The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s findings of non-obviousness based on motivation to combine and objective criteria, and the scope of the injunction that issued, including as sunset period to permit sell off of product.  Broadcom v. Emulex, Case No. 12-1309 (Fed. Cir., Oct. 7, 2013) (Rader, C. J.).

Broadcom sued Emulex for infringement of its patented circuit device for converting an analog signal to a digital signal.  Emulex appealed the court’s judgment as a matter of law (JMOL) of infringement, non-obviousness and its entry of a permanent injunction, that provided Emulex a sell off period to fulfill existing contracts.

As for the infringement issue, Emulex argued on appeal its product did not infringe because, inter alia, it did not always reduce the offset rate between the two claimed signals.  The Federal Circuit rebuffed that argument noting Emulex’s admission that their product sometimes infringes is enough to establish infringement.

As for obviousness, the Federal Circuit agreed with the district court that there was no motive to modify the teachings of the primary prior references, since they described a solution to a completely different problem without any suggestion for expansion to the patented invention.  Second, contrary to the defendant’s inherency argument, because the prior art did not produce any data to recover, a data recovery circuit was not inherent. Third, the Court agreed that there was no rationale for combining the primary prior art reference with other.

The Federal Circuit also agreed with the jury’s and court’s finding of objective indicia of non-obviousness noting that Broadcom had established the requisite nexus between the objective indicia and the claimed invention.  The invention produced a low-cost chip with high reliability and throughput and led to the commercial success of products incorporating it.  The invention also solved a long-felt issue concerning noise coupling that many, including Broadcom, had long tried to solve. 

Finally, the Federal Circuit approve of the court’s analysis of the eBay factors in light of the computer industry’s use of “design win” scenarios in which a component maker’s product is designed into a generation of a manufacturer’s product.  First, because the parties were admitted competitors, Broadcom never willingly licensed the patent-in-suit, and there were only four top-tier clients, Broadcom suffered irreparable harm.  Second, money damages were inadequate because the winning component maker’s immunity against competition and advantage in later bids denied Broadcom a fair chance to win back the market share. Third, the balance of hardships favored Broadcom because the infringing sales were only a small portion of Emulex’s overall sales.  Finally, an 18-month sunset provision protected the public’s interests by allowing Emulex to continue to provide components while manufacturers redesigned their products.

Emulex claimed that the district court had erred in determining irreparable harm in light of Apple v. Samsung Electronics (IP Update, Vol. 16, No. 9), because the evidence did not show a link between Broadcom’s change in market share or a nexus between the harm and the alleged infringement.  The Federal Circuit distinguished Apple based on the nature of the industries and injunction. Appleinvolved discrete sales to numerous consumers and a preliminary injunction.  However, this case involved an injunction against an adjudicated infringer in an industry with only four top-tier clients who integrate a component into a generation of machines.  Broadcom had lost market share from Emulex’s competition in a limited market.