Testing Actual Product Not Necessary of Expert Witness: US Appellate Court
Expert witnesses' tests or experiments on the actual accused products are not always necessary to prove patent infringement, the Federal Circuit Court of Appeals has ruled, reversing the award of $6.6 million by the U.S. District Court, E.D. Pa. for the second time on the same matter.
In Checkpoint Systems, Inc. v. All-Tag Security S.A., No. 16-1397 (Fed. Cir. 2017), Checkpoint claimed that All-Tag infringed its U.S. Patent 4,876,555 ("the '555 patent") for anti-theft tags attached to merchandise and deactivated when the goods are purchased. Checkpoint's '555 patent design includes a "throughhole" in the middle dielectric layer allowing the tags to be deactivated "at a lower current and with greater reliability" than competing tags.
In May 2001, Checkpoint brought suit against All-Tag and Sensormatic for infringement of the '555 patent. To support its claim, Checkpoint had retained Dr. Markus Zahn, professor of electrical engineering at MIT as its patent infringement expert witness. Checkpoint provided Zahn a roll of All-Tag tags to test for the infringing throughhole, which he found and described in his expert report, deposition and testimony at trial.
All-Tag provided Checkpoint with product samples in November 2002, long before the trial which commenced in 2004.
Before the trial, Checkpoint asked All-Tag to admit that its resonance tags contained a throughhole. All-Tag responded that its tags were made "generally in accordance with its patent 5,187,466 ("the '466 patent") and the then-pending application for the 7,023,343 ("the '343 patent").
Zahn testified that both of the All-Tag patents describe products having a hole in the dielectric layer, as Checkpoint claimed. Zahn concluded that those tags would infringe the Checkpoint '555 patent.
A few days before trial, All-Tag Security S.A.'s President and CEO Olivier Boels stated that he believed Zahn had tested old tags, not the current ones accused of infringing Checkpoint's patent. Boels stated that the tags Zahn tested were made by All-Tag Security A.G. in Switzerland, and not the current tags which are made by All-Tag Security S.A. in Belgium. In 1994, All-Tag moved its manufacture of resonance tags from Switzerland to Belgium, and transferred its machinery and equipment to a newly formed Belgian company, resuming its manufacture of the tags on the same equipment within about a week of the move.
The jury found the '555 patent "not infringed, invalid, and unenforceable." The district court held the case to be exceptional, citing that "Checkpoint's pre-suit investigation was inadequate because Checkpoint's expert inspected tags produced in Switzerland rather than in Belgium" and awarded All-Tag $6.6 million in attorneys fess, costs and interest.
Checkpoint appealed to the Federal Circuit Court, which affirmed the jury verdict, but reversed the attorney fee award, holding that "[t]he infringement charge was not shown to have been made in bad faith or objectively baseless."
All-Tag sought certiorari, which was granted. While this petition was pending, in 2014, the U.S. Supreme Court, in a pair of decisions, essentially made it easier for courts to make the loser pay for all attorney costs (eg: patent lawsuit fee-shifting), if the lawsuit is considered frivolous (Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014); Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014).
In 2014, the U.S. Supreme Court remanded the case back to the Federal Circuit Court for further consideration, which in turn remanded the case back to the district court, finding that it should consider the Federal Circuit Court's prior opinion "in which we explained that tests or experiments on the actual accused products are not always necessary to prove infringement."
The district court again held the case to be exceptional, citing the same grounds, and again awarding the $6.6 million in attorney's fees.
Appealed again to the Federal Circuit Court, it concluded that the district court erred, and abused its discretion, reversing the award for attorneys fees.
While the actual products claimed to infringe a patent are not always necessary, clearly they would be preferable, given the additional years in the courts, and the consequent legal fees.