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

March 17, 2017

Overview

In Nidec v. Zhongshan, the panel reverses a determination of anticipation, noting that the Circuit’s Kennametal case does not stand for the proposition that anticipation can be found even when a prior art reference fails to disclose a claim element so long as a skilled artisan reading the reference would “at once envisage” the claimed arrangement.

In a comprehensive decision dealing with claim preclusion, indefiniteness, patentable subject matter, assignor estoppel, evidence of infringement and willful infringement, and lost profits, Mentor Graphics prevails as to most of the appealed issues in its case against Synopsys.

Pete

Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. Ltd — The Circuit reverses an IPR determination of anticipation as to a patent directed to a system for controlling the torque of an electromagnetic motor, ruling that the Board’s decision is not supported by substantial evidence.

Motor control values can be expressed in either a stationary frame of reference (relative to the stator) or a rotating frame of reference (relative to the rotor). The Board found that a Toyota patent (Kusaka) anticipates the claim at issue. However, the panel holds that Kusaka discloses three separate phase currents in the stationary frame of reference, while the claim requires that the signals be in the rotating frame of reference. Therefore, there is no substantial evidence to support the Board’s anticipation ruling.

Citing the Circuit’s 2015 Kennametal case, the Board held that anticipation can be found even when a prior art reference fails to disclose a claim element so long as a skilled artisan reading the reference would “at once envisage” the claimed arrangement. In Kennametal, the challenged claim required a ruthenium binding agent and a PVD coating to be used together. The prior art reference disclosed five binding agents (one of which was ruthenium) and three coating techniques (one of which was PVD). The reference never disclosed the specific combination of ruthenium and PVD, but it taught that any of the five binding agents could be used with any of the three coating techniques. The Circuit held that substantial evidence supported the Board’s finding that the reference effectively taught fifteen combinations, one of which anticipated the challenged claim.

According to the panel, Kennametal does not stand for the proposition that a reference missing a limitation can anticipate a claim if a skilled artisan viewing the reference would “at once envisage” the missing limitation. Rather, Kennametal addresses whether the disclosure of a limited number of combination possibilities discloses one of the possible combinations. The relevant question was “whether the number of categories and components disclosed in the prior art reference is so large that the combination of ruthenium and PVD coatings would not be immediately apparent to one of ordinary skill in the art.” Kennametal does not permit the Board to fill in missing limitations simply because a skilled artisan would immediately envision them.

Read the full opinion

Mentor Graphics Corp. v. EVE-USA, Inc. — Mentor achieves almost a clean sweep of many issues presented to the Circuit in an appeal from litigation in the District of Oregon between Mentor and various Synopsys companies, including its subsidiary EVE-USA. Mentor asserted patents directed to so-called simulation/emulation technology. Synopsys also asserted two of its patents against Mentor. Mentor’s ’376 patent, directed to a system for debugging source code after synthesis, was the only patent tried to the jury, and the panel affirms the denial of JMOL and the $36 million jury verdict. The Circuit also vacates the motion in limine precluding Mentor from presenting evidence of willful infringement. The panel reverses summary judgment that Mentor’s ’882 patent lacks written description support and summary judgment that Mentor’s infringement allegations regarding two of its patents are barred by claim preclusion.

The panel reverses summary judgment that a Synopsys patent is indefinite but affirms summary judgment that the other patent it asserted lacks patent-eligible subject matter.

Our summary is a little longer than usual, given the length of the opinion (42 pages), but the discussion on many of the points is very interesting.

Summary Judgment of Assignor Estoppel Is Affirmed

As to the determination of infringement of Mentor’s ’376 patent, the panel found substantial evidence that was well summarized by Mentor’s expert witness. With respect to Synopsys’s challenge of the grant of summary judgment that it was barred from challenging validity because of assignor estoppel, the panel rejects the argument that Lear v. Adkins“demolished the doctrinal underpinnings of assignor estoppel in the decision that abolished the comparable licensee estoppel. Citing its 1988 Diamond Scientific and its 2016 MAG Aerospace cases, the Circuit notes the continued vitality of the doctrine of assignor estoppel after Lear.

The $36 Million Damage Award to Mentor Is Affirmed

Synopsys’s challenge of the damage award is unsuccessful because the jury instructions properly guided the jury under the so-called Panduit factors as to lost profits because Mentor would have made additional Veloce sales but for Synopsys’s infringing sales. Synopsys argued on appeal that the award should be vacated because it failed to apportion lost profits. The first Panduit factor—demand for the patented product—considers demand for the product as a whole. The second factor—the absence of non-infringing alternatives—considers demand for particular limitations or features of the claimed invention. Together, these factors tie lost profit damages to specific claim limitations and ensure that damages are commensurate with the value of the patented features.

The panel finds the facts of this case to be “remarkably simple” and Synopsys does not dispute any of them. Synopsys does not dispute that but for its infringement, Mentor would have made each of the infringing sales to Intel. Nor does it dispute how much Mentor would have earned, the precise numbers of sales Mentor would have made, whether there were any alternatives that Intel may have preferred over the purchase of Mentor’s product, or whether Intel would have chosen to purchase fewer emulators.

On appeal, Synopsys argues that its products “outperform Mentor’s in price, size, speed, and capacity.” If the evidentiary record is as Synopsys claims, then it had recourse—it could have appealed the jury’s Panduit fact findings as not supported by substantial evidence. This is a highly factual case, and Synopsys did not appeal any of the jury’s fact findings relating to damages.

Summary Judgment of Indefiniteness of the Synopsys ’109 Patent Is Affirmed

Definiteness requires clarity, although under Nautilus, “absolute precision is unattainable.” Claims reciting terms of degree have long been found definite if they provide reasonable certainty to a skilled artisan when read in the context of the patent.

Claim 1 requires “displaying said characteristics associated with those said final circuit’s nets and parts that correspond directly with said initial circuit’s nets and parts near said portions of said synthesis source text file that created said corresponding initial circuit parts and nets.” A goal of the ’109 patent is to aid developers when debugging HDL. To accomplish this, the patent “relates” circuit analysis results with the HDL corresponding to a particular result, and then places the two pieces of information “near” each other on the display screen. This allows a developer to identify and fix problems with specific lines of HDL when debugging. In order for the patent’s stated objective to occur, the system must display the related HDL and analysis results “near” enough to each other such that a developer would “relate” the two. Thus, the panel holds that a skilled artisan would understand “near” requires the HDL code and its corresponding circuit analysis to be displayed in a manner that physically associates the two.

Summary Judgment Is Affirmed that Synopsys’s ’526 Patent Is Invalid Under § 101

The panel affirms summary judgment that the asserted claims of Synopsys’s ’526 patent are invalid under § 101 because of the presence of the term “machine-readable medium” in every challenged claim. A patentee is free to be his own lexicographer, and the specification expressly defines the term: “The computer readable medium is any data storage device that can store data which can be thereafter be [sic] read by a computer system.” Mentor argued that because the ’526 patent defines a “machine-readable medium” as including “carrier waves,” the claims are invalid under the 2008 Circuit case of In re Nuijten. The claimed signal in Nuijten was not limited to a particular medium or carrier but rather covered “any tangible means of information carriage.” In that case, the Circuit held that a “transitory, propagating signal” did not fall within any statutory category of subject matter: process, machine, manufacture, or composition of matter. Therefore, because the claims covered “the signal itself,” they were not eligible subject matter. Here, the panel holds that because the challenged claims are expressly defined by the specification to cover carrier waves, they are similar to the ineligible Nuijten claims in that the claims cover carrier signals themselves.

The challenged claims present a scenario where there are multiple covered embodiments, and some, but not all, of the covered embodiments are patent-eligible. For example, if the machine-readable medium used was a “random-access memory” or “optical data storage device,” the claims would not run afoul of Nuijten. While not binding on the Circuit, it is instructive that MPEP § 2106 instructs that a claim covering both statutory and non-statutory embodiments is not eligible for patenting.

The Panel Reverses the Grant of a Motion in Limine Precluding Mentor from Presenting Evidence of Willful Infringement as to Its ’376 Patent

The district court held that Mentor was precluded from presenting evidence of willfulness because it relied exclusively on post-suit willfulness conduct, and it had not first sought a preliminary injunction. The court stated, “I think Synopsys is right about what we will call the Seagate rule, which is if you don’t seek an injunction, you can’t seek willful infringement for post-filing conduct.” In reaching this conclusion, the court made two errors. First, it erred in determining that the alleged conduct was post-suit conduct because it erred in determining the filing date of the relevant suit. Second, it erred in concluding that Synopsys could not present evidence of post-filing willful infringement because Synopsys did not seek a preliminary injunction.

The relevant date for determining which conduct is pre-suit is the date of the patentee’s affirmative allegation of infringement, in this case the date of Mentor’s counterclaim. Mentor relies on Synopsys’s acquisition of EVE, which terminated the license and rendered all subsequent sales infringing. These events occurred after the declaratory judgment was filed but prior to Mentor’s counterclaim for infringement. The alleged acts of infringement are thus pre-suit acts, and there is accordingly no basis for excluding Mentor’s evidence of willfulness.

The panel also disagrees with the court’s second decision—that Mentor could not assert willful infringement because it did not seek a preliminary injunction. As the Circuit noted in its 2014 Aqua Shield case, there is “no rigid rule” that a patentee must seek a preliminary injunction in order to seek enhanced damages. The opinion also cites to the language in Halo “eschew[ing] any rigid formula for awarding enhanced damages under § 284.” The panel thus holds that the district court abused its discretion in precluding Mentor from presenting evidence of willful infringement, and remands for further proceedings consistent with Halo.

Summary Judgment of Indefiniteness of Synopsys’s ’882 Patent Is Reversed

The panel reverses the district court’s grant of summary judgment of invalidity of the Synopsys ’882 patent because the very language of claim 1 which the court held was not supported by the specification was present in the originally-filed claims. As noted in last year’s ScriptPro case, original claims are part of the original specification and in many cases will themselves satisfy the written description requirement.

The Panel Reverses Summary Judgment of Claim Preclusion as to Synopsys’s ’176 and ’531 Patents

The ’176 and ’531 patents are two of the three patents litigated in the 2006 lawsuit between Mentor and EVE, which was settled when EVE took a license to the patents, and Mentor dismissed its claims with prejudice. Synopsys’s 2012 acquisition of EVE automatically terminated the Mentor/EVE license. Synopsys then filed a DJ action for noninfringement of the ’176 and ’531 patents, and Mentor counterclaimed for infringement. Citing the Supreme Court’s Lawlor decision and the Circuit’s 2012 and 2014 decisions in Aspex Eyewear and Brain Life, the panel accepts Mentor’s argument that its infringement allegations were based exclusively on acts of infringement that occurred after the date Synopsys acquired EVE. Claim preclusion does not bar a patentee from bringing infringement claims for acts of infringement occurring after the final judgment in a previous case.

Read the full opinion

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