Aguayo v. Universal Instruments Corp., CIV.A.H-02-1747.

• Decision Date: 11 February 2005
• Docket Number: No. CIV.A.H-02-1747.,CIV.A.H-02-1747.
• Citation: 356 F.Supp.2d 699
• Parties: Kermit AGUAYO and Khanh N. Tran, Plaintiffs, v. UNIVERSAL INSTRUMENTS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Texas

356 F.Supp.2d 699

Kermit AGUAYO and Khanh N. Tran, Plaintiffs, v. UNIVERSAL INSTRUMENTS CORPORATION, Defendant.

No. CIV.A.H-02-1747.

United States District Court, S.D. Texas, Houston Division.

February 11, 2005.

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David Lee Burgert, Porter & Hedges, Houston, TX, for Plaintiffs.

Victor G. Hardy, Robert A. Cote, Rodger Andrew Sadler, Orrick Herrington et al., New York City; and Thomas W. Paterson, Houston, TX, for Defendant.

MEMORANDUM AND OPINION

ROSENTHAL, District Judge.

This patent dispute arises from a long-standing problem of automated assembly processes: the people who operate the machines can make mistakes in loading components on the assembly machines. These mistakes are more likely, and the consequences more costly, when the components involved are tiny and visually indistinguishable. Such components increase the potential for two types of human errors: identifying what the component to be placed is and determining where to place it for automated assembly. A number of individuals and entities, including plaintiffs, have devised ways to address these problems. On August 31, 1992, plaintiffs Kermit Aguayo and Khanh Tran applied for United States Patent No. 5,283,943 (the "'943 Patent"). This patent claimed an invention for "ensuring the proper loading of assembly equipment" used in the automated assembly of multiple-component products. In 2002, plaintiffs sued Universal Instruments Corporation, alleging that two devices, the PSV — "Platform Setup Validation" — and the CVS+ — "Component/Reel Verification System" — infringed most of the claims of the '943 Patent. Universal designed and marketed the CVS+ and the PSV as options for use on Universal's general surface mount — "GSM" — automated assembly machine.

At trial, Universal did not dispute that the CVS+, which was discontinued in 1996, infringed claims of the '943 Patent. Universal sold only two CVS+ units before introducing the successor device in 1997, the PSV.¹ Universal designed the PSV specifically to avoid infringing the '943 Patent and throughout this litigation vigorously denied any infringement. Universal also challenged the validity of the '943 Patent, arguing that the '943 Patent did not describe a new solution to the problem of operator error in placing components on automated assembly machines and that prior art made the '943 Patent invalid.

This court held a hearing under Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed.Cir.1995), aff'd, 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996), and construed the terms that the parties submitted. After granting in part and denying in part the parties' cross-motions for summary judgment, this court held a jury trial on the following issues: whether Universal's PSV machine infringed the asserted claims of the '943 Patent; whether the ' 943 Patent was invalid based on three different items of prior art; what a reasonable royalty rate would be for Universal's sales of its CVS+ and PSV products; and whether any infringement was willful. The parties timely made and renewed motions for judgment as a matter of law on infringement and validity.

In its answers to specific questions, the jury found that the PSV literally infringed the asserted claims of the '943 Patent. Universal moves for judgment as a matter of law, asking this court to find noninfringement or, in the alternative, order a new trial.² This court grants the motion for judgment as a matter of law, finding no infringement.³

The jury also found that three prior art references invalidated many of the claims of the '943 Patent as anticipated, obvious, or both. The '943 Patent has two independent claims, claim 1 and claim 13. The jury's answers to the questions made all of claim 1's dependent claims invalid under 35 U.S.C. § 102(b) except for dependent claims 4 and 5. The invalidity finding was based on one of the three items of prior art — the Philips Reel Verification System sold to Ford Motor Company (the "Philips RVS"). Although the jury found that dependent claims 4 and 5 were not anticipated by the Philips RVS, these two claims require virtually the same elements as claims 17 and 18, which depend from independent claim 13. The jury treated these two pairs of claims consistently in answering every other question. In answering the questions as to anticipation by the Philips RVS, however, the jury gave a different answer as to claims 17 and 18 than as to claims 4 and 5. The jury found that claims 4 and 5 were not anticipated by the Philips RVS, while claims 17 and 18 were anticipated. Universal asserts that the jury's answers are inconsistent and asks for judgment as a matter of law that claims 4 and 5 are anticipated by the Philips RVS. Plaintiffs respond that the verdict is not inconsistent and ask for judgment as a matter of law that no claim of the '943 Patent is invalid as anticipated or, in the alternative, for a new trial.⁴ This court concludes that the verdict is indeed inconsistent and that as a matter of law, claims 4 and 5 are anticipated by the Philips RVS.

Universal also moves for judgment as a matter of law that the defenses of laches and equitable estoppel bar plaintiffs' claims.⁵ This court finds that neither laches nor equitable estoppel are applicable.

The remaining sets of motions address damages and attorneys' fees. At trial, the jury found a reasonable royalty rate of $2,000 for the sale of each infringing unit. Universal moves for judgment as a matter of law that plaintiffs may not collect such royalties for 65 units sold to Motorola, which were the subject of a settlement between plaintiffs and Motorola in a suit alleging that Motorola infringed the '943 Patent.⁶ This court grants Universal's motion. Finally, plaintiffs move to recover their fees and costs under 35 U.S.C. § 285 on the basis that the case is exceptional. Because this court found, as a matter of law, that the claims of the '943 Patent are invalid and not infringed, this motion is not addressed.

These rulings, based on a careful review of the pleadings, the motions and responses the record, and the applicable law, are explained in detail below.

I. Background

The '943 Patent, issued on February 8, 1994, relates to "improving processes of automated assembly."⁷ The "Summary of the Invention" states that "[t]he present invention contemplates a system for assembling multiple component products using automated assembly equipment," by "ensuring the proper loading of assembly equipment."⁸ An assembly machine operator loads components or compartments of components on the proper locations on the automated assembly machine. The machine then retrieves the components or compartments from the designated locations and places them in the desired locations on the product undergoing assembly. In the section entitled "Background of the Invention," the '943 Patent described the problem it was attempting to address, as follows:

Many mistakes occurring in modern automated manufacturing are caused by human error in the set up of the assembly process. Specifically, assembly operators are prone to load components in the wrong places because modern articles of manufacture have increasingly large numbers of components which are often visually similar. To prevent these set up errors, well trained operators are usually very careful and deliberate in their work. However, no degree of care can totally prevent mistakes. Furthermore, careful and deliberate behavior results in very slow set up which reduces productivity.

The aforementioned problem is particularly acute in the assembly of electronic products, where components are especially numerous and physically similar.... To compound matters, modern electronic assemblies are assembled by machines called pick and place assemblers. These assemblers are designed to retrieve components directly from industry standard reels or tubes. Therefore, the operator's primary visual contact is with the package and not the component.

Electronic products typically require several dozen different components. In a pick and place system, each tube or reel of components must be loaded in a specific place. Given the similarity of visual appearance of the reels and tubes, it is extremely easy for an operator to load a pick and place location with the wrong components.⁹

The '943 Patent disclosed a three-element system and a four-element system for "ensuring the proper loading of assembly equipment." Independent claim 1 recites a system "comprising" three primary elements: an "assembly machine," a "component identifier," and a "location indicator." Independent claim 13 requires the same three primary elements and adds an "information processor." The use of the transitional word "comprising" in the preamble of a claim indicates that the scope of the claim is not limited to the recited elements. Additional elements may be present but still fall within the scope of the claim. See, e.g., AFG Indus. Inc. v. Cardinal IG Co., Inc., 239 F.3d 1239, 1244-45 (Fed.Cir.2001) ("When a claim uses an `open' transition phrase, its scope may cover devices that employ additional, unrecited elements. We have consistently held that the word `comprising' is an open transition phrase.") (citations omitted).

Plaintiffs contend that the Universal PSV infringes independent claim 1 and dependent claims 3, 4, and 5, and independent claim 13 and dependent claims 14-18, 21-24, and 26-28.¹⁰ Independent claim 1 and dependent claims 3, 4, and 5 involve the three-element system. These claims read:

1. A system for assembling multiple component products, comprising:

an assembly machine which assembles products using components retrieved from a plurality of compartments located at a corresponding plurality of locations, each compartment located according to a type of component stored within;

a component identifier that...