Patent Law

Sound & Fury

By Gary Odom and Jordan Kuhn

AT&T developed digital audio compression technology, for which it got patents. In 1988, to further the work, AT&T entered a joint development agreement with German company Fraunhofer Gesellschaft. The result was the MP-3 standard, as well as more patents covering the standard.

Lucent v. Gateway, Dell & Microsoft (CAFC 2007-1546, -1580)

In 2002, Lucent sued Gateway for shipping Windows computers. The accused infringement: Windows Media Player. 2003 brought Dell in. All this brought Microsoft in, as it indemnifies its hardware vendor customers. Microsoft had taken licenses from Fraunhofer, to put MP3 into its Windows Media Player. The separate cases were later consolidated.

The jury awarded damages in the amount of $1,538,056,702 ($769,028,351 for each of the '457 patent and the '080 patent), based on a 0.5% royalty rate for the value of the entire computer that performed the MP3 encoding functions.

The judge overturned the verdict, for lack of evidence of infringement for the earlier '457 patent, and lack of standing for the later '080, as Fraunhofer wasn't in on the act. The appeals court ended up agreeing with the district court.

How the different technologies developed at different times related to the claimed priority date was tedious determination. The later work ("New Work"), which is where the claims were found to came from for '080, involved Fraunhofer. So, with regard to standing, the suit could not be brought without Fraunhofer.

[A]t issue in Israel Bio-Engineering was whether one of the inventors listed on the patent (who, in turn, assigned his ownership rights) was required to be joined in the infringement lawsuit even though he had not invented the asserted claim. Similarly, here, the issue is whether Fraunhofer is an owner of the '080 patent even though it did not contribute to the invention of some of the claims. The answer in both cases is a resounding yes. Pope indeed dictates that patent rights cannot be split between claims, but Israel Bio-Engineering holds that an inventor of one or more claims of the patent is an owner of all claims of the patent.

AT&T, had the ability to file patent applications at its own discretion, and had the option to file separate applications on inventions constituting New Work and inventions constituting Existing Technology, or to include both inventions in a single application. See Israel Bio-Eng'g, 475 F.3d at 1267. Since AT&T chose the latter route, Lucent is required to join Frauhofer in any infringement suit involving the '080 patent.

Lucent failed to meet its burden of proving infringement for '457.

A patentee may rely on either direct or circumstantial evidence to prove infringement. Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1219 (Fed. Cir. 2006) (citing Moleculon Research Corp. v. CBS, Inc., 739 F.2d 1261, 1272 (Fed. Cir. 1986)). "In order to prove direct infringement, a patentee must either point to specific instances of direct infringement or show that the accused device necessarily infringes the patent in suit." Acco, 501 F.3d at 1313.

Lucent did not show specific instances of direct infringement. Instead, Lucent relied on circumstantial evidence to attempt to show that Microsoft's Windows Media Player necessarily infringes the '457 patent.

But "the circumstantial evidence presented by Lucent established only uncertainty and speculation." This was because the Media player could operate multiple ways, so it was difficult "to establish that all of the steps of the method had actually been performed in the prescribed order."

Microsoft's licenses with Fraunhofer didn't factor into the decision.

Affirmed.

Full post as published by The Patent Prospector on September 25, 2008 (boomark / email).