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From Intellectual Property Law Daily, November 19, 2018

Flat panel maker induced infringement of patented manufacturing process, but jury’s damage award was unsupported

By George Basharis, J.D.

The federal district court in San Francisco correctly determined that a maker of flat panel display parts induced infringement of two patents for providing uniform illumination of LED displays, the U.S. Court of Appeals for the Federal Circuit found. However, the court reversed the jury’s multi-million dollar damages verdict that was based on a hypothetical "freedom to operate" license because the award improperly included non-infringing devices in the royalty calculation (Enplas Display Device Corp. v. Seoul Semiconductor Co., Ltd., November 19, 2018, Stoll, K.).

Enplas Display Device Corp. (EDD) filed suit against Seoul Semiconductor Company, Ltd. (SSC), seeking a declaratory judgment of invalidity or unenforceability of SSC’s patents, U.S. Patent No. 6,473,554 ("the ’554 patent") and No. 6,007,209 ("the ’209 patent"). SSC filed counterclaims against EDD for infringement of both patents.

The patents claim methods of achieving uniform backlighting in flat panel LED displays used in televisions, laptops, and other electronics. The ’209 patent describes a method of eliminating bright spots by providing a light source that uniformly backlights the rear surface of a display panel. The ’554 patent solves the uniform backlighting problem through the use of coupling elements near the top surface of display panels.

EDD and SSC collaborated to manufacture lenses for SSC’s "light bars," which are used for backlighting flat-screen television displays. The light bars were covered by the ’554 and ’209 patents. SSC later discovered that EDD sold light bars subject to the patents to competing television makers in the U.S.

EDD moved for summary judgment on the basis that the ’209 and ’554 patents were invalid. According to its motions, EDD maintained that the ’209 motion was anticipated by the U.S. Patent No. 5,684,354 (Gleckman), which described a method of achieving backlight uniformity by illuminating the cavity of a display panel. EDD argued that the ’554 patent was anticipated by U.S. Patent No. 3,774,021 or Japanese Patent Application Publication No. S63-127161, which describe a method of illumination through the use of a detached coupler to achieve uniformity. The district court denied both motions, and the jury found the patents were not invalid.

The district court also denied EDD’s motion for judgment as a matter of law of no induced infringement. The lower court determined that there was substantial evidence that supported the jury’s finding that EDD had specific intent to induce SSC’s competitors to infringe on the ’209 and ’554 patents.

Finally, the district court denied EDD’s motion of judgment as a matter of law that the jury’s $4 million damages award was excessive and not supported by substantial evidence. The award was based on the uncontroverted testimony of SSC’s expert witness regarding the value of a negotiated "freedom to operate" license.

Invalidity. An expert witness for EDD testified that Gleckman could be modified to include light sources similar to those described by the ’209 patent. However, that was not enough for a finding of anticipation, the court of appeals held. Similarly, both parties presented expert testimony regarding the issue of invalidity regarding the ’554 patent. The jury was entitled to find one expert more credible than the other, and its verdict was supported by substantial evidence, the court of appeals said. EDD’s motion for judgment as a matter of law was properly denied by the district court.

Inducement. The district court upheld that jury’s finding of specific intent by EDD to induce infringement of the ’209 and ’554 patents in the U.S. EDD did not dispute that it had knowledge of the patents and that it was informed by SSC employees that the light bars is developed with SSC and sold to competitors were covered by the patents. However, it argued that the evidence did not support a finding that it had specific intent of inducement. Although evidence that EDD knew that the infringing light bars would be incorporated in U.S. televisions was not overwhelming, the court of appeals noted, and while knowledge is not enough to establish specific intent, the court determined that there was at least circumstantial evidence to support the jury’s finding that EDD intended to induce infringement.

Damages. However, the jury’s damages award of $4 million was not supported by substantial evidence, the court of appeals held, reversing the district court’s denial of EDD’s motion for judgment as a matter of law. The only evidence supporting the award was that of SSC’s expert testimony regarding the calculation of royalties based on a negotiated freedom to operate license. The expert’s calculation of damages was based on a calculated royalty on infringing andpotentially infringing products. However, patent damages should be limited to those adequate to compensate for the infringement, the court of appeals said.

Dissent. Circuit Judge Pauline Newman dissented from the majority’s reversal of the jury’s damages award, which was entitled to substantial deference. The district court correctly instructed the jury on damages in Judge Newman’s opinion. The award was based on the unrebutted testimony of SSC’s expert witness, and neither side argued that the award was inadequate to compensate for EDD’s infringement. Although the expert’s testimony included potentially infringing products, the award was based on a negotiated license that would give EDD the freedom to operate without ever having to worry about infringing on SSC’s LED patents. This was the only evidence presented to the jury regarding damages. Under the circumstances, the jury’s award was supported by substantial evidence.

This case is No. 16-2599.

Attorneys: John Christopher Rozendaal (Sterne Kessler Goldstein & Fox, PLLC) for Enplas Display Device Corp. Lawrence J. Gotts (Latham & Watkins LLP) for Seoul Semiconductor Co., Ltd.

Companies: Enplas Display Device Corp.; Enplas Tech Solutions, Inc.; Enplas (U.S.A.), Inc.; Seoul Semiconductor Co., Ltd.

MainStory: TopStory Patent FedCirNews

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