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  • The Federal Circuit Nullifies $2.2 Billion Judgment


    On December 4, 2023, the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) issued an opinion, affirming in part, reversing in part, vacating in part, and remanding the decision of the United States District Court for the Western District of Texas (the “district court” or “Western District”) that U.S. Patent Nos. 7,523,353 (the “’353 patent”) and 7,725,759 (the “’759 patent”), (collectively, the “asserted patents”) were infringed and damages should be awarded. VLSI Tech. LLC v. Intel Corp., No. 2022-1906, 2023 WL 8360083 (Fed. Cir. Dec. 4, 2023). More specifically, the Federal Circuit affirmed the infringement of the ’373 patent but reversed the infringement of the ’759 patent; vacated the damages award for the ’373 patent; reversed the denial of Appellant’s, Intel Corporation (“Intel”), motion for leave to amend; and remanded the matter.

    VLSI Technology LLC (“VLSI”) sued Intel in the Western District, alleging patent infringement of the ’353 and ’759 patents. The ’353 patent describes, inter alia, an embodiment in which an integrated circuit has a memory and a processor; the memory has a minimum operating voltage; and when the processor is provided power at a voltage below the memory-minimum level, the memory is provided power at a higher voltage than the processor. The ’759 patent describes a system in which at least two devices, such as computer processors, are coupled to a bus that can operate at a variety of frequencies (clock speeds); one of the devices, based on its workload, asks a clock controller to change a clock frequency; and the controller is programmed to respond by outputting a clock frequency to control the speed of the bus and a second device coupled to the bus. VLSI asserted claims 1, 5, 6, 9, and 11 of the ’373 patent and claims 14, 17, 18, and 24 of the ’759 patent.

    At the district court, the case was tried to a jury. The jury found literal infringement of the asserted claims of the ’353 patent. The jury did not find literal infringement of the asserted claims of the ’759 patent; however, it found infringement under the doctrine of equivalents. The jury then awarded VLSI nonoverlapping damages for the infringement of the two patents—$1.5 billion for the ʼ373 patent and $675 million for the ʼ759 patent—each award a lump-sum payment for all past and future infringement over the life of the patent. The district court denied various post-trial motions concerning infringement and damages. The court also denied Intel’s motion for leave to amend its answer to assert the defense that it was licensed to practice both asserted patents and its request to sever that defense from the rest of the case.

    Intel appealed, arguing that there is insufficient evidence to support the ’373 patent infringement verdict and that, due to prosecution history estoppel, the ’759 patent infringement verdict under the doctrine of equivalents must be reversed. Additionally, on appeal, Intel challenged the damages awards and denial of its motion for leave to amend its answer to include its license defense and request that the defense be severed from the rest of the case and its adjudication stayed.

    More specifically, as it relates to Intel’s noninfringement argument regarding the ’373 patent, Intel contended that the “RING_RETENTION_VOLTAGE” in the accused microprocessors, which VLSI contended is the “minimum operating voltage” required by the claims, is not actually the minimum voltage at which the C6 SRAM (i.e., static random access memory) can retain data and therefore does not come within the several claim limitations requiring a “minimum operating voltage.” Additionally, Intel argued that the RING_RETENTION_VOLTAGE is not used in the microprocessors to determine which voltage to supply to the C6 SRAM (VCCR or VCCIO) and therefore the several “when” limitations (the last two limitations of claim 1 and the last limitation of claim 9) are not satisfied. 

    The Federal Circuit rejected Intel’s arguments. The Federal Circuit found that there was ample expert testimony, with adequate support in Intel’s internal documents, showing that Intel’s RING_RETENTION_VOLTAGE is the minimum operation voltage of the C6 SRAM. Additionally, the Federal Circuit found that Intel’s arguments turn entirely on its contention that the asserted claims require that falling below the minimum operating voltage be the causal trigger for switching from one voltage source to a different one. The Federal Circuit found that was an argument for a claim construction, and Intel had sought no claim construction on that point. Accordingly, the Federal Circuit held that substantial evidence supports the jury’s verdict of infringement of the ’373 patent and affirmed the district court’s judgement of infringement of the ’373 patent.

    The Federal Circuit next turned to the Intel’s noninfringement arguments regarding the ’759 patent. Intel argued that VLSI’s evidence of equivalents was legally insufficient and that prosecution history estoppel bars VLSI’s theory of equivalents. The Federal Circuit stated that, under the doctrine of equivalents, the proof of equivalents, first, must be limitation specific, not focused only on the claim as a whole, although the limitation-specific inquiry of equivalence may be informed by the “role played by each element in the context of the specific patent claim.” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 40 (1997). Second, for the determination of whether a substitute element is only insubstantially different from a claimed element and hence an equivalent, a traditional formulation—appropriate for this case, as VLSI’s use of it indicates—asks “whether a substitute element matches the function, way, and result of the claimed element.” Id. Third, the patentee must provide “particularized testimony and linking argument as to the insubstantiality of the differences between the claimed invention and the accused device.” Akzo Nobel Coatings, Inc. v. Dow Chemical Co., 811 F.3d 1334, 1342 (Fed. Cir. 2016) (internal quotation marks omitted). The Federal Circuit held that VLSI’s proof of equivalence for the ʼ759 patent, although limitation specific, was insufficient under those principles, and its theory of equivalents failed as matter of law. In presenting evidence for equivalence, VSLI’s expert presented testimony explaining that the different functionality-location placements were a “design choice.” However, the question that should have been addressed is whether the difference in the way the functionalities are actually allocated between devices is an insubstantial one. The Federal Circuit thus reversed the judgement of infringement of the ’759 patent, which consequentially wiped out the damages award for VLSI relating to the ’759 patent.

    The Federal Circuit next addressed Intel’s challenge to the district court’s damages award. The Federal Circuit stated that the issue on appeal relates to VLSI’s proof of damages that led to the jury award and found error in VLSI’s damages calculation. For example, the Federal Circuit found that VLSI’s expert used some inputs that were chosen from data not matching infringing functionality. The Federal Circuit found that this had undermined the reliability of the calculation of power savings gained from use of the infringing functionality. Nevertheless, the Federal Circuit was uncertain whether that step in the damages calculations was harmless to the bottom-line damages amount. So, it remanded the issue of damages relating to the ’373 patent to the district court for a new trial.

    The Federal Circuit then addressed the issue of Intel’s license defense. It found that the license agreement Intel invoked was entered into on November 20, 2012, between Intel and Finjan (i.e., Finjan Software, Inc., Finjan, Inc., and their “Affiliates”). The license agreement broadly defines “Finjan’s Patents” as “all Patent Rights that are owned or controlled at any time on or after November 6, 2012[,] by Finjan.” Intel alleges that Fortress funds acquired Finjan, causing Finjan to become an “affiliate” of VLSI under the provisions of the license. The district court, however, had denied Intel’s motion because of untimeliness, prejudice, and—most significantly—unimportance because of the futility of the defense. The Federal Circuit disagreed, concluding that the district court’s ruling of undue delay was an abuse of discretion and that there was no basis—futility aside—on which prejudice could sustain the denial of Intel’s motion. The Federal Circuit stated that it is not concluding that the license defense is meritorious, only that the governing law is such that the defense requires additional litigation of the sort that begins once it is added to the case. Thus, the Federal Circuit held only that it was an error to deny the motion to add the license defense to the case.

    The Federal Circuit affirmed the judgment of infringement of the ʼ373 patent but reversed the judgment of infringement of the ʼ759 patent. It vacated the award of damages for the ʼ373 patent and remanded for a new trial limited to damages. And it reversed the denial of the motion for leave to amend to add the license defense.

    Categories: DamagesLicensing

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