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Varco, L.P. v. Pason Systems USA Corp.February 3, 2006

In Varco, L.P. v. Pason Systems USA Corp., the Federal Circuit vacated and remanded the matter to the district court stating ‘the district court’s flawed claim construction directly led to its denial of the preliminary injunction motion.’At issue was a Varco patent which claimed an automatic drilling system that controls the release of a drill string in response to a combination of four parameters (e.g., bit weight, drilling fluid pressure, drill string torque, and drill string RPM). Wildcat Services, Varco’s predecessor in interest, sued Pason for infringement of claims 1, 9, 11, and 14 and moved for a preliminary injunction. Before the district court ruled on the preliminary injunction, the United States Patent and Trademark Office ordered reexamination of claims 1-11. Varco and Pason agreed to proceed on claim 14 alone. In regard to claim 14, the parties disputed the two terms ‘selecting’ and ‘relaying.’ The district court limited ‘selecting’ in claim 14 to manual operation of valve selectors by a drilling rig operator, basing its limitation on a portion of the specification and the applicant’s response to the Examiner’s comments during the prosecution of the patent. Having construed the selection step as requiring manual operation, the district court then considered whether Pason’s systems performed a corresponding step. The district court concluded that Varco did not prove a likelihood of infringement because the corresponding step was performed by an electronic selection and not manual operation. The Federal Circuit noted that in this determination by the district court, it failed to evaluate whether Varco proved a likelihood of infringement of this element under the doctrine of equivalents.The district court then construed the ‘relaying’ step in claim 14. The district court construed ‘relaying’ to mean ‘transmitting a signal by means of pneumatically operated valves.’ This definition was determined based on the specification’s disclosure of valves that operate as ‘relays’ to supply compressed air to an air motor from a regulator. The district court interpreted this disclosure as defining ‘relaying’ in a manner that requires the use of pneumatically operated valves. Because Pason did not use pneumatically operated valves, the district court concluded Varco was unlikely to prove infringement of this claim. Again, the Federal Circuit noted that the district court did not evaluate whether Varco proved a likelihood of infringement under the doctrine of equivalents.In arriving at its decision, the Federal Circuit applied the principles that claim terms ‘are generally given their ordinary and customary meaning’ and ‘the inquiry into how a person of ordinary skill in the art understands a claim term provides an objective baseline from which to begin claim interpretation.’ Specifically, the Federal Circuit stated that the district court erred in reading the initial setup or calibration step into the claimed ‘selecting’ step noting the specification specifically stated that the initial setup preceded the claimed selecting step. Additionally, the Federal Circuit noted this initial setup procedure, which preceding the selecting step, was specifically addressed by the applicant during the patent prosecution. As for the ‘relaying’ step, the Federal Circuit stated that nothing in the claim language required or even suggested the use of a pneumatically operated valve in performing the relaying step. Rather, the only discussion of pneumatically operated valves in the intrinsic record came from the specification. Additionally, the Federal Circuit found that the extrinsic evidence in the case confirmed that the relaying step was not limited to pneumatically operated valves. On remand, the Federal Circuit stated the district court may consider the proper interpretation of claim 14, the validity challenges to claim 14 under

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