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TEK Global, S.R.L. v. Sealant Systems International, Inc.

United States Court of Appeals, Federal Circuit

March 29, 2019

TEK GLOBAL, S.R.L., TEK CORPORATION, Plaintiffs-Appellees
v.
SEALANT SYSTEMS INTERNATIONAL, INC., ITW GLOBAL TIRE REPAIR, Defendants-Appellants

          Appeal from the United States District Court for the Northern District of California in Nos. 3:11-cv-00774-VC, 5:11-cv-01649-PSG, Judge Vince Chhabria.

          Daniel E. Jackson, Keker, Van Nest & Peters LLP, San Francisco, CA, argued for plaintiffs-appellees. Also represented by Ashok Ramani, Davis Polk & Wardwell LLP, Menlo Park, CA.

          Stanley Martin Gibson, Jeffer Mangels Butler & Mitchell, Los Angeles, CA, argued for defendants-appellants. Also represented by Jessica Pauline Gans Newman, Andrew I. Shadoff; Gregory S. Cordrey, Irvine, CA.

          Before Prost, Chief Judge, Dyk and Wallach, Circuit Judges.

          PROST, CHIEF JUDGE.

         Following a jury trial finding Sealant Systems International and ITW Global Tire Repair (collectively, "SSI") liable to TEK Corporation and TEK Global, S.R.L. (collectively, "TEK") for infringement of U.S. Patent No. 7, 789, 110 ("the '110 patent"), SSI appeals several pre- and post-judgment orders from the United States District Court for the Northern District of California. Specifically, SSI appeals the district court's claim construction order and its orders denying SSI's motions for a new trial and judgment as a matter of law ("JMOL") on invalidity, non-infringement, and damages. SSI also challenges the district court's permanent injunction.

         Because the district court improperly restricted SSI's efforts to present the jury with relevant evidence of invalidity, we vacate the court's final judgment as to validity and reverse its denial of SSI's motion for partial new trial on validity. In the interest of judicial economy, we also reach the remaining issues on appeal. We affirm on those issues in the event the '110 patent is found not invalid following the new trial.

         Background

         SSI is an original equipment manufacturer ("OEM"): a manufacturer who resells another company's products under its own name and branding. TEK sells tire repair kits to various OEMs and owns the '110 patent. The '110 patent is directed to an emergency kit for repairing vehicle tires deflated by puncture. '110 patent col. 1 ll. 41-50. When TEK filed the '110 patent, a common way to handle a flat tire was to simply replace it with a spare tire. Housing spare tires outside or inside vehicles, however, poses several well-known problems, such as reducing available space in the vehicle, increasing the weight of the vehicle, heightening exposure to tire theft, and compounding the sheer difficulty of changing the tire. Id. at col. 1 ll. 21-43. Because the repair kit disclosed in the '110 patent comprises a small compressor and a container of sealing liquid to mend the hole, it is intended to serve as a smaller, lighter, and less complicated alternative to conventional spare tires. Id. at col. 1 ll. 36-40.

         In November 2010, TEK sued SSI for infringing claims 26, 28, and 31 of the '110 patent. Only claim 26 is independent:

26. A kit for inflating and repairing inflatable articles; the kit comprising a compressor assembly, a container of sealing liquid, and conduits connecting the container to the compressor assembly and to an inflatable article for repair or inflation, said kit further comprising an outer casing housing said compressor assembly and defining a seat for the container of sealing liquid, said container being housed removably in said seat, and additionally comprising a container connecting conduit connecting said container to said compressor assembly, so that the container, when housed in said seat, is maintained functionally connected to said compressor assembly, said kit further comprising an additional hose cooperating with said inflatable article; and a three-way valve input connected to said compressor assembly, and output connected to said container and to said additional hose to direct a stream of compressed air selectively to said container or to said additional hose.

'110 patent, claim 26.

         During claim construction proceedings, SSI argued before the magistrate judge that certain terms in claim 26- "conduits connecting the container" and "container connecting conduit"-should be construed as means-plus- function limitations under 35 U.S.C. § 112, ¶ 6 because the term "conduit" is a nonce word. In August 2012, the magistrate judge rejected that contention and entered an order construing these terms as "hoses and associated fittings connecting the container to the compressor assembly and to an inflatable article for repair or inflation" and "a hose and associated fittings for connecting the container to the compressor assembly," and respectively. J.A. 57-58.

         Following claim construction, SSI moved for summary judgment of invalidity, arguing that claim 26 was obvious over U.S. Patent Application No. 2003/0056851 ("Eriksen") in view of Japanese Patent No. 2004-338158 ("Bridge-stone"). The district court granted SSI's motion in March 2014. See SSI Sys. Int'l, Inc. v. TEK Global, S.R.L., 929 F.Supp.2d 971, 974 (N.D. Cal. 2013) ("SSI I"). In its order, the district court determined that the term "additional hose cooperating with said inflatable article" did not require a direct connection between the additional hose and the inflatable article. Id. at 978. The court further determined that Bridgestone discloses an air tube (54) that works together with a tire, even though it is not directly connected to the tire, and that air tube (54) therefore represents the element of an additional hose (83) cooperating with the tire. Id.

         TEK appealed the district court's order to this court. On appeal, we reversed the district court's construction of the "cooperating with" limitation and its subsequent invalidity determination. Sealant Sys. Int'l, Inc. v. TEK Global, S.R.L., 616 Fed.Appx. 987, 993 (Fed. Cir. 2015) ("SSI II"). We determined that "cooperating with," in the context of the '110 patent, required a direct connection between the additional hose and the inflatable article. Id. Accordingly, we explained that "[u]nder the proper construction of 'cooperating with,' . . . Bridgestone does not disclose an 'additional hose cooperating with' the tire because air tube 54 is not directly connected to the tire." Id. at 995. Thereafter, we reached the following conclusions: (1) "[N]either Bridgestone nor Eriksen teach[es] the use of 'an additional hose . . . cooperating with' the tire," id. at 996; (2) "Based on its erroneous interpretation of claim scope, the district court erred in determining that [SSI] . . . demonstrated by clear and convincing evidence that a [POSITA] would have had reason to combine the teachings of Eriksen and Bridge-stone to achieve the claimed invention," id. at 995-96 (internal quotation marks, brackets, and emphasis omitted); and (3) "In light of these differences, the district court clearly erred in finding Bridgestone disclosed the element of an 'additional hose . . . cooperating with' the tire," id. at 995.

         This court then remanded the case back to the district court, explaining that because SSI "has not had an opportunity to make a case for invalidity in light of this court's claim construction," a "remand is therefore required." Id. at 996. On remand, SSI again moved for summary judgment of invalidity, J.A. 84, contending that "it would have been obvious . . . to modify Bridgestone to eliminate the second three-way valve (60) and joint hose (66), resulting in a conventional tire repair kit meeting the limitations of the claims of the 110 Patent," Appellants' Br. 10-11. At the summary judgment hearing, the magistrate judge struggled to interpret this court's holding in SSI II:

So this is a challenge I have, or trouble I have reading the Federal Circuit's opinion. On the one hand they say there's only a single issue here, which is, do either of these references teach an additional hose cooperating with the tire. They held, under their construction, which by definition is the proper construction, that neither reference teaches that particular limitation. They then go on in the next paragraph to say, but you can try again, defendants, on remand. So what space or gap is left between those, if anything?

J.A. 4047-48. The magistrate judge also grappled with this court's remand directive:

[O]n remand . . . the Federal Circuit was giving defendants another shot with other references, but as to Bridgestone and Eriksen, there's no gap there, right? They've essentially foreclosed this. Whether they intended to or not, I have to apply what they wrote, don't I?

J.A. 4048.

         In May 2016, following the hearing, the magistrate judge denied SSI's motion, noting that "the Federal Circuit has already considered and rejected obviousness in light of the combination of Eriksen and Bridgestone," J.A. 159, and that "[i]t said, without qualification and after specifically considering the same sections that Defendants point to now, that 'neither Bridgestone nor Eriksen teach[es] the use of an additional hose . . . cooperating with the tire, '" J.A. 160.

         The district court held a four-day trial in March 2017. The jury ultimately found claims 26, 28, and 31 of the '110 patent infringed and not invalid. J.A. 2040-42. TEK presented both lost profits and reasonable royalty damages theories. The jury awarded $2, 525, 482 in lost profits and $255, 388 in the form of a reasonable royalty for infringing sales for which TEK did not prove its entitlement to lost profits. J.A. 2045.

         Following trial, SSI moved for a new trial on damages (or remittitur) and for JMOL on damages, invalidity, and noninfringement. The district court denied SSI's motions for a new trial and for JMOL on invalidity and noninfringement. J.A. 4-5. As to SSI's motion for JMOL on damages, the district court denied the motion with respect to lost profits and granted it with respect to reasonable royalty. J.A. 5-6. The district court also granted TEK's motion for a permanent injunction. J.A. 8-9.

         SSI timely appealed to this court. J.A. 3775. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

         Discussion

I. Standards of Review

         Denial of post-trial motions for JMOL and new trial are not unique to patent law; thus, we review them under regional circuit law-here, the Ninth Circuit. See Wordtech Sys., Inc. v. Integrated Networks Sols., Inc., 609 F.3d 1308, 1312 (Fed. Cir. 2010). The Ninth Circuit reviews an order denying JMOL de novo. Wechsler v. Macke Int'l Trade, Inc., 486 F.3d 1286, 1290 (Fed. Cir. 2007) (applying Ninth Circuit law). The district court's JMOL determination therefore must be affirmed if substantial evidence supports the jury's verdict. See Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1370 (Fed. Cir. 2009) (applying Ninth Circuit law). "Substantial evidence is relevant evidence reasonable minds might accept as adequate to support the jury's conclusion, even if it is also possible to draw a contrary conclusion." Id.

         The Ninth Circuit reviews an order denying a new trial for abuse of discretion. The denial is irreversible unless the record contains no evidence in support of the verdict or the district court committed legal error. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007). Likewise, we review the district court's ultimate decision to grant an injunction and its conclusion on each eBay factor for abuse of discretion. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (describing equitable requirements for injunctive relief); i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 861 (Fed. Cir. 2010). But factual findings made in support of the injunction are reviewed for clear error. Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1327 (Fed. Cir. 2008).

         We apply Federal Circuit case law when reviewing issues of patent law. Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1214 (Fed. Cir. 2014). Claim construction is an issue of law reviewed de novo. Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1346 (Fed. Cir. 2015) ("Regarding questions of claim construction, including whether claim language invokes 35 U.S.C. § 112, para. 6, the district court's determinations based on evidence intrinsic to the patent as well as its ultimate interpretations of the patent claims are legal questions that we review de novo."). Infringement is an issue of fact reviewed for substantial evidence. Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 819 (Fed. Cir. 1992) (explaining that "the jury's finding of infringement must be upheld if it is supported by substantial evidence").

         II. Invalidity

         SSI argues that TEK is not entitled to relief because the claims are invalid. Medtronic, Inc. v. Cardiac Pacemakers, Inc., 721 F.2d 1563, 1583 (Fed. Cir. 1983) ("[A]n invalid claim cannot give rise to liability for infringement . . . ."). Specifically, SSI avers that had the district court allowed it to present to the jury its obviousness theory based on Eriksen in view of Bridgestone, the jury would have found the asserted claims invalid.

         As previously mentioned, the district court determined that, based on our decision in SSI II, Bridgestone and Eriksen do not disclose an additional hose cooperating with the inflatable article. Consequently, the district court instructed the jury that it was "not permitted to conclude that Bridgestone or Eriksen, alone or in ...


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