Thursday, August 16, 2018

CAFC expounds on "implied waiver" in Core Wireless

The outcome in Core Wireless v. Apple:

Following trial, the jury found that the defendant,
Apple Inc., infringed both asserted claims, and that
neither claim was invalid. Following a concurrent bench
trial, the district court rejected Apple’s argument that the
’151 patent was unenforceable due to implied waiver. We
affirm in part, reverse in part, vacate in part, and remand.

Of the magistrate judge:

The magistrate judge stated that “[n]either party’s
proposal is of much help.” Claim Construction Order,
2016 WL 3124614, at *11. According to the magistrate
judge, Core Wireless’s proposal was “circular” and only
defined the phrase in “terms of what ‘the receiver can
conclude.’” Id. In addition, the magistrate judge found,
Core Wireless’s proposal “makes no reference to the
inventor’s stated intent of relying on the preexisting
concept of a ‘bad frame.’” Id. As for Apple’s construction,
the magistrate judge found that it was “confusing and
unnecessarily limiting.” Id.

The magistrate judge chose a different approach.
Noting that the “specification uses the terms ‘good’ and
‘bad’ to refer to those concepts in the context of the underlying
wireless protocol,” the magistrate judge reasoned
that a “bad” frame “is one that does not contain error-free
user information” and that “it is something about the
frame itself” that indicates the frame’s status as “good” or
“bad.” Id. As a result, the magistrate judge construed
“good state” as a “state flagging that the frame contains
error-free user information,” and “bad state” as a “state
flagging that the frame does not contain error-free user
information.” Id.

The CAFC did not accept the district court's reasoning on

None of those stated reasons supports the district
court’s conclusion. The district court’s finding that Nokia
did not have a duty to disclose its patent application
because its proposal was rejected is unsupported by the
evidence. ETSI’s intellectual property rights policy states
that the disclosure requirement attaches to a member
“submitting a technical proposal” if that party has intellectual
property that “might” be essential “if that proposal
is adopted.” The district court’s interpretation of the
policy would undermine the very purpose of disclosure,
which Dr. Walker testified was to permit the standardssetting
decisionmakers to make an informed choice about
whether to adopt a particular proposal. Dr. Walker’s
unrebutted testimony made it clear that an ETSI member’s
duty to disclose a patent application on particular
technology attaches at the time of the proposal and is not
contingent on ETSI ultimately deciding to include that
technology in an ETSI standard.

As for the district court’s second ground for decision,
there was no testimony at trial that ETSI’s intellectual
property rights policy exempted patent applications that
had not yet matured into issued patents. Rather, Dr.
Walker’s unrebutted trial testimony made clear that the
ETSI policy included patent applications, which are, by
their nature, not yet final.
As for the court’s determination that there was no evidence
that the ETSI members understood Nokia to have
intended to waive its patent rights, there is no requirement
under the implied waiver doctrine that a third party
must interpret the patentee’s conduct as constituting a
waiver of its rights to enforce the patent; such analysis is
more relevant to equitable estoppel. See Hynix, 645 F.3d
at 1348 (equitable estoppel requires a duty of disclosure, a
breach of that duty, and misleading conduct that “led the
alleged infringer to reasonably infer that the patentee
does not intend to enforce its patent against the alleged
infringer” (quoting A.C. Aukerman Co. v. R.L. Chaides
Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992) (en
banc), abrogated on other grounds by SCA Hygiene Prods.
Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct.
954 (2017)).


Nonetheless, we remand rather than reverse. It is
possible to interpret the district court’s ruling as being
based on the conclusion that, because Nokia’s proposal
was not adopted, no inequitable consequence flowed from
Nokia’s failure to disclose its patent application. Equitable
defenses seek to prevent a party from unfairly benefiting
from its wrongful actions, and in some circumstances
courts have held that an equitable defense will not be
recognized if the offending party did not gain a benefit
from its wrongdoing. See Therasense, Inc. v. Becton,
Dickinson & Co., 649 F.3d 1276, 1292 (Fed. Cir. 2011) (en
banc). Implied waiver is an equitable doctrine, and an
equitable doctrine “hinges on basic fairness.” Id.; see also
Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770,
776 (Fed. Cir. 1995) (discussing prejudice and egregious
conduct as factors in showing the equitable defenses of
laches and equitable estoppel). As the Supreme Court
has acknowledged, “the remedy imposed by a court of
equity should be commensurate with the violation.”
Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465
Because implied waiver, like the doctrine of inequitable
conduct discussed in Therasense, may render an entire
patent unenforceable, the doctrine “should only be applied
in instances where the patentee’s misconduct resulted in
[an] unfair benefit.” 649 F.3d at 1292; see also id.
(“[E]nforcement of an otherwise valid patent does not
injure the public merely because of misconduct, lurking
somewhere in [the past], that was immaterial to the
patent’s [enforcement].”). Therasense, however, recognized
an exception to the materiality requirement for
“cases of affirmative egregious misconduct.” Id. In the
analogous case of implied waiver, which like inequitable
conduct involves the breach of a disclosure duty, the same
equitable considerations require either a showing of
prejudice or egregious misconduct sufficient to justify the
sanction of unenforceability of the patent at issue.

Here, it may be that, despite breaching its duty to disclose
its application, Nokia (and Core Wireless, its successor-in-interest)
did not obtain any unjust advantage,
because Nokia’s proposal was not adopted. On the other
hand, given the similarities between Nokia’s and Ericsson’s
proposals, and given that Nokia participated in at
least some of the discussions in the ETSI working groups,
it is also possible that the standard that was adopted,
which made Nokia’s proposal “optional,” has still provided
Nokia (and Core Wireless) with an undeserved competitive
The district court did not make findings regarding
whether Nokia or Core Wireless inequitably benefited
from Nokia’s failure to disclose, or whether Nokia’s con-
duct was sufficiently egregious to justify finding implied
waiver without regard to any benefit that Nokia or Core
Wireless may have obtained as a result of that misconduct.
Those issues must be addressed in the first instance
by the district court on remand, as the task of applying an
equitable defense is committed to the district court’s
discretion. See Meredith v. Winter Haven, 320 U.S. 228,
235 (1943) (“An appeal to the equity jurisdiction conferred
on federal district courts is an appeal to the sound discretion
which guides the determinations of courts of equity.”);
Qualcomm, 548 F.3d at 1019; A.C. Aukerman, 960
F.2d at 1028. We therefore vacate the district court’s
finding of no unenforceability and remand for further
proceedings consistent with this opinion.

**A footnote from "My Back Pages" (Dylan):

Good and bad, I define these terms
Quite clear, no doubt, somehow


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