Rembrandt Data Technologies, LP v. AOL, LLC

United States Court of Appeals
for the Federal Circuit
__________________________

REMBRANDT DATA TECHNOLOGIES, LP,
Plaintiff-Appellant,

v.
AOL, LLC, CAVALIER TELEPHONE, LLC, AND
DIRECTV, INC.,
Defendants,

and
HEWLETT-PACKARD COMPANY, CANON U.S.A.,
INC., CANON BUSINESS SOLUTIONS, INC., AND
CANON INFORMATION TECHNOLOGY SERVICES,
INC.,
Defendants-Appellees.
__________________________

2010-1002
__________________________

Appeal from the United States District Court for the
Eastern District of Virginia in case no. 08-CV-1009, Judge
Gerald Bruce Lee.
____________________

Decided: April 18, 2011
____________________

GEORGE PAZUNIAK, Womble Carlyle Sandridge & Rice,
PLLC, of Wilmington, Delaware, argued for plaintiff-
REMBRANDT DATA v. AOL 2

appellant. Of counsel were VIRGINIA W. HOPTMAN and
JAMES MICHAEL LENNON.

MICHAEL J. SONGER, Crowell & Moring, LLP, of Wash-
ington, DC, argued for defendants-appellees. With him on
the brief was MICHAEL H. JACOBS.
__________________________

Before GAJARSA, LINN, and DYK Circuit Judges.
GAJARSA, Circuit Judge.

This is a patent infringement appeal the resolution of
which depends on the interpretation of whether a license
exists for the technology at issue. Rembrandt Data Tech-
nologies, LP (“Rembrandt”) appeals the district court’s
decisions regarding contract interpretation, claim con-
struction, and the invalidity of certain claims of United
States Patent Nos. 5,251,236 (“’236 patent”) and
5,311,578 (“’578 patent”) (collectively, “patents-in-suit”).
The district court held that because Conexant Systems,
Inc. (“Conexant”) can trace its rights to a license origi-
nally issued to the Rockwell Corporation, Conexant is
licensed. The district court was correct in this determina-
tion. Rembrandt’s right to enforce the patents-in-suit
against Conexant’s modem chip customers Canon U.S.A.,
Inc., Canon Business Solutions, Inc., and Canon Informa-
tion Technology Services, Inc. (collectively, “Canon”) and
Hewlett-Packard Company (“HP”) was, therefore, extin-
guished by patent exhaustion. See, e.g., Quanta Com-
puter, Inc. v. LG Elecs., Inc., 553 U.S. 617, 638 (2008).
The district court also correctly granted summary judg-
ment on the invalidity of claims 3-11 of the ’236 patent.
The district court erred in granting summary judgment
on the invalidity of claims 1 and 2 of the ’236 patent
because genuine issues of material fact remained. Thus,
3 REMBRANDT DATA v. AOL

we affirm-in-part, reverse-in-part, and remand for further
proceedings consistent with this opinion.

BACKGROUND

I.

A.

Rembrandt is the owner by assignment of United
States Patent Nos. 5,602,869 (“’869 patent”) and
5,844,944 (“’944 patent”). In 2008, Rembrandt filed a
complaint in the Eastern District of Virginia alleging that
AOL, LLC; Cavalier Telephone, LLC; DIRECTV, Inc.;
Canon; and HP infringed the ’236, ’578, ’869, and ’944
patents. On April 30, 2009, Rembrandt stipulated to the
dismissal with prejudice of the claims regarding the ’869
and ’944 patents. AOL, LLC; Cavalier Telephone, LLC;
and DIRECTV, Inc. have been dismissed from this case
and only Canon and HP remain as appellees. The two
remaining patents-in-suit claim certain types of computer
modems and methods of identifying modems.

A modem is “a communications device that enables a
computer to transmit information over a standard tele-
phone line.” J.A. 8832. The ’236 patent, entitled “Frac-
tional Rate Modem with Trellis,” issued in 1993 and
describes a modem utilizing both the “fractional rate
encoding” technique for more rapidly transferring data
and the “trellis encoding” technique for reducing errors in
data transmission. ’236 patent col.2 ll.41-44. Rembrandt
asserted claims 1-3 and 6-11 of the ’236 patent against
Canon and HP. The ’578 patent, entitled “Technique for
Automatic Identification of a Remote Modem,” issued in
1994 and describes using “hidden” identification signals to
enable an originating modem to efficiently identify and
REMBRANDT DATA v. AOL 4

connect to a remote modem. ’578 patent col.2 ll.49-52.
The ’578 patent has seven claims, each of which was
originally asserted against Canon and HP. Claims 1-6 are
no longer being asserted against HP.

The ’236 and ’578 patents were initially acquired by
subsidiaries of AT&T Corporation. In 1996, AT&T Corpo-
ration underwent a “trivestiture,” creating AT&T, NCR
Corporation, 1 and Lucent Technologies, Inc. (“Lucent”).
The patents-in-suit were transferred to Lucent. In 1996,
Lucent spun off Paradyne Corporation (“Paradyne”),
which became the assignee of the ’236 and ’578 patents.
In 2005, Paradyne was acquired by Zhone Technologies,
Inc. (“Zhone”). In 2006, Zhone assigned the patents-in-
suit to Rembrandt IP Management, LLC, which subse-
quently assigned the patents to Rembrandt Communica-
tions, LP (“Rembrandt Communications”). In 2008, less
than two weeks before filing suit, Rembrandt Communi-
cations assigned the ’236 and ’578 patents to the plaintiff-
appellant.

The ownership genealogy of the ’236 and ’578 patents
is documented in the chart below.

1 NCR Corporation was initially named the Na-
tional Manufacturing Company, but NCR is short for the
National Cash Register Company, which it was renamed
in 1884. NCR Corporation was acquired in 1991 by AT&T
Corporation. It was renamed AT&T Global Information
Solutions in 1994. In 1996, AT&T changed the name back
to NCR Corporation in preparation for a spin-off.
5 REMBRANDT DATA v. AOL

B.

In 1996, Rockwell International Corporation executed
an agreement for a third party to acquire some of its
aerospace and defense businesses and reorganized its
corporate structure. For clarity, we refer to the pre-1996
reorganization “Rockwell International Corporation” as
“Old Rockwell” and the post-1996 reorganization “Rock-
well International Corporation” as “New Rockwell.” Old
Rockwell conveyed substantially all of its businesses and
assets to New Rockwell in the “Agreement and Plan of
Distribution dated as of December 6, 1996.” (“Rockwell
Distribution Agreement”) The Rockwell Distribution
Agreement stated that Old Rockwell “contributes, grants,
conveys, assigns, transfers and delivers to Newco [(New
Rockwell)] all the Company’s [(Old Rockwell’s)] right, title
and interest in and to any and all Assets of the Company
REMBRANDT DATA v. AOL 6

[(Old Rockwell)],” except for its aerospace and defense
businesses. J.A. 12986. “Assets” included “agreements,
leases, contracts . . . licenses, franchises, permits, au-
thorizations and approvals.” J.A. 12979.

Before its reorganization, Old Rockwell entered into a
“Patent License Agreement” effective as of October 1,
1988 with AT&T Corporation. (“1988 License Agree-
ment”). In the 1988 License Agreement, AT&T Corpora-
tion and Old Rockwell cross-licensed numerous patents,
including the patents-in-suit. The 1988 License Agree-
ment was amended by the parties through a 1995 Side
Letter Agreement granting Rockwell additional rights,
including sublicensing rights.

In a letter dated October 17, 1996, Lucent, the licen-
sor of the patents-in-suit following the AT&T Corpora-
tion’s trivestiture, acknowledged Rockwell’s
reorganization and the assignment of Old Rockwell’s
rights and notification obligations under the 1988 License
Agreement to New Rockwell. Subsequent to receiving
Lucent’s letter, New Rockwell made its royalty payments
to Lucent. In 1998, New Rockwell spun off its Semicon-
ductor Systems unit, including its modem business, to
Conexant. The licensing of the patents-in-suit is de-
scribed in the chart below.
7 REMBRANDT DATA v. AOL

II.

The Telecommunication Standardization Sector of the
International Telecommunications Union (“ITU”) coordi-
nates protocols for telecommunication. As part of this
process, it periodically promulgates standards known as
“Recommendations.” ITU Recommendations regarding
modems facilitate fast, reliable communication between
modems from different manufacturers and of different
types. Manufacturers market their modems as compliant
with specific ITU Recommendations, such as the V.8,
V.34, V.90, and V.92 protocols. Although Recommenda-
tions are not numbered in chronological order by date of
adoption, they are designed to be backward compatible, so
each successive Recommendation is able to implement
preceding Recommendations.

Rembrandt argues that the inventions of the ’236 and
’578 patents are incorporated into the V.34 protocol. In
its complaint, Rembrandt accuses Canon and HP of
REMBRANDT DATA v. AOL 8

infringement of the patents-in-suit because they market
office products containing modem chips capable of imple-
menting the V.34 protocol. All of the accused products
contain modem chipsets manufactured by Conexant.

III.

On June 17, 2009, the district court issued multiple
orders that are challenged in this appeal. First, it entered
an order construing some claims of the ’236 and ’578
patents. The district court also held claims 3-11 of the
’236 patent invalid as indefinite for improperly mixing
method and apparatus elements. The court denied
Canon’s motion for summary judgment of non-
infringement of the ’578 patent because Rembrandt could
“conceivably carry its burden at trial based on circum-
stantial evidence.” J.A. 14322. The district court also
granted Canon’s motion for summary judgment of ex-
haustion because Conexant, Canon and HP’s supplier of
modem chips, was properly sublicensed under the 1988
License and 1995 Side Letter Agreements, and therefore,
Rembrandt’s right to enforce the ’236 and ’578 patents
was extinguished by patent exhaustion. Rembrandt’s
motion for reconsideration of some of the orders was
denied.

The district court subsequently issued an opinion ex-
plaining its prior summary judgment orders. Rembrandt
Data Techs., LP v. AOL, LLC, 673 F. Supp. 2d 420 (E.D.
Va. 2009). In a footnote, the court stated that the ques-
tion of whether the claims of the ’236 patent were invalid
as indefinite for failing to disclose algorithms correspond-
ing to functions set forth in the claims was moot in light of
its indefiniteness ruling with respect to claims 3-11. Id.
at 428 n.5. Although judgment was entered in Canon’s
favor on all claims, the court’s holding in its Memoran-
9 REMBRANDT DATA v. AOL

dum Order of August 21, 2009 regarding the improper
mixing of method and apparatus claims only applied to
claims 3-11 of the ’236 patent and did not address claims
1 and 2 of the ’236 patent. On September 2, 2009, Canon
filed a motion pursuant to Federal Rule of Civil Procedure
59(e) to amend the August 21, 2009 order to address
claims 1 and 2. The district court granted Canon’s mo-
tion, replacing the second sentence in footnote 5 of the
August 21, 2009 order with the following sentence: “The
Court also holds that each of claims 1-11 in the ’236
patent is invalid as indefinite for failing to disclose the
necessary algorithms for the reasons set forth in its order
of June 17, 2009.” J.A. 1. Rembrandt timely appealed to
this court. We have jurisdiction over Rembrandt’s appeal
pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

Contract interpretation is a question of law reviewed
de novo. Lucent Techs., Inc. v. Gateway, Inc., 543 F.3d
710, 717 (Fed. Cir. 2008). The district court’s grant of
summary judgment is also reviewed de novo. Koninklijke
Philips Elecs. N.V. v. Cardiac Sci. Operating Co., 590 F.3d
1326, 1332 (Fed. Cir. 2010). Summary judgment is ap-
propriate when, drawing all justifiable inferences in favor
of the non-moving party, there exists no genuine issue of
material fact and the moving party is entitled to judgment
as a matter of law. See Fed. R. Civ. P. 56(c); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). This court
has stated that “[i]n determining whether there is a
genuine issue of material fact, the evidence must be
viewed in the light most favorable to the party opposing
the motion, with doubts resolved in favor of the oppo-
nent.” Ethicon Endo-Surgery, Inc. v. U.S. Surgical Corp.,
149 F.3d 1309, 1315 (Fed. Cir. 1998). When a motion for
summary judgment is properly supported by documentary
REMBRANDT DATA v. AOL 10

and testimonial evidence, however, the nonmoving party
may not rest upon mere allegations or denials of his
pleadings, but rather, must present significant probative
evidence to establish a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

I.

Canon and HP contend that Conexant was subli-
censed by New Rockwell. If Conexant, Canon and HP’s
modem supplier, has a valid license to sell the modem
chips, Rembrandt’s rights to sue Canon and HP for in-
fringement of the patents-in-suit are exhausted by that
license. Quanta Computer, 553 U.S. at 638 (holding that
a licensee’s sale of component computer parts that sub-
stantially embodied method patents held by the patentee
was “authorized” by the patentee and exhausted the
patentee’s patents). Rembrandt argues that Conexant
was not sublicensed for two reasons: (1) because New
Rockwell could not sublicense its rights to Conexant; and
(2) even if it could, the sublicense does not apply to the
modem chipsets at issue. Because Conexant is licensed,
Rembrandt’s rights are exhausted and it cannot recover
from Canon and HP. The district court properly held as a
matter of law that New Rockwell could further sublicense
the patents-in-suit to Conexant.

Rembrandt first argues that New Rockwell could not
sublicense its rights to Conexant because it was not
properly assigned licensing rights from Old Rockwell.
Under the 1988 License Agreement, Old Rockwell li-
censed numerous patents, including the patents-in-suit,
from their original assignee, AT&T Corporation. Rem-
brandt also contends that the license was not transferable
from New Rockwell to Conexant without AT&T Corpora-
tion’s written consent.
11 REMBRANDT DATA v. AOL

In the 1995 Side Letter Agreement, AT&T Corpora-
tion recognized that Old Rockwell “may at some time in
the future wish to divest all or part of its business,” and
provided that “the licenses and rights granted in the
Agreement may be sublicensed to any future divested
present business of Rockwell.” J.A. 14373-74. In 1996,
Old Rockwell reorganized its operations but retained its
semiconductor business, which included its modem manu-
facturing unit. As part of the restructuring, Old Rockwell
divested most of its businesses and assets, including its
agreements and licenses, to New Rockwell. This included
its rights and obligations under the 1988 License and
1995 Side Letter Agreements, including its right to subli-
cense.

Rembrandt argues that the license was not properly
assigned from Old Rockwell to New Rockwell because Old
Rockwell never obtained AT&T’s written consent for that
assignment. Rembrandt argues that without AT&T’s
consent, New Rockwell “could only have acquired, at
most, the sublicense rights” provided by the 1995 Side
Letter Agreement. Appellant’s Br. 17. However, the 1995
Side Letter Agreement stated that “the licenses and
rights granted in the Agreement may be sublicensed to
any future divested present business of Rockwell.” J.A.
14373-74. Thus, further consent by AT&T was unneces-
sary. Rembrandt’s concern about licenses and rights
flowing infinitely to subsequent licensees so long as they
share the name “Rockwell” is misplaced. The extension of
the license and rights from AT&T or its successors to
companies related to Rockwell is expressly limited in the
1995 Side Letter Agreement to divested present busi-
nesses of Old Rockwell, which in this case, includes both
New Rockwell and Conexant.
REMBRANDT DATA v. AOL 12

In 1998, New Rockwell divested its modem business
to Conexant and granted it a “royalty-free, world-wide,
irrevocable, non-exclusive license under all intellectual
property rights,” including patents “under which the
Rockwell Group had a right to license” and “which are
used in the conduct of the business of [Conexant]” at the
time of divestiture. Canon Mem. Supp. Mot. Summ. J.,
Ex. 6-c, Section 3.11. Rembrandt argues that New Rock-
well had no authority to further sublicense Conexant
because “the law does not recognize any right of a nonex-
clusive licensee to assign the license or to further subli-
cense.” Appellant’s Br. 20.

Rembrandt is generally correct, unless, as here, a con-
tract provides otherwise. The express language of the
1995 Side Letter Agreement provided that “the licenses
and rights granted in the Agreement may be sublicensed
to any future divested present business of Rockwell.” J.A.
14373-74. Old Rockwell’s rights under the 1988 License
and 1995 Side Letter Agreements were extended by the
terms of the 1995 Side Letter Agreement to New Rock-
well, and in turn, Conexant. Such sublicensing is effec-
tive so long as the sublicensed “future divested business”
continues to “operate[] as a separately identifiable busi-
ness” selling “products and services sold by the future
divested business prior to its divestiture.” J.A. 14373-74.
New Rockwell and Conexant satisfy the 1995 Side Letter
Agreement because New Rockwell sold V.34 protocol-
compliant modem chips prior to spinning off Conexant,
and Conexant, the “future divested business,” continues
to manufacture V.34 protocol-compliant modems.

Finally, Rembrandt argues that even if Conexant was
properly sublicensed, the sublicense does not apply to the
modem chipsets at issue because they are not the “‘prod-
ucts and services sold by the future divested business
13 REMBRANDT DATA v. AOL

prior to its divestiture’ – i.e., products and services sold by
December 1996 when Old Rockwell divested its semicon-
ductor business to New Rockwell.” Appellant’s Br. 23.
Rembrandt maintains that the district court erred by
holding that the parties “intended to cover modems gen-
erally, not specifically the exact types of modems in
production at the time of the sublicense and/or divesti-
ture.”

The 1995 Side Letter Agreement states:

[T]he licenses and rights granted in the Agree-
ment may be sublicensed to any future divested
present business of Rockwell . . . only to the extent
applicable to products and services sold by the fu-
ture divested business prior to its divestiture.

J.A. 14374.

Neither the original 1988 License Agreement nor the
1995 Side Letter Agreement refers to specific models of
modems. Rather, these agreements specify product types
using general, functional terms. Section 1.03 of the 1988
License Agreement provides Rockwell with a license to
“make, have made, use, lease, sell, and import Licensed
Products.” J.A. 14330. The License Agreement defines
“Licensed Products” as “any product (including any speci-
fied combination of other products) or service
listed . . . under Section 1.01.” J.A. 14349. Section 1.01
lists general categories, including “data communication
station systems” and “digital transmission systems.”
Rembrandt, 673 F. Supp. 2d at 434. Although the 1995
Side Letter Agreement does not explicitly define “products
and services,” it requires royalty payments for Old Rock-
well’s “Telecom Sales” and “Reportable Products.” J.A.
14374. The 1995 Side Letter Agreement defines “Telecom
REMBRANDT DATA v. AOL 14

Sales” generally as “any sales of a business unit reported
in Rockwell International Corporation’s annual report (as
of 1994) under ‘Telecommunication’ or its equivalent in
future reports regardless of a Telecom name change of the
assignment of any reported business unit to another
organization within Rockwell.” J.A. 14375. According to
Old Rockwell’s 1994 Annual Report, Old Rockwell’s
telecommunications business unit sold modems. Prior to
New Rockwell’s divestiture of its modem business to
Conexant, it sold modem chipsets, including V.34 proto-
col-compliant chipsets. Conexant continues to sell V.34
protocol-compliant chipsets. Thus, the sublicensing
conditions in the 1995 Side Letter Agreement are satis-
fied.

As the district court correctly explained, the term
“products” covers “modems generally, not specifically the
exact types of modems in production at the time of the
sublicense and/or divestiture.” Rembrandt, 673 F. Supp.
2d at 437. The language of the 1988 License and 1995
Side Letter Agreements favors a broad interpretation of
“product,” rather than the narrow one Rembrandt sug-
gests. Conexant’s sublicense thus precludes Rembrandt’s
recovery against Canon and HP for infringement of the
’236 and ’578 patents.

II.

The district court properly held claims 3-11 of the ’236
patent invalid for indefiniteness, but incorrectly held
claims 1 and 2 of the ’236 patent invalid for failure to
disclose necessary algorithms because there was a genu-
ine issue of material fact regarding the disclosure of the
specification.
15 REMBRANDT DATA v. AOL

A.

Claim 3 of the ’236 patent reads:

3. A data transmitting device for transmitting sig-
nals corresponding to an incoming stream of bits,
comprising:

first buffer means for partitioning said stream
into frames of unequal number of bits and for
separating the bits of each frame into a first group
and a second group of bits;

fractional encoding means for receiving the first
group of bits of each frame and performing frac-
tional encoding to generate a group of fractionally
encoded bits;

second buffer means for combining said second
group of bits with said group of fractionally en-
coded bits to form frames of equal number of bits;
trellis encoding means for trellis encoding the
frames from said second buffer means; and

transmitting the trellis encoded frames.

’236 patent col.6 ll.1-24.

Claims 4-11 depend on claim 3. The first four ele-
ments of claim 3 of the ’236 patent recite apparatus
elements: buffer means, fractional encoding means,
second buffer means, and trellis encoding means. ’236
patent col.6 ll.3-23. The final element is a method:
“transmitting the trellis encoded frames.” Id. at col.6 l.24.
This court has held that “reciting both an apparatus and a
method of using that apparatus renders a claim indefinite
under section 112, paragraph 2.” IPXL Holdings, L.L.C.
REMBRANDT DATA v. AOL 16

v. Amazon.com, Inc., 430 F.3d 1377, 1384 (Fed. Cir. 2005)
(citing Ex parte Lyell, 17 U.S.P.Q.2d 1548 (B.P.A.I. 1990)).
Applying this doctrine, the district court correctly held
claim 3 and its dependent claims 4 through 11 invalid for
indefiniteness.

Rembrandt argues that the phrase “said transmitter
section” in claims 7 and 8 requires that claim 3, on which
claims 7 and 8 depend, contain a “transmitter section”
limitation. Appellant’s Br. 50. Rembrandt requests this
court to insert “transmitter section for” into the final
element of claim 3, thereby adding an apparatus and
rendering the claim valid. Rembrandt contends that the
addition merely corrects “an obvious administrative or
typographical error not subject to reasonable debate.” Id.

We have stated that “[t]his court, however, repeatedly
and consistently has recognized that courts may not
redraft claims, whether to make them operable or to
sustain their validity.” Chef Am., Inc. v. Lamb-Weston,
Inc., 358 F.3d 1371, 1374 (Fed. Cir. 2004). In Novo Indus-
tries, L.P. v. Micro Molds Corp., we held that “[a] district
court can correct a patent only if (1) the correction is not
subject to reasonable debate based on consideration of the
claim language and the specification and (2) the prosecu-
tion history does not suggest a different interpretation of
the claims.” 350 F.3d 1348, 1357 (Fed. Cir. 2003). Rem-
brandt attempts to apply Ultimax Cement Manufacturing
Corp. v. CTS Cement Manufacturing Corp. to this case.
587 F.3d 1339 (Fed. Cir. 2009). Ultimax added that this
determination “must be made from the point of view of
one skilled in the art.” 587 F.3d at 1353. Ultimax is
distinguishable because in that case, the court merely
added a comma to a chemical formula because the plain-
tiff demonstrated that the “claimed formula C9S3S3Ca(f
cl)2 ‘corresponds to no known mineral,’ and one of ordi-
17 REMBRANDT DATA v. AOL

nary skill in the art would know that the formula should
contain a comma” between the “f” and “cl.” Id. Rem-
brandt seeks to have this court substantively re-draft its
claims and has not demonstrated that a skilled artisan
would have read its proposed language into the claim. As
the district court noted, the correction suggested by
Rembrandt is “not minor, obvious, free from reasonable
debate or evident from the prosecution history.” Rem-
brandt, 673 F. Supp. at 428. This court will not redraft
Rembrandt’s claim. Claims 3-11 of the ’236 patent are
invalid.

B.

Claims 1 and 2 of the ’236 patent read:

1. A modem for data transmission at fractional
data rates comprising:

transmitter means including:

buffer meas [sic] for receiving a stream of binary
data, said buffer means being provided for parti-
tioning said stream into frames of unequal num-
ber of bits and separating the bits of each frame
into a first group and a second group of bits;

fractional rate encoding means for receiving said
first group and performing a fractional encoding
thereon to generate a group of fractionally en-
coded bits; combining means for combining said
group of fractionally encoded bits with said second
groups into frames of equal number of bits;

trellis encoding means for trellis encoding said
frames of equal number of bits; and
REMBRANDT DATA v. AOL 18

a transmitter section for transmitting the trellis
encoded frames.

2. The mode of claim 1 wherein said trellis encod-
ing means encodes the bits from said group of
fractionally encoded bits.

’236 patent col.5 ll.36-56.

The district court construed the limitation “fractional
rate encoding means for receiving said first group and
performing a fractional encoding thereon to generate a
group of fractionally encoded bits” as a means-plus-
function element with the following function and struc-
ture:

Function: receiving said first group and perform-
ing a fractional encoding thereon to generate a
group of fractionally encoded bits.

Structure: The fractional rate converter 18 shown
in Figure 1 or in Figure 3, including programming
for both calculating an ideal number of points us-
ing the algorithm 2b/f as disclosed in column 4:14-
60 of the ’236 patent and converting a number of
bits to a different base using the base conversion
algorithm as described in the [5,103,227] patent
and incorporated by reference into the ’236 patent.

J.A. 57.

The district court also construed the limitation “trellis
encoding means for trellis encoding said frames of equal
number of bits” as a means-plus-function element with
the following function and structure:
19 REMBRANDT DATA v. AOL

Function: Trellis encoding the frames of equal
numbers of bits outputted by the combining
means

Structure: The trellis encoder 20 shown in Fig. 1.

J.A. 58.

The district court erred in construing “fractional rate
encoding means” and “trellis encoding means” as means-
plus-function elements governed by 35 U.S.C. § 112, ¶ 6.
A claim limitation that “contains the word ‘means’ and
recites a function is presumed to be drafted in means-
plus-function format under 35 U.S.C. § 112, ¶ 6.” Net-
MoneylN, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1366 (Fed.
Cir. 2008). This presumption can be rebutted if the claim
limitation itself recites sufficient structure to perform the
claimed function in its entirety. TI Grp. Auto. Sys.’s (N.
Am.), Inc. v. VDO N. Am., L.L.C., 375 F.3d 1126, 1135
(Fed. Cir. 2004) (holding that the term “pumping means”
in a patent directed to fuel pump assembly technology
was not a means-plus-function limitation as the limitation
recited not only a pumping means, but its structure,
location, and operation). In Cole v. Kimberly-Clark Corp.,
we held that “perforation means” “cannot meet the re-
quirements” of paragraph 6 of section 112 because the
claim itself defined sufficient structure. 102 F.3d 524, 531
(Fed. Cir. 1996). When determining whether a claim term
recites sufficient structure, we examine whether it has an
understood meaning in the art. Watts v. XL Sys., Inc.,
232 F.3d 877, 880-81 (Fed. Cir. 2000); see also Atmel Corp.
v. Info. Storage Devices, Inc., 198 F.3d 1374, 1379 (Fed.
Cir. 1999) (“[T]he ‘one skilled in the art’ analysis should
apply in determining whether sufficient structure has
been disclosed to support a means-plus-function limita-
tion.”).
REMBRANDT DATA v. AOL 20

On appeal, Rembrandt argues that the district court
erred by granting summary judgment of invalidity of
claims 1 and 2 of the ’236 patent for failing to disclose an
algorithm able to perform the recited functions. We agree
that a genuine dispute of material fact precluded invali-
dation of claims 1 and 2 of the ’236 patent. The district
court determined that the “trellis encoding means,” and
“fractional rate encoding means,” recited in claim 1 of the
’236 patent, from which claim 2 depends, are means-plus-
function elements. J.A. 57-59. Expert testimony supports
the conclusion that the limitations themselves convey
sufficient structure to one of ordinary skill in the art to
overcome the presumption of treatment under § 112, ¶ 6.

Rembrandt’s expert testified that the terms “frac-
tional rate encoding means” and “trellis rate encoding”
were used in publications and published patents in the
early 1990s, and were self-descriptive to one of ordinary
skill in the art. J.A. 11875; see, e.g., Lang, G.R., A Leech
Lattice Modem, IEEE Journal on Selected Areas in Com-
munications, Vol. 7, No. 6 (Aug. 1989); U.S. Patent No.
4,941,154 entitled “Trellis Coding Method and Arrange-
ment for Fractional Bit Rates” issued on July 10, 1990;
and U.S. Patent No. 5,113,401 entitled “Block Coding
Scheme for Fractional-Bit Transmission” issued on May
12, 1992. The invention claimed by the ’236 patent is the
novel combination of fractional rate encoding with trellis-
coded modulation, two known techniques that were
widely thought to be “mutually-exclusive” at the time of
invention. ’236 patent, col.2 l.26. The ’236 patent adopts
the common meanings of fractional rate encoding in
column 3 lines 18-21 and 40-44 and trellis encoding in
column 2 lines 41-49 and does not limit them to any
specific encoders. The phrases “fractional rate encoding”
and “trellis rate encoding” defined algorithms known to
21 REMBRANDT DATA v. AOL

skilled artisans in the early 1990s. The parties do not
dispute this.

The parties do, however, dispute whether the neces-
sary algorithms for “buffer means” and “combining
means” were disclosed. Independent claim 1 and depend-
ent claim 2 include a “buffer meas [sic] for receiving a
stream of binary data, said buffer means being provided
for partitioning said stream into frames of unequal num-
ber of bits and separating the bits of each frame into a
first group and a second group of bits.” ’236 patent, col.5
ll.47-50. The district court construed “buffer means” as
having three functions: receiving data, partitioning the
data “into frames of unequal numbers of bits,” and “sepa-
rating the bits of each frame into a first group and a
second group of bits.” J.A. 56. The “first buffer means”
was construed to perform two material functions: (1)
“partition[] said stream [of bits] into frames of unequal
number of bits”; and (2) “separat[e] the bits of each frame
into a first group and a second group of bits.” J.A. 58.
The court determined that the structure performing these
functions is “buffer 12.” Id. A buffer is only a physical
piece of memory and the actual partitioning and separat-
ing is accomplished by buffer 12 by implementing a
computer algorithm.

Rembrandt’s expert testified that the figures, text,
and table in the ’236 patent disclose a complete algorithm
for “buffer means” to one skilled in the art. Rembrandt
argues that Figure 1 of the ’236 patent provides a picto-
rial algorithm for how a buffer partitions an input data
stream of seven bits, A1 to A7, into two frames, f1 and f2,
having three and four bits, respectively.
REMBRANDT DATA v. AOL 22

The number of bits and frames is provided to the
buffer (buffer 12 in Figure 1) by the format selector.
Rembrandt contends that the accompanying text further
explains how the buffer partitions the incoming bit
stream into frames containing unequal numbers of bits.
’236 patent col.3 ll.4-39. The buffer separates the two
least significant bits from each frame, i.e., A1A2 and A5 A6,
and sends them to another buffer, buffer 16. Id. at col.3
ll.36-38. Rembrandt also notes that Column 5, Table 1
provides examples of how given a bit rate and baud rate,
different ratios of bits and frames are calculated for use
by the buffer.

Canon maintains that these elements merely disclose
the outputs of the algorithm, rather than the algorithm
itself. Canon argues that the categorization into frames is
23 REMBRANDT DATA v. AOL

important and Rembrandt offers no evidence of how
buffer 12 would accomplish the specific functions to meet
the requirements of the invention or how one of ordinary
skill in the art could derive the functions from the figure,
text, or table. In holding claims 1 and 2 invalid when it
found claims 3 through 11 invalid, the district court did
not assess whether the testimony of Rembrandt’s expert
raised a genuine issue of material fact about whether a
skilled artisan would have known the algorithm neces-
sary to accomplish the described outcomes.

The parties make similar arguments about whether
an algorithm for “combining means” was disclosed in the
’236 patent. Claims 1 and 2 include “combining means for
combining said group of fractionally encoded bits with
said second groups into frames of equal number of bits.”
Id. at col.5 ll.47-50. In Figure 1, buffer 16 performs the
combining operation. As with the “buffer means,” Rem-
brandt contends that Figure 1 and the accompanying text
present a pictorial algorithm of the combining means.
Appellant’s Br. 60. Rembrandt argues that the figure and
text explain how to combine the inputs into frames of
equal numbers of bits. The inputs are the frames from
buffer 12 and the fractional rate encoder as incorporated
from the cross-referenced patent application Ser. No.
588,652, which has since issued as U.S. Patent No.
5,103,227.

Rembrandt’s expert testified that there was sufficient
structure to apprise one of ordinary skill in the art that
claims 1 and 2 are capable of performing the recited
function. The expert testified how a buffer orders and
combines inputs to create an output. For example, if
buffer 16 of Figure 1 is combining two four-bit inputs to
create an eight-bit output, the algorithm directs how to
take a bit, e.g. A1 and make it the first row, the fourth
REMBRANDT DATA v. AOL 24

column of the output, then take A2 and make that the first
row, third column of the output, and so on. Rembrandt’s
expert also opined that the actual mechanism of the
operation was a simple decision for a skilled artisan.
Canon argues that the ’236 patent does not disclose how
buffer 16 performs the combining function because it does
not address how and in what order to combine fractionally
encoded bits into particular frames. The parties again
dispute whether the algorithm for “combining means”
would be clear to a skilled artisan.

Drawing all justifiable inferences in favor of Rem-
brandt, we cannot agree with the district court that
summary judgment of the invalidity of claims 1 and 2 of
the ’236 patent was warranted. Based on the expert
testimony, there are genuine disputes of material fact
regarding whether the specification discloses algorithms
for “buffer means” and “combining means.” The indefi-
niteness analysis the district court used to invalidate
claims 3-11 of the ’236 patent does not support the invali-
dation of claims 1 and 2. The district court’s invalidation
of claims 1 and 2 in its order on November 2, 2009 with-
out any reasoning supporting its decision was erroneous.

CONCLUSION

We affirm the district court’s decision that because
Conexant is licensed, Rembrandt’s rights are exhausted
and it cannot recover from Canon and HP, Conexant’s
customers. We also affirm the district court’s grant of
summary judgment on the invalidity of claims 3-11 of the
’236 patent for indefiniteness. We reverse the district
court’s grant of summary judgment on the invalidity of
claims 1 and 2 of the ’236 patent. We remand the case to
the district court for further proceedings consistent with
this opinion.
25 REMBRANDT DATA v. AOL

AFFIRMED-IN-PART, REVERSED-IN-PART, AND
REMANDED

COSTS

No costs.