Technologies v. Aol Llc

• Decision Date: 18 April 2011
• Docket Number: No. 2010–1002.,2010–1002.
• Parties: REMBRANDT DATA TECHNOLOGIES, LP, Plaintiff–Appellant,v.AOL, LLC, Cavalier Telephone, LLC, and DIRECTV, Inc., Defendants,andHewlett–Packard Company, Canon U.S.A., Inc., Canon Business Solutions, Inc., and Canon Information Technology Services, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

641 F.3d 1331

98 U.S.P.Q.2d 1393

REMBRANDT DATA TECHNOLOGIES, LP, Plaintiff–Appellant,

v.AOL, LLC, Cavalier Telephone, LLC, and DIRECTV, Inc., Defendants,andHewlett–Packard Company, Canon U.S.A., Inc., Canon Business Solutions, Inc., and Canon Information Technology Services, Inc., Defendants–Appellees.

No. 2010–1002.

United States Court of Appeals, Federal Circuit.

April 18, 2011.

George Pazuniak, Womble Carlyle Sandridge & Rice, PLLC, of Wilmington, DE, argued for plaintiff-appellant. Of counsel were Virginia W. Hoptman and James Michael Lennon.Michael J. Songer, Crowell & Moring, LLP, of Washington, DC, argued for defendants-appellees. With him on the brief was Michael H. Jacobs.Before GAJARSA, LINN, and DYK Circuit Judges.GAJARSA, Circuit Judge.

This is a patent infringement appeal the resolution of which depends on the interpretation of whether a license exists for the technology at issue. Rembrandt Data Technologies, LP (“Rembrandt”) appeals the district court's decisions regarding contract interpretation, claim construction, and the invalidity of certain claims of United States Patent Nos. 5,251,236 (“'236 patent”) and 5,311,578 (“'578 patent”) (collectively, “patents-in-suit”). The district court held that because Conexant Systems, Inc. (“Conexant”) can trace its rights to a license originally issued to the Rockwell Corporation, Conexant is licensed. The district court was correct in this determination. Rembrandt's right to enforce the patents-in-suit against Conexant's modem chip customers Canon U.S.A., Inc., Canon Business Solutions, Inc., and Canon Information Technology Services, Inc. (collectively, “Canon”) and Hewlett–Packard Company (“HP”) was, therefore, extinguished by patent exhaustion. See, e.g., Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617, 638, 128 S.Ct. 2109, 170 L.Ed.2d 996 (2008). The district court also correctly granted summary judgment on the invalidity of claims 3–11 of the '236 patent. The district court erred in granting summary judgment on the invalidity of claims 1 and 2 of the '236 patent because genuine issues of material fact remained. Thus, we affirm-in-part, reverse-in-part, and remand for further proceedings consistent with this opinion.

Background

I.

A.

Rembrandt is the owner by assignment of United States Patent Nos. 5,602,869 (“'869 patent”) and 5,844,944 (“'944 patent”). In 2008, Rembrandt filed a complaint in the Eastern District of Virginia alleging that AOL, LLC; Cavalier Telephone, LLC; DIRECTV, Inc.; Canon; and HP infringed the '236, ' 578, '869, and '944 patents. On April 30, 2009, Rembrandt stipulated to the dismissal with prejudice of the claims regarding the '869 and '944 patents. AOL, LLC; Cavalier Telephone, LLC; and DIRECTV, Inc. have been dismissed from this case and only Canon and HP remain as appellees. The two remaining patents-in-suit claim certain types of computer modems and methods of identifying modems.

A modem is “a communications device that enables a computer to transmit information over a standard telephone line.” J.A. 8832. The '236 patent, entitled “Fractional Rate Modem with Trellis,” issued in 1993 and describes a modem utilizing both the “fractional rate encoding” technique for more rapidly transferring data and the “trellis encoding” technique for reducing errors in data transmission. '236 patent col.2 ll.41–44. Rembrandt asserted claims 1–3 and 6–11 of the '236 patent against Canon and HP. The '578 patent, entitled “Technique for Automatic Identification of a Remote Modem,” issued in 1994 and describes using “hidden” identification signals to enable an originating modem to efficiently identify and connect to a remote modem. ' 578 patent col.2 ll.49–52. The '578 patent has seven claims, each of which was originally asserted against Canon and HP. Claims 1–6 are no longer being asserted against HP.

The '236 and '578 patents were initially acquired by subsidiaries of AT & T Corporation. In 1996, AT & T Corporation underwent a “trivestiture,” creating AT & T, NCR Corporation,¹ and Lucent Technologies, Inc. (“Lucent”). The patents-in-suit were transferred to Lucent. In 1996, Lucent spun off Paradyne Corporation (“Paradyne”), which became the assignee of the ' 236 and ' 578 patents. In 2005, Paradyne was acquired by Zhone Technologies, Inc. (“Zhone”). In 2006, Zhone assigned the patents-in-suit to Rembrandt IP Management, LLC, which subsequently assigned the patents to Rembrandt Communications, LP (“Rembrandt Communications”). In 2008, less than two weeks before filing suit, Rembrandt Communications assigned the '236 and ' 578 patents to the plaintiff-appellant.

The ownership genealogy of the '236 and '578 patents is documented in the chart below.Image 1 (4.18" X 3.01") Available for Offline Print

B.

In 1996, Rockwell International Corporation executed an agreement for a third party to acquire some of its aerospace and defense businesses and reorganized its corporate structure. For clarity, we refer to the pre–1996 reorganization “Rockwell International Corporation” as “Old Rockwell” and the post–1996 reorganization “Rockwell International Corporation” as “New Rockwell.” Old Rockwell conveyed substantially all of its businesses and assets to New Rockwell in the “Agreement and Plan of Distribution dated as of December 6, 1996.” (“Rockwell Distribution Agreement”) The Rockwell Distribution Agreement stated that Old Rockwell “contributes, grants, conveys, assigns, transfers and delivers to Newco [ (New Rockwell) ] all the Company's [ (Old Rockwell's) ] right, title and interest in and to any and all Assets of the Company [ (Old Rockwell) ],” except for its aerospace and defense businesses. J.A. 12986. “Assets” included “agreements, leases, contracts ... licenses, franchises, permits, authorizations and approvals.” J.A. 12979.

Before its reorganization, Old Rockwell entered into a “Patent License Agreement” effective as of October 1, 1988 with AT & T Corporation. (“1988 License Agreement”). In the 1988 License Agreement, AT & T Corporation and Old Rockwell cross-licensed numerous patents, including the patents-in-suit. The 1988 License Agreement was amended by the parties through a 1995 Side Letter Agreement granting Rockwell additional rights, including sublicensing rights.

In a letter dated October 17, 1996, Lucent, the licensor of the patents-in-suit following the AT & T Corporation's trivestiture, acknowledged Rockwell's reorganization and the assignment of Old Rockwell's rights and notification obligations under the 1988 License Agreement to New Rockwell. Subsequent to receiving Lucent's letter, New Rockwell made its royalty payments to Lucent. In 1998, New Rockwell spun off its Semiconductor Systems unit, including its modem business, to Conexant. The licensing of the patents-in-suit is described in the chart below.Image 2 (4.43" X 2.94") Available for Offline Print

II.

The Telecommunication Standardization Sector of the International Telecommunications Union (“ITU”) coordinates protocols for telecommunication. As part of this process, it periodically promulgates standards known as “Recommendations.” ITU Recommendations regarding modems facilitate fast, reliable communication between modems from different manufacturers and of different types. Manufacturers market their modems as compliant with specific ITU Recommendations, such as the V.8, V.34, V.90, and V.92 protocols. Although Recommendations are not numbered in chronological order by date of adoption, they are designed to be backward compatible, so each successive Recommendation is able to implement preceding Recommendations.

Rembrandt argues that the inventions of the '236 and '578 patents are incorporated into the V.34 protocol. In its complaint, Rembrandt accuses Canon and HP of infringement of the patents-in-suit because they market office products containing modem chips capable of implementing the V.34 protocol. All of the accused products contain modem chipsets manufactured by Conexant.

III.

On June 17, 2009, the district court issued multiple orders that are challenged in this appeal. First, it entered an order construing some claims of the '236 and '578 patents. The district court also held claims 3–11 of the '236 patent invalid as indefinite for improperly mixing method and apparatus elements. The court denied Canon's motion for summary judgment of non-infringement of the '578 patent because Rembrandt could “conceivably carry its burden at trial based on circumstantial evidence.” J.A. 14322. The district court also granted Canon's motion for summary judgment of exhaustion because Conexant, Canon and HP's supplier of modem chips, was properly sublicensed under the 1988 License and 1995 Side Letter Agreements, and therefore, Rembrandt's right to enforce the '236 and '578 patents was extinguished by patent exhaustion. Rembrandt's motion for reconsideration of some of the orders was denied.

The district court subsequently issued an opinion explaining its prior summary judgment orders. Rembrandt Data Techs., LP v. AOL, LLC, 673 F.Supp.2d 420 (E.D.Va.2009). In a footnote, the court stated that the question of whether the claims of the '236 patent were invalid as indefinite for failing to disclose algorithms corresponding to functions set forth in the claims was moot in light of its indefiniteness ruling with respect to claims 3–11. Id. at 428 n. 5. Although judgment was entered in Canon's favor on all claims, the court's holding in its Memorandum Order of August 21, 2009 regarding the improper mixing of method and apparatus claims only applied to claims 3–11 of the '236 patent and did not address claims 1 and 2 of the ' 236 patent. On September 2, 2009, Canon filed a motion pursuant to Federal Rule of Civil Procedure 59(e) to amend the August 21, 2009 order to address claims 1 and 2. The district court granted Canon's motion, replacing the second sentence in footnote 5 of the August 21, 2009 order with the following sentence: “The Court also holds...