Case: Taurus IP, LLC v. DaimlerChrysler Corp., Nos. 2008-1462, -1463, -1464, -1465 (Fed. Cir. Aug. 9, 2013) (precedential). On appeal from W.D. Wis. Before Prost, Schall, and Reyna.
Procedural posture: Plaintiff appealed: (1) the district court’s claim construction of various claim terms; (2) the judgment of invalidity of certain claims; (3) the judgment of non-infringement of certain claims; and (4) the finding of an exceptional case under 35 U.S.C. § 285 and the resulting award of damages. Third-party defendants appealed: (1) the denial of the motion to dismiss for lack of personal jurisdiction; (2) the denial of judgment as a matter of law reversing the jury’s finding of a breach of a warranty provision in a settlement agreement; (3) the denial of judgment as a matter of law regarding the award of damages and attorney fees based on the breach; and (4) the imposition of sanctions based on the finding of witness tampering. Defendants conditionally cross-appealed the district court’s ruling that the settlement agreement did not provide a release to the alleged infringement. CAFC affirmed-in-part and reversed-in-part.
- Claim Construction: The district court correctly construed “user” as “a person who is capable of creating and editing user-defined relationship information,” a construction supported by the patent’s written description. The district court also correctly construed “user-defined relationship information” as “the set of rules specified by the user that governs the relationship between data items within the data model.”
- Anticipation: The district court correctly granted summary judgment of invalidity based on anticipation. “Although anticipation is a question of fact, a district court may, on summary judgment, invalidate a patent claim as anticipated by a prior art reference if the patentee does not identify a genuine issue of material fact to avoid summary judgment.”
- Infringement: The district court correctly granted summary judgment of non-infringement of the patent.
- Exceptional Case/ Attorney Fees: The district court correctly found this case to be exceptional under 35 U.S.C. § 285. “Absent misconduct in litigation or in securing the patent, a case may be found exceptional under § 285 only if (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” This litigation is objectiveless baseless because the plaintiff’s unreasonably broad claim construction, on which infringement hinges, has no support in the written description or the prosecution history. Furthermore, subjective bad faith exists because the plaintiff continued to litigate on an unreasonable infringement theory even in the face of an adverse claim construction ruling.
- Personal Jurisdiction: The Federal Circuit reviews the issue of personal jurisdiction with respect to non-patent claims under the law of the regional circuit. The Seventh Circuit reviews de novo the denial of a motion to dismiss for lack of personal jurisdiction. The district court correctly ruled that it exercised personal jurisdiction over the third-party defendants because, based on state law regarding the alter ego doctrine, the third-party defendants were mere alter egos of the plaintiff.
- Breach of Warranty Provision of Settlement Agreement: The district court correctly denied judgment as a matter of law on the breach of warranty counterclaim. Although the settlement agreement arising out of a previous litigation did not explicitly include the asserted patent in this litigation, it covered “any cause of action arising from the same set of facts.” Since the alleged infringing acts in this litigation are the same as those in the previous litigations that are the subject of the settlement agreement, this cause of action “aris[es] from the same set of facts.” Thus, the plaintiff breached the warranty provision of the settlement agreement by filing the instant litigation.
- Damages: The district court erroneously awarded damages to the third-party plaintiffs consisting of attorney fees in defending the patent litigation. Because the attorney fees awarded here resulted from the breach of the warranty provision of a settlement agreement, and were not traditional attorney fees, Rule 54 of the Federal Rules of Civil Procedure does not support this award. The attorney fees sought were an element of damages, which substantive law requires to be proved at trial. Because the third-party plaintiffs did not submit any evidence at trial to prove these damages, the Federal Circuit reversed the award.
- Attorney Fees: The district court was correct in awarding attorney fees to the third-party plaintiffs for prosecuting the breach of warranty suit, without a jury trial and without use of expert testimony to determine the reasonableness of the fees. The amount at issue was awarded not as damages resulting from the breach of the warranty, but as “’traditional’ attorneys fees.” The Seventh Amendment does not guarantee the right to a trial by jury on the issue on attorney fees assessed after trial. Furthermore, expert testimony is not required to determine the appropriate fees.
- Sanctions: The district court did not abuse its discretion in imposing sanctions on the third-party defendants. The court provided the third-party defendants the necessary notice of the specific conduct for which sanctions would be imposed before the imposition of those sanctions. Notice of potential sanctions can come from either the court or from an opposing party. In this case, both the third-party plaintiffs and the court provided notice. The court also provided the third-party defendants the opportunity to be heard to satisfy due process. The district court heard the third-party defendants’ arguments and simply disagreed with them, which does not violate due process.