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November 11, 2005.

MICREL, INC. Defendant.

The opinion of the court was delivered by: MARILYN PATEL, District Judge

MEMORANDUM & ORDER Granting in part and denying in part Defendant's motion for partial summary judgment
On May 9, 1994, plaintiff Linear Technology Corporation ("LTC") brought this action against defendant Micrel, Inc. alleging infringement of United States Patent Number 4,755,741 ("'741 Patent") and the accompanying reexamination certificates. Now before the court is the defendant's motion for partial summary adjudication as to the issue of the validity of one of the reexamination certificates and the availability of the defense of intervening rights. Having considered the arguments presented and for the reasons stated below, the court enters the following memorandum and order.


  I. Patent History

  All agree on the following facts: On July 5, 1988 the '741 Patent pertaining to adaptive transistor drive circuitry was issued including, inter alia, claims 22 and 32, ("Claim 22" and "Claim 32" respectively), which are asserted in this law suit. The other asserted claims in this action are claims 36-44, 46, 47 and 49. Jt. Stmt. of Undisputed Facts, No. 24. The '741 Patent covers an adaptive transistor drive circuit for use in electrical devices where a transistor is used "as a switch in a switching voltage regulator." U.S. Pat. No. 4,755,741, col. 1, l. 17. The claimed inventive improvements in the '741 Patent include the ability of the drive circuit to operate across a range of collector currents and temperatures and to operate with higher electrical efficiency than previous circuits. Id. at col. 2, ll. 43-66.

  On May 14, 1991, the B1 Reexamination Certificate for the '741 Patent ("B1 Certificate") issued, following a reexamination of the '741 Patent ("Reexam I"). The text of the amended claims was not included in the B1 Certificate, although it is present in the public record of the reexamination history. In 1994, during the second reexamination proceeding ("Reexam II"), the Patent and Trademark Office ("PTO") notified LTC of the printing mistake and stated that a certificate of correction could be requested. See Reexam II, Paper No. 9. There is no indication in the record that LTC ever requested a certificate of correction.

  LTC sent a notice of possible infringement referencing the '741 Patent to Micrel on April 3, 1993, and on May 9, 1994 LTC filed suit against Micrel alleging infringement of the '741 Patent and the B1 Certificate. Oliver Dec., Exh. 7 and Exh. 8 at 2. Defendant Micrel requested reexamination of the amended '741 Patent on September 9, 1994 ("Reexam III"). Reexam II and Reexam III were merged in January 1995, and on December 26, 1995 the B2 Reexamination Certificate ("B2 Certificate") issued.

  During Reexam I, the amendments to Claim 32 narrowed the scope of the amended claim and it is not identical to any original claim in the '741 Patent. See Jt. Stmt. of Undisputed Facts Nos. 5, 25. During Reexams II and III, the Patent Office rejected Claims 22 and 32 on two separate occasions based on prior art; in response to these rejections, LTC made amendments to the claims. Id. Nos. 13-15. In the same year that the lawsuit and Reexam III commenced, Micrel began selling certain accused products — MIC2171, MIC2172, and MIC32172 circuits. See id. No. 42. Before the December 26, 1995 issue of the B2 Certificate Micrel had already shipped 279,655 units of those products. See id. No. 42.

  Micrel later changed the design of its devices to eliminate the circuitry which formed the basis of LTC's infringement contentions. LTC has conceded that the manufacture and use of the redesigned devices would not infringe the asserted claims in the '741 Patent and the reexamination certificates thereto. See Pl's Responses to Micrels' Requests for Admission Nos. 72-75 (Feb. 18, 2005) in Morrill Dec., Exh. G. Plaintiff has also conceded that none of the claims 36-44, 46-47 and 49 is "identical" in scope to any earlier claim. Jt. Stmt of Undisputed Facts Nos 17, 18, 20, 21, 26-39.

  The parties are in dispute over whether Claims 22 and 32 have changed in scope since the B1 Certificate or the '741 Patent. The parties also differ over the amount that Micrel had in inventory and the amount that Micrel had spent in "substantial preparation" of further infringing devices as of December 26, 1995. Defendant alleges that it had 309,294 of accused products in inventory and had spent $500,000 in "substantial preparation" as of the date of the B2 Certificate's issue on December 26, 1995. Plaintiff contends that Micrel had at most 51,600 units of accused products in inventory and disputes the amount spent in developing the accused products.

  II. Procedural Posture

  This actions was initially assigned to United States District Court Judge Eugene F. Lynch, LTC's complaint alleges infringement of the '741 Patent and the associated reexamination certificates. On February 26, 1997, Judge Lynch denied Micrel's motion for summary judgment on the question of the validity of the '741 Patent, identifying a genuine issue of material fact regarding the applicability of the on-sale bar provision of 35 U.S.C. section 102. In the same order, Judge Lynch bifurcated this action, permitting the on-sale bar issue to proceed to trial while staying all other issues. Approximately six months later, the case was reassigned to this court, and the court subsequently conducted a bench trial on the issue of on-sale bar invalidity. On August 19, 1999 this court found the '741 Patent invalid under section 102(b), entering judgment for Micrel accordingly. On appeal, the Federal Circuit affirmed this court's decision in part, reversed in part, and remanded. See Linear Tech. Corp. v. Micrel, Inc., 275 F.3d 1040 (Fed. Cir. 2002), cert denied, 538 U.S. 1052 (2003).

  On January 24, 2004 the court conducted a limited claim construction for the '741 Patent and accompanying certificates, construing the word "saturation" to mean "the state in which the ratio of collector-current to base-current is forced lower by excess base current" and the phrase "in saturation" to mean "the working of the covered invention consistently at a state of forced current gain." Memorandum & Order, No. C 94-1633 MHP, slip op. at 12, 17 (Jan. 22, 2004).

  Now before the court are the parties' memoranda with respect to (1) the validity of the B1 Certificate, (2) the availability of the defense of intervening rights to limit the period within which infringement damages can be calculated, (3) the amounts in inventory, (4) the amount of money spent developing the accused products and (5) the issue of whether Micrel's redesigned products are non-infringing.


  I. Summary Judgment

  As in any other civil action, summary judgment is proper in a patent infringement action when the pleadings, discovery, and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Southwall Techs., Inc. v. Cardinal IG Co., 54 F.3d 1570, 1575 (Fed. Cir.), cert. denied, 516 U.S. 987 (1995). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict in favor of the nonmoving party. Id.

  The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id. at 325; Crown Operations Int'l, Ltd. v. Solutia, Inc., 289 F.3d 1367, 1377 (Fed. Cir. 2002). On the other hand, where the moving party bears the burden of proof on an issue, it must submit evidence sufficient to establish that no reasonable jury could find against it on that issue at trial. See Frank's Casing Crew & Rental Tools, Inc. v. Weatherford Int'l, Inc., 389 F.3d 1370, 1376 (Fed. Cir. 2004); Gart v. Logitech, Inc., 254 F.3d 1334, 1339 (Fed. Cir. 2001), cert. denied, 534 U.S. 1114 (2002).

  Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). The court may not make credibility determinations, Anderson, 477 U.S. at 249, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520 (1991). Nonetheless, even if summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to ...

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