Docket No. 2016-2297
REYNA, SCHALL, WALLACH
August 16, 2017
Brief summary: DC’s infringement ($1.5m awarded), claim construction (preamble is not a limitation), willfulness, and enhanced damages ($1m) conclusions affirmed.
Summary: Holland appealed the DC’s infringement ($1.5m awarded), claim construction, willfulness, and enhanced damages ($1m) conclusions regarding Georgetown’s US 7,616,329 relating to a “system and method for inspecting railroad tracks”. According to the FC panel opinion, “[t]he ‘329 patent purportedly improves the prior art by automating the examination of misaligned tie plates”, “a process that was historically performed manually with certain software systems.” Holland argued the preamble phrase “mounted on a vehicle for movement along the railroad track” was a claim limitation and, therefore, Holland’s product could not infringe. The FC panel reviewed this issue de novo since it only “involve[d] an examination of only intrinsic evidence” (Teva, US 2015). “Generally,” the FC panel explained, “the preamble does not limit the claims” but it can if “it recites essential structure or steps”, the “claims depend on [it] for antecedent basis”, it “is essential to understand limitations or terms”, “or there was ‘clear reliance on [it] during prosecution to distinguish the claimed invention from the prior art” (Allen Eng’g, FC 2002; Catalina Mktg., FC 2002; Applied Materials, FC 1996) but not if it “only  state[s] a purpose or intended use for the invention” (Rowe, FC 1997). The FC panel found the phrase did not limit the ‘329 claims because “[i]n the context of the entire patent, it is apparent that the term…is meant to describe the principal intended use…but not to import a structural limitation”, is not “part of the essential structure…or a ‘fundamental characteristic’ required for any part of the claims” (Poly-Am, FC 2004), the “structurally complete invention” is described “in the claim body” (Catalina), and Georgetown’s statements during prosecution regarding the term with respect to the prior art were “ambiguous” (Grober, FC 2012). Holland also argued “it could not have infringed because it ‘did not benefit from or control’ the purported infringing technology”, did not “use” it, and did not “‘offer to sell’ the entire invention” (§ 271(a)). The FC panel found Holland’s use to be analogous to that in Centillion (FC 2011) in which customers were found to have “‘used’ the entire system…because the customers entered information inquiries into the front-end” which “caused the back-end to perform additional processing”. “Here”, the FC panel wrote, “Holland acts like customers in Centillion-its trucks gather and collect data, and it makes the choice to send collected information to the third party…for processing” and therefore “a reasonable jury could find evidence supporting its conclusion that Holland infringed Georgetown’s ‘329 patent by putting all elements of the infringing system into use.” Regarding lost profits, the “patent owner must prove a causal relation between the infringement and its loss of profits” (Crystal Semi., FC 2001) and Georgetown calculated its lost profits under the “Panduit test” (6th Cir. 1978; Mentor Graphics, FC 2017). The FC panel disagreed with Holland’s objections, finding “substantial evidence supports a finding that demand for the patent product existed” (Panduit factor 1) and that Georgetown had adequately shown its lost profits (Panduit factor 4). The FC panel also found the DC did not err in its willfulness decision, decided under In re Seagate, under the now-controlling Halo “subjective willfulness” standard (“awards of enhanced damages are discretionary”; “subjective recklessness led to willful infringement in this case”). The FC panel also agreed with the DC’s award of enhanced damages, finding it had properly considered “all nine Read factors” (Read, FC 1992). Thus, the DC decision was affirmed.