Innovention Toys, LLC v. Mga Entertainment, Inc. ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
INNOVENTION TOYS, LLC,
Plaintiff-Appellee
v.
MGA ENTERTAINMENT, INC., WAL-MART
STORES, INC., TOYS "R" US, INC.,
Defendants-Appellants
______________________
2014-1731
______________________
Appeal from the United States District Court for the
Eastern District of Louisiana in No. 2:07-cv-06510-SM-
MBN, Judge Susie Morgan.
______________________
Decided: April 29, 2015
______________________
JAMES C. OTTESON, Arnold & Porter, LLP, Palo Alto,
CA, argued for plaintiff-appellee. Also represented by
DAVID A. CAINE, THOMAS T. CARMACK; BRANDON D. BAUM,
Agility IP Law, LLP, Menlo Park, CA.
DONALD ROBERT DUNNER, Finnegan, Henderson,
Farabow, Garrett & Dunner, LLP, Washington, DC,
argued for defendants-appellants. Also represented by
ALLEN MARCEL SOKAL.
2 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
______________________
Before LOURIE, PLAGER, and TARANTO, Circuit Judges.
TARANTO, Circuit Judge.
Innovention Toys, LLC sued MGA Entertainment,
Inc., Wal-Mart Stores, Inc., and Toys “R” Us, Inc. (collec-
tively, MGA) for infringement of U.S. Patent No.
7,264,242, entitled “Light-Reflecting Board Game.” The
district court initially held, on summary judgment, that
MGA infringed the asserted claims of the patent and had
not created a triable issue on its obviousness challenge.
The district court entered an injunction against MGA,
which appealed under 28 U.S.C. § 1292(c)(1). We af-
firmed on infringement but vacated and remanded on
nonobviousness because the district court had failed to
recognize that key prior-art references were pertinent
prior art and had incorrectly found the level of ordinary
skill in the art to be that of a layperson. Innovention
Toys, LLC v. MGA Entm’t, Inc., 637 F.3d 1314 (Fed. Cir.
2011). On remand, the case proceeded to trial, where the
jury rejected MGA’s obviousness challenge, found that
MGA’s infringement was willful, and awarded damages to
Innovention both from the time the patent issued and,
under 35 U.S.C. § 154(d), from the time the patent appli-
cation was published. The district court adopted the
jury’s findings and trebled the damages under 35 U.S.C.
§ 284. On MGA’s new appeal, we reverse only as to
willful infringement and remand for entry of a judgment
without any enhancement under § 284 and for reconsid-
eration of the award of attorney’s fees under 35 U.S.C.
§ 285.
BACKGROUND
The ’242 patent discloses a chess-like board game and
methods for playing the game. The board generates laser
beams for the players, who have various movable board
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 3
pieces. Some of the pieces have mirrors that can reflect
(and change the direction of) the laser beams. The play-
ers “alternate in moving pieces from square to square or
rotating pieces in place.” ’242 patent (Abstract). Each
player’s goal is to direct his or her laser onto the opposing
side’s “key piece.” Id.
Claim 31 is representative:
A board game for two opposing players or
teams of players comprising:
a game board, movable playing pieces hav-
ing at least one mirrored surface, movable
key playing pieces having no mirrored sur-
faces, and a laser source,
wherein alternate turns are taken to move
playing pieces for the purpose of deflecting
laser beams so as to illuminate the key
playing piece of the opponent.
Id., col. 12, lines 37–44. The preferred embodiment is
Egyptian-themed—the key piece dubbed the “Pharaoh,”
the non-key pieces dubbed “Obelisks,” “Pyramids,” and
“Djeds.”
Innovention, the assignee of the patent, was formed to
create and sell a game based on the patent. It marketed
its game first as “Deflexion” and later as “Khet.”
Innovention exhibited a prototype of Deflexion at the
International Toy Fair in New York City in early 2005.
Around the same time, MGA game developer Ami Shapiro
began work on a board game called “Laser Battle.” Mr.
Shapiro’s resume lists him as attending the fair. In
December 2005, Mr. Shapiro bought two copies of Deflex-
ion, sending one to an MGA engineer in China, Alex Fan.
Upon receipt of the game, Mr. Fan remarked to Mr.
4 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
Shapiro over email that the box was “marked with ‘patent
pending’ ” and asked whether Mr. Shapiro knew which
part was patented. J.A. 5030. The record contains no
response from Mr. Shapiro.
In February 2006, Innovention filed a patent applica-
tion (11/353,863), which was published in October 2006
and which, with certain amendments to the claims, issued
as the ’242 patent in September 2007. While Mr. Shapiro
and Mr. Fan worked on Laser Battle, Innovention sold
Deflexion in impressive numbers and garnered critical
acclaim for the game. When Innovention learned of Laser
Battle in late 2006, it sent MGA a notice letter with a
copy of the published ’863 application. MGA did not
respond. After MGA began selling Laser Battle through
retailers, Innovention sued MGA for infringement of
claims 31–33, 39–41, 43, 44, 48–50, 53, and 54.
MGA’s defense was that the subject matter of the as-
serted claims would have been obvious to a relevant
skilled artisan at the relevant time in light of (a) Swift’s
U.S. Patent No. 5,145,182, which claims a laser board
game with deflecting pieces that players put in place
before, but do not move during, the game and (b) two
“Laser Chess” magazine articles, which disclose a com-
puter game in which each player manipulates screen
images of a “laser-firing piece and various reflective
objects” to try to hit the opponent’s “king,” J.A. 5310.
Before trial, the district court granted summary judgment
of infringement and nonobviousness and on that basis
enjoined MGA. On appeal, this court vacated and re-
manded with respect to nonobviousness, holding in key
part that the Laser Chess articles are analogous prior art
that must be considered in the obviousness analysis.
Innovention, 637 F.3d at 1321–24. In remanding, we
noted that various factual issues awaited resolution by
the district court, including the scope and content of the
prior art, the differences between the prior art and the
claimed invention, the level of skill in the art, the pres-
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 5
ence or absence of motivation to combine, and the persua-
siveness of any objective indicia of nonobviousness. Id. at
1323–24.
At trial, the jury resolved all issues in Innovention’s
favor, finding that (1) a skilled artisan would have a
bachelor’s degree in mechanical engineering or equivalent
experience; (2) there are differences between the combina-
tion of the prior art and the claims; (3) it is not highly
probable that a skilled artisan would have had both a
motivation to combine the prior art and a reasonable
expectation of success; (4) six objective indicia—including
commercial success, long-felt need, praise, and copying—
point to nonobviousness; (5) it is not highly probable that
the claims would have been obvious to a skilled artisan;
and (6) MGA’s infringement of the ’242 patent was willful.
As to damages, the jury awarded $1,405,708 in lost-
profit damages starting in September 2007, the time of
the patent’s issuance, and $167,455 in reasonable-royalty
damages for the pre-issuance period starting in October
2006, the date the patent application was published.
With respect to pre-issuance damages, the district court
had already ruled, in denying a summary-judgment
motion by MGA, that such damages would be permissible
under 35 U.S.C. § 154(d) because the scope of the issued
claims are substantially identical to the scope of the
published application’s claims. MGA preserved the issue
in seeking judgment as a matter of law under Fed. R. Civ.
P. 50, and the district court rejected MGA’s renewed
contention on the issue by relying on its earlier summary-
judgment analysis. The district court also denied MGA’s
post-verdict motion for judgment as a matter of law or a
new trial on obviousness and on willful infringement,
concluding in particular that MGA’s obviousness defense
was not objectively reasonable. The court then trebled
the damages award.
6 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
MGA appeals the district court’s determinations re-
garding nonobviousness, willful infringement, and pre-
issuance damages. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(1).
DISCUSSION
The case arises from within the Fifth Circuit. The
standards of review are the normal ones: de novo review
of the denial of a motion for judgment as a matter of law,
a motion that may not be granted “unless there is no
legally sufficient evidentiary basis for a reasonable jury to
find as the jury did,” Goodner v. Hyundai Motor Co., 650
F.3d 1034, 1039–40 (5th Cir. 2011) (internal quotation
marks omitted); and abuse-of-discretion review of the
denial of a new-trial motion for want of a showing that
“the verdict is against the great weight of the evidence,”
Carr v. Wal-Mart Stores, Inc., 312 F.3d 667, 670 (5th Cir.
2002) (internal quotation marks omitted).
A
MGA’s primary argument is that the ’242 patent
should be invalidated for obviousness over Swift and the
Laser Chess articles. Obviousness presents a question of
law based on underlying findings of fact. Graham v. John
Deere Co., 383 U.S. 1, 17 (1966). Relevant facts include
the scope and content of the prior art, the differences
between the prior art and the claimed invention, the level
of ordinary skill in the field of the invention, and any
relevant objective indicia of nonobviousness. Id. at 17–18.
Moreover, “[a] party asserting that a patent is obvious
‘must demonstrate by clear and convincing evidence that
a skilled artisan would have had reason to combine the
teaching of the prior art references to achieve the claimed
invention, and that the skilled artisan would have had a
reasonable expectation of success from doing so.’ ” PAR
Pharm., Inc. v. TWI Pharm., Inc., 773 F.3d 1186, 1193
(Fed. Cir. 2014). “[W]e review any underlying findings of
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 7
fact by the jury—whether explicit or implicit—for sub-
stantial evidence, [and] the ultimate determination of
obviousness . . . de novo.” MobileMedia Ideas LLC v.
Apple Inc., 780 F.3d 1159, 1167 (Fed. Cir. 2015).
The district court properly denied MGA’s motion for
judgment as a matter of law or a new trial. There was
substantial evidence for the jury reasonably to have found
that MGA did not prove facts essential to its particular
obviousness challenge. Likewise, the district court did not
abuse its discretion in concluding that the jury’s findings
were not against the great weight of the evidence. We
need not separate those closely related issues in our
discussion of the evidence.
As the district court discussed at great length, the ju-
ry here not only determined that the subject matter of the
claims would have been nonobvious, but also decided
every underlying factual issue in favor of that conclusion.
In particular, the jury found that MGA had not proved a
reason to combine the prior-art references with a reason-
able expectation of success. The evidence is sufficient to
support that finding. That conclusion, which is reinforced
by sufficient evidence of objective indicia of nonobvious-
ness, disposes of MGA’s obviousness challenge here.
MGA presented little evidence on motivation to com-
bine with a reasonable expectation of success. The only
evidence that it has identified, beyond the prior-art docu-
ments’ own content, is the testimony of its expert, Mr.
Phillips. But Mr. Phillips did no more than cursorily
identify the conceptual relatedness of Swift and the Laser
Chess articles. J.A. 1889 (“Both [are] styles of presenta-
tion . . . they’re teaching methods. They’re ways to get
into your mind a concept. And so they’re equally valua-
ble, in my view, for teaching you what game elements are.
And that’s why I think it’s [] legitimate to combine
these. . . .”). This testimony says nothing about why an
ordinarily skilled artisan would have a reasonable expec-
8 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
tation of success in creating the claimed workable physi-
cal game, with real lasers and regularly moving and
rotating game pieces, based on Swift, which involves
pieces fixed during play, and two articles about a comput-
er game involving mere graphical images of lasers. More
fundamentally, the testimony gives little reason that a
person of ordinary skill in the art—with Swift and the
Laser Chess articles hanging somewhere on the figurative
wall of pertinent art, as we previously held—would have
defined a problem to be solved in such a way as to provide
a motivation to pick out those references for combination.
The Supreme Court has confirmed that “any need or
problem known in the field of endeavor at the time of
invention and addressed by the patent can provide a
reason for combining the elements in the manner
claimed.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 420
(2007) (emphases added). We have noted that “courts
may find a motivation to combine prior art references in
the nature of the problem to be solved.” Tokai Corp. v.
Easton Enters., Inc., 632 F.3d 1358, 1371 (Fed. Cir. 2011)
(emphasis added) (internal quotation marks omitted).
But those standards identify factual issues, and in resolv-
ing the issues, it generally matters what evidence is
submitted in a given case about whether a need or prob-
lem actually was known in the field and would in fact
have motivated an asserted combination. See, e.g.,
Alexsam, Inc. v. IDT Corp., 715 F.3d 1336, 1347–48 (Fed.
Cir. 2013); Kinetic Concepts, Inc. v. Smith & Nephew, Inc.,
688 F.3d 1342, 1368–69 (Fed. Cir. 2012). In this case, the
prior-art documents standing alone do not compel find-
ings on motivation and expectation as a matter of law,
and it was reasonable for the jury to find MGA’s evidence
on these topics to be insufficient.
That is so, in particular, when the full evidence is
considered, including Innovention’s evidence supporting
rejection of MGA’s obviousness contention. Its expert, Dr.
Eimerl, testified to the absence of a motivation to combine
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 9
because a person having ordinary skill at the time of
invention “[was] thinking about making board games like
Monopoly and Stratego and Operation, [so] why would [he
or she] pick out [Swift and the Laser Chess articles]?”
J.A. 2117. He also noted that MGA’s expert, far from
identifying recognition at the time of invention of a prob-
lem whose solution would lead to Innovention’s claimed
invention, presented a hindsight analysis:
[Mr. Phillips] started from the wrong approach.
He started from saying, with the ’242 patent and
worked backwards. In other words, he said if I
had the idea of inventing the ’242 patent and I
was given these or the features of something with
the features of the Khet game, I already had that
idea in mind and I was handed the prior art, that
is the video game articles and Swift patent, and if
I already had it in mind to be thinking about a la-
ser game, then, he made an analysis based on
whether or not they would, the person of ordinary
skill in the art would make it from the prior art to
that, to a laser game.
J.A. 2116–17; see also KSR, 550 U.S. at 421 (“A factfinder
should be aware . . . of the distortion caused by hindsight
bias and must be cautious of arguments reliant upon ex
post reasoning.”). Finally, Dr. Eimerl testified that a
person of ordinary skill in the art would not have readily
seen from the prior art, or known generally, how to solve
the problems of making a workable real-laser, frequent-
movement board game. J.A. 2104, 2117–27. His testimo-
ny tends to suggest no reasonable expectation of success.
The evidence in this case permitted a judgment of
nonobviousness on the foregoing prior-art-focused bases.
That evidence was supplemented, moreover, by substan-
tial evidence supporting the jury’s express findings of
several objective indicia of nonobviousness, including
commercial success of Innovention’s product, which
10 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
embodied the claimed invention; praise from others in the
field; and MGA’s copying of Innovention’s product. The
district court summarized the evidence on those issues,
including evidence permitting the jury to make credibility
findings and to otherwise reject certain submitted testi-
mony by MGA’s Mr. Shapiro. J.A. 52–59. In light of all
the evidence, the district court did not err in refusing to
disturb the jury’s verdict of nonobviousness.
B
MGA argues against the award of pre-issuance rea-
sonable-royalty damages on the ground that the scope of
the claims changed from the published application to the
issued patent. “[T]o obtain a reasonable royalty” based on
pre-issuance activities that would infringe if they took
place post-issuance, “the invention as claimed in the
patent [must be] substantially identical to the invention
as claimed in the published patent application.” 35
U.S.C. § 154(d)(2). “[C]laims are ‘identical’ to their origi-
nal counterparts if they are ‘without substantive
change.’ ” Laitram Corp. v. NEC Corp., 163 F.3d 1342,
1346 (Fed. Cir. 1998) (quoting Seattle Box Co. v. Indus.
Crating & Packing, 731 F.2d 818, 827–28 (Fed. Cir. 1984))
(interpreting “substantially identical” in the reissue
context, 35 U.S.C. § 252). “[I]n determining whether
substantive changes have been made, we must discern
whether the scope of the claims are identical, not merely
whether different words are used.” Id. We review de
novo the ultimate legal conclusion that claims are identi-
cal in scope, id., and the parties have not suggested that
there are any material underlying factual findings here,
see Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831,
835 (2015).
MGA primarily argues against such so-called “provi-
sional rights” damages on the ground that, because “no
published [application] claim required movable key pieces
while all of the [issued] patent claims do, the published
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 11
and issued claims as a matter of law differ in scope.”
Appellant’s Brief at 60. We reject that argument. For
example, claim 31 of the published application required
players to take turns “to move playing pieces.” J.A. 5026;
see also, e.g., J.A. 5026–27 (claim 39). The movability
requirement in no way excludes “key” game pieces (play-
ing pieces): claim 31 itself refers to the piece to be illumi-
nated as “a key playing piece,” J.A. 5026; and the written
description makes express that (the to-be-illuminated)
game piece 30 “is the key game piece” and describes “the
moves that are available to a particular game piece 30
. . . .” J.A. 5021–22. We agree with the district court that
the movability of key pieces was already present in the
claims of the published application.
MGA argues in the alternative that some of the
claims were subject to broadening amendments through a
change of the transitional phrase “consisting of” to “com-
prising.” See, e.g., J.A. 5122 (claim 39). But those
amendments do not stand in the way of pre-issuance
damages in this case. At least some of the claims found to
infringe here retain their original scope, and MGA has not
contended that any of the infringing acts here infringed
only the broadened claims. See Aqua-Aerobic Sys., Inc. v.
Richards of Rockford, Inc., 835 F.2d 871, at *1 (Fed. Cir.
1987) (unpublished) (“[T]he number of valid claims in-
fringed here has no bearing on damages.”). That is suffi-
cient reason to reject MGA’s contention. We need not
further explore the effect of the transitional-language
change in particular claims.
For those reasons, we conclude that the district court
did not err in permitting pre-issuance damages.
C
Finally, MGA challenges the determinations by the
jury, J.A. 118, and district court, J.A. 37–63, that MGA
was willful in its infringement. The applicable standards
12 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
are undisputed by the parties. It is enough here to note
that willfulness is not established where the defendant
has a substantial, objectively reasonable, though ulti-
mately rejected, defense, including an obviousness de-
fense. Spine Solutions, Inc. v. Medtronic Sofamor Danek
USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010); see Halo
Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1382–83
(Fed. Cir. 2014). We review the conclusion on that aspect
of the willfulness issue de novo, Halo, 769 F.3d at 1382,
but here, regardless of the standard of review, we con-
clude that the district court erred in deeming MGA’s
obviousness defense objectively unreasonable.
The key error was in the court’s discussion of the dif-
ferences between the claims and prior art—a discussion
that stressed how, at trial, MGA’s expert witness initially
relied on an incorrect claim construction of “game piece,”
had to be corrected as to the requirement that the phrase
referred to a physical item that can be placed on a physi-
cal board, and then acknowledged that the Laser Chess
articles did not disclose that element. J.A. 46–48. We
may assume, from the district court’s description and
Innovention’s presentation to us, that this process had a
dramatic effect in the courtroom, undermining the ex-
pert’s credibility. But the district court gave it a signifi-
cance it does not have for assessing how large a gap there
is between the prior art and Innovention’s claims. Under
any reasonable view, the gap between the prior art and
Innovention’s claims, while large enough to allow the jury
to find that MGA did not successfully establish the re-
quired motivation to combine with a reasonable expecta-
tion of success, was not particularly large. Indeed, it was
sufficiently small that MGA’s defense was reasonable as a
matter of law even considering evidence of objective
indicia of obviousness.
Swift discloses or makes obvious most of the elements
of the ’242 patent. Compare ’242 patent, col. 12, lines 39–
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 13
41, 49–50 (claim 31: “a game board,” “movable playing
pieces having at least one mirrored surface,” “movable key
playing pieces having no mirrored surface,” and “a laser
source”; claim 33: “recesses on the board to ensure reflec-
tion of the laser beam”), with Swift, col. 12, lines 37–38,
42–43, 45, 47, 49–50, 54–56, 60–61 and col. 13, lines 4, 7–
8 (claim 1: “a playing area having a substantially orthog-
onal, substantially planar matrix,” “means for projecting
visually discernible paths,” “means for angularly divert-
ing said paths,” and “a plurality of scoring modules . . .
having means for detecting contact with said visually
discernible path”; claim 2: “means for projecting is a laser
and said visually discernible path is a laser beam”; claim
4: “means for angularly diverting said path is a mirror”;
claim 7: “plurality of ‘x’-shaped slots, . . . adaptable to
fixedly and frictionally secure said means for diverting
said path”). The Laser Chess articles also teach specific
elements of the ’242 patent’s claims, though on a virtual
platform. J.A. 5310 (disclosing a movable king piece with
no reflective surfaces); id. (“In addition to their ability to
move from square to square, pieces with reflective surfac-
es can also be rotated in place in 90-degree increments.”);
J.A. 5318 (“Partially mirrored stompers can be rotated in
45-degree increments . . . .”).
Our earlier decision that the Laser Chess articles
were pertinent art establishes that an ordinary artisan
creating a physical board game would look to virtual
games for various purposes, including for some game-step
elements of Innovention’s patent claims, even though
computer games’ “pieces” are not physical items to set on
physical boards. That ruling, and the similarity of details
just recited, do not resolve the obviousness issue, but they
do demonstrate that the district court did not draw a
reasonable conclusion about the magnitude of the advance
over the prior art needed to arrive at the asserted claims.
And once that error is corrected, MGA cannot be said to
have “acted despite an objectively high likelihood that its
14 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.
actions constituted infringement of a valid patent,”
Seagate, 497 F.3d at 1371—no matter how irresponsible it
was in actually considering the scope or validity of patent
rights that it knew (from December 2005) that Inno-
vention was seeking and then knew (within about a
month of issuance) that Innovention had obtained.
The willfulness determination is therefore reversed.
It follows that the enhancement of damages must be
reversed. It also follows that the district court’s award of
attorney’s fees, which relied in part on the determination
of willfulness, must be vacated. On remand, the district
court should reconsider whether an award of attorney’s
fees is appropriate under § 285, reassessing the question
without reliance on the now-reversed willfulness finding.
CONCLUSION
For the foregoing reasons, the judgment of the district
court is affirmed in part, reversed in part, and vacated
and remanded in part.
No costs.
AFFIRMED IN PART, REVERSED IN PART, AND
VACATED AND REMANDED IN PART