United States: No Per Se Rule Against Injunctions For Standard-Essential Patents

In Apple Inc. v. Motorola, Inc., Nos. 12-1548, -1549 (Fed. Cir. Apr. 25, 2014), the Federal Circuit affirmed the district court's claim construction decisions, with the exception of its construction of certain "heuristic" claim limitations, reversed the district court's decision to exclude damages evidence (with a minor exception), and reversed the district court's grant of SJ of no damages for infringement of Apple Inc. and Next Software, Inc.'s (collectively "Apple") patents.  Based on its reversal of the district court's construction of the "heuristic" limitations, the Court vacated the grant of SJ regarding Apple's request for an injunction.  The Court also affirmed the district court's decision that Motorola, Inc. and Motorola Mobility, Inc. (collectively "Motorola") were not entitled to an injunction for infringement of its FRAND (fair, reasonable, and nondiscriminatory) committed patent.

Apple filed a complaint against Motorola, and Motorola counterclaimed.  The district court, based on its claim construction decisions, granted SJ of noninfringement with respect to certain claims and excluded most of the parties' damages expert evidence for the remaining claims.  With little expert evidence on damages deemed admissible, the district court granted SJ that neither party was entitled to damages or an injunction and dismissed all claims with prejudice before trial.  On appeal, the parties contested the district court's claim construction, admissibility, damages, and injunction decisions for three Apple and three Motorola asserted patents.

"The framework laid out by the Supreme Court in eBay, as interpreted by subsequent decisions of this court, provides ample strength and flexibility for addressing the unique aspects of FRAND committed patents and industry standards in general."  Slip op. at 71-72.

The Federal Circuit first analyzed the district court's claim construction decisions, beginning with certain "heuristic" claim limitations in Apple's U.S. Patent No. 7,479,949 ("the '949 patent").  The district court concluded that these limitations were means-plus-function limitations under 35 U.S.C. § 112, ¶ 6, despite not reciting the word "means."  The Federal Circuit disagreed, holding that, when a claim limitation lacks the term "means," the determination of whether the claim limitation invokes means-plus-function claiming is based on "whether the limitation, read in light of the remaining claim language, specification, prosecution history, and relevant extrinsic evidence, has sufficiently definite structure to a person of ordinary skill in the art."  Slip op. at 12-13.  The Court explained that "the 'structure' of computer software is understood through, for example, an outline of an algorithm, a flowchart, or a specific set of instructions or rules," and may be provided by "describing the claim limitation's operation, such as its input, output, or connections."  Id. at 13-14.  Applying this standard, the Court determined that the "heuristic" claim limitations had sufficiently definite structure, and thus did not invoke 35 U.S.C. § 112, ¶ 6.  Based on its reversal of the district court's construction of the "heuristic" claim limitations, the Court vacated the district court's grant of SJ of noninfringement for the '949 patent.  The Court affirmed the remainder of the district court's claim constructions and the related grants of SJ of noninfringement.

The Federal Circuit next considered the admissibility of the parties' damages expert evidence.  With respect to Apple's '949 patent, the Court found that the district court improperly excluded Apple's proposed expert testimony on damages because the district court based its damages analysis on an incorrect claim construction and, further, because the district court did not consider the full scope of the asserted claims, questioned the conclusions of Apple's expert, and substituted its own opinion.  The Court explained that, in determining whether to admit expert testimony, the court must ask, "with the entire scope of the asserted claims and the correct claim construction in mind, whether [the expert] employed reliable principles and methods, reliably applied them, and relied upon legally sufficient facts or data."  Id. at 46. 

With respect to Apple's U.S. Patent No. 6,343,263 ("the '263 patent"), the Federal Circuit held that it was improper for the district court to exclude proposed expert testimony for the sole reason that the expert relied on another expert hired by Apple to identify a replacement chip used in the damages calculations.  The Court explained that "Rule 703 explicitly allows an expert to rely on information he has been made aware of 'if experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject.'"  Id. at 52 (quoting Fed. R. Evid. 703).  The Court stated that any concern regarding potential bias was to be addressed by the weight given to the expert's testimony, not its admissibility.

Turning to Motorola's U.S. Patent No. 6,359,898 ("the '898 patent"), the Federal Circuit affirmed the district court's exclusion of certain testimony that relied on testimony from Motorola's licensing expert, but found that the district court erred when it excluded the remainder of Motorola's proposed expert testimony on damages.  The Court explained that proof of damages must be "carefully tied to the claimed invention itself."  Id. at 58.  Relying on a declaration of Motorola's licensing expert, Charles Donohoe, Motorola's damages expert, Carla Mulhern, testified that the first few patents from a given portfolio would typically command 40-50% of the entire portfolio rate.  However, the Court noted that Donohoe's 40-50% theory corresponded to standards-essential telecommunications patents in general, and not to the specific portfolio at issue, and was therefore not tied to the facts of the case.  Thus, the Court affirmed the district court's exclusion of expert testimony based on that theory.  The Court, however, reversed the district court's exclusion of Mulhern's remaining proposed testimony.

The Federal Circuit next considered the district court's grant of SJ regarding damages.  Based on its decisions regarding the admissibility of damages evidence, the Court vacated the district court's grant of SJ regarding damages for Apple's '949 and '263 patents, and for Motorola's '898 patent.  The Court also reversed the district court's grant of SJ regarding Apple's U.S. Patent No. 5,946,647 ("the '647 patent").  The district court found that Apple was not entitled to any damages because Apple failed to show its measure of damages was correct.  The Federal Circuit disagreed, holding that "a finding that a royalty estimate may suffer from factual flaws does not, by itself, support the legal conclusion that zero is a reasonable royalty."  Id. at 63.  The Court explained that "[i]f a patentee's evidence fails to support its specific royalty estimate, the fact finder is still required to determine what royalty is supported by the record."  Id. at 64.

The Federal Circuit then addressed the district court's grant of SJ regarding injunctive relief.  The district court granted Motorola's motion for SJ that Apple was not entitled to an injunction for infringement of the '949, '263, and '647 patents because Apple had failed to show a causal nexus between any alleged irreparable harm and Motorola's infringement.  The Federal Circuit noted that its reversal of the district court's claim construction decision for the '949 patent altered the potential scope of infringement and thus vacated the district court's grant of SJ regarding Apple's request for an injunction. 

The Federal Circuit affirmed the district court's grant of SJ that Motorola is not entitled to an injunction for infringement of the FRAND-committed '898 patent.  The Court noted, however, that to the extent the district court applied a per se rule that injunctions are unavailable for standard-essential patents, it erred, explaining that it saw no reason to create a separate rule or analytical framework for addressing injunctions for FRAND-committed patents.  Rather, the Court held that "[t]he framework laid out by the Supreme Court in eBay, as interpreted by subsequent decisions of this court, provides ample strength and flexibility for addressing the unique aspects of FRAND committed patents and industry standards in general."  Id. at 71-72.  Applying that framework, the Court found that Motorola's FRAND commitments strongly suggested that money damages were adequate to fully compensate Motorola for infringement, and that Motorola had not demonstrated that Apple's infringement caused it irreparable harm.

Judge Rader dissented as to the portion of the Court's opinion affirming the district court's denial of Motorola's request for an injunction.  Judge Rader found that "the record contains sufficient evidence to create a genuine dispute of material fact on Apple's posture as an unwilling licensee whose continued infringement of the '898 patent caused irreparable harm."  Rader Dissent at 1.  According to Judge Rader, the district court did not develop the facts necessary to apply eBay as it should have and, thus, the case should be remanded.

Judge Prost dissented with respect to the proper construction of the "heuristic" claim limitations and with respect to the majority's decision to vacate the district court's grant of SJ regarding Apple's request for an injunction.  According to Judge Prost, the majority misstated Federal Circuit law on means-plus-function claiming.  As Judge Prost explained, "In effect, what the majority has done is imported the second step of the analysis (where you define the scope of a means-plus-function claim term based on the corresponding structure in the specification) into the first step (where you identify whether the term is drafted in means-plus-function format)."  Prost Dissent at 3.  Judge Prost found that the "heuristic" limitations are means-plus-function limitations.  With respect to Apple's request for an injunction, Judge Prost found that Apple's evidence was insufficient to establish the requisite nexus between the accused features and the demand for the accused Motorola products as a whole.  Accordingly, Judge Prost agreed with the district court that Apple could not show that Motorola's infringement caused it irreparable harm and, thus, would affirm the district court's grant of SJ of no injunctive relief.

This article previously appeared in Last Month at the Federal Circuit, May 2014.

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