EDTX & NDTX Monthly Wrap-Up: May 2021

This month's EDTX & NDTX Wrap-Up summarizes a decision from the Eastern District of Texas granting a new trial on patent validity. The court addressed the admissibility of uncorroborated testimony about prior art and whether there was a legally sufficient evidentiary basis for the jury's invalidity determination. The court ultimately granted a new trial but denied judgment as a matter of law ("JMOL").

Uncorroborated testimony is admissible to indicate the level of ordinary skill in the art, but inadmissible as evidence of prior art—"That distinction makes a world of difference." Network-1 Techs., Inc. v. Hewlett-Packard Co., Case 6:13-cv-00072, 2021 WL 1941693, at *4 (E.D. Tex. May 7, 2021) (Schroeder, J.).

Defendants Hewlett-Packard Company and Hewlett Packard Enterprise Company (collectively, "HP") were sued in 2011 for infringement of U.S. Patent No. 6,218,930. Id. at *1. Plaintiff Network-1 Technologies, Inc. tried its infringement claims against HP in November 2017. Id. "HP presented a single invalidity theory" at trial—"that the '930 Patent was invalid as obvious by combining four references": "the Fisher system," "the Fisher patents," and two additional printed publications. Id. HP prevailed; the jury returned a verdict of non-infringement and invalidity of all asserted claims. Id.

After trial, the court entered judgment of non-infringement but granted JMOL in Network-1's favor on validity, overturning the jury's invalidity verdict on two grounds. Id. at *1—2. "First, the Court held that HP had not shown that the Fisher system was prior art." Id. at *1. Second, the court found that HP was estopped under 35 U.S.C. § 315(e)(2) from presenting an invalidity theory based on the remaining three printed publications. Id.

Both parties appealed. The Federal Circuit vacated the lower court's judgment of non-infringement and remanded for a new trial on infringement. Id. at *2; see also Network-1 Techs., Inc. v. Hewlett-Packard Co., 981 F.3d 1015, 1023—26 (Fed. Cir. 2020) (holding that "the [district] Court erroneously construed the term ‘main power source' by excluding AC power sources"). The Federal Circuit also vacated the lower court's decision granting JMOL for Network-1 on validity. Network-1 Techs., 2021 WL 1941693, at *2. The Federal Circuit resolved the estoppel issue but remanded remaining issues to the district court. Id.[1]

On remand, the court ruled on Network-1's validity JMOL motion.

A new trial was appropriate because evidence of the Fisher system should have been excluded and its inclusion prejudiced Network-1.

Network-1 requested a new trial on the ground that "evidence of the Fisher system should have been excluded and its inclusion prejudiced Network-1[.]" Id. at *3. Network-1 argued that the testimony of the Fisher system's creator, David Fisher, was uncorroborated and HP failed to prove that the Fisher system was prior art. Id. "[B]ecause that system was not prior art and Mr. Fisher's testimony was uncorroborated, neither should have been presented to the jury," and "the inclusion of this evidence was so prejudicial as to warrant a new trial." Id.

The court found that the Fisher system was not prior art and Network-1 suffered substantial prejudice from its inclusion. HP's only evidence of public availability of the Fisher system before the '930 patent's priority date was uncorroborated testimony by Mr. Fisher. Id. at *4. But uncorroborated testimony "is legally inadequate" to establish the Fisher system as prior art. Id. (citing Woodland Tr. v. Flowertree Nursery, Inc., 148 F.3d 1368, 1371 (Fed. Cir. 1998) ("Throughout the history of the determination of patent rights, oral testimony by an alleged inventor asserting priority over a patentee's rights is regarded with skepticism, and as a result, such inventor testimony must be supported by some type of corroborating evidence.")).

HP countered that the Fisher system "was still admissible because it had the tendency to make a consequential fact more probab[le]—i.e., that certain limitations were present in the prior art." Id. at *3. HP relied on a Federal Circuit decision where "the court held that references, 'though not technically prior art,' were 'properly used as indicators of the level of ordinary skill in the art to which the invention pertained.'" Id. at *4 (quoting Thomas & Betts Corp. v. Litton Sys., Inc., 720 F.2d 1572, 1581 (Fed. Cir. 1983)).

But the court noted how "HP used the Fisher system for far more than establishing the level of ordinary skill in the art." Id. HP had used the Fisher system "as an invalidating reference in its sole obviousness combination." Id. As the court explained:

That distinction makes a world of difference. The precise date on which a reference was publicly available matters less when determining the level of ordinary skill in the art, as the level of skill is unlikely to change significantly from one day to the next. In contrast, the precise date on which potential prior art was publicly available can be the difference between a valid and invalid patent. Here, to the extent that the Fisher system evidence had any relevance to the case, it was outweighed by its prejudicial effect and it should have been excluded. [FRE] 403.

Id. Uncorroborated evidence of the Fisher system to establish the level of skill is admissible because that level changes gradually, but uncorroborated evidence of the Fisher system as prior art is inadmissible because the precise date is crucial for determining validity. See id. Thus, the court found that "neither Mr. Fisher's testimony nor the Fisher system itself should have been before the jury." Id.

Based on these circumstances, "where the Fisher system and the uncorroborated testimony of its creator should not have been before the jury," the court concluded that "a new trial is appropriate." Id. at *5.

JMOL was not appropriate because the jury had a sufficient basis for its invalidity determination and, in any event, fairness and judicial efficiency warrant a new trial.

Network-1 presented many arguments in its renewed JMOL motion, but the court found that "Network-1 waived all but one of these arguments by raising them via a Rule 50(a) [JMOL] motion during trial." Id. at *6. "Rule 50(a) motions are construed liberally," "[b]ut even the most liberal construction cannot save Network-1’s motion here." Id. Network-1, by raising it in its Rule 50(a) motion, had only "preserve[d] the specific argument . . . that HP's expert allegedly admitted non-obviousness." Id. at *7.

The court denied Network-1's JMOL, finding that "the jury had a sufficient basis for its invalidity determination." Id. HP's expert's "position was essentially that under his interpretation, HP wins on infringement but loses on validity. But [he] was also adamant that if the jury disagreed and instead applied the Court's claim constructions in the same way that Network-1's expert . . . applied them on infringement, then the patent was invalid." Id. Network-1's argument, the court explained, "reads too much into [this] alleged admission." Id. HP's expert merely presented an "argument in the alternative," so JMOL was inappropriate. Id.

 The court also found that a new trial was appropriate over JMOL "even if Network-1 was entitled to relief under Rule 50(b)" because that rule "permits the Court to order a new trial rather than direct the entry of judgment as a matter of law." Id. (citing Fed. R. Civ. P. 50(b)(2) and (3)). With the Federal Circuit-mandated new trial on infringement, "fairness and judicial efficiency would warrant trying HP's invalidity defense too." Id.

Trial is scheduled for August 2, 2021, in Tyler, Texas. Id.

[1] On the estoppel issue, the Federal Circuit "held that the Court misapplied 35 U.S.C. § 315(e)(2)'s estoppel provision because HP only joined [another defendant]'s IPR and was unable to raise additional grounds for invalidating the '930 patent." Id. at *2 (citing Network-1 Techs., 981 F.3d at 1026—28).