Intellectual Ventures II L.L.C. v. JP Morgan Chase & Co. et al
Filing
570
ORDER AND OPINION DENYING MOTION FOR SUMMARY JUDGMENT BASED UPON NON-INFRINGEMENT: For the foregoing reasons, JPMC's motion for summary judgment is denied. JPMC's motion to strike IV's infringement contentions is severed and covered by separate order. The motions to seal are granted. The Clerk shall mark the motions (Doc. Nos. 534, 536, 544, 546) terminated, with Doc. No. 530 remaining open as to the motion to strike IV's infringement contentions. (As further set forth in this Order.) (Signed by Judge Alvin K. Hellerstein on 7/21/2016) (cf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------- x
INTELLECTUAL VENTURES II LLC,
Plaintiff,
ORDER AND OPINION
DENYING MOTION FOR
SUMMARY JUDGMENT
BASED UPON NONINFRINGEMENT
v.
JP MORGAN CHASE & CO., JPMORGAN
CHASE BANK, NATIONAL ASSOCIATION,
CHASE BANK USA, NATIONAL
ASSOCIATION, CHASE PAYMENTECH
SOLUTIONS LLC, and PA YMENTECH LLC,
13-cv-3777 (AKH)
Defendants.
------------------------------------------------------------- x
ALVIN K. HELLERSTEIN, U.S.D.J.:
Intellectual Ventures II LLC (''IV") brought this lawsuit against defendants for
infringement of five patents related to the use of IBM Crypto Cards, cryptoprocessors that assist
"
with and protect the encryption of sensitive information. Defendant J.P. Morgan Chase & Co.
("JPMC") moves for summary judgment to dismiss the one remaining patent in this case, U.S.
patent number 7 ,634,666, on the ground that JPMC' s accused product does not infringe IV's
patent. The issue is whether JPMC's accused product infringes an element of claim four of the
Patent, relating to a "sign inversion unit." That element of the patent haq an agreed definition, as
provided in the Markman order.
JPMC argues that technical discovery has shown that the computer chips at issue
do not include a "sign inversion unit" as that term was described by the parties and by the
Markman Order. See Order Regarding Claim Construction and Patent Summaries, ECF No. 82,
at 12 (March 18, 2014). However, the motion is denied. JPMC's argument has merit, a fuller
understanding of the context of the claim is necessary properly to determine the issue of noninfringement.
Background
Intellectual Ventures ("IV") brought this action against several banks in June
2013, alleging infringement of five patents. See Complaint, Dkt. No. 1 (June 4, 2013). The
asserted infringing products are various versions of IBM Crypto Cards, 1 which defendants
employ as part of their cyber-security systems. Defendants answered and filed counterclaims
seeking a declaratory judgment as to invalidity and noninfringement of the patents. As discovery
progressed, JPMC moved for a stay pending review by the U.S. Patent a!ld Trademark Office
("PTO"). See ECF No. 128. I denied the stay, principally because the delay inherent in patent office
review of only some of the issues before me was not acceptable. See Intellectual Ventures II L. L. C.
v. JP Morgan Chase & Co., No. 13 CIV. 3777 (AKH), 2014 WL 10919562, at *5 (S.D.N.Y. Aug.
11, 2014) (ECF No. 154), appeal dismissed sub nom. Intellectual Ventures II LLC v. JPMorgan
Chase & Co., 781F.3d1372 (Fed. Cir. 2015).
.
As discovery continued, JPMC regularly complained about the opaque nature of
plaintiffs' infringement contentions and interrogatory responses. JPMC filed several motions to
compel, and finally a motion to strike IV's infringement contentions, which I ultimately denied.
See Order Denying Defendants' Motion to Strike Plaintiffs' Infringement Contentions and
Granting in Part and Denying in Part Plaintiffs' and Defendants' Motions to Compel, ECF No.
296 (Nov. 5, 2015). However, I noted that "IV's initial infringement contentions were
inadequate" under Yama Capital LLC v. Canon Inc., No. 12 Civ. 7159, 2013 WL 6588589
1 The
accused products are the IBM 4765 PCie Cryptographic Coprocessor or Y4 Cryptographic Coprocessor (IBM
Crypto Cards 3 and 4), and the 4767 PCle Cryptogrpahic Coprocessor or Sentry Cryptographic Coprocessor (IBM
Crypto Card 5).
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(S.D.N.Y. Dec. 13, 2013), but that on the record then before me, it was "unclear whether IV has
improvidently expanded the scope of its case or simply added detail to its initial infringement
contentions." Id.
On April 28, 2015, I granted partial summary judgment pursuant to 35 U.S.C. §
IOI for JPMC with respect to three of the patents, on the basis that they claimed patent-ineligible
subject matter. See Intellectual Ventures II LLCv. JP Morgan Chase & Co., No. 13-CV-3777
AKH, 2015 WL 1941331, at *I (S.D.N.Y. Apr. 28, 2015) (dismissing Counts 2, 3, and 4 ofthe
Complaint, relating to the '694 Patent, the '084 Patent, and the '409 Patent). A fourth patent,
number 5,745,574, was withdrawn on consent. (ECF No. 519, Sept. 17, 2015).
Only one patent remains at issue in the case, U.S. Patent No. 7,634,666 ("'666
Patent"). The '666 Patent claims a physical co-processor, referred to as a "crypto-engine," used to
assist a host processor, such as a personal or network computer, with the encryption of data. JPMC
previously moved for summary judgment as to noninfringement in May of 2015, prior to the
completion of the deposition phase of discovery. See Defendant's Motion for Summary
Judgment, Dkt. No. 388 (May 12, 2015). I denied the motion, finding that IV raised triable
issues of fact as to whether the IBM Crypto Card had the capability of executing both ECC and
RSA encryption algorithms, as required by Claim 4 of the '666 Patent. See Order and Opinion
Denying Motion for Summary Judgment Based Upon Noninfringement, Dkt. No. 449 (June 30,
2015).
Discovery continued through the fall of 2015. JPMC then filed its motion for
summary judgment, and its motion to strike the infringement contentions (thus terminating the
case as a sanction for discovery abuse). I heard argument on the motions,and to aid my
disposition of the motion gave leave to plaintiffs to file a motion for rehearing of the Markman
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order definition of the term "sign inversion unit." Plaintiffs so moved on June 29, 2016 (ECF Doc.
Nos. 556, 557), and defendants opposed on July 14, 2016 (ECF Doc. Nos. 560, 561, 562). By
separate order, I denied the motion to change the construction of the definition from the conjunctive
"and" to "and/or." See Order Denying Motion to Reconsider Definition of the Claim Term "Sign
Inversion Unit," ECF Doc. No. 568 (July 20, 2016).
Summary of Motion
JPMC claims that the plaintiffs infringement contentions show that the claimed
arithmetic unit of any IBM Crypto Card "can only accept an input value that is positive, and
cannot accept an input value that is negative." Thus, JPMC claims it cannot and does not
infringe, because the unit does not change both positive numbers to negative numbers and
negative numbers to positive numbers, for that was the definition agreed to by the parties for the
term in Claim 4 of the '666 Patent. The relevant section of Claim 4 reads as follows:
A crypto-engine for cryptographic processing of data comprising an arithmetic
unit operable as a co-processor for a host processor and an interface controller for
managing communications between the arithmetic unit and host processor, the
arithmetic unit including: a memory unit for storing and loading data; a
multiplication unit, an addition unit and a sign inversion unit for performing
arithmetic operations on said data, the multiplication unit, addition unit and sign
inversion unit each having an output ...
U.S. Patent No. 7,634,666 (emphasis added).
I held a Markman hearing on March 5, 2014. In discussing how to construe the sign
inversion unit, the parties engaged in the following exchange:
THE COURT: What is sign inversion?
MR. LIM: Simply inverts a sign of a number, your Honor. ...
MR. LIM: Positive number to negative number, negative number to positive number.
Inverting the sign of the number.
THE COURT: How about say a unit that changes positive numbers into negative
numbers and negative numbers into positive numbers?
MR. LIM: We are okay with that.
MR. ADAMO: That's acceptable to JP Morgan Chase.
THE COURT: That's acceptable to Mr. Adamo.
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Transcript, Markman Hearing, ECF No. 78, at 80-81 (March 5, 2014). Consistent with the
agreed definition provided by the parties, I defined "sign inversion unit" as "a unit that changes
positive numbers to negative numbers and changes negative numbers to positive numbers."
Order Regarding Claim Construction and Patent Summaries, ECF No. 82, at 12 (March 18,
2014).
Standard of Review
The standard for summary judgment in a patent case is the same as in any other
case. See Desper Prods., Inc. v. QSound Labs, Inc., 157 F.3d 1325, 1332 (Fed. Cir. 1998);
Union Carbide Corp. v. Am. Can Co., 724 F.2d 1567, 1571 (Fed. Cir. 1984). Summary
judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and that the movant is
entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). A genuine issue of material fact exists "if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc ..
477 U.S. 242, 248 (1986). "Where the record taken as a whole could not lead a rational trier of
fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus.
Co., Ltd v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and internal quotation marks
omitted).
Summary judgment of noninfringement can be granted only if, after viewing the
facts in the light most favorable to the non-movant, there is no genuine issue as to whether the
accused product is covered by the claims. See Pitney Bowes, Inc. v. Hewlett -Packard Co., 182
F.3d 1298, 1304 (Fed. Cir. 1999). A patent is infringed when a person "without authority makes,
uses, offers to sell, or sells any patented invention, within the United States ... during the term of
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the patent." 35 U.S.C. § 271(a). A determination as to whether a party infringes a patent requires
a two-step process. See Markman v. Westview Instruments. Inc., 52 F.3d 967, 976 (Fed. Cir.
1995). First, the court must construe the asserted claims to ascertain their meaning and scope.
Id The trier of fact then must compare the properly construed claims with the accused
infringing product. Id. An accused infringer is entitled to summary judgment of noninfringement if at least one limitation of the claim in question does not read on an element of the
accused product, either literally or under the doctrine of equivalents.2 See Chimie v. PPG Indus.
Inc., 402 F.3d 1371, 1376 (Fed. Cir. 2005); see also Deering Precision Instruments, L.L.C. v.
Vector Distribution Sys., Inc., 34 7 F.3d 1314, 1324 (Fed. Cir. 2003 ). "Direct infringement
requires a party to perform or use each and every step or element of a claimed method or
product." BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378 (Fed. Cir. 2007), overruled
on other grounds by Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed.
Cir. 2012) (en bane). "If any claim limitation is absent from the accused device, there is no
literal infringement as a matter oflaw." Bayer AG v. Elan Pharm. Research Corp., 212 F.3d
1241, 1247 (Fed. Cir. 2000).
Discussion
JPMC argues that because technical discovery shows that the sign inversion unit
accepts only inputs that are greater than zero, IV is unable to show infringement as a matter of
law, because the unit does not both change positive numbers to negative numbers and change
negative numbers to positive numbers. IV, and its expert, Dr. Wolfe, respond that the IBM
technical discovery should not be read to limit the inputs to positive numbers. First, IV argues
2 IV has asserted only direct infringement in its latest infringement contentions, and has waived any contentions
under the doctrine of equivalents. See Plaintiffs Mem. of Law in Opp'n, Dkt. No. 539, at 9; Trans. of Argument,
Dkt. No. 550, at 43-45.
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that the sign inversion unit, by virtue of its operation that involves executing a "two's
complement function," is capable of converting negative to positive numbers, and so infringes
even if the product currently performs the function only with positive-number inputs. Second,
they argue that I did not intend to require conversion in both directions when I construed Claim 4
of the Patent, and that I should revise my construction. Finally, IV argues on the basis of an
expert declaration that JPMC cannot show that the claimed sign inversion unit in the IBM Crypto
Cards requires the use of, and uses, only positive inputs, because the Crypto Card uses a modulo
number system. Plaintiffs Rule 56.1 Statement in Support of Opposition, Dkt. No. 540, at 2-3,
citing Lim Dec., Ex. 22 (Deel. of Andrew Wolfe,
at~
39), Dkt. No. 541. IV's expert submits
that numbers in a modular mathematics system are arranged and a loop, and defined only in
relation to each other, whether positive or negative or both. Thus, IV argues that the technical
documents for the IBM Crypto Cards' sign inversion units, even if they use only inputs greater
than zero, do not necessarily mean that the sign inversion units use only "positive" inputs.
1. Intellectual Ventures' Capability Argument
JPMC's capability argument is irrelevant, and inconsistent with the Markman
order. See, e.g., Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1329 (Fed. Cir. 2010) ("Unless the
claim language only requires the capacity to perform a particular element, we have held that it is
not enough to simply show that a product is capable of infringement.").· IV argues that the
crypto cards' sign inversion unit performs the "two's complement" function on any given input.
Two's complement is a well-known and simple mathematical operation frequently employed in
encryption devices, to switch the sign of a number, from positive to negative, and negative to
positive, achieving the same result as can be accomplished by pushing t}le +/-sign on a standard
calculator. Id. at 20.
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However, the IBM cards are programmed to operate only with positive inputs.
See Ex. J, K, L, and M to Ray Deel. in Support of JPMC's Motion, Dkt. No. 532. This
significant difference, JPMC argues, cannot be subsumed of the Markman order definition of
"sign inversion unit" for the term is defined to mean "a unit that changes positive numbers to
negative numbers and negative numbers to positive numbers."
IV argues that because the sign inversion unit performs its operations by
executing the two's complement function on an input, and because two's complement can accept
negative or positive inputs, the Crypto Cards are thus "capable'' of infringing. Mere capability,
however, is not sufficient to prove infringement where the claim and its construction make no
reference to capability. Furthermore, IV presents no evidence beyond counsel's bare assertion
that the IBM Crypto Cards are "capable of performing the recited function without
modification." Typhoon Touch Technologies, Inc. v. Dell. Inc., 659 F.3d 1376, 1380 (Fed. Cir.
2011 ). JPMC has produced copious evidence showing that the sign inversion units contained in
the IBM Crypto Cards are not designed or programmed to, and are not capable of, converting
negative numbers into positive ones. The source code, functional specifications in IBM
technical documents, and the physical evidence (showing that the IBM Crypto Card and the
Figaro arithmetic unit contained therein could not be altered without disabling their
functionality) show that the IBM Crypto Card is not "capable of performing the recited
function." Microprocessor Enhancement Corp. v. Texas Instruments, Inc., 520 F.3d 1367, 1375
(Fed. Cir. 2008).
2. Intellectual Ventures Has Not Shown Good Cause to Change the Definition of a
"Sign Inversion Unit"
IV argues that the definition of sign inversion unit in Claim 4 of
the '666 Patent should be changed to include sign changes in either or both directions: positive to
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negative, or negative to positive, or both. Plaintiffs Mem. of Law in Opp'n, Dkt. No. 539, at
.
34-35. IV has moved for a rehearing to elicit such an order. By separate order, I denied the
motion. Order Denying Motion to Reconsider Definition of the Claim Term "Sign Inversion Unit,"
ECF Doc. No. 568 (July 20, 2016). The parties agreed to the definition in the Markman order; IV
had advocated that definition in other cases in other courts, and there had been no newly-found
understanding of the patent suggesting such a definitional change. See Nuance Comm 'ens, Inc.
v. ABBYY USA Software House, Inc., 813 F.3d 1368, 1373-4 (Fed. Cir. 2016). IV never before
objected to the Markman definition, either in this case or in other cases. See, e.g., Joint Claim
Construction Statement, Intellectual Ventures v. Citigroup, et al., 14-cv-4638, ECF No. 65, at 2
(March 11, 2015). In Citigroup, where Claim 4 of the '666 patent is also at issue, the parties
submitted a joint claim construction statement, and while Citi sought specification that the sign
inversion unit "solely" "changed positive numbers to negative numbers and negative numbers to
positive numbers," both parties in that case submitted the conjunctive "and" version, and
included both the "positive to negative" direction of inversion, and the "negative to positive." Id.
See also Intellectual Ventures v. Suntrust Banks, Plaintiffs Opening Claim Construction Brief, at
87-88, 1: 13-cv-02454(WSD), ECF No. 93, (N.D. Ga. March 19, 2014) ("Again, the Southern
District of New York rejected the inclusion of the word 'solely,' and construed the 'addition
unit' to be 'a unit that performs addition' and the 'sign inversion unit' to be 'a unit that changes
positive numbers to negative numbers and changes negative numbers to positive numbers.' To
the extent the Court is inclined to adopt the Southern District of New York's constructions, IV
agrees.").
IV's sole reason to change the Markman order is its regret, in opposing JPMC's
motion for summary judgment for noninfringement. Regret is not a legal excuse. Thus, I denied
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IV's motion for rehearing. Order Denying Motion to Reconsider Definition of the Claim Term
"Sign Inversion Unit," ECF Doc. No. 568 (July 20, 2016).
3. The Materiality of a Variance Between an Accused Product and One of Many
Components of a Claim Required Better Understanding that this Summary
Judgment Record Permits
IV insists that "in the context of the modulo mathematics used by both the '666
patent and the IBM Crypto Cards," a distinction between positive and negative numbers is
immaterial. Plaintiffs Rule 56.1 Statement in Support of Opposition, ECF No. 540, at 2-3,
citing Lim Dec., Ex. 22 (Deel. of Andrew Wolfe,
at~
39), ECF No. 541. The technical
discovery developed so far, as presented in the record of this motion, does not persuade beyond
counter-argument that the arithmetic unit "can only accept an input value that is positive, and
cannot accept an input value that is negative," or that it makes a difference. See Lim Dec., Ex.
22 (Deel. of Andrew Wolfe, at ft 27), Dkt. No. 541. Dr. Wolfe, IV's expert, writes that,
While it is common to talk about the modulo numbers described in the patent as
all having positive values, this is only a notational convenience and not pertinent
to the actual mathematics. The same sign-inversion concept is present and is
performed by the identical method using identical structure ... Thus the disclosed
sign inversion unit performs the claimed sign inversion function as construed by
the Court.
IBM's technical documents, including functional specifications for the products
and source code, posit the use of all positive numbers, between 0 and 22048 . Def. Mem. of Law in
Support, Dkt. No. 531 at 21-22, quoting Exs. K, L, M to Ray Deel. in Support of JPMC's
Motion, Dkt. No. 532 (Y4 Cryptographic Coprocessor Functional Specification; Sentry
Cryptographic Coprocessor Functional Specification; Otello Source Code). IV argues that the
numbers just as easily can be negative inputs, in whole or in part, for the numbers are modular
and in a loop. Lim Dec., Ex. 22 (Deel. of Andrew Wolfe,
at~
39), Dkt. No. 541. IV and its
expert contend, "[t]he two's complement circuit in the accused systems has neither the need to
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know the sign of its input nor any reason to know. It performs the same mathematical operation
no matter the input," and that for this reason ''[t]he circuit is capable of changing positive
numbers to negative numbers and negative numbers to positive numbers." Id.
at~
24.
I cannot resolve the issue in the context of a motion for summary judgment. IV's
arguments appear not to be persuasive and may constitute "solely an expert's unsupported
conclusion on the ultimate issue of infringement," Dynacore Holdings Corp. v. U.S. Phillips
Corp., 363 F.3d 1263, 1277-78 (Fed. Cir. 2004). JPMC's contention that the sign inversion unit
in the accused Cryptocards processes only positive numbers, between 0 and 22048 , is persuasive.
I realize infringement cases do not import a concept of overall materiality, see e.g., Planet Bingo,
LLC v. GameTech Int'!, Inc., 472 F.3d 1338, 1343 (Fed. Cir. 2006); Bayer AG v. Etan Pharm.
Research Corp., 212 F.3d 1241, 1247 (Fed. Cir. 2000), but I cannot determine as a matter oflaw
that the product does not infringe without considering the context of the technology and in
relation to the claim language of the Patent, and this I cannot do on the record currently before
me.
Conclusion
For the foregoing reasons, JPMC's motion for summary judgment is denied.
JPMC's motion to strike IV's infringement contentions is severed and covered by separate order.
The motions to seal are granted. The Clerk shall mark the motions (Doc. Nos. 534, 536, 544,
546) terminated, with Doc. No. 530 remaining open as to the motion to strike IV's infringement
contentions.
SO ORDERED.
Dated:
~~~
~HELLERSTEIN
New Yo/. New York
July .z..i,2016
United States District Judge
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