Elbit Systems Land and C4i Ltd v. Hughes Network Systems, LLC
Opinion
Elbit Systems Land and C4I Ltd. and Elbit Systems of America, LLC (collectively, Elbit) brought this action against Hughes Network Systems, LLC (and other defendants no longer in the case). Elbit alleged that Hughes infringed Elbit's U.S. Patent Nos. 6,240,073 and 7,245,874. The jury found system claims 2-4 of the '073 patent infringed and not invalid, and it awarded damages. It also found no infringement of the '874 patent. The district court later found that the case is exceptional and that Elbit is entitled to attorney's fees, but the court has not quantified the fees. The '874 patent is not before us; nor is the validity of the asserted claims of the '073 patent. Hughes appeals the infringement finding and damages award for claims 2-4 of the '073 patent and the exceptionality determination. We affirm as to infringement and damages. We lack jurisdiction over the unquantified attorney's fees decision, so we dismiss that portion of the appeal.
I
A
The '073 patent is entitled "Reverse Link for a Satellite Communication Network." The patent claims a system for transmitting information from user terminals to a central hub using satellite communication-that direction being called a "reverse link." '073 patent, col. 4, lines 45-65; id. , col. 22, lines 51-59. Add "a forward link," i.e. , satellite communication from the hub to user terminals, and the result is "a complete two way communication system via satellite." Id. , col. 4, lines 45-50. To transmit data to the hub, user terminals employ a "transmitter means," which, in turn, has two communication means: the first is for "transmitting short bursty data," while the second is for "continuous transmission of data." Id. , col. 23, lines 30-35. The patent also describes a "switching means" to switch between the two communication means. Id. , col. 23, lines 36-39.
Claim 2 recites:
2. A multiple access communications system for use in a satellite communication network, comprising:
a plurality of user terminals for generating data to be transmitted over said multiple access communication system;
at least one hub for receiving data over said multiple access communication system from said plurality of user terminals;
transmitter means within each user terminal for receiving data to be transmitted from said user terminal to said hub, said transmitter means including first communication means for transmitting short bursty data in combination *1295 with second communication means for continuous transmission of data;
switching means coupled to said transmitter means for switching transmission between said first communication means and said second communication means in accordance with predefined criteria, and
receiver means within said at least one hub adapted to receive data transmitted by said plurality of terminals utilizing either said first communication means or said second communication means,
wherein said switching means comprises means for switching from said first communication means to said second communication means when the length of a message received by said transmitter means exceeds a predetermined threshold.
B
As relevant here, on January 21, 2015, Elbit sued Hughes for infringement of the '073 patent. The limitations now at issue, "communication means for continuous transmission of data" and "switching means," were held to be means-plus-function terms.
Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC
, No. 2:15-CV-37-RWS-RSP,
On August 7, 2017, the jury found that Hughes infringed because its products came within claims 2-4 of the '073 patent, and that those claims are not invalid. The jury found that Hughes did not infringe the '874 patent, a finding that Elbit does not appeal. The jury awarded Elbit $ 21,075,750 in damages. The district court denied Hughes's post-trial motions for judgment as a matter of law for non-infringement and for a new trial on damages. J.A. 220-34; J.A. 245-50. The district court also found that the case is exceptional and granted Elbit's motion for attorney's fees. J.A. 260-65. The district court did not quantify the award. The final judgment was entered on March 30, 2018.
Hughes timely appealed. We have jurisdiction under
II
Hughes challenges the jury's finding of infringement of the '073 patent. In particular, Hughes argues that its products do not include the claimed "continuous transmission of data" communication means or the switching means.
See
A
Substantial evidence supports the jury's finding that the accused Hughes products have a continuous communication means. The accused products are Hughes's DirecWay, HN, HX, and Jupiter product lines, which provide broadband internet access via satellite communication. Hughes's accused products use two methods for transmitting data: ALOHA and Dynamic Stream. When using the ALOHA method, the satellite "randomly transmits bursts [of data] on an available Aloha channel." J.A. 5678. When using the Dynamic Stream method, the terminal can send transmissions of "variable sizes during each frame."
Bruce Elbert, Elbit's expert, testified that the Dynamic Stream mode "provide[s] ... continuous transmission of data," as is required by the patent. J.A. 1465; J.A. 2373-74. His testimony was based on both the way that the Dynamic Stream mode functions and the types of data transmitted in Dynamic Stream mode. For functionality, Mr. Elbert relied on Hughes's own product description, which shows that terminals in ALOHA transmit data in short blocks and terminals in Dynamic Stream transmit data in relatively longer transmissions. J.A. 5678. Additionally, Mr. Elbert testified that Dynamic Stream mode is used for the same types of large data files that are too big for ALOHA bursts and would be transmitted through the second communication means in the '073 patent 's system. J.A. 1465. Elaborating, he stated that "a long burst length" constitutes "continuous transmission" as claimed in Elbit's patent and short bursts consisting of "just a few blocks of data" do not. J.A. 2374-76. Based on Mr. Elbert's testimony and the Hughes documents, the jury could permissibly find that Hughes's products have a continuous transmission mode.
Hughes's primary response to Elbit's evidence is that Dynamic Stream mode cannot provide continuous transmission of data because the transmissions in Dynamic Stream mode have "guard" times during which the transmitter is turned off. Appellant Br. at 28-31. Stephen Wicker, an expert for Hughes, testified that Internet Protocol over Satellite (IPoS), the standard used by the accused Hughes products, includes a guard time. J.A. 2209-12; J.A. 5894. Hughes also points to a reference to guard times in the section of the specification of the '073 patent describing the first communication means. See '073 patent, col. 13, lines 22-23. Finally, Hughes points to testimony from Mr. Elbert discussing a specific kind of channel assignment mode that is non-continuous *1297 and has guard times "[b]etween the bursts." J.A. 1535-36.
Hughes's evidence about guard times, however, does not override, as a matter of law, the substantial evidence supporting the jury's finding that the Dynamic Stream mode is properly characterized by a skilled artisan as "continuous." The evidence includes the following. First, the IPoS may show guard times, but Mr. Elbert testified that Hughes's products do not insert guard times in the middle of a stream transmission. J.A. 2376. Because the jury was entitled to rely on Mr. Elbert's testimony that each transmission in the Hughes system is not interrupted by a guard time, having guard times following a transmission does not necessarily mean the transmission was not continuous. Second, as to the discussion of guard times in the specification, the failure to mention guard times in the section discussing channel assignment (a "continuous" mode) does not imply that no continuous mode can have guard times. That section describes a specific type of channel assignment that does not use guard times, '073 patent, col. 14, line 23, through col. 15, line 2, but the district court did not limit the second communication means to that single type of channel assignment; indeed, the court rejected Hughes's argument that the '073 patent should be limited to one, specific type of channel assignment that did not use guard times. See Claim Construction Decision at *5-7 (defining the structure for the second communication means as "Channel Assignment Transmitter 110 in Fig. 6, and equivalents thereof"). Finally, Mr. Elbert's textbook testimony addressed an older Hughes system and a type of channel assignment that inserted a guard time between bursts of predetermined lengths of time. J.A. 1535-36. The '073 patent and the accused Hughes products, in contrast, provide variable length bursts so the transmission will be sent before a guard time is inserted. J.A. 1464 ("Now, here we're saying dynamic stream involves variable burst lengths ...."); '073 patent, col. 15, lines 29-31 ("[In channel assignment,] [a] specific frequency and a particular bandwidth are assigned and the data is transmitted for a specific period of time or until the data ends ." (emphasis added)). None of Hughes's evidence about guard times precluded the jury from finding that the Hughes products have a continuous transmission mode.
B
Substantial evidence supports the jury's finding that Hughes's products have a switching means. Hughes argues that its products do not perform the algorithm in the '073 patent that the district court identified as the structure for the switching means. Specifically, Hughes argues that its products neither (1) switch back to the first communication modes following the articulated criteria nor (2) request a specific data rate, and that they do not perform an equivalent to those steps either. The jury could reasonably find otherwise.
1
There is substantial evidence that Hughes's products switch back to the first communication mode using a structure that "performs the claimed function in substantially the same way" as the claimed structure.
Odetics, Inc. v. Storage Tech. Corp.
,
Further, expert evidence indicates that, in a relevant respect, the Hughes products use the same criteria for switching in the two directions. Message length is one of the criteria listed in the '073 patent as prompting a switch either from the first to the second communication means or from the second back to the first. '073 patent, col. 10, lines 63-67;
Hughes's second argument for why the structures are not substantially the same is that, in the accused products, the hub, not the terminal, controls at least some of the claimed switching. The parties agree that the '073 patent requires that the terminal control the switch. See J.A. 1514 ("Q. And that decision to switch needs to be in the terminal, we all agree on that? A. I mean, technically, it does, yes. Q. Okay. So there won't be any dispute, any doubt that the decision to switch needs to be in the terminal in order to infringe these claims? A. Yeah, I think that's good."). But, contrary to Hughes's contention, there is substantial evidence on which the jury could find that in the Hughes system the terminal controls the switch. Specifically, Mr. Elbert, relying on information from Hughes's experts, testified that the terminal controls the backlog message, and "the hub accepts that backlog message and what it says and acts upon it. It's obedient to that backlog message." J.A. 2363; see also J.A. 1477 (repeating prior testimony of an expert for Hughes that the hub "takes at face value" the backlog signal sent by the terminal); J.A. 2294-95 (Dr. Wicker testifying that it "wouldn't make sense for the hub to" switch to Dynamic Stream mode without receiving the backlog signal and he had "seen no evidence that that actually happens").
Hughes argues to the contrary based on a section of the IPoS manual that describes the accused switch, which indicates that the hub "does not immediately stop allocating bandwidth to the terminal" when its "backlog goes to zero." J.A. 5252 (emphasis added). But that language, standing alone, does not preclude the jury's finding about the terminal's control; for example, the word "immediately" may be only about when, not whether, the switch will be made upon receiving the terminal's signal. And no other evidence to which we have been pointed establishes that the passage must mean what Hughes suggests it means. Oral Arg. at 32:19-32. Accordingly, the jury could reasonably find that in the Hughes products the terminal controls the switch.
2
The jury could also reasonably find that Hughes's products perform the step of requesting
*1299
a specific data rate. Part of the '073 patent specification that was identified as the structure for the switching means,
Claim Construction Decision
at *14, states that "[t]he request [to switch communication means] also includes a specific requested data rate," '073 patent, col. 11, lines 14-15. There is substantial evidence that the Hughes products perform this portion of the algorithm as well, by having a structural equivalent.
See
Odetics
,
III
The district court did not abuse its discretion in denying Hughes's motion for a new trial on damages. Under the applicable regional circuit's law, we here review the district court's decision to refuse a new trial only for an abuse of discretion.
Encompass Office Sols., Inc. v. La. Health Serv. & Indem. Co.
,
A
Testimony by Elbit's damages expert Mr. Christopher Martinez provides substantial evidence to support the jury's damages award. Mr. Martinez's testimony is the only expert testimony on damages in the trial record. Hughes chose not to introduce any expert testimony of its own on the subject.
We have previously explained that prior settlements can be relevant to determining damages.
Prism Techs. LLC v. Sprint Spectrum L.P.
,
*1300
Mr. Martinez relied on a prior settlement and appropriately accounted for differences between the circumstances of that settlement and the present circumstances. The relied-on settlement was one between Hughes itself and Gilat, another satellite internet company. The Gilat Agreement was the result of a suit that Hughes, as patent owner, filed against Gilat for allegedly infringing Hughes's older satellite communication system, which used satellite communication for only one direction (hub to terminals) of the transmission. Mr. Martinez testified to how what Hughes received in that settlement provided relevant evidence for determining what Hughes reasonably should pay as a royalty for use of Elbit's technology at issue here.
Relevant facts considered by Mr. Martinez include the following. The Gilat Agreement occurred only four months after the agreed-on date of the hypothetical negotiation posited for determining the reasonable royalty in this matter. Compare J.A. 1716 with J.A. 202. The time periods for assessing value in the satellite-service marketplace were therefore very close. The technologies were also related for purposes of determining market value. See J.A. 1485 (Mr. Elbert's testimony that the '073 patent 's technology was "the closest" comparator to the Gilat Agreement). The Gilat Agreement involved obtaining internet access using one-way satellite communication, and the '073 patent involves obtaining internet access using two-way satellite communication. All three companies, Gilat, Hughes, and Shiron (Elbit's predecessor) participated in the satellite internet-access market. While Hughes and Gilat were established competitors and Shiron was a start-up, Shiron had the "breakthrough technology," J.A. 1720, that represented "the next generation" of internet access, J.A. 1717, while the Gilat Agreement concerned "the old one-way product," J.A. 1717-18.
Mr. Martinez attended to all of those facts. Mr. Martinez also accounted for the fact that the Gilat Agreement was a settlement prompted by litigation. See J.A. 1749-52. In the end, he relied on the per-unit figure in the Gilat Agreement for one-way technology, together with Hughes-based evidence that two-way technology was worth at least an additional 20%, to arrive at his proposed per-unit figure-which the jury adopted. J.A. 17708.
We conclude that Elbit and Mr. Martinez did what our case law requires in explaining the relevance of a prior settlement to this case. Hughes, which introduced no expert damages testimony of its own, has not demonstrated either "faulty assumptions" or "a lack of reliable economic testimony" that would warrant disturbing the jury's award.
*1301
Finjan, Inc. v. Secure Computing Corp.
,
B
Hughes argues that Elbit's damages evidence, and hence the jury award, is counter to our precedent on apportionment. "When the accused technology does not make up the whole of the accused product, apportionment is required. '[T]he ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more.' "
Finjan, Inc. v. Blue Coat Sys., Inc.
,
Mr. Martinez testified that apportionment "is essentially embedded in [the] comparable value" from the Gilat Agreement concerning a comparable component of a larger product or service. J.A. 1730; see also J.A. 17576 ("[T]he requisite apportionment is implicitly considered within the royalty rate [of the Gilat Agreement]."). Rather than "parse out a value for each of the claims," Mr. Martinez "came up with a market, comparable royalty rate, and then [he] adjusted it as necessary" for the hypothetical negotiation. J.A. 17699; J.A. 1731. As we have noted, to reach his final figure, he increased the royalty by 20% from the Gilat Agreement, Hughes executives having made statements indicating that the two-way system provided a 20% increase in value over the old one-way system. J.A. 17708.
Mr. Martinez's approach is consistent with our precedent concerning the apportionment requirement that a royalty should reflect the value of patented technology.
See
CSIRO
,
C
Hughes's final damages-related challenge to the district court denial of a new trial points to certain evidence that Elbit introduced. This challenge relies on this court's recognition of an evidentiary principle aimed at avoiding dangers of certain
*1302
testimony. Thus, we have held that a party's reference to an infringer's entire revenue earned from its sale of accused products, where only part of the value of the apparatus is attributable to the patented technology, can "skew the damages horizon for the jury."
Uniloc
,
At three points in his testimony, Mr. Martinez referred to the revenue Hughes receives from service fees for an average customer over the course of that customer's time buying the relevant service from Hughes. First, in explaining how he arrived at his reasonable royalty rate, he stated, based on his expert report, that he "determined that Hughes earns approximately $ 2500 of revenue per customer," on average, from its DirecWay, HN, HX, and HT products. J.A. 1732. Second, the $ 2500 number was referenced in his conclusion that $ 18 was a reasonable royalty because "[$ ]18 is a smaller portion of the $ 2500." J.A. 1733. According to Mr. Martinez, it was "reasonable" for "Hughes to pay $ 18 in order to get approximately $ 2500 worth of revenue."
Mr. Martinez's reference to life-of-service customer-specific (service) revenue from relevant products does not fall into a pattern we have specifically disapproved. The $ 2500 customer-specific reference is not the same as Uniloc's reference to Microsoft's $ 19 billion in company-wide revenue. Nor did Mr. Martinez use a high price of a multi-component overall product or service as a base, multiplied by a percentage, in a rate-base running-royalty calculation. Rather, he calculated a flat per-unit dollar figure based on a license examined for comparability and checked the reasonableness of the resulting figure, as part of a hypothetical-negotiation analysis, against a life-of-relationship service-revenue figure for an average customer. This analysis may be more akin to the reliance on licenses that was the subject of
Ericsson
, where we upheld a license-based calculation that relied on product value, concluding that, under the evidentiary principle grounded in a prejudice-probativeness balance, such a methodology is not automatically reversible error.
Ericsson
,
We do not decide here how the evidentiary principle at issue would apply to testimony of the sort Mr. Martinez gave if the testimony stood alone and an objection were made in a timely fashion with an adequate explanation of why Mr. Martinez's particular analysis created the kind of prejudice that substantially outweighs probative value of the type targeted by the evidentiary principle at issue. But the pretrial *1303 motion to which Hughes points as raising the present issue did not identify a reference of the sort Mr. Martinez made and seek and support its exclusion. 1 Then, at trial, as far as we have been shown, there was no objection by Hughes and no judicial ruling that opened the door to what Hughes itself did-namely, affirmatively use Uniloc -type evidence. Specifically, Hughes itself referred to a figure representing company-wide revenue, see J.A. 10183, despite the pretrial agreement about exclusion of "total revenues," J.A. 119; J.A. 156, and in closing argument, Hughes called the jury's attention to the exhibit disclosing that figure, J.A. 2566. In these circumstances, whether as a matter of forfeiture or as a matter of insufficiency of a showing of prejudice from the Elbit testimony under the principle invoked by Hughes, we see no reversible error in the district court's refusal to grant a new trial.
We therefore do not disturb the jury's damages award.
IV
Hughes asks us to review and reverse the district court's determination that, under
A
We begin with
In
Budinich v. Becton Dickinson & Co.
, the Supreme Court insisted on cleanly separating, for finality purposes, the decision on the merits of a case from the decision on attorney's fees.
Several aspects of
Budinich
's reasoning reinforce this conclusion. First, the Court in
Budinich
reasoned that, for questions of jurisdiction, "[c]ourts and litigants are best served by [a] bright-line rule" of merits-fees separation.
Budinich
,
B
We also see no sound basis in
Section 1292(c)(2) adds to appellate jurisdiction in only one way: it authorizes appellate review of a judgment that would be final, i.e. , reviewable under § 1295, except that certain "accounting" issues are undecided. But Section 1292(c)(2) does not add jurisdiction to review rulings that would not be part of the final judgment if the "accounting" issues were resolved. As already explained, under Budinich , unquantified fees are not part of what is reviewable under § 1295 and so they are not part of what § 1292(c)(2) makes appealable.
To make the point another way, all that § 1292(c)(2) does is allow review of a subset of merits rulings. Fees rulings,
Budinich
makes clear, are not to be treated as merits issues. Indeed, fees arise under a provision,
In nevertheless arguing for jurisdiction, Hughes disputes none of the foregoing, but relies entirely on what this court said in
Majorette Toys (U.S.) Inc. v. Darda, Inc. U.S.A
,
First,
Majorette Toys
contains no decision on, or even any discussion of, dismissing only the challenge to the fee-entitlement ruling, which is the jurisdictional issue before us. The only jurisdictional issue decided in
Majorette Toys
was whether the entire appeal, which included the merits, had to be dismissed. Thus,
Majorette Toys
does not address the specific jurisdictional issue we face, and so it is not controlling precedent on that issue.
See
Arthrex, Inc. v. Smith & Nephew, Inc.
,
Second,
Majorette Toys
predates
Budinich
. We have already recognized that
Budinich
and other supervening Supreme Court precedent undermined the rationale of
Majorette Toys
.
See
Falana
,
For those reasons, we reject Hughes's argument for finding § 1292(c)(2) jurisdiction over the fee-entitlement ruling.
C
Finally, we see no sound basis for exercising pendent appellate jurisdiction over the fees-entitlement determination. In Swint v. Chambers County Commission , the Supreme Court expressed a narrow view of such jurisdiction, limiting it at most to issues that are "inextricably intertwined" with the final decision properly before the court of appeals.
*1306
That demanding standard is not met here. Whether this case is exceptional because of Hughes's litigation conduct (as the district court determined) is not inextricably intertwined with the infringement and damages issues presented on appeal of the merits judgment.
See
V
For the foregoing reasons, we reject Hughes's challenges to infringement and damages and affirm the district court's decision. We dismiss Hughes's appeal to the extent that it seeks review of the determination that attorney's fees are warranted.
Costs awarded to Elbit.
AFFIRMED IN PART, DISMISSED IN PART
Before trial, Hughes moved to preclude reference to Hughes's "total revenues, net worth, or prices," also mentioning "profitability," and it cited only one authority, namely, Uniloc , and only for company-wide figures-revenue, profitability, or net worth. J.A. 18082-83. The parties agreed not to refer to total company revenues and net worth, J.A. 119, 156, and Elbit did not do so. As to "prices," Hughes's pretrial motion merely mentioned the word; it made no argument at all, and cited no authority, to support its request for exclusion, and the district court denied the request. J.A. 119, 156. Hughes's pretrial motion did not even mention exclusion of any reference to life-of-relationship revenue from an average customer (whether as a reasonableness check on a separately derived royalty amount or otherwise), much less explain the proper legal treatment of such a reference.
In support of jurisdiction, Hughes includes a passing citation to
Akron Polymer Container Corp. v. Exxel Container, Inc.
, in which this court reversed an inequitable-conduct judgment and, as a simple corollary, simultaneously reversed an exceptional-case determination (with fees not yet quantified) that rested entirely on the inequitable-conduct judgment.
Reference
- Full Case Name
- ELBIT SYSTEMS LAND AND C4I LTD., Elbit Systems of America, LLC, Plaintiffs-Appellees v. HUGHES NETWORK SYSTEMS, LLC, Defendant-Appellant
- Cited By
- 34 cases
- Status
- Published