SRI patents survive Cisco challenge at the CAFC, but damages, attorneys' fees issues remain

The outcome was mixed, with patent validity sustained (good for patentee SRI), but damages issues in need of review:


We affirm the district court’s denial of summary judgment of ineligibility,
adopt its construction of “network
traffic data,” and affirm its summary judgment of no anticipation.
We vacate and remand the district court’s denial
of judgment as a matter of law of no willful infringement,
and therefore vacate the district court’s enhancement of
damages. We also vacate the district court’s award of attorneys’ fees and remand for recalculation.
Finally, we affirm the district court’s award of ongoing royalties on postverdict
sales of products that were actually found to infringe or are not colorably different.
Accordingly, we affirm-in-part, vacate-in-part, and remand for further proceedings consistent with this opinion.



The Berkheimer case is cited:


We review de novo whether a claim is drawn to patenteligible subject matter.
Berkheimer v. HP Inc., 881 F.3d
1360, 1365 (Fed. Cir. 2018) (citing Intellectual Ventures I
LLC v. Capital One Fin. Corp., 850 F.3d 1332, 1338
(Fed. Cir. 2017)). Section 101 defines patent-eligible subject matter
as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful
improvement thereof.” 35 U.S.C. § 101. Laws of nature,
natural phenomena, and abstract ideas, however, are not
patentable. See Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 566 U.S. 66, 70–71 (2012) (citing Diamond v.
Diehr, 450 U.S. 175, 185 (1981)).
To determine whether a patent claims ineligible subject matter, the Supreme Court has established a two-step
framework. First, we must determine whether the claims
at issue are directed to a patent-ineligible concept such as
an abstract idea. Alice Corp. v. CLS Bank Int’l, 573 U.S.
208, 217 (2014). Second, if the claims are directed to an
abstract idea, we must “consider the elements of each claim
both individually and ‘as an ordered combination’ to determine whether
the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id.
(quoting Mayo, 566 U.S. at 79). To transform an abstract
idea into a patent-eligible application, the claims must do
“more than simply stat[e] the abstract idea while adding
the words ‘apply it.’” Id. at 221 (quoting Mayo, 566 U.S.
at 72 (internal alterations omitted)).

We resolve the eligibility issue at Alice step one and
conclude that claim 1 is not directed to an abstract idea.
See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1337
(Fed. Cir. 2016). The district court concluded that the
claims are more complex than merely reciting the performance of a
known business practice on the Internet and are
better understood as being necessarily rooted in computer
technology in order to solve a specific problem in the realm
of computer networks.

(...)

Contrary to Cisco’s assertion, the claims are not directed to just analyzing data
from multiple sources to detect suspicious activity. Instead, the claims are directed to
an improvement in computer network technology. Indeed,
representative claim 1 recites using network monitors to
detect suspicious network activity based on analysis of network traffic data,
generating reports of that suspicious activity, and integrating those reports using hierarchical
monitors. ’615 patent col. 15 ll. 2–21. The “focus of the
claims is on the specific asserted improvement in computer
capabilities”—that is, providing a network defense system
that monitors network traffic in real-time to automatically
detect large-scale attacks. Enfish, 822 F.3d at 1335–36.



As to anticipation


We also hold that the district court did not err in granting summary judgment
that the asserted claims are not anticipated by SRI’s own EMERALD 1997 reference. We
review the district court’s summary judgment of no anticipation under regional circuit law.
See MAG Aerospace Indus., Inc. v. B/E Aerospace, Inc., 816 F.3d 1374, 1376
(Fed. Cir. 2016). The Third Circuit reviews a grant of summary judgment de novo, applying the same standard as the
district court. See Gonzalez v. Sec’y of Dep’t of Homeland
Sec., 678 F.3d 254, 257 (3d Cir. 2012). Summary judgment
is appropriate when, drawing all justifiable inferences in
the nonmovant’s favor, there exists no genuine issue of material fact and the movant
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); see also Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). Anticipation requires that a single prior art reference disclose each and
every limitation of the claimed invention, either expressly
or inherently. See Verdegaal Bros. v. Union Oil Co. of Cal.,
814 F.2d 628, 631 (Fed. Cir. 1987).



Here, Cisco was treading upon the ground of PREVIOUS arguments


EMERALD 1997 discloses a tool for tracking malicious
activity across large networks. The question before us is
whether the district court erred in concluding on summary
judgment that EMERALD 1997 does not disclose detection
of any of the network traffic data categories listed in
claim 1 of the ’203 and ’615 patents. The Patent Office
considered EMERALD 1997 during the original examination of the ’615 patent,
and the patentability of the claims
over the reference was confirmed in multiple reexamination and litigation proceedings.
Indeed, during reexamination, the Patent Office accepted SRI’s argument that the
claim limitation requires detecting suspicious activity
based on “direct examination” of network packets to distinguish EMERALD 1997.
J.A. 26402 (“[T]he closest prior art
of record, Emerald 1997, fails to teach direct examination
of packet data.”); J.A. 27101 (same).


AND Cisco's experts did not help:


On this record, we conclude that summary judgment
was appropriate. EMERALD 1997 does not expressly disclose directly
examining network packets as required by
the claims—especially not to obtain data about network
connection requests. Nor does Cisco’s expert testimony create a genuine issue of fact on this issue.
Rather, we agree
with the district court that Cisco’s expert’s testimony is
both inconsistent and “based on [] multiple layers of supposition.” Summary Judgment Op., 179 F. Supp. 3d at 358.
Because the evidence does not support express or inherent
disclosure of direct examination of packet data, we conclude that the district court did not err in holding that
there was no genuine issue of fact regarding whether
EMERALD 1997 disclosed analyzing the specific enumerated types of network traffic data recited in the claims.



Cisco did win on willful infringement


Cisco also appeals the district court’s denial of JMOL
that it did not willfully infringe the asserted patents because
the jury’s willfulness finding is not supported by substantial evidence.
We agree that the jury’s finding that
Cisco willfully infringed the patents-in-suit prior to receiving notice
thereof is not supported by substantial evidence
and therefore vacate and remand.



No need for engineers to read patents??



Even accepting this evidence as true and weighing all
inferences in SRI’s favor, we conclude that the record is insufficient
to establish that Cisco’s conduct rose to the level
of wanton, malicious, and bad-faith behavior required for
willful infringement. First, it is undisputed that the Cisco
employees who did not read the patents-in-suit until their
depositions were engineers without legal training. Given
Cisco’s size and resources, it was unremarkable that the
engineers—as opposed to Cisco’s in-house or outside counsel—
did not analyze the patents-in-suit themselves. The
other rationale offered by the district court—that Cisco designed
the products and services in an infringing manner
and that Cisco instructed its customers to use the products
and services in an infringing manner—is nothing more
than proof that Cisco directly infringed and induced others
to infringe the patents-in-suit.


Note footnote 6:


We recognize that, ideally, it should not fall to the
district court to determine when, if ever, willful infringement
began through the mechanism of JMOL. Rather, the
question of when willful infringement began is a fact issue
that would have been best presented to the jury in a special
verdict form with appropriate jury instructions. Better yet,
perhaps SRI could have recognized the shortcomings in its
case and presented a more limited case of willful infringement from 2012 onwards.
Or perhaps Cisco could have
filed a motion for summary judgment of no willful infringement prior to May 8, 2012.



Judge Lourie dissented on the 101 issue


I respectfully dissent from the majority’s decision upholding the eligibility of the claims. In my view, they are
clearly abstract. In fact, they differ very little from the
claims in Electric Power Group, LLC v. Alstom S.A., 830
F.3d 1350, 1355 (Fed. Cir. 2016), where we found the
claims to be abstract.

(...)

Thus, I would find the claims to be directed to an abstract idea at Alice step one, without an inventive concept
at step two, and reverse the district court’s finding of eligibility. Because I would find the claims at issue to be ineligible, I would not reach the remaining issues in the case.