November 21, 2017

Intervening Rights Apply When There Is a Product that Infringes the Original Claim that Does Not Infringe the Amended Claim

By Bryan K. Wheelock, Principal

In Presidio Components, Inc. v. American Technical Ceramics Corp. [2016-2607, 2016-2650] (November 21, 2017), the Federal Circuit affirmed the district court’s holdings that the claims are not indefinite and that American Technical Ceramics Corp. (ATC) is entitled to absolute intervening rights because a substantive amendment was made during reexamination, but reversed the award of lost profits and remanded for determination of a reasonable royalty.

The case involved U.S. Patent No. 6,816,356 on a multilayer capacitor.

1. A capacitor comprising:
a substantially monolithic dielectric body;
a conductive first plate disposed within the dielectric body;
a conductive second plate disposed within the dielectric body and forming a capacitor with the first plate;
a conductive first contact disposed externally on the dielectric body and electrically connected to the first plate; and
a conductive second contact disposed externally on the dielectric body and electrically connected to the second plate, and
the second contact being located sufficiently close to the first contact in an edge to edge relationship in such proximity as to form a first fringe-effect capacitance with
the first contact that is capable of being determined by measurement in terms of a standard unit.

Regarding indefiniteness, the claim required “first fringe-effect capacitance with the first contact that is capable of being determined by measurement in terms of a standard unit.”  Although industry standards for insertion loss testing had not been published at the time the patent was filed, Presidio’s expert testified that insertion loss testing had been well known for many decades and that a person of ordinary skill could use insertion loss measurements to measure capacitance in terms of Farads, the standard unit of measurement for capacitance.

Presidio’s expert further testified that a person of skill in the art would know how to measure fringe-effect capacitance by using insertion loss measurements.  The Federal Circuit said that a claim is not indefinite if a person of skill in the art would know how to utilize a standard measurement method, such as insertion loss, to make the necessary measurement, adding that a patent need not explicitly include information that is already well known in the art.

The Federal Circuit noted that if a skilled person would choose an established method of measurement, that may be sufficient to defeat a claim of indefiniteness, even if that method is not set forth in haec verba in the patent itself.

On the issue of intervening rights, Presidio contested the application of absolute intervening rights.  The Federal Circuit observed that the owner of a patent that survives reexamination is not entitled to infringement damages for the time period between the date of issuance of the original claims and the date of issuance of the reexamined claims if the original and amended claims are not “substantially identical.  In other words, the Federal Circuit said, if an amendment during reexamination makes a substantive change to an original claim, the patentee is only entitled to infringement damages for the changed claim for the period following issuance of the reexamination certificate.

The Federal Circuit reviewed the district court’s assessment of the scope of the original and reexamined claims de novo, and agreed that the scope had changed.  Presidio argued that the scope of the claims did not change because its stated goal in amending the claims was to adopt the district court’s construction in prior litigation.  However, the Federal Circuit said that the patentee’s intent in making the amendment is not determinative or controlling in determining claim scope.

The relevant inquiry is whether the scope of the amended claims is actually identical to the scope of the original claims based on normal claim construction analysis, articulated in Phillips.  To determine whether an amended claim is narrower in scope, one determines whether there is any product or process that would infringe the original claim, but not infringe the amended claim.  The Federal Circuit found that while the construction of the prior claim required that the fringe capacitance be determined, it did not specify it be determined by testing, as the amended claim required, so the claims did in fact have different scopes.

On the issue of lost profits, Presidio claimed lost profits for its sales of the BB capacitors, which Presidio claimed were adversely affected by the sale of ATC’s infringing 550 line of capacitors.  To recover lost profits, Presidio had to show a reasonable probability that, “but for” infringement, it would have made the sales that were made by the infringer.  “But-for” causation can be proven using the four factor test in Panduit, which requires the patentee to show:

  1. Demand for the patented product
  2. An absence of acceptable, noninfringing substitutes
  3. Manufacturing and marketing capability to exploit the demand
  4. The amount of profit that would have been made

A patentee can recover lost profits even if its product does not practice the claimed invention, where the product directly competes with the infringing device.  Although the BB capacitor does not practice the ’356 patent, Presidio could still recover lost profits because the BB capacitor competes directly with the infringing 550 capacitors.  However, the correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringing product.  Thus, while defendant’s 560L product was not a an adequate substitute for the accused 550 product, it might be an adequate non-infringing substitute for Presidio’s BB.

The Federal Circuit found that Presidio failed to prove that the 560L was not an acceptable substitute for its BB product, and reversed the award of lost profits, and remanded for a determination of a reasonable royalty.

The Federal Circuit found no abuse of discretion in the district court’s refusal to award increased damages despite the finding of willfulness.  The Federal Circuit also vacated the injunction in view of its reversal of the lost profits award, and remanded the case for the district court to redetermine the propriety of a permanent injunction.