Jury's Finding of Invalidity Reversed by Federal Circuit; Court's Findings Patent Not Invalid or Unenforceable Affirmed

ACCO Brands, Inc. v. ABA Locks Mfrs. Co., Ltd., --- F.3d ---- (Fed.Cir. Sep 12, 2007) (NO. 2006-1570)
Today the Federal Circuit affirmed in part, vacated in part, and reversed in part the ACCO Brands v. ABA Locks case, which had been tried twice by Judge Ward in 2004 and 2005.  As the procedural history of the case is complex, the following is a brief review.
Procedural background
This is a patent case involving computer security locks. Judge Ward originally tried this case to a jury from May 17-20, 2004. At the time of trial, the plaintiff asserted claims from two patents, the '989 patent and the '557 patent, against two products sold by the defendants. The accused products, the Key Lock and the Combo Lock, were similar, except that one locked under the control of a key and the other locked under the control of a combination. The defendant ABA Locks Manufacturer, Ltd., manufactures the accused products. Defendant Belkin is a distributor.
The jury returned a verdict on May 20, 2004. The jury found that the defendants had willfully infringed all of the asserted claims of the two patents. The jury rejected all of the defendants' invalidity challenges and failed to find that any of the asserted claims were invalid. The jury awarded damages against ABA Locks of $2,399,463 and against defendant Belkin of $1,791,048.
After the verdict, the defendants renewed their motions for judgment as a matter of law. Judge Ward granted in part and denied in part these motions. In particular, the court granted judgment as a matter of law that the claim of the '557 patent were invalid over a piece of prior art. The court concluded that the evidence was insufficient as a matter of law to support the jury's implied finding that the patentee had shown diligence in reducing the invention to practice. The court denied the defendants' motion for judgment as a matter of law on all other grounds.
The court's holding that the '557 patent was invalid rendered the Combo Lock a non-infringing product. This is because the court had previously granted summary judgment that the Combo Lock did not infringe the asserted claims of the '989 patent. The jury, however, had not been asked to separately apportion damages for the Key Lock and the Combo Lock. Moreover, the Combo Lock, as a non-infringing product, would have been available to consumers purchasing in the computer security products market. This caused the court to grant a new trial on damages.
On December 14-15, 2005, the court tried the damages case, restricted to sales of the Key Lock, to a second jury. That jury reached a verdict which awarded the plaintiff a reasonable royalty against Defendant ABA Locks of $1,822,000 and against Defendant Belkin of $253,000. The court overruled the defendants' motions for judgment as a matter of law and for new trial arising out of the damages trial.
The court also tried the defendant's claim of inequitable conduct to the bench outside the presence of the jury. In an opinion dated March 28, 2006, Judge Ward held that the defendants had not established inequitable conduct during the prosecution of the '989 patent. Based on the finding of willful infringement, the court declared the case exceptional, enhanced damages (treble the $1.8 million against ABA and double the $253,000 against Belkin), and awarded attorneys' fees and costs. (The opinion is reported at Acco Brands, Inc. v. ABA Locks Manufacturer Ltd., 2006 WL 887396 E.D.Tex., March 28, 2006)
Appeal
Belkin Components (the $253,000 doubled defendant) appealed.  (ABA did not appeal, thus the $1.8 million trebled damages award against it was not disturbed).  Today, the Federal Circuit held that the jury verdict of direct infringement as to Belkin was not supported by substantial evidence, and thus reversed the district court’s judgment with respect to inducement, and vacated the court’s judgment with respect to willfulness, enhanced damages, and attorney fees, all as to Belkin. Because it found no grounds for reversible error as to the remaining issues Belkin raised (Belkin's claims of unenforceability, invalidity based on misjoinder, claims construction, and the district court's denial of its motion for leave to file a revised summary judgment motion), it affirmed those aspects of the court’s decision.