Federal Circuit Affirms Finding That
Case Is Exceptional But Remands For Proper Calculation Of Attorneys’ Fees
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. |
