Presidio Components, Inc. v. Am. Technical Ceramics Corp.

• Decision Date: 21 November 2017
• Docket Number: 2016-2607,2016-2650
• Citation: 875 F.3d 1369
• Parties: PRESIDIO COMPONENTS, INC., Plaintiff–Cross–Appellant v. AMERICAN TECHNICAL CERAMICS CORP., Defendant–Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

875 F.3d 1369

PRESIDIO COMPONENTS, INC., Plaintiff–Cross–Appellant

v.AMERICAN TECHNICAL CERAMICS CORP., Defendant–Appellant.

2016-2607

2016-2650

United States Court of Appeals, Federal Circuit.

Decided: November 21, 2017

Brett A. Schatz, Wood, Herron & Evans, LLP, Cincinnati, OH, argued for plaintiff–cross–appellant. Also represented by Gregory F. Ahrens.

Ronald E. Cahill, Nutter McClennen & Fish LLP, Boston, MA, argued for defendant–appellant. Also represented by Heather Burnadette Repicky ; Peter F. Snell, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York, NY.

Before Dyk, Moore, and Taranto, Circuit Judges.

Dyk, Circuit Judge.

Presidio filed suit against American Technical Ceramics Corp. ("ATC") for patent infringement in the District Court for the Southern District of California. After separate jury and bench trials, the district court held the asserted claims were infringed and not invalid, and granted a permanent injunction. The district court limited damages due to intervening rights.

We affirm the district court’s holdings that the claims are not indefinite and that ATC is entitled to absolute intervening rights because a substantive amendment was made during reexamination. We conclude that the evidence does not support an award of lost profits and, therefore, reverse the award of lost profits and remand for determination of a reasonable royalty. We conclude that the district court did not abuse its discretion in declining to award enhanced damages. We vacate the permanent injunction, and remand for further proceedings with respect to the injunction.

BACKGROUND

Presidio’s suit against ATC, filed on September 2, 2014, alleged infringement of U.S. Patent No. 6,816,356 ("the ’356 patent"). The ’356 patent claims a multilayer capacitor design and teaches a multilayer integrated network of capacitors electrically connected in series and in parallel.

A capacitor is a passive electrical component that stores and releases energy. Generally, a capacitor comprises two parallel metal plates separated by a non-conductive material, known as a dielectric. When a capacitor is connected to a power source, electricity passes through the metal plates, but not through the dielectric material. This causes a positive charge to accumulate on one plate and a negative charge to accumulate on the other plate. The capacitor will then release the stored energy when the two plates are connected to a conductive path that closes the circuit. The amount of energy that a capacitor can store is called its "capacitance."

Multiple capacitors can be combined to form a multilayer capacitor. The claimed multilayer capacitor creates capacitance in the dielectric material between the parallel plate combinations. Moreover, when the electrodes of a multilayer capacitor are positioned in an edge-to-edge relationship, they form "fringe-effect" capacitance between the external contacts. "Fringe-effect" capacitance is the energy stored in between external contacts of the multilayer capacitor.

While the district court infringement suit was pending, in 2015, ATC sought an ex parte reexamination of the claims of the ’356 patent in light of new prior art. The examiner rejected the claims as anticipated and obvious. Presidio amended the claims. The Patent and Trademark Office issued a reexamination certificate for the ’356 patent.¹ Amended claim 1 of the ’356 patent, the only independent claim asserted by Presidio in this action, is as follows, with the language added during reexamination underscored:

1. A capacitor comprising:

a substantially monolithic dielectric body;

a conductive first plate disposed within the dielectric body;

a conductive second plate disposed within the dielectric body and forming a capacitor with the first plate;

a conductive first contact disposed externally on the dielectric body and electrically connected to the first plate; and

a conductive second contact disposed externally on the dielectric body and electrically connected to the second plate, and the second contact being located sufficiently close to the first contact in an edge to edge relationship in such proximity as to form a first fringe-effect capacitance with the first contact that is capable of being determined by measurement in terms of a standard unit.

U.S. Patent No. 6,816,356 C2, col. 1, ll. 23–36 (Reexamination Certificate filed Dec. 8, 2015).

On December 22, 2015, Presidio amended its district court complaint, alleging infringement of the ’356 patent claims 1, 3, 5, 16, 18, and 19 as amended by the reexamination certificate. Presidio alleged that ATC’s 550 line of capacitors infringed the asserted claims.

ATC defended, as is relevant for present purposes, that the claims were indefinite; that the reexamination amendment entitled it to intervening rights, limiting damages; and that Presidio was not entitled to lost profits or enhanced damages. The district court granted ATC’s motion for summary judgment on the affirmative defense of absolute intervening rights. The district court then held a jury trial. The jury returned a verdict finding direct infringement and induced infringement of claims 1, 3, 5, 16, 18, and 19 of the ’356 patent by all of the accused products—ATC’s 550 line of capacitors. In addition, the jury found that Presidio had proven by clear and convincing evidence that ATC’s infringement of the asserted claims was willful. The jury awarded Presidio $2,166,654 in lost profit damages. It did not reach Presidio’s claim for a reasonable royalty. The jury also issued an advisory verdict as to indefiniteness, finding that ATC failed to prove by clear and convincing evidence that claim 1 of the ’356 patent is indefinite.²

The district court thereafter rejected ATC’s contention that the asserted claims of the ‘356 patent are invalid due to indefiniteness and denied ATC’s motion that Presidio had failed as a matter of law to prove lost profits. The district court also denied Presidio’s motion for enhanced damages, determining that enhanced damages were not warranted despite a jury finding of willful infringement. The district court then entered a permanent injunction against ATC.

ATC appealed, challenging the district court’s determination that the claims were not indefinite, the award of lost profits, and the award of a permanent injunction. Presidio cross-appealed, challenging the district court’s determination as to absolute intervening rights and the denial of enhanced damages. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

On October 21, 2016, we granted a partial stay of the injunction until March 17, 2017 with respect to ATC’s customers that purchased infringing capacitors before June 17, 2016.

DISCUSSION

I

We first address whether the claims are indefinite. 35 U.S.C. § 112 provides that "[t]he specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." Indefiniteness is a question of law that this court reviews de novo. Teva Pharm. USA, Inc. v. Sandoz, Inc. , 789 F.3d 1335, 1341 (Fed. Cir. 2015). Underlying factual findings are reviewed for clear error. UltimatePointer, LLC v. Nintendo Co. , 816 F.3d 816, 826 (Fed. Cir. 2016). A patent is indefinite "if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." Nautilus, Inc v. Biosig Instruments, Inc. , ––– U.S. ––––, 134 S.Ct. 2120, 2124, 189 L.Ed.2d 37 (2014). The definiteness requirement "mandates clarity, while recognizing that absolute precision is unattainable." Id. at 2129.

As noted earlier, the claims here cover multilayer capacitors with a fringe-effect capacitance between external contacts that is "capable of being determined by measurement in terms of a standard unit." U.S. Patent No. 6,816,356 C2, col. 1, ll. 35–36 (Reexamination Certificate filed Dec. 8, 2015).

Here, the patent discloses a method of measuring capacitance called insertion loss testing. The patent specification references insertion loss testing as a method to measure the performance of capacitors. Figures 21A and 21B display insertion loss diagrams, which identify insertion loss testing as a method that may be used to measure performance of capacitors. ’356 patent, col. 6, ll. 10–15, col. 7, ll. 3–18. Moreover, in the prosecution history during the reexamination, Presidio amended the claims to require fringe effect capacitance capable of being determined "by measurement" and explained that the effects of a capacitance according to the invention "can be shown by measurement, such as is done in the measurements of insertion loss referenced in the patent in Figs. 21A and 21B." J.A. 2654, 2656. The method of insertion loss testing was well-known in the art, and there is no dispute that insertion loss testing can measure the overall performance of a capacitor. Indeed, ATC uses insertion loss testing itself to measure the performance of capacitors when comparing its products to Presidio’s products for purposes of determining whether Presidio lost sales to ATC. See infra Part III.

Insertion loss measures how much of a signal is lost when a capacitor is inserted into a circuit. To determine insertion loss, a network analyzer measures the ratio of the input power to the output power of the capacitor in a circuit, which indicates the efficiency with which the signal passes through the capacitor in the circuit. The measurement unit for insertion loss is decibels, and this measurement is a function of all of the capacitances, resistances, and inductances within the capacitor. Thus, the insertion loss value correlates to the overall capacitance of the capacitor. Although industry standards for insertion loss testing had not been published at the time the patent was filed, Presidio’s expert, Dr. Huebner, testified that insertion loss testing had been "well known for many decades" and...