Paice v. Toyota (CAFC 06-1610)

Toyota argued that Paice's expert witness hadn't provided sufficient testimony "to support a finding of infringement under the doctrine of equivalents." But the CAFC thought the witness, Dr. Nichols, was sufficiently specific.

We have stated that “a patentee must . . . provide particularized testimony and linking argument . . . with respect to the function, way, result test when such evidence is presented to support a finding of infringement under the doctrine of equivalents.” Tex. Inst. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1567 (Fed. Cir. 1996) (emphasis added). “Generalized testimony as to the overall similarity between the claims and the accused infringer’s product or process will not suffice.” Id. Under this standard, Dr. Nichols’s testimony was plainly sufficient.

Toyota tried killing the DOE by arguing prosecution estoppel. But Toyota was off-base in its critique of overcoming the prior art, Berman/TRW: what was overcome was exactly what Toyota was infringing.

[T]o the extent Paice drew a distinction between its design and the Berman/TRW design, the distinction is clearly secondary and equivocal at best... As the written description of the ’970 patent reveals, the primary disadvantage of the Berman/TRW design is its control system, which relies upon a human operator to select the mode of operation. ’970 patent, col. 3, ll. 24-25 (“[T]he operator must control the transition between the several modes of operation.”). Paice overcame this disadvantage by using a microprocessor to determine the most appropriate mode of operation based on its monitoring of control inputs from the driver, as well as several other variables. Id. at col. 6, ll. 19-26. Toyota’s drive trains use a microprocessor in the same manner as the ’970 patent, i.e., the microprocessor determines the most appropriate mode of operation based on its monitoring of control inputs from the driver, as well as several other variables. J.A. 1225. Therefore, the ’970 patent’s discussion of the Berman/TRW design’s disadvantages does not preclude the application of the doctrine of equivalents to Toyota’s accused transaxle units.

Paice couldn't get the CAFC to reconsider literal infringement.

Paice wanted a jury trial on the ongoing royalty rate based on its claimed Seventh Amendment right. The CAFC denied that was necessary, but remanded because the district court hadn't explained its reasoning.

[T]he fact that monetary relief is at issue in this case does not, standing alone, warrant a jury trial. Accordingly, Paice’s argument falls far short of demonstrating that there was any Seventh Amendment violation.

[T]he district court followed the traditional four-factor test mandated by the Supreme Court’s recent decision in eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837, 1839 (2006) (“A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.”). With respect to irreparable injury, Paice argued that the absence of an injunction would have an adverse effect on its ability to license the patented technology. The court rejected this argument, however, noting that Paice had only adduced vague testimony that the company was “sidelined” in its business dealings during litigation. Paice LLC v. Toyota Motors Corp., No. 2:04-CV-211, Docket No. 227, slip op. at 8 (E.D. Tex. Aug. 16, 2006). The court also pointed to evidence in the record suggesting that Paice’s inability to reach an agreement with Chrysler, for example, was due to public misrepresentations Paice allegedly made about its relationship with Chrysler, and was not due to the absence of an injunction. Id. Moreover, since Paice does not actually manufacture any goods, the court concluded that there was no threat that Paice would lose name recognition or market share without an injunction. Id. slip op. at 9.

Intertwined with its consideration of irreparable injury was the court’s analysis of the adequacy of monetary damages. Given the relatively small reasonable royalty awarded by the jury—which amounted to approximately $25 per accused vehicle—in comparison to the overall value of the vehicles, the court concluded that monetary damages would suffice. Id. The adequacy of monetary damages was further bolstered, in the court’s opinion, by the fact that Paice had offered a license to Toyota during the post-trial period. Id. slip op. at 9-10.

We begin with the language of 35 U.S.C. § 283, which provides in relevant part:

The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

Perhaps the most apparent restriction imposed by § 283 is that injunctions granted thereunder must “prevent the violation of any right secured by patent.” We have previously held that this statutory language limits the scope of activities that may be enjoined. See, e.g., Joy Techs. v. Flakt, Inc., 6 F.3d 770, 777 (Fed. Cir. 1993) (holding that noninfringing acts may not be enjoined). The more difficult question raised by this case, however, is whether an order permitting use of a patented invention in exchange for a royalty is properly characterized as preventing the violation of the rights secured by the patent.

Under some circumstances, awarding an ongoing royalty for patent infringement in lieu of an injunction may be appropriate.

[A]warding an ongoing royalty where “necessary” to effectuate a remedy, be it for antitrust violations or patent infringement, does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed. In most cases, where the district court determines that a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement.

In this case, the district court, after applying the four-factor test for a permanent injunction and declining to issue one, imposed an ongoing royalty sua sponte upon the parties. But, the district court’s order provides no reasoning to support the selection of $25 per infringing vehicle as the royalty rate. Thus, this court is unable to determine whether the district court abused its discretion in setting the ongoing royalty rate. Accordingly, we think it prudent to remand the case for the limited purpose of having the district court reevaluate the ongoing royalty rate. Upon remand, the court may take additional evidence if necessary to account for any additional economic factors arising out of the imposition of an ongoing royalty. The district court may determine that $25 is, in fact, an appropriate royalty rate going forward. However, without any indication as to why that rate is appropriate, we are unable to determine whether the district court abused its discretion. Cf. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (“It [is] important . . . for the district court to provide a concise but clear explanation of its reasons for the fee award.”). The district court should also take the opportunity on remand to consider the concerns Paice raises about the terms of Toyota’s permissive continuing use.

Judge Rader dissented, opining that the litigants ought to wrangle a while on the royalty rate:

[T]his court should require the district court to remand this issue to the parties, or to obtain the permission of both parties before setting the ongoing royalty rate itself... [C]alling a compulsory license an "ongoing royalty" does not make it any less a compulsory license... In this case, because the court imposed an ongoing royalty on the parties sua sponte after denying injunctive relief, the parties had no meaningful chance to present evidence to the district court on an appropriate royalty rate to compensate Paice for Toyota’s future acts of infringement.