Finisar Corp. v. Directv Group, Inc.

• Decision Date: 18 April 2008
• Docket Number: No. 2007-1023.,No. 2007-1024.,2007-1023.,2007-1024.
• Citation: 523 F.3d 1323
• Parties: FINISAR CORPORATION, Plaintiff-Cross Appellant, v. The DIRECTV GROUP, INC., DirecTV Holdings LLC, DirecTV Enterprises LLC, DirecTV Operations LLC, Hughes Network Systems, Inc., and DirecTV, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

523 F.3d 1323

FINISAR CORPORATION, Plaintiff-Cross Appellant, v. The DIRECTV GROUP, INC., DirecTV Holdings LLC, DirecTV Enterprises LLC, DirecTV Operations LLC, Hughes Network Systems, Inc., and DirecTV, Inc., Defendants-Appellants.

No. 2007-1023.

No. 2007-1024.

United States Court of Appeals, Federal Circuit.

April 18, 2008.

Larry R. Laycock, Workman Nydegger, of Salt Lake City, UT, argued for plaintiff-cross appellant. With him on the brief were Charles L. Roberts, C.J. Veverka, and David R. Todd. Of counsel on the brief was Stanley J. Panikowski, DLA Piper U.S. LLP, of San Diego, CA.

Gregory A. Castanias, Jones Day, of Washington, DC, argued for defendants-appellants. With him on the brief were Jennifer L. Swize, of Washington, DC, and Victor G. Savikas, Louis L. Touton, and Kevin G. McBride, of Los Angeles, CA.

Before MICHEL, Chief Judge, RADER and MOORE, Circuit Judges.

RADER, Circuit Judge.

By a jury verdict, the United States District Court for the Eastern District of Texas found that The DirecTV Group, Inc., DirecTV Holdings, LLC, DirecTV Enterprises, LLC, DirecTV Operations, LLC, and DirecTV, Inc. (collectively DirecTV) had infringed U.S. Patent No. 5,404,505 (the '505 patent), assigned to Finisar Corporation (Finisar). Finding DirecTV's infringement to have been willful, the jury awarded $78.9 million in reasonable royalty damages. The district court sustained the jury's verdict, except with respect to induced and contributory infringement, denied Finisar's request for injunctive relief, imposed a compulsory license, and awarded Finisar $25 million in enhanced damages. Finisar Corp. v. DirecTV Group, Inc., No. 1:05-CV-00264, 2006 WL 2037617 (E.D.Tex. July 7, 2006) (Final Judgment). The district court also denied DirecTV's post-judgment motions for judgment as a matter of law (JMOL) or a new trial. Finisar Corp. v. DirecTV Group, Inc., Case No. 1:05-CV-00264, 2006 WL 2709206 (E.D.Tex. Sept. 1, 2006) (JMOL Order).

Because the district court incorrectly construed a vital term featured prominently in each asserted claim, this court vacates the verdict of infringement. Furthermore, the district court erred in ruling that the prior art did not anticipate claim 16. This error also infects the scope of the prior art for assessing the validity of the rest of the claims. Therefore, this court remands for a new trial on both infringement and validity of claims 17, 22, 24, 26, 39, and 44.

I

The '505 patent, issued on April 4, 1995 from an application filed on November 1, 1991, claims systems and methods for scheduling transmission of database tiers upon specific demand or at specific times and rates of repetition. The '505 patent describes an information broadcasting system that gives subscribers access to video and audio programs through high-speed satellite or cable links. See '505 patent, Abstract; col.1 l.68 — col.2 l.2. Under the patented system, subscribers do not need to request the most popular and trendy movies, for example, or other programs. Instead the system anticipates likely (more popular) requests and broadcasts those programs to users on an announced schedule at regular intervals. Thus, most of the interaction between the user and the information server is unidirectional, meaning that the server sends most of the data to the subscriber without even receiving a request.

For scheduled transmissions, i.e. those not responsive to a specific user request, the system sends more popular data more frequently. To make this work, the system divides the information database into different tiers based on likely popularity. Then the system broadcasts each tier of data at a particular repetition rate. See id., col.14 ll.2-18. Thus, the system arranges all information in the database in a hierarchical structure. See id., col.6 ll.28-40. In this regard, the '505 specification analogizes the claimed invention to accessing information in a large library:

It is important to note that while a user has access to perhaps a terabtye, or even 100 terabytes or more, of data, the total amount of data that systems in accordance with the present invention system can transmit in any one day is much more limited, as will be described below. This is not unlike visiting the main library of a major university, such as Yale or Harvard University, having stacks containing several million volumes of books. Having "access" to all those books every single day does not means [sic] that a user can receive them all in one day, nor does it mean that all the users can receive all the books in a single day. Nevertheless, each particular book (file or program) is available on relatively short notice, and having access to such a large collection of books (data) is still very useful.

Id., col.2 ll.9-23. The '505 specification also compares the claimed invention to other information distribution systems, like books and CDs, estimating that the system saves vast amounts in distribution costs by avoiding shipment of each individual copy of the desired data. See id., col.2 ll.24-43.

DirecTV began offering direct-to-home satellite broadcasting in the United States in 1994. A DirecTV subscriber accesses the broadcasting system through a small antenna (generally a small satellite dish affixed to the exterior of a subscriber's home) and its associated electronics, along with a set-top box, which attaches to the subscriber's television set. DirecTV generally broadcasts four types of information: turnaround programming, playback programming, conditional access information, and program guide information.

Turnaround programming constitutes the bulk of DirecTV's broadcasts. This category of programming re-broadcasts or "turns around" content from other television channels like CNN, Comedy Central, ESPN, and Animal Planet, to name a few. The owners of these channels, rather than DirecTV, schedule the airing of their programs. As discussed below with respect to infringement, the parties dispute the degree to which DirecTV controls, or "programs," the turnaround programming. A different company, Tribune Media Services, collects scheduling information from the various channels. DirecTV adopts the Tribune schedule.

As noted above, DirecTV also offers "playback" programming, which comprises pay-per-view movies and the like. DirecTV itself schedules the broadcast of playback programming. DirecTV's broadcasts also include "conditional access" information, which allows an authorized subscriber to pay for and receive selected programs. DirecTV controls access to this information by broadcasting it in an encrypted format. Finally, DirecTV's broadcasts also include an electronic program guide, which provides the user with information about current and upcoming programs on the various channels.

Finisar sued DirecTV for infringement of the '505 patent, initially asserting that DirecTV's direct broadcast satellite system infringed fifteen of the '505 patent's forty-eight total claims. After a Markman hearing and a claim construction order, Finisar Corp. v. DirecTV Group, Inc., 416 F.Supp.2d 512 (E.D.Tex.2006) (Markman Order), the district court concluded on summary judgment that seven of the asserted claims (claims 1, 2, 7, 9, 10, 11, and 37, all means-plus-function claims) were invalid for indefiniteness. Finisar Corp. v. DirecTV Group, Inc., Case No. 1:05-CV-00264, 2006 WL 1207828 (E.D.Tex. May 2, 2006) (Invalidity Order). Before trial, Finisar dropped its allegation of infringement of one claim (claim 25).

A jury heard evidence on infringement of the remaining seven asserted claims (claims 16, 17, 22, 24, 26, 39, and 44). The jury concluded that DirecTV infringed all seven claims (directly and by inducement and contribution). Finding DirecTV's infringement to have been willful, the jury awarded $78.9 million in reasonable royalty damages. The district court sustained the jury's verdict, except with respect to induced and contributory infringement, denied Finisar's request for injunctive relief, imposed a compulsory license, and awarded $25 million in enhanced damages. Final Judgment. The district court also denied DirecTV's post-judgment motions for JMOL or a new trial. JMOL Order.

II

Between DirecTV's appeal and Finisar's cross-appeal, this court confronts a variety of issues. DirecTV's appeal challenges the district court's construction of two claim terms ("information database" and "downloading into a memory storage device") and the jury's findings of literal infringement, validity (novelty and non-obviousness), and willfulness. Finisar cross-appeals the district court's denial of Finisar's motion for a permanent injunction, imposition of a compulsory license at a rate of $1.60 per set-top box, and grant of summary judgment of invalidity on claims 1, 2, 7, 9, 10, 11, and 37 as indefinite.

The district court denied DirecTV's post-trial motions for JMOL or a new trial on non-infringement, invalidity, and non-willfulness. On the motions for JMOL or a new trial, this court applies the law of the regional circuit, in this case the United States Court of Appeals for the Fifth Circuit. See Harris Corp. v. Ericsson Inc., 417 F.3d 1241, 1248 (Fed.Cir.2005) (JMOL); Imonex Servs., Inc. v. W.H. Munzprufer Dietmar Trenner GmBH, 408 F.3d 1374, 1380 (Fed.Cir.2005) (new trial). Our sister circuit reviews a JMOL motion without deference. Cambridge Toxicology Group, Inc. v. Exnicios, 495 F.3d 169, 179 (5th Cir.2007). JMOL "is appropriate only when a `reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.'" Id. (quoting Fed.R.Civ.P. 50(a)(1)). To this end, "the Fifth Circuit describes appellate review of a JMOL denial as a determination whether 'the facts and inferences point so strongly and overwhelmingly in favor of one party that the court concludes that reasonable jurors could not arrive at a contrary verdict.'" Harris, 417 F.3d at 1248 (quoting Bellows v. Amoco Oil Co., 118 F.3d 268, 273 (5th Cir.199...