Can't Hide Behind Minor Clerical Error to Escape Willful Infringement Verdict
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The US Court of Appeals for the Federal Circuit affirmed a district court decision correcting a clerical error in a claim. Pavo Solutions LLC v. Kingston Technology Company, Inc., Case Nos. 21-1834 (Fed. Cir. June 3, 2022) (Lourie, Prost, Chen, JJ.)
The Pavo patent is generally directed to a "flash memory apparatus having a single body type rotary cover." CATR Co., later substituted by Pavo, sued Kingston for infringing the Pavo patent. Supported by the patent specification and prosecution, the district court judicially corrected the claim language in its claim construction order to read "pivoting the cover with respect to the flash memory main body," not "pivoting the case with respect to the flash memory main body" (change emphasized). Pavo's damages expert, Bergman, presented a profit-based model of reasonable royalty damages, relying on an earlier settlement agreement between CATR and IPMedia to arrive at a profit split of 18.75%, amounting to 40 cents/unit for Kingston. The jury returned a verdict of willful infringement and awarded Pavo a 20% reasonable royalty.
The Federal Circuit addressed and affirmed three issues on appeal, the first being that the district court approximately corrected an obvious minor clerical error in the claims. Correction is appropriate "only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims." In deciding whether a particular correction is appropriate, a court "must consider how a potential correction would impact the scope of a claim and if the inventor is entitled to the resulting claim scope based on the written description of the patent."
The Federal Circuit decided that the error was clear from the full context of the claim language, supported by the specification, and did not broaden the claim scope. Additionally, the correction was not subject to reasonable debate. Judicial correction "is merely giving to it the meaning which was intended by the applicant and understood by the examiner." Kingston's alternative correction would just reverse the order in which the structural components appear in the claim.
The prosecution history also did not suggest a different interpretation of the claim. The applicant and the examiner consistently characterized the claims as describing pivoting the case within the cover, which both the Patent Trial & Appeal Board (Board) and the court recognized. Each reviewing body understood the nature and scope of the invention consistent with correcting "case" to "cover." Kingston argued that the Board denied the applicant's request to correct the language, but the denial was on procedural grounds.
Second, the Federal Circuit determined that Kingston could form requisite intent to support a willful infringement verdict despite its arguments that it reasonably relied on not infringing the claims as originally written, and it could not anticipate that a court would later correct the claims. However, "reliance on an obvious minor clerical error in the claim language is not a defense to willful infringement." By definition, an obvious minor clerical error does not mask the meaning, so Kingston "cannot hide behind the error."
Third, the Federal Circuit decided that there was no abuse of discretion when the district court declined to exclude Bergman's reliance on the 25% profit representation in the IPMedia license. Kingston argued that Bergman's methodology was unsound because it considered not what CATR actually received but what Kingston characterized as a "non-binding non-payment term." A jury's damages award must be upheld unless the amount is grossly excessive or monstrous, clearly not supported by the evidence or based only on speculation or guesswork. Both parties' experts agreed that the IPMedia license was a comparable license. Bergman used a profit-split model to analyze damages, taking into account the difference in profitability and business models between IPMedia and Kingston.
The Court also disagreed with Kingston's argument that in light of evidence showing lower costs, Bergman failed to appropriately apportion for noninfringing features. Costs for materials are not the same as the value of the patented feature, so the two are not comparable. Bergman's analysis also correctly apportioned for noninfringing features by providing sufficient evidence of already built-in apportionment. When a sufficiently comparable license "is used as the basis for determining the appropriate royalty, further apportionment may not necessarily be required," because a damages theory dependent on a comparable license with built-in apportionment may "assume that the negotiators of a comparable license settled on a royalty rate and royalty base combination embodying the value of the asserted patent."
Practice Note: Consider claim language when analyzing willfulness in providing an opinion regarding infringement, as a court may correct an error in the claim language during claim construction. Also consider comparable licenses for reasonable royalty damages that may not require a separate apportionment.
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