Docket No. 2016-2691, 2017-1875
DYK, CLEVENGER, CHEN
July 3, 2018
Brief summary: DC claim constructions affirmed (e.g., no prosecution history estoppel) but damages determination based on the “entire market value rule” vacated and remanded since, e.g., PI “did not meet its burden to show that the patented feature was the sole driver of consumer demand”.
Summary: Fairchild appealed DC denial of its motions for JMOL following the DC’s decision that Fairchild literally infringed claims 31, 34, 38 and 42 of US 6,212,079 and infringed claims 26 and 27 of US 6,538,908 under the doctrine of equivalents (DOE). Fairchild also appealed the jury’s award of “roughly $140 million, finding that the entire market value rule applied in calculating damages for infringement of the ‘079 patent.” The claims related to power supply controller chips which are integrated circuits used in power supplies used in chargers for electronic devices that transform alternating current (AC) into direct current (DC) electricity. The FC panel explained that six months after the first jury verdict, awarding PI $105 million in reasonable royalty damages, the FC’s Virtnex decision was issued (VirnetX, FC 2014 (“infringing product with both patented and unpatented features must ‘apportion damages only to the patented features’”)), and therefore a new damages trial was held (“the first trial did not apportion beyond the ‘smallest salable unit’”), and the jury awarded PI $139.8 million “based on [expert] damages testimony that relied solely on the entire market value rule.” In this appeal, the FC panel first reviewed (de novo, with subsidiary fact determinations being reviewed for clear error (Teva, US 2015)) whether Fairchild’s products included the “fixed switching frequency for a first range of feedback signal values” as construed by the DC (“fixed switching frequency”). The FC panel rejected one of Fairchild’s proposed construction, under which Fairchild might not infringe, because it “would impermissibly render the claims inoperable” (Ecolabs, FC 2009; Chef America, FC 2004 (“claims were unambiguously written in a manner that rendered them inoperable”)). The FC panel also found Fairchild waived a second because it “did not ask the [DC] to modify or clarify its claim construction with regard to ‘per second,’ nor did it object to the jury instructions” and “waited until this appeal to argue that the [DC’s] claim construction was erroneous” (i.e., it was a new argument; Lazare, FC 2010; Solvay, FC 2014). Thus, the FC panel found that substantial evidence supported the jury’s finding that the ‘079 claims were literally infringed. The DOE issue focused on the “current limit” term of the ‘908 claims, and whether prosecution history estoppel applied to the definition of the term (Festo, US 2002; Conoco, FC 2006 (“clear and unmistakable surrender of the subject matter”, “whether a competitor would reasonably believe that the applicant surrendered the relevant subject matter”); Intendis, FC 2016). Fairchild argued for “argument-based estoppel based on a statement” PI made during prosecution of a parent of the ‘908 patent (Abtox, FC 1997 (“statements in the parent application must be confined to their proper context and properly acknowledge the distinctions between…[the] claims”)). The FC panel found that Fairchild failed to establish that the prosecution history is sufficiently clear as to create an estoppel”, and therefore affirmed the jury’s conclusion that the ‘908 claims were infringed.
On damages, the FC panel explained that under LaserDynamics, Versata, and VirnetX, “the entire market value is appropriate only when the patented feature is the sole driver of customer demand or substantially creates the value of the component parts” and “it is not enough to merely sho that the patented feature is viewed as essential”. Here, the FC panel found “the power supply controllers had other valuable features, such as jittering” (Power Int., FC 2016 (a separate lawsuit regarding different patents alleging infringement of the jittering feature)) and PI “did not meet its burden to show that the patented feature was the sole driver of consumer demand”. The damages award was therefore vacated and remanded.
FN2 notes that all of the asserted claims considered here have been found unpatentable in IPR2016-00809 and IPR2016-00995, and that both of those decisions have been separately appealed.