Patent Case Summaries November 23, 2012

Federal Circuit Patent Case Summaries for the Week Ending November 23, 2012

Alston & Bird LLP's weekly Federal Circuit Patent Case Summaries are published by Wolters Kluwer Law & Business as part of its Aspen Publishers product line. The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending on the date below.     

Patent Case Summaries for the Week Ending November 23, 2012 
Kirk Bradley prepared the summaries in this issue.


Case Summaries

Patents and Antitrust Law
Litigation Practice and Procedure: Jurisdiction: Standing
Ritz Camera & Image, LLC v. SanDisk Corp., No. 12-1183 (Fed. Cir. (N.D. Cal.) Nov. 20, 2012). Opinion by Bryson, joined by Dyk and Moore.

In affirming the district court’s ruling, the Federal Circuit held on an interlocutory appeal that a direct purchaser has standing to pursue a Walker Process antitrust claim against a patentee, even if the direct purchaser could not have sought a declaratory judgment of patent invalidity or unenforceability.

SanDisk Corporation (“SanDisk”) manufactures and sells NAND flash memory products, and further holds patent rights to manufacture such products. SanDisk also licenses others to manufacture similar products. Ritz Camera & Image, LLC (“Ritz”) purchases flash memory products from SanDisk and its licensees.

In June 2010, Ritz sued SanDisk on behalf of itself and a class of direct purchasers of NAND flash memory, alleging that SanDisk had violated Section 2 of the Sherman Act, 15 U.S.C. § 2. The complaint alleged that SanDisk had fraudulently procured two patents by failing to disclose known prior art and making affirmative misrepresentations to the U.S. Patent and Trademark Office (“PTO”). SanDisk moved to dismiss the complaint, arguing that Ritz lacked standing to bring a Walker Process claim based on the invalidity or unenforceability of SanDisk’s patents, because Ritz faced no threat of an infringement action and had no other basis to bring a declaratory judgment action challenging the patents. The district court rejected SanDisk’s argument, and SanDisk petitioned for interlocutory review, which the district court and the Federal Circuit granted.

On appeal, SanDisk argued that allowing parties who cannot challenge the validity or enforceability of a patent through a declaratory judgment action to file a Walker Process antitrust claim unjustifiably expands the doctrine set by the Supreme Court in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). The Federal Circuit disagreed. In affirming the district court’s decision, the Federal Circuit noted that Walker Process sets forth two conditions for antitrust liability based on fraudulently obtaining a patent. “First, the plaintiff must show that the defendant procured the relevant patent by knowing and willful fraud on the PTO or (in the case of an assignee) that the defendant maintained and enforced the patent with knowledge of the fraudulent manner in which it was obtained. Second, the plaintiff must prove all the elements otherwise necessary to establish a Sherman Act monopolization charge.” The Federal Circuit noted that, as to the second requirement, the Supreme Court incorporated the rules of antitrust law generally, which includes that direct purchasers are eligible to sue under the antitrust laws.

Moreover, the Walker Process decision rejected an argument closely analogous to SanDisk’s argument when the Supreme Court stated that it found no merit in the proposition that rules defining who may bring suit “to cancel or annul a patent” should also dictate the boundaries of antitrust standing. The Federal Circuit further observed that it and other courts had declined to apply limitations on patent invalidity suits to Walker Process antitrust actions.

In sum, because direct purchasers are generally permitted to bring antitrust actions, and because Walker Process did not preclude it, the Federal Circuit held “that Ritz’s status as a direct purchaser gives it standing to pursue its Walker Process claim even if it could not have sought a declaratory judgment of patent invalidity or unenforceability.”  


Litigation Practice and Procedure: Procedure: Waiver
Defenses: Invalidity
The Patent Application: Claims: Indefiniteness
Claim Interpretation: Means-Plus-Function
Infringement: Generally
Litigation Practice and Procedure: Procedure: Admissibility of Evidence
Remedies: Injunctions: Generally
ePlus, Inc. v. Lawson Software, Inc., Nos. 11-1396, -1456, -1554 (Fed. Cir. (E.D. Va.) Nov. 21, 2012). Opinion by Prost, joined by Dyk and O’Malley.

Affirming-in-part, reversing-in-part, and vacating-in-part the district court’s judgment, the Federal Circuit held a party did not waive its right to argue on appeal that a patent claim is indefinite where the indefiniteness arguments were presented in a motion for summary judgment and were reiterated at the judgment as a matter of law (“JMOL”) stage, but not presented at trial. The Federal Circuit also held certain means-plus-function claims invalid because the specification failed to disclose any structure for performing the claimed functionality. The Federal Circuit also ruled that substantial evidence supported the jury’s finding of infringement for one method claim, but not for two other method claims. The court also ruled that the district court did not abuse its discretion in granting an injunction, excluding testimony of a damages expert, or prohibiting a party from presenting any evidence of damages to the jury.

ePlus, Inc. (“ePlus”) is the assignee of U.S. Patent Nos. 6,023,683 (“the ’683 patent”) and 6,505,172 (“the ’172 patent”), which are generally directed to the use of computer networks for purchasing goods. Specifically, the patents provide for the fulfillment of a single requisition with multiple purchase orders from different vendors. Lawson Software, Inc. (“Lawson”) sells supply chain management computer software. Lawson’s software products are modular items that may be integrated, but require a basic module, called “Core Procurement,” to function. Additional modules provide further functionality, such as connecting to a third party website or sending purchase orders outside of Lawson’s software systems.

ePlus sued Lawson, alleging Lawson’s software modules infringed Claim 1 of the ’172 patent and Claims 3, 26, 28, and 29 of the ’683 patent. Lawson moved for summary judgment that the “means for processing” limitation found in Claim 1 of the ’172 patent and Claim 3 of the ’683 patent was indefinite, rendering these claims invalid, but the district court denied the motion. Lawson also moved the district court to exclude ePlus’s damages expert on the ground that his theories were analytically flawed and, further, to exclude ePlus from presenting any evidence of damages at trial. The district court granted this relief. At trial, the jury found that Lawson infringed the ’172 and ’683 patents, and the district court entered an injunction.

In reversing the district court’s decision regarding indefiniteness, the Federal Circuit first held that Lawson did not waive its right to argue indefiniteness on appeal because although Lawson did not raise the issue at trial, Lawson had moved for summary judgment and had presented written arguments when it sought a JMOL after the jury verdict. The Federal Circuit noted that “indefiniteness is a question of law and in effect part of claim construction,” and therefore “the district court regarded its ruling on summary judgment to be the last word on the matter until appeal.” The Federal Circuit ruled that under the “specific facts of this case,” Lawson had preserved its argument and was not obligated “to ignore the writing on the wall and press the issue over and over again to preserve it for appeal.”

Turning to the substance of the indefiniteness argument, the Federal Circuit agreed with Lawson that the common patent specification does not disclose sufficient structure, indeed any structure, that performs the function for the “means for processing” limitation of Claim 1 of the ’172 patent and Claim 3 of the ’683 patent. Thus, the claims were ruled invalid. In particular, the Federal Circuit stated that assessing whether a means-plus-function claim is indefinite depends on what the specification discloses, not what was known to one skilled in the art apart from and unconnected to the disclosure of the patent.

In upholding the jury’s verdict of infringement with respect to Claim 26 of the ’683 patent, the Federal Circuit held that the jury was free to rely on the plain and ordinary meaning of the claim term “determining,” particularly as Lawson had not sought a narrower construction for the term. Under the ordinary meaning of this term, there was “no serious dispute” that Claim 26 was infringed.

Next, Lawson argued that the verdict of infringement of Claims 28 and 29 of the ’683 patent were not supported by substantial evidence. The Federal Circuit agreed, as ePlus had not presented at trial any evidence suggesting that Lawson or anyone else performed one of the claimed method steps. The Federal Circuit thus remanded for the district court to consider any changes needed for the scope of the injunction.

Additionally, the Federal Circuit held that the district court did not abuse its discretion in granting an injunction because, although ePlus was prohibited from presenting evidence regarding damages, the prohibition did not entitle Lawson to sell infringing products.

On cross appeal, ePlus argued that the district court abused its discretion in excluding testimony from its damages expert and prohibiting ePlus from presenting at trial any evidence on damages. The Federal Circuit disagreed and upheld the district court’s ruling. According to the Federal Circuit, ePlus’s damages expert gave undue weight to two of five settlement agreements in his reasonable royalty calculation. “Indeed, the sum of the higher two amounts well exceeded the sum of the smaller three by 1500%, and the highest paying agreement was over seventy times larger than the smallest. Moreover, the two larger agreements were paid in lump-sums; whereas one of the smaller three included a royalty percentage.” The district court had ruled that the expert’s analytical method was thus flawed and unreliable. Because “the applicable abuse of discretion standard of review is highly deferential,” the Federal Circuit affirmed this aspect.  


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