Opticurrent Survives Reexam, Moves Forward with CAFC Appeal on Damages

On February 12, the U.S. Patent and Trademark Office entered a notice of intent to issue an ex parte reexamination certificate on a patent owned by Opticurrent, LLC, which will confirm all challenged patent claims without any amendments or changes to the specification and drawings. The USPTO’s notice brings an end to a patent battle in which Opticurrent argued that Power Integrations engaged in some unusual gamesmanship to challenge the validity of patent claims asserted against it in district court.

U.S. Patent No. 6958623, Three Terminal Noninverting Transistor Switch, was asserted by Opticurrent against Power Integrations in the Northern District of California in April 2016. Power Integrations alleged invalidity of the ‘623 patent in a counterclaim but decided to drop its invalidity claim prior to a trial last February. About two months after a jury verdict was entered awarding infringement damages and a running royalty to Opticurrent, Power Integrations then filed a request for ex parte reexamination of the ‘623 patent, relying on much of the same prior art raised in its district court counterclaim.

In the ex parte reexamination certificate notice, the USPTO acknowledged that the examiners in the case agreed with arguments presented by Opticurrent this December regarding claim 1 of the ‘623 patent. The examiners found that the primary piece of prior art asserted, U.S. Patent No. 5134323, same title as the ‘623 patent (“Congdon ‘323”), lacks certain claim limitations described by the ‘623 patent. In particular, limitations involving a voltage stabilizer and a complementary metal oxide semiconductor (CMOS) were missing from Congdon ‘323 and couldn’t be supplied by combining Congdon ‘323 with other prior art references submitted by Power Integrations. Thus, claim 1 of the ‘623 patent, which covers a later invention by the same Congdon named in the ‘323 patent, was confirmed by the reexamination and claims 2 through 19 were left in place as they weren’t subject to the reexamination proceedings.

Federal Circuit Appeal

While the reexamination proceedings have been terminated in Opticurrent’s favor, the firm is appealing some aspects of the outcome from the Northern District of California case to the U.S. Court of Appeals for the Federal Circuit. In a corrected appeal brief filed last July, Opticurrent is asking the Federal Circuit to determine if the district court erred by applying a presumption against extraterritoriality by reducing the jury’s royalty rate award by 82%, limiting it to U.S. sales, when the jury’s royalty rate had already been revised downward to match only U.S. imports of infringing products. Further, Opticurrent wants the Federal Circuit to determine if the district court erred by dismissing Power Integrations’ invalidity counterclaim without prejudice, as the invalidity argument was already merged into the judgment as unsuccessful. If the district court did err in this regard, Opticurrent is seeking remand with instructions to the lower court to dismiss the counterclaim with prejudice and “prevent [Power Integrations]’s ability to re-bring its lost validity claim, and vex Opticurrent with it, despite Opticurrent’s res judicata rights.”

As Opticurrent’s appeal brief notes, the district court did not rule on remittitur with a conditional motion for a new trial, a motion which Power Integrations didn’t bring following the jury verdict. Instead, the court granted judgment as a matter of law (JMOL) on the royalty base awarded by the jury despite what Opticurrent says is substantial evidence supporting the use of global sales within the royalty base in view of patent law. The jury was presented with a comparable license that Power Integrations didn’t object to, and the jury was able to use that license to determine a worldwide royalty base.

The jury then reduced the total royalty base of $666 million for Power Integrations’ sales of the accused products down to $222 million based on trial evidence showing that only one-third of Power Integrations’ accused product sales are imported into the United States. In awarding JMOL, the district court aligned the royalty base with Power Integrations’ direct sales into the United States, in conflict with Federal Circuit precedent from Carnegie Mellon University v. Marvell Technology Group (2015) on royalty bases including all imported goods and not just direct sales as part of the hypothetical negotiation. While the district court distinguished Opticurrent’s case from Carnegie Mellon, it relied on the fact that the jury in Opticurrent’s case didn’t find induced infringement under 35 U.S.C. § 271(b), which Opticurrent argues is a misreading of Carnegie Mellon’s holding on extraterritoriality.

Opticurrent also argued that the district court lacked the authority to dismiss Power Integrations’ counterclaim, including its invalidity defense, without prejudice. “It is hornbook law that all defenses that could have been raised (such as invalidity) are merged into a final judgment,” it contends in its appeal brief. By choosing to abandon the invalidity defense on the eve of the trial, Opticurrent argues that the counterclaim is merged into the final judgment as unsuccessful.

The ex parte reexamination of the ‘623 patent takes up very little space in Power Integrations’ response brief at the Federal Circuit filed last October. After challenging the district court’s claim construction ruling and arguing that noninfringement as a matter of law should be found even under that claim construction, Power Integrations argued that the district court properly reduced the damages award based on the presumption against extraterritoriality because Opticurrent proceeded on an induced infringement theory in determining the worldwide royalty base. While liability for direct infringement was limited to 6% of Power Integrations’ worldwide sales, the royalty base for one-third of Power Integrations’ products imported into the United States was based on Power Integrations’ inducement of its foreign customers to import the accused products.

On the dismissal of Power Integrations’ invalidity defense without prejudice, the respondent cited the Federal Circuit’s 2014 decision in Alcon Research Ltd. v. Barr Laboratories, Inc. to support the argument that judgment as a matter of law should only be granted on issues litigated at trial. Further, Opticurrent itself didn’t file a motion for JMOL asking the district court to rule that the ‘623 patent was not invalid.

Damages Theory

The latest brief filed in the case is a reply brief from Opticurrent, in which the appellant argues that Power Integrations didn’t refute that the comparable license submitted to the jury used worldwide sales for the royalty base. The damages theory employed by Opticurrent at trial focused on direct infringement using one-third of Power Integrations’ total worldwide sales, Opticurrent contended, and both parties had agreed that an inducement liability couldn’t be found as the infringement charges focused on Power Integrations’ sales going back to 2010 and Power Integrations wasn’t on notice of the ‘623 patent until Opticurrent filed suit in 2016.

Opticurrent also reasserted its argument based on Carnegie Mellon, noting that the induced infringement theory in that case was irrelevant to the court’s treatment of the extraterritoriality bar. In that case, the court began with a determination of the royalty base that would have been involved in the hypothetical negotiation and then finding not only domestic sales but also infringing products that were imported, activity which Congress deems to be “domestic conduct” allowing those products to be included in the royalty base without creating extraterritoriality issues.

Finally, Opticurrent remains adamant about the effects of Power Integrations’ waiver of its invalidity defense, arguing that the district court had no discretion to dismiss without prejudice. “Even if discretion were in play, it is difficult to grasp how [Power Integrations] shouting from the rooftops that it was waiving its counterclaim justifies relieving [it] from the consequences of such waiver,” Opticurrent argued. “If anything [Power Integrations]’s blatant announcement of its waiver should deepen those consequences.”

Opticurrent pushed back on Power Integrations’ reliance on Alcon Research, a case in which the patentee dropped its assertion of two patents in the case. That scenario involved claims from two patents that didn’t go to trial, so the court’s judgment in that case did not involve compulsory counterclaims like the one filed by Power Integrations.

Ultimately, Opticurrent is asking the Federal Circuit to grant its appeal, deny Power Integrations’ cross-appeal, and remand for recalculation of interest and ongoing royalties, and conversion of the counterclaim dismissal to one with prejudice.

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