January Federal Circuit Review

January 2017

Supreme Court Overturns Federal Circuit on Apportionment of Design Patent Damages

Samsung Electronics Co., Ltd. v. Apple, Inc., No. 15-777 (S. Ct. Dec. 6, 2016)

In Samsung v. Apple, the Supreme Court held that with respect to the statute permitting a design patent plaintiff to recover a defendant’s total profits of an infringing article of manufacture, the term “article of manufacture” may refer to a component within a multicomponent product, such as a smartphone.

Apple sued Samsung in 2011 for infringement of three related design patents directed to ornamental aspects of Apple’s iPhone product, including its rounded, rectangular face and grid of icons. The district court found Samsung liable for infringement of Apple’s design patents, calculated the damages to be Samsung’s total profits earned in connection with the infringing smartphone and tablet products. Samsung appealed to first to the Federal Circuit, and then to the Supreme Court.

Before the Supreme Court, Samsung argued that the phrase “article of manufacture” should have the same meaning as the term “article” used elsewhere in the Patent Act. Designs applied to “articles” may be eligible for design patent protection, and courts have long permitted the issuance of design patents covering particular components of a multi component product (such as a smartphone screen). If a design patent is directed to the design of only one component of a product, a plaintiff should only be able to recover the percentage of profits attributable to that infringing component, and not the total profits generated by the entire product.

Apple countered that section 289 of the Patent Act, regarding design patent damages, was enacted by Congress in 1887 to override the common law rule that design patent damages were only available on the portion of the defendant’s profits that the plaintiff could prove were attributable to the use of the infringing design. Thus, the legislative history of the Act taught that damages should not be apportioned to one component of a multi-component product.

The Supreme Court agreed with Samsung and found that the term “article of manufacture” could apply either to a product sold to a consumer, or a component of that product, whether sold separately or not. The Court demurred on appropriate test for determining whether a component may be separately identified as an “article” for the purposes of damages, and remanded consideration of that question to the Federal Circuit.

Key Takeaways: Where a design patent covers only one component of a multi-component product, an accused infringer may be liable only for the portion its total profits attributable to that component. The Supreme Court has left it to the Federal Circuit to determine the appropriate test for identifying the relevant “article of manufacture” forming the basis for design patent damages.

 

CAFC Affirms Default Judgment of Patent Infringement Issued by District Court as Rule 37 Discovery Sanction

United Construction Prods., Inc. v. Tile Tech, Inc., No. 2016-1392 (Fed. Cir. Dec. 15, 2016)

In United Construction, the Federal Circuit affirmed the issuance of default judgment of patent infringement as a sanction for failing to respond to discovery requests or to comply with court orders.

United Construction sued Tile Tech alleging infringement of a Patent directed to support pedestals having anchoring washers for securing elevated tiles. Over two years of litigation, Tile Tech failed to respond to discovery requests, attempted to delay discovery conferences and missed agreed-upon deadlines to produce documents. Following a motion to compel filed by United Construction, the court imposed monetary sanctions, ordered Tile Tech to respond to discovery requests and threatened to enter default judgment if Tile Tech failed to comply. Tile Tech did not respond to the district court’s order. Though Tile Tech had identified no witnesses during discovery and produced only two responsive documents, it sought to introduce at trial previously undisclosed expert testimony, identified over a dozen trial exhibits and a dozen potential trial witnesses. Tile Tech also failed to respond to United Construction’s amended complaint, and admitted to the destruction of a previously undisclosed mold used to make a key component of the accused system. The court levied additional sanctions for spoliation and entered default judgment, granted relief for all of United Construction’s claims and issuing a permanent injunction.

Tile Tech argued on appeal that the infringement judgment was inappropriate due to a lack of bad faith, attributing its conduct to various unforeseen difficulties. Tile Tech further argued that the injunction was overly broad since it barred possession of “substantially similar” products in addition to directly infringing products, and further ordered an equitable forfeiture of existing property to the plaintiff.

The Federal Circuit found the sanctions to be appropriate under Ninth Circuit law, which it applied because the question was not unique to patent law and thus was judged under the law of the regional circuit. While the district court declined to find bad faith, such sanctions may also be supported on willfulness, which the Ninth Circuit defines to include disobedient conduct not shown to be outside the control of the litigant. The Federal Circuit also found that patent permanent injunctions are generally appropriate where they prohibit infringement by devices not more than colorably different than the accused product. The requirement to surrender any mold or device used with the accused product was also an acceptable means of preventing future infringement.

Key Takeaways: Default judgment of patent infringement may be an appropriate sanction for willful litigation misconduct that is sufficiently continuous and severe. Additional sanctions may include broad permanent injunctions and the surrender of equipment and devices that may be used in the infringement of a patent. Defendants should always work diligently to comply with discovery norms and court orders, to minimize the risk to their business.

 

Patent Owner Failed to Produce Evidence that Steps of Claimed Method Were Attributable to Accused Infringer in Divided Infringement Case

Medgraph, Inc. v. Medtronic, Inc., No. 2015-2019 (Fed. Cir. Dec. 13, 2016)

In Medgraph, the patent owner failed to prove that all steps of a claimed method were performed by, or attributable to, the accused infringer, where there was no evidence that third party doctors and patients had actually infringed any of the method steps the claim required them to perform, and no benefit was conditioned on the performance of the method steps. Because of this lack of evidence, the Federal Circuit affirmed the district court’s finding of no infringement without requiring remand, despite a change in the law regarding divided infringement during the pendency of the appeal.

Medgraph sued Medtronic, Inc. for infringement of two patents directed to a method for improving and facilitating diagnosis and treatment of patients. Medtronic sought summary judgment on the grounds that the claims required performance of certain steps by patients and doctors in addition to steps performed by Medtronic. Under Federal Circuit precedent at that time, the district court granted summary judgment of no infringement because there was no evidence that Medtronic directly infringed the method claim by acting as a ‘mastermind’ by controlling or directing any third party’s performance of method steps that Medtronic could not directly perform itself.

After the district court entered final judgment but before the case was heard on appeal, the Federal Circuit expanded the legal standard for when infringement by several actors could be attributed to a single entity. Under current precedent, an accused infringer may also be liable for the acts of another where the alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance. Medgraph sought to remand the case to the district court for reconsideration consistent with the new standard.

The Federal Circuit affirmed despite the change in the law. When governing legal standards change, remand is ordinarily appropriate. However in this case, the Court concluded the outcome would have remained unchanged under either standard. Medgraph had failed to produce any evidence that any doctors or patients had actually performed the allegedly infringing method steps not allegedly performed by Medtronic. Furthermore, the evidence established that Medtronic did not condition any benefit on the performance of Medgraph’s method steps. Thus, the expanded legal standard did not affect the district court’s basis for finding no infringement.

Key Takeaways: A claim for direct infringement requires proof that all steps of a claimed method are performed by, or attributable to, a single entity. The Federal Circuit has recently expanded the ways attribution may be proven. However, the burden of proof remains with the patent owner to show that steps allegedly performed by third parties were actually performed, and may be attributable to the accused infringer.

 

Identification of Broad Class of Computer Functions Fails to Provide Sufficient Structure to Support Means-Plus-Function Claim

Alfred E. Mann Found. for Sci. Res. v. Cochlear Corp., No. 2015-1580 (Fed. Cir. Nov. 17, 2016)

In Alfred E. Mann, the Federal Circuit held that a patentee’s disclosure of a broad class of logarithmic conversion functions did not render a means-plus-function claim limitation sufficiently definite under 35 U.S.C. § 112, where the claim recited a “means for generating data indicative of the audio signal.”

The Alfred E. Mann Foundation for Scientific Research sued Cochlear Corp. for infringement of two patents directed to a two-part ear implant and testing system. Following a jury verdict in favor of The Foundation, the district court determined that, with one exception, all of the asserted claims were invalid for indefiniteness. The district court reasoned that the patents failed to disclose sufficient algorithmic structures to support the means-plus-function computer-implemented features. The Foundation appealed the district court determination.

The Federal Circuit affirmed the district court finding of indefiniteness. To satisfy the definiteness requirement, a means-plus-function claim requires that the patent disclose sufficient underlying structure associated with the claimed means. While the patentee argued that the means for generating data step could be performed using one or more logarithmic conversion functions, the specification did not clearly identify which structure in the circuit would perform the functions, nor did it disclose any particular algorithms capable of performing the logarithmic conversions. The patent merely disclosed a broad class of logarithmic conversions that did not limit the scope of the claim to the corresponding structure, material or acts that performed the function. Even if a person of ordinary skill in the art would know of potential logarithmic conversion functions to implement, Section 112 requires concrete structure to appear in the patent itself.

Key Takeaways: Identification of a broad class of computer functions does not satisfy the definiteness requirement for a means-plus-function claim where the patent otherwise lacks the disclosure of any specific algorithm or any specific component that would implement such an algorithm. A patentee cannot rely on the knowledge of a person of ordinary skill in the art to supply the structure required for a means-plus-function claim.