SSL Services, LLC v. Citrix

The U.S. Court of Appeals for the Federal Circuit, in an opinion that broached issues of claim construction, non-infringement, willful infringement, invalidity, the legal implications of a general verdict, evidentiary rulings affecting the awarded damages, the date the patentee was first entitled to prejudgment interest, and the circumstances defining the “prevailing party” for purposes of costs under Federal Rule of Civil Procedure 54(d) and attorney’s fees under 35 U.S.C. § 285, affirmed the district court on all issues except the “prevailing party” issue.  SSL Services, LLC v. Citrix, Case No. 13-1419 (Fed. Cir., Oct. 14, 2014) (O’Malley, J.)

SSL Services asserted two patents against Citrix Systems.  The two patents met very different fates.  The jury found that Citrix’s “GoTo Products” did not infringe the claims of one of the patents but did infringe the claims of the other.  SSL appealed.

The Federal Circuit, considering the non-infringement ruling, explained that the district court correctly construed the claim term “destination address” and affirmed.  In doing so, the Federal Circuit consulted the text of the claim and the written description—agreeing that the use of “network address” was not limited to IP-based protocols.  With the correct claim construction in place, the panel addressed whether the presentation of multiple non-infringement arguments led the jury to reach its non-infringement finding based on an erroneous legal theory.  Providing important guidance on the general verdict rule, the Court concluded that SSL had not carried its burden in establishing that the purported error in a construction other than “destination address” could have led to a different outcome.  After reviewing the operation of the accused products, and in view of the affirmed claim construction, the Federal Circuit concluded that there were no facts or evidence to support SSL’s liability theory.

Turning to SSl’s other patent in suit and to a different set of accused products, the Federal Circuit agreed that substantial evidence supported the jury’s verdict that the asserted claims were infringed.  The Court also affirmed that the asserted claims were not invalid because substantial evidence supported the conclusion that a primary prior art reference did not disclose the pertinent authentication and encryption software referenced in the asserted claims.

In revisiting the district court’s willful infringement determination, i.e., for the SSL patent that was infringed, the Federal Circuit applied its ruling in Bard Peripheral Vascular v. W.L. Gore & Assocs., Inc., (IP Update, Vol. 15, No. 2) to conclude that Citrix acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, and actually knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent.  Reviewing the “objective prong” de novo, the panel agreed with the district court that Citrix’s alleged defenses of invalidity and non-infringement were not reasonable.  In particular, during ex parte reexamination, the U.S. Patent and Trademark Office had rejected Citrix’s invalidity positions under the lower preponderance of the evidence standard and concluded that the expert testimony surrounding the non-infringement position was without merit.

The question of subjective intent, which was submitted to the jury, also failed to stave off the willfulness finding.  The evidence demonstrated that Citrix had first learned of the patent in 2000 and was in possession of the relevant technology based on a business relationship with the patentee’s predecessor.  While Citrix sought to introduce evidence of a good faith belief in invalidity based on the ongoing reexamination, the district court excluded evidence as to the ongoing reexaminations, and the Federal Circuit did not disturb those discretionary rulings.  Because Citrix’s evidence of the good faith belief in non-infringement was also excluded by the district court and affirmed on appeal, the finding of willful infringement and enhanced damages remained intact.  SSL was awarded $10 million in infringement damages by the jury as well as $5 million in enhanced damages by the district court for willful infringement, and $4.5 million in prejudgment interest by the district court—calculated from the date of first infringement in 2004.

In assessing which party was the “prevailing party” under Fed. R. of Civ. Pro. 54(d), the Federal Circuit vacated the district court’s finding of “no prevailing party” where “both parties achieved some success and sustained some failure.”  The Federal Circuit clarified that although SSL did not prevail on all infringement claims, its success on the one patent had materially altered the legal relationship between the parties so as to entitle the patent holder to a damages award, costs and potential attorney’s fees.  The question of whether the prevailing party was entitled to fees under § 285 was remanded with the express reminder that a prevailing party was not automatically entitled to such fees.