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This was the classic case of “in like a lion and out like a lamb.”
Innovatio almost pulled off one of the most innovative patent campaigns in history. In particular, Innovatio negotiated control of an extremely potent portfolio of WiFi patents invented by Broadcom engineers. Instead of using those patents to go after WiFi equipment manufacturers, like Motorola, Cisco, Netgear and others, it went after numerous WiFi end users. Coffee shops, hotels, and other venues all received letters, or even had lawsuits filed against them. And the message was always the same – pay us a nominal sum, like $2500, and all of this pain can go away. This strategy, which had been employed so successfully by Jerome Lemolsen many years ago, paid some early dividends for Innovatio.
Eventually, however, the major manufacturers stepped in. While they raised the usual defenses; i.e., noninfringement, invalidity, etc., they also argued that the patents were subject to RAND licensing terms due to Broadcom’s participation in various standards processes. It was this argument that eventually caused Innovatio’s case to explode. Back in October, the Court ruled that Innovatio’s patents were subject to RAND terms, and set a very low royalty per device. The settlements began to role in shortly thereafter. Instead of the billions it was hoping to garner, Innovatio ended up pulling in a few million dollars.
Back in 2012, the state of vicarious liability in patent cases received a major boost when the Federal Circuit held in Akamai v. Limelight that a method claim could be infringed even though no single entity practiced all elements of the claim. However, what the Federal Circuit giveth, it also taketh away. The latter came in the form of a new Federal Circuit decision that held that a good-faith invalidity position could negate any “intent,” which makes it even harder for patent plaintiffs to collect past damages when alleging induced infringement (and probably contributory infringement as well).
In particular, in Commil v. Cisco, the Federal Circuit held that 1) mere negligence; i.e., “should have known,” is insufficient to establish actual knowledge, which is required to establish induced infringement, and 2) issues of validity should be considered by the jury to determine if a defendant had actual knowledge that it was inducing a valid patent.
In practice, this means that a good-faith invalidity position will shield a defendant from a finding of induced infringement, which will preclude past damages. Obviously, once a patent is held to be valid and infringed, the plaintiff can pursue damages for induced infringement.
While the holding of Commil is restricted to induced infringement, the same logic would apply to contributory infringement.
Zebra Technologies v. Intermec, Case No. 12-9808 (N.D. Ill. 11-19-2013)(Judge Kendall)
After being sued by Zebra Technologies, Intermec counterclaimed by alleging induced infringement of several patents. The claims were based on a combination of Zebra Technologies’s printers with mobile devices. Zebra Technologies moved to dismiss these claims per Rule 12(b)(6) as allegedly not pleading sufficient facts on which to support a charge of induced infringement. The Court denied. In particular, the Court found that it was implied that Zebra Technologies wanted to sell as many printers as it could, and that Zebra Technologies touted integration with mobile devices, including those not made by Intermec.
U.S. Supreme Court to Review Two Cases Based on Proper Standard to Award Fees to Prevailing Defendant
Highmark v. Allcare Health Management Systems, Case No. 12-1163
Octane Fitness v. Icon Health & Fitness, Case No. 12-1184
In the Highmark case, Allcare brought a counterclaim for patent infringement. The trial court eventually granted summary judgment in favor of Highmark, and determined that the case was exceptional and awarded nearly $5M in fees and costs. The Federal Circuit affirmed for one claim as it determined that Allcare’s position was “objectively unreasonable,” but reversed with regards to a different claim, and remanded for a determination as to the proper award of fees for just the one claim. The question presented on certiorari is “whether a district court’s award of fees based on a determination that a claim is objectively baseless is entitled to deference?”
In the Octane case, Icon had alleged that Octane infringed its patent. The District Court determined that there was no infringement, and refused to award fees. Octane appealed the District Court’s determination that the case was not exceptional, and, in particular, argued that the standard for a prevailing defendant should be lowered to allow a collection of fees where the plaintiff’s assertions were “objectively unreasonable.” The Federal Circuit affirmed, and in particular determined that it would not revisit the established standard for determining whether a case is exceptional.
Octane’s petition for certiorari asks the court to decide “does the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is ‘exceptional’ under 35 U.S.C. 285 improperly appropriate a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?”
In re Unified Messaging Solutions Patent Litigation, Case No. 12-6286 (N.D. Ill. Sept. 25, 2013)(Judge Lefkow)
Unified Messaging Solutions (“UMS”), which is a patent holding company setup by Acacia, has sued numerous defendants in multiple suits. Those suits were consolidated in the Northern District of Illinois following a determination by the Judicial Panel on Multidistrict Litigation. Several of the defendants moved for sanctions, for dismissal pursuant to Rule 11, and for dismissal pursuant to rule 12(c). All of the motions were based on violation of a common terminal disclaimer of several of UMS’s asserted patents. In particular, several of the asserted patents are related to U.S. Pat. No. 6,350,066.
UMS does not own the ‘066 patent – rather, the ‘066 patent is owned by a separate Acacia entity. However, several of the patents asserted by UMS were issued only based on the following terminal disclaimer:
The owner hereby agrees that any patent so granted on the instant application shall be enforceable only for and during such period that it and the prior patents and any patent granted on said pending reference application are commonly owned. This agreement runs with any patent granted on the instant application and is binding upon the grantee, its successors or assigns.
As UMS does not own the ‘066 patent, the Court ordered that the entity that owns the ‘066 patent be added to the case, or it will be dismissed. However, the Court did not grant sanctions against UMS as it determined that “the facts do not indicate that AMT and UMS impermissibly divided ownership of the patents violating the terminal diclaimers […]”
Plaintiff Gets to Present Damages Calculation Despite Missing Deadline / Unfair Competition Claims Dismissed
Nanochem Solutions v. Global Green Products, Case No. 10-5686, Slip Op. (N.D. Ill. Sept. 10, 2013)(Hart)
At issue in this opinion are (1) a motion in limine, and (2) a motion for summary judgment, both filed by defendant Global Green Products.
In their motion-in-limine, Global Green sought to block Nanochem from introducing any damages calculation at trial because it had originally claimed damages based on a reasonable royalty, but shifted to lost profits at the very end of the case. In fact, it had never unveiled its damages calculation (as required by Rule 26(a)(1)) until it responded to Global Green’s motion-in-limine. Nonetheless, as the date for the final pre-trial order has not yet been set, the Court determined that Global Green was not prejudiced, and therefore, Nanochem will be allowed to present its damages calculation.
Also in their motion-in-limine, Global Green claimed that the damages calculation presented by Nanochem is not a legally proper way to calculate lost profits. The Court essentially ruled that the proper venue to raise this issue is a rule 50 motion for JMOL. In addition, Nanochem will be able to revise its damages calculation (if needed) in the final pretrial order, in jury instructions, and in trial briefs.
Global Green had better luck with its motion for summary judgment. In particular, Global Green challenged count VI (unfair competition based on the Lanham Act) and VII (unfair competition based on Illinois law), and was successful in having both dismissed. The mark asserted by Nanochem (A-5D) was determined to be descriptive; i.e., not distinctive, and without secondary meaning (otherwise referred to as acquired distinctiveness). Under longstanding precedent – no distinctive mark (acquired or inherent), no cause of action for unfair competition. Accordingly, the Court granted summary judgment on both claims.
Commil USA v. Cisco Systems, Case No. 12-1042 (Fed. Cir. June 25, 2013)
The Federal Circuit effected a major change in the law of vicarious liability for patent infringement. In particular, the Federal Circuit has established a defense to induced infringement based on a good-faith belief by the infringer that the patents were invalid. This will likely make obtaining an opinion of counsel on invalidity even more important for those facing patent infringement suits – a well drafted opinion of counsel finding that asserted patents were invalid will greatly reduce the possibility of damages up to a determination of validity at trial, or at a minimum, a denial of summary judgment on invalidity.