct the proper analysis of the fee award.    

This case is: IN RE REMBRANDT TECHS., LP PATENT LITIG.

Editor: Paul Stewart