Chrimar Holding Company, LLC v. Ale USA Inc.

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CHRIMAR HOLDING COMPANY, LLC, CHRIMAR
SYSTEMS, INC., DBA CMS TECHNOLOGIES, INC.,
Plaintiffs-Cross-Appellants
v.
ALE USA INC., FKA ALCATEL-LUCENT
ENTERPRISE USA, INC.,
Defendant-Appellant
______________________
2017-1848, 2017-1911
______________________
Appeals from the United States District Court for the
Eastern District of Texas in No. 6:15-cv-00163-JDL,
Magistrate Judge John D. Love.
______________________
Decided: May 8, 2018
______________________
JUSTIN S. COHEN, Thompson & Knight LLP, Dallas,
TX, argued for plaintiffs-cross-appellants. Also repre-
sented by ADRIENNE E. DOMINGUEZ, J. MICHAEL HEINLEN,
RICHARD L. WYNNE, JR.; RICHARD W. HOFFMANN, Reising
Ethington PC, Troy, MI.
CHRISTOPHER N. CRAVEY, Jackson Walker LLP, Hou-
ston, TX, argued for defendant-appellant. Also represent-
2 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
ed by BRIAN K. BUSS, LEISA T. PESCHEL, DAVID K.
WOOTEN.
______________________
Before PROST, Chief Judge, WALLACH and TARANTO,
Circuit Judges.
TARANTO, Circuit Judge.
Chrimar Systems, Inc., filed a patent infringement
suit against ALE USA Inc. (formerly known as Alcatel-
Lucent Enterprise USA Inc.). In response, ALE asserted
numerous defenses and counterclaims, including a claim
of fraud under Texas law. As relevant here, a jury found
infringement by ALE and awarded damages to Chrimar,
and it rejected ALE’s fraud claim. The court entered
judgment in favor of Chrimar on those issues. The court
also denied Chrimar’s post-trial motion for attorney fees
under 35 U.S.C. § 285. Both parties appeal. We reject
one of the claim constructions adopted by the district
court, but we affirm the damages award, the judgment on
ALE’s fraud claim, and the denial of fees.
I
A
Chrimar owns four related patents—U.S. Patent Nos.
8,155,012; 8,942,107; 8,902,760; and 9,019,838—whose
specifications are materially the same for present purpos-
es. We treat the ’012 patent’s specification as representa-
tive. The specification describes the use of devices that
connect to a wired network, such as Ethernet, and that
manage or track remote electronic equipment, such as a
personal computer, on that network. ’012 patent, col. 1,
lines 23–26, 37–39. In the arrangement described, such
equipment, called an “asset,” has a tracking device, called
a “remote module,” attached internally or externally to it.
Id., col. 1, line 66 through col. 2, line 2. The asset can be
managed, tracked, or identified by using the remote
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 3
module to communicate a unique identification number,
port identification, or wall jack location to the network
monitoring equipment, or “central module.” Id., col. 3,
lines 22–27; see id., col. 8, line 58 through col. 9, line 23;
see also id., col. 6, lines 48–67 & Fig. 4. Asset identifica-
tion may be done without using existing network band-
width, because the remote module can convey information
about the asset to the central module through the same
wiring or cables that convey the high-frequency data on
the network, without adversely affecting the high-
frequency data. See id., col. 3, lines 10–12; id., col. 11,
line 64 through col. 12, line 1 (“The system transmits a
signal over preexisting network wiring or cables without
disturbing network communications by coupling a signal
that does not have substantial frequency components
within the frequency band of network communications.”).
And asset identification does not require that the asset be
powered on. Id., col. 4, lines 65–67; id., col. 12, lines 48–
50.
According to Chrimar, all four patents are standard-
essential patents in that they cover features required by
the Institute of Electrical and Electronics Engineers
(IEEE) Power over Ethernet (PoE) 802.3af standard
(ratified in 2003) and 802.3at amendments to the IEEE
PoE 802.3 standard (ratified in 2009). Those standards
address detection, classification, power-on, operating
power, and removal of power. Chrimar’s patents cover
the first three features (detection, classification, and
power-on).
A Power over Ethernet controller chip controls the ac-
tivities addressed in the standard relevant here. Products
with such a controller chip interact with other products to
enable the safe delivery of power from power-sourcing
equipment (e.g., switches) to powered devices (e.g., wire-
less access points and voice over internet protocol (VoIP)
phones). ALE sells VoIP phones, wireless access points,
4 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
and switches that implement the IEEE PoE 802.3af/at
standard.
B
The IEEE ratified the PoE 802.3af standard in 2003.
That ratification followed a series of meetings convened
by the IEEE regarding adoption of the standard. John
Austermann, Chrimar’s Chief Executive Officer and listed
inventor on the patents, participated in several such
meetings in 2000.
Under the then-applicable bylaws of the IEEE Stand-
ards Association Board (2000)—which have since been
changed—if the IEEE knew of an essential patent, the
IEEE could adopt a standard that includes the known use
of that patent or patent application “if there is technical
justification in the opinion of the standards-developing
committee and provided the IEEE receives assurance
from the patent holder that it will license under reasona-
ble terms and conditions for the purpose of implementing
the standard.” J.A. 10548. The bylaws also stated that
the letter of assurance “shall be provided without coer-
cion,” J.A. 10548; and the IEEE Standards Association
operations manual required that the working group “shall
request that known patent holders submit statements”
but that the working group refrain from coercing the
patent holders to do so, J.A. 6711. According to Chrimar’s
expert Clyde Camp, who served as Chair of the IEEE
Patent Committee, the IEEE’s patent policy at the time
was one of “request and encourage,” J.A. 6706, consisting
of sending letters to owners of patents that may be essen-
tial and requesting (without requiring) that the patent
owner return a “Letter of Assurance,” J.A. 6705–09; see
also J.A. 6713–14 (IEEE 2002 statement submitted to
FTC: “Disclosure of patents is based on the willingness of
the individual participants to disclose any known patents
whose use would be required in the practice of the stand-
ard.”). Mr. Camp also testified that patent holders did not
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 5
always provide a letter of assurance in response to such
requests. J.A. 6712. 1
In October 2001, while the relevant IEEE component
was considering the adoption of the PoE 802.3af standard,
Chrimar expressed its belief to the IEEE that the Chri-
mar-owned U.S. Patent No. 5,406,260—not asserted in
this case—was an essential patent for that standard.
Chrimar submitted a “letter of assurance” agreeing to
license the ’260 patent upon request “to all applicants at
royalty rates that [Chrimar] deems reasonable in light of
the specific circumstances of this particular situation.”
J.A. 10559. The IEEE never requested, and Chrimar did
not submit, any similar letter regarding the four patents
asserted in this case.
C
In 2015, Chrimar sued ALE in the Eastern District of
Texas for direct and indirect infringement of the ’012,
’107, ’838, and ’760 patents under 35 U.S.C. §§ 271(a), (b).
ALE asserted defenses of, inter alia, noninfringement,
invalidity (including anticipation, obviousness, lack of
enablement, lack of sufficient written description, and
lack of proper inventorship), unenforceability based on
unclean hands and inequitable conduct, prosecution
laches, equitable estoppel, waiver, and implied license.
ALE also asserted counterclaims of, inter alia, breach of
contract with the IEEE (with ALE as a third-party benefi-
ciary), fraud, and violation of section 2 of the Sherman
Act, as well as declaratory judgment counterclaims corre-
sponding to several of ALE’s affirmative defenses.
The court issued a claim construction order in late
March 2016. Chrimar Sys., Inc. v. Alcatel-Lucent USA,
Inc., No. 6:15-cv-163, 2016 WL 1228767 (E.D. Tex. Mar.
1 In 2004, the IEEE changed its policy to require
the submission of letters of assurance.
6 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
28, 2016) (Claim Construction Order I). Two weeks before
trial, on September 20, 2016, ALE stipulated to infringe-
ment of claims 1, 5, 72, and 103 of the ’107 patent and
claims 1, 7, and 26 of the ’838 patent under the governing
claim construction order; and ALE requested further
construction of the claim terms “adapted” and “physically
connect” in the asserted claims of the ’012 and ’760 pa-
tents. A week later, the court issued a second claim
construction order construing those terms. Chrimar Sys.,
Inc. v. Alcatel-Lucent USA, Inc., No. 6:15-cv-163, 2016 WL
5393853 (E.D. Tex. Sept. 27, 2016) (Claim Construction
Order II). In light of that order, ALE, on September 30,
2016, stipulated to infringement of claims 31, 35, 43, and
60 of the ’012 patent and claims 1, 59, 69, 72, and 145 of
the ’760 patent. 2
In late June 2016, ALE moved to strike the expert re-
port and exclude the testimony of Chrimar’s damages
expert, Robert Mills, arguing that, in his damages calcu-
lation, he did not properly limit compensation to the value
of the patented features of ALE’s products, i.e., he did not
adequately separate the value of the patented features
2 The claims of the ’107, ’838, ’012, and ’760 patents
to which ALE stipulated infringement in this case were
all determined to be unpatentable by the Patent Trial and
Appeal Board in four final written decisions. Appeals
from the final written decisions for the first three patents
have been filed with this court. Notice of Appeal, Chri-
mar Sys., Inc. v. Juniper Networks, Inc., No. 18-1499 (Fed.
Cir. Feb. 1, 2018), ECF No. 1; Notice of Appeal, Chrimar
Sys., Inc. v. Juniper Networks, Inc., No. 18-1500 (Fed. Cir.
Feb. 1, 2018), ECF No. 1; Notice of Appeal, Chrimar Sys.,
Inc. v. Juniper Networks, Inc., No. 18-1503 (Fed. Cir. Feb.
1, 2018), ECF No. 1. ALE has not yet appealed the final
written decision regarding the ’760 patent, entered by the
Board on April 26, 2018.
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 7
from the value of nonpatented features and the value
associated with the IEEE standardization. In August
2016, the court granted the motion only in part. The
court concluded that, for admissibility, Mr. Mills had
adequately separated patented from nonpatented fea-
tures. But the court concluded that Mr. Mills improperly
stated in his report that there was no need even to assess
the value of standardization because, when the IEEE
standard was adopted, there were no noninfringing alter-
natives to the features at issue; the court struck that
statement. Mr. Mills then submitted a supplemental
report, as authorized, addressing the value of standardi-
zation. When ALE again moved to strike and exclude, the
court again granted ALE’s motion only in part, striking
from the supplemental report one sentence about the lack
of noninfringing alternatives at the time the standard was
adopted.
A jury trial was held in early October 2016. ALE
dropped many of its defenses and counterclaims shortly
before or during trial and, as mentioned previously,
stipulated to infringement under the governing claim
constructions shortly before trial. The issues submitted to
the jury were infringement damages, invalidity based on
improper inventorship, fraud, and breach of contract. On
October 7, 2016, the jury returned a verdict in favor of
Chrimar on all issues and awarded Chrimar a royalty of
$324,558.34. The defenses of equitable estoppel, waiver,
prosecution laches, and inequitable conduct were left to
the court, which ruled for Chrimar on all issues.
After the jury trial, Chrimar filed a motion for attor-
ney fees under 35 U.S.C. § 285, and ALE moved for judg-
ment as a matter of law or a new trial. The court denied
both motions. Chrimar Sys., Inc. v. Alcatel-Lucent Enter.
USA Inc., No. 6:15-cv-163, 2017 WL 568712 (E.D. Tex.
Feb. 13, 2017) (JMOL Order); Mem. Op. & Order, Chri-
mar Sys., Inc. v. Alcatel-Lucent Enter. USA Inc., No. 6:15-
cv-163 (E.D. Tex. Jan. 23, 2017), ECF No. 412 (Fees
8 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
Order), J.A. 20001–05. On February 27, 2017, the court
entered final judgment.
ALE timely appealed. Chrimar timely cross-appealed.
We have jurisdiction under 28 U.S.C. § 1295(a)(1).
II
ALE appeals three of the district court’s claim con-
structions, the denial of its motion to exclude Mr. Mills’s
damages testimony, and the jury instruction on ALE’s
state-law fraud claim.
A
We review de novo a district court’s claim construc-
tion, while reviewing for clear error any underlying factu-
al findings. Teva Pharms. USA, Inc. v. Sandoz, Inc., 135
S. Ct. 831, 840–42 (2015). ALE challenges the district
court’s construction of (1) “adapted,” as used in the rele-
vant claims of the ’012 patent; (2) a series of infinitive
phrases in the relevant claims of the ’107, ’760, and ’838
patents; and (3) “physically connect,” as used in the
relevant claims of the ’760 patent. We agree on the first
issue, not the others.
1
ALE objects to the court’s construction of “adapted” in
claim 31 of the ’012 patent (on which claims 35, 43, and
60 directly or indirectly depend). That claim reads:
31. An adapted piece of Ethernet data termi-
nal equipment comprising:
an Ethernet connector comprising a plurality
of contacts; and
at least one path coupled across selected con-
tacts, the selected contacts comprising at least one
of the plurality of contacts of the Ethernet con-
nector and at least another one of the plurality of
contacts of the Ethernet connector,
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 9
wherein distinguishing information about the
piece of Ethernet data terminal equipment is as-
sociated to impedance within the at least one
path.
’012 patent, col. 18, line 62 through col. 19, line 5 (empha-
sis added).
In this case, the district court, at the parties’ request,
adopted the construction of “[a]n adapted piece of Ether-
net data terminal equipment” from an earlier case in
which the same court construed the preamble in claim 31
of the ’012 patent. See Claim Construction Order II, 2016
WL 5393853, at *1, *3 (referring to ChriMar Sys., Inc. v.
Alcatel-Lucent, Inc., No. 6:13-cv-880, 2015 WL 233433,
at *7–9 (E.D. Tex. Jan. 8, 2015) (6:13-cv-880 Claim Con-
struction Order)). In the claim construction order entered
in the earlier case, the court construed the preamble as
“limiting” and stated that its “plain and ordinary mean-
ing” should govern its scope, a construction with which
both parties to that case agreed. 3 6:13-cv-880 Claim
Construction Order, 2015 WL 233433, at *9. While ac-
knowledging that the parties continued to dispute the
meaning of the term “adapt,” id., the court in that order
reasoned:
The “adapting” requirement in the claims of the
’012 Patent is essential to address the problem
confronted by the inventors taking existing net-
works and adapting them to make equipment dis-
3 That case, filed in 2013, involved Chrimar and Al-
catel-Lucent. (The present case involves Chrimar and
ALE USA Inc., which was spun off from Alcatel-Lucent in
2014.) With the parties’ agreement, the 2013 case was
dismissed without prejudice in June 2015. Chrimar Sys.,
Inc. v. Alcatel-Lucent, Inc., No. 6:13-cv-880 (E.D. Tex. Jan.
8, 2015), ECF No. 140.
10 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
tinguishable. Thus, the word “adapting” must
have some meaning.
Id. The court did not say more about what that “mean-
ing” is. See id.
Two weeks before trial in the present case, ALE asked
for further claim construction of the term “adapted.”
Claim Construction Order II, 2016 WL 5393853, at *1.
According to ALE, the term should be construed as a
“modification of preexisting equipment.” See id. at *3.
The court disagreed with that narrowing construction. Id.
at *4. Instead, the court construed the term “consistently
with its plain and ordinary meaning to mean ‘designed,
configured, or made.’” Id. at *3–4.
In light of the parties’ agreement in this case that the
preamble is limiting, both before the district court and on
appeal, see ALE Br. 12; Chrimar Br. 18 n.5, we disagree
with the district court’s claim construction. Generally,
every apparatus may be described as “designed, config-
ured, or made,” and Chrimar has not explained how that
construction in any way limits the scope of claim 31.
Chrimar also contends that “piece of Ethernet data ter-
minal equipment,” rather than “adapted,” is the limiting
term in the preamble, but it does not explain how the
former is limiting. Chrimar Br. 20–21. The district court
did not adopt that position. See Claim Construction Order
II, 2016 WL 5393853, at *3–4; see also 6:13-cv-880 Claim
Construction Order, 2015 WL 233433, at *9 (assuming
that “the word ‘adapting’ must have some meaning”).
The specification is consistent with giving “adapted” a
meaning tied to existing equipment to avoid stripping the
concededly limiting claim language of meaning. The
specification describes the invention generally as designed
to operate on a preexisting network connected to pieces of
networked terminal equipment. See ’012 patent, col. 3,
lines 18–22 (“In accordance with the teachings of the
present invention, a communication system is provided
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 11
for generating and monitoring data over a pre-existing
wiring or cables that connect pieces of networked comput-
er equipment to a network.”); id., col. 1, line 67 through
col. 2, line 2 (“[A] method for permanently identifying an
asset by attaching an external or internal device to the
asset and communicating with that device using existing
network wiring or cabling is desirable.”). As the district
court noted, moreover, the specification states that “[t]his
invention is particularly adapted to be used with an
existing Ethernet communications link or equivalents
thereof,” ’012 patent, col. 3, lines 35–37, and that “[t]he
communication system 15 and 16 described herein is
particularly adapted to be easily implemented in conjunc-
tion with an existing computer network 17 while realizing
minimal interference to the computer network,” id., col. 4,
lines 56–60. Claim Construction Order II, 2016 WL
5393853, at *3; see also 6:13-cv-880 Claim Construction
Order, 2015 WL 233433, at *9 (stating that “[t]he ‘adapt-
ing’ requirement in the claims of the ’012 Patent is essen-
tial to address the problem confronted by the inventors
taking existing networks and adapting them to make
equipment distinguishable” and therefore “must have
some meaning”).
Chrimar does not dispute that the specification de-
scribes embodiments that require modification of a preex-
isting piece of Ethernet data terminal equipment. Nor
does it dispute that “adapted” appears only in the claims
of the ’012 patent, not the other patents involving essen-
tially the same specification, suggesting that the claim
scope chosen for the asserted claims in this patent is only
a subset of what the specification may support. 4 It is
4 The district court noted that the patent describes
at least one embodiment in which the invention is imple-
mented at the manufacturing stage, rather than through
a modification of already-manufactured equipment.
12 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
hardly unknown for one set of claims to use language that
picks out one among several embodiments, especially
where other claims (perhaps in the same or related pa-
tents) claim more broadly or focus on other embodiments.
E.g., Advanced Cardiovascular Sys., Inc. v. Medronic,
Inc., 265 F.3d 1294, 1305–06 (Fed. Cir. 2001) (refusing to
apply limitations expressed in prosecution histories of
related patents where relevant claim term was not in-
cluded in claims of the asserted patent and “[t]he patent-
ee’s whole point in filing the application that resulted in
the [asserted patent] was to secure broader claims”); see
also, e.g., Haemonetics Corp. v. Baxter Healthcare Corp.,
607 F.3d 776, 782 (Fed. Cir. 2010) (construing term
“centrifugal unit” differently in two separate claims in the
same patent where language in each claim tracked differ-
ent embodiments described in the specification). The
claim language here, to be meaningful, requires such a
construction of “adapted.” We therefore adopt ALE’s
proposed construction of “adapted” to mean “modified.”
2
ALE also objects to the constructions of the infinitive
phrases “to detect,” “to control,” “to provide,” and “to
distinguish” in the relevant claims of the ’838 patent; “to
draw,” “to result,” and “to convey” in the relevant claims
of the ’107 patent; and “to draw,” “to detect,” “to control,”
and “to distinguish” in the relevant claims of the ’760
patent. E.g., ’838 patent, col. 17, lines 17, 19–20; ’107
patent, col. 17, lines 18, 20, 23; ’760 patent, col. 17, lines
28, 33–35. ALE argues that those terms should have been
Claim Construction Order II, 2016 WL 5393853, at *4
(citing ’012 patent, col. 11, lines 16–19 (“It is also envi-
sioned that the electronics of the network identification
circuitry can be placed on a motherboard within the
computer or as part of the circuitry on the NIC [network
interface controller] card.”)).
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 13
construed as means-plus-function elements subject to 35
U.S.C. § 112, ¶ 6 because they do not recite sufficient
structure to perform the required function. 5 The district
court rejected that argument. So do we.
The district court properly recognized the presump-
tion against application of § 112, ¶ 6 where, as here, the
word “means” is not used in the claim and properly asked
whether the terms preceding the infinitive phrases—
“central piece of equipment,” “Ethernet terminal equip-
ment” (or “BaseT Ethernet terminal equipment”), and
“end device”—identify structures or instead are, like
“means,” essentially place-holder nonce words. Claim
Construction Order I, 2016 WL 1228767, at *5; see Wil-
liamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed.
Cir. 2015) (en banc) (For functional terms lacking the
word “means,” the challenger arguing for the application
of § 112, ¶ 6 must satisfy “[t]he standard[, which] is
whether the words of the claim are understood by persons
of ordinary skill in the art to have a sufficiently definite
meaning as the name for structure.”). ALE did not dis-
pute before the district court, and has not disputed on
appeal, that those terms refer to known structures in the
art. Claim Construction Order I, 2016 WL 1228767, at
*5–6; see also id. at *5 n.2 (noting that ALE’s “expert
repeatedly discusses the ‘Ethernet terminal equipment’
and ‘end device’ interchangeably and without any ques-
tion as to the understanding of these terms in the art”).
ALE therefore has not met its burden to overcome the
presumption against applying § 112, ¶ 6 for those infini-
5 Paragraph 6 of 35 U.S.C. § 112 was replaced with
35 U.S.C. § 112(f) when the Leahy-Smith America Invents
Act (AIA), Pub. L. No. 112-29, 125 Stat. 284 (2011), took
effect on September 16, 2012. Because the applications
resulting in the asserted patents were filed before that
date, we refer to the pre-AIA version of § 112.
14 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
tives. A claim term that has an understood meaning in
the art as reciting structure is not a nonce word triggering
§ 112, ¶ 6. Williamson, 792 F.3d at 1349; see, e.g., Skky,
Inc. v. MindGeek, s.a.r.l., 859 F.3d 1014, 1019–20 (Fed.
Cir. 2017) (even including use of the word “means,” “wire-
less device means” was not a means-plus-function term
because “‘wireless device’ is used in common parlance . . .
to designate structure”) (ellipsis in original).
3
ALE argues that the district court erred in construing
“physically connect”—as used in claim 1 of the ’760 patent
(on which claims 59, 69, and 72 depend) and claim 73 of
the ’760 patent (on which claim 145 depends). Claim 1
reads:
1. A BaseT Ethernet system comprising:
a piece of central BaseT Ethernet equipment;
a piece of BaseT Ethernet terminal equip-
ment; and
data signaling pairs of conductors comprising
first and second pairs used to carry BaseT Ether-
net communication signals between the piece of
central Ethernet BaseT Ethernet equipment and
the piece of BaseT Ethernet terminal equipment,
the first and second pairs physically connect be-
tween the piece of BaseT Ethernet terminal
equipment and the piece of central BaseT Ether-
net equipment having at least one DC supply, the
piece of BaseT Ethernet terminal equipment hav-
ing at least one path to draw different magnitudes
of current flow from the at least one DC supply
through a loop formed over at least one of the con-
ductors of the first pair and at least one of the
conductors of the second pair, the piece of central
BaseT Ethernet equipment to detect at least two
different magnitudes of the current flow through
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 15
the loop and to control the application of at least
one electrical condition to at least two of the con-
ductors.
’760 patent, col. 17, lines 15–36 (emphasis added).
The district court considered dependent claim 71 (not
asserted in this case), in which the only additional limita-
tion is that “the first and second pairs are physically
connected between the piece of BaseT Ethernet terminal
equipment and the piece of central BaseT Ethernet
equipment.” Id., col. 21, lines 28–30 (emphasis added). In
light of that dependent claim and the presumption of
claim differentiation, the court stated that the term
“physically connect” in claim 1 requires only that the
components be configured (have the ability) to physically
connect, rather than actually be physically connected (as
in claim 71). Claim Construction Order II, 2016 WL
5393853, at *4–5.
On appeal, ALE argues that the district court’s con-
struction renders the term “physically connect” meaning-
less and that, without an actual physical connection, the
system would be inoperable. But requiring that a system
be configured to physically connect is a meaningful limita-
tion (it imports a meaningful capability), and such a
system is operable (upon action by a user, the system
makes the physical connection needed for actual opera-
tion). Not surprisingly, it is hardly uncommon for an
apparatus or system claim, as a claim to a product rather
than a process (or a forbidden mix), to be directed to
capability, instead of actual operation. Finjan, Inc. v.
Secure Computing Corp., 626 F.3d 1197, 1204 (Fed. Cir.
2010) (“[W]e have held that, to infringe a claim that
recites capability and not actual operation, an accused
device need only be capable of operating in the described
mode.” (citation and quotation marks omitted)); see, e.g.,
Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1217
(Fed. Cir. 2014) (affirming infringement verdict based on
16 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
claims directed to components “reasonably capable of
‘arranging information for transmission . . . which identi-
fies a type of payload information’” (quoting U.S. Patent
No. 6,466,568, col. 13, lines 12–18)); Finjan, 626 F.3d at
1204–05 (affirming infringement verdict for “non-method
claims describ[ing] capabilities without requiring that any
software components be ‘active’ or ‘enabled’” because
“software for performing the claimed functions existed in
the products when sold—in the same way that an auto-
mobile engine for propulsion exists in a car even when the
car is turned off”). Chrimar cites no authority barring a
claim to a component “configured to” work and capable of
operation by a user, where the user’s actual operation is
unclaimed. See Versata Software, Inc. v. SAP Am., Inc.,
717 F.3d 1255, 1262–63 (Fed. Cir. 2013) (affirming in-
fringement verdict based on evidence that the system
would operate in an infringing manner if a user followed
the accused infringer’s instructions, and explaining that
“[w]hile a device does not infringe simply because it is
possible to alter it in a way that would satisfy all the
limitations of a patent claim, . . . an accused product may
be found to infringe if it is reasonably capable of satisfy-
ing the claim limitation” (citation and quotation marks
omitted)). Thus, ALE has not provided any reason that
overcomes the presumption in favor of claim differentia-
tion. See Phillips v. AWH Corp., 415 F.3d 1303, 1315
(Fed. Cir. 2005) (en banc).
4
We affirm the judgment of infringement of the ’107,
’838, and ’760 patents. Because we agree with ALE as to
the term “adapted” in the ’012 patent, we vacate the
district court’s claim construction order as to that term.
We remand for further proceedings on infringement of the
’012 patent under the proper construction of “adapted.”
That result does not call for a new trial on damages.
ALE did not ask for a new trial on damages based on our
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 17
adoption of its construction of “adapted.” See ALE Br. 21
(requesting only reversal of the infringement judgment);
ALE Reply Br. 11 (requesting that the court either “re-
verse or vacate the infringement judgment . . . so that the
fact finder may assess whether the accused products
infringe the asserted claims of the ’012 patent under a
proper construction”). And a new trial on damages is not
warranted on that basis. Chrimar’s technical expert Dr.
Vijay Madisetti testified that all four patents “cover the
PSE [power sourcing equipment] and the PD [power
device] aspects of classification, detection, and controlling
the power,” J.A. 5892—a proposition that ALE agrees
with on appeal, ALE Br. 8. Dr. Madisetti also testified
that the smallest saleable patent-practicing units are
ALE’s power sourcing equipment, which infringe the ’760
and ’838 patents, and ALE’s power devices, which infringe
the ’012, ’107, and ’760 patents, J.A. 5921—a proposition
ALE does not dispute on appeal. Given the (affirmed)
judgment of infringement of the ’107 and ’760 patents, the
absence of an infringement judgment on the ’012 patent is
immaterial to damages because any damages that would
result from the alleged infringement of the ’012 patent
also results from the infringement of the ’107 and ’760
patents. We therefore proceed to consider ALE’s inde-
pendent arguments directed to damages.
B
ALE challenges the damages award by attacking the
testimony of Mr. Mills, Chrimar’s damages expert. Ac-
cording to ALE, Mr. Mills, in calculating a reasonable
royalty, (1) relied on licenses not comparable to the hypo-
thetical negotiation for the present case; (2) did not ade-
quately separate the value of patented features from the
value of standardization and the value of nonpatented
features; and (3) prejudicially referred to ALE’s total net
revenue and profit. The challenge is most naturally
viewed as a challenge to the admission of Mr. Mills’s
testimony, reviewable for abuse of discretion. See Gen.
18 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
Elec. Co. v. Joiner, 522 U.S. 136, 138–39 (1997); Versata,
717 F.3d at 1261 (applying Fifth Circuit law); Snap-
Drape, Inc. v. Comm’r, 98 F.3d 194, 197 (5th Cir. 1996).
Our conclusion would not change even if we viewed ALE’s
argument as challenging the denial of judgment as a
matter of law, reviewed de novo for compliance with the
deferential standard for such challenges to jury verdicts,
see Mirror Worlds, LLC v. Apple Inc., 692 F.3d 1351,
1356–57 (Fed. Cir. 2012) (applying Fifth Circuit law), or
the denial of a new trial, reviewed for an abuse of discre-
tion, see LaserDynamics, Inc. v. Quanta Computer, Inc.,
694 F.3d 51, 66 (Fed. Cir. 2012) (applying Fifth Circuit
law).
1
There is no reversible error based on Mr. Mills’s
reliance on certain licenses to come to a range for a rea-
sonable royalty rate and his selection of a rate in the low
end of that range—i.e., $2.50 per PoE port. See
J.A. 6223–28 (Mills’s trial testimony); see also J.A. 6164–
89 (testimony of Chrimar CEO Austermann going
through 30 licenses). To the extent that ALE argues that
those licenses were not sufficiently comparable to be
reliable indicators of what would have occurred in a
hypothetical negotiation between it and Chrimar, ALE
failed to make that challenge when seeking to exclude Mr.
Mills’s testimony or when that testimony was presented
at trial. See JMOL Order, 2017 WL 568712, at *6 & n.7.
In addition, ALE was able to—and did—attack any dis-
crepancies in the license-comparison approach by present-
ing extensive contrary testimony from its expert.
J.A. 6807–27. This court has approved reliance on licens-
es, which often will not be in identical circumstances, as
long as reasonable adjustments for differences in contexts
are made. See, e.g., Prism Techs. LLC v. Sprint Spectrum
L.P., 849 F.3d 1360, 1368–70 (Fed. Cir. 2017) (citing
cases). ALE has not persuasively shown either an unrea-
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 19
sonable methodology or prejudicial error under that
standard.
2
Nor has ALE shown reversible error regarding Mr.
Mills’s testimony as to apportionment—separating the
patented features’ value from other elements of value in
the accused products. Mr. Mills explained at trial that he
accounted for the products’ non-PoE functionality (non-
patented functionality outside the PoE standard), the
products’ nonpatented PoE functionality (two nonpatent-
ed features of the PoE standard: operating power and
removal of power), and the value of standardization
(generally requiring practice of a standard-essential
patent rather than noninfringing alternatives). J.A. 6239.
For the first, he calculated the “profit premium” of the
PoE functionality, comparing ALE’s products that differ
only in the addition of that functionality. See J.A. 6240–
42. In apportioning the value of that profit premium to
each of the nonpatented and patented features of the PoE
standard, Mr. Mills relied on the testimony of the tech-
nical expert, Dr. Madisetti, who stated that the patents
“are fundamental to the provision of PoE under the
standards” and “relate to the majority and the most
critical aspects of the standard”; that “the standards
would not be successful without Chrimar’s inventions”;
and that “the standards would not have gained wide-
spread adoption without Chrimar’s patented inventions.”
J.A. 6243–44; see also J.A. 4642–43 (Mills expert report
relying on Dr. Madisetti’s explanation); J.A. 5878, 5887–
88, 5892 (Madisetti testimony). Mr. Mills also testified
that, although there was some value attributable to the
nonpatented features of the PoE standard and to stand-
ardization, he adopted a conservative estimate of the
profit premium attributable to the patented features
($2.50 per PoE port), which did not include those values.
J.A. 6244–45 (relying on Dr. Madisetti’s testimony regard-
ing the value of standardization and the nonpatented
20 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
features of the PoE standard, and stating that the testi-
mony “ultimately tells me that $2.50 per port is inherent-
ly reasonable”).
Mr. Mills’s opinion that his conservative estimate of
the portion of the profit premium attributable to the
patented features did not encompass the value of stand-
ardization and nonpatented features does not flunk
standards of reliability and reasonableness. See Aqua
Shield v. Inter Pool Cover Team, 774 F.3d 766, 771 (Fed.
Cir. 2014) (noting that royalty calculations often involve
“approximation and uncertainty”); VirnetX, Inc. v. Cisco
Sys., Inc., 767 F.3d 1308, 1328 (Fed. Cir. 2014) (stating
that “absolute precision” is not required in the task of
apportionment, as “it is well-understood that this process
may involve some degree of approximation and uncertain-
ty”). Nor is unreliability or unreasonableness established
by the fact that Mr. Mills’s proposed royalty rate did not
change in his supplemental report, after he was directed
to take into account the value of noninfringing alterna-
tives. Mr. Mills assumed, based on Dr. Madisetti’s testi-
mony, that the value of nonpatented features of the PoE
standard and the value of standardization were not large,
and he selected a figure toward the low end of the range of
royalty rates from comparable licenses, see J.A. 6223–28,
including a license that covered comparable technology
and in which ALE was the licensee, J.A. 6227–28, to reach
a royalty rate for the patented features. In light of those
assumptions and his initially conservative estimate, the
unchanged royalty rate does not prove his method unreli-
able or unreasonable.
Mr. Mills’s assumptions underlying his damages theo-
ry were the subject of cross-examination. ALE used that
process to suggest that he had neither adequately appre-
ciated the value of nonpatented features and standardiza-
tion nor quantified such value. See, e.g., J.A. 6273–84.
ALE also provided contrary testimony from its own expert
about the value of standardization and noninfringing
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 21
alternatives available at the time the standard was
adopted (leading to ALE’s proposed royalty rate of $0.05
per PoE port). J.A. 6824–27. The jury was given instruc-
tions regarding apportionment (not challenged here),
including a specific instruction regarding the need to
factor out the value of standardization and of nonpatented
features. J.A. 349–50. ALE has not shown reversible
error in leaving the damages dispute in this case to that
process.
3
ALE’s final challenge regarding damages is that the
district court improperly allowed Mr. Mills to refer to
ALE’s total revenue and profit, a reference that, according
to ALE, “skewed” the damages inquiry. ALE Br. 62. The
district court, however, allowed that testimony only after
concluding that ALE had opened the door to it by solicit-
ing testimony from its own witness that relied on ALE’s
net revenue to estimate the very large amount that would
go to Chrimar at ALE’s proposed rate of $0.05 per PoE
port. J.A. 6316–18. We have no basis for disturbing the
district court’s determination that ALE opened the door
and that the now-challenged reference was accordingly
permissible. See United States v. Keith, 582 F. App’x 300,
302 (5th Cir. 2014) (no abuse of discretion in “allow[ing]
the government to elaborate more fully on th[e] line of
questioning” opened by the defendant) (citing United
States v. Walker, 613 F.2d 1349, 1353 (5th Cir. 1980)).
C
ALE challenges the district court’s instruction to the
jury on the law of fraud under Texas law. “[W]e review
the district court’s determination of state law de novo,
though the district court still has ‘wide discretion’ in
formulating the jury charge.” EMJ Corp. v. Hudson
Specialty Ins. Co., 833 F.3d 544, 550 (5th Cir. 2016).
22 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
The jury instruction at issue is as follows (challenged
portions emphasized):
To prove fraud, ALE must show by a prepon-
derance of the evidence that Chrimar: (1) made a
misrepresentation of material fact to ALE,
(2) with knowledge of its falsity, (3) with the in-
tent to defraud ALE, (4) which induced justifiable
reliance by ALE, and (5) which resulted in dam-
age to ALE. . . .
In order to prove fraud by omission, ALE must
show by a preponderance of the evidence that:
(1) Chrimar concealed or failed to disclose a mate-
rial fact within its knowledge from ALE;
(2) Chrimar had a duty to disclose that fact;
(3) Chrimar knew that ALE was ignorant of the
fact and ALE did not have an equal opportunity to
discover the truth; (4) Chrimar intended to in-
duce ALE to take some action by concealing or
failing to disclose the fact; (5) ALE relied on
Chrimar’s non-disclosure; and (6) ALE was in-
jured as a result of acting without that knowledge.
J.A. 351–52 (emphases added).
ALE argues that the instruction improperly excluded
the possibility that Chrimar’s alleged misrepresentations
or omissions to the IEEE, in failing to submit a Letter of
Assurance regarding the four asserted standard-essential
patents, could support ALE’s fraud claim. 6 ALE relies on
6 ALE has not disputed Chrimar’s contention on
appeal that ALE “provided no evidence at trial regarding
its predecessor’s interest and involvement in the IEEE or
the PoE standard-setting process.” Chrimar Br. 52 n.19
(emphasis omitted) (quoting Chrimar Sys., Inc. v. Alcatel-
Lucent Enter. USA Inc., No. 6:15-cv-163, 2017 WL
345991, at *3 (Jan. 24, 2017)).
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 23
Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194
(Tex. 2011), for the proposition that common-law fraud
under Texas law “does not require proof that the entity
committing the fraud—here, Chrimar—intended to de-
fraud the specific party that is making the fraud allega-
tion.” ALE Br. 68. We see no reversible error in the
district court’s decision to give the instruction it gave.
The district court’s instruction mirrors a statement of
the law in an intermediate Texas court of appeals deci-
sion, 7979 Airport Garage, L.L.C. v. Dollar Rent A Car
Sys., Inc., 245 S.W.3d 488, 507 n.27 (Tex. App. 2007)
(reciting elements of a Texas state law fraud claim in
materially identical terms). That decision post-dates the
Texas Supreme Court’s decision in Ernst & Young, L.L.P.
v. Pac. Mutual Life Ins. Co., 51 S.W.3d 573 (Tex. 2001),
which announced the fraud standard later applied by
Exxon, 348 S.W.3d at 218–19. And after Exxon, the Fifth
Circuit itself recited (in an unpublished decision) that
same statement of the elements of a fraud claim from the
7979 Airport Garage decision. Shaver v. Barrett Daffin
Frappier Turner & Engel, L.L.P., 593 F. App’x 265, 271
(5th Cir. 2014). Unless Exxon clearly showed those rul-
ings to be incorrect, the district court permissibly followed
them.
Exxon does not clearly show those rulings to be incor-
rect. In Exxon, the court addressed the “intent to induce”
element of fraud. 348 S.W.3d at 217–18 (affirming prin-
ciple announced in Ernst & Young, 51 S.W.3d at 580–82).
Emerald, a lessor of the O’Connor oil well field, presented
evidence that Exxon, the previous lessor, filed public
plugging reports with the Texas Railroad Commission
with false representations regarding the amount of re-
serves in the oil field, as well as evidence that “the first
place subsequent operators turn is to those very filings at
the Railroad Commission when deciding whether redevel-
opment can be economically undertaken.” Id. at 216–17.
The Texas Supreme Court stated that whether a party
24 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
“might or should rely on statements” in such reports
“alone is not sufficient to establish an intent to induce
reliance.” Id. at 218. Rather, as in § 531 of the Restate-
ment (Second) of Torts (1977), “[o]ne who makes a fraudu-
lent misrepresentation is subject to liability to the persons
or class of persons whom he intends or has reason to
expect to act or to refrain from action in reliance upon the
misrepresentation, for pecuniary loss suffered by them
through their justifiable reliance in the type of transac-
tion in which he intends or has reason to expect their
conduct to be influenced.” Id. at 218–19 (quoting Re-
statement § 531). As explained by the court:
[The] “reason-to-expect standard requires more
than mere foreseeability; the claimant’s reliance
must be ‘especially likely’ and justifiable, and the
transaction sued upon must be the type the de-
fendant contemplated.” Ernst & Young, 51
S.W.3d at 580 . . . . Even an obvious risk that a
misrepresentation might be repeated to a third
party is not sufficient to satisfy the reason-to-
expect standard. A plaintiff must show that “[t]he
maker of the misrepresentation [has] information
that would lead a reasonable man to conclude that
there is an especial likelihood that it will reach
those persons and will influence their conduct.”
[Restatement] § 531, cmt. d . . . , quoted in Ernst
& Young, 51 S.W.3d at 581.
Id. at 219. As a matter of law, the court said, it is not
enough that Exxon “knew” that subsequent lessors would
rely on its reports; Exxon must have known that there
was “an especial likelihood that Emerald specifically
would rely on the plugging reports in a transaction being
considered at the time [Exxon] filed the plugging reports.”
Id. The Exxon court therefore ruled that the misrepresen-
tation, even in a public filing, must be directed at the
defrauded party. That court’s language can fairly be
viewed in the terms (intent even with some constructive
CHRIMAR HOLDING CO., LLC v. ALE USA INC. 25
aspect) articulated before Exxon in 7979 Airport Garage
(adopted after Exxon by the Fifth Circuit in Shaver).
It is true that Texas law “does not require proof that a
misrepresentation be made to the defrauded party” in the
sense ALE suggests—in substance, directly to. ALE
Br. 68. But the jury instructions did not require that the
misrepresentation or omission be made “directly to” ALE.
The instructions permitted liability if the misrepresenta-
tion or omission was made to ALE, whether directly or
indirectly. See Neuhaus v. Kain, 557 S.W.2d 125, 138
(Tex. Civ. App. 1977) (“We recognize the rule that a
fraudulent representation may be either direct or indi-
rect”). Perhaps the instruction would have benefited from
specifying that the fraudulent statement could be made
“directly or indirectly” to ALE; but ALE made no request
for inclusion of words to that effect. ALE objected to the
instruction on the ground that “[w]e think that the evi-
dence has shown that the – Chrimar has committed fraud
on the IEEE in general and that it’s not necessary to show
fraud against ALE in this case.” J.A. 6919. The district
court could reasonably reject that proposal as incorrectly
suggesting that neither a direct nor indirect misrepresen-
tation is required. In these circumstances, ALE lacks a
meritorious argument on appeal for vacatur of the fraud
verdict based on erroneous instructions.
III
Chrimar cross-appeals the district court’s denial of its
motion for attorney fees under 35 U.S.C. § 285, which we
review for abuse of discretion. Highmark Inc. v. Allcare
Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1747 (2014).
Chrimar’s argument relies chiefly on the ground that
ALE pressed a large number of defenses and counter-
claims for years, only to drop most of them (e.g., concern-
ing antitrust, inequitable conduct, and some invalidity
grounds) late in the litigation, even during trial. Chrimar
does not meaningfully show that those dropped claims
26 CHRIMAR HOLDING CO., LLC v. ALE USA INC.
were objectively meritless. It focuses on the contention
that ALE never truly intended to try them.
The district court did not abuse its discretion in mak-
ing what here was a case-specific judgment that it was
distinctively well-positioned to make. The court denied
summary judgment as to a number of the claims ALE
later dropped, allowing them to proceed. And the court
determined that ALE’s litigation decisions fell within the
range of ordinary practices involving the narrowing of
claims for trial. Fees Order, at 3–4.
We have considered Chrimar’s arguments that this
was an exceptional case as a matter of law and find them
unpersuasive. We therefore affirm the district court’s
ruling on ALE’s § 285 motion.
IV
We vacate in part the district court’s second claim
construction order—the part adopting a construction of
“adapted” in claim 31 of the ’012 patent, a construction we
reject. We affirm the district court’s remaining claim
constructions and the infringement damages award and
the fraud judgment. We remand for further proceedings
consistent with this opinion.
Each party shall bear its own costs.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED