Mixed Ruling from CAFC Finds District Court Erred on Damages, JMOL Analysis

The U.S. Court of Appeals for the Federal Circuit (CAFC) ruled on Monday in a precedential decision that the U.S. District Court for the Northern District of California erred in granting judgment as a matter of law (JMOL) that the relevant claims of Cyntec Company, Ltd.’s patents were not invalid as obvious and in denying Chilisin Electronics Corp.’s Daubert motion to exclude testimony from Cyntec’s damages expert. However, it affirmed the district court’s judgment of infringement.

Cyntec sued Chilisin for infringement of its U.S. Patent Nos. 8,922,312 (the ’312 patent) and 9,481,037 (the ’037 patent). The patents cover “molded chokes” and methods of manufacturing molded chokes. Chokes are “a type of inductor used to eliminate undesirable signals in a circuit,” according to the CAFC opinion. The district court granted JMOL that the asserted claims were not invalid as obvious prior to closing arguments and the jury then found that Chilisin infringed the asserted claims and awarded the full amount of damages requested by Cyntec.

On appeal, the CAFC agreed with Chilisin that JMOL on the issue of nonobviousness was not warranted and that there were factual disputes that should have been given to the jury. According to the appellate court, prior to the grant of JMOL, Chilisin had presented evidence to the jury that “would have allowed it to reasonably find the asserted claims obvious in view of Shafer and Nakamura [the prior art].”

The district court’s stated reasons for why JMOL was appropriate were “either insufficient to support JMOL or unsupported by the record,” said the CAFC. In particular, said the opinion, “even under a clear and convincing evidence standard, we are not convinced that Chilisin’s evidence was so meritless as to warrant judgment as a matter of law.” The district court’s judgment on this point was thus reversed and remanded.

As to the infringement finding, which Chilisin argued was based on an erroneous claim construction, the CAFC first found the construction was based on substantial evidence, specifically, that “the plain language of the claims, read in view of the specification, requires only that ‘the hardness difference has an impact on the [formation] temperature but is not the only potential cause of a lower [formation] temperature.’” Under that construction, the court further concluded there was substantial evidence to support the jury’s finding of infringement and the district court’s denial of Chilisin’s motion for JMOL of noninfringement.

Turning to damages, the CAFC found that the district court abused its discretion in denying Chilisin’s Daubert motion to exclude the testimony of Cyntec’s expert, Mr. Van Uden, because Van Uden failed to differentiate between which products did and didn’t incorporate the accused chokes. The CAFC explained:

“The revenue reported in the customers’ annual reports cited by Mr. Van Uden included sales of irrelevant products and services, and he failed to account for these irrelevant products and services. For example, Mr. Van Uden’s importation calculations for Apple Inc. use the reported revenue for 2016–2019 from Apple’s Form 10-K…. But Apple’s 10-K reported revenue includes revenue received from services and products that do not even contain chokes….. Mr. Van Uden therefore assumed all of Apple’s products imported into the United States contained the accused chokes, a mistake he repeated for other customers.”

Quoting from Power Integrations v. Fairlchild Semiconductor International, Inc., the CAFC said “[i]n the end, we are left with an expert opinion derived from unreliable data and built on speculation.” Because the lost profits calculation and award stemmed from Van Uden’s importation calculations, the CAFC therefore vacated the jury’s damages award for lost profits, which accounted for $1,552,493 of the $1,872,956 total damages award.

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Author: gluber
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