RICHARD G. ANDREWS, District Judge.
Before the Court are various Motions for Summary Judgment filed by Defendants Telit Communications PLC ("PLC") and Telit Wireless Solutions Inc. ("Telit U.S.") (collectively, "Defendants"). Defendants bring three separate motions, all of which the Court will consider here: Motion for Summary Judgment Related to Damages (D.I. 165), Motion for Summary Judgment of invalidity (D.I. 171), and Motion for Summary Judgment of Non-Infringement (D.I. 175). The motions are fully briefed. (D.I. 166, 172, 177, 196, 198, 202, 226, 228, 230). The Court heard oral argument on October 30, 2015. (D.I. 245). For the reasons that follow, the Court will deny Defendants' Motion for Summary Judgment of Invalidity (D.I. 171) and Motion for Summary Judgment of Non-Infringement (D.I. 175) in their entirety, but will grant Defendants' Motion for Summary Judgment Related to Damages (D.I. 165) in its entirety.
On January 13, 2012, Plaintiff M2M Solutions LLC ("Plaintiff') filed five patent infringement actions asserting infringement of U.S. Patent Nos. 8,094,010 ("'010 patent") and 7,583,197 ('"197 patent"). (D.I. 1). The Court held a Markman hearing, after which it invalidated the '197 patent and construed several claim terms in the '010 patent. (D.I. 94). In this action, the Court granted a stipulation as to Defendant Motorola Solutions, Inc., for entry of final judgment of invalidity and non-infringement of the '197 patent, which reserved Plaintiff's right to appeal. (D.I. 158). Accordingly, the present motions relate solely to Plaintiff's remaining claims against the Telit Defendants for infringement of the '010 patent.
The '010 patent, broadly speaking, relates to mobile communications technology. ('010 patent, col. 2, ll. 56-57). It discloses "a programmable wireless communications apparatus" that "serves to address [] diverse communication requirements" and allows for "remote data monitoring." (Id. col. I, ll. 22-23; id. col. 7, ll. 24-30). Plaintiff asserts that Defendants indirectly infringe numerous dependent claims of the '010 patent.
1. A programmable communicator device comprising:
('010 patent, claim 1).
I construed the term "wireless communications circuit for communicating through an antenna" to require the inclusion of an antenna. (D.I. 94 at 15). Plaintiff, and its expert on infringement, Dr. Ray W. Nettleton, opine that, as sold out-of-the-box, Defendants' accused modules literally meet and embody all but one of the recited claim limitations. (D.I. 198 at 7-8; D.I. 199-1 at 11-12, ¶ 29). They allege that the accused products contain pads or connectors specifically designed for connecting to an antenna. (D.I. 198 at 8; D.I. 199-1 at 15, ¶ 41). Plaintiff thus argues that in order to use the accused products at all, customers will have to connect them to an antenna, something which Defendants instruct customers to do. (D.I. 198 at 8). Accordingly, the crux of Plaintiff's infringement contentions is that "[o]nee the customers connect an accused product to an antenna, it then literally meets and embodies every limitation of M2M's asserted apparatus claims, and consequently any use of that product by the customer would constitute an act of direct infringement." (Id. (citing D.I. 199-1 at 11-12, ¶ 29)).
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The moving party has the initial burden of proving the absence of a genuinely disputed material fact relative to the claims in question. Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). Material facts are those "that could affect the outcome" of the proceeding, and "a dispute about a material fact is `genuine' if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party." Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The burden on the moving party may be discharged by pointing out to the district court that there is an absence of evidence supporting the non-moving party's case. Celotex, 477 U.S. at 323.
The burden then shifts to the non-movant to demonstrate the existence of a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Williams v. Borough of West Chester, Pa., 891 F.2d 458, 460-61 (3d Cir. 1989). A non-moving party asserting that a fact is genuinely disputed must support such an assertion by: "(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials; or (B) showing that the materials cited [by the opposing party] do not establish the absence ... of a genuine dispute ...." FED. R. Civ. P. 56(c)(1).
When determining whether a genuine issue of material fact exists, the court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris, 550 U.S. 372, 380 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). A dispute is "genuine" only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson, 477 U.S. at 247-49. If the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp., 477 U.S. at 322.
Defendants' non-infringement arguments can be broken down into several overarching categories. First, Defendants argue that the '010 patent does not claim functional capability but instead covers structures and method steps, and that Plaintiff failed to prove that anyone directly infringed by not showing that the product inherently contains these structures or that any of these method steps actually occurred. (D.I. 177 at 17-19). Second, Defendants argue that even if the '010 patent claims cover capability, there is no infringement because users must modify the device to enable the alleged capability. (Id. at 19). Third, Defendants make three specific arguments asserting that, even after the devices are so modified, certain technical aspects of the accused products do not meet the claim limitations of the '010 patent. (Id. at 19-21). Fourth, Defendants make several arguments relating to the standards for indirect infringement. (Id. at 21-25).
At the outset, some background on Plaintiffs specific infringement contentions is useful. Plaintiff asserts that only two specific features of the accused products allow the products to operate using infringing functionality: performing coded number authentication on 1) "incoming `digest ATRUN SMS' message transmissions," and 2) "incoming TCP/IP transmissions received in server mode subject to default automatic authentication."
Defendants characterize these functionalities as modes: "SMS Digest Mode" and "TCP server mode using ... automatic authentication." (D.I. 177 at 10).
"A patent applicant is free to recite features of an apparatus either structurally or functionally." In re Schreiber, 128 F.3d 1473, 1478 (Fed. Cir. 1997). The Federal Circuit has generally held that use of the word "for" within apparatus claims provides functional limitations that "describe capabilities without requiring that any software components be `active' or `enabled.'" Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1204-05 (Fed. Cir. 2010); see also Fantasy Sports Props., Inc. v. Sportsline.com, Inc., 287 F.3d 1108, 1118 (Fed. Cir. 2002) ("Claim 1 also sets forth a number of functionally defined means that the software must contain, including a `means for scoring ... bonus points' for unusual scoring plays." (alteration in original)). In Finjan, the Federal Circuit reasoned that the repeated use of the word "for" in the claim limitations of a system patent covered functional capability and did not "require that the program code be `active,' only that it be written `for causing' a server ... or a computer ... to perform certain steps." Finjan, 626 F.3d at 1204-05. Likewise, the Federal Circuit has also found that use of the word "programmable" is an indication that the patentee is claiming an apparatus in terms of its functionality. See Intel Corp. v. U.S. Int'l Trade Comm'n, 946 F.2d 821, 832 (Fed. Cir. 1991) ("Because the language of claim 1 refers to 'programmable selection means' and states `whereby when said alternate addressing mode is selected,' the accused device, to be infringing, need only be capable of operating in the page mode.").
On numerous occasions, the Federal Circuit has looked at functional language in an apparatus claim and concluded that the claim only requires that an accused apparatus possess the capability of performing the recited function. See, e.g., Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1369-70 (Fed. Cir. 2009) ("[C]laim 22 here only requires a capacity to perform a function...."); Microprocessor Enhancement Corp. v. Texas Instrum. Inc., 520 F.3d 1367, 1375 (Fed. Cir. 2008) ("Claim 7 ... is clearly limited to a pipelined processor possessing the recited structure and capable of performing the recited functions ...." (emphasis in original)); Intel, 946 F.2d at 832. Accordingly, when accused products contain multiple operating modes, "to infringe a claim that recites capability and not actual operation, an accused device `need only be capable of operating' in the described mode." Finjan, 626 F.3d at 1204 (quoting Intel, 946 F.2d at 832). "Thus, depending on the claims, an accused device may be found to infringe if it is reasonably capable of satisfying the claim limitations, even though it may also be capable of non-infringing modes of operation." Id. (internal quotation marks omitted); see also Intel, 946 F.2d at 832.
The Federal Circuit has cautioned, however, that the above "line of cases is relevant only to claim language that specifies that the claim is drawn to capability." Ball Aerosol and Specialty Container, Inc. v. Ltd. Brands, Inc., 555 F.3d 984, 994 (Fed. Cir. 2009). Accordingly, "[u]nless the claim language only requires the capacity to perform a particular claim element ... it is not enough to simply show that product is capable of infringement; the patent owner must show evidence of specific instances of direct infringement." Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1329 (Fed. Cir. 2010). In all of these cases considering whether claim limitations are drawn to capability, the Federal Circuit has repeatedly emphasized that "the language of the claims, as well as the nature of the accused product, dictates whether an infringement has occurred." Fantasy Sports, 287 F.3d at 1118. For instance, in Ball Aerosol, the court found that . "[t]he claim language clearly specifies a particular configuration," rather than mere functional capability. Ball Aersosol, 555 F.3d at 994 (emphasis added). Likewise, in Fujitsu, the court rejected the argument that the claims at issue only required capability when it concluded that the claims at issue were method claims. See Fujitsu, 620 F.3d at 1326. Thus, it appears that courts must make a threshold inquiry into the disputed claim language and decide whether the claims are directed to functional capability or instead require that certain method steps be taken or structural configurations be present.
Here, an important threshold issue to most of Defendants' specific non-infringement contentions is whether the '010 patent properly claims capability or requires actual method steps to be taken. Defendants argue that the claims of the '010 patent are not directed to capability, but instead cover structures and method steps which need to be performed or activated by customers. (D.I. 177 at 17). Defendants argue that, in the processing module limitation of claim 1, the inclusion of the words "sent from" and "received by" demonstrates that the claims cover actual events that need to be performed "and therefore, fall outside the Intel line of `capability' cases." (Id. at 17; D.I. 230 at 8-9). Defendants essentially argue that the addition of these verbs during prosecution demonstrates that these steps — sending, receiving, etc. — must physically occur before the claim limitations are met. (D.I. 177 at 17; D.I. 230 at 7-8). Moreover, Defendants rely on Fujitsu and Ball Aerosol as cases they contend involved similar claim language that courts found did not properly claim capability. (D.I. 177 at 18). Defendants therefore argue that because the claims here are not directed to capability, three steps must be taken by a user before there is any direct infringement of the method limitations: 1) the user must program the module "to receive and execute AT RUN commands in one of the two accused modes, (2) the whitelist or firewall must be programmed and populated, and (3) a user must send a single transmission including the coded number and the contact number." (Id. at 19). Thus, according to Defendants, because there is no proof that any of these three steps have been taken, there is no proof that anyone has directly infringed.
Plaintiff responds by arguing that the claims of the '010 patent are apparatus claims with functional limitations, rendering the proper legal standard to be that "an accused device that possesses the requisite functional capability infringes regardless of whether that capability is activated or utilized in any way." (D.I. 198 at 22 (internal quotation marks and alterations omitted)). Plaintiff cites a plethora of Federal Circuit cases—including Finjan, Fantasy Sports, and Intel-supporting the proposition that where an apparatus claim is stated with functional limitations, it is sufficient for purposes of infringement to show that the accused product contains structure rendering it reasonably capable of performing the recited function. (Id. at 17-20). Plaintiff distinguishes the cases relied upon by Defendants on the grounds that these cases— Fujitsu and Ball Aerosol—did not involve apparatus claims with functional limitations, but rather a method claim and an apparatus claim without any functional limitations, respectively. (Id. at 23). Accordingly, Plaintiff contends that, under the proper standard, Defendants' argument that there is no evidence that its customers actually ever enabled and used the allegedly infringing modes of operation is legally irrelevant. (Id. at 22).
Here, the '010 patent unquestionably covers an apparatus. (See, e.g., '010 patent, col. 1, ll. 22-23 ("The invention relates to a programmable wireless communications apparatus." (emphasis added)); id. claim 1 (claiming a "programmable communicator device" (emphasis added))). Each claim limitation in the two relevant independent claims, much like in Finjan, is described in terms of each component of the device's function, using the word "for." (See id. col. 12, 1. 21 ("a wireless communications circuit for communicating ... .");id. ll. 23-24 ("an identity module for storing a unique identifier ...."); id. ll. 25-26 ("a programmable interface for establishing a communication link ...."); id. l. 27 ("a processing module for authenticating...."); id. l. 38 ("a memory module for storing ....")); see also Finjan, 626 F.3d at 1204-05. The use of adjectives such as "processing," "memory," "programmable," "identity," and "communications," also suggests that each component of the device is defined in terms of its function. See Intel, 946 F.2d at 832 (suggesting that word "programmable" indicates patentee is claiming apparatus in terms of its functionality).
Defendants, however, seize on the language immediately following the "processing module" claim limitation as purportedly requiring "actual events (i.e., sending, receiving, and authenticating," thereby transforming the entire claim such that, rather than covering an apparatus, it now covers "structures and method steps" that must be performed by customers. (D.I. 177 at 17). The principal claim language Defendants rely on comes from claim 1:
Defendants essentially suggest that the Court look at the words "sent" and "received" in isolation and regard this passage as requiring that some third-party user perform all of those steps before there can be direct infringement. (D.I. 177 at 17; D.I. 230 at 7-8). The linguistic gymnastics that Defendants engage in to make this argument are hardly convincing.
The language Defendants point to in the "processing module" and "memory module" claim limitations unambiguously does not discuss the performance of method steps. With regard to the "processing module" claim limitation, "the claim recites a function, [and] the immediately following words provide algorithmic structure for performing that function." (D.I. 237 at 9). The Federal Circuit has stated that "[s]tructure may[] be provided by describing the claim limitation's operation .... [which] is more than just its function; it is how the function is achieved in the context of the invention." Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1299 (Fed. Cir. 2014). As I previously noted, it was particularly important that Plaintiff included considerable description of how the claim's stated functions are achieved in order for "`the presumption against means-plus-function claiming [to] remain[] intact.'" (D.I. 237 at 7 (quoting Apple, 757 F.3d at 1299)). I conclude that the additional language following the processing module claim limitation does not require that method steps be performed. It simply provides a description of how the claimed function is achieved in the context of the invention. See Apple, 757 F.3d at 1299. The language of the "memory module" claim limitation similarly provides additional structure to describe the operation of the stated "storing" function. (' 010 patent, col. 12, ll. 38-43). Because I conclude that the '010 patent contains apparatus claims with functional limitations, Defendants' reliance on Fijitsu and Ball Aerosol, where the courts made initial determinations that the language at issue claimed method steps and an apparatus claim without any functional limitations, respectively, is unpersuasive. See Fujitsu, 620 F.3d at 1326; Ball Aersosol, 555 F.3d at 994.
The Federal Circuit cases that allowed infringement to be based upon a showing that an accused product was reasonably capable of performing the recited function did not contain any express requirement that the words "capability" or "capable" actually be used in the claims. For instance, Defendants rely on Zygo Corp. v. Wyko Corp., 79 F.3d 1563, 1570 (Fed. Cir. 1996), for the proposition that Intel does not apply unless the claim only required capability "by its literal terms." (D.I. 177 at 16-17). The claim language in Intel, however, did not use the word "capable" or otherwise expressly refer to "capability," which the Zygo court itself noted.
Accordingly, I conclude that the claims at issue here only require capability of performing the recited function. In order to prove that the accused modules infringe the asserted claims of the '010 patent, therefore, the accused devices need only be capable of operating in the allegedly infringing modes. See Finjan, 626 F.3d at 1204. Thus, because I reject Defendants' argument that the '010 patent does not properly claim capability, they are not entitled to summary judgment on the ground that Plaintiff failed to prove that any third-party performed certain method steps.
The Federal Circuit has also made clear that, even where apparatus claims use functional language and only require the accused products to have the capability of exercising the accused function, "the apparatus as provided must be `capable' of performing the recited function, not that it might later be modified to perform that function." Typhoon Touch Techs., Inc. v. Dell, Inc., 659 F.3d 1376, 1380 (Fed. Cir. 2011). In fact, in Fantasy Sports, the Federal Circuit rejected the proposition that Intel and its progeny allow infringement to "be based upon a finding that an accused product is merely capable of being modified in a manner that infringes the claims of a patent." Fantasy Sports, 287 F.3d at 1117-18; see also Telemac Cellular Corp. v. Topp Telecomm., Inc., 247 F.3d 1316, 1330 (Fed. Cir. 2001) ("[T]hat a device is capable of being modified to operate in an infringing manner is not sufficient, by itself, to support a finding of infringement."). Accordingly, the infringement analysis of claims that require capability differs in a "situation in which an apparatus does not perform the function stated in the claim unless the apparatus is specifically so programmed or configured." Typhoon Touch, 659 F.3d at 1380.
Fantasy Sports similarly involved claims that were defined in terms of their function. See Fantasy Sports, 287 F.3d at 1118. The Federal Circuit analyzed whether the accused products were inherently capable of the infringing function as follows:
Id. The critical inquiry was whether the accused functionality was already contained in the underlying software such that it only had to be "activated," or whether the user needed to alter the code to enable the computer to use the accused functionality. See id.
The Federal Circuit clarified this standard further in Finjan, in the context of "system claims [that] recite software components with specific purposes" and therefore "describe[d] capabilities without requiring that any software components be `active' or `enabled.'" Finjan, 626 F.3d at 1204-05. There, the Federal Circuit noted that "it is undisputed that software for performing the claimed functions existed in the products when sold—in the same way that an automobile engine for propulsion exists in a car even when the car is turned off." Id. at 1205. The court in Finjan again emphasized that the critical inquiry is whether the accused functionality is "already present" in the accused products when sold, or needs to be added— versus activated—by the user. See id. The court ultimately concluded that:
Id.
Accordingly, the critical inquiry here is whether the accused modules are capable of operating in the two accused modes—SMS digest mode and TCP server mode using automatic authentication—based on what is already present in their underlying firmware. If users must modify or otherwise alter the modules to perform the accused functionality, Plaintiff cannot prove infringement. This distinction between modifying the device's functionality and merely activating functionality that the device already contains is what separates the parties.
Defendants argue that even if the '010 patent does properly claim capability, the devices as sold do not infringe because they need to be modified in order to provide the claimed functionality. (D.I. 177 at 19). They argue that the devices as sold do not operate in either of the two accused modes of operation. Instead, they argue, the user must actively modify the devices to operate that way using AT Commands, providing them with new functionality they did not previously have. (Id.). The only part of the record Defendants cite for the assertion that the modules need to be modified before they can operate in the infringing modes is the deposition testimony of Plaintiffs expert, Dr. Ray Nettleton. (D.I. 178-3 at 41, 63, 70). Accordingly, Defendants rely on Typhoon Touch for the proposition that merely having the capability of being programmed or configured to operate in the infringing mode is not sufficient to find infringement if the product needs to subsequently be altered by the user in order to infringe. (D.I. 177 at 19). Defendants thus assert that because there is no evidence that any of their customers have ever "programmed" these features, there is no proof that anyone directly infringed the '010 patent. (Id. at 7).
Plaintiff responds by reiterating that the proper legal issue to consider is whether Defendants' accused products "include structures that possess the capability of performing the recited functions." (D.I. 198 at 21). Plaintiff further contends that "because M2M is principally reading these claim elements on firmware contained in the accused products, the relevant standard is whether the accused firmware contains software program code that renders it `reasonably capable' of performing the recited functions without the need for having to `modify the underlying code.'" (Id. (quoting Finjan, 625 F.3d at 1204-05)). Accordingly, Plaintiff continues, "[w]here no modification to the software program code is required, as a matter of law the recited functional capabilities will be deemed `already present in the underlying software' such that an accused device will be found to meet the claimed functional limitations." (Id. (quoting Finjan, 625 F.3d at 1204-05)). Under this proper standard, Plaintiff contends that whether the accused products are capable of operating in the accused modes without modification is a disputed issue of material fact. (Id.).
Plaintiff relies on the testimony of its expert, Dr. Ray Nettleton, who explains that the accused products are already capable of the infringing functionalities—performing coded number authentication and utilizing a permitted callers list in the two accused modes—when sold to customers, without the need for customer modification. (D .I. 199-1 at 20, ¶ 55). Dr. Nettleton states that AT Commands
There are disputed issues of material fact precluding an award of summary judgment on this issue. Plaintiff's expert; Dr. Nettleton, as well as Defendant's Rule 30(b)(6) witness, Marco Contento, have offered testimony that characterizes AT Commands as little more than a remote control telling the accused modules to operate in a different mode-a mode they are already capable of operating in. (D.I. 199-1 at 20-22, ¶ 55-56, 60; D.I. 199-4 at 13-14, Tr. pp. 43-44). If a jury were to credit this testimony, and find that AT Commands simply activate software program code that already exists in the accused modules, Plaintiff could prove infringement by showing that the accused modules are capable of operating in the two accused modes under Finjan and Fantasy Sports. Just as in Finjan, the mere fact that users would need to activate the accused modes by sending AT Commands would "not detract from or somehow nullify the existence of the claimed structure in the accused software." Finjan, 625 F.3d at 1205.
Defendants, on the other hand, rely solely on Dr. Nettleton's responses to a line of questioning by defense counsel as purportedly conclusive proof that AT Commands "program," and therefore fundamentally modify, the accused modules. Even if I were to accept the rather strained notion that Dr. Nettleton's answers to these questions are clear admissions that AT Commands modify the accused modules,
Defendants argue that even if the Court rejects its first two non-infringement arguments-which it now has-their accused products, even after the accused modes are activated, still do not infringe. (D.I. 177 at 19-20). They raise three technical arguments, asserting that various features of its accused modules do not meet the claim limitations of the '010 patent, each of which I will consider in turn. (Id. at 20-21). Plaintiffs position is that each of these arguments "implicates material disagreements between the parties' respective expert witnesses concerning factual and claim construction matters" and are therefore "not susceptible to summary judgment." (D.I. 198 at 24). To begin, I note that is well-settled that determining whether an accused product satisfies all the elements of a patent claim, as construed by a district court, "is a question of fact, to be submitted to a jury." Markman v. Westview Instruments, Inc., 517 U.S. 370, 384 (1996) (internal quotation marks omitted).
Defendants argue that the Whitelist feature of its accused products is not a list of "permitted callers" as described in the '010 patent, because the '010 patent "requires calls from unknown numbers to be terminated,"
Defendants also argue that their accused whitelist and firewall features do not necessarily store numbers that "correspond[] to a monitoring device" as described in the claims of the '010 patent, because the accused modules do not "send outgoing alerts to numbers on the whitelist or firewall, which relate exclusively to incoming calls." (D.I. 177 at 20). Once more, Defendants' only evidence to support this contention is two deposition statements by Plaintiffs expert, Dr. Nettleton. (Id.). Plaintiff points to the expert testimony of Dr. Nettleton, who opined that the accused products meet this specific claim limitation. (D.I. 198 at 11 (citing D.I. 199-3 at 9, ¶ 10)). Specifically, Dr. Nettleton stated that "the accused white lists are capable of storing telephone numbers belonging to any type of remote device without restriction. As such, a telephone number `corresponding to an at least one monitoring device' is clearly among the types of telephone numbers that can be stored in the white lists." (D.I. 199-3 at 9, ¶ 10).
Again, because Dr. Nettleton expressly opined that the accused products meet this specific claim limitation, any statements he made that Defendants argue are inconsistent with this declaration only go to the weight that his testimony would be accorded. They do not establish the absence of a genuine issue of material fact. Defendants' argument also appears to be legally baseless, as the crux of this argument is merely a reiteration of its earlier argument that the claims of the `010 patent are not directed to functional capability, an argument that I have already rejected. (D.I. 177 at 20, D.I. 230 at 12). In any event, because there are disputed issues of material fact, Defendants are not entitled to summary judgment on this theory of non-infringement.
Defendants make several additional non-infringement arguments based on their interpretation of various terms used in this court's claim construction of the term "coded number." (D.I. 177 at 20-21). Defendants assert that this Court's construction of"coded number" requires a fixed number because the plain and ordinary meaning of "designated" "implies that something is chosen or selected." (Id. at 21; see also D.I. 94 at 9 (construing "coded number" to mean "A designated, unique sequence of characters")). Accordingly, Defendants argue that the accused MD5 cryptographic hash value (when the accused product is used in SMS digest mode) is not a fixed number, but rather "varies based on the useful text of the message being transmitted, and cannot be known before a message is received." (D.I. 177 at 21). According to Defendants, the accused features are not "known and stored beforehand" and therefore are not "designated" as described in the court's claim construction. (Id.). Defendants rely on the expert report of Dr. Seth James Nielson as support for this plain and ordinary meaning of designated. Dr. Nielson emphasizes that the MD5 hash of the useful text and the password is "computed," which, to one of skill in the art, is not the same as being "designated." (D.I. 178-4 at 16-17, ¶ ¶ 56-59). Defendants also argue that the password (when the accused product is used in TCP server mode) has "no minimum length—it can even consist of a single character." (D.I. 177 at 21). Defendants essentially contend, therefore, that a user could set a password that contained too few characters to be considered "unique," as stated in the Court's claim construction. (Id. at 21).
Plaintiff responds by presenting the expert opinion of Dr. Nettleton, who, citing the American Heritage Dictionary for the English Language, argues that the plain and ordinary meaning of "designate" is "to indicate or specify." (D.I. 199-3 at 25, ¶ 36). Plaintiff also contends that Dr. Nielson's definition of designate was, as he admitted in his deposition, derived from his "use of the English language" and otherwise "unsupported by any citation to dictionaries, reference materials, industry usages, or prior art ...." (D.I. 198 at 13 (citing D.I. 178-4 at 118-22)). Dr. Nettleton ultimately opined that, under the correct definition of "designate," an "MD5 algorithm clearly indicates or specifies a particular hash value output `coded number' that is unique for a given message input." (D.I 198 at 13 (citing D.I. 199-3 at 25, ¶ 36)). Plaintiff also argues, relying on Dr. Nettleton's testimony, that "there is no requirement in the Court's claim construction that the claimed `coded number'.needs to be `preset,' and the prosecution history teaches that the use of a `coded number' that is `preset' is merely one optional approach that is nowhere required by the patent." (Id. at 14 (emphases removed) (citing D.I. 199-3 at 26-27, ¶¶ 38, 40)). With regard to the uniqueness of the coded number, Plaintiff relies on the testimony of Dr. Nettleton, who states that the accused products are capable of using passwords of up to 50 characters in length, which is sufficiently unique, especially when compared to the 8 character PUK code
All of Defendants' non-infringement contentions relating to this Court's "coded number" construction are rebutted by Plaintiffs expert (as cited above), and therefore create genuine disputes of material fact. Accordingly, Defendants' non-infringement arguments relating to this claim term are not amenable to summary judgment.
First, Defendants argue that because there is no record evidence of any third party having operated the devices in an infringing manner, there can be no indirect infringement. (D.I. 177 at 21-22). It is clear, however, that this portion of Defendants' brief merely rehashes its argument that the '010 patent presents method steps that need to be performed rather than requiring functional capability, arguments that I already considered and rejected in Section III.A.I of this opinion. Defendants also recycle their contention that the accused modules require user modification before they are even capable of infringing (D.I. 177 at 22), which I stated was a disputed issue of material fact in Section III.A.2 of this opinion. Accordingly, I decline to consider these arguments anew here.
35 U.S.C. § 271(b) provides that "[w]hoever actively induces infringement of a patent shall be liable as an infringer." 35 U.S.C. § 271(b). "In order to prevail on an inducement claim, the patentee must establish first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement." ACCO Brands, Inc. v. ABA Locks Mfrs. Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007) (internal quotation marks omitted). In other words, "inducement requires evidence of culpable conduct, directed to encouraging another's infringement, not merely that the inducer had knowledge of the direct infringer's activities." DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc). "[S]pecific intent may be inferred from circumstantial evidence where a defendant has both knowledge of the patent and specific intent to cause the acts constituting infringement." Ricoh Co. v. Quanta Computer Inc., 550 F.3d 1325, 1342 (Fed. Cir. 2008). The knowledge requirement may be satisfied by showing actual knowledge or willful blindness. See Global-Tech Appliances, Inc. v. SEB SA., 131 S.Ct. 2060, 2068 (2011). "The requirement that the alleged infringer knew ... his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent." DSU Med. Corp. 471 F.3d at 1304.
Defendants argue that Plaintiff failed to prove the requisite specific intent to cause users to infringe. (D.I. 177 at 22). Again, however, Defendants' arguments rely on their recurring contentions that the '010 patent does not properly claim "capability." (Id. at 23 (arguing that "[t]here is no evidence that Telit encouraged or instructed customers to program the firewall or whitelist in the two accused modes of operation" and that Telit "did not `specifically intend' that any customer use the two accused modes.")). Under this line of argument, Defendants rely on the opinions of their expert, Mr. Savolainen, who opined that customers are unlikely to use the two accused modes at all. (D.I. 178-4 at 42-44).
Plaintiff, on the other hand, frames its inducement allegations in terms of product capability, consistent with its earlier arguments. (D.I. 198 at 14). Plaintiff first asserts that Defendants had knowledge of the '010 patent and the likelihood that their products infringed as a result of the filing of the complaint in this action. (Id. at 24) Under Plaintiffs infringement theory, the accused products as sold meet all claim limitations of the '010 patent except for the "wireless communications circuit" limitation, because this Court's claim construction (D.I. 94 at 15) requires the inclusion of an antenna. (D.I. 198 at 7). Plaintiffs expert, Dr. Nettleton, explained that the products as first sold do not include antennas, but contain pads or connectors specially designed for connecting the modules to antennas. (D.I. 199-1 at 15, ¶ 41). Dr. Nettleton also opined, with citations to specific documents, that "Telit provides its customers or end-users with technical literature that instructs and encourages customers or end-users to connect a GSM antenna to the module's antenna solder pad." (Id.). Plaintiff also points to the deposition testimony of Defendants' Rule 30(b)(6) witness, Marco Contento, who admitted that in order to use the accused modules at all, the modules must be physically embedded into a host device and connected to an antenna. (D.I. 199-4 at 15-16, Tr. pp. 49-50, 53-54). Under Plaintiffs theory of infringement, once an accused product is connected to an antenna—which it appears it must be in order to use it at all—"it then literally meets and embodies every limitation of' the asserted claims in the '010 patent, because the various modules then possess all of the claimed functionality. (D.I. 198 at 8). Plaintiff therefore asserts that, because Defendants sell the accused devices with knowledge that users must connect them to antennas and expressly encourage users to do so, a reasonable jury could find that Defendants had the requisite specific intent to induce infringement. (Id. at 24-25).
Because I have already concluded that the '010 patent claims functional capability, I find Defendants' arguments that they did not actively instruct users to utilize the two accused modes to be legally irrelevant. Defendants have thus not provided any convincing argument or testimony as to Plaintiff's relevant argument that they induced by selling the accused modules and instructing users to connect the modules to antennas, rendering them fully capable of the claimed functionality. Based upon Plaintiff's infringement allegations directed to this relevant inquiry, supported by the expert testimony of Dr. Nettleton, I cannot conclude that a reasonable jury would be unable to find that Defendants knowingly induced infringement by the end-users of its modules and likewise possessed the specific intent to encourage them to do so. I will therefore not grant Defendants' summary judgment motion of no induced infringement.
35 U.S.C. § 271(c) provides:
This provision "reflect[s] patent law's traditional staple of commerce doctrine ... that distribution of a component of a patented device will not violate the patent if it is suitable for use in other ways." Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 932 (2005). "In sum, where an article is good for nothing else but infringement, there is no legitimate public interest in its unlicensed availability, and there is no injustice in presuming or imputing an intent to infringe." Id. (citations and internal quotation marks omitted).
The crux of Defendants' argument as to contributory infringement is that its accused modules have substantial non-infringing uses, because they can operate in non-infringing modes. (D.I. 177 at 23-25). Yet again, however, Defendants' entire argument relies on the assumption that the '010 patent does not claim functional capability, but instead requires that the accused devices actually be operated in the infringing modes. (D.I. 230 at 14 ("M2M's sole argument ... relies implicitly on [its] argument that the module's inchoate capabilities render them infringing without further modification.")). Plaintiff, on the other hand, again points to the expert opinion of Dr. Nettleton, in arguing "that once customers connected the accused products to antennas as they admittedly must always do, the products then satisfy all of the apparatus claim limitations such that `any use' is direct infringement." (D.I. 198 at 25 (citing D.I. 199-1 at 11-12, ¶ 29)).
I have already concluded that the '010 patent properly claims functional capability, rendering Defendants' continued reliance on its argument to the contrary irrelevant. It appears undisputed that in order to use one of Defendants' accused products at all, it must be connected to an antenna. (D.I. 199-4 at 15-16, Tr. pp. 49-50, 53-54). Defendants do not otherwise argue that this is not the case. Dr. Nettleton opined that once a product is connected to an antenna, it has the full functional capability to meet all the claim limitations of the '010 patent. (D .I. 199-1 at 11-12, ¶ 29). A device properly claiming functional capability "may be found to infunge if it is reasonably capable of satisfying the claim limitations, even though it may also be capable of non-infringing modes of operation" Finjan, 626 F.3d at 1204 (quotingintel, 946 F.2d at 832). Accordingly, a reasonable jury could conclude that the accused products have no use if they are not connected to an antenna. Once a user connects an accused product to an antenna, the resulting device will contain the accused functionality, and, viewed in the light most favorable to Plaintiff, will infringe.. Summary judgment is therefore not warranted as to this issue.
The written description requirement contained in 35 U.S.C. § 112, ¶ 1 requires that the specification "clearly allow persons of ordinary skill in the art to recognize that [the inventor] invented what is claimed." Ariad Pharm., Inc., v. Eli Lilly and Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc) (alteration in original) (internal quotation marks omitted). "In other words, the test for sufficiency is whether the disclosure of the application relied upon reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date." Id. The written description inquiry is a question of fact. See id. Although it is a question of fact, "[c]ompliance with the written description requirement ... is amenable to summary judgment in cases where no reasonable fact finder could return a verdict for the non-moving party." PowerOasis, Inc. v. T-Mobile USA, Inc., 522 F.3d 1299, 1307 (Fed. Cir. 2008).
Defendants argue, relying on the Expert Report of Dr. Seth James Nielson, that "[a] person of ordinary skill in the art would know from reading the '010 patent, that Dr. Wesby was [] not in possession of a device that used an MD5 — based authentication process — and that process is
In IPXL Holding, the Federal Circuit held that when a claim "recites both a system and the method for using that system, it does not apprise a person of ordinary skill in the art of its scope, and[] is therefore [indefinite] under section 112, paragraph 2." IPXL Holding, L.L.C. v. Amazon.com, Inc., 430 F.3d 1377, 1384 (Fed. Cir. 2005). Subsequent decisions by the Federal Circuit upheld this rule where, as in IPXL, the claim language expressly required both an apparatus and that a user actually use the apparatus. See H-W Tech., L.C. v. Overstock.com, Inc., 758 F.3d 1329, 1336 (Fed. Cir. 2014) (applying this principle to claim language stating "`wherein said user completes ...' and `wherein said user selects'" (alterations in original)); In re Katz Interactive Call Processing Patent Litig., 639 F.3d 1303, 1318 (Fed. Cir. 2005) (applying this principle to claim language stating "`wherein ... callers digitally enter data' and `wherein ... callers provide ... data'" (alterations in original)). Numerous district courts have described this rule of law, however, as a narrow one, with the general understanding that "the rule does not apply to claims containing language simply describing a system as well as the capabilities of the claimed system; rather, the rule applies to claims describing a system that also require the user of the recited system to take specific action." Bayer Pharma AG v. Watson Labs, Inc., 2014 WL 4954617, at *6 (D. Del. Sept. 30, 2014) (citing various district court opinions in accord with this position).
Defendants argue that the claims of the '010 patent are improper hybrid claims, and therefore are indefinite under the IPXL Holding line of cases, because they "cover both the apparatus and its use." (D.I. 172 at 21-22). The basis of this argument is Defendants' recurring contention that claim 1 of the '010 patent recites method steps, because a transmission must be "`sent from a programming transmitter and received by the programmable communicator ...'" (Id. at 21 (alteration in original) (quoting '010 patent, claim 1)). Not surprisingly, Defendants' contentions mirror the argument made in their non-infringement motion, that the '010 patent does not properly claim capability, but rather method steps. (Id. at 22). Once more, the only expert testimony Defendants provide as to this point is what it characterizes as "admissions" from Plaintiffs expert, Dr. Nettleton, upon questioning from defense counsel. (Id.). Plaintiff responds by reiterating its argument that the '010 patent claims an apparatus with certain functional capability. (D .I. 196 at 24-25). Plaintiff cites the testimony of its expert, Dr. Konchitsky, as supporting the position that the claim language of the '010 patent provides functional limitations on the apparatus claims, rather than any method steps. (Id. at 24 (citing D.I. 197-6 at 3, ¶ 3)). Likewise, Plaintiff points to testimony by Dr. Nettleton where he clearly states that claim 1 "does not describe a process. It describes a module with certain capabilities," expressly correcting Defendants' counsel for saying the claim described a "process." (D.I. 197-7 at 3-4).
At oral argument, Defendants' counsel conceded that the viability of their indefiniteness position would rise and fall with the Court's disposition as to the issue of whether the '010 patent properly claims functional capability, which Defendants had already raised and argued in their non-infringement motion. (D.I. 245 at 175). Indeed, the two arguments rely on an identical premise, that claim 1 of the '010 patent requires a user to perform method steps. Because I have already held that this claim language properly claims functional capability, as opposed to method steps, Defendants' indefiniteness argument merits no relief for the same reasons already stated herein. In any event, it is also clear that—unlike in IPXL, Katz, and H-W Tech.—the contested portion of the '010 patent here definitively does not describe an actual user or other third party performing certain actions. ('010 patent, claim 1 ("a processing module for authenticating an at least one transmission sent from a programming transmitter and received by the programmable communicator device ....")). The "narrow" IPXL line of cases, therefore, does not apply here, because the claims do not "require the user of the recited system to take specific action." Bayer Pharma, 2014 WL 4954617, at *6. Accordingly, Defendants' indefiniteness contentions do not warrant summary judgment.
Defendants bring a Motion for Summary Judgment Related to Damages (D.I. 165), which raises three separate issues. The motion is fully briefed. (D.I. 166, 202, 226). First, Defendants argue that they are entitled to summary judgment of no willful infringement. (D.I. 166 at 15-16). Second, Defendants move for summary judgment of no infringement by products made and shipped outside the U.S. (Id. at 17-20). Third, Defendants move for summary judgment of no infringement by Telit Communications PLC, the British parent company of Telit U.S. (Id. at 21-24).
By way of brief background, Telit Communications PLC ("PLC") is a public limited company established in 2004 under the laws of the United Kingdom, with its principal place of business in London. (D.I. 1 at ¶ 3, D.I. 167-1 at 2, ¶ 3). Telit U.S. is a Delaware corporation within its principal place of business in North Carolina. (D.I. 1 at 2, ¶ 4). PLC is a holding company that holds all the trading companies of Telit that are established in various countries, including the United States, Italy, Israel, and Korea. (D.I. 167-2 at 3, Tr. pp. 27-28). Accordingly, Telit U.S. is a wholly-owned U.S. subsidiary of PLC. (Id. at 3, Tr. p. 27).
In order to show willful infringement, a patentee must meet the two-part test set forth by the Federal Circuit in Seagate. See In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc).
If the first prong is met, "the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer." Seagate; 497 F.3d at 1371. The second prongis a fact question reviewed for substantial evidence. See SSL Servs., LLC v. Citrix Systems, Inc., 769 F.3d 1073, 1090-91 (Fed. Cir. 2014). If a court finds for the alleged infringer with regard to the first prong, "it cannot send the question of willfulness to the jury, since proving the objective prong is a predicate to consideration of the subjective prong." Powell v. Home Depot US.A., Inc., 663 F.3d 1221, 1236 (Fed. Cir. 2011).
With regard to post-suit willfulness, the Federal Circuit explained in Seagate:
Seagate, 497 F.3d at 1374 (citations omitted).
Here, Defendants argue that Plaintiffs cannot meet the "objective recklessness" standard from Seagate, particularly in light of the fact that there is no evidence of pre-suit knowledge or recklessness. The '010 patent issued only three days before Plaintiff filed suit. (D.I. 166 at 16). Defendants argue further that their post-suit conduct does not meet the objective recklessness standard due to the reasonableness of their claim construction, non-infringement, and invalidity defenses. (Id.). Plaintiff conceded at oral argument that its willful infringement claim is based solely upon post-litigation conduct. (D.I. 245 at 134). Plaintiffs argument for willfulness simply goes through each of the defenses Defendants have raised at some point during this litigation and argues why they are unreasonable. (D.I. 202 at 9-10).
The '010 patent issued on January 10, 2012 and Plaintiff filed its Complaint three days later on January 13, 2012. (D.I. 1). Plaintiff did not subsequently move for a preliminary injunction at any point. Accordingly, "[a] patentee who does not attempt to stop an accused infringer's activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer's post-filing conduct." Seagate, 497 F.3d at 1374. To allow a finding of willfulness based solely on post-suit conduct, with nothing more, would punish litigants with the risk of enhanced damages simply for choosing to defend a case on the merits. See LML Holdings, Inc. v. Pac. Coast Distrib., Inc., 2012 WL 1965878, at *5 (N.D. Cal. May 30, 2012). Plaintiff presents no evidence of pre-suit knowledge or conduct tending to establish objective recklessness. Plaintiff simply argues the merits of Defendants' post-suit defenses. It has therefore not provided the necessary clear and convincing evidence to meet the objective first prong of Seagate.
"The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law." Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 454-55 (2007). "It is the general rule under United States patent law that no infringement occurs when a patented product is made and sold in another country." Id. at 441; see also Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F.3d 1348, 1371 (Fed. Cir. 2013) ("It is axiomatic that U.S. patent law does not operate extra territorially to prohibit infringement abroad.").
"Because contributory infringement has the same territorial requirements as direct infringement, [a] Court's analysis with respect to direct infringement applies." Largan Precision Co. v. Genius Elec. Optical Co., 86 F.Supp.3d 1105, 1117 (N.D. Cal. 2015). The Federal Circuit has "not deemed a sale to have occurred within the United States for purposes of liability under§ 271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction occurred wholly outside the United States." Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1378 (Fed. Cir. 2014), cert. granted on other grounds, 136 S.Ct. 356 (2015). "For such a sale, one must examine whether the activities in the United States are sufficient to constitute a `sale' under§ 271(a), recognizing that a strong policy against extra territorial liability exists in the patent law." Id. In Halo, a case "where the negotiations occurred in the United States, but the contemplated safe occurred outside the United States," the Federal Circuit held that a sale had not occurred for purposes of§ 271(a) where "the products under discussion were manufactured, shipped, and delivered to buyers abroad." Id. at 1381, 1379. Despite the plaintiffs argument in Halo that negotiations and contracting activity took place in the United States, the Federal Circuit found this insufficient, stating that "[a]ny doubt as to whether [Defendant's] contracting activities in the United States constituted a sale within the United States under§ 271(a) is resolved by the presumption against extraterritorial application of United States laws." Id. at 1380.
Although the Federal Circuit in Halo did "not reach [the plaintiffs] argument that the place where a contract for sale is legally formed can itself be determinative as to whether a sale has occurred in the United States,"
"An offer to sell is a distinct act of infringement separate from an actual sale. An offer to sell differs from a sale in that an offer to sell need not be accepted to constitute an act of infringement." Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1308 (Fed. Cir. 2010). With regard to "offers to sell," the Federal Circuit has stated that:
Halo, 769 F.3d at 1381. Accordingly, "[t]he focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer." Transocean, 617 F.3d at 1309. In Transocean, the Federal Circuit held that an offer made in Norway by a U.S. company to sell a patented invention to another U.S. company for delivery and use in the U.S. constituted an offer to sell under§ 271(a). See id. Likewise, in Halo, "where the negotiations occurred in the United States, but the contemplated sale occurred outside of the United States," the Federal Circuit concluded that "[Defendant] did not directly infringe the[] patents under the `offer to sell' provision by offering to sell in the United States the products at issue, because the locations of the contemplated sales were outside the United States." Halo, 769 F.3d at 1381.
Here, it is undisputed that all of Defendants' accused products are manufactured outside of the U.S. (D.I. 242 at 1; D.I. 167-2 at 157). The parties also agree that there are two subsets of accused products. The first category of accused products are those which are directly shipped to a U.S. location. Neither party contests that this subset of products reaches the United States, and they are therefore not the subject matter of the present motion. (D.I. 202 at 11; D.I. 245 at 135). However, there is a second subset of products which, despite the order being booked by Telit U.S. and payment being received in the U.S., the customer requests that the accused products be shipped to a contract manufacturer abroad. (D.I. 167-2 at 76-77; D.I. 202 at 11). Defendants' records list the address where each customer requested the purchased products be shipped. (D.I. 205-3). Plaintiff's damages expert, Richard Bero,
Specifically, with regard to its contributory infringement claim, Defendants argue that for the products manufactured and shipped abroad there was no "sale" within the U.S under governing case law, because the location of manufacture and shipment designates where the sale took place. (D.I. 166 at 17-18). Defendants further contend that negotiations and contracting within the United States, even by two U.S. companies, does not constitute a sale under § 271 when those contracts agree on delivery and performance outside of the United States, (Id. at 18). Likewise, Defendants assert that an offer to sell, in order to constitute infringement, must ultimately contemplate sale in the United States rather than a foreign country. (Id. at 19). Defendants emphasize throughout their briefing that Plaintiff "has not identified any evidence that products delivered abroad were ever imported into the U.S." (Id.). Accordingly, Defendants argue that without proof that any products from this subset of accused products entered the U.S., the presumption against extraterritoriality should prevent the Plaintiff from including the foreign sale of those products in its damages calculation. (Id. at 17). With regard to Plaintiffs inducement claim, Defendants argue that even if its accused products were imported into the U.S. by third parties, Telit U.S. itself neither imported these accused products into the U.S. nor induced or otherwise intended that third parties import its accused products into the U.S. after being delivered abroad. (Id. at 19-20). In Defendants' view, once Telit U.S. completes its delivery obligations, it has no control over where its products are shipped thereafter and has no obligation to track where its products ultimately end up. (Id. at 20).
Plaintiff characterizes the issue before the Court differently, as "seeking to hold Telit accountable for products it sells to U.S. customers even though some of those products are shipped by Telit to a facility abroad prior to being imported into the United States." (D.I. 202 at 10 (emphasis added)). The key difference here is that Plaintiff argues there is evidence on the record that those products that are ordered in the U.S. and shipped abroad are eventually imported into the United States, meaning there is a "classic factual dispute" about the amount of products shipped abroad that eventually reach the United States. (Id.). Plaintiff points to the testimony of Defendants' Rule 30(b)(6) representative, Yariv Dafua, as admitting that some products are delivered to foreign contract manufacturers to be embedded into machines before being imported back into the U.S. (Id. at 11 (citing D.I. 205-1 at 15, Tr. pp. 51:5-53:6)). Based on these "admissions," Plaintiff contends, there is a factual dispute about how many accused products were imported into the U.S. after being embedded into end products. (Id.). Plaintiff purports to prove how many of such products reached the U.S. by presenting testimony to the Jury concerning:
(Id. at 11-12 (citations omitted)).
The problem with Plaintiffs argument, however, is that Defendant's Rule 30(b)(6) representative never actually stated that the products shipped abroad are eventually imported into the U.S. or that Defendants are aware of that happening. In the deposition passage Plaintiff cites for this proposition, Mr. Yafua merely states that sometimes U.S. customers ask for the modules to be shipped directly to the customer's contract manufacturer abroad. (D.I. 205-1 at 15, Tr. pp. 51:5-53:6). He says nothing indicating that the products, once incorporated into an end product by the contract manufacturer, reach the United States or that Defendants know or intend for these products to reach the United States.
Much like in Halo, Ziptronix, and Lake Cherokee-with regard to the products shipped abroad-the present matter concerns domestic contracts for foreign sales. See Halo, 769 F.3d at 1379; Ziptronix, 71 F. Supp. 3d at 1096; Lake Cherokee, 964 F. Supp. 2d at 657-58. Accordingly, the actual "sales" here occurred abroad. Likewise, with regard to an "offer to sell," because the focus is not on "the location of the offer, but rather the location of the future sale that would occur pursuant to the offer," Plaintiff cannot prove an infringing offer to sell by merely relying on the fact that Defendants offered to sell their accused products through their U.S. subsidiary. Transocean, 617 F.3d at 1309; see also Halo, 769 F.3d at 1381. Moreover, unlike in Lake Cherokee, Plaintiff here has not presented an estimate, whether by expert testimony or some other evidence, as to how many of the accused products shipped abroad ultimately made it into the U.S. See Lake Cherokee, 964 F. Supp. 2d at 657-58. When such an estimate was offered, the Court in Lake Cherokee denied summary judgment as to the 23 % of accused products the plaintiffs expert estimated made their way into the U.S., because this testimony created a genuine issue of material fact for a jury to consider. See id. at 658. Here, however, neither Plaintiff nor its expert provides any such breakdown. Instead, Plaintiff seeks damages on all products shipped abroad by vaguely asserting that it should be Defendants' burden to prove which products were not later imported to the U.S. (D.I. 167-2 at 157; D.I. 202 at 10-12; D.I. 241 at 1-2). Each of the four categories of evidence Plaintiff purports to present to the jury on this issue do not actually identify any genuine issues of material fact, for the reasons discussed below.
First, Plaintiffs suggestion that it will present facts to the jury concerning "Telit's willful lack of tracking of where its products end up" is perplexing. (D.I. 202 at 11). The suggestion that once Telit U.S. has delivered its products to the location requested by a customer it should be required to track where its products end up after being incorporated into other finished products—even when handled by multiple contract manufacturers—finds no basis in the law. At oral argument (D.I. 245 at 158-59), Plaintiff raised the argument for the first time that Beatrice Foods Co. v. New England Printing & Lithographing Co., 899 F.2d 1171 (Fed. Cir. 1990), stood for the proposition that "fundamental principles of justice require [the court] to throw any risk of uncertainty [in calculating damages] upon the wrongdoer rather than upon the injured party."
Second, and relatedly, Plaintiff purports to present information to the jury concerning "Telit's own documents that identify for each of these transactions the U.S. customer placing the order with the U.S. point of contact." (D.I. 202 at 11-12 (citing D.I. 205-3)). It is difficult to see what this document would prove to the jury aside from what is already agreed upon by the parties: that Telit U.S. entered into contracts in the United States to ship products both to the United States and to contract manufacturers abroad. Defendants kept records of purchases by their customers during the relevant time periods, which show where the products were shipped, and they produced them in this litigation. (D.I. 203-5). As Defendants correctly point out, Plaintiff could have taken some third-party discovery of these customers to prove that at least some accused products were eventually imported into the U.S. (D.I. 242 at 2). Even a few concrete examples of accused products shipped abroad coming into the U.S. could conceivably have provided Plaintiff's expert with a reasonable basis to estimate how many accused products eventually made it into the U.S. Instead, no such discovery was taken and Plaintiff has no evidence of products coming into the U.S. to present to the jury.
Third, Plaintiff also purports to tell the jury about "Telit's practice of booking [] these sales through its U.S. subsidiary, [indicating] the products are meant for[] a U.S. customer as a multinational company intending use outside of the U.S. would be able to place the order with a non-U.S. Telit entity." (D.I. 202 at 12). This line of argument essentially suggests that because the sales were booked through Telit's U.S. subsidiary, as opposed to one of its other foreign subsidiaries, the Court should assume that all of the accused products purchased from Telit U.S. but shipped abroad eventually made it to the U.S. While it seems plausible that some accused products did make it into the U.S. as part of finished products, it seems just as plausible that a considerable amount of the products shipped abroad remained abroad. Yet Plaintiff argues for the inclusion in its damages calculation of all accused products shipped abroad, without offering proof that a single product shipped abroad was ever imported to the U.S. Under Plaintiffs line of argument, any contract of sale entered into by a U.S. subsidiary where the parent company has other foreign subsidiaries selling its products would automatically be considered a sale or offer to sell in the United States, even if no products ever entered the United States. Supreme Court precedent is clear, however, that the presumption against extraterritoriality is not so easily defeated. See Morrison v. Nat'! Australia Bank Ltd., 561 U.S. 247, 266 (2010) ("But the presumption against extraterritorial application [of federal law] would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case."); Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 454-55 (2007) ("The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.").
In the context of inducement claims, other district courts have likewise rejected the argument that a mere likelihood or possibility that component parts manufactured and shipped abroad will be imported to the United States is sufficient to sustain a claim for inducement. See, e.g., Largan, 86 F. Supp. 3d at 1118 ("[Defendant] does not have insight into [other companies'] supply chain after it sells its lenses to the module integrators, and has no idea whether its lenses go into products sold in the United States.... [Therefore Defendant] lacked the requisite `knowledge that the induced acts constitute patent infringement,' because the ... end products using its lenses could all be sold outside the United States, where they would not infringe, ..."); MeadWestvaco Corp. v. Rexam PLC, 2012 U.S. District LEXIS 189304, at *95 (E.D. Va. Apr. 12, 2012) ("Nonetheless, it is possible that some pumps were sold to clients who may import their fragrance products containing these pumps into the United States. However, [Plaintiff] fails to present evidence establishing that such importation in fact took place.").
Fourth, Plaintiff purports to tell the jury about "Telit's own testimony that it relies on information from ABI Research to determine the number of Telit products actually entering the U.S." (D.I. 202 at 11). Defendants respond that the ABI document was merely mentioned in a Telit PowerPoint slide, which references a 2011 estimate of the total North American market for similar products in the industry. (D.I. 242 at 2). More importantly, however, Defendants point out that "[n]o expert or fact witness has ever testified about that ABI document (which is hearsay in any event) ...." (Id. at 2). Without delving into the more extensive substantive criticisms levied by Defendants against the reliability of using the ABI data here, I observe that Plaintiff has not actually stated how it would use the data to come to a reasonable estimate of how many products shipped abroad actually reach the United States. Plaintiff's reference to ABI data essentially amounts to a broad suggestion that it will come up with a damages theory using the ABI data by the time a trial comes around. In doing so, Plaintiffs references to ABI data do not establish that there exists a genuine issue of material fact, because it has not explained, aside from the broad assertion that ABI data exists concerning the overall market in North America, how it can use the ABI data to prove to a reasonable jury could how many accused products shipped abroad made it into the United States, if any.
At bottom, while Plaintiff describes the amount of such products eventually reaching the U.S. as a "classic factual dispute," it offers no evidence through which a jury could quantify, for purposes of calculating damages, how many of those products shipped abroad actually made it into the United States, if any. This failure of proof is highlighted by the fact that Plaintiff, and its expert Mr. Bero, employ an all-or-nothing approach. Rather than providing an estimate of how many of these products enter the U.S. based on some reasonable projection grounded in facts, Plaintiff seeks to include all products shipped abroad in its damages calculation without proving that a single product shipped abroad actually made into the U.S. As Supreme Court precedent makes clear, "[a]ny doubt regarding whether conduct falls outside the purview of United States patent law should be resolved by the presumption against extraterritoriality." Lake Cherokee, 964 F. Supp. 2d at 655-56 (citing Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454 (2007)). Accordingly, because Plaintiff has failed.to offer a shred of evidence that a single product shipped abroad, let alone all of them, made it into the U.S., the presumption against the extraterritorial application of U.S. patent law must govern. I will therefore grant Defendants' Motion for Summary Judgment of no infringement by products made and shipped outside of the U.S.
Defendants argue that there is no legal justification to keep Telit Communications PLC ("PLC"), a foreign parent corporation of Telit Wireless Solutions, Inc. ("Telit U.S."), as a part of this lawsuit, because the crux of Plaintiff's reasoning for including PLC as a defendant is merely that "PLC is the `ultimate parent' of its `wholly owned subsidiary,' Telit US." (D.I. 166 at 22). More specifically, Defendants argue that `"substantial' or `exceptional' reasons must exist to disregard the corporate form," and that Plaintiff, the party alleging PLC's liability, bears the burden of proof that there are such compelling reasons to do so. (Id.). Defendants further contend that to rely on veil piercing theories, Plaintiff must prove fraud or something like it, such as a lack of attention to corporate formalities or that the corporate parent exercises complete domination and control over its subsidiary, which Plaintiff does not even purport to allege here. (Id. at 22-23). Accordingly, Defendants' principal argument is that, because there is no evidence that PLC sells, offers to sell, or imports any product to the United States, and because Plaintiff has not adequately alleged exceptional circumstances such that PLC should be held liable for the sales of its subsidiary, PLC cannot be held liable for contributory or induced infringement. (Id. at 22-24).
While not so clearly presented, the Court perceives that Plaintiff is essentially asserting two arguments as to why PLC should remain part of the litigation.
First, Plaintiff argues that PLC should be held responsible for all of Telit U.S.'s sales, because "all of Defendants' activities operate under a single entity, that being Telit PLC." (D.I. 202 at 12). Plaintiff cites several publicly available documents to support this contention, including a — Telit.Wireless Solutions Company Fact Sheet (D.I. 205-4), a 2011 PLC Annual Report (D.I. 205-6, 205-7), and various portions of the website Telit.com (D.I. 205-5, 205-8, 205-9, 205-10, 205-11, 205-12). (D.I. 202 at 12-14). In particular, Plaintiff emphasizes a statement on the — Fact Sheet that "`Telit Wireless Solutions is a brand of Telit Communications PLC'" and the fact that the Telit website "bears a Telit Communications PLC copyright stamp, [and] provides Telit Communications PLC corporate information as `Telit' information in its `About Us' and `FAQ' pages." (D.I 202 at 12, 15 (citing D.I. 205-4)). The bulk of Plaintiffs remaining arguments essentially assume that because there is "little distinction" in the cited materials and on the Telit website between PLC and Telit U.S., any and all statements generally referring to "Telit" on both mediums are attributable to the PLC parent corporation. (Id. at 12-14). Plaintiffs argument is best summarized by its own statement that, "[a]s M2M Solutions contends that Telit PLC has total control over Telit Inc., M2M Solutions is seeking to hold Telit PLC liable for Telit Inc.'s sales." (Id. at 16). Accordingly, although Plaintiff does not cite any legal authority nor make any true legal arguments that the Coµrt should ignore corporate formalities, I will assume for purposes of argument that this is what Plaintiffs briefing is attempting to suggest.
Second, Plaintiff separately argues, albeit briefly, that PLC is directly "liable for inducement by providing customer support, service, and technical documents teaching U.S. customers how to infringe." (Id.). The underlying evidence that Plaintiffs cite to support the allegation of PLC's inducement, however, relies on the assumption that the Telit website is solely PLC's website, because Plaintiff begins repeatedly referring to the Telit website exclusively as "Telit PLC's website." (D.I. 202 at 13-14). In this vein, Plaintiff argues that Telit.com provides "access to a support forum, access to technical training videos, offers for product technical support, and offers for services technical support," along with. "readily available technical literature." (Id. at 13-16).
Defendants respond by pointing to the testimony of PLC's Senior Vice President, who explains that PLC does not author any technical documents, distribute any technical documents or products to the U.S., or provide any technical support to persons in the U.S. (D.I. 166 at 13 (citing D.I. 167-1 at 4, ¶¶ 7-11)). Further, Defendants argue that the Telit website is not owned and operated by PLC, and that even if it were, that the summarized information presented on a company's website does not alter its corporate structures. (D.I. 226 at 11). Finally, Defendants argue that even if the Telit website were attributable to PLC, Plaintiff's vague allegations of PLC's technical support and marketing activities, based on information provided on its website, are not sufficient to prove inducement. (D.I. 166 at 21; D.I. 226 at 11).
The Federal Circuit recently cautioned that district courts should be careful not to conflate the issue of derivative liability for the act of another entity, such as a subsidiary, with arguments that a parent corporation is directly liable for inducement. See Astornet Techs., Inc. v. BAE Sys., Inc., 802 F.2d 1271, 1278-80 (Fed. Cir. 2015). The Court explained that, "without regard to veil piercing, [Defendant] could be directly liable for its own wrongful acts of inducement . . . . [T]he issue is whether the defendant's own conduct meets the standards for inducement, including the requirements for inducing acts with the requisite intent." Id. at.1279. Accordingly, I will separately consider both a) whether PLC can be held liable for contributory infringement under an alter ego theory based on the sales of its U.S. subsidiary, and b) whether PLC can be held directly liable for inducement under § 271 (b).
"Under ordinary circumstances, a parent corporation will not be held liable for the obligations of its subsidiary. Limited liability is the general rule, not the exception." Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp. 260, 270 (D. Del. 1989) (citation omitted); see also U.S. v. Bestfoods, 524 U.S. 51, 61 (1998) ("It is a general principle of corporate law deeply ingrained in our economic and legal systems that a parent corporation (so-called because of control through ownership of another corporation's stock) is not liable for the acts of its subsidiaries." (internal quotation marks omitted)). "Disregard of the corporate entity is appropriate only in exceptional circumstances. Since it is the exceptional instance where a court will disregard the corporate form, the party who wishes the court to disregard that form bears the burden of proving that there are substantial reasons for doing so." Mobil Oil, 718 F. Supp. at 270 (citations and internal quotation marks omitted). If such exceptional circumstances are proven in a patent case, "[a] parent corporation that directs the allegedly infringing activity of a subsidiary can be liable for its subsidiary's infringement." Intellectual Ventures I LLC v. Toshiba Corp., 66 F.Supp.3d 495, 498 (D. Del. 2014).
Different terminology is often used "in considering whether a parent corporation will be held liable for the actions of its subsidiary .... `alter ego theory' is often used interchangeably with such expressions as `disregarding the corporate entity' and `piercing the corporate veil. "`
Id. When proceeding against a parent corporation under such a theory in a patent infringement action, "[s]imply being a wholly-owned subsidiary of a parent corporation alone does not make the subsidiary the agent of its parent; rather, a parent corporation will be held liable for the activities of the subsidiary only if the parent dominates those activities." Intellectual Ventures I, 66 F. Supp. 3d at 498 (internal quotation marks omitted).
It is clear to the Court that Plaintiff's contributory infringement claim against PLC depends entirely on its alter ego argument, and Plaintiff seems to concede as much. (D.I. 202 at 17 (arguing that "the same knowledge Telit Inc. had applies to Telit PLC" and "Defendants' products sales in the United States, and therefore liability for contributory infringement, should be attributed to Telit PLC.")). Plaintiff has made no argument nor pointed to any evidence of record, to suggest that PLC independently "offers to sell or sells within the United States, or imports into the United States" any products or components at all, as required to prove contributory infringement. See 35 U.S.C. § 271(c). Accordingly, the only way a contributory infringement action against PLC could survive would be if Plaintiff adequately proved that PLC should be held liable for Telit U.S.'s sales as a parent corporation under its alter ego theory.
With regard to its blanket suggestion that all of Telit U.S.'s sales should also be attributable to PLC, Plaintiff does not point to any evidence suggesting a lack of attention to corporate formalities between PLC and Telit U.S. or that PLC otherwise exercises complete domination or control over Telit U.S. See Intellectual Ventures I, 66 F. Supp. 3d at 498; Mobil Oil, 718 F. Supp. at 266. In fact, Plaintiff does not even suggest that PLC directly plays any role in the sales efforts or importation of the allegedly infringing products, aside from the bare assertion that it is the ultimate parent of Telit U.S. The general informational statements Plaintiff points to from the Telit website,
The only evidence that Plaintiff presents to support its contention that PLC directly induces infringement is that Telit's website provides "technical documents" as well as "access to a support forum, access to technical training videos, offers for product technical support, and offers for services technical support." (D.I. 202 at 14). The rest of Plaintiffs purportedly separate inducement arguments revert back to the same alter ego arguments that the Court has already found insufficient with regard to contributory infringement. (Id. at 12-16). In fact, Plaintiffs inducement argument relies entirely on the assumption that the Telit website is owned and operated by PLC, which Plaintiff bases on a PLC copyright stamp and the inclusion of PLC corporate information on the website. (Id. at 15). I am mindful however, that "[m]aintenance of an informational website does not pass muster for the required showing of control or direction." Intellectual Ventures I LLC v. Nikon Corp., 935 F.Supp.2d 787, 795 n.5 (D. Del. 2013); see also supra note 23.
Defendants, on the other hand, provided actual evidence, in the form of a domain name registration page, that the Telit website is not owned and operated by PLC, but rather by Telit Communications S.p.A., an Italian company. (D.I. 227-1 at 36, 41). Moreover, Defendants also provided a sworn statement from PLC's Senior Vice President, Yariv Dafua, stating that PLC does not author any technical documents, distribute any technical documents or products to the U.S., or provide any technical support to persons in the U.S. (D.I 167-1 at 4, ¶ ¶ 7-11). Accordingly, even if all the statements and technical support provided on the Telit website were sufficient to establish inducement, it is undisputed factually-as all that Plaintiff presents to the contrary is mere attorney argument-that the Telit website is not attributable to PLC.
Even if I were to accept for purposes of argument that all the materials on the Telit website are attributable to PLC, Plaintiff does not present adequate evidence for the Court to discern how PLC engaged in "culpable conduct, directed to encouraging another's infringement." See DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc). Plaintiffs theory of infringement is that the accused products do not infringe as sold, but once they are connected to an antenna they meet all the relevant claim limitations. Under this theory, in order to demonstrate facts suggesting "an affirmative act to encourage infringement," Plaintiff would have to point to specific evidence of literature directing the user to hook its product up to an antenna, which would then make its products infringing devices. See Info-Hold, Inc. v. Muzak LLC, 783 F.3d 1365, 1372 (Fed. Cir. 2015). While Plaintiff provides general citations to three portions of the Telit website with product descriptions and links to various user guides (D.I. 202 at 14 (citing D.I. 205-10, 205-11, 205-12)), Plaintiff fails to include the actual user guides in the record, fails to cite specific portions of any of the numerous user guides, and does not adequately explain how any single piece of literature on the Telit website demonstrates to users how to use its products to infringe under its current theory. Plaintiffs general references to the existence of technical literature, a support forum, and technical support on the Telit website, therefore do not create genuine issues of material fact as to PLC's inducement. The mere possibility that documents teaching users to infringe exist among the large multitude of documents available on the Telit website is immaterial because Plaintiff has failed to meet its burden of showing that a fact is genuinely disputed by "citing to particular parts of materials in the record."
After the close of discovery, the fact that Plaintiffs are relying solely on stray statements on the.Telit website and annual reports to justify PLC's continued presence in this lawsuit is telling. Because Plaintiff has presented insufficient record facts to support its contributory infringement and inducement claims against PLC, Defendant PLC is entitled to judgment as a matter of law of non-infringement.
For the reasons set forth above, the Court will grant Defendants' Motion for Summary. Judgment Related to Damages (D.I. 165) in its entirety, and will deny Defendants' Motion for Summary Judgment of Invalidity (D.I. 171) and Motion for Summary Judgment of Non-Infringement (D.I. 175) in their entirety. A separate order, consistent with this Memorandum Opinion, will be entered.
(D.I. 178-3 at 41, Tr. p. 16:16-24). Notably, the word "program" in this exchange comes from defense counsel.
