Federal Circuit Review | September 2015
Federal Circuit Remands Record Damages Award For New Trial On Extraterritorial Sales
In Carnegie Mellon University v. Marvell Technology Group, Ltd., Appeal No. 2014-1492, the Federal Circuit reversed a damages award partially hinging on sales of products outside the United States and asked the lower court to reconsider whether products made and used outside of the United States could be considered as “sold” in the United States.
CMU sued Marvell in 2009, alleging that Marvell's semiconductor chips infringed CMU’s patents. A jury awarded CMU $1.17 billion as a reasonable royalty for the infringing acts. The district court extended the award to the date of judgment, awarded an enhancement of the past damages award based on Marvell’s willfulness (found by the jury and the district court), and entered a record judgment of roughly $1.54 billion for past infringement and a continuing royalty at 50 cents per Marvell-sold chip.
The Federal Circuit affirmed the judgment of infringement and validity but chopped the damages award, leaving $278 million intact and ordering a new trial to recalculate the remaining amount. The Federal Circuit reversed the grant of enhanced damages for willfulness, ruling that Marvell's defense was objectively reasonable, so Marvell could not have willfully infringed. The Federal Circuit also held that some of the award may improperly reach beyond United States borders. The Federal Circuit specifically ruled that $278 million of the award properly covered Marvell products made and delivered abroad, but imported into the United States. But for Marvell products made and delivered abroad but never imported into the United States, a new trial was needed to determine where those chips were sold. “The standards for determining where a sale may be said to occur do not pinpoint a single, universally applicable fact that determines the answer, and it is not even settled whether a sale can have more than one location. Places of seeming relevance include a place of inking the legal commitment to buy and sell and a place of delivery, and perhaps also a place where other substantial activities of the sales transactions occurred.” But the Federal Circuit declined to settle on a legal definition or to decide whether any sale has a unique location as the “governing standards have not been the subject of meaningful briefing here.” The Federal Circuit asked the district court to consider whether the chips made and used outside the United States could be considered as sold in the United States. “To the extent, and only to the extent, that the United States is such a location of sale, chips not made in or imported into the United States may be included in the past-royalty award and ongoing-royalty order.”
En Banc Federal Circuit Confirms ITC’s Jurisdiction To Exclude Articles Based On Induced Infringement
In Suprema, Inc. v. International Trade Commission, Appeal No. 2012-1170, the Federal Circuit vacated a panel decision interpreting 19 U.S.C. § 1337 (“section 337”) as not covering importation of goods that were non-infringing at the time of importation, but that were later used by the importer to directly infringe at the inducement of the goods’ seller. The majority instead gave Chevron deference to the ITC’s interpretation of the statute, and remanded for further proceedings.
Suprema is a Korean manufacturer of fingerprint scanning hardware that can only be used in conjunction with a computer running specialized software. Suprema imported its scanners and sold them to Mentalix, which bundled them with Mentalix software and sold them. Cross Match filed an ITC complaint alleging that the hardware-software bundle infringed Cross Match’s patents. The ITC ruled that the bundle infringed, the elements of induced infringement had been met with regard to Suprema, and appropriate relief included an exclusion order. Suprema appealed, and a divided Federal Circuit panel vacated the ITC’s findings, reasoning that section 337’s “articles that infringe” language includes a temporal requirement that infringement must be measured at the time of importation.
The en banc panel vacated the decision. After determining that it should review the ITC’s ruling pursuant to Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Federal Circuit held that, under Chevron step 1, “we cannot conclude that Congress unambiguously excluded such induced infringement on the basis of the panel’s reasoning,” and, under Step 2, the ITC’s interpretation of the statute was reasonable.
Four members of the panel dissented, arguing that the language of the statute was unambiguous, and that the ITC thus lacked authority to enter an exclusion order on the basis of infringement of a method claim when the underlying direct infringement occurs post-importation.
En Banc Federal Circuit Expands Direct Infringement To Encompass New Forms Of Divided Activity
Akamai Technologies, Inc. v. Limelight Networks, Inc., Appeal Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417, is a unanimous, en banc decision setting forth a framework for the law of divided infringement under 35 U.S.C. § 271(a). Under this framework, Limelight was found to directly infringe a method patent because they directed and controlled the acts of its customers through contractual obligations.
The Federal Circuit revisited the dispute between Akamai and Limelight after the Supreme Court noted “the possibility [of error] by too narrowly circumscribing the scope of § 271(a).” The Federal Circuit set forth the framework that an entity is “responsible for others’ performance of method steps in two sets of circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.” The court emphasized that the application of this rule is “to be considered in the context of the particular facts presented.”
Akamai’s patent is directed to methods for delivering content over the Internet. At issue was whether Limelight infringed since the final steps of “tagging” and “serving” were performed by Limelight’s customers, not Limelight. Limelight conditions its customers’ use of its content delivery network upon its customers’ performance of the tagging and serving steps, and establishes the manner or timing of its customers’ performance. The Federal Circuit held that, because the customers were contractually bound by Limelight to perform the final steps of the method patent, Limelight was directing and controlling the performance of the customers.
Federal Circuit Clarifies Downstream Enforcement Of Standard-Essential Patents
In JVC Kenwood Corp. v. Nero, Inc., Appeal No. 2014-1011, the Federal Circuit affirmed a summary judgment ruling of non-infringement on the basis that, absent specific evidence of direct infringement by the end users, a licensee cannot be held liable for indirect infringement.
JVC asserted that the users of Nero’s software-implemented systems and methods directly infringed six of its patents. Based on the user’s direct infringement, JVC argued that Nero was liable for contributory or induced infringement. JVC failed to provide any evidence of specific direct infringement by any end user, but instead advanced a standards-compliance theory of infringement. According to JVC, because the end use of Nero’s software complied with the DVD and Blu-ray standards to which JVC Patents were essential, the end users necessarily infringed the asserted patents.
In affirming the decision, the Federal Circuit agreed with the district court’s holding that JVC did not establish direct infringement, and thus Nero was not shown to be potentially liable for indirect infringement. The Federal Circuit agreed with the district court that it was JVC’s burden to proffer at least plausible evidence of direct infringement, stating that “JVC cannot have it both ways—either the Patent is essential and licensed or JVC cannot rely on the standards to show infringement.”
The Federal Circuit also vacated the district court’s holding that the conditions for exhaustion, as set forth by the Supreme Court in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), were met on JVC’s theory of infringement. The Federal Circuit declined to rely “[o]n the sketchy record, contradictory arguments, and undeveloped facts” in this case to expand the theory of patent exhaustion.
Federal Circuit Panel Enunciates Tough Standard For Claim Definiteness Under Nautilus
In The Dow Chemical Co. v. NOVA Chemicals Corp., Appeal Nos. 2014-1431, 2014-1462, the Federal Circuit reversed an award of supplemental damages due to the change in the law of indefiniteness, finding asserted claims indefinite because of the existence of multiple, potentially outcome-affecting methods for measuring a claim parameter.
Dow sued NOVA for infringing patents related to plastics. A jury found the asserted claims infringed and not invalid, and the Federal Circuit initially affirmed, holding that the claims were not indefinite. The district court then awarded supplemental damages for the period between the first judgment and the patents’ expiration. NOVA appealed. While the appeal was pending, the Supreme Court decided Nautilus Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014), in which the Supreme Court held that a claim is indefinite if it does not inform a person of skill in the art about its scope with reasonable certainty.
The Federal Circuit reversed the award of supplemental damages, finding the asserted claims indefinite under Nautilus. The Federal Circuit held that neither issue preclusion nor law of the case bound it to the earlier conclusion of no invalidity. The Federal Circuit reasoned that an exception to both doctrines applied because the prior appeal was decided under a different legal standard, and the law had since changed in a way that would alter the outcome of the case. The Federal Circuit explained the tough new standard for claim definiteness under Nautilus as follows: “[where there are plural methods to determine a claim parameter, t]he question is whether the existence of multiple methods leading to different results without guidance in the patent or the prosecution history as to which method should be used renders the claims indefinite. Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method.”
Reaching the merits of the indefiniteness issue, the Federal Circuit ruled that the limitation “slope of strain hardening coefficient” was indefinite because there were multiple methods that one could use to measure it, each yielding a different result. Thus, the choice of method could impact whether a product infringed the claims. Although the Federal Circuit previously concluded that a person of skill in the art could determine some way to measure the slope, the existence of multiple, potentially outcome-affecting methods rendered the claims indefinite under Nautilus.
