The US Court of Appeals for the Federal Circuit affirmed in part, reversed in part, vacated in part and remanded the district court’s findings of definiteness, grant of absolute intervening rights, denial of enhanced damages, award of lost profits and grant of permanent injunction. Presidio Components, Inc. v. American Technical Ceramics Corp., Case Nos. 16-2607; -2650 (Fed. Cir., Nov. 21, 2017) (Dyk, J).

Presidio sued American Technical Ceramics (ATC) alleging infringement of a patent that claims a multilayer capacitor design and teaches a multilayer integrated network of capacitors electrically connected in series and in parallel. While the district court infringement suit was pending, ATC sought an ex parte re-examination of the asserted patent claims. Presidio amended the claims after the examiner rejected the claims as anticipated and obvious. The US Patent and Trademark Office issued a re-examination certificate amending certain claims at issue in the district court action. Thereafter, Presidio amended its complaint to assert these claims.

The district court granted ATC’s motion for summary judgment on the affirmative defense of absolute intervening rights. After a jury trial, ATC was found to infringe and induce infringement of the asserted claims. The jury awarded Presidio more than $2 million in lost profit damages and also found that ATC’s infringement was willful. The district court rejected ATC’s contention that the asserted claims were indefinite and denied ATC’s motion that Presidio had failed as a matter of law to prove lost profits. The district court also denied Presidio’s motion for enhanced damages despite the jury’s willful infringement finding, and entered a permanent injunction against ATC. ATC appealed the district court’s indefiniteness ruling, lost profits award and permanent injunction. Presidio cross-appealed the district court’s intervening rights ruling and denial of enhanced damages.

The Federal Circuit affirmed the district court’s holding that the claims were not indefinite, finding that the method of measuring capacitance was sufficiently well known in the art and referenced in the patent. (See also BASF Corp. v. Johnson Matthey, Inc., in this issue of IP Update). The Court agreed with the district court’s grant of absolute intervening rights, noting that a patentee is only entitled to infringement damages for the period following issuance of the re-examination certificate if an amendment during re-examination makes a substantive change to an original claim. Here, the Court found that under the claim construction of the original claims in an earlier infringement suit between the parties, fringe-effect capacitance could be determined by theoretical calculations that are insufficient under the amended claims. As such, the Court found there was a substantive change in claim scope.

Moving to remedies, the Federal Circuit reversed the district court’s award of lost profits and remanded for determination of a reasonable royalty. Focusing on the second prong of the four-factor Panduit test, the Court explained that the correct inquiry is “whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringement product.” The Court explained that the district court erred by relying on evidence of sales of a non-infringing ATC capacitor product in competition with its infringing capacitor products, rather than comparing the non-infringing ATC capacitor to Presidio’s BB capacitors in a hypothetical market without the infringing capacitors. 

Turning to enhanced damages, the Federal Circuit affirmed the district court’s ruling declining an award of enhanced damages, and emphasized that a district court is “not require[d] to discuss the Read factors” because the Halo test “merely requires the district court to consider the particular circumstances of the case to determine whether [conduct] is egregious.” 

Lastly, the Federal Circuit vacated the permanent injunction and remanded with instructions to consider the relevant evidence and to determine whether Presidio had established the first factor of the eBay test—that “it has suffered an irreparable injury.” In particular, the Court noted that the injunction may have created the hypothetical market necessary to determine whether consumers would purchase Presidio’s BB capacitors in the absence of the infringing capacitors.