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Advice of counsel evidence still relevant to intent to induce infringement

October 06, 2008
Post by Blog Staff

In a recent decision, the Federal Circuit affirmed a jury's finding of infringement of two patents and the related injunction, but reversed the district court's claim construction and the concomitant finding of infringement regarding a third patent. The court affirmed the district court's injunction despite the fact that the patentee licensed, rather than manufactured, the claimed inventions. The injunction was affirmed largely due to the "structural nature of a design win market" typified in nascent technology designs where there are multiple standards competing for market domination, and the fact that the injunction did not take effect for 20 months after the jury verdict to permit time to develop and implement a design-around. In addition, the Federal Circuit rejected the defendant's contention that In re Seagate changed the evidentiary burden for proving intent in the context of inducing infringement. The defendant argued that after Seagate, opinion of counsel evidence was no longer relevant to the question of intent for inducing or contributory infringement. The court held the intent necessary for an inducement finding may still be inferred from "all the circumstances." This has two requirements, as described in DSU Medical: (1) the defendant intended to cause the acts that constitute direct infringement, and (2) the defendant knew or should have known its action would cause the direct infringement. The court observed opinion of counsel evidence may reflect what the accused infringer knew or should have known, it remains relevant to the second prong of this analysis. Further, the court stated it would be "unfair to allow opinion-of-counsel evidence to serve an exculpatory function . . . and not yet permit patentees to indentify failures to procure such advice as circumstantial evidence of intent to infringe." Here, the accused infringer obtained an invalidity opinion, but declined to waive privilege. The Federal Circuit held it was not error for the district court to instruct the jury that the lack of an opinion could be relevant to the issue of intent. The court also instructed the jury, consistent with Knorr-Bremse, that the lack of opinion was not grounds to assume the opinion would be unfavorable. As such, the instructions as a whole comported with Federal Circuit precedent, and the instructions were proper.More detail of Broadcom Corp. v. Qualcomm Inc. after the jump.Broadcom owns three patents related to wireless voice and data communications on cellular telephone networks. Qualcomm and Broadcom produce chipsets with competing technologies (CDMA2000 and WCDMA) for connecting to and utilizing third-generation (3G) networks. Broadcom sued Qualcomm alleging infringement of the three patents. A jury found infringement of all three. The district court awarded an injunction, which included a sunset provision permitting Qualcomm a phase-out period to develop and implement a design-around, to ease the hardship on Qualcomm. Qualcomm appealed, claiming that the district court improperly interpreted various claim limitations and that the injunction was improper as a compulsory license, rather than an injunction, should have been awarded as Broadcom did not actually manufacture any embodiments of the invention. The district court construed the asserted claim of the first patent to require a "global controller." The inclusion of this limitation was crucial to overcome a prior art reference which the parties agreed otherwise anticipated the claim. The Federal Circuit reversed the district court's construction, observing "[t]he claims make no reference to an external global controller, and we find no justification for adding limitations related to the more general video encoding device discussed in the specification when the claims are written to encompass only a specific element of that device." With this revised construction, the claim was admittedly anticipated, so the court reversed the finding of infringement as to that patent.There were two terms at issue in the second patent, "simultaneously participate" and "networks." The parties disputed whether "simultaneous participation" required the device to be actively transmitting on two different networks at the same instant in time, or whether the transmissions could occur during the same period of time. The court held "the specification as a whole repeatedly clarifies that the invention is directed to wireless communications utilizing a single transceiver." This effectively rendered simultaneous transmission at the same instant in time impossible, as in order to transmit on two networks at the same instant in time, two transceivers are required. As a result, the Federal Circuit affirmed the district court's interpretation of this term. Regarding the interpretation of "networks," Qualcomm did not contend "network" required construction until after the close of trial. As a result, the court held Qualcomm did not timely raise the issue with the district court, and refused to consider the issue on appeal. The court therefore affirmed the finding of infringement of the second patent.Regarding the third patent, Qualcomm challenged whether its device met the requirement in the claims that the device "selectively couples to the first and second networks." The district court did not construe this term because the parties agreed to let the ordinary meaning control. Qualcomm claimed that the term required a physical connection to the network. Because the Qualcomm chipset connected via a wireless network, Qualcomm asserted its device did not infringe. The Federal Circuit court held "the jury was presented with more than adequate evidence upon which it could have concluded that [the device] included 'an interface circuit that selectively couples' to either the PTSN or the Internet."Qualcomm also asserted there was insufficient evidence of intent to induce infringement to support the jury's inducing infringement finding. Qualcomm argued that after Seagate, opinion of counsel evidence was no longer relevant to the question of intent for inducing or contributory infringement. The court held the intent necessary for an inducement finding may still be inferred from "all the circumstances." This has two requirements, as described in DSU Medical: (1) the defendant intended to cause the acts that constitute direct infringement, and (2) the defendant knew or should have known its action would cause the direct infringement. The court observed opinion of counsel evidence may reflect what the accused infringer knew or should have known, it remains relevant to the second prong of this analysis. Further, the court stated it would be "unfair to allow opinion-of-counsel evidence to serve an exculpatory function . . . and not yet permit patentees to indentify failures to procure such advice as circumstantial evidence of intent to infringe."Here, Qualcomm obtained an invalidity opinion, but declined to waive privilege. The Federal Circuit held it was not error for the district court to instruct the jury that the lack of an opinion could be relevant to the issue of intent. The court also instructed the jury, consistent with Knorr-Bremse, that the lack of opinion was not grounds to assume the opinion would be unfavorable. As such, the instructions as a whole comported with Federal Circuit precedent, and the instructions were proper. The absence of an exculpatory opinion was circumstantial evidence the jury could consider in determining whether Qualcomm had the necessary intent to infringe. Accordingly, the court affirmed the finding of infringement of the third patent.
The court then turned to Qualcomm's challenge of the injunction. Qualcomm argued "Broadcom's license agreement with Verizon demonstrates that monetary remedies may adequately compensate it for infringement injuries." The court examined the traditional four-factor test set forth in the Supreme Court's eBay decision, which requires a court to consider 1) plaintiff's irreparable injury, 2) inadequacy of remedies at law (such as monetary damages), 3) the balance of hardships, and 4) public interest served by a permanent injunction. Regarding irreparable harm, the court noted that "[i]t remains an open question whether there remains a rebuttable presumption of irreparable harm following eBay." The court declined to resolve the question in this case, instead holding there was sufficient harm demonstrated by Broadcom to support the district court's finding on this factor. The court noted "Broadcom does not rely on harm to others, but rather alleges that its own commercial activities will be irreparable injured by Qualcomm's infringing activity." The harm alleged by Broadcom is that the technology is one where Broadcom and Qualcomm are fighting


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