Source: https://www.schwabe.com/newsroom-publications-13773
Timestamp: 2019-04-19 12:30:43+00:00

Document:
Info-Hold v. Muzak – The Circuit revives an infringement suit by reversing summary judgments that plaintiff was not entitled to ‎any damages and that there is no induced infringement. As to damages, even though Info-Hold's expert testimony was excluded, the panel rules that there is other evidence in the record to support an award of reasonable royalty. With respect to induced infringement, the Circuit rules that issues of fact remain as to whether Muzak was guilty of "willful blindness" under Global-Tech, given that Info-Hold repeatedly contacted Muzak regarding the infringement prior to filing suit.
Info-Hold v. Applied Media Tech. Corp. – Applying de novo review, the Circuit reverses the district court's claim construction, finding that it improperly ‎narrowed the claims. Even though the district court made reference to what it called "extrinsic evidence," the Circuit ruled that de novo is the appropriate standard of review.
‎These two cases involved the same patent, were brought by the same plaintiff, were heard by the same district court judge, and resulted in separate appeals that were heard the same day by the same panel. In Applied Media, the parties agreed to be bound by the claim constructions rendered in Muzak.
The patent in suit in each case is directed to systems for playing music and messages through telephonic and public speaker systems. The patented systems are licensed to XM and Sirius satellite radio. Playback order of the music and message tracks is set on a remote server, which generates and sends control signals to playback devices, telling them to access and play back tracks on a specified order. The output of the message playback device can be directed to a music-on-hold ("MOH") system, which plays tracks to callers who are on hold.
The patent had been subject to an ex parte reexamination proceeding based upon the petition of a third party. To overcome prior art during reexam, Info-Hold ‎amended several claims by adding the limitation "when a caller is placed on hold" to specify ‎the timing of track playback.
Info-Hold's damages expert employed the entire market value rule even though his report was silent on whether the patented features drove demand, and his royalty calculation relied on the 25-percent rule which had been discredited in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011). For these reasons, the district court struck the report and precluded the expert's testimony, and because plaintiff did not disclose any other experts and its lay witnesses were not qualified to testify on the issue of damages, the district court concluded that it could not demonstrate that it was entitled to any measureable remedy and entered judgment for Muzak.
The Circuit determined that the court did not abuse its discretion in striking the expert report and precluding the testimony. However, the panel cited to Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. ‎‎2014)‎, for the proposition that at summary judgment a judge may only award a zero royalty if there is no genuine issue of fact that zero is the only reasonable royalty. It also noted that precedent, citing 35 USC 284 requires that the court award damages for infringement in an amount no less than a reasonable royalty even if plaintiff has no evidence to proffer, and in such a case the district court should consider the Georgia-Pacific factors in detail and award such reasonable royalty damages as the record will support. There was some evidence that the court could have used—deposition testimony regarding other licenses, a royalty to the inventor, profitability of the accused systems, etc. Therefore, notwithstanding loss of its expert, Info-Hold is still entitled to damages if infringement is shown.
Info-Hold accused Muzak of inducing infringement. The district court granted summary judgment for Muzak on the grounds that Info-Hold had failed to show actual knowledge that the acts it alleged constituted infringement. Info-Hold had to show that Muzak knew that the induced acts constituted patent infringement or willfully blinded itself, Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361, 1366 (Fed. Cir. 2013), cert. granted on other grounds, 135 S. Ct. 752 (2014), which in turn requires a showing that defendant subjectively believed that there was a high probability of infringement and took deliberate actions to avoid learning of that fact. See Global-Tech v. SEB S.A., 131 S. Ct. 2060 (2011).
There were a number of communications between the parties before the suit was filed regarding the patent-in-suit. During one such communication, the parties had a conversation in which defendant's in-house counsel raised questions about the specific functionality alleged to be covered by the patent, made an admission about the functionality of one of Muzak's systems, and said he would look again at plaintiff's patent. There was no evidence that he did so. Muzak convinced the district court that because none of Info-Hold's letters specified which claims of the patent were allegedly infringed or specified which products were accused, the knowledge requirement of inducement was not met. However, the panel concluded that the record raised issue of material fact as to whether defendant may have subjectively believed that there was a high probability that its actions induced infringement, and willfully blinded itself to whether it was acting to induce infringement.
Because the district court's claim construction was based solely on the intrinsic record, the construction is reviewed de novo. Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015). The district court construed "when a caller is placed on hold" to mean "at the moment a caller is placed on hold." The panel agreed that the proper construction of "when" is "at one moment of time" and not "during a period of time." The Circuit found the word "placed" in the phrase to be significant. The intrinsic evidence all discussed the claimed functions as occurring at the time when a caller is "placed" on hold, not merely while a caller is on hold. The Circuit noted that every instance of the words "on hold" in the specification is preceded by the world "placed."
Comments: This case presents a good example of how dangerous ex parte reexamination can be. While neither Muzak nor Applied Media was the petitioner in the reexam, the reexamination permitted Info-Hold to strengthen its patent and validity was not the subject of a summary judgment motion.
It was clear that the Circuit would affirm the exclusion of expert witness testimony based upon the discredited Uniloc case but we have to keep in mind that in every case the Circuit will closely look to make sure damages experts testify accurately on the law and that the damage theories they espouse are tied to the evidence in the case. See, Ericsson, Inc. v. D-Link Sys., 773 F. 3d 1201(Fed. Cir. 2014) and VirnetX, Inc. v. Cisco Sys., 767 F. 3d 1308 (Fed. Cir. 2014).
The panel notes that the district court referred to the ‘683 patent and its notice of allowability. This patent was later-issued and unrelated but that was cited in the reexamination certificate of the patent in suit. The panel concludes that this does not call for clear-error review under Teva because the ‘683 patent was part of the patent-in-suit's file history and thus intrinsic. The notice of allowance of the ‘683 patent need not be classified as intrinsic of extrinsic because by itself it presented no disputed issues of fact, and its significance to the ultimate claim construction is a matter of law.
Representative claim 7 recites a computer which is operable to generate and "transmit" signals for controlling message playback devices. The district court construed "transmit" to mean "initiate contact with and send an electronic signal to another device." It based the construction on its understanding that the patent exclusively disclosed the sending of control signals from the server to the remote playback devices, and that the remote playback devices were only configured to receive transmissions.
The Circuit rejects that construction on the grounds that nothing in the word "transmit" suggests a limitation on initiation. The specification confirms the term's neutrality as to initiation, as it states that the "message playback device is preferably operational in a receive-only manner," which implies the invention's ability to operate in a manner in which the playback device initiates communications. The Circuit expressly rejects the contention that if a patent describes only a single embodiment, the claims of the patent must be construed as limited to that embodiment. The Circuit then looks to the specification for a clear intention to restrict the scope of the claims to an embodiment and found none. It finds no clear, intentional disavowal of claim scope and therefore no basis to depart from the ordinary meaning of "transmit."
The district court's construction of two other terms depends on the construction of the term "transmit," and are reversed on the same basis.
Comment: AMTC's argument that Info-Hold disavowed claim constructions that read on versions other than the preferred embodiment was given short shrift by the panel because recent Circuit decisions have uniformly required that there must be a clear and unambiguous disavowal in the prosecution history in order for there to be a ‎disavowal. See, Hill-Rom Servs. v. Stryker Corp., 755 F.3d 1367 (Fed. Cir. 2014); Vederi, LLC, v. Google, Inc., 744 F.3d 1376 (Fed. Cir. 2014) and GE Lighting Solutions, LLC v. AgiLight, Inc., 750 F. 3d 1304 (Fed. Cir. 2014).

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