By Peter Reap, J.D., LL.M.
The federal district court in Boston did not commit clear error in ruling, as an issue of fact, that two patents for taking body temperature—asserted by Exergen Corporation against Kaz USA—passed the Supreme Court’s Alice subject-matter eligibility test by using a method that was not conventional, routine, and well understood at the time of the invention, thereby satisfying the inventive concept requirement, the U.S. Court of Appeals for the Federal Circuit has ruled. Thus, the district court’s denial of judgment as a matter of law that the asserted claims were ineligible under 35 U.S.C. §101 was affirmed. The appellate court also affirmed the district court’s denial of enhanced damages, but reversed the jury’s verdict of infringement with respect to claims 7, 14, and 17 one of the asserted patents, U.S. Patent No. 6,292,685. There was no clear error in the court’s award of damages for both reasonable royalty and lost profits, but the damages award was vacated to take into account the reversal of infringement findings regarding the ’685 patent (Exergen Corp. v. Kaz USA, Inc., March 8, 2018, Moore, K.).
Exergen’s patents disclose a body temperature detector that calculates a person’s core temperature by detecting the temperature of the forehead directly above the superficial temporal artery. The claims at issue include both apparatus claims and method claims.
After trial, the jury found all asserted claims infringed by Kaz and not invalid and awarded Exergen $9,802,228 in lost profits and $4,840,320 in reasonable royalties. No factual or legal issues regarding patent eligibility under Section 101 were submitted to the jury. After post-trial briefing, the district court, with the benefit of the evidence presented at trial and "[g]uided by the jury’s verdict, and by the pleadings specific to this case," denied judgment of invalidity under Section 101. It also summarily denied Kaz’s motions for judgment as a matter of law with respect to noninfringement and for a new trial on damages. Both parties appealed.
Patent eligibility. Under step two of the Alice test, as argued by the parties, the question of patent eligibility turned entirely on whether the combination of elements was well-understood, routine, and conventional at the time of the invention in Exergen’s two asserted patents, the court noted. There was no dispute that the asserted claims employ a natural law to achieve their purpose. The claims recite a "method of detecting human body temperature" and "a body temperature detector," which generally utilize temperature readings from the forehead skin and the ambient temperature to calculate an approximate core body temperature. And a significant portion of the specification is dedicated to deriving the mathematical equations to calculate core temperature based on ambient and skin temperature readings. What the parties disputed was whether the additional claimed steps beyond calculating the temperature present a novel technique in this computation or add an inventive concept sufficient to transform the claims into a patent-eligible application.
The district court reasoned that "while the asserted claims are based in natural phenomena," the claims recite additional steps which, like the claims in Diamond v. Diehr, 450 U.S. 175 (1981), "transformed the underlying natural laws into inventive methods and useful devices that noninvasively and accurately detect human body temperature." The district court’s conclusion that these claim elements were not well-understood, routine, and conventional was a question of fact to which he Federal Circuit was required to give clear error deference.
Here, the patent is directed to the measurement of a natural phenomenon (core body temperature), the court noted. Even if the concept of such measurement is directed to a natural phenomenon and is abstract at step one, the measurement method here was not conventional, routine, and well-understood. Following years and millions of dollars of testing and development, the inventor determined for the first time the coefficient representing the relationship between temporal-arterial temperature and core body temperature and incorporated that discovery into an unconventional method of temperature measurement. As a result, the method is patent eligible, similar to the method of curing rubber held eligible in Diehr, the Federal Circuit reasoned.
Kaz also argued that it was inappropriate for the district court to make these fact findings because it had a Seventh Amendment right to have a jury resolve any underlying factual disputes. Whether the Seventh Amendment guarantees a jury trial on any factual underpinnings of Section 101 is a question which awaits more in-depth development and briefing than the limited discussion in this case, according to the appellate court. It was not necessary to decide that question in this case because Kaz waived its right to a jury trial, by three separate actions, for the factual issues underlying the Section 101 determination in this case.
Infringement of the ‘685 patent. Kaz argued that the jury’s verdict of direct infringement of ’685 claims 7, 14, and 17 was not supported by substantial evidence because the accused devices calculate an oral-equivalent temperature, not the temperature of the body beneath the forehead. The appellate court agreed and reversed the verdict of infringement with respect to these claims.
At best, Exergen’s cited testimony demonstrated that the oral-equivalent temperature calculated by the accused devices approximates the temperature of the body beneath the forehead. While this evidence supported the jury’s infringement verdict for the asserted claims of the ’938 patent, each of which requires a determination of a "body temperature approximation," it did not show that the devices compute the temperature of the region of the body existing beneath the forehead. Unlike the ’685 claims, the ’938 claims’ recitation of the term "approximation" indicated that the claims do not expressly require computation of the temperature under the scanned area, so long as the calculation approximates the temperature under the scanned area. Therefore, while this testimony supported the jury’s infringement verdict with respect to the ’938 claims, it did not support the jury’s verdict with respect to the asserted ’685 claims. The jury’s determination of infringement of ’685 claims 7, 14, and 17 was not supported by substantial evidence.
Damages. Kaz asserted that the reasonable royalty part of the jury’s award translated into a per-unit rate of 32% of the projected sales price and 71% of Kaz’s projected per-unit net profit. It argued that these were unsupported because the hypothetical, nonexclusive, U.S.-only royalty agreement contemplated in this case should be set at a rate less than 5.7%, the rate for the worldwide and exclusive license agreement Kaz entered for a different thermometer.
To the contrary, there was substantial evidence presented at trial which supported the jury’s conclusion that in a hypothetical negotiation, Kaz would have been willing to pay such a price to enter the market, the court held. Kaz did not present any evidence that the jury’s reasonable royalty would not have been feasible from a business perspective. The jury was entitled to credit Exergen’s evidence that Kaz would have been highly motivated to pay a premium to enter the market.
Moreover, the jury’s lost profits award with respect to CVS, the only retailer disputed on appeal, was also supported by substantial evidence. Thus, both portions of the jury’s damage award were supported by substantial evidence. However, because the court had reversed the jury’s finding of infringement for claims 7, 14, and 17 of the ’685 patent, it vacated the damage award and remanded to the district court to determine the consequences of our holding for the award.
Enhanced damages. In this case, the district court granted summary judgment of no willfulness prior to the Halo decision and held that because Kaz’s invalidity contentions were not objectively unreasonable, it did not need to decide the subjective prong of Seagate. The district court reviewed the factors in Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992), and held "[e]ven absent the [Seagate] willfulness threshold, the Read factors do not compel enhanced damages in this case."
The district court could not be found to have abused its discretion in declining to award enhanced damages, the Federal Circuit opined. The district court’s summary judgment of no willfulness based on the objective prong of Seagate was not the only rationale on the record. The district court did not clearly err in its later consideration of the Read factors.
Dissent. In a dissenting opinion, Circuit Judge Todd M. Hughes argued that claimed inventions merely apply a law of nature using conventional, commercially available technology. Following the principle that well-understood, routine, and conventional activities cannot supply an inventive concept, Judge Hughes would find the asserted claims are patent ineligible under Section 101.
Attorneys: Kerry L. Timbers (Sunstein Kann Murphy & Timbers LLP) for Exergen Corp. Pratik A. Shah (Akin, Gump, Strauss, Hauer & Feld, LLP) for Kaz USA, Inc.
Companies: Exergen Corp.; Kaz USA, Inc.
MainStory: TopStory Patent FedCirNews
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