SSL Servs., LLC v. Citrix Sys., Inc., __ F.3d ___ (Fed. Cir. Oct. 14, 2014) (Lourie, Linn, O’MALLEY) (E.D. Tex.: Gilstrap) (2 of 5 stars)
Fed Cir affirms a non-infringement judgment on one patent, affirms a judgment of willful infringement on a second patent, affirms other damages and evidentiary rulings, and determines the patentee is a “prevailing party.”
Claim Construction/Non-infringement: Addressing the first patent, the Fed Cir held the term “destination address” was properly limited to a “network address” based on the surrounding claim language and the specification’s reference to protocols involving a network address format. Given this construction, the non-infringement verdict was proper because there was no evidence the accused products met it, and the patentee waived any contrary argument by not raising it until the reply brief. Moreover, the patentee was not entitled to a new trial because of alleged claim construction errors on other terms. Although “the general verdict rule applies with the same force in patent cases as it does in all other cases,” it was inapplicable here because “even if the district court erred in its construction of the other challenged limitations, the result the jury reached—the finding of non-infringement—would not change.” Slip op. at 16. The patentee thus failed to show prejudice from any other errors, and it was not entitled to any presumption of prejudice.
Infringement/Validity: On the second patent, substantial evidence supported the jury’s finding that the accused product met the only disputed limitation on appeal. Likewise, substantial evidence supported the jury’s non-obviousness finding because a different limitation was absent from the prior art.
Willful Infringement: Citrix willfully infringed the second patent under two-prong test of In re Seagate. The “objective” prong was met because (i) the jury “soundly rejected” the non-infringement and invalidity defenses, (ii) most limitations were uncontested for purposes of infringement, (iii) the presence of the single disputed limitation was “clearly supported by substantial evidence,” (iv) the prior art was missing a limitation, and (v) “[a]lthough not dispositive” the PTO rejected the invalidity arguments in reexamination “despite the lower preponderance of the evidence standard.” Slip op. at 28-29. The subjective prong was met because Citrix learned of the patent and obtained access to technology related to it while negotiating with the patentee’s predecessor. Moreover, the district court properly excluded testimony that Citrix’s engineer believed the accused products did not infringe: “the fact that they were beliefs formed by a lay person without the benefit of the court’s claim construction determinations rendered them of little probative value and potentially prejudicial.” Id. at 31. It also did not abuse its discretion by excluding evidence of non-final rejections in reexamination under Rule 403.
Damages: The patentee’s expert was permitted to calculate royalties by relying on distribution agreements that referenced the second patent, even though they were not patent licenses. The defendant’s expert used the agreements in his own analysis and admitted they were “the closest comparable information a hypothetical negotiations that he could find.” Slip op. at 32. And the patentee’s expert specifically addressed the differences between those agreements and the hypothetical negotiation. The agreements were thus “sufficiently probative” to be admissible: “We do not discount all agreements regarding the technology at issue other than licenses addressing the price terms and circumstances at issue in the case at bar.” Id. at 33.
Prejudgment Interest: The district court did not err in awarding prejudgment interest back to 2004 because Citrix was notified of the patent as early as 2000, notwithstanding its argument it was not notified of infringement until 2009.
Prevailing Party: SSL was the “prevailing party” for purposes of costs under Fed. R. Civ. P. 54 and fees under section 285 because it won on one of the two patents it asserted. “A party ‘prevails’ when “actual relief on the merits of his claim materially alters the legal relationship between the parties . . . in a way that directly benefits the [party].” Slip op. at 20 (quoting Farrar v. Hobby, 506 U.S. 103, 111 (1992)). Here, “SSL has a judgment for damages against Citrix,” which was “relief on the merits.” Id. at 21. “Even though SSL did not succeed on all of its infringement claims, this does not change the outcome.” Id. A remand was thus necessary so the district court could exercise its discretion regarding whether to award costs and fees, and, if so, how much.