Elbit Systems Land and C4i Ltd v. Hughes Network Systems, LLC , 927 F.3d 1292 ( 2019 )

United States Court of Appeals
for the Federal Circuit
______________________
ELBIT SYSTEMS LAND AND C4I LTD., ELBIT
SYSTEMS OF AMERICA, LLC,
Plaintiffs-Appellees
v.
HUGHES NETWORK SYSTEMS, LLC,
Defendant-Appellant
______________________
2018-1910
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 2:15-cv-00037-RWS, Judge
Robert Schroeder, III.
______________________
Decided: June 25, 2019
______________________
RICHARD L. RAINEY, Covington & Burling LLP, Wash-
ington, DC, argued for plaintiffs-appellees. Also repre-
sented by KEVIN F. KING, RANGANATH SUDARSHAN; KURT
CALIA, Palo Alto, CA; PATRICK NORTON FLYNN, Redwood
Shores, CA.
WILLIAM F. LEE, Wilmer Cutler Pickering Hale and
Dorr LLP, Boston, MA, argued for defendant-appellant.
Also represented by LAUREN B. FLETCHER, KEVIN
GOLDMAN; CLAIRE HYUNGYO CHUNG, Washington, DC.
______________________
2 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
Before TARANTO, MAYER, and CHEN, Circuit Judges.
TARANTO, Circuit Judge.
Elbit Systems Land and C4I Ltd. and Elbit Systems of
America, LLC (collectively, Elbit) brought this action
against Hughes Network Systems, LLC (and other defend-
ants no longer in the case). Elbit alleged that Hughes in-
fringed Elbit’s U.S. Patent Nos. 6,240,073 and 7,245,874.
The jury found system claims 2–4 of the ’073 patent in-
fringed and not invalid, and it awarded damages. It also
found no infringement of the ’874 patent. The district court
later found that the case is exceptional and that Elbit is
entitled to attorney’s fees, but the court has not quantified
the fees. The ’874 patent is not before us; nor is the validity
of the asserted claims of the ’073 patent. Hughes appeals
the infringement finding and damages award for claims 2–
4 of the ’073 patent and the exceptionality determination.
We affirm as to infringement and damages. We lack juris-
diction over the unquantified attorney’s fees decision, so we
dismiss that portion of the appeal.
I
A
The ’073 patent is entitled “Reverse Link for a Satellite
Communication Network.” The patent claims a system for
transmitting information from user terminals to a central
hub using satellite communication—that direction being
called a “reverse link.” ’073 patent, col. 4, lines 45–65; id.,
col. 22, lines 51–59. Add “a forward link,” i.e., satellite com-
munication from the hub to user terminals, and the result
is “a complete two way communication system via satel-
lite.” Id., col. 4, lines 45–50. To transmit data to the hub,
user terminals employ a “transmitter means,” which, in
turn, has two communication means: the first is for “trans-
mitting short bursty data,” while the second is for “contin-
uous transmission of data.” Id., col. 23, lines 30–35. The
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 3
SYSTEMS, LLC
patent also describes a “switching means” to switch be-
tween the two communication means. Id., col. 23, lines 36–
39.
Claim 2 recites:
2. A multiple access communications system for
use in a satellite communication network, compris-
ing:
a plurality of user terminals for generating
data to be transmitted over said multiple
access communication system;
at least one hub for receiving data over said
multiple access communication system
from said plurality of user terminals;
transmitter means within each user termi-
nal for receiving data to be transmitted
from said user terminal to said hub, said
transmitter means including first commu-
nication means for transmitting short
bursty data in combination with second
communication means for continuous
transmission of data;
switching means coupled to said transmit-
ter means for switching transmission be-
tween said first communication means and
said second communication means in ac-
cordance with predefined criteria, and
receiver means within said at least one hub
adapted to receive data transmitted by said
plurality of terminals utilizing either said
first communication means or said second
communication means,
wherein said switching means comprises
means for switching from said first commu-
nication means to said second
4 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
communication means when the length of a
message received by said transmitter
means exceeds a predetermined threshold.
Id., col. 23, lines 22–48. Claim 3 describes an “access com-
munications system for use in a satellite communication
network” with the same limitations for transmitting, com-
munication, and switching means as claim 2. Id., col. 23,
line 49, through col. 24, line 9. Claim 4 describes a “multi-
ple access communications system for use in a satellite
communication network” with the same limitations for
transmitting, communication, and switching means as
claim 2. Id., col. 24, lines 10–37.
B
As relevant here, on January 21, 2015, Elbit sued
Hughes for infringement of the ’073 patent. The limita-
tions now at issue, “communication means for continuous
transmission of data” and “switching means,” were held to
be means-plus-function terms. Elbit Sys. Land & C4I Ltd.
v. Hughes Network Sys., LLC, No. 2:15-CV-37-RWS-RSP,
2016 WL 6082571, at *7, *14 (E.D. Tex. Oct. 18, 2016)
(Claim Construction Decision); J.A. 56–64 (affirming the
magistrate judge’s claim constructions). The “second com-
munication means” was construed to require “continuous
transmission of data,” and the corresponding structure was
held to be the “Channel Assignment Transmitter.” Claim
Construction Decision at *7. The “switching means” was
construed to require “switching transmission between said
first communication means and said second communica-
tion means in accordance with predefined criteria,” and the
corresponding structure was held to be a modem or a driver
“performing the algorithms disclosed in the ’073 Patent at
10:30-11:40 or Figure 8, and equivalents thereof.” Id. at
*14. The cited portion of the ’073 patent explains the two
different communication means and lists the criteria for
switching from first to second means, ’073 patent, col. 10,
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 5
SYSTEMS, LLC
line 58, through col. 11, line 11, and for switching back to
first, id., col. 11, lines 26–36.
On August 7, 2017, the jury found that Hughes in-
fringed because its products came within claims 2–4 of the
’073 patent, and that those claims are not invalid. The jury
found that Hughes did not infringe the ’874 patent, a find-
ing that Elbit does not appeal. The jury awarded Elbit
$21,075,750 in damages. The district court denied
Hughes’s post-trial motions for judgment as a matter of law
for non-infringement and for a new trial on damages. J.A.
220–34; J.A. 245–50. The district court also found that the
case is exceptional and granted Elbit’s motion for attor-
ney’s fees. J.A. 260–65. The district court did not quantify
the award. The final judgment was entered on March 30,
2018.
Hughes timely appealed. We have jurisdiction under
28 U.S.C. § 1295(a)(1) to consider the infringement and
damages decisions. Because the unquantified fee award is
not a final decision, we do not have jurisdiction to review
the district court’s exceptionality finding.
II
Hughes challenges the jury’s finding of infringement of
the ’073 patent. In particular, Hughes argues that its prod-
ucts do not include the claimed “continuous transmission
of data” communication means or the switching means.
See 35 U.S.C. § 271(a). We review denials of motions for
judgment as a matter of law de novo under the relevant
regional circuit’s law and ask whether the underlying jury
findings were supported by substantial evidence. See Bear
Ranch, L.L.C. v. HeartBrand Beef, Inc., 885 F.3d 794, 801
(5th Cir. 2018); i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d
831, 841 (Fed. Cir. 2010) (following Fifth Circuit law), aff’d
on other issues, 564 U.S. 91 (2011). Because the jury’s find-
ings as to infringement of the communication means and
the switching means were each supported by substantial
evidence, we reject Hughes’s challenge.
6 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
A
Substantial evidence supports the jury’s finding that
the accused Hughes products have a continuous communi-
cation means. The accused products are Hughes’s Di-
recWay, HN, HX, and Jupiter product lines, which provide
broadband internet access via satellite communication.
Hughes’s accused products use two methods for transmit-
ting data: ALOHA and Dynamic Stream. When using the
ALOHA method, the satellite “randomly transmits bursts
[of data] on an available Aloha channel.” J.A. 5678. When
using the Dynamic Stream method, the terminal can send
transmissions of “variable sizes during each frame.” Id.
Bruce Elbert, Elbit’s expert, testified that the Dynamic
Stream mode “provide[s] . . . continuous transmission of
data,” as is required by the patent. J.A. 1465; J.A. 2373–
74. His testimony was based on both the way that the Dy-
namic Stream mode functions and the types of data trans-
mitted in Dynamic Stream mode. For functionality, Mr.
Elbert relied on Hughes’s own product description, which
shows that terminals in ALOHA transmit data in short
blocks and terminals in Dynamic Stream transmit data in
relatively longer transmissions. J.A. 5678. Additionally,
Mr. Elbert testified that Dynamic Stream mode is used for
the same types of large data files that are too big for
ALOHA bursts and would be transmitted through the sec-
ond communication means in the ’073 patent’s system. J.A.
1465. Elaborating, he stated that “a long burst length” con-
stitutes “continuous transmission” as claimed in Elbit’s pa-
tent and short bursts consisting of “just a few blocks of
data” do not. J.A. 2374–76. Based on Mr. Elbert’s testi-
mony and the Hughes documents, the jury could permissi-
bly find that Hughes’s products have a continuous
transmission mode.
Hughes’s primary response to Elbit’s evidence is that
Dynamic Stream mode cannot provide continuous trans-
mission of data because the transmissions in Dynamic
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 7
SYSTEMS, LLC
Stream mode have “guard” times during which the trans-
mitter is turned off. Appellant Br. at 28–31. Stephen
Wicker, an expert for Hughes, testified that Internet Pro-
tocol over Satellite (IPoS), the standard used by the ac-
cused Hughes products, includes a guard time. J.A. 2209–
12; J.A. 5894. Hughes also points to a reference to guard
times in the section of the specification of the ’073 patent
describing the first communication means. See ’073 patent,
col. 13, lines 22–23. Finally, Hughes points to testimony
from Mr. Elbert discussing a specific kind of channel as-
signment mode that is non-continuous and has guard times
“[b]etween the bursts.” J.A. 1535–36.
Hughes’s evidence about guard times, however, does
not override, as a matter of law, the substantial evidence
supporting the jury’s finding that the Dynamic Stream
mode is properly characterized by a skilled artisan as “con-
tinuous.” The evidence includes the following. First, the
IPoS may show guard times, but Mr. Elbert testified that
Hughes’s products do not insert guard times in the middle
of a stream transmission. J.A. 2376. Because the jury was
entitled to rely on Mr. Elbert’s testimony that each trans-
mission in the Hughes system is not interrupted by a guard
time, having guard times following a transmission does not
necessarily mean the transmission was not continuous.
Second, as to the discussion of guard times in the specifica-
tion, the failure to mention guard times in the section dis-
cussing channel assignment (a “continuous” mode) does not
imply that no continuous mode can have guard times. That
section describes a specific type of channel assignment that
does not use guard times, ’073 patent, col. 14, line 23,
through col. 15, line 2, but the district court did not limit
the second communication means to that single type of
channel assignment; indeed, the court rejected Hughes’s
argument that the ’073 patent should be limited to one,
specific type of channel assignment that did not use guard
times. See Claim Construction Decision at *5–7 (defining
the structure for the second communication means as
8 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
“Channel Assignment Transmitter 110 in Fig. 6, and equiv-
alents thereof”). Finally, Mr. Elbert’s textbook testimony
addressed an older Hughes system and a type of channel
assignment that inserted a guard time between bursts of
predetermined lengths of time. J.A. 1535–36. The ’073 pa-
tent and the accused Hughes products, in contrast, provide
variable length bursts so the transmission will be sent be-
fore a guard time is inserted. J.A. 1464 (“Now, here we’re
saying dynamic stream involves variable burst
lengths . . . .”); ’073 patent, col. 15, lines 29–31 (“[In chan-
nel assignment,] [a] specific frequency and a particular
bandwidth are assigned and the data is transmitted for a
specific period of time or until the data ends.” (emphasis
added)). None of Hughes’s evidence about guard times pre-
cluded the jury from finding that the Hughes products have
a continuous transmission mode.
B
Substantial evidence supports the jury’s finding that
Hughes’s products have a switching means. Hughes ar-
gues that its products do not perform the algorithm in the
’073 patent that the district court identified as the struc-
ture for the switching means. Specifically, Hughes argues
that its products neither (1) switch back to the first com-
munication modes following the articulated criteria nor (2)
request a specific data rate, and that they do not perform
an equivalent to those steps either. The jury could reason-
ably find otherwise.
1
There is substantial evidence that Hughes’s products
switch back to the first communication mode using a struc-
ture that “performs the claimed function in substantially
the same way” as the claimed structure. Odetics, Inc. v.
Storage Tech. Corp., 185 F.3d 1259, 1267 (Fed. Cir. 1999).
Hughes first argues that Mr. Elbert did not testify about
the switching-back process at all. But Mr. Elbert did not
limit his direct testimony to switching from first to second
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 9
SYSTEMS, LLC
communication means. See J.A. 1472; J.A. 1477; J.A.
19122. And on rebuttal, Mr. Elbert specifically disagreed
with Dr. Wicker’s assessment that Mr. Elbert had dis-
cussed switching in one direction only (from first to sec-
ond), indicating that his testimony applied to switching in
either direction. J.A. 2365; J.A. 2370–71.
Further, expert evidence indicates that, in a relevant
respect, the Hughes products use the same criteria for
switching in the two directions. Message length is one of
the criteria listed in the ’073 patent as prompting a switch
either from the first to the second communication means or
from the second back to the first. ’073 patent, col. 10, lines
63–67; id., col. 11, lines 30–31. As Mr. Rich Goodin,
Hughes’s expert, explained, message length is central to
how and when the Hughes products switch communication
modes, J.A. 1574, an assessment confirmed by Mr. Elbert’s
testimony, see J.A. 1469–79. A terminal in the Hughes sys-
tem “tries to send th[e] data within a ALOHA burst. If the
data won’t fit . . . [the terminal] sets the backlog so it can
signal to the hub that there’s more data to send.” J.A. 1574.
If the hub receives a backlog indicator, which means that
the message is too long to send in an ALOHA burst, the
hub assigns the terminal a channel, and the terminal
transmits the remaining data that could not fit in the
ALOHA burst in Dynamic Stream mode. J.A. 1473–76;
J.A. 1574. In addition, Dr. Wicker had testified that it
would not make sense for the terminal to be in Dynamic
Stream mode when the backlog was zero. J.A. 2294–95.
On the record before it, the jury could permissibly find that,
when the backlog is zero, the terminal switches back to
ALOHA mode in the accused products.
Hughes’s second argument for why the structures are
not substantially the same is that, in the accused products,
the hub, not the terminal, controls at least some of the
claimed switching. The parties agree that the ’073 patent
requires that the terminal control the switch. See J.A. 1514
(“Q. And that decision to switch needs to be in the terminal,
10 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
we all agree on that? A. I mean, technically, it does, yes.
Q. Okay. So there won’t be any dispute, any doubt that the
decision to switch needs to be in the terminal in order to
infringe these claims? A. Yeah, I think that’s good.”). But,
contrary to Hughes’s contention, there is substantial evi-
dence on which the jury could find that in the Hughes sys-
tem the terminal controls the switch. Specifically, Mr.
Elbert, relying on information from Hughes’s experts, tes-
tified that the terminal controls the backlog message, and
“the hub accepts that backlog message and what it says
and acts upon it. It’s obedient to that backlog message.”
J.A. 2363; see also J.A. 1477 (repeating prior testimony of
an expert for Hughes that the hub “takes at face value” the
backlog signal sent by the terminal); J.A. 2294–95 (Dr.
Wicker testifying that it “wouldn’t make sense for the hub
to” switch to Dynamic Stream mode without receiving the
backlog signal and he had “seen no evidence that that ac-
tually happens”).
Hughes argues to the contrary based on a section of the
IPoS manual that describes the accused switch, which in-
dicates that the hub “does not immediately stop allocating
bandwidth to the terminal” when its “backlog goes to zero.”
J.A. 5252 (emphasis added). But that language, standing
alone, does not preclude the jury’s finding about the termi-
nal’s control; for example, the word “immediately” may be
only about when, not whether, the switch will be made
upon receiving the terminal’s signal. And no other evi-
dence to which we have been pointed establishes that the
passage must mean what Hughes suggests it means. Oral
Arg. at 32:19–32. Accordingly, the jury could reasonably
find that in the Hughes products the terminal controls the
switch.
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 11
SYSTEMS, LLC
2
The jury could also reasonably find that Hughes’s prod-
ucts perform the step of requesting a specific data rate.
Part of the ’073 patent specification that was identified as
the structure for the switching means, Claim Construction
Decision at *14, states that “[t]he request [to switch com-
munication means] also includes a specific requested data
rate,” ’073 patent, col. 11, lines 14–15. There is substantial
evidence that the Hughes products perform this portion of
the algorithm as well, by having a structural equivalent.
See Odetics, 185 F.3d at 1267. Among such evidence is tes-
timony from a Hughes expert in the anticipation portion of
the trial. Dr. Wicker testified that in an older Hughes sys-
tem, the terminal would request a certain number of trans-
mission slots and “each slot allows you to transmit data at
a certain rate,” meaning that the hub could calculate the
total data rate using the number of slots the terminal re-
quested. J.A. 2249. Mr. Elbert, for his part, testified that
the hub receives information about the size of the message
to be transmitted, which would allow the hub to “compute”
the data rate. J.A. 2364; see also J.A. 1478; J.A. 1514–15.
The jury could permissibly find that Hughes’s products re-
quest a specific data rate as required by the ’073 patent.
III
The district court did not abuse its discretion in deny-
ing Hughes’s motion for a new trial on damages. Under the
applicable regional circuit’s law, we here review the district
court’s decision to refuse a new trial only for an abuse of
discretion. Encompass Office Sols., Inc. v. La. Health Serv.
& Indem. Co., 919 F.3d 266, 273 (5th Cir. 2019); Gutierrez
v. Excel Corp., 106 F.3d 683, 687 (5th Cir. 1997); Scott v.
Monsanto Co., 868 F.2d 786, 789 (5th Cir. 1989); see Uniloc
USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1309 (Fed. Cir.
2011). In determining whether a trial court has abused its
discretion in these circumstances, the Fifth Circuit consid-
ers whether the damages award was supported by
12 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
substantial evidence. See Lucas v. Am. Mfg. Co., 630 F.2d
291, 293–94 (5th Cir. 1980); Pletz v. Christian Herald
Ass’n, Inc., 486 F.2d 94, 97 (5th Cir. 1973) (“When the evi-
dence as shown in the record, however, is insufficient to
support the award, the jury’s award would be erroneous
and a new trial must be had.”).
A
Testimony by Elbit’s damages expert Mr. Christopher
Martinez provides substantial evidence to support the
jury’s damages award. Mr. Martinez’s testimony is the
only expert testimony on damages in the trial record.
Hughes chose not to introduce any expert testimony of its
own on the subject.
We have previously explained that prior settlements
can be relevant to determining damages. Prism Techs.
LLC v. Sprint Spectrum L.P., 849 F.3d 1360, 1369 (Fed.
Cir. 2017). Not every settlement will be relevant, and
some, while probative, will introduce a danger of unfair
prejudice that substantially outweighs the probative value.
Id. Thus, whether in using a settlement agreement at all
or in drawing the appropriate lessons from the particular
settlement for the case in which it is being used, relevant
circumstances—such as similarities and differences in
technologies and market conditions and the state of the
earlier litigation when settled—must be carefully consid-
ered. Id. at 1370–71. Use of actual past licenses and nego-
tiations to inform the hypothetical negotiation does not
“require[] identity of circumstances.” Virnetx, Inc. v. Cisco
Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014). Instead,
the prior licenses or settlements need to be “sufficiently
comparable” for evidentiary purposes and any differences
in circumstances must be soundly accounted for. Id.; see
AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1335 (Fed.
Cir. 2015) (holding that the district court did not err in its
analysis of other, comparable licenses and settlements be-
cause it accounted for “similarities and differences between
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 13
SYSTEMS, LLC
those negotiations and the hypothetical negotiations”); see
also Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d 1283,
1299 (Fed. Cir. 2015) (determining that it was appropriate
to use a prior license to gauge damages because it involved
comparable technology and similarly situated companies);
Transocean Offshore Deepwater Drilling, Inc. v. Maersk
Drilling USA, Inc., 699 F.3d 1340, 1357–58 (Fed. Cir. 2012)
(relying on other licenses and acknowledging the differ-
ences between Maersk’s conduct and the conduct of other
licensees); Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1110
(Fed. Cir. 1996) (relying on licenses between Maxwell and
other licensees to establish the reasonableness of the roy-
alty rate).
Mr. Martinez relied on a prior settlement and appro-
priately accounted for differences between the circum-
stances of that settlement and the present circumstances.
The relied-on settlement was one between Hughes itself
and Gilat, another satellite internet company. The Gilat
Agreement was the result of a suit that Hughes, as patent
owner, filed against Gilat for allegedly infringing Hughes’s
older satellite communication system, which used satellite
communication for only one direction (hub to terminals) of
the transmission. Mr. Martinez testified to how what
Hughes received in that settlement provided relevant evi-
dence for determining what Hughes reasonably should pay
as a royalty for use of Elbit’s technology at issue here.
Relevant facts considered by Mr. Martinez include the
following. The Gilat Agreement occurred only four months
after the agreed-on date of the hypothetical negotiation
posited for determining the reasonable royalty in this mat-
ter. Compare J.A. 1716 with J.A. 202. The time periods for
assessing value in the satellite-service marketplace were
therefore very close. The technologies were also related for
purposes of determining market value. See J.A. 1485 (Mr.
Elbert’s testimony that the ’073 patent’s technology was
“the closest” comparator to the Gilat Agreement). The Gi-
lat Agreement involved obtaining internet access using
14 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
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one-way satellite communication, and the ’073 patent in-
volves obtaining internet access using two-way satellite
communication. All three companies, Gilat, Hughes, and
Shiron (Elbit’s predecessor) participated in the satellite in-
ternet-access market. While Hughes and Gilat were estab-
lished competitors and Shiron was a start-up, Shiron had
the “breakthrough technology,” J.A. 1720, that represented
“the next generation” of internet access, J.A. 1717, while
the Gilat Agreement concerned “the old one-way product,”
J.A. 1717–18.
Mr. Martinez attended to all of those facts. Mr. Mar-
tinez also accounted for the fact that the Gilat Agreement
was a settlement prompted by litigation. See J.A. 1749–52.
In the end, he relied on the per-unit figure in the Gilat
Agreement for one-way technology, together with Hughes-
based evidence that two-way technology was worth at least
an additional 20%, to arrive at his proposed per-unit fig-
ure—which the jury adopted. J.A. 17708.
We conclude that Elbit and Mr. Martinez did what our
case law requires in explaining the relevance of a prior set-
tlement to this case. Hughes, which introduced no expert
damages testimony of its own, has not demonstrated either
“faulty assumptions” or “a lack of reliable economic testi-
mony” that would warrant disturbing the jury’s award.
Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197,
1212 (Fed. Cir. 2010). This is a case in which it was up to
the jury to “weigh contradictory evidence, to judge the cred-
ibility of the witnesses, and to resolve factual disputes.” Id.
B
Hughes argues that Elbit’s damages evidence, and
hence the jury award, is counter to our precedent on appor-
tionment. “When the accused technology does not make up
the whole of the accused product, apportionment is re-
quired. ‘[T]he ultimate combination of royalty base and
royalty rate must reflect the value attributable to the in-
fringing features of the product, and no more.’” Finjan, Inc.
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 15
SYSTEMS, LLC
v. Blue Coat Sys., Inc., 879 F.3d 1299, 1309 (Fed. Cir. 2018)
(quoting Ericsson, Inc. v. D–Link Sys., Inc., 773 F.3d 1201,
1226 (Fed. Cir. 2014)); see also Garretson v. Clark, 111 U.S.
120, 121 (1884); Commonwealth Sci. & Indus. Research
Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1301 (Fed. Cir. 2015)
(CSIRO). We see no violation of those principles here.
Mr. Martinez testified that apportionment “is essen-
tially embedded in [the] comparable value” from the Gilat
Agreement concerning a comparable component of a larger
product or service. J.A. 1730; see also J.A. 17576 (“[T]he
requisite apportionment is implicitly considered within the
royalty rate [of the Gilat Agreement].”). Rather than
“parse out a value for each of the claims,” Mr. Martinez
“came up with a market, comparable royalty rate, and then
[he] adjusted it as necessary” for the hypothetical negotia-
tion. J.A. 17699; J.A. 1731. As we have noted, to reach his
final figure, he increased the royalty by 20% from the Gilat
Agreement, Hughes executives having made statements
indicating that the two-way system provided a 20% in-
crease in value over the old one-way system. J.A. 17708.
Mr. Martinez’s approach is consistent with our prece-
dent concerning the apportionment requirement that a roy-
alty should reflect the value of patented technology. See
CSIRO, 809 F.3d at 1302–03. In CSIRO, the district court
started with evidence of proposed royalty rates from the
parties’ prior attempts at negotiating a license for the pa-
tent. Id. at 1300, 1302–03. We determined that the district
court’s analysis was not in error because it “already built
in apportionment” by starting from “discussions centered
on a license rate” for the same patent, those discussions
having already informally apportioned the proposed li-
cense rates to the value of the patented technology. Id. at
1303. Hughes has not shown the unreasonableness of that
analysis of how a negotiation can fulfill the apportionment
requirement. And this case is relevantly similar. Mr. Mar-
tinez’s testimony allowed the jury to find that the compo-
nents at issue, for purposes of apportionment to the value
16 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
SYSTEMS, LLC
of a larger product or service, were comparable to the com-
ponents at issue in the Gilat-Hughes agreement, and
Hughes introduced no evidence that precluded such a find-
ing. Gilat and Hughes would have had to consider the ben-
efit from the patented technology over other technology
and account for that in the Gilat Agreement. As a result,
when Mr. Martinez used the Gilat Agreement as his start-
ing point, his analysis could reasonably be found to incor-
porate the required apportionment.
C
Hughes’s final damages-related challenge to the dis-
trict court denial of a new trial points to certain evidence
that Elbit introduced. This challenge relies on this court’s
recognition of an evidentiary principle aimed at avoiding
dangers of certain testimony. Thus, we have held that a
party’s reference to an infringer’s entire revenue earned
from its sale of accused products, where only part of the
value of the apparatus is attributable to the patented tech-
nology, can “skew the damages horizon for the jury.”
Uniloc, 632 F.3d at 1320; id. at 1318–19 (holding that it
was improper to permit an expert to testify about the total
$19.28 billion revenue generated by Microsoft Office and
Windows—total company revenue, not customer-specific
revenue—where the patented technology was not the rea-
son customers bought Office or Windows). Relatedly, we
have recognized that, when an expert calculates a running
royalty by using the price of such a product as a royalty
base to be multiplied by a percentage rate, the size of the
base must be suitably limited to avoid a prejudicial effect
on a jury determination. See Ericsson, 773 F.3d at 1226–
27; LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d
51, 67 (Fed. Cir. 2012). Hughes challenges the introduction
of certain Elbit testimony based on that principle, but we
see no reversible error in the district court’s denial of a new
trial on this basis in this case. J.A. 249.
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 17
SYSTEMS, LLC
At three points in his testimony, Mr. Martinez referred
to the revenue Hughes receives from service fees for an av-
erage customer over the course of that customer’s time buy-
ing the relevant service from Hughes. First, in explaining
how he arrived at his reasonable royalty rate, he stated,
based on his expert report, that he “determined that
Hughes earns approximately $2500 of revenue per cus-
tomer,” on average, from its DirecWay, HN, HX, and HT
products. J.A. 1732. Second, the $2500 number was refer-
enced in his conclusion that $18 was a reasonable royalty
because “[$]18 is a smaller portion of the $2500.” J.A. 1733.
According to Mr. Martinez, it was “reasonable” for “Hughes
to pay $18 in order to get approximately $2500 worth of
revenue.” Id. Finally, in summarizing his analysis, he re-
iterated that a royalty rate of $18 was “very reasonable
given the $2500 of revenue that Hughes derives from the
products.” J.A. 1739. Hughes does not identify, and the
transcript at those passages does not reveal, an objection
by Hughes to that testimony.
Mr. Martinez’s reference to life-of-service customer-
specific (service) revenue from relevant products does not
fall into a pattern we have specifically disapproved. The
$2500 customer-specific reference is not the same as
Uniloc’s reference to Microsoft’s $19 billion in company-
wide revenue. Nor did Mr. Martinez use a high price of a
multi-component overall product or service as a base, mul-
tiplied by a percentage, in a rate-base running-royalty cal-
culation. Rather, he calculated a flat per-unit dollar figure
based on a license examined for comparability and checked
the reasonableness of the resulting figure, as part of a hy-
pothetical-negotiation analysis, against a life-of-relation-
ship service-revenue figure for an average customer. This
analysis may be more akin to the reliance on licenses that
was the subject of Ericsson, where we upheld a license-
based calculation that relied on product value, concluding
that, under the evidentiary principle grounded in a
18 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
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prejudice-probativeness balance, such a methodology is not
automatically reversible error. Ericsson, 773 F.3d at 1228.
We do not decide here how the evidentiary principle at
issue would apply to testimony of the sort Mr. Martinez
gave if the testimony stood alone and an objection were
made in a timely fashion with an adequate explanation of
why Mr. Martinez’s particular analysis created the kind of
prejudice that substantially outweighs probative value of
the type targeted by the evidentiary principle at issue. But
the pretrial motion to which Hughes points as raising the
present issue did not identify a reference of the sort Mr.
Martinez made and seek and support its exclusion. 1 Then,
at trial, as far as we have been shown, there was no objec-
tion by Hughes and no judicial ruling that opened the door
to what Hughes itself did—namely, affirmatively use
Uniloc-type evidence. Specifically, Hughes itself referred
to a figure representing company-wide revenue, see J.A.
10183, despite the pretrial agreement about exclusion of
“total revenues,” J.A. 119; J.A. 156, and in closing
1 Before trial, Hughes moved to preclude reference to
Hughes’s “total revenues, net worth, or prices,” also men-
tioning “profitability,” and it cited only one authority,
namely, Uniloc, and only for company-wide figures—reve-
nue, profitability, or net worth. J.A. 18082–83. The parties
agreed not to refer to total company revenues and net
worth, J.A. 119, 156, and Elbit did not do so. As to “prices,”
Hughes’s pretrial motion merely mentioned the word; it
made no argument at all, and cited no authority, to support
its request for exclusion, and the district court denied the
request. J.A. 119, 156. Hughes’s pretrial motion did not
even mention exclusion of any reference to life-of-relation-
ship revenue from an average customer (whether as a rea-
sonableness check on a separately derived royalty amount
or otherwise), much less explain the proper legal treatment
of such a reference.
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 19
SYSTEMS, LLC
argument, Hughes called the jury’s attention to the exhibit
disclosing that figure, J.A. 2566. In these circumstances,
whether as a matter of forfeiture or as a matter of insuffi-
ciency of a showing of prejudice from the Elbit testimony
under the principle invoked by Hughes, we see no reversi-
ble error in the district court’s refusal to grant a new trial.
We therefore do not disturb the jury’s damages award.
IV
Hughes asks us to review and reverse the district
court’s determination that, under 35 U.S.C. § 285, this is
an exceptional case entitling Elbit to some attorney’s fees—
whose amount has not been quantified. We conclude that
we lack jurisdiction to review the unquantified attorney
fees award. We therefore dismiss Hughes’s appeal to the
extent it seeks review of the district court’s exceptionality
finding.
A
We begin with 28 U.S.C. § 1295, which requires a final
decision in the case being appealed and is interpreted in
accordance with the interpretation of 28 U.S.C. § 1291. See
Johannsen v. Pay Less Drug Stores Nw. Inc., 918 F.2d 160,
161 n.1 (Fed. Cir. 1990). We see no basis for § 1295 juris-
diction to review an exceptionality determination made un-
der 35 U.S.C. § 285 before fees have been quantified.
In Budinich v. Becton Dickinson & Co., the Supreme
Court insisted on cleanly separating, for finality purposes,
the decision on the merits of a case from the decision on
attorney’s fees. 486 U.S. 196 (1988). The Court held that
“a decision on the merits is a ‘final decision’ for purposes of
§ 1291 whether or not there remains for adjudication a re-
quest for attorney’s fees attributable to the case.” Id. at
202–03. Once the fees determination is viewed separately
from the merits, as Budinich requires, it follows that a de-
termination of entitlement to fees is not a reviewable final
20 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
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decision until quantification of the fee award. See Falana
v. Kent State Univ., 669 F.3d 1349, 1360 (Fed. Cir. 2012)
(“[T]he district court’s exceptional case determination is a
separately appealable judgment which itself must be final.
. . . The district court’s decision finding the case excep-
tional and awarding attorney fees that remain as of yet un-
quantified is not final and thus, not appealable. . . . A non-
final decision does not become final simply because it is is-
sued in the same order as a final decision.”); Special De-
vices, Inc. v. OEA, Inc., 269 F.3d 1340, 1345 (Fed. Cir. 2001)
(“A decision to award attorney fees under 35 U.S.C. § 285
is not final and appealable before the award has been quan-
tified.”).
Several aspects of Budinich’s reasoning reinforce this
conclusion. First, the Court in Budinich reasoned that, for
questions of jurisdiction, “[c]ourts and litigants are best
served by [a] bright-line rule” of merits-fees separation.
Budinich, 486 U.S. at 202. Section 1295 should be no dif-
ferent. Second, the Court in Budinich explained that one
reason for a clean merits-fees finality separation is that
proceedings on attorney’s fees do not realistically involve
an “opportunity for reconsideration” of the merits. Id. at
202; see id. at 200. The logic of that observation supports
keeping quantification and entitlement together for final-
ity purposes on the fees side of the merits-fees divide: the
quantification process might well present an opportunity
for reconsideration of the entitlement determination. We
held in In re Rembrandt Technologies LP Patent Litigation
that a district court must find a “causal connection” be-
tween the basis for an exceptionality determination and
the amount of fees awarded. 899 F.3d 1254, 1280 (Fed. Cir.
2018). The required scrutiny of what consequences fol-
lowed from the conduct under the exceptionality determi-
nation might lead to reconsideration of whether the case
was exceptional in the first place, at least where, as here,
the exceptionality determination rests on isolated inci-
dents, not overall exceptional weakness on the merits of
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 21
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the entire case or defense. And as a still more practical
matter, the causation inquiry may result in so small a fee
award that no appeal is taken from the award, making ap-
pellate review of exceptionality unnecessary.
B
We also see no sound basis in 28 U.S.C. § 1292(c)(2) for
jurisdiction to review entitlement to fees before quantifica-
tion. That provision permits an appeal from “a judgment
in a civil action for patent infringement which would oth-
erwise be appealable to [this court] and is final except for
an accounting.” This court has held that the “accounting”
provision applies where the only remaining issues are is-
sues of actual and enhanced damages under 28 U.S.C.
§ 284. See Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d
1305, 1311–13 (Fed. Cir. 2013) (en banc). But § 1292(c)(2)
does not authorize review of fees rulings.
Section 1292(c)(2) adds to appellate jurisdiction in only
one way: it authorizes appellate review of a judgment that
would be final, i.e., reviewable under § 1295, except that
certain “accounting” issues are undecided. But Section
1292(c)(2) does not add jurisdiction to review rulings that
would not be part of the final judgment if the “accounting”
issues were resolved. As already explained, under Budi-
nich, unquantified fees are not part of what is reviewable
under § 1295 and so they are not part of what § 1292(c)(2)
makes appealable.
To make the point another way, all that § 1292(c)(2)
does is allow review of a subset of merits rulings. Fees rul-
ings, Budinich makes clear, are not to be treated as merits
issues. Indeed, fees arise under a provision, 35 U.S.C.
§ 285, that is separate from the provisions authorizing
merits relief, including damages relief, 35 U.S.C. §§ 283
(injunctions), 284 (damages). Statutory history confirms
that fees are not part of an “accounting”: the statutory au-
thorization for an “accounting” long predates 1946, see Rob-
ert Bosch, 719 F.3d 1309–13, yet until Congress provided
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for fees in 1946, fees were unavailable in patent cases, Oc-
tane Fitness v. ICON Health & Fitness, 572 U.S. 545, 549
(2014). We have therefore recognized that the “[d]etermi-
nation of attorney fees is not an ‘accounting.’” Special De-
vices, 269 F.3d at 1343 n.2. We hold that § 1292(c)(2) does
not authorize appellate review of a pre-quantification fees-
entitlement ruling.
In nevertheless arguing for jurisdiction, Hughes dis-
putes none of the foregoing, but relies entirely on what this
court said in Majorette Toys (U.S.) Inc. v. Darda, Inc.
U.S.A, 798 F.2d 1390 (Fed. Cir. 1986). There, all merits
issues in the case had been decided by the district court,
which also found fees to be warranted, and nothing re-
mained but to quantify the fees. When the loser appealed
from the judgment, the court denied a motion to dismiss
the appeal, without differentiating the merits from the fee-
entitlement ruling. In denying the motion, the court relied
only on § 1292(c)(2). 798 F.2d at 1390–92. We conclude,
however, that Majorette Toys cannot sustain § 1292(c)(2)
jurisdiction over the fee-entitlement ruling where it is oth-
erwise clear that no such jurisdiction exists.
First, Majorette Toys contains no decision on, or even
any discussion of, dismissing only the challenge to the fee-
entitlement ruling, which is the jurisdictional issue before
us. The only jurisdictional issue decided in Majorette Toys
was whether the entire appeal, which included the merits,
had to be dismissed. Thus, Majorette Toys does not address
the specific jurisdictional issue we face, and so it is not con-
trolling precedent on that issue. See Arthrex, Inc. v. Smith
& Nephew, Inc., 880 F.3d 1345, 1349 (Fed. Cir. 2018); Fla.
Power & Light Co. v. United States, 307 F.3d 1364, 1371
(Fed. Cir. 2002).
Second, Majorette Toys predates Budinich. We have
already recognized that Budinich and other supervening
Supreme Court precedent undermined the rationale of Ma-
jorette Toys. See Falana, 669 F.3d at 1360–61 (so
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 23
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explaining with reference to Budinich and to the Supreme
Court’s post-Majorette Toys narrowing of pendent appel-
late jurisdiction). Indeed, we recognized soon after Budi-
nich was decided that the court’s discussion of § 1292(c)(2)
in Majorette Toys “was not necessary to its holding on ju-
risdiction” because Budinich made clear that jurisdiction
over the appeal in Majorette Toys had clearly been proper
under § 1295. Johannsen, 918 F.2d at 164. Such super-
vening Supreme Court authority is an established basis for
treating an earlier panel opinion as no longer binding. See
Tex. Am. Oil Corp. v. U.S. Dep’t of Energy, 44 F.3d 1557,
1561 (Fed. Cir. 1995) (en banc) (“This court applies the rule
that earlier decisions prevail unless overruled by the court
en banc, or by other controlling authority such as interven-
ing statutory change or Supreme Court decision.”); Troy v.
Samson Mfg. Corp., 758 F.3d 1322, 1326 (Fed. Cir. 2014);
Doe v. United States, 372 F.3d 1347, 1354–57 (Fed. Cir.
2004); Bankers Tr. N.Y. Corp. v. United States, 225 F.3d
1368, 1373 (Fed. Cir. 2000).
For those reasons, we reject Hughes’s argument for
finding § 1292(c)(2) jurisdiction over the fee-entitlement
ruling.
C
Finally, we see no sound basis for exercising pendent
appellate jurisdiction over the fees-entitlement determina-
tion. In Swint v. Chambers County Commission, the Su-
preme Court expressed a narrow view of such jurisdiction,
limiting it at most to issues that are “inextricably inter-
twined” with the final decision properly before the court of
appeals. 514 U.S. 35, 50–51 (1995). We have so recognized
in the context of unquantified fees awards. Falana, 669
F.3d at 1360–61 (recognizing that Swint “threw cold water
on pendent appellate jurisdiction,” limiting it to “extraor-
dinary circumstances . . . when a nonappealable decision is
‘inextricably intertwined’ with the appealable decision”).
24 ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK
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That demanding standard is not met here. Whether
this case is exceptional because of Hughes’s litigation con-
duct (as the district court determined) is not inextricably
intertwined with the infringement and damages issues
presented on appeal of the merits judgment. See id. at 1361
(similar conclusion on different facts). In Orenshteyn v.
Citrix Systems, Inc., we held that we did not have pendent
jurisdiction over an unquantified Rule 11 sanction because
“the finding of invalidity and the sanctions in [Orenshteyn]
ha[d] different legal bases requiring different legal anal-
yses,” meaning that “the unquantified sanction [were not]
‘inextricably intertwined’ with or necessary to review the
final decision on the merits.” 691 F.3d 1356, 1360 (Fed.
Cir. 2012) (quoting Swint, 514 U.S. at 51). The same is true
here. 2
V
For the foregoing reasons, we reject Hughes’s chal-
lenges to infringement and damages and affirm the district
court’s decision. We dismiss Hughes’s appeal to the extent
2 In support of jurisdiction, Hughes includes a pass-
ing citation to Akron Polymer Container Corp. v. Exxel Con-
tainer, Inc., in which this court reversed an inequitable-
conduct judgment and, as a simple corollary, simultane-
ously reversed an exceptional-case determination (with
fees not yet quantified) that rested entirely on the inequi-
table-conduct judgment. 148 F.3d 1380, 1384 (Fed. Cir.
1998). The latter reversal is not precedent for jurisdiction
here for at least two reasons. The court did not address
whether it had jurisdiction over the fees determination.
See Automated Merch. Sys., Inc v. Lee, 782 F.3d 1376, 1381
(Fed. Cir. 2015) (assumption of jurisdiction without discus-
sion is not accorded precedential effect). In any event, in
Akron Polymer the merits and fee-entitlement rulings were
inextricably intertwined: the latter rested wholly on the
former.
ELBIT SYSTEMS LAND AND C4I LTD v. HUGHES NETWORK 25
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that it seeks review of the determination that attorney’s
fees are warranted.
Costs awarded to Elbit.
AFFIRMED IN PART, DISMISSED IN PART