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Lucent Technologies, Inc. v. Gateway


April 30, 2008


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



Defendant Dell Inc. seeks attorney's fees on the ground that it was the prevailing party in this "exceptional case" regarding Plaintiff Lucent Technologies Inc.'s Doughty Patent, which claims a method and apparatus for receiving and displaying the identity of the telephone caller from a telephone switching system (U.S. Patent No. 4,582,956).*fn1 35 U.S.C. § 285. For the reasons stated below, the Court grants the motion.


Lucent Obtains Doughty Patent In 1983, Plaintiff Lucent applied for the Doughty patent (U.S. Patent No. 4,582,956), which issued in 1986. Def.'s Ex. B. The asserted claims are directed to methods and an apparatus for receiving and displaying Caller Identification information sent from a telephone switching system. The pertinent claims require the detection of an "unmodulated signal" in the context of receiving and displaying Caller ID information. E.g., id. (claims 1 & 9 "detecting said unmodulated signal during said silent interval between said ringing signals").

Lucent's Arguments During Reexamination Proceedings

On an application filed by a competitor in 1992, the PTO reexamined the Doughty Patent. Def.'s Ex. E at 108. In order to overcome prior art (such as the Baker patent issued in 1981), Lucent argued that signals that conveyed digital zeros or ones were signals that conveyed information and thus were not "unmodulated." E.g., Def.'s Ex. E at 188-92. Nonetheless, the PTO invalidated those claims of the Doughty Patent. Id. at 195-97.

In response, Lucent filed its own request for reexamination in 1993 and proposed the addition of new claims. Id. at 207; see also id. at 227 & 237. Lucent defended its patent by focusing on its "unmodulated" signal to trigger a unit to receive the modulated signal. Id. at 209. The PTO again rejected these arguments. Id. at 255-70. Next Lucent proposed new claims and distinguished Baker's first signal ("segment 83" of Figure 2) as containing a countable number of zeros and ones, which meant it was a modulated signal carrying coded information. Id. at 278, 282-87.*fn2 By contrast, Lucent argued that its Doughty Patent used "unmodulated signals" which were "segments in which it is impossible to identify individual ones and zeros or any other intelligence" because "[a] signal which can be decoded, to recognize exactly N zeros, is not an unmodulated signal, i.e., a signal from which no bits can be derived." Id. at 287. Lucent argued that "N zeros represent information, i.e., the digital trigger for reliably identifying subsequent conventional data signals." Id. at 286 (some emphasis omitted). Lucent's expert stated that the transmission of N zeros to assist in the detection of conventional data conveyed information, therefore, did not qualify as an "unmodulated signal." Id. at 294 (Davis Decl. ¶ 14). In 1994, the PTO issued a Reexamination Certificate with additional claims 15-19. Id. at 302 & Def.'s Ex. B at 26.

Industry Standards for Caller Identification

In the 1990's, the telephone company standard, which was publicly and widely available, implemented a Caller ID system that used two signals of countable zeros and ones that were used to convey specific information to alert the customer's equipment to prepare to receive Caller ID data. Micallef Decl., Ex. D at § 2.4.2 (generic requirements on voiceband data transmission interface). First published in December 1994, Issue 2 of the GR-30-CORE standard was published in December 1998. Id. at Copyright Page & Preface-2. The GR-30-CORE standard for on-hook data transmission consists "of a block of 300 continuous bits of alternating "0"s and "1"s. The first bit to be transmitted shall be a "0". The last bit to be transmitted shall be a "1". . . . [T]he Mark Signal shall consist of 180 mark bits." Id. at § 2.4.2 (RS-69 & RS-70). A "Mark Signal" is "[a] string of mark bits sent immediately before data transmission starts to alert the [Customer Premises Equipment] to this downloading of data." Id. at Glossary-1. A mark is "[a] single bit set to the logical value of '1'." Id.


In 2002, Lucent alleged infringement of the Doughty '956 Patent (Claims 1, 9, and 15-19) by the sale of computers with telephone modems that allowed users to connect to a telephone line because the software displayed Caller ID information for incoming calls.*fn3

Dell defended itself by claiming its own products used "modulated" signals for receiving Caller ID information. Dell argued that its products operate with signals that do contain information in the form of intelligence expressed digitally as countable zeros and ones, or "modulated" signals. Specifically, Dell's products detect a "Channel Seizure Signal" (with 300 continuous bits of alternating zeros and ones) and a "Mark Signal" (with 180 mark bits -- which is another name for a digital one) transmitted by local telephone companies, which complied with the GR-30-CORE Standard.

Court's Claim Construction

In October 2005, after conducting the Markman hearing on the Doughty Patent, the Court issued its Claim Construction Order. [# 372, Ex. A at 3 & Ex. B at 14]; Def.'s Ex. C at 32 & 43. The Court construed the term "unmodulated signal" to be "a signal containing no information (intelligence expressed digitally as countable zeros and ones)." Id. (emphasis added). By comparison, the Court construed the term "modulated signal" as "a signal carrying information (intelligence expressed digitally as countable zeros and ones)." Id. The Court stated that the function of the unmodulated signal is to alert the receiver that the Caller ID information will be transmitted. Id.

Summary Judgment

In April 2007, Defendant Dell (joined by Gateway) filed a motion for summary judgment of non-infringement. Lucent did not oppose the motion on the doctrine of equivalents. Lucent argued direct infringement because the signals used by the Defendants' computers and the Doughty Patent "only alert the receiver to the approach of incoming caller ID information." In May 2007, the Court granted the Defendants' motion of no literal infringement. There was some debate amongst the experts as to whether the computers counted zeros and ones, but the Court held that "regardless of the counting, the accused devices used 2 analog frequencies to represent a digital signal comprised solely of zeros and/or ones. Thus, the accused devices do not use 'simply an analog signal' as the unmodulated signal defined by the patentee." [# 1793]; Def.'s Ex. A. at 8-9. As a result of no direct infringement, there was no inducing or contributory infringement.

In September 2007, the Court entered Rule 54(b) Judgment in Defendants' favor on the Doughty Patent. [# 2024] Lucent appealed; however, in December 2007, it voluntarily dismissed that appeal. Dell seek attorneys' fees as to the Doughty Patent on the ground that Lucent's prosecution constituted an exceptional case.


"The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. An exceptional case finding involves two steps. First, the applicant must show clear and convincing evidence that the case is exceptional. Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989). Vexatious or unjustified litigation may make a case is exceptional if it was objectively baseless and maintained in bad faith. Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 455 (Fed. Cir. 1985). In the second step, the Court exercises its discretion as to whether to award attorneys' fees. Stephens v. Tech Int'l, Inc., 393 F.3d 1269, 1273 (Fed. Cir. 2004).

Defendant Dell argues this part of the case is exceptional because Lucent had several opportunities to realize the Doughty Patent was not infringed. Even before Lucent filed the lawsuit, the governing telephone standard used modulated signals. Second, Lucent had defended the Doughty Patent in the re-examination proceedings by arguing that modulated signals, such as those in the Baker prior art, were distinguishable from the claimed unmodulated signals for receiving Caller ID information. Dell argues Lucent unequivocally surrendered this matter. Third, after the Court construed the claims, the Markman Order confirmed that the Doughty Patent did not cover the accused products because Doughty was limited to unmodulated signals. Despite this clear and early information, Lucent pursued its infringement case and forced Defendants to move for summary judgment. Dell argues that Lucent finally recognized the futility of its arguments when it dismissed the appeal of this part of the case in December 2007.

Dell argues Lucent's infringement case was objectively baseless based upon the definitions Lucent proffered during the reexamination process, the publicly-available technical standard, and the Markman Order. Dell cites Phonometrics Inc. v. Westin Hotel Co., 350 F.3d 1242 (Fed. Cir. 2003), for the proposition that a patentee who maintains a case after the claim construction order shows there could be no infringement can be an exceptional case. Dell argues that Lucent's summary judgment brief tried to persuade the Court that it used "unmodulated signals" because the signals were not "intelligent" in a bad faith effort to avoid the "unmistakable claim construction ruling and a clear case of prosecution history estoppel." Dell argues the opposition to the summary judgment was premised on trying to recapture subject matter clearly and unmistakably disclaimed in reexamination, which is expressly prohibited by the Federal Circuit. Norian Corp v. Stryker Corp., 432 F.3d 1356, 1361 (Fed. Cir. 2005) (frequently patentees surrender more than may have been absolutely necessary to avoid a particular prior art reference). Dell contends Lucent should have dismissed after the Court issued the Markman Order, and that its failure constitutes bad faith litigation. Union Oil Co. of Calif. v. Chevron USA Inc., 34 F. Supp. 2d 1222 (C.D. Cal. 1998). Dell argues the Court can infer subjective bad faith because Lucent presented strained arguments to attempt to fit the evidence into a tortured reading of the Markman Order. (In a footnote, Dell argues that Lucent's predecessor submitted a false affidavit claiming that the Doughty technology was being used by consumers, when in fact, the modulated signal enjoyed commercial success.)

Lucent argues that Dell has not met the clear and convincing standard because Lucent acted in good faith to allege infringement.*fn4 Lucent cites Brooks Furniture v. Dutalier Int'al, 393 F.3d 1378, 1381 (Fed. Cir. 2005) for the rule that there are two parts to the exceptional case trigger: "both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless." Lucent should not be penalized automatically for seeking to protect its patents but only when shifting fees will prevent a "gross injustice." Forest Labs., Inc. v. Abbott Labs, 339 F.3d 1324, 1329 (Fed. Cir. 2003). Lucent quotes the Court in the summary judgment hearing tentatively denying the motion and calling the products "very, very close, very similar." Lucent always maintained that the GR-30-CORE standard used its patented technology. The definition at the Markman hearing was hotly debated. Lucent opposed the summary judgment motion with evidence and expert testimony by James Bress (a leading expert and drafter of the governing standards) that accepted the Court's definition. Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1260 (Fed. Cir. 2000) (reasonably relying on retained experts). Instead, Lucent focused on the "intelligence" component to argue infringement. Lucent argued the accused programs merely "alerted" or "detected" an unmodulated signal but did not carry, represent, or put specific information in the specified number of zeros and ones. Lucent also argued the Court's term "information" showed Defendants infringed the Doughty Patent because the signal does not carry information in the precise number of zeros and ones -- just because they can be counted. Lucent dismissed its appeal to focus on other issues, not to concede it's suit lacked merit. In sum, Lucent was not "manifestly unreasonable" in pursuing it case. Phonometrics, 350 F.3d at 1246. At the very least, the Court should exercise its discretion to deny fees.

First Step: Exceptional Case

Addressing the first step, the Court finds that Lucent's unsuccessful infringement case on the Doughty patent qualifies as "exceptional" and thus eligible for an award of attorney's fees. There is clear and convincing evidence from the date the Court issued its Markman Order that Lucent's suit against Dell's modulated signal was unjustified. Lucent knew from the reexamination proceedings that the prior art firmly established the use of signals to insure accurate identification of a coded signal. Whether the Doughty patent's term "unmodulated" could be distinguished from the signals carrying information that had been used in prior art, such as Baker, was the sole basis of the two reexamination proceedings. During those proceedings, Lucent firmly argued the definition of "unmodulated" as being a segment which is impossible to decode rendered its invention patentable over the art that used modulated signals. (The publication of the GR-30-CORE standard using the Channel Seizure Signal and Mark Signal raised additional red flag warnings for Lucent regarding that critical distinction of countable zeroes and ones.) In light of this prosecution history, Lucent filed the lawsuit and proceeded to the claim construction hearing with the laboring oar regarding the definition of modulated and unmodulated. The Court fully explored the possible meaning of these terms during the lengthy Markman hearings, and Lucent had a full and fair opportunity to champion its position. In the end, however, the Court construed the terms "modulated" and "unmodulated" in a manner that clearly established Lucent's infringement suit against Dell wholly lacked merit. The Court finds that as of October 14, 2005, Lucent's suit on the Doughty patent became vexatious. Like the party in the Phonometrics case, Lucent "continued to press its infringement action 'knowing that its claim could not meet the . . . standard for infringement'" as the key terms had been defined by the Court. Phonometrics, 350 F.3d at 1246.

The Court rejects Lucent's contention that it continued in good faith to litigate the case which caused Dell to file a summary judgment motion. Lucent claims that it accepted and used the Court's definition of "unmodulated" and presented expert testimony to argue that Dell infringed the Doughty patent. The Court has reviewed the papers that Lucent filed to oppose the summary judgment motion and concludes that the arguments presented were not reasonable. Lucent offered convoluted and contorted arguments that Dell used "unmodulated" signals because the intelligence was not expressed digitally as countable zeroes and ones. Lucent maintained that its unmodulated signal did not contain information, and that a signal that could be decoded to recognize exactly N zeroes is not an unmodulated signal; yet, Dell's products clearly carried information in countable bits of alternating zeroes and ones. Union Oil, 34 F. Supp. 2d at 1225 (tactics and arguments at trial reflected attempts to circumvent the claim construction order). In the face of Lucent's arguments to the patent examiner on the same subject, Lucent's position in court was objectively baseless such that "no reasonable litigant could realistically expect success on the merits." Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1376 (Fed. Cir. 2004) (citation omitted). Lucent's reliance on its expert, Mr. Bress, who generated the complicated language, does not change the Court's conclusion. It is undisputed that Dell's products used modulated signals that contained information as countable zeroes and ones. Despite the Court's contemporaneous comments at the summary judgment hearing, the Court now has a clear, overall picture of the technological issues, having resolved several other patents in this litigation. The facts and circumstances demonstrate that Lucent's accusation of infringement was frivolous, at least after the Markman Order was issued.

"When 'the patentee is manifestly unreasonable in assessing infringement, while continuing to assert infringement in court, an inference is proper of bad faith, whether grounded in or denominated wrongful intent, recklessness, or gross negligence.'" Phonometrics, 350 F.3d at 1246 (quoting Eltech Sys., Corp. v. PPG Indus., Inc., 903 F.2d 805, 811 (Fed. Cir. 1990)). This record contains stronger evidence of Lucent's subjective bad faith because Lucent had expressly abandoned the subject matter concerning "unmodulated" signals in the reexamination proceedings but it alleged infringement against Dell on that identical issue.

Another factor is that Lucent's employee, Dr. Robert Foster, problematically or erroneously asserted the Doughty patent was being used commercially, when others were actually using only modulated signals. A final factor is Lucent's voluntary dismissal of the appeal, which indicates that Lucent acknowledges that Dell was not infringing the Doughty patent.

Second Step: Discretion

Having determined that the case is exceptional for purposes of § 285, the Court determines, in its discretion, that an award of attorney's fees to Dell is appropriate. Beckman, 892 F.2d at 1552. Dell should not bear the expense of Lucent's misguided decision to continue its lawsuit after the Markman order construed the terms "modulated" and "unmodulated" so as to rule out infringement by Dell's devices. At that juncture, the litigant and the attorneys should have reconsidered the propriety of its lawsuit against Dell. Lucent opposed Dell's summary judgment motion of non-infringement with Bress's declaration that purported to accept that the Doughty patent did not have a specified number of zeroes and ones, but claimed that neither did Dell's, and that therefore, Dell's was not intelligent because "intelligence" required a known, precise, specified number of zeroes and ones. The Court has found that Dell's devices do contain specified zeroes and ones. Lucent's weak argument is not only incorrect, but directly contradicted the facts of Dell's devices in order to find infringement. This demonstrates subjective bad faith. An award of attorney's fees should reimburse Dell for that portion of the case (as to the Doughty patent) that Lucent knew was not supported by the evidence on or after the date of the Markman Order. Lucent's efforts to justify its litigation position after Markman are not in the least persuasive. For the totality of these circumstances, the Court exercises its discretion to grant Dell's "exceptional" case motion from the date of the Markman Order. Eltech, 903 F.2d at 810-11.

Billing Evidence

On or before May 30, 2008, Dell shall submit a reasonable fee request containing detailed record of the hours devoted to the Doughty patent from the time of the Markman order on October 14, 2005 to present. On or before June 30, 2008, Lucent shall file any objections to the requested fees. Thereafter, the Court will determine the amount of the award.


Having considered the legal arguments of counsel and upon its review of the record, the Court grants Defendant Dell's motion to declare Plaintiff Lucent's patent infringement claim on the Doughty patent as an exceptional case pursuant to 35 U.S.C. § 285. [# 2161].

On or before May 30, 2008, Dell shall submit a statement of its attorney's fees. Lucent may file objections on or before June 30, 2008.

In light of the settlement with Lucent, Gateway's joinder in this motion is deemed withdrawn. [# 2169]


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