CPLRG™ 0032 - i4i Limited Partnership v. Microsoft Corp. - Mar. 10, 2010

i4i Limited Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010) (PROST, Schall & Moore), cert. granted, 131 S. Ct. 647 (2010) i4iMicrosoft03102010

MAJOR ISSUES: burden of proof on patent validity; clear and convincing evidence; prior art not before PTO during examination; on sale bar; anticipation; corroboration of inventor testimony on prior art; damages; reasonable royalty; expert testimony; claim interpretation; contributory infringement and active inducement; enhanced damages; willful infringement; permanent injunction

COMMENT: SUPREME COURT REVIEW OF BURDEN OF PROOF.  This Federal Circuit panel decision, dated March 10, 2010, had a history and, as it turned out, a future.  The March opinion is a revised and reissued version of an earlier panel opinion, dated December 22, 2009.  Subsequently, the Supreme Court granted certiorari to review the important question:  “Whether the invalidity defense provided for in the Patent Act, 35 U.S.C. § 282, must be proved by clear and convincing evidence.”

1. THE PATENT; $200 MILLION.  The patent at issued concerned a markup computer language, such as custom XML, which allows a user to insert into a document “tags” (metacodes) which, inter alia, identify a text’s content or how to display it (e.g., in italics).  The patent improved editing in XML by storing a document’s content and metacodes separately and providing a “metacode map.”  U.S. Pat. No. 5,787,449.  USPatNo5787449 In an infringement suit against Microsoft, the patent owner asserted that Microsoft’s use of the editor constituted direct, contributory, and induced infringement.  At trial, a jury rendered a general verdict of infringement and awarded damages of $200 million.

2. THE BURDEN OF PROOF ON INVALIDITY.  The adjudicated infringer, Microsoft, argued that the burden should be less “for prior art that was not before the PTO,” citing the Supreme Court’s 2007 KSR decision on obviousness.
      a. IMPACT OF KSR (2007) In KSR International Co. v. Teleflex Inc., 550 U.S. 398, 426 (2007), the Court held that a patent’s claim 4 was invalid as obvious in view of an Asano prior art reference and other references. The Court noted that it “need not reach the question whether the failure to disclose [a pertinent prior art reference] Asano during the prosecution of [the patent in suit] avoids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption.” Yet, the Court thought “it appropriate to note that the rationale underlying the presumption–that the PTO, in its expertise, has approved the claim–seems much diminished here.”  In i4i, the Federal Circuit noted that it had already rejected the argument based on KSR:  “This court’s decisions in Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1311-16 (Fed. Cir. 2009), and Technology Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1327 (Fed. Cir. 2008), make clear that the Supreme Court’s decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 426 (2007) did not change the burden of proving invalidity by clear and convincing evidence.
      b. INVENTORS’ PRIOR SALES OF SOFTWARE; DID THE SOFTWARE CONTAIN THE PATENTED INVENTION? UNCORROBORATED TESTIMONY BY INVENTORS. Whatever the merits of the general rule requiring clear and convincing evidence, the particular validity issue in Microsoft-i4i was a particularly attractive one for easing the burden on a validity challenger.   The patent in question concerned software. The inventors named in the patent in suit had sold a software program more than year before applying for the patent. The program was directed to similar functionality. Sales of the program would invalidate the patent claims for anticipation if, but only if, the program had a particular feature (a “metacode map”), which the later patent claims required. Direct evidence of what the software contained was missing because the “source code” had been lost before the infringement suit was filed. At trial to a jury, the inventors testified that the sold program lacked the metacode map feature. The patent owner’s own expert testified that it was “impossible to know” whether the program contained the feature. Based on the court’s instructions, which required the accused infringer Microsoft to prove invalidity by clear and convincing evidence, the jury found the patent claims not invalid.  On appeal, the Federal Circuit upheld the verdict.  Notably, in patent law, it is well-settled that an inventor’s testimony that she or he previously invented something as of a particular date must be corroborated. In i4i, the Federal Circuit rejected the accused infringer Microsoft’s argument that similar corroboration should be required for inventors’ testimony about their alleged, in other word:  “We know of no corroboration requirement for inventor testimony asserted to defend against a finding of invalidity by pointing to deficiencies in the prior art. Accordingly, we hold that corroboration was not required in this instance, where the testimony was offered in response to a claim of anticipation and pertained to whether the prior art practiced the claimed invention.”

3. OTHER ISSUES.  The March panel decision dealt with a number of issues, not merely or even primarily with the burden of proof question.  The issues included:  (a) the admissibility of the testimony of the patent owner’s damage expert, which provided the basis for the jury’s large verdict, (b) the admissibility of survey evidence estimating usage of the patented method, (c) denial of a new trial on the damage award, (d) sufficiency of the jury’s verdict of no obviousness in view of three prior art references, (e) the correctness of jury instructions on contributory infringement and inducement, (f) the sufficiency of the evidence on contributory infringement, (g) the sufficiency of the evidence on induced infringement, (h) enhancement of damages based on the jury’s willful infringement finding, (i) the propriety of a permanent injunction, and (j) claim interpretation.

     a. ADMISSIBILITY OF TESTIMONY BY PATENT OWNER’S DAMAGE EXPERT.  The accused infringer argued that the district court erred in allowing the admission at the trial to the jury of the testimony of the patent owner’s damage expert (Wagner).  The accused infringer cited Fed. R. Ev. 703 and the Supreme Court’s decisions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).  HELD: the district court did not abuse its discretion in admitting the expert’s testimony.
          i. DAUBERT FRAMEWORK.  Under the Daubert framework, a district court must ensure that scientific testimony is reliable.  An expert witness’ testimony is admissible if it is based on sufficient facts or data, it is the product of reliable principles and methods, and the witness applies the principles and methods reliability to the facts of the case.  If testimony meets this minimum standard, it is admitted.  Disputes about the degree of relevance or accuracy of the testimony are resolved by the trier of fact, here the jury.
         ii. The patent owner’s expert (Wagner) testified that, in his opinion, a reasonable royalty was $ 200 million based on a hypothetical negotiation between the patent owner and the accused infringer at the time the infringement began.  The expert derived the $ 200 million based on a royalty rate of $98 multiplied by an estimated number of products of the accused infringer Microsoft’s Word products that were actually used to carry out the patented method (2.1 million).
          iii. At trial, the accused infringer challenged the expert’s royalty rate ($98) as exorbitant in view of, inter alia, (1) the price of Word products (as low as $97), and (2) the amount the accused infringer Microsoft had paid to license other patents ($1 to $ 5 million).
          iv. EXPERT’S METHODOLOGY; BENCH MARK PRODUCT; ADJUSTMENT FOR GEORGIA-PACIFIC FACTORS.  In response to the challenge, the expert explained his methodology in detail.  The expert selected as a “bench mark” product, XMetaL, an XML editor with a $499 retail price.  The expert applied a “25 Per Cent Rule,” which, the expert testified, was “well-recognized” and “widely used.”  The rule assumed that a licensee would agree to pay 25% of the profits from a license product to the licensor.  Based on the accused infringer’s 76.6% profit margin, the rule yielded a “baseline royalty rate of $96.”  The expert applied five of the 15 Georgia-Pacific factors to adjust the baseline rate from $96 to $98.  See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).  Factor 3 lowered the rate because the hypothetical license was nonexclusive and conveyed no additional consideration such as know-how.  Factor 5 raised the rate because the patent owner and the accused infringer were direct competitors and a license to the accused infringer would destroy the patent owner’s market.  Factor 6 raised the rate because the infringing editor was an important feature for encouraging users to buy new Word products.  Factor 9 raised the rate because the accused infringer needed the editor and had no acceptable non-infringing alternative.  Factor 11 raised the rate because, as indicated in internal Microsoft documents, a “custom XML editor was a critical addition to Word.”
          v. WEAKNESS IN CALCULATIONS?  DISAGREEMENTS WITH CONCLUSIONS, NOT METHODOLOGY;  DECISIONS UPHOLD EXPERT’S USE OF HYPOTHETICAL NEGOTIATION AND GEORGIA-PACIFIC FACTORS TO ESTIMATE A REASONABLE ROYALTY; MICRO CHEM. (2003); INTERACTIVE PICTURES (2001).   On appeal, the accused infringer “ably” pointed to weaknesses in the expert’s calculations.  However, these were disagreements with the expert’s conclusions, not his methodology.  Daubert guards “against unreliable or irrelevant opinions.”  It does not guarantee  correctness. 
B.   Decisions consistently uphold “experts’ use of a hypothetical negotiation and Georgia-Pacific factors for estimating a reasonable royalty.  See, e.g., Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387, 1393 (Fed. Cir. 2003); Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384 (Fed. Cir. 2001).”
          vi. Given (1) the expert’s testimony on “acceptance of the hypothetical negotiation model among damage experts and economists,” (2) his “methodical explication of how he applied the model to the relevant facts,” and (3) his testimony on his credentials, “the district court did not abuse its discretion in finding [the expert] qualified to apply the methodology.”
          vii. SUFFICIENT FACTS OR DATA; FACTS DRAWN FROM ACCUSED INFRINGER’S INTERNAL DOCUMENTS, PUBLIC INFORMATION, AND SURVEY.  The expert’s opinion “was `based on sufficient facts or data.’  Fed. R. Evid. 702.”  The facts “were drawn from internal Microsoft documents, publicly available information about other custom XML editing software, and a survey designed to estimate the amount of infringing use.”   The expert gave three reasons for choosing the XMetaL product as the benchmark: (1) the accused infringer used it to develop its own custom XML editor, (2) it was the cheapest custom editor on the market, and (3) the accused infringer identified XMetal as one of three competitors in the market.  The accused infringer argued (1) the difference between its Word versions with and without the customer editor ($50) was a better estimate of its value, and (2) the XMetaL product had features in addition to its custom XML editor, making its $499 retail price an overestimate of an editor’s value.  The expert responded that users who “really needed” custom XML functionality would choose a “high-end” product such as XMetal even though it had “superfluous features.”  The expert explained that adoption of the “baseline royalty” rate was justified by the accused infringer Microsoft’s “business strategy.”  To induce existing users of its products, such as “Word,” to purchase new versions, the accused infringer “included new features,” such as a custom XML editor, “at no additional cost, making it difficult to value the new features.”  The expert explained his reliance on the survey of estimated infringing use, which is discussed below.  The facts the expert relied upon “had a sufficient nexus to the relevant market, the parties, and the alleged infringement.”  The expert “could have used other facts,” but that is irrelevant to the question of the admissibility of the expert’s testimony.  The accused infringer could, and did, present contrary evidence, cross the expert, and obtain a “careful instruction on the burden of proof.”      

     b. ADMISSIBILITY OF SURVEY “ESTIMATING INFRINGING” USE OF PATENTED METHOD; ESTIMATE: 2.1 MILLION INFRINGING BUSINESS USERS.  The accused infringer argued that the district court erred in allowing admission of a survey “for estimating infringing use” of the patented method, to wit, use of a custom XML editor.  The survey gave a “conservative” estimate of 1.2 million infringing business users.   The district court did not abuse its discretion in admitting the survey.  The patent owner’s survey expert (Wecker) explained the survey.  The survey sought to estimate only infringing uses by businesses, not consumers.  The expert sent a survey to 988 randomly selected businesses.  On 46 responders, 19 reported using the accused infringer Microsoft’s Word product in an infringing ma  nner.  The expert assumed that all companies not responding did not use the Word product in an infringing manner.  Based on the assumptions, the expert determined that “1.9% of all copies of Word sold to businesses” during the infringement period (2003 to 2008) “were used in an infringing manner.” This yielded a 1.8 million uses.  The expert added post-survey uses to reach a total of 2.1 million infringing business uses.  The accused infringer contested the survey’s accuracy.  The survey expert responded that “the survey’s conservative assumptions about the unresponsive companies mitigated (and perhaps even overcorrected) for those weaknesses.”  The expert’s explanation “sufficed to show that the survey was compiled in accordance with acceptable survey methods.”

     c. DENIAL OF NEW TRIAL ON DAMAGES; LUCENT (2009).  The district court did not abuse its discretion in denying a new trial on damages.  The accused infringer argued that recent decision, Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1301 (Fed. Cir. 2009), setting aside a large reasonable royalty damage award against [the accused infringer] Microsoft, was controlling.  A different and narrower review standard applies in this case because, unlike in Lucent, the accused infringer Microsoft did not move for a pre-verdict JMOL on damages.  Under the narrow review standard, an accused infringer must show that the award is clearly excessive, that is, unsupported by any evidence.  Here, the award was high but had support in the experts’ testimony.

     d. OBVIOUSNESS IN VIEW OF COMBINATION OF REFERENCES.  Second, the accused infringer argued that the claimed invention would have been obvious in view of the Kugimiya reference combined with either the Rita reference or the DeRose reference.
           i. PRIOR ART.  The Kugimiya reference disclosed an English-to-Japanese language translation process.  During the translation process, a document’s XML tags were removed and stored in a separate file.  After the tags were placed in the translated documents, the separate tag file was discarded.  The Rita reference disclosed a system for creating and editing documents in SGML, a markup language similar to XML.  It stored tags and contents together in a “tree structure”.  “Pointers” allowed a user to move between branches of the tree structure.  The DeRose reference disclosed a system for creating and navigating a markup language document.  It also used a tree structure and pointers.
          ii. FAILURE TO MOVE FOR PRE-VERDICT JMOL ON OBVIOUSNESS; NO REVIEW OF SUFFICIENCY OF EVIDENCE; MOTION BASED ON ANOTHER THEORY (ANTICIPATION): NOT SUFFICIENT.  At trial, before the court submitted the case to the jury, the accused infringer moved for judgment as a matter of law (JMOL) that the patent claims were invalid on the first ground (anticipation in view of the “on sale” S4 software) but not on the second ground (obviousness in view of the three references).  Under Rule 50 of the Federal Rules of Civil Procedure, the accused infringer’s failure to move for pre-verdict JMOL bars the accused infringer from contesting the sufficiency of the verdict to support the jury’s findings of fact.  The accused infringer’s pre-verdict JMOL directed to the theory of anticipation based on one reference, the “on sale” S4 software, was not sufficient to preserve the accused infringer’s right to contest the sufficiency of the evidence on a different theory (obviousness) based on different prior art references (Rita, DeRose and Kugimiya).  See Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098, 1108 (Fed. Cir. 2003).  Because of the accused infringer’s failure to seek a pre-verdict JMOL, the scope of appellate review is limited to “whether the district court’s legal conclusion of nonobviousness was correct, based on the jury’s presumed factual findings.”
          iii. FACT-BASED ARGUMENTS.  The accused infringer’s arguments for obviousness depended heavily on factual issues, which, because of the jury’s general verdict of no-invalidity, were presumed to have been resolved by the jury against the accused infringer and in favor of the patent owner.  The accused infringer’s argument that the prior art disclosed all the asserted patent claims’ limitation was dependent on factual issues.  One factual issue was whether the “tree structures” in the Rita and DeRose references met the “metacode map” limitation of the patent’s claims.  The jury presumably found that they did not.  Another factual issue was whether the “pointers” in the Rita and DeRose references met the “address of use” limitation of the patents’ claims.  The jury presumably found that they did not.
          iv. MOTIVATION TO COMBINE?  KUGIMIYA OUTSIDE FIELD OF INVENTION? The accused infringer argued that a person of ordinary skill would have been motivated to combine the prior art references.  The patent owner responded, inter alia, that one of the references, Kugimiya, was not in the same field as the patented invention because it dealt with language translation.  Whether there was a motivation to combine the references’ teachings was a question of fact.  The jury presumably found that there was no motivation.  The “scope of the prior art” is a question of fact.

     e. JURY INSTRUCTIONS ON CONTRIBUTORY INFRINGEMENT AND INDUCEMENT; TWO ALLEGED ERRORS.  The accused infringer argued that it was entitled to a new trial because the jury instructions on contributory infringement were erroneous in two respects.
          i. IMPROPER REFERENCE TO “COMPONENT” FOR USE IN A PATENTED PROCESS, INSTEAD OF “MATERIAL OR APPARATUS”; NO PREJUDICE.  In its instruction, the court told the jury it could find contributory infringement if, inter alia, the accused infringer sold “a material component for use in practicing the patented claim–or patented method.”  Section 271(c), on contributory infringement of a patented process, refers to a “material or apparatus.”  It uses “component” in reference to a “patented machine, manufacture, combination or composition.”  HELD: the jury was properly guided despite the semantical difference between the statute and the instruction.  The parties’ contentions did not depend on any difference between a “component” and a “material or apparatus.”
          ii. SUBSTANTIAL NON-INFRINGING USE; FOCUS ON XML EDITOR RATHER THAN WHOLE SOFTWARE PRODUCT (WORD); SEPARATE AND DISTINCT FEATURE; LUCENT (2009).  The district court instructed the jury that, in deciding whether alleged noninfringing uses were “substantial,” which would preclude contributory infringement liability under Section 271(c), the jury should “focus on the custom XML editor, rather than all of Word.”  The accused infringer argued that this was error.  HELD: as explained in Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1320-21 (Fed. Cir. 2009), “a larger software package may be the relevant `material or apparatus’ when that tool is a separate and distinct feature.”  That the editor was a separate and distinct feature was confirmed by evidence that some versions of the accused infringer “Word” had the editor whereas others did not.

     f. SUFFICIENCY OF THE EVIDENCE:  CONTRIBUTORY INFRINGEMENT.  There was sufficient evidence to support the patent owner’s theory of contributory infringement.
          i. DIRECT INFRINGEMENT; AT LEAST ONE PERSON USED ACCUSED INFRINGER’S PRODUCT TO PERFORM THE CLAIMED METHOD.  A patent owner must show direct infringement to establish contributory or induced infringement.  See § 5115.20.  For a method claim, such as the assert claims in this case, sale of a product, such as software, is not direct infringement.  However, the evidence supported a jury finding that “at least one person performed” the claimed method.  The patent owner’s expert testified that the accused infringer’s Word custom XML editor, when used to open, edit or save an XML document, met all the asserted claims’ limitations.  The accused infringer stipulated that the editor in Word was used in the ways the expert indicated.
          ii. NO SUBSTANTIAL NONINFRINGING USES; VITA-MIX (2009); KNOWLEDGE OF PATENTS; INTERNAL E-MAILS.  The evidence supported a jury finding that the accused infringer’s custom XML editor in its Word product had no substantial, noninfringing uses.  The patent owner’s expert stated that the editor could be used in noninfringing ways, such as by saving a document in a “binary format,” but indicated that such a use deprived the users of the intended benefit of the XML language.  In evaluating whether a non-infringing use is substantial, rather “unusual, far-fetched, illusory, impractical, occasional, aberrant, or experimental,” a fact finder considers “not only the use’s frequency, but also the use’s practicality, the invention’s intended purpose, and the intended market.  See Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317, 1327 (Fed. Cir. 2009). Here, there was amply evidence that the noninfringing use was not practical for the intended user community.  Circumstantial evidence supported a jury finding that the accused infringer Microsoft knew that use of its XML editor infringed the patent.  The patent owner made a presentation of its software practicing the patented method to the accused infringer’s “Word development team.”  In internal e-mails, the accused infringer Microsoft’s employees showed (1) familiarity with the patent owner’s product, which was marked with a patent number, and (2) a belief that the accused infringer’s editor would render the patent owner’s product obsolete.

     g. SUFFICIENCY OF THE EVIDENCE:  INDUCED INFRINGEMENT; AFFIRMATIVE INTENT; INTERNAL E-MAILS; KNOWLEDGE OF PATENT AND INFRINGING NATURE OF ACCUSED EDITOR.  There was sufficient evidence to support the patent owner’s theory of induced infringement.  The jury could find that the accused infringer Microsoft had an “affirmative intent to cause direct infringement.”  DSU Med. Corp v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc in relevant part).  The accused infringer provided detailed instructions on using its XML editor.  “Unlike the instructions in Vita-Mix, 581 F.3d at 1328-29, which taught a use the defendant `could have reasonably believed was non-infringing’ and another use that was `non-infringing,’ here there was substantial evidence [the accused infringer] knew its instructions would result in infringing use.”   The internal e-mails discussed above showed the accused infringer’s knowledge of the patent and of “the infringing nature of Word’s custom XML editor.”

     h. WILLFUL INFRINGEMENT; ENHANCEMENT OF DAMAGES.  The jury rendered a verdict of willful infringement and awarded damages of $200 million.  The district court awarded $ 40 million in enhanced damages even though the statute (Section 284) allows up to triple the jury award.  On appeal, the accused infringer appealed only the district court’s decision to enhance damages.  It did not challenge the jury instructions or finding on willfulness.  The district court did not err or abuse its discretion  
           i. READ FACTORS.  The district court applied the “Read factors.”  Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992).  Factor 2 favored enhancement because the infringer Microsoft was aware of the patent and did not form a good faith belief in noninfringment.  Factor 4 favored enhancement because the infringer Microsoft was “the world leader in software” with annual revenues of about $ 60 billion.  Factors 6, 7, and 8 favored enhancement because the infringer failed to analyze potential infringement and added its infringing custom XML editor “with the purpose of rendering [the patent owner’s] products obsolete.”   Factors 1 and 9 weighed against enhancement because the infringer did not deliberately copied and the patent owner delayed bringing suit.
          ii. NOT REAPPLY SEAGATE WILLFULNESS TEST; PROPER TO CONSIDER INFRINGER’S SIZE AND FINANCIAL CONDITION AND WHETHER INFRINGER INVESTIGATED THE PATENT’S SCOPE.   The district court properly applied the Read factors rather than reapplying the test for willfulness set forth in In re Seagate Technology, LLC., 497 F.3d 1360 (Fed. Cir. 2007) (en banc).   “Under the Read factors, the district court properly considered [the accused infringer] Microsoft’s size and financial condition, as well as whether [the accused infringer] investigated the scope of the patent.  [Read, 970 F.2d] at 827; see also Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364, 1377-78 (Fed. Cir. 2002).”

     j.  PERMANENT INJUNCTION.   The district court granted a preliminary injunction.  The Federal Circuit stayed the injunction pending the appeal.  On the merits, it modified the injunction’s effective date, stressing the injunction’s narrow scope.
          i. NARROW; NO EFFECT ON COPIES WORD PREVIOUSLY SOLD.  The injunction is narrow because it had no effect on “copies of Word sold or licensed before the injunction goes into effect.”  “Thus, users who bought or licensed Word before the injunction becomes effective will still be able to use the infringing custom XML editor, and receive technical support from [the accused infringer].”  “After its effective date, the injunction prohibits [the accused infringer] from selling, offering to sell, importing, or using copies of Word with the infringing custom XML editor.”  The accused infringer “is also prohibited from instructing or assisting new customers in the custom XML editor’s use.”
          ii. STANDARD OF REVIEW; FOUR eBAY FACTORS.  On appeal, a district court’s findings of fact are reviewed for clear error.  Its conclusions on each of the four equitable factors from eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006), are reviewed for an abuse of discretion. 
                A. IRREPARABLE INJURY; PAST HARM PROPERLY CONSIDERED. The district court did not abuse its discretion in finding that the infringement irreparably harmed the patent owner.  The district court properly considered past harm to the patent owner.  In eBay, the Supreme Court referred to a patent owner who “has suffered an irreparable injury.”  An injunction is a “tool for perspective relief,” but “the first eBay factor looks, in part, at what has already occurred.”     There was circumstantial evidence that the accused infringer, by introducing its custom XML editor into its Word products, had rendered the patent owner’s separate product largely obsolete, causing the patent owner loss of market share and forcing it to change its business strategy to one of providing “add-on” products that enhance the accused infringer’s Word XML editor.   EDITORIAL NOTE ON “PAST HARM”:  The phrase “has suffered” is, grammatically, in the present perfect tense, which usually means that a situation began in the past and is continuing at the time of writing.  The past perfect tense would be “had suffered,” which usually means that the situation is in the past only.  Hence, one can read the Supreme Court’s phrasing of the irreparable harm factor as referring to irreparable harm that has begun in the past that is continuing at the time of the injunction.  The phrasing can be read as excluding past, completed irreparable harm.   ‘S PRODUCT OBSOLETE; LOST MARKET SHARE; CHANGE IN MARKET STRATEGY.   (e) INADEQUATE REMEDIES AT LAW.  The district court did not abuse its discretion in finding that “monetary damages would be inadequate.”
               B. INADEQUATE REMEDIES AT LAW; LOSS OF MARKET SHARE AND GOODWILL.   The district court found that monetary remedies would be inadequate.  The patent owner had not licensed its patent and   “sought to retain exclusive use of its invention.”  The patent owner suffered losses of “market share, brand recognition, and customer goodwill.”  These losses “frequently defy attempts at valuation, particularly when the infringing acts significantly change the relevant market.”
               C.  BALANCE OF HARDSHIPS; PATENT CENTRAL TO PATENT OWNER’S BUSINESS; INFRINGER DEVELOPMENT COSTS NOT CONSIDERED.  The district court did not abuse its discretion in finding that the balance of hardships favored the patent owner, except “on the limited issue of timing,” which is discussed below.  Factors bearing on the balance of hardships include “the parties’ sizes, products, and revenues sources.”  The patented technology was “central to [the patent owner’s] business.”  The infringing custom XML editor was “on a small fraction of [the infringer’s] sizeable business.”  The district court properly declined to consider the expense to the infringer of developing the infringing product and of redesigning it to avoid infringement.  See Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1327-31 (Fed. Cir. 2008).
                D.  PUBLIC INTEREST.  The district court did not abuse its discretion in finding that the public interest favored an injunction, except “on the limited issue of timing,” which is discussed below.  For the public interest factor, the “touchstone” is “whether an injunction, both in scope and effect, strikes a workable balance between protecting the patentee’s rights and protecting the public from the injunction’s adverse effects.”  Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 704 (Fed. Cir. 2008).   “[T]he injunction’s narrow scope substantially mitigates the negative effects on the public, practically and economically.”
          (iii) EFFECTIVE DATE MODIFIED; ONLY EVIDENCE: FIVE MONTHS TO ALTER PRODUCT.  The district court set the injunction’s effective date at sixty days after the order issuing the injunction.   The only pertinent evidence in the record was a declaration by a Microsoft employee that it might take five months to implement the injunction by altering the Word products to eliminate the infringing custom XML editor.  “Accordingly, we modify the injunction’s effective date from `60 days from the date of this order’ to `5 months from the date of this order.’ Cf. Canadian Lumber Trade Alliance v. United States, 517 F.3d 1319, 1339 n.22 & 1344 (Fed. Cir. 2008) (modifying an injunction’s terms on appeal); Forest Labs., Inc. v. Ivax Pharms., Inc., 501 F.3d 1263, 1271-72 (Fed. Cir. 2007) (modifying an injunction’s terms on appeal).”
     k. CLAIM INTERPRETATION; TWO LIMITATIONS?  The infringer Microsoft contested the interpretation of the patent’s claims, which required, inter alia, mapped content and a map of metacodes, the metacodes being “stored in distinct storage means.”   It argued that the claim word “distinct” imposed two limitations:  (1) that a document’s metacodes and content be in “separate files,” and (2) that a user be able to edit the content and metacodes ” `independently and without access’ to each other.”
           i. FIRST:  NO SEPARATE “FILES” LIMITATION.   “Distinct” did not require storage in separate files.  Neither the claims nor the specification used the word “files” for the required separate storage.  Rather the claims used broader term, “storage means”.   The specification showed no clear intent to limit the claims to storage in separate files.  The examples use a broader term, “storage space.”  The specification “arguably renounces particular formats by defining `document’ as a `non-random aggregation of data irrespective of its mode of storage or presentation.’ … (emphasis added).”   Statements that the accused infringer “plucked from the prosecution” did not show a disavowal of storage means that are not files.  During prosecution, the patent owner did distinguish one prior art reference (Mizuta) as showing storage of all information on a document “in one file.”   The “one file” statement was not all the patent owner said about the Mizuta reference.  The patent owner also stated that Mizuta lacked any notion of a metacode map or a “distinct storage means.”  In context, the statements made clear that the patent owner did not distinguish the Mizuta reference by storage type: file or no file.  Rather, it distinguished Mizuta as lacking the claimed “separation of a document’s content and structure.” 

          ii. SECOND: INDEPENDENT MANIPULATION; “CLOSER” QUESTION.  The question on the alleged limitation to independent manipulation of the metacode map and the mapped content was “closer,” but in view of the claim language, the “specification’s permissive language,” and the prosecution history, “independent manipulation” was “a benefit of separate storage, but not itself a limitation.”  
               A. EMBODIMENTS ALLOWED USER TO MANIPULATE ONLY METACODE MAP OR MAPPED CONTENT.  The embodiments in the specification allow a user to “manipulate only the metacode map or mapped content,” but the claims are not limited to the embodiments.
               B. CLAIM LANGUAGE.  The claims omitted any mention of “independent manipulation.”
               C. SPECIFICATION: BENEFIT OF SEPARATE STORAGE; NO DISCLAIMER OF SYSTEMS WITHOUT THAT BENEFIT.  The specification disclosed independent manipulation as one benefit of separate storage, but it did “not clearly disclaim systems lacking these benefits.”  The specification referred to “separate” and “distinct”, which were”not the same as `independent.’ ”  The specification did contain statements on “the ability to work solely on metacodes,” but the statements “are best understood as describing the advantages of separate storage, the real claim limitation.” 
               D. PROSECUTION HISTORY.   The prosecution history revealed “no statements that unequivocally narrow the claims to require independent manipulation.”  During prosecution, the examiner rejected claims as obvious on the ground that “storage is always distinct, even if at distinct addresses.”  In response the patent owner argued , inter alia, that, with the “present invention,” “one could change the architecture … of a document without even having access to the actual content of the document” and that this was “achieved by” “creating a map of the location of the metacodes” and storing the map and the document’s contents separately.  The response clarified why, contrary to the examiner’s assertion, the invention was more than just “distinct addresses.”  The discussion of “the benefits of separate storage” was not sufficiently clear and unmistakable to constitute a disavowal of “embodiments lacking independent manipulation.”


1. On the burden of proof on invalidity, see Chisum Patent Law Digest 1562; Chisum on Patents 5.06[2][d].

2. On damages for patent infringement, see Chisum Patent Law Digest 6211; Chisum on Patents 20.03[3].

3. On contributory infringement and active inducement, see Chisum Patent Law Digest 5115; Chisum on Patents 17.03, 17.04

4. On willful infringement, see Chisum Patent Law Digest 6317; Chisum on Patents 20.03[4][b].

5. On permanent injunctions, see Chisum Patent Law Digest 6122; Chisum on Patents 20.04[2].

6. On claim interpretation, see Chisum Patent Law Digest 5220; Chisum on Patents 18.03.

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