December 2023 Federal Circuit Newsletter (Japanese)

Intel Wrongly Denied Opportunity to Litigate License Defense that Could Unwind $2.1 Billion Judgment

In Vlsi Technology LLC v. Intel Corporation, Appeal No. 22-1906, the Federal Circuit held that district court abused its discretion in denying motion to amend answer to assert a license defense where defense was not futile under governing law.

VLSI Technology LLC sued Intel Corporation for infringement of two patents relating to memory-voltage management and clock-speed management for microprocessors.  After trial, a jury found that Intel infringed both patents and awarded VLSI over $2.1 billion in damages.  Months before trial, however, Intel filed a motion to amend its answer to assert a defense that it acquired a license to both VLSI patents but requested that the defense be severed from the rest of the case and stayed.  Intel asserted that it had a patent license agreement with Finjan, Inc. and that Finjan had recently been acquired by Fortress, which also controlled VLSI.  Intel argued that the Intel-Finjan license covered patents owned by Finjan’s affiliates which now included VLSI due to Fortress’ acquisition of Finjan.  After the trial, the district court denied Intel’s motion to amend on the grounds that it was untimely, prejudicial to VLSI, and that the defense was futile.

Intel appealed the denial of the motion to amend.  The Federal Circuit reversed the denial, finding that the district court abused its discretion.  First, it was an abuse of discretion to find that Intel unduly delayed in filing the motion for three and a half months after the acquisition.  Intel was required under the license agreement to follow certain dispute resolution procedures, and Intel did so before filing the motion.  Second, any prejudice to VLSI could not support denial of the motion.  Intel’s motion requested that the defense be severed and stayed such that trial of other issues would not be delayed.  Finally, the license defense could not be considered futile under governing law.  The district court relied on a general rule that non-parties to a contract are not bound by that contract under Delaware law but did not consider exceptions to that rule.  Because Delaware law did not provide a definitive answer to the license defense, the Federal Circuit reversed the denial of the motion so that the defense could be fully litigated.

Intel also appealed the jury’s findings that Intel infringed the two patents and its damages awards.  The Federal Circuit affirmed infringement of one patent, reversed infringement of the other patent, leading to a reduction of $675 million in damages, and vacated the remaining $1.5 billion damages award for the infringed patent and remanded for a new trial on damages.

Federal Circuit Avoids Deciding Whether Statements to Foreign Patent Office Can Disavow U.S. Claim Scope

In K-Fee System Gmbh v. Nespresso Usa, Inc., Appeal No. 22-2042, the Federal Circuit did not need to decide whether statements to the European Patent Office (EPO) can disavow claim scope in a U.S. patent because the statements in this case were too ambiguous to constitute disavowal.

K-fee sued Nespresso for infringing three patents that claim coffee capsules with a barcode that controls a coffee machine’s functionality.  The district court construed the term “barcode” to exclude bit codes using only two binary symbols, based on K-fee’s statements to the EPO about a related European patent application.  These statements were part of the intrinsic record before the USPTO because K-fee submitted the EPO records to the examiner during U.S. prosecution.  Based on the district court’s construction, Nespresso moved for summary judgment of non-infringement, arguing that its products do not meet the barcode limitations.  The district court agreed and granted summary judgment.

The Federal Circuit reversed the district court’s construction and summary judgment.  The Federal Circuit explained that the district court’s construction ignored some of K-fee’s statements to the EPO, which undermined the alleged disavowal of bit codes.  Even if statements to the EPO could limit U.S. claim scope, K-fee did not act with the clarity required to either prescribe a new meaning to the term “barcode” or disclaim any portion of the apparent meaning of “barcode.”