Abstract
Under the patent owner's infringement theory, use of the defendant's standards-compliant software with DVD or Blu-ray discs necessarily infringes the asserted patents because those patents are essential to playing, copying, and recording data on optical discs that comply with DVD or Blu-ray standards. The patent owner, however, is a member of two groups of licensing pools, which license the asserted patents for purposes of practicing DVD or Blu-ray standard specifications. Recognizing that licensees are not infringers, the Federal Circuit emphasized that the patent owner failed to present any specific allegations and evidence of direct infringement by customers by showing use of unlicensed discs and thus affirmed summary judgment of no indirect infringement by the provider of the standards-compliant software.
Absent evidence of direct infringement, a patent owner cannot succeed on a claim for induced or contributory infringement, each of which is a theory of indirect infringement. In JVC Kenwood Corp. v. Nero, Inc.,1 the patent owner argued that end users directly infringed its patents when using the defendant's standards-compliant software with DVD or Blu-ray discs and that the defendant was liable for induced or contributory infringement. The patent owner did not provide evidence of specific direct infringement by any end user. It instead argued that use of the standards-compliant software necessarily infringes the asserted patents because those patents are essential to playing, copying, and recording data on optical discs that comply with DVD or Blu-ray standards.
The Federal Circuit, however, affirmed the district court's decision that licensing pools, including the asserted standard-essential patents, negated the patent owner's infringement claims.
Background
JVC Kenwood Corp. sued Nero, Inc. for contributory or induced
infringement of six asserted standard-essential patents directed to
structures, methods, or systems used with DVD and Blu-ray discs.
Nero manufactures standards-compliant software used by consumers in
conjunction with DVD and Blu-ray discs. JVC argued that by using
Nero's software with DVD or Blu-ray discs, end users
necessarily infringe the asserted patents because those patents are
essential to playing, copying, and recording data on discs that
comply with DVD or Blu-ray standards. JVC emphasized that, as a
licensed member of the DVD Format/Logo Licensing Corporation, Nero
is obligated to ensure that its software complies with the
standards specifications.
JVC is a member of two groups of licensing pools, which license the
asserted patents for purposes of practicing DVD or Blu-ray standard
specifications. Licensees purchase licenses for specific categories
of products (e.g., DVD-R discs, DVD-RW discs, etc.).
The district court accepted JVC's position that the asserted
patents are embodied by the standard-compliant discs. Based on the
principle that licensees cannot be infringers, however, the
district court awarded summary judgment in favor of Nero, finding
that JVC's licenses negated its infringement claims. According
to the district court, "JVC cannot have it both
ways—either the patent is essential and licensed or JVC
cannot rely on the standards to show infringement." JVC, the
district court reasoned, cited no specific allegations and evidence
of unlicensed discs.
In the alternative, the district court found that use of Nero's
software with licensed discs presented a case of patent exhaustion,
an affirmative defense to patent infringement.
JVC appealed to the Federal Circuit.
The Federal Circuit's Decision
On appeal, JVC argued that licensees of the pools only receive a
license to those patents related to particular products, selected
by the licensee, which practice standards specifications applicable
to the licensee's products. The Federal Circuit, however,
emphasized that JVC failed to present any specific allegations and
evidence showing use of unlicensed discs. Thus, JVC could not prove
that Nero's software was used to directly infringe the asserted
patents. Absent of showing direct infringement, JVC could not prove
that Nero indirectly infringed. The Federal Circuit thus affirmed
the district court's summary judgment in favor of Nero. The
court also rejected JVC's contention that the district court
abused its discretion when it denied JVC's request for
additional discovery to collect specific information concerning
customers that use Nero's software with unlicensed discs. JVC,
the court reasoned, failed to specifically allege such facts or
provide evidence indicating that the information sought
exists.
Regarding the issue of patent exhaustion, the court vacated the
district court's ruling. According to the court, the record did
not clearly establish the conditions for patent exhaustion. For
example, the record did not clearly establish that the sale of the
discs originated from or through JVC, a requirement to trigger
patent exhaustion.
Strategy and Conclusion
Under facts involving licensed and unlicensed products, patent owners should be mindful that they may bear the burden to allege facts and introduce evidence that an infringement claim is based on activities involving unlicensed products.
Footnote
1 The Federal Circuit's decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/JVCKenwoodCorp_v_NeroInc.pdf.
Previously published by LES Insights
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