Ultratec, Inc. v. Sorenson Communications, Inc. ( 2018 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
ULTRATEC, INC., CAPTEL, INC.,
Plaintiffs-Appellants
v.
SORENSON COMMUNICATIONS, INC.,
CAPTIONCALL, LLC,
Defendants-Cross-Appellants
______________________
2017-1161, 2017-1225
______________________
Appeals from the United States District Court for the
Western District of Wisconsin in No. 3:14-cv-00066-jdp,
Judge James D. Peterson.
______________________
Decided: May 18, 2018
______________________
KRISTIN GRAHAM NOEL, Quarles & Brady, LLP, Madi-
son, WI, argued for plaintiffs-appellants. Also represent-
ed by MATTHEW J. DUCHEMIN, MARTHA JAHN SNYDER,
ANTHONY ALLEN TOMASELLI.
PRATIK A. SHAH, Akin, Gump, Strauss, Hauer & Feld,
LLP, Washington, DC, argued for defendants-cross-
appellants. Also represented by ZE-WEN JULIUS CHEN,
2 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
RACHEL J. ELSBY; MICHAEL P. KAHN, CAITLIN ELIZABETH
OLWELL, New York, NY.
______________________
Before PROST, Chief Judge, DYK and O’MALLEY,
Circuit Judges.
PROST, Chief Judge.
Plaintiffs Ultratec, Inc. and CapTel, Inc. (collectively,
“Ultratec”) appeal from the United States District Court
for the Western District of Wisconsin’s judgment as a
matter of law after a jury verdict that claims of U.S.
Patent No. 7,660,398 (“’398 patent”) are invalid as obvi-
ous. Ultratec also appeals the district court’s conclusion
that defendants Sorenson Communications, Inc. and
CaptionCall, LLC (collectively, “Sorenson”) are entitled to
judgment as a matter of law that their infringement, if
any, was not willful. Sorenson cross-appeals the district
court’s denial of its motion for judgment as matter of law
or for a new trial on damages.
We reverse the court’s judgment as a matter of law as
to invalidity and reinstate the jury’s verdict that the
claims were not invalid for obviousness. We affirm the
district court’s judgment as a matter of law that
Sorenson’s infringement was not willful. The district
court’s denial of Sorenson’s motion for judgment as matter
of law or for a new trial on damages is affirmed.
BACKGROUND
Ultratec creates technologies to help deaf and hard-of-
hearing people use the public telephone system. This case
involves Ultratec’s Patent No. 7,660,398 for “Captioned
Telephone Service,” which is directed to assisting individ-
uals with hearing impairment communicate over a tele-
phone network. Ultratec asserts claims 11, 12, and 13 of
the ’398 patent, which claim a method of operating a
captioned telephone call using specific configurations of
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 3
components. See Ultratec, Inc. v. Sorenson Commc’ns,
Inc., No. 14-CV-66-JDP, 2015 WL 5330284, at *1 (W.D.
Wis. Sept. 11, 2015) (“District Court Opinion I”).
In general, telephone relay service (TRS) systems “in-
volve connecting a hearing-impaired user to a ‘relay,’
typically a call center at which a call assistant can tran-
scribe speech into text so that the assisted user can read
the words of the other caller.” Id. “Early forms of TRS
involved a one-line connection from the assisted user to
the relay, and from the relay through another connection
to the remote user.” Id. These early forms were cumber-
some and slow because they made the users wait for the
call assistant to translate between text and speech. Id.
“Over time, more sophisticated and efficient systems
made TRS more functionally equivalent to voice telephone
communication.” Id.
The form of TRS at issue in this case is the captioned
telephone. Id. This telephone allows the assisted user
and the remote user to communicate as they would on a
traditional voice telephone, but the assisted user’s device
displays text captions of the remote user’s words. Id.
Thus, the hard-of-hearing user can pick up any missed
words from the text captions. Id.
Claim 11, from which claims 12 and 13 depend, is ex-
emplary:
11. A method of operating a captioned tele-
phone call in which an assisted user is connected
by a captioned telephone device which is connect-
ed both to one telephone line to a remote user and
a second telephone line to a relay providing cap-
tioning for a conversation, the method comprising
the steps of
during a telephone conversation, the cap-
tioned telephone device receiving captioning for
spoken words of the remote user from the relay
4 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
and displaying the words in a visual display for
the assisted user; and
during the telephone conversation, the cap-
tioned telephone device using echo cancellation to
cancel the voice of the assisted user from the sec-
ond telephone line so that the relay does not hear
the voice of the assisted user, so the relay can cap-
tion all the words on the second telephone line
without causing confusion to the assisted user.
’398 patent col. 11 l. 12–col. 12 l. 8 (emphasis added).
Before the district court, Ultratec contended that
Sorenson infringes the ’398 patent by providing captioned
telephone services using their captioned telephone devic-
es. Relevant here, Sorenson contended that the ’398
patent is invalid for obviousness.
After the validity phase of an eight-day trial, the jury
returned a general verdict rejecting the obviousness
defense as to each asserted claim. The jury determined
that Sorensen had not proven by clear and convincing
evidence that the claims were invalid as obvious.
J.A. 14350–51.
Prior to starting the damages phase of trial, the dis-
trict court determined that Sorenson was entitled to
judgment as a matter of law on the issue of willful in-
fringement. The court “conclude[d], as a matter of law,
that plaintiffs cannot meet the objective prong of the
Seagate willfulness test, and thus defendants are entitled
to judgment as a matter of law that their infringement, if
any, was not willful.” J.A. 138. Accordingly, the court did
not present the subjective prong of the willfulness inquiry
to the jury. Id.
Following the damages phase, the jury awarded a to-
tal running royalty payment of approximately $5,443,485.
J.A. 14403.
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 5
Sorenson filed renewed motions for judgment as a
matter of law with regard to obviousness and damages.
The district court granted Sorenson’s motion for
judgment as a matter of law that claims 11, 12, and 13
are invalid as obvious. Ultratec, Inc. v. Sorenson
Commc’ns, Inc., No. 14-CV-66-JDP, 2016 WL 8674696, at
*6 (W.D. Wis. Sept. 30, 2016) (“District Court Opinion II”).
The district court upheld the damages verdict, denying
Sorenson’s motion for judgment as matter of law or for a
new trial on damages. Id. at *7.
Ultratec’s appeal and Sorenson’s cross-appeal fol-
lowed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
I
Under Seventh Circuit law, we review a district
court’s grant of judgment as a matter of law after a jury
verdict de novo and we can overturn a jury’s decision only
if no rational jury could have come to the same conclusion.
E.E.O.C. v. AutoZone, Inc., 707 F.3d 824, 834–35 (7th Cir.
2013).
Obviousness is a question of law based on underlying
factual findings. Kinetic Concepts, Inc. v. Smith & Neph-
ew, Inc., 688 F.3d 1342, 1360 (Fed. Cir. 2012). In review-
ing a jury’s obviousness verdict, “[w]e first presume that
the jury resolved the underlying factual disputes in favor
of the verdict winner and leave those presumed findings
undisturbed if they are supported by substantial evi-
dence.” Circuit Check Inc. v. QXQ Inc., 795 F.3d 1331,
1334 (Fed. Cir. 2015) (quoting Jurgens v. McKasy, 927
F.2d 1552, 1557 (Fed. Cir. 1991)). We must conduct this
inquiry in light of Sorenson’s burden to overcome the
presumption of validity by clear and convincing evidence.
L & W, Inc. v. Shertech, Inc., 471 F.3d 1311, 1320 (Fed.
Cir. 2006). Second, “we examine the legal conclusion de
6 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
novo to see whether it is correct in light of the presumed
jury fact findings.” Circuit Check, 795 F.3d at 1334.
Whether there is a reason to combine prior art refer-
ences is a question of fact. Kinetic Concepts, 688 F.3d at
1367. Further, the defendant bears the burden of demon-
strating a reason to combine by clear and convincing
evidence. See id. at 1360 (“At all times, the burden is on
the defendant to establish by clear and convincing evi-
dence that the patent is obvious.”). Thus, by finding the
claims nonobvious, the jury presumably found that
Sorenson failed to demonstrate by clear and convincing
evidence that a person of ordinary skill in the art would
have been motivated to combine the teachings of the prior
art references to achieve the claimed invention. See
Circuit Check, 795 F.3d at 1335. Ultratec argues we must
leave this presumed finding undisturbed because it is
supported by substantial evidence. We agree.
As the district court determined, “[a]t its heart, claim
11 of the ’398 patent claims a two-line captioned tele-
phone that uses echo cancellation to prevent the voice of
the assisted user from reaching the call assistant.” Dis-
trict Court Opinion II at *3. On appeal, the parties focus
their arguments on two prior art references: U.S. Patent
Application No. US 2002/0085685 (“’685 publication”) and
the CapTel Trials 1. The parties do not dispute that the
’685 publication discloses the two-line arrangement or
that the CapTel Trials disclose a one-line arrangement
that uses echo cancellation on the voice of the assisted
1 In the alternative, Ultratec appeals the district
court’s ruling as a matter of law that the CapTel Trials
are prior art under § 102(b). Because we reinstate the
jury’s verdict that the ’398 patent is not obvious even if
the CapTel Trials are prior art, we need not reach this
issue.
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 7
user. Nor do the parties take issue with the district
court’s summary of the differences between the prior art
and claim 11. First, “claim 11 combines the two-line
arrangement with the use of echo cancellation.” Id. And
second, “in claim 11, the echo cancellation mechanism is
part of the phone, whereas in the CapTel [T]rials, echo
cancellation was performed at the relay.” Id. In other
words, the combination of the CapTel Trials with the ’685
publication would require moving the echo canceller from
the relay (in a one-line system) to the captioned telephone
(in a two-line system) in order to arrive at the claimed
invention.
Substantial evidence supports the jury’s presumed
finding that Sorenson failed to demonstrate by clear and
convincing evidence that a person of ordinary skill in the
art would have been motivated to use an echo canceller,
which had been used in one-line captioned telephone
systems, to prevent the voice of the assisted user from
reaching the call assistant in a two-line arrangement.
For example, the jury heard evidence that, contrary to the
“well controlled” environment of the one-line CapTel—
where echo cancellation was performed by the Ultratec-
controlled and designed relay—the two-line environment
has a great deal more variability. J.A. 22668–70. Ul-
tratec offered evidence that, even after working for years
on echo cancellation in the one-line arrangement, due to
this variability, its engineers did not initially consider
using echo cancellation in the two-line device, and instead
considered alternative methods to cancel the voice of the
assisted user. J.A. 22670 (“So when we were designing,
too, and we were worried about this issue of the uncon-
trolled environment, so more variability. . . . [W]e talked
about, well, if we’re having some problem with the echo
canceller in one-line, are there other ways we could do it
[remove the assisted user’s voice] in two-line. And we
talked about, actually, taking the audio off the earpiece
and sending that to the CA.”)
8 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
Additionally, apart from cancelling the assisted user’s
voice, there is no other reason to use echo cancelation in a
two-line system. J.A. 14897–99. This is in contrast to
one-line systems, which can require echo cancelation for
the additional reason of removing objectionable audio.
J.A. 22666–67.
Sorenson failed to present such clear and convincing
evidence of a motivation to combine that no reasonable
juror could find otherwise. “Where, as here, there is a
verdict of validity, the question is whether the challeng-
er’s evidence so met the burden of establishing invalidity
by clear and convincing evidence that reasonable jurors
could not have concluded that the challenger failed to
overcome that burden.” L & W, 471 F.3d at 1320 (quoting
Perkin–Elmer Corp. v. Computervision Corp., 732 F.2d
888, 893 (Fed. Cir. 1984)) (alterations omitted).
Sorenson’s expert, Dr. Shenoi, testified that the com-
bination of a two-line captioned telephone with the use of
echo cancellation “would arise naturally from the transi-
tion from one-line captioned telephones to two-line cap-
tioned systems.” J.A. 15591. This conclusory statement,
however, is contradicted by Ultratec’s evidence, discussed
above, that two-line systems did not otherwise require an
echo canceller and that due to the uncontrolled and varia-
ble nature of a two-line environment, Ultratec’s engineers
did not initially consider using echo cancellation in the
two-line device. It was also reasonable for the jury to
reject this and other statements from Dr. Shenoi because
he lacked familiarity with the relevant field. For exam-
ple, he admitted that he had no experience with telecom-
munications systems for the deaf and hard-of-hearing.
J.A. 14447–48.
In sum, we conclude that substantial evidence sup-
ports the jury’s presumed finding that Sorenson failed to
prove by clear and convincing evidence that a person of
ordinary skill in the art would have been motivated to
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 9
combine prior art references to achieve the claimed inven-
tion. Thus, we must leave this finding undisturbed.
Circuit Check, 795 F.3d at 1334. On this record, Sorenson
has not proven by clear and convincing evidence that the
asserted claims are obvious. The district court erred by
failing to defer to the jury’s factual findings and granting
judgment as a matter of law on obviousness. We reverse
the court’s judgment as a matter of law as to invalidity
and reinstate the jury’s verdict that the claims were not
invalid for obviousness.
II
During trial, Sorenson moved for judgment of no will-
ful infringement as a matter of law under the two-part
Seagate test. The district court granted Sorenson’s mo-
tion based on Seagate’s objective prong, which required a
patentee to “show by clear and convincing evidence that
the infringer acted despite an objectively high likelihood
that its actions constituted infringement of a valid pa-
tent.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371
(Fed. Cir. 2007), abrogated by Halo, 136 S. Ct. 1923.
After the district court granted judgment of no willful
infringement but while post-trial motions were still
pending, the Supreme Court decided Halo Electronics,
Inc. v. Pulse Electronics., Inc., which overturned the two-
part Seagate test and specifically rejected Seagate’s re-
quirement of “a finding of objective recklessness in every
case.” 136 S. Ct. 1923, 1932 (2016).
Ultratec now asks this court to vacate the district
court’s judgment of no willful infringement and to remand
in light of Halo. Sorenson counters that Ultratec waived
its right to appeal this issue by failing to raise it in the
district court. We agree that the issue was waived.
In Rentrop v. Spectranetics Corp., we held that “when
there is a relevant change in the law before entry of final
judgment, a party generally must notify the district court;
10 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
if the party fails to do so, it waives arguments on appeal
that are based on that change in the law.” 550 F.3d 1112,
1117 (Fed. Cir. 2008). Other circuits have similarly held
that an argument based on a change in law is waived if
not raised in a timely manner. See Beazer East, Inc. v.
Mead Corp., 525 F.3d 255, 264 (3d Cir. 2008); United
States v. Cheal, 389 F.3d 35, 45 n.10 (1st Cir. 2004).
Here, Ultratec failed to notify the district court about
the change in willfulness law stemming from Halo despite
the fact that Halo issued over three months before the
district court resolved the parties’ post-trial motions and
entered final judgment. Accordingly, we find that the
issue was waived and affirm the district court’s judgment
as a matter of law that Sorenson’s infringement was not
willful.
III
Sorenson cross-appeals the district court’s denial of its
motion for judgment as matter of law or for a new trial on
damages. Sorenson maintains that the jury’s
$5,443,484.61 damages award was unsupported by the
evidence.
“We review the jury’s determination of the amount of
damages, an issue of fact, for substantial evidence.”
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1310
(Fed. Cir. 2009). “A jury’s decision with respect to an
award of damages ‘must be upheld unless the amount is
grossly excessive or monstrous, clearly not supported by
the evidence, or based only on speculation or guesswork.’”
Id. (quoting State Contracting & Eng’g Corp. v. Condotte
Am., Inc., 346 F.3d 1057, 1072 (Fed. Cir. 2003)).
“The jury came to its per-minute running royalty
amount by first finding the royalty rate (three cents), then
finding the total number of infringing minutes
(181,449,487 minutes), and finally, by multiplying those
two numbers.” District Court Opinion II at *6. Before the
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 11
district court, Sorenson contested the jury’s finding of the
total number of infringing minutes. Id. “The parties
agree that not all of the 206,192,599 minutes of service
that defendants have provided since 2011 infringe the
’398 patent because[,] on some number of those calls, the
voice of the assisted user was audible to the relay.” Id.
Thus, “[t]he extent of infringement was somewhere be-
tween one minute and 206,192,598 minutes of calls.” Id.
Sorenson contended that the jury did not hear reliable
evidence concerning the number of infringing minutes.
Id. We agree with the district court in rejecting
Sorenson’s argument that that the jury award was com-
pletely unsupported or based on mere speculation. Id. at
*7.
Substantial evidence supports the jury’s finding that
the majority of Sorenson’s calls infringed. A call was
infringing “so long as a call assistant with normal hearing
would not hear the words spoken by the assisted user
while captioning a call.” 2 J.A. 321 (quoting jury instruc-
tion). First, the jury heard evidence that Sorenson de-
signed and built its phones to have no audible words from
the assisted user at the relay and, thus, to practice the
infringing methods. The jury also heard evidence that
Sorenson repeatedly represented to potential customers
that its service completely cancels the voice of the assisted
user. It is only when the echo cancellation malfunctions
that words from the assisted user are audible.
In addition to this circumstantial evidence, Ultratec’s
witness presented direct evidence that the vast majority
of Sorenson’s captioned telephone calls he analyzed
infringed the asserted claims. Ultratec’s witness ana-
lyzed a random sample of sixty captioned telephone calls
2 Sorenson stipulated to infringement of at least
one captioned telephone call. J.A. 16643.
12 ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC.
recorded during his inspection of two Sorenson call cen-
ters. The witness provided an opinion on the scope of
infringement. He summarized his review of the site
inspection recording as follows:
Q. And so having looked at around 60 calls on the
site inspection videos, what is the total number of
calls that you remember being in the category of
infringing and noninfringing?
A. About seven.
Q. Seven were what?
A. Seven were noninfringing.
J.A. 23122. On cross-examination, Ultratec’s witness
later stated that he was unable to testify with certainty as
to whether nine of these sixty calls infringed. These nine
calls involved automated messages and lacked the context
of a two-speaker call he needed to conclusively swear that
the calls infringed. He did, however, testify as to how
they may have infringed. The jury could reasonably infer
from this testimony, and the other evidence of record, that
a significant majority of the calls infringed. We also note
that Sorenson did not offer any rebuttal evidence on the
number of infringing minutes.
We have fully considered Sorenson’s remaining argu-
ments and find them to be unpersuasive. Accordingly,
because we conclude that substantial evidence supports
the jury’s finding, we affirm the district court’s denial of
Sorenson’s motion for judgment as matter of law or for a
new trial on damages.
CONCLUSION
In sum, because the jury’s presumed findings are
supported by substantial evidence, we reverse the court’s
judgment as a matter of law as to invalidity and reinstate
the jury’s verdict that the claims were not invalid for
obviousness. We affirm the district court’s judgment as a
ULTRATEC, INC. v. SORENSON COMMUNICATIONS, INC. 13
matter of law that Sorenson’s infringement was not
willful. Finally, we affirm the district court’s denial of
Sorenson’s motion for judgment as matter of law or for a
new trial on damages.
AFFIRMED-IN-PART AND REVERSED-IN-PART
COSTS
The parties shall bear their own costs.