Latest Federal Court Cases - October 2020 #4

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TecSec, Inc. v. Adobe, Inc., Appeal Nos. 2019-2192, -2258 (Fed. Cir. Oct. 23, 2020)

In our Case of the Week, the Federal Circuit issued a wide-ranging opinion following three previous appeals in the same case and a jury trial on remand.

The patents concern security over digital objects in documents. The claims are method claims. TecSec sued a number of companies, including IBM and Adobe, for inducing infringement of the claims by customers who use the software. In the case of Adobe, the accusations concerned its actions involving .pdf documents. The district court stayed the action against all defendants other than IBM. On March 3, 2011, the court construed several claim terms, including “multimedia” and then granted summary judgment of noninfringement in favor of IBM. The Federal Circuit affirmed, without reaching the claim construction issue.

The case then proceeded against Adobe and other defendants. The parties stipulated that Adobe did not infringe under the court’s claim construction, and the court entered a judgment of noninfringement for Adobe. TecSec then appealed, and the Federal Circuit reversed that claim construction. Sixteen days later, in October 2018, the patents expired.

On remand, Adobe then moved for summary judgment of noninfringement, which was granted. That triggered a third appeal, and the Federal Circuit reversed again.

Back at the district court a fourth time, the case eventually went to trial. In advance of trial, Adobe stipulated to a single instance of direct infringement by one of its employees using Adobe’s software. Adobe moved for a motion in limine to preclude TecSec from raising any allegation of induced infringement or willful infringement between March 2011 and October 2013-the period of time during which the patent claims had been construed in a way that precluded any finding of infringement. By Adobe’s logic, it could not have had the requisite intent to satisfy a claim of induced infringement or willfulness if it had been under a reasonable belief, based on a court claim construction, that its products did not infringe. The district court ultimately precluded “any reference” to Adobe’s post-March 2011 conduct. The district court held that Adobe could not have had the requisite intent as a matter of law. Second, the district court held that if it were to allow induced infringement to go to the jury for that period of time, it would have had to allow the court’s prior claim construction and noninfringement decisions to go before the jury as well. It held that admitting these documents would be highly prejudicial to TecSec and would confuse the jury.

At trial, TecSec stipulated to a failure to mark its products with the patent, thus precluding any claim of damages prior to 2010. Trial was limited to direct infringement from 2010-2013, induced infringement from 2010 to March 2011, invalidity, and damages. The jury found no induced infringement, but awarded damages of $1.75 million for direct infringement.

Following post-trial motions, the district court reduced the damages award to zero dollars. The district court held that the damages evidence at trial was relevant only to an induced infringement analysis, and that no evidence had been supplied concerning direct infringement by Adobe. TecSec appealed both the decision concerning the decision to preclude its induced infringement claim from 2011-2013 and also the district court’s reduction of its damages award.

Induced Infringement and Willfulness

The Federal Circuit reversed on the district court’s decision to strike the induced infringement claim between 2011 and 2013. The Court held that, while induced infringement requires intent, which could be overcome based on a prior court decision, that does not foreclose a trial on the issue. Intent is a fact issue, and is for the jury to decide. Relying on Cheek v. United States, 498 U.S. 192 (1991), a taxpayer case, the Court held that “the jury had to be permitted to decide” the subjective question of intent—what the defendant believed “was not answered as a matter of law even by the objective unreasonableness of that belief.” Because Adobe had failed to produce any evidence of its subjective intent on which a summary judgment determination could have been drawn, it was improper to strike this entire theory from the trial.

The Court noted that motions in limine are appropriate for excluding evidence. But that is entirely different from striking an entire theory of liability. In terms of the prejudice argument for keeping out the theory of liability, the Federal Circuit put it back on the district court to avoid the prejudice and jury confusion issues the district court cited, through jury instructions or otherwise.

The Court remanded for further proceedings on the issue of induced infringement.

Damages

The Federal Circuit affirmed the district court’s damages award, though with a remand on the induced infringement claim, the damages issue will need to be revisited. With a stipulation of direct infringement, TecSec argued that Section 284 entitled it to a non-zero royalty. The Federal Circuit has held as much before. But here, the Court held that there was zero evidence in the record to support any royalty amount, and therefore a zero dollar award was appropriate.

Other Issues

In its 31-page ruling, the Court also addressed issues concerning jury instructions, evidence issues, and issued a lengthy opinion finding the patents not ineligible under Section 101.

The opinion can be found here.

By: Nika F. Aldrich

ALSO THIS WEEK

American Axle & Manufacturing, Inc. v. Neapco Holdings LLC, Appeal No. 2018-1763 (Fed. Cir. 2020)

In this precedential Order, the Federal Circuit denied a stay of its mandate, pending the filing of a certiorari petition, from its controversial decision finding claims directed to a method of manufacturing driveline shafts patent-ineligible under 35 U.S.C. § 101. The Court agreed that patentee American Axle had shown the required reasonable probability that certiorari would be granted, as well as a fair prospect that its judgment would be reversed by the Supreme Court. However, the Court found that American Axle failed to show a likelihood of irreparable harm resulting from denial of a stay, as even substantial and potentially unrecoupable continued litigation expenses were not irreparable injury, and that this ground alone warranted denial. Judge Moore, who filed vigorous dissents in the underlying opinions, concurred in the decision, arguing that certiorari should be granted but agreeing that the mandate should not be stayed pending that determination. Our previous write-ups of the original decision and decision on panel rehearing can be found here and here.

The opinion can be found here.

By: Jason A. Wrublesk

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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