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Updates from the Federal Circuit, March 2017

Federal Circuit Applies Panduit Factors to Specific Feature

In Mentor Graphics Corp. v. EVE-USA, Inc., No. 15-1470 (Fed. Cir. March 16, 2017), the Federal Circuit determined that the Panduit factors could apply to a patented feature that represented only one part of a multi-component product, as well as to a patented product.
Under the Panduit test, a patentee is entitled to damages based on lost profits if it can establish (1) demand for the patented product, (2) an absence of acceptable non-infringing alternatives, (3) that it has the manufacturing and marketing capability to exploit the demand, and (4) the amount of profit it would have made.
In this case, Mentor Graphics asserted several patents against Synopsis, the parent company of EVE. A jury found that EVE’s “ZeBu” hardware emulator infringed one of Mentor’s patents, U.S. Patent No. 6,240,376 (the ‘376 patent), which covered a method for debugging source code. When arguing damages, Mentor had argued that it was entitled to lost profit damages for lost sales of its “Veloce” hardware emulators due to infringing sales of “ZeBu” emulators, because it would have made additional sales of the “Veloce” emulators if not for the infringing “ZeBu” sales. A jury found that Mentor satisfied all four Panduit factors, despite the fact that the feature was only one aspect of the “ZeBu” hardware emulator, and awarded lost profits.
Synopsis argued that the District Court erred in failing to apportion lost profits based on Mentor’s inventive contribution to the emulator, rather than based on the entire cost of the emulator. However, the Federal Circuit affirmed the decision of the District Court, finding that in the relevant market (suppliers of emulators to Intel, which consisted of Mentor Graphics and Synopsis), for each sale that EVE made, Mentor lost that exact sale. There were no non-infringing alternatives, and Intel would not have purchased the emulators if they lacked the claimed features. Therefore, it was appropriate for the District Court not to apportion the award of lost profits.

Federal Circuit Upholds Inertial Tracking System Claims In Thales Visionix v. United States

In Thales Visionix Inc. v. United States, No. 15-5150 (Fed. Cir. Mar. 8, 2017), the Federal Circuit reversed a decision of the Court of Federal Claims which had found the claims of a patent on an inertial tracking system invalid under 35 U.S.C. §101.
In particular, the patent at issue, U.S. Patent No. 6,474,159 (the ‘159 patent) had claimed an inertial tracking system having a first sensor on an object being tracked, a second sensor on a moving reference frame, and an element that determines the tracked object’s orientation relative to the moving reference frame using the signals of both sensors. Prior art systems had tracked the positions of the object and the moving reference frame relative to the earth and fused the data, which caused some error to build up over time which had to be periodically corrected.
Thales had alleged that the helmet-mounted display of the F-35 Joint Strike Fighter infringed the claims of the ‘159 patent. However, the Court of Federal Claims found that the claims were directed to an abstract idea, in particular the abstract idea of “using laws of nature governing motion to track two objects,” and as such were not patent-eligible under 35 U.S.C. §101.
The Federal Circuit reversed this decision, finding that the claims were nearly indistinguishable from the claims of Diamond v. Diehr in terms of patentability, and were patent-eligible under the Alice standard. In particular, the Federal Circuit characterized the claims as using mathematical equations in conjunction with inertial sensors “in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame,” just as the claims in Diehr had been directed to using mathematical equations to reduce the likelihood of problems in rubber molding. The Federal Circuit stressed that the mere use of a mathematical equation does not “doom the claims to abstraction.” Since the claims did not seek to cover the general use of the mathematical equations, but merely sought to cover the application of the equations to the unconventional configuration of sensors, the claims were not directed to an abstract idea and were thus patent-eligible.

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