ANDREW J. GUILFORD, District Judge.
Defendant Universal Remote Control, Inc. ("Defendant") moves for summary judgment on seven separate issues. Plaintiff Universal Electronics, Inc. ("Plaintiff") opposes the Motion. The Motion is GRANTED IN PART and DENIED IN PART.
Plaintiff and Defendant are competitors in the universal remote control business.
Summary judgment is appropriate where the record, read in the light most favorable to the non-moving party, shows that "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Material facts are those necessary to the proof or defense of a claim, as determined by reference to substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. In deciding a motion for summary judgment, "[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 269, 106 S.Ct. 2505.
The burden initially is on the moving party to show an absence of a genuine issue of material fact or to demonstrate that the nonmoving party will be unable to make a sufficient showing on an essential element of its case for which it has the burden of proof. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Only if the moving party meets its burden must the non-moving party produce evidence to rebut the moving party's claim and create a genuine issue of material fact. Id. at 322-23, 106 S.Ct. 2548. If the non-moving party meets this burden, then the motion will be denied. Nissan Fire & Marine Ins. Co. v. Fritz Co., Inc., 210 F.3d 1099, 1103 (9th Cir.2000).
The legal standards applicable to each issue on which Defendant seeks summary judgment will be discussed in the appropriate portion of the Analysis section.
Defendant argues that Plaintiff knew of Defendant's alleged infringement of the '067 Patent and '426 Patent for over a decade before filing this action. (Mot. 3.) Defendant also argues that it has an implied license to the '426 Patent because (1) Plaintiff licensed U.S. Patent No. 5,959,751 ("'751 Patent") to Defendant and (2) Defendant cannot practice the '751 Patent without practicing the '426 Patent because the patents claim the same subject matter. (Mot. 3-4.) Plaintiff responds that the lawsuit it filed against Defendant in 2000 ("2000 Litigation") involved claims 1 and 4 of the '426 Patent, but not claims 2 and 3 of that patent, which are the claims at issue in this case. (Opp'n 2.) In the 2000 Litigation, Plaintiff dismissed its claim for infringement of the '426 Patent in 2002, and then in 2004, the parties entered into a
"As equitable defenses, laches and equitable estoppel are matters committed to the sound discretion of the trial judge," reviewed for abuse of discretion. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1028 (Fed.Cir.1992) (en banc). "[L]aches may be defined as the neglect or delay in bringing suit to remedy an alleged wrong, which taken together with lapse of time and other circumstances, causes prejudice to the adverse party and operates as an equitable bar." Id. at 1028-29. Laches may operate to bar damages otherwise within the six year recovery period provided by 35 U.S.C. § 286. Id. at 1030.
Id. at 1032. "Such prejudice may be either economic or evidentiary." Id. at 1033. "Evidentiary, or `defense' prejudice, may arise by reason of a defendant's inability to present a full and fair defense on the merits due to the loss of records, the death of a witness, or the unreliability of memories of long past events, thereby undermining the court's ability to judge the facts." Id. Economic prejudice may arise where there is a "change in the economic position of the alleged infringer during the period of delay." Id. "[E]conomic prejudice is not a simple concept but rather is likely to be a slippery issue to resolve." Id. "A court must also consider and weigh any justification offered by the plaintiff for its delay." Id. (providing non-exhaustive list of justifications).
"A patentee may also defeat a laches defense if the infringer has engaged in particularly egregious conduct which would change the equities significantly in plaintiff's favor." Id. (internal citations and quotations omitted). "Conscious copying may be such a factor weighing against the defendant, whereas ignorance or a good faith belief in the merits of a defense may tilt matters in its favor." Id. In patent cases, there is a presumption of laches where the patentee delayed filing suit for more than six years after actual or constructive knowledge of the infringement. Id. at 1035-36. Laches must be shown by a preponderance of the evidence. Id. at 1045.
Defendant argues that although the '067 Patent was specifically referenced in the 2004 license as a "UEI Related Patent" that potentially could be the subject of an infringement action in the future, and although Plaintiff had full knowledge of Defendant's product line, Plaintiff delayed suing for infringement of the '067 Patent. Plaintiff filed suit in March 2012, more than seven years after the 2004 license and
Defendant's quotation ends at page 448, line 9 of the deposition, but lines 10-22 undercut the idea that Plaintiff knew of Defendant's activities that might infringe the '067 Patent "for years" before filing this action. Specifically, the following question and answer revealed that the only time the deponent could recall Plaintiff "investigating what URC was doing" "as part if its ... due diligence and in trying to position itself as well as possible" in competitive business processes was in 2010, when Defendant was promoting a feature called "Quick Step" or "Quick Set." (Sept. 12, 2013 Hayes Dep. 448:10-22, Rowland Decl. Ex. 81.)
Defendant also argues that Plaintiff had constructive notice because Defendant's sale of millions of remote control devices and website describing many of the accused products rendered the allegedly infringing activity "sufficiently prevalent in the inventor's field of endeavor." (Mot. 8 (quoting Wanlass v. Gen. Elec. Co., 148 F.3d 1334, 1338 (Fed.Cir.1998) ("[T]he law is well settled that where the question of laches is in issue the plaintiff is chargeable with such knowledge as he might have obtained upon inquiry, provided the facts already known by him were such as to put upon a man of ordinary intelligence the duty of inquiry.")).) While Plaintiff has narrowed its infringement contentions by dropping its claims against Defendant's earlier products, Defendant argues that the withdrawal of infringement contentions against earlier products cannot "unring the bell" as to laches. (Mot. 9 (citing St. Clair Intellectual Prop. Consultants, Inc. v. Acer, Inc., 961 F.Supp.2d 610, 614-15 (D.Del.2013)).) Therefore, Defendant argues, Plaintiff's delay of nearly ten years on the '426 Patent and over seven years on the '067 Patent triggers a presumption of laches. (Mot. 9-10.)
Defendant argues that Plaintiff cannot rebut the presumption that its delay was inexcusable because Plaintiff's proposed excuses are that (1) it "conducted little or no analyses of [Defendant's] products as to avoid disrupting the parties' [2004 License] agreement" (Mot. 10 (quoting Plaintiff's Response to Interrogatory No. 2, Rowland Decl. Ex. 24), and (2) the '067 Patent was being reexamined from 2006-2011 (Mot. 11 (citing Response to Interrogatory No. 24, Rowland Decl. Ex. 26 (the Court was unable to locate any reference to a reexamination in that Interrogatory response-perhaps the relevant portion of the response was not submitted in the exhibit)).)) As to the first excuse, Defendant argues that turning a blind eye to infringement is the opposite of diligence, and as to the second excuse, Defendant argues that Plaintiff provided it no notice of the reexamination or Plaintiff's eventual intent to sue after its conclusion. (Mot. 10-11.)
Plaintiff responds that its delay was reasonable because after settling the 2000 Litigation in 2004 through a license, Plaintiff proceeded with its business believing that Defendant "was operating in accordance with its license agreement, and building product using the license[d] technologies as intended under the settlement agreement." (Opp'n 3 (quoting Sept. 12, 2013 Hayes Dep. 423-24, Decl. of Brian
Plaintiff argues that it is not asserting infringement in this case against any products identified in its October 1997 notice letter, which was the prelude to the 2000 Litigation. (Opp'n 3.) It argues that none of the accused remotes in the 2000 Litigation included the "rotating favorite channel macro" feature found in the currently accused products, and that Defendant first introduced that feature in 2007. (Opp'n 3.) It argues that the rotating favorite channel macro (1) is required for infringement of claims 2 and 3 of the '426 Patent, which were not asserted in the 2000 Litigation, (2) require more structure than claim 1 of the '426 Patent, and (3) were invented five years later than claim 1 of the '426 Patent. (Opp'n 3-4 (citing claim chart from 2000 Litigation 89-90, Rowland Decl. Ex. 9, Sept. 17, 2013 Deposition of Chang K. Park 454-456, Haan Decl. Ex 10).) The distinction between the various claims of the '426 Patent is discussed further in Section 1.3, in the context of analyzing whether Defendant has an implied license to the '426 Patent.
Defendant responds that Plaintiff originally accused pre-2006 products in this suit, and that its withdrawal of those products from the lawsuit in September 2013 cannot solve the laches problem. (Reply 2 (citing St. Clair Intellectual Prop. Consultants, Inc. v. Acer, Inc., 961 F.Supp.2d 610 (D.Del.2013)).) But in St. Clair, the court held that the plaintiff's narrowing of its infringement contentions did not avoid laches where the narrowing was not based on any information unavailable before the beginning of the laches period, and that the "record does not contain evidence from which a reasonable factfinder could conclude that changes were made to the accused products which would trigger a new laches period." St. Clair, 961 F.Supp.2d at 617. Here, there are such disputes, and allegations that there were product changes during the laches period.
Plaintiff argues that once it became aware of Defendant's infringement in 2010, it promptly conducted an investigation and sent notice letters in March 2010 and May 2011, and then filed suit in early 2012. (Opp'n 8 (citing notice letters, Rowland Decl. Exs. 18 and 20).)
Defendant has not shown an absence of genuine dispute that Plaintiff knew, or in the exercise of reasonable diligence, should have known before 2010 that Defendant was selling products that utilized Plaintiff's patents beyond those that Defendant licensed in 2004. That is particularly so since Defendant could have taken, but chose not to take, a license to either the '426 or '067 Patent in 2004. Plaintiff's evidence, which must be credited on summary judgment, shows that it believed that Defendant was operating within the parameters of the license. See Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 774 (Fed.Cir.1995) (holding that patentee's testimony of his belief that the defendant would comply with a 1979 agreement supported the reasonable inference that patentee had no reason to sue until at least 1986, when patentee saw evidence of infringement). Nor has Defendant shown the absence of a genuine dispute concerning whether the delay between Plaintiff's 2010 discovery of the infringement and the 2012 suit was unreasonable.
Given the Court's determination in Section 1.1.2, the Court need not evaluate prejudice, but does so in the interest of completeness. As to economic prejudice, Defendant argues that it was "lulled ... into a false sense of security." (Mot. 12, 14.) But Defendant does not show what it would have done differently. As to evidentiary prejudice, Defendant argues that evidence relating to Plaintiff's petitioning the PTO to add a Mr. Darbee as a named inventor on the '426 Patent has been lost. (Mot. 11-12.) Plaintiff petitioned for correction ten years after Plaintiff stated its intention to do so, and Darbee's death in September 2013 makes him unavailable for trial. (Mot. 11-12.) Further, Defendant argues that the memories of witnesses concerning the invention of a patent filed in 1992 will have faded, and notes Plaintiffs position that Plaintiff's emails generated before 2006 were not reasonably accessible. (Mot. 11-12 (citing October 2013 discovery correspondence, Rowland Decl. Ex. 62).) Defendant also contends that it has suffered economic prejudice from the loss of investment and claims for damages which could have been avoided if Plaintiff had filed suit within a reasonable period of time. (Mot. 12.)
Plaintiff responds that Darbee's death does not prejudice Defendant because Defendant took Darbee's full-day deposition on September 16, 2013, and Defendant has not specified any fact that could have been proved by Darby's trial testimony. (Opp'n 10.) Plaintiff further argues that Defendant did not depose two co-inventors of the '426 Patent, O'Donnell and Luo, and failed to pursue the depositions of patent attorneys after serving subpoenas on them. (Opp'n 10 (citing subpoenas, Haan Decl. Ex. 20).) Plaintiff points out that it offered to share the cost of trying to restore its pre-2006 emails for production, but Defendant declined. (Opp'n 10 (citing discovery correspondence, Rowland Decl. Ex. 62) (any offer by Plaintiff to share in the cost of restoration does not seem to appear in this particular correspondence chain)). And Plaintiff correctly points out that Defendant's assertion of economic prejudice is conclusory, as Defendant presents no evidence that it would have acted differently had suit been brought earlier. (Opp'n 10-11.)
The testimony of unavailable trial witnesses is commonly presented by deposition. Defendant can so present Darbee's testimony, and has not specifically shown that the passage of time has otherwise caused it evidentiary prejudice. For example, it appears that Defendant has not obtained the available testimony of other co-inventors. As to the unavailable pre-2006 email, the estimated cost of restoration was $30,000. (Sept. 25, 2013 discovery correspondence, Rowland Decl. Ex. 62.)
While not a trivial amount, $30,000 is not outsized in the context of patent litigation e-discovery or the amount at issue here. Defendant's decision not to incur the cost shows that Defendant itself believed that the expected value of the information, in terms of supporting Defendant's positions, was less than $30,000 — or if higher, that it was less than the expected value of using the uncertainty about what might have been obtained as an argument in favor of laches. (See Oct. 2, 2013 discovery correspondence, Rowland Decl. Ex. 62 (Defendant declines to proceed with the email restoration, and instead "stand[s] by its position that the unavailability of this important discovery constitutes substantial evidentiary prejudice to [Defendant]'s defense of this suit.").)
The Court finds that Defendant has not shown the absence of a genuine issue concerning prejudice from the delay.
Equitable estoppel is a defense addressed to the sound discretion of the district court. A.C. Aukerman, 960 F.2d at 1041. "Where there has been contact or a relationship between the parties during the delay period which may give rise to an inference that the plaintiff has abandoned its claim against the defendant, the facts may lend themselves to analysis under principles of equitable estoppel," which is a defense that "focuses on what the defendant has been led to reasonably believe from the plaintiff's conduct." Id. at 1034.
Id. at 1041 (quoting Remedies § 2.3, at 42). In a patent case, the misleading message conveyed by words or silence is that the patentee did not intend to press an infringement claim. Id. at 1042. "In the most common situation, the patentee specifically objects to the activities currently asserted as infringement in the suit and then does not follow up for years." Id. To satisfy the reliance element, the accused infringer must show that it substantially relied on the patentee's misleading conduct in taking some action. Id. at 1042-43. The harm element can be shown through a change of economic position or loss of evidence. Id. at 1043. Finally, the court must consider any other facts bearing on the equities of the parties. Id.
While equitable estoppel may be determined on summary judgment, the inference that the patentee's conduct communicated that the patentee was not going to enforce the patent "must be the only possible inference from the evidence." Id. at 1043-44. Equitable estoppel must be shown by a preponderance of the evidence. Id. at 1045.
Defendant argues that Plaintiff's 2002 dismissal of the '426 Patent with prejudice from the 2000 Litigation constituted a misleading communication that Plaintiff did not intend to sue for infringement of that patent. (Mot. 13.) After being confronted with potentially invalidating prior art in the 2000 Litigation, Plaintiff responded that it could overcome the prior art by adding Darbee as an inventor. (Mot. 13.) But instead of doing so, Plaintiff dismissed the '426 Patent from the case, leading Defendant to believe that Plaintiff could not add Darbee as an inventor and that Plaintiff recognized the invalidity of the claims without Darbee's co-inventorship. (Mot. 13.) Plaintiff disputes that those circumstances communicated its intention not to assert the '426 Patent, particularly because Defendant was not aware that Plaintiff did not petition to correct inventorship (which Plaintiff finally did in 2012, 10 years after the issue arose). (Opp'n 12.)
Plaintiff's actions and inaction communicated that it did not intend to assert the '426 Patent. Plaintiff acknowledged the merit of the invalidity argument Defendant raised in the 2000 Litigation, but stated that it could be overcome by adding Darbee as an inventor. Instead of doing so, Plaintiff dismissed the patent from the case, which reasonably gave rise to the inference that it was unable to add Darbee as an inventor. Further, in resolving the
Defendant also argues that because the licensed '751 Patent covers the same subject matter as the '426 Patent, it believed that Plaintiff would not assert the '426 Patent. (Mot. 13.) That argument is better considered in evaluating Defendant's implied license defense, which the Court does in Section 1.3.
As to reliance, Defendant argues that it relied on these misleading communications by continuing to invest in, and by selling millions of, remote controls that included the accused rotating channel feature. (Mot. 14.) Plaintiff responds that Defendant's CEO testified that Defendant always believed that the '426 Patent was invalid and so would not have done anything differently even if Plaintiff sued in 2006. (Opp'n 11.) Plaintiff provides no evidentiary citation for that assertion, but may have intended to cite to the September 17, 2013 Deposition of Chang K. Park, which includes the following exchange:
(Haan Decl. Ex. 10 244). While this exchange might suggest a lack of reliance, it does not address the fact that the '426 Patent expired on May 9, 2012, only two years after Plaintiff's notice letter, and only two months after the Complaint. If it was reasonable for Plaintiff to delay filing suit for two years, then it may have been reasonable for Defendant to take the same amount of time to act on the issue, and by that time, the '426 Patent had expired. As such, Park's deposition testimony does not demonstrate lack of reliance. But neither has Defendant come forward with actual facts demonstrating reliance, as is its burden. It instead relied on the notion that it would have done something differently, but has not explained precisely, or submitted evidence showing, what course of action it would have taken. Defendant has therefore not demonstrated the absence of a genuine issue of material fact concerning its affirmative defense of equitable estoppel.
"Legal estoppel refers to a narrow[] category of conduct encompassing scenarios where a patentee has licensed or
389 F.2d 448, 451 (Ct.Cl.1968). Picking up that strain many years later, the Federal Circuit in TransCore expanded the doctrine, holding that whether the later-acquired patent existed before the licensed patent was a distinction without a difference, and that an implied license arose when the asserted patent was broader than, and thus necessary to practice, the licensed patent. 563 F.3d at 1279. Because the non-licensed patent in Trans-Core was "broader than, and necessary to practice" the licensed patent, the court concluded that the patentee was legally estopped from asserting it, and had granted an implied license. Id. That was so even though the license stated that it did not apply to any other patents to be issued in the future, because while that language was generally operative, it did not permit the patentee to derogate from the rights it expressly granted. Id.
Two years later, the Federal Circuit expanded the doctrine again. Gen. Protecht Grp., Inc. v. Leviton Mfg. Co., Inc., 651 F.3d 1355 (Fed.Cir.2011). In General Protecht, the patentee argued that the doctrine did not apply because at least some claims of its continuation patents were narrower than the previously asserted claims, so denying an implied license would not derogate from the right to practice the licensed claims. Id. at 1361. The patentee pointed to specific limitations in the asserted patents that did not appear in the licensed claims. Id. The Federal Circuit rejected the patentee's argument, finding that the continuation patents were based on the same disclosure as the licensed patents, and by definition, could not claim any invention not already supported in the earlier issued patents. Id. General Protecht thus expanded TransCore by holding that the relative breadth of the patents was not controlling, and that narrower claims could be subject to the implied license, at least where the patents share the same disclosure. 651 F.3d at 1362.
General Protecht's focus on the patents' disclosure, rather than their claims, is somewhat anomalous given the law, stated in the case upon which General Protecht relies, that "the grant of a patent does not provide the patentee with an affirmative right to practice the patent but merely the right to exclude," TransCore, 563 F.3d at 1275, coupled with the "`bedrock principle' of patent law that `the claims of a patent define the invention to which the patentee is entitled the right to exclude.'" Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir.2005) (quoting Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed.Cir.2004)). Also curious is General Protecht's conclusion that it "reasonably follows" from Trans-Core that where "continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations
Finally, General Protecht stated that it was merely articulating an interpretive presumption that "parties are free to contract around." Id. Yet, it held unavailing the provisions of the license expressly preserving the patentee's "right to sue on related patents," although it did not quote those provisions or discuss them in detail. Id. While not outcome determinative here, General Protecht may have implications for the Federal Circuit's concern for "predictability in the resolution of patent disputes," Lighting Ballast Control LLC v. Philips Electronics N. Am. Corp., 744 F.3d 1272 (Fed.Cir.2014), and predictability in patent licensing.
Defendant argues that by licensing the '751 Patent in the 2004 License, it received an implied license to the '426 Patent. (Mot. 14.) Both patents share a common ancestor application, No. 07/586,957, filed in 1990 ("'957 Application"), which is a continuation of the application that resulted in U.S. Patent No. 4,959,810 to Darbee ("'810 Patent"). The application resulting in the '426 Patent was filed as a continuation-in-part of the '957 Application in 1992, meaning that it contained a portion or all of the disclosure of the '957 Application/'810 Patent together with added matter not present in the those documents. PowerOasis, Inc. v. T-Mobile USA, Inc., 522 F.3d 1299, 1304, n. 3 (Fed.Cir.2008). The application resulting in the '751 Patent was filed in 1997 as part of a chain of continuation and divisional applications of the '957 Application, meaning that its disclosure contains no new matter absent from the '957 Application or '810 Patent. Id.; Pfizer, Inc. v. Teva Pharm. USA, Inc., 518 F.3d 1353, 1359 (Fed.Cir.2008).
The 2004 License specifically licenses only the "UEI Patents-In-Suit," defined as a list of four patents that included the '751 Patent, but did not include the '426 Patent. (Rowland Decl. Ex. 16 ¶ 1.7.) The 2004 License specifically excludes the "UEI Related Patents," defined as "any patent or patents that are based on a continuation or divisional application of the UEI Patents-in-suit ... including but not limited to U.S. Patent Nos. 6,587,067 and 6,496,135." (Rowland Decl. Ex. 16 ¶ 1.8.) The '426 Patent undisputably falls into that category, although listing it might have simplified the issues to be addressed here. Because the '426 Patent was not expressly licensed in the 2004 License, we must examine whether asserting it would allow Plaintiff to "derogate from the rights it has expressly granted." TransCore, 563 F.3d at 1279.
Defendant argues that Plaintiff's assertion of the '426 Patent derogates from its rights under the 2004 License because Defendant cannot practice the '426 Patent without also practicing the '751 Patent. (Mot. 15.) Under TransCore, that argument would be backwards: Defendant
As would be expected due to their partially shared disclosure, there are some similarities between the '751 and '426 Patents. Contrary to Plaintiff's arguments, the similarity extends to claim 1 of the '426 Patent and claim 7 of the '751 Patent. Plaintiff's expert, Burke, presents a comparison of the language of those claims, pointing out that claim 1 of the '426 Patent is narrower than claim. 7 of the '751 Patent. (Decl. of Shawn Burke ("Burke Decl.") Ex. B 175-176.) For example, Burke presents a comparison of corresponding clauses from each claim:
'751 Patent claim 7 '426 Patent claim 1
transmission circuitry coupled to said microprocessor IR lamp driver circuitry coupled to said microprocessor;
light emitting means for generating
and emitting IR signals coupled to
said IR lamp driver circuitry
(Burke Decl. Ex. B 175.) Burke then argues that the scope of '751 Patent claim 7 is narrower than that of '426 Patent claim 1, because it speaks of transmission circuitry in terms that could include RF wireless or wired circuitry, while the '426 Patent claim 1 is limited to infrared transmission. (Burke Decl. Ex. B 175.) But Burke does not compare, under General Protecht, the
But Plaintiff's opposition wisely focuses on '426 Patent claims 2 and 3, and Defendant must show that it has an implied license to the specific subject matter of those claims. Plaintiff argues that their subject matter was added years after the '810 Patent. (Opp'n 14.) Plaintiff's expert argues:
(Burke Decl. Ex. B 176-177.) Defendant's expert agrees with this analysis, which supports Defendant's invalidity theory. (Bristow Rep., Haan Decl. Ex. 21 30-31 ("These statement in the '426 Patent are admissions that `parts of the favorite channel macro program and of the rotating macro program' are new matter in the '426 Patent over what was disclosed in the Darbee '810 Patent"; "Darbee[] admitted during his deposition ... that the subject matter of asserted claims 2-3 was Mr. O'Donnell's idea and that it was not contemplated until 1992.").)
Despite that distinction, Defendant now argues that "UEI admitted in deposition that the '426 and '751 patents are indistinct and that practicing the '426 patent requires practicing the '751 patent." (Mot. 15 (citing Sept. 12, 2013 Hayes Dep. 454:13-455:4, 470:15-25, 481:1-8, Rowland Decl. Ex. 81).) Again, while the '751 Patent is broader than the '426 Patent, such that practicing the narrower '426 Patent may involve practicing the '751 Patent,
Finally, the fact cited by Defendant that some of Plaintiff's internal product specifications list both patents under the rotating macro function discussion (Mot. 15) is far too slender a reed to support a jury's finding of implied license in light of the language of the 2004 License and the actual relationship between the patents. This is particularly so since the '426 Patent uses the term "rotating macro" seven times, while the '751 Patent never does so. If the functionality were described in the '751 Patent through other words, Defendant could have pointed that out, but it did not.
Defendant has not shown its entitlement to summary judgment of an implied license to claims 2 and 3 of the '426 Patent, even under a General Protecht analysis of the disclosure, rather than the claims, of the patents. To the contrary, Plaintiff has shown that there is no genuine issue that Defendant does not have a license to the '426 Patent, and for the reasons already discussed, the Court will grant summary judgment to Plaintiff on that issue in the accompanying Order on Plaintiffs motion for summary judgment.
As to issue 1, laches, equitable estoppel, and implied license, the Motion is DENIED.
While Defendant's brief addresses invalidity of the '426 Patent before noninfringement of that patent, it treats invalidity as a backup or footnote to its noninfringement argument. That is, Defendant does not attempt to show that all the elements of the challenged claims are found in the prior art reference, but instead argues that if Plaintiff's evidence is enough to show infringement, the same approach also shows invalidity: "With regard to the remaining structure ... the Court should find that [Plaintiff and its expert] have failed to show infringement as a matter of law.... If, however, the Court believes that [Plaintiff's] approach to the infringement analysis of this `means' limitation is correct, then that same approach must apply to any analysis of [the prior art]." (Mot. 20-21.) With that in mind, the Court treats the issues in the same order as Defendant, both for ease of reference and because considering the invalidity issues first does help to illuminate some of the noninfringement issues.
Claims of issued United States patents are presumed valid. 35 U.S.C. § 282. "A party seeking to establish that particular claims are invalid must overcome the presumption of validity in 35 U.S.C. § 282 by clear and convincing evidence." State Contracting & Eng'g Corp. v. Condotte Am., Inc., 346 F.3d 1057, 1067 (Fed.Cir.2003). "Although an exact definition is elusive, `clear and convincing evidence' has been described as evidence that `place[s] in the ultimate factfinder an abiding
Plaintiff asserts infringement of claims 2 and 3 of the '426 Patent, both of which depend from claim 1. All three are reproduced here:
The parties have stipulated that in claim 2, the "means for establishing and recalling three selected channels upon depression of a predetermined series of keystrokes and the at least one MACRO key" are the "instructions shown in Figs. 4 & 5" of the '426 Patent. (Jt. Claim Construction Chart 2, Dkt. No. 56.)
Figure 4, at right, "is a flow chart of the steps performed by a macro entry definition program stored in the remote control and entitled: ROTATING MACROS: entry and definition." ('426 Patent 3:15-18.)
Figure 5, at right, "is a flow chart of the steps performed by a macro playback program stored in the remote control and entitled: MACRO: playback." ('426 Patent 3:19-21.)
The parties have also agreed that a "MACRO key" is a "key which can be assigned macro program for effecting a sequence of functions with one stroke of that key and/or rotating functions on successive depressions of that key." (Jt. Claim Construction
Defendant argues that the asserted claims of the '426 Patent are invalid under 35 U.S.C. § 102 as anticipated or under 35 U.S.C. § 103 as obvious in light of a prior art remote control by Memorex and publications describing that remote ("Memorex"). (Mot. 15-17.) The parties dispute whether Memorex assigns a macro program to a MACRO key "for establishing and recalling three selected channels upon depression of a predetermined series of keystrokes and the at least one MACRO key" using the processes described by Figures 4 and 5. (Opp'n 14.)
Defendant argues that Memorex includes a macro, which Memorex calls a "favorite channel feature," that allows up to 32 favorite channels to be defined and then allows a user to sequence through those channels. (Mot. 14 (citing Memorex product manual, Rowland Decl. Ex. 70 24-26).) Defendant argues that for "macro entry," Memorex teaches "a step-by-step way of entering or defining favorite channels into the remote control's memory using two keys (`[LEARN]' and `[FAVORITE]') along with channel number keys," and "using specific keys to playback or retrieve the favorite channels." (Mot. 18.) Defendant argues that Plaintiff's expert, Burke, admitted that the Memorex Manual disclosed the components necessary for the Memorex remote to perform the favorite channel feature and macro entry. (Mot. 18-19 (citing Jan. 30, 2014 Deposition of Shawn Burke ("Burke Dep.") 218:13-18, 222:22-223:7, Rowland Decl. Ex. 480).) Essentially, Burke simply agreed that the Memorex Manual says what it says, and that he had no other understanding of what it meant.
Those "step-by-step way" and "using specific keys" are explained in the Memorex manual as follows:
(Rowland Decl. Ex. 70 24-25.)
Because the parties have agreed that the "means" for establishing three selected channels are the instructions in Figures 4 and 5, the question concerning anticipation is whether Memorex contains the instructions in those figures. A direct comparison is complicated by the fact that Figures 4 and 5 are written from the perspective of the remote control, while the Memorex instructions are written from the perspective of the human operator. Rewriting the patent figure from the perspective of the human operator obscures certain important
'426 Patent Fig. 5 (Operator View) Using Memorex Favorite Channel
1. Press MACRO key: remote transmits the 1. Press [FAVORITE]. The FAVORITE
first channel from your stored list of three. indicator appears.
[Remote increments playback rotation count,
and if that results in rotation count being
four, returns it to 1.]
2. Press MACRO key: remote transmits the 2. When you press CHANNEL [▴] or [▾],
second channel from your stored list of three. the Turbo transmits the channels from your
[Remote increments playback rotation count, favorite channel-list, instead of the normal
and if that results in rotation count being CHANNEL [▴][▾] command codes.
four, returns it to 1.]
3. Press MACRO key: remote transmits the 3. Use the SELECT [←] or [→] keys to
third channel from your stored list of three. change devices. The favorite channel list
[Remote increments playback rotation count, becomes active for any device that you select.
and if that results in rotation count being
four, returns it to 1.] [Repeat as many times
as you like.]
4. To perform other functions, just press 4. Press [FAVORITE] or [CANCEL] to
another key on the remote. leave the favorite-channel mode without
changing your entries.
Certain differences are apparent. Returning to the remote control's perspective, in Figure 5, the remote responds to the press of the MACRO key by fetching the playback rotation count for that key (that is, whether it is the first, second, or third press of the key), retrieving the channel stored for whichever of the three rotation count positions has just been referenced, transmitting that channel, and updating the rotation count, returning it to 1 if it has reached 4. ('426 Patent, Fig. 5.) By contrast, Memorex uses two (or optionally, three) different buttons to rotate through the favorite channels. Pressing the [FAVORITE] button alone does not result in the transmission of a favorite channel. Instead, the remote only does so after both [FAVORITE] and [▴] or [▾] are pressed. From the evidence presented, it is unknown whether Memorex updates the rotation count with each press.
We now turn to a comparison of Figure 4 with programming Memorex:
'426 Patent Fig. 4 (Operator View) Memorex Favorite Channel Selection
1. Press "I" Key, then "III" Key. 1. Press [LEARN]. The LEARN indicator
appears. SELECT and KEY alternat[l]ey
appear on the display.
2. Press MACRO key. [Remote fetches rotation 2. Press [FAVORITE]. The FAVORITE indicator
count for that key and prepares to appears and CHN* * appears on the
record a channel to that rotation count display.
position.]
3. Enter channel. Once channel entry is 3. Enter your two-digit favorite-channel.
completed, press "I" Key, then "III" Key, to Example: If you press 04, CHN 04 appears
store channel selected. [Remote stores on the display.
channel in rotation count position, increases
rotation count by 1, and if that results in
rotation count being four, returns it to 1.]
4. Repeat step 3 as many times as you want, 4. Repeat Step 3 to continue adding your but only the last three channels will be favorite channels, up to 32 channels. Note: stored. [A specific channel macro can be if the Turbo stops accepting favorite deleted by selecting the macro, then pressing channels, press [STORE]. the "I" Key, the "0" Key, followed by the "III" Key.] 5. When you finish adding channels to the favorite channel list, press [STORE]. [Channels can be deleted by using the delete button.]
The parties dispute the significance of these differences, and whether it means that Memorex has a "MACRO key" as jointly defined by the parties: "A key which can be assigned a macro program for effecting a sequence of functions with one stroke of that key and/or rotating functions on successive depressions of that key." (Jt. Claim Construction Chart 1, Dkt. No. 56.)
Defendant correctly argues that the Darbee '810 Patent, incorporated by reference into the '426 Patent, teaches that channel-up and channel-down keys can be macro keys. (Mot. 20, Rowland Decl. Ex. 69 at 16:42-59, 17:28-32.) Plaintiff responds that Figure 4, in conjunction with the parties' definition, requires "a single key that is assigned a macro program for establishing and recalling three selected channels." (Opp'n 15-16.) Further, according to Plaintiff, Defendant has failed to show that the Memorex reference discloses this feature. (Opp'n 16.) Defendant replies, correctly, that Plaintiff conflates a number of elements in the claims and attempts to consolidate into the MACRO key a number of elements that appear elsewhere in the claims. (Reply 8.) Under the Court's construction, the MACRO key itself does not need to include all the limitations to which Defendant objects.
Plaintiff parses the claim terms, agreed definitions, and figures in an attempt to make the elements of the claims found in general terms in Memorex very specific, while generalizing the specific aspects of the claims not found in the accused devices. Plaintiff recasts fetching storage rotation counts, recording to rotation counts, and incrementing storage rotation counts as "associating a particular memory location with a channel for each stroke of the MACRO key." (Opp'n 16.) This both generalizes the particular memory operation claimed into the more general "associating a particular memory location," and restricts the claim to one covering only a single key depressed multiple times for cycling through favorite channels. While the claim certainly covers such a key, a close examination of the claim language and Figures 4 and 5 of the '426 Patent show that a two-button favorite channel macro key arrangement is not excluded.
Plaintiff argues that its expert, Burke, opined that Memorex's channel up/down buttons perform the same function in favorite channel mode as in normal operation, and that the remote just transmits codes from a smaller list. (Opp'n 16-17, Burke Decl., Ex. B., Expert Report 31.) But Defendant points out that at his deposition, Burke was confronted with the Memorex manual, which Burke understood to say that in favorite channel mode, Memorex "transmits channels from your favorite channel list instead of the normal channel up or down command codes." (Mot. 19, Jan. 30, 2014 Burke Dep. 228:20-229:6, Rowland Decl. Ex. 48.) Plaintiff objects that the cited testimony is just Burke reading the reference. (Opp'n 17.) But Burke specifically stated in his answer to
That aside, one clear difference between Memorex and the asserted claims is that because Memorex can store up to 32 channels, it does not return the rotation count to 1 when it reaches 4 any time the remote is programmed with 4 or more channels. But it is unclear whether Memorex uses a rotation counter in the same way as depicted in Figure 5, such that it would satisfy Figure 4 when programmed with only three favorite channels. Another difference is that Memorex does not overwrite channels if more than the total (32) are stored. Instead, a separate delete function must be used. Also unpersuasive is Defendant's argument that a "storage rotation count" is not part of the asserted claims because it is separately claimed in dependent claim 7. (Reply 8.) That argument ignores the presence of the storage rotation count in Figure 4, and the parties have agreed that Figure 4 is the means corresponding to the function in claim 2.
Further, repeating the point that appears at the beginning of this section, Defendant does not actually attempt to specifically demonstrate that all of the elements of Figures 4 and 5 of the '426 Patent are found in Memorex. (Mot. 20-21.) Instead, it argues that the Court should find noninfringement as to these elements, but that if the loose functional approach Plaintiff uses for infringement is correct, then Memorex would invalidate the patent. (Mot. 20-21.) Defendant is correct that "a patent may not, like a `nose of wax,' be twisted one way to avoid anticipation and another to find infringement." Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir.2001). But Defendant has not demonstrated its entitlement to summary judgment of invalidity.
As to issue 2, invalidity of the '426 Patent, the Motion is DENIED.
Determinating patent infringement is a two step process. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454 (Fed.Cir.1998). "First, the court determines the scope and meaning of the patent claims asserted and then the properly construed claims are compared to the allegedly infringing device." Id. (citations omitted). Because the ultimate burden of proving infringement rests with the patentee, an accused infringer may establish that summary judgment is proper "either by providing evidence that would preclude a finding of infringement, or by showing that the evidence on file fails to establish a material issue of fact essential to the patentee's case." Novartis Corp. v. Ben Venue Labs., Inc., 271 F.3d 1043, 1046 (Fed. Cir.2001). If the moving party meets this initial burden, the burden shifts to the party asserting infringement to set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "[A] party does not meet this evidentiary threshold merely by submitting the affidavit of an expert who opines that the accused device meets the claim limitations." Novartis, 271 F.3d at 1051.
"Whether an accused device or method infringes a claim either literally or under the doctrine of equivalents is a question
Defendant argues that Figures 4 and 5 of the '426 Patent include, and through their incorporation into claims 2 and 3, require, very specific algorithms that use "rotation counters." (Mot. 22.) Specifically, Defendant notes that in Figure 4, the "storage rotation count" is incremented each time a favorite channel is programmed, and when the storage rotation count reaches 4, it is reset to 1, meaning that "[i]f one attempts to establish a fourth macro for a fourth selected channel, the first macro for the first selected channel will be erased and overwritten." (Mot. 22 (quoting '426 Patent 5:12-14).) Likewise, Defendant notes that in Figure 5, a "playback rotation count" is incremented with each key press, and it also resets to 1 every time it reaches 4, such that "[i]f only one selected macro is created, the second and third keystrokes of a MACRO key will cause nothing to happen and the fourth keystroke will repeat the selection of the first selected macro to select the single selected channel." (Mot. 23 (quoting '426 Patent 5:15-19).) Defendant has made an unrebutted showing that in its "R6" remote control, one of the accused products, each button can program up to 5 favorite channels, but when only three are programmed, the remote does not "cause nothing to happen" on the fourth and fifth keystrokes. (Mot. 25 (citing R6 Owner's Manual 18, Rowland Decl. Ex. 42).) Instead, the "sequence starts all over again." (R6 Owner's Manual 18, Rowland Decl. Ex. 42.)
Defendant also argues that if you program the R6 with three favorite channels, and then later try to program a fourth favorite channel, instead of overwriting only the first favorite channel as in Figure 4, the first three favorite channels will be deleted, leaving only the single favorite channel. (Mot. 25.) But Defendant provides no evidentiary citation for this argument, and its foundation is not apparent in the material cited in the same paragraph. And when repeating this point in reply, Defendant merely cites back to the Motion at 25:21-24, again without pointing to any evidentiary support. (Reply 11.) The Court therefore does not consider the argument.
Plaintiff does not dispute the facts, but contests Defendant's understanding of the claims, arguing that the '426 Patent's statement that "[i]f one attempts to establish a fourth macro for a fourth selected channel, the first macro for the first selected channel will be erased and overwritten" is just a "preferred embodiment." (Opp'n 23.) Of course, "it is improper to read limitations from a preferred embodiment described in the specification — even if it is the only embodiment — into the claims absent a clear indication in the intrinsic record that the patentee intended the claims to be so limited." Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 913 (Fed.Cir. 2004).
But that is not what Defendant here urges. The parties have
As to issue 3, non-infringement of the '426 Patent, the Motion is GRANTED.
The '906 Patent is titled "Method for Selecting a Remote Control Command Set." In the method, a group of multiple command sets are stored in a remote control. ('906 Patent 1:7-8.) The purpose of having multiple command sets stored in the remote control is for one remote to be able to control various devices. ('906 Patent 1:9-10.) The prior art contained various methods of selecting the correct command set to control a given device. In one system, the remote automatically cycled through the entire list of command sets, transmitting a test command from each until the user interrupts the cycle. ('906 Patent 1:29-40.) A second method, similar to the first, was to have the user cycle through each command set. ('906 Patent 1:44-54.) A third method was a "direct entry — quick set" procedure, where the user looked up the make and model of the device from a printed list, and then inputted the code to select the appropriate command set. ('906 Patent 1:55-61.) Other methods also existed. ('906 Patent 1:62-2:32.)
In the '906 Patent's method, multiple "effects observable commands" — for example, a "power off" command — from a group of command sets are assigned to multiple buttons on the remote control. ('906 Patent 2:35-43.) The user then presses the buttons one at a time until the device responds as desired, which shows that the remote has transmitted a command from the correct command set. ('906 Patent 2:44-49.) The user then stops the procedure, thus programming the remote to the correct command set. ('906 Patent 2:49-53.)
Plaintiff asserts infringement of claims 1, 10 and 12 of the '906 Patent, reproduced here:
Defendant argues that in its accused products, the keys are not pressed "sequentially and individually," because they require pressing keys simultaneously. (Mot. 27.) Defendant argues that the user manual for its R6 remote control instructs the user to:
(R6 Owner's Manual, Rowland Decl. Ex. 42 7 (emphasis in original).) Defendant argues that because the user presses the numeric keys while holding down the component button, the keys are not being pressed "individually." (Mot. 27.) Defendant points out that Plaintiff's expert distinguished a prior art remote by arguing that "the Power button and numeric keys are actuated together in order to select and load a command set; buttons are not actuated sequentially and individually,". (Mot. 27 (quoting Burke Decl. Ex. B 95).) Defendant thus argues that Plaintiff's expert believes that "sequentially and individually" excludes holding down one button while pushing another.
Plaintiff responds that holding the component button is simply an additional step, and that the asserted claims, written in "comprising" transitional language, allow for additional steps. (Opp'n 26 (citing Solvay S.A. v. Honeywell Int'l, Inc., 742 F.3d 998, 1005 (Fed.Cir.2014)).) Plaintiff further points out that the "keys" that need to be actuated "sequentially and individually" are the "assignable user activated" keys, and that the "component" button is not such a key. (Opp'n 26.) Plaintiff argues that Defendant's expert admitted that he was unaware of any evidence that the component button on the accused remotes can send an effects observable command, but unfortunately, the deposition page Plaintiff cites in support was missing from the exhibit. (Opp'n 26-27 (citing Feb. 6, 2014 Deposition of Stephen Bristow ("Bristow Dep.") 379:12-20, Haan
Plaintiff also argues that Defendant mischaracterized its expert's testimony, and that rather than relying on "sequentially and individually" to distinguish the prior art, he distinguished it because it described a single key — the power button — having an effects observable command. (Opp'n 27.) Plaintiff's expert did distinguish that prior art on the grounds that the "[p]ower button and numeric keys are actuated together in order to select and load a command set; buttons are not actuated sequentially and individually." (Burke Decl. Ex. B 95.) But Plaintiff's expert also argued that the prior art failed to meet the "actuating sequentially and individually each one of the plurality of assignable user actuated switches or keys" limitation both because "the numeric keys are not assigned" and because "the (nonassigned) numeric keys are not actuated individually." (Burke Decl. Ex. B 95.) The latter seems to be the argument that Plaintiff now denies its expert made. Further, the prior art remote control manual that Plaintiff's expert was distinguishing is ambiguous as to whether the power key needs to be pressed separately to test the function after the power and numeric keys are pressed together to select a code set. (Burke Decl. Ex. B 94 (compare steps 2 and 5 with steps 3 and 4).)
No matter. Defendant has not demonstrated that the component button in the accused products is an "
In a footnote, Defendant asks the Court to invalidate the asserted claims of the '906 Patent if Plaintiff's expert analysis were to be adopted by the Court. (Mot. 28, n. 8.) Plaintiff did not cross-move for summary judgment of infringement of the '906 Patent, so the Court is not "adopting" Plaintiff's infringement analysis. In any event, Defendant will need to present its invalidity argument to the jury.
As to issue 4, non-infringement of the '906 Patent, the Motion is DENIED.
The '067 Patent is titled "Universal Remote Control with Macro Command Capabilities." The specification teaches two principal ways to match equipment to the remote control: the "step-and-set" method illustrated in Figure 16, and the "direct-entry/quick set" procedure illustrated in Figure 17. (Claim Construction Order 30, Dkt. No. 60.) The asserted claims concern the "direct-entry/quick set" procedure. "Quick-Matching is a way to set the device directly to match any controlled equipment in its library." ('067 Patent 18:34-37.) The specification provides two ways to obtain that code. First, the user can look up the make and model of the device in a booklet that lists the codes. ('067 Patent Fig. 17, 10:48-50.) If the device is not listed in the booklet, the user can first match the device using the step-and-set method, and then have the remote provide the code once set through trial and error. ('067 Patent Fig. 17, 19A, 19B, 18:33-44.)
Plaintiff asserts infringement of claims 1, 2, 3, and 6 of the '067 Patent. All four
Defendant argues that it does not infringe because the parties agreed that the phrase "plurality of different home appliances of different manufacturers" means "a plurality of home appliances of different make and model," and that its product codes do not directly identify the home appliance to be matched by make and model. (Mot. 29.) Defendant provides an image of some of the codes from the accused "FX-1" remote's manual, which Defendant has annotated to show that a manufacturer can have multiple codes, and that a given code can be associated with multiple manufacturers:
(Mot. 30, FX-1 Owner's Manual, Rowland Decl. Ex. 41.)
Defendant's argument fails. First, the Court specifically construed "to directly identify each of the plurality of different home appliances of different manufacturers to which the universal remote to control is to be matched" to mean "directly identify each particular home appliance to which the universal remote control is to be matched." (Claim Construction Order 34, Dkt. No. 60.) While the parties stipulated to the meaning of "plurality of different home appliances" in another part of the claim, it is the Court's construction of the actual term at issue that controls.
True, Defendant could make the same argument based on the words in the
Defendant's own evidence, showing that the remote control is matched to different manufacturers' appliances through the use of a code, demonstrates at least a genuine issue of fact concerning whether the accused remotes directly identify each particular home appliance to which it is to be matched. The fact that the same code may apply to more than one manufacturer's equipment would only show noninfringement if the claims required the use of a code that uniquely identified the product. But that is not what the claim requires.
As to issue 5, non-infringement of the '067 Patent, the Motion is DENIED.
Defendant seeks partial summary judgment that:
(Mot. 31.) Ultimately, the relief Defendant seeks would require the Court to resolve a number of disputed facts, and to exclude as a matter of law methods of analysis more appropriately attacked by "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof." Daubert v. Merrell Dow Pharms., 509 U.S. 579, 596, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).
But, mindful of Defendant's hope that [c]larity on this issue will appropriately regulate the parties' expectations and enhance opportunities for resolution before trial" (Mot. 31), the Court provides its views on some of the issues debated between the parties, without prejudging issues that may arise during the presentation of evidence and motions for judgment as a matter of law.
A prevailing patentee is entitled to "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 35 U.S.C. § 284. Defendant starts its argument with Garretson v. Clark, an 1884 Supreme Court case admirable for its brevity — 450 words — and style. Quoting Circuit (and soon to be Supreme Court) Judge Blatchford, Garretson held that
111 U.S. 120, 121, 4 S.Ct. 291, 28 L.Ed. 371 (1884) (quoting Garretson v. Clark, 15 Blatchf. 70, 10 F.Cas. 40 (C.C.N.D.N.Y. 1878)) (Blatchford also served as a reporter of decisions. See "Justice Blatchford Dead," New York Times, July 8, 1893). Garretson was decided under the Patent Act of 1870, which entitled the patentee to the profits of the defendant, as well as damages caused by the infringement. Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1440 (Fed.Cir.1998) (citing Patent Act of 1870, 16 Stat. 201 § 55). While apportionment had a particular significance under the 1870 Act due to the patentee's ability to recover the infringer's profits, the existence of which is firmer than the hypothetical lost profits of the patentee, Defendant is correct that Garretson required apportionment of both defendant's profits and "the patentee's damages."
While apportionment in the reasonable royalty context has been the topic of much recent discussion, see, e.g., Laser-Dynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed.Cir.2012), Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed.Cir.2011), its application to the lost profits theory of recovery is less familiar. Defendant cites to Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Systems, LLC, 350 F.3d 1327, 1346 (Fed.Cir.2003) as establishing that the apportionment requirement applies with equal force in the lost profits context.
In Ferguson, the plaintiff claimed that the infringement cost it sales of two different devices. Id. at 1345-46. The first embodied two patents ('376 and '991), while the second only embodied one of the two ('376). Id. The patentee only proved that the defendant infringed one of the patents, but obtained an award of lost profits for both of its devices. Id. at 1346. Because "the district court based its lost profits award on evidence of sales of a device embodying features in addition to those present in the infringed '376 patent, namely, those features attributable to the '991 patent," the Federal Circuit held that "[t]he district court therefore failed to distinguish the allocation of profits that would have been made `but for' the infringement of the '376 patent with the profits that could fairly be allocated to customer demand related to the features embodying the '991 patent." Id.
Ferguson supports Defendant's argument to some extent. But it does not specifically discuss the entire market value rule, and a powerful counterpoint is found in the frequently-cited case of Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1544 (Fed.Cir.1995) (en banc). Rite-Hite contains an extensive historical analysis of "but for" lost profits damages under the current statutory regime, noting that the Supreme Court framed the analysis as asking "had the Infringer not infringed, what would the Patentee Holder-Licensee have made?" Id. at 1580 (quoting Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964)). Rite-Hite treats this as a simple but-for test, albeit limited by principles of proximity and foreseeability:
Id. at 1546.
Rite-Hite then applied these principles to two categories of products that had been included in the damages calculation. First, it addressed the plaintiffs lost sales of a product that did not itself embody the patent, but which directly competed with the infringing product. Id. It held that because such lost sales are "surely foreseeable," they "constitute the full compensation set forth by Congress, as interpreted by the Supreme Court, while staying well within the traditional meaning of proximate cause," and are therefore "clearly" compensable. Id. The second Panduit lost profits factor is absence of acceptable non-infringing substitutes. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir.1978). In Rite-Hite, the patentee's own unpatented product was substitutable with the infringing product, raising the possibility that the chain of causation for lost profits had been broken. But Rite-Hite held that the Panduit factors are not the exclusive way of proving but-for causation, and that in any event, a patentee's
Second, Rite-Hite addressed the plaintiff's lost sales of dock levelers that it would have sold with the patented and unpatented restraints. Id. at 1549. The district court had included those follow-along sales under the entire market value rule. Id. The court explained that the "entire market value rule has typically been applied to include in the compensation base unpatented components of a device when the unpatented and patented components are physically part of the same machine," or together constituted a functional unit. Id. at 1549-1550. Rite-Hite concluded that the entire market value rule did not apply because the products did not function together to achieve one result and could have been used independently. Id. at 1551.
Despite the increased scrutiny courts have recently applied to patent damages awards, Rite-Hite is still good law. Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1263-64 (Fed.Cir.2013) cert. denied, ___ U.S. ___, 134 S.Ct. 1013, 187 L.Ed.2d 851 (2014). To be sure, there is a distinction between the mechanical devices at issue in Rite-Hite and "electronic devices, which may include dozens of distinct components, many of which may be separately patented, the patents often being owned by different entities." LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 66 (Fed.Cir.2012). And "to assess how much value each patented and non-patented component individually contributes to the overall end product — e.g., a personal computer — can be an exceedingly difficult and error-prone task." Id.
A fair corollary to LaserDynamics is that trying to prove but-for lost profits in a case involving devices that may include dozens of distinct and possibly separately patented products can also be "an exceedingly
While Defendant argues based on Garretson that Plaintiff must show apportionment because the patents at issue are "improvement" patents (Reply 14), Plaintiff's but-for theory here, if borne out by the facts, would explain why apportionment is not necessary in these particular market conditions. While Ferguson could be read to support Defendant's argument, it did not discuss the entire market value rule, nor involve the market conditions asserted to be present here. Ultimately, Ferguson may best be understood here as reinforcing the idea that Defendant may attack Plaintiff's but-for causation proof by demonstrating that factors other than the asserted patents were the but-for cause of the lost sales.
There is no real dispute in this case that a remote control is the smallest patent-practicing unit, and Plaintiff submitted evidence that licenses and sales in the industry use a remote control as the unit of sale. (Opp'n 29-33.) Defendant's argument that Plaintiff inappropriately applies the entire market value is therefore not a search for a smaller physical unit or a request to exclude a follow-on sale, but a demand that Plaintiff show how much of its profit results from the patented features. Plaintiff has elected not to make that general showing, but instead seeks to convince the jury that in this particular commercial context, it would have made the sale but for the infringement. While the jury might not agree, Plaintiff has provided enough evidence in support of that theory to avoid summary judgment.
As to issue 6, application of the entire market value rule, the Motion is DENIED.
Patentees who make or sell products in the United States may notify the public that the product is patented by marking the product with the patent number. 35 U.S.C. § 287. If a patentee does not do so, the damages period does not start running until the patentee notifies the infringer of the infringement. Id. Compliance with the marking requirement is a question of fact, on which the patentee bears the burden of proof. Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed.Cir. 1996). The patentee must show that "substantially all of [the patented product] being distributed were marked, and that once marking was begun, the marking was substantially consistent and continuous." Nike, 138 F.3d at 1446.
Defendant argues that because Plaintiff failed to properly mark substantially all of its products, no damages are available for the period before Plaintiff provided notice of the alleged infringement. (Mot. 37-38.) Defendant argues that the four categories of documents Plaintiff produced to show compliance with the marking statute are insufficient. (Mot. 39.) Those documents are (1) product specifications, (2) documented corporate policies and procedures, (3) QA Product
Plaintiff argues that Defendant's 30(b)(6) witness on marking, Hayes, who had been Plaintiffs former Vice-President of Intellectual Property, testified that he could not say whether any of the remotes that practiced the patents-in-suit were appropriately marked. Hayes testified that to answer that question, one would need to undertake a multi-step examination of the documents and the remote controls themselves, and Hayes had not done that analysis. (Mot. 40 (citing Oct. 31, 2013 Hayes Dep., Rowland Decl., Ex. 80), Reply 19.) Hayes testified that to be able to tell whether any of Plaintiffs products were marked, he would need to either see the product itself or refer to "the quality assurance records and the product specifications, the manufacturing documents that would show whether the markings were placed in the tool or placed on the sticker or placed on the label or silkscreened onto the product." (Hayes Dep. 642:5-24.) Hayes was presented with certain of Plaintiffs remote controls that he would expect to include the features claimed by the '426 and '067 Patents, but were not marked with those patent numbers. (Hayes Dep. 662:5-663:28.) Hayes testified that it was impossible to see the patent numbers in a number of photographs and schematics that Plaintiff had produced. (Hayes Dep. 674:23-675:17, 681:13-683:3.) That lead to the following exchange:
(Hayes Dep. 683:13-25.) Defendant's counsel's remarks accurately captured the fact that Plaintiff bears the burden on this issue, and had by that point in the deposition not satisfied it.
Hayes then testified that the simplest way to see whether a remote was marked would be to look at the remote, but that Plaintiff does not "maintain a library of sample units ex-production," so [t]here is no point that you can go to to get samples of these [remotes on lists showing which products practiced which patents]. "Most of these probably do not exist anymore." (Hayes Dep. 736:5-25.) Given the absence of a library of samples for inspection and no way to look at photographs that match up to the lists, Hayes reaffirmed that marking could be demonstrated by looking at all the product development documents, but had "no idea" how long that would take, and had not undertaken it for any of Plaintiff's products that Plaintiff asserts practice the patents-in-suit. (Hayes Dep. 739:21-740:21.)
It appears that while the Plaintiff's Atlas family of remotes constituted over 90% of the remotes covered by the '426 Patent in the relevant period, Plaintiff did not mark them with the '426 Patent. (Mot. 41 (citing Atlas photos, Rowland Decl. Exs. 54 and 58, Atlas specifications and design verification documents, Rowland Decl. Ex. 57).) Plaintiff's first line of response to this evidence, that certain of its products' technical specifications list the '426 Patent, is not directly responsive. (Opp'n 41.) That evidence does not show that those products were actually marked, and Plaintiff does not show the percentage of '426 Patent-covered products that those specifications cover. Plaintiff argues, without citation to any evidence, that "less than ½ of 1% of UEI's quality assurance inspections detected patent marking issues with respect to the patents-in-suit." (Opp'n 41.) But Plaintiff does not show that the inspections were accurate or that they were even looking for the '426 Patent number on substantially all of the product lines, let alone products, covered by the '426 Patent. Plaintiff also focuses on the fact that a particular "Crystalis NV-10 remote" was marked (Opp'n 41), again without showing what percentage of '426-covered sales were accounted for by that remote.
Plaintiff shows that the technical specifications for two Super Atlas remotes require marking, and that the Product Design Verification document for the Super Atlas remote identifies no patent marking quality problems. (Opp'n 42.) But a review of the Product Design Verification document shows that it is simply not probative as to patent marking. It appears to have been completed by two electrical engineers and provides the following "Test Results": "Results of Evaluation: Pass[.] Quality Issues?: None." (Haan Decl. Ex. 46.) The "Test Comments" are: "[t]he non-compliant issues noted by the factory are acceptable." (Haan Decl. Ex. 46.) There is no indication whatsoever that the test included checking that the correct patent markings were present, or whether incorrect marking would have been an "acceptable" noncompliance.
The most direct approach Plaintiff makes to demonstrating that substantially all of the '426-covered remotes were appropriately marked was to attack Defendant's identification of the Atlas remotes as products that were in fact covered by the '426 Patent. Plaintiff argues that none of the 6 model numbers in the Atlas remote photographs submitted by Defendant in support of the Motion appear on Plaintiff's covered product sales summaries. (Opp'n 42, Haan Decl. Ex. 47 ¶ 6-7.) But Defendant responds that at his deposition, Hayes identified the 1055 and 1056 prefixes, which do appear on Plaintiff's covered product sales summaries as identifying the Atlas remotes. (Reply 19, Rowland Decl. Ex. 130 at 664:4-668:15.)
Plaintiff misapprehends its burden here. "On an issue for which the moving party does not have the burden of proof at trial, the moving party may meet its initial burden on the motion either by providing evidence that negates an essential element of the opposing party's case, or by showing that the evidence on file (such as pleadings, depositions, and admissions) establishes no material issue of fact and that the opposer will not be able to prove an essential element of its case." Vivid Techs., Inc. v. Am. Sci. & Eng'g, Inc., 200 F.3d 795, 807 (Fed.Cir.1999). While the nonmoving party's evidence is to be believed, Defendant here only needed to show that not "substantially all" of Plaintiff's '426-covered products were marked to shift the burden to Plaintiff to show otherwise. Defendant went further, and showed that around 90% of the '426-covered products
Defendant argues that Plaintiff has taken the position that almost every product Plaintiff sold from 2003-2007 (the life of the '067 Patent) was covered by the '067 Patent. (Mot. 42 (citing Oct. 31, 2013 Hayes Dep. 638:22-640:4).) Defendant points to the lack of evidence of marking on four categories of remotes which collectively accounted for between 50-60% of covered remotes in 2006 and 2007. (Mot. 42-43.) Those remotes were the Atlas remotes, the DirecTV remotes, the Motorola DRC800 remotes, and a group of Radio Shack remotes. (Mot. 42-43.) The Atlas remotes did not include the Millennium 4 product, but that was difficult to ascertain from the Motion, because it was stated only in a declaration submitted as Rowland Exhibit 91, which in turn was only cited on page 41, in the argument about the '426-covered remotes, and not in the following pages specifically addressing the '067-covered remotes.
In any event, Plaintiff's response again begins not by addressing the specific evidence Defendant presented, but instead offering evidence of various remotes marked with the '067 Patent, with general citations to various product specifications, the lack of many findings of marking problems in quality inspections, and various manufacturing drawings. (Opp'n 42.) Plaintiff does present evidence that the DirecTV remotes were marked (see Opp'n 43), and despite Defendant's attack on that evidence (Reply 20), it would suffice to create a genuine issue for the jury to decide. But Plaintiff fails to offer evidence creating a genuine issue of fact as to the other remotes. Its Atlas evidence addresses only the Millennium 4 product (Haan Decl. Ex. 45 586, 589) that did not form part of the basis for the Motion. It offers no evidence concerning the Motorola DRC800 remotes. It offers no evidence that the Radio Shack remotes addressed in the Motion were marked, instead providing evidence that other Radio Shack remotes — the 8-in 1 and GamerPro models — were marked (Haan Decl. Ex. 43), and that other Radio Shack specifications state that the "owner's manual" should be marked. (Haan Decl. Ex. 51 792.) As Defendant points out (Reply 20), marking the owner's manual is insufficient where the product itself is capable of being marked, as is the case here. See Metrologic Instruments, Inc. v. PSC, Inc., Civ. A. No. 99-4876(JBS), 2004 WL 2851955, *20, *21, 2004 U.S. Dist. LEXIS 24949, *55, *60 (D.N.J. Dec. 13, 2004) (holding insufficient listing the patent numbers of its products in the related instruction manuals).
Subtracting out the genuinely disputed DirecTV remotes shows that Plaintiff has failed to establish a genuine dispute concerning the fact that it failed to mark approximately 23% of the '067-covered remotes in 2006 and 22% of the '067-covered remotes in 2007. Those figures fail the "substantially all" requirement by a wide measure. See Hazeltine Corp. v. Radio Corp. of Am., 20 F.Supp. 668, 673 (S.D.N.Y.1937) (holding that a failure to mark 13% of products is "certainly not adequate marking.").
As Defendant notes (Mot. 43), "Section 287(a) provides that absent marking,
Plaintiff's Complaint in this case alleged that it sent Defendant written notice of infringement of the '426 Patent on March 1, 2010. (Dkt. No. 1 ¶ 11.) Defendant accepts that date for purposes of the Motion, and Plaintiff does not dispute it. Therefore, Plaintiff's damages for infringement of the '426 Patent are limited to those accruing on or after March 1, 2010.
Defendant argues that Plaintiff's first notification of infringement of the '067 Patent was the Complaint in this case on March 2, 2012, and that because the '067 Patent expired in 2007, Plaintiff is not entitled to any damages for the '067 Patent. (Mot. 44.) Plaintiff does not dispute those dates in its Opposition, and thus has waived any objection to such a finding.
Despite that, the Court discusses those potential notice dates in the interest of completeness. The Motion acknowledges that the Complaint alleges that Plaintiff provided notice of the patent on either December 16, 2004, by listing the '067 Patent in the license agreement that settled the 2000 litigation, or in a letter dated May 27, 2011. (Mot. 44 (citing Compl., Dkt. No. 1 ¶¶ 46-47).) As to the 2004 date, the Complaint only alleges that the license agreement provided notice of the '067 Patent, not that it provided notice of infringement. (Dkt. No. 1 ¶ 46.) Had the 2004 license agreement alleged infringement, that would likely create laches and equitable estoppel problems, and would be in conflict with the positions taken by Plaintiff in opposing summary judgment on those issues. As to the May 27, 2011 letter, it merely stated, after discussing particular infringement of a number of patents by a number of remotes, that "[i]n addition, in the past certain URC products may have infringed upon now-expired UEI patents, including ... [the '067 Patent] as previously communicated to you." That was not an "affirmative communication of a specific charge of infringement by a specific accused product or device." Amsted, 24 F.3d at 186.
Plaintiff's inability to recover for any infringement of the '067 Patent is a result not only of its failure to mark, but of its lack of diligence in asserting infringement. The accused infringement of the '067 Patent relates to what are apparently common features of both parties' remotes. Not only are the parties the two largest competitors in the market, they were in direct competition for the Time Warner account since 2006, which competition lead to the bulk of Plaintiff's damages claim in this case. (Decl. of Frank Bernatowicz ("Bernatowicz Decl."), Tab. A. ¶¶ 51-94, Ex. 16.) While the undisputed facts are not sufficient to grant summary judgment of laches, Plaintiff's assertion of its patent rights was not a model of diligence.
As to issue 7, patent marking, the Motion is GRANTED.
The Court rules on Defendant's Motion for Summary Judgment as follows:
IT IS SO ORDERED.
