Greenblum & Bernstein, P.L.C.
Recent Litigation News in Intellectual Property
In This Issue
· Federal Circuit Affirms Finding That Case Is Exceptional But Remands For Proper Calculation Of Attorneys’ Fees
· Federal Circuit Reverses Grant Of Summary Judgment For Improperly Resolving Factual Questions Against The Non-Moving Party
· Federal Circuit Rules En Banc On Induced Infringement
· Federal Circuit Clarifies Damage Awards
In Highmark, Inc. v. Allcare Health Management Systems, Inc. (Appeal No. 11-1219), the Federal Circuit affirmed the district court order finding the case exceptional under 35 U.S.C. § 285. In this case, Highmark moved for summary judgment of non-infringement with respect to claims 52, 53 and 102. Allcare opposed Highmark’s motion with respect to claims 52 and 53, but did not oppose the motion with regard to claim 102. Allcare instead formally withdrew the infringement allegations with respect to claim 102.
The district court found that Allcare’s assertion of infringement of claim 102 was frivolous and warranted an exceptional case finding, and awarded attorneys’ fees as sanctions.
The Federal Circuit agreed with the district court that Allcare’s assertion of claim 102 frivolous. However, because the district court did not determine the amount of attorneys’ fees apportionable to each of the issues, the Federal Circuit remanded the case to the district court for a calculation of attorneys’ fees based on the frivolity of the claim 102 allegations only. Judge Mayer dissented.
Federal Circuit Reverses Grant Of Summary Judgment For Improperly Resolving Factual Questions Against The Non-Moving Party
In Raytheon Co. v. Indigo Systems (Appeal Nos. 2011-1245 and 1246), the Federal Circuit reversed a grant of summary judgment because the district court erred by resolving genuine issues of material fact and drawing inferences in favor of Indigo.
The issue on summary judgment was whether Raytheon’s trade secret misappropriation claim was time-barred. In 2004, Raytheon obtained and disassembled an Indigo camera, and thereafter, Raytheon filed suit for trade secret misappropriation in 2007. Indigo asserted that Raytheon’s trade secret claim was time-barred by the applicable three-year statute of limitations because Raytheon had a basis for suspicion that its trade secret had been misappropriated as early as 2000. The statute of limitations for the misappropriation claim began to accrue when Raytheon knew or reasonably should have known the facts giving rise to the claim. Raytheon provided evidence that it did not know of the misappropriation more than three years earlier. Nevertheless, the district court granted the motion, but in doing so, improperly resolved factual questions against Raytheon, the non-moving party, at summary judgment.
Accordingly, the Federal Circuit reversed the grant of summary judgment holding that there was a genuine question of material fact, as to when it knew or should have known of the alleged misappropriation, that should not have been resolved against Raytheon.
Federal Circuit Rules En Banc On Induced Infringement
In Akamai Tech v. Limelight Networks and McKesson Technologies, Inc. v. Epic Systems Corporation (Appeal No. 2010-1291), the Federal Circuit held en banc that, at least, with respect to “indirect” or induced infringement under 35 U.S.C. §271(b), “that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”
The Federal Circuit was careful to make clear that its present ruling does not affect the current line of cases that require a single actor (or its agents) to perform each element of a claim to be liable for “direct” infringement under 35 U.S.C. §271(a).
The Federal Circuit has, however, rejected its prior interpretation of the infringement statutes that required a single actor to perform all claimed steps in connection with “indirect” infringement.
The patent-at-issue was generally directed to a method that increases the efficiency of delivering web content by placing some of the content on a set of replicated servers and having the content provider’s web page instruct web browsers to retrieve that content from those servers. Defendant, Limelight, maintains a network of servers and places content on its servers, but it did not modify the web pages to instruct the browsers to retrieve the content on its servers. Instead, Limelight instructs its customers on the steps needed to do that modification.
The district court concluded that Limelight did not infringe because Limelight’s customers performed one of the claimed steps.
The Federal Circuit reiterated that, to be liable for induced infringement, the accused infringer must have specific intent to encourage another’s infringement and, thus, it is not a strict liability tort like direct infringement (where knowledge of the patent is not a requirement). Further, the Court indicated that there is no reason to distinguish between an actor who “knowingly induces” multiple actors (including itself) to infringe a patent and one who knowingly induces a single actor to infringe. The Federal circuit analogized induced infringement to the tort law doctrine of liability for inducing innocent actors to commit tortious acts, which is a separate basis for liability, independent of the liability grounded in the actual tort.
Federal Circuit Clarifies Damage Awards
In Laserdynamics v. Quanta Computer (Appeal Nos. 2011-1440 and 1470), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded the district court judgment for further proceedings regarding damages.
The Federal Circuit discussed the “entire market value rule,” under which a patentee may be awarded damages as a percentage of revenues or profits from the “entire product,” even when the patented technology only relates to a feature within that product. The Federal Circuit reiterated that the entire market value rule is a narrow exception, and not the general rule, for determining the royalty base for calculating an award of damages. The Federal Circuit stated that where “small elements of multi-component products are accused of infringement, calculating a royalty on the entire product carries a considerable risk that the patentee will be improperly compensated for non-infringing components of that product. Thus, it is generally required that royalties be based not on the entire product, but instead on the ‘smallest salable patent-practicing unit.’”
The entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand. The Court clarified that “the requirement to prove that the patented feature drives demand for the entire product may not be avoided by the use of a very small royalty rate,” and reaffirmed “that in any case involving multi-component products, patentees may not calculate damages based on sales of the entire product, as opposed to the smallest salable patent-practicing unit, without showing that the demand for the entire product is attributable to the patented feature.”
The Court also clarified the hypothetical negotiation date to be used in the Georgia-Pacific royalty damages calculation which is based on what two willing parties would agree to pay for a license under a hypothetical negotiation generally set on “the date that the infringement began.” The Court held that the proper date, in the context of the claims asserted in the instant action, was when the accused infringer began inducing infringement, not the date the complaint was filed and the date of notice of infringement.
The Federal Circuit also addressed the use of litigation settlement agreements as evidence for establishing a reasonable royalty under a hypothetical negotiation. The Federal Circuit noted that the “propriety of using prior settlement agreements to prove the amount of a reasonable royalty is questionable.” Instead, the Court stressed that “[a]ctual licenses to the patents-in-suit are probative not only for the proper amount of a reasonable royalty, but also of the proper form of the royalty structure.” It was improper for the damages expert to ignore the royalties in the 28 lump sum licenses and present a damages theory based on a running royalty rate.