Damages expert evidence based on reliable methods is improperly excluded; no per se rule precluding injunctions for SEPs

Federal Circuit affirms-in-part and reverses-in-part claim construction rulings, reverses rulings excluding damages evidence, vacates grant of summary judgment that neither party is entitled to damages, vacates summary judgment regarding Apple's request for an injunction, and affirms denial of Motorola's request for injunction based on infringement of its FRAND-committed patent.

Apple Inc., et al v. Motorola, Inc., et al, __ F.3d __ (Fed. Cir. Apr. 25, 2014) (Rader, Prost, REYNA) (N.D. Ill.: Posner, by designation) (4 of 5 stars)

CLAIM CONSTRUCTION: 1) summary judgment of noninfringement was vacated because the "heuristic" limitations in the '949 patent were not in means-plus-function form; the strong presumption that 112/6 (112/f) does not apply to limitations lacking the term "means" had not been overcome; 2) plain meaning and the specification supported construction of "analyzer server," whereas Apple's proposed construction read "analyzer server" out of the claim; 3) plain meaning and the specification, including Figure 4, supported the construction of "linking actions to the detected structures"; 4) the construction of "realtime application program interface" did not read "realtime" out of the claim and was supported by the claims and the specification; 5) claim language and the specification supported the construction of "preamble sequence," requiring the third step (multiplying step) to be performed only after the first and second steps were performed; and 6) the specification and statements made during prosecution of related Japanese application supported the construction of "transmit overflow sequence number."

DAMAGES/EXPERT TESTIMONY: As the gatekeeper of evidence, a district court may exclude evidence that is based on unreliable methods or principles, but it must be cautious not to overstep its role by performing tasks reserved for the fact-finder. In the context of patent damages, more than one method may be reliable because estimating a reasonable royalty "is not an exact science" and thus "the record may support a range of reasonable royalties." Slip Op. at 41.

As for Apple's '949 patent, excluding Apple's proposed testimony was improper because the district court 1) based its analysis on an incorrect claim construction, 2) failed to consider the full scope of the infringement, and 3) questioned the factual underpinnings of the testimony, rather than the method's reliability. Summary judgment of no damages on Apple's '263 patent was vacated because the damages testimony was improperly excluded for the sole reason that the damages expert relied on a technical expert hired by Apple. "Experts routinely rely upon other experts hired by the party they represent for expertise outside of their field."  Id. at 52. Any potential bias could be addressed by the weight (not admissibility) given to the testimony and could be exposed through cross-examination. Summary judgment of no damages on Motorola's '898 patent was also vacated, because its expert testimony should not have been excluded, except for a portion relying on the declaration of one of Motorola's licensing experts who failed to tie his opinion to the claimed invention. The remainder of the testimony was not inadmissible, however, simply because the expert did not address other non-infringing alternatives. There is no "requirement that a patentee value every potential non-infringing alternative in order for its damages testimony to be admissible." Id. at 60. Use of "sufficiently comparable licenses is a generally reliable method of estimating the value of a patent." Id. at 60. On Apple's '647 patent, the issues was not admissibility, but sufficiency, and Motorola did not meet its burden to show absence of any genuine issue of material fact that zero was the only reasonable royalty, whereas Apple presented evidence that it was entitled to a non-zero reasonable royalty. Moreover, "simply because a patentee fails to show that its royalty estimate is correct does not, by itself, justify awarding a royalty of zero at summary judgment." Id. at 66.

INJUNCTION: The Federal Circuit's reversal on claim construction meant that denial of an injunction to Apple on the '949 needed to be vacated.

But refusal of an injunction on Motorola's standards-essential '898 patent was affirmed: there is no per se rule that injunctions are unavailable for SEPs, although FRAND commitments are relevant to the injunction analysis in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Although a patentee who agrees to FRAND terms may have difficulty establishing irreparable harm or that damages are not an adequate remedy, an injunction may be justified where an infringer unilaterally refuses a FRAND license or unreasonably delays negotiations. Because the record had no evidence of irreparable harm by Motorola or any unilateral refusal by Apple, Motorola was not entitled to an injunction.

J. RADER (Dissenting In Part): Judge Rader dissented from the affirmance of the denial of Motorola's injunction. He believed the record contained evidence sufficient to create a genuine issue of material fact as to whether Apple acted as an unwilling licensee. Moreover, the complex and fact-intensive nature of FRAND valuation renders the subject "not likely to be susceptible to summary adjudication." J. Rader DIP Slip Op. at 2.

J. PROST (Concurring in Part, Dissenting in Part): In Judge Prost's view: 1) the "heuristic" claim limitations were MPF limitations, 2) Apple's damages expert's testimony was inherently unreliable because he relied on a benchmark commercial product that did not have any of the claimed functionality; 3) Apple was not entitled to an injunction based on its failure to show irreparable harm; and 4) Motorola is not entitled to an injunction, but a party's pre-litigation conduct in licensing negotiations should not impact the availability of injunctive relief.