Virnetx, Inc. and SAIC v. Cisco Systems, Inc. and Apple Inc.

Docket No. 2013-1489

September 16, 2014

Brief Summary: DC claim construction finding reversed based on intrinsic evidence (specification). Infringment under DOE finding reversed because expert testimony did not show function in same “way”. Damages award vacated because based “on the entire market value of a multi-component product”.

Summary: Apple appealed from DC final judgment that it infringed four patents (US 6,502,135; 7,418,504; 7,490,151; and 7,921,211) with its Face Time and VPN On Demand products, that none of the claims were invalid, and award of over $368 million in damages. Apple argued the DC erroneously constructed “domain name” as “a name corresponding to an IP address” and “secure communication link” as “a direct communication link that provides data security”. The FC panel affirmed the “domain name” construction because “the dictionary definition seems to contemplate web addresses on the Internet, while the specification makes clear that the claim term in question is not so limited” (Apple argued for the dictionary definition) and “fundamental principles of claim differentiation disfavor reading Apple’s hierarchical limitation into the dependent claims.” The construction of “secure communication link” was reversed because the term “as used in the ‘504 and ‘211 patents requires anonymity” (and should therefore read “…provides data security and anonymity”). The question of whether Face Time infringed the claims was therefore remanded to determine whether Apple’s servers provide anonymity, although the FC panel agreed with the jury that the “direct communication link” was met. The DC determination that Apple’s VPN On Demand infringed the “‘determine whether’ a requested domain name is a secure website or server” limitation of the ‘135 and ‘151 patents was also affirmed. The requirement of the ‘135 patent for “creating a ‘VPN’ ‘between’ the client and a target computer” was determined to be met literally. The jury finding that VPN On Demand infringed claim 1 of the ‘151 patent (requiring an encrypted channel) under the DOE was reversed because expert testimony did not show encryption (did not function in the same “way” (Crown Packaging, FC 2009)). The DC was also found to be correct that the patents were not anticipated. VirnetX also “attempted to show that Apple knew or was willfully blind to the fact that its customers’ use of its products would infringe valid claims” (induced infringement). Apple attempted to show that a rejection during reexamination was “evidence of Apple’s reasonably-held belief that the patents were invalid”. But the FC determined the DC’s exclusion of this evidence was proper (SynQor, FC 2013). The damages award was vacated and remanded because the awarded royalty was based “on the entire market value of a multi-component product” while the “patentee must do more to estimate what portion of the value of that product is attributable to the patented technology” (“we are cognizant of the difficulty that patentees may face in assigning value to a feature that may not have ever been individually sold”; Laser Dynamics, FC 2012). The FC panel did separately conclude that expert testimony regarding “allegedly comparable licenses” was appropriate (Finjan, FC 2010 and ActiveVideo Networks, FC 2012). It also found two different methods used to estimate incremental profits were improper (Nash Bargaining Solution and customer surveys).

This entry was posted in Anticipation (35 USC 102), Claim Construction, Claim Differentiation, Damages, Doctrine of equivalents, Expert Testimony, Inducement to Infringe, Infringement. Bookmark the permalink.

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