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Lucent Technologies, Inc. v. Gateway

August 6, 2007


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



On January 29, 2007, a jury trial commenced in case no. 02cv2060 on issues pertaining to audio coding patents U.S. Patent Nos. 5,341,457 and RE 39,080 ("the '457 patent" and "the '080 patent," respectively). On February 22, 2007, the jury returned a verdict in favor of Plaintiff Lucent Technologies, Inc. ("Lucent") finding the patents valid and infringed by Defendant Microsoft Corporation ("Microsoft").

Following the trial, the Court also ruled on the non-jury issues of standing and Microsoft's license defense. These rulings were based on the jury's finding that the work incorporated into U.S. Patent No. 5,627,938 ("the '938 patent"), the patent on which the reissue '080 patent is based, was not performed on or after April 1989. The Court held that the '080 reissue patent is not co-owned by Fraunhofer; Lucent is sole owner of the '080 patent and has standing to sue for infringement. The Court also ruled that the Fraunhofer-Microsoft Agreement did not confer a license to Microsoft to practice the'080 patent.

Microsoft now moves the Court for judgment as a matter of law under Fed. R. Civ. P. 50(b) on the following issues: (1) no infringement of the '457 patent; (2) no infringement the '080 patent; (3) the '080 patent is not "existing work" under the AT&T-Fraunhofer Agreement; (4) invalidity; and (5) damages. In addition, Microsoft moves the Court to amend its judgment under Fed. R. Civ. P. 52(b) regarding Lucent's standing and Microsoft's license defense. Microsoft also moves for a new trial on related issues including: (1) infringement; (2) the categorization of the '080 patent as "Existing Work";(3) invalidity; and (4) damages.


A. Judgment as a Matter of Law

A motion for judgment as a matter of law must be denied, and a jury verdict upheld, if the judgment is supported by substantial evidence. Johnson v. Paradise Valley Unified School District, 251 F.3d 1222, 1227 (9th Cir. 2001). Substantial evidence is evidence adequate to support the jury's conclusion, even if it is possible to draw a contrary conclusion from the same evidence." Id. The Court must review the record as a whole but disregard all evidence favorable to the moving party that the jury is not required to believe. Id. All reasonable inferences must be drawn in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986).

B. New Trial

The power of the court to grant a new trial under Fed. R Civ. P. 59(a) is "confided almost entirely to the exercise of discretion on the part of the trial court." Murphy v. City of Long Beach, 914 F.2d 183, 186 (9th Cir. 1990) (quoting Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33, 36 (1980)). Unlike a motion for judgment as a matter of law, "[t]he judge can weigh the evidence and assess the credibility of witnesses, and need not view the evidence from the perspective most favorable to the prevailing party." Landes Const. Co., Inc. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th Cir. 1987); Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) ("the district court has the duty to weigh the evidence as the court") (internal quotations omitted). The district court should "set aside the verdict of the jury, even though supported by substantial evidence, where, in the court's conscientious opinion, the verdict is contrary to the clear weight of the evidence." Molski, 481 F.3d at 729.; see also Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir. 2001) ("a trial court may grant a new trial if the verdict is contrary to the clear weight of the evidence . . . or to prevent, in the sound discretion of the trial court, a miscarriage of justice"). In general, a court should grant a new trial only when it "is left with the definite and firm conviction that a mistake has been committed." Landes Constr., 833 F.2d at 1372. "[A] district court may not grant a new trial simply because it would have arrived at a different verdict." Silver Sage Partners, 251 F.3d at 819.


Among the affirmative defenses raised by Microsoft, two related to the ownership of the '080 patent. Microsoft asserted that the '080 patent was co-owned by Fraunhofer Gesellschaft ("Fraunhofer"), a German research company. As such, Microsoft contended that Lucent lacked standing to bring suit against Microsoft for infringement of the '080 patent. Microsoft also asserted the defense of license, contending that it had a license from Fraunhofer to practice the '080 patent. These affirmative defenses were addressed in two parts at trial. The jury heard evidence on the factual question of whether any work performed during the period of collaboration between AT&T and Fraunhofer had been incorporated into any of the claims of U.S. Patent No. 5,627,938 ("the '938 patent") which then was reissued as the '080 patent. The Special Verdict Form included a "Special Question" on this issue: "Has Microsoft proven by a preponderance of the evidence that work was performed on or after April 1989 which was incorporated into any of the claims of the '938 patent? Please answer yes or no." The jury answered "no." Based then on the jury's factual finding, the Court ruled that under the 1989 research agreement between AT&T and Fraunhofer ("the JDA"), Fraunhofer was not a co-owner of the '938 patent or the '080 reissue patent. Therefore, Lucent had standing to sue and the defense of license was not available to Microsoft. Microsoft now challenges the jury's findings and the Court's subsequent rulings on a number of grounds.

A. Exclusion of Deposition Testimony from Mr. Restaino and Mr. Devilliers

At trial on February 12, Microsoft attempted to play two video-taped depositions before the jury to which Lucent objected. (Trial Tr. vol. X, 17:6-24:7, Feb. 12, 2007.) The first was the deposition of Mr. Restaino from AT&T and the other was the deposition of Mr. DeVilliers from Creative Labs. Mr. Restaino was to testify about AT&T's view of the rights under the JDA. (Id. at 18:4-18.) The Court ruled that AT&T's opinions of Lucent's duties under the agreement were not relevant. (Id. at 19:16-24.) Mr. DeVilliers was to testify about Lucent 's reticence in its negotiations with Creative Labs to discuss Lucent's rights under the JDA. (Id. at 20: 8-16, 21:18-25.) The Court ruled that this latter testimony was collateral, lacking relevance and confusing to the jury. (Id. at 23:2-6.)

Microsoft now argues that the exclusion of these depositions was in error because the jury was entitled to hear how AT&T and Lucent viewed the JDA. The Court, however, finds no error or prejudice in the exclusions. First, Microsoft incorrectly asserts that the Court's reason for the exclusion of the testimony was because it was deemed "not credible" and that credibility should have been a question for the jury. This is belied by the record; the Court excluded the testimony as not relevant and/or prejudicial. Microsoft confuses "credibility" with "admissibility." Admissibility is a question for the court, not the jury. Fed. R. Evid. 104. Additionally, Microsoft has not pointed to any jury issue on which this evidence would have been relevant. The interpretation of the JDA was a question left to the Court, not the jury. Therefore, the Court DENIES Microsoft's motion for a new trial on this ground.

B. New Work Versus Existing Technology Under the JDA

The JDA between Fraunhofer and AT&T covered collaborative work during the period of the stay of Karlheinz Brandenburg at AT&T. (DX 6489 at 2.) This period began in April 1989 and ended in June 1990. (Trial Tr. vol. VI, 192:15-17, Feb. 5, 2007.) All work done on digital audio coding during this period was classified as "New Work" and would be jointly owned by AT&T and Fraunhofer. (DX 6489 at 2, 3 § 1.) In 1991, the period covering New Work was extended by AT&T and Fraunhofer to cover work that continued after the expiration of the JDA and the departure of Brandenburg. ("the extension letter," DX5616.) The parties agreed to extend the period indefinitely, until one of the parties gave notice to terminate the arrangement. (Id.) No evidence was presented that the parties ever terminated the agreement. Hence, the combined effect of the JDA and the extension letter defines the period of New Work as beginning in April 1989 at the arrival of Brandenburg and continuing indefinitely thereafter.

In the instant trial, Lucent and Microsoft agreed to present the factual question of New Work to the jury by asking whether or not work performed on or after April 1989 was incorporated into any of the claims of the '938 patent. (Special Verdict Form; Tr. Chambers Feb. 7, 2007, 173:12-24; Trial Tr. vol. XII, 90:7-22, Feb. 14, 2007.) Microsoft's prima facie case relied on the description of the work in the '938 patent specification. The '938 patent was applied for on September 22, 1994 and claimed priority as a continuation of application serial no. 844,811 to March 2, 1992. This dated the work described and claimed therein to 1992. Lucent argued that the claims of the '938 patent were described in the '457 patent specification filed in 1988; this placed the date of this work before the April 1989 dividing line in the JDA.*fn1 Lucent also presented testimony of Mr. Johnston, the inventor of the '938 patent, on work he had performed on or around 1988.

Microsoft now contends that there was insufficient evidence on which the jury could have found that the work encompassed in claims 2 and 4 of the '938 patent was not performed on or after April 1989.

1. Claim 2

Claim 2 is a dependent claim which includes the method of claim 1 and adds the limitation "wherein the set of frequency coefficients are MDCT coefficients." Microsoft contends that MDCT (modified discrete cosine transform) coefficients are nowhere mentioned in the '457 patent and thus this patent and its date of filing cannot provide evidence that the work embodied in claim 2 was performed before April 1989.

Regarding the disclosure of the claimed method using an MDCT, Lucent argues that sufficient evidence was presented on this point in the form of testimony of witnesses and statements in the '938 patent specification showing that MDCT coefficients were well known in the art. It contends that because the '457 patent describes time to frequency transforms and an MDCT is a type of such transform, one of ordinary skill in the art would understand the '457 to include the method set forth in claim 2 of the '938 patent.

This contention is problematic. First, as a matter of law, claim 2 cannot claim priority to the '457 patent based on the evidence presented at trial. The '457 specification does not mention MDCTs. Dr. Jayant's testimony stated only that MDCTs were known at the time of the '457 patent. (Trial Tr. vol. XI, 101:4-11, Feb. 13, 2007.) He also testified that one of ordinary skill in the art would have recognized that the claimed methods could have been implemented with an MDCT and would have been able to do so without undue specification. (Id. at 101:12-24.) This testimony does not demonstrate that the method of claim 2 was sufficiently described in the '457 patent. "A description which renders obvious the invention for which an earlier filing date is sought is not sufficient." Lockwood v. American Airlines, Inc., 107 F.3d 1565, 1572 (Fed. Cir. 1997). A demonstration of obviousness is not sufficient to show the inventor "possessed" the invention. Id.

Second, simply because one of skill in the art may have been able to implement claim 2 from the '457 patent specification and the knowledge in the art as to MDCTs, does not lead to the conclusion that the inventor of the '938 patent, Johnston, performed such work as of the filing date of the '457 patent. On this topic, Johnston testified that he did not perform this work before the collaborative period of the AT&T-Fraunhofer agreement began:

Q Who taught you about an MDCT?

A Well, I hadn't heard of it until I saw Karlheinz's paper, and then I had sort of looked at it before Karlheinz came, but when Karlheinz came and sat down and explained it, that was when I really learned about it. It was the first time I actually got my hands on it practically.

Q In other words, in 1989?

A Yeah.

Q Okay. And did you have any understanding from Doctor Karlheinz -- Doctor Brandenburg at the time you did the work on the 457 patent?

A No. I hadn't heard of the MDCT at all. Apparently the publication was out, but I hadn't spotted it.

(Trial Tr. vol. VI, 36:13-25, Feb 5, 2007.) Although Lucent argues that the jury could have disregarded this testimony, there was no other evidence of record that the work was performed prior to April 1989. The only other evidence of the work encompassed by claim 2 was the '938 specification itself, with a date of 1992.*fn2 Therefore, the jury's finding that claim 2 was not performed on or after April 1989 is not supported by sufficient evidence; the Court therefore GRANTS judgment as a matter of law on this ground. Additionally, because the jury's verdict was against the clear weight of the evidence, in the alternative, the Court GRANTS a new trial on this issue.

2. Claim 4

In the Markman hearing preceding trial, the Court construed the means for receiving and the means for converting as set forth in claim 4 to require the same corresponding structure:

Structure: (as described in the ['938] specification at Col. 23:59 - Col. 24:1)*fn3, adigital signal processor (DSP), a DSP with software, VLSI hardware embodiments, or hybrid DSP/VLSI embodiments.

These corresponding structures (DSP and VLS1) do not appear in the '457 specification; they appear for the first time in the '938 patent specification filed in 1992. At trial, however, Lucent's expert Dr. Jayant testified in a conclusory fashion that this corresponding structure was disclosed in the '457 specification. (Trial Tr. vol. XI, 110:1218, Feb. 13, 2007.) He did not, however, indicate where these structures could be found in the '457 specification. Instead, Jayant's testimony took two paths - both insufficient as a matter of law to demonstrate that the written description in the '457 patent could provide a 1988 priority date for claim 4.

First, Jayant testified that the two "means" could be found in Figure 7 of the '457 patent, labeled as boxes 72 and 76. He indicated that box 76 was where the bitstream came into the decoder and was unpacked; box 72 transformed frequency information into a time wave form. (Id. at 109:5-15, 110:1-11.) He did not identify these boxes as "structures." Figure 7 of the '457 patent identifies only function and does not describe any structures that carry out these functions. Moreover, even if boxes 72 and 76 could themselves arguably represent a structure, Lucent did not present any evidence through Jayant or any other witnesses to show that such structure was the same or equivalent to the corresponding structure for claim 4 as construed by the Court.

Second, Jayant's testimony that one of skill in the art would know that the DSP/VLS1 structures could be used for implementing the means for receiving and converting functions (id. at 110:19-111:6) also is insufficient. "[S]tructure supporting a means-plus-function claim under § 112, ¶ 6 must appear in the specification . . . [the] consideration of the understanding of one skilled in the art in no way relieves the patentee of adequately disclosing sufficient structure in the specification. Medical Instrumentation and Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1212 (Fed. Cir. 2003); Biomedino, LLC v. Waters Technologies Corp., - - F.3d - -, 2007 WL 1732121, *5 (Fed. Cir. June 18, 2007).

Dr. Jayant's legally unsupportable opinions cannot support the jury's verdict. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242 (1993) ("When an expert opinion is not supported by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict or otherwise render the opinion unreasonable, it cannot support a jury's verdict."); Tronzo v. Biomet, Inc.,156 F.3d 1154, 1159 (Fed. Cir.1998) (expert testimony that was either contradicted by the patent specification itself and/or incorrect based on the applicable law was insufficient to support the jury's verdict on written description and priority date).

As with claim 2, the disclosure of the '938 patent establishes a prima facie case that the corresponding structure for claim 4 was first described therein and thus entitled to a date no earlier than 1992. Having excluded Dr. Jayant's testimony on claim 4, there is no other evidence that rebuts this prima facie showing. The only other evidence relied on by Lucent, the inventor Mr. Johnston's testimony, does not indicate that the work incorporated in claim 4 was performed prior to April 1989. Johnston testified that he constructed his perceptual transform (PXFM) decoder software by April 2, 1987 (Trial Tr. vol. VI, 97:511, Feb. 5, 2007.) Johnston testified only that his constructed PXFM performed the functionality related to the decoder described in the '457 patent; he did not testify as to whether his constructed decoder had the DSP and/or VLS1 corresponding structures. Lucent's argument that several experts testified as to the existence of DSPs before April 1989 is of no avail, nor is the evidence that Johnston may have known about DSPs in some general context (but not in the context of his invention). The question is not whether the inventor could have constructed the decoder with the corresponding structure but whether he did.

Because the only evidence of work involving the decoder constructed with the DSP and/or VLSI corresponding structure appeared in the '938 specification as filed September 22, 1994 (priority date March 2, 1992), there was insufficient evidence to support the jury's verdict that claim 4 was performed before April 1989. Therefore, Microsoft's motion for judgment as a matter of law on this issue is GRANTED. Additionally, because the jury's verdict was against the clear weight of the evidence, in the alternative, the Court GRANTS a new trial on this issue.

C. Ownership of the '080 Patent

Having determined that claims 2 and 4 were performed on or after April 1989, under the JDA, these claims constitute "New Work." The question then turns to the ownership rights of this work as it stands incorporated into the '938 and '080 patents. The JDA contains the following relevant provisions on ownership of New Work:

All New Work is treated as joint work. The intellectual property rights to that workwill be jointly owned by AT&T and FhG. Each party has the nonexclusive right tomake use of the results of New Work (including intellectual property rights), andmay grant nonexclusive licenses to others to use the results of such New Work.

(DX 6489 at 3 § 1.)

The parties will consult with each other regarding the filing of patent applications onNew Work including New Work reflected in the above-mentioned transmittals andpapers proposed for publication. Each party will have the first opportunity to filepatent applications for New Work done primarily by its employees, but if a partydeclines the opportunity to file any such patent application, or after filing any patentapplication chooses not to proceed further in attempting to secure a patent, the otherparty may elect to do so. Each party will ensure that its employees, and otherscooperating with it in New Work cooperate with the other party in filing all patentapplications.

(Id. at 3 § 2.) Based on these passages and the context of the agreement, the JDA evidences an intent to share ownership of New Work, including work on which patent applications would be filed.

The '938 and '080 patents encompassing the jointly owned New Work also contains two additional claims (claims 1 and 3) that are not New Work.*fn4 These claims are classified as "Existing Technology" under the JDA, defined as Digital Audio Coding Work before the beginning of the period of Brandenburg's stay at AT&T (before April 1989) as described in Attachments A ...

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