Supreme Court's Decision on Indefiniteness Constitutes Basis to Reconsider Prior Claim Construction Order But Does Not Result in Change of the Claim Construction

July 23, 2014

In this patent infringement action, Defendant Lighthouse Photonics Corporation's ("Lighthouse") moved to reconsider the Court's Claim Construction Order. Lighthouse argued three reasons for reconsideration: "first, Newport withheld discovery regarding its relevant prior art patents; second, a recent Supreme Court decision constitutes an intervening change in the law; and third, the Court adopted a construction that had not been advanced by either party until the reply briefing."

The district court, turning to the first basis for the motion to reconsider, stated: "There has been no shortage of sniping and finger-pointing in this case, and the briefing on this Motion is no exception. The parties vigorously dispute whether Newport withheld discovery regarding its prior art patents: No. 4,756,003 ("'003 Patent") and No. 5,410,559 ("'559 Patent"). The Court finds no need to wade into the quagmire over who withheld what, because it exercises its "inherent jurisdiction to modify, alter, or revoke" interlocutory decisions. See Martin, 226 F.3d at 1048-49. Specifically, the Court finds that the presentation of two related patents, which were allegedly withheld by Newport, constitutes good cause to reconsider the May 7, 2014 claim construction order."

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Motion to Stay Pending CBM Review Granted Where Non-Practicing Entity Did Not Seek Preliminary Injunction

July 21, 2014

Boku, Inc. ("Boku") filed a CBM petition with the PTAB seeking review of the patentability of Plaintiff's U.S. Patent No. 7,273,168 (the "'168 patent"). The petition challenged all claims of the '168 patent on grounds that they are indefinite, or anticipated by or rendered obvious by one or more of four prior art references not considered by the Patent Office during prosecution of the patent -in-suit.

Boku moved to stay the litigation pending the CBM review based on Section 18(b) of the America Invents Act ("AIA"). As explained by the district court, this statute requires the court to weigh four factors when determining whether to stay litigation pending CBM review, including (1) whether a stay, or denial thereof, will simplify issues and streamline the trial, (2) whether discovery is complete and whether a trial date has been set, (3) whether a stay, or denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party, and (4) whether a stay, or denial thereof, will reduce the burden of litigation on the parties and the court.

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Image Processing Patent Held To Be An Abstract Idea Under Alice Corp.

July 18, 2014

Digitech Image Technologies ("Digitech") asserted U.S. Patent No. 6,128,415, directed to the generation and use of device profiles for digital image processing system against numerous defendants, including Xerox and Fujifilm Corporation. Digitech appealed the district court's finding on summary judgment that the asserted claims were invalid under 35 U.S.C. §101. Specifically, Digitech argued that the district court erred in finding (1) that the device profile claims are directed to a collection of data that lacks tangible or physical properties and (2) that the asserted method claims encompass an abstract idea not tied to a specific machine or apparatus. The Federal Circuit affirmed the decision of the district court.

The '415 patent was aimed at reducing distortion of an image's color and spatial properties caused by imaging devices (e.g. digital cameras, TVs, printers) due to the fact that such devices differ in the range of colors and spatial information that they utilize. According to the court, independent claims 1 and 26 described a device profile as "a collection of information; specifically, a description of a device dependent transformation of spatial and color information":

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising: first data for describing a device de-pendent transformation of color information content of the image to a device independent color space; and second data for describing a device de-pendent transformation of spatial in-formation content of the image in said device independent color space.

26. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising data for describing a device dependent transformation of spatial information content of the image to a device independent color space, wherein through use of spatial stimuli and device response for said device, said data is represented by spatial characteristic functions.

Digitech argued that the claimed "device profile" was patent eligible subject matter under section 101 because it was a tangible object that was an "integral part of the design and calibration of a processor device within a digital image processing system." In particular, Digitech argued that the device profile is "hardware or software within a digital image processing system" and exists as a tag file appended to a digital image. The court disagreed, finding that Digitech's position was unsupported by the claim language, which did not describe the device profile as a tag or any other embodiment of hardware or software ("[T]he claims encompass all embodiments of the information contained in the device profile, regardless of the physical process through which this information is obtained or the physical medium in which it is stored."). Thus, the claimed device profile was viewed as a collection of information or data in an "ethereal, non-physical form" that was ineligible subject matter under section 101.

Similarly, the patent's method claim for generating a device profile was found to be ineligible subject matter because it was directed at an abstract process of organizing information through mathematical correlations (i.e. combining two data sets into a single data set, the device profile) that was not tied to a specific structure or machine and "did not require input from a physical device." The court noted the established principle that claims falling within one of the four subject matter categories (e.g. process) may nevertheless be ineligible if they encompass laws of nature, physical phenomena, or abstract ideas and the Supreme Court's recent affirmation that fundamental concepts by themselves, are ineligible abstract ideas. Citing Diamond v. Chakrabarty, 447 U.S. at 309 and Alice Corp. v. CLS Bank Int'l, 573 U.S. ___, No. 13-298, slip op. While Alice recognized that a claim may be eligible if it includes additional inventive features beyond just the abstract idea, recitation of an abstract idea does not become patent eligible "merely by adding the words 'apply it'." Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1276 (Fed. Cir. 2012).

The court's reasoning suggests that the patent could have been in compliance with section 101 had its claims been expressly tied to an image processor and its use of the "device profile" to capture, transform or render the digital image. Instead, the claims only recited the manipulation of existing data (i.e., measured chromatic stimuli, spatial stimuli, and device response characteristic functions) into a new form (device profile). The claims' reference to a "digital image reproduction system" in the preamble was found to be insufficient for imparting such limitations. Citing Bicon, Inc. v. Strau-mann Co., 441 F.3d 945, 952 (Fed. Cir. 2006) (holding that the preamble does not limit claim scope if it "merely states the purpose or intended use of an invention.") The claims were simply too broad and lacked the requisite tangible/ physical limitations to go beyond abstract mathematical algorithms.

Adrea v. Barnes & Noble: Court Holds That Adrea Is Precluded From Seeking Certain Past Damages for Failure to Mark

July 16, 2014

Adrea, LLC ("Adrea") filed a patent infringement action against Barnes & Noble, Inc., barnesandnoble.com llc, and Nook Media LLC (collectively, "B&N"), which alleged that B&N's e-reader Nook infringed U.S. Patent Nos. 7,298,851 ("the '851 patent"), 7,299,501 ("the '501 patent"), and 7,620,703 ("the '703 patent"). As explained by the district court, "[t]he '851 patent describes systems and methods of securely distributing electronic books and other digital content to a portable viewing device, discloses an operations center for storing and transmitting electronic books and a device for viewing books, and further describes encryption processes for securing those electronic books. The '501 patent describes systems and methods of controlling access to electronic books, essentially a fixed-time rental system. The '703 patent describes devices and methods for retrieving information related to the usage context of devices and discusses embodiments where the device is configured to retrieve information about the usage context of the device without a web browser."

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Permanent Injunction Granted After Jury Trial Where Plaintiff and Defendant Were Competitors and Plaintiff's Products that Embodied Patent-in-Suit Constituted Core of Plaintiff's Business

July 14, 2014

After a jury trial in which Power Integrations, Inc. ("Power") obtained a verdict of infringement and validity in its favor against Fairchild Semiconductor ("Fairchild"), Power moved for a permanent injunction. In analyzing the motion, the district court first repeated the common test from eBay: "In order to obtain a permanent injunction, Power, as the moving party, must demonstrate each of the following four factors:

(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

eBay Inc v. MercExchange, LLC, 547 U.S. 388, 391 (2006).

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Finding of Exceptional Case Denied Due to Unclean Hands

July 10, 2014

In Gaymar Industries, Inc. v. Cincinnati Sub-Zero Products, Inc. et al, 1-08-cv-00299 (NYWD July 3, 2014, Order) (McCarthy, M.J.), the magistrate judge recommended denial of defendant's request for reconsideration of its failed motion for attorneys' fees under 35 U.S.C. §285 in light of Defendant's unclean hands.

After the court's denial of its motion for attorneys' fees as an "exceptional case" pursuant to 35 U.S.C. §285, Defendant Cincinnati Sub-Zero Products, Inc. ("CSZ") moved for reconsideration in light of new case authority, i.e. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Management System, Inc., 134 S.Ct. 1744 (2014). The court noted that Octane Fitness lowered the burden of proof for proving an "exceptional case" by rejecting the "clear and convincing" standard in favor of the "preponderance of the evidence" and relaxed the underlying test by holding that "an 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances . . . . There is no precise rule or formula for making these determinations." Citing 134 S.Ct. at 1756; Highmark, 134 S.Ct. at 1748.

The court found that neither of the submitted authorities called for a different result than previously reached. In doing so, the court noted these cases did not alter the long-standing rule that "[e]ven for an exceptional case, the decision to award attorney fees . . . [is] within the district court's sound discretion." Citing Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005). This discretion allows the judge to consider factors, including closeness of the case, the tactics of counsel, the conduct of the parties, and any other factors that may contribute to a fair allocation of the litigation burdens of litigation between winner and loser.

While acknowledging that the plaintiff's conduct was questionable, the court recounted instances of litigation misconduct by CSZ and its reluctance to award attorneys' fees under such circumstances. The court rejected Defendant's argument that greater focus and weight should be given to the plaintiff's behavior in determining an exceptional case. Rather, the court reasoned that its discretion was subject to traditional equitable principles, including the equitable maxim of unclean hands requiring that "he who comes into equity must come with clean hands." Citing Precision Instrument Mfg. Co. v. Automotive Maintenance Machine Co., 324 U.S. 806, 814 (1945); Motorola Credit Corp. v. Uzan, 561 F.3d 123, 127 (2d Cir. 2009) ('[U]nclean hands' really just means that . . . the plaintiff's fault, like the defendant's, may be relevant to the question of what if any remedy the plaintiff is entitled to.")

Accordingly, the magistrate judge found that defendant lacked the "clean hands" sufficient to render it an "exceptional case" and recommended denial of its motion for reconsideration.

Walker Digital v. Google: Stay Pending CBM Review Denied Where Discovery Was Complete and Stay Would Prejudice the Plaintiff

July 9, 2014

After the PTAB instituted a CBM review of the patents-in-suit, Google sought a stay of the litigation pending resolution of CBM review by the PTAB. The district court explained that "[c]ourts consider four factors when deciding whether to stay litigation pending CBM review: (1) whether a stay will simplify the issues, (2) whether discovery is complete and a trial date is set, (3) whether there will be undue prejudice to the non-moving party, and (4) whether a stay will reduce the burden on the Court and the parties. See AIA § 18(b)(1)."

With respect to the first factor, the district court found that some "simplification of the issues could result from cancellation of the asserted claims or, failing that, from the estoppel effects on Google arising from presenting its arguments to the PTAB in the CBM process. See AIA § 18(a)(1)(D)." But the district court also found that the "estoppel only goes so far, especially as the PTAB rejected several of the grounds for CBM review articulated by Google. Thus, unless the PTAB invalidates all of the asserted claims on a basis on which it has initiated CBM review, it is likely that the Court will have to address at least some of Google's invalidity defenses. Therefore, while the simplification factor favors a stay, it does not do so by much."

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Court Excludes Defense Damage Expert's Royalty Base Where Expert Based Royalty Base Solely on "Inventive Aspects" of Patent and Not on All Claimed Elements

July 7, 2014

ThinkOptics, Inc. ("ThinkOptics") filed a patent infringement action accusing several Defendants of infringing three patents: U.S. Patent Nos. 7,796,116; 7,852,317; and 7,864,159. As explained by the district court, "[t]he three patents share a common specification and are directed to systems and methods for displaying and moving a cursor on a screen using a handheld pointing device. All defendants other than Nintendo have since been dismissed. The accused products encompass Nintendo Wii consoles that operate with the Wii Remote, Wii Remote Plus, and the Wii Sensor Bar."

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Apple v. Samsung: Court Denies Samsung's Request for Discovery Based on Apple's Alleged Disclosure of Confidential Information

July 2, 2014

In the ongoing patent battle between Samsung and Apple, Samsung, trying to turn the tables on Apple, filed a motion for sanctions based on Apple's disclosure of confidential information. The court had previously sanctioned Samsung for disclosing confidential information.

Prior to addressing the specific Samsung motion, the court went through the factual background of the prior ruling sanctioning Samsung. "On June 4, 2013, Nokia and Samsung met to continue their ongoing negotiations for a license deal. At that meeting, Dr. Seungho Ahn of Samsung told Paul Melin of Nokia that he knew the terms of Nokia's license agreement with Apple; he then recited the terms and indicated that his lawyers had told him what they were. As Dr. Ahn put it, 'all information leaks.'"

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After Entry of Judgment, District Court Orders Deposit of Amount of Judgment Plus 20% Interest for One Year in order to Obtain Stay of Execution Pending Appeal

June 30, 2014

Innovention Toys, LLC prevailed in a patent infringement action against MGA Entertainment. After the Court entered a final judgment, the parties agreed that execution of the judgment should be pending resolution of post-judgment motions and appeal but disagreed regarding the amount Defendant MGA should deposit with the district court as security.

MGA argued that it should only deposit the amount of the judgment plus one year of post-judgment interest at 0.10%. Innovention asserted that MGA should deposit the amount of the judgment plus 20%, citing Local Rule 62.2.

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Court Denies Motion to Compel Plaintiff's Expert Testimony Prior to Claim Construction

June 25, 2014

Plaintiff Glas-Weld Systems, Inc., filed a patent infringement and unfair competition action against defendants Michael P. Boyle, dba Surface Dynamix, and Christopher Boyle. Plaintiff moved for partial summary judgment and to supplement the record, and Christopher Boyle moved to compel depositions of plaintiff's expert. The district court stayed the partial summary judgment motion pending the ruling on claim construction and ordered that once the court construes the patent claims, the parties could supplement their briefing in support of and in opposition to the motion for partial summary judgment.

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Court Strikes Errata Sheets to Depositions Where "Clarifications" Materially Altered Testimony

June 23, 2014

Plaintiffs Scott Clare, Neil Long, and Innovative Truck Storage, Inc. filed a patent infringement action against Defendant Chrysler Group, LLC, arguing that Defendant infringed their patent for hidden pick up truck bed storage. Chrysler Group filed a motion to strike Plaintiffs' errata sheets from depositions, arguing that Plaintiffs were attempting to materially alter, through the errata sheets, the witnesses' deposition testimony.

As explained by the district court, Federal Rule of Civil Procedure 30(e) contemplates changing a deposition transcript in "form or substance." Courts have placed different burdens on a party attempting to change a deposition in substance and have different views of Rule 30(e).

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Motion for Leave to File Billing Statements Under Seal Denied Where Billing Descriptions Were Not Protected by the Attorney-Client Privilege

June 18, 2014

Plaintiffs filed a motion to permit them to file an affidavit, along with billing documents, under seal. The affidavit, along with its exhibits, was forty-seven pages in length. In the motion, the Plaintiffs contend that "the fees charged for each attorney as well as information contained in the time entries are confidential and private financial information of Plaintiffs and Plaintiffs' counsel and is not publicly available information." The district court stated that the Plaintiffs did not cite any case law in support of their position.

The district court then examined the relevant local rules. Local Rule 26.2 states: "Except as otherwise provided by statute, rule, or order, all pleadings and other papers of any nature filed with the Court ("Court Records") shall become a part of the public record of this Court." E.D. Tenn. L.R. 26.2(a). In order to seal any part of the record, a party must show good cause. E.D. Tenn. L.R. 26.2(b).

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Infringement Action Dismissed Due to Patent Co-Owner's Refusal to Join

June 16, 2014

In STC.UNM v. Intel Corp., Fed. Cir., No. 2013-1241 (June 6, 2014), The Federal Circuit found that the plaintiff patent owner did not have standing for its infringement claims because one of the four co-owners had not been joined and could not be involuntarily joined.

The asserted patent, U.S. Patent No. 5,705,321 ("Method for Manufacture of Quantum Sized Periodic Structures in Si Materials") issued in 1998 with four named inventors: three employees of the University of New Mexico ("UNM") and the fourth an employee of Sandia Corp. A joint assignment made two years prior to issuance incorrectly identified all four inventors as UNM employees. This was subsequently corrected with an assignment by UNM to Sandi Corp. Before the issuance of the '321 patent, two of the UNM inventors filed another patent, U.S. Patent No. 6,042,998, that incorporated the '321 patent by reference and issued in 2000. During the prosecution of the '998 patent, the PTO rejected the application for double-patenting in view of the '321 patent. UNM filed a terminal disclaimer to overcome the double-patenting rejection, which represented that "any patent granted on this instant application shall be enforceable only for and during such period" that the two patents were commonly owned, and that UNM was "the owner of record of a 100 percent interest." However, Sandia never claimed ownership in the '998 patent.

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Supreme Court's Indefiniteness Ruling Has Immediate Impact at ITC

June 16, 2014

After a hearing in an Investigation occurred between February 24 and March 7, 2014 and with the parties having submitted their opening post-hearing briefs on March 21, 2014 and their reply post-hearing briefs on March 28, 2014, the Administrative Law Judge determined that supplemental briefing was necessary after the Supreme Court's decision in Nautilus v. Biosig.

Noting that the final initial determination on violation in the Investigation was currently due to be issued no later than June 20, 2013, the Administrative Law Judge pointed out that "among the material issues involved in this investigation is whether certain claims of the asserted patents are indefinite under 35 U.S.0 § 112."

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