Medtronic Navigation, Inc. v. BrainLAB Medizinische Computersysteme GMBH, 603 F.3d 943, CPLRG0056 (Fed. Cir. 2010) (BRYSON & Newman; LOURIE, concurring)Medtronic04262010
MAJOR ISSUES: attorney fee award to prevailing accused infringer; “exceptional case” determination under 35 U.S.C. § 285; continuing infringement suit after adverse claim construction ruling; theory on doctrine of equivalents and prosecution history estoppel; denial of summary judgment; litigation misconduct; arguments to jury allegedly undermining court’s claim construction
COMMENT. This decision has good news and bad news for patent owners bringing ultimately unsuccessful infringement suits.
The good news is that the Federal Circuit overturned a district court’s award of $ 4 million in attorney fees against the patent owner and its trial counsel.
The district court cited two grounds for its determination that the case was “exceptional,” which triggered the authority to award fees under 35 U.S.C. Section 285.
First, the district court ruled that an adverse claim construction order precluded literal infringement and that prosecution history estoppel precluded equivalency as to some claims. Consequently, the district court ruled that the patent owner was legally obligated to either abandon its case or challenge the claim construction on appeal. The Federal Circuit held that the district court erred because, inter alia, after the order, the patent owner limited its infringement case to a not unreasonable assertion of infringement under the doctrine of equivalents, the prosecution history estoppel was not “clear-cut,” and the district court had denied summary judgment and pre-verdict JMOL of no infringement. Under the law, a patent owner may pursue an infringement claim that is not frivolous or objectively unreasonable. Clear and convincing evidence is required to to show that claims are pursued in bad faith.
Second, the district court ruled that the patent owner and its counsel also committed litigation misconduct at trial by, inter alia, making arguments that “artfully avoided” the court’s claim constructions. The Federal Circuit held that the court’s findings on misconduct were either erroneous or not sufficiently egregious to justify the large award, which had been based on improper prolongation of the case.
The bad news is that the Federal Circuit panel felt the need to write an extensive opinion, authored by Judge Bryson, who is known for brevity, almost apologetically justifying the reversal of a decision about litigation conduct, a matter traditionally left to district court discretion.
Ominous for patent owners pressing questionable infringement claims is Judge Lourie’s concurring opinion, which noted that “[m]any patent suit are brought these days with little chance of success.” Judge Lourie noted that the Federal Circuit frequently affirmed “summary judgments of non-infringement based on claim constructions.” He professed ignorance of whether this was because of (1) “poor and non-objective appraisals of plaintiffs’ prospects,” or (2) “less worthy motives.” But he stressed that “district court judges are entirely justified, when they encounter frivolous claims and/or excessively hard-ball tactics, in imposing sanctions on offending parties.”
1. BRAIN SURGERY. Four patents concerned systems for tracking surgical instruments in a patient’s head during brain surgery. U.S. Pat. No. 5,383,454 (Bucholz) USPatNo5383454; U.S. Pat. No. 4,722,056 (Roberts) USPatNo4722056; U.S. Pat. No. 5,389,101 (Heilbrun) USPatNo5389101; U.S. Pat. No. 5,603,318 (Heilbrun) USPatNo5603318.
2. INFRINGEMENT SUIT. In a district court infringement suit, a patent owner, Medtronic, alleged that an accused infringer, BrainLAB, infringed four patents (Bucholz, Roberts, and two Heilbrun patents).
a. CLAIM CONSTRUCTION. In a claim construction order, the district court rejected the patent owner’s proposed broad claim constructions. Rejecting the patent owner’s contention that the Bucholz and Roberts patents’ claims covered “sensors” generally, the district court construed them as limited to acoustic or electromagnetic methods. The district court specifically excluded optical methods. The district court limited the claims of the two Heilbrun patents to static systems in which coordinates must be reestablished if a camera is moved.
b. Following the claim construction, the accused infringer suggested that there would be no need for a trial because the accused infringer’s products were optical. The district court responded that “if we’re talking about the doctrine of equivalence, it’s hard not to see issues of fact.”
c. SUMMARY JUDGMENT DENIED. The accused infringer moved for summary judgment of non-infringement. The accused infringer argued that its optical, dynamic system was too different to be equivalent to the non-optical system claimed in the Bucholz and Roberts patents and the static system claimed in the Heilbrun patents. Further, it argued that argument-based prosecution history estoppel barred equivalency on the Bucholz patent. In view of the limiting claim construction, the patent owner represented that it would not argue literal infringement but would limit its infringement contentions to the doctrine of equivalents. On estoppel, it argued that that there was no clear and unmistakable surrender. It argued that the accused system was “dynamic” only in a limited sense. Two weeks before trial, the district court denied the summary judgment motions.
d. The district court held a jury trial. After the patent owner’s case-in-chief, the accused infringer moved for judgment as a matter of law (JMOL), adding as a new argument amendment-based estoppel. The district court denied JMOL, noting, inter alia, that “I don’t understand the law….” At the close of evidence, the accused infringer renewed its JMOL motion. The district court denied the motion, noting that the estoppel issues were “not going to go to the jury.” The jury found infringement of the Bucholz and Roberts under the doctrine of equivalents, awarding $50 million in damages, and literal infringement of the Heilbrun patents, awarding $1 million in damages. At trial, after dismissing the jury, the district court judgment commended both counsel for presenting the case with professionalism and efficiency.
e. JMOL: NO INFRINGEMENT. After trial, the district court granted JMOL of no infringement on all four patents. Medtronic Navigation, Inc. v. BrainLAB Medizinische Computersystems GmbH, 417 F. Supp. 2d 1188 (D. Colo. 2006).
i. It found Bucholz not infringed for two reasons. It found that equivalency was barred by both argument-based and amendment-based estoppel. It found that the accused optic system, which measured direction, did not operate in the same way as the claimed acoustic system, which measured time. The district court noted that the jury’s infringement finding resulted from the patent owner’s “deliberate distortion” of the court’s claim construction.
ii. The district court found no factual equivalence between the Roberts claims and the accused system, noting that “broad conceptual similarity was not sufficient.”
iii. The district court found the Heilbrun patents not infringed. It found that that the patent owner failed to provide the “particularized testimony” required for the doctrine of equivalents.
f. APPEAL; AFFIRMED. The Federal Circuit affirmed in a non-precedential opinion. Medtronic Navigation, Inc. v. BrainLAB Medizinische Computersysteme GmbH, 222 F. App’x 952 (Fed. Cir. 2007).
3. PETITION FOR ATTORNEY FEES AND EXPENSES. After the appeal, the accused infringer filed a petition for attorney fees and expenses, which the district court granted against both the patent owner and its lawyers. The district court gave two grounds.
a. FIRST: FAILURE TO APPEAL OR ABANDON CASE AFTER ADVERSE CLAIM CONSTRUCTION. First, the district court ruled that, after the adverse claim construction order, and facing the accused infringer’s summary judgment motion, the patent owner should have either abandoned its infringement case or appealed the claim construction. The district court noted that the patent owner and its counsel had a duty to objectively reassess whether the accused products infringed the claims as construed. Instead, the district court noted, the patent owner continued the suit fully aware that it was without merit.
b. SECOND: LITIGATION MISCONDUCT. Second, the district court ruled that the patent owner and its counsel engaged in litigation misconduct.
i. The district court charged the patent owner with “artful avoidance” of the court’s claim constructions, noting the patent owner’s repeated description of the Bucholz as “an array of sensors” for detecting energy, which was the construction the patent owner had lost.
ii. The district court charged the patent owner with disregarding the prosecution history of the Bucholz patent.
iii. The district court criticized the patent owner’s counsel for (1) comparing the parties’ products rather than the accused product to the patent claims, and (2) arguing that the accused infringer’s submission to the Food and Drug Administration (FDA) was an “admission of infringement.”
4. CLEAR ERROR IN FINDING CASE EXCEPTIONAL. The district court clearly erred in finding the case “exceptional” under Section 285.
5. NO LEGAL OBLIGATION NOT TO OPPOSE SUMMARY JUDGMENT FOLLOWING CLAIM CONSTRUCTION ORDER; INFRINGEMENT CLAIMS: SUFFICIENTLY REASONABLE TO WARRANT LITIGATION TO VERDICT. The patent owner and its counsel were not legally obligated not to oppose summary judgment. Each of the patent owner’s infringement claims was “sufficiently reasonable to warrant being litigated to verdict, even though all of them were ultimately rejected by the district court in its JMOL ruling and by this court on appeal.”
a. CLAIM CONSTRUCTION; PURSUING EQUIVALENCY THEORY. In its claim construction, the district court rejected the patent owner’s argument that the Bucholz and Roberts patents literally covered an “array of sensors” in general. However, the patent owner was entitled to argue that the accused system using optical sensors was substantially equivalent. Supporting the patent owner’s equivalency position were expert reports and testimony that the optical systems performed the same function to achieve the same result and were interchangeable with certain trade-offs and that the “inventive breakthrough” was not in the type of radiation used.
b. PROSECUTION HISTORY ESTOPPEL: NOT CLEAR-CUT; HAYNES INT’L (1993). The issue of prosecution history estoppel was not “so clear-cut that it was unreasonable for [the patent owner] to litigate the question until it obtained a ruling from the district court on the matter. See Haynes Int’l, Inc. v. Jessop Steel Co., 8 F.3d 1573, 1579-80 (Fed. Cir. 1993) (district court erred in awarding attorney fees under 35 U.S.C. § 285 based on the conclusion that the patentee should have known its infringement claim was barred by prosecution history estoppel).”
i. The patent owner plausibly contended an argument during prosecution was not a “clear and indisputable disclaimer.”
ii. The accused infringer did not raise amendment-based estoppel in its summary judgment motion. The patent owner plausibly contended that the rationale of an amendment bore only a “tangential relation” to an asserted equivalent, under the principles of Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 740-41 (2002).
c. HEILBRUN PATENTS: REASONABLE LITERAL INFRINGEMENT POSITION. On the Heilbrun patents, the patent owner had a reasonable position of literal infringement. Contrary to the district court, the patent owner’s position at trial was not inconsistent with that at the prior summary judgment stage. At summary judgment, the patent owner pointed to four structures int the accused system as corresponding to a claim limitation (a “fiducial”). At trial, the patent owner pointed to only two of the four. The court noted: “A decision by a party to narrow its case for presentation to a jury does not generally suggest manipulation of the litigation process ….”
6. LITIGATION MISCONDUCT. The district court’s finding that the case was “exceptional” could not be “sustained based on the court’s findings of litigation misconduct at trial.”
a. CLOSING AND REBUTTAL ARGUMENTS TO JURY. The district court focused on comments by the patent owner’s counsel in closing and rebuttal arguments to the jury. The court’s criticism of several of those comments was not warranted.
i. The district court noted counsel’s repeated statements that “tracking is tracking,” as undermining the court’s claim construction limiting the claims to tracking by acoustic methods. However, counsel was using the phrase as a “shorthand way of summarizing” the patent owner’s equivalency theory. That was “not unfair or confusing” and was “not accompanied by any suggestion, subtle or otherwise” that the jury not follow the district court’s instructions on claim construction.
ii. The district court found the patent owner’s counsel’s comment about the absence of an instruction on the prosecution history misleading because the court had ruled that estoppel was a question of law not to be submitted to the jury. However, the comment was a response to the accused infringer’s discussion of the prosecution history.
b. STRATEGY OF DISTORTING CLAIM CONSTRUCTION RULINGS; CAREFUL CRAFTING OF EXPERT TESTIMONY; TESTIMONY SUPPORTIVE OF THEORY OF EQUIVALENCE. The district court found that the patent owner pursued a “strategy of distorting” the court’s claim construction rulings by careful crafting of expert testimony. However, the experts’ testimony did not display a “intransigent adherence” to the patent owner’s rejected claim construction. Rather, the testimony was supportive of the patent owner’s theory of equivalence.
c. PRODUCT-TO-PRODUCT COMPARISONS; PATENT OWNER’S PRODUCT NOT COVERED BY PATENT; RELEVANCE TO PROOF OF DAMAGES; DISPUTE OVER WHICH PARTY WAS THE INNOVATOR. The district court criticized the patent owner for improperly comparing the patent owner’s product to the accused infringer’s product, the proper comparison being the patent claims to the accused product. (The patent owner’s product, like the accused product, used optical sensors and thus was not covered by the Bucholz patent.) However, the patent owner introduced its product in order to establish lost profits damages. The district court gave a limiting instruction. Also, the accused infringer had argued to the jury that it, not the patent owner, was the innovator in the field. The patent owner offered not to demonstrate its product to the jury if the accused infringer similarly agreed. The accused infringer refused.
d. PATENT OWNER’S MISLEADING STATEMENT THAT ACCUSED INFRINGER’S LETTER TO FDA COMPARING PRODUCT WAS “AN ADMISSION OF INFRINGEMENT.” The only finding on litigation misconduct that could be sustained was the patent owner’s misleading statement that the accused infringer’s letter to the FDA stating that the accused infringer’s product and the patent owner’s previously approved product was equivalent was “an admission of infringement.” Given the deference accorded to trial courts in assessing counsel’s conduct, the district court’s finding should not be overriden, even though the statement could have been interpreted “quite differently,” to wit, as a response to the accused infringer’s assertion to the jury that it, not the patent owner, was the innovator.
7. ONLY ONE INCIDENT OF MISCONDUCT: NO SUPPORT FOR FINDING ENTIRE CASE EXCEPTIONAL AND BROAD ATTORNEY FEE AWARD. The single incident of misconduct, “viewed in context,” could not support a finding that the entire case was “exceptional” and was “plainly insufficient to support the broad attorney fee award that the district court entered in this case.”
a. The district court awarded the accused infringer’s costs of legal representation after summary judgment on the ground that the patent owner had unnecessarily prolonged the proceedings.
b. Given reversal of the finding of unnecessary prolongation and of most of the other misconduct findings, the exceptional case finding and attorney fee award under Section 285 must be reversed.
8. SECTION 1927; AWARD AGAINST ATTORNEY PERSONALLY. In addition to the Section 285 award based on an “exceptional case” finding, the district court awarded fees against the patent owner’s counsel personally, evoking 28 U.S.C. Section 1927, which authorizes such awards for unreasonable and vexatious multiplication of proceedings. This was error.
a. NO REASONABLE PROSPECT AFTER CLAIM CONSTRUCTION ORDER? The district court concluded that the attorney “should have known, after the district court entered its claim construction order, that it had no reasonable prospect of prevailing in the case.”
b. PROSPECTS DIMINISHED BY CLAIM CONSTRUCTION; ETHICAL OBLIGATION TO MAKE REASONABLE ARGUMENTS. Even if the attorney concluded that the patent owner’s “prospects for ultimately prevailing in the litigation were significantly diminished by the court’s claim construction order, it was not unreasonable for [the attorney] to continue to press its client’s case in light of the arguments that remained available to it. See Mezibov v. Allen, 411 F.3d 712, 719 (6th Cir. 2005) (`[A]n attorney is ethically bound to make reasonable arguments on behalf of his client, even if the attorney disagrees with them.’); Stitt v. Williams, 919 F.2d 516, 528 (9th Cir. 1990) (`[A] lawyer should not be sanctioned for failing to abandon his client’s case at the drop of a summary judgment motion, unless there is no colorable defense to the motion that can be advocated and no possible merit to any argument that can be advanced.’).”
8. INHERENT AUTHORITY. The district court awards were alternatively based on its inherent authority. However, a “court’s inherent powers `must be exercised with restraint and discretion.’ Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1992).” Here, “we have deferred to the district court’s judgment that counsel’s use of the FDA submission evidence was improper,” but “viewed in context, that incident was not sufficiently egregious to justify the imposition of sanctions under the court’s inherent authority.”
CROSS REFERENCES: On attorney fee awards to prevailing accused infringers based on “exceptional case” findings, see Chisum Patent Law Digest 6333; Chisum on Patents 20.03[c][iii].