IP Law Daily Settlement agreement released Alcatel-Lucent and Cisco from infringement liability
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Wednesday, May 27, 2020

Settlement agreement released Alcatel-Lucent and Cisco from infringement liability

By Peter Reap, J.D., LL.M.

The agreement between patent owner Oyster Optics and Fujitsu had the effect of releasing Oyster’s claims for infringement against Fujitsu affiliates.

A settlement agreement between patent owner Oyster Optics and Fujitsu Limited and Fujitsu Network Communications (the Oyster/Fujitsu Agreement) had the effect of releasing Alcatel-Lucent USA, Inc. (ALU) and Cisco Systems from liability for infringement of Oyster’s U.S. Patent No. 7,620,327 (the ’327 patent), the U.S. Court of Appeals for the Federal Circuit has determined. Substantial evidence supported the conclusion of the federal district court in Marshall, Texas, that the Fujitsu modulators and receivers "substantially embod[y] the patented invention by embodying its essential features." Thus, the ruling of the district court was affirmed. The opinion originally was issued under seal; the public opinion was issued May 27 (Oyster Optics, LLC v. Alcatel-Lucent USA, Inc., May 8, 2020, Schall, A.).

Oyster’s ’327 patent is directed to transceiver cards for sending and receiving data over a fiber optic network. Oyster sued Fujitsu Network Communications (FNC) for infringement of the ’327 patent. In its suit, Oyster alleged that FNC infringed the patent by "making, selling, using, offering for sale, and/or causing to be used" versions of Fujitsu’s 100G/400G LN Modulator and 100G/400G Integrated Coherent Receiver, among other products. Separately, Oyster also sued ALU and Cisco for infringement of the ’327 patent and Oyster’s suits against ALU and Cisco were consolidated with its suit against FNC.

In May of 2018, Oyster settled its suit against FNC by entering into the Oyster/Fujitsu Agreement. Relevant here, in Section 3.1 of the Agreement Oyster released "FNC, Fujitsu, and their Affiliates" from "any and all claims of infringement under any patent right within the Licensed Patents, on account of any product, process, or service exported or imported, made, had been made, used, distributed, offered to sell, sold, or otherwise disposed of by FNC, Fujitsu, and their Affiliates." Then, in the "[f]or further clarity" provision, it stated that, when the "only reasonable and intended use of the component comprising the Licensed Product is to practice the claim and the component substantially embodies the pa-tented invention by embodying its essential features," Oyster is "prevent[ed] from exercising its patent rights" under the Agreement.

In the wake of the Oyster/Fujitsu Agreement, ALU and Cisco moved for partial summary judgment in Oyster’s suit against them. The district court found that the Fujitsu modulators and receivers contained in ALU’s and Cisco’s products qualified as "Licensed Products" and held that ALU and Cisco were released from Oyster’s claims for infringement of the ’327 patent for those products containing Fujitsu modulators and receivers that were sold prior to the May 22, 2018, effective date of the Agreement.

In the second part of its summary judgment decision, the district court concluded that there was an alternative ground for concluding that the Oyster/Fujitsu Agreement released ALU and Cisco from liability under the ’327 patent. The court determined that, to the extent its holding with respect to the "[f]or further clarity" provision of Section 1.3 was held on appeal to be incorrect, ALU and Cisco still would be released from liability. Specifically, the court found that, in light of Oyster’s contentions and representations "in the prior Fujitsu litigation," the Fujitsu products identified in that litigation "embody the essential features of the patented invention," as required by the "[f]or further clarity" provision of Section 1.3. "Therefore," the court stated, "in the event that the ‘for further clarity’ provision in Section 1.3 of the [Oyster/Fujitsu Agreement] limits the definition of Licensed Products, the Court holds that Section 3.1’s release still applies to the Defendants as to any claim of infringement relating to the ’327 Patent where the accused products contain one of the Accused Instrumentalities of the Fujitsu litigation." ALU and Cisco interpreted the phrase "Accused Instrumentalities of the Fujitsu litigation" to include the "category" of Fujitsu products named in the infringement contentions, "‘i.e., 100G/400G LN Modulator’ and ‘100G/400G Integrated Coherent Receiver’ products," and, in its November 7th Order, the district court held that ALU and Cisco’s interpretation was correct. Oyster appealed.

On appeal, the parties did not dispute that "the only reasonable and intended use" of the Fujitsu modulators and receivers contained in the accused products is to practice the asserted claims of the ’327 patent. Thus, the narrow issue for the appellate court was whether the Fujitsu modulators and receivers "substantially embod[y] the patented invention by embodying its essential features." The district court’s conclusion that Oyster’s infringement contentions served to satisfy ALU’s and Cisco’s burden of establishing that the Fujitsu modulators and receivers contained in ALU’s and Cisco’s products substantially embody the patented invention by embodying its essential features was supported by sufficient evidence in the record, according to the Federal Circuit.

Oyster accused the Fujitsu modulators and receivers of directly infringing the ’327 patent in its suit against FNC, the appellate court reasoned. This was evident from the fact that Oyster defined "Accused Instrumentalities" to include the Fujitsu modulators and receivers in its infringement contentions and accompanying claim charts in case No. 2:16-cv-01299-JRG. Oyster’s expert witness in the same case included the Fujitsu modulators and receivers in his definition of "Accused Products" that he analyzed for infringement. Further, in yet another case, No. 2:18-cv-0153-JRG, Oyster defined "Accused Instrumentalities" to include the Fujitsu modulators and receivers in its complaint. The evidence to which the district court pointed, except for the contentions in the complaint in case No. 2:18-cv-0153-JRG, consisted of infringement contentions and expert testimony, not complaint allegations. In the circumstances of this case, it was not error for the district court to rely on this material, especially infringement contentions, which served to flesh out the infringement allegations in the prior Fujitsu litigation, the Federal Circuit held.

Oyster’s argument that the modulators and receivers are merely claim components and did not practice the claim or substantially embody the invention of the ’327 patent was not persuasive, the appellate court said. In other words, the district court did not err when it found, for purposes of the Oyster/Fujitsu Agreement: (i) that the Fujitsu modulators and receivers at issue embody the essential features of the patented invention in view of "what [Oyster] alleged and how [it] . . . pursued the litigation"; and (ii) that the Fujitsu modulators and receivers thus fall under the release of liability for directly infringing devices. Thus, the district court correctly held that the release of Section 3.1 of the Agreement applied to ALU and Cisco as to "any claim of infringement relating to the ’327 patent where the accused products contain one of the Accused Instrumentalities of the Fujitsu litigation." Finally, the district court did not err in in its November 7th Orderclarifying the scope of its alternate ground in the Summary Judgment Decision.

This case is Opposition No. 19-1255 and 19-1257.

Attorneys: Reza Mirzaie (Russ August & Kabat) for Oyster Optics, LLC. Matthew S. Stevens (Alston & Bird LLP) for Alcatel-Lucent USA, Inc. John C. O'Quinn (Kirkland & Ellis LLP) for Cisco Systems, Inc.

Companies: Oyster Optics, LLC; Alcatel-Lucent USA, Inc.; Cisco Systems, Inc.

MainStory: TopStory Patent FedCirNews GCNNews

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