We do not usually report on district court cases, but the Columbia Sportswear v. Seirus design patent case handled by our firm is particularly interesting, given the award of all of defendant’s profits, and the district court’s recent grant of a TRO preventing Seirus from filing for ex parte reexamination of the design patent. In BASF v. Johnson Matthey, the Circuit rules that claims reciting parameters in functional terms that are supported in the specification are sufficiently definite under Nautilus. The Circuit reverses and remands an award of lost profits and permanent injunction in Presidio v. ATC, a decision also dealing with indefiniteness, intervening rights and enhanced damages.

Thanks to my newest colleague, Cristin Wagner, for her help with this week’s report. Cristin is a patent litigator who has recently joined our Portland office.

Columbia Sportswear v. Seirus (S.D. Cal.)

In a trial concluded in September, a San Diego jury awarded our client Columbia Sportswear over $3 million, amounting to all of the profits the defendant, Seirus, made on its gloves that infringed Columbia’s design patent. The design patent is directed to a pattern for heat-reflective material used on outdoor clothing. The case is significant in that it is the first design patent case to go to trial since the Supreme Court’s ruling in Apple v. Samsung. In that case, the Supreme Court reversed long-standing precedent that one who sells an article of manufacture that bears a patented design is liable to the extent of all of the profits made from the sale of that article. The Supreme Court ruled that when a product has multiple component parts, and the design is applied only to a component, patentees are not necessarily entitled to the total profits of the product as sold, but may be liable only for the profits attributable to the design-bearing component.

In the present case, Seirus argued that only one component of its gloves—the lining fabric—infringed the design patent, and that profits should be based on that component, and not the total sales from the gloves. Our litigators, led by Nika Aldrich, argued several different theories of recovery to the jury, and the jury elected to award Seirus’s entire profits from the sales of the gloves to Columbia.

The case has taken an interesting turn in the past week, when Seirus informed Columbia it was going to seek an ex parte reexamination of the design patent. Columbia immediately filed for a TRO because Seirus had previously agreed in a Stipulated Judgment that the patent was valid. For that reason, this case is arguably different from other recent cases in which parties challenged the validity of patents at the Patent Office after the entry of judgment of no invalidity following a jury trial.  The district court granted the temporary restraining order the same day, ruling:

Columbia has demonstrated that it is likely to succeed on the merits. The parties’ consent judgment on the Design Patent’s validity is binding and likely precludes Seirus from initiating proceedings with the PTO. See Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001) (recognizing that the parties’ stipulation of validity gave rise to res judicata, barring subsequent challenges to patent validity).

The district court has indicated it will be issuing a scheduling order “regarding the issuance of a preliminary injunction.”

BASF Corp. v. Johnson Matthey Inc., Fed. Cir. Case 2016-1770 (November 20, 2017)

The Circuit reverses a determination of indefiniteness of a patent directed to catalytic converters for diesel engines, ruling that “effective to catalyze” and “effective for catalyzing” are sufficiently definite in functional terms to enable one with ordinary skill to determine the scope of the claims.

BASF sued Johnson Matthey for infringement of its patent directed to systems for performing catalytic conversion of nitrogen oxides (NOx) in an exhaust gas stream. As relevant here, the patent claims a partly-dual-layer arrangement of coatings on a substrate over which exhaust gas passes—a coat containing “a material composition B effective to catalyze selective catalytic reduction (SCR) of NOx”; and beneath part of that coat, a partial-substrate undercoat containing “a material composition A effective for catalyzing NH3 oxidation.” The district court held that the italicized phrases were indefinite.

When referring to compositions A and B, the specification includes various examples of how catalyst layers are prepared and how they perform under practical engine conditions in comparison to the prior art. Rather than explicitly defining the material compositions, the claims utilize functional language, specifically “effective,” to purportedly define them.  In other words, the claims recite a performance property the composition must display, rather than its actual composition.

Under Nautilus, the question presented here is this: would the “composition . . . effective to catalyze” language, understood in light of the rest of the patent and the knowledge of the ordinary skilled artisan, have given a person of ordinary skill in the art a reasonably certain understanding of what compositions are covered?  The Nautilus standard of “reasonable certainty” does not exclude claim language that identifies a product by what it does.  What is needed is a context-specific inquiry into whether particular functional language actually provides the required reasonable certainty.

The district court’s analysis did not consider that the specification makes clear that it is the arrangement of the SCR and AMOx catalysts, rather than the selection of particular catalysts, that purportedly renders the inventions claimed in the ’185 patent a patentable advance over the prior art.  As a result, the claims and specification let the public know that any known SCR and AMOx catalysts can be used as long as they play their claimed role in the claimed architecture.  Both the claims and specification provide exemplary material compositions that are “effective” to catalyze the SCR of NOx and the oxidation of ammonia, disclose the chemical reactions that define the “SCR function” and “NH3 oxidation function,” and illustrate through figures, tables, and accompanying descriptions how the purportedly novel arrangement of the catalysts results in improved percent conversion of ammonia and improved nitrogen selectivity. The inference of indefiniteness simply from the scope finding is legally incorrect: “breadth is not indefiniteness.”

Presidio Components, Inc. v. American Technical Ceramics Corp., Fed. Cir. Case 2016-2607, -2650 (November 21, 2017)

Presidio sued ATC for infringement of its ’356 patent directed to a multilayer capacitor design. Presidio prevailed in the district court and was granted its lost profits (limited by intervening rights because the patent was amended during reexamination) and a permanent injunction. The Circuit reverses the lost profits award and remands the case for a determination of reasonable royalty and for further proceedings as to the injunction.

The panel first considers the argument that the claim language referencing multilayer capacitors with a fringe-effect capacitance between external contacts that is “capable of being determined by measurement in terms of a standard unit” is indefinite. At trial, Presidio presented expert testimony that a person of skill in the art would know how to measure fringe-effect capacitance. The panel determines that although the specific steps performed by Presidio’s expert had not been published, the general approach of making such modifications to a capacitor was within the knowledge of someone skilled in the art. Thus, the district court could properly conclude that such measurement was within the skill of one in the art.

The district court granted summary judgment on the issue of intervening rights because the claims were amended and are not “substantially identical.” Under the scope of the original claims, theoretical calculations are sufficient to satisfy the claim limitations. Under the amendment claims, they are not. Based on this substantive change in claim scope, the district court properly granted the affirmative defense of absolute intervening rights.

As to lost profits, the issue is whether Presidio established its right to recover lost profits for its sales of the pertinent capacitors. The four-factor Panduit test requires the patentee to show: (1) demand for the patented product; (2) an 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. ATC argues that the district court erred as to the absence of an acceptable, non-infringing alternative. To prove the absence of acceptable, non-infringing alternatives, the patentee may prove either that the potential alternative was not acceptable to potential customers or was not available at the time.

With respect to the “acceptable substitute” question, the district court noted that the evidence showed that the 560 capacitors are not as good as the 550 capacitors. However, the correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringing product. Undisputed evidence showed that the 560L capacitor was less expensive than Presidio’s BB capacitor and also had lower insertion loss for at least some frequencies, which indicates better performance.

On the question of availability, the district court determined that sufficient evidence supported the finding that the 560L capacitor was not an available substitute because unlike the infringing 550 capacitors, ATC sold the 560L capacitor only to a single customer and did not list it on its website. The fact that ATC only sold the 560L capacitor to a single customer, or that it was not widely advertised, does not show a lack of availability. The patentee thus failed to establish the 560L capacitor was not an available substitute.

As to enhanced damages, the jury found that ATC willfully infringed the ’356 patent, and the district court denied judgment as a matter of law of no willful infringement. Despite that, the district court declined to award enhanced damages.

The district court here appropriately analyzed ATC’s culpability only during the period beginning when the reexamination certificate issued on December 8, 2015. The district court noted that at that point, ATC and Presidio were already involved in the present litigation, and ATC had been selling the 550 capacitors for almost six years without a finding of infringement. At that point, ATC had received the district court’s claim construction order and developed defense theories. Additionally, ATC had just succeeded in causing Presidio to narrow the scope of its claims during reexamination proceedings instituted by ATC. The district court further noted that ATC’s invalidity defense at trial was not meritless, though ultimately rejected by the jury. Therefore, the district court concluded that the present case was a “garden-variety” hard-fought patent case, rather than an egregious case of misconduct, and declined to award enhanced damages. The panel rules that, under Halo, this was not an abuse of discretion.

Finally, the district court issued a permanent injunction, which enjoined ATC from selling any 550 capacitors. Here, the focus is whether Presidio has established irreparable injury. To prove irreparable injury, a patentee must show (1) that absent an injunction, it will suffer irreparable harm, and (2) that a sufficiently strong causal nexus relates the alleged harm to the alleged infringement. The district court correctly pointed out that a jury award of lost profits may support a finding of irreparable harm because it necessarily results in a finding that the patentee lost sales and would continue to lose sales in the future.

In light of its reversal of the lost profits award for lack of proof of past lost sales, the panel feels it must vacate the injunction. However, the opinion notes that the district court has discretion to determine whether other evidence could support a finding of irreparable injury.

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