Universal Electronics, Inc. v. Universal Remote Control, Inc.
Docket: Case No. SACV 12-00329 AG (JPRx)
Court: District Court, C.D. California; March 24, 2014; Federal District Court
The court partially granted and partially denied Universal Remote Control, Inc.'s motion for summary judgment in a case brought by Universal Electronics, Inc. regarding alleged patent infringements. The plaintiff filed suit on March 2, 2012, claiming infringement of several U.S. patents, two of which have expired. The court previously invalidated a relevant claim of one patent and denied the defendant's motion to stay proceedings. The defendant's request for lengthy summary judgment briefs was restricted, but the court allowed substantial page limits for submissions.
The legal standard for summary judgment requires the moving party to demonstrate there are no genuine issues of material fact, with the non-moving party entitled to have all evidence viewed favorably. The burden initially lies with the moving party but shifts to the non-moving party if the initial burden is met.
In the analysis, the defendant argued that the plaintiff had knowledge of the alleged infringement for over a decade and claimed an implied license to the '426 Patent based on a prior licensing agreement with the plaintiff. The plaintiff contended that the previous litigation did not involve all claims of the '426 Patent at issue in the current case.
In the 2000 Litigation, the Plaintiff dismissed its infringement claim for the '426 Patent in 2002. In 2004, the parties reached a settlement and licensing agreement concerning the 'Patents-In-Suit.' The Plaintiff proposed a license for additional patents, including the '067 Patent, which the Defendant declined. A dispute arose regarding whether the '426 Patent was included in that offer and if it was impliedly licensed alongside the '751 Patent.
Laches, an equitable defense, is determined by the trial judge's discretion and can bar damages within the six-year recovery period under 35 U.S.C. § 286. To establish laches, a Defendant must prove: (1) the Plaintiff delayed unreasonably in filing suit after becoming aware of the claim, and (2) this delay caused prejudice to the Defendant, which can be economic or evidentiary. Prejudice may arise from lost records or witness unavailability, impacting the Defendant’s ability to mount a defense. Economic prejudice involves changes in the Defendant's financial position during the delay.
The burden of proof for laches lies with the Defendant, and a presumption exists if the Plaintiff waits over six years post-knowledge of infringement. The court must evaluate any justifications for the Plaintiff's delay and may consider egregious conduct by the Defendant as a factor favoring the Plaintiff.
In this case, the Defendant contends that the Plaintiff, aware of its product line, delayed filing suit for the '067 Patent until March 2012, over seven years after the 2004 license and nearly five years post-expiration of the '067 Patent. The Plaintiff initiated a claim for the '426 Patent on March 1, 2010.
Defendant contends that Plaintiff acknowledged awareness of Defendant's products, having engaged in competitive analysis and investigations, particularly in 2010 regarding a feature called 'Quick Step' or 'Quick Set.' Despite this, the deposition lines following Defendant's citation reveal that Plaintiff's awareness of potential infringement activities was limited. Defendant claims that Plaintiff had constructive notice due to the prevalence of Defendant’s remote control devices, invoking legal principles of laches, which implies that a plaintiff is assumed to have knowledge based on available information that should prompt further inquiry.
Defendant argues that Plaintiff's nearly ten-year delay in addressing the '426 Patent and over seven years for the '067 Patent establishes a presumption of laches, which Plaintiff cannot rebut. Plaintiff's justifications for the delay include minimal analysis of Defendant’s products to avoid disrupting a prior licensing agreement and the reexamination of the '067 Patent from 2006 to 2011. However, Defendant challenges these excuses, asserting that ignoring potential infringement negates diligence and that Plaintiff failed to inform Defendant about the reexamination or its intent to sue afterward.
In response, Plaintiff asserts that its delay was reasonable, believing Defendant was compliant with their license agreement post-2004 settlement. Plaintiff claims it only recognized possible infringement in 2010 when two remote controls were presented to its counsel, and it did not analyze the '067 Patent for infringement until after the reexamination concluded in February 2011. Additionally, Plaintiff clarifies that it is not asserting infringement against products mentioned in its 1997 notice letter related to the earlier litigation.
The accused remotes in the 2000 Litigation did not include the 'rotating favorite channel macro' feature, which was first introduced by the Defendant in 2007. This feature is necessary for infringing claims 2 and 3 of the '426 Patent, which were not part of the 2000 Litigation, and requires more structure than claim 1 of the same Patent, having been invented five years later. The distinction between the claims is further analyzed regarding whether the Defendant has an implied license to the '426 Patent. The Defendant contends that the Plaintiff initially accused pre-2006 products, and the withdrawal of these products in September 2013 does not address the laches issue. The case of St. Clair Intellectual Property Consultants, Inc. v. Acer, Inc. illustrates that narrowing infringement contentions does not negate laches if based on previously available information, and the record shows disputes and allegations regarding product changes during the laches period.
The Plaintiff claims that after discovering the infringement in 2010, it promptly investigated, sent notice letters in March 2010 and May 2011, and filed suit in early 2012. The Defendant has not proven a lack of genuine dispute regarding when the Plaintiff knew or should have known about the infringement, particularly since the Defendant opted not to take a license in 2004. Plaintiff's evidence indicates it believed the Defendant was operating within the licensing terms. The Court finds no absence of genuine dispute about the reasonableness of the delay between the Plaintiff's discovery of infringement and the filing of the lawsuit.
Regarding prejudice from the delay, the Court discusses the Defendant's claims of being misled and the loss of evidence related to the addition of a Mr. Darbee as a named inventor on the '426 Patent, which occurred ten years after the Plaintiff's initial intention. The death of Darbee and the fading memories of witnesses concerning a 1992 patent invention are also noted, alongside issues of accessibility to Plaintiff’s emails prior to 2006. However, the Court finds it unnecessary to evaluate prejudice due to its determination in the previous section.
Defendant claims economic prejudice due to lost investment and potential damages that could have been mitigated had Plaintiff filed suit sooner. Plaintiff counters that Defendant's ability to mitigate prejudice is intact, as it deposed Darbee before his death and has not demonstrated how his trial testimony would have been critical. Additionally, Plaintiff notes that Defendant did not pursue depositions of co-inventors O’Donnell and Luo or follow up on subpoenas for patent attorneys. Plaintiff offered to share costs for restoring pre-2006 emails, which Defendant rejected, suggesting it believed the value of that information to be less than the restoration cost of $30,000. This decision indicates that Defendant did not deem the potential evidence as significantly beneficial to its defense. The Court concludes Defendant has not adequately demonstrated genuine prejudice resulting from the delay, nor has it shown that it would have acted differently had the suit been filed earlier.
Regarding equitable estoppel, the legal standard requires three elements: (1) the defendant must have been misled by the plaintiff's actions or silence, (2) the defendant must have relied on that misleading communication, and (3) the defendant would suffer material harm if the plaintiff is allowed to assert a claim inconsistent with prior conduct. In patent cases, such misleading messages often involve the patentee’s failure to indicate an intention to pursue infringement claims.
The patentee's prolonged inaction following specific objections to alleged infringement is critical in assessing equitable estoppel. To establish reliance, the accused infringer must demonstrate substantial reliance on the patentee's misleading conduct. Harm can be indicated by a change in economic position or loss of evidence. Courts may determine equitable estoppel on summary judgment, provided the inference that the patentee would not enforce the patent is the only one supported by the evidence. A preponderance of evidence is required for equitable estoppel.
In this case, the defendant contends that the plaintiff's 2002 dismissal of the '426 Patent with prejudice from prior litigation misled the defendant into believing the plaintiff did not intend to sue for infringement. The plaintiff had previously claimed that it could overcome validity issues by adding Darbee as an inventor but opted to dismiss the patent instead, leading the defendant to infer that the plaintiff could not correct inventorship and acknowledged the claims’ potential invalidity. The plaintiff disputes this interpretation, arguing that the defendant was unaware of the plaintiff's later efforts to correct inventorship in 2012.
The plaintiff's actions, including the dismissal of the '426 Patent without asserting it during the settlement of the 2000 Litigation, suggested an intention not to enforce the patent. Furthermore, the plaintiff's failure to address the '426 Patent during settlement negotiations, despite acknowledging the need for inventorship correction, reinforced the defendant's belief that the patent would not be asserted. The defendant also argues that the existence of a licensed '751 Patent covering similar subject matter contributed to its belief that the '426 Patent would not be enforced. This reliance led the defendant to continue investing in and selling products containing the accused feature.
Defendant’s CEO asserted that the company believed the '426 Patent was invalid and would not have acted differently had Plaintiff sued in 2006. Although Plaintiff referenced this assertion, it lacked evidentiary citation, potentially referring to a September 17, 2013 deposition. The deposition exchange indicated that no significant business or software changes were made by Defendant after being informed of Plaintiff's infringement claim. However, the '426 Patent expired on May 9, 2012, shortly after Plaintiff's notice and Complaint, raising questions about the reasonableness of Plaintiff's delay in filing suit and Defendant's inaction. Despite this, Defendant failed to provide concrete evidence of reliance on the patent’s validity or specific actions it would have taken, leaving a genuine issue of material fact regarding its equitable estoppel defense.
The concept of legal estoppel is defined as a scenario where a patentee has licensed or assigned a right and later seeks to contradict that right. Historically, courts have established that a seller of a patent, which infringes a prior patent, is estopped from suing the buyer for infringement, even if the prior patent is acquired later. The Federal Circuit has broadened this doctrine, indicating that an implied license may arise when a later-acquired patent is necessary to practice the licensed patent, regardless of the timing of patent acquisition. In TransCore, the court ruled that the patentee was legally estopped from asserting a broader patent that was essential to practice the licensed patent. Subsequent cases, such as General Protecht, further developed the doctrine, addressing the implications of narrower claims in continuation patents on the doctrine's application.
The patentee argued that certain limitations in the asserted patents were not present in the licensed claims. However, the Federal Circuit rejected this argument, stating that the continuation patents derived from the same disclosure as the licensed patents and could not claim inventions not already supported by the earlier patents. General Protecht expanded on TransCore, ruling that the breadth of patents is not decisive; narrower claims can still fall under an implied license if they share the same disclosure. This focus on disclosure over claims is notable, as patent law typically emphasizes that claims define the scope of rights granted to the patentee. General Protecht inferred that products licensed under parent patents are presumed to be impliedly licensed under their continuation patents unless explicitly stated otherwise, although this conclusion is somewhat contentious given TransCore’s emphasis on the breadth of claims rather than familial relationships among patents.
Furthermore, General Protecht articulated an interpretive presumption that parties can contract around, but it dismissed the relevance of license provisions that preserved the patentee's right to litigate related patents without detailed discussion. While this decision does not directly affect the outcome, it raises concerns about predictability in patent dispute resolutions, as noted in previous Federal Circuit cases.
In the application of these principles, the defendant claims that by licensing the '751 Patent in 2004, it received an implied license for the '426 Patent. Both patents share a common ancestor application, with the '426 Patent being a continuation-in-part of the earlier application. The 2004 License explicitly includes only the '751 Patent and excludes the '426 Patent, which falls under the category of 'UEI Related Patents' that are based on continuation or divisional applications of the licensed patents. Since the '426 Patent was not expressly licensed, the court must determine if asserting it would infringe upon the rights granted in the 2004 License.
Defendant contends that Plaintiff's assertion of the '426 Patent undermines its rights under the 2004 License, as practicing the '426 Patent necessitates practicing the '751 Patent. However, according to the TransCore precedent, this argument is flawed because Defendant holds an explicit license for the '751 Patent. The only way the claim could derogate from the '751 Patent would be if practicing it infringes the '426 Patent, which Defendant hasn’t proven. There are similarities between the two patents due to partially shared disclosures, specifically between claim 1 of the '426 Patent and claim 7 of the '751 Patent. Plaintiff's expert, Burke, compares these claims, asserting that claim 1 of the '426 Patent is narrower than claim 7 of the '751 Patent. However, Burke fails to compare the disclosures adequately, noting that infrared transmission circuitry is primarily disclosed in the '751 Patent. It seems Defendant has an implied license to claim 1 of the '426 Patent as per General Protecht. However, Plaintiff's focus on claims 2 and 3 is crucial, as Defendant must demonstrate an implied license to these specific claims. Plaintiff argues that claims 2 and 3 were added after the '810 Patent, with Burke stating that they disclose inventive structures not suggested in the '751 Patent. Defendant's expert supports this view, indicating these claims contain new matter compared to the '810 Patent. During deposition, Darbee confirmed that parts of the claim were new and that they originated from Mr. O’Donnell's idea in 1992. Despite this, Defendant claims that a deposition admission by UEI indicates that the '426 and '751 patents are indistinct, asserting that practicing the '426 Patent requires practicing the '751 Patent.
The '751 Patent is broader than the '426 Patent, meaning practicing the narrower '426 Patent may also involve aspects of the '751 Patent. However, this does not satisfy the requirements under TransCore, as the cited deposition does not demonstrate that the patents are indistinct. Plaintiff's witness, Hayes, clarified the distinction between various types of favorite channel buttons, indicating that only some are covered by the '751 Patent. He also testified that programming a single macro is covered by both patents, while programming multiple macros falls under claims 2 and 3 of the '426 Patent, not the '751 Patent.
Defendant's argument, based on internal product specifications listing both patents under a rotating macro function, is deemed insufficient to support a jury's finding of implied license, particularly since the '426 Patent explicitly mentions 'rotating macro' multiple times, whereas the '751 Patent does not. The Defendant has not successfully demonstrated entitlement to summary judgment for an implied license to claims 2 and 3 of the '426 Patent. Conversely, Plaintiff has established that no genuine issue exists regarding Defendant's lack of a license to the '426 Patent, leading to the Court granting summary judgment in favor of Plaintiff on this issue.
Regarding invalidity, Defendant's brief treats this as secondary to its noninfringement argument, failing to show that all elements of the challenged claims are present in prior art. The Court will address these issues in the order presented by Defendant for clarity. It reiterates that claims of issued patents are presumed valid under 35 U.S.C. § 282, and establishing invalidity requires clear and convincing evidence. Plaintiff asserts infringement of claims 2 and 3 of the '426 Patent, both of which depend on claim 1.
A remote control system is described, featuring a microprocessor with CPU and memory, a keyboard with a MACRO key, IR lamp driver circuitry, and light-emitting means to generate IR signals for controlling a device. The system includes a macro entry/definition program for users to define a macro to select favorite channels through keystrokes and a macro playback program for rapid selection using the MACRO key. Claim 2 specifies a function for establishing and recalling three selected channels with a keystroke sequence. The keyboard has specific keys for macro definition, with the agreed definitions of “MACRO key” and “macro entry/definition program” established by the parties.
The validity of the '426 Patent claims is contested by the defendant, citing prior art from Memorex, arguing it anticipates or renders the claims obvious under 35 U.S.C. 102 and 103. The dispute centers on whether Memorex's macro program can assign to a MACRO key the function of recalling three channels as described in the patent's Figures 4 and 5. The defendant asserts that Memorex's “favorite channel feature” allows for defining up to 32 favorite channels and includes a method for entering these channels using specific keys, which they argue parallels the patent's claims.
Defendant claims that Plaintiff’s expert, Shawn Burke, acknowledged the Memorex Manual provided all necessary components for the Memorex remote’s favorite channel feature and macro entry. Burke's deposition indicates he merely confirmed the manual's content without additional interpretation. The parties concur that the instructions in Figures 4 and 5 of the patent outline the "means" for selecting three channels, raising the issue of whether Memorex includes these instructions. The comparison is complex because Figures 4 and 5 are designed from the remote's viewpoint, while the Memorex instructions are oriented towards the user.
In the operator's view of Figure 5, the Memorex process involves pressing the MACRO key to transmit channels from a stored list, incrementing a playback count, and employing specific keys to activate the favorite channel function. The Memorex system appears to use multiple buttons to cycle through favorite channels, requiring both the [FAVORITE] and another button to transmit a channel, unlike the patent's approach. It's unclear if Memorex updates the playback count with each button press. The excerpt indicates a detailed analysis of the operational differences between the Memorex remote and the patented figures will follow, specifically regarding Figure 4.
Memorex's Favorite Channel Selection involves a series of steps to store and manage favorite channels on a remote control. To store a channel, the user first presses the “I” and then “HI” keys, followed by the MACRO key, which retrieves the rotation count for that channel position. After entering the desired channel, the user repeats the initial steps to store the channel, at which point the rotation count is incremented. If the count reaches four, it resets to one. The user can add up to 32 favorite channels, with only the last three entries being retained in the macro. Deleting a specific channel macro involves selecting the macro and pressing the “I,” “0,” and “III” keys. The document also discusses a dispute regarding the definition of a "MACRO key" as agreed upon by the parties, with defendant arguing that the Darbee '810 Patent allows channel-up and channel-down keys to function as macro keys. The plaintiff contends that a MACRO key must uniquely assign and recall three selected channels. The defendant maintains that the plaintiff has misinterpreted the claims and definitions, conflating multiple elements of the claims while attempting to narrow the interpretation of the MACRO key's functionality. The plaintiff's expert claims that the channel up/down buttons on the Memorex remote operate similarly in both favorite and normal modes, suggesting a limited function for these buttons. The court's construction indicates that the MACRO key does not need to encompass all disputed limitations, allowing for a broader interpretation that includes a two-button arrangement for channel selection.
Defendant highlights that during his deposition, Burke referred to the Memorex manual, which indicates that in "favorite channel mode," Memorex transmits channels from the user's favorite list instead of using standard channel commands. Plaintiff contends that Burke is merely reading from the manual and cannot interpret it differently. Burke clarified that his understanding aligns with the manual’s content. A key distinction noted is that Memorex can store up to 32 channels and does not reset the rotation count to 1 upon reaching 4, unlike the asserted claims. There is uncertainty about whether Memorex’s use of a rotation counter aligns with the illustration in the patent. Additionally, Memorex requires a separate function to delete channels if the total exceeds 32, rather than overwriting them.
Defendant's argument that a "storage rotation count" is not part of the asserted claims, as it is included in dependent claim 7, is dismissed since Figure 4 of the patent is acknowledged to correspond with the function in claim 2. Defendant fails to provide specific evidence demonstrating that Memorex encompasses all elements of Figures 4 and 5 of the '426 Patent, instead arguing that if the Plaintiff's approach to infringement is valid, Memorex would invalidate the patent. However, the court finds that Defendant has not substantiated its claim for summary judgment on invalidity.
The conclusion regarding the invalidity of the '426 Patent is that the Motion is DENIED. Regarding non-infringement, the legal standard involves a two-step process: first, interpreting the patent claims and then comparing them to the accused device. The burden of proof for infringement lies with the patentee, allowing the accused infringer to seek summary judgment by either disproving infringement or showing a lack of material fact essential to the patentee's case. If the accused infringer meets this burden, the onus shifts to the patentee to present specific facts for trial, beyond merely submitting expert affidavits claiming that the accused device meets the claim limitations.
Infringement of a patent claim can occur either literally or under the doctrine of equivalents, which is a factual determination. A patentee must demonstrate that the accused device meets all claim limitations. The defendant contends that specific algorithms in Figures 4 and 5 of the '426 Patent, as incorporated into claims 2 and 3, require "rotation counters." In Figure 4, the "storage rotation count" increments with each programmed favorite channel and resets after reaching 4, leading to overwriting the first macro when a fourth is established. Figure 5 features a "playback rotation count" that also resets at 4, resulting in no action from the second and third keystrokes if only one macro is created.
The defendant's product, the R6 remote control, allegedly allows programming up to 5 favorite channels but does not exhibit the same behavior as described in the patent, as it resets the sequence when additional channels are programmed, instead of overwriting only the first channel. However, the defendant fails to provide evidentiary support for this assertion, leading the court to disregard it. The plaintiff does not dispute the facts but challenges the defendant's interpretation, arguing that the patent’s description of overwriting is merely a "preferred embodiment" and not a limitation of the claims. The court notes that limitations from a preferred embodiment cannot be imposed on claims unless the intrinsic record indicates a clear intent to do so.
Claim 2 incorporates the structures depicted in Figures 4 and 5 of the patent. The Defendant’s references to the specification merely describe the figures rather than optional features of a preferred embodiment. The figures illustrate that if a fourth macro is established for an additional selected channel, it will erase the first macro. Furthermore, if only one macro is created, subsequent keystrokes will yield no action, and only the fourth keystroke will repeat the first macro. Consequently, the Defendant's assertion that its remotes function differently does not rely on irrelevant features; instead, it provides evidence of non-infringement based on the playback function diverging from Figure 5. The court grants the motion for non-infringement of the '426 Patent.
The '906 Patent, titled “Method for Selecting a Remote Control Command Set,” allows for multiple command sets to be stored in a remote for controlling various devices. Several prior art methods for selecting the appropriate command set are described, including automatic cycling through command sets and direct entry based on device specifications. The '906 Patent's method involves assigning observable commands (e.g., “power off”) from different command sets to multiple buttons. The user presses these buttons until the device responds correctly, thus programming the remote to the appropriate command set. The Plaintiff claims infringement of claims 1, 10, and 12 of the '906 Patent, which outline the process of assigning commands to buttons and sequentially activating them until the desired effect is achieved.
Halting the operation of multiple assignable user-actuated switches and configuring the remote control to transmit future commands based on the last observable effect are key components of the method outlined. The effects observable command specifically refers to a power-off command. The remote control features mode selection keys that allow users to choose from different modes before assigning an observable command, facilitating the selection of distinct command sets for each mode.
In the analysis, the Defendant contends that its remote control requires simultaneous key presses rather than sequential individual presses, as evidenced by its user manual. The Defendant argues that the user must hold down a component button while pressing numeric keys, thus not actuating them “individually.” The Defendant references a previous distinction made by the Plaintiff's expert, who noted that the Power button and numeric keys are actuated together, contradicting the requirement for sequential individual presses.
In response, the Plaintiff asserts that holding the component button is merely an additional step and does not exclude the possibility of sequential individual pressing as the claims use “comprising” language. The Plaintiff clarifies that the “assignable user activated” keys, which need to be actuated sequentially and individually, do not include the component button. Furthermore, the Plaintiff points out that the Defendant’s expert admitted a lack of evidence regarding the component button's capability to send an observable command, despite the absence of a cited deposition page. Ultimately, the Plaintiff argues that the relevant keys in the accused remotes are indeed being pressed “sequentially and individually,” and that the Defendant misinterpreted its expert's testimony, which distinguished the prior art based on a single key's effect observable command.
Plaintiff's expert contended that prior art did not satisfy the limitation of "actuating sequentially and individually" for user-actuated switches, citing that the numeric keys were not assigned and were not actuated individually. Plaintiff now disputes this characterization of the expert's argument. Additionally, the prior art remote control manual presents ambiguity regarding whether the power key must be separately pressed after the power and numeric keys are simultaneously activated to select a code set. Despite this ambiguity, the Defendant has not established that the button in the accused products qualifies as an "assignable user actuated" key, and thus the simultaneous pressing does not negate individual actuation of the assignable keys. Consequently, the court finds no genuine issue of material fact regarding non-infringement of the '906 Patent, denying the Defendant's motion on this point.
Regarding the '067 Patent, titled "Universal Remote Control with Macro Command Capabilities," the patent outlines two methods for matching equipment: the “step-and-set” method and the “direct-entry/quick set” procedure. Plaintiff alleges infringement of claims 1, 2, 3, and 6, which involve directly identifying various home appliances by manufacturer. The Defendant argues non-infringement based on an agreed interpretation that the phrase refers to appliances of different make and model, asserting that its product codes do not directly identify appliances by make and model. However, the Defendant's argument is insufficient.
The Court interpreted the phrase “to directly identify each of the plurality of different home appliances of different manufacturers to which the universal remote is to be matched” as requiring a direct identification of each specific appliance. While the parties agreed on the meaning of "plurality of different home appliances" elsewhere in the claim, the Court's interpretation of the key term takes precedence. The Defendant's argument that the same code used for multiple manufacturers' devices fails to directly identify each appliance extends beyond the agreed constructions. The Defendant proposes a more restrictive definition, suggesting that the code should not only directly identify but uniquely identify each appliance, a requirement not present in the claims as constructed. The evidence presented by the Defendant indicates that the remote can match different appliances using a code, suggesting a genuine factual dispute regarding whether the remotes directly identify each specific appliance. The argument that a shared code implies non-infringement is unfounded, as the claim does not necessitate a unique identification.
Regarding the “entire market value rule” and apportionment, the Defendant seeks partial summary judgment, asserting that this rule does not apply since the patented features represent minor improvements and do not drive consumer demand for the entire accused remote devices. The Defendant argues for a legal requirement to differentiate between patented and non-patented features in calculating damages. The Court notes that resolving these issues involves disputed facts better suited for cross-examination and evidence presentation rather than a legal ruling at this stage. The Court also aims to provide clarity on these points, acknowledging the need to regulate expectations before trial without prejudging future evidentiary matters. Under 35 U.S.C. § 284, a prevailing patentee is entitled to damages adequate for infringement, including at least a reasonable royalty, as established in the Supreme Court case Garretson v. Clark.
Evidence must clearly separate or apportion the defendant’s profits and the patentee’s damages between patented and unpatented features. This evidence should be reliable and tangible, eschewing conjecture or speculation. Alternatively, the patentee may demonstrate, through equally reliable evidence, that profits and damages should be calculated based on the entire machine, attributing its marketable value to the patented feature. Under the Patent Act of 1870, which allowed the patentee to recover the defendant’s profits and damages from infringement, apportionment gained significance due to the certitude of the infringer’s profits compared to the hypothetical lost profits of the patentee.
The standard for apportionment applies equally in the context of lost profits recovery. In *Ferguson Beauregard/Logic Controls v. Mega Systems*, the Federal Circuit emphasized the necessity of distinguishing between profits attributable solely to the infringed patent and those related to additional features. The court found that the lower court failed to make this distinction when awarding lost profits for devices embodying features beyond those of the infringed patent. Conversely, in *Rite-Hite Corp. v. Kelley Co.*, the court provided a comprehensive historical analysis of lost profits under current law, framing the inquiry around what the patentee would have earned had the infringement not occurred.
Rite-Hite applies a but-for test constrained by proximity and foreseeability principles in assessing patent damages under § 284 of the patent statute. For an injury to be compensable, it must be reasonably foreseeable to an infringing competitor in the relevant market. Lost sales of a competing product that does not embody the patent are considered “clearly” compensable, as they are deemed foreseeable and align with the intended compensation under the statute. The second Panduit factor, which examines the absence of acceptable non-infringing substitutes, was also addressed. Rite-Hite clarified that a patentee’s own non-infringing products do not negate the ability to prove but-for causation under this factor.
In discussing lost sales of dock levelers, the court determined that the entire market value rule was not applicable because the patented and unpatented products could function independently and did not achieve a singular result together. Despite heightened scrutiny on patent damages, Rite-Hite remains a valid precedent. The ruling distinguishes between mechanical and electronic devices, noting the complexities in attributing value to distinct components within electronic products, which may include multiple patents held by different entities.
Proving but-for causation for lost profits in cases involving multiple distinct and potentially separately patented products is challenging and carries a significant risk of failure, particularly if the plaintiff does not properly apportion damages among the asserted patents. The defendant contends that the plaintiff's inability to effectively demonstrate this apportionment, given the complexity of the accused products, indicates a likely failure. Conversely, the plaintiff argues that customer bid requirements and the defendant's marketing strategies substantiate that the infringement was the direct cause of lost sales.
The defendant’s reliance on Garretson to assert the necessity for apportionment due to the patents being improvement patents may not hold, as the plaintiff’s theory, if proven, could eliminate the need for apportionment in this market context. Although Ferguson is cited to support the defendant’s position, it does not fully address the entire market value rule or the specific market conditions present in this case.
The plaintiff has demonstrated that a remote control represents the smallest patent-practicing unit and has provided evidence of its use in industry sales and licensing. The defendant’s challenge regarding the application of the entire market value rule does not seek a smaller unit or exclude follow-on sales but demands evidence of how much profit derives from the patented features specifically. The plaintiff has opted to argue that, in the specific commercial situation, it would have made sales absent the infringement, and has presented sufficient evidence to withstand a motion for summary judgment regarding this theory.
In conclusion, the motion concerning the application of the entire market value rule is denied.
Regarding patent marking, U.S. patent law allows patentees to notify the public of a patent by marking products with the patent number per 35 U.S.C. § 287. Failure to mark delays the damages period until the infringer is notified. The burden of proof lies with the patentee to show that substantially all products were marked consistently. The defendant claims the plaintiff did not adequately mark its products, thus precluding damages prior to notification of infringement, arguing that the documents provided by the plaintiff to demonstrate compliance are insufficient.
Defendant argues that evidence of the company's current policies and practices alone is inadequate to counter a motion for summary judgment regarding compliance with marking requirements, referencing the case Von Holdt v. A-l Tool Corp. Plaintiff counters that Von Holdt allows for specific evidence of marked products or affidavits to survive summary judgment, which they claim is present in this case. The Plaintiff's 30(b)(6) witness, Hayes, a former Vice-President of Intellectual Property, admitted he could not confirm if any remotes associated with the patents-in-suit were properly marked without conducting a detailed review of documents and the products themselves, which he had not done. Hayes noted that determining marking status required access to quality assurance records and product specifications, but he was presented with certain remotes that were expected to embody features of the patents without any markings. He further indicated that many photographs and schematics provided by Plaintiff did not clearly show patent numbers. During the deposition, Defendant’s counsel pointed out the difficulty in reading the evidence presented and emphasized that Plaintiff has the burden to prove marking. Hayes acknowledged that the simplest way to verify marking would be to inspect the remotes directly, but noted that Plaintiff does not maintain a library of sample units for this purpose, and many products may no longer exist. He reiterated that while marking could potentially be demonstrated through product development documents, he had not undertaken this analysis for any of the Plaintiff's products claiming to practice the patents-in-suit.
Plaintiff's Atlas family of remotes, which represent over 90% of the products covered by the '426 Patent, were not marked with the patent number. The Plaintiff's claim that certain technical specifications reference the '426 Patent does not demonstrate actual marking nor does it quantify the coverage of those specifications. The Plaintiff argues that inspection issues were minimal, but fails to substantiate the accuracy of these inspections or their relevance to the '426 Patent. The reference to a specific remote, the Crystalis NV-10, lacks evidence regarding its sales impact on the '426 Patent. Although the technical specifications for two Super Atlas remotes require marking, the Product Design Verification document does not provide evidence of compliance with patent marking requirements. The Plaintiff's main strategy to counter the Defendant's claims centers on disputing the identification of Atlas remotes as covered products, but the Defendant counters with evidence from deposition testimony linking specific model prefixes to the Plaintiff’s sales summaries. The moving party (Defendant) does not bear the burden of proof at trial; instead, it can shift the burden to the Plaintiff by demonstrating that not all of the '426-covered products were marked, which the Defendant has done by evidencing that approximately 90% were unmarked.
Plaintiff failed to present sufficient rebuttal evidence to demonstrate that substantially all of its products covered by the '426 Patent were marked, only managing to show that some products were marked, which does not create a genuine issue of material fact. Regarding the '067 Patent, Defendant contends that nearly all products sold by Plaintiff from 2003 to 2007 were covered, yet there is a lack of marking evidence for four categories of remotes that comprised 50-60% of the covered remotes during 2006 and 2007. Specifically, these remotes include the Atlas, DirecTV, Motorola DRC800, and various Radio Shack remotes. The Atlas remotes did not include the Millennium 4 product, and this detail was inadequately referenced in the Motion.
Plaintiff's response did not adequately address the specific evidence provided by Defendant but instead cited various marked remotes and general manufacturing information. While evidence was presented that the DirecTV remotes were marked, it was insufficient for the other remote categories. Specifically, there was no evidence for the Motorola DRC800 remotes or the Radio Shack remotes in question, as Plaintiff only referenced other models. Additionally, marking the owner’s manual alone does not satisfy the requirement that the product itself must be marked.
Consequently, excluding the disputed DirecTV remotes, Plaintiff has not established a genuine dispute regarding the marking of approximately 23% of '067-covered remotes in 2006 and 22% in 2007, which does not meet the "substantially all" standard. Furthermore, under Section 287(a), a patentee cannot recover damages without proving that the infringer was notified of the infringement if the products are not marked.
Actual notice of patent infringement requires specific communication regarding a charge of infringement tied to an identified product. The Plaintiff claimed to have notified the Defendant about the infringement of the '426 Patent on March 1, 2010, a date the Defendant accepted, thus limiting the Plaintiff's damages for that patent to occurrences after this date. For the '067 Patent, the Plaintiff's first alleged notification was on March 2, 2012, but since this patent expired in 2007, the Plaintiff is entitled to no damages. The Plaintiff does not dispute these dates, effectively waiving any objections.
The Plaintiff also referenced a potential notice from a license agreement dated December 16, 2004, but this agreement only indicated the existence of the '067 Patent, not an infringement claim. A letter dated May 27, 2011, similarly failed to constitute an affirmative infringement notice as it vaguely referenced potential past infringement without specificity. The Plaintiff's failure to diligently assert its rights is noted, particularly given the competitive context between the parties.
In the court's ruling on the Defendant’s Motion for Summary Judgment, several issues were addressed:
- Laches, Estoppel, and Implied License: DENIED
- Invalidity of the '426 Patent: DENIED
- Non-Infringement of the '426 Patent: GRANTED
- Non-Infringement of the '906 Patent: DENIED
- Non-Infringement of the '067 Patent: DENIED
- Entire Market Value Rule: DENIED
- Patent Marking: GRANTED
The ruling concludes that the Plaintiff's lack of diligence in enforcing the '067 Patent rights contributed to its inability to recover damages.
