Fairchild's appeal against Power Integrations. Infringement affirmed; damages vacated

The outcome: infringement affirmed, damages under the "entire market value rule" vacated:


We affirm the district court’s judgments of infringement.
We conclude that the entire market value rule
cannot be used here to calculate damages. We vacate the
damages award and remand for further proceedings.



Fairchild tried to attack the jury verdict on infringement:


Fairchild argues that the jury verdict is not supported
by substantial evidence because none of the Fairchild
products has a “fixed switching frequency” according to
the language of the claims or a “non-varying frequency”
under the district court’s claim construction, because even
during “fixed” frequency mode, the products operate with
5% to 15% variance in frequency. This variance is due to
operating conditions, such as temperature and input
voltage. The question is whether this variability renders
the products non-infringing.



The CAFC determined that "fixed frequency" did not mean
absolutely fixed at one value:


Fairchild’s argument is unpersuasive. The district
court’s construction of “fixed switching frequency” as
“non-varying” does not exclude the possibility of natural
variation because doing so would impermissibly render
the claims inoperable. See Ecolabs, Inc. v. FMC Corp., 569
F.3d 1335, 1345 (Fed. Cir. 2009) (finding that where claim
language permits an operable construction, the inoperable
construction is wrong).5 Here, the parties offered expert
testimony to address the knowledge of persons of ordinary
skill in the art. The expert testimony demonstrated that
no real-world power supply controllers could operate with
an absolutely fixed, or non-varying, frequency. Indeed,
Fairchild seems to concede that there is always some
variation in frequency due to operating conditions. Moreover,
technical marketing documents from products sold
by Fairchild, Power Integrations, and third parties label
these controllers as “fixed frequency” products despite the
undisputed, minor variations in frequency. Since the term
“fixed” is not unambiguously defined in the claims, the
fact that power supply controllers cannot operate without
any variation supports that the plain and ordinary meaning
of “fixed” encompasses minor environmental variations.

Thus, the jury could have properly concluded that the
terms “fixed frequency” and “non-varying” left open the
possibility for minor frequency variations due to operating
conditions. A reasonable jury could have found that the
accused products have a “fixed” or “non-varying” frequency
despite slight variance due to operating conditions.



Of issue waiver:



Power Integrations argues that because Fairchild did
not seek additional claim construction at the district court
and chose to litigate this issue as a factual dispute about
infringement, Fairchild has waived its “per second” claim
construction argument. Fairchild responds that it did not
waive its claim construction argument because the claim
construction it proposes now is the same as the claim
construction it proposed during the Markman hearing,
which did not contain the “per second” limitation.
We have held that a party does not waive a claim construction
argument by failing to object during trial when
the construction proposed on appeal is the same as the
construction proposed in a Markman hearing. O2 Micro
Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351,
1359 (Fed. Cir. 2008); see also D’Agostino v. Mastercard
Int’l Inc., 844 F.3d 945, 950 (Fed. Cir. 2016); In re Pabst
Licensing Dig. Camera Patent Litig., 778 F.3d 1255, 1266
(Fed. Cir. 2015). “When the claim construction is resolved
pre-trial, and the patentee presented the same position in
the Markman proceeding as is now pressed, a further
objection to the district court’s pre-trial ruling may indeed
have been not only futile, but unnecessary.” Cardiac
Pacemakers, Inc. v. St. Jude Med., Inc., 381 F.3d 1371,
1381 (Fed. Cir. 2004). However, this rule only applies
when “issues were fully litigated and decided at the
Markman stage of the litigation.” O2 Micro, 521 F.3d at
1359.


The problem for Fairchild is that the issue of the appropriate
time interval over which to measure frequency
was not fully litigated—or even raised as an issue in
dispute—at the Markman stage of this proceeding. During
the Markman proceedings, there was no dispute about
the time interval. Neither Fairchild nor Power Integrations
proposed a construction with the “per second” limitation.
The district court added this limitation to the
construction on its own without providing a clear explanation.
Because the district court had not specifically addressed
this issue in its claim construction order, in order
to preserve an objection to the district court’s claim construction,
Fairchild was required to raise the issue before
submission to the jury. Yet even when this dispute arose
at trial, Fairchild did not ask the district court to modify
or clarify its claim construction with regard to “per second,”
nor did it object to the jury instructions. Instead,
Fairchild waited until this appeal to argue that the district
court’s claim construction was erroneous.
It is well-settled that a party cannot reserve a new
claim-construction argument for the post-trial motion
stage of litigation. Lazare Kaplan Int’l, Inc. v. Photoscribe
Techs., Inc., 628 F.3d 1359, 1376 (Fed. Cir. 2010);
Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 694
(Fed. Cir. 2008); Hewlett-Packard Co. v. Mustek Sys., Inc.,
340 F.3d 1314, 1320 (Fed. Cir. 2003).

(...)

By failing either to request
that the district court modify or clarify its claim construction
earlier in the litigation proceedings or to object to the
jury instructions, Fairchild has waived this new claimconstruction
argument.

Because Fairchild has waived its “per second” claim construction
objection, we only review whether substantial
evidence supported the jury verdict under the court’s
construction. See Lazare, 628 F.3d at 1376; HewlettPackard,
340 F.3d at 1320.


**As to the '908 patent:



Prosecution-history estoppel limits the application of
the doctrine of equivalents. If a patentee surrenders
certain subject matter during prosecution, the patentee is
then barred from using the doctrine of equivalents to
recover for infringement based on that same subject
matter. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki
Co., 535 U.S. 722, 733–34 (2002). Prosecution-history
estoppel can occur either when the patentee makes a
narrowing amendment to the claim or surrenders claim
scope through argument to the patent examiner. Conoco,
Inc. v. Energy & Envtl. Int’l, L.C., 460 F.3d 1349, 1363
(Fed. Cir. 2006). Here there was no claim amendment, so
Fairchild relies on argument-based estoppel. To invoke
argument-based estoppel, the prosecution history must
evince a “clear and unmistakable surrender of the subject
matter.” Id. at 1364. The application of prosecutionhistory
estoppel is a question of law that we review de
novo. Intendis GMBH v. Glenmark Pharm. Inc., USA, 822
F.3d 1355, 1365 (Fed. Cir. 2016)



Of damages:


In its JMOL motion, Fairchild argued that the evidence
presented by Power Integrations was insufficient as
a matter of law to invoke the entire market value rule,
pointing to our decision in LaserDynamics. The district
court noted that three prior cases relied on evidence that
“LaserDynamics . . . arguably would find inadequate to
support EMVR,” and that the evidence presented by
Power Integrations was comparable to the evidence in the
prior cases. J.A. 26; see Bose Corp. v. JBL, Inc., 274 F.3d
1354, 1361 (Fed. Cir. 2001); Tec Air, Inc. v. Denso Mfg.
Mich. Inc., 192 F.3d 1353, 1362 (Fed. Cir. 1999); Fonar
Corp. v. Gen. Elec. Co., 107 F.3d 1543, 1552–53 (Fed. Cir.
1997).

Despite the district court’s suggestion to the contrary,
there is no conflict between LaserDynamics and these
earlier cases, and subsequent cases have relied on LaserDynamics.
See VirnetX, 767 F.3d at 1326–27; Commonwealth
Sci. & Indus. Research Org. v. Cisco Sys., Inc.,
809 F.3d 1295, 1301–02 (Fed. Cir. 2015); Versata Software,
Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir.
2013). L

(...)

As LaserDynamics, Versata, and VirnetX held, the entire
market value rule is appropriate only when the
patented feature is the sole driver of customer demand or
substantially creates the value of the component parts.
LaserDynamics, 694 F.3d at 67; Versata, 717 F.3d at
1268; VirnetX, 767 F.3d at 1326. The burden of proof in
this respect is on the patent holder. LaserDynamics, 694
F.3d at 67. The question is whether the accused product,
compared to other products in the same field, has features
that would cause consumers to purchase the products
beyond the patented feature, i.e., valuable features.
Where the accused infringer presents evidence that its
accused product has other valuable features beyond the
patented feature, the patent holder must establish that
these features are not relevant to consumer choice. A
patentee may do this by showing that the patented feature
“alone motivates customers to purchase [the infringing
product]” in the first place. See id. at 69. But when the
product contains multiple valuable features, it is not
enough to merely show that the patented feature is
viewed as essential, that a product would not be commer-
cially viable without the patented feature, or that consumers
would not purchase the product without the
patented feature. Id. at 68. When the product contains
other valuable features, the patentee must prove that
those other features did not influence purchasing decisions.
Here, the power supply controllers had other valuable
features, such as jittering. The district court noted that
“there is evidence in the record that other features are
important and are highlighted by the respective parties”
and that “there is no question that . . . there are other
valuable features.”6 J.A. 1764. In fact, Power Integrations
sought infringement damages from Fairchild on the
jittering feature in these same products in a separate
lawsuit based on different patents, and we affirmed the
judgment of infringement. See Power Integrations, Inc. v.
Fairchild Semiconductor Int’l, Inc., 843 F.3d 1315 (Fed.
Cir. 2016). Moreover, many of Fairchild’s technical marketing
documents specifically mention the jittering feature
and other features in addition to the ’079 patented
feature. There is no proof that these features, including
jittering, did not affect consumer demand. Without such
proof, Power Integrations did not meet its burden to show
that the patented feature was the sole driver of consumer
demand, i.e., that it alone motivated consumers to buy the
accused products.7

(...)

Because the evidence presented by Power Integrations
was insufficient as a matter of law to invoke the
entire market value rule, we vacate the award of damages
and remand for a new trial. In light of this disposition, we
need not address Fairchild’s other arguments about the
sufficiency of the reasonable-royalty evidence.