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

July 25, 2016

Overview

WBIP v. Kohler In a thorough discussion of the objective considerations supporting nonobviousness, the panel affirms the denial of JMOL that the asserted claims directed to low–carbon monoxide-emitting electrical generators would have been obvious.The panel also affirms a determination of willful infringement that was based on instructions under Seagate. Halo was decided following the trial so the panel contrasts the test for willfulness under Seagate and Halo. Finally, in perhaps the most interesting ruling in the case, the panel determines that the district court abused its discretion in denying a motion for permanent injunction just because WBIP, a smaller company, would otherwise have been the sole supplier of a product designed to ensure the safety of the public.

The panel rejects Kohler’s first argument on appeal that there was no nexus demonstrated between the claimed invention and the objective indicia. Where the patentee shows that the asserted objective evidence is tied to a specific product and that product is the invention disclosed and claimed in the patent, there is a presumption of nexus. The presumption may be rebutted by a patent challenger that can present evidence showing the objective evidence was due to extraneous factors, such as improvements in marketing. The Circuit determines that Kohler failed to present evidence to rebut the presumption, and rejects Kohler’s argument that evidence of nexus must be limited to the supposedly “new” features recited in the claims.

The opinion then points to the substantial evidence supporting the jury’s presumed factual findings as to long felt need (third-party product liability suits against Kohler involving prior generators), industry praise (trade association and other awards received for patented generator), skepticism (an industry workshop audience expressed “shock” when the inventor announced that he would have a commercial product as claimed within two years), copying (when the inventor explained to Kohler engineers at a trade show how his product achieved the claimed benefits, Kohler documents show that funding was requested to develop a product following the same techniques), and commercial success (evidence of immediate success of the Kohler unit). The panel stresses that it will not substitute its judgment for the jury verdict on any of these preliminary Graham v. Deere factual inquires.

Kohler also argues that the patents are invalid based on violation of the written description requirement, but the panel refuses to consider this argument since it was not presented to the district court.

As to willful infringement, the panel rejects Kohler’s argument that its invalidity position was reasonable, noting that Halo rejected this test from Seagate. Halo tells us to assess the infringer’s culpability by looking at its knowledge at the time the infringement was initiated. Kohler then argues that even though it admitted in its Statement of Undisputed Facts that it knew of the patents at an early date, that evidence was not submitted to or considered by the jury. The panel reviews the evidence that the jury did consider, including that WBIP marked the number on its product, and finds this evidence sufficient to support the presumed jury finding that Kohler knew of the patent.

WBIP cross-appealed the district court's denial of a permanent injunction, which was based on the fact that WBIP was a much smaller producer of these low–carbon monoxide generators, so depriving the consuming public of access to a potentially lifesaving product showed that it was not in the public interest to grant the injunction. The panel notes that the district court did not explain how the public interest in enforcing patent rights was outweighed by the public interest of having more than one manufacturer of such generators, especially if WBIP has the manufacturing capacity to meet the industry's needs. The district court's decision was based on its reasoning that having more manufacturers of a lifesaving good in the market is better for the public interest, but this reasoning is true in nearly every situation involving such goods. Congress expressly indicated in 35 U.S.C. § 271(e)(4)(B) that injunctions may be granted in cases involving lifesaving goods, such as pharmaceutical drugs. The panel therefore vacates the judgment and remands the case for a more thorough analysis of the eBay factors.

Comments: We think you’ll find the Circuit’s opinion of interest, particularly the discussions of willful infringement and permanent injunction, where the Circuit appears to laud the grant of injunctions in pharmaceutical cases even though the injunction might jeopardize the supply to patients. The original 41-page opinion is wordy, but our much-condensed version includes, we think, the most pertinent analysis.

Polar v. Suunto – The Circuit vacates and remands a decision dismissing Suunto, a Finnish company, based upon lack of personal jurisdiction. In examining whether Suunto had sufficient minimum contacts with Delaware, the forum state, the panel looks to see if specific jurisdiction exists. The panel disagrees with the district court and holds that Suunto purposefully availed itself of the Delaware market. The case is somewhat unusual in that ASWO, Suunto’s U.S. distributor, took title to the goods in Finland and not in the U.S. The panel found it significant that under its distribution agreement with ASWO, Suunto provided outbound logistic services, including preparing export documents, packing the ordered goods and coordinating the freight to the destination specified by ASWO.  Suunto shipped at least ninety-four accused products to Delaware retailers via that standard ordering process.

In addition to purposeful minimum contacts, due process requires that the assertion of personal jurisdiction be reasonable and fair. The district court did not decide the reasonableness prong because it dismissed the case against Suunto for lack of minimum contacts. Therefore, the Circuit remands for the district court to determine whether exercising jurisdiction over Suunto would be reasonable and fair.

The panel then looks to whether the district court correctly determined that exercising jurisdiction over Suunto would be proper under the Delaware long arm statute. The district court determined that personal jurisdiction exists over Suunto under a so-called dual jurisdiction theory expressed in a Delaware appellate court opinion in which two alternative sections of the Delaware long arm statute are at least partially satisfied. Because Suunto’s activities demonstrate an intent to serve the U.S. market generally and the Delaware market specifically, the panel determines that the district court correctly determined that personal jurisdiction over Suunto is proper under the Delaware long arm statute.

Unwired v. Apple – Unwired, a nonpracticing entity owning several thousand patents, filed suit against Apple based on infringement of ten of its patents. After Unwired dismissed five of the ten patents from the case, the Northern District of California granted summary judgment of noninfringement as to four of the remaining patents. In this appeal the Circuit affirms one and vacates three of those rulings.

Summary Judgment of Non-Infringement as to Siri Is Vacated Because There Was No Disclaimer of a Broad Construction

The panel vacates summary judgment of noninfringement as to Apple’s Siri voice recognition system because summary judgment was based on an erroneous construction of "voice input." In adopting Apple's proposed construction, the district court relied on the summary of the invention in the '446 specification, noting that the sentence describing "the present invention" limits the scope of the claims. But the panel rules that the plain meaning of “voice input” does not require any particular type of channel for its transmission. According to the opinion, the district court's narrower construction can be justified only if there exists a clear and unmistakable disclaimer in the specification or the prosecution history. The panel determines that this language from the specification was not a sufficiently clear disclaimer.

Summary Judgment of Non-Infringement Is Vacated Where the Jury Could Have Reasonably Disagreed

The '260 patent discloses an invention for providing new or updated features to a mobile phone through a process referred to as "provisioning." The patent explains that "a number of parameters must be provisioned into a mobile device in order to enable communication services and applications and in order to distinguish the device from others." To purchase an app from Apple's App Store or a song from Apple's iTunes Store, a user must first have an iTunes account. To establish an iTunes account, a user must select a password, which, according to Unwired, satisfies the claimed "user information required to establish a user account" limitation of the claim under dispute. When an iOS device user with an iTunes account wants to purchase an app or a song, the user first enters his Apple ID and password to the iOS device, which sends them to Apple's servers. Second, Apple's servers respond with an "X-token," which contains a hashed version of the user's password and a timestamp generated by the servers. Third, the iOS device sends a "buyProduct request," which includes the X-token and the user's selection of content. In vacating the summary judgment, the panel determines that a reasonable jury could find that a hashed password in the X-token contains the same information as in the user's unmodified password, albeit in a different form.

Summary Judgment of Non-Infringement Is Appropriate Where No Genuine Issues of Fact Remain

Unwired’s '831 patent requires a wideband channel to first exchange security information, and a narrowband channel to then transmit encrypted data. The panel affirms summary judgment of noninfringement because Apple's accused Push Notification Service ("APNS") does not use a “narrowed channel.”

APNS allows app providers to send push notifications to iOS devices via APNS servers. Unwired's infringement theory is that the "narrowband channel" extends from an app provider (i.e., a push notification sender) to an iOS device, whereas the "wideband channel" is the channel that carries the communications between the APNS and the iOS device. It argues that the channel that carries communications between an app provider server and an iOS device is a narrowband channel because it is at a meaningfully lower data transfer rate.

However, the panel rules that the characteristics of the data being transmitted by APNS cannot transform the wideband channel based on TCP/IP into a narrowband channel. Under the agreed upon construction, Apple has met its burden of proving that there is no genuine issue of material fact.

The Strength of Apple’s Non-Infringement Arguments Is Not an Appropriate Basis to Grant Summary Judgment of No Indirect Infringement

The '092 patent discloses an improved technology for identifying the location of a wireless station, such as a cell phone or pager. In order to more accurately locate a wireless station, the invention gathers inputs about the location of the wireless station from multiple location finding equipment such as handset global positioning system, time difference of arrival, and the use of cell/sector location. It then responds to a location request by providing the location information. Unwired alleged that the location-finding technology of iOS devices infringes a claim which recites, in relevant part, "receiving a plurality of device dependent location inputs provided by said location finding equipment."

The district court denied Apple's motion for summary judgment of no direct infringement, based on Apple's argument that the iOS devices only use a single "location input." However, the court granted Apple's motion for summary judgment of no induced or contributory infringement, reasoning that Apple's noninfringement argument was strong enough that no reasonable juror could conclude that Apple acted with actual knowledge or was willfully blind that it was inducing or contributing to infringement.

The panel vacates the summary judgment of no indirect infringement based on a conclusion that the district court's reliance on the objective strength of Apple's non-infringement arguments is not an appropriate basis on which to grant a motion for summary judgment of non-infringement.

 
   

WBIP, LLC v. Kohler Co., Fed. Cir. Case 2015-1038, -1044 (July 19, 2016)

Westerbeke and Kohler are competitors who manufacture and sell marine generators ("gen-sets") that are used on houseboats. The exhaust from a typical engine in a gen-set, like any gasoline-powered engine, contains carbon monoxide, which can cause asphyxiation at certain concentrations. The '044 and '196 patents are directed to marine engine exhaust systems that reduce the amount of carbon monoxide released in the exhaust. Westerbeke makes a low–carbon monoxide gen-set ("Safe-CO") that incorporates the technology of the patents in suit. It introduced the Safe-CO gen-sets at a boat show in 2004. Two Kohler employees visited Westerbeke's trailer at that show and Westerbeke explained the technology to them. A year later Kohler launched its own low–carbon monoxide gen-sets.

WBIP, the assignee of the patents in suit, sued Kohler, asserting that Kohler's low–carbon monoxide gen-sets infringed the asserted claims. A jury ruled in favor of WBIP, finding that Kohler infringed all the asserted claims and that Kohler had failed to prove that any of the asserted claims were invalid either for obviousness or for lack of written description. The jury also set a reasonable royalty rate, calculated a damages award of $9,641,206, and found that WBIP had proven by clear and convincing evidence that Kohler's infringement was willful. WBIP’s motion for a permanent injunction was denied. The district court granted Kohler remittitur, reducing the damages from $9,641,206 to $3,775,418. It granted WBIP's motion for enhanced damages under 35 U.S.C. § 284. It concluded it was appropriate to enhance the damages by 50%. It found the case exceptional under 35 U.S.C. § 285 on account of Kohler's willful infringement and awarded reasonable attorney fees to WBIP.

I.          The Panel Affirms the District Court Ruling That the Claims Were Not Obvious

Kohler argues on appeal that the district court erred in refusing to grant JMOL that the asserted claims would have been obvious in light of a patent to Phipps and elements that would have been known to an ordinarily skilled artisan. It also argues that WBIP's objective evidence of nonobviousness cannot overcome the prima facie case and that WBIP failed to establish a nexus between the objective evidence and the merits of the claimed invention. We disagree on both points.

A. Obviousness and Motivation to Modify

Kohler argues, and WBIP does not dispute, that Phipps teaches most of the elements of claim 1 of the ’044 patent, but it is not disputed that these elements existed in other prior art. Citing KSR, Kohler argues that because each of the elements was known in the prior art, the question is whether a skilled artisan starting with Phipps would have found it obvious to add the conventional features to Phipps to produce the claimed invention. At trial, Kohler presented evidence that a skilled artisan could do so if asked.

Whether an ordinarily skilled artisan would have been motivated to modify the teachings of a reference is a question of fact. We presume that the jury found that an ordinarily skilled artisan would not have been motivated to modify the teachings of Phipps. If such a fact finding is supported by substantial evidence, we may not reverse it.

WBIP argues that it presented evidence upon which a jury could have found that Phipps is "somehow so flawed that there was no reason to upgrade it, or devices like it, to be compatible with modern devices" and that this evidence may be sufficient to show that an ordinarily skilled artisan would not have modified that reference or combined it with others. Thus, there is evidence of record from both sides regarding the presence or absence of a motivation to convert Phipps into a marine-based environment. As the ultimate question of obviousness is one of law which must consider all four Graham factors including objective indicia, we turn next to those factors.

B. Objective Considerations

The objective indicia of non-obviousness play an important role as a guard against the statutorily proscribed hindsight reasoning in the obviousness analysis. As explained below, we disagree with Kohler's argument that the objective evidence of non-obviousness is entitled to little or no weight in this case since we find substantial evidence for the jury's fact findings as to each of the objective considerations of non-obviousness, which we conclude collectively support the jury verdict.

1. Nexus

On appeal, Kohler argues that the objective evidence of non-obviousness WBIP presented to the jury should not be considered because WBIP failed to prove there is a nexus between the presented evidence and the merits of the claimed invention. Kohler's argument is that, in order to prove a nexus exists, WBIP must show that what is "novel in the claim," which Kohler asserts are the elements of the claimed invention that are not disclosed by Phipps, is tied to the asserted objective evidence.

As WBIP correctly argues, there is a presumption of nexus for objective considerations when the patentee shows that the asserted objective evidence is tied to a specific product and that product "is the invention disclosed and claimed in the patent." The presumption of nexus is rebuttable: a patent challenger may respond by presenting evidence that shows the proffered objective evidence was "due to extraneous factors other than the patented invention." Such extraneous factors include additional unclaimed features and external factors, such as improvements in marketing. However, a patent challenger cannot successfully rebut the presumption with argument alone—it must present evidence.

At trial, WBIP presented evidence that specific products (i.e., Westerbeke's Safe-CO gen-sets and Kohler's accused products) are embodiments of the invention as claimed in the asserted claims. As Kohler agrees, WBIP presented evidence on five types of objective evidence of non-obviousness: 1) the long-felt need for reducing carbon monoxide poisonings from marine gen-sets; 2) industry skepticism that gen-sets producing exhaust substantially free of carbon monoxide could be produced; 3) industry praise of Westerbeke's Safe-CO gen-sets; 4) Kohler's copying of Westerbeke's Safe-CO gen-sets; and 5) the commercial success of low–carbon monoxide gen-sets. This showing—that the specific products are embodiments of the claimed invention and that the proffered objective evidence relates to these products—is sufficient to establish the presumption of nexus.

2. Long-Felt Need

Evidence of a long felt but unresolved need tends to show non-obviousness because it is reasonable to infer that the need would have not persisted had the solution been obvious. Kohler argues that substantial evidence does not support the jury's presumed factual finding that the claimed invention solved the problem of carbon monoxide poisonings from marine gen-sets, a problem that was long known in the marine gen-set field. Specifically, Kohler argues that the evidence that WBIP relied upon to show a long-felt need in the industry—third-party product liability suits against Kohler involving carbon monoxide poisonings from older generation gen-sets—is not relevant to a long-felt need for low–carbon monoxide emitting gen-sets. Kohler argues that the evidence shows that it resolved the carbon monoxide poisonings at issue in these lawsuits by changing the material it used for the exhaust pipes, from black iron (which corroded from the inside out) to stainless steel. Thus, Kohler argues that there is no nexus between the problems at issue in these product liability suits and the problem solved by the asserted claims. Kohler argues that, when this irrelevant evidence is not considered, the evidence of record shows that the industry was not aware of the dimensions of the carbon monoxide problem on boats until 2000. Because this date is only a few years before the priority date of the patents in suit, Kohler argues that substantial evidence does not support a finding of long-felt need.

We have already rejected Kohler's argument that the objective considerations lack nexus because they are not tied specifically to the coolant elements of the asserted claims. We similarly reject Kohler's argument that the product liability suits are irrelevant to whether there was a long-felt need for a solution to carbon monoxide poisonings on boats and whether this need was met by the claimed invention. The evidence concerning the product liability suits undoubtedly establishes that there was a known problem in the industry regarding carbon monoxide poisonings. It also shows that Kohler was aware of this problem prior to 2000, as many of the lawsuits Kohler faced were the result of incidents that occurred in the 1990s. And, although Kohler argues that it solved the problem underlying the product liability suits by switching the exhaust pipe material that it used, other Kohler documents suggest that Kohler itself thought the carbon monoxide poisoning problem was solved by low–carbon monoxide emitting gen-sets. Presented with this conflicting evidence, the jury was entitled to find that the claimed invention, as opposed to switching the exhaust pipe material, solved the carbon monoxide poisoning problem. Given the verdict, we presume it did so in WBIP's favor. Substantial evidence, in the form of the testimony and documents WBIP presented, supports this finding.

Kohler also challenges the evidence of product liability suits against it as "grossly prejudicial" and that the inclusion of this evidence entitles it to a new trial. The district court denied Kohler's motion for a new trial on this ground, explaining that it rejected Kohler's pre-trial arguments for exclusion and that "Kohler has presented no new arguments to dissuade it." But the district court determined that part of the jury's damages verdict was not supported by substantial evidence and granted Kohler's motion for remittitur, reducing the awarded damages from $9,641,206 to $3,775,418.

Kohler argues that the challenged evidence was grossly prejudicial as evidenced by the runaway damages verdict. But Kohler never explains how the mitigating and remedial steps taken by the court (i.e., its order that the parties' agreed-upon limiting instruction be read to jurors prior to the challenged testimony and its grant of remittitur) failed to redress any prejudice that may have affected Kohler. Considered in context, we cannot say that these are extraordinarily compelling circumstances that warrant reversing the district court's evidentiary decision and remanding for a new trial.

3. Praise

Kohler argues that WBIP's evidence of praise was only a "few snippets" that "fell far off target" because they relate to WBIP's Safe-CO, low–carbon monoxide gen-set products, not solely to the coolant elements not disclosed in Phipps. This argument is primarily one of nexus. As discussed above, WBIP established its entitlement to a presumption of nexus for each type of objective evidence that it presented. Moreover, the jury's presumed finding of industry praise of the claimed invention is supported by substantial evidence.

WBIP's evidence of praise includes the fact that Westerbeke received the National Marine Manufacturers Association Innovation Award in 2004 for its Safe-CO gen-sets. Other record evidence of praise includes several other awards. Contrary to Kohler's argument, this constitutes substantial evidence to support the jury's presumed factual finding.

4. Skepticism

Evidence of industry skepticism weighs in favor of non-obviousness. If industry participants or skilled artisans are skeptical about whether or how a problem could be solved or the workability of the claimed solution, it favors non-obviousness. Kohler's arguments regarding skepticism are similar to its arguments regarding praise, and fail for similar reasons. The jury's presumed factual finding that there was skepticism that low–carbon monoxide gen-sets could be produced is supported by substantial evidence. WBIP presented evidence that an audience of over 200 people at an industry workshop on carbon monoxide poisonings expressed shock when Mr. Westerbeke announced that Westerbeke "would have low carbon monoxide—actually zero percentage PPM carbon monoxide generators within one to two years." The same witness explained that, at the time, Westerbeke had a prototype gen-set that produced between zero and nine ppm of carbon monoxide and that two individuals from Kohler told Mr. Westerbeke that "it was impossible to produce a generator with zero PPM of carbon monoxide."

Drawing reasonable inferences in favor of WBIP, we cannot say that a jury would be unreasonable if it found, based on this evidence, that the boating industry expressed skepticism that low–carbon monoxide producing gen-sets could be made.

5. Copying

The fact that a competitor copied technology suggests it would not have been obvious. The parties dispute whether substantial evidence supports a finding that Kohler copied Westerbeke's Safe-CO gen-sets, which are an embodiment of the claimed invention. WBIP argues it presented evidence that it demonstrated its Safe-CO gen-sets in a trailer at a 2004 boat show and that, in response to a question from two Kohler employees who visited this trailer, a Westerbeke engineer explained that the low–carbon monoxide emissions were achieved through use of a catalyst and electronic fuel injection. WBIP also presented evidence that, shortly after this show, an internal Kohler document requesting funding for development of Kohler's own low–carbon monoxide gen-sets explained that low–carbon monoxide exhaust would be achieved through the same two features that the Westerbeke engineer had described: "a precise electronically-controlled engine management system and exhaust after-treatment with a catalyst." In fact, this document specifically mentions Westerbeke's "'Safe-CO' line" of gen-sets and the fact that Westerbeke had "patented their concept."

Kohler counters that it produced testimony and documentary evidence contradicting WBIP's evidence of copying. However, based on the evidence presented, we cannot say that a jury would be unreasonable in finding that Kohler copied the claimed invention.

6. Commercial Success

When a product attains a high degree of commercial success, there is a basis for inferring that attempts to a solution have been made and have failed. Demonstrating that an invention has commercial value, that it is commercially successful, weighs in favor of its non-obviousness.

On appeal, Kohler's primary argument regarding commercial success of the claimed invention is that WBIP failed to establish nexus. As discussed above, WBIP was entitled to a presumption of nexus, which Kohler acknowledged in its reply brief. Kohler did not rebut that presumption. WBIP presented the jury with evidence of the immediate and high level of success of the Kohler low–carbon monoxide generator which was found to infringe. We see no basis to disturb the jury's presumed factual findings of commercial success underlying its verdict on obviousness.

The objective considerations in this case, commercial success, long-felt need, industry praise, skepticism, and copying, each weigh in favor of a conclusion that using conventional coolant components to convert the land-based Phipps engine into a low–carbon monoxide emission marine gen-set would not have been obvious to one of skill in the art at the relevant time. Too often the obviousness analysis is framed as an inquiry into whether a person of skill, with two (and only two) references sitting on the table in front of him, would have been motivated to combine (or, in Kohler's view, could have combined) the references in a way that renders the claimed invention obvious. The real question is whether that skilled artisan would have plucked one reference out of the sea of prior art (Phipps) and combined it with conventional coolant elements to address some need present in the field (the need for low–carbon monoxide emission marine gen-sets). Whether a skilled artisan would be motivated to make a combination includes whether he would select particular references in order to combine their elements. This is part of the fact question and we must give deference to the jury's findings on this point. Objective indicia minimize hindsight's impact. And in this case, the objective indicia point to the nonobviousness of the claimed combination. They are substantial evidence that one of skill would not have found the claimed combination obvious. We see no legal error in the ultimate conclusion that Kohler failed to prove that the asserted claims would have been obvious by clear and convincing evidence.

II.        The Panel Refuses to Consider Kohler’s New Written Description Argument

On appeal, Kohler argues it should have prevailed on written description as a matter of law and presents to this court a detailed argument regarding a lack of written description support for the claimed "compound control scheme." The jury found that Kohler failed to prove by clear and convincing evidence that the asserted claims were invalid for lack of written description.

Nowhere did Kohler present the jury with the detailed argument it provides to us in this appeal, despite the fact that Kohler, as the party challenging validity, had the burden to prove by clear and convincing evidence that the written description requirement was not met. On appeal, we limit ourselves to the arguments raised by the parties and review jury findings on the record presented below. Based on what was presented to the jury in this case, the jury's verdict is clearly supported by substantial evidence.

III.        There Is Substantial Evidence to Support the Finding of Willful Infringement

At the time of the district court decision, proof of willful infringement required clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent and that this objectively-defined risk was either known or so obvious that it should have been known. In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007). The jury found that WBIP had proven by clear and convincing evidence that Kohler's infringement was willful.

Kohler argues first, that, contrary to the district court's determination, its obviousness and written description defenses are objectively reasonable under Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed. Cir. 2014), cert. granted, 136 S. Ct. 356 (Oct. 19, 2015). Second, it argues that WBIP did not present evidence to the jury that Kohler was aware of the patents in suit, which is an element of the subjective prong of the willfulness test. After this case was argued on appeal, the Supreme Court decided Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016).

As with awards of attorney's fees under 35 U.S.C. § 285, a party seeking enhanced damages under § 284 bears the burden of proof by a preponderance of the evidence. Octane Fitness, LLC v. ICON Health & Fitness Inc., 134 S. Ct. 1749 (2014). As to Kohler's first argument—that its defenses were objectively reasonable—the Supreme Court's decision in Halo expressly rejected the notion that objective recklessness must be found in every case involving enhanced damages for willful infringement. The Court cited the objective recklessness requirement as the principal problem with Seagate's two-part test, explaining that such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, including those who intentionally infringe another's patent. Applying reasoning similar to Octane Fitness, the Court explained that an infringer's subjective bad faith alone may support an award of enhanced damages. And it explained that the appropriate time frame for considering culpability is by assessing the infringer's knowledge at the time of the challenged conduct. This is a departure from our Seagate line of cases, which permitted infringers to escape liability for enhanced damages provided that they were able to muster a reasonable (even though unsuccessful) defense at the infringement trial.

In this case, the district court determined that Kohler was objectively reckless under Seagate, as its litigation-developed obviousness and non-infringement defenses were unreasonable.  On appeal, WBIP argues that the court correctly determined that Kohler was objectively reckless, and that Kohler's obviousness defense was a litigation-contrived, hindsight reconstruction. Kohler argues that it is no answer to characterize its obviousness defense as litigation-contrived because Seagate's objective recklessness prong requires analysis of all of the infringer's noninfringement and invalidity defenses, even if those defenses were developed for litigation. But as the Supreme Court explained in Halo, timing does matter. Kohler cannot insulate itself from liability for enhanced damages by creating an (ultimately unsuccessful) invalidity defense for trial after engaging in the culpable conduct of copying, or plundering, WBIP's patented technology prior to litigation. Thus, Kohler's arguments on appeal that the court erred in concluding that its obviousness defense was objectively unreasonable is not a basis for concluding that the court abused its discretion in enhancing damages.

Kohler also argues that the jury's verdict that Kohler willfully infringed should be overturned because the record did not contain substantial evidence that Kohler knew about the patents at the time it was infringing. Kohler does not contest that it, in fact, had pre-suit knowledge of the patents in suit. Despite an admission in its Statement of Undisputed Facts, Kohler argues that no evidence of its knowledge was presented to the jury and thus the jury's finding of willfulness should be rejected.

We conclude that there was substantial evidence for the jury's finding that Kohler had knowledge of the patents in suit at the time of infringement. At trial, WBIP presented testimony and photographs showing that Westerbeke's low–carbon monoxide gen-sets have been marked with the patents in suit since their issuance. It also presented testimony that Westerbeke and Kohler were the only two companies in the market that provide low–carbon monoxide gen-sets. The jury had record evidence upon which it could have inferred that Kohler had knowledge of the patents at issue.

The district court, exercising its discretion, decided not to treble damages, but rather to enhance damages by 50%. The district court has the discretion to decide whether the case is sufficiently egregious to warrant enhancing damages and to decide the amount of enhancement that is warranted (up to the statutory limit of treble damages). And the Supreme Court explained, "none of this is to say that enhanced damages must follow a finding of egregious misconduct." We review the district court's decision to enhance damages under an abuse of discretion standard. We cannot say that the district court abused its discretion in enhancing damages for Kohler's willful infringement.

IV. The District Court Abused Its Discretion in Denying WBIP's Motion for Permanent Injunction

WBIP cross-appeals the district court's denial of a permanent injunction. The district court originally denied WBIP's motion for a permanent injunction, reasoning the public interest factor weighed against an injunction because, as WBIP was a much smaller producer of low–carbon monoxide gen-sets than Kohler, it "would deprive the consuming public of access to a potentially life saving product." It determined that, based on its public interest finding, it need not address the remaining factors identified in eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006).

We agree with WBIP that the district court's analysis is sufficiently flawed to constitute an abuse of discretion warranting vacating the judgment. Before the district court, WBIP argued that there is a "public interest to uphold patent rights." But the district court did not explain how this public interest was outweighed by the public interest of having more than one manufacturer of gen-sets that produce low–carbon monoxide in their exhaust, especially if WBIP does have the manufacturing capacity to meet the industry's needs. The district court's decision is based on its reasoning that having more manufacturers of a lifesaving good in the market is better for the public interest. But this reasoning is true in nearly every situation involving such goods, such that, if it alone is sufficient, it would create a categorical rule denying permanent injunctions for life-saving goods, such as many patented pharmaceutical products. And Congress has expressly indicated that injunctions may be granted in cases involving lifesaving goods, such as pharmaceutical drugs. See 35 U.S.C. § 271(e)(4)(B). In denying WBIP a permanent injunction on these grounds, the district court abused its discretion. We vacate its judgment and remand for the district court to conduct a more thorough analysis of the eBay factors in the first instance.

 
   

Polar Electro Oy v. Suunto Oy, Fed. Cir. Case 2015-1930 (July 20, 2016)

Polar owns the ’346 and ’227 patents directed to a system for measuring heart rates during physical exercise. Polar sued Suunto, Amer Sports Winter & Outdoor ("ASWO"), and Firstbeat Technologies Oy in the Delaware district, alleging infringement through the manufacture, use, sale, offer for sale, and importation of certain Suunto products. Suunto is a Finnish company with a principal place of business and manufacturing facilities in Finland. ASWO is a Delaware corporation with a principal place of business in Utah. Suunto and ASWO are sister companies, ultimately owned by the same parent company. ASWO distributes Suunto's products in the U.S. pursuant to a distribution agreement in which Suunto is responsible for supplying the products from Finland and for providing "outbound logistics services."

As the supplier, Suunto is obligated to ship its products to addresses specified by ASWO. According to Polar, the accused Suunto products are shipped via a standard ordering process from Finland to the U.S., which comprises: (1) Suunto receiving an order for a product; (2) Suunto packaging that order at its factory in Finland; (3) Suunto then placing the packaged product on its shipping dock for a third-party shipper to pick up; and (4) the third-party shipper delivering the order to an address provided by ASWO, such as the address of a U.S. retailer. ASWO pays for shipping, and title to the goods passes from Suunto to ASWO at Suunto's shipping dock in Finland. At least ninety-four accused products have been shipped from Finland to retailers in Delaware using that standard ordering process. At least three retail stores in Delaware sell the accused Suunto products.

Suunto also owns the website, www.suunto.com/us. Customers can use the "Dealer Locator" feature on that website to locate retailers in Delaware that sell Suunto products. ASWO maintains that feature, however. In addition, customers can order Suunto products on the Suunto website. ASWO fulfills such online orders via an e-commerce platform that ASWO owns. At least eight online sales have been made in Delaware.

In the district court, Suunto filed a motion to dismiss the complaint against it for lack of personal jurisdiction. The court found that the specific-jurisdiction provisions of the Delaware long arm statute, Del. Code Ann. tit. 10, § 3104(c), were not met because Suunto did not directly sell the accused products in Delaware. Nevertheless, the court found the long arm statute satisfied under a "dual jurisdiction" theory, as articulated by the Delaware Superior Court in Boone v. Oy Partek Ab, 724 A.2d 1150 (Del. Super. Ct. 1997), aff'd, 707 A.2d 765 (Del. 1998), with the partial satisfaction of § 3104(c)(1) and (c)(4).

As to whether exercising jurisdiction over Suunto comports with due process, the court concluded that Suunto did not have sufficient contacts with Delaware to support specific jurisdiction. Accordingly, the district court dismissed the complaint against Suunto for lack of personal jurisdiction and entered final judgment in favor of Suunto. Polar appealed to this court.

In a case such as this, a plaintiff need only make a prima facie showing of personal jurisdiction where, as here, the parties conducted jurisdictional discovery, the jurisdictional facts are in dispute, and the district court determined personal jurisdiction without an evidentiary hearing. Celgard, LLC v. SK Innovation Co., 792 F.3d 1373 (Fed. Cir. 2015). Under that prima facie standard, the court must resolve all factual disputes in the plaintiff’s favor.

In determining whether personal jurisdiction over an out-of-state defendant is proper, a court first looks to see if the requirements of the long arm statute of the state in which it sits are met.  Second, the court decides whether exercising jurisdiction comports with the Due Process Clause of the U.S. Constitution.  Here, because the district court's dismissal of Suunto is premised on its determination that due process considerations prevented its exercise of jurisdiction, we consider the due process inquiry first.

Suunto's Purposeful Shipping Supports Minimum Contacts, But the Case Needs to Be Remanded for the District Court to Determine Whether Exercising Jurisdiction Would Be Reasonable and Fair

Due process requires that the defendant have sufficient "minimum contacts" with the forum state, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945). Personal jurisdiction can be specific or general. General jurisdiction is not at issue here. We apply a three-prong test to determine whether specific jurisdiction exists: (1) whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair. Plaintiff bears the burden of establishing minimum contacts, and upon that showing, the burden shifts to defendant to prove that the exercise of jurisdiction would be unreasonable.

Polar asserts a stream-of-commerce theory of personal jurisdiction over Suunto, but the precise requirements of the stream-of-commerce theory remain unsettled. We agree with Polar that Suunto has sufficient contacts with Delaware to sustain specific jurisdiction. The record shows that Suunto's actions satisfy the more stringent tests articulated by Justice O'Connor in Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987) and by Justice Kennedy in McIntyre Mach., Ltd. V. Nicastro, 564 U.S. 873 (2011) [foreseeability or awareness is insufficient, and there must be some additional conduct of the defendant purposefully directed toward the forum state] as well as the more flexible test articulated by Justice Brennan in that case [foreseeability or awareness of the defendant that its product would wind up in the forum state is sufficient]. Specifically, Suunto purposefully shipped at least ninety-four accused products to Delaware retailers, fully expecting that its products would then be sold in Delaware as a result of its activities. It thus can be said that Suunto's actions are purposefully directed to Delaware, indicating an intent and purpose to serve not only the U.S. market generally, but also the Delaware market specifically. This is true regardless of which stream-of-commerce theory is applied.

The record shows that Suunto entered into a distribution agreement with ASWO, its sister company, to market and distribute Suunto products in the U.S. Under that agreement, Suunto is obligated to supply its products from Finland and provide outbound logistic services, including "incoming order administration, preparing export documents, invoicing the order, picking and packing the ordered goods and coordinating the freight to the destination specified by" ASWO. Suunto has shipped at least ninety-four accused products to Delaware retailers via that standard ordering process. Although ASWO provided the destination addresses, took title to the goods in Finland, and directed and paid for shipping, it was Suunto, not ASWO, who physically fulfilled the orders, packaged the products, and prepared the shipments in Finland. Suunto admits as much. Through its own conduct, Suunto purposefully availed itself of the Delaware market.

This is not a case where a small manufacturer sells its products to an independent distributor, who then distributes the products to consumers across the nation. Suunto did not simply place its products in the stream of commerce, with the products fortuitously reaching Delaware as a result of the unilateral effort of ASWO. Rather, "acting in consort" with ASWO, Suunto deliberately and purposefully shipped the accused products to Delaware retailers. Suunto's active participation in supplying and shipping the accused products to Delaware thus constitutes purposeful availment.

Moreover, it is undisputed that this patent infringement action arises out of and relates to Suunto's purposeful shipping of the accused products to Delaware. Polar therefore has made a prima facie showing of minimum contacts under all articulations of the stream-of-commerce test. Because Suunto's purposeful shipping adequately supports minimum contacts, we need not decide whether the other facts argued by Polar, namely, Suunto's website, the eight online sales, and the warranty and data privacy obligations, constitute purposeful availment by Suunto.

Upon a showing of purposeful minimum contacts, due process also requires a showing that "assertion of personal jurisdiction is reasonable and fair." Here, however, the district court did not decide the reasonableness prong because it dismissed the case against Suunto for lack of minimum contacts. Rather than deciding this issue in the first instance, we remand for the district court to determine whether exercising jurisdiction over Suunto would be reasonable and fair. Accordingly, because we conclude that Suunto has sufficient minimum contacts with Delaware, we vacate the district court's determination that it lacked personal jurisdiction over Suunto and remand for the district court to determine whether exercising jurisdiction over Suunto would be reasonable and fair.

Personal Jurisdiction Over Suunto Is Proper Under the Delaware Long Arm Statute

We next consider whether the district court correctly determined that exercising jurisdiction over Suunto would be proper under the Delaware long arm statute, Del. Code Ann. tit. 10, § 3104(c), which provides, in relevant part:

(c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or a personal representative, who in person or through an agent:

(1) Transacts any business or performs any

character of work or service in the State; [or]

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State . . . .

The district court determined that personal jurisdiction exists over Suunto under a dual jurisdiction theory. The dual jurisdiction theory is based on at least partial satisfaction of § 3104(c)(1) and (c)(4). It was first articulated by the Delaware Superior Court in a stream-of-commerce case in Boone. We agree with Polar that the district court correctly applied the dual jurisdiction theory in this case. It may seem counterintuitive that the dual jurisdiction theory does not demand the full satisfaction of any individual subsection of the Delaware long arm statute. But to date, no Delaware state court has rejected that theory. Although the Boone decision is not binding on this court or the district court, we conclude that the district court did not err in applying the dual jurisdiction theory in this case.

We also agree with Polar that the dual jurisdiction theory as articulated in Boone does not require a showing of general jurisdiction. The Boone court opined that a stream-of-commerce case often "does not fit neatly into any section of § 3104," that § 3104(c)(4) "has been deemed a general jurisdiction provision," and that the stream-of-commerce theory "rests on a specific rather than general jurisdiction rationale."  The reasoning of the Boone court indicates that the dual jurisdiction theory does not require a showing of general jurisdiction or the full satisfaction of § 3104(c)(4). Rather, under Boone, a plaintiff must show that (1) "there is an intent or purpose on the part of the defendant to serve the Delaware market," and (2) that "intent or purpose results in the introduction of the product to Delaware and plaintiffs cause of action arises from injuries caused by that product."

Here, Suunto's activities demonstrated its intent to serve the Delaware market. The record here demonstrates an intent to serve not only the U.S. national market generally, but also the Delaware market specifically. Moreover, it is undisputed that the accused products have been sold in Delaware as a result of Suunto's intent to serve the Delaware market. Accordingly, the district court correctly determined that personal jurisdiction over Suunto is proper under the Delaware long arm statute.

For the foregoing reasons, we vacate the district court's determination that it lacked personal jurisdiction over Suunto and remand for further proceedings consistent with this opinion.

 
   

Unwired Planet, LLC v. Apple, Inc., Fed. Cir. 2015-1725 (July 22, 2016)

Dispute related to U.S. PATENT No. 6,532,446

In the system disclosed in the '446 patent, a mobile device sends a user's voice input to a remote speech recognition server. The server translates the received voice input into a data file that can be processed by the mobile device, and the data file is sent back to the mobile device. The accused Siri service allows a user to speak into an iOS device (e.g., iPhone, iPad) using server-based speech recognition.

On appeal, the parties dispute the construction of the claim term "voice input". The parties' claim construction dispute is whether the "voice input" should be limited to a voice input transmitted over a particular type of channel, a voice channel as opposed to a data channel.

In adopting Apple's proposed construction, the district court relied on the summary of the invention in the '446 specification, noting that the sentence describing "the present invention" is immediately followed by a sentence describing the particular task of "establishing a voice communication channel" as part of the voice recognition process, and thus held that the sentence limits the scope of the claims. Based on this, the district court concluded that the voice input limitation should be construed as requiring that the voice input signal be conveyed over a voice channel, or that "a voice channel must be an actual, identifiable type of channel, not some ambiguous channel that can be labeled a voice channel merely because it transports voice."  The district court granted summary judgment of non-infringement to Apple after concluding that no reasonable jury could find Siri transmits voice input over a "voice channel."

The Panel Interprets the Term Based On Its Plain Meaning

The district court erred in its construction of "voice input." The claims require a voice input, not a voice channel. By its plain language, the term "voice input" does not dictate the manner in which voice is to be transmitted from a mobile device to a server. Thus, the district court's construction, adopted at Apple's urging, can be justified if there exists a clear and unmistakable disclaimer in the specification or the prosecution history. However, the summary of the invention does not constitute a disclaimer that limits the scope of every claim. A disclaimer or disavowal of claim scope must be clear and unmistakable, requiring “words or expressions of manifest exclusion or restriction" in the intrinsic record. The specification does not clearly and unmistakably require that voice signals be transmitted exclusively over voice channels, so "voice input" is construed to have its plain meaning, which does not require the use of any particular type of channel for its transmission. Accordingly, the summary judgment of noninfringement is vacated as to the '446 patent because it was based on the erroneous construction of "voice input."

Dispute related to U.S. PATENT No. 6,647,260

The '260 patent discloses an invention for providing new or updated features to a mobile phone through a process referred to as "provisioning." It explains that "a number of parameters must be provisioned into a mobile device in order to enable communication services and applications and in order to distinguish the device from others." Unwired challenges the grant of summary judgment of non-infringement based on the "user information" limitation, and construction of the claim term "provisioning.” 

According to Unwired, in order to purchase an app from Apple's App Store or a song from Apple's iTunes Store, a user must first have an iTunes account. To establish an iTunes account, a user must select a password, which, according to Unwired, satisfies the claimed "user information required to establish a user account" limitation of the claim under dispute. When an iOS device user with an iTunes account wants to purchase an app or a song, the user first enters his Apple ID and password to the iOS device, which sends them to Apple's servers. Second, Apple's servers respond with an "X-token," which contains a hashed version of the user's password and a timestamp generated by the servers. Third, the iOS device sends a "buyProduct request," which includes the X-token and the user's selection of content. Unwired argued that the buyProduct request satisfies the "provisioning request comprising the user information and the user's selection" limitation of the claim in dispute.

Hashing Information May Not Transform Information Enough to Satisfy Non-Infringement

Unwired argues that a hashed password is merely a mathematical function applied to the user's password, and that the court improperly resolved on summary judgment whether merely hashing the user information along with a time stamp transforms it into something non-infringing because the X-token contains the same substantive content, only in a different (i.e., hashed) format.

The district court correctly noted that "the user information" in claim 1 refers to the same "user information" recited earlier in the claim as part of the "receiving user information required to establish a user account" step. However, the court essentially required the claimed "user information" to be in a particular format. While "user information" refers to some information, knowledge, or data on a user, the plain meaning of the term does not require that information to be in any specific format or form. A reasonable jury could find that a hashed password in the X-token contains the same information as in the user's unmodified password, albeit in a different form.

The court did not think the non-reversibility of a hash function—i.e., that a hashed password cannot be decrypted into the password, is determinative of the relevant inquiry. The claims do not dictate a particular form in which "user information" exists, and interchangeability or reversibility cannot be adopted as the essential characteristic in determining whether multiple forms of expression have the same underlying information. Accordingly, the district court's summary judgment of non-infringement is vacated.

Dispute related to U.S. PATENT No. 6,317,831

The '831 patent requires a wideband channel to first exchange security information, and a narrowband channel to then transmit encrypted data. Apple's accused Push Notification Service ("APNS") allows app providers to send push notifications to iOS devices via APNS servers. An iOS device may have a number of apps that receive notifications (e.g., Facebook, Twitter, ESPN). Rather than connecting with multiple app provider servers, the iOS device only needs to connect to APNS servers, because the multiple app providers all send messages to APNS servers, which then send messages to the iOS devices.

The Panel Affirms, Ruling that Apple Does Not Use a “Narrowed Channel”

Unwired's infringement theory is that the "narrowband channel" extends from an app provider (i.e., a push notification sender) to an iOS device, whereas the "wideband channel" is the channel that carries the communications between the APNS and the iOS device. It argues that the channel that carries communications between an app provider server and an iOS device is a narrowband channel because it is at a meaningfully lower data transfer rate.

Apple argued that the grant of summary judgment of non-infringement should be affirmed because there is no genuine issue of fact; APNS does not use a narrowband channel. The stipulated construction of the narrowband channel requires "a meaningfully lower data transfer rate or bandwidth than the wideband channel." Apple argued that there is no dispute that APNS uses the same TCP/IP connection, with the bits traveling at the same speed, for both the exchange of security information and the transmission of the push message. We agree with Apple that the characteristics of the data being transmitted by APNS cannot transform the wideband channel based on TCP/IP into a narrowband channel. Under the agreed upon construction, Apple has met its burden of proving that there is no genuine issue of material fact.

Dispute related to U.S. PATENT No. 6,321,092

The '092 patent discloses an improved technology for identifying the location of a wireless station, such as a cell phone or pager. In order to more accurately locate a wireless station, the invention gathers inputs about the location of the wireless station from multiple location finding equipment ("LFE") such as handset global positioning system ("GPS"), time difference of arrival, and the use of cell/sector location. It then responds to a location request by providing the location information. Unwired alleged that the location-finding technology of iOS devices infringes a claim which recites, in relevant part, "receiving a plurality of device dependent location inputs provided by said location finding equipment."

The district court denied Apple's motion for summary judgment of no direct infringement, based on Apple's argument that the iOS devices only use a single "location input." However, the court granted Apple's motion for summary judgment of no induced or contributory infringement. It reasoned that Apple's noninfringement argument was strong enough that no reasonable juror could conclude that Apple acted with actual knowledge or was willfully blind that it was inducing or contributing to infringement.

Summary Judgment Based on Strength of Apple’s Non-Infringement Argument Is Not Appropriate

Indirect infringement requires knowledge of the underlying direct infringement—not merely the knowledge of the existence of the patent. This knowledge requirement may be satisfied under the doctrine of willful blindness. The doctrine of willful blindness requires the patentee to show not only that the accused subjectively believed that there was a high risk of infringement, but also that the accused took deliberate actions to avoid confirming infringement.

The district court's reliance on the objective strength of Apple's non-infringement arguments as precluding a finding of induced or contributory infringement was erroneous. Therefore, summary judgment on this basis is inappropriate, and we vacate summary judgment of no indirect infringement.

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