Federal Circuit Vacates and Remands Stipulated
Judgment Of Noninfringement
In Craig Thorner v. Sony Computer, Appeal No. 2011-1114 (February 1,
2012), the Federal Circuit vacated and remanded the New Jersey District
Court’s entry of judgment of non-infringement.
The patent-in-suit related to a
tactile feedback system for computer video games. The claim terms in dispute were “flexible
pad” and “attached to said pad.” The
district court adopted Sony’s proposed constructions, finding that “flexible”
meant “capable of being noticeably flexed with ease” and that “attached to
said pad” meant “affixed to an exterior surface.” Based upon such constructions, the parties
stipulated to a judgment of noninfringement and plaintiff appealed.
On appeal, Thorner argued that
the term “flexible” should be construed to mean “capable of being flexed” and
that the district court had erred in its construction. The Federal Circuit agreed with Thorner,
stating that neither the claims nor the specification requires the “flexible
pad” to be noticeably flexed with ease. The Federal Circuit noted that specification
says only that the flexible pad must be a semi-rigid structure, and that the
task of determining the degree of flexibility, the degree of rigidity that
amounts to “semi-rigid,” is part of the infringement analysis, not part of
the claim construction.
With respect to the
construction of “attached to said pad,” the district court had reasoned that
“attached” meant attached to the outside of an object because the specification
used the word “embedded” to refer to something inside an object. Thus, the
district court concluded that “attached” and “embedded” had different
meanings, so “attached to said pad” must mean “affixed to an exterior
surface.”
The Federal Circuit stated: “There
is nothing inconsistent about the applicant’s use of the narrower term,
‘embedded,’ to describe embodiments affixed to an internal surface. The plain
and ordinary meaning of embedded, ‘attached within,’ is narrower than ‘attached.’
Hence it makes sense that the applicant would want to use embedded when it
meant to explicitly claim attached to the inside only. That does not mean the
word attached automatically means attached to the external surface, as
opposed to the broader plain meaning – attached to either the interior or
exterior.”
The Federal Circuit agreed with
Thorner, holding that the term “attached to said pad” should be given its
plain and ordinary meaning which encompasses either internal or external
attachment. Accordingly, the Federal
Circuit vacated and remanded the case.
Federal Circuit Affirms Civil Penalty For Violation Of ITC
Orders
In Ninestar
Technology v. ITC, Appeal No. 2009-1549 (Feb. 8, 2012), the Federal
Circuit affirmed the International Trade Commission’s (“ITC”) assessment of a
civil penalty against the Ninestar companies for failure to comply with
exclusion and cease and desist orders arising from a violation of Section 337
of the Tariff Act, 19 U.S.C. §1337.
In an earlier action, the ITC had found unfair trade
practices based on infringement of certain U.S. patents by the importation
and sale of ink printer cartridges produced in China by Ninestar Technology
Co., Ltd. and imported into and sold in the United States by various entities
including Ninestar’s wholly owned U.S. subsidiaries. The ITC ruled that the
ink printer cartridges infringed U.S. patents and issued a general exclusion
order, limited exclusion orders, and cease and desist orders in October
2007. The Federal Circuit affirmed the
ITC’s orders in January 2009.
Despite the entry of the orders, Ninestar continued to
import and sell cartridges in the U.S. An enforcement proceeding was brought
and the ITC found Ninestar to have violated the orders. The ITC then levied a civil penalty against
Ninestar. Ninestar appealed the assessment of the penalty and its amount, and
also objected to the inclusion of Ninestar China as jointly and severally
liable.
On appeal, Ninestar did not deny its actions and its
knowledge that it was not in compliance with the Commission’s orders. Instead, Ninestar argued that it was
justified in non-compliance because the law applied by the Commission was
wrong. Ninestar argued that the correct law is that the manufacture and sale
of a product in any country extinguishes all patent rights, regardless of the
physical location where the sales occur.
After reviewing the record, the Federal Circuit affirmed that
the ITC had applied the correct law and that the ITC’s orders had been violated
with knowledge and in bad faith.
The civil penalty imposed by the ITC was $55,000 per day,
for a total of $11,110,000. The ITC stated
that this penalty “should be sufficient to deter future violations by the
Ninestar Respondents and others considering violating the Commission’s
orders.” The ITC observed that
Ninestar had “the ability to pay substantial penalties” and that Ninestar “did
not introduce accounting records or demonstrate any reason why the maximum
penalties should not be imposed.” The
Federal Circuit held that the ITC’s penalty was within its authority and in
accordance with the legislative purpose, and that Ninestar had not shown an
abuse of discretion in the imposition of a penalty and its amount.
As to the joint and several liability issue, Ninestar
argued that the penalty cannot be levied against Ninestar China because it is
established law that a parent is not liable for the actions of its
subsidiary, even if there are overlapping directors or officers. The ITC found that Ninestar China monitored
and controlled the actions of its U.S. subsidiaries, that regular reports
were made of sales, inventories, and returns, and that the profits of the
infringing sales were regularly sent to Ninestar China. The ITC further found that Ninestar China
exercised control over the U.S. subsidiaries for the benefit of Ninestar
China, and that after the ITC orders were issued, Ninestar China did not
order its subsidiaries to terminate importation and sales, but instead was
complicit in violation of the orders, including providing to its subsidiaries
the false affidavits of compliance.
Ninestar additionally argued that Ninestar China cannot be
liable for the penalty because it is a foreign entity and not within the
ITC’s jurisdiction. The ITC responded that Ninestar China waived any issue of
jurisdiction because it was a party in the enforcement proceedings and the
underlying investigation, and participated actively in trade with the United
States as the owner of the United States subsidiaries that import and sell
its products and that remit all profits to the parent company in China. The
ITC found that Ninestar China exercised control over the US subsidiaries for
the benefit of Ninestar China and Ninestar did not order its subsidiaries to
terminate importation and sales but instead was complicit in violation of the
orders.
The Federal Circuit determined that the record contained
substantial evidence to support the ITC’s findings and affirmed the ITC’s
assessment of joint and several liability.
Lastly, Ninestar raised constitutional arguments that a
non-judicial body cannot be assigned authority to issue a punitive penalty
for violation of an administrative order. The Federal Circuit stated that Section 337 proceedings are integral
to the control of unfair competition in trade, and the provision of a civil
penalty is within regulatory authority and is appropriately assigned to the
administrative agency. The Federal
Circuit further noted that decisions of the ITC were subject to judicial
review, as a safeguard against administrative excess. Accordingly, the
Federal Circuit held no violation of constitutional structure in the ITC’s
authority to levy a civil penalty, and no violation of constitutional
protections in the procedures followed and the penalty assessed.
Accordingly, the ITC’s rulings were affirmed.
Federal Circuit Reverses Grant Of Summary Judgment
In HTC Corp. v.
IPCom, GMBH., Appeal No. 2011-1004 (Jan. 30, 2012), the Federal Circuit reversed
the District Court for the District of Columbia’s grant of summary judgment
of invalidity. The district court
concluded that the asserted claims were indefinite because they claimed both
an apparatus and method steps.
The patent-in-suit covers a handover in a cellular telephone
network. The relevant claims recite a
mobile station and a network. The parties disagree whether the mobile station or
the network implement the six functions enumerated the claims. The Federal Circuit stated that if the
mobile station implements the functions, the claims are indefinite because
they recite both an apparatus—the mobile station—and method steps—the
enumerated functions. However, if the network performs the functions, the
claims are not indefinite because the claims merely describe the network
environment in which the mobile station must be used. The district court improperly concluded that
the mobile station implements the enumerated functions.
The Federal Circuit reviewed the specification and held
that although the mobile station “performs” the handover, the base stations
are actually implementing the enumerated functions. Thus, the functions
define the network environment and they are not functions performed by the
mobile station.
Accordingly, the Federal Circuit reversed the district
court’s grant of summary judgment to HTC on the ground that claims 1 and 18
cover hybrid subject matter.
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