Welcome to Winston & Strawn’s Federal Circuit Patent Decision Summaries. This bulletin provides a short summary of, and links to, the precedential patent cases decided by the Federal Circuit last week. We hope that these summaries are useful in keeping you updated on the Federal Circuit’s patent decisions.

In a permanent injunction analysis, a finding that the public interest factor supports an injunction is not itself sufficient to mandate injunctive relief. A post-verdict royalty calculation determined at the district level may change if additional economic factors alter the parties’ bargaining positions after an appeal.

Activevideo Networks, Inc. v. Verizon Communications, Inc., Nos. 2011-1538, -1567, 2012-1129, -1201 (Fed. Cir. Aug. 24, 2012).

A jury found the asserted patents valid and infringed. The district court entered a permanent injunction against the alleged infringer and established a sunset royalty for the alleged infringer’s continued infringement until the injunction took effect. The Federal Circuit reversed the permanent injunction and affirmed the post-verdict royalty calculation.

The Federal Circuit held that the district court erred in its analysis of three of the four permanent injunction factors. The district court erred with respect to the irreparable harm factor for three reasons. First, litigation cost cannot support irreparable harm because, although “[l]itigation costs are undoubtedly undesirable and may take funds away from other endeavors . . . they are not irreparable harm in the injunction calculation.” Second, loss of market share by the patentee’s non-exclusive licensee does not make the patentee’s harm irreparable especially because, here, the alleged infringer and patentee do not compete. Third, the focus of the irreparable harm analysis should be on the patentee and not its non-exclusive licensee. In addition, the evidence illustrated that the patentee expended efforts attempting to license the patents-in-suit to the alleged infringer, asked for a sunset royalty period six months longer than what the court eventually ordered, and the harm to the patentee was readily quantifiable. With this evidence and analysis, the court concluded that it was clearly erroneous for the district court to conclude that money damages would not adequately compensate the patentee.

Next, the district court erred when it held that the adequacy of remedies is lacking. Particularly because no evidence in the record supported the assertion that a large share of the patentee’s business opportunity or damage to brand recognition is now lost. In fact, the patentee’s own expert testified that the patentee had not lost any sales by licensing to the alleged infringer.

Moreover, the Federal Circuit concluded that the balance of hardships favoring the patentee was not supported by the evidence. The district court erroneously relied on the fact that the patentee was a smaller company that relied on patents more than the alleged infringer did. But, this fact does not matter, especially here, when the patentee and the alleged infringer do not compete in the same market. 

Finally, the district court correctly held that the public interest factor favored a permanent injunction. “[The alleged infringer’s] customers will suffer some harm with removal of their video-on-demand services, but it was satisfied that [the patentee] showed that the customers’ interests in entertainment did not outweigh the public interest in allowing patentees [generally] to enforce their right to exclude.” Given the district court’s reasoning, the Federal Circuit held that the finding on the public interest factor was not clearly erroneous. Moreover, the Supreme Court previously held that finding that the public interest favored a permanent injunction, when the other three factors do not, is not enough to grant a permanent injunction.

Also the Federal Circuit held that there was no error in its post-verdict royalty calculation. Nonetheless, the Federal Circuit suggested that the district court determine an appropriate ongoing royalty and may consider, on remand, additional evidence of changes in the parties’ bargaining positions and other economic circumstances that may be of value in determining an appropriate ongoing royalty.

A copy of the opinion can be found here. 

Claim construction should not be limited by the goal of the patent unless the goal could not be achieved with alternative construction; terms should be construed with an eye toward use of the same term in related patents.

In re Rambus, No. 2011-1247 (Fed. Cir. Aug. 15, 2012).

A party found to infringe a patent initiated ex parte reexamination proceedings to challenge the validity of the infringed, but now expired, claims. The Board of Patent Appeals and Interferences (the “Board”) held that one infringed claim was invalid as anticipated by prior art based on its claim construction. The patentee appealed, stating that the Board improperly construed a claim term by not including two functional limitations.

The Federal Circuit affirmed the Board’s decision, rendering the claim invalid. Because the Board was construing an expired patent, it properly used the more thorough analysis of a district court, and did not follow the practice of using the broadest reasonable construction. 

Regarding the first functional limitation, the panel found that, absent “words of manifest exclusion or clear disavowals,” a claim term should not be restricted to only the preferred embodiments. Further, because the claim term was not shown to be a term of art, the ordinary meaning of the term based on the context of the claims, specification, and prosecution history was applied. Finally, in other patents within the same family, the claim term at issue was differentiated from other claims that specifically claimed the functional limitation sought by the patentee. Because claim terms in related patents have the same meaning, unless otherwise compelled, the doctrine of claim differentiation warranted affirming the Board’s construction.

Regarding the second functional limitation, the panel rejected the notion that the goal of the invention required its inclusion. Because the goal could still be achieved, albeit less efficiently, that doctrine did not preclude an alternative construction. The Federal Circuit affirmed the Board’s construction because the limitation must be present for the claim to function as written. Under the Board’s affirmed construction, the identified prior art anticipated the claim at issue.

A copy of the opinion can be found here. 

The patent was obvious because it was simply an optimization of result-effective variables.  In order for a variable to be result-effective, the prior art need not explain the relationship between the property and the variable; the prior art need only recognize the relationship. 

In re Applied Materials, Inc., Nos. 2011-1461, -1462, -1463, -1464 (Fed. Cir. Aug. 29, 2012).

The Board of Patent Appeals and Interferences (the “Board”) rejected four patents, which claimed pads for chemical mechanical polishing with surface grooves having certain ranges of depth, width, and pitch. The pads are used to flatten the surface of a substrate as circuits are created. The prior art disclosed dimensions that overlapped with the claimed ranges. The Board found that the dimensions were result-effective variables. Because the optimization of a result-effective variable is within the ordinary skill in the art, the Board held that the invention was obvious. Further, there was insufficient evidence of commercial success to outweigh the finding of obviousness.

The Federal Circuit affirmed. Substantial evidence supported the Board’s determination that the dimensions of the pads were result-effective variables. The court relied on a “basic engineering” principle to affirm the finding that depth was result-effective, and on the prior art to affirm the finding that width and pitch were result-effective. The patentee argued that the prior art did not disclose the precise impact of pitch and width on performance. But the court held that no great specificity is required; a “recognition in the prior art that a property is affected by the variable is sufficient to find the variable result-effective.” Further, a new claim “does not become nonobvious simply because the patent specification provides a more comprehensive explication of the known relationships between the variables and the affected properties.”

The patentee failed to rebut the prima facie case of obviousness. There was no evidence that the claimed variable ranges produced unexpected, beneficial results, and the mere combination of result-effective variables was within the ordinary skill in the art. Further, the patentee’s commercial success was not linked to the quality of the claimed invention.

Judge Newman wrote a brief dissent, accusing the majority of “simply rubber-stamping agency factfinding.” In his view, there was nothing in the record  showing that the changes in the dimensions were obvious, and there was significant evidence of commercial success.

A copy of the opinion can be found here. 

Section 282’s requirement that prior art be disclosed at least 30 days before trial does not eliminate other disclosure requirements under the Federal Rules of Civil Procedure; a patentee’s failure to explicitly challenge that the prior art contains a limitation is not a concession that the prior art includes that limitation.

Woods v. DeAngelo Marine Exhaust, Inc., No. 2010-1478 (Fed. Cir. Aug. 28, 2012).

The patentee brought an infringement action against a competitor. Two days before discovery closed, and more than 30 days before trial, the accused infringer located several drawings that predated the patents. The next day the accused infringer informed the patentee that the drawings may be anticipatory prior art, and that the drawings may be used at trial. At trial, the patentee moved to exclude the drawings because the accused infringer failed to supplement its response to an interrogatory seeking, on a claim-by-claim basis, all prior art that would be used to challenge validity. The accused infringer moved to sanction the patentee for failing to conduct an adequate pre-filing investigation. The district court denied the accused infringer’s motion for sanctions and excluded the drawings, and the patentee obtained a jury verdict in its favor. The accused infringer appealed, and the Federal Circuit affirmed. 

The court held that the district court did not abuse its discretion in excluding the drawings, which were not disclosed in the alleged infringer’s interrogatory response. The requirement to give 30 days prior notice of prior art under 35 U.S.C. § 282 does not eliminate an alleged infringer’s obligations under the Federal Rules of Civil Procedure. Although the alleged infringer had timely produced the documents to the patentee consistent with Section 282, the accused infringer had inadequately supplemented its interrogatory response in violation of Rule 26(e). Exclusion of the drawings was an appropriate sanction for this discovery violation.

The court also rejected the accused infringer’s argument that the patentee acquiesced to various characterizations of the prior art by the examiner in related patent applications. In one instance, the patentee amended a claim to include an additional limitation. This amendment did not constitute an admission that the prior art included all the previous limitations because “viewing an amendment as an admission that the initial claim was unpatentable requires more than the mere presence of a limitation.” Similarly, “[a] patent applicant is not presumed to have conceded the presence in the prior art of every claim limitation he had no reason to dispute.” 

A copy of the opinion can be found here.