The Infringer Sourced The Infringing Goods in China, So Infringement Was Willful, Right?

No.

Washington Shoe Company ("WSC") has sold certain shoes in Target.  (There is debate through the opinion discussed below whether WSC sold its shoes through Target "for years," but I will not get into that factual dispute.)  WSC sent an initial demand letter to Olem Shoe Corp. concerning the below boots:

Olem responded that it was investigating the claim, but WSC had not identified any copyright registrations.  WSC responded with registration information, but the Copyright Office was unable to locate the deposit copies corresponding to the boots.  WSC then filed supplementary registrations to address certain issues.

WSC obtained summary judgment that Olem had infringed, but the district court refused to find the infringement willful.  WSC appealed.  Olem cross-appealed the infringement finding.

Willfulness

Concerning willfulness, WSC argued that it was entitled to a jury determination as to whether or not Olem's infringement was willful.  WSC argued the following facts inferred willfulness:

• Cease and desist letters;
• "Striking similarity" of the infringing boots
• Olem's sourcing of the boots from China because "it is ... well known that China is a source of infringing goods"
• Olem's inability to point to any other works on which its shoes were based

Neither the district court nor the Eleventh Circuit were convinced.  As to the letters, the Court noted that Olem undertook a serious investigation, and identified issues with WSC's copyright registrations, which required WSC to file supplementary registrations.  As to the similarity of the boots, the court noted that "striking similarity" is a standard for finding infringement, but that did not mean Olem had the necessary state of mind to support a finding of willfulness:

[WSC]'s asserting that the similarity of Olem's boot designs to those of [WSC] "makes it more likely that the work was copied" is, of course true.  [WSC] has indicated no authority, however, that supports its argument that the similarity of the designs is evidence that the copying was willful.  Generally, establishing a reckless state of mind in a copyright case requires a showing that the infringer possessed particular knowledge from which willfulness could be inferred, such as evidence demonstrating that the infringer was given samples of the copyrighted work prior to producing the infringing work.  See Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 112, 113 (2d Cir. 2001) [parenthetical omitted]

As to sourcing the infringing boots in China, the Eleventh Circuit appeared hesitant to follow such an approach:

Although [WSC] notes that Olem did not design its boots and purchased them from China, it does not point to any record evidence to substantiate its claim that these facts "increase[] the probability of infringement" such that a jury could infer that Olem acted recklessly.  This argument, if effective, would impute reckless disregard to any company purchasing and selling products from China that it did not design itself that turned out to be copyrighted by another.  Thus, it is unpersuasive.

The Court was also not persuaded by WSC's argument attempting to attribute a reckless state of mind to Olem for its inability to point to other works on which the boots were based.

Cross-Appeal - Finding of Infringement

Olem's cross appeal attempted to negate the infringement finding based in part on challenging WSC's evidence suggesting broader access to WSC's boots based on purported misrepresentations.  The Court analyzed the WSC boots and Olem boots and concluded the Olem boots were "strikingly similar" to WSC's.  As such, the infringement finding stands.

Olem Shoe Corp. v. Washington Shoe Corp., Case Nos. 12-11227, 12-11356 (11th Cir. Jan. 12, 2015)

Microsoft's appeal brief in Microsoft Word injunction matter

Dennis Crouch at Patently-O has acquired and posted Microsoft's 101-page opening appellate brief in i4i v. Microsoft. Microsoft's argument reads as a who's who in many of patent law's latest major decisions, including

• KSR v. Teleflex -- obviousness of inventions
• Cardiac Pacemakers v. St. Jude Med -- 35 U.S.C. § 271(f) does not apply to method claims (although Microsoft argues in terms of § 271(c))
• In re Seagate -- willful infringement
• eBay v. MercExchange -- injunctions in patent cases

As you will recall, a Texas judge entered an injunction preventing Microsoft from selling versions of Word which can handle custom XML, and ordering Microsoft to pay $290 million in damages. Read my earlier posts here, here, and here.

Microsoft expressed its clear discontent with the proceedings below:

In patent cases, even more than most, the trial judge’s role as a gatekeeper is crucial. As gatekeeper, the judge must define the metes and bounds of a patent through claim construction and then ensure that the evidence presented by the parties’ numerous experts is both reliable and rooted in the facts of the case at hand. And after the jury has rendered its verdict, it is the judge who, before allowing that verdict to become an enforceable judgment, must ensure that the verdict is adequately supported by the evidence and supportable under the law. This gatekeeping function is especially important in patent cases because of the delicate balance struck by patent law to achieve its objective of promoting, rather than stifling, innovation. That balance can be lost if the district court does not protect the process, and patent litigation then becomes a tax on innovation rather than its guardian.

This case stands as a stark example of what can happen in a patent case when a judge abdicates those gatekeeping functions.

* * *

By the time the plaintiffs presented their damages case, the district court had abandoned even the semblance of gatekeeping. ...

* * *

At this point, if the district court had been more faithful to its role as gatekeeper, it should have recognized a trial run amok and interceded to prevent a miscarriage of justice ...

In sum, justice was denied, and the Constitution violated:

This is not justice. If district courts are free to admit theories of infringement that nullify a patent’s claim terms, specification, prosecution history, and title; if they will allow an inventor to validate his patent by testifying without corroboration that he lied about the date of conception; if they will not intercede to preclude manifestly unreliable—indeed, concededly manipulated—surveys of infringing use, or Georgia-Pacific analyses based on “benchmarks” bearing no rational relationship to the accused product, then patent litigation will be reduced to a free-for-all, unbounded by the requirements of the substantive law or the rules of evidence or trial procedure. While that mode of dispute resolution might enrich some plaintiffs and their investors, it hardly can be said to “promote the Progress of Science and the useful Arts.” U.S. Const. art. I, § 8.

Microsoft then presents a 5-pronged attack on the proceedings below:

1. Improper claim construction read a key limitation -- the word "distinct" out of the claims
2. The claims are invalid
3. Insufficient evidence to support indirect infringement finding
4. The $200 million damage award is not "reasonable"
5. Awarding an injunction here is improper

HP and Dell Amicus Briefs

HP and Dell also weighed in. HP and Dell both argued that enjoining sales of Word would impose large hardships, as both of these companies distribute Word. Both companies explained their process for creating images, which are then copied onto new computes. For those computers that include enjoined copies of Word (presumably this number is large, but the amicus briefs are redacted to protect this confidential information), HP and Dell would need to create and test new images, which would cost time and money.

We'll see how i4i responds....

Microsoft Word + custom XML = no more?

Tuesday, Judge Davis of the Eastern District of Texas entered a permanent injunction against Microsoft, enjoining the company from:

1. selling, offering to sell, and/or importing in or into the United States any Infringing and Future Word Products that have the capability of opening a .XML, .DOCX, or .DOCM file (“an XML file”) containing custom XML;

2. using any Infringing and Future Word Products to open an XML file containing custom XML;

3. instructing or encouraging anyone to use any Infringing and Future Word Products to open an XML file containing custom XML;

4. providing support or assistance to anyone that describes how to use any infringing and Future Word Products to open an XML file containing custom XML; and

5. testing, demonstrating, or marketing the ability of the Infringing and Future Word Products to open an XML file containing custom XML.

The Court also entered final judgment, with damages:

• $200 million for infringement
• $40 million for willful infringement
• ~$11.8 million for post-verdict damages
• ~$38 million in pre-judgment interest
• (for a total of ~$290 million)

i4i sued Microsoft for infringing U.S. Patent No. 5,787,449 directed to separately manipulating the architecture and content of a document. The '449 invention relied upon a "metacode map," which allowed a reliable method of manipulating the structure of a document without reference to its content. Claims 1-13 were found to be invalid for being indefinite under 35 U.S.C. § 112 ¶ 2.

Claim 14 provides:

14. A method for producing a first map of metacodes and their addresses of use in association with mapped content and stored in distinct map storage means, the method comprising:

providing the mapped content to mapped content storage means;

providing a menu of metacodes; and

compiling a map of the metacodes in the distinct storage means, by locating, detecting and addressing the metacodes; and

providing the document as the content of the document and the metacode map of the document.

Direct Infringement

Microsoft's offered 3 arguments that there was no direct infringement: (1) no evidence that Word created a "data structure," as required by the Court's construction of the term "metacode map;" (2) insufficient evidence that Word contained "metacodes;" and (3) improper construction of the terms "distinct map storage means," "mapped content storage means," and "mapped content storage." The Court was not persuaded by any of these arguments.

Indirect Infringement

Microsoft next argued that contributory and inducement infringement was also improper. The Court explained:

A cause of action for contributory infringement flows from 35 U.S.C. § 271(c). That section provides:

Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

35 U.S.C. § 271(c).

Induced infringement is a separate cause of action from contributory infringement. “In order to prevail on an inducement claim, the patentee must establish first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement.” ACCO Brands, Inc. v. ABA Locks Mfr. Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007) (internal quotation marks omitted). “[I]nducement requires evidence of culpable conduct, directed to encouraging another's infringement, not merely that the

inducer had knowledge of the direct infringer's activities.” Id. at 1306. Furthermore, “[t]he plaintiff has the burden of showing that the alleged infringer's actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.” DSU Med. Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) (quoting Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed. Cir. 1990)).

Both forms of indirect infringement require the plaintiff to prove corresponding acts of direct infringement. See DSU Med. Corp., 471 F.3d at 1303. Importantly however, a patentee may prove both indirect infringement and the corresponding direct infringement by circumstantial evidence. See Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1219 (Fed. Cir. 2006). “There is no requirement that direct evidence be introduced, nor is a jury's preference for circumstantial evidence over direct evidence unreasonable per se.” Id. Moreover, “[t]he drawing of inferences, particularly in respect of an intent-implicating question . . . is peculiarly within the province of the fact finder that observed the witnesses.” Rolls-Royce Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed. Cir. 1986); see also Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005) (declining to disturb jury's verdict because intent to induce infringement “is a factual determination particularly within the province of the trier of fact”).

Microsoft offered 3 arguments concerning contributory infringement: (1) insufficient evidence that Microsoft knew Word was "patented and infringing;" (2) insufficient evidence that Word did not have a substantial non-infringing use; and (3) the software couldn't form the basis of a contributory infringement claim because the only claims asserted were process claims. The Court was not persuaded by any of these arguments.

Willfulness

To prevail on a charge of willful infringement, the patentee must show the accused infringer acted with objective recklessness. In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). First, the patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions infringed a valid patent. Id. The accused infringer's state of mind is irrelevant to this objective inquiry. Id. If the patentee meets this threshold objective standard, the patentee must further demonstrate that the accused infringer knew or should have

known of this objectively high risk. Id. Whether infringement is willful is a question of fact and reviewed for substantial evidence. Metabolite Labs., Inc. v. Labs. Corp. of Am. Holdings, 370 F.3d 1354, 1359 (Fed. Cir. 2004).

Microsoft offered a number of arguments, none of which were convincing to the Court, including: (1) because the Court invalidated some claims of the '449 patent, Microsoft asserted defenses to the remaining claims, and i4i involuntarily dismissed some accused products, there was no willfulness; and (2) insufficient evidence of whether Microsoft knew of the likelihood of infringement.

The Court then addressed obviousness and anticipation, as well damages.

The Court's claim construction order (also granting partial summary judgment of invalidity) can be found here. Supplemental claim construction here.

The Court's 65-page memorandum and order can be found here. The permanent injunction can be found here. And the final judgment can be found here.

i4i Ltd. v. Microsoft Corp., Case No. 6:07-CV-00113-LED (E.D. Tex. Aug. 11, 2009).