Docket No. 2014-1167
Reyna, Wallach, Taranto
April 24, 2015
Brief Summary: DC grant of SJ awarding zero royalty reversed; grant of SJ regarding inducement to infringe (“affirmative act to encourage infringement with the knowledge…actual knowledge or willful blindness”) reversed; DC claim construction affirmed (otherwise “the word ‘placed’ [would be read] out of the claims of the patent”).
Summary: Info-Hold appealed DC decision regarding US 5,991,374 relating to systems, apparatuses, and methods for playing music and messages such as advertisements using telephones (e.g., music that plays while callers are on hold) and public speaker systems and a remote server. Following claim construction of the term “when a caller is placed on hold” (i.e., “when” means “at the moment the caller was placed on hold (Muzak’s position)”, not “during the period the caller was on hold (Info-Hold’s position)”), the DC granted SJ to Muzak that “notwithstanding infringement, Info-Hold was not entitled to reasonable royalty damages, and that Muzak did not induce infringement” (for “lack of evidence of knowledge or willful blindness”). The FC reversed the SJ of no damages for infringement, vacated the SJ of no induced infringement but affirmed the DC’s claim construction. Regarding damages, Info-Hold argued the DC “is required to award some amount of damages when infringement is proven…even when there is little or no satisfactory evidence as to the amount of the reasonable royalty”. The FC first concluded the DC did not err in excluding Info-Hold’s expert report since it relied on “the entire market value rule without presenting evidence that the patented features drove customer demand” and the “25-percent rule, which this court discredited as ‘fundamentally flawed’” (Uniloc, FC 2011). However, it also reversed the DC finding of no royalty because there is “other record evidence to demonstrate the existence of a genuine issue of material fact as to whether zero is a reasonable royalty rate” (Apple, FC 2014). Regarding inducement to infringe, the opinion explains that “[t]o prove inducement of infringement, the patentee must ‘show that the accused inducer took an affirmative act to encourage infringement with the knowledge that the induced acts constituted patent infringement” (Microsoft, FC 2014); knowledge may be shown by “actual knowledge or willful blindness” (Commil USA, FC 2011; Global-Tech, US 2011 (“alleged inducer (1) subjectively believe[s] that there is a high probability that a fact exists and (2) take[s] deliberate actions to avoid learning that fact”). Here, the FC decided the record raises issues of material fact as whether Muzak may have had that belief and took deliberate actions to avoid learning if it did and vacated this grant of SJ. The FC opinion explained that the DC’s evaluation of the intrinsic record is reviewed de novo (Teva, US 2015) and held the DC “remain[ed] faithful to our principles of construction and is supported by the intrinsic evidence” (e.g., “Every instance of the words ‘on hold’ in the ‘374 patent is preceded by the word ‘placed’. Thus, to construe this term not to require that playback starts at the time the caller is placed on hold…would be to read the word ‘placed’ out of the claims of the patent.”)