694 F.3d 1312 (Fed. Cir. 2012), 2011-1538, ActiveVideo Networks, Inc. v. Verizon Communications, Inc.

Docket Nº:2011-1538, 2011-1567, 2012-1129, 2012-1201.
Citation:694 F.3d 1312
Opinion Judge:MOORE, Circuit Judge.
Party Name:ACTIVEVIDEO NETWORKS, INC., Plaintiff-Cross Appellant, v. VERIZON COMMUNICATIONS, INC., Verizon Services Corp., Verizon Virginia Inc., and Verizon South Inc., Defendants-Appellants.
Attorney:Thomas M. Peterson, Morgan, Lewis & Bockius, LLP, of San Francisco, CA, argued for plaintiff-cross appellant. With him on the brief were Daniel Johnson, Jr. and Brett M. Schuman; and Michael J. Lyons, Dion M. Bregman, Ahren C. Hsu-Hoffman and Michael F. Carr and Jason E. Gettleman, of Palo Alto, ...
Judge Panel:Before BRYSON, DYK, and MOORE, Circuit Judges.
Case Date:August 24, 2012
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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694 F.3d 1312 (Fed. Cir. 2012)

ACTIVEVIDEO NETWORKS, INC., Plaintiff-Cross Appellant,

v.

VERIZON COMMUNICATIONS, INC., Verizon Services Corp., Verizon Virginia Inc., and Verizon South Inc., Defendants-Appellants.

Nos. 2011-1538, 2011-1567, 2012-1129, 2012-1201.

United States Court of Appeals, Federal Circuit.

August 24, 2012

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Thomas M. Peterson, Morgan, Lewis & Bockius, LLP, of San Francisco, CA, argued for plaintiff-cross appellant. With him on the brief were Daniel Johnson, Jr. and Brett M. Schuman; and Michael J. Lyons, Dion M. Bregman, Ahren C. Hsu-Hoffman and Michael F. Carr and Jason E. Gettleman, of Palo Alto, CA; Nathan W. McCutcheon and David M. Morris, of Washington, DC.

Michael K. Kellogg, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. of Washington, DC, argued for defendants-appellants. With him on the brief were Evan T. Leo and W. Joss Nichols. Of counsel on the brief were John Thorne and John P. Frantz, Verizon Communications Inc., of Arlington, VA, and Gregory N. Stillman, Hunton & Williams LLP, of Norfolk, VA; and Henry B. Gutman and Noah M. Leibowitz, Simpson Thacher & Bartlett, LLP, of New York, NY. Of counsel were Leonard C. Suchyta and Caren Khoo, Verizon Corporate Resources Group, of Basking Ridge, NJ; and Richard G. Taranto, Farr & Taranto, of Washington, DC.

Before BRYSON, DYK, and MOORE, Circuit Judges.

OPINION

MOORE, Circuit Judge.

These appeals stem from a patent infringement action brought by ActiveVideo Networks, Inc. (ActiveVideo) against Verizon Communications, Inc. et al. (Verizon). Verizon counterclaimed that ActiveVideo infringed certain of its patents. After trial, a jury found that Verizon infringed four ActiveVideo patents and that ActiveVideo infringed two Verizon patents and awarded damages to both parties. Following trial, the district court entered a permanent injunction against Verizon but delayed enforcement of the injunction for six months during which Verizon was ordered to pay a sunset royalty. On appeal, Verizon challenges the infringement finding and damages award as well as the permanent injunction and sunset royalty. Verizon also appeals the district court's grant of summary judgment of invalidity as to a third Verizon patent and its grant of judgment as a matter of law (JMOL) preventing Verizon's invalidity defenses from reaching the jury. Active Video cross-appeals the district court's denial of JMOL of non-infringement and its grant of JMOL preventing ActiveVideo's invalidity defenses from reaching the jury. For the reasons set forth below, we affirm-in-part, reverse-in-part, vacate-in-part, and remand.

BACKGROUND

ActiveVideo asserted U.S. Patent Nos. 5,550,578 ('578 patent), 6,205,582 ('582 patent), 6,034,678 ('678 patent), and 6,100,883 ('883 patent) against Verizon at trial. ActiveVideo alleged that Verizon's

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video on demand (VoD) feature of the Verizon FiOS-TV system infringed claim 9 of the '578 patent, claims 1 and 2 of the '678 patent, claims 1 and 26 of the '883 patent, and claims 5, 7, and 8 of the '582 patent. The '578, '678, and '883 patents share a common specification and generally disclose and claim interactive television systems and methods for delivering interactive television to subscribers. For purposes of the issues on appeal, the '578 and '883 patents generally disclose a system with three major components: (1) a headend processing center with information storage and processing capabilities to provide information services such as VoD to subscribers; (2) home interface controllers connected to subscriber televisions that receive and display information services from the headend and allow subscribers to request information services from the headend; and (3) a communication network between the headend and home interface controllers. The '678 patent generally discloses a method of delivering information services to cable subscribers by establishing interactive sessions over a cable distribution network between a headend node and a home interface controller connected to a subscriber television. The '582 patent generally discloses an interactive television system where the headend processing center includes a frame server component and a plurality of individually assignable processors, which communicate with assigned home interface controllers.

Verizon asserted counterclaims that ActiveVideo in-fringed claim 1 of U.S. Patent No. 6,169,542 ('542 patent) and claim 9 of U.S. Patent No. 7,561,214 ('214 patent). Verizon also asserted U.S. Patent No. 6,381,748 ('748 patent), but this patent was held invalid by the district court prior to trial. The three Verizon patents generally disclose systems and methods related to interactive television features, including internet access ('748 patent), two-dimensional channel navigation ('214 patent), and advertising ('542 patent).

During a three week jury trial, the district court excluded testimony from Verizon's damages expert about an agreement between ActiveVideo and Cablevision because the agreement post-dated the date of hypothetical negotiation. The district court overruled Verizon's objection and allowed testimony from ActiveVideo's damages expert about indemnity agreements Verizon had with its FiOS-TV equipment suppliers. The district court also denied Verizon's motion for JMOL on damages, concluding that Verizon failed to establish that it was an intended third-party beneficiary to an agreement between ActiveVideo and TV Guide, which potentially barred any assessment of damages against Verizon prior to the agreement's expiration. The district court granted-in-part and denied-in-part Verizon's motion for JMOL on pre-suit damages for ActiveVideo's failure to mark its products under 35 U.S.C. § 287. And the district court granted both ActiveVideo's and Verizon's motions for JMOL on validity, preventing the invalidity defenses of both ActiveVideo and Verizon to reach the jury.

The jury found that the parties infringed each others' patents and awarded ActiveVideo $115,000,000 and Verizon $16,000 in damages. After trial, the district court entered a permanent injunction against Verizon, established a sunset royalty for Verizon's continued infringement until the injunction was to take effect, and denied Verizon's motions for JMOL or new trial on infringement, damages, and invalidity. The district court also denied ActiveVideo's motions for partial new trial on infringement and invalidity. Verizon appeals and ActiveVideo cross appeals. On June 25, 2012, after oral argument in this case, we stayed the permanent injunction

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pending appeal. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

I. Infringement

We review the denial or grant of JMOL under regional circuit law. ClearValue, Inc. v. Pearl River Polymers, Inc., 668 F.3d 1340, 1343 (Fed.Cir.2012). The Fourth Circuit reviews post-verdict JMOL rulings de novo, determining whether substantial evidence supports the jury verdict. Carolina Trucks & Equip., Inc. v. Volvo Trucks of N. Am., 492 F.3d 484, 488 (4th Cir.2007). The Fourth Circuit reviews the grant of pre-verdict JMOL rulings de novo, considering the evidence in the light most favorable to the non-moving party and determining whether a reasonable jury could find for the non-moving party on the issue in question. Brown v. CSX Transp., 18 F.3d 245, 248 (4th Cir.1994) (citing Fed.R.Civ.P. 50(a)).

Determining literal infringement is a two step process: the " proper construction of the asserted claim and a determination whether the claim as properly construed reads on the accused product or method." Georgia-Pacific Corp. v. U.S. Gypsum Co., 195 F.3d 1322, 1330 (Fed.Cir.1999). The first step is a question of law, which we review de novo. Id. The second step is a question of fact, which we review for substantial evidence. i4i Ltd. P'Ship v. Microsoft Corp., 598 F.3d 831, 849 (Fed.Cir.2010), aff'd, __ U.S. __, 131 S.Ct. 2238, 180 L.Ed.2d 131 (2011).

Verizon contends the district court committed three errors in denying Verizon's JMOL of non-infringement. First, Verizon argues that the district court erred because its FiOS-TV system does not meet the " information service" limitation, which is required by every asserted claim. Second, with respect to the '578 patent only, Verizon argues that the district court erred because its FiOS-TV system does not satisfy the " television communication" limitation. Third, with respect to the '582 patent only, Verizon argues that the district court erred because the Verizon FiOS-TV system does not satisfy the " individually assignable processors" limitation.

In cross-appeal, ActiveVideo argues that the district court committed two errors in denying its JMOL of non-infringement. First, ActiveVideo argues that the district court erred in failing to construe the " superimposing" limitation in the '214 patent and that under the correct construction, ActiveVideo's system does not infringe. Second, ActiveVideo contends that the district court's construction of " video still image" was erroneous and that under the correct construction, ActiveVideo's system does not infringe.

A. " information service"

The term " information service" appears in each claim asserted by ActiveVideo.1 The district court adopted an agreed construction for " information service," which is set forth in each of the patent specifications:

a service capable of being furnished to a television viewer having an interface permitting (but not necessarily requiring) interaction with a facility of the cable provider, including but not limited to an...

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