Fresh From the Bench: Latest Federal Circuit Court Case
The Federal Circuit issued numerous precedential opinions last week, two of which answered long simmering questions about inter partes reviews (IPRs). Below we discuss a case addressing whether admissions of prior art in the patent itself can be considered as prior art in an IPR. Our Case of the Week reversed Federal Circuit precedent concerning the scope of IPR Estoppel. It also addressed the appropriateness of two reasonable royalty rates applied to two different defendants within the same supply chain.
CASE OF THE WEEK
California Institute of Technology v. Broadcom Limited, Appeal Nos. 2020-2222, 2021-1527 (Fed. Cir. Feb. 4, 2022)
Our Case of the Week concerned heavily-litigated patents owned by the California Institute of Technology relating to error correction technology in computer chips.
IPR Estoppel Issue
Apple had filed multiple IPR petitions challenging the validity of the claims at issue. The Patent Trial and Appeal Board (PTAB) ultimately found that Apple failed to prove invalidity. At the district court, Apple asserted that the claims were invalid over new combinations of the prior art not asserted in the IPR proceedings.
Apple Inc. v. Wi-Lan Inc., Appeal Nos. 2020-2011, -2094 (Fed. Cir. Feb. 4, 2022)
In this case, the Federal Circuit weighed in on multiple issues following an $85.23 million jury verdict against certain Apple iPhone models for infringement of two Wi-LAN patents relating to bandwidth allocation and signal modulation methods used in 4G LTE wireless networking. Apple appealed certain of the district court’s claim constructions, its denial of judgment as a matter of law (JMOL) of non-infringement, and its denial of a new trial on damages. Wi-LAN cross-appealed the district court’s grant of a new trial on damages following an initial damages award of $145.1 million, as well as its grant of partial summary judgment of non-infringement for iPhones incorporating chips sold by Intel, which had a license to the asserted patents from Wi-LAN. The Federal Circuit generally agreed with the district court’s holdings supporting infringement, but vacated and remanded for a new trial on damages.
On claim construction, Apple appealed the district court’s construction of “subscriber unit” and “subscriber station” terms in the claim preambles, arguing that they should be limited specifically to customer premises equipment (CPE) because the patentee had acted as its own lexicographer by using CPE interchangeably with the disputed claim terms, and because CPE was the only disclosed embodiment of those terms. The Federal Circuit disagreed, finding that the specifications at most described CPE as a type of subscriber unit or station, but that the terms were not used interchangeably, and that there was no manifest language of exclusion (e.g., describing “the invention” as comprising CPE) limiting the terms to that embodiment. As such, the Federal Circuit affirmed the district court’s construction of those terms.
Apple argued that even under this broader construction, the accused iPhones did not contain a “subscriber unit” or “subscriber station” as described in the claims, and that the district court erred in denying its post-trial motion for JMOL of non-infringement. The Federal Circuit disagreed, finding that expert testimony had provided substantial evidence supporting the jury’s finding of infringement, and affirmed the JMOL denial.
On the licensing issue, it was undisputed that iPhones containing Intel chipsets sold to Apple during the term of an Intel/Wi-LAN license agreement did not infringe. However, the district court had found that the agreement also granted Intel a perpetual license to the asserted patents following expiration of the license period, and so had granted summary judgment of non-infringement as to iPhones containing Intel chipsets sold to Apple following the expiration of that term. Wi-LAN cross-appealed on this issue, and the Federal Circuit agreed with Wi-LAN that the license agreement unambiguously provided for a term-limited license and that the district court had misconstrued the survival clause at issue. As such, the Court reversed the district court’s summary judgment of non-infringement as to that subset of accused products.
On damages, a jury had initially awarded $145.1 million to Wi-LAN based on its expert’s testimony that a difference in sound quality between calls placed using Voice over Long-Term Evolution (VoLTE) and Skype (a non-infringing alternative) was attributable to the patented technology, which Wi-LAN’s damages expert relied on in determining a reasonable royalty. The district court had determined that Wi-LAN’s expert improperly conflated VoLTE technology as a whole (which Wi-LAN admittedly did not invent) with the specific methods claimed in Wi-LAN’s patents, and had granted Apple a new trial on damages. Wi-LAN cross-appealed on this issue and argued that the original award should be reinstated, but the Federal Circuit found no abuse of discretion and affirmed the grant of a new trial.
At the second trial, Wi-LAN’s expert shifted to a “comparable licenses” theory of damages relying on several other Wi-LAN licenses containing the asserted patents, which supported the $85.23 million award at issue in Apple’s appeal. Apple had again moved for a new trial on damages, arguing that Wi-LAN’s expert had now failed to properly apportion the value of the asserted patents in light of the hundreds of other patents contained in the bundled licenses on which Wi-LAN relied. The Federal Circuit agreed with Apple on this point, found that the district court had abused its discretion in denying Apple’s motion for a new trial, and remanded for a new trial on damages consistent with its opinion.
Quanergy Systems, Inc. v. Velodyne Lidar USA, Inc., Appeal Nos. 2020-2070, -2072 (Fed. Cir. Feb. 4, 2022)
In an appeal from an IPR proceeding, the Federal Circuit affirmed that the disputed claims were not unpatentable as obvious, addressing issues of claim construction and obviousness. The patent related to a laser-based measurement system used for helping autonomous cars sense their surroundings. Concerning claim construction, the Court found that the PTAB’s claim construction was consistent with the testimony of both parties. Concerning the PTAB’s obviousness analysis, Quanergy first asserted that the claims at issue were disclosed by prior art. The Court disagreed, explaining that the Board’s findings were supported by substantial evidence and noting that both parties’ experts’ testimony supported such a conclusion. Second, Quanergy “challenge[d] the Board’s presumption of a nexus between the claimed invention and Velodyne’s evidence of unresolved long-felt need, industry praise, and commercial success.” Again, the Court affirmed, explaining that “[s]ubstantial evidence support[ed] the Board’s presumption of a nexus.” The Court further specified that “Velodyne provided ‘ample evidence’ that its commercial products ‘embod[ied] the full scope of the claimed invention, and that the claimed invention [was] not merely a subcomponent of those products.’”
In an appeal from the U.S. District Court for the Eastern District of Michigan, the Federal Circuit addressed whether the district court erred by granting a preliminary injunction in favor of plaintiff BlephEx, LLC, where, among other things, defendant Myco Industries, Inc. argued that it presented a substantial question of validity. The Federal Circuit affirmed the district court’s decision. The Federal Circuit rejected Myco’s main argument that the patent at issue—which disclosed a swab attached to an electromechanical device for eye care professionals to use to clean patients’ eyelid margins and eyelashes—was anticipated by a published patent application. Figure 2 of the Nicharmin Application showed a wand contacting a portion of the eyelid margin. Figure 3 of the Nicharmin Application showed a hand-held device with an applicator used to chafe the eyelid margin. Because neither figure showed a swab operably connected to an electromechanical device where the swab contacts a portion of the eyelid margin as required by the patent at issue, the Federal Circuit rejected Myco’s argument that Figures 2 and 3 depict the same anticipating embodiment.
In addition to Myco’s anticipation argument, the Federal Circuit also rejected Myco’s arguments that the patent at issue is invalid as obvious, that the preliminary injunction improperly upset the status quo, and that the preliminary injunction is overbroad.
Plasmacam, Inc. v. CNCElectronics, LLC, Appeal No. 2021-1689 (Fed. Cir. Feb. 3, 2022)
In an appeal from a district court order enforcing one party’s draft of a purported settlement agreement, the Federal Circuit remanded because a different draft of the agreement more accurately reflected the parties’ agreement. Plasmacam, Inc. (Plasma) sued CNCElectronics, LLC, et al. (CNC) for infringing a patent. After the parties notified the lower court that they had agreed to settle, the court ordered the parties to submit a final written settlement agreement. The parties exchanged numerous draft settlement agreements, but were unable to agree on a key term. The lower court adopted Plasma’s interpretation of the agreement. The Federal Circuit reversed, holding that Plasma’s agreement to one of the terms was conditioned on the parties agreeing on any release language, not on CNC agreeing to Plasma’s specific release language. Because the record showed a mutual agreement on release language, Plasma was deemed to have accepted CNC’s definition of a key term, such that Plasma’s release would apply to CNC’s past, present, and future products. Judge Newman dissented, pointed out that the parties agreed multiple times that they had not reached an agreement, and that nothing in the record suggested Plasma ever intended to agree to CNC’s demand for full immunity from suit for all possible new infringing CNC products. Judge Newman said there was no clear error in the lower court’s ruling.
Qualcomm Incorporated v. Apple Inc., Appeal Nos. 2020-1558, -1559 (Fed. Cir. Feb. 1, 2022)
In an appeal from an IPR proceeding, the Federal Circuit considered the role of applicant admitted prior art (AAPA). In one of the Qualcomm patents challenged by Apple, the patent specification acknowledged that a prior art reference taught most elements of the challenged claims. Apple cited this AAPA in combination with a prior art patent to argue obviousness of the challenged claims. The PTAB rejected Qualcomm’s argument that the AAPA could not be considered because is not a “patent or printed publication” under § 311(b) of the Patent Act, and found the claims unpatentably obvious. On Qualcomm’s appeal, the Federal Circuit put a finer point on the question, finding that while AAPA may be considered in an IPR, it may not provide the basis of a ground in an IPR. Based on this ruling, the Federal Circuit remanded to the Board to determine whether the AAPA impermissibly formed a basis for Apple’s IPR challenge.