Harris Brumfield v. IBG LLC, Appeal No. 2022-1630 (Fed. Cir. Mar. 27, 2024)
In our case of the week, the Federal Circuit addressed three issues in a dispute that dates back to 2010, and has been to the Court on three other occasions. The case was originally filed by Trading Technologies International, Inc. (“TT”), which sued IBG in relation to four related patents directed to graphical user interfaces used by commodity traders. The case proceeded to trial, at which TT won an award of approximately $7 million. Along the way, however, two of its patents were found invalid under Section 101, one of its damages opinions was held inadmissible at trial, and the district court denied a new trial motion. TT’s successor appealed those three decisions. (IBG did not appeal the verdict against it.)
The most significant of the Court’s opinions concerned the expert’s effort to attach damages in the form of a reasonable royalty to overseas customers’ use of accused software. That opinion, encompassing more than 20 pages of the Court’s 47-page opinion, cited extensively to the Supreme Court’s decision in WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407 (2018), which we wrote about here. We discuss that analysis first.
Extraterritorial Damages
TT’s expert sought a reasonable royalty from IBG’s “making” the accused products in the United States, even though they were used by customers overseas.
Under the WesternGeco framework, “which starts with a presumption that a statute lacks extraterritorial reach, a court ordinarily asks, first, ‘whether the presumption against extraterritoriality has been rebutted’ (by clear enough congressional action) and, second (if the presumption has not been rebutted), ‘whether the case involves a domestic application of the statute’ (rather than an extraterritorial application).”
The Court came to several conclusions in interpreting and applying WesternGeco. Importantly, the Court addressed whether WesternGeco’s analysis applied beyond the facts of WesternGeco, where lost profits were sought rather than a reasonable royalty, and where the act of infringement was brought under Section 271(f) rather than the “making” clause in Section 271(a). The district court found that WesternGeco did not apply under these circumstances, and instead applied the more restrictive analysis articulated in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., 711 F.3d 1348, 1370–71 (Fed. Cir. 2013). The Court held that the district court had erred in applying Power Integrations, but ultimately affirmed the decision to exclude the expert’s analysis under the WesternGeco framework.
The Court first considered the difference between lost profits and a reasonable royalty:
“An award of lost profits generally depends on showing the existence and magnitude of profits lost to the patentee on sales the patentee did not make, or made at lower prices, as a result, under proper causation standards, of the infringement. . . . The reasonable royalty theory of damages, however, seeks to compensate the patentee not for lost sales caused by the infringement, but for its lost opportunity to obtain a reasonable royalty that the infringer would have been willing to pay if it had been barred from infringing.” But “the royalty due for patent infringement should be the value of what was taken—the value of the use of the patented technology.” (Citations omitted, original emphasis.)
Ultimately, the Court concluded that:
“Those principles point to a minimum requirement for a patentee seeking reasonable-royalty damages based on foreign conduct that is not independently infringing. Under the foregoing principles, the hypothetical negotiation must turn on the amount the hypothetical infringer would agree to pay to be permitted to engage in the domestic acts constituting ‘the infringement.’ . . .. If the patentee seeks to increase that amount by pointing to foreign conduct that is not itself infringing, the patentee must, at the least, show why that foreign conduct increases the value of the domestic infringement itself—because, e.g., the domestic infringement enables and is needed to enable otherwise-unavailable profits from conduct abroad—while respecting the apportionment limit that excludes values beyond that of practicing the patent. This kind of causal connection, framed in terms of the agreement-to-pay aspect of a hypothetical negotiation, is a necessary beginning . . . for a foreign-conduct analysis in a reasonable-royalty case.”
The Court also provided a lengthy analysis on the proximate cause requirement applicable to foreign damages under the WesternGeco framework.
Applying those principles to the facts of this case, the Court held that TT was not entitled to a reasonable royalty for overseas uses. The patent claims at issue were method claims and “computer readable medium” (CRM) claims. The “making” act of infringement simply does not reasonably apply to the method claims, and in relation to the CRM claims, TT had failed to establish where the actual computer readable media were manufactured. Instead, it focused on where the software was developed. The Federal Circuit considered this and held as follows:
“The Supreme Court has recognized the important distinction between software and a particular copy of it on a CRM, as just noted. . . . Even if the BookTrader software as such could be claimed . . . the software itself is not claimed in the ’304 and ’132 patent claims at issue. Thus, Ms. Lawton’s proposal is legally insufficient, even under the WesternGeco framework, for the simple reason that, though it claims a ‘making,’ it does not start from an act of ‘infringement’— making a claimed CRM (or method)—in asserting the required causal connection to the foreign conduct for which the proposal seeks royalty damages.”
But the Court went a step further and suggested that TT’s expert’s analysis would have failed anyway under the causation requirement in WesternGeco. Although that analysis might be regarded as dicta, it spans several pages, and would be highly recommended reading for any practitioners who seek extraterritorial damages.
Patent Eligibility
The Court first addressed the district court’s finding that two of the patents were invalid as directed to abstract ideas. On two other occasions, the Court had issued precedential opinions concerning other patents in the same patent family, finding them invalid as abstract ideas. The Court affirmed here because it saw “no material distinction between those cases and this one.” For more on those prior opinions, we recommend our write-ups of those opinions here and here.
TT argued that the Federal Circuit should adopt the reasoning of yet a third appeal the Court had previously decided concerning TT’s patent claims. See Trading Technologies International, Inc. v. CQG, Inc., 675 F. App’x 1001, 1006 (Fed. Cir. 2017). But the Court found CQG irrelevant. Not only was it a non-precedential opinion, but it concerned narrower claims that provided “a specific solution to [a] then-existing technological problem.” In contrast, the claims at issue here were broader, and thus did not provide a “specific solution.”
TT also relied on yet a fourth appeal directed to these patents: IBG LLC v. Trading Technologies International, Inc., 757 F. App’x 1004 (Fed. Cir. 2019). But that case was also non-precedential. Moreover, it was about whether the claims were subject to Covered Business Method (CBM) review, not whether they might be invalid as abstract ideas.
Alleged Discovery Deficiencies
TT also argued that discovery deficiencies warranted a new trial. The Federal Circuit did not find any abuse of discretion in the district court’s assessment of the relevant facts concerning the alleged discovery deficiency.
In the end, the Court affirmed the district court’s decisions in their entirety.
The opinion can be found here.
By Nika Aldrich
ALSO THIS WEEK
Virtek Vision International ULC v. Assembly Guidance Systems, Inc., Appeal Nos. 2022-1998, -2022 (Fed. Cir. Mar. 27, 2024)
In a brief precedential decision, the Federal Circuit reversed in part and affirmed in part a PTAB decision that had invalidated some claims, and upheld others, with regard to Virtek’s US Patent No. 10,052,734. Virtek appealed the decision of the unpatentable claims, arguing a lack of substantial evidence for the obviousness conclusion. Petitioner Aligned Vision cross-appealed on the claims found not unpatentable. The Federal Circuit reversed the PTAB’s obviousness findings but affirmed on the cross-appeal, such that all claims ultimately survived the challenge.
The ’734 patent is directed to a laser projector calibration system that uses a two-part alignment method to improve the speed and efficiency of the laser calibration system., with claim elements including “identifying a pattern of the reflective targets on the work surface in a three dimensional coordinate system.” For the set of challenged claims found to be obvious over the prior art, Virtek argued on appeal there was insufficient evidence that a skilled artisan would have been motivated to combine Aligned’s asserted references. The Federal Circuit agreed.
Here, Aligned Vision had not included any reasons in their petition for why a skilled artisan would have made the asserted element substitutions and combinations to arrive at the invention claimed in the ’734 patent. The Federal Circuit noted that while the Supreme Court in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) had described certain circumstances under which a motivation to combine elements would be evident—e.g., when there is a design need, market pressure, or a finite number of identified, predictable solutions—none of these circumstances were present in this case. As the Court explained, “KSR did not do away with the requirement that there must exist a motivation to combine various prior art references in order for a skilled artisan to make the claimed invention.” Therefore, the Federal Circuit concluded there was not sufficient evidence to support the finding of unpatentability for obviousness on this set of challenged claims, and reversed the PTAB’s decision on those claims.
For the set of claims the PTAB found not unpatentable, the Federal Circuit affirmed the PTAB’s conclusion that they had not been shown to be unpatentable.
The opinion can be found here.
By Ann Bernert
Inline Plastics Corp. v. Lacerta Group, LLC, Appeal Nos. 2022-1954, -2295 (Fed. Cir. Mar. 27, 2024)
In this appeal from the United States District Court for the District of Massachusetts, the Federal Circuit addressed a number of trial-related issues raised in Inline Plastics Corp’s (“Inline”) appeal, including (1) whether the district court had erred in denying Inline’s motion for judgment as a matter of law of no invalidity; and (2) whether the district court had given incorrect jury instructions as to the objective indicia of nonobviousness. The Federal Circuit rejected Inline’s argument that the district court erred in denying its motion for judgment as a matter of law as to no invalidity, but found the district court’s jury instructions to be in error and not harmless. Particularly, the instructions mentioned only the objective indicia of commercial success and long-felt need, not other objective indicia for which there was evidence. Lacerta Group, LLC filed a cross appeal, but the Federal Circuit found the issues raised in the cross appeal were not ripe for determination in light of the Court’s decision to vacate the district court’s judgment and remand for a new trial.
The opinion can be found here.
By Mario E. Delegato
Edwards Lifesciences Corporation v. Meril Life Sciences Pvt. Ltd., Appeal No. 2022-1877 (Fed. Cir. Mar. 25, 2024)
In this case, the Federal Circuit re-affirmed its broad interpretation of the regulatory “safe harbor” provided in 35 U.S.C. 271(e)(1), over a vigorous dissenting opinion by Judge Lourie. The case concerned appellee Meril’s importation of two prototypes of an allegedly infringing heart valve system for demonstration at a research symposium, although the devices ended up staying locked in baggage or storage for the duration of their stay in the United States. A majority of the Federal Circuit panel affirmed the district court’s grant of summary judgment for Meril that the importation fell within the safe harbor.
Section 271(e)(1) provides that it is not patent infringement “to sell, or sell within the United States or import into the United States a patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs . . . .” Here, the panel found that the lower court had properly applied its precedent stemming from AbTox, Inc. v. Exitron Corp., 122 F.3d 1019 (Fed. Cir. 1997), to the effect that an alleged infringer’s “intent or alternative purposes” are “irrelevant” to application of § 271(e)(1), “as long as the use is reasonably related to FDA approval.” Although there was evidence that Meril had intended some non-U.S. marketing activity at the symposium, it was undisputed that no sales or offers for sales occurred, and also that Meril’s representatives interacted with potential clinical investigators for purposes of supporting an FDA submission for the devices. Because the importation was thus “reasonably related” to generating information for regulatory approval, the majority affirmed the district court’s grant of summary judgment for Meril.
Judge Lourie entered a pointed dissent, writing that the majority—along with AbTox and its progeny—had “incorrectly given short shrift to the word ‘solely’ in the statute.” He argued the Court’s precedent had strayed from the plain language of the safe harbor statute, and that an accused infringer’s intent and possible alternative purposes were critical to determining whether a given act was “solely” for purposes reasonably relating to approval. Judge Lourie opined that in this case, Edwards had presented a material factual dispute as to that question, and that he would not have affirmed the grant of summary judgment.
The opinion can be found here.
By Jason A. Wrubleski
