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

October 20, 2014


Bosch TheCircuit disagrees with the district court's handling of the presumption of "means plus function" claiming but affirms that the terms ‎‎"program recognition device" and "program loading device" invoke 35 U.S.C. § 112, ¶ 6. The panel determines that the ‎specification does not disclose corresponding structure for ‎these terms, so the claims are found to be indefinite and therefore invalid.

SSL SERVICES The Circuit affirms motions denying a new trial as to whether Citrix's "GoTo" products dealing with encrypted data communication infringe, and denying JMOL as to willful infringement and invalidity of the patents. The panel also vacates and remands the denial of prevailing party status to SSL.‎ The ruling thus preserves the district court's adding $5 million to a $10 million judgment against Citrix as a result of the willful infringement.‎

Cardsoft − Because the district court erred by failing to give "virtual machine" its ordinary and customary meaning, the Circuit reverses the court's construction of this term, throwing out a $15 million verdict against payment terminal manufacturer VeriFone. Because CardSoft waived any argument that Verifone ‎infringes under the correct construction, the Circuit grants Appellants' judgment of no infringement as a matter of law.‎

Robert Bosch, LLC v. Snap-On Inc.,Fed. Cir. Case 2014-1040

Bosch owns the rights to the '313 patent, which claims ‎a diagnostic tester that determines whether the computerized control unit in a motor vehicle needs to be reprogrammed. The external diagnostic tester is made up of a ‎‎"program recognition device" and a "program loading ‎device," defined in claim 1 as follows:‎

  1. An external diagnostic tester for motor vehicles . . . comprising,‎

    a program recognition and program loading device, wherein a program version contained in a ‎connected control unit is queried and recognized by means of the program recognition device, and, if the program available in the ‎motor vehicle and recognized via the diagnostic/test plug is not stored there in a latest and ‎most current version, a respective most current version is loaded by the program loading ‎device into a program storage device of the ‎pertinent control unit of the motor vehicle, ‎wherein the external diagnostic tester automatically establishes communication with a ‎central data base in order to check the program version and, if necessary, to obtain the ‎current program version that applies for the ‎control unit connected to the diagnostic tester ‎and to store it there.‎ (emphasis added)

Section 112, ¶ 6 (now § 112(f)) allows a patentee to ‎express a claim limitation as "a means or step for performing a specified function without the recital of structure, material, or acts in support thereof," and claim limitations expressed in this manner ‎‎"shall be construed to cover the corresponding structure, ‎material, or acts described in the specification and equivalents thereof."‎ According to the panel, the framework under which the courts are to determine if a claim ‎limitation invokes § 112, ¶ 6 is a two-step process. First, we ‎must determine if the claim limitation is drafted in the ‎means-plus-function format. The use of the term "means" ‎triggers a rebuttable presumption that § 112, ¶ 6 governs ‎the construction of the claim term. EnOcean GmbH v.‎ Face Int'l Corp., 742 F.3d 955, 958 (Fed. Cir. 2014). Alternatively, where the claim language ‎does not recite the term "means," we presume that the ‎limitation does not invoke § 112, ¶ 6. When a claim ‎term lacks the word "means," the presumption can be ‎overcome if the challenger demonstrates that "the claim ‎term fails to ‘recite sufficiently definite structure' or else ‎recites ‘function without reciting sufficient structure for ‎performing that function.'" ‎

If a claim term invokes § 112, ¶ 6, ‎then we proceed to the second step and attempt to construe the ‎disputed claim term by identifying the "corresponding ‎structure, material, or acts described in the specification" to ‎which the claim term will be limited. Welker Bearing Co. ‎v. PHD, Inc., 550 F.3d 1090, 1097 (Fed. Cir. 2008). If we ‎are unable to identify any "corresponding structure, ‎material, or acts described in the specification," the claim ‎term is indefinite. Determining whether certain claim language invokes ‎§ 112, ¶ 6 is an exercise in claim construction and is ‎therefore a question of law, subject to de novo review.‎

There is No Presumption that "Program Recognition Device" Is ‎a Means-Plus-Function Term

Claim 1 includes two references to a ‎‎"program recognition device": "the external diagnostic ‎tester comprising, a [1] program recognition and program ‎loading device, wherein a program version contained in a ‎connected control unit is queried and recognized by means ‎of the [2] program recognition device . . . ." The district court ‎adopted a presumption that "program recognition device" ‎is a means-plus-function term based on the phrase "by ‎means of" in claim 1. ‎Bosch claims that the subsequent use of ‎the term "by means of" later in the claim does not trigger ‎the presumption in favor of § 112, ¶ 6.‎ The panel agrees with Bosch, noting that we are unaware of any precedent stating that the presumption is ‎triggered by a claim's use of the expression "by means of." ‎In the past we have applied the presumption when a ‎claim uses the word "means" as a noun in the claim: a ‎‎"means" for doing something. We have not done so for the ‎phrase "by means of."‎

The Presumption Against Invoking § 112, ¶ 6 Is Overcome for Both Terms

The '313 patent's specification does not contain a single reference to the structure of ‎the "program recognition device" itself; all of the proffered ‎citations from the specification merely explain its function. ‎For example, the statement that the external diagnostic ‎tester is "equipped" with the "program recognition device" ‎that "queries and recognizes" program versions in the ‎control unit is nothing more than a functional ‎description. This passage is ‎devoid of structure. Likewise, the passage that explains ‎how the external diagnostic tester uses the "program ‎recognition device" to automatically check which ‎program version is currently on the control unit only ‎describes the connection of the external diagnostic tester to ‎the control unit in the vehicle. The specification is, therefore, also silent about ‎any interaction between the "program recognition device" ‎and other components of the system, including the external diagnostic tester. Contrary to what Bosch contends, ‎the specification does not teach how the "program recognition device" receives and processes signals, as the words ‎‎"signal" and "process" are not even in the specification.‎

The passages in the specification on which ‎Bosch relies to discuss the "program loading device" ‎similarly provide no structural guidance. Indeed, as Snap-On ‎notes, the patent is silent on what such a "program ‎loading device" consists of; the loading could be achieved ‎by using any type of device that comprises hardware, ‎software, or both. And the specification is again silent ‎about how the "program loading device" receives and ‎processes signals; the lone mention of a serial communication protocol is actually in reference to the "diagnostic/test ‎plug." ("The control units ‎used today are equipped with a flash storage device that ‎can be programmed via the serial communication protocol ‎via the diagnostic/test plug.").

Although Bosch was entitled to a presumption against ‎means-plus-function claiming, for the foregoing reasons the panel agrees with the district court and Snap-On that this ‎presumption was overcome. The claim terms, construed ‎in light of the specification, fail to provide sufficiently ‎definite structure to one of skill in the art. The claim terms ‎‎"program recognition device" and "program loading device" ‎invoke § 112, ¶ 6.‎

The Two Claim Terms Are Indefinite

Since the panel concludes that both claim terms invoke ‎§ 112, ¶ 6, it attempts to construe the terms by ‎identifying the corresponding structure described in the specification to which the claim term will be limited.‎ ‎If there is no ‎structure in the specification corresponding to the means-‎plus-function limitation in the claims, the claim will be found invalid as indefinite.‎ On this ‎point, however, little needs to be said.‎ Bosch did not argue that, even if the claim language at ‎issue is within § 112, ¶ 6, the language is definite because the specification sufficiently discloses corresponding structure. And the panel finds no ‎such disclosure.‎

Indeed, in the limited number of instances that the specification even ‎mentions these claim terms, it offers no further guidance ‎about their structures. Therefore, the panel concludes that ‎‎"program recognition device" and "program loading device" are indefinite. Since these terms are found in the ‎only independent claim of the patent, all claims in the '313 patent are invalid.‎

Comment: The interpretation of means-plus-function language has been a topic of interest to the Circuit this year with a number of precedential decisions. Bosch follows the guidelines of EnOcean GmbH v. Face Int'l. Corp., 742 F.3d 955 (Fed. Cir. 2014) in determining whether claims that don't use "means for" language nonetheless should be construed under § 112, ¶ 6‎. The case of, Inc. v. SAP, 564 Fed. ‎Appx. 599 (Fed. Cir. 2014) noted that it was ordinarily necessary to have expert testimony as to whether one with ordinary skill in the ‎art ‎would have understood the functions described, and whether there was adequate disclosure in ‎the specification ‎to support the claims. Such testimony was unsuccessfully presented in Bosch.‎ In Chicago Board Options Exchange, Inc. v. Intl. Securities Exchange, ‎LLC, ‎748 F.3d 1134 (Fed. Cir. 2014), the Circuit set forth the tests for determining whether there was adequate support in the specification for "means" language in the claims.

SSL Services, LLC v. Citrix Systems, Inc. and Citrix Online, LLC, Fed. Cir. Case 2013-1419,-1420 (October 14, 2014)

The patents in suit are both entitled ‎‎"Multi-Access Virtual Private Network." The claims define an authentication and encryption program that encrypts computer files ‎using a "session key" before transmitting data over the ‎Internet. Once the other client computer has received the ‎encrypted files, it can decrypt those files using the same ‎session key. This approach allows the transfer of ‎encrypted data directly from one client computer to another client computer over the open network.‎

The accused GoTo Products allow ‎direct encrypted communication between two computers ‎while bypassing a broker server that cannot access the ‎encrypted data. All of the GoTo Products use a broker ‎server to initialize the communication and that server ‎carries out communications between the computers.‎ The accused products are GoToMyPC, GoToAssist, and GoToMeeting. Also accused are Citrix's Access Gateway and Netscaler software products ‎that enable a computer to communicate securely with a ‎remote server.

Claim Construction

The district court held a Markman ‎hearing in which it construed the term "destination address" as "the network address of a computer or server." The court also construed the term "encrypt files" as "to render a set of data used by a ‎program unintelligible without decrypting." The panel agrees with Citrix as to the construction of "destination address," noting that both the claim language and the specification support the district court's construction.

Motion for a New Trial

SSL argues that even if the panel affirms construction of "destination address," ‎it is entitled to a new trial if the panel determines that ‎any one of the disputed claim constructions was erroneous. Specifically, SSL contends the panel must assess the constructions relating to ‎all the disputed limitations before being assured that ‎the jury's non-infringement finding was not infected by ‎some error. Because the jury returned a general verdict of ‎non-infringement after hearing multiple theories of non-‎infringement, SSL argues that "it would be impossible for ‎this Court to discern whether the jury rested its verdict of ‎non-infringement on the erroneous claim construction." ‎

The panel agrees that the general verdict rule applies with ‎the same force in patent cases as it does in all other cases. ‎The panel finds, however, that there is no ‎evidence in the record from which a good faith argument ‎can be made that the Citrix GoTo Products' identifiers are ‎‎"network addresses" as that term was construed by the district court. Because that construction is affirmed, even if the court erred in its ‎construction of the other challenged limitations, the result ‎the jury reached—the finding of non-infringement—would ‎not change. In these circumstances, the panel concludes that it soundly can base ‎its conclusion that the non-infringement verdict stands ‎on the fact that the single network address limitation is not ‎practiced by the accused products.

‎Prevailing Party

The district court's determination of ‎whether a party is the "prevailing party" under Federal ‎Rule of Civil Procedure 54(d) and 35 U.S.C. § 285 de novo.‎ To be the ‎"prevailing party," the Circuit requires: (1) that the party "received ‎at least some relief on the merits," and (2) "[t]hat relief must ‎materially alter the legal relationship between the parties by modifying one party's behavior in a way that ‎‘directly benefits' the opposing party." A party does not need to prevail on all ‎claims to qualify as the prevailing party.

The district court found that Citrix prevailed on non-‎infringement of the '796 Patent and SSL prevailed on ‎willful infringement of the '011 Patent. Accordingly, the ‎district court concluded that neither party is the prevailing party because "both parties achieved some success ‎and sustained some failure." Despite some success by Citrix in defending against ‎some of SSL's claims, the panel agrees with SSL that it is the ‎prevailing party. ‎Finding SSL to be the prevailing party, however, does ‎not automatically entitle it to any particular level of fees. ‎ Accordingly, the panel vacates the district court's finding of no prevailing party and ‎remands so that the district court may assess the amount of ‎fees or costs to award to SSL in connection with the claims ‎on which it prevailed.‎

Citrix's Cross-Appeal

Citrix raises ‎several issues in its cross-appeal: (1) non-infringement ‎based on the "encrypt files" limitation; (2) invalidity; (3)‎ willful infringement; (4) the propriety of the district ‎court's evidentiary ruling regarding expert reliance on the ‎V-One Agreements; and (5) the award of prejudgment ‎interest. ‎

‎"Encrypt Files"‎

The asserted claims of the '011 Patent include a limitation to "encrypt files." The district court construed the ‎term as "to render a set of data used by a program unintelligible without decrypting." Citrix did not challenge this claim construction. Citrix argues that the jury's infringement verdict is ‎not supported by substantial evidence that Citrix's Access Gateway and Netscaler products "encrypt files." The panel agrees that substantial evidence supports the jury's ‎verdict of infringement. The testimony of SSL's expert ‎on the encryption of files supports the conclusion that the ‎Access Gateway and Netscaler products do, in fact, "render ‎a set of data used by a program unintelligible without ‎decrypting."‎

Invalidity of the SSL Patents

Citrix asserts that many of the infringed claims would have been obvious under Takahashi et al. The Circuit reviews the ultimate legal conclusion of obviousness de novo in light of the underlying factual ‎findings.

While Citrix asserts that Takahashi discloses ‎the use of encryption software at the applications level, ‎SSL argues that the district court correctly denied JMOL ‎on invalidity of the '011 Patent as Takahashi does not ‎disclose the use of authentication and encryption software ‎on the applications level. The panel agrees with SSL that substantial evidence supports ‎the finding that Takahashi does not disclose the authentication and encryption software at the applications level. ‎

Citrix argues that the software in Takahashi is on the ‎applications level because it is above the TDI layer. ‎The panel disagrees. That software is located ‎above the TDI level does not make it part of the applications level. For example, the '011 Patent explains that ‎the Winsock element is located above the TDI level, but ‎the Winsock is not deemed part of the applications level. ‎ SSL's expert also testified ‎that the Winsock software, which appears above the TDI ‎level, is not in the applications level. ‎Therefore, Citrix's argument that, if Takahashi discloses ‎software above the TDI layer, it is automatically a part of ‎the applications level is unpersuasive.

Willful Infringement

To establish willful infringement, the patent holder ‎must show clear and convincing evidence that: (1) "the ‎infringer acted despite an objectively high likelihood that ‎its actions constituted infringement" and (2) "that this ‎objectively-defined risk . . . was either known or so obvious ‎that it should have been known to the accused infringer." ‎In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. ‎‎2007) (en banc). We review the first objective prong de ‎novo and the second subjective prong for substantial ‎evidence.

‎(1) Objective Prong

Citrix argues that, because its non-infringement and ‎invalidity defenses were reasonable, the district court erred ‎in denying JMOL of no willful infringement. In support, ‎Citrix relies on the fact that the court did not grant ‎summary judgment and that the USPTO rejected the relevant claims of ‎the '011 Patent multiple times over the same prior art ‎references presented at trial during the initial phases of an ‎ex parte reexamination. However, the panel rules that the court's finding that SSL met the threshold ‎objective prong is supported by the record. The jury ‎soundly rejected Citrix's invalidity argument and non-‎infringement arguments. As noted above, the Takahashi ‎reference does not disclose an applications level encryption program. Although not dispositive, the USPTO ‎similarly found Citrix's invalidity arguments unfruitful, ‎despite the lower preponderance of the evidence standard.

‎(2) Subjective Prong

After the district court found the objective prong satisfied, it submitted the issue of willful infringement to the ‎jury. The jury returned a verdict finding that Citrix ‎willfully infringed the relevant claims of the '011 Patent. ‎The panel agrees that SSL presented substantial evidence ‎that Citrix knew of the objectively high risk that its ‎products infringed the asserted claims of the '011 Patent. ‎SSL presented evidence that Citrix first became aware of ‎the '011 Patent in 2000 based on the V-One Agreements. ‎Citrix negotiated and ‎executed the agreements with V-One, which identified and incorporated ‎the '011 Patent. Furthermore, a former Citrix executive, Bill Mangum, testified that he knew of the '011‎ Patent as a result of Citrix's relationship with V-One. A ‎V-One executive also testified that Citrix knew of the ‎‎'011 Patent and that V-One had provided Citrix with access ‎to its technology relating to the '011 Patent. Based on ‎this evidence, the panel finds that the district court did not err in ‎denying Citrix's motion for JMOL on the subjective prong ‎of SSL's claim of willful infringement.‎

Citrix argues that it should receive a new trial on ‎willfulness because the court prevented the jury from ‎hearing testimony from its Chief Engineer regarding Citrix's good faith belief that its ‎products were non-infringing and that reexamination ‎had been initiated at the PTO. We find that the ‎district court did not abuse its discretion in precluding that testimony since its probative value was ‎outweighed by its potential prejudice.

Evidentiary Ruling on Damages

Again applying Fifth Circuit law, we review evidentiary rulings and the denial of a motion for a new trial for ‎an abuse of discretion. Citrix argues that the district court ‎abused its discretion by allowing SSL's damages expert to ‎rely on the V-One Agreements, which were not patent ‎licenses, in his damages analysis. These 2000 and 2001 ‎agreements were between V-One and Citrix, and referenced the '011 Patent as intellectual property that was ‎relevant to the technology underlying the agreements. ‎Though the agreements only supplied Citrix with distribution rights to the Smartgate software product and ‎provided no patent license, the court found the agreements "sufficiently ‘comparable' to be probative of the ‎hypothetical negotiation" as they involve the actual ‎parties, relevant technology, and were close in time to the ‎date of the hypothetical negotiation.

The ‎trial court carefully assessed the probative value of the ‎V-One agreements and properly concluded that any issues ‎regarding their fit to the precise facts presented should be ‎addressed by way of cross-examination. The panel thus concludes that the district court did not ‎abuse its discretion in allowing SSL's expert to rely on the ‎V-One Agreements.‎

Prejudgment Interest

‎"Upon finding for the claimant the court shall award ‎the claimant damages adequate to compensate for the ‎infringement, but in no event less than a reasonable ‎royalty for the use made of the invention by the infringer, ‎together with interest and costs as fixed by the court." 35‎ U.S.C. § 284. "Prejudgment interest should be awarded ‎under § 284 absent some justification for withholding ‎such an award." The purpose of prejudgment interest is to place the patentee in as good a position as he would have been had the infringer paid a reasonable royalty rather than infringe. The Circuit reviews the award of prejudgment interest for an abuse ‎of discretion.

Citrix alleges that awarding prejudgment interest was an abuse of discretion because it ‎did not receive notice of potential infringement until the ‎filing of the complaint in May 2009. As part of the willful infringement finding ‎discussed above, however, the district court found that ‎Citrix knew of the '011 Patent as early as 2000, when it ‎entered into the V-One Agreements. Consequently, we ‎find that the court did not abuse its discretion in ‎awarding prejudgment interest back to 2004—the date ‎the infringement began.

Comment: The opinion deals with a lot of issues but one of the most interesting is the ruling permitting consideration of the so-called V-One Agreements, which were not licenses under the patents in suit. Like its recent decision in VirnetX v Cisco Systems, Fed. Cir. Case 2013-1489 (September 16, 2014), the Circuit noted that the jury was told these were not licenses under the patents and therefore the jury could determine for itself how relevant the agreements were. This is very different from the other damage theories propounded by an expert in VirnetX and in other recent damages decisions where experts described theoretical formulae that were not based on the facts in the cases.

CardSoft, LLC, v. Verifone, Inc., et al., Fed. Cir. Case 2014-1135 (October 17, 2014)

CardSoft alleges that Appellants infringe two patents ‎directed to software for small, specialized computers, like ‎payment terminals. In construing the patent claims, the ‎district court adopted CardSoft's proposed construction for ‎the claim term "virtual machine." Applying the ‎court's construction, a jury returned a verdict for Card‎Soft. Claim 1 is representative of the asserted claims:‎

A communication device which is arranged to process messages for communications, comprising a ‎virtual machine means which includes:

a virtual function processor and function processor instructions for controlling operation of ‎the device, and

message instruction means including a set of ‎descriptions of message data;‎

a virtual message processor, which is arranged to be called by the function processor ‎and which is arranged to carry out the message handling tasks of assembling the messages, disassembling messages and comparing ‎the messages under the direction of the message instruction means that is arranged to ‎provide directions for operation of the virtual ‎message processor, whereby when a message ‎is required to be handled by the communications device the message processor is called to ‎carry out the message handling task,‎ wherein the virtual machine means is emulatable in different computers having incompatible hardwares or operating systems.‎

Construction of "Virtual Machine"

The district court construed "virtual machine" as "a ‎computer programmed to emulate a hypothetical computer for applications relating to transport of data." According to the panel, that ‎construction is correct, but incomplete. The district court ‎improperly rejected the Appellants' argument that the ‎"virtual machine" must "process instructions expressed in a hardware/operating system-independent language."‎ The court's construction improperly conflates ‎the claimed virtual machine with applications written to ‎run on the virtual machine. The claimed virtual machine ‎is operating system or hardware dependent because it must ‎communicate directly with the underlying operating ‎system or hardware. But the applications written to run ‎on the virtual machine are not correspondingly dependent ‎because the applications are written to communicate with ‎the virtual machine, not the actual underlying operating ‎system or hardware.‎

The evidence establishes that, ‎at the time the asserted patents were filed, the defining ‎feature of a virtual machine was its ability to run applications that did not depend on any specific underlying ‎operating system or hardware. One problem with the ‎prior art, as the specification notes, was that applications ‎were hardware or operating system dependent. The patent teaches using a ‎virtual machine to solve this problem because a virtual ‎machine "creates a complete portable environment," ‎which "allows programs to operate independent of processor" and allows "different arrangements of hardware to ‎be controlled by the same application software." ‎

That the specification would emphasize this aspect of a ‎virtual machine is not surprising in light of the extrinsic ‎evidence. Sun Microsystems, Inc. released the ‎famed Java virtual machine in 1996, the year before the ‎earliest possible priority date of the asserted patents. The Java virtual machine acted as an interpreter between a computer application and the computer's ‎underlying operating system and hardware, allowing ‎developers to write one application and run it on multiple ‎different types of computers. Sun ‎marketed Java by emphasizing that the virtual machine ‎allowed a developer to "write once, run anywhere." ‎

The prosecution history expressly ties this extrinsic evidence—the "write once, run anywhere" Java virtual ‎machine—to the patent's use of "virtual machine." During prosecution of the '945 patent, the applicant stated that the Java virtual machine was a "conventional" virtual machine that allowed "different incompatible computers (incompatible hardware and operating systems)" to ‎‎"be programmed to emulate the same hypothetical computer" so that "applications" written for that hypothetical computer "are therefore portable to the previously ‎incompatible computers." The applicant explained that the claims describe "an addition to a conventional virtual machine," not a wholly new structure. ‎In short, the asserted patents use "virtual machine" in ‎exactly the same way Sun used the term—the patents ‎simply optimize the virtual machine for use on a payment ‎terminal.‎

‎CardSoft's Arguments

CardSoft makes two arguments in support of the district court's construction. It first argues that the structure of the claims dictates a broader meaning for "virtual ‎machine" because the claims state that the virtual machine "includes" certain "instructions." But according to the panel, such a construction would ‎leave "virtual machine" essentially meaningless.‎

CardSoft next argues that differentiation of claim 1 from dependent claims 7 and 8 of the '945‎ patent mandates a broader construction because these ‎dependent claims state that instructions "do not require ‎translation to the native software code of the microprocessor." But claim ‎differentiation is merely a presumption. It is "a rule of ‎thumb that does not trump the clear import of the specification." Marine Polymer Techs., Inc. ‎v. HemCon, Inc., 672 F.3d 1350 (Fed. Cir. 2012) (en ‎banc). Because the ordinary meaning of "virtual machine" is clear in light of the ‎specification and prosecution history, claim differentiation ‎does not change its meaning.‎

Verifone is entitled to judgment of no infringement.

VeriFone contends that, applying the correct construction, it is entitled to judgment of no infringement as a ‎matter of law because the accused payment terminals run ‎applications that depend on a specific underlying operating ‎system or hardware. CardSoft did ‎not respond to this argument in its responsive brief on ‎appeal. It instead argued ‎that "because Appellants' construction of ‘virtual ‎machine' is wrong" the jury's verdict should be affirmed. ‎By failing to respond to ‎VeriFone's argument, CardSoft effectively conceded that the accused devices run applications ‎that depend on a specific underlying operating system or ‎hardware. Consequently, the panel concludes that CardSoft ‎waived this argument, and grants Appellants judgment ‎of no infringement as a matter of law.‎