218-1. $15 Million Judgment Against CalAmp Corp. Vacated, Case Remanded for a New Trial on Several Issues

The United States Court of Appeals for the Federal Circuit recently vacated a $15 million patent infringement jury verdict against CalAmp Corp. and remanded various issues for a new trial. In so holding, the Court urged the parties “to achieve clarity by clearly presenting evidence, objections, arguments and jury instructions as to direct and indirect infringement, compensatory damages and willful infringement.” See Omega Patents, LLC v. CalAmp Corp., No. 2018-1309, 2019 U.S. App. LEXIS 10203 (Fed. Cir. Apr. 8, 2019) (Before Prost, Chief Circuit Judge, Dyk and Wallach, Circuit Judges) (Opinion for the Court, Dyk, Circuit Judge).

Omega Patents, LLC (“Omega”) is the owner of U.S. Patent Nos. 6,346,876 (’876 patent), 6,756,885 (’885 patent), 7,671,727 (’727 patent) and 8,032,278 (’278 patent), all of which relate to systems for remotely monitoring and controlling various vehicle functions (i.e., monitoring speed, remotely staring the vehicle). CalAmp Corp. (“CalAmp”) operates in a similar field and sells a Location Messaging Unit to businesses to monitor and track vehicles. Omega sued CalAmp in the Middle District of Florida for patent infringement of various claims of the patents.

At trial, a jury found Omega’s patents to be valid and infringed, awarding Omega $2.98 million in compensatory damages. The jury also found willful infringement, and the district court trebled the damages and awarded attorney’s fees. The final judgment topped $15 million with an on-going royalty. CalAmp subsequently appealed the judgment.

On appeal, the Federal Circuit first addressed CalAmp’s arguments against the jury’s finding of validity. CalAmp argued that the district court’s claim construction affected the jury’s findings. CalAmp did not argue that the construction affected invalidity in light of prior art introduced at trial but instead took the position that, had the district court adopted CalAmp’s construction, “CalAmp’s invalidity defenses would have included additional prior art references.”

Under Federal Rules of Civil Procedure 46, “‘a party, at the time the ruling or order of the trial judge is… sought, [must] make known to the court the action that he desires the court to take… and the grounds therefor,’ otherwise a claim of error is typically forfeited.” The requirement must not be “applied in a ritualistic fashion,” and context can help decide if the issue is preserved. In the district court, CalAmp failed to mention what “additional prior art” was excluded due to the construction. On appeal, CalAmp again only provided vague arguments that its “invalidity defenses would have included additional prior art references.” The Court held these conclusory positions did not preserve the issue and affirmed the validity judgment for all claims.

Second, the Court addressed CalAmp’s challenge to the findings of direct infringement of ’727 Patent Claim 11. The claim required that a device “‘read[ ] the data related to vehicle speed from the vehicle data communications bus’ and use that information to determine when ‘to send a remote vehicle speed exceeded notification.’” According to CalAmp, it could not directly infringe, because its products do not use vehicle speed data from the communications bus but instead use a GPS receiver to measure speed. The court held that there was sufficient evidence to find that some devices infringed. A CalAmp witness testified that approximately 5% of CalAmp’s products may use the communications bus. The Court, admitting this to be “a close issue…conclude[d] that there was sufficient evidence for a reasonable jury to find that CalAmp, at least under some circumstances, directly infringed original claim 11 of the ’727 patent and therefore affirm[ed] the judgment of infringement.”

Third, the Court addressed CalAmp’s challenge to the findings of direct infringement of the ’876 and ’885 patents. Omega’s theory was based on making and selling the claimed systems. However, the claims included a limitation of “a transmitter and a receiver for receiving signals from said transmitter.” The evidence at trial indicated that CalAmp’s products used a cell tower as a transmitter and a receiver, but CalAmp does not “provide the cell tower.” Further, Omega did not argue that CalAmp directly infringed by “us[ing]” the system. Accordingly, the Court reversed the direct infringement claims.

The Court next considered Omega’s claims of induced direct infringement of the claims of the ’876 patent. First, the Court addressed CalAmp’s position that there were no predicate acts of direct infringement in which to base induced infringement. CalAmp’s arguments against predicate acts proceeded in three parts. Of particular importance was the argument that the district court’s construction of the phrase “device code” needed additional construing. The district court construed “device code” to mean a “signal from a vehicle device.” The district court, however, did not construe “vehicle device.” During the Markman hearing, CalAmp proposed a construction in line with the specification. Omega asserted the phrase needed no construction as it was “perfectly understandable.” The district court stated it did not “know that people on a jury would understand,” but the court, nonetheless, did not construe the phrase.

The Court reemphasized that, “[w]hen the parties raise an actual dispute regarding the proper scope of these claims, the court, not the jury, must resolve that dispute.” Quoting O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1360 (Fed. Cir. 2008). “[T]he court is not absolved of this duty to construe the actually disputed terms just because the specification of the patent defines the term.” Although Omega eventually decided CalAmp’s construction was “fine,” Omega’s theory at trial was not in line with the specification. Accordingly, the Court held there was no way to determine if the jury found infringement based on an improper construction, and the Court vacated and remanded on this ground.

The Court next addressed CalAmp’s position that there was no inducement of certain claims of the asserted patents. CalAmp’s arguments against inducement proceeded in two parts. First, CalAmp argued that inducement was not properly before the jury because no written questions on “inducement” were presented to the jury. The Court held that a “general verdict must be read in light of the written questions submitted to the jury, jury instructions, and presentation at trial.” Quoting Popham v. City of Kennesaw, 820 F.2d 1570, 1575 (11th Cir. 1987). The written questions asked whether “any of the accused CalAmp devices infringed,” which the Court concluded “should be read as asking the jury whether it found that CalAmp’s customers’ ‘use’ of these products constituted infringement.” The Court held this was consistent with presenting the issue to the jury.

Next, CalAmp argued it was entitled to a new trial for certain claims because evidence of its “state of mind” was erroneously withheld from the jury. “Liability for inducement ‘can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement.’” Quoting Enplas Display Device Corp. v. Seoul Semiconductor Co., 909 F.3d 398, 407 (Fed. Cir. 2018). CalAmp argued that certain testimony from its senior director of business development and from its outside counsel was erroneously excluded. The Court reserved discussion of this issue for the section on willful infringement but stated the “exclusion deprived CalAmp of the opportunity to support its defense that there was no inducement because it reasonably believed it did not infringe the patents.” The Court vacated the jury’s findings of indirect infringement for these claims and remanded for new trial.

Next, the Court decided whether the compensatory damages could be sustained in light of its holdings. The only judgment affirmed was the direct infringement of ’727 Patent Claim 11. “[T]he ‘normal rule would require a new trial as to damages’ when the jury renders a single verdict on damages and liability as to a subset of asserted claims has been set aside on appeal. Quoting Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295, 1310 (Fed. Cir. 2007); WesternGeco LLC v. ION Geophysical Corp., 913 F.3d 1067 (Fed. Cir. 2019). The Court held that the damages award of $2.98 million was not supported be evidence. Omega presented an expert that stated, for the products falling under ’727 Patent Claim 11, “a script is what makes the CalAmp device do anything at all,” and “[t]he CalAmp device out of the box as shipped from CalAmp doesn’t do anything.” CalAmp’s products could only infringe with additional programming, and the record did not indicate what subset of CalAmp’s devices had the programming. Accordingly, the Court vacated the damages award and remanded for a new trial.

Finally, the Court addressed the finding of willful infringement. The jury was not asked which patent or patents were willfully infringed. Because some findings were set aside, the Court held that the willfulness must be set aside, along with the enhanced damages and attorney’s fees. The Court did, however, discuss the district court’s decision to limit testimony from CalAmp’s director of business development and its outside counsel. Mr. Chen, the director of business development, was tasked “with investigating the patent landscape” before CalAmp released products. The Court held that preventing Chen from stating his conclusion on whether the asserted claims would be infringed was abuse of discretion. The Court also held that the district court erred by excluding testimony by a Mr. Bailey, CalAmp’s outside counsel, on his analysis of potential infringement. “‘[O]pinion-of-counsel evidence’ is relevant to the intent analysis for induced infringement because such evidence ‘may reflect whether the accused infringer “knew or should have known” that its actions would cause another to directly infringe.’”

The Court affirmed the judgment of no invalidity, affirmed-in-part, reversed-in-part, vacated-in-part, and remanded the judgment as to direct infringement. The Court vacated and remanded the findings on indirect infringement, compensatory damages, willful infringement, enhanced damages, and attorney’s fees.

First, in an invalidity defense, conclusory statements that a claim construction limited the pool of prior art are insufficient to preserve the issue; a reference to what are was excluded is required. Second, when asserting an infringement theory based on “making” or “selling” a system, counsel should fully consider whether elements of the claims are provided outside of the system made or sold by the alleged infringer. Finally, even if a claim term is defined in the specification, if the term is “actually disputed,” the court must construe the term.

218-2. Federal Circuit Clarifies the Diligence Requirement for Antedating a Reference While Reversing the PTAB’s Decision to Invalidate the Unified Shader Patents

The Federal Circuit recently issued an opinion reversing the decision of the PTAB, invalidating three patents owned by ATI Technologies ULC (“ATI”) as anticipated or obvious based on its holding that ATI failed to establish diligence to constructive reduction to practice necessary for the patents to antedate the relevant prior art references. See ATI Techs. ULC v. Iancu, No. 16-2222, 2019 U.S. App. LEXIS 10704 (Fed Cir. Apr. 11, 2019) (Before Newman, O’Malley, and Wallach, Circuit Judges) (Opinion for the Court, Newman, Circuit Judge).

The patents at issue (the “Unified Shader Patents”) are directed to novel “shaders” – computer-implemented systems that specify how a three-dimensional computer-graphics image is generated and presented on a two-dimensional screen. The Unified Shader Patents specifically describe systems that process both vertex and pixel operations, rather than requiring separate shaders for the two to specify how and with what attributes a final image is drawn.

During inter partes review, LG Electronics, Inc (“LGE”) cited several prior art references against the Unified Shader Patents, which ATI in turn argued were antedated. The PTAB disagreed with ATI, concluding that the inventors of the Unified Shader Patents established conception of the claimed systems before the filing dates of the relevant references but failed to establish actual reduction to practice or diligence to constructive reduction to practice. The patents were, thus, invalid as anticipated or obvious over the prior art. ATI appealed. LGE withdrew from the appeal, and the PTO Director intervened in support of PTAB’s holding. The sole issue on appeal was whether ATI demonstrated diligence through constructive reduction to practice sufficient to antedate the cited prior art.

The Federal Circuit held the PTAB applied an incorrect legal standard for diligence requiring “continuous reasonable diligence” rather than “reasonably continuous diligence.” Under the correct legal standards, ATI established diligence through constructive reduction to practice sufficient to antedate the prior art. To antedate a prior art reference under 37 C.F.R. §1.131, the patent owner “must not only have conceived the invention before the reference date, but must have reasonably continued activity to reduce the invention to practice.” The burden of proving diligence is on the party seeking its benefit. An inventor’s testimony of diligence must be corroborated by evidence, which his considered as a whole under a rule of reason.

ATI presented extensive evidence of daily activity towards reduction of practice, and the PTAB presented no evidence to the contrary and further cited no basis for its finding that the invention was not being diligently pursued. Here, the inventor provided a 60-page declaration explaining that ATI increased the number of employees working on implementing and testing the relevant project and that at least one person on the project team worked on this every business day from conception until the filing dates of the relevant references. The inventor provided nearly 1300 pages of documentary records, including precise metadata, document logs, and folder histories, tracking the development of the project and corroborating his declaration. The inventor also provided a calendar summarizing the folder histories and classifying the relevant activities as they applied to the three patents.

The Court rejected LGE’s argument and the PTAB’s reasoning that ATI could have filed its patent applications sooner, and that continuing activity to develop a product while considering optional features not eventually recited in the claims at issue did not constitute diligence. “Diligence is not negated if the inventor works on improvements and evaluates alternatives while developing an invention.” Furthermore, the purpose of the diligence requirement is to show that the invention was not abandoned or set aside. The PTAB did not point to any evidence of abandonment.

The Court similarly rejected the PTAB’s argument that ATI failed to identify delays or gaps in its activity and therefore provided no reasonable way for the PTAB to determine whether unexplained lapses occurred. Instead, ATI identified daily activity sufficient to establish diligence. The Court invoked the principle that:

“[n]o general standard, by which diligence can be estimated, has been established by the law, nor, in the nature of things, is such a standard possible. It must be reasonable, under all the circumstances of the particular case in question. The character of the invention; the health, the means, the liberty of the inventor; his occupation upon kindred or subordinate inventions, — are proper subjects for con-sideration. Such reasonable diligence does not involve uninterrupted effort, nor the concentration of his entire energies upon this single enterprise.”

To constitute diligence for purposes of antedating a prior art reference under 37 C.F.R. §1.131, the effort must be “reasonably continuous” and need not be uninterrupted or narrow in its purpose. Continuing to develop an invention, including considering optional features not eventually present in the recited claims, does not negate diligence to constructive reduction to practice.