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Packet Intelligence LLC v. Netscout Systems, Inc.

United States District Court, E.D. Texas, Marshall Division

June 4, 2019

PACKET INTELLIGENCE LLC, Plaintiff,
v.
NETSCOUT SYSTEMS, INC., TEKTRONIX COMMUNICATIONS, TEKTRONIX TEXAS, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSTRAP UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendants NetScout Systems, Inc. and NetScout Systems Texas, LLC's (f/k/a Tektronix Texas, LLC d/b/a Tektronix Communications) (collectively, “NetScout”) Motion for Judgment as a Matter of Law of No. Pre-Suit Damages Pursuant to Fed.R.Civ.P. 50(b) (Dkt. No. 315) and Renewed Motion for Judgment as a Matter of Law of No. Willful Infringement Pursuant to Fed.R.Civ.P. 50(b) (Dkt. No. 316). The Court heard oral argument on the motions on May 21, 2019. (Dkt. No. 339.) Having considered the parties' motions, briefing, oral arguments, and trial record, the Court is of the opinion that each motion should be and hereby is DENIED.

         I. BACKGROUND

         Plaintiff Packet Intelligence LLC (“PI”) sued NetScout for patent infringement on March 15, 2016. (Dkt. No. 1.) PI alleged that NetScout's GeoProbe 10 (“G10”) and GeoBlade (collectively, the “Accused Products”) literally[1] infringe Claims 10 and 17 of U.S. Patent No. 6, 665, 725 (the “'725 Patent”); Claims 1 and 5 of U.S. Patent No. 6, 839, 751 (the “'751 Patent”); and Claims 19 and 20 of U.S. Patent No. 6, 954, 789 (the “'789 Patent”) (collectively, the “Asserted Claims” or “Patents-in-Suit”).[2] (Id.) PI also alleged willful infringement and sought pre-suit damages. (Id.) NetScout asserted several defenses, including invalidity under 35 U.S.C. §§ 101, 102, 103, and 112; failure to properly name all inventors under 35 U.S.C. § 102(f); inequitable conduct; and unclean hands. (Dkt. No. 205 at 9-11.) The case proceeded to trial, and the jury returned a verdict in favor of PI, finding that the Asserted Claims were willfully infringed, none of the Asserted Claims were invalid, and that PI was entitled to damages in the amount of $5.75 million as a running royalty. (Dkt. No. 237.) Following submission of the evidence to the jury, the Court conducted a bench trial as to the equitable issues and concluded that NetScout had failed to show that PI's claims were barred under the doctrines of unclean hands or inequitable conduct. (Dkt. Nos. 242, 306.) The Court entered final judgment on September 7, 2018, designating PI as the prevailing party. (Dkt. No. 307 at 2.)

         NetScout now moves pursuant to Federal Rule of Civil Procedure 50(b) for an order that vacates (1) the jury's award of $3.5 million in pre-suit damages (Dkt. No. 315) and (2) the jury's finding of willful infringement (Dkt. No. 316).

         II. LEGAL STANDARDS

         A. Federal Rule of Civil Procedure 50(b)

         Judgment as a matter of law is appropriate if “the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for [a] party” on an issue. Fed.R.Civ.P. 50(a)(1). “The grant or denial of a motion for judgment as a matter of law is a procedural issue not unique to patent law, reviewed under the law of the regional circuit in which the appeal from the district would usually lie.” Finisar Corp. v. DirectTV Grp., Inc., 523 F.3d 1323, 1332 (Fed. Cir. 2008). The Fifth Circuit “uses the same standard to review the verdict that the district court used in first passing on the motion.” Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th Cir. 1995). Thus, “a jury verdict must be upheld unless ‘there is no legally sufficient evidentiary basis for a reasonable jury to find as the jury did.'” Id. at 700 (quoting Fed.R.Civ.P. 50(a)(1)). The jury's verdict must be supported by “substantial evidence” for each claim. Am. Home Assurance Co. v. United Space All., 378 F.3d 482, 487 (5th Cir. 2004).

         Under Fifth Circuit law, the court is to be “especially deferential” to a jury's verdict and must not reverse the jury's findings unless they are not supported by substantial evidence. Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 499 (5th Cir. 2012). “Substantial evidence is defined as evidence of such quality and weight that reasonable and fair-minded men [and women] in the exercise of impartial judgment might reach different conclusions.” Threlkeld v. Total Petroleum, Inc., 211 F.3d 887, 891 (5th Cir. 2000). The moving party is entitled to judgment as a matter of law unless “the evidence points so strongly and so overwhelmingly in favor of the nonmoving party that no reasonable juror could return a contrary verdict.” Int'l Ins. Co. v. RSR Corp., 426 F.3d 281, 296 (5th Cir. 2005) (citing Cousin v. Tran Union Corp., 246 F.3d 359, 366 (5th Cir. 2001)). However, “[t]here must be more than a mere scintilla of evidence in the record to prevent judgment as a matter of law in favor of the movant.” Arismendez v. Nightingale Home Health Care, Inc., 493 F.3d 602, 606 (5th Cir. 2007).

         In evaluating a motion under Rule 50, the court must “draw all reasonable inferences in the light most favorable to the verdict and cannot substitute other inferences that [the court] might regard as more reasonable.” E.E.O.C. v. Boh Bros. Const. Co., L.L.C., 731 F.3d 444, 451 (5th Cir. 2013) (internal citation omitted). “[T]he court must give credence to the evidence favoring the nonmovant as well as that ‘evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses.'” See Ellis v. Weasler Eng'g Inc., 258 F.3d 326, 337 (5th Cir. 2001) (quoting 9A Wright & Miller § 2529). However, in doing so, the court may not make credibility determinations or weigh the evidence, as those are solely functions of the jury. See Id. (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51 (2000)).

         B. Pre-Suit Damages

         To obtain pre-suit damages, a patent owner must show either that it (1) provided the accused infringer with actual notice of infringement or (2) complied with the marking requirements of 35 U.S.C. § 287(a). If a patent owner fails to comply with the marking statute, then it may only recover damages from the time it provided actual notice of the alleged infringement. 35 U.S.C. §287(a).

         The marking statute provides:

Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by [1] fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or [2] 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 cannot 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.

35 U.S.C. § 287(a).

         The marking statute applies to both the patentee and those who make and sell patented articles under the patentee's authorization. Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed. Cir. 1996). “[W]ith third parties unrelated to the patentee, it is often more difficult for a patentee to ensure compliance with the marking provisions. A ‘rule of reason' approach is justified in such a case and substantial compliance may be found to satisfy the statute.” Id. Thus, “[w]hen the failure to mark is caused by someone other than the patentee, the court may consider whether the patentee made reasonable efforts to ensure compliance with the marking requirements. The rule of reason is consistent with the purpose of the constructive notice provision-to encourage patentees to mark their products in order to provide notice to the public of the existence of the patent and to prevent innocent infringement.” Id. at 1111-12.

         “[A]n alleged infringer who challenges the patentee's compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked ‘patented articles' subject to § 287.” Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350, 1368 (Fed. Cir. 2017). This initial burden is a “low bar” and “the alleged infringer need only put the patentee on notice that he or his authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent. The alleged infringer's burden is a burden of production, not one of persuasion or proof.” Id. “Once the alleged infringer meets its burden of production, however, the patentee bears the burden to prove the products identified do not practice the patented invention.” Id. The patentee bears the ultimate burden of proving compliance with marking. Id.

         C. Willful Infringement

         Section 284 of the Patent Act provides that, in the case of infringement, courts “may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. Whether enhanced damages are warranted and in what amount are within the sound discretion of the trial court. Halo Elects., Inc. v. Pulse Elects., Inc., 136 S.Ct. 1923, 1932 (2016). The Supreme Court has explained that such damages “are not to be meted out in a typical infringement case, but are instead designed as a ‘punitive' or ‘vindictive' sanction for egregious infringement behavior.” Id. at 1932. Conduct warranting enhancement has been variously described as “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or-indeed-characteristic of a pirate.” Id.

         Willful infringement may justify, but does not mandate, an award of enhanced damages. Read Corp. v. Protec, Inc., 970 F.2d 816, 816 (Fed. Cir. 1992). “To willfully infringe a patent, the patent must exist and one must have knowledge of it.” State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985); see also WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed. Cir. 2016) (“Knowledge of the patent alleged to be willfully infringed continues to be a prerequisite to enhanced damages.”). Willful infringement requires some sort of intentional conduct-whether it be subjective or objective. Halo, 136 S.Ct. at 1932; see also Arctic Cat, 876 F.3d at 137 (explaining that “Halo emphasized that subjective willfulness alone-i.e., proof that the defendant acted despite a risk of infringement that was ‘either known or so obvious that it should have been known to the accused infringer,' can support an award of enhanced damages”).

         Willful infringement is a question of fact reviewed for substantial evidence. WBIP, 829 at 1341-42. It is “generally measured against the knowledge of the actor at the time of the challenged conduct” and “can arise pre- or post-suit.” Huawei Techs. Co. v. T-Mobile U.S., Inc., No. 2:16-cv-00052-JRG-RSP, 2017 WL 1129951, at *4 (E.D. Tex. Feb. 21, 2017), report and recommendation adopted, No. 2:16-cv-00052-JRG-RSP, 2017 WL 1109875 (E.D. Tex. Mar. 24, 2018) (quoting Halo, 136 S.Ct. at 1933). “Whether an act is ‘willful' is by definition a question of the actor's intent, the answer to which must be inferred from all the circumstances.” Indus., Inc. v. IPS Corp., 721 Fed.Appx. 959, 970 (Fed. Cir. 2018) (quoting Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 510-511 (Fed. Cir. 1990) (emphasis in original)).

         III. DISCUSSION

         A. Pre-Suit Damages

         At trial, PI alleged, and the jury found, that PI was entitled to $3.5 million for NetScout's pre-suit infringement of the Asserted Claims. (Dkt. No. 237 at 5.) NetScout moves to vacate that finding. (Dkt. No. ...


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