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From Intellectual Property Law Daily, November 30, 2018

$140M verdict for Sprint against Time Warner affirmed in VoIP patent dispute

By Brian Craig, J.D.

The U.S. Court of Appeals for the Federal Circuit has affirmed a $139.8 million jury verdict in favor of Sprint Communications against Time Warner for infringement of five Sprint patents related to VoIP technology. The appeals court concluded that the district properly admitted evidence relating to the jury verdict in an earlier, related case brought by Sprint against Vonage, another carrier offering VoIP service. Time Warner failed to show that the evidence presented at trial was insufficient to support the jury’s damage award and verdict. Circuit Judge Haldane Robert Mayer wrote a dissenting opinion arguing that the patents asserted by Sprint are invalid as a matter of law (Sprint Communications Co., L.P. v. Time Warner Cable, Inc., November 30, 2018, Bryson, W.).

Sprint asserted that Comcast’s and Time Warner’s respective broadband and packet-based telephony products and services infringed a number of its patents relating to Voice over Internet Protocol (VoIP) technology. Sprint claimed infringement regarding U.S. Patent Nos. 6,633,561 ("the ’3,561 patent"), 7,286,561 ("the ’6,561 patent"), and 6,452,932 ("the ’932 patent"), all entitled "Method, System and Apparatus for Telecommunications Control," and No. 6,563,918 ("the ’918 patent") entitled "Telecommunications System Architecture for Connecting a Call." The patents at issue fall into two groups: the "call control" patents (the ’052 and ’561 patents) and the "broadband" patents (the ’064, ’084, and ’429 patents). The call control patents describe methods for telecommunication control of calls to and from the packet-switched communication network. The broadband patents address the interface between circuit-switched (or "narrowband") networks and packet-switched (or "broadband") networks. Sprint accused Time Warner of infringing the call control and broadband patents by using a VoIP service, which converted calls into packet data, transmitted the call over an IP network. Following a trial, the jury found that Time Warner infringed each of the asserted claims of the five patents at issue, that none of those claims was invalid, that Sprint had proved reasonable royalty damages in the amount of $139.8 million, and that the infringement was willful. Time Warner appealed to the Federal Circuit.

Admission of the Vonage verdict. The appeals court first discussed whether the district court improperly permitted Sprint to introduce evidence relating to the jury verdict in an earlier, related case brought by Sprint against Vonage, another carrier offering VoIP service. The district court ruled that the Vonage evidence was relevant to the jury’s assessment of reasonable royalty damages under a hypothetical negotiation theory. In Applied Medical Resources Corp. v. U.S. Surgical Corp., 435 F.3d 1356 (Fed. Cir. 2006), the Federal Circuit affirmed the admission of evidence regarding a prior verdict between the parties on the ground that the evidence of that verdict was relevant to the hypothetical negotiation between the same parties, which bore on the amount of the damages to be awarded under a reasonable royalty theory of damages, as well as the issue of willfulness. Here, the district court admitted the prior verdict evidence as relevant to willfulness and to Time Warner’s equitable defenses. A reasonable jury could well conclude that the verdict and the amount of damages awarded in a similar prior litigation would have influenced the outcome of a hypothetical negotiation in the case at bar. The district court also gave the jury limiting instructions that the Vonage evidence was to be considered only on the issues of damages and willfulness. Because the core allegations in both the Vonage and present case are the same, the district court properly admitted the Vonage verdict. The Federal Circuit also found no reversible error by the district court for failing to strike comments made by Sprint’s counsel during closing arguments that referenced the Vonage case.

The damages award. The Federal Circuit also analyzed whether the jury’s award of $1.37 per VoIP subscriber per month was supported by sufficient evidence. In addition to the previously raised objections to the admission of evidence of the Vonage verdict, Time Warner argued that the use of the Vonage verdict in the expert’s damages calculation was improper because the Vonage verdict was legally flawed because Sprint did not apportion the damages award to the incremental value that the patented invention added to the end product. The evidence showed that the damages award in the Vonage case of $1.37 per subscriber per month was approximately five percent of Vonage’s total VoIP revenues for the infringement period. The jury settled on the same amount for the damages award in this case as in the Vonage case. The evidence indicates that the jury’s damages award was based on the value of what was taken from Sprint, not the value of unpatented features of Time Warner’s VoIP system. The jury had an adequate basis from which to find that damages should be awarded in the amount of $1.37 per VoIP subscriber per month. As a result, the court concluded that the jury’s verdict was supported by sufficient evidence and did not contravene the principles of apportionment.

Written description requirement. The court then turned to Time Warner’s argument that both the call control patents and the broadband patents were shown to be invalid for failure to satisfy the written description requirement set forth in 35 U.S.C. § 112. The written description issue was submitted to the jury on instructions that are not objected to on appeal. Through its verdict, the jury found that the written description requirement was satisfied with respect to both the call control patents and the broadband patents. The appeals court could not conclude that Time Warner has shown by clear and convincing evidence that the call control specification lacks an adequate written description to support the asserted claims. Although the broadband patents focus on ATM technology, Time Warner failed to meet its burden of showing by clear and convincing evidence that the common specification of the broadband patents lacks an adequate written description of claimed subject matter in those patents.

Broadband patents under the doctrine of equivalents. Finally, the court considered whether the evidence was insufficient to support the jury’s verdict that the broadband patents were infringed under the doctrine of equivalents. At trial, Sprint introduced evidence that Time Warner’s MGX8880 media gateway, which uses an IP card to convert data to IP packets, was interchangeable with an ATM interworking multiplexer, and therefore satisfied the "interworking unit" limitation under the doctrine of equivalents. The evidence of interchangeability was sufficient to sustain the jury’s verdict. In addition, an expert testified at length regarding how Time Warner’s IP system satisfied the function-way result test for equivalency for each of the asserted broadband claims. Therefore, the evidence was sufficient to support the jury’s verdict.

Dissenting opinion. In his dissenting opinion, Judge Mayer argued that the patents asserted by Sprint are invalid as a matter of law because their specifications provide no written description support for the full breadth of the asserted claims. Sprint’s argument that the specification does not require the selection of all of the network elements and connections in a communications path fails, he opined. The specification refers to establishing a communications path and contains nothing even arguably suggesting that a fixed communications path will not be established, as would be the case if the claimed invention encompassed IP technology, in Judge Mayer’s view.

This case is No. 2017-2247.

Attorneys: J. Michael Jakes (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for Sprint Communications Co., L.P. John C. O'Quinn (Kirkland & Ellis LLP) and Matthew Philip Downer (Arnold & Porter Kaye Scholer LLP) for Time Warner Cable, Inc., Time Warner Cable, LLC, Time Warner Entertainment Co., L.P., Time Warner Entertainment-Advance/Newhouse Partnership and TWC Communications, LLC.

Companies: Sprint Communications Co., L.P.; Time Warner Cable, Inc.; Time Warner Cable, LLC; Time Warner Entertainment Co., L.P.; Time Warner Entertainment-Advance/Newhouse Partnership; TWC Communications, LLC

MainStory: TopStory Patent TechnologyInternet FedCirNews

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