IP Law Daily In row over healthcare evaluation software, $12.3M jury verdict against OptumInsight stands
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Thursday, September 8, 2016

In row over healthcare evaluation software, $12.3M jury verdict against OptumInsight stands

By Thomas Long, J.D.

Cave Consulting Group, LLC ("CCGroup"), a developer and provider of evaluation software to the healthcare industry has prevailed on patent infringement claims brought against a competitor, OptumInsight, Inc., f/k/a Ingenix, Inc. ("Optum"). After a 10-day jury trial, a jury found that Optum was liable for $12.3 million in royalty damages for infringing a CCGroup patent related to technology for measuring and evaluating physician efficiency. The jury also determined that CCGroup did not infringe a patent owned by Optum. The federal district court in San Jose denied the parties’ post-trial motions for judgment as a matter of law (JMOL) or for a new trial, denied CCGroup’s motion for a permanent injunction and to set an ongoing royalty rate, and granted motions by CCGroup for supplemental damages and interest (Cave Consulting Group, LLC v. OptumInsight, Inc., September 7, 2016, Davilla, E.).

Patents-in-suit. CCGroup and Optum both develop and market software and services used to evaluate various parameters of healthcare delivery, including the efficiency of healthcare providers. CCGroup’s asserted that Optum’s "Impact Intelligence" product infringed method and product claims of U.S. Patent No. 7,739,126 ("the ’126 patent"). Optum counterclaimed, alleging that CCGroup’s "Cave Grouper" product infringed U.S. Patent No. 7,222,079 ("the ’079 patent"). The patents-in-suit were related to technology used for comparing the cost of care provided by an individual physician to the cost of care provided by a relevant peer group. In a February 20, 2015 order, the court denied summary judgment motions by both parties, and the case went to trial. The jury returned a verdict in CCGroup’s favor; both parties filed post-trial motions.

Optum’s JMOL—infringement. Optum argued that its product did not infringe claims of the ’126 patent teaching "calculat[ing] weighted episode of care statistics across medical conditions utilizing a predefined set of medical conditions for a specific specialty type." According to Optum, the asserted claims required "utilizing a predefined set" in the process of calculating "weighted episode of care statistics." Optum contended that because the set of medical conditions its Impact Intelligence product used to calculate weighted episode of care statistics was not was not defined in advance of processing, the product did not meet the claim limitations at issue. However, the court noted, the jury heard testimonial evidence that Impact Intelligence relied on a predefined set of medical conditions and that it utilized that predefined set in calculating weighted episode of care statistics. The court also rejected Optum’s argument that its product did not use a "maximum duration rule" to identify episodes of care, as required by the ’126 patent. The jury heard substantial evidence that Impact Intelligence did perform this step. Optum’s motion for JMOL or new trial on infringement was denied.

Optum’s JMOL—validity of ’126 patent. Optum contended that the asserted claims of the ’126 patent were invalid for failure to satisfy the written description requirement with respect to "weighted episode of care statistics." When construing the claim term "weighted episode of care statistics," the court decided that the term covered two competing approaches to assigning weights to medical conditions: indirect standardization and direct standardization. Optum argued that the ’126 patent’s specification did not satisfy the written description requirement with respect to direct standardization because it referenced direct standardization only in the background section of the patent, describing it as prior art that can create error. The court disagreed. First, the ’126 patent discussed direct standardization at some length, indicating that the inventor was aware of that approach. Second, undisputed trial testimony showed that direct standardization was well known in the art as of the filing date of the ’126 patent. Although the preferred embodiment in the specification used indirect standardization, a claim is not invalid for lack of written description simply because the embodiments of the specification did not contain examples explicitly covering the full scope of the claim language.

The court also rejected Optum’s argument that the ’126 patent failed to adequately describe the term "applying a first maximum duration rule to identify episodes of care." Optum’s own expert acknowledged that the ’126 patent specification used the word "identify" to describe the application of a maximum duration rule in building episodes of care. The jury had sufficient evidence to find that the term met the written description requirement.

Optum’s JMOL—reasonable royalty damages. Optum argued that the jury’s damages verdict was excessive, warranting a new trial. Specifically, Optum argued that CCGroup’s damages expert, Michael Lewis, did not perform a proper reasonable royalty analysis. Lewis testified that CCGroup’s reasonable royalty damages were in the range from $12.15 to 13.45 million, based on a hypothetical negotiation taking place on June 15, 2010, the date that the ’126 patent issued. In the court’s view, Lewis used an acceptable methodology to determine the hypothetical bargaining range, basing the figure on a two-supplier market with a floor set by the profit CCGroup would have made if Impact Intelligence had not been on the market during 2011 to 2014. Lewis’s testimony provided ample support for the jury’s $12.3 million award, and Optum is not entitled to a new trial on damages, the court concluded.

Optum’s JMOL—noninfringement of ’079 patent. The court also declined to disturb the jury’s determination that CCGroup did not infringe Optum’s ’079 patent. At trial, CCGroup successfully undermined the testimony of Optum’s expert witness by identifying several ways the expert’s testimony contradicted his statements in deposition. CCGroup also showed that, during the deposition, the expert changed back and forth between conflicting positions and admitted that he did not fully understand what the patent claimed. The jury was entitled to disregard the expert’s testimony, the court said.

CCGroup’s JMOL—validity of ’079 patent. CCGroup urged the court to find that Optum’s ’079 patent was invalid for anticipation and lack of enablement. The court denied this request. With respect to anticipation, the jury had sufficient evidence to decide that a prior art reference did not teach a "dynamic time window" disclosed by the ’079 patent. With respect to lack of enablement, CCGroup argued that claim 1 of the ’079 patent—which required grouping data records to an episode treatment category based on a predefined relationship, where each category had "a dynamic time window defining a time period which validated … data records may be grouped to an episode treatment category"—was nonsensical and impossible to practice. However, Optum’s expert told the jury that the ’079 patent would enable a person of skill in the art to practice the claimed invention, and the jury was not compelled to reach the opposite conclusion merely because the claim language was "opaque."

CCGroup’s motion for permanent injunction. CCGroup sought entry of a permanent injunction barring Optum from renewing or entering into any new contracts to use or license the Impact Intelligence software and from inducing third parties to infringe the ’126 patent. The court concluded that an injunction was not warranted because: (1) CCGroup’s business had grown despite competition from Optum; (2) CCGroup had licensed its technology to other competitors and would have been willing to license to Optum; (3) CCGroup’s alleged harm was quantifiable; and (4) CCGroup delayed nearly five years in seeking an injunction. Money damages would adequately compensate CCGroup for Optum’s infringement.

CCGroup’s motion for ongoing royalty. The jury did not make a finding as to the appropriate ongoing royalty rate. The court stated that it could not now do so without violating Optum’s Seventh Amendment right to a jury trial on that issue. In addition, given the complexity of the issues presented, the court decided would be appropriate to delay the consideration of evidence and calculating the ongoing royalty rate until after the completion of the appeals in this case.

CCGroup’s motions for supplemental damages and interest. The parties had reached an agreement that CCGroup was entitled to approximately $850,000 in supplemental damages necessary to bring the jury’s award current through March 31, 2015; the court was satisfied with the figure. The court also determined that CCGroup was entitled to prejudgment interest through the April 6, 2015 entry of judgment in the amount of $38,714, and post-judgment interest at the statutory treasury bill rate on the total damages award.

The case is No. 5:11-cv-00469-EJD.

Attorneys: Noel Andrew Leibnitz (Farella Braun + Martel LLP), Richard Louis Brophy (Armstrong Teasdale LLP), and B. Scott Eidson (Stinson Leonard Street LLP) for Cave Consulting Group, LLC. Peter Lancaster (Dorsey & Whitney LLP) and Sri K. Sankaran (Winthrop & Weinstine, PA) for OptumInsight, Inc.

Companies: Cave Consulting Group, LLC; Optuminsight, Inc.

MainStory: TopStory Patent CaliforniaNews

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