Taurus Ip, LLC v. Daimlerchrysler Corp.

• Decision Date: 09 August 2013
• Docket Number: Nos. 2008–1462,2008–1464,2008–1463,2008–1465.,s. 2008–1462
• Citation: 726 F.3d 1306
• Parties: TAURUS IP, LLC (now known as Manufacturing System Technologies, LLC), Plaintiff/Third Party Defendant–Appellant, and Orion IP, LLC (now known as Clear With Computers LLC) and Erich Spangenberg, Third Party Defendants–Appellants, v. DAIMLERCHRYSLER CORPORATION, Chrysler Financial, LLC, and DaimlerChrysler Company, LLC, Defendants, and Chrysler Holding, LLC, Defendant, and Mercedes–Benz USA, Inc. and Chrysler Group LLC, Defendants/Third Party Plaintiffs–Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

726 F.3d 1306

TAURUS IP, LLC (now known as Manufacturing System Technologies, LLC), Plaintiff/Third Party Defendant–Appellant,

and

Orion IP, LLC (now known as Clear With Computers LLC) and Erich Spangenberg, Third Party Defendants–Appellants,

v.DAIMLERCHRYSLER CORPORATION, Chrysler Financial, LLC, and DaimlerChrysler Company, LLC, Defendants,andChrysler Holding, LLC, Defendant,

and

Mercedes–Benz USA, Inc. and Chrysler Group LLC, Defendants/Third Party Plaintiffs–Cross Appellants.

Nos. 2008–1462, 2008–1463, 2008–1464, 2008–1465.

United States Court of Appeals,Federal Circuit.

Aug. 9, 2013.

Jon E. Wright, Sterne, Kessler, Goldstein & Fox, PLLC, of Washington, DC, argued for plaintiff/third party defendant-appellant. With him on the brief was Bryon L. Pickard.

Paul H. Berghoff, McDonnell Boehnen Hulbert & Berghoff, LLP, of Chicago, IL, argued for third party defendant-appellants. With him on the brief were Jeremy E. Noe and Kurt W. Rhode. Of counsel on the brief was Elizabeth A. Wiley, The Wiley Firm PC, of Austin, TX.

Mitchell G. Stockwell, Kilpatrick Townsend & Stockton LLP, of Atlanta, GA, argued for defendant/third party plaintiff-cross appellant, Mercedes–Benz USA, Inc. and Megan S. Woodworth, Dickstein Shapiro LLP, of Washington, DC, argued for defendant/third party plaintiff-cross appellant, Chrysler Group LLC. On the brief was Frank C. Cimino, Jr., Dickstein Shapiro LLP, of Washington, DC, for defendant/third party plaintiff-cross appellant, Chrysler Group LLC. Of counsel were Bonnie M. Grant, Vaibhav P. Kadaba, Ronald L. Raider and Vanessa M. Spencer, Kilpatrick Stockton LLP, of Atlanta, GA, for defendants/third party plaintiffs-cross appellants.

Before PROST, SCHALL, and REYNA, Circuit Judges.

SCHALL, Circuit Judge.

These appeals come to us from the United States District Court for the Western District of Wisconsin. There, in two separate actions, Taurus IP, LLC (“Taurus”) sued various defendants, alleging that their external websites infringed independent claim 16, as well as dependent claims 19, 22, 23, and 27, of Taurus's U.S. Patent No. 6,141,658 (the “'658 patent”). The '658 patent generally relates to “a computer system for managing product knowledge related to products offered for sale by a selling entity.” '658 patent col. 2 ll. 52–54.

In the first action, Taurus sued DaimlerChrysler Corporation; Chrysler Financial, LLC; DaimlerChrysler Company, LLC; Chrysler Holding, LLC; Mercedes–Benz USA, Inc.; and Chrysler LLC for infringement (the “DaimlerChrysler Patent Suit”). In the second action, Taurus sued Hyundai Motor America; Reebok International, Ltd.; Polo Ralph Lauren Corporation; and Michelin North America, Inc. (the “Hyundai Patent Suit.”).

In the DaimlerChrysler Patent Suit, the Chrysler-related defendants (“Chrysler”) and Mercedes-related defendants (“Mercedes”) asserted license and release defenses. They also asserted a breach of contract counterclaim against Taurus, and filed a contract claim against third-party defendants Orion IP, LLC; Constellation IP, LLC; Plutus IP Wisconsin, LLC; Plutus IP, LLC; and Erich Spangenberg.¹See Taurus IP, LLC v. DaimlerChrysler Corp., 519 F.Supp.2d 905, 911–12 (W.D.Wis.2007) (the “ Jurisdiction Decision ”). In those claims and counterclaims, Chrysler and Mercedes alleged that, by filing the DaimlerChrysler Patent Suit, Taurus and/or certain third-party defendants violated various provisions of a 2006 patent licensing agreement (the “2006 Settlement Agreement”) entered into by DaimlerChrysler Corporation and Orion IP, LLC (“Orion”) to settle two prior patent infringement suits.²

On February 25, 2008, a few months after construing the relevant claim terms in the '658 patent, the district court entered summary judgment in the DaimlerChrysler Patent Suit, finding that neither Chrysler's nor Mercedes's accused websites infringed any of the asserted claims and finding claims 16 and 27 invalid as anticipated by a prior art patent. Taurus IP, LLC v. DaimlerChrysler Corp., 534 F.Supp.2d 849, 873–82 (W.D.Wis.2008) (the “Summary Judgment Decision ”); see also Taurus IP, LLC v. DaimlerChrysler Corp., No. 07–cv–158, 2007 WL 5601495 (W.D.Wis. Nov. 9, 2007) (the “Claim Construction Decision ”). Based on the Summary Judgment Decision and the Claim Construction Decision in the DaimlerChrysler Patent Suit, the parties to the Hyundai Patent Suit stipulated to dismissal of all pending claims and counterclaims to permit appeal of those two decisions. Subsequently, in a decision dated June 3, 2008, the district court found the DaimlerChrysler Patent Suit to be exceptional under 35 U.S.C. § 285. See Taurus IP, LLC v. DaimlerChrysler Corp., 559 F.Supp.2d 947, 966–69 (W.D.Wis.2008) (the “Post–Trial Decision ”). As a result, the district court awarded damages in the amount of $1,644,906.12, representing the costs incurred by Chrysler and Mercedes in defending against the suit. See id. at 969, 976.

The Breach of Warranty Suit presented the district court with a host of non-patent issues. First, the court was required to determine whether it could exercise personal jurisdiction over third-party defendant Spangenberg, a resident of Texas, and over third-party defendant corporations Orion; Constellation IP, LLC; and Plutus IP, LLC, all organized under the laws of Texas.³ In a decision dated October 16, 2007, the court denied a motion to dismiss for lack of personal jurisdiction filed by the Texas Third–Party Defendants, finding that Taurus and the Texas Third–Party Defendants were alter egos of one another. Jurisdiction Decision, 519 F.Supp.2d at 917–21. Alternatively, the court found personal jurisdiction over Spangenberg proper under Wisconsin's long-arm statute. Id. at 921–23.

After finding jurisdiction, the district court addressed, at the summary judgment stage, two separate challenges to the merits of the claims in the Breach of Warranty Suit. The district court granted a motion for summary judgment filed by Taurus and the Third–Party Defendants, finding that Articles 2.1 and 3.5 of the 2006 Settlement Agreement did not provide a release to the infringement alleged in the DaimlerChrysler Patent Suit. Summary Judgment Decision, 534 F.Supp.2d at 870, 881 ¶ 9(a). In addition, the district court denied a motion for summary judgment filed by Taurus and the Third–Party Defendants, finding that triable issues of fact remained as to whether Orion or Spangenberg breached a warranty provision in Article 8.1(a)(iii) of the 2006 Settlement Agreement (the “Warranty Provision”). Summary Judgment Decision, 534 F.Supp.2d at 871–873, 881 ¶ 10. Later, at trial, a jury determined that Orion had breached the Warranty Provision. Post–Trial Decision, 559 F.Supp.2d at 957. Based on this finding, the district court awarded damages against Orion. Id. at 961–66, 976–77 ¶¶ 7, 11.

The trial in the Breach of Warranty Suit resulted in one additional ruling relevant to this appeal. The district court imposed sanctions on Orion and Spangenberg for pre-trial witness tampering. Id. at 957. Under the sanctions, Spangenberg and Orion were not permitted to put on evidence at trial to support their defense that neither Chrysler nor Mercedes relied on the Warranty Provision. Id. at 975.

In due course, the district court entered judgments in the DaimlerChrysler Patent Suit, the Breach of Warranty Suit, and the Hyundai Patent Suit.⁴ Taurus now appeals various rulings from the DaimlerChrysler Patent Suit: (1) the district court's claim construction of various claim terms; (2) the judgment of invalidity of claims 16 and 27; (3) the judgment of noninfringement of asserted claims 16, 19, 22, 23, and 27; and (4) the finding of an exceptional case under 35 U.S.C. § 285 and the resulting award of damages.

Orion and Spangenberg appeal various rulings from the Breach of Warranty Suit: (1) the denial of the motion to dismiss for lack of personal jurisdiction; (2) the denial of judgment as a matter of law reversing the jury's finding of breach of the Warranty Provision; (3) the denial of judgment as a matter of law regarding the award of damages and attorney fees based on the breach; and (4) the imposition of sanctions based on the finding of witness tampering.

Finally, Chrysler and Mercedes conditionally cross-appeal the ruling in the Breach of Warranty Suit that Articles 2.1 and 3.5 of the 2006 Settlement Agreement did not provide a release to the alleged infringement.

For the reasons set forth below, we rule as follows on the issues presented: In the appeals from the DaimlerChrysler Patent Suit, (1) we affirm the district court's constructions of all the disputed claim terms; (2) we affirm the judgment of invalidity of claims 16 and 27 of the '658 patent; (3) we affirm the judgment of noninfringement; and (4) we affirm the finding of an exceptional case under 35 U.S.C. § 285 and the resulting award of damages. In the appeals from the Breach of Warranty Suit, (1) we affirm the denial of the motion to dismiss for lack of personal jurisdiction over Orion and Spangenberg; (2) we affirm liability for breach of the Warranty Provision; (3) we affirm the award of damages consisting of attorney fees incurred by Chrysler and Mercedes in prosecuting the Breach of Warranty Suit, but reverse the award of damages consisting of attorney fees incurred by Chrysler and Mercedes in defending against the DaimlerChrysler Patent Suit; and (4) we affirm the imposition of evidentiary sanctions based on witness tampering. Based on these rulings, we do not reach the conditional cross-appeal.

I. The Daimlerchrysler Patent Suit

A. Background

1. The Patent and the Accused Products

As noted, the '658 patent generally relates to “a computer system for managing product knowledge related to products offered for sale by a selling entity.” '658 patent col. 2 ll. 52–54. As shown in figure 1, reproduced below, the patent discloses a system consisting of a data source 104, a data importer 102, an editor 106, a user system 108, a data model 110, and...