Tecsec, Inc. v. Adobe Inc.

• Citation: 978 F.3d 1278
• Decision Date: 23 October 2020
• Docket Number: 2019-2192,2019-2258
• Parties: TECSEC, INC., Plaintiff-Appellant v. ADOBE INC., Defendant-Cross-Appellant SAS Institute, Inc., SAP America, Inc., SAP AG, Cisco Systems, Inc., Sybase, Inc., Software AG, Software AG, Inc., Oracle Corporation, Oracle America, Inc., Defendants
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

978 F.3d 1278

TECSEC, INC., Plaintiff-Appellant

v.ADOBE INC., Defendant-Cross-Appellant

SAS Institute, Inc., SAP America, Inc., SAP AG, Cisco Systems, Inc., Sybase, Inc., Software AG, Software AG, Inc., Oracle Corporation, Oracle America, Inc., Defendants

2019-2192

2019-2258

United States Court of Appeals, Federal Circuit.

Decided: October 23, 2020

Michael Oakes, Hunton Andrews Kurth LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Ozzie Farres, Brian L. Saunders, Steven Leslie Wood ; David Parker, Richmond, VA.

Gabriel Bell, Latham & Watkins LLP, Washington, DC, argued for defendant-cross-appellant. Also represented by Tara Elliott, Rachel Weiner Cohen, Michael A. Morin.

Before Prost, Chief Judge, Reyna and Taranto, Circuit Judges.

Taranto, Circuit Judge.

TecSec, Inc. brought this case in 2010 against several companies, including Adobe Inc., alleging that the companies directly and indirectly infringed claims of four TecSec patents. Aspects of the case have been before this court three times already. The present appeal involves Adobe only and several rulings of the district court, of which two are central. Specifically, before trial, in response to a motion in limine by Adobe, the court excluded all evidence of induced infringement from March 3, 2011, through the expiration of the patents at issue in October 2013. Earlier, the court had rejected Adobe's challenge to the asserted claims as ineligible under 35 U.S.C. § 101.

A jury found for TecSec on direct infringement, but not induced infringement; rejected Adobe's prior-art validity challenges; and awarded damages. The district court, though generally denying Adobe's post-trial motions, reduced the damages award to zero on the ground that there was no proof of any damages from direct infringement and the jury had rejected induced infringement.

TecSec appeals. It challenges the district court's motion-in-limine ruling, as well as certain jury instructions and the post-trial damages reduction. Adobe cross-appeals, challenging the district court's ruling on eligibility. We reverse the evidentiary ruling that eliminated TecSec's inducement case for a substantial period, and we reject Adobe's challenge to the district court's eligibility ruling. For those reasons, and others stated in this opinion, we reverse the judgment in part and remand for further proceedings on TecSec's claim of induced infringement.

I

A

TecSec owns U.S. Patent Nos. 5,369,702, 5,680,452, 5,717,755, and 5,898,781, the patents asserted in this case. The patents are entitled "Distributed Cryptographic Object Method" (the "DCOM patents") and claim particular systems and methods for multi-level security of various kinds of files being transmitted in a data network. See '702 patent, col. 3, lines 12–24; id. , col. 12, lines 2–16; id. , col. 12, line 45, through col. 13, line 20. In particular, the DCOM patents describe a method in which a digital object—e.g. , a document, video, or spreadsheet—is assigned a level of security that corresponds to a certain combination of access controls and encryption. Id. , col. 3, line 58, through col. 4, line 2; id. , col. 4, lines 18–25; id. , col. 5, lines 42–51. The encrypted object can then be embedded or "nested" within a "container object," which, if itself encrypted and access-controlled, provides a second layer of security. Id. , col. 4, lines 25–34.

Claims 1 and 8 of the '702 patent are representative of the asserted claims. Claim 1 recites:

1. A method for providing multi-level multimedia security in a data network, comprising the steps of:

A) accessing an object-oriented key manager;

B) selecting an object to encrypt;

C) selecting a label for the object;

D) selecting an encryption algorithm;

E) encrypting the object according to the encryption algorithm;

F) labelling the encrypted object;

G) reading the object label;

H) determining access authorization based on the object label; and

I) decrypting the object if access authorization is granted.

'702 patent, col. 12, lines 2–15. Whereas the subject of claim 1 is a method, the subject of claim 8 is a system that includes components—a "system memory," "an encryption algorithm module," "an object labelling subsystem," "a decryption algorithm module," and "an object label identification subsystem"—that carry out the steps of claim 1's method. Id. , col. 12, line 45, through col. 13, line 19.

B

In 2010, TecSec filed a complaint alleging infringement of the DCOM patents by Adobe, International Business Machines Corp. (IBM), and several other companies. On March 3, 2011, after staying the case as to all defendants except IBM, the district court construed several claim terms of the DCOM patents, including the term "multimedia." Based on those constructions, the district court granted IBM summary judgment of noninfringement. In January 2012, we summarily affirmed that noninfringement judgment without reaching certain issues, including the construction of "multimedia." TecSec, Inc. v. Int'l Business Machines Corp. , 466 F. App'x 882 (Fed. Cir. 2012).

The case then proceeded in district court against Adobe and other defendants. As relevant here, on April 23, 2012, TecSec and Adobe stipulated that, under the claim construction already adopted (which TecSec reserved the right to appeal), TecSec could not show that Adobe or the users of its accused Acrobat products infringed the DCOM patents, as alleged, through their actions involving portable document format documents (PDFs). The next day, the district court entered a judgment of noninfringement for Adobe. On October 2, 2013, we reversed the district court's construction of "multimedia" and remanded for further proceedings under the correct construction. TecSec, Inc. v. Int'l Business Machines Corp. , 731 F.3d 1336, 1345–49 (Fed. Cir. 2013) ( TecSec I ), cert. denied sub nom. Cisco Systems, Inc. v. TecSec, Inc. , 572 U.S. 1158, 134 S.Ct. 2698, 189 L.Ed.2d 756 (2014).

The DCOM patents expired on October 18, 2013, shortly after our TecSec I ruling. In October 2014, Adobe filed a motion for summary judgment of noninfringement, J.A. 165, and the district court granted the motion in May 2015, J.A. 27086–127. In August 2016, citing genuine disputes over material facts, we reversed that judgment and again remanded to the district court. TecSec, Inc. v. Adobe Systems Inc. , 658 F. App'x 570 (Fed. Cir. 2016) ( TecSec II ).

The case returned to the district court. In March 2017, Adobe moved for summary judgment of ineligibility under § 101. J.A. 1841–71. The district court, noting that the parties agreed that claims 1 and 8 of the '702 patent were representative for § 101 purposes, J.A. 4, denied the motion in May 2017. J.A. 3–13. In its ruling, the court stated that its rationale actually warranted "judgment in favor of [TecSec]" on Adobe's ineligibility challenge. J.A. 8.

In April 2018, after additional discovery, Adobe filed another motion for summary judgment of noninfringement, making at least one argument for lack of provable inducement of infringement. See ECF 1054 (motion); ECF 1123 at 10–11 (reply supporting motion). The district court denied the motion in June 2018. J.A. 10298–99. In August 2018, Adobe stipulated that "on at least one occasion," "there was direct infringement of the asserted claims" by an Adobe employee. J.A. 10307–08. It is common ground on appeal that this stipulation was referring to an occasion when an Adobe employee performed the steps of the method claims using an accused version of Adobe's Acrobat product, reflected in a February 2009 blog post on "packaging options for encrypted PDFs" that he wrote for an Adobe users' forum. See J.A. 24459–60.

In October 2018, as trial was approaching, Adobe filed an omnibus motion in limine, the first heading of which asked the court to "preclude argument, evidence, or testimony on Adobe's intent to induce or willfully infringe between March 3, 2011 and October 18, 2013, unless TecSec concedes admissibility of the March 3, 2011 Order (DX-28), Stipulation of Non-infringement (DX-29), and Judgment (DX-30)." J.A. 10429. Adobe argued that a "judgment or stipulation of non-infringement is highly relevant to an accused infringer's state of mind." Id. "If TecSec argues that Adobe had specific intent to induce infringement or willfully infringe during this period," Adobe stated, "TecSec opens the door to the admissibility of this exculpatory evidence"—which, Adobe asserted (without citing evidence), it reasonably relied on, so that "there can be no specific intent to induce infringement during [the] roughly 31-month period" from March 2011 to October 2013. Id. TecSec argued that intent was a fact question for the jury, and it disagreed with Adobe's submission that allowing proof of inducement during the period at issue required admission of the three documents. J.A. 10849. TecSec did not indicate that it would decline to proceed with its inducement case for the period at issue if that evidence was to be admitted.

At an oral argument on the omnibus motion on Friday, November 9, 2018, the district court indicated that it intended to preclude "any reference" to Adobe's post-March 2011 conduct, making admission of the three documents immaterial. ECF 1294, p. 35; id. at pp. 3–4, 34–37. The court stated its intent in that respect equally for the inducement contention and the willfulness contention. Id. On November 13, 2018, after the Veterans Day weekend but before any ruling by the court, TecSec filed a supplemental brief stating expressly that even if the district court allowed Adobe to present evidence of Adobe's lack of intent, "the Court should not preclude TecSec from presenting evidence on Adobe's intent to induce infringement." TecSec, Inc.'s Suppl. Br. Regarding Def. Adobe Inc.'s Mot. in Limine #1 at 7, TecSec, Inc. v. Adobe, Inc. , No. 1:10-cv-00115-LO-TCB (E.D. Va. Nov. 13, 2018), ECF 1283-1 (TecSec's Supp. MIL Br.). The district court, TecSec argued, could not "resolve a substantive factual dispute through a...