Addressing claim construction issues after having already affirmed a non-infringement holding as to one defendant under Rule 36, the U.S. Court of Appeals for the Federal Circuit largely reversed a district court’s ruling of no infringement as to the remaining defendants, finding that the plaintiff was not precluded from challenging the district courts’ claim construction because that holding was not essential to the earlier affirmance.  TecSec. Inc. v. IBM Corp., Case No. 12-1415 (Fed. Cir., Oct. 2, 2013) (Linn, J.). 

TecSec brought suit against IBM, PayPal and 11 others for infringing three of its patents directed to network data encryption.  Early in the case, the district court severed the claims against IBM and granted its motion for summary judgment of no infringement.  The court found that TecSec had failed to produce sufficient evidence of direct infringement because IBM sold only software, whereas the claims required both hardware and software.  The court also found insufficient evidence as to intent for inducement.  The district court set forth an alternate ground for no infringement by construing certain claim terms and holding that IBM’s software failed to meet the claims as construed.  TecSec appealed both grounds, but the Federal Circuit affirmed without opinion pursuant to Rule 36.

On remand, TecSec stipulated to non-infringement as to the remaining defendants under the court’s claim constructions and again appealed. 

As its first order of business, the Federal Circuit found that there was no preclusion from re-raising the claim construction arguments.  The Court reiterated that a Rule 36 judgment does not endorse or reject any specific part of the trial court’s reasoning and merely confirms the judgment.  The Court determined that the mandate rule did not apply because the district court’s claim construction was not essential to its affirmance under Rule 36.  The Court also concluded that there was no collateral estoppel because either of the alternatives in the district court judgment was independently sufficient to affirm a judgment of no infringement.

Turning to claim construction, the Court agreed with the district court that the term “multi-level multimedia security” requires multiple layers of encryption due to statements made by the inventors during prosecution, but disagreed that it was limited to multimedia objects.  On that basis, the Court affirmed the non-infringement judgment as to PayPal but reversed it as to the other defendants.  The Court also disagreed with the district court’s conclusion that the terms “system memory means” and “digital logic means” were means-plus-function limitations, finding that “system memory means” itself is already sufficient structure for the recited function of storing data and that the claims themselves specify what the “digital logic means” comprises.  Finally, the Court reversed the district court’s holding that 14 computer-implemented means-plus-function elements were indefinite.  While the district court had found that there was no corresponding algorithm, the Federal Circuit disagreed and found that the specification provided a sufficiently detailed prosaic description to implement the claimed functions.