Period Between Entry of Judgment and Entry of Permanent Injunction Should Be Considered When Calculating Damages
November 04, 2010
Last Month at the Federal Circuit - December 2010
Judges: Newman, Gajarsa, Linn (Author)
[Appealed from: D. Del., Judge Sleet]
In Finjan, Inc. v. Secure Computing Corporation, Nos. 09-1576, -1594 (Fed. Cir. Nov. 4, 2010), the Federal Circuit affirmed the district court’s finding of infringement of asserted “system” and “storage medium” claims and reversed the finding of infringement of asserted method claims. The Court also affirmed the damages award but remanded for determination of postjudgment, preinjunction damages.
Finjan, Inc. (“Finjan”) owns U.S. Patent Nos. 6,092,194 (“the ’194 patent”), 6,804,780 (“the ’780 patent”), and 7,058,822 (“the ’822 patent”). The patents relate generally to proactive scanning or techniques directed to detecting and defeating previously unknown Internet-based threats to computers, such as viruses, spyware, and adware. The asserted claims of each patent include both method and nonmethod claims. The asserted claims of the ’194 patent include method claims, corresponding “system” claims, and “computer-readable storage medium claims” for performing the claimed methods. The ’780 patent includes claims similar to the ’194 patent, but covers “caching,” or identifying previously encountered downloadable files. The ’822 patent addresses “sandboxing” a potentially dangerous downloadable with protective code. It encompasses both “processor-based methods” and “processor-based systems.”
Finjan sued Secure Computing Corporation, Cyberguard Corporation, and Webwasher AG (collectively “Secure Computing”). Secure Computing counterclaimed against Finjan for infringement of U.S. Patent Nos. 6,357,010 (“the ’010 patent”) and 7,185,361 (“the ’361 patent”). A jury found all of the patents valid, that Finjan did not infringe Secure Computing’s patents, and that Secure Computing willfully infringed all asserted claims of Finjan’s patents. The district court awarded damages to Finjan, enhanced the award under 35 U.S.C. § 284, and entered a permanent injunction against Secure Computing. Secure Computing appealed the district court’s findings of infringement and damages. Finjan cross-appealed the denial of damages for the period between the entry of judgment and the entry of the injunction.
On appeal, the Federal Circuit first considered the district court’s finding of infringement of the “system” and “storage medium” claims. Secure Computing argued that it sold no infringing products, because all software modules that feature proactive scanning were “locked” unless the customer purchased the appropriate software key. The Federal Circuit dismissed this argument, reminding that, to infringe a claim that recites capability and not actual operation, an accused device “need only be capable of operating” in the described mode. Slip op. at 10-11 (citing Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d 821, 832 (Fed. Cir. 1991)). The Court found the accused products capable of operating in the described mode of Finjan’s patents.
The Federal Circuit turned next to the method claims in the three patents. Using the standard established in Lucent Technologies v. Gateway, Inc., 580 F.3d 1307 (Fed. Cir. 2009), the Court stated that “to infringe a method claim, a person must have practiced all steps of the claimed method.” Id. at 13 (emphasis added). The Court found the record inadequate to show that all steps of the claimed methods of Finjan’s patents were practiced. The Court concluded that Finjan at most demonstrated that Secure Computing’s product performed proactive scanning on one occasion in Germany during testing based on a single debug file. In the Court’s view, this was insufficient to show direct infringement in the United States as the Patent Act requires.
The Federal Circuit then considered Secure Computing’s request for a new trial. Secure Computing argued that the district court erred by failing to construe the term “addressed to a client” from each asserted claim of the ’194 patent. The Federal Circuit rebutted this argument by distinguishing the present case from O2 Micro International Ltd. v. Beyond Innovation Technology Co., 521 F.3d 1351 (Fed. Cir. 2007). In O2 Micro, the Court held that the district court erred by giving the term “only if” its plain and ordinary meaning, because that definition “failed to resolve the parties’ dispute.” Slip op. at 15 (citing O2 Micro Int’l, 521 F.3d at 1361). Distinguishing the present case from O2 Micro, the Federal Circuit noted that the district court rejected Secure Computing’s construction of the claim term in the present case, rather than failing to resolve the parties’ quarrel all together, as in O2 Micro.
The Court subsequently considered the damages issues. Secure Computing raised two challenges to the royalty base, or total sales, that the jury used to compute damages. First, Secure Computing claimed the jury misapplied the entire market rule by using the full value of the accused products. See Lucent, 580 F.3d at 1336 (“For the entire market rule to apply, the patentee must prove that the patent-related feature is the basis for customer demand.”). The Federal Circuit found that Secure Computing waived this argument when they did not raise it in its JMOL motion following trial. Second, Secure Computing contended the jury erroneously included sales to the United States Government. The Court found that the district court had in fact instructed the jury at trial that sales to the United States Government should not be included in any damages calculation performed. Secure Computing next argued that the jury’s royalty percentages lacked support under the Georgia-Pacific factors. The Court found that the royalty percentages were made with substantial evidence and based on expert opinion not appropriate for second-guessing.
Finally, the Court addressed Finjan’s cross-appeal of the damages award. At trial, the district court granted Finjan additional damages by multiplying the jury’s royalty rates against previously uncalculated sales. However, Finjan argued that the jury did not consider damages for the period between the entry of judgment and the imposition of the injunction seventeen months later. The Court agreed, stating that
“[a]lthough courts have broad discretion in determining appropriate relief for patent infringement . . . injunctions and damages must be tailored to the circumstances and be correlatively determined.” Slip op. at 26 (quoting Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 881 (Fed. Cir. 1995)). Noting that a patentee is not fully compensated if the damages award did not include future lost sales, the Court found that the district court should have awarded compensation for any infringement prior to the injunction. The case was remanded to the district court to determine appropriate damages for the seventeen-month period from the entry of judgment to the entry of the permanent injunction.
Summary authored by Rajiv K. Bhateja, Esq.