MEMORANDUM AND ORDER
I. BACKGROUND.. .32
A. Factual Background... 32
B. Procedural History.. .33
1. Initial Complaint and Pre-Trial Proceedings.. .33
2. Jury Verdict... 34
3. Post-Trial Motions... 34
C. Applicable Standards of Review.. .35
II. DEFENDANT’S INVALIDITY DEFENSES... 36
A Invalidity Defenses Submitted to the Jury...37
1. Background.. ,37
2. Obviousness of’924 Patent.. .37
3. Lack of Written Description.. .41
4. Conclusion.. .44
B. Invalidity Defenses Reserved for the Court.. .44 ,
1. Background.., 44 -
2. Unpatentable Subject Mattel; of ’609 Patent... 45 -,
3. Indefiniteness... 54
4. Conclusion... 59
III. WILLFUL INFRINGEMENT .. .59
A. Direct Infringement.. .60
2. ’609 Patent... 60
3. ’924 Patent,. .61
B.Willfulness.. .64
1. Subjective Willfulness... 64
2. Objective Willfulness... 69
IV. DAMAGES... 71
A. Aрpthority’s Motion for a New Trial Based on the Damages Award.. .71
1. Legal Standard... 72
2. Analysis... 72
B. Supplemental Damages... 83
C. Veracode’s Motion for Enhanced Damages... 84
1. Legal Standard... 84
2. Analysis... 85
D. Prejudgment Interest.. .87
V. INJUNCTIVE RELIEF.. .88
A. Background... 88
B. Legal Standard... 88
C. Findings of Fact and Conclusions of Law.. .89
1. Appropriateness of a Permanent Injunction. . .89
2. Scope of the Injunction.. .95
3. Appthority’s Request for a Stay of the Injunction.. .97
VI. MOTIONS FOR ATTORNEYS’ FEES... 99
A. Legal Standard... 99
B. Analysis... 100
1. Prevailing Party Status... 100
2. Exceptional Nature... 100
VII. CONCLUSION.. .103
Plaintiffs Veracode, Inc. and Rovi Solutions Corporation (collectively, “Vera-code,” except where otherwise noted) brought this action against Defendant Appthority, Inc., for infringing two patents, U.S. Patent No. 5,854,924 (the “’924 Patent”) and U.S. Patent No. 7,752,609, (the “’609 Patent”), relating to the analysis and manipulation of computer code. The jury found that Appthority willfully infringed two claims (1 and 5) of the ’924 Patent but did not infringe any claims of the ’609 Patent. The jury also found that all asserted claims of the patents-in-suit were valid. Following a separate presentation of evidence as to damages, the jury awarded $781,857 to Veracode. Before me now is an array of post-trial motions. For the reasons that follow, I. conclude that the jury’s findings and its damages award were supported by substantial evidence, that the claims of the patents-in-suit were valid, that Appthority’s infringement of claims 1 and 5 of the ’924 Patent was willful, that an award of enhanced damages or attorneys’ fees is unwarranted, and that a permanent injunction is appropriate to prevent further infringement of the ’924 Patent.
I. BACKGROUND
A. Factual Background
The underlying claims are described in greater detail in my order on claim construction, see Veracode, Inc. v. Appthority, Inc.,
Veracode is the exclusive licensee of the ’924 Patent issued in 1998 and owned by Rovi. The ’924 Patent is a “static debugging tool ... to detect the presence of
Both patents generate an intermediate file from a program’s binary code. Binary code is a machine-readable form of code that allows a computer to run a particular pieeé of software; it is originally written as source code by software developers and then compiled into binary form by a computer. Although binary code is not readable by humans, the intermediate file the patented technology generates is intelligible to persons of ordinary-skill in the art of software development A software developer can reverse engineer the intermediate code to reconstruct or approximate the program’s original source epde.
B. Procedural History
I. Initial Complaint and Pre-Trial Proceedings
Veracode filed its initial complaint on March 16, 2012, alleging willful infringement of the ’924 and ’609 Patents by Appthority. Appthority asserted affirmative defenses of non-infringement and invalidity with respect to both patents. Following the completion of fact discovery, I conducted a Markman hearing and construed relevant claim terms. See generally Veracode,
Prior to trial, the parties agreed on limited claims and defenses each could assert at trial. The trial accordingly concerned asserted infringement -by Appthority of claims 1, 5, and 17 of the ’924 Patent
2. Jury Verdict
I held a ten-day trial on liability followed by a two-day trial on damages. The, jury returned a split verdict. It found that Ver-acode established by a preponderance of the evidence that the Appthority Platform infringes claims 1 and 5 of the ’924 Patent but not claim 17 or any of the claims of the ’609 Patent. It further found that Vera-code established by clear and convincing evidence that Appthority’s infringement of the ’924 Patent was willful. The jury rejected all of the invalidity defenses submitted to it, finding that Appthority did not establish by clear and convincing evidence that any of the asserted claims of the'’924 or ’609 Patents were anticipated, obvious, or- invalid for lack of written description. After a separate presentation of evidence on damages, the jury found that Veracode had sustained damages in the amount of $781,857 as a result of Appthority’s infringement.
3. Post-Trial Motions
Following the verdict, the parties submitted a total of eleven post-trial motions. Both parties renewed (at least in part) their earlier Fed. R. Civ. P. 50(a) motions for. judgment as a matter of law, filed motions for judgment on partial findings pursuant to Fed. R. Civ. P. 52(c), and seek the award of attorneys’ fees under 35 U.S.C. § 285. Veracode also filed motions for, a permanent injunction, the award of enhanced damages under 35 U.S.C. § 284, and for entry of judgment. Appthority has filed a motion for a new trial and/or remit-titur, and seeks a stay of any injunction. After a hearing.on these motions, I invited the parties to submit further briefing.
C. Applicable Standards of Review
In considering these motions, I am guided by several distinct standards of review, dictated by the standards applied in this circuit. See Jennings v. Jones,
Most of the parties’ motions seek judgment as a matter of law. A motion for judgment as a matter of law on patent claims is reviewed according to First Circuit case law. See Abbott GmbH & Co., KG v. Centocor Ortho Biotech, Inc.,
The burden for judgment as a matter of law, particularly after a jury verdict, is demanding. See Ortiz v. Jordan,
The parties also seek judgment on partial findings on several issues under Fed. R. Civ. P. 52(c). Rule 52(c) is designed to parallel Rule 50(a) and permit the court to enter a judgment when “it can appropriately make a dispositive finding of fact on the evidence.” Fed. R. Civ. P. 52, advisory committee note, 1991 amend. However, “[t]he standards that.govern.judgment as a matter of law in a jury case have no bearing on a decision, under Rule 52(c).” Fed. R. Civ. P. 52, advisory committee note, 2007 amend. In addressing a Rule 52(c) motion, the court is to weigh the evidence, assess the credibility of the witnesses, resolve evidentiary conflicts, and decide based on the preponderance of the evidence whether judgment should be granted in the moving party’s favor. See 9C Charles Allen Wright & Arthur R. Miller, Federal Practice and Procedure § 2573.1 (3d ed. 2008). A Rule 52(c) judgment “must be supported by findings of fact and conclusions of law.” Fed. R. Civ. P. 52(c); see Fed. R. Civ. P. 52(a). My findings and conclusions are set forth in this Memorandum and Order.
II. DEFENDANT’S INVALIDITY DEFENSES
Appthority bears the burden of establishing its invalidity defenses by clear and convincing evidence. See Microsoft Corp. v. i4i Ltd. P’ship,
I. Background
The jury considered whether the asserted claims of the ’924 Patent were anticipated, obvious, or invalid for lack of written description due to the inclusion pf the term “program error or potential program error.” It also considered whether the asserted claims of the ’609 Patent were anticipated or invalid for lack of written description due to the inclusion of'thp term “exhaustive.” The jury found that 'Appth-ority did not establish by clear and convincing evidence that any of the asserted claims of the patents-in-suit were invalid on the grounds presented to it. Appthority now seeks judgment as a matter of law or a new trial as to its' obviоusness defense for the ’924 Patent and its writteiH description defenses for the ’924 Patent and the ’609 Patent.
2. Obviousness of ’924 Patent
a. Legal Standard
Under 35 U.S.C. § 103, a patent may not be obtained “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” Obviousness is a question of law, but it is predicated on factual underpinnings. i4i Ltd.,
Secondary considerations suggesting that the claimed invention was not obvious include: commercial success of the products covered by the claim; a recognized need for a solution that was satisfied by the claimed invention; response to the invention, including industry acclaim and/or skepticism; superior results over closely related prior art; licensing of the patent due to the merits of the claimed invention; and attempts by the alleged pat-
In assessing the evidence, the fact finder cannot rely on the benefit of hindsight and instead must “return to the time the invention was made,” Uniroyal,
b. Analysis
Appthority asserts that the claimed invention of the ’924 Patent simply combined known techniques of disassembling and decompiling for the purpose of debugging, which were articulated in an article published in 1995 by Australian computer scientists (the “Cifuentes arti-clé”), with known techniques of debugging assembly-level code, which were articulated in a patent filed in 1992 (the “Hansen pateht”). See Cristina Cifuentes & K. John Gough, Decompilation of Binary Programs, 25 Software—Practice & Experience 811-829 (July 1995); Assembly Language Programming Potential Error Detection Scheme Sensing Apparent Inconsistency with a Previous Operation, Ü.S. Patent No. 5,132,972 (filed July 21, .1992). These publications were introduced at trial by Dr. Paul Clark, Appthority’s expert,' who testified that all of the elements of the ’924 Patent existed in these publications, with the potential exception of the output arrangement.
Veracode does not dispute that aspects, if not all of the relevant elements, of the asserted claims of the ’924 Patent were present in the prior art; instead, they contend that Appthority did not present any evidence that a person of ordinary skill in the art would have found each claim of the patent obvious in light of the prior art of the 1995 Cifuentes article and the 1992 Hansen patent. The parties agreed for the purposes of the invalidity defenses to the ’924 Patent that the level of ordinary skill in the art is that of a person in the field of computer science with an undergraduate Bachelor of Science degree and/or about two years of practical programming experience or other software engineer experience, and an understanding of basic principles of analyzing computer programs in the 1996 time frame when the invention in the ’924 Patent was conceived.
The only evidence Appthority offered at trial regarding a motive to combine these references or some perception of this combination as desirable was through Dr.
We talked earlier in your testimony about when you combine references, if we’re using the Cifuentes ’95 and the Hans[e]n patent together, that there are some things you consider about whether you can combine that. I’d like you to tell us why you think it is obvious to combine these two references.
Dr. Clark stated that:
[T]his is assembly language, so it’s intermediate code which is clearly mentioned by the Cifuentes article. And, it talks about error detection, which it would include bugs. So there’s certainly somebody who wanted to display an error list, if that was somehow inventive, would be able to look to both these references.
When asked whether this combination “would be intuitive or obvious to a programmer in the ’95 or ’96 time frame,” Dr. Clark testified, “Sure. You would have, as I said, assemblers and assembly language were known and available tools to a programmer before 1996, to be sure.” '
That one could combine the references and had the tools to do so, however, is not the same as having the motive or suggestion to do so. To succeed on an obviousness defense, not only must “each and every element of [the] claimed invention” be presented in the prior art,-Procter & Gamble,
More importantly, the inferences Appth-ority asks to be drawn from Dr. Clark’s direct testimony are rebutted by his cross-examination and the testimony of other witnesses. On cross-examination, Dr. Clark acknowledged that in his. deposition he had testified that a person of-ordinary skill in the art would not “simply provide the output of Cifuentes ’95 into the Hansen debugging program and run the program.” This position regarding the prospect of combining the concepts was supported by testimony from Dr. Aviel Rubin, who testified on behalf of Veracode that “the Ci-fuentes article and the Hansen invention are completely incompatible” because the Hansen patent processed only a certain type of assembly code with which the de-compiler articulated in the Cifuentes article could not work. According to Dr. Rubin, because of this incompatibility, “Ci-fuentes actually teaches away from combining [with] something like Hansen,” rather than motivating such a combination. Dr. Rubin further testified that, because of this apparent incompatibility, modifying the Cifuentes, program to be compatible with the Hansen patent required skill far beyond that of a person of ordinary skill in the art, as the parties had defined it. The lack of motivation to combine the existing tools was also evidenced by the testimony of Mr. Christien Rioux, the inventor, who stated that, at the time, no one thought a practical decompiler was feasible. Cf. ATD Corp. v. Lydall, Inc.,
In short, Appthority failed to present evidence of a teaching or suggestion in the prior art to combine the references in the Hansen patent and the CifuenteS article, and that contention was affirmatively contested by Veracode. Where “the prior art gave either no indication of which parameters were critical or no direction -as to which of many possible choices is likely to be successful,” it is appropriate to reject “hindsight claims of obviousness,” which is a fair characterization of Dr. Clark’s initial statements regarding the obviousness of the combination. In re Kubin,
In addition to the absence of evidence of a motive or suggestion to combine the known concepts, several objective indicia of non-obviousness support- the jury’s finding. Commercial success is a kéy consideration—that occurs when “the product met an unsolved need and was quickly adopted' by the ... industry.” ATD Corp.,
Appthority contends that there is an insufficient nexus between Veracode’s commercial success and the claimed invention of the ’924 Patent, because the patent did not bring any' commercial success to the initial assignee or to Rovi for seven years after its issuance, and because Vera-code paid only $2 million for the patent license but has invested over $65 million in research and development of its products. These arguments are not sufficiently specific to identify an alternative reason for or factor in Veracode’s success other than the patented technology, and therefore do not serve to rebut the presumption that the success, of Veracode’s products that incorporate the ’924 Patented technology is due to their inclusion of this technology. Indeed, Veracode presented evidence that it advertises the ’924 Patent as part of the innovative nature of its products, pointing specifically to marketing materials indicating that its products that scan mobile applications to detect the presence of program errors and potential program errors are patent-protected, and to its interactions with potential customers, in which it articulated the license to the ’924 Patent as a distinguishing feature of its products. There is no basis to believe that Vera-code’s investment in the license of the ’924 Patent, and its.investment in first deciding to obtain the license -and then undertaking to harness that technology most effectively in the .market, was not the basis for its commercial success.
These objective indicia suggest .that the invention was not obvious, in light of the prior art. See Stratoflex, 713 F.2d.at 1538. For these reasons, I find that substantial evidence supported the jury’s conclusion that the claims of the ’924 Patent were not obvious.
3. Lack of Written Description
a. Legal Standard
Under 35 U.S.C. § 112, a patent specification must “contain a .written description of the invention, and .of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same;” That description must “clearly allow persons of ordinary skill in the art to recognize that [the inventor] invented what is claimed.” Vas-Cath Inc. v. Mahurkar,
As with the nonobviousness requirement, compliance with the written description requirement is a question of fact focused-on the time at which the patent process for the claimed invention began. Ariad Pharm.,
b. ’924 Patent
Appthority contends that no reasonable jury could find that the ’924 Patent
Appthority’s argument is unpersuásive. Appthority seeks to reinvigorate a definition of “program error” that was rejected during claim construction, and to attribute a “subjective opinion” element to Veracode that it has not asserted.
c. ’609 Patent
As for the ’609 Patent, Appthority contends that no reasonable jury could find that the specification demonstrates possession of the claim term “exhaustive.” Here, again, the dispute centers on the definition of the term itself. During claim construction, I concluded that the term “exhaustive” did not require construction because it was used in the claims accord
There is substantial evidence in the record to support Veracode’s argument and the jury’s verdict. Dr. Rubin identified the relevant language in the ’609 Patent specification as: “What is also needed -is a complete decompiling process and. toolset that allows a full representation of the.control and data flows of a target program such that all instructions and internal processes are fully represented at the nánocode level.” He testified that it was clear from this language that the patent was aimed at creating a complete model “by looking at every single instruction in a program,” and that this satisfactorily defined the “optimized, exhaustive model” claimed in the ’609 Patent. The testimony of Dr. Steven Hanna, an expert for Appthority, is consistent with this understanding. Dr. Hanna testified that an optimized, exhaustive data and control flow model is one that “consider[s] all these instructions and how they are interrelated before pruning,” rather than throwing away instructions before calculating dependencies between them. In other words, what is exhaustive is the model rather than the outcome. This is consistent with the use..of the term “exhaustive” in the ’609 Patent itself as modifying the word, “model,” and is consistent with my own construction of the term “complete” as being used in the claims “only to describe the intermediate representation, ... but not to directly describe the optimized model itself.” Sea Veracode,
Dr. Clark’s testimony is not inconsistent with this. Rather than employ the plain meaning of “exhaustive,” Dr. Clark testified that he understood “exhaustive” to mean “to model all of the executable code then using" current computer technology.” He stated that such a feat is' “computationally infeasible for a' program' of a certain size, depending upon the hardware.” In his opinion, using this definition, the written description in the ’609 Patent was inadequate, because “if we understand exhaustive not as it’s being asserted but as I understand it, there’s no. disclosure that I can see that would tell me how to implement it.” As the claim construction order makes clear, however, this definition of exhaustive is not the one relevant here.
Appthority misreads Mr. Rioux’s testimony as supporting its argument when in fact it bolsters Veracode’s appropriate reading of “exhaustive” as referring to the method used rather, than the completeness of the final product. Mr. Rioux testified that a data flow graph .could be “exhaustive just in how it’s generated. Again, this covers the modeling, not what you do with it after.” He further explained that “[y]ou can’t be searchably complete. You can be transformably complete,” and that the ’609 Patent claimed technology .did not aim to produce a data flow graph of a program that is one-hundred percent complete, be
Appthority argues in the alternative that it presented sufficient evidence at 'trial to establish that' Mr. Rioux, the inventor, did not have “possession of the claimed subject matter as of the filing date,” as required under § 112, because a commercial product using the patented technology was not prototyped until at least two years later, and not released until at least five years later. See Ariad,
In sum, Veracode’s asserted definition of the term “exhaustive”—understood by its plain meaning in the context of the ’609 Patent—as referring to the model, rather than the product, was supported by the testimony at trial. Further, there was substantial evidence to support the conclusion that the description in the ’609 Patent of the model adequately explained that it operates -in an exhaustive fashion in a way that a person of ordinary skill in the art could understand at the time. See Ariad;
4. Conclusion
After reviewing the record, I am persuaded that the jury had a legally sufficient evidentiary basis to conclude that Appthority did not demonstrate by clear and convincing evidence that either the ’924 or ’609 Patents are invalid on the basis of obviousness or lack of written description. Accordingly, I will deny Appthority’s motion for judgment as a matter of law as to these invalidity defenses.
B. Invalidity Defenses Reserved for the Court (Doc. 229)
1. Background
The parties agreed that the invalidity defenses Appthority could assert during the jury trial would be limited to anticipation, obviousness, and invalidity due to lack of written description, as to both patents-in-suit. This agreement also permitted Appthority to present an invalidity defense of indefiniteness to the court, which it did following the close of evidence in the liability portion of the trial.
Appthority now asserts in addition that the ’609 Patent is invalid because it consists of unpatentable subject matter. Vera-code contends that this defense should not be considered because Appthority expressly waived it in the agreement with Vera-code, and because Appthority did not pui--
Appthority has resurrected a defense that had indeed been effectively abandoned. However, this defense was not necessarily waived, as Veracode contends, by the agreement between the parties. That agreement appears ■ designed to limit the claims and invalidity defenses that would be presented at trial, and does not expressly preclude Appthority from raising this defense in a post-trial motion. Cf. Wood v. Milyard, — U.S. —,
At the hearing on these post-trial motions, I afforded Veracode an opportunity to offer additional evidencé regarding the patentability of the subject matter'under the ’609 Patent, which it did in the form of a declaration from Mr. Rioux. Appthority also submitted a declaration from Paul Clark in support of its position, and both parties offered additional argument on the issue by reference to the witnesses, and exhibits offered at trial. Because Veracode has had an adequate opportunity to respond to this defense, I will not invoke principles of equitable estoppel to prevent consideration of this belatedly reasserted defense.
2. Unpatentable Subject Matter of ’609 Patent
a. Legal Standard
As a threshold requirement for patent protection, the patented technology or subject matter of a patent must be patentable.' 35 U.S.C. § 101. If this requirement is not satisfied, the patent is invalid. The purpose of § 101 is to ensure “that patent protection promotes, rather than impedes, scientific progress and technological innovation.” I/P Engine, Inc. v. AOL Inc.,
Section 101 defines patentable subject matter as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” The Supreme Court has identified three categories of unpatentable subject matter (or :patent-ineligible concepts) because they fail to meet this definition: laws of nature» physical phenomena, and abstract ideas, including mental processes. In re Bilski,
The Supreme Court has recently focused its attention on the patentability requirement, particularly in the realm of abstract ideas and mathematical processes. See Alice Corp. Pty. Ltd. v. CLS Bank Int’l, — U.S. —,
First, the defendant must show that the claims at issue are directed toward one of the patent-ineligible concepts. Id.) see Mayo,
If the defendant satisfies this burden, it must then satisfy the second step by demonstrating that there-is no “inventive concept” in the claimed, matter or technology that would “transform the nаture of the claim into a patent-eligible application.” Alice,
b. Findings of Fact and Conclusions of Law
The ’609 Patent claims a software analysis framework that consists of methods and systems of analyzing executable software code using a computer. As explained above, when a programmer writes a computer program, he or she does so in source code. That source code is not readable by computers, and as a result must be compiled. into an intermediate file, which is then assembled into a binary that is readable by a computer; this final result is the executable file. Binary is. not readable by humans. When the original source code is not available, decompilers and similar tools are used to translate a binary into an intermediate representation that is then readable by a programmer and can be used to determine, at least to some degree of accuracy, what the original source code for the program was.
The claimed method in the ’609 Patent processes executable software code to generate “an optimized, exhaustive data flow model” and “an optimized, exhaustive control flow model.” In so doing, it decompiles the executable software code into an intermediate file form “that one of a certain skill can analyze.” This provides “a complete model of the executable software code based on the optimized data flow model and the optimized control flow mod- ' el,” which “facilitate^] analysis of the exe
Appthority contends that the ’609 Patent claims are directed to a computerized, automated approach to software analysis that is based on longstanding technological approaches (data flow and control flow), which were previously done by hand using human mental processes, and are therefore unpatentable. Veracode apparently concedes that the concepts of control flow and data flow analysis are abstract ideas, but instead contends that the invention is directed at much more than these .concepts and contains inventive components, because the specific processes articulated in the ’609 Patent claims cannot be'" performed by humans and contain meaningful limitations on the abstract idea underlying the patent claims.
i. Directed to a Patent-Ineligible Concept
The focus in the first part of the Alice/Mayo test is on the purpose of the claimed invention, rather than its novelty. See Enfish, Inc. v. Microsoft Corp.,
Mathematical relationships and formulas, including algorithms, are considered abstract ideas. DDR Holdings, LLC v. Hotels.com, L.P.,
Appthority has presented substantial evidence that the primary functions of the invention at issue here—control flow and data flow analysis—are longstanding, recognized building blocks of computer science. See generally Alfred V. Aho et al., Compilers: Principles, Techniques, and Tools (reprint 1988). Consistent with the policy purposes of the patent system, these basic principles are not patent-eligible. See Enfish,
In addition, both parties recognize that it is possible to analyze binary code manually or mentally. “[A] method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible .... because computational methods which can be performed entirely in the human mind are the types of meth
It is clear, then, that the claimed invention of the ’609 Patent is directed at a building block of computer science and a fundamental practice in the industry, and therefore is directed at a patent-ineligible concept.
ii. Presence of an Inventive Concept
I ask next whether the patent consists exclusively of a building block concept, or whether it forms an inventive concept by offering “additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize [the abstract, ineligible concept] itself.” Mayo,
Indeed, the case law makes clear that a process that simply automates a known transaction and requires nothing more than a generic computer to perform conventional computer functions and activities already known in the industry is not patent-eligible. See Versata Dev. Grp., Inc. v. SAP Am., Inc.,
Despite this, limitation on patent eligibility for claims involving computer implementation of abstract ideas or known mathematical algorithms, Alice left open the possibility that a method that “purport[s] to improve the functioning of the computer itself’ or “effect an improvement in any other technology or technical field” could be patent-eligible. Alice,
With these principles in mind, I turn to the specific language of the claims of the ’609 Patent, focusing primarily on claim 1.
Appthority—seizing on Mr. Riou'x’s testimony that the claimed method could be performed manually
During claim construction, I found that “optimized” meant “refined by iteration until substantially all'data variables or control branches are modeled;” See Veracode,
The evidence presented at trial and through the subsequent submissions of the parties demonstrates that the .optimized and exhaustive features of the claimed method “effect- an improvement” in the technical field and the preexisting technology, compared to what could be done by humans or simply by .automating a manual process. See Alice,
It was this third method that the claimed method under the ’609 Patent sought to improve upon. By employing a method that involves multiple iterations or progressive steps to achieve as comprehensive as possible models, essentially mimicking the process employed for compilation, Mr. Rioux’s decompilation method overcame .numerous shortcomings of existing méthods for identifying security risks in producing a more complete and accurate model of the underlying software. By including both control flow and data flow models that aim for both optimization and exhaustion, the method achieves a more accurate and more complete translation of the binary for security analysts to review than what the existing methods could provide. An optimized data flow model, Dr. Rubin testified, is built up by iteration by “going through a loop in the code in the analyzer, and modeling substantially all of the variables that write to memory and read from memory.” Similarly, an optimized control flow model “models substantially all of the control flow branches in the program.”
These achievements—that is, the process and result of producing a more complete model of the computer program being analyzed—are ones that could not be done using the technology as it existed at the time, according to the trial testimony, and that rely upon the complex functions of the patented computer system. The claimed method performs steps that a human mind can take only so far; it thus continues the iterative process further toward completion than a human mind could, and than the existing technology could. Cf. Enfish,
The ’609 Patent claims share important characteristics with those at issue in DDR Holdings. In that case, the Federal Circuit observed that the claims at issue did “not recite an invention as technologically complex as an improved, particularized method of digital data compression,” but they also did not “recite a commonplace business method aimed at processing business information, applying a known business process to the particular technological environment of the Internet, or creating or altering contractual relations using generic computer functions and conventional network operations, such as the claims in Alice, Ultramercial, buySAFE, Accenture, and Bancorp.” DDR Holdings,
Here, the ’609 Patent claims do not claim a monopoly over all decompiling methods, but rather focus on a specific method for generating as-complete-as-possible data and control flow models in the form of an intermediate representation that can be used to identify flaws in the executable’ software code. In so doing, the ’609 Patent does not claim the broad concept of an intermediate representation, but rather a narrower manifestation of it, by articulating an iterative process that had previously been unavailable to programmers and security risk analysts that addressed the problem of analyzing illegible binary code. As in DDR Holdings,
In sum: the fact of having to translate from one language (source code) to another (binary) is in many respects unique to the world of software and computers. The claimed method, by offering an iterative process for achieving an optimized and as-near-to-exhaustive modeling of the underlying software as possible to enable a more complete security analysis to be conducted than could be performed through basic automation of human processes,-presents “a. unique computing solution that addresses a unique computing problem.” Cal. Inst.,
3. Indefiniteness
Appthority contends that the ’924 Patent is invalid due to indefiniteness of the term “program errors or potential program errors” and that the ’609 Patent is invalid due to indefiniteness of the term “exhaustive.”
a. Legal Standard.
Under 35 U.S.C. § 112, ¶ 2, a patent must “conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention.”
As with patent eligibility, the Supreme Court has recently revisited the standard for definiteness. See Nautilus, Inc. v. Biosig Instruments, Inc., — U.S. —,
b. ’924 Patent—“Program Errors or Potential Program Errors’’—Findings of Fact and Conclusions of Law
The ’924 Patent claim sрecification does not provide an explicit definition for “program errors.” However, it offers a long list of examples of the types of errors the claimed technology could detect, including “errors such as- uninitialized memory, array bounds violations, accesses outside of allocated memory, inconsistent argument types or returns between calls and called functions, and functions that are not consistent in- their returns or that do not return may all be readily detected using the inventive static debugging tool,” and “a wide variety of other program errors such as invalid references to automatic memory (either through function returns or by assignments to globals which are referenced after the owning function has returned), accessing -freed memory, and frees of non-allocated memory.” ’924 Patent, at 9:3-13.
During the claim construction process, I construed the term “program errors” to mean “the result of an invalid or impossible maneuver.” Veracode,
Appthority argues that the term “program .errors”-is ambiguous because it could include a-full range of behaviors, and that the inclusion in .the specification of examples of types of errors and a catch-all provision for “potential program errors” does not cure this ambiguity. The testimony does not support this argument. Dr. Rubin, Veracode’s expert, testified that the specification adequately explains to one of ordinary skill in the art what “program errors” means in the context of the patent, particularly in light of, the examples provided. Dr. Clark, Appthority’s expert, also testified that he knows what a program error is as defined within the specification, and listed certain types of program errors known at the time of the invention and consistent with the examples given in the patent specification—bugs, viruses,. Trojan Horses, malware, adware, and other errors within, the program file—that “nobody would argue are not program errors.”
Interval Licensing LLC v. AOL, Inc.,
Here, the specification provides nine examples of the types of included program errors. During claim construction, I observed that “[m]any of the examples of errors listed in the specification—such as accessing invalid memory and array bounds violations—are useful tools for exploitation or subversion,” that is, they are errors that could be recognized as mal-ware or viruses. See Veracode,
Much of Appthority’s argument of indefiniteness hinges on a specific subset of errors it contends was intended to be captured by the ’924 Patent claims but is not. It asserts that in the mobile application context, whether application behavior constitutes a “program error' or potential program error” is based on the subjective opinion and preferences of an individual user. Where individuals set their own preferences and permissions for mobile application resource access, what constitutes a “program error” or what is “the result of an invalid or impossible maneuver” cannot be knоwn on a global scale, because what is “invalid” or “impossible” is locally defined. Under this definition, Appthority argues, any behavior -at all in a mobile application could be considered a program error, as an individual user could deny permission to any type of behavior. Cf. Geneva Pharms., Inc. v. GlaxoSmithK-line PLC,
This argument misses the mark for several reasons. First, there is substantial evidence that the term program errors does not include user-driven errors, and that the term would have been understood by a person of ordinary skill in the art at
Second, although Appthority argues that user-driven errors are- the type of error that Veracode alleges the Appthority Platform detects in infringing the ’924 Patent, and therefore that this type of error must have been intended to be included in the ’924 Patent claims-but is not clearly encompassed, Veracode could prove infringement using the. definition of “program errors” adopted in claim construction and without including user-driven errors.
That there was testimony regarding the potential for user preferences to make all sorts of behaviors into “program errors” does not mean that. Appthority’s product did not infringe upon the ’924 Patent claims using the narrower definition of “program errors.” The Appthority Platform could detect such user-driven errors while-also detecting precisely the type of program errors identified in the ’924 Patent specification using static, analysis.
The crux of the inquiry is whether a person of ordinary skill in the art at the time would have any “reasonable uncertainty about the governing scope of the claims.” Ancora Techs., Inc. v. Apple, Inc.,
c. ’609 Patent—“Exhaustive”—Findings of Fact and Conclusions of Law
The" ’609 Patent claims a method and system that generates “an optimized, exhaustive data, flow model” and an “optimized, exhaustive control flow model.” The term “exhaustive” appears in the claims themselves- but not in the specification. During claim construction, Appthority advocated a definition of “exhaustive” as “testing all program possibilities, or considering all program elements, from entry to exit,” which I considered overly complicated where the term is not a technical or ambiguous one. Id. at *15. Accordingly, I declined to construe the term “exhaustive” because it is used in the Patent “according to its plain, ordinary meaning.” Veracode,
In asserting that the term “exhaustive” is indefinite, Appthority renews the argument I rejected during claim construction. Appthority asserts that the focus in the ’609 Patent is on the “complete,” “exhaustive,” nature of the claimed data flow and control flow modeling, as this comprehensive nature is what distinguishes the patented, technology from the prior art decompilers, which were known to use imprecise and incomplete statement modeling tools that result in incompletely defined data flow or control flow. However, truly exhaustive flow modeling is impossible, as demonstrated by the prior art and by the testimony of both Dr. Clark and Mr. Rioux at trial. Where complete flow modeling is impossible, the term “exhaustive”—absent any indication of how thorough or complete the modeling must be if it is to be something better than the prior art but less than 100%—is indefinite when defined as Appthority seeks to define it.
Importantly, the language of the ’609 Patent and the testimony at trial demonstrate how the patented technology is different from the prior art. See Halliburton,
Further, in making clear that “exhaustive” refers to the process of creating the model rather than the completeness of the model itself, the ’609 Patent adequately defines the parameters of what is arguably a term of degree. See Biosig,
I find that the claim description and specification adequately explained the term “exhaustive” such that a person of ordinary skill in the art at the time would know with reasonable certainty what the claimed invention was.
4. Conclusion
Based on the factual findings and reasons set forth above, I conclude that Appthority did not prove by clear and convincing evidence that the ’609 Patent is based on unpatentable subject matter or that any of the terms of the ’609 Patent or the ’924 Patent are indefinite.
III. WILLFUL INFRINGEMENT
Haying put the invalidity defenses to rest, I turn to the question of infringement. Both parties challenge the jury’s findings of direct infringement. Veracode claims that Appthority infringed all of the daims-in-suit for both patents, and not merely Claims I and 5 of the ’924 Patent as the jury found, whereas Appthority com tends that it did not infringe any of the claims-in-suit. In addition, Appthority challenges the jury’s finding that its infringement of the ’924 Patent was subjectively
A. Direct Infringement (Docs. 191, 198, , 238,250)
1. Legal Standard
A party directly infringes a patent when it “without authority makes, uses, offers to sell, or sells any patented invention, within the United States ... during the term of the patent therefor.” 35 U.S.C. § 271(a); see Cross Med. Prods., Inc. v. Medtronic Sofamor Danek, Inc.,
2. ’609 Patent
The jury found that the Appthority Platform did not infringe any of the claims at issue of the ’609 Patent. Vera-code now seeks judgment as a matter of law that Appthority directly and willfully infringes claims 1, 13, and 14 of the ’609 Patent.
Claim 1 of the ’609 Patent consists of a method that processes the executable software code to generate “optimized, exhaustive”- data flow and control flow models and then stores “an intermediate representation of the executable software code that provides a complete model of [the code] based on” the optimized data and control flow models. Claim 13, which is dependent on Claim 1, consists of the method in Claim i and the function' of analyzing the intermediate representation and identifying “one or more flaws in the executable software code.” Claim 14 consists of a system for achieving the method described in Claim 1.
In defending the. jury verdict on the ’609 Patent, Appthority reasserts its argument regarding the meaning of “exhaustive” as focusing on the completeness of the models, rather than on the process of creating them. This argument has been rejected previously in this case and elsewhere in this Memorandum and Order, and does not speak to the question of whether the Platform itself infringed the ’609 Patent.
Leaving Appthority’s unhelpful argument aside, there is nonetheless sufficient support in the record for the jury’s verdict. Dr. Hanna, Appthority’s expert, testified that the Appthority Platform engages in a “pruning process” in which it throws away numerous instructions before it refines the intermediate representation by iteration. In other words, the Platform discards instructions, including “all kinds of functions,” before evaluating which instructions are needed to construct exhaustive data and control flow models, “hoping we got things right,” because doing so “save[s] some computational time.” In Dr. Hanna’s opinion, the Platform- did not generate an exhaustive, optimized model of data flow or control flow because of this pruning process. That the Platform did not achieve models meeting the criteria of the ’609
Because the jury heard testimony it was entitled to credit that directly stated that the Platform did not model substantially all of the components of the binary file, the jury reasonably could have concluded that the Platform did not generate “optimized, exhaustive” data flow and control flow models, even if it also heard evidence to the contrary.
3. ’924 Patent
The jury found that the Appthority Platform infringes Claims 1 and 5 of the ’924 Patent, but does not infringe claim 17 of the ’924 Patent. Appthority now seeks judgment as a matter of law that there was not substantial еvidence to support the jury’s verdict as to Claims 1 and 5. Veracode seeks judgment as a matter of law that there was not substantial evidence to support the jury’s verdict as to Claim 17, or in the alternative, a new trial, on the issue.
a. Claim 1
To prove that the Appthority Platform infringes Claim 1 of the ’924 . Patent, Veracode was required to present sufficient evidence that the Platform (1) statically analyzes binary files; (2) statically analyzes intermediate files that represent the binary flies to detect the presence of (3) program errors or potential program errors, as defined and contemplated by the ’924 Patent; and (4) outputs an error list of the errors or potential errors détect-ed.
The parties do not dispute, and the testimony and evidence at trial makes clear, that at least some part of the Appthority Platform statically analyzes Android and iOS binary files and statically analyzes intermediate files to detect the presence of program errors or potential program errors. There was ample evidence at trial that ,the Platform uses rules and signatures to detect the presence of program errors and potential program errors in intermediate representations of binary files (called smali files for Android applications, and otool output flies for iOS applications). The parties also do not dispute that the Platform outputs an error list of detected errors.
The crux of Appthority’s argument is that the Platform defines • “program errors” by way of user preferences, because the Platform asks users to identify which permissions they have provided for specific applications, and therefore the errors that the Platform identifies are not the type of errors contemplated by the ’924 Patent. For this reason, Appthority contends the Platform does not directly infringe Claim 1 of the ’924 Patent. This argument is unavailing.
Program errors, as construed in this case, include the result, whether intentional or unintentional, “of an invalid or impossible maneuver.” Veracode,
Veracode presented substantial evidence at trial, through the testimony of Dr. Rubin, Dr. Hanna, and others, that the Platform detects malware and potential malware.
Beyond this example, there was ample evidence that the Platform detects program behaviors that would objectively be considered program errors or-potential program errors, regardless of user preference, because they are behaviors that no user would want, and that the Platform does so using static analysis of a binary through an intermediate representation. Speaking more generally, Dr. Rubin testified that the Platform detects “certain things that would be considered universally wrong, like if an app were to delete the data on your phone.” Dr. Rubin explained that “[u]nless it’s the erase app, I don’t think that anybody would consider that to be á reasonable behavior.”
The jury was entitled to credit Dr. Rubin’s assessment that behaviors of an application accessing a mobilе phone function that is not directly relevant to the purpose of the application constitute program errors within the meaning of the term as it is contemplated by the ’924 Patent—that is, an objective program error, and one that is the result of an invalid or impossible maneuver. This objective parsing of programs and what behaviors they would perform based on their functionality was supported further by Dr. Hanna, who testified that “accessing the camera is a perfectly valid maneuver from Facebook to Instagram to any of the other apps [because] [fit’s something that is a functionality provided by the operating system to be used in applications.”
In addition, the jury heard testimony from Dr. Rubin that the Platform analyzes applications “without any knowledge of who the consumer is or what their expectations are.” This is because the static analysis is performed on a server before an application is ever downloaded to a. device. This was corroborated, at least in part, by Dr. Hanna’s testimony.
Appthority’s focus on all the other functions that the Platform performs, including dynamic analysis and detection of application behaviors that are outside of the scope of the program errors contemplated by
b. Claim 5
Claim 5 of the ’924 Patent adds to Claim 1 '“a flow determining arrangement for determining and Symbolically representing the function flow of the representation of the binary program file.” The phrase “determining and symbolically representing the function flow” was defined during claim construction to mean “identifying how functions are associated and interconnected with other functions and representing those associations and connections through symbols.” Veracode,
c. Claim 17
Claim 17 of the ’924 Patent is distinct from Claim 1 in its inclusion of an “intermediate program file” that specifically “includes flow paths and flow structure associated with the binary program.” It is also distinct from Claim 5, which claims the tool in Claim 1 with the inclusion of “a flow determining arrangement for determining and symbolically representing the function flow of the representation of the binary program file.” Because I have concluded that there is substantial evidence to support the jury’s verdict on Claim 1, I need only assess- whether there was substantial evidence to support the jury’s determination that this additional feature to Claim 17 was not infringed upon by the Appthority Platform.
■ The parties agree that “flow paths and flow structure” means “information that identifies each function flow branch, the end function of each branch, and how that branch is interconnected with other branches.” Dr. Rubin testified that the intermediate files generated by the Appthority Platform were the small file on Android and the otool output file on iOS. There was no evidence' at trial that these files contained flow paths and flow structures. Instead, Dr. Rubin testified that these files were processed iteratively to build an intermediate representation that contains the data flow and control flow models. That intermediate representation, according to Dr. Rubin, includes a call graph that represents functions and the relationships between functions. Accordingly, while there may have been call graphs containing flow paths and flow ¡structures in the intermediate representation, the jury reasonably could have found that these call graphs were not included in the intermediate files. Although in practice this could be a distinction without a- difference, the jury was presented with two distinctly different terms—intermediate program file and intermediate representation—and could reasonably have concluded that they did not refer to the same thing.
B. Willfulness
Because I conclude that there was substantial evidence to support the jury’s verdict as to both patents-in-suit, I need only consider the willfulness of the infringement of Claims 1 and 5 of the ’924 Patent. Willful infringement requires findings of both objective and subjective willfulness. Halo Elecs., Inc. v. Pulse Elecs., Inc.,
I. Subjective Willfulness (Docs. 311, 319)
a. Challenge to Jury Instruction
In its post-trial filings, Appthority challenges the’propriety of the jury instruction I gave on willfulness. The instruction was as follo-ws:
If you find that it is more likely than not that Appthority infringed the claims of the ’924 patent,.or the ’609 patent, then you must decide whether Appthority’s infringement was willful. ...
Willfulness requires Veracode to prove that it is highly probable that: Appthority either knew or should have known that there was a high likelihood of infringement.
In determining whether Appthority knew-of a high likelihood of infringement or the likelihood was so obvious that Appthority should have known of that likelihood, you must consider the totality of all the circumstances. The .totality of the circumstances comprises anumber of factors, which include, but are not limited to, whether Appthority intentionally copied the claimed' invention or a product covered by a patent, whether Appthority relied on competent legal advice. And understand that that’s at the time of the infringement, not some legal advice that they may have gotten at a later point. You’re .asking yourself whether they had legal-advice at the time of the alleged infringement to make an evaluation of the totality of the circumstances. And whether’ Appth-ority has presented a substantial defense to infringement, including, the defense that the patent is invalid.
This instruction was a departure from that proposed by the parties but ultimately consistent with the approach advocated by Veracode.
In post-trial motion practice, Appthority renews its challenge to the willfulness instruction given.
Appthority’s main contention at this stage is that the given instruction! did not focus the jury temporally on Appthority’s knowledge prior to The instigation of this litigation. Appthority asserts that ' absent instruction on this requirement, the jury was left to find that even merely negligent conduct would constitute willful infringement, which is inconsistent with the legal standard established in In re Seagate Tech., LLC,
b. Willful Infringement Test After Seagate
In the wake of Seagate, there has been some confusion whether actual knowledge of the patent-in-suit prior to the lawsuit is required to prove willful infringement. Before Seagate, in a case addressing the import of a “patent pending” notice, the Federal Circuit stated that “[t]o willfully infring a patent, the patent múst exist and one must have knowledge of it.” State Indus., Inc. v. A.O. Smith Corp.,
In Seagate, the Federal Circuit overruled the duty of care standard for willfulness articulated in Underwater Devices and replaced it with a two-part objective recklessness standard, consisting of objective and subjective prongs. See Seagate,
The Seagate court accordingly shifted the focus away from actual knowledge of the patent to knowledge—either actual or constructive—of a risk of infringement of a patent. See id.; see also Tomita Techs. USA, LLC v. Nintendo Co., No. 11 Civ. 4256(JSR),
Under the Seagate standard, a defendant who is merely negligent will not be liable, but a defendant who is aware of the risk of infringement, or who is recklessly indifferent to the existence of a patent and the risk of infringement, will face liability.' The object of the knowledge under Seagate is the risk of infringement rather than the patent itself, and the knowledge of that risk may be either actual or constructive.
.This reading of Seagate is supported by the Federal Circuit’s post-Seagate decisions, in which it has not referenced an actual knowledge requirement. See, e.g., WesternGeco L.L.C. v. ION Geophysical Corp.,
i4i Ltd., a case Appthority relies upon heavily, is not inconsistent with this reading. In that case, the Federal Circuit indicated that willful infringement requires “aware[ness] of the asserted patent.” See i4i Ltd.,
c. Adequacy of the Jury Instruction and Substantial Evidence Supporting the Jury’s Finding
With this standard in mind, I return to the jury instruction and the sufficiency of the evidence. When an objection has been, timely asserted, as here, “[a] jury instruction ... constitutes reversible error only if it (i) is ‘misleading, unduly complicating, or incorrect as a matter of law,’ ... and (ii) cannot be considered harmless, viz., as adversely affecting the jury verdict and the ‘substantial rights’ of the objecting party.” Davignon v. Clemmey,
Upon careful review of the law and the jury instructions as a whole, I conclude that the instruction was sufficiently accurate and adequate under the circumstances. I instructed the jury that “[w]illfulness requires Veracode to prove that it is highly probable that: Appthority either knew or should have known that there was a high likelihood of infringement.” I further instructed the jury to “determin[e] whether Appthority knew of a high likelihood of infringement or the likelihood was so obvious that Appthority should have known of that likelihood” considering “the totality of all the circumstances.”-A short while later, I instructed the jury to consider Appthority’s conduct and any legal advice it had received “at the time of the infringement.”
Under Seagate,
Moreover, I do not find that any arguable inadequacy in the instruction affected Appthority’s substantial rights, because even if actual, pre-suit knowledge of the patent were to have been required, the jury’s finding would be supported by substantial evidence. See Powell,
Based on this evidence, a reasonable jury would necessarily have concluded that Appthority willfully infringed the ’924 Patent. That Veracode may not have? provided Appthority with the specific patent numbers is not determinative, where the evidence was uncontested that Appthority was aware Veracode was operating in a similar area and could have identified the patents through its own research. Accordingly, there was a legally sufficient, eviden-tiary basis for the jury’s finding of willfulness, regardless of whether actual, pre-suit knowledge is required. Even if the instruction were in error, it did not adversely affect Appothority’s substantial rights.
2. Objective Willfulness (Docs. 221, 238)
a. Legal Standard
Although the objective prong is described by the Federal Circuit as a threshold inquiry, a court can “decid[e] the objective prong of willfulness after submitting the question of subjective willfulness to the jury,” and I regard it as prudent to delay a ruling on this prong until after the jury verdict. Cf. WBIP, LLC v. Kohler, Civ. No. 11-10374-NMG,
An alleged infringer’s conduct is objectively willful if the infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Bard Peripheral II,
b. Findings of Fact and Conclusions of Law
I begin by considering the reasonableness of Appthority’s defenses. An infringer’s conduct will not be considered objectively willful if the infringer “presents in the litigation a defense, including an invalidity defense, that is objectively reasonable (though ultimately rejected).” Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd.,
Upon review of the record as a whole, I find that' there was “an objectively high likelihood that [the defendant’s] actions constituted infringement of a valid patent.” Seagate,
To determine whether Appthority acted despite this high likelihood of infringement, I consider a variety of factors. Ample evidence was presented at trial that Appthority knew about Veracode’s product and considered it a direct competitor, but nonetheless did not conduct a freedom to' operate search. Veracode began advertising that some of its technology— namely that used in its products scanning mobile applications to detect the presence
The Platform launched in February 2012 at an industry conference, where it presented itself as essentially engaging in similar program error detection work for mobile applications as what Veracode of-, fered. It was at that conference that Ms. King informed Mr. Bettini of .Veracode’s patents in the area of static binary analysis. Even with this information, Appthority still did not conduct a freedom to operate search, obtain an opinion of counsel, or otherwise investigate Veracode’s patents further. Although, as discussed above, Appthority may not have had specific knowledge of the patent numbers, there is sufficient evidence to infer that Appthority had knowledge of the high likelihood that Veracode held patents that were directly relevant to Appthority’s Platform.
Appthority’s lack of effort to investigate the ’924 Patent after it..received notice of the likely existence of the patent, and, more significantly, its lack of effort to design around the ’924 Patent, weigh strongly in favor of a finding of willfulness. See Cordance Corp. v. Amazon.com, Inc.,
Based on these factual findings and legal conclusions, I conclude that Appthority’s infringement of the ’924 Patent was willful.
IV. DAMAGES
A. Appthority’s Motion for a New Trial Based on the Damages Award (Doc. 245)
After a separate trial on damages, the jury returned a verdict finding $781,857 in damages for Veracode. Appth-ority now moves for a new trial and/or remittitur,
1. Legal Standard
Under 35 U.S.C. § 284, a prevailing plaintiff is entitled to damages “adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.”' 'A jury’s award of damages must be supported by substantial evidence and not “based on speculation and guesswork.” Baxter Healthcare Corp. v. Spectramed, Inc.,
A common method for determining a reasonable royalty is the hypothetical negotiation. VirnetX, Inc. v. Cisco Sys., Inc.,
2. Analysis
Appthority makes several claims of error as to the damages award. First, it contends that the jury award is not supported by substantial evidence, and that it is grossly excessive in relation to Appthori
a. Sufficiency of the Evidence, and Reasonableness of the Damages'Award
Appthority contends that the jury could only have based its verdict on speculation or guesswork, and that the ultimate amount awarded shocks the conscience, particularly in relation to Appthority’s revenues, of which the award constitutes approximately 99.8%. As the Federal Circuit has observed, “[ajsking whether a damages award is ‘reasonable,’ ‘grossly excessive or monstrous,’ ‘based f only on speculation or guesswork,’ or ‘clearly not supported by the evidence,’ are simply different ways of asking whether 'the jury’s award is supported by the evidence.” i4i Ltd.,
i. Evidence at Trial
The evidence presented at the . damages phase of trial included the following. Mr. Martinez, Veracode’s expert on damages, opined that damages should be some amount more than $547,382. His opinion was based on a hypothetical negotiation between Veracode and Appthority and the Georgia-Pacific factors. See Georgia-Pacific,
Mr. Martinez looked to the Rovi license to Veracode as a starting point, consistent with the first Georgia-Pacific factor. This license agreement consisted of an upfront payment, a tiered royalty, and a minimum royalty. As an upfront payment, Veracode agreed - to pay approximately $523,000, equaling 5% of Veracode’s equity, but only if they closed a round of funding of at least $4 million. Under the tiered royalty structure, Veracode agreed to pay 3% of the first $10 million worth of' sales from products incorporating the ’924 Patent, 2% on the next $10 million, and 1% on all sales thereafter. As a minimum royalty guarantee, Veracode agreed to.pay no. less than $500,000 in royalties over the first five years of the- agreement. As of the trial in this case, Veracode had paid approximately $1.8 million in royalties—$1.3 million, in cash and 5% equity valued at $523,000— based on $69 million in net sales of products including the ’924 Patent. Veracode did not begin making royalty payments until 2007, once it had products on the market;, as a result, in the first five years it paid only $258,000 in royalties, .and. had to pay Rovi a lump sum of $242,000 in order to meet the $500,000 minimum royalty.
Mr. Martinez reasoned that the Rovi-Veracode agreement was translatable to the Veracode-Appthority relationship in part because Veracode was in a position at the time of its negotiation with Rovi in 2005 similar to Appthority .at the time of its hypothetical negotiation with Vera-code—that is, both companies were unfunded or underfunded startups seeking to obtain intellectual property rights to pursue their business ventures. In addition, Mr. Martinez- reasoned that the 1-3% royalty range used in the Rovi-Veracode agreement made sense for the Veracode-Appthority relationship, because this low percentage reflected the fact that the products using the patented technology did not consist exclusively of the patented technology, but also incorporated other functionality. Using the Rovi-Veracode agreement framework, -Mr. Martinez calculated that Appthority would owe an upfront payment of $523,889 and running royalties under the tiered royalty • structure of approximately $23,493, based on Appthority’s sales of $783,000. This was
With these baseline royalty numbers, and with a hypothetical negotiation date of March 2012 (the date of the filing of this lawsuit), Mr. Martinez considered the other relevant Georgictr-Padfic factors as they applied to the relationship between Vera-code and Appthority, and concluded that an upward modification of an unspecified amount—to be determined- by the jury— was appropriate.
Although Veracode likely would have negotiated a nonexclusive, and therefore less valuable, license with Appthority, Mr. Martinez opined that other differences in the Rovi-Veracode arid Veracode-Appthority relationships demonstrated that the Veracode-Appthority license would be more valuable than the one that Rovi and Veracode négotiated. These differences include (1) that Veracode and Appthority are direct competitors, and were at the time of the hypothetical negotiation, whereas Ver-acode and Rovi were not; (2) that Rovi did not use the patented technology- at all, whereas Veracode had established commercial success of its products using the patented technology at the time of the hypothetical negotiation, thereby making the technology demonstrably valuable; (3) that certain of Veracode’s products using the patented technology - are avenues for promoting other Veracode products and obtaining customers for Veracode’s business overall; and (4) that the patented technology was core to the functionality of the products of both Veracode and Appth-ority, such that a meaningful portion of the profit of the products can be attributable to the ’924 Patent. In addition, Mr. Martinez opined that both Rovi and -Veracode have -been protective of the patent rights in declining to sublicense them, suggesting a desire for exclusivity. In short, Rovi licensed a patent it did not intend to use-to Veracode at a time when there was-< no evidence that the technology could be used for commerciаl success; in contrast, at the time of a hypothetical negotiation between Veracode and Appthority, they would have been direct competitors using the patented technology as a central feature of products that Veracode had already demonstrated were commercially viable.
' The jury also heard testimony from Appthority’s expert, Dr. Bruce Abramson. Dr. Abramson testified that instead of converting the upfront equity stake of 5% in the Rovi-Veracode license to a cash payment of approximately $523,000—as Mr. Martinez did—he would turn it into a-larger revenue sharing agreement. This was particularly significant to Dr. Abramson, because Appthority did not hate any financial resources at the time of the hypothetical .negotiation, which he placed in late 2011. Dr. Abramson also opined, contrary to Mr. Martinez’s opinion, that the patented technology was not central to Appthority’s product. With these considerations, Dr. Abramson testified that he would convert the equity share, into a 1.5% revenue share and combine it with the 3% equity share, resulting in a royalty payment of a 4.5% share. If this calculation had been used by Veracode and Rovi in their agreement, it would have produced more revenue for Rovi, Dr. Abramson opined.
With Dr. Abramson’s framework of 4.5% of the revenues, Veracode would have obtained $35,240 in damages, based on Appthority’s total revenues of $783,113. However, because Dr. Abramson opined that the ’924 Patent was less important to Appthority than it was to Veracode—the patented technology was not as central to Appthority’s product, he contended—Dr. Abramson concluded that this amount should be reduced further under the Geor-giar-Padfie factors. Accordingly, Dr. Abramson reduced the 4.5% by 2.35%, on the basis that only 2.35% (20 out of 850) of
ii. Analysis
In the absence of specific questions on the verdict form, it cannot be known with certainty how the jury reached the $781,857 damages award, and whether it parsed out a lump-sum entry fee and a running royalty.
Appthority’s primary argument in support of a new trial or remittitur is that a 33% royalty rate was not supported by the evidence and vastly exceeded the suggested royalty rates of both experts. It is true that Mr. Martinez did not offer a specific royalty rate recommendation other than to advocate an upward modification of the 1-3% royalty rate in the Rovi-Veracode agreement, and that Dr. Abramson, Appthority’s expert, offered a recommended royalty rate well below this figure. However, it was permissible'for the jury to fashion a reasonable royalty rate from the evidence that differed from the rates, suggested by the damages experts. See SmithKline Diagnostics, Inc. v. Helena Labs. Corp.,
A 33% royalty rate is supported by the record. The jury could have concluded, based on the hypothetical negotiation approach, that “the value of the patented technology to the parties in the marketplace” at the time the infringement began was far greater than it was at the time that Rovi and Veracode negotiated their agreement, and that this increased value warranted an upward modification. See LaserDynamics,
Where the damages award is “within the'universe” of what the evidence would support, Clark v. Taylor,
Here, the jury verdict on damages does not surpass “any rational appraisal of estimate of the damages that could be based on the evidence before the jury” and accordingly is not “so ' clearly against the weight of the evidence as to amount to a manifest miscarriage of justice.” Rivera Castillo v. Autokirey, Inc.,
b. Hypothetical Negotiation Date
Appthority contends that- Mr. Martinez selected an improper hypothetical negotiation date, and therefore that his opinions could not have served as ían appropriate basis for the jury’s verdict. The Federal Circuit has consistently held that “the date of the hypothetical negotiation is the date that the infringement began.” LaserDynamics,
The chronological prеmise of Mr. Martinez’s testimony was indeed flawed. However, a new trial requires some injustice, and a remittitur requires some meaningful difference in what the damages would have been but for an error. I cannot find such a consequence here. First, the jury was instructed properly as to the date of the hypothetical negotiation. As the First Circuit has made clear:
Providing the jury with timely and appropriate curative instructions to ignore the offending testimony is a common way to obviate the need for ordering a mistrial.... Curative instructions are sufficient for this purpose unless the offending testimony could not have been ■ reasonably ignored by the jury despite the instructions.
Rodriguez-Torres v. Caribbean Forms Mfr., Inc.,
In addition, Mr. Martinez testified, and the record demonstrates, that there was no substantive difference in the parties’ positions in. late 2011 and March 2012. Appthority did not receive its initial venture capital investment until April 2012 and did not make a sale until December 2012, and at both times Veracode was selling patented products.- In any event, the jury was free to consider events taking place after the date of the hypothetical negotiation, to the extent they were foreseeable at the time. See Lucent Techs., Inc. v. Gateway, Inc.,
c. Jury instruction and Application of-the Entire Market Value Rule
Finally, Appthority argues that the damages award necessarily and improperly applies the entire market value rule, and attributes this error in part to Mr. Martinez’s reliance on the rule in his testimony and in part to the jury instruction-given. I agree with Appthority that the verdict suggests that the jury may have calculated the damages award based on the entire market value of the Platform, but disagree that there was error in either the jury instruction or the jury’s potential application of the rule.
As a general principle, damages are limited to the value of the individual, infringing component of a multi-component product, unless certain circumstances— identified below—merit consideration of the market value of the entire product in which the infringing components are contained. See LaserDynamics,
i. Jury Instruction
After the submission of bench memoran-da from the parties and two lengthy discussions with counsel, I instructed the jury that a damages award may be “based on the value of the entire Appthority Platform product” if it found, by a preponderance of the evidence, one of the following scenarios: (1) “the unpatented and patented components are physically part of the same product and the patented feature is what motivates consumers to purchase the entire product,” or (2) “the separate unpat-ented components function together with the patented components to constitute a single unitary product or functional unit.”
I further instructed the jury that:
[I]f you find that customers’ demand for the Appthority Platform is based at least in part on something other than the patented features and the separate unpatented components do not function together with the patented component to constitute a single unitary product or functional unit, you may award damages based only on the value of the patented features and not the total value of the entire Appthority Platform.
In choosing this language, I was cognizant of the challenges of apportionment when a program like the Platform, rather than a physical product, is at issue.
The case law supports the application of the entire market value rule in either of these scenarios. See Uniloc USA,
VirnetX—a case to which Appthority draws a misplaced analogy—does not hold otherwise. In VirnetX, the judge instructed the jury that the entire market value of the product could be used in determining a royalty base if: “(1) the patented feature creates the basis for the customers’ demand for the product, or the patented feature substantially creates the value of the other component parts of the product; or (2) the product in question constitutes the smallest saleable unit containing the patented feature.” VirnetX,
The VimetX Court made clear that “the smallest salable patent-practicing unit”—if it contains infringing and non-infringing features—may be used as the basis for a reasonable royalty- only if the unit overall bears “a sufficiently close relation to the claimed functionality.” Id. at 1329. VirnetX therefore does not foreclose a reasonable royalty- calculation based on the smallest salable unit; it requires only that the pat-entee “do more to estimate what portion of the value of that product is attributable to the patented technology” than simply identifying the smallest unit, id. at 1327, such as considering “the contribution of the patented feature to the entire product.” See AstraZeneca AB,
This is consistent with Federal Circuit precedent—tracing back to the Supreme Court’s 1884 Garretson opinion— that when apportionment is possible,- a reasonable effort must be made to do so, at least approximately. See VirnetX,
ii. Substantial Evidence to Support Application of Entire Market Value Rule
Appthority next contends that Veracode did not present any evidence that consumer demand for the Platform was based on the ’924 Patented technology, and therefore that the entire, market value rule could not apply. I disagree. There was substantial evidencet for the jury to find first that the infringing features of the Platform are not separable from the Platform itself, such that the infringing and non-infringing components function together as a single unit, and second that thé infringing features are the basis for consumer demand of the product. Therefore, it was appropriate for the jury to consider the entire market value of the Platform overall in calculating the damages award.
First, there was substantial evidence to support a finding that the static binary analysis capabilities of the Platform are so integrated with the other components of the Platform that they constitute a single unitary product. See Rite-Hite,
This testimony supports the conclusion that the static binary analysis of program errors and potential program errors is an integrated, inseparable part of the Platform, both on the back end, in which the static and dynamic analyses occur during the same stage, and on the front end, in what the consumers ultimately see. Even if there were evidence suggesting that the value of the infringing features could be apportioned, “the jury was.free to ‘make credibility determinations and believe the witness it considers more trustworthy.’” Kinetic Concepts, Inc. v. Smith & Nephew, Inc.,
There is also sufficient evidence to demonstrate that consumer demand for the Platform is driven by the inclusion .of the infringing features. In addition to the evidence described above, Mr. Guerra confirmed that the speed and accuracy in behavior detection—which Mr. Watkins attributed to static analysis—is important to consumers. See Uniloc USA,
Appthority’s reliance on LaserDynamics and Lucent Technologies to argue that this evidence, is insufficient to prove consumer demand is unpersuasive. In LaserDynamics,
In contrast to- the laptop computers and comprehensive email software-at issue in LaserDynamics and Lucent Technologies, here the product at issue has a very specific consumer purpose: to scan mobile applications for threats. See LaserDynamics,
B. Supplemental Damages
Supplemental damages are permitted— and indeed required—under 35 U.S.C. § 284, which requires that the court award damages “adequate to compensate” the plaintiff for the infringement, and “in no event less than a reasonable, royalty for the use made of the invention by the infringer.” Although Veracode has not yet formally filed a motion for supplemental damages, I directed the parties to submit briefing on the issue so that it , could be addressed in conjunction with the request for injunctive relief. See Carborundum Co. v. Molten Metal Equip. Innovations, Inc.,
The damages calculations presented at trial were based on financial data "through March 31, 2014. Accordingly, there are two time periods for which supplemental damages could conceivably be available: (1) the post-discovery, pre-verdict time period, from April 1, 2014 through August 26, 2014 (the date of the jury verdict on damages), and (2) the post-damages verdict time, period, from August 26, 2014 through the entry of judgment or issuance of an injunction. Appthority raises two arguments in an attempt to limit Veracode’s recovery of additional damages for these time periods.
Appthority first argues - that Veracode has waived any claim for an accounting to update computations of pre-verdict damages to reflect the entire period, through the verdict, because it did not. specifically make this argument or:present evidence supporting it at trial, and because the parties did not agree on how to address such damages revisions. There is -some support in -the case law for Appthority’s position. See, e.g., Oscar Mayer Foods Corp. v. Conagra, Inc.,
Similarly, I conclude "that Veracode has not wáived its right to "request an accounting and to seek oh a post-verdict basis damages unaddressed by the jury. See Mikohn Gaming v. Acres Gaming, Inc., No. CV-S-97-1383-EJW,
Typically, supplemental damages are calculated based on the jury’s damages verdict. See, e.g., Mikohn,
Although this question is not yet ripe in this case, because Yeracode has not moved for post-verdict damages and Appthority has not formally requested a jury trial on this question,, my inclination upon such motion practice is to invite the submission of evidentiary materials on post-verdict damages and rule on the papers, or following an evidentiary hearing if one is needed, and not to submit the issue to a jury absent the identification by the parties of a compelling reason .to do so. See Paice,
C. Veracode’s Motion for Enhanced Damages (Doc. 240)
1. Legal Standard
Section 284 of Title 35 of the United States Code permits the court to “increase the damages up to three times the amount found or assessed.” The Federal Circuit has consistently held, in accordance with Supreme Court precedent, that “an award of enhanced damages requires a showing of willful infringement.” Seagate, 497 F.3d at 1368. A finding of willfulness permits an
I concluded in Section III.B, supra, that Appthority willfully infringed Claims 1 and 5 of the ’924 Patent.' With that threshold requirement satisfied, the factors set forth in Read Corp. v. Portec, Inc.,
The Read factors include:
(1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other’s patent protection, investigated the scope of the. patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer’s behavior as a party to the litigation; (4). defendant’s size and financial condition; (5) closeness of the case; (6) duration of defendant’s misconduct; (7) remedial action by the defén-dant; (8) defendant’s motivation for harm; and (9) whether defendant attempted to conceal its misconduct.
Liquid Dynamics Corp. v. Vaughan Co.,
2. Analysis
a. Whether Enhancement Is Warranted
i. Factors Favoring Enhancement
At least one court has found certain Read factors presumptively satisfied where they are effectively addressed by the jury instruction. See Informatica Corp. v. Bus. Objects Data Integration, Inc.,
Factor 7 also weighs in favor of enhanced damages. The record before me indicates that Appthority has not taken
ii. Factors Neutral on, or Against, Enhancement
Factors 3 and 5, discussed in greater detail in relation to the' request for attorneys’ fees, are neutral. The jury’s split verdict finding infringement of the ’924 Patent but not the '’609 Patent suggests that the case was not wholly a victory for Veracode. Veracode asserts, however, that Appthority’s non-infringement contentions were unsupportable and were based on rejected claim constructions, and that its invalidity and damages defenses were “farfetched” and not based in evidence.
With regard" to only the ’924 ■ Patent infringement, the case for direct infringement was not a close one; the evidence overwhelmingly demonstrated that the Platform .incorporates the patented technology. See nCube Corp. v. SeaChange Int'l Inc.,
Factor 8 is also neutral. Evidence of a desire to engage in normal business competition, particularly where there are commercial advantages to entering the mobile application security market during its early stages, does not constitute an improper motive. See WBIP, LLC,
Factor 4 is largely neutral and may weigh against enhanced damages. Appth-ority is a smaller company, having received approximately $10 million in venture capi
Finally, factor 9 is neutral, and Veracode concedes as much. Veracode cites to no evidence that Appthority attempted to conceal its misconduct; indeed, Appthority was a known direct competitor of Veracode and has promoted its products as offering the same services as those of Veracode. There is no evidentiary basis to find that this factor weighs in favor of enhanced damages.
iii. Summary
I find that four of .the factors weigh significantly in favor of enhancement, while five are relatively neutral. The totality of the circumstances demonstrate that the jury could have found differently on some of Appthority’s invalidity defenses, and that it “could have awarded substantially less damages,” consistent with the recommendation of even Veracode’s expert. Cf. Riles v. Shell Exploration & Prod. Co.,
D. Prejudgment Interest
Veracode seeks prejudgment, interest at the rate of twelve percent per annum running from March 16, 2012, the date this suit was filed, to the date of judgment. Appthority argues that Vera-code has not shown that it is entitled to prejudgment interest, and that if prejudgment interest is awarded, it should be at either the 52-week Treasury bill 'rate or the prime rate.
Prejudgment interest is a matter entrusted to the discretion of the court. See 35 U.S.C. § 284 (damages award should be not “less than a reasonable royalty ... together with interests and costs as fixed by the court”). Its purpose is consistent with the goal of ensuring “that the patent owner is placed in as good a position as [it] would have been in had the infringer entered into a reasonable royalty agreement,” Gen. Motors Corp. v. Devex Corp.,
The Federal Circuit has affirmed the use. of the Treasury bill rate and the. prime rate for prejudgment interest, but has not limited prejudgment interest to these two measures. See Mars, Inc. v. Coin Acceptors, Inc.,
It is my practice to look to the Massachusetts state law of prejudgment interest for contract damages, because the reasonable royalty rate is essentially a contract
Massachusetts General Laws ch. 231, § 6C, directs prejudgment interest “at the rate of twelve per cent per annum from the date of the commencement of the action.” This “comprehends the damages necessary to afford the patentee full compensation for infringement.” Cohesive Techs.,
V. INJUNCTIVE RELIEF
A. Background
Veracode seeks a permanent injunction prohibiting Appthority from continuing to infringe claims 1 and 5 of the ’924 Patent. Appthority asserts that an injunction is not necessary because monetary damages are adequate. Following a hearing on these matters, both parties submitted proposed language for an order of injunction. If an injunction is granted, Appthority moves for a stay pending appeal or for sixty days to enable it to revise its Appthority Platform so it does not infringe the ’924 Patent.
A. Legal Standard
Protection of the right conveyed by a patent—“to exclude others from making, using, offering for sale, or selling the invention”—may require the remedy of a permanent injunction for its vindication. See 35 U.S.C. § 154(a)(1); i4i Ltd.,
C. Findings of Fact and Conclusions of Law
1. Appropriateness of a Permanent Injunction
a. Irreparable Injury
The Federal Circuit requires that a plaintiff make two showings in order for the irreparable injury factor to weigh in its favor for a permanent injunction. See Apple, Inc. v. Samsung Elecs. Co. (Apple III),
i. Irreparable Harm
Irreparable harm can be demonstrated by establishing a variety of consequences, including lost market share, lost future sales, and reputational injury. See Douglas Dynamics LLC v. Buyers Prods. Co.,
Veracode has also presented evidence, albeit somewhat limited, that it has lost business opportunities to Appthority, including direct sales and collateral sales. This is “a paradigmatic example of irreparable injury.” Smith & Nephew,
Reserving, for discussion below my consideration of whether the monetary damages Veracode will receive are adequate to address the harm it suffered, which is also relevant to the irreparable harm inquiry, I find that this prong is satisfied.
Veracode must also satisfy the causal nexus requirement. A plaintiff must demonstrate “some connection between the patented feature and demand for [the infringer’s] products.” Apple III,
Few courts have had the occasion to apply the causal nexus requirement since Apple III; as a result, I navigate somewhat uncharted waters. In Riverbed Tech., Inc. v. Silver Peak Sys., Inc., Civ. No. 11-484-RGA,
Similarly, in Apple, Inc. v. Samsung Elecs. Co. (Apple V), Case No: 11-cv-01846-LHK,
Clearly, district courts have interpreted the Federal Circuit’s Apple decisions as imposing a demanding bar for satisfaction of the irreparable harm factor, while implementing the Federal Circuit’s statement that harm caused by otherwise lawful competition—and not by the infringement— should not weigh in favor of an injunction. Apple III,
These opinions might suggest that Apple III presents a substantial hurdle for a plaintiff seeking to establish that customers choose particular products because of specific features they offer, absent a large-scale survey of a customer base. However, the language of Apple III need not result in an overly austere. interpretation. Instead, “evidence that a patented feature makes a product significantly more desirable” or its absence less desirable can be adequate to establish a causal connection under Apple III,
Along these lines, at least three judges have found a causal nexus after Apple III where there is evidence that the infringing feature is a central part of the defendant’s product, and the inference can be made that this centrality drives consumer demand to some extent. See TransPerfect Global, Inc. v. MotionPoint Corp., No. C 10-2590 CW,
With these recent interpretations of Apple III in mind, I turn to the record in this case. The parties make the same arguments as on' the issue of consumer demand as a basis for application of the entire market value rule in calculating damages.
Veracode points to the testimony of Mr. Guerra and Mr. Watkins, who stated that the ’924 Patented technology is responsible for the speed and efficiency of the Appth-ority Platform and is part of its “core.” Veracode therefore asserts that the speed and efficiency of the Platform-r-features directly attributable to the ’924 Patented technology—make the product “significantly more desirable” to customers. See Apple III,
Appthority contends that it is static analysis—but not necessarily only of binar ry files, to which the ’924 Patent is limited—that increases the speed and efficiency of the Platform. It further asserts that Veracode has not established that customers use either the Appthority or the Vera-code products because of the claimed functionality of the ’924 Patent.
Consistent with my analysis, above regarding the entire market value rule, I find that Verácode hás presented evidence that “the inclusion of [the] patented feature^] makes [the Appthority] product significantly more desirable.” Apple III,
b. Inadequate Remedies Available at Law
Monetary damages may be inadequate where “[t]here is no reason to believe that [the defendant] will stop infringing, or that the irreparable harms resulting from its infringement will otherwise cease, absent an injunction.” Robert Bosch,
Veracode makes numerous claims of losses that are exceedingly difficult to value, particularly where the infringement has been ongoing for several years. See Polymer Techs., Inc. v. Bridwell,
Appthority asserts that Veracode’s damages are fully compensated and compensa-
Innogenetics is distinguishable. In Innogenetics,
Here, in contrast, the jury was instructed only to award “damages,”, “which by definition covers only past harmi” Whitserve, LLC v. Comput. Packages, Inc.,
Although it is possible—and likely—that the jury included an entry fee as part of the damages award, this does not compensate .adequately for continued damage of uncertain dimension inflicted- post-verdict by Appthority. Even if the jury did contemplate the inclusion of an entry fee, the evidence demonstrated that the equity stake entry fee paid by Veracode to Rovi in exchange for the ’924 Patent license was not a payment made in contemplation of future sales in the long run, but rather a partial consideration for the license. It cannot be said that the jury award here contemplated any compensation for future infringement, as it did in Innogenetics. Cf. Innogenetics,
Veracode has identified, as has already been discussed, numerous harms that it will suffer if Appthority is not enjoined from continuing to use the infringing technology, including continued lost sales and frustrated business development. More importantly, without an injunction Veracode continues to lack control over an invention to which it has successfully asserted an exclusive right., See Robert Bosch,
I must also consider Appthority’s hardships, but here they have little weight. Where a defendant is found to have willfully infringed a patent, the hardships that may appropriately be considered under this factor are limited. “One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the' business so elected.” Windsurfing Int’l, Inc. v. AMF, Inc.,
Appthority attempts to bolster its own hardships by pointing to those that would result for its customers and its business partners if a permanent injunction issued and it was forced to discontinue the Appthority Platform and database. But “the balance considered is only between a plaintiff and a defendant, and thus the effect on customers ... is irrelevant under this prong of the injunction test.” Acumed,
d. Public Interests at Stake
In general, the public interest “favors protecting the rights of patentees and enforcing the patent system.” Smith & Nephew,
In order for this factor to weigh in favor of Appthority, it must point to sufficient objective evidence of some public interest that would be disserved by a permanent injunction. See Acumed,
2. Scope of the Injunction
Calibrating the scope of the injunction when one is to be issued is important to prevent farther litigation and provide an appropriate equitable remedy. See Fed. R. Civ. P. 65; Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc.,
I first consider whether the database, should be included in the injunction in some fashion. The database consists of re-ports for more than 2.5 million mobile applications that Appthority has scanned to detect program errors and potential program errors using the Platform’s analyzer. When an application is submitted for analysis through’ the Platform, Appthority first cross-references its database to determine if the application has already been analyzed; if it has; then a full report of the application’s behaviors and risks is generated from the database. If it has not, then
Because the database was built on acts of past infringement, for which Veracode will be compensated through the reasonable royalty award, I conclude an injunction as to this database is overly broad and does not serve the purpose of equitable relief. See Johns Hopkins Univ. v. CellPro, Inc.,
Veracode’s counterpoint—that future use of the database could be considered continued infringement—is inadequately developed. Although Veracode seems to offer a “fruits of our labor” argument, it is unclear how Appthority’s reliance on or use of the database would constitute continued infringement, except that it would entail the use or distribution of a product generated by its infringing technology. This proposition finds little support in the case law-as a basis for- an injunction.
Because I agree with Appthority that Véracodé is' adequately compensated for its past infringement by the damages award, I will issue only a limited injunction as to Appthority’s use of- the database. Appthority will be enjoined from using any mobile application reports that were generated using the infringing technology, as described- below, and that were added to the database after March 31, 2014, the date through which the jury’s damages award covers (or after a later date through which supplemental damages are ultimately awarded, if such an award is determined applicable). I will further enjoin the addition of any reports for new mobile applications to the database if they were generated using the infringing technology. This approach will ensure that the injunctive relief is “narrowly tailored to fit the specific legal violations” and does not overcompensate for injury that has already been captured in the damages award. Gemveto Jewelry Co. v. Jeff Cooper Inc.,
I turn next to the Appthority Platform itself, and whether the injunction must include the Platform as a whole or can reasonably segregate only those infringing portions. On, the one hand, enjoining the use of the Platform as a whole would certainly achieve the goal of ceasing Appthority’s infringement, and compre
On the other hand, Appthority has demonstrated that the Platform engages in numerous functions that, standing alone, do not infringe the ’924 Patent, including dynamic analysis, detection of behaviors not reasonably classified as program errors, and static analysis of non-binary files. It has further represented that the Platform can continue to perform thése functions without engaging in the infringing activity. Following the hearing on these post-trial motions, Appthority implemented changes to its Platform consistent with its own proposed injunction language. Appthority represents that the Platform no longer “statically analyze[s] any representation of mobile app binary files, wherein the representation of the binary file is an intermediate file, to detect the presence or potential presence of’ twenty-two specific types of program errors or potential program errors. These twenty-two include the fourteen behaviors for which some evidence was offered at trial and the seven examples articulated in the ’924 Patent claim specification of “program - errors or potential program errors.”
Tailoring an injunction only to infringing activity makes a permanent injunction prohibiting the manufacture, use, or sale of the Platform as a whole unnecessary. Cf. Int'l Rectified Corp. v. IXYZ Corp.,
A more appropriate injunction covers all program errors and potential program errors, as the term was defined during claim construction, except those that are deemed program errors solely because of a subjective user’s preference settings. This is consistent with the evidence presented at trial that the ’924 Patent does not contemplate errors generated by such user preferences, and consistent with the reаsonable inference from the evidence that more than the specific signatures _ identified at trial infringe the ’924 Patent. I conclude that this approach more appropriately achieves the balance of interests required for equitable relief and minimizes confusion as to how Appthority can comply with the injunction order. See Oakley,
3. Appthority’s Request for a Stay of the Injunction
In its original briefing on the issue of an injunction, Appthority requested a stay of the injunction pending its
When determining whether to grant a stay of a permanent injunction pending an appeal pursuant to Fed. R. Civ. P. 62(c), the court considers “(1) whether the stay applicant has made a strong showing that • he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Hilton v. Braunskill,
As the ..extensive discussion of- Appthority’s myriad post-trial claims in this Memorandum and Order suggests, Appthority has failed to demonstrate a likelihood of success on the merits of an appeal, nor has it even identified the basis on which it contemplates an appeal. See NSK Corp,,
The request for a sixty-day stay is somewhat more compelling. “[A] delayed injunction may be more likely to prevent only infringing features rather than the sale of entire products, because the defendant would have time to implement a non-infringing alternative. For that reason, a delay in enforcement;may make an injunction more equitable and, thus, more justifiable in any given case.” Apple III,
VI. MOTIONS FOR ATTORNEYS’ FEES
Both parties move for attorneys’ fees, and following the hearing on these'motions submitted additional briefing in support of their respective positions.
A. Legal Standard
Although parties typically must bear their own litigation costs, the Patent Act contains a fee-shifting provision authorizing the award of attorneys’ fees in certain circumstances. Under 35 U.S.C. § 285, a court may award reasonable attorneys’ fees to the prevailing party in “exceptional cases.” The Supreme Court has defined an “exceptional case” as “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the .governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., — U.S. —,
The exceptional nature of the case must be established by a preponderance of the evidence through a ease-by-case analysis of the totality of the circumstances. Id. at 1756, 1758. The “simple discretionary inquiry” Octane Fitness instructs judges to conduct can include considerations , of “frivolousness,, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 1756 n. 6, 1758 (quoting Fogerty v. Fantasy, Inc.,
Litigation brought in bad faith or with objectively baseless claims may be considered exceptional, as may litigation demonstrating inequitable conduct or willful infringement.
B. Analysis
1. Prevailing Party Status
As a threshold matter, I must determine whether either or both Veracode and Appthority may be considered the “prevailing party.” A prevailing party is one “who has established his entitlement to some relief on the merits of his claims.” Hanrahan v. Hampton,
The Federal Circuit recently affirmed a district court judge’s classification of the plaintiff, and not the defendant, as the prevailing party in a case returning a split verdict similar to the one here; that affir-mance was based on an assessment of “the parties’ respective successes.” See SSL Servs., LLC v. Citrix Sys., Inc.,
In these circumstances, SSL Services counsels that only Veracode may be considered the “prevailing party.” Although a party need not succeed on every issue in order to be considered prevailing, In re Omeprazole Patent Litig.,
2. Exceptional Nature
Following the guidance of Octane Fitness, I also assess the exceptional nature of the case by looking to the totality of the circumstances. Although Veracode asks that I limit my review to only the ’924 Patent issues, I interpret Octane Fitness to direct consideration of the litigation as a totality, with a particular focus on the parts which were successful for the moving party. With this in mind, I consider whether the case “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness,
I find it relevant that, this case arises in a highly technical area of rapid growth and development—the governing law has shifted even while these motions have been under advisement. In this context, I see no reason why Appthority should not have •asserted all of its available defenses (in good faith) against Veracode’s claims, or should be penalized simply for not putting on the best defense case it could. See Small,
Second, I cannot say this case was litigated in- an unreasonable manner. See SFA Sys.,
I also take into account “considerations of compensation and deterrence,” although they are not particularly instructive here. Octane Fitness,
Although Octane Fitness lowered the bar for an exceptional case finding, it did not eliminate it. See Small,
I therefore conclude that under the totality of the circumstances, this case is not exceptional. See Am. Nat’l Ins. Co. v. Am. Nat’l Inv. Advisors, LLC, Case No. 11-cv-4016,
VII. CONCLUSION
For the reasons set forth more fully above, I:
- DENY the plaintiffs’ motion for summary judgment on infringement, Dkt. No. 70, as moot;
- DENY the defendant’s corrected motion for summary judgment on non-infringement, Dkt. No. 76, ks moot;
- DENY the defendant’s motion for summary judgment on invalidity, Dkt. No. 81, as moot;
- DENY the plaintiffs’ motion in limine no. 6, Dkt. No. Ill, as moot;
- DENY the defendant’s motion in li-mine no. 1, Dkt. No. 121, ak moot;
- DENY the defendant’s preverdict motion for judgment as a matter of law, Dkt. No. 191, as moot;.
- DENY the plaintiffs’ preverdict motion for judgment as a matter of law . on invalidity, Dkt. No. 196, as moot;
- DENY the plaintiffs’ preverdict motion for judgment as a matter of law on direct and willful infringement, Dkt. No. 198, as moot;
- DENY the defendant’s preverdiet motion for judgment as. a matter of law, Dkt. No. 200, as moot;
- GRANT the plaintiffs’ motion for judgment on partial findings on objective . willfulness, Dkt. No. 221;
- DENY the defendants corrected motion for judgment on partial findings on indefiniteness and unpatentable subject matter, Dkt. No. 229;
- GRANT the plaintiffs’ motion for a permanent injunction, Dkt. No. 235, as reflected in the final judgment entered this date;
- DENY the plaintiffs’ renewed motion for judgment as a matter of law on direct and willful infringement, Dkt. No. 238;
- DENY the plaintiffs’ motion for enhanced damages and attorney’s fees, Dkt. No. 240;
- DENY the defendant’s motion for a new trial and/or remittitur, Dkt. No. 245;
- DENY the defendant’s renewed motion for judgment as a matter of l’aw, Dkt. No. 250;
- DENY the defendant’s motion for. attorney’s fees,. Dkt. No. 261;
- GRANT in part (by way of a durational stay of 30 days for compliance with the permanent injunction) and DENY in part the defendant’s motion for a stay of the execution of judgment, Dkt. No. 265;
- GRANT the plaintiffs’ motion for entry of judgment, Dkt, No. 302; and
GRANT in part and DENY in part the defendant’s motion to strike the plaintiffs' brief (Dkt. No. 330),’ Dkt. No. 334; and
Further, I will separately enter the FINAL JUDGMENT AND PERMANENT INJUNCTION consistent with this MEMORANDUM AND ORDER disposing of this case.
Should the plaintiff seek supplemental damages, the parties shall submit a status report on or before October 16, 2015 proposing a schedule, for motion practice,
. Claim .1 of the ’609 -Patent consists of "A method- for analyzing executable software code using a computer comprising a processor and a memory, the method comprising: processing the executable software code to generate an optimized, exhaustive data flow model including parsing the executable software code to facilitate-identification-of data flows for inclusion in the exhaustive data flow model; processing the executable software code to generate an optimized, exhaustive control flow model; and storing, in the
Claim 13 is dependent on claim 1 and consists of "The computer-implemented method of claim 1 further comprising: analyzing the intermediate representation; and based on the analysis, identifying identify [sic] one or more .. flaws in the executable software code.”
Claim 14 consists of "A system for analyzing executable software code, the system comprising a processor, a memory, and a computer-implemented modeler executable by the . processor for: causing-the processor to process the executable software code to generate an optimized, exhaustive data flow model of the executable software code including parsing the executable software code to facilitate identification of data flows for inclusion in the exhaustive data flow'model; causing the.processor to process the executable software code to generate an optimized, exhaustive control flow model based on the executable software code; and storing, in the memory, an intermediate representation of the executable software code that provides a complete model of the executable software code based on the optimized data flow model and the optimized control flow model, thereby facilitating analysis of the executable software code according to comparison of the intermediate representation to reference models.”
. Ampng this briefing is a document filed by Veracode titled "Plaintiffs’ Memorandum in Response to Defendant’s Supplemental Briefs Concerning Indefiniteness and the Scope of the Permanent Injunction.” Appthority moves to strike this memorandum as an improper reply brief. The memorandum responds to a notice of supplemental authority Appthority filed, directing attention to Interval Licensing LLC v. AOL, Inc.,
. If the preverdict motion did not state the ground on . which a party seeks judgment as a matter of law, the only available recourse is a motion to set aside the verdict and/or a motion for a new trial. See 9B Charles Alan Wright & Arthur R. Miller, Federal Rules of Civil Procedure § 2537 (3d ed. 2008).
. All of the invalidity defenses asserted in Appthority’s renewed JMOL motion were also raised in its preverdict motion and therefore are properly before me.
. Appthority has also filed a separate ‘ motion for a new trial and/or remittitur pursuant to Fed. R. Civ. P. 59, regarding claims of invalidity submitted to the jury. In addition, Veracode moved prior to the jury verdict for judgment of a matter of law as to all of Appthority’s invalidity defenses for all asserted claims of both patents-in-suit pursuant to Fed. R. Civ. P. 50(a). In essence, Ver-acode contended that Dr. Clark’s testimony formed the entirety of Appthority’s invalidity case presented to the jury, and that his testimony did not present clear and convincing evidence to support any of the asserted invalidity defenses. They did not renew the substance of this motion after the verdict. Rather, Veracode’s renewed motion for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(b) pertained to its other preverdict motion under Fed. R. Civ. P. 50(a), that regarding direct and willful infringement. Because Veracode’s renewed JMOL motion did not articulate the invalidi
. Appthority does not appear to challenge the jury verdict as to the anticipation defense for either patent-in-suit. In any event, such a challenge would be unavailing.
. Veracode does not appear to make this argument in the post-trial motions. Rather, it is Appthority that develops this argument in its Rule 52 motion as a basis for claiming indefiniteness of the term "program error or potential program error.” Veracode contends that I construed the term "program error 'or potential program error” in a' manner consistent with the understanding of one skilled in the art and that what such program errors consist of was knowable with reasonable certainty by a person skilled in the art.
. I observe that some of the testimony which the parties have cited regarding written description was actually proffered during the non-jury' indefiniteness proceeding that followed the jury trial. I did not consider such evidence here, because it was not part of the record considered by the jury in reaching its verdict.
. Appthority states that it raised this defense only in response to Mr. Rioux’s testimony at trial, which unexpectedly revealed Mr. Rioux’s view that the benefit of his invention was simply automation of a task that could be completed manually.
. For the purposes of analysis here, I consider all of the claims to articulate a similar method. See Accenture Global Servs. v. Guidewire Software, Inc.,
. In Alice, the patent claims articulated a process for creating shadow records for parties to a transaction, obtaining start-of-day balances of those parties’ accounts, adjusting the shadow records when transactions capable of fulfillment occur, and then issuing end-of-day instructions to the institutions holding the accounts to Carry out the transactions that could be fulfilled based on available balances. See Alice Corp. Pty. Ltd. v. CLS Bank Int'l, — U.S. —,
. In buySAFE, Inc. v. Google, Inc.,
The Federal Circuit affirmed Judge Stark’s ruling. Id. at 1351. It reasoned that the claimed method created a particular type of "long-familiar" contractual relationship or commercial transaction, and therefore was directed to an abstract idea. Id. at 1355. "The claims’ invocation of computers adds 'no inventive concept” because "[t]he computer functionality is generic” and “not even arguably inventive.” Id. As in Alice, the claimed role of the computer in performing the long-established transaction was inadequate to transform what was otherwise an abstract idea into an inventive concept. Id. (citing Alice,
. In Digitech Image Techs., LLC v. Electronics for Imaging, Inc.,
. As Judge Pfaelzer has observed, Alice and other recent Supreme Court decisions show some skepticism toward patenting algor- , ithms;—which form the building blocks of computer software and computer code—but they have not outright rejected the patentability of such technology. Cal. Inst., 59 F.Supp.3d at 980. Nonetheless, in exercising Caution in interpreting Alice, few district ’ courts have found software claims patentable after Alice. See id. at 984 n. 9, 990-91, 1000
. In California Institute,
. Claim 13 of the '609 Patent, which is dependent on claim 1, adds the element of "identifying ... one 'or more flaws in the executable software code” by "analyzing the intermediate representation.” This is a specific application of Claim 1 that' narrows it to a particular technological problem,, аnd therefore is patentable if claim 1 is patentable. Claim 14 is a nearly identical system claim to the method claim of claim 1, and therefore will rise or fall together with it. See Accenture,
. Appthority repeatedly cites Mr. Rioux’s testimony that ”[y]ou could apply your own eyeballs to the problem ... You could look at the binary,” arguing that the only contribution the ’609 Patent makes is automation of an existing process that can be done manually. Mr. Rioux’s testimony continued, however: “You wouldn’t want to use your eyeballs to do this. This is painful. After the tenth binary somebody asks you to determine what it’s doing and look inside it, it’s' just like, this is for the birds.” To be sure, Mr. Rioux’s efforts at simplifying his testimony for a non-technical audience might be read to suggest a lack of complexity or inventiveness, but the testi- ■ mony as a whole—corroborated by that óf Dr. Rubin and not refuted by Dr. Clark—demonstrates that manual binary analysis was only minimally possible, and even then not with much precision.
In his subsequent declaration, Mr. Rioux further clarified that in his testimony he was referring to static analysis through a manual review of the source code, rather than the binary, which would be "an extremely difficult process that could not be readily performed by hand.”
. Although I find that it is- the optimized, exhaustive nature of the method that renders it inventive, I agree with Appthority that storing an intermediate representation of the software code is not an inventive concept. See generally Alfred V. Aho et al., Compilers: Principles, Techniques, and Tools (reprint 1988).
; To the extent Appthority argues that that term is indefinite and therefore cannot serve as a basis for an inventive element to the claimed method, I reject that argument, as discussed below.
. As the Federal Circuit has regularly, noted, paragraph 2 of 35 U.S.C. § 112 was replaced with § 112(b) by § 4(c) of the LeahySmith America Invents Act (“AIA”), Pub. L. No. 112-29, which took effect on September 16, 20l2. Because the applications resulting in the patents at issue here were filed.before that date, the pre-AIA version of § 112 applies. See Biosig Instruments, Inc. v. Nautilus, Inc.,
. Appthority asserts that after Nautilus, the fact that a claim term was construed during Markman proceedings does not prevent a finding of indefiniteness with respect to that term, but it provides no citation for this assertion. Where.the claim construction process involves application of "the same understanding [of claims] as that of persons knowledgeable in the fiéld of the invention,” however, the analysis employed during claim construction is plainly relevant. See Merck & Co. v. Teva Pharms. USA, Inc.,
. In discussing the functionality of the Appthority Platform, Dr. Rubin testified that of the general class of signatures and rules that he reviewed, "some of them can be representative of things that are program errors and some of them could be representative of things that are not program errors.” In addition, Mr. Guerra testified that the status of various behaviors as violations is explicitly configured by Appthority’s customers, and therefore what is defined as a program error by Appthority is based on subjective user preferences. That die Appthority Platform may go beyond the claimed invention of the ’924 Patent, however, does not mean that it did not incorporate the claimed invention into its product. As discussed in greater detail below, Veracode demonstrated at trial how the Appthority Platform detects precisely the types of errors the ’924 Patent was designed to detect: invalid or impossible maneuvers that may be intentional and designed to impede some purpose of the program (such as malware, adware, viruses, and malicious ■ code), as well as invalid or impossible maneuvers that are unintentional.
. Dr. Rubin’s complete statement was: "Anyone that has malware on their program would consider that to be something that’s invalid, that isn’t something that they want.”
. That the juty did not find that the Appthority Platform infringed the '609 Patent does not mean that the claims themselves were necessarily indefinite, inadequately -defined in the written description, or invalid for any other reason. The validity of the patent and . whether it has - been infringed are, of course, distinct issues.
. Although Veracode points to many more types of program errors and behaviors that the Platform detects, its emphasis on the detection of known malware and access to cer- • tain functions on a mobile phone that are not relevant to the particular service provided by the application is enough to provide substantial support for the jury’s verdict.
. Appthority also emphasizes Dr. Hanna's testimony that the Appthority platform disregards information about flow paths and flow structure for Android applications and does not process it for iOS applications. On cross-examination, however, Dr. Hanna acknowledge that the call flow or function flow represents the paths through the call graph, consis
. To the extent Appthority asks that-1 “order that the balance of the platform, outside of the functionality specifically accused at trial, does hot infringe as a matter of law,” I decline to do to. The scope of the infringement will be taken into account in the damages calculation and will be factored into the measure of injunctive relief. Further declaratory action'as to the scope of infringement is unnecessary.
. Appthority objected both before and after I gave the instruction.
. Several other district court judges have adopted this interpretation. For example, in a 2012 case, Judge Rakoff read Seagate as requiring recklessness, which "depends not upon knowledge of any specific facts, but instead upon knowledge or near-khowledge of an'objective risk." Tomita Techs. USA, LLC v. Nintendo Co., No. 11 Civ. 4256(JSR),
Similarly, in another 2012 case, Judge Bryant interpreted the Seagate standard to require that the infringer "either kn[ew] of the risk of infringement, or the risk of infringement was so obvious that it should have been known." Sargent Mfg. Co. v. Cal-Royal Prods., Inc., Civ. Action No. 3:08-cv-408(VLB),
More recently, Judge Gilstrap reasoned that 'knowledge of a patent application "is probative evidence of whether Defendants knew or should have known about the likelihood of infringement and may be supplemented by other disputed facts that could support a finding of willfulness by a jury.” See Smartflash LLC v. Apple Inc., Nos. 6:13cv447-JRG-KNM, 6:13cv448-JRG-KNM,
. The myriad district court opinions Appth-ority cites as support for its position—all appearing to require actual, pre-suit knowledge of the patent-in-suit after Seagate by citing to i4i Ltd.., State Industries, or Gustafson—do not call for a different result. See, e.g., Irori Techs., Inc. v. Luminex Corp., No. 13-CV-2647-BEN(NLS),
Others emphasize not that specific knowledge of the patent is required, but rather that the defendant must have had some awareness prior to the litigation to state a claim for willful infringement. See, e.g., Rembrandt Social Media, LP v. Facebook, Ind.,
Still others do not cite Seagate for the willful infringement standard when it clearly governs. See, e.g., Milo & Gabby, LLC v. Amazon.com, Inc.,
. Specifically, the Federal Circuit defined willful infringement as "when the infringer was aware of the asserted patent, but nonetheless 'acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,’ ” and then stated that "[a]fter satisfying this objective prong, the patentee must also show that the infringer knew or should have known of this objectively high risk.” i4i Ltd. P’ship v. Microsoft Corp.,
. I note that this finding is not inconsistent with my conclusion on enhanced damages, infra Section IV.B, that the jury could have found differently on some of Appthority's invalidity defenses, because that conclusion is specifically limited to Appthority’s defenses on the '609 Patent,
. The assertion that the claimed invention of the '609 Patent was patent-ineligible, in contrast, was a close call, but that defense is not relevant to a determination of willfulness as to infringement of the '924 Patent.
. I note, however, that the Federal Circuit has made clear that defenses raised during summary judgment but not presented to the jury, including claim construction arguments, "may be objectionably. reasonable,” and therefore may defeat a claim of objective willfulness. See Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd.,
. I am not persuaded by Appthorily’s argument that because the '924 Patent was held by Rovi and licensed to Veracode, it could not have been located with reasonable diligence.
. After the jury Verdict, AppthorityV counsel stated to the press that Appthority had confidence in its post-trial motions and felt that “the lawsuit represents the kind of groundless patent intimidation that stifles innovation for start-ups like Appthority.”
. Remittitur is appropriate if the damages award granted by the jury "exceeds any rational appraisal or estimate of the damages that could be based upon the evidence before it.” Wortley v. Camplin,
. For this reason, Appthority’s reliance on WBIP, LLC v. Kohler Co., No. 11-10374-NMG,
. Alternatively, the jury could have 'adjusted the proposed entry fee upward and maintained a 3% royalty rate or a 1-3% royalty range. If it took this approach, approximately $23,493 of the damages award would be attributable to ongoing royalties (at a 3% royalty rate), and the entry fee would amount to $758,364. I am hot persuaded by Appthority’s argument that the jury applied a 59.85% royalty rate because it would have subtracted out $350,000 of Appthority’s revenues that are attributable to projects that used only dynamic analysis and therefore did not infringe the '924 Patent. Even if this calculation were supported by the evidence, the jury reasonably could have considered the entire Platform as the royalty base—for reasons discussed below—and adopted a 33% royalty rate. On review, of course, I resolve any doubts about the calculation in favor of the patentee. See Lam, Inc. v. Johns-Manville Corp.,
. Veracode asserts that Appthority should not be permitted to argue that the award is grossly excessive in relation to its revenues, because it announced publicly following the trial that "there is no scenario where the outcome in this case ... in any way disrupts or impairs Appthority’s business prospects, and the verdict amount is "not at a sufficient level to negatively impact Appthority’s business viability.” Because I conclude that the award was a reasonable one, I need not address this issue further.
. Of course, these cases speak in terms of profits, whereas the award here approximates Appthority’s revenues. The cases Appthority cites for support, however, do not state that a damages award cannot exceed or approximate an infringer’s revenues. Although such an award might be unreasonable if it were based solely on a royalty rate, here, it was reasonable to include an upfront entry fee as part of the award. Accordingly, as a percentage of Appthority’s revenues, the royalty'rate does not even come close to representing 100% of revenues.
. Mr. Martinez testified as follows:
Q: And when does that hypothetical negotiation take place? ....
A: The hypothetical negotiation is to take place at the date of first infringement.
Q: And did you choose a date for the hypothetical negotiation in doing your analysis here?
A: I did, yes.
Q: What date did you choose? ....
A: I chose March of 2012, one, because that's the date that the lawsuit was filed. I looked for any evidence of when first-infringement might have taken place, and typically what we use as, damages experts, we look for the first sale of a product that incorporates the patent. Well, as of March 2012, Appthority had not yet sold any product, and so, typically, that’s our default. We go back to the date that the suit was filed as a timing for the hypothetical negotiation.”
Mr. Martinez acknowledged that Dr. Abramson had chosen October 2011 as the hypothetical negotiation date but did not know why he chose it. Mr. Martinez further testified that he did not think the difference of five to six months was relevant, because "Apptliority was in essentially the same position in October of 2011 as they were in March of 2012,” that is, an unfunded startup that had not offered a product yet, and they were also in the same position in relation to Vera-code, in perceiying each other as competitors as early as June 2011.
. Specifically, I instructed the jury that "[a]l-though the relevant date for the hypothetical license negotiation is just before the infringement began, you may consider any actual profits made by Appthority due to its infringement or the infringing products after that date. You may only consider this information, however, if those sales and profits were foreseeable just before the infringement began; that is, if they informed the judgment about what the negotiation was going to be, what they anticipated.”
. The VirnetX Court further concluded that this error was not harmless, because the plaintiffs expert had relied on the entire value of what he identified as the "smallest salable units" in calculating a reasonable royalty. See VirnetX, Inc. v. Cisco Sys., Inc.,
. Although Veracode argues that the evidence also demonstrates that the patented , feature "substantially create[s] the value of the component parts,” Uniloc USA, Inc. v. Microsoft Corp.,
. The Federal Circuit has declined, to resolve whether the duration factor considers conduct starting from the date of direct notice of infringement, or from the date of a judicial finding of infringement, observing only that this factor, like others, is ‘‘informed by the totality of the circumstances.” Funai Elec. Co. v. Daewoo Elecs. Corp.,
. The Federal Circuit has recognized that the presumption of irreparable harm supporting the issuance,of a permanent injunction that was recognized by courts prior to eBay no longer applies. See Robert Bosch LLC v.
. The parties in Riverbed were companies operating in the "Wide Area Network ("WAN”) optimization márket” that “utilize hardware and virtual appliances to minimize the application performance problems caused by bandwidth constraints,” Riverbed Tech., Inc. v. Silver Peak Sys., Inc., Civ. No. 11-484-RGA,
. I am not persuaded by Veracode's claims of lost partnership opportunities with MDM vendors, or by the relevance of the upfront investment Veracode made in obtaining a li
. It is also significant that the remaining time on the patent was far greater in Innogen-etics than it is here.
. It is important to emphasize that any supplemental damages Veracode -receives may account for the time period only up to the date on which an injunction becomes effective (the date of entry or the effective date following a stay). Under this arrangement, Veracode
. Without acknowledging its own contradictions, Appthority represents to the court that it would be destroyed by a permanent injunction of the scope sought by Veracode, yet it has represented to the public that its business will not be harmed by the verdict.
. In making this proposal, Appthority reserves its rights of appeal, including as to non-infringement and injunctive relief, and again asserts its arguments that the detection of these application behaviors does not infringe the ’924 Patent.
. I recognize there is some precedent, supporting Veracode’s general proposition. In ePlus, Inc. v. Lawson Software, Inc.,
Here, the database was made during the term of the patent using infringing technology that, while not part of the database, was necessary for the database’s creation. Cf. Johns Hopkins Univ. v. CellPro, Inc.,
. Veracode suggests that a ,finding of willful infringement alone is enough to warrant a finding of exceptionality. In support of this assertion, it points'to two district court opinions following Octane Fitness in which attorneys’ fees were awarded as part .of default judgments. See Ceiva Logic Inc. v. Frame Media Inc., No. SACV 08-00636-JVS,