Validity of Rembrandt Wireless patents affirmed on appeal; $15.7M damages award vacated, remanded


April 17, 2017

A federal district court did not err in denying a post-verdict motion for judgment as a matter of law (JMOL) by Samsung Electronics and various affiliates, which challenged a judgment that confirmed a jury’s finding that two communication patents held by Rembrandt Wireless were not invalid as obvious over prior art, the U.S. Court of Appeals for the Federal Circuit has ruled. The patents described a "system and method of communication in which multiple modulation methods are used to facilitate communication among a plurality of modems in a network, which have heretofore been incompatible." Because substantial evidence supported the jury’s presumed findings that: (1) a prior art reference (Boer) did not teach the patents’ "different types" limitation regarding modulation methods and (2) a person of skill in the art would not have been motivated to combine Boer and another prior art reference (Upender), the appellate court rejected Samsung’s obviousness challenge to Rembrandt’s infringed independent claims. The district court’s denial of JMOL was affirmed, but a $15.7 million damage award was vacated because the lower court had improperly denied Samsung’s motion to limit damages based on Rembrandt’s failure to mark products that were covered by one of the patent claims (Claim 40) (Rembrandt Wireless Technologies, L.P. v. Samsung Electronics Company, Ltd., April 17, 2017, Stoll, K.).

Rembrandt Wireless Technologies sued Samsung Electronics Company, Samsung Electronics America, and Samsung Telecommunications America for the infringement of U.S. Patent Nos. 8,023,580 and 8,457,228. The two patents disclosed a "system and method of communication" in which multiple modulation methods were used to "facilitate communication among a plurality of modems in a network, which have heretofore been incompatible." The patents described the use of the first section of a transmitted message (the "header") to indicate the modulation method that was being used for the substance of the message (the "payload").

The representative claim described, in relevant part, a communication device that included "a transceiver, in the role of the master according to the master/slave relationship," for sending transmissions that were modulated using at least two types of modulation methods, "wherein the at least two types of modulation methods comprise a first modulation method and a second modulation method, wherein ‘the second modulation method is of a different type than the first modulation method’ …"

Claim construction. The district court construed the claim limitation "modulation method [] of a different type" as "different families of modulation techniques, such as the FSK [frequency-shift keying] family of modulation methods and the QAM [quadrature amplitude modulation] family of modulation methods." The Federal Circuit adopted that construction, even though the district court had relied on the applicant’s "self-serving" characterization of the term "different types" in the prosecution history.

According to the Federal Circuit, the clearest statement of record regarding the meaning of the term "different types" was the descriptive statement that the applicant had made to the examiner when the limitation was inserted into the claims during patent prosecution. Because Samsung’s arguments to the contrary did not diminish that unambiguous statement, the Federal Circuit agreed with the district court that the phrase "modulation method [] of a different type" meant "different families of modulation techniques, such as the FSK family of modulation methods and the QAM family of modulation methods."

Obviousness. Rembrandt’s patents were invalid for obviousness under 35 U.S.C. §103, Samsung argued, even under the district court’s construction of the phrase "different types." At trial, Samsung presented a prior art combination that included U.S. Patent No. 5,706,428 ("Boer") as the primary reference and an article by Bhargav P. Upender and Philip J. Koopman Jr. ("Upender") as a secondary reference. According to Samsung, the DBPSK and PPM/DQPSK modulation methods that were discussed in Boer were in "different families" and thus were different types of modulation methods under the district court’s construction.

The question of whether the Boer prior art had met the "different types" limitation under the district court’s construction was a "factual question" regarding "the scope and content of the prior art," the Federal Circuit noted. Taken with the testimony of Rembrandt’s infringement expert, the fact that both of Boer’s modulation methods altered phase was "substantial evidence to support the jury’s presumed fact finding that Boer did not teach the ‘different types’ limitation." Substantial evidence also supported the jury’s presumed finding that a motivation to combine Boer with Upender was lacking.

The jury’s presumed findings that Boer did not teach the "different types" limitation—and that a person of skill in the art would not have been motivated to combine Boer with Upender—undermined Samsung’s obviousness challenge against all of the infringed independent claims, the court explained. Because substantial evidence supported both of those findings, the appellate court affirmed the district court’s legal judgment that the infringed claims were invalid as obvious.

Damages. Samsung challenged the jury’s royalty award of $15.7 million because Rembrandt’s damages expert, Mr. Weinstein, had used a "flawed" methodology to calculate a proposed reasonable royalty rate. In an effort to determine the incremental value associated with implementing the infringing Bluetooth "enhanced data rate" (EDR) functionality, Weinstein compared the prices of two Bluetooth chips that Samsung had purchased from Texas Instruments: one with EDR functionality and one without. After calculating the price premium that Samsung had paid to procure the EDR chips (as compared to non-EDR chips), Weinstein concluded that the reasonable royalty rate would be between 5 and 11 cents per infringing unit, resulting in a total damages range of $14.5–$31.9 million.

The Federal Circuit concluded that Rembrandt had proffered plausible explanations for the time periods that were used to compare the prices of the Bluetooth chips that Samsung had purchased from Texas Instruments. According to the court, the explanations showed that Weinstein’s royalty calculations were properly based on the incremental value that the patented invention added to the end product.

The court acknowledged that Weinstein had compared the Bluetooth chips for a period in which the price differential for the EDR and non-EDR chips was "on the high end of the spectrum," but noted that Samsung could have cross-examined Weinstein on that issue. In any event, the jury’s award of $15.7 million fell within the low end of Weinstein’s suggested range of $14.5–$31.9 million. Ultimately, the Federal Circuit could not find that the district court had abused its discretion in permitting Weinstein to use the methodology that he had adopted.

Because the court rejected Samsung’s challenges to Weinstein’s expert damages presentation, and because the amount of the jury award fell within the range that Weinstein had suggested, the court concluded that substantial evidence supported Rembrandt’s damages award as to all of Samsung’s infringing sales.

Marking. Samsung argued that the district court should have barred the recovery of pre-notice damages based on Rembrandt’s failure to mark products that were covered by a claim that Rembrandt had later disclaimed. The Federal Circuit agreed with Samsung that Rembrandt could not use a disclaimer to avoid the marking requirement. The appellate court thus vacated the district court’s judgment with respect to marking.

The district court had denied Samsung’s motion to bar the recovery of pre-notice damages based on Rembrandt’s disclaimer of claim 40 of the ’580 patent. In denying Samsung’s motion, the district court relied on the notion that a disclaimed patent claim should be treated as if it had "never existed" in the patent, and therefore allowed Rembrandt’s disclaimer to retroactively excuse its failure to mark. The Federal Circuit acknowledged that a disclaimer relinquished the rights of the patentee, but emphasized that it had never held that a patentee’s disclaimer relinquished the rights of the public.

The focus of the marking statute was not limited to the rights of the patentee, the court explained, the statute also focused on the rights of the public. In considering those rights of the public, the court found that a disclaimer could not "retroactively dissolve" the §287(a) marking requirement for pre-notice damages.

Rembrandt had argued before the district court that the marking statute should attach on a claim-by-claim basis, not a patent-by-patent basis. Applying the claim-by-claim approach in this case would permit Rembrandt to recover pre-notice damages for Samsung’s infringement of claims other than claim 40 (the only claim that the unmarked product embodied, according to Samsung). Samsung argued that, because Rembrandt’s licensee sold a product that embodied claim 40 of the ’580 patent, Rembrandt could not recover pre-notice damages for any infringed claim of that particular patent.

The patent-by-patent versus claim-by-claim dispute raised a novel legal issue that was not squarely addressed by past decisions, the Federal Circuit noted. Rembrandt, however, did not raise that issue on appeal; nor did Rembrandt waive it. The Federal Circuit thus remanded the case to the district court to decide whether the patent-marking statute should attach on a patent-by-patent basis or a claim-by-claim basis.

The case is No. 2016-1729.

Attorneys: Michael F. Heim (Heim, Payne & Chorush, LLP) for Rembrandt Wireless Technologies, LP. Jesse J. Jenner (Ropes & Gray LLP) for Samsung Electronics Co., Ltd.; Samsung Electronics America, Inc.; and Samsung Telecommunications America, LLC.

Companies: Rembrandt Wireless Technologies, LP.; Samsung Electronics Co., Ltd.; Samsung Electronics America, Inc.; Samsung Telecommunications America, LLC

MainStory: TopStory Patent FedCirNews

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