PTAB Denies Institution in Inter Partes Review of Patent Challenged in Twelve Previous Petitions
by Matthew George Hartman & Daniel L. Moffett
Patent Trial and Appeal Board, Inter Partes Review. Nov. 5, 2018
The Patent Trial and Appeal Board (the “Board”) exercised its discretionary power to deny institution in an inter partes review (IPR) filed by BMW of North America, LLC (“Petitioner” or BMW) seeking review of a patent that had already been challenged 12 times. The petition addressed U.S. Patent No. 8,155,342 (the “’342 patent”), which is owned by Blitzsafe Texas, LLC (“Patent Owner”). Although the ’342 patent had been the subject of numerous previous petitions, including one filed by BMW, BMW argued that the new petition was based on a newly-discovered prior art reference and, therefore, trial should proceed. Without reaching the merits, the Board exercised its discretion to deny institution under 35 U.S.C. § 314(a) based on its analysis of the General Plastic factors, which relate to the treatment of follow-on petitions. General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19, § II.B.4.i (PTAB Sept. 6, 2017) (precedential).
The Board typically denies institution of an IPR when the petition fails to establish a reasonable likelihood that the petitioner will prevail on the merits. The Board also has discretion to deny institution for other reasons, including where the petition is merely a follow-on petition challenging the same claims that were challenged in an earlier petition. For follow-on petitions, the Board examines the following seven non-exclusive factors from its precedential General Plastic decision:
- whether the same petitioner previously filed a petition directed to the same claims of the same patent;
- whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it;
- whether at the time of filing of the second petition the petitioner already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition;
- the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;
- whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent;
- the finite resources of the Board; and
- the requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than 1 year after the date on which the Director notices institution of review.
In this case, the Board found that all but one of the General Plastic factors weighed against institution and that the remaining factor, number 7, was neutral. In light of the fact that BMW had already challenged the ’342 patent in a previous petition, BMW emphasized that the second petition was based on a new prior art reference, Michmerhuizen, that BMW had not identified in its previous prior art search. The Board did not find this fact persuasive.
While the Board credited BMW’s assertion that it did not find the Michmerhuizen reference in an earlier search, the Board criticized BMW for failing to address whether it could have discovered Michmerhuizen in that search. Ultimately, the Board concluded that “Petitioner does not persuade us that through reasonable diligence it could not have located Michmerhuizen in its prior search or that it has not benefitted from the delay in finding the reference.”
The Board was also skeptical of the timing of BMW’s follow-on petition, stating that, although the prior art search uncovering Michmerhuizen was conducted by February 2018, “Petitioner waited until April 24, 2018, after receiving the Board’s decision denying review in [the previous IPR], on April 20, 2018, before filing this Petition.”
Finally, when considering the sixth factor, “the finite resources of the Board,” the Board considered the “similarity (if not exact identity) of the arguments in BMW’s prior challenge, added to the twelve other unsuccessful petitions the Board has already considered.” The Board found that these facts weighed “heavily” against institution.
Petitioners filing follow-on petitions should put particular emphasis on explaining, with evidentiary support if possible, why they could not have asserted the grounds in a previous petition. Merely showing that the follow-on petition is based on newly-discovered prior art may be insufficient without also showing why the prior art could not have been discovered earlier. In addition, a follow-on petition should be filed as soon as possible after uncovering a new ground, and ideally before the issuance of an institution decision in the earlier proceeding.
BMW of North America, LLC et al v. Blitzsafe Texas, LLC, IPR2018-00926, October 19, 2018
PTAB Denies Request to Cross-Examine Experts Because Declarations Were Prepared for Other Proceedings and Were Not “Critical” Evidence
by Thomas W. Landers IV, Matthew George Hartman & Rubén H. Muñoz, Akin Gump
Patent Trial and Appeal Board, Inter Partes Review. Nov. 7, 2018
In an ongoing inter partes review (IPR) proceeding, the Patent Trial and Appeal Board (the “Board”) denied Petitioner Nestlé Healthcare Nutrition, Inc.’s request to cross examine two expert witnesses after Patent Owner Steuben Foods, Inc. submitted five declarations that the witnesses had prepared for other proceedings. The Board explained that cross examination of such declarants is “not routine discovery” under 37 C.F.R. § 42.51(b)(1)(ii).
Under 37 C.F.R. § 42.51(b)(1)(ii), “[c]ross examination of affidavit testimony prepared for the proceeding is authorized within such time period as the Board may set” (emphasis added). Nestlé argued that, even though the declarations were not prepared for the IPR proceeding, Steuben should produce the witnesses for deposition because the “declarations were recently created, and . . . Patent Owner has not asserted that the Declarants are unavailable,” citing IBG LLC et al. v. Trading Technologies Internationale, Inc., CBM2015-00179, Paper 39 (PTAB Apr. 15, 2016). The Board rejected that argument and distinguished the IBG case. In IBG, the Board ordered the petitioner to produce a witness from a prior litigation because the witness’s testimony “was the sole evidence that a reference was prior art.” Here, Nestlé “d[id] not allege that Patent Owner’s evidence rises to such a critical level.”
The Board did not reach Nestlé’s alternative request to exclude the declarations because Nestlé had not filed a motion to exclude.
When seeking to cross-examine witnesses based on declarations from prior or parallel proceedings, parties should include in their requests an explanation of why the declaration is “critical” evidence in the IPR. Parties should also consider objecting to the declarations by filing a motion to exclude that includes a reasoned explanation justifying exclusion.
Nestlé Healthcare Nutrition, Inc. v. Steuben Food, Inc., IPR2015-00249, Paper 107 (PTAB Oct. 29, 2018).
Patent Owner’s Statements Made During Inter Partes Review Constitute Disclaimer, Leading to Summary Judgment of Noninfringement
by Rehan M. Safiullah, Matthew George Hartman & Rubén H. Muñoz, Akin Gump
District Court, Non-Infringement, Inter Partes Review. Nov. 21, 2018
The Northern District of California granted summary judgment of noninfringement—holding that a patent owner’s statements about a claim term during inter partes review (IPR) were binding in the litigation.
In the litigation, patent owner Radware and accused infringer F5 Network, each filed summary judgment motions on the issue of infringement, which centered on the construction of the claim term “decision function.” Both parties agreed to construe the term as “function used to decide which data route is selected based on its parameters;” however, the court determined that the agreed-upon definition was ambiguous because “its” could refer to either “data route” or “function.” To resolve the conflict, the court relied on Radware’s argument during IPR that “its” referred to “data route” parameters to conclude that—as a matter of law—the input for “decision function” was limited to data route parameters. The court held that Radware could not broaden the meaning of the term in view of its IPR statements
Relying on Federal Circuit law, the court explained that “statements made by the patent owner during inter partes review put the public on notice of how the patent owner views its patent.” The court held that “[e]ven if the PTAB may not have expressly adopted Radware’s interpretation, the public is still entitled to rely on it.” Accordingly, the court denied Radware’s motion for summary judgment and granted F5 Network’s summary judgment motion of noninfringement.
When presenting arguments in an IPR proceeding to distinguish prior art, patent owners must be cognizant of the potential disclaimer effects of their arguments on ongoing or future litigation. In district court litigation, patent owners will be bound by their IPR arguments, which may foreclose certain infringement theories. Further, whether the PTAB relies on such arguments is immaterial to whether the arguments serve as a disclaimer.
F5 Networks, Inc. v. Radware, Inc., No. 17-cv-03166-VC, slip op. (N.D. Cal. Nov. 19, 2018).
Evidence of Failed IPR Precluded When Validity No Longer at Issue
by Ashley Edison Brown, Matthew George Hartman & Rubén H. Muñoz, Akin Gump
District Court, Infringement, Motion in Limine, Inter Partes Review, Southern District of New York. Dec. 11, 2018
The Southern District of New York has granted a motion in limine precluding evidence of Defendant’s failed inter partes review (IPR) petition.
The parties to the lawsuit are in the business of manufacturing and selling theater rigging equipment and winch systems. Olaf Sööt Design (“Plaintiff”) brought an action against Daktronics (“Defendant”) alleging infringement of U.S. Patent No. 6,520,485 (the “’485 patent”), which covers a winch system that is designed to move large theater scenes on and off the stage quickly. Notably, although the Defendant initially alleged that the ’485 patent was invalid, it withdrew its invalidity defense during the course of litigation.
Leading up to trial, each party filed motions in limine seeking to exclude evidence related to the validity of the ’485 patent. Specifically, Plaintiff moved to exclude prior art references and related testimony as irrelevant and unduly prejudicial. Defendant moved to exclude evidence of its failed IPR and its decision to withdraw its invalidity defense. In granting the motions, the court concluded that these pieces of evidence were irrelevant and prejudicial because validity was no longer at issue in the case. In opposing Defendant’s motion, Plaintiff argued that the purpose of introducing the failed IPR evidence was to discredit Defendant’s witnesses. In precluding evidence of the failed IPR, the court determined that the likelihood that such evidence would confuse the jury and prejudice the Defendant was high. In reaching its conclusion, the court stated that “the jury could confuse Defendant’s failure before the PTAB as evidence of infringement.”
In cases where validity is no longer an issue for trial, evidence of an IPR may be deemed confusing and prejudicial, thus providing a basis for exclusion under Federal Rule of Evidence 403.
Olaf Sööt Design, LLC v. Daktronics, Inc., 15 Civ. 5024, Doc. No. 304 (Dec. 4, 2018).
Ever-Changing Inventorship Dispute Heads to Bench Trial
by Michael Francis Reeder II, John Wittenzellner & Charles Everingham IV, Akin Gump
District Court, Patent Trial and Appeal Board, Inter Partes Review, District of Massachusetts Dec. 17, 2018
In a case of twisting facts, a trial judge has denied a plaintiff’s motion to correct inventorship to add an inventor to a patent because that plaintiff previously asked the PTO to remove that same inventor from the patent just months before.
The salient facts are as follows: Egenera sued Cisco for patent infringement on a patent with eleven named inventors. Cisco challenged the asserted patent in an IPR before the PTAB. Egenera responded to the IPR petition by arguing that one of Cisco’s main prior-art references did not constitute prior art, because one of Egenera’s own articles, authored by one of the inventors, predated the reference and fully described the patented invention. The trouble, however, was that the article was written before one of the eleven inventors, Schulter, went to work for Egenera—so if the article fully disclosed the invention, Schulter could not be an inventor. Faced with this dilemma, Egenera petitioned the PTO to remove Schulter from the patent (claiming he was accidentally included as inventor). The PTO granted the petition to remove Schulter as an inventor, and the PTAB subsequently denied institution of Cisco’s IPR.
In an unusual twist, back at the district court, Cisco argued that Schulter was indeed an inventor of the patent, and his exclusion should invalidate it. In support, Cisco argued that portions of the asserted claims rely on technology that was invented by Schulter after he joined Egenera. Further, Cisco disputed that the article Egenera presented to the PTAB actually disclosed the patented invention. Cisco argued that the patent specification included, sometimes verbatim, articles Schulter wrote during his employment at Egenera.
In response, Egenera took the position that it had acted in good faith all along—it accidentally named Schulter as an inventor, which it had since corrected, and if further discovery should prove that he was indeed an inventor, then the remedy should be correction, not invalidation.
The court, however, held that Egenera was estopped from making such an argument. Even though correction of inventorship is liberally permitted, the court found that under the doctrine of judicial estoppel, Egenera was prevented from asserting a correction of inventorship claim when it had made an inconsistent claim in a previous proceeding. Based on the record before it, the court found that there were genuine disputes of material facts related to inventorship, so the court denied the parties’ cross-motions for summary judgment and set a bench trial to hear the issue.
Practitioners should be mindful that the doctrine of judicial estoppel is not limited to statements made in particular tribunals. As this case shows, statements made in PTAB briefing and related PTO petitions were the basis for judicial estoppel to prevent seemingly contradictory arguments to the district court. Thus, in cases with parallel proceedings at the PTAB and the district court, legal strategies and positions must be weighed not only for their merit in a particular tribunal, but also for the potential foreclosure of contradictory arguments in the other tribunal.
Egenera, Inc. v. Cisco Systems, Inc., 16-11613-RGS, D. Mass., December 3, 2018
PTAB Denies Motion to Excuse Late Filing of Exhibits to IPR Petition
by Michael N. Petegorsky, Matthew George Hartman & Rubén H. Muñoz , Akin Gump
Patent Trial and Appeal Board. Jan. 02, 2019
The Patent Trial and Appeal Board (PTAB) has denied a petitioner’s motion to excuse the late filing of the exhibits to its petition for inter partes review (IPR). The PTAB found that the petitioner had failed to show good cause to excuse this clerical error, especially in light of the notice of the deficient filing provided by the PTAB. The PTAB also found that excusing the late filing was not in the interests of justice.
Petitioner Nuna Baby Essentials, Inc. filed a petition for IPR on September 10, 2018. Because of an apparent clerical error, no exhibits were filed with the petition, although they were served with the petition on patent owner Britax Child Safety, Inc. In a Notice of Filing Date (the “Notice”) entered on September 21, the PTAB informed Nuna that “[n]o exhibits [had] been filed.” The Notice stated, “Petitioner must correct the defect(s) within FIVE BUSINESS DAYS from this notice. Failure to correct the defect(s) may result in an order to show cause as to why the Board should institute trial.” According to papers filed by Nuna, a legal assistant for Nuna’s counsel checked the docket on October 2 and discovered for the first time that the exhibits had not been filed. Nuna then filed the exhibits and sought leave to file a motion to excuse the late filing. The PTAB granted Nuna leave and authorized Britax to file an opposition.
Under 37 C.F.R. § 42.5(c)(3), “[a] late action will be excused on a showing of good cause or upon a Board decision that consideration on the merits would be in the interests of justice.” Nuna put forward various reasons why good cause existed, but the PTAB disagreed.
Nuna first argued that good cause existed because the PTAB routinely allows petitioners to correct mistakes in petition filings, including the failure to properly upload exhibits. However, according to the PTAB, the fact that other panels allow correction of clerical errors does not establish per se good cause. The PTAB held that Nuna was given the opportunity to correct its error when the PTAB issued its Notice, and Nuna’s failure to correct within the allotted time meant that there was no good cause for an untimely correction.
Nuna also argued that good cause existed because Britax was on notice of the basis for relief and suffered no prejudice. The PTAB agreed that there was no prejudice here, but it found that the lack of prejudice does not demonstrate good cause to excuse a late filing. The PTAB similarly found that Nuna’s alleged “good-faith” belief that it had correctly filed the exhibits did not absolve Nuna of its responsibility to check that the filing was properly completed, especially in light of the notice provided by the PTAB.
Finally, the PTAB did not find that it was in the interests of justice to accept the late filings, despite the prejudice to Nuna of being time-barred from filing a new petition. The PTAB noted that there is no automatic right to petition for IPR and that there was no justifiable excuse for Nuna’s failure to file within the limits set by Congress. Accordingly, Nuna’s motion to excuse the late filing was denied, and every exhibit accompanying its petition was expunged.
After every filing, a party should check the PTAB’s End to End docketing system to confirm that all documents and exhibits were uploaded and filed properly. Likewise, it is important to analyze thoroughly every notice and order issued by the PTAB—including seemingly routine ones—to avoid missing important instructions.
Nuna Baby Essentials, Inc. et al. v. Britax Child Safety, Inc., IPR2018-01683, Paper 11 (P.T.A.B. Dec. 18, 2018)
Estoppel Applies to “Known or Used” Prior Art if PTAB Considered Corresponding Written References
by Jason Weil, Rachel J. Elsby & Rubén H. Muñoz, Akin Gump
District Court, 35 U.S.C. § 103, 35 U.S.C. § 315(e)(2) estoppel, Inter Partes Review. Jan. 04, 2019
A district court in California has granted-in-part a Plaintiff’s motion for summary judgment of no invalidity under 35 U.S.C. § 103 due to inter partes review (IPR) estoppel. During the pendency of the litigation, Defendants filed 10 IPR petitions. The Patent Trial and Appeal Board (PTAB) issued final written decisions finding that four patent claims asserted in the litigation were not unpatentable.
In response to the PTAB decisions, the Plaintiff in the district court moved for partial summary judgment of no invalidity of the same four claims due to IPR estoppel pursuant to 35 U.S.C. § 315(e)(2). As the district court explained, the grounds that a petitioner reasonably could have raised in an IPR (which trigger estoppel) include prior art that a skilled researcher conducting a diligent search reasonably could have been expected to discover.
With respect to the four obviousness challenges that Plaintiff addressed in its motion for summary judgment, Defendants did not dispute that they were aware of the relevant art at the time that they filed the IPR petitions. Instead, Defendants argued that they could not have raised their district court invalidity challenges in the PTAB because they relied on the art in the district court not as “patents or printed publications” under pre-AIA Section 102(b), but as information that was “known or used by others” before the patented inventions under pre-AIA Section 102(a)—an argument that they could not have raised at the PTAB because the PTAB’s consideration of prior art is limited to patents and printed publications. In response, Plaintiff argued, inter alia, that, where alleged prior art is a written document, the standard for establishing the reference as a “printed publication” is substantively the same as the “known or used” standard, and the relevant material must still be “publicly accessible.” Thus, according to Plaintiff, Defendants were making the same argument that they lost before the PTAB and should be estopped.
For three of the alleged invalidity challenges, the court agreed. The court found that Defendants sought to use the relevant references themselves as the basis for their invalidity arguments (as opposed to corroborative evidence). One invalidity challenge, however, included additional evidence—emails between two authors of relevant references relating to the ideas expressed in their work, and related testimony. The court noted that it was not clear whether the emails and testimony were intended to establish a reason to combine two references, as opposed to showing that certain elements of the invention were “known or used by others.” Nevertheless, and despite the court’s skepticism about the “public accessibility” issues surrounding the information in the emails and testimony, the court noted that the issue had not been squarely addressed by Plaintiff and declined to extend IPR estoppel to that challenge at the summary judgment stage. Accordingly, the district court granted Plaintiff’s motion for summary judgment of no invalidity based on IPR estoppel, except as to Defendants’ invalidity challenge that relied on the combination of prior art, testimony and email evidence.
If one asserts substantively the same reference in the PTAB and a district court on a theory that the written reference is separate evidence of what was known or used by others before the invention, IPR estoppel may attach based on a final written decision by the PTAB. IPR estoppel may not attach, however, if additional evidence, beyond the reference itself, which could not be raised in an IPR, is introduced at the district court.
Cal. Inst. Of Tech. v. Broadcom Ltd., et al., CV 16-3714 (C.D. Cal. Dec. 28, 2018) (Dkt. No. 830)
Jury Verdict of $145 Million Reduced to $10 Million Based on Expert’s Failure to Properly Apportion
by Jenna Marie Pellecchia, John Wittenzellner & Daniel L. Moffett, Akin Gump
District Court, Damages, Southern District of California
On January 3, 2019, following a jury’s award of $145 million in damages to Wi-LAN, the Southern District of California granted Apple’s motion for a conditional order of remittitur to a $10 million damages award. In granting remittitur, the court reasoned that Wi-LAN’s expert’s apportionment methodology rendered Wi-LAN’s damages opinion unreliable.
In the case, the accused product was the iPhone, and the patented feature was a “subscriber unit/station,” which Wi-LAN admitted was the Voice over LTE (VoLTE) capability of the phone’s baseband processor, not the entire iPhone. Both Apple and Wi-LAN agreed that apportionment was required, but disagreed on the method of apportioning. Apple apportioned based on the smallest saleable patent practicing unit, while Wi-LAN apportioned based on a “direct valuation” methodology.
Accordingly to Wi-LAN, three steps comprise a “direct valuation” apportionment analysis: (1) study the incremental benefits of the patented technologies and quantify those technological benefits for each patent group by comparing the accused product with the “next-best” noninfringing alternative, (2) assign the benefits discovered in Step 1 a monetary value through the use of a “willingness to pay” survey, and (3) use the benefits discovered in Step 1 and the valuation attributed to them in Step 2 to determine a reasonable royalty. The court noted that Wi-LAN was unable to cite to any case applying the direct valuation method. Moreover, the court found Wi-LAN’s application of its method fundamentally flawed due to Wi-LAN’s expert’s failure to start the analysis with the patented technology. Specifically, in Step 1 of the direct valuation analysis, Wi-LAN’s expert relied on the benefits of the VoLTE standard, which includes many aspects in addition to the patented features. The court found that, while the reliance on a product’s incorporation of certain standards-related technology may be suitable to prove infringement, a reasonable royalty calculation still demands an analysis of the patent features alone.
The court recognized that there is flexibility in arriving at an apportionment, but it stressed that the patented features must be the starting point for an apportionment analysis. Because the “benefits” of the patented technology described by Wi-LAN’s expert were not actually attributable to the patented technology, but the VoLTE standard, the court held that the opinion should not have been presented to the jury.
Patent holders, understandably, are motivated to take damages positions that capture as much of the value of the accused product in the reasonable royalty base as possible. While there is flexibility in apportionment methodologies, this case illustrates that taking an overly aggressive approach to apportionment can backfire for a plaintiff. In particular, this case suggests that a damages opinion that is not centered on the patented features themselves may be excluded.
Apple Inc. v. WI-LAN Inc., et al, 3-14-cv-02235 (CASD 2019-01-03, Order) (Dana M. Sabraw)
District Court Permits Recovery of Worldwide Damages for Direct Infringement in Decision Certified for Interlocutory Appeal
by Brock F. Wilson, John Wittenzellner & Daniel L. Moffett, Akin Gump
In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., et al. Judge Stark ruled that the Supreme Court’s holding in WesternGeco LLC v. ION Geophysical Corp., 138 S.Ct. 2129 (2018)—allowing for recovery of lost profits from foreign sales for infringement under 35 U.S.C. § 271(f)(2)—can be applied to sales stemming from run-of-the-mill direct infringement under 35 U.S.C. § 271(a) and should not be limited to only those sales stemming from the specific form of indirect infringement at issue in WesternGeco.
In WesternGeco, the defendant made components of infringing products in the United States, then shipped them outside of the U.S. for assembly. As such, the defendant did not directly infringe within the U.S. The defendant’s practice, however, violated a specific and not-often-cited indirect infringement provision, 35 U.S.C. § 271(f)(2), which allows for infringement liability based, in part, on activities occurring outside of the U.S. Under these facts, the Supreme Court awarded lost profit damages, under 35 U.S.C. § 284, resulting from sales that occurred outside of the U.S. after shipping the products extraterritorially. Although the Supreme Court based its decision, in part, on the specific infringement provision concerning actions performed outside of the U.S., it did not foreclose application of its reasoning to infringement generally.
Unlike the products in WesternGeco, the accused products in Power Integrations were fully assembled within the U.S. and, as a result, directly infringed under 35 U.S.C. § 271(a) before they were shipped extraterritorially for sale (some of the products were also sold in the U.S.). Thus, the question at issue in Power Integrations was whether the court should apply the Supreme Court’s ruling in WesternGeco broadly to allow for a recovery of lost-profit damages based on worldwide sales of products resulting from direct infringement within the U.S. under 35 U.S.C. § 271(a). The court held that it should, even though—unlike the language of 35 U.S.C. § 271(f)—the language of 35 U.S.C. § 271(a) does not explicitly concern extraterritorial actions.
The Power Integrations litigation overlapped with the Supreme Court’s decision in WesternGeco. Thus, a brief discussion of that litigation history helps to frame the procedural context of the Court’s decision. Before the WesternGeco decision, in Power Integrations, the plaintiff sought lost-profit damages based on the defendant’s direct infringement in the U.S. During trial, the numbers underlying plaintiff’s damages expert’s opinions included defendant’s worldwide sales. The parties stipulated to infringement, and the jury awarded the plaintiff $34 million in damages. After the trial, however, Judge Stark found that the jury’s decision was improper because it was based on worldwide sales, which violated policies against applying U.S. law extraterritorially. For this reason, the court reduced the award to $6 million, reflecting only those sales made within the U.S.
Power Integrations appealed, but the Federal Circuit affirmed the district court’s reasoning with respect to worldwide sales, ruling “the entirely extraterritorial production, use, or sale of an invention patented in the United States is an independent, intervening act that, under almost all circumstances, cuts off the chain of causation initiated by an act of domestic infringement.” See Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1371-72 (Fed. Cir. 2013). Nevertheless, the court disagreed with the specific amount of damages awarded based on U.S. sales and remanded for a jury trial to determine that amount. See Id. at 1374.
After remand to the district court, the Supreme Court’s decision in WesternGeco issued, and Judge Stark asked the parties to submit briefings on whether the decision implicitly overruled the Federal Circuit’s earlier decision in Power Integrations, affirming that lost profits based on direct infringement within the U.S. should be limited to sales made within the U.S. After briefing, Judge Stark issued the instant decision, finding that such damages should not be so limited. Judge Stark reasoned that “the patent damages statute, § 284, has equal applicability to the direct infringement allegations pending here, as governed by § 271(a), as it did to the supplying a component infringement claims at issue in WesternGeco II, which were governed by § 271(f)(2)” because “Section 271(a) ‘vindicates domestic interests’ no less than Section 271(f).”
Given the atypical procedural history, Judge Stark certified the decision for interlocutory appeal. Thus, the parties will likely soon find themselves before the Federal Circuit again for further clarity on this issue.
Companies that manufacture patented products within the U.S. for sale outside of the U.S. should pay close attention to the Federal Circuit’s treatment of this decision, and current and prospective plaintiffs should consider seeking worldwide damages based on Judge Stark’s rationale. The upside of basing damages on worldwide sales can be significant. In this case, including worldwide sales would potentially increase a damages award by 82 percent.
Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., et al., Case No. Civil Action No. 04-1371-LPS (D. Del. October 4, 2018).