Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_02-cv-02060/USCOURTS-casd-3_02-cv-02060-4/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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28 02CV2060-B (CAB)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

LUCENT TECHNOLOGIES INC.,

Plaintiff and Counterclaim-defendant,

v.

GATEWAY, INC. and GATEWAY

COUNTRY STORES LLC, GATEWAY

COMPANIES, INC., GATEWAY

MANUFACTURING LLC and

COWABUNGA ENTERPRISES, INC.,

Defendants and Counter-claimants,

and

MICROSOFT CORPORATION,

Intervenor and Counter-claimant,

_____________________________________

MICROSOFT CORPORATION,

Plaintiff and Counterclaim-defendant,

v.

LUCENT TECHNOLOGIES INC.,

Defendant and Counter-claimant

_____________________________________

LUCENT TECHNOLOGIES INC., 

Plaintiff,

v.

DELL, INC.,

Defendant.

_____________________________________

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Civil No: 02CV2060-B(CAB)

consolidated with

Civil No: 03CV0699-B (CAB) and

Civil No: 03CV1108-B (CAB)

ORDER ON LUCENT’S MOTION FOR

SUMMARY ADJUDICATIONS

REGARDING U.S. PATENT NO.

4,701,954

Case 3:02-cv-02060-B-MDD Document 844 Filed 01/12/07 Page 1 of 12
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I. INTRODUCTION

Lucent moves the Court for summary adjudication on a multitude of issues with

respect to U.S. Patent No. 4,701,954 (“the ‘954 patent”). The issues were fully briefed by

the parties and oral argument was heard on January 8, 2007. The Court now rules on these

issues as explained herein.

II. BACKGROUND

Lucent sued Dell and Gateway in 2002. The case was originally filed in the Eastern

District of Virginia and then transferred to the Southern District of California. Microsoft

filed a declaratory judgment action against Lucent in 2003. The cases were eventually

consolidated and then the issues separated into “groups” of technologies for trial. The

instant Group 3 concerns the speech coding patent U.S. Patent No. 4,701,954 (“the ‘954

patent”). This patent describes and claims methods related to digital speech codecs which

transform speech signals into electrical pulses. Lucent, the patentee, has accused Dell,

Gateway and Microsoft of infringing this patent. Claims 1, 2 and 6, all methods claims, are

at issue.

III. ANALYSIS

A. STANDARD OF LAW

Federal Rule of Civil Procedure 56(c) provides that summary judgment is

appropriate if the “pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law.” In

considering the motion, the court must examine all the evidence in the light most favorable

to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). If

the Court is unable to render summary judgment upon an entire case and finds that a trial is

necessary, it shall if practicable grant summary adjudication for any issues as to which,

standing alone, summary judgment would be appropriate. Fed. R. Civ. P. 56(d).

When the moving party does not bear the burden of proof, summary judgment is

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1

 Defendants collectively refers to Microsoft, Dell and Gateway.

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warranted where the moving part demonstrates an absence of facts to support the nonmoving party’s case and where the non-moving party responding to the motion fails “to

make a sufficient showing on an essential element of her case with respect to which she has

the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986). 

B. Issues for Summary Adjudication

Lucent moves the Court for summary adjudication on the following issues regarding

U.S. Patent No. 4,701,954 (“the ‘954 patent”): no invalidity for anticipation; no invalidity

under 35 U.S.C. § 102(f) for failure to name inventors; and no invalidity under 35 U.S.C. §

112 for lack of written description and enablement. Lucent also moves for summary

adjudication that Defendants’1

 affirmative defenses of laches, equitable estoppel/implied

license/waiver, patent misuse and unclean hands lack evidentiary support. Finally, Lucent

moves the Court for summary adjudication regarding the date of actual notice to Microsoft. 

1. Unopposed Issues

Under the Federal Rules of Civil Procedure, if an adverse party does not respond to

a motion for summary adjudication, the Court may enter judgment against the adverse party

if it is appropriate. Fed. R. Civ. P. 56(e) (West 2006). Here, Defendants have chosen not

to respond or not to oppose a number of issues presented by Lucent for summary

adjudication.

Having considered these unopposed motions, the Court finds it appropriate and

GRANTS summary adjudication in Lucent’s favor on the following:

a. No Invalidity for Anticipation

b. No Invalidity under § 102(f) for failure to name inventors

c. No Invalidity under § 112 (written description/enablement)

d. No Prior Settlements (Gateway’s affirmative defense)

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2. Laches

Lucent moves the Court for summary adjudication that Defendants’ affirmative

defense of laches lacks evidentiary support. Lucent sets forth two grounds: (1) laches is

inapplicable to Microsoft because Lucent is seeking only post-suit damages; and (2) Dell

and Gateway have presented no evidence of their own to support laches but only rely on

Lucent’s conduct towards Microsoft, which Lucent contends is insufficient as a matter of

law.

Laches is an equitable defense. Halstead v. Grinnan, 152 U.S. 412, 417 (1894); A.C.

Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1032 (Fed. Cir.1992). In patent

cases, when applied, laches bars only pre-filing damages; it will not bar post-filing

damages or injunctive relief. Aukerman, 960 F.2d at 1040. For laches to apply, a defendant

must prove that plaintiff unreasonably delayed in filing suit from the time plaintiff knew or

should have known of the infringement and that there was resulting prejudice to the

defendant. Id. The resulting prejudice may be evidentiary, affecting the defendant’s ability

to put on a full and fair defense, or the prejudice may be economic. Id. at 1033. For

economic prejudice, the defendant must demonstrate damages or monetary loss that would

not have been incurred if the plaintiff had not delayed filing suit; “[s]uch damages or

monetary losses are not merely those attributable to a finding of liability for infringement.” 

Id.

Here, since Lucent is seeking only post-suit damages against Microsoft, based on

Aukerman, a defense of laches is not available to Microsoft. See Aukerman, 960 F.2d at

1040. Therefore, Lucent’s motion to preclude Microsoft from the use of laches as an

affirmative defense is GRANTED.

As to Microsoft’s customers, Co-Defendants Dell and Gateway, the issue requires

additional considerations. Dell and Gateway have relied on Microsoft to argue this defense

on their behalf, and neither Dell or Gateway has presented any evidence on their own to

support a claim of laches against Lucent. Microsoft argues that because Lucent assiduously

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avoided filing infringement claims against Microsoft, Lucent’s delay should not only bar

recovery from Microsoft but also bar recovery of the same damages from Microsoft’s

indemnified customers, Dell and Gateway. For Microsoft (and therefore Dell and Gateway)

to prevail on such an argument, Microsoft must show that Lucent unreasonably delayed

filing against Microsoft resulting in prejudice, and that if this conduct were to give rise to

laches, as a matter of law, that defense would necessarily be available to Microsoft’s

customers.

With respect to the first point, Microsoft has raised sufficient issues of genuine

material fact to preclude a determination that Lucent’s conduct does not give rise to laches. 

Microsoft sets forth several pieces of evidence in regards to unreasonable delay, : (1)

Lucent should have known of Microsoft’s use of the G.723.1 standard in its Netmeeting

software as early as April 26, 1996, based on its meetings with Lucent and press releases

for the software; (2) as of April 1997, Lucent had actual knowledge of Microsoft’s

potential infringement based on an email sent to Lucent on April 6, 1997, where Microsoft

announced it was shipping product with the Intel G.723 codec; (3) emails between

Microsoft and Lucent in October 1997 discussed plans for Microsoft’s expanded use of the

G.723 standard; (4) Lucent’s awareness that the ‘954 patent covered the G.723 standard. 

With respect to resulting prejudice, Microsoft argues that there is both economic and

evidentiary prejudice. Witnesses and documentary evidence are now unavailable (e.g., the

death in 2003 of Lucent’s licensing manager on standards, an expert on the G.723.1

standard; two additional witnesses who represented Lucent in licensing negotiations who

now cannot remember relevant facts and Lucent documents that were purportedly thrown

away at some point). As for economic prejudice, Microsoft contends that Lucent’s delay

resulted in Microsoft and its customers continued use of the G.723.1 codec where it could

have chosen a non-infringing alternative such as the G.711 codec that was used in earlier

versions of the software. See Aukerman, 960 F.2d at 1033 (noting that patentee may not

intentionally lie in wait where alleged infringer could have made a switch to a nonCase 3:02-cv-02060-B-MDD Document 844 Filed 01/12/07 Page 5 of 12
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2

 Microsoft also claims that since Lucent should have known of the alleged infringement in

1996, more than 6 years before its suit with Microsoft was initiated, a presumption of laches should

arise. See Aukerman, 960 F.2d at 1028 (presumption of laches arises where the delay was more than

6 years from the time the patentee knew or should have known of the alleged infringement). However,

the evidence presented is insufficient to invoke the presumption; there remains at least an issue of fact

as to whether a 6 year period had elapsed when Lucent should have known of the alleged infringing

activities.

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infringing activity).2

However, Microsoft has not demonstrated that as a matter of law Lucent’s conduct

towards Microsoft necessarily “transfers” to Dell and Gateway. Microsoft’s premise relies

on Odetics, Inc. v. Storage Technology Corp., 919 F. Supp. 911 (E.D. Va. 1996) vacated on

other grounds, 116 F.3d 1497 (Fed. Cir 1997), on remand, 14 F. Supp. 2d 800 (E.D. Va.

1998), aff’d in part, rev’d in part, 185 F.3d 1259 (Fed Cir 1999). In Odetics, the plaintiff

became aware of the alleged infringing activity when the defendant manufacturer’s

products appeared in a trade journal, but did not begin to investigate any possible

infringement until 6 years later. Id. at 916. It then waited two more years before initiating

suit against the manufacturer and two of its customers. Id. Thus, in Odetics, the customers

had no more knowledge than the manufacturer and plaintiff’s delay thus applied to all of

the parties. 

The instant case however presents very different circumstances from Odetics. Here,

irrespective of Lucent’s silence towards Microsoft, Lucent communicated with Dell and

Gateway regarding infringement. Thus, unlike Odetics, where the customers had no more

notice than the manufacturer, here, Lucent’s conduct towards Dell and Gateway was

individualized and entirely separate from its conduct towards Microsoft. Therefore,

Microsoft’s analogy to Odetics is insufficient as a matter of law to make the defense of

laches available to Dell and Gateway. Moreover, absent evidence that would demonstrate

laches should apply based on conduct by Lucent towards Dell and Gateway, there is no

issue of material fact. Therefore, Lucent’s motion to preclude the defense of laches by Dell

and Gateway is GRANTED.

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3. Equitable Estoppel

Equitable estoppel has three elements: (1) “[t]he patentee, through misleading

conduct, leads the alleged infringer to reasonably infer that the patentee does not intend to

enforce its patent against the alleged infringer”; (2) “[t]he alleged infringer relies on that

conduct”; (3) “[d]ue to its reliance, the alleged infringer will be materially prejudiced if the

patentee is allowed to proceed with its claim.” Aukerman, 960 F.2d at 1028. Lucent argues

first that Microsoft has presented insufficient evidence to support two of these elements,

misleading conduct and reliance. With respect to Gateway and Dell, Lucent argues that

their basis for the defense is insufficient as matter of law. 

In regards to Microsoft’s defense, Microsoft has failed to meet its burden to provide

sufficient evidence of misleading conduct as a basis for this defense. First, Microsoft

contends that it told Lucent that Microsoft believed it had a license to the G.723.1 codec

through Intel and Lucent remained silent. “Silence alone will not create an estoppel unless

there was a clear duty to speak,” Aukerman, 960 F.2d at1043, and Microsoft has not

presented sufficient facts to demonstrate Lucent had a duty to correct Microsoft’s

misconception. Second, Microsoft points to a hearsay statement allegedly made by an

unknown Lucent employee to someone at Microsoft that “Microsoft was not on Lucent’s

radar with regard to Lucent’s patent portfolio.” 

Even if this evidence were to warrant further analysis, Microsoft has not presented

sufficient evidence of reliance to preclude summary judgment. Microsoft has not pointed

to a single witness who relied on Lucent’s statement regarding Microsoft not being on its

radar or who relied on Lucent’s silence regarding the misconception over the Intel license. 

Therefore, since Microsoft has not presented sufficient evidence to demonstrate a genuine

issue of fact in regards to essential elements of its defense, Lucent’s motion as it pertains to

Microsoft is GRANTED.

Turning to Dell’s and Gateway’s defenses, these parties rely solely on Microsoft’s

arguments made on their behalf that if equitable estoppel applies to Microsoft, so too

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should it apply to Microsoft’s customers. Gateway’s and Dell’s defenses thus fail on two

grounds. First, since the Court has determined that the defense of equitable estoppel is not

available to Microsoft, it is thereby unavailable for Dell and Gateway. 

Second, even if the defense would be available to Microsoft, Dell and Gateway have

not demonstrated as a matter of law that this defense would necessarily be available to

them. Their argument (as made by Microsoft) relies on an unpublished case, Forest

Laboratories, Inc. v. Abbott Laboratories, 1999 WL 33299123, *1 (W.D.N.Y.1999), where

the court found equitable estoppel applied to defendant Forest on two grounds: Forest could

demonstrate all of the elements of equitable estoppel based on the plaintiff’s behavior

towards Forest and that as a matter of law, any implied license to the manufacturer should

run to its customer. Id. at *23. 

Application of this case here is problematic. Forest is not precedential for this court

or any other court as it is an unreported district court opinion. Additionally, unlike

defendant Forest, Dell and Gateway have presented no facts of their own that would

demonstrate equitable estoppel. Finally, as with the laches argument considered above,

Lucent’s conduct towards Dell and Gateway was individualized and entirely separate from

its dealings with Microsoft. Therefore, Dell and Gateway have failed to meet their burden

to provide any evidence in support their defense of equitable estoppel; Lucent’s motion as

to Dell and Gateway defense is thus GRANTED.

4. Implied License/Waiver

Lucent moves the Court for summary adjudication on Microsoft’s and Gateway’s

affirmative defense of implied license/waiver. “An implied license signifies a patentee's

waiver of the statutory right to exclude others from making, using, selling, offering to sell,

or importing, the patented invention.” Winbond Electronics Corp. v. International Trade

Com'n, 262 F.3d 1363, 1374 (Fed. Cir. 2001). The defense has three elements that closely

resemble those of equitable estoppel: “(1) the patentee, through statements or conduct, gave

an affirmative grant of consent or permission to make, use, or sell to the alleged infringer;

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 Gateway simply joined Microsoft’s motion as to implied license and waiver; thus, all rulings

on these issues pertaining to Microsoft should be applied to Gateway.

4

 In its reply brief, Lucent contends that simply stating Microsoft’s defense lacks evidentiary

support is sufficient. However, under Rule 56, the moving party must make at least a “demonstration

of an absence of facts to support the non-moving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317,

325 (1986). Bare general allegations without any “demonstration” as to specifics of the defense are

insufficient.

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 Gateway again simply joins with Microsoft and presented no arguments on its own.

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(2) the alleged infringer relied on that statement or conduct; and (3) the alleged infringer

would, therefore, be materially prejudiced if the patentee is allowed to proceed with its

claim.” Id. at 1374. The arguments presented by the parties mirror those for equitable

estoppel.3

 Thus, for the reasons given above regarding equitable estoppel, Lucent’s motion

as it applies to implied license/waiver also is GRANTED.

5. Exhaustion

Lucent moves the Court for summary adjudication on Microsoft’s affirmative

defense of exhaustion. Lucent however did not brief this issue at all;4

 therefore this motion

is DENIED.

6. Patent Misuse

Lucent contends that Microsoft and Gateway lack sufficient evidentiary support for

their affirmative defense of patent misuse. Patent misuse addresses whether “the patentee

has impermissibly broadened the ‘physical or temporal scope’ of the patent grant with

anticompetitive effect.” B. Braun Medical, Inc. v. Abbott Laboratories, 124 F.3d 1419,

1426 (Fed. Cir. 1997). 

Having considered the arguments and evidence presented by the parties,5

 the Court

finds that Microsoft and Gateway have failed to make any showing that genuine issues of

fact remain with regard to this defense. Although these Defendants have alleged that

Lucent impermissibly extended its monopoly on the ‘954 patent by declaring it “essential”

to the G.723.1 standard, they have failed to provide any evidence or law to demonstrate that

this representation constitutes patent misuse. Microsoft and Gateway simply have presented

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 Gateway again simply joins with Microsoft and so all discussions and recommendations

apply equally to Lucent’s motion on Gateway’s defense.

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a number of unsupported allegations and conclusions that do not raise a genuine issue of

material fact. Lucent’s motion is therefore GRANTED.

7. Unclean Hands

Lucent moves the Court for summary adjudication on all Defendants’ affirmative

defense of unclean hands, contending that the Defendants have failed to provide any

evidence to support this defense. “The doctrine of unclean hands is a self-imposed

ordinance that closes the doors of a court of equity to one tainted with inequitableness or

bad faith relative to the matter in which he seeks relief, however improper may have been

the behavior of the defendant.” Princess Cruises, Inc. v. U.S., 397 F.3d 1358, 1369 (Fed

Cir. 2005) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S.

806, 814 (1945)). 

Microsoft and Gateway rely on the same argument as presented for patent misuse

regarding Lucent’s representation to the standards body that the ‘954 patent was essential

to the G.723.1 codec.6

 Again, other than bare allegations, Microsoft and Gateway have

failed to meet their burden to demonstrate how Lucent’s representations to the standards

body amount to an extension of its patent monopoly and thus unclean hands. Therefore,

Lucent’s motions as to Microsoft and Gateway are GRANTED.

Dells’ theory of unclean hands rests on an alleged failure of Lucent to do a proper

pre-filing investigation of Dells’ products. To support this contention, it submits a snippet

of a deposition of a Lucent corporate witness who answers “I don’t know” in response to

the question of whether Lucent ever purchased and analyzed Dell products. This evidence

appears woefully insufficient and Dell has provided no legal basis why this evidence would

support an unclean hands defense. Therefore, Lucent’s motion as it pertains to Dell is

GRANTED.

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7

 35 U.S.C § 287(a) refers to the recovery of damages by a patentee that has failed to mark and

where the patentee must then give actual notice of the alleged infringement. While marking is not at

issue here, neither party is contending that damages should begin before Microsoft received actual

notice, and thus it is only the definition of "actual notice" that remains at issue.

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8. Date of Actual Notice

Lucent moves the Court for summary adjudication that the date of actual notice of

infringement provided to Microsoft is April 8, 2003, the date Microsoft filed its declaratory

judgment action. Microsoft contends that the actual date of notice is May 9, 2003, the date

Lucent answered Microsoft’s declaratory judgment complaint and cross-complained for

infringement.

The Federal Circuit has held generally, that “notice must be an affirmative act on the

part of the patentee which informs the defendant of infringement . . . [and it] must focus on

the action of the patentee, not the knowledge of the infringer.” Lans v. Digital Equipment

Corp., 252 F.3d 1320, 1327 (Fed. Cir. 2001). Furthermore, “the actual notice requirement

of § 287(a) is satisfied when the recipient is informed of the identity of the patent and the

activity that is believed to be an infringement, accompanied by a proposal to abate the

infringement” SRI Intern., Inc. v. Advanced Technology Laboratories, Inc., 127 F.3d

1462, 1470 (Fed. Cir. 1997).7

 

A declaratory judgment complaint does not meet these standards. Its purpose is a

declaration of no infringement; the party bringing the action for declaratory relief believes

that the activity in question is not an infringement. It is not an action taken by the patentee. 

A declaratory judgment complaint also is not proposal to abate the infringement, but rather

a statement of intent by the party filing the action to continue the activity in question. 

Furthermore, although Lucent argues that Microsoft’s declaratory judgment complaint

acknowledges its infringement, an examination of the complaint’s allegations reveal no

such admissions; the declaratory judgment complaint does not plead any facts related to

actual notice by Lucent pertaining to the ‘954 patent.

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Therefore, Lucent’s first affirmative action as patentee, notifying Microsoft that its

activity is believed to be an infringement triggers actual notice. This date is May 9, 2003,

the date of Lucent’s answer and cross-complaint for infringement to Microsoft’s

declaratory judgment complaint. Therefore, Lucent’s motion to set the date of notice at

April 8, 2003, is DENIED.

IT IS SO ORDERED

DATED: January 12, 2007 

Hon. Rudi M. Brewster

United States Senior District Judge

cc: Hon. Cathy Ann Bencivengo

 United States Magistrate Judge

 All Counsel of Record

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