Lucent Technologies, Inc. v. Gateway, Inc.

• Decision Date: 25 September 2008
• Docket Number: No. 2007-1546.,No. 2007-1580.,2007-1546.,2007-1580.
• Citation: 543 F.3d 710
• Parties: LUCENT TECHNOLOGIES, INC., Plaintiff/Counterclaim Defendant-Appellant, and Lucent Technologies Guardian I LLC, Counterclaim Defendant, and Multimedia Patent Trust, Plaintiff/Counterclaim Defendant, v. GATEWAY, INC., Gateway Country Stores LLC, Gateway Companies, Inc., Cowabunga Enterprises, Inc., and Gateway Manufacturing LLC, Defendants/Counterclaimants, and Dell Inc., Defendant, and Microsoft Corporation, Defendant/Counterclaimant-Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

543 F.3d 710

LUCENT TECHNOLOGIES, INC., Plaintiff/Counterclaim Defendant-Appellant, and Lucent Technologies Guardian I LLC, Counterclaim Defendant, and Multimedia Patent Trust, Plaintiff/Counterclaim Defendant, v. GATEWAY, INC., Gateway Country Stores LLC, Gateway Companies, Inc., Cowabunga Enterprises, Inc., and Gateway Manufacturing LLC, Defendants/Counterclaimants, and Dell Inc., Defendant, and Microsoft Corporation, Defendant/Counterclaimant-Cross Appellant.

No. 2007-1546.

No. 2007-1580.

United States Court of Appeals, Federal Circuit.

September 25, 2008.

Richard G. Taranto, Farr & Taranto, of Washington, DC, argued for plaintiff/counterclaim defendant-appellant. Of counsel on the brief were John M. Desmarais, Robert A. Appleby, Paul A. Bondor, and Michael P. Stadnick, Kirkland & Ellis LLP, of New York, NY.

John E. Gartman, Fish & Richardson P.C., of San Diego, CA, argued for defendant/counterclaimant-cross appellant. With him on the brief were John W. Thornburgh, Matthew C. Bernstein, and Justin M. Barnes, and John A. Dragseth, of Minneapolis, MN. Of counsel on the brief was Stephen P. McGrath, Microsoft Corporation, of Redmond, WA.

Before LOURIE, BRYSON and PROST, Circuit Judges.

PROST, Circuit Judge.

This case involves alleged infringement by Gateway, Inc. ("Gateway"), Microsoft Corporation ("Microsoft"), and Dell Inc. ("Dell") of two patents owned by Lucent Technologies, Inc. ("Lucent"). After a jury verdict of infringement and a damages award of $1,538,056,702, the district court granted judgment as a matter of law ("JMOL"), and alternatively a new trial, on infringement and damages. Lucent Techs., Inc. v. Gateway, Inc., 509 F.Supp.2d 912 (S.D.Cal.2007) ("Lucent"). For the reasons set forth below, we affirm the court's grant of JMOL based on lack of standing for one patent and based on non-infringement for the other patent. We need not decide the damages issues.

I

A

The patents at issue in this appeal are directed to methods of compressing digital audio files to reduce storage space without compromising the quality of sound produced from the files. The methods involve using the frequencies of the audio signals to generate frequency coefficients, and then using certain thresholds—which dictate what data can be ignored and how finely to encode the data—to assign numbers to the audio signals, i.e., to "quantize" the frequency information. For example, an "absolute hearing threshold" is an estimate of the quietest sounds a person can hear. A "masking threshold" reflects what sounds are inaudible when other sounds are present.

James Johnston and Joseph Hall are the listed inventors on the earliest application, Application No. 07/292,598 ("the '598 application"), which was filed in 1988 while they were working at AT & T Bell Laboratories ("AT & T").¹ They are likewise the inventors of U.S. Patent No. 5,341,457 ("the '457 patent"), which was filed in 1993 and is a continuation, through two other applications, of the '598 application. The claims of the '457 patent are directed to a method of compressing digital audio files wherein "tonality values" are used in generating masking thresholds for quantization. Claim 1 recites:

1. A method of processing an ordered time sequence of audio signals partitioned into a set of ordered blocks, each said block having a discrete frequency spectrum comprising a first set of frequency coefficients, the method comprising, for each of said blocks, the steps of:

(a) grouping said first set of frequency coefficients into at least one group, each group comprising at least one frequency coefficient;

(b) generating at least one tonality value, each group having an associated tonality value, said at least one tonality value reflecting the degree to which said time sequence of audio signals comprises tone-like quality;

(c) generating at least one noise masking threshold, each said at least one noise masking threshold being based upon at least a portion of said at least one tonality value; and

(d) quantizing at least one frequency coefficient in said at least one group, said quantizing based upon said at least one noise masking threshold.

(Emphases added). Claims 5 further limits the method to one wherein each block is representable by a number of bits. Claim 10 is directed to a storage medium "manufactured in accordance with" the method of claim 1.

U.S. Patent No. 5,627,938 ("the '938 patent"), which was filed in 1994, claims priority to an application filed in 1992. Johnston is the sole inventor of the '938 patent. Three of the claims of the '938 patent are directed to a method that, instead of using tonality values in quantizing, uses a masking threshold and an absolute hearing threshold, and an iterative process for achieving a required bit rate. The fourth claim is directed to a decoder for decoding a set of frequency coefficients. The claims are as follows:

1. A method of coding an audio signal comprising:

(a) converting a time domain representation of the audio signal into a frequency domain representation of the audio signal, the frequency domain representation comprising a set of frequency coefficients (b) calculating a masking threshold based upon the set of frequency coefficients;

(c) using a rate loop processor in an iterative fashion to determine a set of quantization step size coefficients for use in encoding the set of frequency coefficients, said set of quantization step size coefficients determined by using the masking threshold and an absolute hearing threshold; and

(d) coding the set of frequency coefficients based upon the set of quantization step size coefficients.

2. The method of claim 1 wherein the set of frequency coefficients are MDCT [modified discrete cosine transform] coefficients.

3. The method of claim 1 wherein the using the rate loop processor in the iterative fashion is discontinued when a cost, measured by the number of bits necessary to code the set of frequency coefficients, is within a predetermined range.

4. A decoder for decoding a set of frequency coefficients representing an audio signal, the decoder comprising:

(a) means for receiving the set of coefficients, the set of frequency coefficients having been encoded by:

(1) converting a time domain representation of the audio signal into a frequency domain representation of the audio signal comprising the set of frequency coefficients;

(2) calculating a masking threshold based upon the set of frequency coefficients;

(3) using a rate loop processor in an iterative fashion to determine a set of quantization step size coefficients needed to encode the set of frequency coefficients, said set of quantization step size coefficients determined by using the masking threshold and an absolute hearing threshold; and

(4) coding the set of frequency coefficients based upon the set of quantization step size coefficients; and

(b) means for converting the set of coefficients to a time domain signal.

(Emphases added).

In April 2006, following a reissue proceeding, the '938 patent was surrendered in favor of U.S. Patent No. RE 39,080 ("the '080 patent"). Notably, claim 2 was canceled during the reissue proceeding. In addition, the priority claim was amended such that the '080 patent claims priority, through several applications, as a continuation-in-part ("CIP") to the '598 application.

B

In 1988, AT & T entered into a Joint Development Agreement ("JDA") with a German company, Fraunhofer Gesellschaft ("Fraunhofer"), which was also working on digital compression technologies. Under the JDA, Fraunhofer's scientist, Karlheinz Brandenburg, went to work with Johnston at AT & T beginning in April 1989. The JDA preserved "Existing Technology," technology developed by AT & T or by Fraunhofer before April 1989, to each company. The JDA defined Existing Technology as:

Existing Technology is the results of work relating to Digital Audio Coding needed to cover ISO work done by AT & T's Information Principles Research Laboratory and FhG [Fraunhofer] at its AIS (including the work of Mr. Brandenburg and his colleagues at the University of Erlangen, cooperating with FhG/AIS) before the beginning of the Period.

Existing AT & T Technology is described in Attachment A (papers describing technical information) and Attachment B (patents and patent applications).

Existing FhG Technology is described in Attachment C (papers describing technical information) and Attachment D (patents and patent applications).

(Emphasis added).² In contrast, "New Work," technology developed after April 1989, was to be jointly owned—and each company had the nonexclusive right to make use of, and to grant nonexclusive licenses to others to use, the technology. Specifically, the JDA stated:

All New Work is treated as joint work. The intellectual property rights to that work will be jointly owned by AT & T and FhG [Fraunhofer]. Each party has the nonexclusive right to make use of the results of New Work (including intellectual property rights), and may grant nonexclusive licenses to others to use the results of such New Work.

Although the JDA was originally set to terminate on September 30, 1990, it was later extended indefinitely.

Working together in late 1989, Johnston and Brandenburg implemented and assisted in setting the industry standard ISO 11172-3 Audio Layer 3 ("MP3") coding techniques. By 1997, Fraunhofer had written software for MP3 functionality, and licensed hundreds of companies to use its MP3 software and patents. Microsoft sought to add to its Windows Media Player the ability to play MP3 files. Thus, in 1997, Microsoft obtained a license from Fraunhofer for the MP3 decoder software and incorporated it into computers containing Windows Media Player to allow the computers to play MP3 files.

In 2004, after the commencement of this litigation, Microsoft took another license from Fraunhofer for encoding and decoding software for use in its Windows Media Player 10. The software included two...