In This Issue
·
Federal
Circuit Reverses ITC Finding Claim Term a Nounce Word Invoking
Means-Plus-Function Analysis
·
Federal
Circuit Affirms District Court’s Finding of Document Spoliation Against
Rembrandt
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Federal Circuit Reverses ITC Finding Claim
Term a Nonce Word Invoking Means-Plus-Function Analysis
The Federal Circuit (“CAFC”), on appeal from the ITC, held that the
claim term “cheque standby unit” constituted a nonce word requiring analysis
as a means-plus-function claim in Diebold
Nixdorf, Inc. v. International Trade Commission, and Hyosung TNS, Inc.,
and found the asserted claims invalid under 35 U.S.C. §112 as indefinite
because the specification did not describe the structure of a “cheque standby
unit.”
By way of background, patentee-Hyosung asserted the ‘235 patent
against Diebold alleging infringement before the ITC. The ‘235 patent is directed to an ATM
apparatus that is capable of performing banking transactions, and more
particularly is “capable of automatically depositing a bundle of cashes and
cheques inserted at once,” by performing the following steps: (1) separating deposited bundles into
individual banknotes; (2) transferring such notes horizontally through the
ATM; (3) verifying the authenticity or abnormality of each note; (4) sorting
and processing the notes based on how each was verified; and (5) preparing
the notes for depositing into storage safes.
As is relevant here, one feature recited in each of the ‘235
patent’s nine claims is a “cheque standby unit” that is “placed in the main
transfer path between the first gate and the second gate” and is “configured
to hold the at least one authentic cheque to return the at least one
authentic cheque to the user responsive to receiving user instructions
cancelling deposition of the at least one authentic cheque.” The ‘235 patent specification however does
not disclose a “cheque standby unit,” but instead discloses a “cheque
temporary standby unit.” The “cheque
standby unit” limitation was added to the claims during prosecution to
overcome prior art that purportedly permitted cheques to be stored in a safe, but did not disclose returning stored cheques to the
user upon cancellation of the deposit.
After an evidentiary hearing, the ALJ issued an Initial Decision
which the ITC allowed to become final, holding that (i) the accused Diebold
module directly infringed claims 1-3, 6, 8 and 9, (ii) Diebold contributorily
infringed the claims by importing the module, and (iii) the claims of the
‘235 patent were not invalid. Specifically, the Decision concluded that
the claim term “cheque standby unit” is not indefinite and according the term
its plain and ordinary meaning on the grounds that a person of ordinary skill
in the art “would understand that a structure in an ATM that temporarily
holds checks pending the customer confirming the deposit is the ‘cheque
standby unit’” and that “in general a ‘cheque standby unit’ is the escrow
that temporarily holds checks”. The Decision
expressly credited the testimony of Hyosung’s expert noting that Dr. Howard
“described how the phrase ‘a cheque standby unit’ would necessarily have a
structural meaning to such a person, and would refer
to the physical portion of a cash-and-check depositing module that is
comprised of well-known components for holding cheques in a standby
configuration pending user confirmation of the deposit.”
On appeal, Diebold argued that “cheque standby unit” was a purely
functional term that connoted no specific structure and was, therefore, a
means-plus-function claim subject to 35 U.S.C. §112, ¶ 6 (the ‘235 patent was
filed prior to September 16, 2012, such that pre-AIA §112 was being applied). Diebold specifically argued that the word
“unit” is a “generic nonce word” akin to “mechanism, element, device
and other nonce words that reflect nothing more than verbal constructs,” and
highlighted that the ‘235 patent recites thirteen different “unit” elements
in the claims, each of which has unique function. Diebold continued arguing that (i) the
specification included no discussion of a specific structure of the “cheque
standby unit”, but instead defined the term by its function and location
exclusively, (ii) Hyosung’s expert did not testify that the term “cheque
standby unit” connotes sufficiently definite structure, but instead testified
that the term encompasses all structures capable of fulfilling the function
of temporarily holding checks pending the customer confirming the deposit,
including a non-exhaustive list of structures as varied as a “suction cup”, a
“trap door,” and a “drum.”
Both the ITC and Hyosung responded that the claims do not recite the
word “means” raising the presumption that these are not means-plus-function
claims, and that Diebold had failed to present evidence of its own regarding
the term “cheque standby unit” to rebut the presumption.
The CAFC opened its analysis noting that the claims of the ‘235
patent were presumed to not be means-plus-function because they did not
recite word “means,” but that the presumption may be overcome if the
challenger demonstrates that the claim term fails to “recite sufficiently
definite structure” or else recites “function without reciting sufficient
structure for performing that function.”
The CAFC continued by observing that the standard for finding a term a
nonce word was “whether the words of the claim are understood by persons of
ordinary skill in the art to have a ‘sufficiently definite’ meaning as the
name for the structure.”
In finding the ‘235 patent claims means-plus-function and invalid, the
CAFC found that Diebold had shown that the term “cheque standby unit” as
understood by one of ordinary skill in the art, both (i) failed to recite
sufficiently definite structure and (ii) recited a function without reciting
sufficient structure in the specification for performing that function. The CAFC continued finding that the
intrinsic evidence suggested that the claims do not recite any structure,
much less “sufficiently definite structure” for the “cheque standby unit,”
but rather, describe the term solely in relation to its function and location
in the apparatus. The CAFC found that
although the specification contained passages suggesting that the “cheque
standby unit” must have some structure to perform the function of holding
checks and then either returning them to the user or continuing to process
them pending a user instruction, the ‘235 patent does not offer any clues as
to what such a structure might be.
The CAFC accordingly held that the term “cheque standby unit” was a
nonce word, and held the ‘235 patent claims invalid
under 35 U.S.C. §112 as indefinite because the specification does not
describe with any specificity the definite structure of a “cheque standby
unit.”
Federal
Circuit Affirms District Court’s Finding of Document Spoliation Against
Rembrandt
On appeal of a finding of evidence spoliation, the CAFC affirmed the
district court’s ruling “that Rembrandt engaged in (or failed to prevent)
widespread document spoliation over a number of years.” In so doing, the CAFC noted that under
Third Circuit jurisprudence, “spoliation occurs where: the evidence was in the party’s control;
the evidence is relevant to the claims or defenses in the case; there has
been actual suppression or withholding of evidence; and, the duty to preserve
the evidence was reasonably foreseeable to the party”. Bull
v. United Parcel Serv., Inc., 665 F.3d 68, 73 (3d Cir. 2012) (citing Brewer v. Quaker State Oil Ref. Corp.,
72 F.3d 326, 334 (3d Cir. 1995)).
The CAFC further noted that (i) Rembrandt did not dispute that Zhone
destroyed thousands of boxes at the warehouse, (ii) by the time litigation
had already begun or was reasonably foreseeable, Rembrandt had a duty to
preserve relevant evidence, and (iii) even if most of the documents were
irrelevant, at least some of the destroyed documents were relevant. Rather, Rembrandt’s only argument was that
it had no control over the destroyed documents.
The CAFC rejected Rembrandt’s lack of control argument and continued
noting that a district court may award fees in the rare case in which a
party’s unreasonable conduct, while not necessarily independently
sanctionable – is, like here, nonetheless so “exceptional” as to justify an
award of fees. The CAFC also rejected
Rembrandt’s argument that there was no bad faith because Zhone destroyed the
documents to clear warehouse space without even reviewing their contents
noting that the issue is not Zhone’s bad faith, rather it is Rembrandt’s, and
Rembrandt should have taken steps to preserve the documents.
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