Latest Federal Court Cases, 7/1/19
PATENT CASE OF THE WEEK
Elbit Systems Land and C4I Ltd. v. Hughes Network Systems, LLC, Appeal No. 2018-1910 (Fed. Cir. June 25, 2019)
In this appeal from the United States District Court for the Eastern District of Texas, the Federal Circuit affirmed the district court’s finding of infringement and damages, but dismissed the portion of the appeal relating to exceptional case attorney’s fees under 35 U.S.C. § 285 due to lack of jurisdiction.
Elbit filed suit against Hughes for infringement of two patents, only one of which is at issue on appeal. That patent, U.S. Patent No. 6,240,073 (“the ’073 patent”) is directed to a system for transmitting information in a satellite communication network. The ’073 patent specifically claims a “transmitter means” that has two “communication means,” one for transmitting short bursts of data, the other for continuous transmission of data. The ’073 patent also claims a “switching means” to switch between the two communication means. Hughes’s products use two methods for transmitting data; in one (the ALOHA method) the satellite randomly transmits bursts of data, and in the other (the Dynamic Stream method) the terminal can send transmissions of variable sizes during each frame. The jury found that Hughes’s products infringed the ’073 patent and awarded Elbit over $2 million in damages. The district court found the case to be exceptional due to Hughes’s litigation conduct, and granted Elbit’s motion for attorney’s fees, but did not quantify the fee award.
On appeal, Hughes argued that its products, which provide broadband internet access via satellite communication, do not contain the claimed “continuous transmission of data” communication means, nor the “switching means,” and therefore cannot infringe. Hughes also argued that the damages award should be overturned because of Elbit’s reliance on a prior settlement, and because Elbit’s damages expert failed to properly apportion damages. Finally, Hughes argued that the case is not exceptional.
As to infringement based on the “continuous transmission” limitation, Elbit’s expert witness testified that the Dynamic Stream method in fact provides continuous transmission of data. That testimony was, in part, based on Hughes’s own product description. It further constitutes continuous data transmission because it is used for file types that are too large for the short “bursts” used by the ALOHA mode, thus making its transmissions of “long burst length” communications continuous transmissions. The Court found that substantial evidence supported this finding. Hughes’s counter-evidence that those transmissions have “guard” time in which the transmission is turned off did not override the evidence supporting the jury’s finding because the jury reasonably relied on Elbit’s expert, who testified that having a guard time does not necessarily mean there was a break in the continuous transmission. Moreover, just because the ’073 patent’s specification failed to mention guard time when discussing continuous transmission did not limit continuous transmissions to those without guard time; indeed, the district court rejected Hughes’s similar argument at claim construction.
As to the “switching means,” the Court also found that substantial evidence supported the jury’s finding. For example, Hughes’s products switch back to the first communication mode that performs the claimed function in substantially the same way as the claimed structure, and the jury reasonably relied on expert testimony indicating that Hughes’s products switched from one mode to another, and then back. This was further proven by evidence showing that message length, one criteria listed in the ’073 patent as prompting the switching, is central to how Hughes’s products switch back and forth between modes. For example, if the ALOHA method is being used, but the data will not fit the transmission, the terminal hub switches to the Dynamic Stream mode; and because Hughes’s expert testified that it would not make sense for the terminal to remain in that mode, it was reasonable for the jury to conclude that the terminal switched back to the ALOHA mode.
As to the jury’s damages award, the Court again found that it was supported by substantial evidence. For example, Elbit’s damages expert, who was the only damages expert to testify at trial, properly relied upon a prior settlement between Hughes and another satellite internet company, Gilat, and appropriately accounted for the differences between the circumstances of that settlement and the present. The Gilat agreement—which occurred near the time of the hypothetical negotiation, which was about related technologies, and which was a settlement prompted by litigation—was used to provide relevant evidence regarding a reasonable royalty Hughes should pay for use of Elbit’s technology. Hughes introduced no evidence showing that this analysis was faulty in any way. As to apportionment, Elbit’s expert’s approach was consistent with precedent that the royalty should reflect the value of the patented technology. Elbit’s expert used the Gilat agreement and statements from Hughes executives that the two-way system provided a 20% increase in value over the old one-way system, which reasonably reflected the value of the technology. Finally, Elbit’s expert’s reliance on Hughes’s customer-specific revenues from relevant products was appropriate because it was not company-wide revenue, and did not involve the overall multi-component product (moreover, Hughes never objected at trial to this evidence or testimony).
As to the exceptional case determination, the Court concluded that it did not have jurisdiction to review the award or the exceptional case finding because the district court did not quantify the fee amount; as such, the decision was not a “final decision” under 28 U.S.C. § 1295. In coming to this conclusion, the Court first analogized section 1295 to section 1291 and relied upon the reasoning in Budinich v. Becton Dickonson & Co., 486 U.S. 196 (1988), a case decided by the Supreme Court in which it held that a decision on the merits is “final” for purposes of section 1291 regardless of whether there remains for adjudication a request for attorney’s fees. Thus, the Court reasoned that determination of entitlement to fees is not a reviewable final decision until quantification of the fee award. The Court explained that as with section 1291, section 1295 requires a clean line between merits and fees finality. As such, quantification and entitlement must be kept together on the fees side of the line because the quantification process “might well present an opportunity for reconsideration of the entitlement determination.” For instance, due to the “causal connection” required between the exceptionality and the amount of fees awarded, the required scrutiny might lead to reconsideration of whether the case was exceptional in the first place. Or, the causation inquiry may result in so small a fee that no appeal is taken from the award.
The Court also found no basis for jurisdiction in section 1292(c)(2), which adds to appellate jurisdiction only in that it authorizes review of a judgment that would be final except that certain “accounting” issues are undecided. Those “accounting” issues are a subset of merits rulings, which are not the same as unquantified fees rulings. Furthermore, the fees provision for exceptional case arises under a separate provision from those authorizing merits relief, including damages relief. As such, “fees” are not part of an “accounting.” The single case Hughes relied on, Majorette Toys (U.S.) Inc. v. Darda, Inc. USA, 798 F.2d 1390 (Fed. Cir. 1986), is no longer binding on the Court because the only jurisdictional issue on appeal was whether the entire appeal, including the merits, should be dismissed; and moreover, the Court had already recognized other supervening Supreme Court precedent that undermined the rationale of the case.
The Court additionally found no basis to exercise pendent appellate jurisdiction over the fees-entitlement determination. This type of jurisdiction is narrow, and is limited, at most, to issues that are inextricably intertwined with the final decision properly before the court of appeals. Whether the case is exceptional because of Hughes’s litigation conduct does not meet that demanding standard.
The opinion can be found here.
ALSO THIS WEEK
Cellspin Soft, Inc. v. Fitbit, Inc., Appeal Nos. 2018-1817, -1819 ,-1820, -1821, -1822, -1823, -1824, -1825, -1826, -2178, -2179, -2180, -2181, -2183, -2184 (Fed. Cir. June 25, 2019)
The Court vacated orders dismissing infringement claims as directed to patent-ineligible subject matter under 35 U.S.C. § 101, and awarding attorney’s fees under 35 U.S.C. § 285. The asserted claims were directed to methods of automatically publishing data from a “data capture device” (such as a camera) to the Internet, via a paired mobile device, automatically and with minimal or no user intervention. Applying the two-part Alice test, the Federal Circuit agreed with the trial court that the claims were directed to an abstract idea. With respect to the presence of an inventive concept, the Court found that the district court erroneously ignored specific, plausible allegations in the complaints that, taken as true, indicated that certain claimed combinations of elements were not well-understood, routine, or conventional at the time of the invention. The Court also found that the trial judge erroneously distinguished its precedent concerning Section 101 invalidity at the summary judgment stage, and held that factual disputes concerning an inventive concept may preclude dismissal at the pleadings stage.
In the interest of judicial economy, the Court also addressed certain errors in the vacated fee award, which was based in part on the trial court’s determination that plaintiff should have examined its claims more critically before bringing suit. The Federal Circuit advised that this basis was erroneous, because the presumption of patent validity extends to patent-eligibility under Section 101.
The opinion can be found here.
UCB, Inc. v. Watson Laboratories Inc., Appeal Nos. 2018-1397, -1453 (Fed. Cir. June 24, 2019)
This appeal concerns two patents involving rotigotine, a drug used for treatment of Parkinson’s disease. In a bench trial, the district court had found a first patent directed to a system for using rotigotine infringed under the doctrine of equivalents, and had rejected defendants’ obviousness and anticipation challenges. The district court had found a second patent directed to a polymorph of rotigotine invalid under 35 U.S.C. section 102(a) as being “known or used by others” in the United States before the date of invention. The Federal Circuit affirmed on all counts. Addressing the system patent first, the Federal Circuit upheld the district court’s rejections of defendants’ various arguments against infringement under the doctrine of equivalents, including prosecution history estoppel, intentional narrow claiming, vitiation, and ensnarement. Moving to alleged invalidity, the Federal Circuit found the district court had correctly rejected defendants’ lack of motivation to combine and reasonable expectation of success arguments in support of obviousness, and that anticipation was absent due to a missing claim limitation. Turning to the polymorph patent, the Federal Circuit affirmed the district court’s holding that use of the claimed polymorph by a single patient prior to the invention date was sufficient to invalidate the asserted patent on anticipation grounds.
The opinion can be found here.