IP Law Daily In VoIP patent dispute, Time Warner’s post-trial motion for JMOL fails; Sprint awarded prejudgment interest
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Thursday, June 1, 2017

In VoIP patent dispute, Time Warner’s post-trial motion for JMOL fails; Sprint awarded prejudgment interest

Time Warner Cable was not entitled to judgment as a matter of law (JMOL) following a $139.8 million jury verdict that found the company liable for the infringement of five Sprint patents related to VoIP technology, the federal district court in Kansas has ruled. In addition, Sprint was awarded over $6 million in prejudgment interest (Sprint Communications Company, L.P. v. Time Warner Cable, Inc., May 30, 2017, Lungstrum, J.).

The jury found that Time Warner had infringed each of the asserted claims of the five patents at issue, that none of those claims was invalid, that Sprint had proved reasonable royalty damages in the amount of $139.8 million, and that the infringement was willful. In its findings of fact and conclusions of law, the court rejected Time Warner’s equitable defenses and Sprint’s claim for enhanced damages. The court entered judgment on the verdict and added post-judgment interest and costs. Before the court was Time Warner’s post-trial motion for judgment as a matter of law pursuant to Rule 50(b) and Sprint’s motion for prejudgment interest pursuant to Rule 59.

Damages. Sprint presented evidence of a reasonable royalty only through its damages expert, who declined to apportion damages among the patents at issue, based on the assumption that the patents were "blocking patents," meaning that any VoIP-PSTN connection would infringe at least one of Sprint’s patents. Sprint thus had to prove that the patents were blocking patents. Viewed in the light most favorable to Sprint, the jury could have considered the expert’s testimony that he did not find any acceptable non-infringing alternatives, "in general," as providing evidence that there were no non-infringing alternatives. A reasonable interpretation of blocking patents as used by Sprint’s expert would be that any acceptable product would infringe Sprint’s patents. Thus, the evidence was sufficient to allow the jury to: (1) reasonably find that the assumption of Sprint’s expert had been proved and (2) accept his royalty opinion. The court thus denied Time Warner’s motion for judgment on that basis.

Time Warner also attacked the expert’s royalty opinion as improper and representing "junk science" because the opinion was based on a prior case in which Sprint’s damages expert had employed a 25-percent rule that the Federal Circuit had since found unreliable. The instant court noted, however, that: (1) Sprint’s damages expert did not use the 25-percent rule in forming his royalty opinion in this case; (2) in the prior case, the jury heard different damages opinions, and it did not find damages in accord with Sprint’s expert; and (3) the verdict represented a piece of information that the parties might have considered in a hypothetical license negotiation. Because Time Warner did not provide any authority to support its argument that the verdict could not be used here, the court rejected Time Warner’s motion for judgment on that basis. Finally, regarding damages, the court refused to revisit its Daubert motion and various motions in limine.

Infringement. Time Warner argued that Sprint’s proof failed as to nine claim limitations, and the court rejected each argument in turn. First, Time Warner argued that Sprint failed to prove satisfaction of the "in response to" limitation in four of the patents. Under the plain meaning of the term, the conversion or transfer could be "in response to" the receipt of the message, even if other steps were also required for that conversion or transfer. Sprint’s expert testified that this limitation was satisfied by the accused system, and that testimony provided a sufficient basis for the jury’s verdict.

Second, Time Warner asserted that Sprint failed to prove satisfaction of the "asynchronous communication" term in three patents. The court had previously found that the plain meaning of that term was "a communication in which the transmitting and receiving devices do not share a common clock." At trial, Sprint’s expert provided sufficient evidence that the term was satisfied in the accused system, as he testified that the relevant communications were asynchronous because there was no strict timing relationship in Time Warner’s managed IP network.

Third, Time Warner asserted that Sprint failed to prove satisfaction of the "processing … to select" limitation in three patents. The court had previously rejected Time Warner’s proposed limitation, which would have required the processing element make the selection, and it instead construed this term to mean "processing … to participate in the selecting." Time Warner did not explain why the processing element did not "participate" in the selecting, and Sprint offered expert testimony that the element was satisfied in Time Warner’s system. Thus, the court rejected that argument.

Fourth, Time Warner asserted that Sprint failed to prove satisfaction of the "interworking unit" limitation found in three patents, which the court construed to mean an "ATM interworking multiplexer." Time Warner argued that Sprint did not present sufficient evidence that the accused media gateway was equivalent to an ATM interworking multiplexer. The court disagreed with Time Warner because Sprint’s expert had testified that the gateway satisfied the function-way-result test under the doctrine of equivalents. The court concluded that Sprint’s evidence was sufficient.

Fifth, Time Warner asserted that Sprint failed to prove satisfaction of the "identifier" term in two patents. During claims construction, the court explained why it refused to construe "identifier" to add other limitations. Thus, the fact that Sprint did not prove satisfaction of an additional limitation contrary to the court’s claim construction did not provide a basis for JMOL.

Sixth, Time Warner asserted that Sprint failed to prove satisfaction of the "narrowband system" limitation in two patents. Time Warner argued that the pertinent signaling passes through a Syniverse device, which is not a narrowband system. Sprint’s expert specifically addressed and rejected that argument at trial, as did the jury in finding for Sprint. Sprint’s expert’s testimony was sufficient to support the jury’s verdict on that issue.

Seventh, Time Warner asserted that Sprint failed to prove satisfaction of the "egress" limitation in two patents. The patent claims contained no such requirement, the court noted, and it was too late for Time Warner to propose a new construction based on the specification. Because Time Warner failed to propose such a construction at the claim construction stage or at trial, Sprint was not required to show satisfaction of any additional limitation. The court thus rejected that basis for JMOL.

Eighth, Time Warner argued that Sprint failed to prove satisfaction of one patent’s step of "converting the asynchronous communication into a user communication." Sprint’s expert testified that the accused system IP packets (the asynchronous communications) are converted into TDM (a form for the PSTN) (the user communication), and that testimony was sufficient to meet the plain language of the claim. The court thus rejected Time Warner’s argument.

Ninth, and finally, Time Warner argued that Sprint failed to prove satisfaction of the limitation, in two patents, that required transfer to the packet communication system (PCS). During claim construction, the court, in construing the terms "transmitting," "receiving," and "transferring," declined to impose a limitation that would prohibit one of the two elements involved in the transfer from being part of the other. Accordingly, the court confirmed its prior ruling that, under their plain language, those patent claims did not include the additional limitation urged by Time Warner. The court thus rejected that argument for JMOL.

Invalidity—written description. At trial, Time Warner argued that each patent claim at issue was invalid for failure to satisfy the written description requirement of 35 U.S.C. §112. Time Warner argued that the two so-called Call Control Patents were invalid because the relevant specification disclosed an ATM switch that did not exist at the time of the patent applications. However, Time Warner did not cite any authority indicating that a patent is invalid if something disclosed in the specification did not exist. In fact, authority indicated that the specification had to show possession of the invention that was claimed in the patent. The court ruled that the asserted patent claims did not require the use of an ATM switch. The jury was properly instructed that the full scope of the claim need not be expressly disclosed in the specification, as long as a skilled artisan would have understood the scope of the claim. Because the specification did not need to describe all possible examples, the fact that the embodiments did not include a system without an ATM switch was not dispositive and did not require JMOL.

Next, Time Warner argued that the Call Control Patents should have been deemed invalid as a matter of law because, although the patent claims were broad enough to cover an IP network without fixed end-to-end paths or separate signaling networks, the specification did not describe such an IP network. Sprint cross-examined Time Warner’s expert on that issue, and the jury was not required to credit his expert opinion. Moreover, Sprint’s expert had addressed and refuted the expert’s opinions, so the evidence was sufficient to support the jury’s decision to reject that defense.

Finally, Time Warner argued as a matter of law that the three so-called Broadband Patents were invalid for failure to satisfy the written description requirement. The jury was told that the specification did not need to describe every possible covered example, as long as a skilled artisan would recognize from the specification that the invention was not so limited. Sprint did present any evidence that supported the jury’s decision to reject that defense, as Sprint’s expert had testified that a skilled artisan would understand that those elements were not limited to ATM. Time Warner’s expert opinions were challenged in cross-examination and Sprint’s expert gave contrary testimony. The jury was therefore entitled to reject Time Warner’s expert testimony and find that Time Warner had not sustained its heightened burden of proof. The court thus rejected that basis for JMOL.

Invalidity—anticipation or obviousness. At trial, Time Warner argued that each patent claim was obvious in light of two pieces of prior art, and that most of the claims were invalid as anticipated in light of one of those pieces of prior art, but the jury found in Sprint’s favor. Time Warner proffered its own evidence on those issues, but the evidence was rebutted by Sprint’s expert’s testimony that the disclosures in the asserted prior art were insufficient. The court thus rejected Time Warner’s anticipation and obviousness argument.

Willfulness. Time Warner did not explain why the court should address willfulness that became moot considering the court’s denial of Sprint’s motion for enhanced damages. In any event, sufficient evidence of willful infringement was presented at trial. Sprint presented credible evidence that the parties had discussed Sprint’s patents, that Time Warner had monitored Sprint’s infringement suit against Vonage, and that Time Warner had subsequently investigated Sprint’s patents. Therefore, the jury could have reasonably found that Time Warner should have known of a high likelihood that it was infringing a valid patent.

Prejudgment interest. The court found that Sprint did not delay unreasonably in initiating its lawsuit, and thus ruled that an award of prejudgment interest was appropriate. The court awarded prejudgment interest from October 1, 2010, by reference to a hypothetical license negotiation just prior to the date of infringement. The court favorably viewed the Ninth Circuit’s use of the 52-week Treasury bill rate. The court chose a rate of 1.06 percent and calculated prejudgment interest as just over $6 million. The judgment was therefore adjusted to nearly $146 million.

The case is No. 2:11-cv-02686-JWL.

Attorneys: Aaron E. Hankel (Shook, Hardy & Bacon LLP) and J. Michael Jakes (Finnegan, Henderson, Farabow, Garrett & Dunner LLP) for Sprint Communications Co., L.P. C. Austin Ginnings (D'Amore Law Group, PC), Catherine C. Theisen (Barber Emerson, LC), and John T. Ryan (Latham & Watkins LLP) for Time Warner Cable Inc., Time Warner Cable LLC, and Time Warner Entertainment Co., L.P.

Companies: Time Warner Cable Inc.; Time Warner Cable LLC; Time Warner Entertainment Co., L.P; Sprint Communications Co., L.P

MainStory: TopStory Patent KansasNews

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