Applied Capital, Inc. v. ADT Corp.
| Decision Date | 09 April 2021 |
| Docket Number | CIVIL ACTION NO. 1:16-CV-00815 |
| Parties | APPLIED CAPITAL, INC., Plaintiff, v. THE ADT CORPORATION and ADT LLC, Defendants. |
| Court | U.S. District Court — District of New Mexico |
This matter is before the Court on the following motions: plaintiff Applied Capital, Inc.'s ("Applied Capital") motion for a summary judgment in its favor on defendants ADT Corporation's and ADT LLC's (collectively "ADT") defense of invalidity based on anticipation or obviousness, Doc. 181; ADT's motion for a summary judgment of non-infringement, Doc. 188; Applied Capital's motion under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 590 (1993), to exclude certain testimony of Dr. Stephen B. Heppe, Doc. 183; ADT's Daubert motions to exclude testimony of Dr. Gregory J. Gonsalves and Keiko Hikino, Docs. 184 and 186. This is an action for patent infringement that involves security systems, in particular, patents on a system and method for monitoring premises using a graphical floor plan.
Applied Capital is the assignee and exclusive owner of all rights, title, and interest in patents covering inventions by Rodney Fox, including United States Patent No. 8,378,817 ("the '817 Patent") and United States Patent No. 9,728,082 ("the '082 Patent) (collectively, "the asserted patents"). Doc. 173, Second Amended Complaint at 2; Doc. 173-2, Ex. B, '817 Patent; Doc. 173-3, Ex. C, '082 Patent. The patents, titled"Premises Monitoring System," share a disclosure that fully incorporates and claims priority to two provisional applications (Nos. 61/147,948 and 61/228,044) filed with the United States Patent and Trademark Office ("PTO") in 2009. Doc. 173, Second Amended Complaint at 4. The '817 Patent issued on February 19, 2013 and the '082 Patent issued August 8, 2017. The '817 Patent has one independent method claim (claim 1) and the '082 Patent has two independent system claims (claims 1, 17). Id. Applied Capital asserts infringement of claims 1-3, 6-9, and 11-15 of the '817 Patent and claims 1-3, 6-9, 11-15, and 17 of '082 Patent).
In early 2018, the Patent and Trademark Appeals Board ("PTAB") declined to institute inter partes review on a petition filed by ADT challenging the validity of the '817 Patent claims for obviousness under 35 U.S.C. § 103. Doc. 173, Second Amended complaint at 7. The PTAB also rejected ADT's request for rehearing on the issue. Id. This Court later denied ADT's motion for summary judgment of patent ineligibility as an abstract idea under 35 U.S.C. § 101. Doc. 145, Memorandum and Order.
The invention of the asserted patents is a system and method for remotely monitoring sensors installed at a premises using an interactive, vector-based graphical notification user interface in which event-tailored graphical information is hierarchically organized around vector-based visual indicators of a device and its status (an event) is superimposed on a floorplan or map of the premises. Applied Capital asserts ADT has infringed its patents by providing, operating, and otherwise using the interactive security and home-automation service known as "ADT Pulse" and the ADT web portal ("Pulse" or the "accused products").1 Doc. 1-2, Complaint, Ex. B. In defense, ADT denies itinfringed the patents, asserts the patents are invalid by reason of anticipation and/or obviousness, and contends that Applied Capital's infringement claims are barred by its own inequitable conduct.
In claim construction proceedings under Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), the parties agreed that no construction of the term "superimposed visual indicators" in the asserted patents was necessary. Doc. 146, Memorandum and Order at 8. Further, they agreed the term "hierarchically organized graphical images should be construed as "a group of graphical images arranged relative to one another and/or accessible through one another." Id. at 8. The Court rejected ADT's construction of the term "vector-based graphical images" as "vector image files," instead construing the term as "images that include one or more vectors," stating that "the express language of the claims encompasses retrieval of vector-based images that are not stored as files." Id. at 8-9. With respect to the term "determining one or more communication methods and communication destinations based on the device identifier and the device condition," the Court again rejected ADT's proposed construction that would have required separately determining device and condition with respect to method and destination. Id. at 10. The Court found that both the communication methods and communications destinations were required to be determined based on the device identifier and condition, but that the steps did not have to be performed separately. Id. at 11. The Court found the remaining disputed claims should be afforded their plain and ordinary meanings. Id. at 13-16. Specifically, the Court found that the patent examiner's replacing "and/or" throughout the document with "and" did notsubstantively change the meaning of the clauses containing the language. Id. at 14. The Court stated that absence of the limiting language "all of" in dependent claim 9 of the '817 Patent meant that the claim should not be read as requiring the retrieval of all of the information recited in the claim. Id.
Dr. Stephen Heppe, D.Sc., is ADT's invalidity expert. He offers opinions regarding the scope and validity of the '817 and '082 Patents. Doc. 182, Excerpts of Opening Expert Report of Dr. Stephen B. Heppe ("Heppe Invalidity Rep't") at APP0004-0184; Doc. 185-7, Ex. F, Heppe Invalidity Rep't at 39-40. Dr. Heppe obtained a Bachelor of Science degree in Electrical Engineering and Computer Science from Princeton University in 1977, a Master of Science degree in Electrical Engineering (specializing in communications) from George Washington University in 1982, and a Doctor of Science in Electrical Engineering (specializing in Communications, with a minor in Operations Research and a minor in Electrophysics) in 1989. Doc. 182, Heppe Invalidity Rep't, Ex. A., Resume at 6, APP0072. He has worked in the fields of radio communication, computer and network communications, packet radio, and ad hoc packet radio networking and mesh networks since 1977. Id. at 3-6, APP0069-0072. Dr. Heppe is also the named inventor on several U.S. patents, and he is familiar with the process and requirements associated with applying for and obtaining a patent from the U.S. PTO. Doc. 182, Heppe Invalidity Rep't at 4, APP0007; Ex. A., Resume at 7, APP0073.
He considered several prior art references, including United States Patent No. 6,369,695 ("the '695 Patent") and its parent, United States Patent No. 6,229,429 ("the '429 Patent") (collectively, "Horon") and United States Patent Application Serial No.2009/0022362 ("Gagvani"). Doc. 182, Heppe Invalidity Rep't at 2-28. Dr. Heppe states in his report that "the asserted claims are either anticipated separately by Horon and Gagvani, or rendered obvious by either Horon or combined with other prior art references of record." Id. at 42-43, 46. He also opined that each of the claims of the asserted patents may be invalid based on indefiniteness, but that opinion is not at issue herein. Id. at 58.
Dr. Heppe acknowledged that ADT had asserted an inequitable conduct defense and noted that Applied Capital and the inventor, Rodney Fox, were aware of the Horon patents, as well as other prior art references, and failed to disclose them to the PTO. Id. at 54-55. He further stated that the Horon patents were material to the question of patentability for the application that matured into the asserted patents. Id. at 55. Applied Capital moves to exclude Dr. Heppe's testimony on inequitable conduct, contending that he is not qualified to testify as to intent to deceive and materiality.2
Dr. Jun Zheng was retained by Applied Capital to offer opinions on certain technical matters in connection with ADT's motion for summary Judgment on patent ineligibility. Doc. 132-2, Declaration of Jun Zheng, Ph.D., at 2. Dr. Zheng has been a Professor of Computer Science and Engineering at New Mexico Institute of Mining and Technology ("New Mexico Tech") since 2008 and has been the Associate Chair of the Department of Computer Science and Engineering since 2018. Id. at 2-3, Ex. C, Curriculum Vitae. He has a Bachelor of Science degree and a Master of Science degree in Electrical Engineering from Chongqing University in China, a Master of Science - Engineering in Biomedical Engineering from Wright State University, and a Ph.D. in Computer Engineering from the University of Nevada - Las Vegas. Id.
He later submitted a rebuttal report expressing further opinions on teachings, lack of anticipatory disclosure, nonobviousness, and absence of motivations to combine. Doc. 198-3, Ex. C, Dr. Zheng Rebuttal Report. In that report, he stated that none of the teachings in either the Horon or Gagvani references "explicitly or inherently disclose or make obvious the Fox invention." Id. at 1-2. He also stated the system and features disclosed by Horon are disclosed in other art submitted to the PTO during the prosecution of the asserted patents. Doc. 185-10, Rebuttal Expert Report at 2. Dr. Zheng also opined that the accused product, Pulse, infringes the asserted patents based on his review of the source codes. Doc. 189-3, Ex. B, Infringement Expert Report of Jun Zheng, Ph.D. at 9. Further, he stated that his opinions on infringement applied to all three generations of Pulse. Id.
Dr. Gregory J. Gonsalves was retained by Applied Capital as an expert to provide opinions on the inequitable conduct allegations made by ADT, specifically, to offer a rebuttal to the statements of Dr. Stephen Heppe on that subject. Doc. 185-8, Rebuttal Expert Report of Gregory Gonsalves, Ph.D. Dr. Gonsalves is a patent attorney who has represented clients in more than 225 inter partes reviews. He expressed the opinion that ADT "failed to...
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