Abuse of Discretion on Evidentiary Exclusions Leads CAFC to Vacate Parking Lot Management System Ruling

Today, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a ruling in Indect USA Corp. v. Park Assist, LLC largely affirming the Southern District of California in a patent infringement case involving methods of managing parking lots. However, the Federal Circuit reversed some aspects of the district court’s rulings after finding abuse of discretion by excluding evidence related either to invalidating sales of the patented method or to bad faith patent infringement allegations against several customers using the alleged infringer’s accused system, including a regional airport.

Claimed Method Not Physically Impossible If Reasonable Reading Leads to Sensible Result

In 2018, Indect USA filed suit in Southern California seeking declaratory judgment that neither it nor its customers infringe claims of U.S. Patent No. 9594956, Method and System for Managing a Parking Lot Based on Intelligent Imaging. Prior to that suit, Park Assist asserted that Indect’s UPSOLUT system infringes the ‘956 patent in letters sent to Indect’s customers, including the San Diego County Regional Airport Authority that was sued separately by Park Assist. Along with noninfringement, Indect sought a declaration that Park Assist’s written communications and lawsuit against the airport was unfair competition violating Section 43(a) of the Lanham Act for pursuing baseless infringement claims. After a jury verdict of noninfringement, the district court found that the ‘956 patent was not invalid and that Indect failed to prove its unfair competition claim, while also denying Park Assist’s motion to amend the judgment to clarify that the jury’s noninfringement finding did not apply to Indect’s customers.

On appeal, Indect had argued that claim 1 of the ‘956 patent was indefinite under 35 U.S.C. § 112 for being physically impossible to perform, primarily because steps of the claimed method could only be performed if parking spaces were both occupied and vacant. The appellate court noted that Indect’s literal reading of the claimed method’s steps rests on the incorrect assumption that the steps must be performed in the order written such that the step extracting high resolution image info from a vehicle occupying a space must happen after or concurrent with the step correcting occupied status if the space is actually vacant. Although the claim language could have been written more clearly, Federal Circuit precedent is clear that constructions rendering all embodiments inoperable are viewed skeptically, the appellate court held.

Cases cited by Indect invalidating “impossible” claims for indefiniteness were inapplicable, the appellate court held. Patent claims invalidated by the Federal Circuit in Trustees of Boston University v. Everlight Electronics (2018) claimed a method of making a semiconductor by forming a monocrystalline film on an amorphous structure, which is physically impossible. By contrast, Park Assist’s patent claims can be performed because a skilled artisan would not read them in such a way that required the physical impossibility of a parking space being both occupied and vacant. Indect also relied upon Chef America v. Lamb-Weston (2004), which the Federal Circuit found did not require invalidation when there is a reasonable interpretation of the claims leading to a sensible result.

The Federal Circuit likewise dismissed Indect’s argument indefiniteness for the claim term “high resolution image,” which the district court construed as an image of sufficient resolution to extract a license plate number. The Federal Circuit found that this construction gave a skilled artisan sufficient ability to distinguish high resolution images from those that aren’t. Indect also argued the district court’s failure to construe all disputed claim terms, but the Federal Circuit found that Indect either agreed with the district court’s construction or that the scope of certain claim limitations were properly submitted to the jury as factual questions bearing on Indect’s obviousness defense.

Evidentiary Exclusions, Broad Noninfringement Declaration Leads CAFC to Remand

Indect fared better on its appeal of the district court’s exclusion of evidence relevant to its on-sale bar and unfair competition arguments. The Southern California district court excluded an offer to sell a Park Assist parking system more than one year prior to the ‘956 patent’s filing date. Because the parties did not dispute this parking system was indistinguishable from the method claimed in the ‘956 patent, excluding the offer for sale was clear legal error and an abuse of discretion, said the CAFC. Likewise, the district court abused its discretion by excluding evidence related to Park Assist’s airport litigation, which the Federal Circuit said should have been admitted to allow the jury to fully evaluate whether those infringement claims were objectively baseless and pursued in bad faith.

Turning to Park Assist’s cross-appeal, the Federal Circuit agreed with the district court’s determination that the preamble to claim 1 of the ‘956 patent was limiting. Here, the preamble “method of managing a plurality of parking spaces” gave meaning to the claims and specification, which repeatedly referred to multiple “slots” or “spaces” and “parking lots” that must consist of more than a single parking spot. Further, the district court’s determination that a parking space’s thumbnail image must be displayed in real-time did not improperly import a limitation from the specification as outdated thumbnails would not accurately identify if a parking space was occupied.

Finally, however, Park Assist successfully persuaded the Federal Circuit to vacate Southern California’s broad declaratory judgment of noninfringement for all of Indect’s past, present and future customers. Although Kessler doctrine prevents patent owners from alleging infringement against users of a product found to not infringe, here the district court expressly refused to determine whether Indect’s accused UPSOLUT system infringed the ‘956 patent.

Having vacated the previously mentioned portions of the Southern California district court’s rulings, the Federal Circuit remanded for further proceedings on obviousness based on the on-sale bar, unfair competition under the Lanham Act and to determine whether the UPSOLUT system infringes the ‘956 patent, adding that the district court may want to assess validity issues first before addressing infringement.