U.S. Ethernet Innovations, LLC v. Acer, Inc. et al

Filing 867

ORDER by Judge Claudia WilkenGRANTING IN PART AND DENYING IN PART (Docket Nos. 766 in 10-3724, 450 in 10-5254) MOTION FOR PARTIAL SUMMARY JUDGMENT ADDRESSING MARKING AND NOMINAL DAMAGES, GRANTING USEIS RULE 56(D) ( 793 in 10-3724) MOTION AND GRANTING IN PART AND DENYING IN PART USEIS (Docket No. 823 in 10-3724) MOTION FOR LEAVE TO FILE A NOTICE OF NEWLY DISCOVERED EVIDENCE AND A SURREPLY. (ndr, COURT STAFF) (Filed on 8/16/2013)

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE NORTHERN DISTRICT OF CALIFORNIA

3
4

U.S. ETHERNET INNOVATIONS, LLC,

5

Plaintiff,

6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

v.
ACER, INC.; ACER AMERICA
CORPORATION; APPLE, INC.; ASUS
COMPUTER INTERNATIONAL; ASUSTEK
COMPUTER, INC.; DELL, INC.;
FUJITSU, LTD.; FUJITSU AMERICA,
INC.; GATEWAY, INC.; HEWLETT
PACKARD CO.; SONY CORPORATION;
SONY CORPORATION OF AMERICA; SONY
ELECTRONICS INC.; TOSHIBA
CORPORATION; TOSHIBA AMERICA,
INC.; and TOSHIBA AMERICA
INFORMATION SYSTEMS, INC.,
Defendants.
INTEL CORPORATION; NVIDIA
CORPORATION; MARVELL
SEMICONDUCTOR, INC.; ATHEROS
COMMUNICATIONS, INC.; and
BROADCOM CORPORATION,
Intervenors.
________________________________/

No. C 10-3724 CW

1

U.S. ETHERNET INNOVATIONS, LLC,,

2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16

No. C 10-5254 CW

Plaintiff,

ORDER GRANTING IN
PART AND DENYING
IN PART MOTION FOR
PARTIAL SUMMARY
JUDGMENT
ADDRESSING MARKING
AND NOMINAL
DAMAGES (Docket
Nos. 766 in 103724, 450 in 105254), GRANTING
USEI’S RULE 56(D)
MOTION (Docket No.
793 in 10-3724)
AND GRANTING IN
PART AND DENYING
IN PART USEI’S
MOTION FOR LEAVE
TO FILE A NOTICE
OF NEWLY
DISCOVERED
EVIDENCE AND A
SURREPLY (Docket
No. 823 in 103724)

v.
AT&T MOBILITY LLC; BARNES &
NOBLE, INC.; CLAIRE’S BOUTIQUES,
INC.; J. C. PENNEY COMPANY, INC.;
SALLY BEAUTY HOLDINGS, INC.; ANN
TAYLOR STORES CORPORATION; ANN
TAYLOR RETAIL, INC.; HARLEYDAVIDSON, INC.; HARLEY-DAVIDSON
MOTOR COMPANY, INC.; KIRKLAND’S
INC.; KIRKLAND’S STORES, INC.;
MACY’S, INC.; MACY’S RETAIL
HOLDINGS, INC.; MACY’S WEST
STORES, INC.; NEW YORK & COMPANY,
INC.; LERNER NEW YORK, INC.;
RADIOSHACK CORPORATION; RENT-ACENTER, INC.; and THE DRESS BARN,
INC.,
Defendants.
________________________________/
AND ALL RELATED CLAIMS AND
COUNTERCLAIMS
________________________________/

Intervenors Intel Corporation, Broadcom Corporation,
17
Marvell Semiconductor Inc., Nvidia Corporation, Atheros
18
Communications Inc. and Sigma Designs, Inc., and Defendants Acer,
19
Inc., Acer America Corporation, Apple, Inc., Asustek Computer
20
Inc., AT&T Services, Inc., Dell Inc., Fujitsu Ltd., Fujitsu
21
America, Inc., Gateway, Inc., Hewlett Packard Co., Sony
22
Corporation, Sony Corporation of America, Sony Electronics Inc.,
23
Toshiba Corporation, Toshiba America, Inc., and Toshiba America
24
Information Systems, Inc. (collectively, with Defendant ASUS
25
Computer International, Movants) move for partial summary judgment
26
against Plaintiff U.S. Ethernet Innovations, LLC (USEI), seeking a
27
determination that USEI cannot recover pre-suit damages for
28
2

1

infringement of three of the patents-in-suit, U.S. Patent Nos.

2

5,434,872, issued on July 18, 1995 (the ‘872 Patent), 5,307,459,

3

issued on April 26, 1994 (the ‘459 Patent) and 5,299,313, issued

4

on March 29, 1994 (the ‘313 Patent) based on its failure to mark

5

under 35 U.S.C. § 287(a).1

6

a determination that USEI cannot recover pre-suit damages for

7

infringement of the ‘313 Patent based on its failure to mark.

8

Intel and Nvidia further move for partial summary judgment

9

precluding USEI from recovering more than nominal damages against

ASUS Computer International also seeks

United States District Court
For the Northern District of California

10

them.

11

Intel and Nvidia’s request under Federal Rule of Civil Procedure

12

56(d) and moves for leave to file a notice of additional evidence

13

and a surreply.

14

and their arguments at the hearing on this motion, the Court

15

GRANTS in part the motion for partial summary judgment, DENIES it

16

in part, GRANTS the Rule 56(d) motion and GRANTS IN PART AND

17

DENIES IN PART the motion for leave to file a notice of additional

18

evidence and surreply.

USEI opposes the motion, moves to continue resolution of

19
20

Having considered the papers filed by the parties

BACKGROUND
On June 1, 1999, 3Com Corporation, the original owner of the

21

patents-in-suit, entered into a license agreement with

22

International Business Machines Corporation (IBM).

23

¶ 2, Ex. A.1.

24

IBM’s use of “3COM Licensed Patents,” which are defined to “mean

Constant Decl.

Among other things, the license agreement addressed

25
26
1

27
28

Movants do not seek summary judgment regarding U.S. Patent
No. 5,732,094 (the ‘094 Patent) on this ground. Accordingly,
USEI’s argument that the ‘094 Patent is not subject to the
requirements of 35 U.S.C. § 287(a) is not on point.
3

1

all patents,” with certain limitations, “issued or issuing on

2

patent applications entitled to an effective filing date prior to

3

June 1, 2005” and for which 3Com had the right to grant licenses.

4

Id. at § 1.4.

5

that 3Com

6
7
8

grants to IBM, as Grantee, a nonexclusive and worldwide
license under 3COM’s Licensed Patents:
(a)

to make (including the right to use any apparatus
and practice any method in making), use, import,
offer for sale, lease, sell, and/or otherwise
transfer or distribute IBM’s Licensed Products,
and/or practice any businesses related to such IBM
Licensed Products;

(b)

to have IBM’s Licensed Products made by another
manufacturer for the use, importation, offer for
sale, lease, sale and/or other transfer or
distribution by IBM only when the conditions set
forth in Section 2.2 are met.

9

United States District Court
For the Northern District of California

10
11

The license agreement provided in relevant part

12
13
14

. . .

15

Id. at § 2.1.2.

16

license agreement.

17

for several types of apparatuses, including “Manufacturing

18

Apparatus,” “Data Processing Apparatus” and “Semiconductor

19

Apparatus.”

The phrase “any apparatus” was not defined in the
However, the agreement did provide definitions

Id. at §§ 1.8-1.11.

20

Section 2.2 provided,

21
22

The License granted in [Section 2.1.2(b)] to the
respective Grantee to have products made by another
manufacturer:

23

. . .

24

(b)

shall only apply when the specifications for such
Grantee’s Licensed Products were created by or for
the Grantee (either solely or jointly with one or
more third parties; and

(c)

shall not apply to (i) any methods used; or (ii)
any products in the form manufactured or marketed
by said other manufacturer prior to the Grantee’s
furnishing of said specifications.

25
26
27
28

4

1

. . .
Id. at § 2.2.

2
The agreement defined “IBM Licensed Products” to mean “IHS
3
Products and Peripheral Devices.”

Id. at § 1.5.

In turn, “IHS

4
Products” was defined to mean,
5
6
7
8

an Information Handling System or any instrumentality or
aggregate of instrumentalities (including without
limitation, any component, subassembly, computer program
or supply) designed for incorporation in an Information
Handling System. . . .
Id. at § 1.2.

An “Information Handling System” referred to

9

United States District Court
For the Northern District of California

10
11
12
13

any instrumentality or aggregate of instrumentalities
primarily designed to compute, classify, process,
transmit, receive, retrieve, originate, switch, store,
display, manifest, measure, detect, record, reproduce,
handle or utilize any form of information, intelligence
or data for business, scientific, control,
entertainment, or other purposes.
Id. at § 1.1.

A “Peripheral Device” meant “an ancillary device

14
which is designed to operate in combination with a Grantee’s
15
Licensed Product.”

Id. at § 1.19.

The agreement did not require

16
that IBM Licensed Products be marked with the relevant patents
17
utilized, including the patents-in-suit.
18
On November 8, 2002, Intel and 3Com entered into three
19
agreements to resolve litigation taking place between 3Com and
20
Xircom, Inc., a subsidiary of Intel.

Jones Decl., Ex. AA.2

These

21
included a settlement agreement, a covenant not to sue and a cross
22
license.

The latter two documents were attached to the

23
settlement agreement as exhibits.

In the covenant not to sue,

24
Intel and 3Com agreed not to assert “any Patent” that they owned
25
against one another for a two-year time period.

Id. at Ex. I

26
27
2

28

Although USEI refers to this as the “IBM Settlement
Agreement,” IBM was not a party to any of the three agreements.
5

1

(Covenant Not to Sue) §§ 3.2.1, 3.2.2.

2

did not require Intel to mark any products it made during this

3

time period to qualify for the protection under it.

4

license agreement, 3Com granted Xircom and Intel a license to

5

practice five of 3Com’s patents, none of which are at issue in

6

this case.

7

3.4.

8
9

The covenant not to sue

In the cross-

Id. at Ex. H (Cross License Agreement) §§ 1.6, 3.3,

Between 2003 and 2006, 3Com’s patented product sales totaled
about $200 million.

Constant Decl., Ex. A.5, 475:16-23; Constant

United States District Court
For the Northern District of California

10

Decl., Ex. A.6.

11

sold more than 140 million components that USEI now accuses of

12

infringing the patents-in-suit, for almost $1.9 billion.

13

Decl. ¶ 3, Ex. B.

14

twenty-five million Intel components, for more than $350 million.

15

Insley Decl. ¶ 2, Ex. A.

16

that IBM purchased from Intel were incorporated into IBM products

17

that it subsequently sold to customers.

18

¶ 10.3

19

against Intel accuse many of the components that IBM purchased for

20

inclusion in its products.

21

IBM nor Intel marked their products with the ‘872, ‘459 or ‘313

22

Patent numbers.

23

¶ 11.

Between November 2003 and November 2004, Intel

Insley

Between 2004 and 2009, IBM purchased more than

The “vast majority” of the components

Constant Decl., Ex. A.3,

In the present lawsuit, USEI’s infringement contentions

Constant Decl., Ex. A.2, 2-5.

Neither

Schiffhauer Decl. ¶ 2; Constant Decl., Ex. A.3

24
25
26
3

27
28

In their reply brief, Movants cite “Exhibit C” to the
Constant declaration. However, there is no such exhibit attached
to this declaration, and it appears that Movants intended to refer
to Exhibit A.3 to the declaration instead.
6

1

Starting in 2003, 3Com was involved in a separate lawsuit in
this district with Realtek Semiconductor System and D-Link

3

Systems, Inc.

4

infringed of the ‘872, ‘459 and ‘094 Patents.

5

not at issue in that case.

6

motion for partial summary judgment based on marking.

7

Decl., Ex. I.

8

offered “a spreadsheet showing the sales of products practicing

9

the patents at issue for which marked samples have been located

10
United States District Court
For the Northern District of California

2

and products for which marked samples could not be found during

11

the period roughly from 1997 until [July 13, 2004] . . . According

12

to this spreadsheet, 3Com sold 32,196,864 units practicing the

13

patents at issue during this time, of which 4,803,508 units, or

14

14.9 percent were of product types for which 3Com could not locate

15

a marked sample.”

16

“[m]arking 85 percent of products sold is almost certainly not

17

marking ‘substantially all’ products,” it held that a jury could

18

infer, based on other evidence in the record, that, although 3Com

19

had lost some documentary evidence, it had a practice of marking

20

its products since at least 1997 and thus that the remaining

21

products for which documentary evidence did not exist were in fact

22

marked.

23

submitted in the Realtek case.

24

In that case, 3Com alleged that Realtek and D-Link
The ‘313 Patent was

In 2008, the court denied Realtek’s
Jones

In opposing the summary judgment motion, 3Com

Id. at 1, 7.

Id. at 7-8.

Although the court noted that

USEI has offered here the evidence that 3Com

At the deposition taken in this matter, USEI’s Rule 30(b)(6)

25

witness testified that he did not know if there were ever any

26

products marked with the ‘313 Patent produced by 3Com or anyone

27

else.

28

did practice this patent.

Constant Decl., Ex. A.7, 21:6-14.

USEI contends that 3Com

Constant Decl., Ex. A.2, 18.
7

1

USEI also offers evidence that it has entered into license

2

agreements with Realtek, ADMtek and VIA, to authorize them to use

3

some or all of the ‘459, ‘872 and ‘094 Patents, that these

4

licenses included marking requirements, and that the licenses had

5

complied with their marking obligations or that 3Com took steps to

6

ensure that they did so.

7

LEGAL STANDARD

8

Summary judgment is properly granted when no genuine and
disputed issues of material fact remain, and when, viewing the

10
United States District Court
For the Northern District of California

9

evidence most favorably to the non-moving party, the movant is

11

clearly entitled to prevail as a matter of law.

12

56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);

13

Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.

14

1987).

15

Fed. R. Civ. P.

The moving party bears the burden of showing that there is no

16

material factual dispute.

17

true the opposing party’s evidence, if supported by affidavits or

18

other evidentiary material.

19

815 F.2d at 1289.

20

in favor of the party against whom summary judgment is sought.

21

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

22

587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952

23

F.2d 1551, 1558 (9th Cir. 1991).

24

Therefore, the court must regard as

Celotex, 477 U.S. at 324; Eisenberg,

The court must draw all reasonable inferences

Material facts which would preclude entry of summary judgment

25

are those which, under applicable substantive law, may affect the

26

outcome of the case.

The substantive law will identify which

27

facts are material.

Anderson v. Liberty Lobby, Inc., 477 U.S.

28

242, 248 (1986).
8

1

Where the moving party does not bear the burden of proof on

2

an issue at trial, the moving party may discharge its burden of

3

production by either of two methods:

4
5
6
7

The moving party may produce evidence negating an
essential element of the nonmoving party’s case, or,
after suitable discovery, the moving party may show that
the nonmoving party does not have enough evidence of an
essential element of its claim or defense to carry its
ultimate burden of persuasion at trial.
Nissan Fire & Marine Ins. Co., Ltd., v. Fritz Cos., Inc., 210 F.3d

8
1099, 1106 (9th Cir. 2000).
9
If the moving party discharges its burden by showing an
10
United States District Court
For the Northern District of California

absence of evidence to support an essential element of a claim or
11
defense, it is not required to produce evidence showing the
12
absence of a material fact on such issues, or to support its
13
motion with evidence negating the non-moving party’s claim.

Id.;

14
see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990);
15
Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991).

If

16
the moving party shows an absence of evidence to support the non17
moving party’s case, the burden then shifts to the non-moving
18
party to produce “specific evidence, through affidavits or
19
admissible discovery material, to show that the dispute exists.”
20
Bhan, 929 F.2d at 1409.
21
If the moving party discharges its burden by negating an
22
essential element of the non-moving party’s claim or defense, it
23
must produce affirmative evidence of such negation.

Nissan, 210

24
F.3d at 1105.

If the moving party produces such evidence, the

25
burden then shifts to the non-moving party to produce specific
26
evidence to show that a dispute of material fact exists.
27
28
9

Id.

1

If the moving party does not meet its initial burden of

2

production by either method, the non-moving party is under no

3

obligation to offer any evidence in support of its opposition.

4

Id.

5

ultimate burden of persuasion at trial.

This is true even though the non-moving party bears the

6
7
8
9

Id. at 1107.

DISCUSSION
I.

Failure to mark
Movants contend that they are entitled to a summary

adjudication that USEI cannot collect pre-suit damages for

United States District Court
For the Northern District of California

10

infringement of the ‘459, ‘872 and ‘313 Patents pursuant to 35

11

U.S.C. § 287(a) because it cannot show that “substantially all” of

12

the licensed products were marked during the damages period4 or

13

that it provided any or adequate actual notice of alleged

14

infringement to Movants.5

15

3Com marked substantially all of the products that it sold itself,

16

this is not sufficient to meet the statutory requirement because

17

3Com’s sales were dwarfed by the sales by Intel and IBM, as

18

licensees, of purportedly infringing products.

They argue that, even assuming that

19
20
21
22
4

23
24
25
26
27
28

USEI filed the original complaint in the earlier case on
October 9, 2009. Title 35 U.S.C. § 286 provides that “no recovery
shall be had for any infringement committed more than six years
prior to the filing of the complaint or counterclaim for
infringement in the action.” Accordingly, USEI may not recover
damages for infringement that occurred prior to October 3, 2003.
5

ASUS Computer International joins this motion as to the
‘313 Patent but not as to the ‘459 and ‘872 Patents. It
acknowledges that it received a letter from 3Com dated December 8,
2003, asserting that certain ASUS products infringed the ‘459 and
‘872 Patents.
10

1

USEI responds that 3Com and its authorized licensees did mark

2

“substantially all” patented products that they produced, and it

3

disputes that Intel and IBM were actually licensed.6

4

Title 35 U.S.C. § 287(a) provides,

5

15

Patentees, and persons making, offering for sale, or
selling within the United States any patented article
for or under them, . . . may give notice to the public
that the same is patented, either by fixing thereon the
word “patent” or the abbreviation “pat.”, together with
the number of the patent, or by fixing thereon the word
“patent” or the abbreviation “pat.” together with an
address of a posting on the Internet, accessible to the
public without charge for accessing the address, that
associates the patented article with the number of the
patent, or when, from the character of the article, this
can not be done, by fixing to it, or to the package
wherein one or more of them is contained, a label
containing a like notice. In the event of failure so to
mark, no damages shall be recovered by the patentee in
any action for infringement, except on proof that the
infringer was notified of the infringement and continued
to infringe thereafter, in which event damages may be
recovered only for infringement occurring after such
notice. Filing of an action for infringement shall
constitute such notice.

16

“Thus, the statute defines that ‘[a patentee] is entitled to

17

damages from the time when it either began marking its product in

18

compliance with section 287(a)[, constructive notice,] or when it

19

actually notified [the accused infringer] of its infringement,

20

whichever was earlier.’”

21

1111 (Fed. Cir. 1996) (quoting American Medical Sys., Inc. v.

22

Medical Eng’g Corp., 6 F.3d 1523, 1537 (Fed. Cir. 1993))

23

(formatting in original).

6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14

Maxwell v. J. Baker, Inc., 86 F.3d 1098,

The Federal Circuit has “construed

24
25
6

26
27
28

USEI has not presented any argument to dispute Movants’
contentions regarding the issue of actual notice. Although it
avers in a footnote that “[a]ny decision on actual notice is
premature” in light of the status of discovery, Opp. at 19 n.51,
it has not made a showing of any essential facts relevant to this
determination that it may obtain through discovery.
11

1

section 287(a) to require that ‘once marking has begun, it must be

2

substantially consistent and continuous in order for the party to

3

avail itself of the constructive notice provisions of the

4

statute.’”

5

Id. (quoting American Medical Sys., 6 F.3d at 1537).

“In addition to governing patent owners, the provisions of 35
U.S.C. § 287(a) extend to licensees.”

7

v. Dell Computer Corp., 262 F. Supp. 2d 358, 362 (D. Del. 2003)

8

(citing 35 U.S.C. § 287(a); Devices for Medicine, Inc. v. Boehl,

9

822 F.2d 1062 (Fed. Cir. 1987)); see also Amsted Indus. v. Buckeye

10
United States District Court
For the Northern District of California

6

Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994) (“A licensee

11

who makes or sells a patented article does so ‘for or under’ the

12

patentee, thereby limiting the patentee’s damage recovery when the

13

patented article is not marked.”); Maxwell, 86 F.3d at 1111

14

(“licensees, such as Target, and other authorized parties, such as

15

Target’s manufacturers, must also comply” with the marking

16

requirement).

17

not implicate Section 287(a), . . . a licensee’s failure to mark

18

does bear consequences for a patent owner seeking damages for

19

infringement.”

20

bears responsibility to ensure that ‘licensees . . . and other

21

authorized parties . . . comply’ with Section 287(a).”

22

(quoting Maxwell, 86 F.3d at 1111-12).

23

to both express licensees and implied licensees.

24

24 F.3d at 185.

25

Tulip Computers Int’l B.V.

“Thus, while an infringer’s failure to mark does

Id. (internal citation omitted).

“A patent owner

Id.

This requirement applies
Amsted Indus.,

“However, with third parties unrelated to the patentee, it is

26

often more difficult for a patentee to ensure compliance with the

27

marking provisions.”

28

reason’ approach is justified in such a case and substantial

Maxwell, 86 F.3d at 1111.

12

“A ‘rule of

1

compliance may be found to satisfy the statute.”

2

failure to mark is caused by someone other than the patentee, the

3

court may consider whether the patentee made reasonable efforts to

4

ensure compliance with the marking requirements.”

5
6
7

Id.

“When the

Id. at 1111-12.

As the patentee, USEI bears the burden of pleading and
proving compliance with the marking statute.

Id. at 1111.

As previously noted, the parties dispute whether Intel or IBM

8

was either explicitly or implicitly licensed to practice the

9

patents at issue.

If Intel and IBM were not acting in accordance

United States District Court
For the Northern District of California

10

with a license or with their obligations under a license when they

11

sold the products in question, then the sales may not be imputed

12

to 3Com or its successor, USEI.

13

Tulip, 262 F. Supp. 2d at 362.

14

See Maxwell, 86 F.3d at 1111-12;

Regarding IBM, USEI argues that the 1999 license agreement

15

between 3Com and IBM did not permit IBM to purchase infringing

16

Intel components and then resell them, absent compliance with the

17

requirements of section 2.2 of the agreement that IBM create the

18

specifications for the products and not purchase premade items.

19

Movants contend that the evidence shows that IBM did not simply

20

sell the premade components but instead used them to make its

21

Licensed Products and then sold the completed item.

22

that this was authorized by section 2.1.2(a) of the license

23

agreement, which permits IBM to “use any apparatus . . . in

24

making” its Licensed Products.

25

Movants argue

USEI’s interpretation of the 3Com-IBM license agreement is

26

not persuasive.

27

under which IBM can use 3Com’s patents “to have IBM’s Licensed

28

Products made by another manufacturer.”

The sections on which it relies govern the terms

13

Constant Decl., Ex. A.1,

1

§§ 2.1.2(b), 2.2.

2

under which IBM can obtain parts for use when it makes its own

3

Licensed Products.

4

own products; the issue is instead whether it was permitted to

5

obtain purportedly infringing, premade components and to use those

6

components when it made its products.

Thus, these sections do not address the terms

Here, there is no dispute that IBM made its

As Movants contend, pursuant to section 2.1.2(a) of the

8

license agreement, the answer is that IBM was allowed to do this.

9

In that provision, 3Com gave IBM the right to make its own

10
United States District Court
For the Northern District of California

7

Licensed Products and to “use any apparatus” in doing so.

11

agreement placed no restriction that IBM was permitted to use only

12

particular types of components--for example, those obtained from

13

licensed chip suppliers--and instead unambiguously provided that

14

“any apparatus” could be used.

15

relevant components accused here do not qualify as “any apparatus”

16

under the terms of section 2.1.2(a).

17

the reference in section 2.1.2(a) to “any apparatus” should be

18

construed to mean only “manufacturing apparatus,” it provides no

19

reason that this phrase should be so construed.

20

parties to the agreement specifically defined and used the term

21

“manufacturing apparatus” elsewhere in the agreement where they

22

intended to do so and distinguished it from other apparatus types.

23

Thus, to define apparatus to mean “manufacturing apparatus” here

24

would render other parts of the agreement surplusage or

25

contradictory.

26

is frequently used in the patents at issue themselves to refer to

27

the claimed inventions.

The

USEI provides no argument that the

Although USEI argues that

Notably, the

Further, the Court notes that the term “apparatus”

28
14

1

The sole case upon which USEI relies is not to the contrary.

2

In that case, Tulip Computers, IBM had entered into a license

3

agreement with Tulip very similar to the one at issue here.

4

that case, the court held that IBM’s purchase and sale of the

5

allegedly infringing products from Dell was not imputable to Tulip

6

because IBM had not complied with the specific restrictions on its

7

“have made” rights under section 2.2 of the agreement and was thus

8

not acting within its license granted by Tulip.

9

262 F. Supp. 2d at 366.

In

Tulip Computers,

However, there, IBM had entered into a

United States District Court
For the Northern District of California

10

remarketing agreement with Dell Computer Corporation, pursuant to

11

which “IBM made off-the-shelf purchases of products manufactured

12

by Dell and resold them to its customers.”

13

there, IBM did not make the products at issue and rather purchased

14

them premade.

15

products, using chips purchased from Intel.

16

Movants’ interpretation would render the restrictions in section

17

2.2 of the agreement “virtually meaningless” is also unavailing.

18

IBM was not allowed to have its own licensed products made by

19

another manufacturer practicing 3Com’s patents, except in

20

compliance with those restrictions.

Id. at 360.

Thus,

In contrast, here, IBM made its own licensed
USEI’s argument that

21

Thus, because the license agreement allowed IBM to make and

22

sell its own licensed products, using any apparatus to do so, it

23

acted pursuant to its license rights when it made and sold

24

products that included purportedly infringing components that it

25

purchased from Intel.7

Accordingly, those products--the “vast

26
27
28

7

USEI has moved for leave to file a surreply to address this
issue. It contends that this argument was raised for the first
time in Movants’ reply brief.
15

1

majority” of twenty-five million between 2004 and 2009--can be

2

imputed to 3Com and USEI.

3

nor IBM marked these products or components with the patent

4

numbers.

5

IBM constitute a de minimis number of the licensed products or

6

that the marked products sold by 3Com or the licensees whose

7

agreement required marking constituted substantially all of the

8

relevant products sold.

There is no dispute that neither Intel

USEI has not offered evidence that the products sold by

USEI contends that summary judgment is nevertheless

10
United States District Court
For the Northern District of California

9

inappropriate because “3Com made reasonable efforts to ensure

11

compliance with the marking requirements.”

12

argues that, because the IBM-3Com cross-licensing agreement was

13

“broad” and encompassed the entirety of each company’s portfolio

14

of patents, it would have been unreasonable for 3Com to monitor

15

IBM’s large number of products to determine which infringed the

16

patents-in-suit.

17

“any relationship to the patents at issue” here and that there is

Opp. at 13-16.

It

It contends that IBM-3Com agreement did not have

18
19
20
21
22
23
24
25
26
27
28

In their opening brief, Movants made clear that they based
their arguments in part on IBM’s sale of its own licensed
computers that were built with accused Intel components, not
simply on IBM’s “sale of accused Intel chips,” as USEI argues.
Mot. for Leave to File a Notice and Surreply, Docket No. 823, 2
n.1; see, e.g., Mot. at 3 (arguing that “IBM purchased more than
25 million Intel components now accused of infringement for
inclusion in IBM’s licensed products”). Thus, USEI could have
responded to this argument in its opposition brief.
Further,
even if USEI misunderstood the argument at the time that it filed
its opposition, it had ample opportunity to present any further
response on this issue at the hearing.
Nonetheless, because the Court has considered the arguments
raised by USEI in its proposed surreply and has not found them
meritorious, the Court GRANTS it leave to file the surreply.
16

1

no evidence that 3Com suspected that IBM was selling products that

2

infringed any of these patents.

3

However, here, the evidence does not support that 3Com made

4

reasonable efforts to ensure that IBM marked any licensed products

5

with the patents-in-suit.

6

that 3Com took no steps whatsoever to do so.

7

have been burdensome for 3Com to monitor whether IBM was in fact

8

marking all products practicing the patents, 3Com failed even to

9

include in the licensing agreement an obligation that IBM itself

In fact, the evidence offered shows
Even if it would

United States District Court
For the Northern District of California

10

make efforts to mark any products that it reasonably believed

11

practiced 3Com’s patents.8

12

the patents-in-suit without any requirement that IBM even make a

13

minimal effort to mark them.

14

such a step without first knowing itself that IBM was making

15

products that practiced its patents, given that 3Com was

16

authorizing IBM to do so.9

It instead authorized IBM to practice

3Com could reasonably have taken

USEI’s argument that the licensing

17
18
19
20
21
22
23
24
25
26
27
28

8

The Court also notes that, although USEI contends that it
would have been unreasonable to expect 3Com to investigate fully
which IBM products practiced each of 3Com’s patents in order to
monitor compliance and to know which products had to be marked
with the patents-in-suit, 3Com would simply have had to conduct
the same type of investigation that USEI was required to conduct
for the accused products in this suit.
9

Movants have offered some evidence that 3Com did in fact
have such knowledge. Notably, in an August 1999 Form 10-K filed
with the Securities Exchange Commission, 3Com wrote that “we
derive a significant portion of our personal connectivity product
sales from PC OEMs, such as . . . IBM, who incorporate our
[Network Interface Cards], analog modems, or chipsets into their
products.” Constant Decl., Ex. A.16.
17

1

agreement had no relationship to the patents-in-suit is

2

unavailing.

3

certain patents by number, and the parties did not discuss in

4

their negotiations particular products that would be licensed

5

under the agreement, the license encompassed 3Com’s patents with

6

an effective filing date prior to June 5, 2005, which includes all

7

of the patents at issue here.

8
9

Although the agreement did not specifically identify

In addition, USEI provides no authority that supports its
contention that the sale of products under a broad portfolio

United States District Court
For the Northern District of California

10

license cannot be imputed to the patent holder.10

11

§ 287(a) do not contain any such express exemption and instead

12

apply to any “persons making, offering for sale or selling within

13

the United States any patented article” under a patentee.

14

U.S.C. § 287(a); see also In re Yarn Processing Patent Validity

15

Litig., 602 F. Supp. 159, 169 (W.D.N.C. 1984) (this section

16

“applies to authorizations by patentee of other persons to make

The terms of

35

17
18
19
20
21
22

In response, USEI asserts that the Form 10-K is not a
“reasonable basis for 3Com to believe that” IBM was infringing the
patents-in-suit. Opp. at 16 n.42. However, USEI does not explain
why not. Further, Movants did not offer this document as evidence
from which 3Com should have learned that IBM was using technology
covered by the patents-in-suit in its products; instead, they
offered it to show that 3Com knew that IBM was doing so.
10

23
24
25
26
27
28

USEI suggests in its opposition that the court in Clancy
Sys. Int’l v. Symbol Techs., 953 F. Supp. 1170 (D. Colo. 1997),
found that, for a licensee to sell a patented article “for or
under” a patentee, the license must “specifically” permit the
licensee to sell the infringing product, and thus that a “broad
portfolio license” is insufficient. However, there was no such
discussion or holding in Clancy. The portion of that opinion that
USEI cites is simply a description of the license agreement at
issue in that case and a recitation of the fact that the patent
owner there admitted that the licensed product infringed the
patent, thereby qualifying as a “patented article” under § 287(a).
Id. at 1173.
18

and sell patented articles regardless of the particular form these

2

authorizations may take”), cited with approval by Amsted Indus. v.

3

Buckeye Steel Castings Co., 24 F.3d 178, 185 n.2 (Fed. Cir. 1994).

4

Here, 3Com, as the patentee, granted IBM the right to make and

5

sell products that practice its patents.

6

applied marking requirements in the context of a portfolio

7

license.

8

Supp. 2d 634, 636, 641-43 (E.D. Va. 2010).

9

otherwise would be inconsistent with the “three related purposes”

10
United States District Court
For the Northern District of California

1

of the marking statute: “1) helping to avoid innocent infringement

11

. . .;

12

the article is patented . . . ; and 3) aiding the public to

13

identify whether an article is patented . . .”

14

Mart Stores, 138 F.3d 1437, 1443 (Fed. Cir. 1998).

15

penalizes patentees who put into the marketplace--either directly

16

or indirectly, through their failure to take reasonable efforts to

17

police their licensees--unmarked products that do not inform the

18

public that the intellectual property embodied in those products

19

is protected.

Other courts have

See, e.g., WiAV Solutions LLC v. Motorola, Inc., 732 F.
Further, to hold

2) encouraging patentees to give notice to the public that

Nike Inc. v. WalSection 287(a)

20

The parties also dispute whether the products sold by Intel

21

were subject to the marking requirement due to the 2002 covenant

22

not to sue between Intel and 3Com.

23

the purpose of the covenant not to sue was to obtain “patent

24

peace” and not to grant a license or authorization to make

25

products, courts have previously found that § 287’s marking

26

requirement applies to a patentee’s authorization of other persons

27

to make and sell patented items in whatever form the authorization

28

was given, “regardless of whether the authorizations are
19

Although USEI contends that

1

‘settlement agreements,’ ‘covenants not to sue’ or ‘licenses.’”

2

In re Yarn Processing Patent Validity Litig., 602 F. Supp. at 169;

3

see also De Forest Radio Tel. Co. v. United States, 273 U.S. 236

4

(1927) (“As a license passes no interest in the monopoly, it has

5

been described as a mere waiver of the right to sue by the

6

patentee”) (internal quotation marks and citation omitted);

7

TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d

8

1271, 1275 (Fed. Cir. 2009) (stating that “this court and its

9

predecessors have on numerous occasions explained that a non-

United States District Court
For the Northern District of California

10

exclusive patent license is equivalent to a covenant not to sue”

11

and collecting cases).

12

USEI also argues that the covenant not to sue should not be

13

read as such an authorization because 3Com did not grant Intel the

14

rights to practice the patents-in-suit under the restrictive

15

cross-license that they entered at the same time as the covenant

16

not to sue.

17

Adams & Assocs., LLC v. Winbond Elecs. Corp., 2010 U.S. Dist.

18

LEXIS 93799 (D. Utah), in which the district court considered a

19

licensing agreement that contained a covenant not to sue and

20

addressed whether it authorized the sale of particular products,

21

which were not encompassed in the express license, as “for or

22

under the” patentee pursuant to § 287.

23

read the covenant not to sue as granting an implied license as to

24

all matters covered in that covenant would render all of the

25

limitations in the express license “surplusage, an impermissible

26

result under California law.”

27

concluded that the products sales could not be imputed to the

28

patentee for the purposes of the marking statute.

In support of its argument, USEI relies on Phillip M.

The court found that, to

Id. at 29-30.

20

Thus, the court

Id. at 30.

1

However, USEI fails to demonstrate that the separate cross

2

license and covenant not to sue at issue here are the equivalent

3

of those analyzed by in the Adams case or that reading of the

4

covenant not to sue as an implied license in this case would

5

render any part of the cross license as surplusage.

6

Adams, the documents here are separate contracts that involve

7

different parties.

8

litigation, Xircom, 3Com and Intel contemporaneously entered into

9

a series of contracts.

Unlike in

As explained above, to resolve the Xircom

The settlement agreement was signed by all

United States District Court
For the Northern District of California

10

three and had the other two contracts attached to it.

11

license was also executed by all three and involved only Xircom

12

and 3Com patents, among other things, granting Xircom and Intel

13

the right to use five specific 3Com patents that are not at issue

14

in this litigation.

15

contrast, the covenant not to sue was executed only by Intel and

16

3Com.

17

assert any of their patents against each other alleging

18

infringement of the subject matter covered by the agreement.

19

Covenant Not to Sue § 3.2.

20

broadly and encompasses all products made by the respective

21

companies, with limited exclusions.

22

1.21.

23

and parties to the agreements, it is not clear that interpreting

24

the covenant not to sue as an authorization to practice the

25

patented technology would have any effect whatsoever on the

26

separate cross license, and USEI has not identified any.

27
28

The cross

Cross License Agreement §§ 1.6, 3.3, 3.4.

In

In that document, each of these companies agreed not to

The covered subject matter is defined

Id. at §§ 1.9, 1.10, 1.20,

Particularly in light of the differing time periods, scope

Further, reading the document as a whole, the covenant not to
sue does unambiguously authorize Intel’s manufacture and sale of
21

1

products under any of 3Com’s covered patents, even if the parties

2

did not specifically discuss or know that Intel was practicing the

3

technology of the patents-in-suit at the time of contracting.11

4

the covenant, 3Com agrees that, for the effective term of the

5

agreement, it “will not Assert any Patent owned by 3Com or as to

6

which 3Com has the right to Assert infringement against Intel or

7

Permitted Assignees, alleging direct or indirect infringement with

8

respect to Covered Intel Subject Matter.”

9

term, without apparent restriction or limitation, thus authorizes

Id. at § 3.2.2.

In

“This

United States District Court
For the Northern District of California

10

all acts that would otherwise be infringements: making, using,

11

offering for sale, selling, or importing.”

12

1276.

13

Matter” encompasses “all products manufactured, imported, sold or

14

offered for sale by or for Intel,” with limited exceptions that

15

USEI has not invoked here.

16

see also id. at § 3.1 (stating the intent of the parties to avoid

17

“patent disputes between themselves as a result of sales of their

18

products”).

19

TransCore, 563 F.3d at

This is particularly clear because “Covered Intel Subject

Cross License Agreement §§ 1.9, 1.21;

Accordingly, Intel’s sales of purportedly infringing products

20

during the time period covered by the covenant not to sue were

21

carried out under the authority of 3Com and can thus be imputed to

22

3Com for the purposes of § 287’s marking requirement.

23

IBM agreement, 3Com did not take reasonable efforts--or any

24

efforts whatsoever--to ensure that any sale of products by Intel

25

under this authorization complied with this requirement.

As with the

Further,

26
27
28

11

Movants have offered evidence that shows that 3Com was
aware that Intel was a “well-positioned competitor” in the
relevant technology at this time. Constant Decl., Ex. A.17, 9.
22

1

the number of purportedly infringing components sold by Intel

2

during a one year time period from November 2003 to November 2004

3

dwarfs, by a factor of almost five, the number of components sold

4

by 3Com for a seven year period through 2004.

5

To the extent that USEI relies on the district court’s denial

6

of the defendant’s motion for partial summary judgment based on

7

marking in the Realtek litigation, this is unavailing.

8

there was brought based on 3Com’s purported failure to mark its

9

own products with the patents, not on its failure to make

The motion

United States District Court
For the Northern District of California

10

reasonable efforts to ensure that licensees complied with the

11

marking requirements.

12

motion that 3Com did mark substantially all of its own products

13

and that it made reasonable efforts to ensure that its express

14

licensees, Realtek, ADMtek and VIA, did so, this is not sufficient

15

to preclude summary judgment, in light of the failure to take

16

reasonable steps to ensure that Intel and IBM marked products with

17

the patents.

18

Even assuming for the purposes of this

USEI also argues that the motion should be denied because

19

Movants have not offered evidence that Intel’s products infringe

20

the patents-in-suit and instead rely on USEI’s assertions of

21

infringement.

22

some or all of Intel’s products may be found ultimately not to

23

infringe and “there would be no reasonable argument that 3Com

24

failed to comply with the marking requirements of Section 287

25

based on the sale of non-infringing Intel products.”

26

However, as explained by another district court presented with the

27

same argument, this argument is insufficient to raise a genuine

28

issue of material fact:

It contends that this motion is premature, because

23

Opp. at 19.

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15

Loral simply argues that a genuine factual issue remains
as to whether the CCDs sold by Toshiba, NEC and the
other defendants infringe claims of the ‘485 patent.
Loral contends that this court cannot rule on this
motion until the finder of fact rules on infringement.
These legal contentions, however, do not satisfy Loral’s
burden to present factual evidence showing a genuine
issue of material fact.
Loral has consistently asserted in this case that the
CCDs sold by Matsushita, Toshiba, and NEC in the United
States infringe claims of the ‘485 patent. Defendants
have conclusively shown these specific allegedly
infringing CCDs were sold, unmarked, during the terms of
license agreements with Fairchild. Loral has not
withdrawn its claim of infringement of any of these
devices. In sum, Loral has provided no evidence to show
a genuine issue of material fact. See Fed. R. Civ. P.
56(e).
Rather than supply evidence creating a genuine factual
issue, Loral has merely argued the possibility that the
trier of fact could find that these CCDs do not infringe
-- a position inconsistent with Loral’s pleadings,
answers to interrogatories, statement of undisputed
facts, and its interpretation of the scope of its
patent, either literally or by equivalents. Loral
cannot create a genuine issue of fact as to whether
these licensed CCDs are covered by the ‘485 patent
simply by arguing the possibility of such a result.

16

Loral Fairchild Corp. v. Victor Co. of Japan, 906 F. Supp. 813,

17

818 (E.D.N.Y. 1995).

18

the position that the relevant products sold by Intel infringe its

19

patents, and it has not offered any evidence here that they do

20

not--instead, it just speculates that the factfinder ultimately

21

may find that Intel’s products do not infringe.

22

motion, Movants offered evidence that the marking requirement was

23

not met and thus the burden shifted to USEI to raise an issue of

24

fact to preclude summary judgment.

25

do so simply through argument unsupported by evidence.

26

Similarly, here, USEI has consistently taken

With their

It cannot meet its burden to

Further, USEI has raised no genuine issue of material fact

27

that 3Com failed to mark its products with the ‘313 Patent.

28

their motion, Movants offered evidence that 3Com did practice the
24

With

1

‘313 Patent.

2

“its predecessor in interest, 3Com Corporation, practiced [the

3

Asserted Claims] as 3Com was a world-wide leader in Ethernet

4

products until it was forced out of business . . .”

5

Decl., Ex. A.2, 18.

6

short of demonstrating that 3Com sold an unmarked products that

7

practiced the ‘313 Patent.”

8

offered this to show that 3Com did make products that practiced

9

the ‘313 Patent, and a jury could conclude from this statement

In its infringement contentions, USEI asserted that

Constant

USEI responds that this statement “falls

Opp. at 18, n.49.

However, Movants

United States District Court
For the Northern District of California

10

that 3Com did this.

11

Rule 30(b)(6) witness that USEI did “not know” if 3Com or anyone

12

else ever marked products with the ‘313 Patent.

13

Ex.

14

that USEI would not able to meet its burden of persuasion at trial

15

to show that the products that 3Com made practicing the ‘313

16

Patent were marked.

17

demonstrate that there is a genuine issue of fact as to this.12

18

Finally, USEI argues that, even if the Court holds--as it

A.7, 21:6-14.

Movants also offered testimony from USEI’s

Constant Decl.,

Thus, Movants produced evidence that showed

USEI did not respond with any evidence to

19

has--that patented products sold by Intel during the term of the

20

covenant not to sue should be imputed to 3Com, “[a]ny limitation

21

on USEI’s ability to recover damages for infringement of the

22

Patents-in-Suit under 35 U.S.C. §287 should end on November 8,

23

2004,” the expiration of that covenant.

Opp. at 17-18.

However,

24
25
12

26
27
28

In addition, Movants offered evidence that USEI has
identified Broadcom’s BCM5700 chip of infringing the ‘313 Patent,
see Constant Decl., Ex. A.2, 7; Bremer Reply Decl., Ex. A.2, 7,
and that 3Com itself made unmarked products that utilized this
chip, see Bremer Reply Decl., Exs. A.3, A.4. USEI did not address
or respond to this evidence at the hearing.
25

1

this argument fails to take into account that the license

2

agreement with IBM remained valid past that date and that IBM

3

continued to sell unmarked products that included accused Intel

4

components through 2009.

5

Accordingly, the Court GRANTS Movants’ motion for partial

6

summary judgment on the basis of marking.

7

damages for any acts of infringement of the ‘872, ‘459 or ‘313

8

Patents against Movants, except ASUS Computer International, that

9

took place before it filed infringement claims against each of

USEI cannot recover

United States District Court
For the Northern District of California

10

them.

11

infringement of the ‘313 Patents against ASUS Computer

12

International that took place before USEI filed infringement

13

claims against it.

14

II.

Further, USEI cannot recover damages for any acts of

Nominal damages

15

Intel and Nvidia move for summary judgment precluding USEI

16

“from asserting that damages should be calculated by applying a

17

royalty rate or percentage to revenues or profits from the accused

18

products” and limiting USEI “to proffering a reasonable royalty

19

based on the total costs of permanently removing the accused

20

features from the accused products, rather than on any alleged

21

value of the accused features to Intel, Nvidia, or their

22

customers.”

23

2003, they have disabled the accused features of their Ethernet

24

products in the software drivers that they provide to purchasers.

25

USEI moves to continue the motion for partial summary judgment

26

pursuant to Federal Rule of Civil Procedure 56(d).

27
28

Mot. at 20.

They argue that, since before October

Although, if Intel and Nvidia were to prove ultimately that
any infringing capabilities of their accused products were in fact
26

fully disabled for the damages period, and that the accused

2

features were of no benefit to them or their customers during that

3

time, USEI may be foreclosed from recovering damages as they urge,

4

USEI has identified sufficiently specific evidence that it may

5

obtain through discovery that may be relevant to the issue of

6

disablement, including whether the features may have been re-

7

enabled.

8

The Court DENIES Intel and Nvidia’s motion for partial summary

9

judgment without prejudice to re-filing as part of the parties’

10
United States District Court
For the Northern District of California

1

dispositive cross-motions that are set to be briefed after the

11

close of fact and expert discovery.13

Accordingly, the Court GRANTS USEI’s Rule 56(d) motion.

12
13

CONCLUSION
For the reasons set forth above, the Court GRANTS in part and

14

DENIES in part Movants’ motion for partial summary judgment

15

(Docket Nos. 766 in 10-3724, 450 in 10-5254), GRANTS USEI’s Rule

16

56(d) motion (Docket No. 793), GRANTS USEI leave to file a

17

surreply and DENIES it leaves to file a notice of newly discovered

18

evidence (Docket No. 823).

19

Order, USEI shall file its proposed surreply in the docket.

20

Within three days of the date of this

USEI is precluded from recovering damages for any acts of

21

infringement of the ‘872, ‘459 or ‘313 Patents by Intervenors

22

Intel Corporation, Broadcom Corporation, Marvell Semiconductor

23

Inc., Nvidia Corporation, Atheros Communications Inc. and Sigma

24

Designs, Inc., and Defendants Acer, Inc., Acer America

25

Corporation, Apple, Inc., Asustek Computer Inc., AT&T Services,

26
27
13

28

USEI’s motion for leave to file newly discovered evidence
regarding disablement is therefore DENIED as moot.
27

1

Inc., Dell Inc., Fujitsu Ltd., Fujitsu America, Inc., Gateway,

2

Inc., Hewlett Packard Co., Sony Corporation, Sony Corporation of

3

America, Sony Electronics Inc., Toshiba Corporation, Toshiba

4

America, Inc., or Toshiba America Information Systems, Inc. that

5

took place before it filed infringement claims against such

6

Defendant or Intervenor.

7

recovering damages for any acts of infringement of the ‘313

8

Patents against ASUS Computer International that took place before

9

USEI filed infringement claims against it.

United States District Court
For the Northern District of California

10

Further, USEI is precluded from

IT IS SO ORDERED.

11
12
13

Dated: 8/16/2013

CLAUDIA WILKEN
United States District Judge

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
28