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From Intellectual Property Law Daily, March 16, 2017
By Cheryl Beise, J.D.
Substantial evidence supported an Oregon jury’s infringement verdict and $36 million damages award to Mentor Graphics for rival Synopsys’ infringement of simulation/emulation technology patent, the U.S. Court of Appeals for the Federal Circuit has decided. The district court’s denial of judgment as a matter of law was upheld. However, because the district court erred by precluding evidence of Synopsys’ willful infringement, the case was remanded for trial of that issue and assessment of Mentor Graphics’ claim for enhanced damages. The appeals court also reversed several of the district court’s summary judgment rulings, clearing the way for Mentor to pursue claims for infringement of three additional patents and for Sysopsys to pursue a counterclaim for infringement of one patent (Mentor Graphics Corp. v. EVE-USA, Inc., March 16, 2017, Moore, K.).
The appeal arose from litigation in the federal district court in Portland, Oregon, between Mentor Graphics Corp. ("Mentor") and Synopsys, Inc., Synopsys Emulation and Verification S.A.S., and EVE-USA, Inc. (collectively, "Synopsys"). Synopsys acquired EVE-USA from Mentor in 2012. Mentor asserted several patents against Synopsys, including U.S. Patent Nos. 6,240,376 ("the ’376 patent"), 6,947,882 ("the ’882 patent"), 6,009,531 ("the ’531 patent"), and 5,649,176 ("the ’176 patent"). Synopsys asserted two patents against Mentor—U.S. Patent Nos. 6,132,109 ("the ’109 patent") and 7,069,526 ("the ’526 patent"). Every patent in the case involved simulation/emulation technology.
Summary judgment rulings. The district court issued several summary judgment rulings. The court held that the claims of Mentor’s ’882 patent were invalid for lack of written description support. The court also held that both Synopsys patents were invalid: the ’109 patent as indefinite, and the ’526 patent for claiming ineligible subject matter. The court ruled that Mentor’s infringement allegations relating to the ’531 and ’176 patents were barred by claim preclusion.
The ’376 patent trial. Mentor’s ’376 patent was the only patent to survive summary judgement challenges and be tried to a jury. Prior to trial, the district court granted summary judgment barring Synopsys from challenging the ’376 patent’s validity because of assignor estoppel. It also granted Synopsys’ motion in limine precluding Mentor from introducing evidence of willful infringement. The jury found in favor of Mentor on liability and awarded damages of approximately $36,000,000. Following trial, the district court denied Synopsys’ motion for judgment as a matter of law (JMOL).
The parties filed cross-appeals challenging unfavorable rulings and trial results. The Federal Circuit affirmed-in-part, reversed-in-part, and remanded the case for further proceedings.
Issues on Appeal
Assignor estoppel—the ’376 patent. Prior to trial, the district court held that the doctrine of assignor estoppel barred Synopsys from challenging the validity of the ’376 patent. Assignor estoppel is a judicially created doctrine that prohibits the inventors or assignors of a patent from later challenging the patent’s validity. Synopsys did not challenge that the doctrine applied in this case, but argued that the doctrine was implicitly invalidated when the Supreme Court abolished licensee estoppel in Lear, Inc. v. Adkins, 395 U.S. 653 (1969). The Federal Circuit disagreed, and affirmed the district court’s ruling.
Infringement verdict—the ’376 patent. The jury found Synopsys’ "ZeBu" emulation and verification system infringed claims 1, 24, and 26–28 of the ’376 patent and awarded damages. Following trial, the district court denied Synopsys’ motion for JMOL that its products did not infringe. The ’376 patent relates to debugging source code after synthesis. Synthesis is the process of transforming Hardware Description Language ("HDL") into gate-level "netlists." Much of the patent’s disclosure addresses Register Transfer Level ("RTL") source code, which is a subset of HDL.
The Federal Circuit agreed with the district court that substantial evidence at trial supported the jury’s finding that Synopsys’ accused system infringed the ’376 patent. Synopsys argued that its ZeBu emulators did not "indicate" an RTL statement, but instead merely provided the name of a block of RTL that a developer can use to locate corresponding code. However, testimony at trial established that a developer using the ZeBu emulator could create a test file called a "Tcl" file and input test probes into a netlist using the "probe signals" command. The expert explained how a developer could use the simulation results to locate a particular line of RTL code corresponding to an instrumentation signal. Thus, there was sufficient evidence to support the finding that the instrumentation signal indicates at least one RTL statement, the court said.
Damages award— the ’376 patent. The jury awarded Mentor $36,417,661 in lost profits and another $242,110 in reasonable royalties for Synopsys’ infringement of the ’376 patent. Synopsys argued that the damage award should be vacated because the district court failed to apportion the lost profits. According to Synopsys, Mentor was only entitled to the amount of profit properly attributable to its patented features.
The Federal Circuit did not agree. The goal of lost profit damages is to place the patentee in the same position it would have occupied had there been no infringement. In this case, the relevant market (suppliers of emulators to Intel) was made up of only two parties, Synopsys and Mentor. The jury found that there was no acceptable alternative to the parties’ emulators. Thus, for each infringing sale it made to Intel, Mentor lost that sale and the associated profits, for a total of $36,417,661. In view of the undisputed facts of this case, the court held that apportionment was properly incorporated into the lost profits analysis, in particular through application of the Panduit factors, first articulated by the Sixth Circuit for determining lost profits. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). In other words, Mentor’s damages were tied to the worth of its patented features. "We leave for another day whether a different theory of ‘but for’ damages adequately incorporates apportionment principles," the court said.
Willful infringement—the ’376 patent. The district court granted a motion in limine precluding Mentor from presenting evidence of willful infringement of the ’376 patent. The court held that Mentor was precluded from presenting evidence of willfulness because it relied exclusively on post-suit willfulness conduct, and because it had not first sought a preliminary injunction.
However, there is "no rigid rule" that a patentee must seek a preliminary injunction in order to seek enhanced damages, the Federal Circuit said. The appeals court also explained that the relevant date for determining which conduct is "pre-suit" is the date of the patentee’s affirmative allegation of infringement, in this case the date of Mentor’s counterclaim. Mentor relied on Synopsys’ acquisition of EVE, which terminated the parties’ license and rendered all subsequent sales infringing. Because these events occurred after the declaratory judgment was filed, but prior to Mentor’s counter-claim for infringement, the alleged acts of infringement were pre-suit acts, according to the court, and there was no basis for excluding Mentor’s evidence of willfulness.
The district court’s grant of the motion in limine was vacated for abuse of discretion and the issues of willfulness and enhanced damages remand for further proceedings, consistent with the Supreme Court’s Halo decision.
Mentor’s ’882 patent—indefiniteness. The district court granted summary judgment that claims 7, 9, and 13 of the ’882 patent were invalid for lack of written description The Federal Circuit reversed. The ’882 patent discloses an emulator comprised of a series of field programmable gate arrays. The court noted that very language of claim 1, which the district court held was not supported by the specification, was present in the originally-filed claims. Original claims are part of the original specification and in many cases will satisfy the written description requirement, the Federal Circuit explained. The claims at issue raised none of the genus/species concerns that caused the court in other cases to question whether originally filed claims satisfy written description, the court added.
Claim preclusion—Mentor’s ’531 and ’176 patents. The Federal Circuit reversed the lower court’s summary judgment that Mentor’s infringement allegations regarding the ’531 and ’176 patents were barred by claim preclusion. Both patents were litigated in a 2006 lawsuit between Mentor and EVE. The case was settled when EVE took a license to the asserted patents, and Mentor dismissed its claims with prejudice. Synopsys’ 2012 acquisition of EVE automatically terminated the Mentor/EVE license.
Claim preclusion does not bar infringement claims with respect to accused products that were not in existence at the time of the prior litigation, the appeals court said. The Federal Circuit has held that for products made or sold after the prior action, it does not matter whether the new products are "essentially the same" as the previously accused products. Mentor’s infringement allegations in this case as to the ’531 and ’176 patents were based on alleged acts of infringement that occurred after the Mentor/EVE license terminated and were not part of the previous lawsuit. Claim preclusion does not bar a patentee from bringing infringement claims for acts of infringement occurring after the final judgment in a previous case. A licensee should not be able to use the fact that it voluntarily terminated a license as a shield against future infringement liability, the court remarked.
Synposis ’109 patent—indefiniteness. The district court granted summary judgment that claim 1 of Synopsys’ ’109 patent is indefinite. The’109 patent discloses "a method for displaying the results of synthesized circuit analysis visually near the HDL source specification that generated the circuit." The patent "relates" circuit analysis results with the HDL corresponding to a particular result, and then places the two pieces of information "near" each other on the display screen. The Federal Circuit reversed the grant of summary judgment of indefiniteness, based on its finding that the term "near" was not ambiguous, but informed those of skill in the art about the scope of the invention with reasonable certainty.
Synposis ’526 patent—eligibility. The district court granted summary judgment that claims 19, 24, 28, 30, and 33 of Synopsys’ ’526 patent lack patentable subject matter under Section 101 on the ground that the "claims embrace unpatentable electromagnetic carrier waves." Because the challenged ’526 claims were expressly defined by the specification to cover carrier waves, the claims covered carrier signals themselves. The Federal Circuit has previously held that claims covering a "transitory, propagating signal" did not fall within any statutory category of subject matter: process, machine, manufacture, or composition of matter." In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007). The appeals court affirmed summary judgment that Synopsys’ ’526 patent lacks eligible subject matter.
Summary. The Federal Circuit held that there was substantial evidence to support the jury’s infringement verdict regarding the ’376 patent and affirmed the district court’s denial of judgment as a matter of law. The jury’s damages award was affirmed. The appeals court also affirmed summary judgment that assignor estoppel barred Synopsys from challenging the validity of the ’376 patent. Summary judgment that Synopsys’ ’109 patent is indefinite was reversed, but summary judgment that Synopsys’ ’526 patent lacks eligible subject matter was affirmed. The court vacated the district court order granting the motion in limine precluding Mentor from presenting evidence of willful infringement and remanded for a trial of that issue and assessment of Mentor’s claim for enhanced damages. The summary judgment that Mentor’s ’882 patent lacks written description support was reversed. Also revered was the summary judgment that Mentor’s infringement allegations regarding the ’531 and ’176 patents were barred by claim preclusion.
The case is Nos. 2015-1470, 2015-1554, 2015-1556.
Attorneys: Mark E. Miller (O’Melveny & Myers LLP) for Mentor Graphics Corp. Synopsys, Inc., and Synopsys Emulation and Verification S.A.S. E. Joshua Rosenkranz (Orrick, Herrington & Sutcliffe LLP) for EVE-USA, Inc.
Companies: Mentor Graphics Corp.; Synopsys, Inc.; Synopsys Emulation and Verification S.A.S.; EVE-USA, Inc.
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