Docket No. 2016-2691, 2017-1875
DYK, CLEVENGER, CHEN
July 3, 2018 (updated September 25, 2018)
Update: Original opinion modified on Sept. 20, 2018 following a petition for rehearing filed by Power Integrations (PI) but the same decisions were reached (DC claim constructions and findings of infringement affirmed, and 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”).
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 constructions, 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” (“the feature patented constitutes the basis for consumer demand” (Lucent, FC 2009)) and “it is not enough to merely show that the [patented feature] is viewed as valuable, important, or even essential to the use of the [infringing product]” (Laser Dynamics). And the burden of proof on this point is on the patent holder (Laser Dynamics) (“Where the accused infringer produces evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features do not cause consumers to purchase the product.”) Here, the FC panel wrote that the DC noted “evidence in the record that other features are important” (e.g., “jittering”, the subject of a separate lawsuit regarding different patents alleging infringement of the jittering feature (Power Int., FC 2016)), and PI “did not meet its burden to show that the patented feature was the sole driver of consumer demand, i.e., that it alone motivated consumers to buy the accused products” (FN7 explained that PI “provided testimony that the patented feature drove demand for some” of its “own products” but that that was not enough to meet its burden. 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.