No Second Bite At the Apple, Where The Apple Is A Reasonable Royalty Based On Benefits To Infringer's Customers

Case: Glenayre Electronics, Inc. v. Phillip Jackson and PMJ Family Ltd. Partnership, Case No. 04-1568 (Fed. Cir. 4/11/06)

The One Sentence Summary: The Federal Circuit affirmed denial of Jackson's request for a second trial of its infringement claims, rejecting the argument that the first trial, in which it had been awarded damages for direct infringement, had been bifurcated as to direct versus indirect infringement and that its right to pursue indirect infringement in a separate action was preserved.

What They Were Fighting About: After the District Court initially stayed counterclaims based on infringement by Glenayre's customers and Glenayre's own indirect infringement, and Jackson proceeded to put on evidence of that infringment as part of its case for direct infringement against Glenayre, was awarded damages on that claim, and then accepted a remittitur of those damages, Jackson sought a second trial on the claims against the customers and claims for indirect infringement against Glenayre.

Federal Circuit Holdings:

• Having already collected an award based, in part, of evidence of the benefits to customers from the use of the infringing products, where that award reflected the district court's determination of a reasonable royalty, the Federal Circuit concluded that Jackson had fully litigated his full measure of damages, such that the remitted damages constitute full compensation as a matter of law for (1) direct infringement by Glenayre, (2) direct infringement by Glenayre's customers, and (3) possible indirect infringement by Glenayre through its sale of infringing products and the resulting use of those products by customers.
  
• The Federal Circuit further found no guarantee or promise by the district court that a second trial would be held to address Jackson's claims of indirect infringement. Jackson had identified statements by the district court that it contended demonstrated a commitment to a second trial. For example in granting judgment on the first claims, the decision was pursuant to FRCP 54(b), "[b]ecause additional claims, dependant on the finality and affirmance of the patent infringement [] remain for adjudication . . . ." The Federal Circuit rejected Jackson's interpretation, finding such statements showed only that claims had been stayed pending resolution of the counterclaim for direct infringement, allowing the district court to revisit the issue of additional relief, if necessary, after the trial was complete.
  
• The Federal Circuit further disagreed with Jackson's contention that it had not been fully compensated for infringement by Glenayre's customers. Having accepted remitted damages based on an estimate of a reasonable royalty, as a matter of law there was full compensation. The court noted that the claim of indirect infringement related solely to the sale of infringing products to the customers and their use of the same, and not to any other specific acts of indirect infringement. Where the indirect infringement is so limited, damages are normally the same as damages that would be assessed had the patentee sued the customers directly, and damages for indirect infringement equal those assessed for the underlying direct infringement.
  
• The Federal Circuit further characterized Jackson's argument as in essence another argument against the district court's remittatur decision, even though it had already collected on that award.
  
• The court was influenced by the fact that Jackson had introduced at trial evidence of the customers' use of and anticipated profits from the infringing products. Its reasoning also rested on the fact that the district court had determined the highest possible royalty Jackson was entitled to as being based on Glenayre's sales. The very issues Jackson was seeking to relitigate had therefore already been decided in a final, unappealed judgment.
  
• The court also looked to cases such as Birdsell v. Shaliol, 112 U.S. 485 (1894), in finding that a party is precluded from suing to collect damages for direct infringement by a buyer and user of a product when actual damages covering that very use have already been collected from the maker and seller of that product. Here, Jackson had already recovered actual damages from Glenayre as the maker and seller of the product, so could not recover a second time for the customers' use of the products.
  
• The Federal Circuit also reasoned that allowing Jackson to come back and relitigate against Glenayre based on its customers' use of the products would be equivalent to permitting the patentee to relitigate its entitlement to "full compensation" with the same adversary a number of times equal to the number of steps that a product takes in the path of commerce, a proposition that is obviously inappropriate. Having already been awarded, and accepted, a reasonable royalty as damages, as a matter of law Jackson had received full compensation.
  
• Circuit Judge Newman dissented from the opinion, contending that the district court had incorrectly held that there cannot be contributory infringement by a direct infringer.
  
  

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Judgments of Non-infringement Premised on District Court’s Flawed Claim Construction are Vacated

Case: Lava Trading, Inc. v. Sonic Trading Mgmt., LLC, No. 05-1177, 05-1192 (Fed. Cir. 4/19/06)

The One Sentence Summary: Federal Circuit vacates judgments of non-infringement of a patent, involving software that aggregates and integrates securities trading and order placement information from various alternative trading systems, where judgment orders were premised on district court's flawed claim construction.

What They Were Fighting About: Plaintiff had a patent for software that aggregates and integrates securities trading and order placement information from various alternative trading systems. During an infringement suit, the District Court made a claim construction ruling from the bench that limited the patent’s claim to software that provided information on all securities in a combined order book, rather than some subset of those securities. Plaintiff appealed the ensuing stipulated judgments of non-infringement.

Federal Circuit Holdings:

• Plaintiff did not waive its theory on appeal -- that its patent claimed software that aggregated and integrated trading information on any or all securities in a combined order book -- by unsuccessfully asserting that theory before the District Court.
• A person of ordinary skill in the art would not have limited the patent’s claim as the District Court had. Language in the patent claim described the patented software as providing trading information to traders in “a” security or commodity, rather than “all” securities and commodities. Moreover, embodiments in the specification clearly envisioned use of the software to provide information on subsets of securities in a combined order book. Thus, the Court set aside the District Court’s claim construction.
• Because the final judgment orders were premised on the District Court’s flawed claim construction, they too had to be set aside.
  
  

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Royalty Under 35 USC § 284 Must Be Determined By Judge Or Jury

Case: Parental Guide of Texas, Inc. v. Thomson, Inc., Case No. 05-1493 (Fed. Cir. 4/21/06)

The One Sentence Summary: Provision of settlement agreement that referenced a royalty in accord with 35 U.S.C. § 284 referred to a reasonable royalty determined through the express application, by the judge or jury, of the Georgia Pacific factors.


What They Were Fighting About: The parties executed a settlement agreement whereby the alleged patent infringer agreed to pay an additional amount if the lawsuit subsequently terminated in favor of the plaintiff and a royalty was determined in accord with 35 U.S.C. § 284.

Federal Circuit Holdings:

• 35 U.S.C. § 284 provides that the court shall award a patent claimant compensatory damages, in no event less than a reasonable royalty.
• 35 U.S.C. § 284 contemplates that the amount of damages will be found by a jury or a judge through express application of the Georgia-Pacific factors.
• A settlement agreement provision that referenced a "Litigation Royalty" "in accordance with the law applicable to 35 U.S.C. § 284" applied only to a resonable royalty determined by a judge or jury applying Georgia-Pacific.
• No such determination of a royalty had occurred because the litigation had ended in settlements. Thus, no contingent payment of a "Litigation Royalty" was due to plaintiff.
  
  

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Comment Period Soon to Expire on PTO Proposed Rule Changes That Would Impose New Burdens on Patent Applicants

On May 3, 2006, the comment period will end on proposed Patent Office rule changes on the examination of applications. The proposed rules seek to cut down the backlog of pending applications at the PTO by imposing significant limits on the examination of new and continuation applications. The proposed rules would limit intial examination of an application to "representative claims" rather than all claims. The rules would also limit continuation applications by requiring that second or subsequent continued examination filings be "supported by a showing as to why the amendment, argument, or evidence presented could not have been previously submitted."

More information about the proposed rule changes can be found on the PTO's web site at the following link: Proposed Rule Changes to Focus the Patent Process in the 21st Century.

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Tornado Device for Semiconductor Cleaning Does Not Infringe

Case: Semitool, Inc. v. Dynamic Micro Systems Semiconductor Equipment GMBH, Case No. 05-1299 (Fed. Cir. 4/6/06)

The One Sentence Summary: Although claim language could be read more broadly, claims were limited by the specification.


What They Were Fighting About: Plaintiff alleged that DMS's Tornado device for cleaning semiconductor wafer carriers infringed its patents.

Federal Circuit Holdings:

• Affirms summary judgment of non-infringement.
• The specification made clear that the "processing chamber" was co-extensive with the entire interior of the processing vessel.
• In order to infringe plaintiff's patent, a system must supply drying gas to the process chamber. As the condenser in defendant's system was inside the processing chamber, it could not supply drying gas to the processing chamber as required for infringement.
  
  

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Amazon Did Not Infringe Patent for Computerized On-Demand, Retail, Single Copy Book Printing

Case: On Demand Machine Corp. v. Ingram Industries, Inc., Lightning Source and Amazon, No. 05-1074, 05-1075, 05-1100 (Fed Cir. 3/31/06)

The One Sentence Summary: A patent for providing computers to customers who could select and print single copies of books in a retail setting could not be interpreted to bar Amazon from providing book information over the Internet that was used to order books, even if those books might be printed on demand.


What They Were Fighting About: Plaintiffs had a patent for providing customers with computers with book sales information allowing the customer to select a book that would be printed on site. Lightning Books sometimes printed single copies ordered by customers of Amazon. A jury found against defendants.

Federal Circuit Holdings:

• The district court erred in construing a claim limitation requiring that "sales information" about the book should be provided. The specification made clear that "sales information" was more than just identifying information, but was rather promotional information that helped a customer choose a book. Because the book printer used by Amazon, Lightning, did not receive any promotional "sales information" in printing the book, a jury could not find infringement under the correct claim construction.
• The district court erred in not limiting the term "customer" to a customer at a retail store when the specification clearly used the term in this context.
• Defendants did not provide computers to customers for reviewing book information. Amazon's providing of information about books was not the same as providing a computer at a retail outlet.
• The district court erred in construing the claim phrase "printing on paper pages" to include a factory process where printing occurs on large sheets that are later cut into pages.
• A preamble limited the claim to high speed manufacture of a single copy of a book after a customer selects it.
• The individual phrases of the claim must be interpreted together in the context of the overall invention described in the specification.
• Joint infringement could not be found even though Amazon provided information to customers who could select books that might be printed as single copies. The invention was providing computers for customers to select books and have them printed rapidly on site, not for delivery a week later.
• The district court had authority to deny an injunction and rather award future royalties, but that issue was not considered because it was moot in light of the panel's finding of non-infringement.
  
  

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Takings Clause Did Not Allow Patent Infringement Claim Against United States Government

Case: Zoltek Corp. v. United States, No. 04-5100,-5102 (Fed Cir. 3/31/06)

The One Sentence Summary: The Tucker Act did not allow a patent infringement claim against the United States when some steps of the method were performed outside the United States, and the Takings Clause did not provide an alternate basis of jurisdiction.


What They Were Fighting About: Zoltek claimed that the United States and Lockheed infringed a method patent for making silicide fibers used for an airplane made in Japan. The Federal Court of Claims held that the claim could be pursued as a Takings claim.

Federal Circuit Holdings:

• The Federal Court of Claims had no jurisdiction over a claim for patent infringement against the United States where some of the steps of the patented method were done outside the United States. The limited waiver of sovereign immunity under the Tucker Act, 28 U.S.C. § 1498, only applied when all steps of the method were performed in the United States.
• The Fifth Amendment Takings clause did not provide an alternate basis for jurisdiction over the claim.
  
  

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