LG Electronics v. Bizcom Electronics and Everex Systems and First International Computer and Quanta Computer (CAFC 05-1261)

LGE is the owner of patents relating to personal computers, including U.S. Patents Nos. 4,918,645 (disclosing systems and methods that increase the bandwidth efficiency of a computer’s system bus); 5,077,733 (claiming, in relevant part, a method that controls the access of a device to a bus shared by multiple devices); 4,939,641 (claiming, in relevant part, a system for ensuring that outdated data is not retrieved from memory); 5,379,379 (claiming a system and method for ensuring that outdated data is not retrieved from memory); and 5,892,509 (claiming networked computers capable of sharing certain video images). LGE sued defendants alleging infringement of these patents.

Exhaustion - License Protection & Unconditional Sale

Defendants purchase microprocessors and chipsets from Intel or its authorized distributors and install them in computers. Intel is authorized to sell these products to defendants under an agreement with LGE. However, pursuant to this agreement, Intel notified defendants that, although it was licensed to sell the products to them, they were not authorized under that agreement to combine the products with non-Intel products. LGE brought suit against defendants, asserting that the combination of microprocessors or chipsets with other computer components infringes LGE’s patents covering those combinations. LGE did not assert patent rights in the microprocessors or chipsets themselves.

After construing the patent claims, the trial court granted summary judgment of noninfringement of each patent. It determined that there was no implied license to any defendant, but that, with the exception of the ’509 patent, LGE’s rights in any system claims were exhausted. The court also found that LGE was contractually barred from asserting infringement of the ’509 patent against defendants. It found the ’645, ’733, and ’379 patents not infringed after applying its claim construction to the accused methods and devices.

The appeals court agreed with the trial court finding that there was no implied license for defendants usage.

The trial court had ruled that the system claims were exhausted. The CAFC reversed that decision. The CAFC agreed with the district court that the method claims had not been exhausted.

It is axiomatic that the patent exhaustion doctrine, commonly referred to as the first sale doctrine, is triggered by an unconditional sale. See Mitchell v. Hawley, 83 U.S. 544, 547 (1873). “[A]n unconditional sale of a patented device exhausts the patentee's right to control the purchaser’s use of the device thereafter. The theory behind this rule is that in such a transaction, the patentee has bargained for, and received, an amount equal to the full value of the goods. This exhaustion doctrine, however, does not apply to an expressly conditional sale or license. In such a transaction, it is more reasonable to infer that the parties negotiated a price that reflects only the value of the ‘use’ rights conferred by the patentee.” B. Braun Med. Inc. v. Abbott Labs., 124 F.3d 1419, 1426 (Fed. Cir. 1997) (discussing Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 708 (Fed. Cir. 1992)) (emphasis added and citations omitted).

There are two sales at issue here. First, prior to this litigation, LGE granted Intel a license covering its entire portfolio of patents on computer systems and components. This transaction constitutes a sale for exhaustion purposes. See United States v. Masonite Corp., 316 U.S. 265, 278 (1942). Second, with LGE’s authorization, Intel sold its microprocessors and chipsets to each defendant. Notably, this sale involved a component of the asserted patented invention, not the entire patented system.

The district court had found the sale of the processors to defendants unconditional, thus exhausting the system claims.

In finding the unconditional sale requirement satisfied, the court concluded that although “LGE is entitled to impose conditions on the sale of the essential components of its patented products does not mean that it actually did so here. To the contrary, defendants’ purchase of the microprocessors and chipsets from Intel was unconditional, in that defendants’ purchase of the microprocessors and chipsets from Intel was in no way conditioned on their agreement not to combine the Intel microprocessors and chipsets with other non-Intel parts and then sell the resultant products.” Id. at 916-17. We disagree.

The LGE-Intel license expressly disclaims granting a license allowing computer system manufacturers to combine Intel’s licensed parts with other non-Intel components. Moreover, this conditional agreement required Intel to notify its customers of the limited scope of the license, which it did. Although Intel was free to sell its microprocessors and chipsets, those sales were conditional, and Intel’s customers were expressly prohibited from infringing LGE’s combination patents. Cf. N.Y. U.C.C. Law § 2-202 (allowing contracts to be supplemented by consistent additional terms unless the writing is intended to be complete and exclusive). The “exhaustion doctrine . . . does not apply to an expressly conditional sale or license,” B. Braun Med. Inc., 124 F.3d at 1426, so LGE’s rights in asserting infringement of its system claims were not exhausted.

The exhaustion doctrine applies differently to method claims than system claims.

Conversely, the trial court declined to find LGE’s asserted method claims exhausted. Several defendants contest this ruling on cross-appeal, and we reject their challenge. Based on the above reasoning, even if the exhaustion doctrine were applicable to method claims, it would not apply here because there was no unconditional sale. However, the sale of a device does not exhaust a patentee’s rights in its method claims. Glass Equip. Dev., Inc. v. Besten, Inc., 174 F.3d 1337, 1341 n.1 (Fed. Cir. 1999) (citing Bandag, Inc., 750 F.2d 903, 924 (Fed. Cir. 1984)). The court was correct.

The '509 patent was in a separate class, owing to an LGE license agreement with Microsoft, which barred LGE from suing licensees, but the CAFC found summary judgment inappropriate owing to factual dispute as to whether the defendants are licensees "protected by the LGE-Microsoft non-assertion provision."

The ’509 patent discloses a system of networked computers capable of sharing video images. The trial court’s exhaustion ruling did not extend to the ’509 patent; instead it granted summary judgment of noninfringement on the ground that LGE was contractually barred from asserting infringement of the ‘509 patent claims against defendants. This conclusion was based on a non-assertion provision in a contract between LGE and Microsoft, which barred LGE from suing “[Microsoft], its suppliers, their subsidiaries, or their licensees.” The court concluded that defendants were included within this class of parties. Because a genuine issue of material fact exists as to whether defendants fall within the protection of this contract provision, we reverse the trial court’s grant of summary judgment of noninfringement.

Claim Construction

A disputed claim construction went to a '509 claim 35 term, "control unit", that the trial court had construed as a means-plus-function limitation, which can be rebutted by showing that the limitation claimed a function without defining structure. But the claim had provided a structure for "control unit," so the CAFC concurred.

Claim 35, from which asserted claims 45 and 51 depend, contains the limitation of “a control unit for controlling the communication unit, wherein the control unit comprises a [central processing unit (“CPU”)] and a partitioned memory system.” LGE contends that the trial court erroneously construed the term “control unit” as a means-plus-function limitation.

“‘[A] claim term that does not use ‘means’ will trigger the rebuttable presumption that § 112 ¶ 6 does not apply.’” Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir. 2004) (quoting CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1369 (Fed. Cir. 2002)). This presumption can be rebutted “by showing that the claim element recite[s] a function without reciting sufficient structure for performing that function.” Watts v. XL Sys., 232 F.3d 877, 880 (Fed. Cir. 2000) (citing Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294, 1302 (Fed. Cir. 1999)). However, the presumption “is a strong one that is not readily overcome.” Lighting World, Inc., 382 F.3d at 1358.

Here, the claim limitation at issue does not use the term “means,” and the presumption against means-plus-function treatment is not overcome. The claim itself provides sufficient structure, namely “a CPU and a partitioned memory system,” for performing the stated function, “controlling the communication unit.” See id. at 1359-60. Thus, the proper construction of “control unit” is “a combination comprising a CPU and a partitioned memory system capable of controlling the communication unit.”

In the '645 patent, the district court had found noninfringement after imposing an additional limitation based upon prosecution history. But the CAFC disagreed, that the prosecution history was not definitive, and so the additional limitation unjustified.

LGE alleged infringement of system claims 1-4 and 6 and method claims 12-15 and 17. The trial court granted summary judgment of noninfringement of all asserted claims, concluding that the RAS/CAS signals in defendants’ devices did not travel over the system bus. However, the ’645 patent claims do not contain a limitation requiring that the strobe signals travel over the system bus. Moreover, the specification does not suggest that the strobe signals must travel over the system bus. To the contrary, Figure 5 shows an embodiment of the invention in which the strobe signals travel only internally within the replying agent, not across the system bus. In an attempt to impose this limitation on the claims, defendants rely on the prosecution history. While the prosecution history is relevant to claim construction, “it often lacks the clarity of the specification and thus is less useful for claim construction purposes.” Phillips, 415 F.3d at 1317 (citations omitted). Here, defendants point to statements in the prosecution history that the prior art does not teach “a page mode type of access over a system bus from a requesting agent to a replying agent.” While we agree that this and other statements in the prosecution history lack ideal clarity, we do not find that they rise to the level of disclaiming or limiting the scope of the express claim language. Therefore, the trial court erred in construing the ’645 claims to require the RAS and CAS signals to travel over the system bus.

The ruling covers several other claim disputes as well. Some of the CAFC disagreement with the trial court was whether summary judgment was merited, as facts were disputable. Other disagreement stemmed from the district court imposing additional, unjustified limitations to claim terms, based upon written description or prosecution history, including presumed disavowal.

Beginning on page 25 is a claim construction dispute leading to a bit of murk about applying the doctrine of equivalents, where again the CAFC overturned the trial court ruling because of factual disputability.

The doctrine of equivalents operates under the “all limitations rule,” whereby “equivalence [is] assessed on a limitation-by-limitation basis, as opposed to from the perspective of the invention as a whole.” Freedman Seating Co. v. Am. Seating Co., 420 F.3d 1350, 1358 (Fed. Cir. 2005) (citing Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 29 (1997)). This doctrine, by its very nature, extends beyond the patent’s literal claim scope, because otherwise a finding of no literal infringement would be a foreordained conclusion of no infringement at all. Ethicon Endo-Surgery v. U.S. Surgical Corp., 149 F.3d 1309, 1317 (Fed. Cir. 1998). At the same time, however, “[i]f our case law on the doctrine of equivalents makes anything clear, it is that all claim limitations are not entitled to an equal scope of equivalents.” Moore U.S.A., Inc. v. Standard Register Co., 229 F.3d 1091, 1106 (Fed. Cir. 2000).

“There is no set formula for determining whether a finding of equivalence would vitiate a claim limitation, and thereby violate the all limitations rule. Rather, courts must consider the totality of the circumstances of each case and determine whether the alleged equivalent can be fairly characterized as an insubstantial change from the claimed subject matter without rendering the pertinent limitation meaningless.” Freedman Seating Co., 420 F.3d at 1359 (citations omitted).

Remanded.