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