Tuesday, February 09, 2010

ResQNet.com, Inc. v. Lansa at the CAFC

ResQNet.com, Inc prevailed over Lansa, except on the amount of damages. The district
court judge was Senior Judge Robert W. Sweet.

As to the availability of the reference invoked for invalidation:

ResQNet states that its submission of the manuals was not an admission that they were
publicly available publications. In Abbott Laboratories v. Baxter Pharmaceutical Products,
Inc., 334 F.3d 1274, 1279 (Fed. Cir. 2003), the court explained that “mere submission of an
IDS to the USPTO does not constitute the patent applicant’s admission that any reference
in the IDS is material prior art.” We agree that ResQNet did not convert these manuals into
printed publication prior art by including them with the IDS submitted to the PTO. No other
evidence of publication or public availability was provided.

The question in the case was not "whether it was material prior art" but whether
it was publicly available. The cite to Abbott appears as a non sequitur.

Lansa did better on the damages issue:

Lansa’s cross-appeal challenges the district court’s award of $506,305 in damages
for infringement of ResQNet’s ’075 patent. This amount reflects the district court’s
acceptance of a 12.5% reasonable royalty rate applied to Lansa’s revenues from the sale
of infringing NewLook software. Lansa challenges the methodology used by ResQNet’s
damages expert, Dr. Jesse David, in determining this reasonable royalty. Because the
district court’s award relied on speculative and unreliable evidence divorced from proof of
economic harm
linked to the claimed invention and is inconsistent with sound damages
jurisprudence, this court vacates the damages award and remands.

Footnote 1:

Dr. David’s conclusion that ResQNet’s products are “‘based on the technology
described in the patents in suit,’” Dis. Op. at 4 (quoting Dr. David’s expert report), is a far
cry from a conclusion that ResQNet’s products are coextensive with the claimed invention.
Neither this court nor the district court had any way of knowing from Dr. David’s report
whether ResQNet’s products practice, for example, the prior art described in the patents in
suit or the actual the latter.

And, of lack of an opposing expert on damages:

The district court seems to have been heavily influenced by Lansa’s decision to offer
no expert testimony to counter Dr. David’s opinion. But it was ResQNet’s burden, not
Lansa’s, to persuade the court with legally sufficient evidence regarding an appropriate
reasonable royalty. See Lucent, 580 F.3d at 1329 (“Lucent had the burden to prove that
the licenses were sufficiently comparable to support the lump-sum damages award.”). As a
matter of simple procedure, Lansa had no obligation to rebut until ResQNet met its burden
with reliable and sufficient evidence. This court should not sustain a royalty award based
on inapposite licenses simply because Lansa did not proffer an expert to rebut Dr. David.

Of the Rule 11 business, Pennie & Edmonds was cited:

Courts that have discussed the matter have endorsed the application of time limits on Rule 11 motions. See, e.g., In re
Pennie & Edmonds LLP, 323 F.3d 86, 89 (2d Cir. 2003) (“the ‘safe harbor’ provision
functions as a practical time limit, and motions have been disallowed as untimely when filed
after a point in the litigation when the lawyer sought to be sanctioned lacked an opportunity
to correct or withdraw the challenged submission”).

The sanctions were removed:

For the several reasons we have discussed—the untimeliness
of the motion, the prompt withdrawal of the ’127 patent, and the recognition of litigation
substance concerning the ’608 patent3—we conclude that the award of sanctions was an
abuse of the court’s discretion, and is reversed.
[The lawyer who escaped sanctions
was from New Jersey: Jeffrey I. Kaplan, Kaplan Gilman & Pergament, LLP, of Woodbridge, New Jersey.]

Footnote 3 expresses some dicta about the use of settlement documents in sanction

ResQNet’s September 24, 2001 letter was designated “FOR SETTLEMENT
ONLY,” J.A. 625, and Lansa’s correspondence stated that the information provided could
not be used “for any purpose other than reaching an amicable settlement,” J.A. 614 (Aug.
21, 2001). The district court did not mention these conditions, but recognized that
settlement letters are exempted from discovery by Rule 408, Fed. R. Evid. However, the
court cited authority related to settlement correspondence that was considered for the
purpose of impeaching an unrelated claim. Although not necessary to our conclusion that
the sanction awarded here was improper, we doubt the relevance of this impeachment
authority to this case, particularly in view of the strong policy favoring settlement. See, e.g.,
Manko v. United States, 87 F.3d 50, 54 (2d Cir. 1996) (“The primary purpose of Rule 408 is
the ‘promotion of public policy favoring the compromise and settlement of disputes’ that
would otherwise be discouraged with the admission of such evidence.”) (quoting Rule 408,
advisory committee’s notes).

Judge Newman's partial dissent:

In the district court, ResQNet’s damages expert Dr. David, a qualified economist with
experience in the field, followed the traditional application of the Georgia-Pacific factors,
see Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y.
1970), analyzing the impact of all of these factors in an extensive Expert Report and in
testimony at trial. He was subject to examination and cross-examination in the district
court, and the district court provided a full and reasoned analysis of the evidence. No flaw
in this reasoning has been assigned by my colleagues, who, instead, create a new rule
whereby no licenses involving the patented technology can be considered, in determining
the value of the infringement, if the patents themselves are not directly licensed or if the
licenses include subject matter in addition to that which was infringed by the defendant


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