CPLRG™ 0052 - Verizon Services Corp. v. Cox Fibernet Virginia, Inc. - Apr. 16, 2010

Verizon Services Corp. v. Cox Fibernet Virginia, Inc., 602 F.3d 1325 (Fed. Cir. 2010) (LINN, Mayer & Prost)Verizon04162010

MAJOR ISSUES:  arguments to jury bearing on claim construction; anticipation; single reference rule; incorporation by reference; obviousness; relevant field of art; hostile testimony by named inventors

COMMENT.  At one time, it was widely believed in the patent litigation bar that juries strongly tended to favor patent owners, especially when the technology was complex.  A patent owner could rely on a combination of the presumed correctness of the PTO in issuing the patent and on expert testmony averring infringement.  This case is an example of an accused infringer succeeding in the face of six asserted patents.  The jury displayed considerable prowess in distinguishing between and among infringement and validity issues.  But did the accused infringer’s counsel mislead the jury, suggesting that all the patents were limited to “the internet” when they were not and when the accused system was a private network?

1. TELEPHONE CALLS BY DATA PACKETS THROUGH A NETWORK.  Six patents concerned technology on providing telephone calls by reducing voice to data packets and sending the packets through a network. The packets do not necessarily travel the same path.  U.S. Pat. No. 6,282,574 USPatNo6282574; U.S. Pat. No. 6,104,711 USPatNo6104711; U.S. Pat. No. 6,430,275 USPatNo6430275; U.S. Pat. No. 6,292,481 USPatNo6292481; U.S. Pat. No. 6,137,869 USPatNo6137869; U.S. Pat. No. 6,636,597 USPatNo6636597.   For litigation involving four of the six patents, see Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295 (Fed. Cir. 2007).

2. In a district court infringement suit, the patent owner, Verizon, asserted the patents against an accused infringer, Cox.
a. ACCUSED INFRINGER: TELEPHONY THROUGH CABLE; PRIVATE NETWORK, NOT PUBLIC NETWORK (THE “INTERNET”).  The accused infringer provided packet-switched telephony through a cable system.  The accused system was a private network in contradistinction to a public network, such as the “Internet.”
b. PATENTS: NO EXPLICIT REFERENCE TO “INTERNET.”  The patents’ asserted claims did not explicitly refer to either the Internet or public networks.  Instead, the claims referred to packet switched networks.
c. THREE CATEGORIES.  In explaining the patented technology, the parties divided the patents into three groups.
i. FEATURE PATENTS: CALL-FORWARDING, ETC.; ENHANCED NAME TRANSLATION SERVER Two “Feature Patents” (‘711 and ‘574) concerned providing features such as call-forwarding over a packet-switched networks.  The patents described an “enhanced name translation server” for converting existing textual domain names into numeric Internet Protocol (IP) addresses.  They also described software for transferring real-time voice information between personal computers.
ii. NETWORK PATENTS: PER-CALL SUPPORT FUNCTIONALITY.  Three “Network” patents (‘275, ‘869, ‘481) concerned providing “per-call support functionality.”
iii. QUALITY OF SERVICE PATENT: DYNAMICALLY ALLOCATING RESOURCES ON A CALL-BY-CALL BASIS.  One “Quality of Service Patent” (‘597) concerned a method for “dynamically allocating resources to vary the quality of service on a call-by-call basis.”

3. JURY TRIAL: VERDICT FOR ACCUSED INFRINGER.  At trial, a jury rendered verdicts in favor of the accused infringer Cox on all issues except for the asserted invalidity of the Network Patents and the Quality of Service Patent.
a. NO CLAIMS INFRINGED.  The jury found all the asserted claims not infringed.
b. FEATURE PATENTS: INVALID.  The jury found the asserted claims of the Feature Patents invalid.
c. DENIAL OF BOTH PARTIES’ JMOL AND NEW TRIAL MOTIONS.  The district court denied the patent owner’s motions for JMOL or a new trial on infringement.  It denied the accused infringer’s motions on invalidity of the Network Patents and Quality of Service Patent.

4. APPEAL; JUDGMENT AFFIREMD. Both parties appealed.  The Federal Circuit affirmed.

5. ALLEGEDLY IMPROPER ARGUMENTS TO JURY ON CLAIMS SCOPE; NEW TRIAL?   In support of its new trial motion, the patent owner argued that the accused infringer Cox presented improper evidence and arguments to the jury about claim scope.  The argument lacked merit, and the district court properly denied the request for a new trial on this ground.
a.CLAIM CONSTRUCTION: “PACKET DATA NETWORK” NOT LIMITED TO INTERNET; PRIVATE AS WELL AS PUBLIC NETWORKS.  As agreed by the parties, the claim phrase, “packet data network,” was not limited to the Internet but encompassed private networks, such as the accused infringer used, as well as public ones.”
i. CONSTRUCTION.  The district court construed “packet data network” as follows:  “a packet-switched data network, where the network transports packets of data over a non-dedicated circuit to a destination, and each packet includes source and destination addresses.”
ii. Neither party asserted error in this construction.
iii. INSTRUCTION ON CLAIM CONSTRUCTION; CAUTION AGAINST RELIANCE ON LAWYER’S STATEMENT ABOUT THE LAW.  At trial, the district court instructed the jury that it must follow the court’s interpretation and cautioned the jury against relying on the lawyer’s statements about the law.
b. The patent owner argued that the accused infringer’s counsel and experts repeatedly suggested to the jury that the patents’ claims were limited by the inventors’ intent and, in effect, invited the jury to “limit the claims to the Internet.”
c. The patent owner framed its argument as one involving an improper submission of a claim construction dispute to a jury, which was held to be error in O2 Micro International Ltd. v. Beyond Innovation Technology Co., Ltd., 521 F.3d 1351 (Fed. Cir. 2007).
i. Subsequent decisions clarify that (1) O2 Micro permits a remand for further construction but does not necessarily require a remand, particularly if the parties did not use a disputed construction before the jury, Kinetic Concepts, Inc. v. Blue Sky Medical Group, Inc., 554 F.3d 1010 (Fed. Cir. 2009), and (2) no remand is required if a claim construction dispute is raised only after a jury verdict,  Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683 (Fed. Cir. 2008).
ii. Here, unlike in O2 Micro, the parties identified no specific term in need of construction.
iii. The arguments of which the accused infringer complained of did not relate to any particular claim term.
iv. Unlike O2 Micro, the accused infringer “did not invite the jury to choose between alternative meanings of technical terms or words of art or to decide the meaning of a particular claim term ….”
b. The patent owner’s contention was more accurately characterized, not as one over claim construction, but rather over whether the accused infringer improperly invited the jury to “shirk its key factfinding function” by focusing on the distinction between how the accused infringer’s system works and the Internet.
i. On setting a jury verdict aside because of improper arguments, regional circuit law applies, here, that of the Fourth Circuit.  The Fourth Circuit looks to the totality of the circumstances.
ii. Here, the district court did not abuse its discretion in denying a new trial.
iii. Both parties vigorously litigated infringement and validity and submitted multiple expert witnesses.
iv. To support its contention, the patent owner relied on “snippets of testimony” and argument as improper.
v. Having the last opportunity to make a closing statement, the patent owner’s counsel could rebut allegedly improper and misleading statements.

6. INFRINGEMENT: NETWORK PATENT ‘481 CLAIM 1.  The patent owner argued that it was entitled to a JMOL of infringement of the Network Patent (‘481) method claim 1 because its expert demonstrated that the accused system practiced every step of the method.  The Federal Circuit held that argument lacked merit because there was conflicting testimony on whether two of the method steps were performed.  The accused infringer did not improperly argue that the claim required that its first two steps be performed in sequence.
a. “SEARCH A FIRST DATABASE.”  The claim required “searching a first database” for an address in a second database.
ii.  The accused infringer’s expert testified that the accused system used a “domain name server to translate the textual domain name of a known Call Management Server (`CMS’) into its numeric IP Address and this translation is a lookup….”  The expert characterized this translation as a “lookup, not a search.”
ii. The patent owner’s expert testified that the translation amounted to a search.
iii. The conflict between the experts was a factual dispute that the jury could resolve in the accused infringer’s favor.
b. “SECOND DATA BASE.”  The claim required that the search be for an “address of a second database.”
i. The accused infringer’s expert testified that the CMS, which the accused system searched, was not a “database.
ii. The patent owner’s expert testified that the CMS was equivalent to a “second database.”
iii. Again, there was a factual dispute.
c. PERFORMANCE IN SEQUENCE: NOT REQUIRED.  The patent owner argued that the accused infringer’s expert asserted, improperly, that the claim’s first two steps (requesting a communication path and searching a database) must have been performed in sequence.  The argument lacked merit because, inter alia, the district court gave a cautionary instruction to the jury that the claim’s first three steps need not occur in any order.

8. CLAIM CONSTRUCTION: DISPUTE ON LIMITATION NEED NOT BE RESOLVED; JURY COULD FIND NO INFRINGEMENT REGARDLESS OF CONSTRUCTION; EVIDENCE THAT OTHER LIMITATIONS NOT MET BY ACCUSED SYSTEM.  The patent owner argued that the district court erred in construing a limitation in the asserted Quality of Service Patent’s claims.  Proper construction of the phrase need not be addressed because there was evidence that other limitations of the claims were not met by the accused infringer’s system.
a. The disputed limitation recited:  “evaluating said set of candidate resources to find a best candidate resource ….”
b. The accused infringer’s testified explicitly that he found missing from the accused system not only the “evaluating” limitation but also two other limitations (“determining criteria” and “searching a resource data structure”).
c.  The Federal Circuit noted:  “We may affirm the jury’s findings on infringement `if substantial evidence appears in the record supporting the jury’s verdict and if correction of the errors in a jury instruction on claim construction would not have changed the result, given the evidence presented.’  Teleflex Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1328 (Fed. Cir. 2002).”

9. VALIDITY; SUBSTANTIAL EVIDENCE SUPPORTING JURY’S VERDICT THAT SOME PATENTS WERE INVALID, SOME NOT.  Substantial evidence, including conflicting expert testimony, supported the jury’s verdicts that “the Feature Patents were invalid for anticipation or obviousness and that the Network Patents and Quality of Service Patent were not.”
a. FEATURE PATENTS (‘711 AND ‘574); ANTICIPATION; EXPERT; COAUTHOR TO TWO PAPERS AS ANTICIPATORY PRIOR ART.  To show anticipation, the accused infringer presented an expert, Handley, who testified on two prior art papers (SIP article and SDP article), which he authored, and another document (RFC).
i. The expert Handley testified, at length, on how the SIP article disclosed every element of each asserted claim of the ‘711 patent and how the RFC disclosed the same for the ‘574.
ii. The expert Handley also testified that the 1996 SIP article referred to the 1995 SDP article as a “companion draft” and that the two paper, read together, anticipated the claims of both the ‘711 and ‘574 patents.
iii. INCORPORATION BY REFERENCE?  KYOCERA WIRELESS (2008); IMPROPER SUBMISSION TO JURY?  The patent owner argued that (1) the SIP article did not sufficiently identify material in the SDP to be incorporated by reference, Kyocera Wireless Corp. v. Int’l Trade Comm’n, 545 F.3d 1340, 1352 (Fed. Cir. 2008), and (2) incorporation by reference, a matter of law, was improperly left to the jury.
iv.  The court noted that “if incorporation by reference comes into play in an anticipation determination, it is the court’s role to determine what material in addition to the host document constitutes the single reference.  Advanced Display Sys., Inc. v. Kent State Univ., 212 F.3d 1272, 1283 (Fed. Cir. 2000).”  However, here, the expert testified that the single prior art articles (SIP and RFC) anticipated the ‘711 and ‘574 patents respectively.  Consequently, any error in failing to instruct the jury on incorporation by reference was harmless.
v. ENABLEMENT: ABILITY TO MAKE ORDINARY TELEPHONE CALL.  The patent owner argued that the SIP and SDP were not anticipatory because they did not enable a “basic claim requirement,” to wit, the ability to make an ordinary telephone call.  However, the Feature Patents claims did specifically recite making an actual call.  The accused infringer’s experts testified that an ordinarily skill person would have no problem “implementing the functionality disclosed in the SIP Article.”

b. IMPROPER ARGUMENT: PRACTICING THE PRIOR ART?  The patent owner argued that a new trial was required because the accused infringer made an improper “practicing the prior art” argument, which the district court failed to correct.  The argument lacked merit.
i. EXPERT: ACCUSED SYSTEM EVOLVED FROM PRIOR ART SIP AND SDP ARTICLES; CLOSING ARGUMENT: ACCUSING THE PRIOR ART?  The accused infringer’s expert Handley testified that the accused infringer’s system evolved from the prior art SIP and SDP articles.  In closing argument, the accused infringer’s attorney argued that the patent owner erred by accusing “the prior art”, which “invalidates their patent.”
ii. An accused infringer cannot prove anticipation merely by establishing that one “practices the prior art.”  Zenith Electronics Corp. v. PDI Communication Systems, Inc., 522 F.3d 1348, 1363 (Fed. Cir. 2008).
iii. Here, however, the accused infringer’s expert testified in detail that the prior art SIP reference showed each limitation of each asserted claim.  Therefore, a reasonable jury could find anticipation based on the evidence “apart from any alleged `practicing the prior art’ argument.”
c. OBVIOUSNESS: FEATURE PATENTS; RELEVANT ART; INTERNET AND NETWORKS? OR TELEPHONE AND WIRELESS COMMUNICATIONS?  The accused infringer’s expert, Handley, testified that the Feature Patents’ claims would have been obvious in light of the prior art.  The patent owner argued that the expert testified on obviousness “using the wrong field of art,” “Internet and network protocols” rather than the art as correctly defined in the district court’s jury instructions, “telephony and wireless communications.”  The argument lacked merit.
i. The Feature Patents did relate to telephony, but they made frequent reference to the Internet and network protocols.
ii. The expert described “a person of ordinary skill working in the area of the `Internet telephony industry,’ which is clearly a subset of telephone and wireless communications.”
iii. To determine the relevant art, a court looks to the “nature of the problem confronting the inventor.”  Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367, 1375 (Fed. Cir. 2004).
(D) Here, the problem was providing telephone service over a network, including the Internet.
d.  QUALITY OF SERVICE PATENT AND NETWORK PATENTS: CONFLICTING EXPERTS.  The accused infringer and patent owner presented conflicting expert testimony on whether two prior art patents disclosed all the elements of the asserted claims of the Network Patents and Quality of Service Patent.  The jury found no invalidity.  “The jury was entitled to resolve the conflicting evidence in favor of [the accused infringer] for the Feature patents and for [the patent owner] on the Network and Quality of Service patents.:
i. LIMITING TESTIMONY BY NAMED INVENTORS; ERROR IN APPLYING ASSIGNOR ESTOPPEL?  The accused infringer argued that the district court abused is discretion by limiting the testimony of the named inventors based on the patent owner’s assignor estoppel argument.
ii. NO NEED TO ADDRESS ASSIGNOR ESTOPPEL.  The assignor estoppel argument need not be addressed.  The district court allowed the inventors to give factual testimony about the invention but excluded their testimony as experts because they had not provided expert reports or been qualified as experts.

1.  On claim construction during jury trials, see Chisum Patent Law Digest 5312.20.
2. On incorporation by reference by prior art references for anticipation purposes, see Chisum Patent Law Digest 1211.40.
3. On jury verdicts on invalidity by anticipation or obviousness, see Chisum Patent Law Digest 1246, 1565.

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