Tag: method patent

Packet Intelligence LLC v. NetScout Systems, Inc. (Federal Circuit Opinion, July 14, 2020)

While this opinion arrived on our desk months ago, we feel it a necessary one to discuss. Defendant NetScout appealed a jury verdict and judgment order from Judge Gilstrap in the Eastern District of Texas. Relevant to our inquiry, the Federal Circuit reversed Judge Gilstrap’s findings on pre-suit damages, and it also clarified an opaque issue regarding method patents and damages.

Judge Gilstrap and the jury found for the plaintiff, Packet Intelligence, awarding pre-suit damages, post-suit damages and enhanced damages. Pre-suit damages hinged on two issues, with the district court agreeing: 1) with plaintiff Packet Intelligence that it was defendant NetScout’s burden to prove lack of marking; and 2) that method claims may be considered infringing for purposes of damages calculations, if the accused product is capable of infringing. The Federal Circuit reversed on both these issues.

Regarding the first issue, Packet Intelligence had licensed the patent-in-suit to several companies, including Exar, which sold a MeterFlow product that arguably practiced. This was important for damages analysis: if the MeterFlow product practiced the asserted patent, but Exar did not mark, then the damages period could not predate filing of the complaint or “notice.” Packet Intelligence successfully argued to the district court that it should be NetScout’s burden to prove the MeterFlow product practiced the patent and was not marked. NetScout argued that it was Packet Intelligence’s burden to show that the product did not practice, or was a marked and practicing product.

The Federal Circuit explained which party bore the burden of marking of licensed products:

The Federal Circuit found that the district court’s jury instruction was in “tension” with this guidance. The Federal Circuit explained that the alleged infringer bore the initial burden of identifying unmarked products and the patent holder and licensor bore the burden of demonstrating that the products identified did not practice the asserted patent:

Regarding the second issue, Packet Intelligence argued that it should be awarded pre-suit damages, if not on the marking issue, then on the fact that a patent holder may pursue damages up to six years prior to a complaint filing, if those asserted are method patents. The idea behind this rule is that one cannot mark a product with a method patent, because it is only practiced if the method is used, while the product itself is not infringing absent such specific use.

Packet Intelligence argued that asserted method claims were directly infringed by NetScout through the latter’s testing prior to filing of the complaint, and as a result, that pre-suit damages should be available. The Federal Circuit, however, disagreed:

This matter provides important guidance to attorneys and experts alike regarding both appropriate royalty bases and damages time periods.

Johns Hopkins University v. Alcon Laboratories, Inc. et al. (Order Issued April 25, 2018)

Judge Lawrence Stengel of the District of Delaware, Sitting by Designation, approved and adopted the recommendations of Magistrate Judge Sherry Fallon.  Among other recommendations, Judge Fallon recommended denying the motion to exclude plaintiff’s damages expert.

The case involves a method patent for performing eye surgery.  Alcon moved to exclude Brian Napper, plaintiff’s expert, based on alleged violation of the entire market value rule for his use of product and ancillary sales in his royalty base.  Mr. Napper relied upon a comparable patent licensing analysis to support his royalty base which included more than the accused cannula at issue.

Citing to Commonwealth Scientific and Industrial Research Organization (“CSIRO”) v. Cisco, Judge Fallon noted that the royalty base in the comparable license and the one contemplated by Mr. Napper were the same.

Judge Fallon also noted that Mr. Napper provided some accounting for non-infringing uses.  Accordingly, she recommended denying the Daubert motion related to these issues.

An additional issue that arose in the motions for summary judgment was whether the reasonable royalty could be tied to defendant’s sales.  Alcon explained that Alcon would not infringe the patented method because it only sells products; it does not use the products in an infringing manner.  Thus, Alcon reasoned, its sales are not the proper royalty base.  Judge Fallon denied Alcon’s motion because Johns Hopkins showed that the product was purchased for use in an infringing way and because both damages experts (for plaintiff and for defendant) used Alcon sales as the basis for their royalty base.