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Lucent Technologies Inc. v. Gateway

January 11, 2007


The opinion of the court was delivered by: Hon. Rudi M. Brewster United States Senior District Judge


On November 16, 2006, and November 21, 2006, Lucent and Microsoft, respectively, filed motions for summary adjudication on the Group 2 audio coding patents, U.S. Patent Nos. 5,341,457 ("the '457 patent") and RE 39,080 ("the '080 patent"). The parties then filed oppositions and replies thereto and a hearing was held on January 4, 2007. Having considered the parties motions and evidence in support thereof, the Court now rules as explained herein.


Lucent filed for patent infringement against Dell and Gateway in 2002. The case was originally filed in the Eastern District of Virginia and then transferred to the Southern District of California. Microsoft filed a declaratory judgment against Lucent in 2003. The cases were eventually consolidated. The instant Group 2 audio coding patents are at issue only between Lucent and Microsoft; they have not been asserted against Dell or Gateway. Microsoft's Windows Media Players WMP10 and WMP11 and the software contained therein for encoding into MP3 format are alleged to infringe one or both of the patents.

A. The '457 Patent

The application for the '457 patent was filed on December 30, 1988 by inventors James Johnston and Joseph Hall. The '457 patent describes a method of processing audio signals to compress them into smaller file sizes. The method eliminates signals that are not heard by the human ear so that those portions are not encoded and file space is saved. This process takes audio signals that have been transformed into the frequency spectrum and assesses which frequency coefficients will be masked by others and thus not heard by the human ear; this sets a "masking threshold." The signals above the threshold are quantized and encoded. A feature of the method claimed in the '457 patent is the use of a "tonality value" to produce a more accurate masking threshold. A tonality value assesses whether the sound is more tone-like or noise-like and then sets the masking threshold accordingly.

B. The '080 Patent

The '080 patent is a reissue patent. The original patent on which it was based is U.S. patent No. 5,627,938 ("the '938 patent") which was applied for on September 22, 1994, issued on May 2, 1997, and assigned to Lucent. On its face, the '938 patent claims to be a continuation of application serial no. 844,811 filed on March 2, 1992. The '938 patent is directed to methods of encoding audio information in the smallest file size with the highest sound quality. To accomplish this goal, the method uses two thresholds, a masking threshold which measures whether introduced noise (from the encoding) is audible and an absolute hearing threshold which measures the quietest sounds that can be heard by a human.

On August 13, 2002, Lucent applied for a reissue of the '938 patent. The reissue, the '080 patent, was granted on April 25, 2006. The claims of the reissue are almost identical to those of the '938 patent; the only change is the deletion of dependent claim 2 in the reissue. Otherwise, the claim language remains essentially the same. The change appears in Lucent's claim of priority date in the '080 patent, which now reads:

This is a reissue application of U.S. Pat. No. 5,627,938 filed Sep. 22, 1994 as application Ser. No. 08/310,898 which is a continuation of application Ser. No. 07/844,811, filed on Mar. 2, 1992, now abandoned, which is a continuation-in-part of application Ser. No. 07/844,967 filed Feb. 28, 1992, now abandoned, which is a continuation of Ser. No. 07/292,598 filed Dec. 30, 1988 now abandoned.

Hence, if given effect, the '080 patent now claims priority back to December 30, 1988. The application to which it claims priority, serial no. 07/292,598 issued as U.S. Patent No. 5,341,457 ("the '457 patent"), the other patent at issue in the instant Group 2 audio coding litigation.



Federal Rule of Civil Procedure 56(c) provides that summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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." In considering the motion, the court must examine all the evidence in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). If the Court is unable to render summary judgment upon an entire case and finds that a trial is necessary, it shall if practicable grant summary adjudication for any issues as to which, standing alone, summary judgment would be appropriate. Fed. R. Civ. P. 56(d).

When the moving party does not bear the burden of proof, summary judgment is warranted where the moving part demonstrates an absence of facts to support the non-moving party's case and where the non-moving party responding to the motion fails "to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).

B. Lucent's Motion for Summary Adjudication on the '457 Patent

1. No Invalidity for Indefiniteness

Lucent moves for summary adjudication that the claims of the '457 patent are not invalid under §112 ¶2 for indefiniteness. Section 112 paragraph 2 requires the claims of a patent to point out and distinctly claim "the subject matter which the applicant regards as his invention." 35 U.S.C. §112. Lucent contends that Microsoft's only evidence on which it rests its allegations is the testimony of inventor James Johnston offering a purported understanding of the invention that differs from the claims. In response, Microsoft argues that it has offered not only the inventor's testimony but also expert opinion that the '457 specification does not teach the association of a tonality value with each frequency group, as set forth in the claims.

Having considered these contentions and the evidence in support thereof, the Court finds there is no genuine issue of material fact regarding invalidity. In Solomon v. Kimberly-Clark Corp., the Federal Circuit concluded that "that inventor testimony, obtained in the context of litigation, should not be used to invalidate issued claims under section 112, paragraph 2." 216 F.3d 1372 (Fed. Cir. 2000). Thus, James Johnston's testimony is insufficient to support a claim for invalidity. Additionally, Microsoft's expert opinion goes towards lack of written disclosure under §112 ¶ 1, rather than indefiniteness under §112 ¶ 2. Therefore, Lucent's motion for summary adjudication on this ground is GRANTED.

2. No Patent Exhaustion

Under the doctrine of patent exhaustion, often referred to as the "first sale" doctrine," once a patentee has sold a patented product without any further restrictions, the patentee has parted with his exclusive rights. Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 707 (Fed. Cir. 1992). In its fifteenth affirmative defense, Microsoft alleges that it bought the accused software from German corporation Fraunhofer Gesselschaft ("Fraunhofer") which allegedly had rights from AT&T (Lucent's predecessor), thus giving rise to patent exhaustion..

This is not the first time this issue has been raised before the Court: In July 2005, the Court heard and denied Microsoft's motion for partial summary judgment that the Fraunhofer MP3 codecs used by Microsoft cannot infringe due to patent exhaustion.*fn1 At the time the Court ruled, there remained an outstanding issue as to whether an additional written agreement existed other than the 1989 Joint Development Agreement ("JDA") between Fraunhofer and AT&T that would permit Fraunhofer the right to produce and sell the software performing the method of the '457 patent. In the instant motion, Lucent argues since the Court has rejected this defense, Microsoft should be precluded from asserting it any further. In opposition, Microsoft contends that although there is no other agreement, parole evidence raises an issue of material fact as to the intent of the JDA.

Having considered these arguments, the Court finds that the JDA on its face is not ambiguous. It sets forth no right for Fraunhofer to sell the technology of the '457 patent.

Moreover, even if this Court were to take into consideration the parole evidence offered, it would not raise a genuine issue of material fact: the majority of the evidence is testimony taken many years after the JDA was formed and after other interests have intervened. Additionally, some of the proffered evidence does not even speak to the technology of the '457 patent but only to the parties' intent concerning technology of U.S. Patent No. 5,627,938, (the predecessor to the '080 patent). Therefore, Lucent's motion for summary adjudication to preclude Microsoft from going forward on the defense of patent exhaustion is GRANTED.*fn2

3. No Implied License

To prevail on an implied license theory, Microsoft must prove that "the circumstances of the sale . . . plainly indicate that the grant of a license should be inferred." LG Electronics, Inc. v. Bizcom Electronics, Inc., 453 F.3d 1364, 1369 (Fed Cir. 2006).

Lucent contends, similar to its argument regarding patent exhaustion, that the Court has already addressed this issue and concluded that there was no implied license. Microsoft responds that its new evidence pertaining to patent exhaustion also raises issues of material fact with respect to implied license. Having considered the agreements and supporting evidence, for similar reasons to those discussed above, Lucent's motion to preclude Microsoft from going forward on the defense of implied license is GRANTED.

4. No Equitable Estoppel/Implied License/Waiver

To prevail on a defense of equitable estoppel, the defendant must demonstrate: "1) the patentee, through misleading conduct, leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer, 2) the alleged infringer relies on that conduct, and 3) due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim." Ecolab, Inc. v. Envirochem, Inc., 264 F.3d 1358, 1371 (Fed. Cir. 2001). Waiver/implied license arises where language or conduct by the patentee leads another to "properly infer that the owner consents to his use of the patent in making or using it, or selling it." Winbond Electronics Corp. v. International Trade Com'n, 262 F.3d 1363, 1374 (Fed. Cir. 2001). Both of the defenses share the element of reliance.

Here, Lucent contends that Microsoft has failed to provide evidence of any conduct or any reliance that would constitute equitable estoppel or waiver. In response, Microsoft offers evidence of Lucent's long silence on Microsoft's products and a double-hearsay statement allegedly made by someone at Lucent to someone at Microsoft that Microsoft was not on Lucent's radar screen with regard to its patent portfolio.*fn3 This evidence does not satisfy the burden of presenting some evidence of a basis for equitable estoppel. See A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1043 (Fed. Cir. 1992) ("silence alone will not create an estoppel unless there was a clear duty to speak."); Winbond Electronics Corp. v. International Trade Com'n, 262 F.3d 1363, 1374 (Fed. Cir. 2001) (alleged infringer must know about the patent and reasonably infer acquiesce to the infringement from the patentee's acts or statements to demonstrate waiver/implied license); but see Hynix Semiconductor Inc. v. Rambus Inc., 2006 WL 1867724 (N.D.Cal. 2006) (a party's affirmative representation that it has no patents covering the alleged infringer's activities may be sufficient to apply equitable estoppel where alleged infringer had no knowledge of patentee's patent).

But, even if the above evidence were enough to require further analysis, Microsoft fails to make a sufficient showing of reliance to raise a genuine issue of material fact; it offers nothing more than conclusory statements of what it might have done but no evidence that it actually did rely on Lucent's conduct or statement. In fact, it is not disputed that the only sworn testimony on the subject of reliance came from two tendered Microsoft witnesses who both testified that they did not rely on any assurances from Lucent. Therefore, there is no material issue of fact on reliance and Lucent's motion on Microsoft's defenses of equitable estoppel/waiver/implied license is GRANTED.

5. No Laches

For the defense of laches, "a defendant has the burden to prove two factors: 1. the plaintiff delayed filing suit for an unreasonable and inexcusable length of time from the time the plaintiff knew or reasonably should have known of its claim against the defendant, and 2. the delay operated to the prejudice or injury of the defendant." Aukerman, 960 F.2d at 1032. Laches, however, will not bar post-filing damages or injunctive relief. Id. at 1040. "Laches bars relief on a patentee's claim only with respect to damages accrued prior to suit." Id. at 1041. In ...

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