While I was taking a blogging break last week, the Federal Circuit issued a precedential opinion in TecSec Inc. v. Adobe, Inc., opinion by Judge Taranto, joined by Chief Judge Prost and Judge Reyna. The principal substantive issues relate to patentable subject matter and induced infringement. On the latter, the general rule, according to the U.S. Supreme Court's decision in Commil USA, LLC v. Cisco Systems, Inc., is that a defendant cannot be liable for active inducement if it had a good-faith belief that the conduct it was inducing was noninfringing. The Federal Circuit holds here, however, that even if Adobe had an objectively good-faith basis for believing that the conduct it was inducing was infringing--which it did, during the relevant time period, because the district court had so held, prior to being reversed in an earlier appeal on claim construction--it could still be liable if it had a subjective belief that the conduct was infringing. So the matter will have to be retried on that subjective theory, which (to me at least) seems like a colossal waste of resources: how can it subjectively unreasonable to rely on a district court's claim construction, and what exactly is the point of making inducement liability hinge on evidence that a defendant should have doubted the correctness of the district court's decision? But I'll leave those issues aside and focus on damages. The court below also held that Adobe couldn't be liable for damages for direct infringement, because TecSec hadn't proven any damages resulting from the direct infringement, and on this issue the Federal Circuit affirms:
TecSec argues that because the jury found direct infringement of each asserted claim, 35 U.S.C. § 284 entitles TecSec to a non-zero reasonable royalty. Specifically, TecSec highlights § 284’s statements that “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty” and that “[w]hen the damages are not found by a jury, the court shall assess them.” 35 U.S.C. § 284. Taken together, TecSec contends, those statements require an award of damages greater than zero in all cases where the jury finds infringement.
The statute does not require an award of damages if none are proven that adequately tie a dollar amount to the infringing acts. We have explained that “a patent owner may waive its right to a damages award when it deliberately abandons valid theories of recovery in a singular pursuit of an ultimately invalid damages theory.” Promega Corp. v. Life Techs. Corp., 875 F.3d 651, 666 (Fed. Cir. 2017). More generally, we have observed that there can be an award of no damages where “none were proven.” Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 509–10 (Fed. Cir. 1990); cf. Gadsden Indus. Park, LLC v. United States, 956 F.3d 1362, 1372 (Fed. Cir. 2020) (Takings Clause does not require an award of compensation without adequate proof). Although we have not upheld a zero royalty rate in a case with an affirmative infringement finding—and have stated that it is “unlikely” that a hypothetical negotiation would result in a zero royalty rate—we have previously stated that “in a case completely lacking any evidence on which to base a damages award, the record may well support a zero royalty award.” Apple, Inc v. Motorola, Inc., 757 F.3d 1286, 1328 n.7 (Fed. Cir. 2014).
In this case, TecSec presented no evidence of damages caused by Adobe’s direct infringement, which was the only form of infringement that the jury found Adobe to have committed. . . . TecSec did not, for example, provide any evidence regarding the number of Adobe employees in the United States or the number of times that Adobe employees installed Acrobat. . . . TecSec’s only damages evidence relied on “sales of accused products.” E.g., J.A. 12840, 12842–44, 12854–56, 12866; see also J.A. 13499–500 (TecSec’s closing argument, stating, “all that TecSec is asking for here, a reasonable royalty based on [Adobe’s] sales of Acrobat products”). But the district court found, and TecSec does not dispute, that direct infringement occurs only after Acrobat is installed. . . . Sales of Acrobat, therefore, cannot be a measure of damages for direct infringement by Adobe—sales could serve here as a measure of damages only for TecSec’s indirect infringement theory, which relies on infringement by Adobe customers. But the jury found no indirect infringement.
On appeal, TecSec tries to rationalize the jury’s award by theorizing ways the jury could have used sales data to derive a value for Adobe’s conduct. For instance, TecSec argues that the jury could have decided that sales were a good proxy for the value of TecSec’s patented invention to Adobe’s development of Acrobat. . . . But this theory, like the others that TecSec offers, is ultimately speculative and insufficiently grounded in evidence. The district court therefore committed no error in concluding that the jury’s damages award was not supported by the evidence (pp. 19-20).
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