Packet Intelligence v. NetScout was decided on July 14, 2020, on appeal from the Eastern District of Texas. Plaintiff Packet Intelligence sued Defendant NetScout on two method-claims patents and one apparatus-claims patent. The jury found all claims willfully infringed, rejected NetScout’s invalidity defenses under § 102, awarded $3.5 million in pre-suit damages, and awarded $2.25 million in post-suit damages. The district court then issued findings of facts and conclusions of law under Rule 52, rejecting NetScout’s § 101 defense. “The court also enhanced damages in the amount of $2.8 million and, in accordance with the jury’s verdict, awarded an ongoing royalty for post-verdict infringement.” NetScout appealed.
The Federal Circuit affirmed the judgment of infringement, of no invalidity under § 101 and § 102, of post-suit damages, of the ongoing royalty, of willfulness, reversed the pre-suit damages, and vacated the enhancement of the pre-suit damages.
“When the district court charged the jury in this case, [the Federal Circuit] had not yet ruled on which party bears the burden of proving compliance with the marking statute.” After the verdict, the Federal Circuit held in Arctic Cat Inc. v. Bombardier “that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement.” The initial burden is a “low bar.” The alleged infringer needs “only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the patent.” “The burden then f[alls] on the patentee to prove that the identified products do not practice the patent-at-issue.”
The district court erred in denying NetScourt’s motion for JMOL on pre-suit damages. Here, the district court’s jury instruction was in tension with Arctic Cat, “as it appears to place the burden on NetScout” to show that Packet Intelligence’s licensee products practice the apparatus patent. “It is undisputed that NetScout adequately identified” licensee products that were unmarked. “Packet Intelligence then bore the burden of proving that” the licensee products did not practice at least one claim of the apparatus patent.
Packet Intelligence did not carry its burden. Packet Intelligence proffered evidence that (1) the licensee products were mentioned in a prior patent application and not mentioned in later applications, and that (2) a named inventor stated that a different product does not embody his invention. This does not prove that the licensee products do not practice the patent. “Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the [apparatus] patent to the features of the [licensee unmarked products], NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the [apparatus] patent.”
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The pre-suit damages award cannot be supported by evidence of infringement of the method-claims patents. “Method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process.” “Therefore, Packet Intelligence cannot simply count sales of the software accused of infringing the [apparatus] patent as sales of the method claimed in the [method] patents.” “Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed.”
“Packet Intelligence advanced a theory that NetScout’s internal testing, customer support, and customer training was pre-suit activity infringing the method patents and thus supporting damages.” “But there is no evidence supporting damages caused by or resulting from these pre-suit activities.” Packet Intelligence’s damages expert “applied a calculated reasonable royalty to revenue from NetScout’s sales of the [accused] products—occurring both before and after the suit was filed.” “The damages base was not tailored to any alleged internal use of the claimed methods.” “Packet Intelligence is barred from recovering damages for pre-suit sales of [accused] products because it failed to comply with the marking requirement.” “It cannot circumvent § 287 and include those products in its royalty base simply by arguing that” NetScout’s internal use of the patented method drove sales for the accused products.
The jury’s willfulness verdict is supported by substantial evidence. The jury was permitted to credit NetScout testimony regarding inventorship and the sales of NetScout products to draw the inference that NetScout willfully infringed the asserted patents.
Judge Reyna concurred-in-part and dissented-in-part, arguing that the asserted claims are directed to an abstract idea at Alice Step 1 and must be examined at Alice Step 2.