Friday, August 24, 2012

Verizon expert slammed in ActiveVideo case


Background in case:

ActiveVideo asserted U.S. Patent Nos. 5,550,578 (’578 patent), 6,205,582 (’582 patent), 6,034,678 (’678 patent), and 6,100,883 (’883 patent) against Verizon at trial. ActiveVideo alleged that Verizon’s video on demand (VoD) feature of the Verizon FiOS-TV system infringed claim 9 of the ’578 patent, claims 1 and 2 of the ’678 patent, claims 1 and 26 of the ’883 patent, and claims 5, 7, and 8 of the ’582 patent. The ’578, ’678, and ’883 patents share a common specification and generally disclose and claim interactive television systems and methods for delivering interactive television to subscribers.

Of background law on invalidity:

Invalidity must be established by clear and convincing evidence. Microsoft Corp. v. i4i Ltd, 131 S. Ct. 2238, 2242 (2011). Clear and convincing evidence is such evidence that produces “an abiding conviction that the truth of [the] factual contentions are ‘highly probable.’” Colorado v. New Mexico, 467 U.S. 310, 316 (1984). Anticipation under 35 U.S.C. § 102 is a question of fact. ClearValue, Inc. v. Pearl River Polymers, Inc., 668 F.3d 1340, 1343 (Fed. Cir. 2012). To anticipate a patent claim, a prior art reference must describe “each and every claim limitation and enable one of skill in the art to practice an embodi- ment of the claimed invention without undue experimen- tation.” Id. (quoting Am. Calcar, Inc. v. Am. Honda Motor Corp., 651 F.3d 1318, 1341 (Fed. Cir. 2011)). Obviousness under 35 U.S.C. § 103 is a question of law based on fac- tual underpinnings. Graham v. John Deere Co., 383 U.S. 1, 17 (1966). To invalidate a patent claim based on obvi- ousness, a challenger must demonstrate “by clear and convincing evidence that a skilled artisan would have been motivated to combine the teachings of the prior art references to achieve the claimed invention, and that the skilled artisan would have had a reasonable expectation of success in doing so.” Procter & Gamble v. Teva Pharms. USA, Inc., 566 F.3d 989, 994 (Fed. Cir. 2009) (quoting Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1361 (Fed. Cir. 2007)).

Verizon's expert was conclusory:

We agree with the district court that the obviousness testimony by Verizon’s expert was conclusory and factu- ally unsupported. Although Verizon’s expert testified that “[t]hese are all components that are modular, and when I add one, it doesn’t change the way the other one works,” J.A. 4709, he never provided any factual basis for his assertions.


This is not sufficient and is fraught with hindsight bias. See KSR, 550 U.S. at 418 (“A patent composed of several elements is not proved obvious by merely demonstrating that each of its elements was, independently, known in the prior art.”); Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1373-74 (Fed. Cir. 2008) (“Such vague testimony would not have been helpful to a lay jury in avoiding the pitfalls of hindsight that belie a determination of obviousness.”).

KSR invoked as to "identify a reason":

See KSR, 550 U.S. at 418 (“[I]t can be important to identify a reason that would have prompted a person of ordinary kill in the relevant field to combine the elements in the way the claimed new invention does . . . because inven- tions in most, if not all, instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.”); Innogenetics, 512 F.3d at 1373 (Fed. Cir. 2008) (“[K]nowledge of a problem and motiva- tion to solve it are entirely different from motivation to combine particular references . . . .”). Because the record evidence was insufficient for a reasonable jury to support a determination of obviousness, the district court’s grant of ActiveVideo’s JMOL on obviousness was not erroneous.

As to a sunset royalty:

Following trial, Verizon asked the district court to stay the injunction during an eight month “sunset” period during which a design around to the ActiveVideo patents could be completed. The district court stayed the perma- nent injunction for a six month sunset royalty period during which Verizon was ordered to pay a sunset royalty for its continued infringement. The court held that grant- ing this sunset royalty would mitigate harm to the public and provide Verizon considerable time to implement non-nfringing alternatives. Verizon moved this court for a further stay of the injunction pending appeal, which we granted.
On appeal, Verizon argues that the sunset royalty amount should be vacated because it was based on the “flawed damages methodologies” of ActiveVideo’s expert. Appellants’ Br. 42. ActiveVideo sought a sunset royalty amount of $3.40 per subscriber per month. Verizon argues that the royalty rate should be $0.17 per FiOS-TV subscriber per month. Verizon argues that ActiveVideo receives $0.17 before costs in its agreement with Cablevi- sion. In a thorough and well-reasoned opinion, the dis- trict court concluded that the sunset royalty rate should be $2.74 per FiOS-TV subscriber per month.

As to the conclusion:

For the foregoing reasons, the district court’s judg- ment of infringement against Verizon as to the ActiveVi- deo ’582 patent is reversed. The district court’s grant of summary judgment of invalidity as to the Verizon ’748 patent is vacated and remanded for further proceedings. The district court’s entry of a permanent injunction is reversed. The district court’s imposition of a sunset royalty is affirmed. The district court’s judgment of infringement with respect to the ActiveVideo ’578, ’678, and ’883 patents is affirmed. Because Verizon has not argued either before the district court or on appeal that a finding of non-infringement of the ’582 patent should result in a reduction of damages, we affirm the damages award against Verizon in full. The district court’s judg- ment in all other respects is affirmed.


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