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Willfulness and Opinions of Counsel

March 07, 2001

Decision icon Decision

Last Month at the Federal Circuit - April 2001

Judges: Rader (author), Mayer, and Clevenger

In Crystal Semiconductor Corp. v. Tritech Microelectronics International, Inc., No. 99-1558 (Fed. Cir. Mar. 7, 2001), the Federal Circuit affirmed the district court’s partial SJ of infringement, its JMOL denying price erosion damages, its denial of prejudgment interest, and an increase of damages due to willfulness. The Court also vacated JMOL of no on-sale bar and reversed JMOL of no lost profit damages.

Crystal Semiconductor Corporation (“Crystal”) sued Tritech Microelectronics International, Inc. (“Tritech”) and OPTi, Inc. (“OPTi”) for infringement of three patents relating to analog-to-digital (“A/D”) converter technology. Tritech manufactures A/D converters, which it sells to OPTi for sale in the United States. After construing the claims, the district court entered partial SJ of infringement of two of the patents, U.S. Patent Nos. 4,746,899 (“the ‘899 patent”) and 5,220,483 (“the ‘483 patent”). The case then proceeded to trial. At the close of evidence, but before jury deliberation, the district court granted JMOL that the third patent, U.S. Patent No. 4,851,841 (“the ‘841 patent”) was not invalid due to an alleged on-sale bar. The jury held against Tritech and OPTi on other defenses (not appealed), and awarded lost profit damages, price erosion damages, and a reasonable royalty. The district court subsequently denied Crystal the lost profits and price erosion awards due to the lack of supporting evidence and denied prejudgment interest. The district court doubled the reasonable royalty award, however, based on the jury’s finding of willfulness. 

On appeal of the partial SJ of infringement, the Federal Circuit first construed disputed terms in the ‘483 and ‘899 patent claims. The ‘483 patent recites a capacitor structure “having” one layer “disposed over a portion” of another layer. The parties disputed whether this language covered complete, rather than partial, overlap of the layers. The Federal Circuit explained that the indefinite articles “a” or “an” mean “one or more” in claims containing open-ended transitional phrases. Here, the transitional phrase is “having,” which can be open or closed depending on its usage. Based on an examination of the rest of the claim language and the specification, the Federal Circuit concluded that “having” has an open meaning and, therefore, that the term “a portion” means “at least a portion.” Under this interpretation, the Court concluded, the accused devices meet the claim element.

For the ‘899 patent, the Federal Circuit reviewed the district court’s construction of the phrase “a first clock signal.” The Federal Circuit decided that because the claim uses “comprising” as the transitional phrase, the claim element encompasses the use of one or more clocks. Noting further that nothing in the written description or the prosecution history limited the claims to exactly one clock, the Federal Circuit affirmed the district court’s construction and judgment of infringement.


Tritech received notice of the ‘483 and ‘841 patents with the filing of the lawsuit. Tritech had known of the ‘899 patent, however, since 1994. Tritech attempted to design around the ‘899 patent, but did not seek advice of counsel. The jury found Tritech to have willfully infringed all three patents. Tritech appealed this finding concerning the ‘483 and ‘841 patents, arguing that its defenses were not frivolous and relying on Gustafson, Inc. v. Intersystems Industrial Products, Inc., 897 F.2d 508 (Fed. Cir. 1990). The Federal Circuit upheld the finding, noting that Tritech did not obtain an opinion of counsel after suit was filed, and that defenses prepared for a trial are not equivalent to a competent legal opinion. The Court specifically ruled that Gustafson did not hold, as a matter of law, that a party that continues its accused infringing activity after a patentee files suit cannot be guilty of willful infringement as long as that party presents a nonfrivolous defense to infringement. The Federal Circuit also pointed to evidence of copying to support its decision.


On-Sale Bar 
Before the critical date, Crystal received a purpage chase order for five chips embodying the ‘841 invention. Crystal recorded revenue for the chips prior to the critical date, but did not ship the parts until after. Crystal alleged that it placed the purchase order on hold and did not accept it until after the critical date. Also prior to the critical date, Crystal shipped two chips to a distributor, which Crystal later characterized in a letter and in a Mask Work Registration as the first commercial exploitation of its chip. Crystal contended that this shipment did not qualify as a sale because it was an engineering sample of no valuethat it had shipped to a customer site at no charge for confidential testing. Construing this evidence in a light most favorable to Crystal, the Federal Circuit decided that the jury should have decided the issue and therefore vacated the JMOL of no on-sale bar.


Crystal sought, and the jury awarded, lost profits for about 40% of Tritech’s infringing sales. The district court determined, however, that the testimony of Crystal’s expert was unreliable and did not constitute substantial evidence of entitlement to lost profits. Although OPTi had conceded that the evidence supported a lesser award of lost profits, the district court had vacated all lost profits, leaving Crystal without compensation for 40% of the infringing sales. The Federal Circuit examined the other evidence of record, including the testimony of Tritech’s and OPTi’s experts and the testimony of Crystal’s other fact witnesses, and concluded that the evidence supported the jury award even without the testimony of Crystal’s expert.

On price erosion, the Federal Circuit agreed with the district court that the record did not support any award of damages. To calculate price erosion damages, Crystal’s expert selected a product similar to the patented product and compared performance of that product in a market free of infringement with the performance of the patented product in the market affected by infringement. The Federal Circuit rejected this methodology because the market chosen by the expert was not as competitive as the market at issue. The Federal Circuit also rejected Crystal’s theory because it did not take into account supply and demand. That is, if Crystal had sold its chips at higher prices, it would have sold fewer chips. The Federal Circuit further opined that lost sales and price erosion are inextricably linked, and Crystal’s failure to take into account the effect of fewer sales on its profits further undermined its analysis.


Prejudgment Interest
The district court denied prejudgment interest because Crystal had delayed several years in filing suit and because Crystal had engaged in litigation tactics that delayed the disposition of the suit. On appeal, the Federal Circuit noted that, although an award of prejudgment interest is the rule, not the exception, the district court did not abuse its discretion in refusing to award prejudgment interest on the facts of this case.