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License under method patent not limited to use with licensor's products absent express limitation

April 18, 2008
Post by Blog Staff

In a decision Wednesday, the Federal Circuit affirmed-in-part, vacated-in-part, and reversed-in-part a district court's decision regarding two patents. The district court held the broadest claims of both patents invalid and not infringed, and dismissed claims of inequitable conduct relating to the patents.

The Federal Circuit affirmed with respect to one patent, but vacated and reversed with respect to the other. Regarding the first patent, the court held there was no genuine issue of material fact that a product embodying all the claim limitations was in public use before the critical date. There was also no genuine issue of material fact that the defendants were licensed under the patent, as the license grant was not limited to use with the plaintiff's products.

With regard to the second patent, however, the court held the defendant's motion for summary judgment of invalidity was not properly supported, and vacated the finding of invalidity. Further, there were insufficient findings in the district court's summary judgment order to support a finding of noninfringement of the second patent. The court also reinstated the defendant's claims of inequitable conduct, as not all claims of the patents had been found invalid, making an additional finding of unenforceability not moot.

Zenith owns two patents relating to televisions with wired remote controls used in hospital rooms, where wireless remote controls would cause unacceptable interference. The devices also include speakers that play the television audio, commonly referred to as "pillow speakers." Pillow speakers use a three-wire system to transmit power and audio signals from the television to the speaker and control signals to the television. The patents improved previous pillow speakers by permitting digital signals to be transmitted via the same three-wire interface.

In 1997, three companies produced pillow speakers under a license from Zenith under the '301 patent. These were specifically designed to work with Zenith televisions, and transmitted control signals using Zenith control codes. In 2003, the defendant in this case, PDI Communication Systems (PDI), began selling a new television that was compatible with the licensed pillow speakers. In response, Zenith sued for infringement of the two patents.

At the close of discovery, the district court granted summary judgment of invalidity of the broadest claims of both patents, as well as noninfringement of both patents. Before the critical date of the two patents, another company's pillow speaker was in public use that, according to the district court, met all the limitations of the broadest claims of both patents. As a result of these decisions, the court dismissed PDI's claims of inequitable conduct. Both parties appealed.

The '301 patent

The Federal Circuit first turned to the '301 patent. The key limitation for purposes of anticipation requires that the television supply "operating power" to the pillow speaker. The product in public use before the critical date used a capacitor to store power in sufficient quantity to make the device operate; it was only capable of drawing .48 mA of current from the television, but required at least 5 mA to operate. The court held that there was no requirement in the claim "that the operating power must come directly from the television or in full and continuous strength from the television."

Further, there was no real dispute that the previous product was in public use. The defendant's expert testified that it was available in 1989, well before the critical date of the patent. This testimony was corroborated by the testimony of other witnesses as well as documents and admissions by Zenith. For example, in Zenith's motion for summary judgment, it stated that a feature of the product was changed "in about 1992, less than one year after it was introduced." Based on all the evidence, the court affirmed that there was no genuine issue of material fact that the device was in public use. As a result, the court affirmed the finding of invalidity.

Turning to the question of infringement, the issue was whether Zenith's license to the pillow speaker manufacturers extended to their use with non-Zenith televisions. While the district court found an implied license (based on a lack of noninfringing uses for the pillow speakers), the Federal Circuit found an easier way to affirm: the license agreements with the pillow speaker manufacturers. According to the court, the license agreements "specifically authorize the sale of pillow speakers for infringing uses," and the grant permitted the manufacturers "to make and sell any pillow speaker unit the use of which would otherwise infringe the '301 patent." As a result, the license from Zenith to practice the patent was not limited to use with Zenith televisions, and therefore using the defendant's televisions with the licensed pillow speakers was included within the scope of the license. As a result, the court affirmed the finding of noninfringement of the '301 patent.

The '513 patent

The Federal Circuit was not so impressed with the district court's conclusions regarding the '513 patent, however. The district court based its invalidity finding on a single term of claim 1 of the patent, stating that other elements could be ignored because Zenith did not point to any other elements that were absent. The Federal Circuit held this was error, because Rule 56 only requires the nonmoving party to come forward with rebuttal evidence when a motion for summary judgment is properly supported. Here, PDI did not offer sufficient evidence that the previous product had all the elements of claim 1 of the '513 patent, instead just stated that "to the extent the [allegedly infringing product] is considered to practice [the other claim elements], then so did the" prior art device. Because this was insufficient support for PDI's motion, Zenith was under no obligation to provide opposing evidence. As a result, the court vacated the district court's summary judgment of noninfringement.

Likewise, the Federal Circuit vacated the judgment of noninfringement of claim 1 of the '513 patent. The court noted that it did not necessarily appear from the district court's order that it granted summary judgment of noninfringement, instead just stating at the end of the order that PDI was entitled to a judgment that it did not infringe that claim. However, there were no "findings that could form the basis for a summary judgment of noninfringement with respect to claim 1 of the '513 patent." Further, the '513 patent was not included in the license agreement that prevented a finding of infringement of the '301 patent. As a result, the court vacated the judgment of noninfringement of this claim to the extent such a judgment was entered.

Inequitable conduct claims

The court also reinstated PDI's inequitable conduct claims with regard to both patents, although not with respect to all claims. The court noted that not all claims of the two patents were held invalid, and as a result, a finding of inequitable conduct would affect other claims that have not been held invalid.

The court affirmed the dismissal with prejudice of PDI's inequitable conduct allegations with regard to claims 2-8 of the '513 patent, as PDI had not come forward with evidence that the prior art product was material to the limitations of those claims. While PDI could still pursue inequitable conduct with regard to claim 1 (and such a finding would render claims 2-8 unenforceable), it could not specifically seek a finding of inequitable conduct with regard to claims 2-8.

To read the full decision in Zenith Electronics Corp. v. PDI Commc'n Sys., Inc., click here.


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