Docket No. 2016-2121, -2208, -2235
DYK, BRYSON, TARANTO
May 1, 2018
Brief summary: DC decision relating to trade secret misappropriation affirmed- and vacated-in-part (e.g., “Intersil did not misappropriate information that it already had” but did not show alleged trade secret “was no longer ‘secret’” at the time of the misappropriation; no error excluding sales outside the US from the § 271(a) damages calculation).
Summary: Both parties appealed DC rulings for each party related to TAOS’s alleged trade secret (TS) misappropriation by Intersil following merger negotiations. After the parties “went their separate ways,…Intersil released new [ambient light] sensors with the technical design TAOS has disclosed in the confidential negotiations”. TAOS sued for infrginement of US 6,596,981, TS misappropriation, breach of contract, and tortious interference with prospective business relations under TX state law. A jury awarded TAOS about $99 million in damages. TAOS’s moved for an injunction and enhanced damages for willful patent infringement, and Intersil moved for JMOL and for a new trial, all of which were denied and appealed here. The FC panel explained that it reviews the denial of JMOL de novo (i4i, FC 2010; FRCP 50(b)(2)). The FC panel agreed with Intersil that TAOS failed to show it acquired a TAOS trade secret related to glass packaging by misappropriation (“Intersil did not misappropriate information that it already had.”) The FC panel also agreed with Intersil that its alleged misappropriation of financial information (used in its “Build vs. Buy” analysis) was “contractually permitted” (in the Confidentiality Agreement). But the FC panel disagreed with Intersil that a second alleged trade secret (the photodiode array structure) “was no longer ‘secret’ in 2004 (the time of the misappropriation) because…the ‘981 patent disclosed that structure in 2003” as Intersil did “not point to any evidence or argument at trial-that the patent discloses the combination” structure (Sikes, 5th Cir. 1982). This point was enough for the FC panel to “affirm the verdict of Intersil’s liability for trade secret misappropriation”. Given these determinations, the FC panel also found the damages award to be improper because it was not clear, e.g., “which of the trade secrets contributed to what amount of profit to be disgorged” and one of the alleged TS’s (a particular photodiode array) was accessible “by proper means” as “Intersil successfully reengineered” that array (i.e., it was “no longer a protected secret” (E.I. DuPont, 5th Cir. 1970). As “[m]ore than 90% of” the TS misappropriation award was “attributable to sales” after Intersil’s reengineering, the disgorgement award was vacated and remanded (and “exemplary damages” were vacated). The FC panel also remanded for a new trial on disgorgement by the DC, not a jury, after finding TAOS does not have a Seventh Amendment right to a jury decision on this point because this type of action “or a sufficient analog, could [not] have been brought in the English courts of law in 1791” (Chauffers, US 1990; Parsons, US 1830; Dairy Queen, US 1962 found not to support TAOS’s claim). Intersil also argued there was insufficient evidence supporting the jury’s infringement verdict, and the FC panel agreed as to the method claims (Mirror Worlds, FC 2012 “requires that each step of the method be performed”) but not with respect to the apparatus claims which only require Intersil’s products to be “capable of” performance (Ericsson, FC 2014). The FC panel agreed with Intersil that the DC erred “in concluding that the award for patent infringement is not duplicative of the” TS misappropriation award as those were “based on a subset of the sales that form the basis of the” TS award (Aero, FC 2006 (“[D]ouble recovery for the same injury is inappropriate.”))
TAOS argued the DC erred in excluding sales outside the US from the § 271(a) damages calculation, but the FC panel disagreed (Profectus, FC 2016; Halo, US 2014 (“TAOS has presented an even weaker case than Halo presented.”); Carnegie Mellon, FC 2015 (“some evidence suggesting contractual commitments…were made in the” US); Transocean, FC 2010 (“must be an offer to make a sale that will occur in the [US]; it is not enough that the offer is made in the [US]”)). TAOS also argued the DC erred in not granting its request for a permanent injunction because “a reasonable royalty should be adequate” and “[o]n that ground alone…TAOS had not shown irrepairable harm” (eBay, US 2006); the FC panel agreed since “[a] patent owner’s request for…a reasonable royalty may be relevant…but it is not conclusive without further analysis” (“hard-to-measure harms…can justify injunctions” (i4i, FC 2010)). The FC panel also vacated the DC’s denial of TAOS’s motion for enhanced damages because it affirmed the patent infringement verdict, which the jury found to be willful (Halo, US 2016).
Federal Circuit summaries 