Federal Circuit Affirms that Lucent’s $1.5B Patent Victory is Gone

Lucent v. Gateway, Dell, & Microsoft (Fed. Cir. 2008)

Lucent’s two patents cover a compression method for MP3 digital audio files. The case originally resulted in a $1.5 billion jury award for Lucent. The district court, however set aside the jury verdict. That decision is affirmed here on appeal. Lucent’s problems stem from (1) joint ownership of its ‘080 patent and (2) failure to provide even one specific instance when the Microsoft’s encoder actually infringed the ‘457 patent.

“Lucent has failed to provide sufficient evidence to establish that the High Quality encoder actually runs on Windows Media Player and thus it would be too speculative to conclude that Windows Media Player necessarily infringes the ‘457 patent.”

This case provides important lessons for both inventorship and proving infringement. More to come.

32 thoughts on “Federal Circuit Affirms that Lucent’s $1.5B Patent Victory is Gone

  1. 32

    ” Bloom, respectfully, do you have an opinion on that?”

    I’ve got an opinion on almost everything, but I don’t know what would be motivating applicants to cancel allowed method claims. If the Patent Office’s recent position on method claims prevails in Bilski (per its brief, a method claim must be “tied” to another statutory class) then there are potentially a lot of invalid method claims out there. But cancellation ahead of time would seem to be premature, as I don’t know why those claims would contaminate the corresponding apparatus.

    There are also a lot of method claims out there that are essentially worthless because they require two independent parties to infringe them. In view of recent case law on this subject, perhaps some applicants are canceling this type of claim?

  2. 31

    Bloom is correct …

    RIMM in one of its many many workarounds did separate aspects of its systems so that not all of the elements of the allegedly infringing product were physically located in the US … the servers for instance were mostly in ontario

    as for method & apparatus claims in some of the related cases ATT et al, MP3 can be separated into an encoder & decoder but the original emphasis was on a CODEC – phone companies were ahead of the curve likely a result of wanting to squeeze more “audio” over copper lines – a possible reason for the re-issue of the decoder apparatus claim? not sure …

    but, there have been made patents in this art where applicants have been reluctant to have method claims – even canceling the method claims alone after allowance – asked several examiners about that & cant seem to understand why … Bloom, respectfully, do you have an opinion on that?

  3. 30

    “After reviewing Joy v Flact, I wonder if there is a distinction between selling a machine that is capable of infringing a method claim and selling a machine (e.g. software + computer) that is ONLY capable of infringing a method claim.”

    Sure there is, but not a meaningful one. You might want to read the discussion of the legislative history in RIM v. NTP again. You can look for distinctions all day, but you’re swimming against a strong current, vis a vis the Supreme Court’s pronouncement in Deepsouth Packing v. Laitram.

  4. 29

    “It’s hard to imagine any method that — if you prove (1) that the method was performed once and (2) that the defendant induced that performance — would have damaged any plaintiff to the tune of 1.5 billion dollars.”

    Not hard at all, if the one use was to test and verify functionality and if the successful test was required to bring the product to market.

    But you make a good point if the one use was strictly at the user level. The issue would then be not so much was there infringement, since that has been demonstrated, but the damages to the plaintiff.

  5. 28

    However, 35 USC 271 doesn’t distinguish between direct or indirect infringement. It distinguishes between infringement and contributory infringement.

    More importantly (here I go yet again, but with additional ammunition), the Supreme Court’s eBay Opinion doesn’t wash with 35 USC 271 (d) !

    And since 35 USC 271 (d) was legislated lawfully under the Constitution, the Supreme Court cannot lawfully rule as it did in eBay!, because its eBay ruling is in conflict with 35 USC 271 (d), to wit:

    “(d) NO PATENT OWNER otherwise entitled to relief for infringement or contributory infringement of a patent SHALL BE DENIED RELIEF or deemed guilty of misuse or illegal extension of the patent right BY REASON OF his having done one or more of the following:

    (4) refused to license or use any rights to the patent; …”

    Therefore, if an ordinary inventor refuses to license or use his patent, he is nonetheless entitled to relief as specified in 35 USC 154 which is derived (as directly as can be) from the Constitution’s “Patent Clause.”

  6. 27

    This is another general question about
    35 U.S.C. 271 Infringement of patent.
    (a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

    (b) Whoever actively induces infringement of a patent shall be liable as an infringer.

    (c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

    I always assumed that, according to 35 USC 271, any infringement under (a) was direct infringement; and, anything under (b) or (c) was indirect infringement.

    Am I right?

  7. 26

    After reviewing Joy v Flact, I wonder if there is a distinction between selling a machine that is capable of infringing a method claim and selling a machine (e.g. software + computer) that is ONLY capable of infringing a method claim.

    Joy v Flact cites Philad Co. v. Lechler Lab., Inc., 107 F.2d 747, 748, 43 USPQ 284, 286 (2d Cir.1939) (“The patent sought to be enforced is on a process of waving hair. It does not give the plaintiff a monopoly in the appliances by which the process is operated.”) Getting a patent on a process for waving hair should not give you a monopoly on hair brushes.

    One the other hand, software can be extraordinarily specific in the utility it provides. For a given set of inputs, it carries out a unique set of steps. If the only substantial utility of the High Quality encoder is to carry out the steps of the ’080 patent, then it seems to me that selling the software is one and the same as selling the method.

  8. 25

    Mark Nowotarski asked, “Is the court saying that if Lucent could provide clear and convincing evidence of only one computer executing the patented method (i.e. High Quality encoder running on Windows Media Player 10) that it would have found in favor of Lucent?”

    No. Where A = Evidence of Direct Infringement and where B = $1.5 Billion Award is Appropriate, the court said Not A –> Not B. You’re applying the logical fallacy of denying the antecedent (if I remember it correctly). You’re asking, since Not A –> Not B, is the court saying A –> B. The court isn’t saying that.

    It’s hard to imagine any method that — if you prove (1) that the method was performed once and (2) that the defendant induced that performance — would have damaged any plaintiff to the tune of 1.5 billion dollars. But one use of an mp3 encoder??? That wouldn’t amount to 1.5 dollars.

  9. 23

    “Don’t be too hasty. In NTP v RIM, the Court held that “We need not and do not hold that method claims may not be infringed under the ‘sells’ and ‘offers to sell’ prongs of section 271(a). “ The court was certainly not encouraging plaintiffs to take this tack, but the door is open a crack.”

    That’s a very tiny crack. NTP was not really on point, I think, because the disputed method was partially performed by RIM and partially by its customers, so it wasn’t about selling software that entirely embodies a method. In any event, despite the court’s (appropriate) refusal to make a broad holding, which you quote above, the accompanying discussion sends an unmistakable message that it would make such a holding in the correct case. The court discussed that the legislative history is crystal clear on this matter, and that the court has issued dicta on this point before: “A method is DIRECTLY infringed only by one practicing the patented method.” (Joy Technologies v. Flakt, 1993.)

  10. 22

    “Can one be guilty of infringement if one sells a piece of software embodying a patented method to a user and inducement to infringe when the user uses that patented method? This question I believe is academic because a court wouldn’t go past the direct infringement …”

    Notwithstanding Mark’s comment above (which I understand – but I disagree with his ‘common sense’ interpretation of selling), I don’t think anyone has ever been held liable (“guilty” is technically the wrong word) for direct infringement of a method claim by virtue of selling software that embodies that method. However, it is certainly possible to be liable for direct infringement of an apparatus or computer-readable medium claim AND be liable for inducement of a corresponding method. I’m not a litigator, but I don’t think it’s an academic question at all – if I’m a patentee I want to pursue both theories, and get a ruling on both, so that if one is overturned on appeal I have the other. I only get my damages once, of course.

  11. 21

    “You can’t ‘sell’ or ‘make’ a method”

    Don’t be too hasty. In NTP v RIM, the Court held that “We need not and do not hold that method claims may not be infringed under the ‘sells’ and ‘offers to sell’ prongs of section 271(a). “

    The court was certainly not encouraging plaintiffs to take this tack, but the door is open a crack. At the very least, “common sense” (KSR v Teleflex) dictates that if you sell several hundred million copies of a piece of software, and that software is specifically designed to carry out all the steps of a given method without any additional specific actions required by the user, you have “sold” the method. Having infringement turn on proving that merely one machine located in the US actually executed the method certainly “exalts form over substance”.

  12. 20

    Can one be guilty of infringement if one sells a piece of software embodying a patented method to a user and inducement to infringe when the user uses that patented method?
    This question I believe is academic because a court wouldn’t go past the direct infringement of selling (unless the user is a party to the case, which I imagine is possible. And if the user were a party, he‘d also (allegedly) be guilty of (direct) infringement.).
    (My questions are general and do not directly relate to Lucent.)

  13. 19

    “Why does it surprise you that a method claim isn’t infringed until the method is actually practiced?”

    I’m not surprised that you have to practice a method to infringe a method claim. What I’m surprised is that Lucent couldn’t provide better evidence or better claims. Is the court saying that if Lucent could provide clear and convincing evidence of only one computer executing the patented method (i.e. High Quality encoder running on Windows Media Player 10) that it would have found in favor of Lucent? If so, and with $1.5 billion at stake, it seems to me that at least one of the following actions would have been more than cost effective:

    1. Send the software off to the lab and tell them to make it execute the patented method (i.e. the “Hiqh Quality” encoder).
    2. Offer a bounty of $ 1 million to anyone who can make Windows Media Player 10 execute the High Quality encoder on their machine.
    3. Get the test records from all of the defendants and show that they ran the High Quality encoder during test. Find out how they made it run. I can’t imagine them installing the High Quality encoder as a backup system and not testing it.
    4. Write code to record when a machine runs the High Quality encoder and report back to Lucent when it was run and why. Offer $100 to the first million users to install it.

    I think you get the idea.

    The other question this raises is why didn’t Lucent patent the computer readable medium? I did a quick check on PAIR, and I didn’t see any child patents that have this type of claim. There is a child reissue (RE 40,280) that issued on April 29, 2008 that claims “A decoder for decoding a set of frequency coefficients” (claim 7), but I don’t know if this helps since Microsoft stopped including the High Quality encoder in 2006.

  14. 17

    You can’t “sell” or “make” a method, but you can “use” one. You can also induce infringement by selling software with the intent that the user practice an infringing method with it. However, the patentee still has to prove that someone actually used the method. That’s not quite what’s going on in this case, but the issue is similar – the patentee failed to prove that the method was ever used.

  15. 16

    But if you “sell” a patented method, why wouldn’t that constitute infringement?

  16. 15

    35 U.S.C. 271 Infringement of patent.

    (a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

    You can’t make a “method” per se.

  17. 14

    “Do I understand that correctly?”

    Yes. Why does it surprise you that a method claim isn’t infringed until the method is actually practiced? A properly written apparatus or computer-readable medium claim, on the other hand, would presumably have been infringed the moment the CD, hard-drive, etc. were configured.

  18. 13

    I have a question about infringing a software patent.

    This case seems to be saying that if you sell a license to a piece of software, and that software has instructions to perform a certain patented method, there is NO direct infringement of the patent until the method is actually run by a user. (see p 22 et seq. of the decision).

    Do I understand that correctly?

  19. 12

    This case has it all: multiple layers of continuations, inventorship/ownership conundrums, contract-law tension — very complex. And, yes, drama by the buckets-full. I think Proust did a great job on the opinion. I came away deluded that I understood the case after only 1 reading.

    Another nice piece of work is Patti Saris’ (sitting by designation) opinion in Israeli Bio-Engineering (CAFC, 2007), cited by Proust. Another complex case nicely laid out.

  20. 11

    by the way – how’s rimm doing these days now that it has been spending massively on US Patent assets the past 9 months ($350 mil in the 1st qtr alone)

    excited statesider, gladly taking loonies!

  21. 10

    but surely a “police state” resulting from bill c-61 is a bit more DRAMATIC, no? Copyright Law = “Police State” in the esteemed CBC story below – wow !!!
    link to cbc.ca

  22. 9

    And Americans wonder why foreigners think their patent laws are insane. Triple damages, jury awards, patent trolls, fraud on the patent office, file wrapper estoppel, Festo. Too much drama. Take a deep breath and calm down. No wonder we Canadians calls it “The Excited States of America”.

  23. 8

    Fraunhofer licensed the technology to Microsoft. So why would it want to join Lucent? Lucent claimed that it was the sole owner. It was wrong.

  24. 7

    “Lucent is required to join Frauhofer in any infringement suit involving the ’080 patent” because the two parties are co-inventors, co-owners, and analogously _co-tenants_ (so to speak) of the intellectual property. Each can rent or license their undivided co-interest to any other party. So, allowing one to sue without joining the other could permit a situation where one co-tenant quit-claims their right to sue for infringement, in consideration of a one-time royalty, and the other co-tenant then sues for ongoing royalties …

  25. 3

    AT&T and Fraunhofer co-owned the ’080 patent. As near as I can tell, Lucent took over AT&T’s interest in the patent. I’m not sure why, but “Lucent is required to join Frauhofer in any infringement suit involving the ’080 patent.” It is not clear as to why Lucent didn’t join Fraunhofer (mad at ’em? forgot? Gates brown nosers?) Any guesses?

  26. 2

    We “affirm the court’s grant of JMOL based on lack of standing for one patent and based on non-infringement for the other patent.” So someone with standing had a $1,538,056,702 honey pot sitting there and now they don’t? I once had a $1 lottery ticket that expired before I could claim it, but dang!

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