Free Proposed Pretrial Order - District Court of Delaware - Delaware

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 1 of 45

Exhibit 4 LML'S STATEMENT OF ISSUES OF LAW THAT REMAIN TO BE LITIGATED The following legal issues remain to be litigated. To the extent that any issues of fact set forth in Exhibit 2 of the Joint Pre-Trial Order may be considered issues of law, LML incorporates those portions of Exhibit 2 herein by reference. To the extent any of the issues of law set forth in this Exhibit 4 may be considered issues of fact, LML incorporates those portions of this Exhibit 4 in Exhibit 2 below. LML incorporates Exhibit 10 (Brief Statement of Intended Proofs) herein. I. ISSUES ON WHICH LML BEARS THE BURDEN OF PROOF A. Infringement Direct Infringement 35 U.S.C. § 271(a) states: Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefore, infringes the patent. 1. "A patent infringement analysis involves two steps: claim construction and

application of the construed claim to the accused process or product." Middleton, Inc. v. Minnesota Mining & Mfg. Co., 311 F.3d 1384, 1387 (Fed. Cir. 2002). "Determination of

infringement, whether literal or under the doctrine of equivalents, is a question of fact." Hilgraeve Corp. v. Symantec Corp., 265 F.3d 1336, 1341 (Fed. Cir. 2001) (citing Bai v. L&L Wings, Inc., 160 F.3d 1350, 1353 (Fed. Cir. 1998)), cert. denied, 535 U.S. 906 (2002)). 2. The first step of the infringement analysis, claim construction, is a question of

law, with the Court construing the disputed terms of the patent at issue as they would be understood by a person of ordinary skill in the art. Phillips v. AWH Corp., 415 F.3d 1303, 1313

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 2 of 45

(Fed. Cir. 2005) (quoting Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1116 (Fed. Cir. 2004)). This Court held a Markman hearing on December 19, 2005 to construe claims 1, 2, 4, 5, 6, 9, 10, 11, 14, 16, am of the `988 patent. 3. Once the claims are properly construed, they must be compared with the accused

product(s). Nomos Corp. v. BrainLAB, Inc., 239 F. Supp. 2d 430, 434-35 (D.Del. 2003). "Infringement requires proof by a preponderance of the evidence." Seal-Flex, Inc. v. Athletic Track & Court Const., 172 F.3d 836, 842 (Fed. Cir. 1999). "To show infringement of a patent, a patentee must supply sufficient evidence to prove that the accused product or process contains, either literally or under the doctrine of equivalents, every limitation of the properly construed claim. Id. "A patent is infringed if a single claim is infringed." Intervet Am., Inc. v. Kee-Vet Lab., Inc., 887 F.2d 1050, 1055 (Fed. Cir 1989). "Infringement, literal or by equivalence, is determined by comparing an accused product not with a preferred embodiment described in the specification, or with a commercial embodiment of the patentee, but with the properly and previously construed claims in suit." SRI Intern. v. Matsushita Elec. Corp. of Am., 775 F.2d 1107, 1121 (Fed. Cir. 1985); see also Zenith Labs, Inc. v. Bristol Myers Squibb Co., 19 F.3d 1418, 1423 (Fed. Cir. 1994). "[C]laims are infringed, not specifications." SRI Intern., 775 F.2d at 1121. 4. Literal infringement occurs when each element of at least one asserted claim of the

patent at issue is found in the alleged infringer's product. Mas-Hamilton Group v. LaGard, Inc., 156 F.3d 1206, 1211 (Fed. Cir. 1998); Nomos, 239 F. Supp. 2d at 434. If "an asserted claim does not literally read on an accused product, infringement may still occur under the doctrine of equivalents." Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241, 1250-51 (Fed. Cir. 2000). "The doctrine of equivalents is an equitable doctrine designed to prevent parties from

-2-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 3 of 45

realizing the benefit of another's patent by designing around the patent's literal language." BOC Health Care, Inc. v. Nellcor Inc., 892 F.Supp. 598, 604 (D. Del. 1995), aff'd, 98 F.3d 1357 (Fed. Cir. 1996). "Infringement under the doctrine of equivalents may be found where those limitations of a claim not found exactly in the accused device are met equivalently." Zygo Corp. v. Wyko Corp., 79 F.3d 1563, 1568 (Fed. Cir. 1996). "An element in the accused product is equivalent to a claim limitation if the differences between the two are `insubstantial' to one of ordinary skill in the art." Eagle Comtronics, Inc. v. Arrow Comm'n Labs, Inc., 305 F.3d 1303, 1315 (Fed. Cir. 2002), cert. denied, 123 S.Ct. 995 (2003). The doctrine of equivalents applies if the "substitute element matches the function, way, and result of the claimed element." WarnerJenkinson Co., Inc. v. Hilton Davis Chem. Co., 520 U.S. 17, 40 (1997). 5. "There is no intent element to direct infringement." Intel Corp. v. U.S. Int'l Trade

Com'n, 946 F.2d 821, 832 (Fed. Cir. 1991). Neither literal infringement nor infringement by equivalents requires intent. Warner-Jenkinson, 520 U.S. at 34 ("Application of the doctrine of equivalents, therefore, is akin to determining literal infringement, and neither requires proof of intent.") 6. An accused product infringes even if it does not always infringe when it is used. See

Canon Computer Sys., Inc. v. Nu-Kote Int'l, Inc., 134 F.3d 1085, 1089 (Fed. Cir. 1998) ("Even assuming that Nu-Kote's video establishes that its cartridge will not infringe under a particular set of controlled circumstances . . . this has little bearing on whether its cartridge will avoid infringement under other foreseeable operating conditions."); Impax Labs, Inc. v. Aventis Pharm., Inc., 2004 WL 253482, at *3 (D. Del. Feb. 5, 2004); Interspiro USA Inc. v. Figgie Int'l, Inc., 815 F. Supp. 1488, 1512 (D. Del. 1993) ("[I]t is of no moment that in certain modes of operation . . . the E-Z Flo may not operate in a way that would infringe the `145 patent. It

-3-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 4 of 45

matters only that the accused device operate in an infringing way at some time."), aff'd, 18 F.3d 927 (Fed. Cir. 1994). "An accused product that sometimes, but not always, embodies a claimed method nonetheless infringes." Bell Comm'n Research Inc. v. Vitalink Comm'n Corp., 55 F.3d 615, 622-23 (Fed. Cir. 1995), see also Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 20 (Fed. Cir. 1984) ("That the machine was not operated in its optimum mode is inconsequential: imperfect practice of an invention does not avoid infringement."). 7. Moreover, in analyzing infringement, the differences between system and method

claims must be accounted for. In re Kollar, 286 F.3d 1326, 1332 (Fed. Cir. 2002) (finding error where the court failed to recognize the "distinction between a claim to a product, device, or apparatus, all of which are tangible items, and a claim to a process which consists of acts or steps"); NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1316 (Fed. Cir. 2005) (noting the infringement analysis is different for "different types of claims"). 8. Because system claims cover what a system is and not what a system does, a system

claim is infringed by a system that contains all of the recited capabilities of the claimed system, regardless of whether those capabilities are actually used. Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1468 (Fed. Cir. 1990) ("[A]pparatus claims cover what a device is, not what a device does."); Intel Corp. v. ITC, 946 F.2d 821, 832 (Fed. Cir. 1991) (holding that a device claim was infringed if it was capable of operating in the claimed mode and that actual operation in the claimed mode was not required); see also Key Pharms. Inc. v. Hercon Labs. Corp., 981 F. Supp. 299, 310 (D. Del. 1997) (finding that all that was required for infringement was that the system have the claimed capability, regardless of whether or not it was used). 9. On the other hand, method claims do not cover a tangible item but instead "consists

of a series of acts or steps." In re Kollar, 286 F.3d at 1332. Thus, a method claim is infringed

-4-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 5 of 45

only by "practicing the patented method," regardless of what capabilities the system performing the process might have. Joy Tech., Inc. v. Flakt, Inc., 6 F.3d 770, 775 (Fed. Cir. 1993). Moreover, "infringement of a patented process or method cannot be avoided by having another perform one step of the process or method." Shields v. Halliburton Co., 493 F.Supp. 1376, 1389 (W.D. La. 1980); Idacon, Inc. v. Central Forest Prod., Inc., 3 U.S.P.Q. 2d 1079, 1092 (E.D. Okla. 1986) (same); see also Marley Mouldings Ltd. v. Mikron Indus., Inc., 2003 WL 1989640, *2 (N.D.Ill., April 30, 2003); Cordis Corp. v. Medtronic Ave, Inc., 194 F.Supp.2d 323, 349 (D. Del. 2002) (J. Robinson), remanded on other grounds 339 F. 3d 1352 (Fed. Cir. 2003); Faroudja Lab., Inc. v. Dwin Electronics, Inc., 1999 WL 111788 *5 (N.D. Cal. Feb. 24, 1999); Avery Dennison Corp. v. UCB Films, 1997 WL 567799 *2 (N. D. Ill. Sept. 4, 1997); E.I. Dupont De Nemours & Co. v. Monsanto Co., 903 F.Supp. 680, 734 (D. Del. 1995). Indeed, direct infringement exists even where various steps in a claim are performed by distinct persons or entities, as long as they have "some connection" to each other. Cordis, 194 F.Supp.2d at 349 (finding direct infringement of a method patent relating to stents where physicians performed many of the claim steps, and manufacturer performed remaining step where "some connection" existed between the two). Inducement of Infringement 1. 35 U.S.C. § 271(b) states "Whoever actively induces infringement of a patent shall

be liable as an infringer." Section 271(b) "is a broad statement and [an] enactment of the principle that one who actively induces infringement of a patent is likewise liable for infringement." Rohm & Haas Co. v. Mobil Oil Corp., 718 F. Supp. 274, 331 (D. Del. 1989), aff'd, 895 F.2d 1421 (Fed. Cir. 1990) (quoting Power Lift, Inc. v. Lang Tools, Inc., 774 F.2d 478, 481 (Fed. Cir. 1985)).

-5-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 6 of 45

2.

"Inducement is the active and knowing aiding and abetting of another's direct

infringement." Penederm Inc. v. Alzo, Inc. 1996 WL 724766, *3 (N.D.Cal., Dec. 6, 1996) "In order to prevail in an action for inducement, a plaintiff must show that the defendant actually knew of the patent and intended to cause the acts which constituted the infringement." Hughes Aircraft Co. v. National Semiconductor Corp. 857 F.Supp. 691, 699 (N.D.Cal.,1994). Liability can be established by proving that the party accused of inducement "knew or should have known that its actions would induce actual infringement." Mentor H/S, Inc. v. Medical Device Alliance, Inc., 244 F.3d 1365, 1379 (Fed. Cir. 2001). Moreover, "[t]he requisite intent to induce may be inferred from all of the circumstances, such as giving a direct infringer instructions on how to use a patented process or designing a product to infringe." Apple Comp., Inc. v. Articulate Sys., Inc. 991 F.Supp. 1189, 1191 (N.D.Cal.,1997); see also Hughes Aircraft Co., 857 F.Supp. 699 (inducment may be proven by circumstantial evidence). 3. Also, proof of "[d]irect infringement by a third party is required, but may be inferred

from circumstantial evidence that the accused compound has no practical use other than in an infringing composition." Penederm Inc. 1996 WL 724766, at 3; see also nCube Corp. v. Seachange Int'l, Inc., 436 F.3d 1317, 1324 (Fed. Cir. 2006) Contributory Infringement 35 U.S.C. § 271(c) states in pertinent part: Whoever sells a component of . . . manufacture . . . or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

-6-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 7 of 45

1.

The doctrine of contributory infringement serves "to protect patent rights from

subversion by those who, without directly infringing the patent themselves, engage in acts designed to facilitate infringement by others. Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 188 (1980). Under 35 U.S.C. § 271(c), the plaintiff must show "that an alleged contributory infringer knew that the combination for which his components were especially made was both patented and infringing." Preemption Devices v. Minnesota Min. & Mfg. Co., 803 F.2d 1170, 1174 (Fed. Cir. 1986). The law is "clear that only proof of a defendant's knowledge, not intent, that his activity cause infringement was necessary to establish contributory infringement." Hewlett-Packard Co. v. Bausch & Lomb Inc. 909 F.2d 1464, 1469 (Fed. Cir. 1990). Moreover, "constructive knowledge is sufficient to satisfy the knowledge element." Philips Electronics N. Am. Corp. v. Remote Solution Co., Ltd., 2006 WL 266103, *1 (D.Del. Feb. 3, 2006). 3. The law requires that the infringing component "is not a staple article suitable for

substantial noninfringing use." Preemption Devices v. Minnesota Min. & Mfg. Co., 803 F.2d 1170, 1174 (Fed. Cir. 1986). But, it is the accused infringer's burden to establish substantial noninfringing uses for the component. See CFMT, Inc. v. Steag Microtech Inc., 14 F.Supp.2d 572, 592 (D. Del. 1998) (an accused infringer ''did not present any evidence that customers use the (accused product) in some non-infringing way.''); Regents of the Univ. of Cal. v. Hansen, 54 USPQ2d 1473, 1480 (E.D. Cal. 1999) (''Aside from defendants' statements that the (articles) can be used for other uses than [in the patented method] and that 'from time to time customers mention their intent' to use the [articles] for another use, defendants have shown no facts indicating that anyone actually does use the [the articles] for anything other than [in the patented method].''); Sing v. Culture Prod., Inc., 469 F. Supp. 1249, 1252, (E.D. Mo. 1979)(''The evidence

-7-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 8 of 45

failed to establish that the product could be used except in accordance with the patented process.''). 4. Key to the infringer's burden is evidence that the non-infringing uses are substantial.

"Occasional aberrant use of a product that is clearly designed to be used in a particular matter . . . does not make defendant's device a staple article or commodity of commerce suitable for substantial noninfringing use." Hansen, 54 U.S.P.Q.2d at 1480 (citing Dennison Mfg. Co. v. Ben Clements & Sons, Inc., 467 F.Supp. 391, 428 (S.D.N.Y. 1979)). 5. "Proof of contributory infringement may be based on circumstantial evidence."

Lucas Aerospace, Ltd. v. Unison Indus., L.P., 899 F. Supp. 1268, 1286 (D. Del. 1995). B. 1. Willfulness Willful infringement is a question of fact. Slimfold Mfg. Co. v. Kinkead Indus., Inc.,

932 F.2d 1453, 1459 (Fed. Cir. 1991). Infringement will be considered willful "when, upon consideration of the totality of the circumstances, clear and convincing evidence establishes that the infringer acted in disregard of the patent, [and] that the infringer had no reasonable basis for believing it had a right to engage in the infringing acts." Electro Med. Sys., S.A. v. Cooper Life Sciences, 34 F.3d 1048, 1056 (Fed. Cir. 1994); see also SRI Int'l, Inc. v. Advanced Tech. Lab. Inc., 127 F.3d 1462, 1464-65 (Fed. Cir. 1997) (stating that the "primary consideration in determining [whether there has been willful infringement] is whether the infringer, acting in good faith and upon due inquiry, had sound reason to believe that it had the right to act in the manner that was found to be infringing"); Crystal Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336, 1346 (Fed. Cir. 2001); State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1581 (Fed. Cir. 1989), cert. denied, 493 U.S. 1022 (1990). 2. To establish willful infringement, LML must prove first, that each Defendant was

aware of the `988 patent; and second, that once Defendants became aware of the `988 patent, -8-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 9 of 45

they did nothing to form a good faith basis that they did not infringe the patent. John Hopkins v. CellPro, 894 F. Supp. 819, 843 (D. Del. 1995). Actual knowledge of the patent is not required for a finding of willful infringement. Jurgens, v. CBK, Ltd., 80 F.3d 1566, 1573 (Fed. Cir. 1996) ("Actual notice of the patent would, of course, render constructive notice unnecessary to trigger the affirmative duty of due care to avoid infringement."); Mor-Flo, 883 F.2d at 1581 ("Actual knowledge is not required."); Afros S.p.A. v. Krauss-Maffei Corp., 671 F. Supp. 1402, 1438 (D. Del. 1987) ("The issue of willfulness does not rest solely on the timing or knowledge of the patent, but on the totality of the circumstances."). Knowledge of the infringed upon patent may be inferred. ADC Telecomm., Inc. v. Siecor Corp., 954 F. Supp. 820, 834 (D. Del. 1997) (holding that a "reasonable factfinder might infer knowledge" of the infringed-upon patent from internal memoranda mentioning "some patent issues" and "clones" as well as from information contained in competitive reports). 3. Once an alleged infringer has obtained notice of a pertinent patent, it has "an

affirmative duty of due care to avoid infringement of the known patent rights of others." KnorrBremse Systeme v. Dana Corp., 383 F.3d 1337, 1345-46 (Fed. Cir. 2004), quoting L.A. Gear Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1127 (Fed.Cir.1993); see also Underwater Devices, Inc. v. Morrison-Knudsen Co., Inc., 717 F.2d 1380, 1389 (Fed. Cir. 1983); Imonex Services, Inc. v. W.H. Munzprufer Dietmar Trenner GMBH, 408 F.3d 1374, 1377 (Fed. Cir. 2005). Whether that duty is satisfied is viewed in the totality of the circumstances. King Instrument Corp. v. Otari Corp., 767 F.2d 853, 867 (Fed. Cir. 1985). Factors that are considered include "evidence that the infringer copied the ideas or design, evidence that the infringer had actual notice of the patent, and evidence that the infringer sought, obtained and justifiably relied on legal advice from counsel on whether or not the patents were invalid or infringed." Thorn EMI N. Am. v.

-9-

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 10 of 45

Micron Tech., Inc., 837 F. Supp. 616, 620 (D. Del. 1993); see also Read Corp. v. Portec, Inc., 970 F.2d 816, 828 (Fed. Cir. 1992) (listing nine factors, including, "whether the infringer deliberately copied the ideas or designs of another," "whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good faith belief that it was invalid or not infringed," "the infringer's behavior as a party to the litigation," "closeness of the case," and others), abrogated on other grounds by Markman v. Westview Instruments, Inc., 52 F.3d 967, 975 (Fed. Cir. 1995). 4. That an opinion of counsel was obtained does not dictate a finding that the

infringement was not willful--the opinion must be competent. Golden Blount, Inc. v. Robert H. Peterson Co., 2006 WL 335607 (Fed. Cir. Feb. 15, 2006) (noting that the patentee "is free to introduce as evidence whatever opinions were obtained and to challenge the competence of those opinions in satisfaction of the patentee's burden on willfulness); nCube Corp. v. Seachange Int'l, Inc., 436 F.3d 1317, 1324 (Fed. Cir. 2006) (affirming finding of willful infringement where infringer obtained incompetent opinion); CFMT, Inc. v. Steag Microtech Inc., 14 F. Supp. 2d 572, 592 (D. Del. 1998), aff'd in part & rev'd in part on other grounds, 194 F.3d 1336 (Fed. 1999) ("[T]he mere fact that a party obtains a legal opinion does not preclude a finding that the party acted wilfully."). 5. In order to be competent, an opinion must contain an authoritative, complete, and

objective analysis of the patent's validity and/or the infringer's potential to infringe and must have been obtained before the initiation of any possible infringing activity. Jurgens, 80 F.3d at 1572; Underwater Devices, 717 F.2d at 1390. Disingenuous opinions which are tendered subjectively in an attempt to shield an infringer from liability should be ignored. Jurgens, 80 F.3d at 1572. Such opinions do not satisfy the duty of care and cannot prevent a finding of

- 10 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 11 of 45

willfulness. In re Hayes Microcomputer Prods., Inc. Patent Litig., 982 F.2d 1527, 1544 (Fed. Cir. 1992) ("The evidence shows that the advice of counsel was more of a protective device than a genuine effort to determine before infringing whether the patent was invalid.") 6. Other factors to be considered in evaluating the competency of an opinion of counsel

and the reasonableness of an infringer's reliance upon it include: (1) whether the attorney issuing the opinion seeks the advice of an independent expert or relies merely on interested parties, (see Minnesota Mining, 976 F.2d at 1580-81); and (2) whether the opinion is based on sufficient and accurate facts. Id. at 1582 (finding that potential infringer's ability to rely on counsel's case analysis was limited because it did not accurately inform counsel of the facts in its possession); Goodwall Const. Co. v. Beers Const. Co., 991 F.2d 751, 758 (Fed. Cir. 1993) (upholding finding of willful infringement where potential infringer concealed information from its patent attorney when seeking an opinion). Additionally, "oral opinions are not favored" and "carry less weight, for example, because they have to be proved perhaps years after the event, based only on testimony which may be affected by faded memories and the forces of contemporaneous litigation." Minnesota Mining, 976 F.2d at 1580. 7. The existence of an opinion cannot be a defense to willful infringement if the

infringer does not actually rely on the opinion. See Amsted Indus. v. Buckeye Steel Castings Co., 24 F.3d 178, 182 (Fed. Cir. 1994) ("What matters is the nature of that opinion and what effect it had on an infringer's actions.").

- 11 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 12 of 45

C.

Damages Permanent Injunction 35 U.S.C. § 283 states: The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by the patent, on such terms as the court deems reasonable.

1. "It is the general rule that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it." Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226, 1247 (Fed. Cir. 1989). "Entry of a permanent injunction following a finding of infringement is usually granted." Genentech, Inc. v. Wellcome Found. Ltd., 826 F. Supp. 828, 829 (D. Del. 1993). "A patent conveys the right to exclude others from making, using, or selling the invention, and this right implies the propriety of an injunction enforcing exclusivity." Matter of Mahurkar Double Lumen Litig., 831 F. Supp. 1354, 1397 (N.D. Ill. 1993), aff'd, 71 F.3d 1573 (Fed. Cir. 1995). 2. Moreover, a patentee's willingness to license its patents should not "deprive it the right to an injunction to which it is otherwise entitled." Mercexchange L.L.C. v. eBay, Inc. and Half.Com, Inc, 401 F.3d 1323, 1339 (Fed. Cir. 2005). As the Federal Circuit explained, "[i]njunctions are not reserved for patentees who intend to practice their patents, as opposed to those who choose to license. The statutory right to exclude is equally available to both groups, and the right to an adequate remedy to enforce that right should be equally available to both as well." Id.

- 12 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 13 of 45

Reasonable Royalty 35 U.S.C. § 284 states in pertinent part: Upon finding for the claimant the court shall award the claimant damages to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. 1. The assessment of damages is a question of fact and is decided by the jury.1

Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1578 (Fed. Cir. 1993). Although LML's damages may not be speculative, LML's burden of proof in demonstrating its damages is not an absolute one, but merely one of showing a reasonable probability. Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1327 (Fed. Cir. 1987); King Instruments Corp. v. Otari Corp., 767 F.2d 853, 863 (Fed. Cir. 1985); Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983). Moreover, any doubts regarding the amount of LML's damages must be resolved against Defendants. Kalman v. Berlyn Corp., 914 F.2d 1473, 1482 (Fed. Cir. 1990); Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983) 2. LML's damages award shall be "in no event less than a reasonable royalty,'" as a

reasonable royalty sets the "floor below which damage awards may not fall." See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1544 (Fed. Cir. 1995) (citation omitted). "The royalty may be based upon an established royalty, if there is one, or if not, upon the supposed result of hypothetical negotiations between the plaintiff and defendant." Rite-Hite, 56 F.3d at 1554. "A reasonable royalty is the amount of money that would be agreed to in a hypothetical arms length

1The

jury will assess damages through December 31, 2005. LML will seek, an accounting of damages accruing from January 1, 2006 through such time as defendants are enjoined from further infringement.

- 13 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 14 of 45

negotiation [at the time infringement began] between the owners of the patent rights and the infringer, with both operating under the assumption that the negotiated patent is not invalid and is infringed." Johns Hopkins University v. Cellpro, 894 F. Supp. 819, 838 (D. Del. 1995); see also Integra Lifesciences I, Ltd. v. Merck KGaA, 331 F.3d 860, 869 (Fed. Cir. 2003). The "book of wisdom" rationale should be applied, meaning it should be assumed that both parties knew all pertinent information at the time of the hypothetical negotiation and all events and facts that occurred after the date of the hypothetical negotiation even if those events could not have been known to or predicted by the hypothetical negotiators. Honeywell Int'l, Inc. v. Hamilton Sundstrand Corp., 378 F. Supp. 2d 459, 465 (D. Del. 2005). 3. are: (1) the royalties received by the patentee for the licensing of others under the [patents- in-suit] and the rates paid by the licensee for the use of other patents comparable to the [patents-in-suit]; (2) the nature and scope of the license, as exclusive or non-exclusive; or as restricted or nonrestricted in terms of territory or with respect to whom the manufactured product may be sold; (3) the licensor's established policy and marketing program to maintain his patent exclusivity by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that exclusivity; (4) the commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventors or promoters; Some of the factors for determining the results of such a hypothetical negotiation

- 14 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 15 of 45

(5)

the effect of selling the patented specialty in promoting sales of other products of the licensee, the existing value of the invention to the licensor as a generator of sales of his non-patented items, and the extent of such derivative or convoyed sales;

(6) (7)

the duration of the patent and the term of the licenses; the established profitability of the product made under the patent, its commercial success, and its current popularity;

(8)

the utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results;

(9)

the nature of the patented invention, the character of the commercial embodiment of it as owned and produced by the licensor, and the benefits to those who nave used the invention;

(10)

the extent to which the infringer has made use of the invention, and any evidence probative of the value of that use;

(11)

the portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions;

(12)

the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer;

(13)

the opinion testimony of qualified experts; and

- 15 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 16 of 45

(14)

any other economic factor that a normally prudent businessman would, under similar circumstances, take into consideration in negotiating the hypothetical license.

See SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1168 (Fed. Cir. 1991); Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp 1116 (S.D.N.Y. 1970), modified and aff'd, 446 F.2d 295 (2d Cir. 1971), cert. denied, 404 U.S. 870 (1971). Marking 1. Generally, Section 287(a) requires that patent owners "making, offering for sale, or

selling within the United States any patented article...give notice to the public that the same is patented." 35 U.S.C. § 287(a). However, the marking requirement applies only when apparatus claims are asserted. See Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075 (Fed. Cir. 1983). Thus, the marking requirement does not apply "where the patent is directed to a process or method." State Contracting & Eng'g v. Condotte Am. Inc., 346 F.3d 1057, 1073 (Fed. Cir. 2003) (internal quotations omitted); see also Am. Med. Sys., Inc. v. Med. Eng'g Corp., 6 F.3d 1523, 1538 (Fed. Cir. 1993) ("The law is clear that the notice provisions of Section 287 do not apply where the patent is directed to a process or method."); Loral Fairchild Corp. v. Victor Co. of Japan, Ltd., 906 F. Supp. 813, 816 (E.D.N.Y. 1995) ("The notice provisions of section 287 do not apply to a process or method patent because there is nothing to mark."). A system, like a method, is merely a way of doing something--it is an action, not an article that can be marked. In fact, a "system" claim is composed of combinations of methods. See CFMT, Inc. v. Yieldup Int'l Corp., 349 F.3d 1333, 1339 (Fed. Cir. 2003) (noting that most systems claims disclose several combinations of methods).

- 16 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 17 of 45

Pre-Judgment Interest 1. The patent owner is entitled to prejudgment interest on its damages award. Uniroyal,

Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991). In General Motors Corp. v. Devex Corp., "[t]he Supreme Court explained that the denial of prejudgment interest simply creates an incentive to prolong litigation, and that prejudgment interest in patent cases is withheld only under exceptional circumstances....[A]n award of prejudgment interest serves to make the patent owner whole, for damages properly include the forgone use of money of which the patentee was wrongly deprived." Sensonics, Inc. v. Aerosonic Corp., 81 F.3d, 1566, 1574 (Fed. Cir. 1996), quoting General Motors, 461 U.S. at 655-56. Enhanced Damages and Attorneys Fees 1. Up to three times the amount found as actual damages can be granted as enhanced damages for willful infringement. 35 U.S.C. § 284. Actual bad faith need not be shown to obtain these increased damages. TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 902 (Fed. Cir. 1986). 2. When a case is found to be exceptional, the Court may award "reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. If the patent owner prevails, the court may find the case exceptional because the infringement was willful, e.g., Avia Group Int'l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1567 (Fed. Cir. 1988); Imonex, 408 F.3d at 1377. A court may also hold a case "exceptional" because of the infringer's litigation misconduct even though the infringer was not guilty of willful infringement. In Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547 (Fed. Cir. 1989), the Federal Circuit held that the district court did not commit clear error in finding the case "exceptional" because of the infringer's "strategy of vexatious activity." Id. at 1551-53. The Federal Circuit did hold, however, that in this context

- 17 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 18 of 45

the trial court should only award those attorneys fees made necessary by the "extra legal effort to counteract [the infringer's] misconduct." Id. at 1552. II. ISSUES ON WHICH DEFENDANTS BEAR THE BURDEN OF PROOF A. Validity 35 U.S.C. § 282 (Supp. 1999) states in pertinent part: A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent or multiple dependent form) shall be presumed valid, independently of the validity of the other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim....The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." 1. Because the `988 patent is presumed valid, Defendants' standard for proving invalidity is high. Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co.,1996 WL 621830, at *3 (D. Del. Oct. 21, 1996)("The presumption of validity imposes the burden of proving invalidity on the attacker."). "Invalidity must be established by facts supported by clear and convincing evidence." Kegel Co., Inc. v. AMF Bowling, Inc, 127 F.3d 1420, 1429 (Fed. Cir. 1997). "Clear and convincing evidence has been described as evidence which proves in the mind of the trier of fact 'an abiding conviction that the truth of [the] factual contentions are [sic] `highly probable.'" Intel Corp. v. United States Int'l Trade Comm'n, 946 F.2d 821, 830 (Fed. Cir. 1991) (citation omitted). 2. "[A] patent is presumed valid, and this presumption exists at every stage of the litigation." Canon Computer Sys., Inc. v. Nu-Kote Int'l, Inc., 134 F.3d 1085, 1088 (Fed. Cir. 1998). "'[T]he burden of persuasion is and remains always upon the party asserting invalidity.'" American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1358 (Fed. Cir. 1984) (citation omitted). "The presumption is never annihilated, destroyed, or even weakened,

- 18 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 19 of 45

regardless of what facts are of record." ACS Hosp. Sys., Inc. v. Montefiore Hosp., 732 F.2d 1572, 1574-75 (Fed. Cir. 1984). 3. "The burden of proof arises from the presumption that the Patent Office properly carried out its administrative functions." BOC Health Care, 892 F. Supp. at 602. "It is not necessary that the court hold a patent valid; it is only necessary that it hold that the patent challenger has failed to carry its burden." Ajinomoto, 1996 WL 621830, at *5. "[W]here the challenger fails to identify any persuasive evidence of invalidity, the very existence of the patent satisfies the patentee's burden on the validity issue." Canon Computer Sys., 134 F.3d at 1088. 4. "When determining the validity of the claims of a patent, each claim must be separately considered." Rosco, Inc. v. Mirror Lite Co., 304 F.3d 1373, 1379 (Fed. Cir. 2002). Prior Art 1. One who challenges the validity of a patent bears the burden of establishing that a reference is "prior art" by clear and convincing evidence. Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1576 (Fed. Cir. 1996). "The presumption of validity...requires those challenging validity to introduce clear and convincing evidence on all issues relating to the status of a particular reference as prior art." Sandt Tech., Ltd. v. Resco Metal and Plastics Corp., 264 F.3d 1344, 1350 (Fed. Cir. 2001). The burden is "most formidable" when the party asserting invalidity relies on prior art that was considered by the PTO. Central Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1577 (Fed. Cir. 1983). To constitute prior art for purposes of invalidating a patent, "the knowledge must be publicly accessible." Minnesota Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1306 (Fed. Cir. 2002).

- 19 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 20 of 45

Anticipation 35 U.S.C. § 102(a) and (b) states in pertinent part: A person shall be entitled to a patent unless -- (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, or.... 1. "Anticipation under 35 U.S.C. § 102 means lack of novelty, and is a question of fact." Brown v. 3M, 265 F.3d 1349, 1351 (Fed. Cir. 2001), cert. denied, 535 U.S. 970 (2002). "Invalidity based upon lack of novelty requires that the same invention, including each element and limitation of the claims, was known or used by others before it was invented by the patentee." Oney v. Ratliff, 182 F.3d 893, 895 (Fed. Cir. 1999) (citing Hoover Group, Inc. v. Custom Metalcraft, Inc., 66 F.3d 299, 302 (Fed. Cir. 1995)). 2. A claim is anticipated only "when a single prior art reference discloses each and every limitation of the claim." Glaxo Inc. v. Novopharm Ltd., 52 F.3d 1043, 1047 (Fed. Cir. 1995), cert denied, 516 U.S. 988 (1995). The "anticipating reference must describe the patented subject matter with sufficient clarity and detail to establish that the subject matter existed in the prior art and that such existence would be recognized by persons of ordinary skill in the filed of the invention." Crown Operations Int'l, Ltd. v. Solutia, Inc., 289 F.3d 1367, 1375 (Fed. Cir. 2002). "[A]nticipation does not permit an additional reference to supply a missing claim limitation." Teleflex, Inc. v. Ficosa N.Am. Corp., 299 F.3d 1313, 1335 (Fed. Cir. 2002). Moreover, "an expert's conclusory testimony, unsupported by the documentary evidence, cannot supplant the requirement of anticipatory disclosure in the prior art reference itself. Motorola, Inc. v. Interdigital Tech. Corp., 121 F.3d 1461, 1473 (Fed. Cir. 1997). - 20 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 21 of 45

3. If a prior art reference does not expressly state an element of a claim, "that reference may still anticipate if that element is `inherent' in its disclosure." In re Robertson, 169 F.3d 743, 745 (Fed. Cir. 1999). Whether a claim limitation is inherent in a prior art reference is a question of fact. Telemac Cellular Corp. v. Topp. Telecom, Inc., 247 F.3d 1316, 1328 (Fed. Cir. 2001). "Inherency, however, may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient." Cont'l Can Co., USA, Inc. v. Monsanto Co., 948 F.2d 1264, 1268-69 (Fed. Cir. 1991) (citations omitted) (emphasis in original). "Inherent anticipation requires that the missing descriptive material is `necessarily present,' not merely probably or possibly present in the prior art." Triitec Indus., Inc. v. Top-U.S.A. Corp., 295 F.3d 1292, 1295 (Fed. Cir. 2002). 4. "Prior art does not `anticipate' for purposes of § 102 even `if the general aspects are the same and the differences in minor matters is [sic]...such as would suggest itself to one of ordinary skill in the art.'" BOC Health Care, 892 F. Supp. at 603 (quoting Structural Rubber Prods. Co. v. Park Rubber Co., 749 F.2d 707, 716 (Fed. Cir. 1984). In order to anticipate, "[t]he prior art reference must also be enabling, thereby placing the allegedly disclosed matter in the possession of the public." Key Pharms., 981 F. Supp. at 311. Obviousness 35 U.S.C. § 103 states in pertinent part: (a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made. 1. "Whether a claimed invention is unpatentable as obvious under 35 U.S.C. § 103 is a question of law based on underlying findings of fact." Okajima v. Bourdeau, 261 F.3d 1350, - 21 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 22 of 45

1354 (Fed. Cir. 2001) (citation omitted), cert. denied, 534 U.S. 1128 (2002). The "underlying factual inquiries [the Graham factors] include: (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the prior art and the claimed invention; and (4) extent of any objective indicia of non-obviousness." Winner Int'l Royalty Corp. v. Wang, 202 F.3d 1340, 1348 (Fed. Cir. 2000), cert. denied, 530 U.S. 1238 (2000); Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 17-18 (1966). "[Federal Circuit] precedent clearly establishes that the district court must make Graham findings before invalidating a patent for obviousness." Ruiz v. A.B. Chance Co., 234 F.3d 654, 663 (Fed. Cir. 2000). Throughout the obviousness determination, "a patent retains its statutory presumption of validity...and the movant retains the burden to show the invalidity of the claims by clear and convincing evidence as to underlying facts." McGinley v. Franklin Sports, Inc., 262 F.3d 1339, 1349 (Fed. Cir. 2001). 2. "The consistent criterion for determination of obviousness is whether the prior art would have suggested to one of ordinary skill in the art that this process should be carried out and would have a reasonable likelihood of success, viewed in the light of the prior art." In re Dow Chem. Co., 837 F.2d 469, 473 (Fed. Cir. 1988). "Both the suggestion and the expectation of success must be founded in the prior art, not in the applicant's disclosure." Merck & Co. v. Danbury Pharmacal, Inc. , 694 F. Supp. 1, 29 (D. Del. 1988) (citation omitted), aff'd, 873 F.2d 1418 (Fed. Cir. 1989). 3. "35 U.S.C. § 103 requires that obviousness be determined with respect to the invention as a whole. This is essential for combination inventions, for generally all combinations are of known elements." Interconnect Planning Corp. v. Feil, 774 F.2d 1132, 1143 (Fed. Cir. 1985) (citations omitted); Grain Processing Corp. v. American Maize-Prod. Co., 840 F.2d 902,

- 22 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 23 of 45

907 (Fed. Cir. 1988)("The inquiry is not whether each element existed in the prior art, but whether the prior art made obvious the invention as a whole for which patentability is claimed."); see also Environmental Designs, Ltd. v. Union Oil Co., 713 F.2d 693, 698 (Fed. Cir. 1983). 4. "[A]n invention is not obvious just because all the claimed elements are found in the prior art. There must be something in that prior art to suggest the combination." Key Pharms., 981 F. Supp. at 316. Accordingly, it is insufficient for Defendants to establish obviousness based on the mere showing that the separate elements of the `988 patent existed in the prior art, absent some teaching or suggestion, in the prior art, to combine the elements. Arkie Lures, Inc. v. Gene Larew Tackle, Inc., 119 F.3d, 953, 957 (Fed. Cir. 1997). "The absence of such a suggestion to combine is dispositive in an obviousness determination." Gambro Lundia AB v. Baxter Healthcare Corp., 110 F.3d 1573, 1579 (Fed. Cir. 1997); In re Kotzab, 217 F.3d at 1371(finding patent valid where "there was no finding as to the specific understanding or principle within the knowledge of a skilled artisan that would have motivated one with no knowledge of [the] invention to make the combination in the manner claimed."); Robotic Vision Sys., 189 F.3d at 1377 (finding patent valid where record failed to disclose suggestion to combine prior art teaching). 5. Likewise, it is improper to "pick and choose among the individual elements of assorted prior art references to recreate the claimed invention," but rather, one must "look for some teaching or suggestion in the references to support their use in the particular claimed combination." Symbol Techs., Inc. v. Opticon, Inc., 935 F.2d 1569,1576 (Fed. Cir. 1991) (citation omitted). Clear and convincing evidence must be presented that the prior art contains a suggestion to combine or a patent cannot be found invalid as obvious. Smiths Indus. Med. Sys., Inc. v. Vital Signs, Inc., 183 F.3d 1347, 1356-57 (Fed. Cir. 1999). There must be an explanation

- 23 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 24 of 45

of "the reasons one of ordinary skill in the art would have been motivated to select the references and to combine them to render the claimed invention obvious." In re Rouffet, 149 F.3d 1350, 1359 (Fed. Cir. 1998); In re Kotzab, 217 F.3d at 1370. Where the prior art does not specifically teach or suggest combining prior art to make the claimed invention, it is rare that such a suggestion can be supplied simply by the level of skill in the art. See Al-Site Corp. v. VSI Intern. Inc., 174 F.3d 1308, 1324 (Fed. Cir. 1999). Moreover, a motivation to combine cannot come simply from the fact that the asserted prior art is within the same field. See Winner Int'l Royalty Corp., 202 F.3d at 1349. 6. Instead, the "motivation to combine must be clear and particular, and it must be supported by actual evidence." Teleflex, 299 F.3d at 1334 (citation omitted). In Teleflex, the court rejected defendant's contention that the nature of the problem could provide the motivation to combine where defendant "offer[ed] no evidence in support of its conclusory assertion...much less a clear and particular showing." Id. 7. "The decision of obviousness vel non is made not from the viewpoint of the inventor, but from the viewpoint of a person of ordinary skill in the field of the invention." Arkie Lures, 119 F.3d at 956. "The purpose is to assure an appropriate perspective of the decisionmaker, and to focus on conditions as they existed when the invention was made." Id. Accordingly, "[t]he issue of obviousness is determined entirely with reference to a hypothetical `person having ordinary skill in the art.' It is only that hypothetical person who is presumed to be aware of all the pertinent prior art." Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 454 (Fed. Cir. 1985) (emphasis added). 8. "It is critical that the question of obviousness not be viewed 'in the light of the accomplished result,' an analysis recognized by the Supreme Court as unsound. . . ." BOC Health

- 24 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 25 of 45

Care, 892 F. Supp. at 603 (citation omitted). "The Federal Circuit likewise has consistently rejected obviousness analyses based upon hindsight." Id. "The invention must be viewed not with the blueprint drawn by the inventor, but in the state of the art that existed at the time." Interconnect Planning, 774 F.2d at 1138. 9. The Federal Circuit and this Court "have consistently held that 'obvious to try' is not to be equated with obviousness under 35 U.S.C. § 103." Gillette Co. v. S.C. Johnson & Son, Inc., 919 F.2d 720, 725 (Fed. Cir. 1990). "[T]he governing standard is emphatically not whether a particular method or process leading to an invention would be 'obvious to try,' but whether such an experiment would have been expected to succeed." Merck, 694 F. Supp. at 29 (citation omitted). 10. Objective evidence of nonobviousness or secondary consideration, including commercial success, long-felt but unsolved needs, failure of others to develop the invention, copying by others, and licenses showing industry respect for the invention, must be considered prior to reaching a conclusion of nonobviousness. See WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339, 1359 (Fed. Cir. 1999); Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1569 (Fed. Cir. 1987); Ashland Oil, Inc. v. Delta Resins & Refractories, Inc., 776 F.2d 281, 306 (Fed. Cir. 1985). These indicia "are often most probative and determinative of the ultimate conclusion of obviousness or nonobviousness." Pro-Mold & Tool Co. v. Great Lakes Plastics, Inc., 75 F.3d 1568, 1573 (Fed. Cir. 1996). 11. "[W]hen differences that may appear technologically minor nonetheless have a practical impact, particularly in a crowded field, the decision-maker must consider the obviousness of the new structure in this light. Such objective indicia as commercial success, or filling an existing need, illuminate the technological and commercial environment of the

- 25 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 26 of 45

inventor, and aid in understanding the state of the art at the time the invention was made." Continental Can Co. v. Monsanto Co., 948 F.2d 1264, 1273 (Fed. Cir. 1993). 12. "[L]ong-felt need is analyzed as of the date of an articulated identified problem and evidence of efforts to solve that problem." Texas Instruments v. United States Int'l Trade Com'n, 988 F.2d 1165, 1178 (Fed. Cir. 1993). "Nonobviousness is suggested by the failure of others to 'find a solution to the problem which the patents in question purport to solve. Such evidence shows indirectly the presence of a significant defect in the prior art.'"' Symbol Techs., 935 F.2d at 1578-79 (citation omitted). This objective evidence of nonobviousness therefore must be taken into account. Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1380 (Fed. Cir. 1986), cert. denied, 480 U.S. 947 (1987). Copying is an indicium of nonobviousness, and is to be given proper weight. See Windsurfing Intern., Inc. v. AMF, Inc., 782 F.2d 995, 1000 (Fed.Cir. 1986), cert. denied, 477 U.S. 905 (1986) ("the district court correctly noted that copying the claimed invention, rather than one within the public domain, is indicative of nonobviousness"); see also Panduit, 774 F.2d 1082, 1099 (Fed. Cir. 1985). Enablement 35 U.S.C. § 112, ¶ 1 states: The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention. 1. "Invalidity for lack of enablement is a conclusion of law and must be supported by facts proved by clear and convincing evidence, for the grant of the patent by the PTO carries with it the presumption of validity compliance with § 112." N. Telecom, Inc. v. Datapoint Corp., 908 F.2d 931, 941 (Fed. Cir. 1990). - 26 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 27 of 45

2. The Federal Circuit has interpreted the enablement provision of § 112 to require that the specification "teach those skilled in the art how to make and use the full scope of the claimed invention without `undue experimentation.'" Koito Mfg. Co., Ltd. v. Turn-Key-Tech, LLC, 381 F.3d, 1142, 1155 (Fed. Cir. 2004) (citing Genetech Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1365 (Fed. Cir. 1997)). "An inventor need not, however, explain every detail...patent specifications would turn into product specifications....That some experimentation is necessary does not preclude enablement." DeGeorge v. Bernier, 768 F.2d 1318, 1323 (Fed. Cir. 1985) (internal citations omitted). For example, the Federal Circuit "has repeatedly explained that a patent applicant does not need to include in the specification that which is already known to and available to one of ordinary skill in the art" such as things that are "standard in the industry." Koito, 381 F.3d at 1156. Additionally, only the claimed invention must be enabled by the specification and not all related, unclaimed devices or systems with which the claimed invention might interface. DeGeorge, 768 F.2d at 1324. 3. Whether an application meets the criteria set forth in 35 U.S.C. § 112, first paragraph, must be judged as of the application's filing date. Vas-Cath Inc. v. Mahurka, 935 F.2d 1555, 1566 (Fed. Cir. 1991). "The enablement requirement is met if the description enables any mode of making and using the invention." Johns Hopkins Univ. v. Cellpro, Inc. 152 F.3d 1342, 1361 (Fed. Cir. 1998) (quoting Engel Indus., Inc. v. Lockformer Co., 946 F.2d 1528, 1533 (Fed. Cir. 1991)). 4. Moreover, "the determination of what constitutes undue experimentation in a given case requires the application of a standard of reasonableness, having due regard for the nature of the invention and the state of the art. The test is not merely quantitative, since a considerable amount of experimentation is permissible, if it is merely routine." Boston Scientific Scimed, Inc.

- 27 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 28 of 45

v. Cordis Corp., 392 F.Supp.2d 676, 682 (D. Del. 2005) (Robinson, C.J.) (denying summary judgment for lack of enablement). 5. The time and expense that might be required to practice every possible embodiment of the claims of an invention is not determinative, since the time and cost may not be totally due to experimentation: the emphasis is properly placed on experimentation, not the time and cost standing alone. U.S. v. Telectronics, Inc., 857 F.2d 778, 785 (Fed. Cir. 1988). The time and cost of developing an embodiment of an invention are "factors [that] may be taken into account [but] standing alone [do not] show the experimentation to be excessive." Id. If one embodiment of an invention is disclosed in a patent specification, it is likely that "other permutations of the invention could be practiced by those skilled in the art without undue experimentation." Id. at 786. In determining whether claims are enabled, "[i]t is not a function of the claims to specifically exclude" all possible inoperative embodiments. Atlas Powder Co. v. E.I. duPont De Nemours & Co., 750 F.2d 1569, 1576 (Fed. Cir. 1984). Written Description 35 U.S.C. § 112 states in pertinent part: The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art. 1. Whether the written description requirement of § 112 has been met is a question of fact. In re Hayes Microcomputer Prods., Inc. Patent Litig., 982 F.2d 1527, 1533 (Fed. Cir. 1992). The burden of proof is on the party alleging that a claim is invalid for failure to comply with the written description requirement to prove by clear and convincing evidence. Mobil Oil Corp. v. Amoco Chems. Corp., 779 F. Supp. 1429, 1498-99 (D. Del. 1991), aff'd, 980 F.2d 742 (Fed. Cir. 1992).

- 28 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 29 of 45

2. The written description requirement of § 112 serves two purposes. First, "the `essential goal' of the description of the invention requirement is to clearly convey information that an applicant has invented the subject matter which is claimed." In re Barker, 559 F.2d 588, 592 n.4 (C.C.P.A. 1997). Second, the written description puts the public in possession of what the applicants have described as their invention. Id.; see also Regents of the Univ. of Cal. v. Eli Lilly, 119 F.3d 1559, 1566 (Fed. Cir. 1997). 3. The Federal Circuit has interpreted the written description requirement to require that the patent specification "describe the claimed invention so that one skilled in the art can recognize what is claimed." Enzo Biochem, Inc. v. Gen-Probe Inc., 323 F.3d 956, 968 (Fed. Cir. 2002). "Compliance with § 112 requires sufficient information in the specification to show that the inventor possessed the invention at the time of the original disclosure." Pandrol, 424 F.3d 1161, 1165 (Fed. Cir. 2005) (citing Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1561 (Fed. Cir. 1991)) (emphasis added). Thus, for claim language added after the filing of the original specification, the originally filed specification must "convey to those skilled in the art that applicant had invented the subject matter later claimed." In re Wilder, 736 F.2d 1516, 1520 (Fed. Cir. 1984). 4. However, the written description requirement does not require that the specification "describe the claimed subject matter in exactly the same terms as used in the claims." Koito, 381 F.3d at 1154 (citing Eiselstein v. Frank, 52 F.3d 1035, 1038 (Fed. Cir. 1995) (emphasis added)). "[T]he failure of the specification to specifically mention a limitation that later appears in the claims is not a fatal one when one skilled in the art would recognize upon reading the specification that the new language reflects what the specification shows has been invented." All Dental Prodx, LLC v. Advantage Dental Prods., Inc., 309 F.3d 774, 779 (Fed. Cir. 2002)

- 29 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 30 of 45

(holding that it was improper to grant summary judgment of invalidity for failure to satisfy the written description requirement where the limitation at issue was described in the original specification although the exact phrase later added to the claims was not specifically used); see also In re Wright, 866 F.2d 422, 425 (Fed. Cir. 1989) (holding that the fact that the words of the claim limitation at issue--"not permanently fixed"--were not in the specification was not important in evaluating the adequacy of the written description because the original specification described the process of the claim limitation containing those words). 5. No new matter may be added to a patent application after the application is filed. 35 U.S.C. § 132. Making the determination as to whether an amendment constitutes new matter is closely related to evaluating the written description requirement of § 112. Schering Corp. v. Amgen Inc., 222 F.3d 1347, 1352 (Fed. Cir. 2000). "The fundamental inquiry is whether the material added by amendment was inherently contained in the original specification." Id. "[T]o avoid the new matter prohibition, an applicant must show that his original application supports the amended matter." Id. However, an applicant may clarify something disclosed in his original application without the clarification being treated as new matter. See Brook-Hill 1, LLC v. Intuitive Surgical, Inc., 334 F.3d 1294, 1303-1304 (Fed. Cir. 2003) (holding that an amendment clarifying a limitation supported by the original disclosure was not a new matter violation). In cases where the PTO has allowed amendments during prosecution without objection thereto as new matter, the presumption of validity "is entitled to an especially weighty presumption of correctness." Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1574-75 (Fed. Cir. 1992) (emphasis added).

- 30 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 31 of 45

Definiteness 35 U.S.C. § 112, paragraph 2 states: The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention. 1. A "determination of claim indefiniteness is a legal conclusion that is drawn from the court's performance of its duty as the construer of patent claims." Exxon Research & Eng'g Co. v. United States, 265 F.3d 1371, 1376 (Fed. Cir. 2001). The accused infringer has the burden of showing by clear and convincing evidence that the claims are invalid for indefiniteness under § 112, second paragraph. N. Am. Vaccine, Inc. v. Am. Cyanamid Co., 7 F.3d 1571, 1579 (Fed. Cir. 1993). 2. The definiteness requirement does not "compel absolute clarity." Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1347 (Fed. Cir. 2005). In ruling on an assertion of claim indefiniteness, "a court must determine whether those skilled in the art would understand what is claimed when the claim is read in light of the specification." Bancorp Services, L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367, 1371 (Fed. Cir. 2004). A determination that a patent claim is invalid for failure to meet the definiteness requirement is a conclusion "that is drawn from [a] court's performance of its duty as the construer of patent claims," and likewise is a question of law. Id. 3. Only claims "not amenable to construction" or "insolubly ambiguous" are indefinite. Datamize, 417 F.3d at 1347 (internal citations omitted) (emphasis added). "Thus, the definiteness of claim terms depends on whether those terms can be given any reasonable meaning." Id. The law is clear that a claim is not indefinite merely because it poses a difficult question of claim construction. Bancorp, 359 F.3d at 1371 (citing Honeywell Int'l, Inc. v. Int'l Trade Comm'n, 341 F.3d 1332, 1338-39 (Fed. Cir. 2003). In other words, if the meaning of a - 31 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 32 of 45

claim is discernable, "even though the task may be formidable and the conclusion may be one over which reasonable persons will disagree, . . . the claim [is] sufficiently clear to avoid invalidity on indefiniteness grounds." Exxon Research & Eng'g Co. v. United States, 265 F.3d 1371, 1375 (Fed. Cir. 2001). Moreover, in the face of an allegation of indefiniteness, "general principles of claim construction apply." Datamize, 417 F.3d at 1348. This means that "intrinsic evidence in the form of the patent specification and file history should guide a court." Id. 4. The Federal Circuit has noted that "[b]y finding claims indefinite only if reasonable efforts at claim construction prove futile, we accord respect to the statutory presumption of patent validity, see 35 U.S.C. § 282, and `we protect the inventive contribution of patentees, even when the drafting of their patents has been less than ideal.'" Bancorp, 359 F.3d at 1371 (quoting Exxon Research & Eng'g Co. v. United States, 265 F.3d 1371, 1375 (Fed. Cir. 2001)). Thus, "close questions of indefiniteness in litigation involving issued patents are properly resolved in favor of the patentee." Exxon Research, 265 F.3d at 1380. On-Sale Bar 1. Under 35 U.S.C. § 102(b), a patent is invalid by reason of the on-sale bar if the "invention was . . . on sale in this country . . . more than one year prior to the date of application for the patent in the United States." 35 U.S.C. § 102(b) 2. Defendants must prove, by clear and convincing evidence, that the invention of the asserted claims of the `988 patent was on sale one year prior to its critical date. Helifix Limited v. Blok-Lok, Ltd., 208 F.3d 1339, 1346 (Fed. Cir. 2000). 3. "The ultimate determination that a product was placed on sale [ ] is a question of law, based on underlying facts." Tec Air, Inc. v. Denso Manufacturing Michigan Inc., 192 F.3d 1353, 1358 (Fed. Cir. 1999) (citation omitted).

- 32 -

Case 1:04-cv-00858-SLR

Document 559-5

Filed 03/16/2006

Page 33 of 45

4. In Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), the Supreme Court held that the on-sale bar applies when two conditions are met before the critical date: first, "the product must be the subject of a commercial offer for sale"; and second, "the invention must be ready for patenting." Id. at 66-67.. 5. To prove the first prong of the Pfaff analysis ­ offer for sale ­ Defendants "must demonstrate by clear and convincing evidence that there was a definite sale or offer to sell more than one year before the application for the subject patent, and that the subject matter of the sale or offer to sell fully anticipated the claimed invention or would have rendered the claimed invention obvious by its addition to the prior art." Stx, LLC, v. Brine, Inc., 211 F.3d 588, 590 (Fed. Cir. 2000) (citations omitted). 6. In order for Defendants to demonstrate ­ under the first prong of the Pfaff analysis ­ that there was a definite sale or offer to sell more than one year before the application for the subject patent, the Federal Circuit has consistently found direct evidence of "a definite sale or offer to sell" necessary, such as an accepted purchase order or signed purchase agreement. Pfaff, 119 S.Ct. at 311-12 (relying on direct evidence of an accepted purchase order); Weatherchem Corp. v. J.L. Clark, Inc., 163 F.3d 1326, 1333 (Fed. Cir. 1998) (relying on record evidence of signed purchase agreement before critical date); Evans Cooling Sy