Georgetown Rail Equip. Co. v. Holland L.P.

• Decision Date: 01 August 2017
• Docket Number: 2016-2297
• Citation: 867 F.3d 1229
• Parties: GEORGETOWN RAIL EQUIPMENT COMPANY, Plaintiff-Appellee v. HOLLAND L.P., Defendant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

867 F.3d 1229

GEORGETOWN RAIL EQUIPMENT COMPANY, Plaintiff-Appellee

v.HOLLAND L.P., Defendant-Appellant

2016-2297

United States Court of Appeals, Federal Circuit.

Decided: August 1, 2017

Dana M. Herberholz , Parsons Behle & Latimer, Boise, ID, argued for plaintiff-appellee. Also represented by Christopher Cuneo, Jamie K. Ellsworth ; C. Kevin Speirs , Salt Lake City, UT.

Daniel J. Schwartz , Faegre Baker Daniels LLP, Chicago, IL, argued for defendant-appellant. Also represented by Kathryn Ann Feiereisel; Lauren J. Frank, Timothy E. Grimsrud , Minneapolis, MN.

Before Reyna, Schall, and Wallach, Circuit Judges.

Wallach, Circuit Judge.

Following a claim construction ruling adverse to Appellant Holland L.P. ("Holland"), a jury in the U.S. District Court for the Eastern District of Texas ("District Court") found that Holland infringed Appellee Georgetown Rail Equipment Company's ("Georgetown") U.S. Patent 7,616,329 ("the '329 patent") and awarded Georgetown lost profits. The District Court later approved an additional award of enhanced damages based on a finding of willful infringement. Holland appeals the District Court's conclusions as to claim construction, willful infringement, and enhanced damages, as well as its decision to deny Holland's renewed motion for judgment as a matter of law ("JMOL") of noninfringement. See Georgetown Rail Equip. Co. v. Holland L.P. (Georgetown Rail II ), No. 6:13-cv-366, 2016 WL 3346084, at *1 (E.D. Tex. June 16, 2016) (denying JMOL and granting Motions for Finding of Willful Infringement and Enhanced Damages); Georgetown Rail Equip Co. v. Holland L.P. (Georgetown Rail I ), No. 6:13-cv-366-JDL, 2014 WL 11498109, at *1 (E.D. Tex. Nov. 13, 2014) (Claim Construction Order); J.A. 162–63 (Final Judgment). We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) (2012). We affirm.

BACKGROUND

I. The Patented Technology

The '329 patent generally relates to a "system and method for inspecting railroad tracks" with the use of digital technology. '329 patent, Abstract. Specifically, it discloses a system for inspecting tie plates, which are steel plates that connect the steel rail tracks to wooden ties. Id. col. 2 ll. 19–31; J.A. 928. Tie plates can sink or cut into the wooden ties and disrupt railroad service. '329 patent, Abstract. The '329 patent purportedly improves the prior art by automating the examination of misaligned tie plates, a process that was historically performed manually with certain software systems. See id. col. 1 l. 39–col. 2 l. 6 (describing the prior art).

Claim 16, the only asserted claim, recites:

A system for inspecting a railroad track bed, including the railroad track, to be mounted on a vehicle for movement along the railroad track , the system comprising:

at least one light generator positioned adjacent the railroad track for projecting a beam of light across the railroad track bed;

at least one optical receiver positioned adjacent the railroad track for receiving at least a portion of the light reflected from the railroad track bed and generating a plurality of images representative of the profile of at least a portion of the railroad track bed; and

at least one processor for analyzing the plurality of images and determining one or more physical characteristics of the said portion of the railroad track bed, the one or more physical characteristics comprising at least a geographic location of the plurality of images along the railroad track bed, wherein the processor includes an algorithm for detecting a misaligned or sunken tie plate of the railroad track bed, the algorithm comprising the steps of:

(a) analyzing a frame of the plurality of images, the frame comprising a region of interest;

(b) determining whether the region of interest contains a tie plate;

(c) if a tie plate is present, determining a crosstie contour and a tie plate contour;

(d) comparing an orientation of the crosstie contour and an orientation of the tie plate contour; and

(e) determining whether the tie plate is misaligned or sunken based upon the comparison.

Id. col. 11 l. 40–col. 12 l. 2 (emphasis added).

II. Relevant Facts and Procedural History

Holland purchases track and crosstie measuring technologies from Rail Vision Systems, J.A. 1072–73, and then places those technologies on its own track inspection vehicles, called TrackStar vehicles, J.A. 1564. Data from the track is collected and then may be sent to third-party companies, for example, Rail Vision Europe Ltd., a company based in the United Kingdom, for data processing. See Georgetown Rail II , 2016 WL 3346084, at *6. Rail Vision Europe Ltd. then sends finished reports back to Holland for distribution to Holland's customers. Id. at *5–6 ; see J.A. 1103–04.

Georgetown markets similar products that practice the '329 patent as part of its Aurora Track Inspection System. J.A. 850. Specifically, the Aurora Track Inspection System uses lasers and cameras mounted on a Hi-Rail vehicle to collect and process information about track ties. J.A. 817–19. The purpose of these types of systems is generally to allow customers to use the processed data to "manage the logistics of crosstie replacement and to quantify the need for new crossties." '329 patent col. 1 ll. 39–40; see J.A. 1102–03.

Holland and Georgetown knew of each other's place in the track-tie market. In January 2012, both companies participated in a "head-to-head challenge," in which they demonstrated their services to potential customer Union Pacific Railroad ("Union Pacific"). Georgetown Rail II , 2016 WL 3346084, at *3 (citations omitted). Following the demonstrations, Union Pacific and Holland entered into a change order agreement ("Change Order") to alter an existing contract between Holland and Union Pacific to allow Holland to provide Rail Vision Systems technology to Union Pacific on an as needed basis. Id. ; Appellant's Br. 23; Appellee's Br. 13; J.A. 10741–44. The Change Order was signed for a particular number of years and included compensatory amounts for actual quantities of work performed upon Union Pacific's request. Appellant's Br. 25–26; J.A. 10742.

Georgetown sued Holland for infringement in 2013 and was granted a preliminary injunction in January 2014, ending any of Holland's potential sales to Union Pacific under the Change Order. Georgetown Rail II , 2016 WL 3346084, at *3. The parties proceeded to a jury trial, and the jury found that Holland willfully infringed the '329 patent and awarded $1,541,333 in damages. Id. The District Court then denied Holland's motion for JMOL and awarded Georgetown an additional $1,000,000 in enhanced damages based on a finding of willful infringement pursuant to 35 U.S.C. § 284 (2012). Id. at *12–21.¹

DISCUSSION

Holland raises four issues on appeal. First, Holland challenges the District Court's finding that the term "mounted on a vehicle for movement along the railroad track" in the preamble of claim 16 is not a claim limitation. Appellant's Br. 62–66. Second, Holland challenges the jury's infringement finding. Id. at 33–45. Third, Holland challenges the District Court's approval of the jury's award of lost profits. Id. at 45–58. Fourth, Holland argues that we should reverse the District Court's award of enhanced damages. Id. at 58–62. We address these issues in turn.

I. Claim Construction

At the District Court, Holland argued that the phrase "mounted on a vehicle for movement along the railroad track" in the preamble of claim 16 was a claim limitation, such that Holland's product, which did not have a processor capable of mounting on a vehicle, could not infringe. Georgetown Rail I , 2014 WL 11498109, at *2. The District Court rejected this argument for four reasons. First, it found that the term did not recite an "essential structure" of the invention because the specification also included the phrase "[a]lternatively, the computer analysis can be performed by another computer system having image processing software known in the art," '329 patent col. 7 ll. 12–14, such that the system need not be performed in a vehicle, Georgetown Rail I , 2014 WL 11498109, at *2–3. Second, it found that, for the same reason, the phrase could not recite "additional structure or steps ... underscored as important by the specification." Id. at *3 (capitalization omitted). Third, it found that the term was not an "antecedent basis" for the claim terms because "[t]he claim body, neither in whole [n]or in part, mentions the phrase ‘mounted on a vehicle.’ " Id. Finally, it found that Georgetown did not clearly rely on the limitation during prosecution because the cited statements from the prosecution history did not "distinguish the claimed invention from the prior art by reference to the system being mounted on a vehicle." Id. at *4.

A. Standard of Review and Legal Standard

We review the district court's ultimate construction of the claim language de novo. Teva Pharm. USA, Inc. v. Sandoz, Inc. , ––– U.S. ––––, 135 S.Ct. 831, 835, ––– L.Ed.2d –––– (2015). "[W]hen the district court reviews only evidence intrinsic to the patent (the patent claims and specifications, along with the patent's prosecution history^{[2 ]}), the judge's determination will amount solely to a determination of law, and the Court of Appeals will review that construction de novo. " Id. at 841. "In cases where ... subsidiary facts [relating to claim construction] are in dispute, courts will need to make subsidiary factual findings about that extrinsic evidence. These are the evidentiary underpinnings of claim construction ... and this subsidiary factfinding must be reviewed for clear error on appeal." Id . (internal quotation marks omitted). Because our analysis of the relevant issue here, the preamble, involves an examination of only intrinsic evidence, we review the District Court's determination de novo.

"Whether to treat a preamble as a limitation is a determination resolved only on review of the entire ... patent to gain an understanding of what the inventors actually invented and intended to...