Raylon, LLC v. Complus Data Innovations, Inc., s. 2011–1355

• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit
• Writing for the Court: PROST
• Citation: 700 F.3d 1361
• Parties: RAYLON, LLC, Plaintiff–Appellee, v. COMPLUS DATA INNOVATIONS, INC., Defendant–Appellant, and Casio America, Inc. and Casio Computer Co., Ltd., Defendants–Appellants, and Symbol Technologies, Inc., Defendant–Appellant, and Advanced Public Safety, Inc., Tripod Data Systems, Zebra Technologies Corporation, EZ Tag Corporation, Fujitsu America, Inc. and Fujitsu Japan Ltd., Defendants.
• Docket Number: 2011–1359.,2011–1358,Nos. 2011–1355,2011–1356,2011–1357,s. 2011–1355
• Decision Date: 07 December 2012

700 F.3d 1361

105 U.S.P.Q.2d 1355

RAYLON, LLC, Plaintiff–Appellee,
v.
COMPLUS DATA INNOVATIONS, INC., Defendant–Appellant,
and
Casio America, Inc. and Casio Computer Co., Ltd., Defendants–Appellants,
and
Symbol Technologies, Inc., Defendant–Appellant,
and
Advanced Public Safety, Inc., Tripod Data Systems, Zebra Technologies Corporation, EZ Tag Corporation, Fujitsu America, Inc. and Fujitsu Japan Ltd., Defendants.

Nos. 2011–1355, 2011–1356, 2011–1357, 2011–1358, 2011–1359.

United States Court of Appeals,
Federal Circuit.

Dec. 7, 2012.

[700 F.3d 1362]

D. Scott Hemingway, Hemingway & Hansen LLP, of Dallas, TX, argued for the plaintiff-appellee. On the brief was Amanda Abraham, Roth Law Firm, of Marshall, TX.

John R. Emerson, Haynes and Boone, LLP, of Dallas, TX, argued for the defendant-appellant Complus Data Innovations,

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Inc. With him on the brief were Debra J. McComas, Donald Edward Tiller and Sean M. O'Neill.

Scott D. Stimpson, Sills Cummis & Gross P.C., of New York, New York, argued for defendant-appellants Casio Computers Co. Ltd, et al. With him on the brief were Katherine M. Lieb and David C. Lee.

Mitchell S. Feller, Sobel & Feller, of New York, New York, argued for defendant-appellant Symbol Technologies, Inc. With him on the brief was Jonathan M. Sobel.

Before PROST, MOORE, and REYNA, Circuit Judges.

Opinion for the court filed by Circuit Judge PROST. Concurring opinion filed by Circuit Judge REYNA.

PROST, Circuit Judge.

Raylon, LLC (“Raylon”) brought three suits against, inter alia, Complus Data Innovations, Inc. (“Complus”), Casio America, Inc. and Casio Computer Co., Ltd., (collectively “Casio”), and Symbol Technologies, Inc. (“Symbol”) (collectively, “defendants”) in the Eastern District of Texas. Raylon alleged that all defendants infringe claims 1–17 of U.S. Patent No. 6,655,589 (“'589 patent”). The district court consolidated the three suits. After a combined hearing, the court adopted defendants' claim construction, granted summary judgment in their favor, and denied their motions for Rule 11 sanctions. The district court also denied defendants' motions for attorneys' fees and costs under 35 U.S.C. § 285, citing its Rule 11 decision. Defendants appeal the denial of sanctions and attorneys' fees. For the reasons set forth below, we affirm in part, vacate in part, and remand for further proceedings.

Background

Raylon is the assignee of the '589 patent, which is directed to a hand-held identification investigating and ticket issuing system. The object of the invention is to provide an affordable, durable system that reduces the amount of time a user spends identifying and issuing tickets to individuals and allows the user to maintain visual contact with the individual throughout the identification and ticketing process. '589 patent col.2 ll.64–65; col.3 ll.34–48. The system is described as containing a housing within which there is an input assembly for entering data, an elongated slot for receiving identification forms that have a magnetic tape, an elongated aperture for access to the housing's interior, a transceiver assembly to communicate remotely with a computer, a printer assembly for printing tickets, and a display that “is pivotally mounted on the housing for displaying data entered into the input assembly.” See, e.g., '589 patent Abstract; col.1 ll.26–40; col.1 l.66–col.2 l.14; col.3 ll.18–33. Figure 1 is a schematic perspective of the system:

Image 1 (3.03" X 3.83") Available for Offline Print

[700 F.3d 1364]

With reference to Figure 1, the preferred embodiment's display 39 “may be pivotally mounted on the housing 12 and may be positioned generally adjacent to the first end 13 of the housing

12

.

” Id. col.5 ll.58–61. Claim 1 is representative of the patented system:

1. A system for investigating an identification of a person and for issuing tickets, the identification comprising a card having a computer readable magnetic tape secured on the card, the computer readable magnetic tape containing pertinent data relating to the person displayed on the identification card, said system being connectable to a computer for transmitting data between said system and the computer, said system being connectable to a data cable of a computer, said system comprising:

a housing having an interior, said housing having an elongated slot for selectively receiving the identification card, said housing having an elongated aperture providing access into said interior of said housing;

an input assembly for inputting data about a person, said input assembly being mounted on said housing, said input assembly including a data reading means for reading the computer readable magnetic tape on the identification card;

a transceiver assembly for remotely communicating with a computer, said transceiver assembly being mounted in said interior of said housing;

a display for displaying data entered into said input assembly, said display being pivotally mounted on said housing;

a printer assembly being mounted in said interior of said housing for printing a ticket; and wherein said printer assembly includes

a substrate for receiving indicia, said substrate including an end extendable

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through said elongated aperture in said housing,

a printer means for printing indicia on said substrate, and

means for advancing said substrate with respect to said printer means such that substrate is advanced though said elongated aperture in said housing when said printer means prints indicia on said substrate.

Id. col.7 ll.9–44 (emphasis added). Independent system claims 16 and 17 also recite a “display being pivotally mounted on said housing” limitation. Id. col.8 ll.55–57; col.9 ll.20–22.

In 2009, Raylon filed three suits in the U.S. District Court for the Eastern District of Texas against software integrators and product component manufacturers of various ticket-writing and enforcement handheld devices, including Complus, Casio, and Symbol. In each suit, Raylon asserted that defendants' devices directly infringe claims 1–17 of the '589 patent literally and under the doctrine of equivalents, that defendants induce others to infringe, and that defendants contributorily infringe all claims of the ' 589 patent. Defendants moved to dismiss, for judgment on the pleadings, or for summary judgment; the court denied or postponed these motions pending claim construction.

During the spring of 2010, Casio and other defendants sent several letters to Raylon, expressing their concerns that Raylon's complaints violated Rule 11(b)(2) and Rule 11(b)(3) because, inter alia, Raylon's claim construction positions were unsupportable by intrinsic evidence and its infringement positions with regards to the display, magnetic strip reader, and printer elements of the asserted claims were unreasonable. Raylon disagreed, maintaining that the patent supported a broad claim construction and that the accused products infringed each and every claim of the '589 patent. Specifically, Raylon alleged that the accused devices all literally met the “display being pivotally mounted on said housing” element because they each had “a display that is mounted on the housing and can be pivoted relative to the viewer's or user's angle of visual orientation.” J.A. 4223; J.A. 4912; J.A. 5768. In other words, under Raylon's theory of infringement a display with a fixed-mounted screen meets the ‘pivotally mounted on said housing’ limitation when the user pivots the device by moving his elbow, wrist, or other joint.

In advance of the Markman hearing, both Raylon and defendants proposed constructions of, inter alia, “display being pivotally mounted on said housing,” “a printer assembly being mounted in said interior of said housing,” and “said housing having an elongated slot for selectively receiving the identification card.” Defendants also filed motions for Rule 11 sanctions in each suit. The district court consolidated the three suits for purposes of claim construction, summary judgment, and sanctions.

On December 2, 2010, the district court held a consolidated hearing. The only term construed was “display being pivotally mounted on said housing.” Raylon construed the term to mean “an electronic device attached to a housing for the visual presentation of information, the display capable of being moved or pivoted relative to the viewer's perspective.” Defendants proposed various constructions, all of which excluded from “pivotally mounted” any displays that are fixed or incapable of pivoting.¹ The district court rejected Raylon's

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construction, noting that its citation to the specification did not support its overly broad claim construction such that its construction “stretch[es] the bounds of reasonableness beyond what I am willing to accept.” J.A. 3681. Accepting defendants' construction, the district court granted summary judgment in their favor. The court concluded the hearing by denying defendants' motions for Rule 11 sanctions.

The district court's holdings were memorialized in later-issued orders. On March 9, 2011, the district court issued an order reflecting its denial of Rule 11 sanctions. In that order, the district court quoted the Fifth Circuit's objective standard and stated that while “Raylon's claim construction arguments and infringement theory do stretch the bounds of reasonableness, and the Court rejected Raylon's positions, they do not cross the line.” J.A. 4. The court then analyzed Raylon's settlements and damages model to determine whether Raylon filed suit to recover nuisance value settlements or whether the numbers were “indicative of the good faith nature with which the case is brought.” Id. It found Raylon's proffered model “not large for a patent case,” suggesting that Raylon's “earlier settlements were not so unreasonable as to indicate that Raylon believed its case was weak or frivolous.” Id. On this basis, the district court concluded that this was not a situation where “the cost of the litigation is more of a driving...