Tgip, Inc. v. AT&T Corp.

• Decision Date: 29 October 2007
• Docket Number: Civil Action No. 2:06-CV-105.
• Parties: TGIP, INC., Plaintiff, v. AT&T CORP., Defendant.
• Court: U.S. District Court — Eastern District of Texas

527 F.Supp.2d 561

TGIP, INC., Plaintiff, v. AT&T CORP., Defendant.

Civil Action No. 2:06-CV-105.

United States District Court, E.D. Texas, Marshall Division.

October 29, 2007.

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Douglas A. Cawley, Bradley Wayne Caldwell, Christopher Thor Bovenkamp, David Sochia, Steven Chase Callahan, Theodore Stevenson, III, McKool, Smith, Dallas, TX, Andrew Thompson Gorham, Charles Ainsworth, Robert Christopher Bunt, Robert M. Parker, Parker, Bunt & Ainsworth, P.C., Tyler, TX, Samuel Franklin Baxter, McKool, Smith, Marshall, TX, for Plaintiff.

Virgil Bryan Medlock, Jr., Catherine Isabelle Casey Rajwani, James Patrick Bradley, Jennifer L. Jadlow, Tung Thanh Nguyen, Sidley, Austin, Dallas, TX, Charles W. Goehringer, Jr., Lawrence Louis Germer, Germer, Gertz, L.L.P., Kent Morrison Adams, Adams & Boswell, PC, Beaumont, TX, Deborah J. Race, Otis W. Carroll, Jr., Ireland, Carroll & Kelley, Tyler, TX, for Defendant.

ORDER ON DEFENDANT'S MOTIONS FOR JUDGMENT AS A MATTER OF LAW,

RON CLARK, District Judge.

Plaintiff, TGIP Inc., claimed infringement of two patents relating to prepaid calling cards. The jury returned a verdict that was adverse in all respects to Defendant, AT & T Corporation, which timely made and renewed motions for judgment as a matter of law ("JMOL") on alternative grounds. [Does. # 469, # 472, # 478, # 479, & # 512]. AT & T's three arguments for JMOL on the issue of noninfringement are summarized as follows:

a. The claims teach that the call authorization amount of a card or account is not linked to a security number until the card or account is activated, whereas the call authorization amount in the accused system and method (hereinafter referred to as "the AT & T System") is linked with the security number before activation;

b. TGIP failed to prove infringement of the '114 patent because AT & T uses two different numbers for activation of cards and for making calls, while the claims specify a single number; and

c. TGIP's claims rest on a theory of joint infringement that cannot be sustained from the record.

AT & T further asserts that it is entitled to JMOL on the issue of willful infringement, and on the grounds of invalidity, laches and equitable estoppel. The court grants AT & T's motion for judgment as a matter of law based on noninfringement on the ground that the card authorization amount in the AT & T System is linked before activation. Alternatively, the motion for JMOL on the ground of willfulness is granted because TGIP did not prove by clear and convincing evidence that AT & T knew, or should have known, that it acted in the face of an objectively high risk of infringement of a valid patent. All other motions for JMOL are denied.

I. PROCEDURAL HISTORY

On March 17, 2006, TGIP filed suit against AT & T alleging infringement of United States Patent No. 5,511,114 ("the '114 patent") and United States Patent No. 5,721,768 ("the '768 patent"). On June 12, 2006, the case was transferred to this court, which conducted a Markman hearing and issued an order construing the disputed claim terms [Doc. # 238]. Definitions of agreed terms are set out in Doc # 237. Subsequently, the court granted summary judgment as to invalidity of Claim 7 of the '114 patent, and denied summary judgment as to invalidity of Claims 1 and 6 of the '114 patent, and Claim 7 of the '768 patent. [Doc. # 278].

Issues concerning Claims 1 and 6 of the '114 patent, and Claims 1 and 11 of the '768 patent were tried to a jury from September 5-14, 2007.¹ After deliberating for about an hour, the jury returned a verdict finding the patents valid and willfully infringed by AT & T. The jury awarded TGIP damages in the amount of $156,289,609.00, and found that the claims were not barred by laches or equitable estoppel.²

Defendant now moves the court for JMOL under Fed.R.Civ.P. 50(b) on the following issues: 1) no infringement of the '114 patent; 2) no infringement of the '768 patent; 3) wilfulness; 4) invalidity; 5) laches; and 6) equitable estoppel.

II. PATENT BACKGROUND AND TECHNOLOGY

A. The '114 Patent

The application that led to the '114 patent was filed on June 6, 1994, and the patent issued on April 23, 1996, naming Charles J. Stimson and Brady S. Beshear as inventors. The '114 patent relates to a prepaid calling card system having a remote terminal to provide on-site activation and re-charging of calling cards. The system includes four main functional components: a plurality of calling cards; a host computer; a plurality of on-site activation terminals; and a call processor. Each of the calling cards preferably includes a body portion and a read-only memory stripe with a stored security number. The main management and processing of the system is accomplished by the host computer, which is capable of connecting to the telephone network. The host computer includes a database for storing security numbers associated with authorized calling cards. The data terminals are remote from the host computer and are capable of being connected for transmitting data between the terminals and the host computer. The call processor is controlled by the host computer for connecting one or more customers to the telephone network using the authorized calling cards.

TGIP contends that AT & T infringes independent Claims 1 and 6 of the '114 patent. These claims describe pre-paid calling systems that allow customers to purchase calling cards and to use the calling cards to access a telephone network. '114 Patent, cob 6, ll. 1-45; col. 6, 1. 58—col. 8, l. 8.

B. The '768 Patent

The '768 patent is a continuation in part of the '114 patent. The application for the '768 patent was filed on November 18, 1996, and the patent issued on February 24, 1998, naming Stimson and Beshear as the inventors. On July 6, 2000, TGIP asked the United States Patent and Trademark Office ("USPTO") to reexamine the '768 patent in light of Japanese Published Patent Application, HE I 4[1992]-23659, by Kozo Yamaki, entitled "CARD TYPE CONTROL SYSTEM" published on January 28, 1992 ("Yamaki publication"). After reexamination, the Examiner issued a Reexamination Certificate on March 1, 2005.

Focusing on the ways in which it is different from the '114 patent, the '768 patent discusses an alternative embodiment not discussed in the '114 patent, whereby a user may activate or recharge a pre-paid card account with an authorized dollar amount at a user activation terminal. The pre-paid card account may then be used to purchase various goods and services up to the authorized dollar amount. The activation terminals are connected to a main processor, which includes a host computer responsible for management and processing of the system through a purchasing network. The host computer includes a database for storing security numbers associated with authorized card accounts and enables users to purchase goods and services up to authorized dollar amounts using the authorized pre-paid card accounts. TGIF alleged that AT & T infringes Claims 1 and 11 of the '768 patent.

III. STANDARD AND SCOPE OF REVIEW

JMOL for a party is appropriate when "there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Fed.R.Civ.P. 50(a), See Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 2109, 147 L.Ed.2d 105 (2000). The Federal Circuit reviews an appeal from a grant or denial of a motion for JMOL under the law of the regional circuit in which the appeal from the district court would usually lie. See ACCO Brands, Inc. v. ABA Locks Mfr. Co. Ltd., 501 F.3d 1307, 1311-12 (Fed.Cir.2007). A finding of patent infringement by a jury in a federal district court in Texas is reviewed under the "substantial evidence" rule. Id.

"Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Eli Lilly & Co. v. Aradigm Corp. 376 F.3d 1352, 1363 (Fed.Cir.2004).³ A post-trial motion for JMOL should only be granted when the facts and inferences so conclusively favor one party "that reasonable jurors could not arrive at a contrary verdict." Tol-O-Matic, Inc. v. Proma Produkt-Und Marketing Gesellschaft m.b.H., 945 F.2d 1546, 1549 (Fed.Cir.1991) (internal quotations omitted). If reasonable persons in the exercise of impartial judgment could differ in their interpretations of the evidence, then the motion should be denied. Tol-O-Matic, Inc., 945 F.2d at 1549.

In entertaining a motion for judgment as a matter of law, the court must review all of the evidence in the record. Reeves, 530 U.S. at 150, 120 S.Ct. at 2110. In doing so, "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Id. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id. Thus, although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe. Id. That is, the court should give credence to the evidence favoring the nonmovant as well as that "evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that evidence comes from disinterested witnesses." Id.

A party moving for a judgment as a matter of law must first do so at the close of all evidence in order to renew such a motion after judgment has been rendered. Taylor Pub. Co. v. Jostens, Inc., 216 F.3d 465, 471 (5th Cir.2000); Fed.R.Civ.P. 50(b). There are instances where "technical noncompliance" with Fed.R.Civ.P. 50(b) has been excused when purposes of the rule have been satisfied. See Alcatel U.S.A., Inc. v. D.G.I. Technologies., Inc., 166 F.3d 772, 780 (5th Cir.1999); ...