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Substantial Noninfringing Uses Lead to No Indirect Infringement

March 31, 2004

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Last Month at the Federal Circuit - April 2004

Judges: Gajarsa (author), Rader, and Bryson

In Dynacore Holdings Corp. v. U.S. Philips Corp., No. 03-1305 (Fed. Cir. Mar. 31, 2004), the Federal Circuit affirmed the district court’s SJ ruling that more than twenty electronic manufacturers did not indirectly infringe a local area network (LAN) patent by selling network products capable of substantial noninfringing uses.

Dynacore Holdings Corporation (“Dynacore”) alleged that companies whose products incorporate technology that facilitates the implementation of LANs compliant with the IEEE 1394 Standard for a High Performance Serial Bus (“IEEE 1394”) infringe U.S. Patent No. 5,077,732 (“the ‘732 patent”). The IEEE 1394 Standard, like the ‘732 patent, teaches network designers how to connect devices with differing capabilities to a single LAN without sacrificing enhanced or optimized capabilities possessed by some but not all devices.

All five of the independent claims of the ’732 patent require “at least three nodes” that are all interconnected as “equal peers in a single network configuration.” In a prior litigation involving the ’732 patent, the term “equal peers” was construed to require that “all data frames transmitted by each node are heard by all other nodes.”

The district court found that IEEE 1394 networks did not include the “equal peers” limitation because there are circumstances in which data frames are not transmitted to all of the other nodes on the IEEE 1394 network.

The Federal Circuit found that Dynacore was collaterally estopped from challenging the earlier claim construction of “equal peers.” Accordingly, it turned to a comparison of the claims to the accused devices.

When evaluating infringement, the panel found that Dynacore sought to establish the Defendants’ broad vicarious liability by showing that a particular configuration of Defendants’ products, compliant with the IEEE 1394 Standard, would directly infringe the ’732 patent. The Federal Circuit rejected that attempt and explained that precedent requires that the mere sale of a product capable of substantial noninfringing uses does not constitute indirect infringement of a patent. As such, Dynacore must either demonstrate that LANs compliant with the IEEE 1394 Standard necessarily infringe the ‘732 patent, or must point to a specific instance of direct infringement and restrict its suit to liability stemming from that specific instance.

Dynacore could do neither. The Federal Circuit concluded that Dynacore engaged in speculation and did not point to even a single network that both complies with the IEEE 1394 Standard and meets the “equal peers” limitation. Having shown no direct infringement, Dynacore could not prove indirect infringement, so the Court affirmed the SJ.