ACCO Brands, Inc. v. ABA Locks Manufacturer Co.

United States Court of Appeals for the Federal Circuit

2006-1570

ACCO BRANDS, INC. (doing business as Kensington Technology Group),

Plaintiff-Appellee,

v.

ABA LOCKS MANUFACTURER CO., LTD.,

Defendant,

and

BELKIN COMPONENTS,

Defendant-Appellant.

Richard L. Stanley, Howrey LLP, of Houston, Texas, argued for plaintiff-appellee.
With him on the brief were Henry C. Bunsow, K.T. Cherian, and Brian A. E. Smith, of
San Francisco, California. Of counsel was Courtney Towle of Houston, Texas.

Lawrence G. Kurland, Bryan Cave LLP, of New York, New York, argued for
defendant-appellant. With him on the brief were Joseph J. Richetti and George C. Chen,
of Phoenix, Arizonia.

Appealed from: United States District Court for the Eastern District of Texas

Judge T. John Ward
United States Court of Appeals for the Federal Circuit

2006-1570

ACCO BRANDS, INC. (doing business as Kensington Technology Group),

Plaintiff-Appellee,

v.

ABA LOCKS MANUFACTURER CO., LTD.,

Defendant,

and

BELKIN COMPONENTS,

Defendant-Appellant.

_____________________

DECIDED: September 12, 2007
_____________________

Before LOURIE, SCHALL, and PROST, Circuit Judges.

LOURIE, Circuit Judge.

Belkin Components (“Belkin”) appeals from the judgment of the United States

District Court for the Eastern District of Texas following a jury verdict in favor of ACCO

Brands, Inc. d/b/a Kensington Technology Group (“ACCO”) of willful induced

infringement of U.S. Patent 5,502,989 (the “’989 patent”). Belkin also appeals from the

court’s grant of enhanced damages and attorney fees, its denial of judgment as a matter

of law that the patent is invalid and unenforceable, and its claim construction order.

Because the jury verdict of direct infringement was not supported by substantial
evidence, we reverse the district court’s judgment with respect to inducement, and

vacate the court’s judgment with respect to willfulness, enhanced damages, and

attorney fees. Because we find no grounds for reversible error as to the remaining

issues, we affirm those aspects of the court’s decision.

BACKGROUND

ACCO is the owner of U.S. Patents 5,493,878 (the “’878 patent”), 6,006,557 (the

“’557 patent”), and the ’989 patent. The patents in suit are entitled “Computer Physical

Security Device,” and are directed to locking systems that “inhibit[] the theft of

equipment such as personal computers.” ’878, ’557, and ’989 patents, Abstract. The

’989 patent was the subject of an appeal that was previously before us. In ACCO

Brands, Inc. v. Micro Security Devices, Inc., 346 F.3d 1075 (Fed. Cir. 2003), we

construed a key limitation that is at issue in this appeal. Claim 10 of the ’989 patent, a

representative claim, reads as follows:

A locking system comprising:

a portable electronic device including an exterior wall defining a security
slot;

cable means for attaching to a first object other than to the portable
electronic device;

a housing, proximate to said electronic device and including a slot
engagement member having a slot engaging portion provided with a
locking member having a peripheral profile complementary to preselected
dimensions of said security slot to thereby permit said locking member to
extend into said slot, said slot engagement member being rotatable
between an unlocked position wherein said locking member is removable
from the slot, and a locked position wherein said locking member is
retained within the slot;

a pin, coupled through said housing, for extending into said security slot
proximate said slot engaging portion when said slot engagement member

2006-1570 2
 is in said locked position to thereby inhibit rotation of said slot engagement
member to said unlocked position; and

means, coupled to said housing, for attaching said cable to said housing.

’989 patent Reexamination Certificate col.2 ll.13-37 (emphasis added). In ACCO

Brands, we upheld the district court’s claim construction with regard to the pin limitation

of claim 10. The district court concluded, and we agreed, that that limitation requires

the pin to extend through the security slot after the slot engagement member is rotated

to its locked position, thus prohibiting rotation into its unlocked position. 346 F.3d 1079-

80.

ABA Locks Manufacturer Co., Ltd. (“ABA”) is a Taiwan-based manufacturer of

the accused products in this case, viz., the K100 (“key lock”) and the C100 (“combo

lock”). Belkin is a California-based distributor of the key lock and combo lock in the

United States. In May 2002, ACCO sued ABA and Belkin (collectively “defendants”) in

the United States District Court for the Eastern District of Texas alleging that both the

key lock and combo lock infringe the asserted claims of the patents in suit. In January

2004, the district court construed the disputed claim limitations, and defendants moved

for summary judgment. Aided by our ACCO Brands decision, the court granted

summary judgment that the combo lock did not infringe either the ’989 or ’878 patents,

and that the key lock did not infringe the ’878 patent. The court denied the remainder of

defendants’ motions.

A trial was held on May 17-20, 2004, in which a jury determined the remaining

infringement and validity issues with respect to the ’989 and ’557 patents. At trial, the

jury was informed that, based on the claim construction of the pin limitation, the key lock

could essentially be operated in two ways, one infringing and the other noninfringing.

2006-1570 3
The infringing method was demonstrated at trial by ACCO’s expert, Dr. Dornfeld, and

thus was referred to as the “Dornfeld method.” The noninfringing method, the “press-to-

lock” method, was the method that Belkin instructed its customers to use in the

instructions included in its key lock product. The parties agreed that when a user

employs the press-to-lock method, direct infringement does not occur.

The jury found that defendants willfully induced infringement of the asserted

claims of the ’989 and ’557 patents and rejected all invalidity defenses. The jury

awarded damages against defendants, but did not apportion damages based on the

type of lock. The defendants then moved for judgment as a matter of law, which the

court granted in part. The district court granted judgment as a matter of law that the

claims of the ’557 patent were invalid, which resulted in the combo lock not infringing

any of the asserted patents as a matter of law, and denied the remainder of defendants’

motions. Because the jury’s damages award was not apportioned separately for the

key lock and the combo lock, and because the court previously determined that the

combo lock did not infringe the ’989 patent, the court set aside the damages verdict. In

December 2005, a second jury trial was held to determine damages due to the key

lock’s infringement of the ’989 patent. The second jury found that all of ABA and

Belkin’s key lock sales induced infringement and awarded damages against ABA in the

amount of $1,822,000 and against Belkin in the amount of $253,000.

A bench trial on inequitable conduct was also held, and on March 28, 2006, the

district court determined that defendants failed to prove that the patent was

unenforceable. On that same day, the court also found the case exceptional under 35

2006-1570 4
U.S.C. § 285, and thus awarded enhanced damages and attorney fees. The court

awarded treble damages against ABA and doubled the damages award against Belkin.

Belkin timely appealed. 1 We have jurisdiction pursuant to 28 U.S.C.

§ 1295(a)(1).

DISCUSSION

A. Jury Verdict of Induced Infringement

“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 court would usually lie.” Summit Tech. Inc. v. Nidek Co.,

363 F.3d 1219, 1223 (Fed. Cir. 2004). In the Fifth Circuit, the Court of Appeals “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). “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.

A determination of infringement is a question of fact that is reviewed for

substantial evidence when tried to a jury. TI Group Auto. Sys. (N. Am.), Inc. v. VDO N.

Am., L.L.C., 375 F.3d 1126, 1133 (Fed. Cir. 2004). “Whether infringement is willful is a

question of fact, and the jury’s determination as to willfulness is therefore reviewable

under the substantial evidence standard.” Braun Inc. v. Dynamics Corp. of Am., 975

F.2d 815, 822 (Fed. Cir. 1992) (citation omitted). Willful infringement must be proven by

clear and convincing evidence and is determined from the totality of circumstances. Id.

We review a district court’s exceptional case finding for clear error, Pharmacia & Upjohn

1
ABA did not file a notice of appeal and hence we have no basis to review
the district court’s damages award against it.

2006-1570 5
Co. v. Mylan Pharms., Inc., 182 F.3d 1356, 1358-59 (Fed. Cir. 1999), and an award of

enhanced damages and attorney fees under an abuse of discretion standard. Electro

Scientific Indus., Inc. v. Gen. Scanning Inc., 247 F.3d 1341, 1349 (Fed. Cir. 2001).

On appeal, Belkin argues that the jury’s findings of induced infringement and

willfulness are not supported by substantial evidence. According to Belkin, the record is

devoid of any evidence that Belkin’s customers actually used the ABA key lock in an

infringing manner or that Belkin encouraged any of its customers to use the key lock in

that way. Instead, Belkin asserts that the record shows that it had no knowledge of the

infringing mode and that it instructed its customers to use the noninfringing press-to-lock

method to operate the lock. Belkin further argues that the jury award of damages is

unsupported by substantial evidence and that the district court abused its discretion by

awarding enhanced damages and attorney fees.

ACCO responds that substantial evidence supports the jury’s finding of induced

infringement. According to ACCO, the record shows that key lock users will use the

lock in an infringing manner at least some of the time because that configuration is the

most natural and intuitive way to use the lock, in comparison with the press-to-lock

method. ACCO contends that the record also supports the jury’s finding of willfulness

because, inter alia, Belkin had knowledge of the ’989 patent, but failed to obtain its own

noninfringement opinion. In addition, ACCO argues that the damages verdict was

supported by substantial evidence and that the district court did not abuse its discretion

in enhancing damages and awarding attorney fees.

We agree with Belkin that substantial evidence is lacking in the record to support

the verdict that Belkin induced infringement of the ’989 patent. Section 271(b) of the

2006-1570 6
Patent Act provides that “[w]hoever actively induces infringement of a patent shall be

liable as an infringer.” 35 U.S.C. § 271(b). In order to prevail on an inducement claim,

the patentee must establish “first that there has been direct infringement, and second

that the alleged infringer knowingly induced infringement and possessed specific intent

to encourage another’s infringement.” Minn. Mining & Mfg. Co. v. Chemque, Inc., 303

F.3d 1294, 1304-05 (Fed. Cir. 2002) (citation omitted). Specific intent requires a

“showing that the alleged infringer’s actions induced infringing acts and that he knew or

should have known his actions would induce actual infringements.” DSU Med. Corp. v.

JMS Co., Ltd., 471 F.3d 1293, 1304 (Fed. Cir. 2006) (en banc in relevant part) (quoting

Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 554 (Fed. Cir. 1990)).

The record shows that ACCO failed to prove the threshold requirement of direct

infringement. In support of its assertion that direct infringement was proven, ACCO

points to the expert testimony of Dr. Dornfeld, a set of instructions provided in ABA’s

key lock product that described the infringing method (“the ABA hang card”), and the

jury’s observations of the lock itself. ACCO contends that such evidence established

that the key lock was capable of being used in an infringing manner, which Dr. Dornfeld

testified was the “natural and intuitive way to employ the device.” According to ACCO,

the jury was entitled to accept Dr. Dornfeld’s testimony and find that, at least some of

the time, all users of the key lock would use it in an infringing manner.

ACCO’s argument, however, is unpersuasive. In order to prove direct

infringement, a patentee must either point to specific instances of direct infringement or

show that the accused device necessarily infringes the patent in suit. See Dynacore

Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1275-76 (Fed. Cir. 2004). Here,

2006-1570 7
the parties do not dispute that the accused device can be operated in either of two

modes—the infringing Dornfeld method or the noninfringing press-to-lock method.

Because the accused device can be used at any given time in a noninfringing manner,

the accused device does not necessarily infringe the ’989 patent.

The record further shows that ACCO failed to point to specific instances of direct

infringement. The sole witness at trial who testified to having used the lock in an

infringing manner was ACCO’s expert, Dr. Dornfeld. However, the record contains no

evidence of actual users having operated the lock in an infringing manner. ACCO

proffered no witness testimony of actual Belkin key lock users, or surveys of Belkin’s

customers, that would indicate that a user, aside from the expert retained for this

particular litigation, directly infringed the ’989 patent. Moreover, we are not persuaded

by ACCO’s assertion that Dr. Dornfeld’s testimony combined with the ABA hang card

provides substantial evidence of direct infringement. The record indicates that Belkin

key lock users received instructions describing the noninfringing press-to-lock method

and thus provides no basis for concluding that Belkin key lock users directly infringed

the patent. Furthermore, Belkin did not provide the ABA hang card to purchasers.

Indeed, the district court found in its enhanced damages determination that there was

“no evidence that Belkin knew of the hang card or was involved in its preparation.”

The lack of evidence of specific instances of direct infringement is further

buttressed by Dr. Dornfeld’s own testimony. When questioned about whether users

other than himself used the lock in the infringing mode, Dr. Dornfeld had no opinion on

that issue:

2006-1570 8
 Q: Okay. Do you have any opinion as you sit here today on whether
there are users other than yourself who operate the key lock in the
alternate mode of operation?

A: I don’t have any opinion on that, no.

***

Q: Now, it’s true, isn’t it, that you testified earlier in your deposition in
this case that you are not aware of anyone else using the key lock
in the alternate mode that you’ve proposed?

A: I didn’t ask anybody if they did that, no. So I am not personally
aware of anybody else doing it the way I do it.

Thus, based on the record before us, we find no evidence of direct infringement.

We are further unpersuaded by ACCO’s reliance on Hilgraeve Corp. v. Symantec

Corp., 265 F.3d 1336 (Fed. Cir. 2001), which states that an accused device may be

found to infringe a product claim “if it is reasonably capable of satisfying the claim

limitations, even though it may also be capable of non-infringing modes of operation.”

Id. at 1343. That broad legal statement does not alter the requirement that ACCO must

prove specific instances of direct infringement or that the accused device necessarily

infringes the patent in suit, in order to sustain the jury verdict of induced infringement.

Hypothetical instances of direct infringement are insufficient to establish vicarious

liability or indirect infringement. See Dynacore, 363 F.3d at 1274. Moreover, as we

stated in Dynacore, “[t]he mere sale of a product capable of substantial non-infringing

uses does not constitute indirect infringement of a patent.” Id. at 1275. Thus, ACCO’s

argument is unavailing.

Because we find that the record lacks substantial evidence to support the jury’s

finding of direct infringement, the jury verdict of inducement cannot stand, and the

district court’s denial of judgment as a matter of law must be reversed. See Linear

2006-1570 9
Tech. Corp. v. Impala Linear Corp., 379 F.3d 1311, 1326 (Fed. Cir. 2004) (“There can

be no inducement or contributory infringement without an underlying act of direct

infringement.”). In light of that conclusion, we further vacate the court’s judgment with

respect to willfulness, enhanced damages, and attorney fees.

B. Remaining Issues

Belkin raises numerous other issues in its appeal including unenforceability,

invalidity based on purported misjoinder, claim construction, and the district court’s

denial of its motion for leave to file a revised summary judgment motion. On appeal

from a bench trial on inequitable conduct, we review “the trial court’s findings of

materiality and intent, the underpinnings of inequitable conduct, for clear error,” and “the

ultimate determination of inequitable conduct for an abuse of discretion.” Agfa Corp. v.

Creo Prods. Inc., 451 F.3d 1366, 1371 (Fed. Cir. 2006). A jury verdict on invalidity

“must be upheld unless ‘there is no legally sufficient evidentiary basis for a reasonable

jury to find’ as the jury did.” Hiltgen v. Sumrall, 47 F.3d at 700. Claim construction is an

issue of law, Markman v. Westview Instruments, Inc., 52 F.3d 967, 970-71 (Fed. Cir.

1995) (en banc), that we review de novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d

1448, 1456 (Fed. Cir. 1998) (en banc). A district court’s decision to deny a motion for

leave is a procedural issue not unique to patent law, and thus the regional law of the

circuit applies. Madey v. Duke Univ., 307 F.3d 1351, 1358 (Fed. Cir. 2002). In the Fifth

Circuit, a court’s decision to deny a motion for leave is reviewed for abuse of discretion.

See Moore v. Cockrell, 144 Fed. Appx. 397, 403 (5th Cir. 2005).

Based on our review of the record, we find no basis to reverse those findings.

Accordingly, we affirm those aspects of the district court’s decision.

2006-1570 10
 CONCLUSION

For the foregoing reasons, we reverse the district court’s judgment of induced

infringement, and vacate the court’s judgment with respect to willfulness, enhanced

damages, and attorney fees. We affirm all other aspects of the court’s ruling.

REVERSED IN PART, VACATED IN PART, and AFFIRMED IN PART

2006-1570 11