Nautilus Hyosung Inc v. Diebold Incorporated et al
Filing
102
MEMORANDUM OPINION AND ORDER: This Order addresses the construction of one of several disputed claim terms pursuant to Markman v. Westview Instruments, Inc, 52 F.3d 967 (Fed. Cir. 1995) (en banc). It appears to the Court that, given its finding and holding regarding the phrase "cheque standby unit," it is unnecessary to proceed with further claim construction. The Court directs the parties to confer and determine if they can submit a proposed final judgment that is agreed as to form. If they are unable to agree on that, the Court directs the parties to provide their respective views regarding what further proceedings the Court should conduct to bring this case to final judgment by letters docketed on CM/ECF no later than 5:00 p.m., fourteen (14) days from the date of this Order. (Ordered by Judge David C Godbey on 7/23/2020) (oyh)
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IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
HYOSUNG TNS, INC.,
Plaintiffs,
v.
DIEBOLD NIXDORF, INC.,
Defendants.
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Civil Action No. 3:16-CV-0364-N
MEMORANDUM OPINION AND ORDER
This Order addresses the construction of one of several disputed claim terms
pursuant to Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc),
aff’d, 517 U.S. 370 (1996). Plaintiff Hyosung TNS, Inc. (“Hyosung”) brought suit against
Defendant Diebold Nixdorf, Ind. (“Diebold”) for infringement of US Patent No. 8,523,235
(the “’235 Patent”). Having reviewed the relevant intrinsic evidence in the record, and
such extrinsic evidence as necessary, the Court finds the disputed phrase “cheque standby
unit” is indefinite; accordingly, no further claim construction is necessary.
I. BACKGROUND OF THE INVENTIONS
The invention relates to an improvement to an automated teller machine (“ATM”).
In particular, the invention allowed for depositing bundles of cash or checks. One aspect
of the invention was an escrow area where a bundle of checks could be held so that if the
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customer decided to cancel the deposit transaction before it was completed, the pending
bundle of checks could be returned to the customer: the “cheque standby unit.”1
II. CLAIM CONSTRUCTION STANDARDS
A. Basics
Claim construction is a question of law for the Court, see Markman, 517 U.S. at
391, although it may involve subsidiary factual questions. See Teva Pharm. USA, Inc. v.
Sandoz, Inc., 574 U.S. 318, 324-27 (2015). In construing the claims of a patent, the words
comprising the claims “are generally given their ordinary and customary meaning” as
understood by “a person of ordinary skill in the art in question at the time of the invention,”
i.e. a “POSITA.” Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (en
banc) (citations and internal quotation marks omitted).
Accordingly, courts must
determine the meaning of claim terms in light of the resources that a person with such skill
would review to understand the patented technology. See id. at 1313 (citing Multiform
Desiccants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1477 (Fed. Cir. 1998)). First, “the
person of ordinary skill in the art is deemed to read the claim term . . . in the context of the
entire patent, including the specification.” Id. If the specification “reveal[s] a special
definition given to a claim term by the patentee that differs from the meaning it would
otherwise possess . . . , the inventor’s lexicography governs.” Id. at 1316. Likewise, if
“the specification . . . reveal[s] an intentional disclaimer, or disavowal, of claim scope by
When quoting the language of the claim, the Court will use the spelling “cheque;” when
otherwise referring to a paper negotiable instrument, the Court will use the spelling
“check.”
1
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the inventor . . . [,] the inventor’s intention, as expressed in the specification, is regarded
as dispositive.” Id. (citation omitted). While the claims themselves provide significant
guidance as to the meaning of a claim term, the specification is generally dispositive as “it
is the single best guide to the meaning of a disputed term.” Id. at 1314-15 (internal
quotation marks omitted).
In addition to the specification, courts may examine the patent’s prosecution history
– that is, the “complete record of the proceedings before the PTO and includ[ing] the prior
art cited during the examination of the patent.” Id. at 1317 (citation omitted). “Like the
specification, the prosecution history provides evidence of how the PTO and the inventor
understood the patent.” Id. (citation omitted). In particular, courts must look to the
prosecution history to determine “whether the inventor limited the invention in the course
of prosecution, making the claim scope narrower than it would otherwise be.”
(citations omitted).
Id.
“[W]here the patentee has unequivocally disavowed a certain
meaning to obtain his patent, the doctrine of prosecution disclaimer attaches and narrows
the ordinary meaning of the claim congruent with the scope of the surrender.” Omega
Eng’g, Inc. v. Raytek Corp., 334 F.3d 1314, 1324 (Fed. Cir. 2003).
Finally, in addition to evidence intrinsic to the patent at issue and its prosecution
history, courts may look to “extrinsic evidence, which ‘consists of all evidence external to
the patent and prosecution history, including expert and inventor testimony, dictionaries,
and learned treatises.’” Phillips, 415 F.3d at 1317 (quoting Markman, 52 F.3d at 980).
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In general, extrinsic evidence is “less reliable than the patent and its prosecution history in
determining how to read claim terms.” Id. at 1318.
When the intrinsic evidence, that is the patent specification and prosecution history,
unambiguously describes the scope of a patented invention, reliance on extrinsic evidence,
which is everything outside the specification and prosecution history, is improper. See
Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1583 (Fed. Cir. 1996). While the
Court may consult extrinsic evidence to educate itself about the invention and relevant
technology, it may not rely upon extrinsic evidence to reach a claim construction that is
clearly at odds with a construction mandated by the intrinsic evidence. See Key Pharm.
v. Hercon Labs. Corp., 161 F.3d 709, 716 (Fed. Cir. 1998).
B. “Nonce” Words and Means Plus Function
Courts have held that certain terms are simply placeholders and invoke means plus
function construction. The Court will address the contested term below, but will preface
2
that with an overview of the applicable legal principles.
Three recent Federal Circuit decisions guide this inquiry. In Williamson v. Citrix
3
Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015) (en banc), the Federal Circuit considered
the force of the presumption that use of the word “means” is necessary to invoke means-
2
This discussion is taken from SecurityProfiling, LLC v. Trend Micro America, Inc.,
2018 WL 4585279, at *1-2 (N.D. Tex. Sep. 25, 2018).
3
Only Part II.C.1 of the opinion is en banc. See id. at 1347 n.3.
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plus-function under 35 U.S.C. § 112, ¶ 6.
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The Court held that the presumption is not
strong. Id. at 1349. It further held that use of the term “module” invoked means-plusfunction. Id. at 1350. Following the district court, it understood that “‘module’ is simply
a generic description for software or hardware that performs a specified function.” Id.
Generic terms such as “mechanism,” “element,” “device,” and other nonce
words that reflect nothing more than verbal constructs may be used in a claim
in a manner that is tantamount to using the word “means” because they
typically do not connote sufficiently definite structure and therefore may
invoke § 112, para. 6.
Id. (quotation omitted). The Court also found it unavailing that one skilled in the art could
have programmed a computer to perform that function. “[T]he fact that one of skill in the
art could program a computer to perform the recited functions cannot create structure where
none otherwise is disclosed.” Id. at 1351. “The standard is whether the words of the
claim are understood by persons of ordinary skill in the art to have a sufficiently definite
meaning as the name for structure.” Id. at 1349. “When a claim term lacks the word
‘means,’ the presumption can be overcome and § 112, para. 6 will apply if the challenger
demonstrates that the claim term fails to ‘recite sufficiently definite structure’ or else recites
‘function without reciting sufficient structure for performing that function.’” Id. (quoting
Watts v. XL Sys., Inc., 232 F.3d 877, 880 (Fed. Cir. 2000)).
In Zeroclick, LLC v. Apple, Inc., 891 F.3d 1003 (Fed. Cir. 2018), a panel of the
Court reversed a district court holding that “program” and “user interface code” were nonce
4
After the prosecution of the ’235 patent, this paragraph was recodified as 35 U.S.C.
§ 112(f).
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terms under Williamson.
approach.
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The Circuit identified three errors in the district court’s
“First, the mere fact that the disputed limitations incorporate functional
language does not automatically convert the words into means for performing such
functions.” Id. at 1008 (citing Greenberg v. Ethicon EndoSurgery, Inc., 91 F.3d 1580,
1583 (Fed. Cir. 1996)). Second, the district court wrongly removed the terms from their
context. Id. For example, “user interface code” was not a generic black box, but a
reference to a conventional program existing in prior art at the time of the inventions. Id.
Third, the district court failed to make pertinent fact findings that the terms it identified
were used as a substitute for “means.” Id. at 1009.
C. The Diebold Case
Most recently, in Diebold Nixdorf, Inc. v. Int’l Trade Comm’n, 899 F.3d 1291 (Fed.
Cir. 2018), the Circuit reversed a ruling by the International Trade Commission. The
Diebold case is of extreme importance to this Court’s disposition of the instant Markman
Order, as it involved the same parties, the same patent, and the same disputed phrase:
“cheque standby unit.” As mentioned above, the “cheque standby unit” was described as
an “escrow” where the ATM could hold a deposit after a customer physically placed items
to be deposited into the ATM but before the customer had confirmed the transaction, to
allow for the return of the deposit items if the customer cancelled the transaction. The
Federal Circuit held that “Diebold has shown that the term ‘cheque standby unit,’ as
understood by one of ordinary skill in the art, both fails to recite sufficiently definite
structure and recites a function without reciting sufficient structure for performing that
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function.” Id. at 1298. In reaching that holding, it noted that Diebold was not required
to offer extrinsic evidence, but could meet its burden by relying only on intrinsic evidence.
Id. at 1299-1300. The Court also held that the patent owner’s expert’s testimony did not
show that “cheque standby unit” had a reasonably well understood meaning in the art, and
simply described the phrase in terms of its function. Id. at 1300-01. The Circuit thus
found that § 112, ¶ 6 applied, and then held that the specification did not disclose sufficient
structure corresponding to the claimed function so the claims with those terms were
indefinite. Id. at 1302-03.
The obvious question is if the Federal Circuit has already decided this question, why
is this Court revisiting that? As the Court stated in its Order denying Diebold’s Rule
12(b)(6) motion to dismiss, raising that issue:
In Diebold, the Federal Circuit acknowledged that trial courts
“interpret patent claims” and arrive at legal conclusions “after deciding
factual disputes.” Diebold Nixdorf, Inc., 899 F.3d at 1299 (emphasis
added). Further, the Federal Circuit expressly noted evidence, not presented
at the time, that could warrant a different determination on the issue of the
ʼ235 patent’s validity. Id. at 1300 n.4; see also Tex. Instruments, Inc.[v.
Cypress Semiconductor Corp.], 90 F.3d [1558,] 1562–63, 1570 [(Fed. Cir.
1996)] (affirming district court finding of noninfringement even though the
Federal Circuit had affirmed a prior ITC finding of infringement).
The Court finds that there may be evidence not presented on the ITC
record considered by the Federal Circuit that could merit a different claim
construction and a different conclusion regarding the validity of the ʼ235
patent. But this is a fact issue that cannot be resolved on the pleadings.
Consequently, raising the Federal Circuit’s decision to dispose of this case at
the Rule 12(b)(6) stage is unavailing when, as here, Hyosung has adequately
pled a claim for patent infringement and the validity of the ʼ235 patent cannot
be determined without resolution of disputed facts. The Court thus denies
Diebold’s motion to dismiss.
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Order at 4-5 (Dec. 5, 2019) [83].
The parties have fulsomely provided the Court with expert testimony not present in
the record before the ITC, and thus the Federal Circuit in Diebold. The Court must now
decide whether this additional evidence makes a difference in the outcome. It does not.
III. “CHEQUE STANDBY UNIT” WOULD NOT DENOTE STRUCTURE TO A POSITA
Before this Court, Hyosung attempts to accomplish what the Federal Circuit said it
had not done before the ITC: show that “cheque standby unit” (or CSU) would denote a
particular structure or classes of structure to a POSITA. It relies on the opening and
rebuttal declarations of its expert, Dr. Howard. See Appendix to Diebold’s Opening Br.
at 142, 368 [73-1].5 [hereinafter App.] Diebold likewise relies on the declarations of its
expert, Dr. Singhose. Id. at 15, 271. Unsurprisingly, Howard says CSU would denote
two classes of structure to a POSITA, Singhose says it would not. Under Teva, the Court
is faced with making a credibility call between the two experts on this point. See Teva,
supra, 135 S. Ct. at 836-39. Initially, the Court observes that both experts are extremely
well qualified and appear very knowledgeable regarding the technology at issue.6
The declarations appear at multiple places in the record. For convenience, the Court will
cite to Diebold’s appendix, which has all four together. The Court cites to the ECF page
number, rather than the printed Appendix page number at the bottom of the page images.
The Court has also reviewed the transcript of the Howard deposition; it does not materially
alter the content of his declarations, so the Court will limit its discussion to the declarations.
6 For what it is worth, the Court’s last Markman order found against Dr. Singhose on
similar fact questions. See Unicorn Global Inc. v. Golabs, Inc., Civil Action No. 3:19CV-0754-N (N.D. Tex. May 26, 2020) [134].
5
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On balance, the Court finds Singhose to be more credible and persuasive on this
issue. Initially, as Singhose notes, CSU is a coined phrase. See App. at 50 (Singhose
Decl. ¶ 134). It is not standard industry usage7 and was apparently created by the drafter
of the ʼ235 patent. It is virtually impossible that a coined term, before it was published in
the patent, would have indicated some structure or classes of structure to a POSITA. See
Adv. Ground Info. Sys. v. Life360, Inc., 830 F.3d 1341, 1348 (Fed. Cir. 2016) (coined term
not used by POSITA to designate structure).
Moreover, the structure of Howard’s declaration does not establish that the term
CSU indicates a structure to a POSITA. He more nearly indicates that a POSITA aware
of the prior art “would be able to design” a CSU. For example:
Given the figures and detailed description of structure, the
components, and the operation of the escrow unit, it is my opinion that a
person of ordinary skill in the art would understand that the term “cheque
standby unit” in the ’235 Patent encompasses the structure of the escrow unit
described in the 2003 Wincor Manual, and would be able to design a “cheque
standby unit” using the well-known components disclosed in the reference
combined with the person of ordinary skill in the art’s knowledge.
App. at 188 (Howard Decl. ¶ 116) (emphasis added).
Whether a POSITA would be able to design structure to perform the designated
function is not the question, however: “the fact that one of skill in the art could program a
computer to perform the recited functions cannot create structure where none otherwise is
disclosed.” Williamson, supra, 792 F.3d at 1351. “The standard is whether the words of
Singhose did a Google search for the phrase and all the search results were related to the
ʼ235 patent and the litigation between these parties. See App. at 50 (Singhose Decl. ¶
135).
7
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the claim are understood by persons of ordinary skill in the art to have a sufficiently definite
meaning as the name for structure.”
Id. at 1349.
What the Howard declaration
establishes is that the function of the CSU was known to a POSITA and was embodied in
various forms in the prior art, not that the term CSU indicated that structure to a POSITA.8
Howard would have a better case if the drafter of the ʼ235 patent had used the term “escrow
unit,” instead of CSU. See App. at 181-82 (Howard Decl. ¶ 101) (citing eight patents
using variants of the term “escrow” for structures performing functions comparable to
those of the CSU). But the drafter did not.
The Court also agrees with Singhose that Howard is being overly simplistic in
describing the world of escrow units as divided into drum structures and stacking
structures. See App. at 56-57 (Singhose Decl. ¶ 157). As Singhose demonstrates at great
length, other than the presence of a stacker or drum, the cited references were all very
different. See App. at 75-76 (Singhose Decl. ¶ 193) (“The foregoing demonstrates that
none of the structures identified for each reference discussed in the Howard Declaration
are the same. Each reference discloses different combinations that are structurally and
functionally different.”).
One could imagine the following colloquy based on the Howard Declaration:
Court:
Ms. POSITA, could you design a CSU for an ATM for me?
POSITA:
I’m not sure. I’ve never heard of a CSU before. What does it do?
Court:
It does X.
POSITA:
It does X? Oh, sure then. There are lots of ATM designs out there that do
something similar to X. I’m confident that, with a little effort, I could modify one of those
designs to make you a CSU for an ATM that does X.
8
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For the reasons stated above, the Court finds that Singhose is more persuasive and
credible regarding the CSU than Howard. The Court, therefore, finds that the phrase
“cheque standby unit” would not be understood by persons of ordinary skill in the art at
the relevant time to have a sufficiently definite meaning as the name for structure.
Having made this determination, the balance of this Court’s inquiry is now
controlled by the Federal Circuit’s ruling in Diebold. Having determined that the term
CSU is not a name for structure, the Court must follow the “means plus function” analysis
of section 112, paragraph 6. Diebold, 899 F.3d at 1297-98. The question then becomes
whether the ʼ235 patent recites sufficient structure to perform the function of the CSU.
“Examining the evidence intrinsic to the ʼ235 patent, we observe that the claims do not
recite any structure, much less ‘sufficiently definite structure’ for the ‘cheque standby
unit.’” Id. at 1298 (emphasis in original); see also id. at 1302-03. Having resolved the
factual dispute in favor of Diebold, this Court has no further discretion to vary from the
Federal Circuit’s holding regarding the precise language at issue.9 Accordingly, the Court
holds that the phrase “cheque standby unit” is indefinite, and that the ʼ235 patent is invalid
for indefiniteness under 35 U.S.C. § 112, para. 2. Diebold, 899 F.3d at 1303.
CONCLUSION
It appears to the Court that, given its finding and holding regarding the phrase
“cheque standby unit,” it is unnecessary to proceed with further claim construction. The
Court directs the parties to confer and determine if they can submit a proposed final
9
If this Court were free to make its own determination, it would reach the same result.
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judgment that is agreed as to form. If they are unable to agree on that, the Court directs
the parties to provide their respective views regarding what further proceedings the Court
should conduct to bring this case to final judgment by letters docketed on CM/ECF no later
than 5:00 p.m., fourteen (14) days from the date of this Order.
Signed July 23, 2020.
_______________________
David C. Godbey
United States District Judge
ORDER – PAGE 12
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