Mentor Graphics Corp. v. EVE-USA, Inc., (Fed. Cir. Mar. 16, 2017) (Before Lourie, Moore, and Chen, J.) (Opinion for the court, Moore, J.)
Various Synopsys parties and EVE-USA, Inc.* (collectively “Synopsys”) sued Mentor Graphics, seeking a declaration that Mentor’s ’376, ’531, and ’176 patents were invalid and not infringed. Mentor counterclaimed for willful infringement of those three patents, and also asserted infringement of two more (the ’526 and ’109 patents). The court consolidated the case with another involving a fourth patent owned by Mentor (the ’882 patent).
Infringement The jury found that Synopsys infringed the ’376 patent and Synopsys appealed. The ’376 patent claims methods of debugging source code after the Hardware Description Language (HDL) is transformed into “netlists.” Prior art methods only allowed developers to view the input and output of a netlist, not intermediate lists. The ’376 patent allowed developers to insert test probes at various stages of the transformation to monitor intermediate netlists. On appeal, the Court found there was substantial evidence to support the jury’s finding that Synopsys practiced all elements of the ’376 patent and infringed.
Assignor Estoppel Prior to trial, the district court barred Synopsys from challenging the validity of the ’376 patent based on assignor estoppel and Synopsys appealed. Synopsys did not dispute that assignor estoppel applied to its facts but argued that the doctrine was abolished by the Supreme Court in Lear, Inc. v. Adkins. The Court disagreed, finding that assignor estoppel survived Lear and affirmed the district court’s decision. (The Court did not analyze the scope of assignor estoppel under Lear, only that it still has life.)
Damages The jury awarded Mentor $36 million in lost profits and reasonable royalties for infringement of the ’376 patent. Synopsys but argued that the jury did not properly apportion damages because the claimed features were only one part of a multi-component product. The Court affirmed the jury’s award, finding it properly applied the Panduit test for lost profits. A patentee is entitled to lost profits if it can establish (1) demand for the patented product, (2) the absence of acceptable non-infringing alternatives, (3) that it has the manufacturing and marketing capability to exploit the demand, and (4) the amount of profit it would have made. The jury was not required to apportion lost profits to the features of the patented invention after applying Panduit, which incorporates apportionment by requiring proof of demand for the product as a whole, and there are no non-infringing alternatives (The first and second Panduit factors implicitly account for apportionment).
Indefiniteness Mentor’s ’109 patent discloses “a method for displaying the results of synthesized circuit analysis visually near the HDL source specification that generated the circuit.” The district court granted summary judgment that the term “near” was indefinite. Synopsys appealed and the Court reversed. The ‘109 specification described the purpose of the “nearness requirement” and included several diagrams that showed the circuit analysis and HDL code displayed next to one another on a screen. The description in the specification in combination with the drawings provided enough detail for a skilled artisan to understand what “near” meant in the context of the patent.
Patent Eligible Subject Matter Prior to trial, the district court granted summary judgment that the Synopsys ’526 patent did not recite patent eligible subject matter. The patent claimed a “machine-readable medium,” which was described as “any data storage device that can store data,” including “read-only memory, random-access memory, CD-ROMs . . . carrier waves.” The Court affirmed, finding that the ’526 patent lacked patent eligible subject matter under the Court’s decision in In re Nuijten. There, claims covering signals were not patent eligible because they did not claim a “process, machine, manufacture, or composition of matter.” The claims of the ’526 patent expressly covered carrier signals, like the patent ineligible claims in Nuijten.
Willful Infringement Prior to trial, the district court granted a motion in limine precluding Mentor from introducing evidence of willful infringement. Mentor appealed the motion and the Court vacated on two grounds. First, the district court erred in determining that Mentor’s willfulness claim relied exclusively on post-suit conduct because Mentor’s allegations covered events after the declaratory judgment action was filed by Synopsys and EVE-USA but before Mentor’s counterclaims for infringement. Second, the district court erred in precluding Mentor from presenting evidence of willfulness because Mentor did not seek a preliminary injunction, noting that there is no “rigid rule” that a patentee must seek a preliminary injunction before seeking enhanced damages.
Written Description Support The district court found that Mentor’s ’882 patent lacked written description support for “the signal routing clock is independent of the first clock signal and the second clock signal.” The Court reversed, finding that the inventor clearly possessed and described an invention including “one or more signal routing clock signals which are independent of the first and second clock signals” when the application was filed. The Court noted that the exact language of the challenged claims was present in the originally-filed claims and explained that “[o]riginal claims are part of the original specification and in many cases will satisfy the written description requirement.”
Claim Preclusion The district court granted summary judgment that Mentor’s infringement allegations regarding the ’531 and ’176 patents were barred by claim preclusion because the patents were part of a 2006 lawsuit between Mentor and EVE-USA that ultimately settled. The Court reversed, finding that claim preclusion did not apply because the current litigation was based on events that occurred after the 2006 suit was settled. (Mentor’s allegations could not have been asserted in the prior litigation.)
A jury does not have to further apportion lost profits to patented features of a larger product after applying the Panduit factors, which implicitly incorporate apportionment into the lost profit award. Claim preclusion applies when a claim was asserted, or could have been asserted, in a prior action. It does not bar allegations that did not exist at the time of the earlier action.
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* EVE is a subsidiary of Synopsys.