800 Adept v. Targus (CAFC 2007-1272)

Somebody dialed the wrong number.

After thorough consideration of all the issues in the case, we conclude that the trial court erred regarding a critical claim construction issue in the Adept patents, one that permitted the jury to make incorrect findings. Under the correct claim construction, no reasonable jury could find that Targus infringes the asserted claims of Adept's patents; accordingly, we reverse the trial court's judgment of infringement. For the reasons we shall explain, we also reverse the trial court's judgment for Adept on its tortious interference claim. In light of these determinations, we vacate the trial court's damages award, the permanent injunction, and the judgment with respect to willfulness, enhanced damages, and attorney fees.

Regarding the Targus patents, with two exceptions we affirm the trial court's judgment upholding the jury's verdict that the asserted claims of Targus's patents are invalid; for the reasons we explain, we vacate the invalidity judgment on two of the asserted claims of Targus's patents and remand for a new trial on these claims. Because the validity of the unasserted claims of Targus's patents was not at issue during the trial, we vacate the trial court's invalidity judgment with respect to all of those claims.

How your nationwide toll-free call for pizza ends up with the pimply-faced kid down the road -

The patents at issue in this case relate to technology for routing telephone calls made to 800 numbers. Typically when a caller dials an 800 number, the long distance carrier ("LDC") handling the call must identify the 10-digit telephone number, known as a "Plain Old Telephone System" ("POTS") number, to which to route the call. (A POTS number has the form NPA-NXX-XXXX, where NPA is the area code and NXX is the exchange.) If all calls to a particular 800 number are to be routed to a single location, the process is relatively simple. Some businesses, however, advertise a single 800 number but have multiple service locations. When a caller dials the 800 number of one of these businesses, the LDC must have some way to determine the POTS number of an appropriate service location. For example, if the 800 number is for a chain of pizza restaurants, the correct service location could be the closest restaurant or one that delivers within the geographic area in which the caller is located.

Plaintiff Adept owns the [Re. 36,111] patent and its divisional, the [5,805,689] patent, both of which claim priority to an application filed on July 31, 1992. The two patents, referred to as the Neville patents, are entitled "Geographically Mapped Telephone Routing Method and System," and have virtually identical written descriptions.5 The Neville patents disclose a method for directly routing an 800 call to the appropriate service location based on the caller's 10-digit telephone number (NPA-NXX-XXXX), sometimes referred to as the Automatic Number Identification ("ANI"). The invention involves the construction of a database that assigns a service location POTS number to every potential caller according to geographic criteria provided by the owner of the 800 number. This database can be provided to the LDC, which then routes calls made to the 800 number according to the routing instructions in the database.

The claim construction amendment that flipped the dime used to make the call -

On the nineteenth day of trial, in response to Adept's argument, and over the objection of Targus's counsel, [district court] Chief Judge Fawsett added a sentence to the claim construction. The final jury instruction regarding this limitation read:

The term "assigning" as used in the third element of the claims of the '111 and '689 Patents refers to "a designation made prior to the telephone call of the first parties." However, the '111 and '689 patents do not exclude calculations made during the telephone call.

[T]he addition of the "However . . . " sentence to the assigning limitation changed the dynamic of the trial.

The ultimate question, then, is not when the assigning step must occur, which the parties agree must be prior to any telephone call, but rather what constitutes an assignment. To that end, Targus argues that the trial court erred when it added to its original claim construction the "However . . . " statement that the patents "do not exclude calculations made during the telephone call" because that allowed the jury to apply Adept's flawed interpretation.

The claims were clear, as was the specification, and prosecution history.

The plain language of the claims makes clear that the "assigning" step requires that "a telephone number of a service location" be assigned to each potential caller. Nothing in the claims suggests that storing an algorithm that will be used to determine the telephone number of the correct service location during a telephone call constitutes an assignment of a service location telephone number to a potential caller before a telephone call is placed.

The patents' written description confirms this. See Phillips, 415 F.3d at 1315-17.

Statements made by the applicant during prosecution reinforce the conclusion that any calculations necessary for assigning service location telephone numbers to callers must be performed before any calls are placed. See Phillips, 415 F.3d at 1317 ("[T]he prosecution history can often inform the meaning of the claim language by demonstrating how the inventor understood the invention . . . .").

As is true of the written description, nothing in the prosecution history supports Adept's position that a stored algorithm constitutes an assignment of a service location to a caller.

Under the correct claim construction, only calculations that are necessary to complete the assignment must be performed before any calls are made. As long as that requirement is met, the claims do not preclude any additional calculations during the telephone call.

The district court claim construction allowed Adept to argue a technically incorrect interpretation.

In sum, based on consideration of the claims, the written description, and the remainder of the intrinsic evidence, we conclude that the trial court was correct in the first instance when it construed the "assigning" language to refer to "a designation made prior to the telephone call of the first parties." We must also recognize, however, what the assignment entails--the telephone number of a service location is assigned to the physical location or telephone number of each potential caller. As noted, this assignment must be made before any calls are placed. Thus, to the extent any calculations are needed to complete the assignment of service location telephone numbers to potential callers, they must be performed prior to any calls.

The trial judge modified the original claim construction by adding that the Neville patents "do not exclude calculations made during the telephone call." That statement is imprecise in the context in which it was presented, i.e., as part of the construction of the term "assigning," and allowed Adept to argue before the jury that calculations for completing the assigning step could be performed while a caller is on-line, an argument that is not consistent with the patented invention. Under the correct claim construction, assignment of service location telephone numbers to potential callers must occur prior to any calls, and thus any calculations necessary for completing that assignment must be performed before any telephone calls are placed.

The correct construction dials non-infringement.

Thus the accused Targus services do not assign service location telephone numbers to potential callers before calls are placed. Because all calculations necessary to complete the assignment are performed in real-time while the caller is on the line, the Targus services do not satisfy the "assigning" limitations in the Neville claims. Under the correct claim construction, no reasonable jury could find that Targus infringes the asserted claims of Adept's patents. Accordingly, we reverse the trial court's denial of Targus's motion for judgment of non-infringement as a matter of law. In light of that result, we vacate the infringement damages award and the permanent injunction; we also vacate the trial court's judgment with respect to willfulness and attorney fees.

Targus' total disconnect is given static on appeal -

Adept also prevailed at trial on all issues related to Targus's patents. The jury found that Adept did not infringe any of the asserted claims of Targus's patents. Regarding the validity of Targus's patents, the jury determined that all claims of the '897 patent and the '131 patent were invalid, even though Targus asserted only claim 69 of the '897 patent and claims 1 and 50 of the '131 patent. The jury also found that the asserted claims of the other Moore-Shaffer patents were invalid.

In this case, it is clear from the parties' pretrial statement and from the trial proceedings that the unasserted claims were neither litigated nor placed in issue during the trial. We therefore reverse the trial court's judgment of invalidity with respect to the unasserted claims.

As to the asserted claims, an expert witness for Adept, Dr. Brody, "was mistaken."

Under these circumstances, the trial judge should have granted the motion for a new trial with regard to these two claims because the great weight of the evidence in the record was against the jury's verdict. This does not preclude the possibility that other evidence produced at a retrial would be sufficient to establish invalidity.

There were still Targus claims left invalidated.

Adept claimed that Targus cut a tort "because Targus had asserted certain of its patent claims against some of Adept's customers, Targus had tortiously interfered with Adept's business relationships with those customers."

State tort claims against a patent holder, including tortious interference claims, based on enforcing a patent in the marketplace, are "preempted" by federal patent laws, unless the claimant can show that the patent holder acted in "bad faith" in the publication or enforcement of its patent. Id. at 1355; Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1336-37 (Fed. Cir. 1998). As the Supreme Court said long ago, "Patents would be of little value if infringers of them could not be notified of the consequences of infringement, or proceeded against in the courts. Such action, considered by itself, cannot be said to be illegal." Virtue v. Creamery Package Mfg. Co., 227 U.S. 8, 37-38 (1913).

The issue in this case is whether Adept presented to the jury sufficient facts, if believed, that a reasonable jury could find for Adept on the issue of Targus's bad faith. This "bad faith" standard has objective and subjective components. Dominant Semiconductors Sdn. Bhd. v. Osram GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008). The objective component requires a showing that the infringement allegations are "objectively baseless." Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1375 (Fed. Cir. 2004). The subjective component relates to a showing that the patentee in enforcing the patent demonstrated subjective bad faith. See id. Absent a showing that the infringement allegations are objectively baseless, it is unnecessary to reach the question of the patentee's intent. See id.

Infringement allegations are objectively baseless if "no reasonable litigant could realistically expect success on the merits." Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993); see also GP Indus., Inc. v. Eran Indus., Inc., 500 F.3d 1369, 1374 (Fed. Cir. 2007); Globetrotter, 362 F.3d at 1375-76. To prove at trial that Targus's actions were objectively baseless, Adept was required to offer clear and convincing evidence that Targus had no reasonable basis to believe that its patent claims were valid or that they were infringed by Adept's customers. See Golan v. Pingel Enter., Inc., 310 F.3d 1360, 1371 (Fed. Cir. 2002). Because of the value placed on property rights, which issued patents share, see 35 U.S.C. § 261 ("[P]atents shall have the attributes of personal property."); Consol. Fruit-Jar Co. v. Wright, 94 U.S. 92, 96 (1876) ("A patent for an invention is as much property as a patent for land."); Kearns v. Gen. Motors Corp., 94 F.3d 1553, 1555 (Fed. Cir. 1996) ("By statutory and common law, each patent establishes an independent and distinct property right."), and in light of the underlying jurisprudential basis for the bad faith standard, rooted as it is in Supreme Court cases and Constitutional principles, see Globetrotter, 362 F.3d at 1375-77, a party attempting to prove bad faith on the part of a patentee enforcing its patent rights has a heavy burden to carry.

The jury verdict was that Adept had proved its case. Targus appeals the trial court's denial of its motion for judgment as a matter of law, arguing that there was no clear and convincing evidence on which a reasonable jury could conclude its actions were objectively baseless. On the record before us, for the reasons we shall explain, we believe Targus is correct that Adept has not successfully carried its burden.

In sum, we conclude that there is not clear and convincing evidence on which a reasonable jury could find that Targus acted in bad faith by asserting objectively baseless patent infringement allegations. Thus Adept's state-law tortious interference claim is preempted by federal patent law. The trial judge erred in denying Targus's motion for judgment as a matter of law on this claim, and we therefore reverse the trial court's judgment.

The CAFC dénouement -

We reverse the trial court's judgment of infringement of the Neville [Adept] patents. Accordingly, we vacate the infringement damages award and the permanent injunction; we also vacate the trial court's judgment with respect to willfulness and attorney fees.

We reverse the trial court's judgment of invalidity with respect to the unasserted [Targus] claims of the '897 patent and '131 patent. We vacate the trial court's judgment that claim 46 of the '868 patent and claim 10 of the '810 patent are invalid and remand for a new trial on the validity of those claims. We affirm the invalidity judgment with respect to the remaining patent claims asserted by Targus against Adept.

We reverse the trial court's judgment on Adept's tortious interference claim and vacate the accompanying award of compensatory and punitive damages.

Affirmed-in-part, reversed-in-part, vacated-in-part, and remanded.

This technically simple case gone wrong, replete with legal intricacy, utters a plea for a dedicated patent trial circuit. Certainly it points out, in absence of that, venue shopping is justified as economical justice shopping.