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

August 17, 2017

Overview

Visual Memory v. Nvidia reverses the grant of a motion to dismiss under Rule 12(b)(6), ruling that the claims recite an enhanced computer memory system and not an abstract idea under § 101. In Georgetown Rail v. Holland, the Circuit affirms claim construction, willful infringement and enhanced damages of $1 million in an action involving a digital system for inspecting railroad tracks.

Thanks to my new colleague Justin Brask for his help with this week’s report. Justin is part of a significant expansion in our intellectual property group this summer.

Any cases decided Friday will be included in next week’s report, as I’m heading out to join the throngs in Central Oregon to watch the eclipse.

Pete

Visual Memory LLC v. Nvidia Corporation, Fed. Cir. Case 2016-2254 (August 15, 2017)

A divided panel reverses and remands the grant of a motion to dismiss under Rule 12(b)(6), ruling that the patent is not directed to an abstract idea but instead claims an enhanced computer memory system. Much like Enfish’s self-referential table and the motion tracking system in Thales, the claims survive step one of the Alice test, so the majority does not need to consider step two.

Claim 1 of the patent recites: “A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor by a bus, said system comprising: a main memory connected to said bus; and a cache connected to said bus; wherein a programmable operational characteristic of said system determines a type of data stored by said cache.”

Two recent cases inform the majority’s evaluation of whether the claims are “directed to” an abstract idea pursuant to Alice’s first step. In Enfish, the Circuit held claims reciting a self-referential table for a computer database were patent-eligible under Alice step one because the claims were directed to an improvement in the computer’s functionality. Similarly, in Thales, the Circuit determined that claims reciting a unique configuration of inertial sensors and the use of a mathematical equation for calculating the location and orientation of an object relative to a moving platform were patent-eligible under Alice step one. The majority’s review of the claims demonstrates that they are directed to an improved computer memory system, not to the abstract idea of categorical data storage.

It is for this reason that the majority finds the district court’s reliance on the patent-ineligible claims in the Circuit’s 2014 Content Extraction case and its 2016 TLI Communications cases misplaced.  In Content Extraction, the patents claimed a method of using a computer and a scanner to extract data from hard copy documents, recognizing specific information in the extracted data, and storing that information in memory. Alice clarified that adding a computer cannot spare a claim that otherwise would be directed to an abstract idea, so the Circuit concluded that these claims were directed to the basic concept of data recognition and storage. In TLI Communications, the invention involved assigning “classification data,” such as timestamps or dates, to digital images, sending the images to a server, extracting the classification data, and having the server take the classification data into consideration when storing the digital images. The Circuit held that the claims were directed to the abstract idea of classifying and storing digital images in an organized manner. Although the claims recited the use of a phone and a server to carry out the claimed method, the claims did not describe a new telephone, a new server, or a new physical combination of the two and were not directed to a specific improvement to computer functionality.

The claims at issue do not simply require a “programmable operational characteristic.” Even claim 1 requires a memory system with a main memory and a cache memory, where the memory system is configured by a computer to store a type of data in the cache memory based on the type of processor connected to the memory system.

Judge Hughes’ dissent contends that the claimed programmable operational characteristic is nothing more than a black box, and that the patent lacks any details about how the invention’s purpose is achieved. However, the majority notes that, when reviewing a dismissal under Rule 12(b)(6), where all factual inferences must be drawn in favor of the non-moving party, it is improper to assume that the code set forth in the specification would not teach one of ordinary skill how to practice the invention. Moreover, whether a patent specification teaches an ordinarily skilled artisan how to implement the claimed invention presents an enablement issue under 35 U.S.C. § 112, not an eligibility issue under § 101.

Read the full opinion

Georgetown Rail Equip. Co. v. Holland L.P., Fed Cir. Case 2016-2297 (August 16, 2017)

The Circuit affirms claim construction, willful infringement and enhanced damages of $1 million in an action involving a patent to a digital system for inspecting tie plates for railroad tracks, which are steel plates that connect the steel rail tracks to wooden ties. The case went to trial after the parties competed head-to-head for a contract with Union Pacific. Holland won the contract using technologies from a U. K. company Rail Vision Systems, but shortly thereafter Georgetown was granted a preliminary injunction, precluding Holland from fulfilling the contract. After claim construction in which the district court determined that the preamble did limit the claim, the case proceeded to trial, where the jury found that Holland willfully infringed the patent and awarded over $1.5 million in damages. The district court denied JMOL and awarded Georgetown an additional $1 million in enhanced damages.

As to claim construction, the panel first notes that a preamble may be limiting if it recites essential structure or steps; claims depend on a particular disputed preamble phrase for antecedent basis; the preamble is essential to understand limitations or terms in the claim body; the preamble recites additional structure or steps underscored as important by the specification; or there was clear reliance on the preamble during prosecution to distinguish the claimed invention from the prior art. The reverse is also true. The panel rules that, in the context of the entire patent, it is apparent that the term “mounted on a vehicle for movement along the railroad track” is meant to describe the principal intended use of the invention but not to import a structural limitation or to exclude from the reach of the claims an assembly that does not include a vehicle mount.

The opinion then turns to the issue of whether the court properly denied JMOL as to infringement.  Holland argued that it could not have infringed because it “did not benefit from or control” the purported infringing technology. The panel rejects this argument, holding that Holland’s use of Rail Vision Systems’ technology is analogous to the system found “used” for purposes of the infringement analysis in the Circuit’s 2011 Centillion case. As in Centillion, Holland collects and gathers data by its system platform on the front-end. Then, Holland sends the gathered information to Rail Vision, with instructions to process and analyze the information. The fact that the transmission from the front-end to the back-end in this case involves physically removing the hard drives with data and shipping them overseas is of no consequence. The intermediary steps are still “put into service” as a result of Holland’s front-end collection and request for processing, demonstrating Holland’s ultimate control of, and derivation of benefit from, the system.

The panel then turns to Holland’s contention that JMOL should have been granted as to the jury’s award of lost profits. To determine if lost profits should be awarded, the Circuit applies its four-factor Panduit test, requiring the patentee to show: (1) demand for the patented product; (2) absence of acceptable noninfringing substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit that would have been made. Holland contests the presence of the first and fourth factors. As to the first factor, Holland alleges that there is no evidence that Union Pacific demanded Georgetown’s patented invention and, instead, evidence points to a conclusion that Union Pacific “repeatedly rejected” Georgetown’s patented technology. The panel notes that Holland improperly narrows the scope of the inquiry, which merely asks whether demand existed in the marketplace for the patented product. Georgetown presented evidence showing that its system generated millions in revenue and was contracted out to four U.S. railroad companies, and Holland submitted evidence showing there was demand for the Rail Vision device at least before 2011. Holland argued that Georgetown must show demand “during the period of allegedly infringing sales,” but the panel disagrees, noting that all a patentee must do is sell some item, the profits of which have been lost due to infringing sales. Thus, there is substantial evidence to support a finding that demand for the patented product existed. As to the amount of damages, Georgetown’s damages expert set forth a legally sufficient evidentiary basis from which a reasonable jury could have found that Georgetown would have received business from Union Pacific for data collection services in this two-supplier market if Holland’s infringing product was not being offered.

As to willful infringement, the panel determines that substantial evidence supports the verdict that Holland was aware of the patent and that Holland copied Georgetown’s technology. As to enhanced damages, the panel cites to the district court’s application of the nine Read v. Portec factors, and concludes that, under Halo, the court did not abuse its discretion in awarding enhanced damages of $1 million in addition to the $1.5 million damages award.

Read the full opinion

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