First published in LES Insights

Abstract

Under the patent owner's infringement theory, use of the defendant's standards-compliant software with DVD or Blu-ray discs necessarily infringes the asserted patents because those patents are essential to playing, copying, and recording data on optical discs that comply with DVD or Blu-ray standards. The patent owner, however, is a member of two groups of licensing pools, which license the asserted patents for purposes of practicing DVD or Blu-ray standard specifications. Recognizing that licensees are not infringers, the Federal Circuit emphasized that the patent owner failed to present any specific allegations and evidence of direct infringement by customers by showing use of unlicensed discs and thus affirmed summary judgment of no indirect infringement by the provider of the standards-compliant software.

Absent evidence of direct infringement, a patent owner cannot succeed on a claim for induced or contributory infringement, each of which is a theory of indirect infringement. In JVC Kenwood Corp. v. Nero, Inc.,1 the patent owner argued that end users directly infringed its patents when using the defendant's standards-compliant software with DVD or Blu-ray discs and that the defendant was liable for induced or contributory infringement. The patent owner did not provide evidence of specific direct infringement by any end user. It instead argued that use of the standards-compliant software necessarily infringes the asserted patents because those patents are essential to playing, copying, and recording data on optical discs that comply with DVD or Blu-ray standards.

The Federal Circuit, however, affirmed the district court's decision that licensing pools, including the asserted standard-essential patents, negated the patent owner's infringement claims.

Background

JVC Kenwood Corp. sued Nero, Inc. for contributory or induced infringement of six asserted standard-essential patents directed to structures, methods, or systems used with DVD and Blu-ray discs. Nero manufactures standards-compliant software used by consumers in conjunction with DVD and Blu-ray discs. JVC argued that by using Nero's software with DVD or Blu-ray discs, end users necessarily infringe the asserted patents because those patents are essential to playing, copying, and recording data on discs that comply with DVD or Blu-ray standards. JVC emphasized that, as a licensed member of the DVD Format/Logo Licensing Corporation, Nero is obligated to ensure that its software complies with the standards specifications.

JVC is a member of two groups of licensing pools, which license the asserted patents for purposes of practicing DVD or Blu-ray standard specifications. Licensees purchase licenses for specific categories of products (e.g., DVD-R discs, DVD-RW discs, etc.).

The district court accepted JVC's position that the asserted patents are embodied by the standard-compliant discs. Based on the principle that licensees cannot be infringers, however, the district court awarded summary judgment in favor of Nero, finding that JVC's licenses negated its infringement claims. According to the district court, “JVC cannot have it both ways—either the patent is essential and licensed or JVC cannot rely on the standards to show infringement.” JVC, the district court reasoned, cited no specific allegations and evidence of unlicensed discs.

In the alternative, the district court found that use of Nero's software with licensed discs presented a case of patent exhaustion, an affirmative defense to patent infringement.

JVC appealed to the Federal Circuit.

The Federal Circuit's Decision

On appeal, JVC argued that licensees of the pools only receive a license to those patents related to particular products, selected by the licensee, which practice standards specifications applicable to the licensee's products. The Federal Circuit, however, emphasized that JVC failed to present any specific allegations and evidence showing use of unlicensed discs. Thus, JVC could not prove that Nero's software was used to directly infringe the asserted patents. Absent of showing direct infringement, JVC could not prove that Nero indirectly infringed. The Federal Circuit thus affirmed the district court's summary judgment in favor of Nero. The court also rejected JVC's contention that the district court abused its discretion when it denied JVC's request for additional discovery to collect specific information concerning customers that use Nero's software with unlicensed discs. JVC, the court reasoned, failed to specifically allege such facts or provide evidence indicating that the information sought exists.

Regarding the issue of patent exhaustion, the court vacated the district court's ruling. According to the court, the record did not clearly establish the conditions for patent exhaustion. For example, the record did not clearly establish that the sale of the discs originated from or through JVC, a requirement to trigger patent exhaustion.

Strategy and Conclusion

Under facts involving licensed and unlicensed products, patent owners should be mindful that they may bear the burden to allege facts and introduce evidence that an infringement claim is based on activities involving unlicensed products.