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Fresh From the Bench: Recent Patent Cases ‎From the Federal Circuit

July 28, 2014

Overview

Arlington – The Circuit dismisses for lack of jurisdiction an appeal of a contempt order because the order is not a final judgment or otherwise appealable until the sanctions are decided by the district court. The fact that sanctions were ordered by the district court after the notice of appeal was filed does not help the appellant since the Circuit cannot normally consider documents outside of the record on appeal.

Golden Bridge – The Circuit determines that the patentee disclaimed a broader scope of the claim term "preamble" in an IDS submission that included a previously-agreed-upon construction. An additional infringement theory argued by the patentee in a motion for reconsideration was waived because the argument was made for the first time in a motion for reconsideration‎.

ePlus – The Circuit vacates an injunction, a contempt order and an $18 million penalty because all of the claims of the two patents in suit have either been determined by the Circuit to be not infringed or invalid.

Arlington Industries, Inc. v. Bridgeport Fittings, Inc., Fed. Cir. Case 2013-1357 (July 17, 2014)

Arlington owns a patent to a method for connecting electrical ‎cables to a junction box using electrical fittings. Arlington sued Bridgeport in 2004, and the parties entered into a settlement agreement ‎under which Bridgeport agreed to be enjoined from making and selling certain products and their colorable imitations. Bridgeport then redesigned its electrical ‎connectors, and Arlington sought a contempt order holding that these redesigned connectors violated the original agreement. The district court entered an order finding Bridgeport in contempt of the original injunction, but at ‎the time of appeal, had not yet determined any sanctions for Bridgeport's contempt. Bridgeport appeals the contempt order. Because the contempt order is not a final judgment or otherwise appealable, the panel dismisses this appeal for lack of jurisdiction.‎

The parties' dispute before the district court centered around two limitations of claim 1 of the '488 ‎patent, and construed those limitations in its memorandum and contempt order. The district court ‎found by clear and convincing evidence that the new connectors met the limitations of claim 1 and that therefore Bridgeport directly and indirectly ‎infringed the patent.‎ Because it found the new connectors not more than ‎colorably different from the old connectors, the ‎court determined that Bridgeport had violated the 2004‎ Injunction and held Bridgeport in contempt. In its contempt order the district court also expressly enjoined the ‎sale of the new connectors for the life of the '488 patent. The district court did not, however,‎ enter sanctions at that time. Bridgeport appeals the ‎district court's contempt order, the claim constructions,‎ the infringement findings, the scope of the injunction, and the determination that the new connectors were not ‎more than colorable imitations of the old connectors.‎

The opinion looks first to 28 U.S.C. § 1295(a)(1), which provides that the Circuit has exclusive ‎jurisdiction of an appeal from a "final decision" of a district court in a case arising under any Act of Congress ‎relating to patents. Section 1292(c) further provides this ‎court with jurisdiction to review certain interlocutory ‎decisions. In patent cases, 28 U.S.C. §§ 1292(a)(1) and (c)(1) provide for exclusive jurisdiction over "interlocutory ‎orders of district courts of the United States . . . granting, ‎continuing, modifying, refusing or dissolving injunctions, ‎or refusing to dissolve or modify injunctions." And § 1292(c)(2) gives the Circuit jurisdiction ‎over "an appeal from a judgment in a civil action for ‎patent infringement which would otherwise be appealable ‎‎. . . and is final except for an accounting." Bridgeport argues that the Circuit has jurisdiction ‎over its appeal under both § 1292(c)(1) and § 1292(c)(2). ‎

Jurisdiction is not proper under 28 U.S.C.‎ ‎§ 1292(c)(1)‎

The panel notes that the Circuit can exercise appellate jurisdiction under ‎§ 1292(c)(1) if the injunction has been modified. Thus, the panel must determine whether the district court's order constitutes a modification, or is ‎simply an interpretation or clarification.‎ Under Federal Circuit law, even when an order does ‎not on its face modify an injunction, the Circuit still has jurisdiction over an appeal of that order if it effectively amounts ‎to a modification.‎

The facts in this case parallel Entegris, Inc. v. Pall Corp., 490 F.3d 1340 (Fed. Cir. 2007). And relying ‎on that precedent, the panel similarly concludes that the Circuit lacks ‎jurisdiction to consider Bridgeport's appeal because the ‎district court's order simply interpreted or clarified its ‎original 2004 injunction.‎

The focus of the clarification-or-modification analysis ‎is whether there were changes to the original injunction ‎that "actually altered the legal relationship between the ‎parties." Because ‎clauses of both injunctions are almost identical in wording ‎and are congruent in meaning, the legal relationship ‎between the parties is not altered.‎ The 2004 Injunction and the 2013 Injunction are directed to the same parties, apply to the same activities, and ‎are in force for the same time period. Similarly, the injunctions ‎apply to the same products even though the actual wording in each injunction differs slightly. Because the 2004 Injunction applies to "any colorable ‎imitations" of the old connectors, and the district court found that the new connectors were colorable imitations of the old connectors, ‎the district court's express inclusion of the new connectors in the 2013 Injunction simply clarifies what was ‎already implicit in the 2004 Injunction. ‎

Also, just because the district court construed claim ‎terms for the first time in the 2013 Injunction, it does not ‎necessarily follow that the 2013 Injunction is transformed ‎into a modification of the parties' relationship. Because ‎the 2004 Injunction was the result of a settlement agreement, the district court did not need to analyze infringement and therefore did not need to issue any claim ‎constructions at that time. In expressly providing the claim constructions, the ‎district court simply interpreted or clarified the meaning ‎of those claim terms.

For these reasons, the 2013 Injunction is not a modification of the 2004 Injunction. Thus, the Circuit cannot exercise jurisdiction over Bridgeport's appeal under § 1292(c)(1). ‎

Jurisdiction is not proper under 28 U.S.C.‎ ‎§ 1292(c)(2)

To exercise jurisdiction under § 1292(c)(2), the appeal ‎must be "final except for an accounting." To hold that this ‎appeal is final except for an accounting, the Circuit would have to ‎extend the narrow exception to the final judgment rule ‎laid out in § 1292(c)(2) to contempt orders, and the panel declines to do so in this case.‎

The panel recognizes that § 1292(c)(2) confers jurisdiction to entertain appeals from patent infringement liability determinations when a trial on ‎damages has not yet occurred. See Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305 (Fed. Cir. 2013) (en banc) But here, the Circuit is not considering a determination of patent infringement; it has before it a civil contempt order. Thus, although Congress created an exception to the final judgment rule in patentcases via § 1292(c)(2), this patent carve-out does not expressly include contempt orders. Accordingly,‎ the panel holds that ‎§ 1292(c)(2) does not extend to contempt orders.

The panel notes that "a contempt order ‎interpreting or enforcing an injunction . . . is generally not ‎appealable until final judgment. This is particularly so ‎where no sanction has yet been imposed for that contempt and proceedings with respect to that question ‎remained ongoing at the time the appeal before us is ‎filed." Aevoe Corp. v. AE Tech Co., 727 F.3d 1375, 1380-81 (Fed. Cir. 2013). Here, the district court imposed sanctions, but only well after the record was fixed for appeal. ‎Bridgeport filed notices of appeal after the sanction award, but the Circuit normally cannot consider documents outside of the record on appeal. And ‎even if the Circuit was to take judicial notice of the sanction order,‎ Bridgeport's later notice of appeal suggests that Bridgeport recognized, as the Circuit is now holding, that its earlier ‎appeal was premature.

For the foregoing reasons, the panel dismisses the case for ‎lack of jurisdiction.‎

Comment:

While the Circuit dismisses this appeal due to lack of jurisdiction, because the amount of sanctions has already been decided by the district court in the amount of $2.3 million, and a notice of appeal has already been filed, this case will be right back before the Circuit in the proper appeal. This dismissal might seem overly strict, but it is consistent with the Circuit's precedent. See Entegris and Aevoe, discussed at length in the opinion.

Golden Bridge Technology, Inc. v. Apple, Inc., et al., Fed. Cir. Case 2013-1496 (July 14, 2014)

GBT's patents describe and claim an improvement to a Code ‎Division Multiple Access (CDMA) system. A CDMA wireless cellular network consists of a ‎base station and multiple mobile stations, such as cellular ‎telephones. To establish communication between a mobile ‎station and a base station, the mobile station transmits a ‎known signal called a "preamble" over a random access ‎channel (RACH). The CDMA system allows multiple ‎signals to be sent over the same RACH by using different ‎numerical spreading codes in transmitting each signal. ‎Spreading codes enable the mobile stations and the base ‎station to distinguish a particular wireless communication from other concurrent communications. However, if too many mobile stations are transmitting simultaneously at high ‎power levels, the signals from mobile stations can interfere with each other.‎ The patents-in-suit disclose an improvement for a ‎CDMA system that reduces the risk of interference between the signals sent from various mobile stations.

GBT previously asserted the ‎'267 patent in the E. D. of Texas. In accordance with the parties' stipulation, the ‎Texas district court construed "preamble" to be "a signal used for communicating with the base station that is spread ‎before transmission." The district court subsequently granted summary judgment of anticipation,‎ which the Circuit affirmed. While the appeal of the Texas litigation was pending, GBT sought new claims (1) during a reexamination of the '267 ‎patent and (2) in a pending continuation application,‎ which issued as the '427 patent. During prosecution of the '427 patent and reexamination of the '267 patent, ‎GBT submitted to the PTO as part of an IDS the claim construction order from the Texas litigation and various filings setting forth GBT's stipulated definition of preamble.‎ The claims GBT asserted against Apple in this case are new claims that ‎were either added during reexamination of the '267‎ patent or during prosecution of the '427 patent.‎

The district court issued a claim construction order ‎construing the disputed claim terms, including the term "‎preamble," which is included in the claims of both patents. The court granted Apple's motion for summary judgment of noninfringement based on its construction of ‎"preamble," and denied Apple's motion for summary judgment of invalidity. Following the district court's ruling on summary judgment, GBT filed a motion for reconsideration. The court reviewed the motion but declined to modify its summary judgment of noninfringement. ‎GBT ‎appeals.

Claim Construction of "Preamble"

In construing the term "preamble," the district court agreed with the construction from the Texas litigation, concluding that it was still applicable insofar as it includes spreading prior to ‎transmission.‎ It construed "preamble" as "a signal for communicating with ‎the base station that is spread before transmission and that ‎is without message data." ‎ GBT disputes the portion of the district court's construction requiring that the preamble be spread prior to ‎transmission. It argues that the district court's construction departs from the plain meaning of preamble, and ‎that there is no lexicography or disclaimer that would merit ‎this departure. GBT also contends that it is not bound by ‎its stipulated construction of preamble in the Texas ‎litigation. It argues that its submission of its stipulated ‎construction to the PTO in an IDS does not constitute a ‎disclaimer of the broader claim scope. GBT contends ‎that, under PTO rules, submissions in an IDS are not ‎admissions that the cited information is material; therefore, GBT argues that its stipulated construction of preamble in the Texas litigation does not control the meaning of preamble ‎in the reexamined '267 patent and new '427 patent.‎

The panel notes that the Circuit generally construes ‎terms according to their plain and ordinary meanings to ‎one of ordinary skill in the art, but departs from that ‎meaning where there is disclaimer. Here, GBT clearly and unmistakably limited the ‎term preamble to "a signal used for communicating with ‎the base station that is spread before transmission." During reexamination of ‎the '267 patent and prosecution of the '427 patent, GBT ‎submitted and requested that the PTO "expressly consider" its stipulated construction of preamble from the ‎Texas litigation. The stipulation required the ‎preamble to be spread before transmission. According to the panel, It would ‎have been natural for both the PTO and the public to rely ‎upon the stipulation in determining the scope of the ‎claimed invention.‎

It is correct that "mere disclosure of potentially material prior art to the PTO does not automatically limit the ‎claimed invention." ‎However, this is not a typical IDS, and GBT did more ‎than simply disclose potentially material prior art. It ‎submitted its own stipulated construction of a claim term ‎in the context of the particular patents being reexamined ‎‎('267 patent) and prosecuted ('427 patent). This is a clear ‎and unmistakable assertion by the patentee to the PTO of ‎the meaning and scope of the term preamble. The fact ‎that the stipulation was contained in documents accompanying an IDS does not change this result. The Circuit has ‎held that "an applicant's remarks submitted with an IDS can be the basis for limiting claim scope." On the facts of ‎this case, the panel sees no meaningful difference between limiting ‎claim scope based on an applicant's stipulations contained ‎in IDS documents and an applicant's remarks contained ‎in the IDS itself. GBT's stipulation tells the PTO how ‎preamble should be construed, and the panel concludes that GBT ‎is bound by this representation. Therefore, the term "preamble" is to be construed in ‎accordance with the stipulation as "a signal used for ‎communication with the base station that is spread before transmission and that is without message ‎data."

Although Circuit precedent allows applicants to rescind a ‎disclaimer during prosecution, GBT did not avail itself of ‎this route and never notified the PTO that it sought a ‎meaning of preamble that was different from its stipulated ‎construction. Therefore the panel holds that GBT's ‎submission of its stipulation to the PTO thus constitutes a ‎clear and unmistakable disclaimer of the broader claim ‎scope that GBT now seeks.‎

Summary Judgment of Noninfringement

The panel holds that the district court properly granted ‎summary judgment of noninfringement. The preamble ‎must be "spread prior to transmission" and the PRACH ‎preamble is not spread. The district court properly granted summary judgment of ‎noninfringement on this basis.‎

‎Decision on Reconsideration ‎

GBT also argues that the district court erred by declining to modify its judgment of noninfringement on ‎reconsideration. The panel concludes that the district court properly refused to ‎grant the relief GBT requested in its motion for reconsideration because this infringement argument was made for the first time in its motion ‎for reconsideration. Such motions ‎are not to be used as an opportunity to relitigate the case; ‎rather, they may be used only to correct manifest errors of ‎law or fact or to present newly discovered evidence.‎ Because the panel concludes that GBT waived the signature ‎sequence infringement argument, it does not pass judgment on whether ‎the signature sequence is a signal used for communicating ‎with the base station that is spread before transmission.‎

Comment:

The Circuit reminds us once again, as it did earlier this month in Hill-Rom v. Stryker (June 27, 2104), that there must be a clear and unambiguous disavowal in the prosecution history in order for there to be a disavowal. The recent cases of X2Y Attenuators, Inc. v. ITC and Intel (July 7, 2014) and Vederi v. Google (March 14, 2014) applied that same strict test to disavowal in the patent specification. However, despite this high bar, these cases show that the Circuit is not reluctant to find clear and unambiguous disavowals.

ePlus, Inc. v. Lawson Software, Inc., Fed. Cir. Case 2013-1506, -1587 (July 25, 2014)

ePlus sued Lawson Software for infringement of its ‘683 and ‘172 patents. The district court found two of the asserted ‎system claims and three of the asserted method claims not invalid, and a jury found that Lawson infringed those claims. In a first appeal, the Circuit reversed in part on the ‎ground that the system claims were invalid and that two of the asserted method claims were not infringed, and affirmed only the infringement verdict as to one method ‎claim—claim 26—of the '683 patent. ‎

On remand the district court modified the injunction in ‎one respect and found Lawson in civil contempt for ‎violating the injunction. Lawson appealed both the injunction and contempt order. During the pendency of ‎Lawson's appeal, the PTO completed a reexamination of ‎the '683 patent and determined that claim 26 was invalid. ‎In a separate appeal, the Circuit affirmed the PTO's invalidity ‎determination. In the present decision a divided panel vacates the injunction and contempt order because both were based on claim 26, which the PTO has now cancelled.‎

The patents in suit are ‎directed to using electronic databases to search for product ‎information and ordering selected products from third-‎party vendors. The only claim now at issue in this ‎appeal, claim 26 of the '683 patent, recites a "method ‎comprising the steps of": "maintaining at least two product ‎catalogs on a database," "selecting product catalogs to ‎search," "searching for matching items," "building a ‎requisition," "processing the requisition to generate one or ‎more purchase orders," and "determining whether a ‎selected matching item is available in inventory."

Pursuant to the jury verdicts, the district court permanently enjoined Lawson from directly or indirectly making, using, offering to ‎sell, or selling within the United States or importing into the United States any of the adjudged infringing product configurations and/or installation, implementation, design, configuration, ‎consulting, upgrade, maintenance and support ‎and training and other related and associated services and any colorable variations thereof.‎ Lawson appealed.‎

After the Circuit's first ruling , the district court ordered the parties to ‎file statements of position on the effect of the Circuit's decision on ‎the injunction. Lawson ‎challenged the very provisions of the injunction that led to ‎the contempt sanctions sought by ePlus—namely, the bar against sales of particular software products. Lawson argued ‎that infringement of a single method claim (claim ‎26 of the '683 patent) could not support the injunction ‎against product sales (and hence, contempt sanctions based ‎on such sales) and that the Circuit's opinion distinguished "sales" of ‎software from "installation" and other services provided to ‎customers. This court upheld the finding of induced ‎infringement of claim 26 not based on sales, but based on ‎Lawson's providing customer services, including software ‎installation, demonstrations, and maintenance. Lawson also urged that, in light of this court's narrowing of the jury's infringement findings, the enjoined software ‎products were capable of significant non-infringing uses ‎and sales of such software should not be enjoined. Additionally, Lawson filed a Rule 60(b) motion to modify the injunction., arguing that under eBay Inc. v. Mer‎cExchange, L.L.C., 547 U.S. 388 (2006), the balancing of ‎equities no longer supported any injunction. The district court disagreed, modifying the injunction by deleting the configuration found not to infringe but retaining the injunction in all other respects. ‎

On remand, in addition to reconsidering the injunction, the district court instituted contempt proceedings. Following the jury verdicts, Lawson stopped selling products with a ‎user interface module, the basic ‎building block of Lawson's system. Lawson had also ‎redesigned its software. ePlus alleged that Lawson was in contempt for violating the injunction with respect to the redesigned software, ‎arguing that the changes did not make the software more ‎than colorably different, and ‎that the redesigned software infringed claim 26. The court held Lawson in contempt for ‎violating the injunction, finding that the redesigned ‎products were no more than colorably different and infringed. The court ordered Lawson to pay a compensatory ‎fine of $18,167,950 and coercive daily fines of $62,362 ‎until it could show compliance with the injunction. It ‎declined to award enhanced damages or attorneys' fees. ‎Lawson appealed the district court's modified injunction ‎and contempt order. The Circuit stayed the accumulation of fines ‎during the pendency of the appeals.‎

While Lawson's appeals were pending, in another ‎case, the Circuit affirmed the PTO's reexamination decision ‎invalidating claim 26 of the '683 patent.

Injunction

The first question is whether the district court's modified injunction against Lawson must be set aside now that ‎the PTO has cancelled the patent claim on which it is ‎based. It is well established that an injunction must be ‎set aside when the legal basis for it has ceased to exist. ‎ Pennsylvania v. Wheeling & Belmont Bridge Co., 54 U.S. ‎‎(13 How.) 518, 577–79 (1851). The principles of the Wheeling Bridge case have repeatedly been followed by the Supreme Court as well as ‎‎"by lower federal and state courts. Those principles reflect the fact that "a continuing ‎decree of injunction directed to events to come is subject ‎always to adaptation as events may shape the ‎need. . . . A court does not abdicate its power to revoke or ‎modify its mandate, if satisfied that what it has been ‎doing has been turned through changing circumstances ‎into an instrument of wrong."

The Circuit has applied these principles to an injunction ‎barring infringement of patents later found to be invalid. ‎

Under these authorities, there is no longer any legal ‎basis to enjoin Lawson's conduct based on rights that ‎claim 26 of the '683 patent previously conferred as those ‎rights have ceased to exist. The PTO found claim 26 ‎invalid and the Circuit affirmed that decision, so claim 26 no longer ‎confers any rights that support an injunction.

Civil Contempt Remedies

The second question is whether the civil contempt ‎sanctions should be set aside. It is well established that ‎‎"violations of an order are punishable as criminal ‎contempt even though the order is set aside on appeal ‎‎. . . or though the basic action has become moot." ‎ United States v. United Mine Workers of Am., 330‎ U.S. 258 (1947) If Lawson had been found guilty of criminal contempt, that ‎order and any resulting penalties would not be set aside simply because claim 26 had been cancelled.‎ However, the district court found Lawson in civil, not ‎criminal, contempt.

This case is not distinguishable on the ground that ‎the injunction has been set aside as the result of the PTO ‎proceeding rather than a court judgment. In Fresenius ‎USA, Inc. v. Baxter International, Inc., the Circuit held that a ‎non-final money judgment of damages for infringement ‎must be set aside where the judgment rested on a patent ‎claim that the PTO later cancelled. 721 F.3d 1330, 1344,‎ ‎1347 (Fed. Cir. 2013). Thus, the cancellation of the patent precluded the patentee from recovering damages in Fresenius. Similarly, here ‎the civil contempt sanctions must be set aside.‎

In dissent, Judge O'Malley argued that the facts of Fresenius were so different that Fresenius did not require that the contempt award be vacated.

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