Fresh From the Bench: Recent Patent Cases From the Federal Circuit
Every week or so we will continue to provide summaries of cases we think clients and others might find of interest. If you have any questions about the information provided in these case summaries or wish to discuss them further, please contact Peter Heuser at 503-796-2424 or email@example.com.
Suprema, Inc. and Mentalix, Inc. v ITC, 2012-1170, Federal Circuit, (12/13/2013)
An ITC exclusion order may not be predicated on a theory of induced infringement under 35 USC § 271(b) where direct infringement does not occur until after importation.
A split panel of the Federal Circuit ruled that the Commission's authority under section 1337 only reaches "articles that . . . infringe a valid and enforceable United States patent" at the time of importation. Because there can be no induced infringement unless there has been an act of direct infringement, however, there are no "articles . . . that infringe" at the time of importation when direct infringement has yet to occur. The ITC's exclusion order was thus revised to bar only those articles that directly infringed at the time of importation.
The patents in suit include method and apparatus claims directed to fingerprint image capture and processing. Cross Match, the complainant, is a global provider of fingerprint acquisition technology based in Florida. One respondent is Suprema, a Korean company that manufactures and imports hardware and software for scanning fingerprints. A second respondent, Mentalix, is a domestic importer of Suprema scanners that integrates the scanners with its own software in the U.S. Cross Match contended that its system claims are directly and indirectly infringed by Suprema's optical systems, and that the method claims are infringed when Suprema's scanners are used in combination with the Mentalix software.
The Commission determined that the term "capture" within the meaning of the asserted claims, cannot occur until after the print quality and number of prints have been determined and detected, which occurs only after the Suprema system is integrated with the Mentalix software in the U.S. However, the Commission held that because Suprema induced infringement of the patented method under 35 USC § 271(b), this formed the basis for a section 337(a)(1)(B)(i) exclusion.
The majority of the Circuit panel first determined that only a few of the Suprema designs directly infringed the system claims. Because most of the equipment being imported required integration with software, the panel looked to see if Suprema might have been guilty of contributory infringement as to that equipment. However, because the Suprema equipment was capable of substantial non-infringing uses, there could be no contributory infringement under 35 USC § 271(c). The panel then turned to the induced infringement argument. The Commission had held that because Suprema began encouraging and aiding and abetting Mentalix's infringement well before importation, Suprema was already indirectly infringing at the time of importation. The Circuit panel agreed that the inducement analysis must focus on the intent of the inducer, citing its recent en banc decision in Akamai Techs., Inc. v. Limelight Networks, Inc. 692 F.3d 1301, 1307-08 (Fed.Cir. 2012). However, the panel held that because there is no complete inducement under section 271(b) until there has been a direct infringement, there can be no "articles . . . that infringe" at the time of importation under section 337. The ITC ruling was thus affirmed only as to those Suprema units that directly infringed the patents in suit.
In a dissent, Judge Reyna argued that the majority ignores that section 337 is a trade statute designed to provide relief from specific acts of unfair trade and patent infringement, including acts that lead to the importation of articles that will result in harm to a domestic industry. According to Judge Reyna, to negate both a statutory trade remedy and its intended relief the majority overlooks the Congressional purpose of section 337, "creating a fissure in the dam of the U.S. border through which circumvention of section 337 will ensue."
CBT Flint Partners, LLC v. Return Path, Inc., 2013-1036, Federal Circuit, 12/13/2013
The district court ruled against the patentee CBT on the merits and then awarded defendants their costs, most of which were for e-discovery service providers, ruling that such costs were "the 21st Century equivalent of making copies." A split Federal Circuit panel held that the district court erred in its interpretation of 28 U.S.C. § 1920(4) in awarding such costs. This case is of interest because it discusses the allocation of such costs and because of pending legislation providing for a broad shifting of costs to the prevailing party.
After the district court construed the patent claims at issue, CBT stipulated to noninfringement of the asserted claims of one of the patents in suit, and the court granted summary judgment of indefiniteness of claims of the other patent. The Commission awarded both defendants costs under 28 U.S.C. § 1920, amounting to $33,858 and $234,453, that they had paid to e-discovery service providers. In an earlier appeal the Federal Circuit reversed the summary judgment of indefiniteness and therefore vacated the award of costs. On remand the district court granted summary judgment of noninfringement, and defendants were again awarded costs. The Federal Circuit thus had to determine, under Federal Rule of Civil Procedure 54(d)(1) and 28 USC §1920(4), applying Eleventh Circuit law, whether the district court's interpretation of the statute was correct.
Section 1920(4) was amended in 2008 to encompass electronically-stored information as well as information on paper. Section 1920(4) now covers "[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." The Eleventh Circuit had not addressed section 1920(4) since it was amended. The Eleventh Circuit's pre-amendment precedent, however, expressed the general principle that section 1920(4) "allows recovery only for the reasonable costs of actually duplicating documents, not for the cost of gathering those documents as a prelude to duplication." The panel stated that it would interpret the scope of amended section 1920(4) in accordance with that principle, making necessary allowances for the inherent differences between paper and electronic documents.
The panel first reviewed the legislative history of section 1920(4), concluding that Congress intended only modest changes to the statute, leaving larger-scale shifting of litigation expenses to future legislation. The panel then turned to Federal Circuit precedent, which acknowledged the applicability of section 1920(4) to electronic documents, but only to those documents produced to a requester, not those a party creates for its own litigation or other use. The panel concluded that recoverable costs under section 1920(4) are those costs necessary to duplicate an electronic document "in as faithful and complete a manner as required by rule, by court order, by agreement of the parties, or otherwise." To the extent a party is obligated to produce (or obligated to accept) electronic documents in a particular format or with particular characteristics intact (such as metadata, 2-color, motion, or manipulability), the costs to make duplicates in such a format or with such characteristics preserved are recoverable as "the costs of making copies . . . necessarily obtained for use in the case." But only the costs of creating the produced duplicates are included, not a number of preparatory or ancillary costs commonly incurred leading up to, in conjunction with, or after duplication.
CBT also contested the district court's award of costs for prior-art searches. The panel noted that nothing in section 1920 covers research costs, and the Eleventh Circuit has confirmed that fees for computerized legal research, an analogous expense, are not recoverable. Accordingly, the panel reversed the district court's award of costs for prior art searches.
In dissent, Judge O'Malley agreed with much of what the majority said, but thought that the majority went too far in granting some of the costs that were not strictly for duplication of documents to be provided to the opposing party.