CAFC Affirms California Court’s Claim Construction and Calculation of Damages in USB Drive Infringement Action

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“The CAFC has determined that relying on a minor clerical error evident in the language of the claim is not a valid defense against willful infringement.”

On Friday, the United States Court of Appeals for the Federal Circuit (CAFC) upheld a decision of the United States District Court for the Central District of California following an appeal by Kingston Technology Company LLC, in which the court of district ruled that Kingston willfully infringed the U.S. patent. No. 6,926,544 (‘544 patent) and awarded $7,515,327.40 in compensatory damages plus 50%. The CAFC said in part that the district court may judicially correct claims where there are “obvious minor typographical and clerical errors in patents” without changing the scope of the claim.

Infringement lawsuit

The ‘544 patent relates generally to a “flash memory apparatus having a single body type rotating cover”. The ‘544 patent purports to solve the problems of the prior art resulting in the loss of the flash memory device covers after separation. The patent describes an apparatus which includes a flash memory main body which has a housing containing a hinge.

In 2014, CATR Co (CATR), later replaced by Pavo Solutions (Pavo), filed a lawsuit against Kingston alleging infringement of the ‘544 patent. Kingston responded by requesting an inter partes review (IPR) of the patent, which resulted in the court staying the litigation pending the outcome of the IPR. A portion of the ‘544 patent claims survived the IPR, requiring the district court to proceed with the case.

The district court agreed with Pavo that the claimed phrase “rotate the case with respect to the main body of flash memory” included an error which it judicially corrected by replacing the word “case” with the word “coverage” in interpreting the district court’s request. order. The district court determined that the error was clear on the face of the patent and supported by the prosecution history because “the matter is described as part of the main body, so it is not possible that it rotates relative to the body. “Kingston’s proposed alternative resulted in the same scope of protection against the claim. Kingston provided expert testimony, but the court determined that the testimony was not consistent with the intrinsic record.

At trial, Pavo’s damages expert, Mr. Jim Bergman, presented a reasonable damages model which was a profit-based model that relied on a prior settlement agreement between CATR and IPMedia. In the earlier settlement agreement, IPMedia agreed to pay a royalty of 1 cent for future sales, or approximately twenty-five percent of the profits recognized by IPMedia. Mr. Bergman concluded that Pavo and Kingston would have agreed to a license resulting in an amount of 40 cents per unit owed to Pavo based on the differences between Kingston and IPMedia.

Prior to trial, Kingston attempted to exclude Mr. Bergman’s testimony because his model results were speculative and incorrect. The district court denied Kingston’s motion, noting that Mr. Bergman was relying only on the express terms of the IPMedia license, meaning his conclusion did not involve speculation. The jury returned a verdict that Kingston willfully infringed claims 1, 4 and 24 of the ‘544 patent at the end of the trial. Pavo received a reasonable royalty of 20 cents, and Kingston sought a judgment at law, which the district court denied.

Kingston’s Arguments

On appeal, Kingston presented five arguments, of which the court addressed only three on the merits. Kingston’s two arguments that the CAFC did not address were that the district court improperly instructed the jury regarding the agreed construction of the claim and that the district court allowed Pavo to prejudice the jury by allowing Pavo to refer to the total revenue from the sale of Kingston. The arguments the court addressed were: 1) the district court should not have judicially corrected the phrase “rotate the case with respect to the main body of flash memory” because there is no was no error; 2) Kingston could not have formed an intent to infringe to support the verdict of willful infringement because Kingston did not infringe the originally written claims; and 3) the District Court should not have allowed Mr. Bergman to rely on its model based on the IPMedia agreement.

The CAFC first considered Kingston’s claim that the district court should not have judicially corrected the allegations. Citing Novo Indus., LP vs. Micro Molds Corp. (CAFC, 2003), the court stated that a district court can correct “minor typographical and clerical errors evident in patents”. The court has defined the necessary criteria for it to be suitable for correction. The correction cannot be reasonably argued based on the wording of the claim and the specification and the prosecution history does not suggest that the claims have a different interpretation.

Novo Industry Criterion applied

The court began its analysis by determining whether the wording of the claim contained an obvious clerical error. The CAFC found in claims 1 and 24 the references to “housing” in the phrase “rotating the housing relative to the main body of the flash memory” is in error. The court found that this was a manifest error in the full context of the language of the claim and the language of the claim alone shows that the reference to the case should have been on the cover, at the end of account agreed with the district court. The CAFC found that Kingston’s arguments ignored the wording of the claim and misquoted prior decisions that did not apply to the facts presented.

Next, the CAFC determined whether the correction is “subject to reasonable debate based on review of the language of the claim and the specification.” Citing CBT Flint Partners, LLC v Return Path Inc. (CAFC, 2011), because the court found it instructive, the court concluded that both corrections resulted in the same action, the meaning is clear based on the meaning intended by the plaintiff, meaning that it was appropriate for the district court to conclude that the correction was not subject to reasonable argument. Again, the court disagreed with Kingston’s arguments because the outcome of correcting their claim would result in the same scope of claim.

Finally, the court considered whether a different interpretation of the claims is supported by the prosecution history. Applicant and Examiner, through the prosecution, have always characterized the claims as describing a case within a cover. The CAFC concluded that there was no other reasonable interpretation revealed by the prosecution history.

Voluntary offense and expert testimony

Kingston argued that she could not have the required intent to deliberately infringe because she could not have foreseen that the court would change the wording of the claim. The CAFC argued that relying on an obvious minor clerical error in the wording of the claim is not a valid defense against willful infringement. Noting that Kingston’s argument appeared to be based on the belief that the district court had changed the scope of the claims, the CAFC explained that a minor clerical error does not redo the claim.

With respect to Kingston’s final argument, the court held that the district court did not abuse its discretion in refusing to exclude Mr. Bergman’s testimony. The district court’s decision for the calculation of damages is a decision that the CAFC is reviewing for abuse of power. The CAFC said:

“Here, both parties agree that the IPMedia license was comparable. This license granted rights to the ‘544 patent, and it clearly reflected the value that the contracting parties had set for the patent. As a starting point for Mr. Bergman’s analysis, he provided ample evidence of “already constructed[-]in the distribution.'”

The court concluded its analysis by stating that Kingston lost its two remaining arguments because they did not raise the arguments in their post-trial motions to the district court.

Image Source: Depot Photos
Author: billperry
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