Trustid, Inc. v. Next Caller, Inc.

Case: 22-1433 Document: 35 Page: 1 Filed: 03/01/2023
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
TRUSTID, INC.,
Plaintiff-Appellant
v.
NEXT CALLER, INC.,
Defendant-Appellee
______________________
2022-1433
______________________
Appeal from the United States District Court for the
District of Delaware in No. 1:18-cv-00172-MN, Judge
Maryellen Noreika.
______________________
Decided: March 1, 2023
______________________
WILLIAM MILLIKEN, Sterne Kessler Goldstein & Fox,
PLLC, Washington, DC, argued for plaintiff-appellant.
Also represented by MICHAEL D. SPECHT, JONATHAN
TUMINARO.
SARAH CHAPIN COLUMBIA, McDermott Will & Emery
LLP, Boston, MA, argued for defendant-appellee. Also rep-
resented by IAN BARNETT BROOKS, PAUL WHITFIELD
HUGHES, Washington, DC; JACK B. BLUMENFELD, MEGAN
Case: 22-1433 Document: 35 Page: 2 Filed: 03/01/2023
2 TRUSTID, INC. v. NEXT CALLER, INC.
DELLINGER, Morris, Nichols, Arsht & Tunnell LLP, Wil-
mington, DE.
______________________
Before LOURIE, PROST, and CHEN, Circuit Judges.
LOURIE, Circuit Judge.
TRUSTID, Inc. (“TRUSTID”) appeals from a decision of
the United States District Court for the District of Dela-
ware denying TRUSTID’s motion for judgment as a matter
of law (“JMOL”) on a claim of infringement of U.S. Patents
8,238,532 (the “’532 patent”) and 9,001,985 (the “’985 pa-
tent”) and granting Next Caller, Inc.’s (“Next Caller’s”) mo-
tion for JMOL on a claim of false advertising under the
Lanham Act. See TRUSTID, Inc. v. Next Caller, Inc., No.
1:18-cv-00172, 2022 WL 318299 (D. Del. Jan. 5, 2022) (“De-
cision”). For the following reasons, we affirm.
BACKGROUND
In the late 2000s, TRUSTID developed a caller identi-
fication product known as the Authenticator and described
that system and a method of using it in the ’532 and ’985
patents. Next Caller later entered the caller identification
market at a lower price point than the Authenticator with
a product known as VeriCall.
Both products detect fraudulent or “spoofed” calls while
authenticating those from a business’s genuine callers.
TRUSTID advertised that such authentication could prove
beneficial for businesses that utilize automated Interactive
Voice Response (“IVR”) technology to answer calls. In par-
ticular, TRUSTID advertised that use of the Authenticator
could lead to a 5–10 percent improvement in IVR contain-
ment rates, a measure of callers who can have their issues
resolved by the automated system without having to speak
to a live agent. Such increases in IVR containment may
save businesses money because, if a caller has her issue
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TRUSTID, INC. v. NEXT CALLER, INC. 3
resolved by the automated system, the business need not
pay an agent to provide that caller with additional service.
After learning about TRUSTID’s IVR-containment
marketing, which had been confirmed via extensive test-
ing, Next Caller’s Head of Sales instructed his team to “jack
that stat or make up a number like 8%” for Next Caller’s
product. J.A. 8557. Thereafter, Next Caller advertised
VeriCall as providing a 10 percent increase in IVR contain-
ment rates.
TRUSTID sued, asserting that Next Caller falsely ad-
vertised VeriCall’s ability to increase IVR containment by
10 percent. J.A. 6294, 6540. At trial, the jury found Next
Caller’s 10 percent IVR containment statements to be lit-
erally, and willfully, false, ultimately finding in favor of
TRUSTID on its claim for false advertising under the Lan-
ham Act. The jury subsequently awarded TRUSTID $1.44
million in damages, plus an additional $1.44 million in pu-
nitive damages.
TRUSTID also sued for infringement of the ’532 and
’985 patents. The ’532 patent relates to TRUSTID’s caller-
ID system. Representative claim 32 is presented below:
32. A system for performing forensic analysis
on calling party number information associ-
ated with an incoming call from a telephonic
device, before the incoming call is answered,
comprising
an interface for receiving calling party
number information associated with the
incoming call;
a memory configured to store a plurality of
expected call patterns; and
one or more processors configured to:
gather operational status information
associated with the calling party num-
ber information, and
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4 TRUSTID, INC. v. NEXT CALLER, INC.
assign a source origin confidence met-
ric to the calling party number using
the operational status information and
an expected call pattern in the plural-
ity of expected call patterns.
’532 patent at col. 16 l. 62–col. 17 l. 9 (emphasis added).
The ’985 patent relates to TRUSTID’s caller-ID
method. Representative claim 1 is presented below:
1. A method of determining a source origin
confidence metric of a calling party number or
a billing number associated with an incoming
call to a called party telephonic device from a
calling party telephonic device, comprising:
receiving by an electronic system associ-
ated with the called party telephonic de-
vice the calling party number or billing
number, wherein the electronic system re-
ceives the calling party number or billing
number from the called party telephonic
device;
after receiving the calling party number or
billing number and before the incoming
call is answered, gathering by the elec-
tronic system associated with the called
party telephonic device operational status
information associated with the calling
party number or billing number; and
determining by the electronic system asso-
ciated with the called party telephonic de-
vice the source origin confidence metric for
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TRUSTID, INC. v. NEXT CALLER, INC. 5
the calling party number or billing num-
ber.
’985 patent at col. 15 ll. 2–19 (emphasis added).
Next Caller focused its noninfringement arguments on
three claim limitations, one of which is shared across the
two asserted patents. In particular, Next Caller asserted
that VeriCall did not perform its authentication analysis
“before the incoming call is answered,” as required by both
asserted patents, because its analysis is performed after an
IVR system answers incoming calls. At trial, the jury ac-
cordingly found TRUSTID’s patents valid but uninfringed.
TRUSTID and Next Caller both moved for JMOL, with
Next Caller moving for a finding of no false advertising and
no punitive damages, and TRUSTID moving for a finding
of infringement. The district court denied TRUSTID’s mo-
tion but granted Next Caller’s motion, finding no false ad-
vertising while upholding the jury’s finding of
noninfringement. TRUSTID appealed the grant of JMOL
finding no false advertising and the denial of JMOL regard-
ing infringement. We have jurisdiction under 28 U.S.C.
§ 1292(c)(1).
DISCUSSION
We review decisions on motions for JMOL under the
law of the regional circuit. MobileMedia Ideas v. Apple, 780
F.3d 1159, 1164 (Fed. Cir. 2015). The Third Circuit reviews
district court JMOL decisions de novo, viewing the record
in the light most favorable to the verdict winner and draw-
ing all reasonable inferences in its favor. Id. “Only if the
record is ‘critically deficient of the minimum quantum of
evidence’ on which a jury could reasonably base its verdict
does the Third Circuit affirm a grant of JMOL.” Id. (citing
Pitts v. Delaware, 646 F.3d 151, 155 (3d Cir. 2011)).
TRUSTID contends that the district court erred in en-
tering JMOL overturning the jury verdict that Next Caller
willfully engaged in false advertising under the Lanham
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6 TRUSTID, INC. v. NEXT CALLER, INC.
Act. TRUSTID also contends that the district court erred
in upholding the jury’s findings of noninfringement.
I.
We turn first to the district court’s grant of Next
Caller’s motion for a JMOL of no false advertising under
the Lanham Act. Section 43 of the Lanham Act provides:
Any person who, on or in connection with
any goods or services, or any container for
goods, uses in commerce . . . any false desig-
nation of origin, false or misleading descrip-
tion of fact, or false or misleading
representation of fact, which . . . in commer-
cial advertising or promotion, misrepresents
the nature, characteristics, qualities, or geo-
graphic origin of his or her or another person’s
goods, services, or commercial activities, shall
be liable in a civil action by any person who
believes that he or she is or is likely to be dam-
aged by such an act.
15 U.S.C. § 1125(a)(1)(B).
In the Third Circuit, a Lanham Act false advertising
claim requires a showing of five elements:
1) that the defendant made false or misleading state-
ments as to his own product or another’s;
2) that there is actual deception or at least a tendency
to deceive a substantial portion of the intended au-
dience;
3) that the deception is material in that it is likely to
influence purchasing decisions;
4) that the advertised goods travelled in interstate
commerce; and
5) that there is a likelihood of injury to the plaintiff in
terms of declining sales, loss of good will, etc.
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TRUSTID, INC. v. NEXT CALLER, INC. 7
Warner-Lambert v. Breathassure, 204 F.3d 87, 91−92 (3d
Cir. 2000).
Although the district court agreed with the jury that
Next Caller willfully made literally false statements con-
cerning IVR containment (element one), it found insuffi-
cient evidence of deception (element two), materiality
(element three), and injury (element five). The district
court therefore entered JMOL reversing the jury’s verdict.
TRUSTID contends that sufficient evidence exists to
support the jury’s finding of false advertising, and thus
that the district court erred in overturning that verdict. In
addition, TRUSTID contends that the jury may have based
its verdict on a separate legal theory involving price dis-
gorgement. At oral argument, TRUSTID further contended
that such a theory does not require proving actual decep-
tion or materiality. We address these arguments in turn.
A.
We first address whether there was a deficiency of
proof in establishing any of the five elements of a Lanham
Act claim under Third Circuit law. We begin and end with
element three: materiality.
The parties dispute what is required for the materiality
prong to be met. TRUSTID argues that a showing of actual
reliance on a false statement is not required to establish
materiality. Rather, the false statement need only be
“likely to influence the purchasing decision.” U.S.
Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898
F.2d 914, 922 (3d Cir. 1990). However, the seminal Lan-
ham Act case in the Third Circuit, Parkway Baking v. Frei-
hofer Baking Co., 255 F.2d 641 (3d Cir. 1958) holds that,
for cases involving monetary damages, “there must be a
showing of some customer reliance on the false advertise-
ment.” Id. at 648; see also Decision at *9 (framing the ma-
teriality element as requiring that “the purchasing decision
of the deceived party [be] impacted by the deceptive
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8 TRUSTID, INC. v. NEXT CALLER, INC.
statement”). We find it unnecessary, however, to deter-
mine whether TRUSTID needed to demonstrate actual re-
liance on Next Caller’s false statements or just a likelihood
that they would influence purchasing decisions because,
under either theory, there is insufficient evidence to sup-
port a finding of materiality.
First, we look to the record, viewing it in the light most
favorable to TRUSTID, to determine whether it is critically
deficient in the minimum quantum of evidence on which a
jury could reasonably find that the 10 percent IVR contain-
ment statements actually influenced customers’ purchas-
ing decisions. See MobileMedia Ideas, 780 F.3d 1164. In
performing the same analysis, the district court held that
“there is a dearth of evidence that any customer relied on
or was impacted by the 10% IVR statement in connection
with making purchasing decisions.” Decision at *9. In par-
ticular, the court noted that “the only evidence for [] cus-
tomers that addressed IVR containment suggested that
IVR containment was not important or relevant to their
purchasing decisions.” Id. We agree.
The record contains evidence relating to only four Next
Caller customers: Capital One, Dish Network, Comcast,
and BBVA. TRUSTID has not pointed us to any part of the
record establishing that any of these customers’ decisions
to purchase a call authenticator product were influenced by
Next Caller’s false statements.
Indeed, Capital One made its purchasing decision be-
fore the false statements were ever made. J.A. 60 (finding
the false IVR statement was first made in September
2017), 6443−47 (establishing that Capital One made its
purchasing decision no later than April 2017); see also id.
6509. The false statements therefore could not have influ-
enced Capital One’s purchasing decision.
For Dish Network, a company representative expressly
testified that it did not rely on Next Caller’s false IVR con-
tainment claims when making its purchasing decision.
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TRUSTID, INC. v. NEXT CALLER, INC. 9
J.A. 6550−51. Instead, it relied on a positive referral from
Capital One, which had conducted two pilot trials to test
VeriCall’s authentication capabilities, including one head-
to-head test with TRUSTID’s Authenticator product. J.A.
6446−47, 6481. After completing these trials, Capital One
determined that VeriCall “demonstrate[ed] better accu-
racy” at a fraction of the cost of TRUSTID’s Authenticator
product. J.A. 6522−24; see also J.A. 6312−13, 7877−78,
6525 (finding that VeriCall caught non-authentic, “spoof”
calls that the Authenticator missed). After Capital One
provided this positive referral, Dish Network performed its
own independent evaluation of VeriCall, and subsequently
decided to purchase it. Id. 6550−51.
Representatives from Comcast and BBVA further tes-
tified that they did not use VeriCall for IVR containment
purposes. See J.A. 6532 (testimony that BBVA had not
used VeriCall for “[IVR] containment purposes at all”); id.
6540-41, 6544 (testimony that Comcast did not consider us-
ing VeriCall for IVR containment because Comcast does
not “use IVR authentication to drive IVR containment”).
These company representatives further testified that their
companies elected to purchase VeriCall based on a variety
of factors, including independent testing, relating to call
authentication, not their application to IVR containment.
See, e.g., J.A. 6436−37, 6438.
Thus, whether because of the timing of the purchase
(Capital One), independent testing (Capital One, Dish Net-
work, Comcast), reliance on positive referrals (Dish Net-
work), use of the product for authentication rather than
IVR containment (Comcast, BBVA), or explicit testimony
that the marketing materials containing the false state-
ment were not relied upon for making purchasing decisions
(Dish Network), none of these customers showed any ac-
tual reliance on the false 10 percent IVR containment
statements.
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10 TRUSTID, INC. v. NEXT CALLER, INC.
Even assuming that Third Circuit law required
TRUSTID to establish only that customer purchasing deci-
sions were likely to be impacted by the false statements, we
still find a deficiency of evidence. TRUSTID has not
pointed to any evidence suggesting that any one of these
four customers was likely to be influenced by the false
statements after having performed their own independent
testing of the product or in deciding to purchase VeriCall
for implementation outside of the IVR context. TRUSTID
also has not pointed to any evidence suggesting that Next
Caller had or was likely to procure other customers inter-
ested in purchasing VeriCall for application in an IVR con-
text such that their purchasing decisions were likely to
have been affected by the false statements.
Evidence in the record established that “[i]f one vendor
has [a] better IVR containment metric than the other, that
might be something that [a customer] would consider when
selecting a vendor.” J.A. 6531−32. However, whether a
metric “might be something” to consider when selecting be-
tween two vendors is insufficient to establish a likelihood
of influencing a decision to purchase one authentication
product over another. Although TRUSTID’s CEO testified
that IVR containment is “the single key metric for compa-
nies that use it,” the record fails to provide testimony from
a Next Caller customer that did use or consider using Ver-
iCall for that purpose. See J.A. 6295−95. At best, the rec-
ord reflects that it was possible that, sometime within the
three-and-a-half-year window during which Next Caller
falsely claimed unproven IVR containment improvements,
a potential customer interested in purchasing an authenti-
cator for use within an IVR context could have had its pur-
chasing decision influenced by Next Caller’s false
statements. That is not enough to establish materiality.
See, e.g., Allen Organ Co. v. Galanti Organ Builders Inc.,
798 F. Supp. 1162, 1164–65, 1169–70 (E.D. Pa. 1992) (hold-
ing that testimony from plaintiff’s corporate president on
the perceived effect that false advertising had on
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TRUSTID, INC. v. NEXT CALLER, INC. 11
consumers, along with an economist’s testimony on the al-
leged effects on plaintiff’s sales due to the defendant’s entry
into the market, was insufficient to establish an “impact of
the offensive materials directly on the purchasing public”),
aff’d, 995 F.2d 215 (3d Cir. 1993) (affirming without writ-
ten opinion).
Because of the deficiency in proof to establish materi-
ality, we affirm the district court’s decision finding no Lan-
ham Act violation under Third Circuit law.
B.
We next turn to TRUSTID’s profit disgorgement the-
ory. According to TRUSTID, under Williamson-Dickie
Manufacturing Co. v. Davis Manufacturing Co., 251 F.2d
924 (3d Cir. 1958), if a plaintiff successfully establishes
that the defendant committed a willful violation of the Lan-
ham Act, then the plaintiff is entitled to disgorgement of
profits. At oral argument, TRUSTID asserted that profit
disgorgement was available even absent a showing of ma-
teriality of that false statement. We are not persuaded.
The decision in Williamson-Dickie was predicated on a
finding of trademark infringement, that is, an actual find-
ing of injury, with a resulting right to recover any resulting
damages. Id. at 927. Here, although TRUSTID is correct
that there was a finding of a willfully false statement, as
discussed above in Section I.A, TRUSTID failed to estab-
lish that it had a right to recover under the Lanham Act
under the operable Third Circuit law. The willfully false
statement, standing alone, does not establish this right;
TRUSTID still had to show each of the other four elements
of the claim to be on par with the finding of trademark in-
fringement in Williamson-Dickie. Because TRUSTID
failed in that respect, the price disgorgement theory ad-
vanced in Williamson-Dickie is inapposite.
II.
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12 TRUSTID, INC. v. NEXT CALLER, INC.
We turn next to the decision denying TRUSTID’s mo-
tion for JMOL of infringement, which we review de novo,
viewing the record in the light most favorable to the verdict
winner, which, for this issue, was Next Caller. See Mo-
bileMedia, 780 F.3d at 1164.
The dispute over infringement focused on three distinct
claim elements across the two asserted patents. One of
those claim elements—performing an authentication anal-
ysis “before the incoming call is answered”—is common to
both asserted patents, and our findings on it are dispositive
in both patents.
TRUSTID asserts that Next Caller infringes the “in-
coming call” limitation because VeriCall performs its au-
thentication analysis before the call is answered by a live
agent. Next Caller argues that by the time the agent an-
swers the call, it is no longer an “incoming call” because it
has already been “answered” by the IVR.
Although the district court construed “call” to mean
“any connection” over a network, and construed “is an-
swered” to mean “actually or virtually goes off the hook,” it
did not construe “incoming.” See J.A. 12−13. Thus, alt-
hough TRUSTID frames this dispute as a legal one con-
cerning the proper construction of the incoming call
limitation, we find the actual question on appeal is whether
the jury could have reasonably determined that a call al-
ready answered by the IVR still constituted an “incoming
call” when it was later answered by a human agent. That
is not a question of law, but rather a question of fact chal-
lenging the sufficiency of the evidence of noninfringement.
See ePlus v. Lawson Software, 700 F.3d 509, 520 (Fed. Cir.
2012); ACCO Brands, Inc. v. ABA Locks Mfrs. Co., 501 F.3d
1307, 1311 (Fed. Cir. 2007); see also Kaufman v. Microsoft,
34 F.4th 1360, 1369−70 (Fed. Cir. 2022).
In denying TRUSTID’s motion for JMOL, the district
court concluded that the jury was presented with sufficient
evidence to support its verdict. Decision at *5; see also, e.g.,
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TRUSTID, INC. v. NEXT CALLER, INC. 13
J.A. 6439−40, 6826−27, 6839−40, 7667−68, 7680, 7801. Alt-
hough the court found that there was conflicting testimony,
it reasoned that the “jury was free to credit the evidence
presented that the ‘call’ was no longer an ‘incoming call’
once it was answered by the IVR.” Decision at *5. We
agree. Because that claim limitation is common to all in-
dependent claims of the asserted patents, we need not as-
sess any additional limitations to affirm the district court’s
denial of JMOL as to infringement.
CONCLUSION
We have considered TRUSTID’s remaining arguments
and find them unpersuasive. For the foregoing reasons, we
affirm.
AFFIRMED