IP Law Daily Judgment of $8.5M reduced to $5M for infringement of computer network patents
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Tuesday, July 14, 2020

Judgment of $8.5M reduced to $5M for infringement of computer network patents

By Brian Craig. J.D.

The district court erred in awarding $3.5 million in damages for pre-suit infringement but properly ruled on infringement, validity, and willfulness.

In a patent infringement suit brought by Packet Intelligence LLC against NetScout Systems, Inc. over three patents relating to the transmission of information over patches via computer networks, the U.S. Court of Appeals for the Federal Circuit has held that the federal district court in Marshall, Texas, correctly ruled on issues relating to infringement, validity, and willfulness for but erred in awarding pre-suit damages for infringement. The Federal Circuit affirmed the validity of the computer-related patents and the district court’s finding of willfulness, but the district court improperly awarded $3.5 million in pre-suit damages based on the failure of licensees to properly mark their products. Judge Jimmie Reyna wrote a separate opinion arguing that the patent claims are unpatentable because they are directed to an abstract idea (Packet Intelligence LLC v. Netscout Systems, Inc., July 14, 2020, Lourie, A.).

Packet Intelligence LLC brought suit against NetScout Systems, Inc. and other defendants over NetScout’s Geoprobe 10 and GeoBlade products claiming literal infringement of U.S. Patent No. 6,665,725; U.S. Patent No. 6,839,751; and U.S. Patent No. 6,954,789 ("patents-in-suit"). The patents-in-suit are directed to monitoring and classifying information that is transmitted over a computer network. Information is generally transmitted over a network via groups of "packets" that flow from one connection point to another through computer networks. Following a jury verdict and bench trial, the district court concluded that Packet Intelligence is entitled to $3.5 million in damages for pre-suit infringement, post-suit damages of $2.25 million, $2.8 million in enhanced damages, and an ongoing royalty for future infringement of 1.55%. NetScout appealed.

Infringement. The Federal Circuit first concluded that substantial evidence supports the jury verdict’s finding of infringement. An expert for Packet Intelligence testified that the accused products contain a "flow state block" (FSB) corresponding to source code. According to the expert, the FSB contains flow entries and the information in the flow record can be used to correlate or associate flow entries into conversational flows. The appeals court held that this testimony alone is substantial evidence to support the jury’s verdict.

Patent eligibility. The Federal Circuit next concluded that the asserted claims are patent-eligible. Software-based innovations can make non-abstract improvements to computer technology and be deemed patent-eligible subject matter. The asserted patents’ specifications make clear that the claimed invention presented a technological solution to a technological problem. The specifications explain that known network monitors were unable to identify disjointed connection flows to each other, and the focus of the claims is a specific improvement in computer technology: a more granular, nuanced, and useful classification of network traffic.

Pre-suit damages. The Federal Circuit held, however, that neither the record nor the law supports Packet Intelligence’s recovery of pre-suit damages for any of the asserted patents. Before filing the instant suit, Packet Intelligence licensed the asserted patents to Exar, Cisco, and Huawei, which were alleged to have produced unmarked, patent-practicing products. Because Packet Intelligence failed to present substantial evidence to the jury that Packet Intelligence’s licensees properly marked their patent-practicing products entitled NetScout to judgment as a matter of law on pre-suit damages. Therefore, the Federal Circuit reversed the district court’s judgment awarding $3.5 million in damages for pre-suit infringement.

Willfulness. The Federal Circuit concluded that the jury’s willfulness verdict for enhanced damages is supported by substantial evidence. At trial NetScout’s corporate representative, admitted that he did not read the patents but still testified that he believed one of the named inventors of the asserted patents lied and stole the claimed inventions. NetScout’s CEO testified that he could not recall ever reviewing the asserted patents and confirmed that, even though NetScout was phasing out the accused products, he would sell one to a customer if the product was demanded. The jury was permitted to credit this evidence and to draw the inference that NetScout willfully infringed Packet Intelligence’s patent rights.

Conclusion. Accordingly, the Federal Circuit affirmed the judgment of the district court as to infringement, validity, and willfulness but reversed and vacated the district court’s award of pre-suit damages.

Concurring and dissenting opinion. Judge Reyna wrote a separate opinion joining the majority’s reasoning and conclusions as to all issues except patentability of the asserted claims. In Judge Reyna’s view, the claims are directed to the abstract idea of identifying data packets as belonging to "conversational flows" rather than discrete "connection flows." Judge Reyna argued that the relevant inquiry for patentability under 35 U.S.C. § 101 purposes is not whether the patent as a whole teaches a concrete means for achieving an abstract result, but whether such a concrete means is claimed.

This case is No. 19-2041.

Attorneys: Paul Skiermont (Skiermont Derby LLP) for Packet Intelligence LLC. Eric Kraeutler (Morgan, Lewis & Bockius LLP) for NetScout Systems, Inc. and NetScout Systems Texas, LLC f/k/a Tektronix Texas, LLC.

Companies: Packet Intelligence LLC; NetScout Systems, Inc.; NetScout Systems Texas, LLC f/k/a Tektronix Texas, LLC

MainStory: TopStory Patent TechnologyInternet FedCirNews GCNNews

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