Addressing multiple issues in the long-running litigation between competing power supply controller chip companies, the US Court of Appeals for the Federal Circuit affirmed in part, reversed in part and vacated in part the district court’s final judgment, ultimately reducing both parties’ liability for infringement. Power Integrations Inc. v. Fairchild Semiconductor Int’l, Inc., Case No. 15-1329 (Fed. Cir., Dec. 12, 2016) (Chen, J).

Power Integrations (PI) sued Fairchild Semiconductor International in 2008 alleging direct and indirect infringement of four patents. Fairchild counterclaimed that PI directly and indirectly infringed three patents. Both parties’ patents relate to different aspects of power supplies, including frequency jitter, which is the concept of varying the frequency of the controller chip’s oscillator, and current limiting, the concept of using a regulator to steadily increase the power supply’s current threshold. The jury returned a mixed verdict finding that both sides’ patents were valid and that each side infringed some (but not all) of the patents under various theories. The district court granted PI’s motion for a permanent injunction and denied Fairchild’s motion for permanent injunction. Both sides appealed.

Fairchild appealed the jury’s finding that it induced infringement of two frequency jitter patents, arguing that the jury instructions misstated the law on inducement. Specifically, the instructions stated that under a theory of induced infringement, the “infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.” The Federal Circuit agreed with Fairchild, finding that these instructions provided the jury with the improper understanding that a party could be liable for induced infringement without ever actually communicating with and inducing a third-party infringer. Instead, the term “induce,” as used in § 271(b) and explained by the Supreme Court of the United States, requires successful communication between the alleged inducer and the third-party infringer. Without actual inducement, there can be no finding of induced infringement. The Court vacated the jury’s inducement verdict but declined Fairchild’s request for judgment as a matter of law of no induced infringement, finding that the evidentiary record allowed more than one reasonable finding on the inducement issue and that PI presented significant evidence at trial to support a finding of inducement.

PI appealed the finding of infringement under the doctrine of equivalents. Specifically, at trial PI successfully argued that its product contained only a single feedback signal, rather than two distinct signals, and so it could not infringe. The jury found no literal infringement but found infringement under the doctrine of equivalents. On appeal, PI argued that the jury’s verdict could not be reconciled with the law, and the Federal Circuit agreed. Applying a claim vitiation analysis, the Court explained that, if a finding of infringement under the doctrine of equivalents would entirely vitiate a particular claimed element, the court should rule that there is no such infringement. Here, because the jury found no literal infringement, it must necessarily have found that PI’s products contained only a single feedback signal. Furthermore, any finding that the single feedback signal was equivalent to the two distinct feedback signals would vitiate the distinction required by the claims.

Turning to the permanent injunction question, the Federal Circuit found that because it had reversed the jury’s infringement verdict with respect to PI, Fairchild’s appeal regarding a permanent injunction was moot. The Court also vacated the permanent injunction against Fairchild, explaining that it had “significantly reduced the scope of Fairchild’s liability” by vacating the jury’s finding of induced infringement, among other rulings. The Court concluded that, given the changed circumstances, the district court is in the best position to determine in the first instance if a permanent injunction is appropriate.