Emulex loses big to Broadcom at CAFC

Broadcom v. Emulex

After a trial and post-trial motions, the United States District Court for the Central District of California de- termined that Emulex Corporation (Emulex) infringed Broadcom Corporation’s (Broadcom) U.S. Patent No. 7,058,150 (the ’150 patent). On appeal, the only issues remaining relate to the ’150 patent, and the district court’s grant of a permanent injunction and modifications to that permanent injunction. Second Amended Notice of Appeal, Broadcom Corp. v. Emulex Corp., No. 2012-1309 (Fed. Cir. August 10, 2012) (No. 43). Upon review of the record, this court affirms the district court’s finding that Emulex infringed the ’150 patent. Similarly, this court affirms the district court’s determination that the ’150 patent would not have been obvious at the time of inven- tion and hence invalid. Finally, because the district court properly exercised its discretion in granting a permanent injunction with a well-crafted sunset period, this court also affirms that determination.



The claim at issue is to a device


Claim 8, the only claim at issue, recites:

8. A COMMUNICATION DEVICE CONFIGURED TO RECEIVE MULTIPLE SERIAL DATA SIGNALS, COMPRISING:

a master timing generator adapted to generate a master timing signal;
multiple receive-lanes each configured to receive an associated one of the multiple serial data sig- nals, each receive-lane including
a phase interpolator adapted to produce a sampling signal having an interpolated phase, and
a data path adapted to sample and quan- tize the associated serial data signal in ac- cordance with the sampling signal; and
an interpolator control module coupled to each re- ceive-lane, the interpolator control module being adapted to cause the phase interpolator in each receive-lane to rotate the interpolated phase of the sampling signal in the receive-lane at a rate cor- responding to a frequency offset between the sam- pling signal and the serial data signal associated with the receive-lane so as to reduce the frequency offset between the sampling signal and the serial data signal.
’150 patent col. 38 l. 53–col. 39 l. 5.



The prior art


On appeal, the relevant prior art is European Patent No. EP0909035, the Pickering reference (Pickering). J.A. 245. Pickering teaches “an apparatus for producing an oscillating signal,” i.e., a clock, and “devices for synchro- nising an output signal with an input signal.” J.A. 218. Pickering also discloses “recover[ing] a corresponding clock signal at the receiver in order to demodulate the received signal.” J.A. 218. The record shows that Picker- ing discloses each limitation of claim 8 except for a “data path”—also referred to as a “receiving path.” See J.A. 245; Appellant’s Br. 34; Appellee’s Br. 37–38. In other words, Pickering teaches recovering the clock, but not the data; in contrast, the ’150 patent teaches recovering both the clock and the data. See J.A. 748–49. (...)
Though Emulex challenged some of the jury’s factual findings on nonobviousness, the primary dispute was over the teachings of Pickering. J.A. 243–45. As noted earlier, the record shows that Pickering teaches each limitation of Claim 8 except for a “data path.” See J.A. 245. By con- trast, the ’150 patent claims recovering both the clock and the data. J.A. 748–749. And the district court found that Pickering addressed a different problem than the ’150 patent. J.A. 247–48. Emulex argued that a person of ordinary skill in the art would have been able to adapt Pickering to recover data in the same fashion as the ’150 patent. J.A. 247. The district court, however, determined that Emulex had not proved this invalidity theory by clear and convincing evidence. J.A. 247. Thus, the district court held that claim 8 would not have been obvious at the time of invention. J.A. 248. (...)
Obviousness is a question of law based on under- lying findings of fact. An analysis of obviousness must be based on several factual inquiries: (1) the scope and content of the prior art; (2) the differ- ences between the prior art and the claims at is- sue; (3) the level of ordinary skill in the art at the time the invention was made; and (4) objective ev- idence of nonobviousness, if any.
In re Kubin, 561 F.3d 1351, 1355 (Fed. Cir. 2009); see also Graham v. John Deere Co., 383 U.S. 1, 17–18 (1966). Based on the underlying fact findings, whether a claimed invention would have been obvious under 35 U.S.C. § 103(a) is a question of law reviewed de novo. Power- One, Inc. v. Artesyn Techs., Inc., 599 F.3d 1343, 1351 (Fed. Cir. 2010). Underlying factual findings by the judge are reviewed for clear error. Id. Factual findings by the jury receive substantial evidence review. W. Union Co. v. MoneyGram Payment Sys., Inc., 626 F.3d 1361, 1369 (Fed. Cir. 2010). Because the ’150 patent is presumed valid, to prevail on its motion for JMOL, Emulex needed to prove that the ’150 patent would have been obvious at the time of invention by clear and convincing evidence. Power-One, 599 F.3d at 1351.

The obviousness analysis here asks whether a person of ordinary skill in the art at the time of the invention— an electrical engineer with at least a bachelor’s degree and several years of CDR experience—would have had a reason to modify Pickering to include a “data path.” Pickering teaches recovering clock signals and phase synchronization. J.A. 245. However, Pickering neither teaches a data path nor teaches adjusting the phase for data recovery. Based on the evidence presented at trial, the district court concluded that Pickering and the ’150 patent addressed two different problems—clock recovery versus clock and data recovery, respectively.(...)
While a prior art reference may support any finding apparent to a person of ordinary skill in the art, prior art references that address different problems may not, depending on the art and circumstances, support an inference that the skilled artisan would consult both of them simultaneously. See Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1366 (Fed. Cir. 2012) (finding invention nonobvious when none of the “refer- ence[s] relate to the [problem] described in the patents” and no evidence was proffered “indicating why a person having ordinary skill in the art would combine the refer- ences”).
Specifically, at trial the expert testimony indicated that there was no “motive or reason [for Pickering] to seek a data path in order to broaden its function.” J.A. 751. Pickering’s system was described as a “self-contained” system. J.A. 751. Its task and purpose was to recover the clock data and to phase synchronize the signal— Pickering’s system accomplished its objective and provid- ed no suggestion to broaden that objective. J.A. 751.
In addition to solving a different problem than the ’150 patent, Pickering does not address the ’150 patent’s critical “data path,” i.e., the data recovery function. As the district court found, the record does not support Emulex’s contention that Pickering implicitly requires a data path. Pickering’s device is designed to match transi- tion points, or cross-over points, on a waveform. At the cross-over points there is no data to recover, so Pickering cannot inherently require recovering data. J.A. 245–46. Moreover, contrary to Emulex’s suggestion, Pickering’s Figure 16 shows only clock recovery, not data recovery. J.A. 246. Further, Pickering does not teach data outputs or recovered data.
(...)
An invention is not obvious just “because all of the elements that com- prise the invention were known in the prior art;” rather a finding of obviousness at the time of invention requires a “plausible rational [sic] as to why the prior art references would have worked together.” Power-One, 599 F.3d at 1351; Amgen Inc. v. F. Hoffman-LA Roche Ltd., 580 F.3d 1340, 1362 (Fed. Cir. 2009) (“An obviousness determina- tion requires that a skilled artisan would have perceived a reasonable expectation of success in making the invention in light of the prior art.”). Indeed, expert testimony indicated that the proposed combination of Pickering with a data path would not have resulted in the invention of the ’150 patent’s claim 8 and would not have worked for its intended purpose. Broadcom’s expert, Dr. Stojanovic, testified that combining Pickering with a data path function would result in an “unfunctional circuit.” J.A. 749–51. The combination of Pickering with a data path would have caused sampling in undefined zones resulting in undefined values. J.A. 750–51. In other words, adding data recovery functionality to Pickering would have defeated the ability to recover data. J.A. 750–51.



As to injunctions



This court reviews a decision to grant or deny an in- junction for an abuse of discretion. Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1379 (Fed. Cir. 2008). Similarly, the scope of an injunction is reviewed for abuse of discretion. Streck, Inc. v. Research & Diagnostic Sys., Inc., 665 F.3d 1269, 1293 (Fed. Cir. 2012). An abuse of discretion occurs when a district court exercises its discre- tion “based upon an error of law or clearly erroneous factual findings” or commits “a clear error of judgment in weighing relevant factors.” Innogenetics, 512 F.3d at 1379.
Before assessing irreparable harm and public interest, the district court reviewed the characteristics of the market place. The district court found that Emulex and Broadcom competed in a market characterized by “design win” scenarios. J.A. 13. Their customers were original equipment manufacturers (OEMs)—Dell, HP, IBM, Cisco—who integrated various component parts into finished products like servers for data centers. J.A. 13. OEMs hold competitions to determine which supplier will provide a given chip or component for each generation of a product. These design competitions often occur well in advance because integrating various component parts together into the OEM’s final product can take extensive planning and modification. Once an OEM designs a supplier’s component part into the OEM’s final product, it is very difficult to alter the design of the OEM product.


The Emulex position:


Relying primarily on Apple, Inc. v. Samsung Electron- ics Co., 678 F.3d 1314 (Fed. Cir. 2012), Emulex argues that the district court abused its discretion in granting the injunction. Emulex argues a lack of irreparable harm because there was no link between Emulex’s and Broad- com’s market share changes and there was no causal nexus “show[ing] that the infringement caused harm in the first place.” Appellant’s Reply Br. 28 (quoting Apple, 678 F.3d at 1324). Specifically, Emulex contends that Broadcom has shown no evidence of demand for the features claimed in the ’150 patent and the patented feature is only a “small” component of the infringing products. Id. at 28–29.
In Apple, the district court found that there was con- siderable evidence that the patented feature was not a determinative factor in sales and that the alleged in- fringement “at most” caused an “insignificant amount of lost sales.” Apple, 678 F.3d at 1324.



The CAFC rejected the Emulex position:


However, contrary to Emulex’s assertions, the evidence here shows that the infringement did cause the harm. Emulex and Broadcom were competitors in a “design wins” market, which is fundamentally different from the market in Apple. In a design wins market, the sales are “design wins,” not a steady flow of discrete product sales as in Apple.
(...)
As direct competitors in a limited market, Broadcom’s harm was clearly linked to Emulex’s in- fringement of Broadcom’s patent property rights. Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F.3d 1336, 1345 (Fed. Cir. 2013) (“Where two companies are in competi- tion against one another, the patentee suffers the harm— often irreparable—of being forced to compete against products that incorporate and infringe its own patented inventions.”)
Furthermore, Emulex is more than just a likely in- fringer, as was the accused infringer in Apple—Emulex is an adjudicated infringer. See Apple, 678 F.3d at 1323 (citing Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008) (“A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm . . . .”)). Broad- com has shown—not that it is likely to succeed on the merits and likely to suffer irreparable harm—but that it in fact has succeeded on the merits and has suffered irreparable harm.


As to property rights:


The courts have a long history of remedying trespass on property rights—including patent rights—by removing the trespasser. See, e.g., Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 702 F.3d 1351, 1362 (Fed. Cir. 2012). This history of removal stems from a constitution- al and statutory grant to exclude others from one’s prop- erty. U.S. Const. art. I, § 8, cl. 8 (“by securing for limited times to . . . inventors the exclusive right to their respec- tive . . . discoveries”) (emphasis added); 35 U.S.C. § 154(a)(1) (“Every patent shall contain . . . a grant to the patentee . . . of the right to exclude others from making, using, offering for sale, or selling the invention....”) (emphasis added).
However, in the interest of equity and with an eye to- wards protecting the public interest, the decision to grant or deny a permanent injunction remains within the equitable discretion of the district courts. Presidio, 702 F.3d at 1362.