Earlier this month, the Federal Circuit heard oral argument in Jiaxing Super Lighting Electric Appliance, Co. v. CH Lighting Technology Co., a patent infringement case we have been tracking because it attracted an amicus brief. In this case, the Federal Circuit is reviewing a judgment of the Western District of Texas, which granted a partial judgment as a matter of law that asserted patents were not invalid and entered judgment on a jury verdict of infringement and no invalidity. Judges Dyk, Chen, and Hughes heard the argument. This is our argument recap.
Jeffrey A. Lamken argued for CH Lighting Technology. He began with damages because, he said, despite the complexity of the case, the damages estimate “contravenes [Federal Circuit] precedent.” He contended the plaintiff’s expert proposed an estimate that “exceeded the royalty that the plaintiff ever received for the entirety of its 261-patent portfolio” when only three patents were at issue in the case. He argued the court’s precedent establishes a “clear requirement” that, “when experts rely on a prior license that covers a range of patents, they must address the extent to which the other patents––patents other than the ones being asserted––contributed to the prior royalty.” The plaintiff’s expert witness failed to do that here, he said.
One judge questioned whether the expert testified about whether the other two asserted patents were “somehow technically comparable to other relevant patents.” In response, Lamken argued the probative question is not whether the other patents were similar to the ones at issue in the case, but whether the other “patents contributed to the value.” In this case, he explained, the royalty was “forty percent of CH Lighting’s total profit–not the profit attributable to the infringement–forty percent of its total profit on every sale.” Lamken argued that the royalty was “excessive” and “simply cannot stand.”
Another judge moved the argument to the on-sale bar raised in the briefing, questioning whether CH Lighting on appeal was “relying primarily on the exclusion of two documents that would prove that the tubes were on sale.” Lamken responded by arguing that the admitted evidence was “sufficient because [the expert] pointed specifically” to evidence relevant to the on-sale bare. But, he contended, there “would have been much more evidence” relating to the on-sale bar “but for the exclusion” of the relevant documents. Lamken emphasized that “relevance is a low standard,” testing only whether evidence tends to make a fact more likely than not. Lamken suggested “it was an abuse of discretion to exclude” those documents.
As to exclusion of other evidence, one judge suggested it might be “problematic because there is no requirement” to specifically list a witness testifying as to each piece of evidence. Lamken agreed, claiming the lower court “abused its discretion” by “applying a non-existent rule.” The abuse was clear, Lamken contended, because “Super’s own disclosure” also “[didn’t] say which witness [would] authenticate which document.” Lamken argued that “applying a non-existent rule unevenly between the parties” is an abuse of discretion.
Matthew Bernstein argued for Jiaxing Super Lighting Electric Appliance. Prompted by one judge, he began by addressing the exclusion of evidence allegedly related to the on-sale bar dispute. He argued the lower court appropriately excluded a document because it was relevant only to inequitable conduct and not invalidity. He further explained that CH Lighting’s expert “had the same one sentence conclusion about the prior art.” He suggested the expert had “no analysis . . . on how any of the documents actually showed that the references were on sale in any way.” As a result, Bernstein argued, the expert’s “conclusory opinion” was properly excluded.
In response, one judge indicated that, in the expert’s report, the expert found that the prior art “satisfied all of the claim limitations” and stated that, because Super “possessed the tube and that they were deconstructing, it shows that it was on sale.” Bernstein countered this position by noting that the discussion was “not in the invalidity part” of the expert’s report but instead in his discussion of inequitable conduct where he was only assessing materiality. According to Bernstein, moreover, in the expert’s discussion pertaining to whether the product was on sale, “he did not refer to this document,” which was why the lower court “excluded the document as being related to solely to inequitable conduct.”
Another judge questioned the lower court’s exclusion of an expert witness because that witness was not listed in advance of the trial. Bernstein suggested that if CH Lighting had “a specific witness that has information, or a party that has information about the prior art,” CH Lighting should have identified that person during discovery. In response, the judge suggested there is no requirement “in listing your trial witnesses, [that] you have to say which document they’re going to cover.”
With respect to damages, Bernstein framed the case as one with “a limited universe of evidence.” One judge, however, interrupted, faulting Berstein’s client for putting on “an expert witness” that, “by her own admission, wasn’t a technical expert and had no knowledge of the valuation of the patents and the license agreements.” Bernstein countered, claiming the witness “relied on a document that identified” the patents and Super’s technical expert, whom “she’s allowed to rely on.” But one judge seemingly rejected that argument: “No, you’re not to rely on fact witness testimony without putting the fact witness testimony into evidence.”
Another judge was concerned about a witness’s economic theory, described as “pushing up” to establish damages. Bernstein reiterated that both experts were cross-examined “and it was up to the jury to decide.” The judge however, highlighted the function of a district court as a “gatekeeper . . . to ensure some baseline level of reliability in the methodology.” In this case, the judge suggested, “it feels based more on instinct.”
During his rebuttal, Lamken noted that an expert report shows that the product was “on sale” at the appropriate time. Moreover, as to whether the expert report was focused solely on “inequitable conduct,” Lamken pointed to the report where it explicitly discussed invalidity. As to identifying witnesses, he reiterated that “there isn’t a rule that says you must identify in advance which document, which witnesses will authenticate.”
One judge asked Lamken what the lower court should have done to achieve the appropriate level of damages. Lamken claimed the court should have looked at the patents “and determined how much they’re overlapping.” Furthermore, Lamken argued, the judge should have “looked at the patents and determine whether or not the patents that aren’t asserted add value beyond the patents that are asserted, and that simply wasn’t done.” Mathematical precision isn’t required, Lamken claimed, but “it has to be done to know what you’re counterbalancing.”
We will continue to keep track of this case and report on developments.