Adasa Inc. v. Avery Dennison Corp.

• Citation: 55 F.4th 900
• Decision Date: 16 December 2022
• Docket Number: 2022-1092
• Parties: ADASA INC., Plaintiff-Appellee v. AVERY DENNISON CORPORATION, Defendant-Appellant
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

55 F.4th 900

ADASA INC., Plaintiff-Appellee

v.AVERY DENNISON CORPORATION, Defendant-Appellant

2022-1092

United States Court of Appeals, Federal Circuit.

Decided: December 16, 2022

Robert Greenspoon, Dunlap Bennett & Ludwig PLLC, Chicago, IL, argued for plaintiff-appellee. Also represented by William W. Flachsbart ; Glenn Schuyler Orman, Jonathan Tad Suder, Friedman, Suder & Cooke, Fort Worth, TX.

Derek L. Shaffer, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, argued for defendant-appellant. Also represented by Joseph Milowic, III, Owen Roberts, New York, NY; Mark Yeh-Kai Tung, Redwood Shores, CA.

Before Moore, Chief Judge, Hughes and Stark, Circuit Judges.

Moore, Chief Judge.

Avery Dennison Corporation appeals the United States District Court for the District of Oregon's grant of summary judgment that claim 1 of U.S. Patent No. 9,798,967 is directed to eligible subject matter under 35 U.S.C § 101 and is valid under 35 U.S.C. §§ 102 and 103. Avery Dennison also appeals the district court's order denying its motion for a new trial and imposing sanctions for its discovery misconduct. For the reasons set forth below, we affirm in part, reverse in part, vacate in part, and remand for further proceedings.

BACKGROUND

A

The ’967 patent relates, in part, to methods and systems for commissioning radio-frequency identification (RFID) transponders. ’967 patent at 3:27–32. RFID transponders, also known as RFID tags, are used, like barcodes, to identify and track objects by encoding data electronically in a compact label. Id. at 1:32–34. But unlike traditional barcodes, RFID tags need not include external, machine-or human-readable labels and can communicate the data they encode over a distance using radio-frequency transmission. Id. at 1:34–53, 6:28–59.

To facilitate identifying and tracking an object in the stream of commerce, RFID tags are encoded with information associated with the object through a process known as "commissioning." Id. at 1:40–53. The encoded data may include various categories of information, "for example, data representing an object identifier, the date-code, batch, customer name, origin, destination, quantity," etc. Id. at 1:45–50. Regardless of the specific categories included, to ensure accurate tracking, it is critical that the data uniquely identify the tagged object. Id. at 2:21–22, 2:48–50.

In the RFID industry, uniqueness is ensured by assigning RFID tags an Electronic Product Code (EPC or EPCglobal) in accordance with certain global formatting standards. An EPC is a serialized object number comprising object class information and a serial number that together uniquely identify the associated object. See id. at 9:7–15. For example, the EPC may be a Serialized Global Trade Item Number (SGTIN), which consists of a Global Trade Item Number identifying the brand and class of the item (i.e., object class information) followed by a serial number uniquely identifying the tagged item within the brand and class. Id. Since objects from the same brand and class will share the same object class information, ensuring the uniqueness of the overall EPC amounts to ensuring uniqueness of the serial number.

Ensuring uniqueness, however, is not necessarily straightforward. Id. at 2:49–50. Serialization generally "requires a central issuing authority of numbers for manufacturers, products, and items to guarantee uniqueness and to avoid duplication of numbers." Id. at 2:23–25. The issuing authority assigns blocks of numbers to remote locations, wherein each remote location receives the numbers one by one or where the numbering space is partitioned in some manner. Id. at 2:25–29. But, in either case, the encoded numbers must generally be reconciled by comparison to a central database "either one or several numbers at a time." Id. at 2:30–32.

In the case of EPCglobal numbers, the central issuing authority is known as GS1. Id. at 7:61–65, 9:7–15. GS1 distributes blocks of numbers to member companies in a hierarchical manner, wherein each company is authorized to then "further allocate numbers from its upper level database to as many lower database levels as it deems necessary to distribute number authority throughout its enterprise." Id. at 7:61–8:3.

Using central databases to distribute the allocated numbers has certain drawbacks. It generally requires encoders to maintain a continuous network connection with the database so that new serial numbers can be retrieved when an RFID tag is commissioned. See id. at 3:27–4:4. But a continuous connection is not always possible and, even when it is, may be plagued by network delays that slow down the commissioning process. See id. at 3:64–4:4. This in turn may delay or impair downstream activity, including manual steps in the commissioning or distribution process. Id.

The ’967 patent seeks to "overcome[ ] these shortcomings" using systems and methods for commissioning RFID tags "on-demand" and "with no external authorizations or queries required on a transponder-by-transponder basis," enabling commissioning to proceed without the need for continuous connectivity to a central database. Id. at 3:27–35, 3:64–67. In one embodiment, pre-authorized ranges of serial numbers for specific object classes are allocated to lower levels in the hierarchy, for example, individual encoders. Id. at 8:4–11. In this embodiment, the object class serial number space is subdivided into sectors defined by a series of fixed "Most Significant Bits" (MSBs), wherein the number of allocatable sectors is determined by the number of MSBs. Id. at 8:11–15. For example, according to the SGTIN-96 standard, the serial number space consists of 38 bits which can encode 2³⁸ distinct serial numbers. If the first 14 of these bits are designated as MSBs, then the serial number space is correspondingly subdivided into 2¹⁴ sectors or "blocks" which can be allocated to as many as 2¹⁴ different encoders. See id. at 8:21–29. The remaining 24 bits can then be used to encode a unique serial number space within a given block. Id. "Each allocated block of serial numbers represents authority for encoding objects of an object class that can either be used by an encoder for encoding transponders, or allocated to a lower level in the authority hierarchy." Id. at 8:32–36.

Critically, once a block is allocated to an encoder, there is no need to reconnect to a central database until the unique numbers within the block have been exhausted. See id. at 8:37–51. Thus, in the previous example, 2²⁴, or approximately 16.8 million, RFID tags could be commissioned before reconnection to a central database is required. And by eliminating the need for a continuous connection to the database, the attendant delays are reduced and the commissioning process is improved. The ’967 patent refers to such a system, where only intermittent connection to a central database is necessary, as quasi-autonomous encoding authority. Id. at 8:4–7.

Claim 1 is the only claim at issue on appeal. As issued following a 2018 reexamination, it recites:

1. An RFID transponder comprising:

a substrate;

an antenna structure formed on the substrate; and

an RFID integrated circuit chip which is electrically coupled to the antenna structure;

wherein the RFID integrated circuit chip is encoded with a unique object number, the unique object number comprising an object class information space and a unique serial number space;

wherein the unique serial number space is encoded with one serial number instance from an allocated block of serial numbers, the allocated block being assigned a limited number of most significant bits ;

wherein the unique serial number space comprises the limited number of most significant bits uniquely corresponding to the limited number of most significant bits of the allocated block and of remaining bits of lesser significance that together comprise the one serial number instance.

’967 patent at claim 1 (emphasis added).

B

In October 2017, ADASA sued Avery Dennison in the District of Oregon, alleging its manufacture and sale of certain RFID tags infringed claims 1–6, 13, and 14 of the ’967 patent. The case was assigned to a magistrate judge and the parties consented that the magistrate judge's decisions would be final, subject to appeal.

Following discovery, both parties sought summary judgment. Relevant to this appeal, Avery Dennison moved for summary judgment of noninfringement of all asserted claims or, in the alternative, that the asserted claims were ineligible under § 101. ADASA moved for summary judgment of infringement and that the asserted claims are neither anticipated by U.S. Patent No. 7,857,221 (Kuhno) or the book RFID for Dummies nor rendered obvious by RFID for Dummies in combination with certain EPC standards.

The district court granted ADASA's motion as to validity, granted in part its motion as to infringement, and denied Avery Dennison's motions in toto . See ADASA Inc. v. Avery Dennison Corp. , No. 6:17-CV-01685-MK, 2020 WL 5518184 (D. Or. Sept. 14, 2020) ( Summary Judgment Order ). In addition, while denying Avery Dennison's motion for summary judgment of ineligibility, the district court simultaneously granted judgment in ADASA's favor that the asserted claims were directed to "an encoded RFID transponder implemented with a memory structure accommodating a specific hardware-based number scheme" and thus patent-eligible. Summary Judgment Order , at *8.¹ Following summary judgment, ADASA moved to sever and stay its claims of infringement as to all claims except claim 1, which the district court granted. The court subsequently dismissed those claims without prejudice. J.A. 14589–90.

Prior to trial, ADASA moved in limine to exclude Avery Dennison's damages expert, Mr. David Yurkerwich's, testimony related to certain Avery Dennison licenses, arguing Mr. Yurkerwich had failed to adequately establish the licenses’ technological and economic comparability. The district court granted the motion, determining "Mr. Yurker[w]ich's testimony relating...