Federal Circuit Vacates Jury Verdict and Damages for Multiple Errors

On June 16, in Optis Cellular Technology v. Apple Inc., the Federal Circuit issued a decision reversing the district court on multiple grounds, including § 101 patent eligibility and trial procedure, in vacating infringement and damages judgments against Apple. The Federal Circuit identified a number of errors and also reversed summary judgment rulings in the Eastern District of Texas regarding patent eligibility and means-plus-function analysis.  

Background of the Case

Optis asserted five wireless standard-essential patents against various Apple devices. The jury initially awarded over $500 million, but the district court vacated the award and granted a new trial on damages only. The second jury for the damages trial awarded Optis $300 million. Apple and Optis both appealed to the Federal Circuit.

Damages and Admission of Prior Settlement Agreement

In the initial trial, both Optis and Apple proposed including separate infringement questions for each of the five patents. However, the district court only allowed a single generalized question regarding infringement on the jury form. The jury was only asked if “Apple infringed ANY of the Asserted Claims?” (Emphasis in original). In other words, the question allowed the jury to answer “Yes” even if different jurors believed Apple infringed different claims in different patents. The Federal Circuit ruled that the jury verdict form violated Apple’s right to a unanimous jury verdict by failing to ask about infringement on a patent-by-patent basis.

Additionally, before a second damages trial, Apple filed a motion to exclude reference to an Apple-Qualcomm settlement agreement from 2019 settling a worldwide dispute. The district court denied the motion, allowing evidence and testimony regarding the settlement. The Federal Circuit reiterated that use of prior settlement agreements is questionable and should be used in limited circumstances. Further, the Federal Circuit stated that the settlement agreement had minimal probative value and reference to the large prior settlement value was highly prejudicial to Apple especially because of large scope of rights under the settlement compared to the five patents at issue. Therefore, the Federal Circuit found the district court abused its discretion admitting evidence regarding the Apple-Qualcomm settlement.

Patent Eligibility under § 101

The Federal Circuit reversed the district court’s summary judgment ruling that claims 6 and 7 of U.S. Patent 8,019,332 were not directed to an abstract idea. The district court found that the claims directed to using a mathematical equation were not directed to an abstract idea and applied an equation in a way that offers a technical improvement. The Federal Circuit disagreed, stating that “the purported advancement of the ‘332 patent over the prior art is the use of the claimed equation” which “is an ineligible mathematical formula.” Since the district court did not reach Alice step two regarding patent eligible subject matter, the Federal Circuit remanded.

Mean-Plus-Function

The Federal Circuit also determined that the district court erroneously found that the phrase “selecting unit” did not invoke means-plus-function analysis under § 112, paragraph 6. While the phrase did not include the term “means” and appeared more structural on its face, the term was functional without imparting and concrete structural meaning. The Federal Circuit applied the two-step test from Williamson v. Citrix Online. In the first step, the term is analyzed if it is in means-plus-function format. There is a rebuttable presumption when the term “means” is not used. In the first step, the Federal Circuit determined that the term “unit” did not sufficiently connote structure and is similar to other nonce terms previously found to be similar to “means.” Since the district court erroneously found the term structural, the Federal Circuit remanded for the district court to conduct the second step of the analysis, determining if the specification discloses adequate corresponding structure for means-plus-function terms.

Implications for Drafting Applications and Litigation

This case reinforces that patent drafters should support a demonstration of improvement to a technology when the invention utilizes mathematical equations, and cannot avoid means-plus-function issues by using nonce terms such as unit or module, especially when the remaining claim terms otherwise recite purely functional features. Moreover, the specification should provide adequate disclosure of structural elements for the second step of the means-plus-function analysis.

For litigation, patents, and sometimes claims, should each be presented separately to a jury and in jury instructions. Otherwise, a single infringement question could run afoul of the Seventh Amendment. Further, the use of prior settlement agreements should be heavily scrutinized to show that they are truly comparable in scope.     

For more information on this decision, please contact Fitch Even partner Joseph H. Herron, author of this alert.

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