Tuesday, November 21, 2017

Mixed result in CAFC decision in Presidio case

The outcome

Presidio filed suit against American Technical Ceramics
Corp. (“ATC”) for patent infringement in the District
Court for the Southern District of California. After separate
jury and bench trials, the district court held the
asserted claims were infringed and not invalid, and
granted a permanent injunction. The district court limited
damages due to intervening rights.

We affirm the district court’s holdings that the claims
are not indefinite and that ATC is entitled to absolute
intervening rights because a substantive amendment was
made during reexamination. We conclude that the evidence
does not support an award of lost profits and,
therefore, reverse the award of lost profits and remand for
determination of a reasonable royalty. We conclude that
the district court did not abuse its discretion in declining
to award enhanced damages. We vacate the permanent
injunction, and remand for further proceedings with
respect to the injunction.

The technology:

Presidio’s suit against ATC, filed on September 2,
2014, alleged infringement of U.S. Patent No. 6,816,356
(“the ’356 patent”). The ’356 patent claims a multilayer
capacitor design and teaches a multilayer integrated
network of capacitors electrically connected in series and
in parallel.

As to indefiniteness:

Here, the patent discloses a method of measuring capacitance
called insertion loss testing.
While it was established that insertion loss testing
could be used to measure overall performance of capacitors,
it was not well known as a method to measure the
comparative contributions from different capacitances
within the multilayer capacitor
Under our post-Nautilus cases, a claim is not indefinite
if a person of skill in the art would know how to
utilize a standard measurement method, such as insertion
loss, to make the necessary measurement. A patent need
not explicitly include information that is already well
known in the art. Nautilus, 134 S. Ct. at 2127; see also
Dow Chem. Co. v. Nova Chem. Corp., 809 F.3d 1223, 1225
(Fed. Cir. 2015) (Moore, J., concurring in the denial of the
petition for rehearing en banc) (citing Wellman, Inc. v.
Eastman Chem. Co., 642 F.3d 1355, 1367 (Fed. Cir.
2011)). “[I]f a skilled person would choose an established
method of measurement, that may be sufficient to defeat
a claim of indefiniteness, even if that method is not set
forth in haec verba in the patent itself.” Dow, 809 F.3d at
1224 (Prost, C.J., Dyk & Wallach, JJ., concurring in the
denial of the petition for rehearing en banc). For example,
in Ethicon Endo-Surgery, Inc. v. Covidien, Inc., 796 F.3d
1312, 1316 (Fed. Cir. 2015), claims covered surgical
shears for cutting and sealing blood vessels that required
a clamping pressure within a specified range.
Even assuming that ATC is correct that an entirely
new method could in some circumstances render the
claims indefinite, this is not such a situation. Here, as we
earlier noted, the insertion loss testing method was well
established and referenced in the patent. Although the
specific steps performed by Dr. Huebner had not been
published in any industry publications or peer-reviewed
articles, the general approach of making modifications to
a capacitor to isolate the impact of discrete capacitances
was within the knowledge of someone skilled in the art.
Based on this record, the district court could properly
conclude that such measurement was within the skill of a
skilled artisan based on an established method.

As to lost profits:

The third issue is whether the district court correctly
awarded lost profits. The district court held that the jury
verdict awarding lost profits was supported by substantial
evidence and denied judgment as a matter of law. The
question is whether Presidio established its right to
recover lost profits for its sales of the BB capacitors,
which Presidio claimed were adversely affected by the
sale of ATC’s infringing 550 line of capacitors.
To recover lost profits, the patentee bears the burden
of proof to show a “reasonable probability that, ‘but for’
infringement, it would have made the sales that were
made by the infringer.” Crystal Seminconductor Corp. v.
TriTech Microelecs. Int’l, Inc., 246 F.3d 1336, 1353 (Fed.
Cir. 2001); BIC Leisure Prods, Inc. v. Windsurfing, Int’l,
Inc., 1 F.3d 1214, 1218 (Fed. Cir. 1993). “But-for” causation
can be proven using the test given in Panduit Corp. v.
Stahlin Bros. Fibre Works, Inc., 575 F.2d 1156 (6th Cir.
1978). See Versata Software, Inc. v. SAP Am., Inc., 717
F.3d 1255, 1264 (Fed. Cir. 2013). The four-factor Panduit
test requires the patentee to show: (1) demand for the
patented product; (2) an absence of acceptable, noninfringing
substitutes; (3) manufacturing and marketing
capability to exploit the demand; and (4) the amount of
profit that would have been made. Panduit, 575 F.2d at
The district court’s analysis and Presidio’s argument
were flawed. The correct inquiry under Panduit is whether
a non-infringing alternative would be acceptable compared
to the patent owner’s product, not whether it is a
substitute for the infringing product. “The ‘but for’ inquiry
therefore requires a reconstruction of the market, as it
would have developed absent the infringing product, to
determine what [sales] the patentee ‘would . . . have
made.’” Grain Processing, 185 F.3d at 1350. The district
court erred by relying on evidence about sales of the 560L
capacitor in competition with the currently infringing
product, rather than comparing the 560L capacitor to
Presidio’s BB capacitor in a hypothetical market without
the infringing 550 capacitor. There was not substantial
evidence in the record upon which a jury could conclude
that the 560L was not an acceptable, noninfringing alternative
for Presidio’s BB capacitors. Undisputed evidence
showed that the 560L capacitor was less expensive than
Presidio’s BB capacitor and also had lower insertion loss
for at least some frequencies, which indicates better

On the matter of the injunction:

A district court abuses its discretion
when it makes “a clear error of judgment in weighing
relevant factors or exercise[s] its discretion based upon an
error of law or clearly erroneous factual findings.” Innogenetics,
N.V. v. Abbott Labs., 512 F.3d 1363, 1379
(Fed. Cir. 2008).
The district court
then based its conclusion as to irreparable injury on the
jury’s lost profits award. The district court reasoned that
“[t]he jury’s lost profits award also supports a finding of
irreparable injury” because “the jury necessarily found
ATC’s [550] capacitor sales caused Presidio to lose BB
capacitor sales.” J.A. 87. In light of our reversal of the lost
profits award for lack of proof of past lost sales, we must
vacate the injunction.


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