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

March 9, 2017

Overview

It has been a busy week at the Circuit. In Comcast v. Sprint the Circuit affirms a $7.5 million ‎judgment that includes prejudgment interest running from the date of the first-to-issue patent ‎instead of apportioning the interest based on the issue dates of the patents in suit. In two cases, ‎the panel affirms the invalidity ‎under § 101‎ of Intellectual Ventures patents directed to data ‎management software. In Prism v. Sprint the Circuit affirms a reasonable royalty damage award ‎of $30 million, rejecting Sprint’s argument that a prior license to settle litigation involving the ‎same patents should have been excluded. Finally, based primarily on the ‎prior art book World ‎Wide Web Searching for Dummies, the Circuit affirms a ‎determination of obviousness of claims ‎directed to searching the Internet in Meiresonne v. Google.‎

Thanks to my colleagues Vladimir Raskin and Ian Griswold for their help this week. Any ‎cases decided tomorrow will be included in next week’s report.‎

Pete ‎ ‎

Comcast IP Holdings v. Sprint Communications  The Circuit affirms a $7.5 million award to Comcast for the infringement by Sprint and Nextel ‎‎(collectively, Sprint) of three patents directed to the use of computer network technology to ‎facilitate a telephone call.

Sprint contests the construction of two of the terms of the patents but in each case the panel ‎finds Sprint’s arguments unpersuasive. Moreover, Sprint’s arguments as to each of the terms are ‎irrelevant because Sprint failed to show how its construction would have made any difference. ‎

Sprint next complains that there was insufficient evidence for the jury to find two of the claim ‎limitations—which the jury was instructed to apply its plain and ordinary meaning because ‎neither party asked for a construction—were met by the accused systems. The panel disagrees, ‎holding that there was substantial evidence to support the jury’s findings.‎

In the panel’s mind, Sprint was essentially proffering claim construction arguments in the guise ‎of a challenge to the sufficiency of the evidence of infringement. But if Sprint desired such a ‎narrow definition, it could (and should) have sought a construction to that effect. In light of this, ‎the jury reasonably relied on Comcast’s expert testimony that the relevant accused call flows ‎were routed in a manner that infringes the patents. ‎

Sprint also argued that the district court erroneously charged Comcast prejudgment interest from ‎‎2006 forward even though two of the three patents did not issue until later. In other words, ‎Sprint contends the district court should have apportioned the prejudgment interest calculations ‎based on the issue dates of the individual patents. Instead, the jury was told that the lump sum ‎royalty payment should run from the date of the earliest relevant hypothetical negotiation.‎

The panel responds that the jury was also told that the hypothetical negotiators would have ‎employed the “book of wisdom,” looking forward in time from the date of the first hypothetical ‎negotiation to account for “all information that would have been relevant to the parties in coming ‎to and arriving at a deal.” The experts agreed that this information would have included the ‎issuance of any later patent relating to the same technology. Therefore, a lump sum royalty in the ‎amount of $7.5 million was appropriate and apportionment was not necessary. The panel ‎therefore finds no abuse of discretion in the assessment of prejudgment interest against Sprint. ‎

Read the full opinion

Intellectual Ventures v. Capital One;  ‎Intellectual Ventures v. Erie Indemnity Company  The Circuit affirms a determination by the district court that the asserted claims of IV’s ’081 ‎patent do not pass muster under § 101. ‎

The panel quickly disposes of two secondary issues: the district court did not abuse its discretion ‎in certifying the appeal because it expressly determined that there was no just reason for delay of ‎proceedings; and the court correctly determined that IV was collaterally estopped from pursuing ‎its patent infringement claims as to the ’084 patent because the finality of judgement requirement ‎was met. ‎

The ’081 patent concerns a system and method for editing XML documents. The patent claim ‎creates the dynamic document based upon “management record types” (“MRTs”) and “primary ‎record types” (“PRTs”). The inventor coined these terms to describe the organizational structure ‎of the data at issue.‎

Under step one of Alice eligibility analysis (whether the claim is directed to a law of nature, a ‎natural phenomenon, or an abstract idea), the panel concludes that the claims of the ’081 patent ‎are directed to the idea of collecting, displaying, and manipulating data, and thus are abstract. ‎Although the claimed data structures add a degree of particularity, the underlying concept ‎embodied by the limitations merely encompasses the abstract idea itself of organizing, displaying, ‎and manipulating data of particular documents. ‎

Applying the second step of Alice, the panel perceives no “inventive concept” that transforms the ‎abstract idea of collecting, displaying, and manipulating XML data into a patent-eligible ‎application of that abstract idea. The claims recite two generic computer elements—a ‎processor—and a series of generic computer “components” that merely restate their individual ‎functions—i.e., organizing, mapping, identifying, defining, detecting, and modifying. They ‎merely describe the functions of the abstract idea itself. MRT and PRT data structures do not ‎sufficiently transform the abstract concept into a patentable invention. In particular, the MRTs ‎and PRTs—although technical sounding—include generic data types for which the system can ‎store the extracted data. ‎

Although the patent purports to have met a need in the art to “allow the user to view and update ‎XML documents in different formats, and manipulate the data and perform actions without ‎programming skills,” the claims recite nothing inventive or transformative to achieve this stated ‎goal. Thus, taken individually or in combination, the recited limitations neither improve the ‎functions of the computer itself, nor provide specific programming, tailored software, or ‎meaningful guidance for implementing the abstract concept. Accordingly, they do not ‎meaningfully limit the claims to provide the requisite inventive concept under step two.‎

Another decision, IV v. Erie Indemnity, decided the same day as IV v. Capital One, will not be ‎separately discussed because its § 101 analysis and decision are essentially the same as those in ‎the Capital One case. However, as to one of the patents in suit in Erie, the Circuit reverses the ‎determination of invalidity because the chain of title was defective and, thus, IV did not have ‎standing to sue. ‎

Read the full opinion (IV v. Capital One)
Read the full opinion (IV v. Erie)

Prism Technologies LLC v. Sprint Spectrum  The Circuit affirms a reasonable royalty damage award of $30 million for infringement of two ‎Prism patents directed to network security systems, and affirms the denial of Prism’s motion for ‎an ongoing royalty. This appeal largely concerns Sprint’s argument that a settlement agreement in ‎which AT&T took a license under the same patents should not have been admitted into evidence. ‎

On the same day that Prism sued Sprint, it sued AT&T for infringement of the same patents. The ‎AT&T case went to trial first and on the last day of trial, just prior to closing arguments, the ‎parties settled with AT&T taking a license. Sprint argued on appeal that the court should have ‎excluded the license under Rule 403, which provides that relevant evidence may be excluded if ‎its probative value is outweighed by its prejudicial effect. Weighing in favor of admission are: the ‎patents are the same and the technology is very similar; one reason a litigation settlement would ‎present distorted evidence is that litigation costs still to come may loom large in parties’ decisions ‎to settle, but here those costs were largely already incurred; and discovery and adversarial ‎processes tend to move a legal inquiry toward improved answers, so the parties’ agreement seems ‎especially probative if reached toward the end of litigation. Weighing against admission are: the ‎earlier suit’s settlement figure may be too low if it was lowered by the patent owner’s ‎discounting of value by a possibility of losing on validity or infringement (the hypothetical ‎negotiation assumes that the asserted patents are valid and infringed); and the royalty rate may ‎have been too high since it included a risk to defendant of enhanced damages.‎

The panel has little trouble concluding that the court did not abuse its discretion in admitting the ‎license agreement. What the court found particularly compelling was that Sprint itself had ‎successfully sought the admission of several other Prism licenses on the same patents that ‎resulted from prior litigation settlements (which of course set forth lower royalty rates). The panel ‎also rejects two additional arguments Sprint presents: (1) litigation settlements on the issue of ‎reasonable royalty rather than “established royalty” should be excluded; and (2) Rule 408 bars ‎admission of evidence relating to settlement. After criticizing the application of those arguments ‎in the present case, the panel rules that the arguments were waived since neither was presented to ‎the district court.‎

Sprint also argues that the court erred in admitting Prism’s damages evidence based on an ‎estimate of costs Sprint avoided by infringing. At trial, Prism presented evidence that a ‎reasonable royalty would reflect Sprint’s willingness, in a hypothetical negotiation, to pay an ‎amount calculated by reference to the costs that Sprint would have incurred if it had chosen not ‎to infringe—in this case, the costs of building a private backhaul network instead of leasing ‎backhaul services from third-party providers. Sprint argued that Prism’s approach was ‎insufficiently tied to the “footprint” of the invention because Prism did not “invent” backhaul ‎networks. The panel disagrees, ruling that a price for a hypothetical license may appropriately be ‎based on consideration of the costs and availability of non-infringing alternatives and the ‎potential infringer’s cost savings.‎

In its cross-appeal, Prism argues that the district court erred in denying its motion for ongoing ‎royalties. The panel notes that § 283 provides that a court may grant an injunction, and the ‎Circuit has interpreted that provision to permit a court to award an ongoing royalty in lieu of an ‎injunction. However, Prism’s expert testified that the parties would have valued the patents ‎based on Sprint’s expected cost savings from avoiding the need to build its own backhaul ‎network. Because those cost savings consisted, in large part, of Sprint’s initial capital costs, the ‎panel concludes that the jury could have reasonably found that the parties would have structured ‎the agreement as a fully paid license.‎

Read the full opinion

Meiresonne v. Google – Based primarily on a ‎prior art book World Wide Web Searching for Dummies, the Circuit affirms a PTAB ‎determination of obviousness of patent claims directed to searching the Internet. ‎

In response to an accusation of infringement, Google filed an IPR, which the Board instituted ‎based on the obviousness of all four of the challenged claims. In its final ruling the PTAB found ‎the claims obvious based on the combined teachings of the Dummies book by Hill and a patent ‎to Finseth. It found that Hill disclosed all of the limitations of the claims except for the “rollover ‎viewing area” limitation, which it found disclosed by Finseth. ‎

The issue before the panel was whether Hill and Finseth teach away from the claimed invention, ‎which combines descriptive text with a rollover viewing area. Meiresonne argued that Hill and ‎Finseth teach away because both references disparage the use of descriptive text. He argued that ‎Finseth’s solution to the “cursory, if not cryptic” descriptive text was abandoning and replacing ‎textual descriptions with graphical previews. He also noted that Hill describes the abstract text as ‎‎“gibberish” and advocates “visiting the actual site” instead of reading an unreliable abstract. ‎

However, the panel holds that substantial evidence supports the Board’s fact finding that the ‎prior art does not teach away from the claimed combination. Although Finseth teaches graphical ‎previews in a rollover window, it never implies that text and graphics are mutually exclusive or ‎advocates abandoning text descriptions altogether. The panel concludes that the disparaging ‎remarks in Finseth such as “often cursory, if not cryptic” do not automatically convert the ‎reference to one that teaches away from combining text descriptions with a rollover window. ‎This description implies only that text descriptions may be incomplete or insufficient to fully ‎understand the content. Nor does Hill’s description of website abstracts as “sometimes as ‎informative as a paragraph of gibberish” amount to promoting abandonment of text descriptions. ‎

The opinion distinguishes this case from a prior “teaching away” case, DePuy Spine, where the ‎prior art taught that the addition of a rigid screw to the prior art spinal assembly would eliminate ‎or reduce the device’s desired “shock absorber” effect, thereby rendering the device inoperative ‎for its intended purpose. The prior art depicted a “causal relationship between rigidity and screw ‎failure,” which supported the finding that it taught away from using rigid screws. Here, neither ‎Hill nor Finseth indicates that inclusion of descriptive text would detract in any way from ‎Finseth’s goal of using a rollover viewing area to peruse data “much faster” than previous ‎methods and “determining which web pages would be of most interest to the user.”‎

Read the full opinion

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