American Calcar v. Honda (CAFC 2009-1503, -1567) precedential; Judges Lourie (author), Bryson, Gajarsa

American Calcar, Inc. ("ACI") appeals from the final judgment of the United States District Court for the Southern District of California. The court found U.S. Patents 6,330,497 ("the '497 patent"), 6,438,465 ("the '465 patent"), and 6,542,795 ("the '795 patent") unenforceable due to inequitable conduct. The court also granted summary judgment of noninfringement of U.S. Patents 6,754,485 ("the '485 patent"), 6,987,964 ("the '964 patent"), 6,577,928 ("the '928 patent"), 6,524,794 ("the '794 patent"), and 6,275,231 ("the '231 patent") in favor of the defendants American Honda Motor Company, Incorporated and Honda of America Manufacturing, Incorporated (collectively, "Honda"). Further, the court granted summary judgment of infringement of U.S. Patent 6,587,759 ("the '759 patent").

The patents fell into functional categories. '485 and '964 are "car-mail" patents: sending email from a vehicle. '231 is a computerized "radio" (entertainment panel) patent. '928 and '794 are "service provider" patents, directed to identifying a service provider when a vehicle needs service, and telling a driver about it. '759 alerts a driver of a "notable condition." '465 and '795 are "search" patents, providing information about a car. '497, termed a "three-status" patent, gives users option lists related to vehicle status that may be activated.

The district court granted summary judgment of noninfringement of five patents, namely the Car-Mail, Service Provider, and Radio patents. Regarding the Car-Mail patents, the court concluded that Honda's system does not use vehicle-address-based "car-mail" as claimed in the patents, but instead broadcasts information to selected geographic areas, and the information is received by every Honda vehicle within range. See Car-Mail SJ Op. at 8. With regard to the Service Provider patents, the court concluded that because Honda's system requires significant user interaction in order to find a service provider when the system identifies a need for maintenance, it does not infringe the claims literally. Service Provider SJ Op. at 6. It also reasoned that the prosecution history of the Service Provider patents barred ACI from asserting a doctrine of equivalents infringement theory. Id. at 7-8. The court granted summary judgment of noninfringement of the Radio patent because it concluded that accused systems do not "receive signals from a plurality of sources." Radio SJ Op. at 6. The court found that the accused systems employed satellite radio, wherein the signal was received from a single source. Id. The court also granted summary judgment of noninfringement under the doctrine of equivalents because it found that ACI had failed to provide particularized testimony and linking argument as to the equivalency of the Radio patent and the accused product. Id. at 8-9. The court, however, denied Honda's summary judgment motion on invalidity of the Notable Condition patent. Am. Calcar, Inc. v. Am. Honda Motor Co., Inc., No. 06-CV-02433, Dkt. No. 142 (S.D. Cal. Apr. 28, 2008) ("Notable Condition SJ Op."). In doing so, the court concluded that neither [prior art references] Nihei nor Mitsubishi taught the claim limitation "prompting a user to select the option," which the court construed as requiring a user prompt to select, not just any of the multiple displayed options, but only the one that led the user to a solution. Id. at 8-9.

The district court held a jury trial on numerous issues, including invalidity, infringement, damages, and inequitable conduct, although the parties agreed that the verdict on inequitable conduct would only be advisory. The jury found the Three-Status patent invalid as anticipated by the 96RL [a prior art computerized car navigation system]. Verdict Form at 3. The jury awarded $24 million in damages to ACI for the patents that had been found infringed and not invalid. Id. at 9. The jury also rendered advisory findings of no inequitable conduct by the inventors as to the Three-Status and Search patents. Id. at 12.

Following a trial, a jury found the asserted claims of the '497 patent invalid, and the asserted claims of the '465, '795, and '759 patents not invalid. The district court denied Honda's renewed motion for judgment as a matter of law ("JMOL") or new trial on the validity of the '759 patent and entered judgment on that patent in favor of ACI.

Following the verdict, the district court ruled on Honda's inequitable conduct motion, finding that the inventors had committed inequitable conduct in the prosecution of the '355 Patent Family, and therefore held the Three-Status patent as well as the Search patents unenforceable. See Inequitable Conduct Op. at 22. The court made numerous fact findings including that in August 1996, one of the inventors, Dinkel, had borrowed a 96RL vehicle and the inventors had spent between "30 minutes to an hour" in that car operating the navigation system. Id. at 3. The court found that Obradovich hired attorney Yip in October, 1996, but never informed him of his experience with the 96RL. Id. The court found evidence that the inventors continued to gather information on the 96RL system...

The district court found "notable" circumstantial evidence of deceptive intent, given that the inventors had operated the navigation system in the 96RL and that, given their prior business of developing car manuals, they had a great interest in learning about the navigation system and its functionality. Id. at 10-11. The court held that evidence supported Honda's position that, based on the "uncanny resemblance" between the two, the limited disclosure of the system in the '355 patent specification came from a 96RL manual to which the inventors must have had access. Id. at 14-16.

ACI appeals the court's finding of inequitable conduct and the summary judgment of noninfringement. Honda cross-appeals from the court's JMOL decision. We affirm the court's summary judgment decisions on noninfringement, reverse the court's denial of JMOL on the validity of the '759 patent, vacate the district court's decision on inequitable conduct, and remand to the district court to decide the inequitable conduct issue under the guidelines of our recent en banc decision. See Therasense v. Becton, Dickinson & Co., No. 2008-1511, slip op. (Fed. Cir. May 25, 2011).

Inequitable Conduct

Inequitable conduct is equitable in nature, with no right to a jury, and the trial court has the obligation to resolve the underlying facts of materiality and intent. See Duro-Last, Inc. v. Custom-Seal, Inc., 321 F.3d 1098, 1110 (Fed. Cir. 2003) (citing Baxter Healthcare Corp. v. Spectramed, Inc., 49 F.3d 1575, 1584 (Fed. Cir. 1995)). Where a court submits the question to a jury, and both parties agree that the jury findings will be advisory, the court shall treat them as such. Id. That is the universal rule. Heinze v. Butte & B. Consol. Mining Co., 126 F. 1, 27 (9th Cir. 1903) ("Where a court sitting in equity allows a jury trial, the verdict is but advisory to the court, and in no sense binding."). The district court therefore was in no way bound by the jury's finding of no inequitable conduct in this case.

To prove inequitable conduct, the accused infringer must provide evidence that the applicant (1) misrepresented or omitted material information, and (2) did so with specific intent to deceive the PTO. Id. at 19 (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)). Under Therasense, the materiality required to establish inequitable conduct is, in general, but-for materiality. Id. at 27. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Id.

While deceptive intent can be inferred from indirect and circumstantial evidence, that "inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard." Star Scientific, 537 F.3d at 1366. "In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference." Therasense, slip op. at 24 (citing Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995)).

Intent and materiality are separate requirements. Id. at 25 (citing Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003)). A district court should not use a "sliding scale," where a weak showing of intent may be found sufficient based on a strong showing of materiality, or vice versa. Id.

This court reviews a district court's determination of inequitable conduct under a two-tiered standard: we review the underlying factual determinations of materiality and intent for clear error, and we review the ultimate decision as to inequitable conduct for an abuse of discretion. Star Scientific, 537 F.3d at 1365. If the district court's inequitable conduct determination rests on a clearly erroneous finding of materiality or intent, it constitutes an abuse of discretion and must be reversed. Id.

Under Therasense, "the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it." Id. at 24.

The CAFC vacated and remanded the district court's inequitable conduct finding as inconsistent with its asinine Therasense opinion.

Noninfringement

Claim construction is an issue of law, Markman v. Westview Instruments, Inc., 52 F.3d 967, 977-78 (Fed. Cir. 1995) (en banc), which we review de novo, Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454-55 (Fed. Cir. 1998) (en banc). Although the claims of a patent define the invention which the patentee is entitled to exclude others from practicing, we must read the claims "in view of the specification, of which they are a part." Phillips v. AWH Corp., 415 F.3d 1303, 1312-15 (Fed. Cir. 2005) (en banc) (quotations omitted); Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996) ("[I]n interpreting an asserted claim, the court should look first to the intrinsic evidence of record, i.e., the patent itself, including the claims, the specification and, if in evidence, the prosecution history.").

The district court had narrowly construed disputed claim terms, which was considered appropriate. In other words, unless the CAFC has a bone to pick with the district court judge, they back his (or her) play, as they did here.

For the email patents, for example, "messages" was construed has having an email address, as contrasted to the much broader "communications" label that ACI wanted. Like tea leaves read by an oracle (tea leaves actually being wet mush), the CAFC panel bent case law to its will. ACI had a reasonable argument to claim differentiation between claims 1 (broader) & 2 (narrower), but not to the CAFC.

In doing so, we also reject ACI's claim differentiation argument. ACI points out that claim 2 of the '485 patent adds the limitation that the message include addresses, and, therefore, this limitation cannot be included in independent claim 1, which is presumed to be broader than claim 2. See Comark Commc'ns, Inc. v. Harris Corp., 156 F.3d 1182, 1186 (Fed. Cir. 1998) ("The doctrine of claim differentiation create[s] a presumption that each claim in a patent has a different scope."). However, the doctrine of claim differentiation is not a conclusive basis for construing claims, and the '485 patent specification overrides its effect here. Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533, 1538 (Fed. Cir. 1991) ("Claim differentiation is a guide, not a rigid rule. If a claim will bear only one interpretation, similarity will have to be tolerated.").

The "radio" patent encountered a lot of distortion. The "source" of a broadcast was sphinctered.

ACI argues that the court construed the term "source" too narrowly, requiring that it broadcast from a fixed location and on a specified frequency. ACI contends that there is no "broadcast" or "fixed location" requirement in the claims, or that the signal be received directly from the originating source. ACI proposes that the term "source" refers to any point from which information originates. ACI therefore argues that Honda's accused satellite radio receivers that receive a single signal containing multiple radio channels from a satellite meet the claim limitation of "plurality of sources." At least, ACI argues, there is a question of fact as to whether the accused XM Satellite Radio ("XM") receivers meet the limitation under the doctrine of equivalents, and the court therefore erred in granting summary judgment of noninfringement.

We agree with the district court that the claimed "source" in the Radio patent refers to a fixed source of broadcast on a specified frequency. The specification characterizes sources as radio stations with limited geographic coverage, explaining how a user can lose the radio signal by travelling outside the coverage area. '231 patent, col.20 ll.46-48. The patent also discloses the use of a frequency scanner to find and list radio stations in the receiving range. Id. at 49-51. In light of this disclosure, it was proper to limit the term "source" in the manner that the district court did. Abbott Labs. v. Sandoz, Inc., 566 F.3d 1282, 1288 (Fed. Cir. 2009) (en banc) ("[We] may reach a narrower construction, limited to the embodiment(s) disclosed in the specification, when the claims themselves, the specification, or the prosecution history clearly indicate that the invention encompasses no more than that confined structure or method."). ACI's broad reading of the term "source" as any source of information is not supported by the specification.

But the claims were not so limited, nor was there a technical justification to legally limit claim scope; the narrowing being justified for alleged technical reasons. The paragraph above, which facilely backs Honda, practically proved ACI's point.

Better reasoning was behind the finding of non-infringement because ACI's claim specified a "plurality of sources," not the single source which Honda used.

It is undisputed that the accused satellite radio receiver in the Honda vehicles receives one signal, from the XM Programming Center.

We also reject ACI's doctrine of equivalents argument. The "essential inquiry" in any determination under the equivalents doctrine is whether "the accused product or process contain[s] elements identical or equivalent to each claimed element of the patented invention." Warner-Jenkinson Co., Inc. v. Hilton Davis Chem. Co., 520 U.S. 17, 40 (1997). We have assessed the insubstantiality of an alleged equivalent by applying the function-way-result test as set forth in Union Paper-Bag Machine Co. v Murphy, 97 U.S. 120, 125 (1877), which asks whether an element of an accused product "performs substantially the same function in substantially the same way to obtain the same result" as an element of the patented invention. See, e.g., TIP Sys., LLC v. Phillips & Brooks/Gladwin, Inc., 529 F.3d 1364, 1376 (Fed. Cir. 2008).

The district court found that ACI had failed to meet its evidentiary burden of demonstrating by particularized testimony that the accused receivers perform substantially the same function in substantially the same way to obtain the same result as the claimed system. Radio SJ Op. at 8. We agree. We have held that "a patentee must . . . provide particularized testimony and linking argument as to the 'insubstantiality of the differences' between the claimed invention and the accused device or process, or with respect to the "function, way, result" test when such evidence is presented to support a finding of infringement under the doctrine of equivalents. Such evidence must be presented on a limitation-by-limitation basis." Texas Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1567 (Fed. Cir. 1996). The same rule applies in the summary judgment context. AquaTex Indus., Inc. v. Techniche Solutions, 479 F.3d 1320, 1326 (Fed. Cir. 2007). Here, ACI was required to provide particularized testimony and linking argument to show the equivalence of the XM Programming Center and a plurality of broadcast sources. The only evidence proffered by ACI on the issue of equivalents was the declaration from the inventor Obradovich in which he stated that the XM Programming Center is, at most, insubstantially different from the claimed plurality of sources. J.A. 261. Such generalized testimony as to the overall similarity between the claims and the accused infringer's product from one of the inventors does not suffice to create a genuine issue of material fact. See Texas Instruments, 90 F.3d at 1567. Moreover, we agree with Honda that finding a signal from one source to be equivalent to "signals from a plurality of sources" would vitiate that claim limitation by rendering it meaningless. Such a theory of equivalence is legally insufficient. See DePuy Spine v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005, 1017 (Fed. Cir. 2006). We therefore affirm the district court's summary judgment of noninfringement of the Radio patent.

The search provider patents got no provision from the courts, particularly in light of prosecution history.

We agree with the district court's claim construction and its finding of prosecution history estoppel. "In response to" connotes that the second event occur in reaction to the first event. The language of the claim itself suggests that when a vehicle condition is detected, the processing element identifies a provider automatically as opposed to requiring further user interaction. Further, the specification fails to disclose any embodiment that requires any type of user interaction prior to identification of a service provider. See, e.g., '928 patent, col.10 l.68-col.11 l.5. Thus, the court properly construed the claim terms "in response to" and "when" to require a cause-and-effect relationship.

Honda's accused system on the other hand requires a user to initiate a search for a provider by taking several steps. The user has not only to detect and select the message indicating that maintenance is required, but also has to select one of four options to ask the system to "Find Nearest Acura Dealer." Thus, when the user is presented with identification of the service provider, it is not "in response" to the vehicle condition, as required by the claims, but rather, in response to user actions. ACI proposes that we ignore several intervening events that may or may not occur between the two relevant events. We are not persuaded to do so.

We also agree with the district court that ACI is barred from asserting an infringement claim under the doctrine of equivalents. The doctrine of equivalents prohibits one from avoiding infringement liability by making only "insubstantial changes and substitutions . . . which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of law." Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 607 (1950). But the doctrine of prosecution history estoppel limits the doctrine of equivalents when an applicant makes a narrowing amendment for purposes of patentability, or clearly and unmistakably surrenders subject matter by arguments made to an examiner." Salazar v. Procter & Gamble Co., 414 F.3d 1342, 1344 (Fed. Cir. 2005) (citing Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 736 (2002)). During prosecution of the Service Provider patents, the examiner rejected certain claims as anticipated by Bunn. In distinguishing Bunn to the examiner, the ACI inventors stated:

Bunn further teaches away from the claimed invention in that any service provider identified in Bunn in a POS transaction is in response to a vehicle renter's selection of a service shown on a display, rather than in response to a vehicle condition determined by a processor, based on a measure concerning the vehicle as in the claimed invention.

J.A. 1020-21 (emphases added). That remark to the Patent Office clearly and unmistakably surrendered subject matter that ACI now seeks to claim, i.e., where the identification of service providers is brought about in response to the user. ACI argues that what its inventors distinguished was simply the cause-and-effect relationship resulting from the determination of a vehicle condition by the processors. We disagree. Bunn employed a similar local control system in the vehicle to monitor vehicle condition and also allowed the user to search and select service providers on the system. The inventors' disclaimer was thus broad, distinguishing the claimed invention as one where the identification of service providers is solely in response to a vehicle condition determined by a processor. See Sextant Avionique, S.A. v. Analog Devices, Inc., 172 F.3d 817, 826-27 (Fed. Cir. 1999) ("The scope of estoppel, i.e., what subject matter has been surrendered during prosecution by the patentee, is to be viewed from the vantage point of a reasonable competitor of the patentee."). Thus, we agree with the district court's finding of noninfringement of ACI's Service Provider patents by Honda's accused systems.

The district court was caught out as inconsistent: a narrow claim term construction that let the '759 "notable condition" patent avoid invalidation by anticipatory prior art.

The district court mistakenly read the word "the" in the phrase "prompting . . . to select the option" to mean "only that" option, whereas that word simply refers back to the prior phrase "an option . . . is provided." Notable Condition SJ Op. at 8. Honda points out that ACI itself, in making infringement contentions against Honda's system, asserted that the "prompting" was met simply because the user is moved to select one of the two options on Honda's warning screen. J.A. 1549-50. Although the court agreed with ACI at that stage, it erred in its claim construction at the summary judgment stage by importing an unnecessary limitation into the '759 patent claims. The court's subsequent jury charge, and therefore its JMOL ruling on the issue of validity, relied on the court's erroneous construction. JMOL Op. at 2.

Under the correct claim construction, it is clear that [prior art Japanese patent] Nihei meets the only disputed limitation of the asserted claims.

The upshot: forget the inequitable conduct, as the bar has been set too high. But it was enough to bias the courts against the patent holder, and nothing beats biasing a court as a way to prevail. So, costs to Honda for the CAFC letting it off the hook; a small price to pay.