Rembrandt Wireless v. Samsung Electronics

Citations: 853 F.3d 1370; 122 U.S.P.Q. 2d (BNA) 1301; 2017 U.S. App. LEXIS 6502; 2017 WL 1370089Docket: 16-1729

Court: Court of Appeals for the Federal Circuit; April 17, 2017; Federal Appellate Court

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Rembrandt Wireless Technologies, LP sued Samsung Electronics and its affiliates for infringing U.S. Patent Nos. 8,023,580 and 8,457,228, which describe a communication system using multiple modulation methods to facilitate communication among incompatible modems. The Eastern District of Texas jury found Samsung liable for infringement and awarded Rembrandt $15.7 million, rejecting Samsung's arguments regarding the patents' invalidity based on prior art. Following the trial, Samsung sought judgment as a matter of law (JMOL) on issues of obviousness and damages, which the district court denied. Samsung also challenged the court's claim construction and a ruling that limited Rembrandt's damages due to alleged failure to mark patented articles. The Federal Circuit affirmed the district court's claim construction and denial of JMOL but vacated the decision on the marking statute, remanding for further proceedings. The patents prioritize a provisional application from December 5, 1997, and propose using a message header to indicate the modulation method in master/slave communication scenarios, addressing compatibility issues highlighted in the prior art. Claim 2 of the ’580 patent is identified as representative of the invention's scope.

A transceiver operates as a master in a master/slave configuration, capable of sending transmissions using at least two distinct modulation methods: a first method and a second method. Each transmission consists of a group of sequences, structured into a first portion and a payload portion. The first portion includes information indicating which modulation method is employed for the payload. At least one group of sequences is directed to a specific recipient, where the first portion contains a sequence modulated by the first method that signals a switch to the second method. Following this, a second sequence modulated by the second method is sent. Additionally, the transceiver may send a third sequence after the second, reverting communication back to the first modulation method.

In the related case, the district court interpreted "modulation method of a different type" as referring to different families of modulation techniques, like frequency-shift keying (FSK) and quadrature amplitude modulation (QAM). Rembrandt Wireless Technologies alleged that Samsung's devices, which utilized the Bluetooth enhanced data rate (EDR) standard, infringed its patents. A jury found Samsung liable, awarding Rembrandt $15.7 million in damages. Samsung's post-trial motions for judgment as a matter of law were denied, and the company subsequently appealed, challenging the district court's claim construction, denial of motions regarding obviousness, a Daubert motion, and a motion to limit damages. The appeal does not contest the jury's infringement finding. The court reviews claim constructions based on the intrinsic record de novo, relying on the applicant's characterization during prosecution.

The applicant of the ’580 parent patent added a 'different types' limitation to its claims after receiving a notice of allowance from the examiner, aiming to clarify the subject matter of the claims. The applicant specified that independent claim 1 was revised to reference two distinct families of modulation techniques, namely FSK and QAM. Samsung challenges the court's interpretation, arguing that it improperly relies on a single, self-serving remark made by the applicant post-allowance, asserting that the claim language only requires different types of modulation methods to be 'incompatible.' Samsung posits that devices using the same family of modulation methods but differing in amplitude should also qualify as 'different types.' However, the court sided with the district court's construction, emphasizing that while the specification primarily defines disputed terms, the prosecution history is also significant. The applicant's clarification using 'i.e.' was deemed to indicate a definitional intent, supported by case law indicating that such usage often signifies a definition rather than an example. Samsung's argument against this interpretation, asserting potential internal inconsistencies with claim 43, was rejected by the court, which maintained that the context strongly indicated the applicant's intention to define the 'different types' limitation.

Claim 43 does not necessarily conflict with the adopted construction, as it relies on claim 26, which similarly uses "at least" to describe "at least two different types of modulation methods," countering Samsung’s argument. The court finds that the claim differentiation argument does not overcome the applicant's definitional statement from the prosecution history, referencing ERBE Elektromedizin GmbH v. Canady Tech. LLC. The specification mentions various modulation methods but lacks specific examples or definitions. Samsung's reference to related IPR proceedings, where the Patent Trial and Appeal Board adopted a broader construction, does not bind the court, as the Board operates under a different standard. Despite the Board adopting Samsung's construction, it did not deem Rembrandt's patents unpatentable, which is Samsung's goal. The court agrees with the district court's construction that "modulation method of a different type" refers to "different families of modulation techniques," such as FSK and QAM.

In the context of obviousness under 35 U.S.C. 103, Samsung asserts that it proved Rembrandt’s patents invalid and that the jury's nonobviousness verdict should be overturned. The applicable version of 35 U.S.C. 103 predates the America Invents Act. The court reviews the district court’s post-trial denial of judgment as a matter of law de novo, assessing whether a reasonable jury had sufficient evidence to support its findings. The jury's general verdict on obviousness implies resolution of factual disputes in favor of the winner, and these findings are upheld if supported by substantial evidence. Samsung’s trial argument for obviousness involved U.S. Patent No. 5,706,428 (Boer) as the primary reference and an article by Upender as a secondary reference. Samsung contended that the modulation methods in Boer are from "different families," thus qualifying as different types under the district court's definition. Expert testimony indicated that Boer’s methods modify different characteristics, aligning with the notion of distinct modulation families.

Dr. Morrow, Rembrandt's infringement expert, testified that modulation methods belong to different families only if they exhibit no overlapping characteristics. He argued that PPM/DQPSK and DBPSK are not in different families because both modify phase. The jury had the discretion to accept Dr. Morrow's testimony over Dr. Goodman’s. Samsung contended that Dr. Morrow's testimony misinterpreted the court’s construction of "different types," claiming modulation methods could overlap and still be categorized differently. However, the district court determined that this was a factual issue rather than a claim construction matter. The court emphasized that not all ambiguity must be resolved in claim construction, and whether Boer meets the "different types" requirement is a factual question related to prior art analysis.

The jury’s conclusion, supported by Dr. Morrow’s testimony, indicated that Boer’s DBPSK and PPM/DQPSK methods did not satisfy the "different types" limitation. Additionally, substantial evidence backed the finding that there was no motivation to combine Boer’s CSMA/CA protocol with Upender’s teachings, as the latter suggests CSMA/CA is superior to master/slave protocols. Rembrandt argued that one skilled in the art would not be motivated to replace Boer’s existing protocol, citing Upender's analysis of communication protocols. Samsung's argument conflated the concepts of motivation to combine and teaching away, which are distinct legal doctrines. The court affirmed that substantial evidence supported the jury's findings on both points.

A prior art reference that teaches away from a combination provides evidence against the motivation to combine that reference with another. However, the lack of formal teaching away does not automatically imply motivation to combine. The jury was not required to find that Upender taught away from using master/slave to conclude that there was no motivation to replace CSMA/CA in Boer with master/slave. Even without a teaching away, Upender’s comments on user preferences could influence the motivation to combine it with Boer. Upender’s suggestion that master/slave is inferior to CSMA/CA supports the jury’s finding that a skilled artisan would not be motivated to combine Boer with Upender, undermining Samsung’s obviousness challenge to the independent claims. Consequently, the court affirms the district court’s denial of Samsung’s motion for judgment as a matter of law (JMOL) regarding the claims' validity.

On the issue of damages, Samsung contests the jury's award of $15.7 million, arguing that the district court improperly handled certain evidentiary disputes related to damages. Under Fifth Circuit law, the court reviews these disputes for abuse of discretion. Samsung claims the court should have excluded the testimony of Rembrandt’s damages expert, Mr. Weinstein, due to alleged flaws in his methodology for calculating the reasonable royalty rate. Mr. Weinstein compared the prices of Bluetooth chips from Texas Instruments, one with EDR functionality and one without, finding a price premium that led to a proposed royalty rate between 5 and 11 cents per unit, resulting in total damages ranging from $14.5 million to $31.9 million. The court found no reversible error in the district court's decision to deny the exclusion of Mr. Weinstein's testimony, as his methodology was based on the incremental value of the infringing product, supported by reasonable explanations regarding his chosen data periods.

Mr. Weinstein compared chip prices during a period of high price differential between non-EDR and EDR chips, allowing Samsung the opportunity to cross-examine him. The jury awarded $15.7 million, which is at the lower end of Mr. Weinstein’s suggested damages range of $14.5–$31.9 million. Samsung contested Mr. Weinstein's attribution of the cost differential solely to EDR functionality, arguing that other technological differences existed. Rembrandt countered that expert testimony indicated EDR was the primary difference, and Samsung did not cross-examine this point. The court noted that Samsung’s criticisms pertained to evidentiary weight rather than admissibility. 

Mr. Weinstein's methodology included referencing a settlement agreement with BlackBerry and a licensing agreement with Zhone Technologies to validate his proposed royalty rate. Samsung objected to the inclusion of the BlackBerry agreement, claiming it was not representative of an arms-length transaction. However, the court upheld its relevance, as it involved the same patents Samsung infringed. Samsung also argued that redacted information from both agreements hindered the jury's understanding. The court found the redactions justified to protect confidential business information and avoid jury confusion.

Finally, Samsung contended that substantial evidence did not support the $15.7 million damages award. The court rejected this, affirming the award was supported by evidence within the suggested damages range. The case is remanded for the district court to decide whether Samsung is liable for pre-notice damages due to Rembrandt's alleged failure to mark licensed products.

If the district court finds Samsung not liable for pre-notice damages, the jury’s damages award must exclude royalties from pre-notice sales, a task the district court can perform using existing sales data without a new damages trial. Samsung contends that the district court incorrectly allowed Rembrandt to recover pre-notice damages despite Rembrandt's failure to mark products associated with claim 40 of the ’580 patent, which Rembrandt later disclaimed. Samsung's argument is supported by the patent marking statute, 35 U.S.C. 287, which allows for limiting damages to those incurred post-notice of the patent. Rembrandt had previously licensed the patent to Zhone Technologies, which sold unmarked products embodying the patent claim but was not contractually required to mark them. After filing a complaint, Rembrandt withdrew claim 40 and filed a statutory disclaimer. The district court denied Samsung's motion based on the notion that disclaiming a patent claim negates any prior marking obligations, referencing Federal Circuit precedent that a disclaimed claim is treated as never having existed. The patent marking statute allows patentees to give notice by marking patented articles, but failure to mark limits recovery to damages incurred after actual notice of infringement is provided. The statute aims to protect the public by allowing the exploitation of unmarked products until proper notice is given.

The marking statute is designed to promote public awareness of patents, serving three main purposes: preventing innocent infringement, encouraging patentees to notify the public of patented articles, and assisting the public in identifying patented items. Rembrandt’s interpretation of the statute, which the district court supported, is inconsistent with its intent, as it allows Rembrandt to use a disclaimer to bypass the marking requirement, thereby undermining the statute’s public notice function. The district court concluded that a disclaimed patent claim is treated as if it never existed, which enabled Rembrandt to retroactively excuse its failure to mark. However, while a disclaimer relinquishes the rights of the patent owner, it does not relinquish the rights of the public. Previous cases indicate that disclaimers do not affect the public's interests in relation to relinquished claims. The marking statute emphasizes both the rights of patentees and the rights of the public, leading to the conclusion that a disclaimer cannot retroactively eliminate the requirement for patentees to mark their patents to claim pre-notice damages. Additionally, Rembrandt argued that the marking statute should apply on a claim-by-claim basis rather than a patent-by-patent basis. This approach would allow Rembrandt to recover pre-notice damages for claims beyond the single claim Samsung identified as unmarked. In contrast, Samsung contended that the statute attaches on a patent-by-patent basis, maintaining that only the specific claim associated with an unmarked product is relevant.

Rembrandt cannot recover damages incurred before providing notice of the patent infringement to Samsung. The Magistrate and District Judges did not rule on Samsung's motion to limit damages based on a disclaimer. During the appeal, Rembrandt did not argue this as an alternative basis for affirming the district court's decision regarding patent marking, though it acknowledged that the Zhone product practices claim 40, eliminating that as a live dispute. The case involves a novel legal issue concerning the patent marking statute, specifically whether it should be applied on a patent-by-patent or claim-by-claim basis. Although Rembrandt did not raise this issue on appeal, it has not waived the argument, as established in precedent. The court refrains from addressing unbriefed legal questions and remands the issue back to the district court for consideration. The court affirms part of the district court's decisions while vacating its denial of Samsung's motion to limit damages, directing further proceedings. Each party is responsible for its own costs.