CAFC upholds validity of Intellectual Ventures patents, reverses infringement findings

Intellectual Ventures I LLC v. Motorola Mobility LLC, (Fed. Cir. Sep. 13, 2017) (Before Newman, Dyk, and Taranto, J.) (Opinion for the court, Dyk, J.) (Concurring in part and dissenting in part, Newman, J.)

The Federal Circuit affirmed a district court decision upholding the validity of two patents belonging to Intellectual Ventures (“IV”), but reversed all findings of infringement regarding one patent and remanded for further proceedings regarding the other.

IV sued Motorola for infringement of two patents. The ‘144 patent relates to a file transfer system between computer devices. The ‘462 patent relates to a portable computer formed by docking a smartphone into a “shell” with a larger display and keyboard. Motorola defended the suit by arguing non-infringement and the invalidity of the patents. At separate trials, a jury found Motorola infringed both patents and failed to prove them invalid. Motorola moved for judgment as a matter of law and the district court denied both motions.

The ‘144 Patent

On appeal, Motorola argued that claim 41 of the ‘144 patent was invalid for lack of written description, because the claim scope included embodiments capable of utilizing long-term storage, but those embodiments were excluded by the specification. The Court dismissed this argument, finding that claim 41 should be construed in view of the specification, which excluded long term storage. Motorola further argued that the ‘144 claims were obvious, but the Court found there was substantial evidence to support the jury’s verdict of validity over the prior art.

Finally, Motorola contended there was not substantial evidence to prove infringement. The parties construed claim 41 as a system claim with limitations directed in part to an “authenticating device configured to . . . generate a delivery report.” Motorola claimed that IV failed to offer evidence that any of Motorola’s customers, whom the jury found to be direct infringers, utilized the claimed authenticating device.

The Court first addressed the standard for system claims under Centillion Data Systems, LLC v. Quest Communications International, Inc., 631 F.3d 1279 (Fed. Cir. 2011). The district court decided, under Centillion Data Systems, LLC v. Quest Communications International, Inc., 631 F.3d 1279 (Fed. Cir. 2011), that the infringer only needed to benefit from the system as a whole in order to infringe. More specifically, “the benefit derived from any claimed component of the claimed system would suffice to demonstrate an infringing ‘use.’” The Court disagreed. It held that Centillion required a person to control (even indirectly) and benefit from each claimed element of the system to constitute an infringing use.

Under this standard, the Court found that there was not substantial evidence that Motorola’s customers ever “generated a delivery report,” so as to benefit from that element of the system. Further, there was no evidence to support that Motorola’s customers ever received, utilized, or had knowledge of any delivery reports otherwise generated by the system. Therefore, they did not benefit from all elements of the system, and infringement was not supported by substantial evidence. Since IV failed to prove a directly infringing use, Motorola was entitled to judgment as a matter of law regarding the ‘141 patent.

The ‘462 Patent

Motorola argued that the ‘462 patent was obvious, but did not challenge the finding of infringement. The Court reasoned that there was substantial evidence for the jury to find no motivation to combine the prior art, as they could evaluate which party’s expert they found to be more credible. The case was remanded for further proceedings regarding damages.

Judge Newman concurred with the majority’s finding of non-infringement, but dissented regarding the majority’s interpretation of Centillion. She explained that “to infringe a claim, every element of the claim . . . must be practiced; but the benefit a user receives flows from the claimed system as a whole.” Accordingly, “it is not a necessary element of proof of infringement, to require proof of benefit from each element . . . of the claim.” Judge Newman found non-infringement because Motorola’s use of the accused system did not practice every element of claim 41.

Judge Newman also dissented with respect to the invalidity of the ‘144 and ‘462 patents, arguing that they both would have been obvious in light of the prior art and that no reasonable jury could have found otherwise.

To infringe a system claim, the infringer must control and benefit from all claimed elements of the system. If the infringer benefitted from the system as a whole, but not from each claimed element, the use does not constitute infringement.

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