Presidio Components, Inc. v. American Technical Ceramics Corp.
875 F.3d 1369 (Fed. Cir. 2017)
Authored by Matheus Lopes
Statement of Facts: Presidio is the owner of U.S. Patent No. 6,816,356 (“the ’356 patent”), which consists of a multilayer capacitor design and teaches a multilayer integrated network of capacitors electrically connected in series and in parallel. 875 F.3d at 1373. These multilayer capacitors are positioned edge-to-edge, forming a “fringe-effect” capacitance between the external contacts. Presidio filed suit against American Technical Ceramics Corp. (“ATC”) in the District Court for the Southern District of California alleging infringement of the ’356 patent.
ATC sought an ex parte reexamination of the claims of the ’356 patent in light of new prior art while the case was pending in the district court. The examiner rejected these claims. After the USPTO issued a reexamination certificate for the ’356 patent, Presidio amended its district court complaint. The amended complaint alleged infringement of the ’356 patent claims 1, 3, 5, 16, 18, and 19 as amended by the reexamination certificate. Specifically, Presidio alleged that ATC’s 550 line of capacitors infringed on the ’356 patent. ATC’s defense was that the claims were indefinite, that the reexamination amendment entitled it to intervening rights, which limits damages, and that Presidio was not entitled to lost profits or enhanced damages.
ATC filed a motion for summary judgment on the affirmative defense of absolute intervening rights, which the district court granted. A jury trial ensued and the jury returned a verdict, finding direct infringement and induced infringement of claims 1, 3, 5, 16, 18, and 19 of the ’356 patent by all of the accused products–ATC’s 550 line of capacitors. Furthermore, the jury found that Presidio met its burden of proving by clear and convincing evidence that ATC’s infringement of the asserted claims was willful. The jury awarded Presidio $2,166,654 in lost profit damages, but it did not decide Presidio’s claim for a reasonable royalty. The jury further issued an advisory verdict regarding the indefiniteness of the claims, finding that ATC failed to prove by clear and convincing evidence that claim 1 of the ’356 patent is indefinite.
Finally, the district court rejected ATC’s argument that the asserted claims of the ’356 patent are invalid due to indefiniteness. The court denied ATC’s motion contending that Presidio had failed, as a matter of law, to prove lost profits, and denied Presidio’s motion for enhanced damages, finding that enhanced damages were not called for despite a jury finding of willful infringement. The district court then entered a permanent injunction against ATC.
Procedural History: The district court first granted ATC’s motion for summary judgment on the affirmative defense of absolute intervening rights. After separate jury and bench trials, the district court held that ATC infringed the asserted claims and that the claims are not invalid, and granted a permanent injunction. The jury returned a verdict finding ATC had had directly infringed claims 1, 3, 5, 16, 18, and 19 of the ’356 patent through its 550 line of capacitors. The district court limited damages due to intervening rights. The district court denied Presidio’s motion for enhanced damages, determining that, regardless of a jury finding of willfulness, enhanced damages were not warranted despite a jury finding of willful infringement. ATC appealed, challenging the district court’s determination as to absolute intervening rights and the denial of enhanced damages.
Questions Presented:
- Whether the claims are indefinite.
- Whether ATC is entitled to absolute intervening rights.
- Whether Presidio established its right to recover lost profits.
- Whether the district court abused its discretion by not awarding enhanced damages.
- Whether the district court abused its discretion when it granted a permanent injunction.
Holdings:
- The claims are not indefinite. The court affirmed.
- ATC is entitled to absolute intervening rights. The court affirmed.
- The evidence does not support an award of lost profits. The court reversed and remanded the award of lost profits for determination of a reasonable royalty.
- The district court did not abuse its discretion in declining to award enhanced damages.
- The court vacated the permanent injunction and remanded the case for further proceedings with respect to the injunction.
Reasoning: The Federal Circuit held that the claims were not indefinite because the insertion loss testing method was well established and referenced in the patent. Presidio presented expert testimony at trial that a person skilled in the art would know how to measure the impact of fringe-effect capacitance on performance of the capacitor. ATC argued that the expert developed a new test methodology rather than using an existing test or one for which the patent provided necessary guidance. Therefore, ATC argued, the claims are indefinite. The Federal Circuit concluded that, although the specific steps performed by Presidio’s expert witness’s testimony had not been published in any industry publications or peer-reviewed articles, the general approach of making modifications to a capacitor to isolate the impact of discrete capacitances was within the knowledge of someone skilled in the art. Such measurement was within the skill of a skilled artisan based on an established method.
The Federal Circuit held that ATC is entitled to absolute intervening rights because a substantive change made in the original claims. Because the district court found that ATC was entitled to intervening rights, Presidio argued that the scope of the claims did not change during the ex parte reexamination because the goal in amending the claim was to adopt the district court’s construction in Presidio I. Presidio declared it was making the amendment “to incorporate and make explicit the interpretation of the independent claim that was established in the Presidio I litigation.” 875 F.3d at 1379 (citing J.A. 128). There was a substantive change in the scope of the claim, because under the scope of the original claim, theoretical calculations are enough to satisfy the claim limitation, whereas after the amendments, the claims are not.
The Federal Circuit also held that the evidence does not support an award of lost profits. Although the BB capacitor does not practice the patent, Presidio could still recover lost profits because the BB capacitor competes directly with the infringing 550 capacitors. ATC argued that the district court incorrectly found that substantial evidence supported that Presidio had satisfied the second prong of the Panduit four-factor analysis. See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). Presidio also argued that the 560L product did not perform as well as the infringing 550 capacitor. The district court should have relied on evidence comparing the 560L capacitor to Presidio’s BB capacitor in a hypothetical market without the infringing 550 capacitor. Presidio failed to provide evidence that the 560L capacitor was either not an acceptable or available substitute to Presidio’s BB capacitor. The Federal Circuit also found that the fact that ATC sold the 560L capacitor to a single customer did not establish that it was unavailable. Also, the fact that the 560L capacitors were not widely advertised when sold in a market with the 550 capacitors does not show a lack of availability.
The Federal Circuit further concluded that the district court did not abuse its discretion in declining to award enhanced damages. The discretion remains with the district courts to determine whether the conduct was sufficiently egregious to warrant enhanced damages. When making this determination, courts should consider the overall circumstances of the case. The court concluded that the district court conducted a correct analysis of ATC’s culpability, which looked only at the period beginning when the reexamination certificate issued on December 8, 2015. The district court properly considered the particular circumstances of the case and correctly concluded that the situation was not sufficiently egregious to warrant enhanced damages.
Finally, the Federal Circuit vacated the permanent injunction and remanded the case for further proceedings with respect to the injunction due to the court’s reversal of the lost profits award for lack of proof of past lost sales. The Federal Circuit directed that on remand, the district court should reopen the record and consider current available evidence of irreparable harm. Specifically, the district court should consider whether consumers have turned to non-infringing alternatives to the BB capacitor, such as the 560L capacitor, after the 550 series capacitors became unavailable. The court should also consider whether Presidio’s sales of the BB capacitor have increased because the 550 is no longer on the market. In light of this further evidence, the Federal Circuit remanded for the district court to determine whether Presidio has established irreparable injury and the appropriateness of the injunction.