In Packet Intelligence LLC, v. Netscout Systems, Inc. the Federal Circuit reversed a jury determination for pre-suit damages, and vacated an enhancement of such damages, for Netscout’s infringement of U.S. Patent 6,665,725, U.S. Patent 6,839,751, and U.S. Patent 6,954,789, all owned by Packet Intelligence.
The patents at issue were all directed to monitoring packets exchanged over a computer network. The ‘798 patent includes system claims, and the ‘725 and ‘751 patents include method claims. It was important in this case that infringement of the various system and method claims have different requirements to qualify for pre-suit damages. Pre-suit damages for the system claims are controlled by the marking requirements of 35 U.S.C. § 287(a), whereas pre-suit damages for the method claims are not.
With respect to the method claims of the ‘725 and ‘751 patents, Packet Intelligence argued that evidence of direct infringement of the ‘725 and ‘751 patents was sufficient to merit an award of damages for pre-suit activities. Direct infringement would require the method of the patent claims to actually be practiced, i.e., the steps of method actually performed. However, NetScout’s primary activity was to sell and license software, and, as the Federal Circuit pointed out, method claims are not directly infringed by the mere sale of a product that can perform the claimed methods. Accordingly, various software that was sold pre-suit and that was capable of performing the claimed methods did not qualify for an award of pre-suit damages.
With respect to the system claims of the ‘798 patent, and as discussed by the Federal Circuit, to avoid pre-suit damages for infringement of the system claims under 35 U.S.C. § 287(a) the alleged infringer merely has to put the patentee on notice that certain licensees sold specific unmarked products that are believed to practice the patent. The patent owner then bears the burden of showing that such products do not practice the invention. See Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350, 1368 (Fed. Cir. 2017) (relied on by the Federal Circuit in the present case).
NetScout argued that it met its burden at trial concerning pre-suit damages under § 287(a) by alleging that a licensed software product known as MeterFlow practiced the inventions of the ‘798 patent, and that Packet Intelligence failed to rebut such assertions. Packet Intelligence argued that removal of a reference to MeterFlow in a provisional patent application when converting the application to a non-provisional in the prosecution history of the ‘789 patent, along with expert testimony provided at trial, was sufficient evidence to show that MeterFlow did not practice the patent. The Federal Circuit sided with Netscout for numerous reasons. First, the jury instructions provided at trial were in error with respect to burdens under § 287(a). Specifically, the instructions stated that “NetScout must first show the existence of a patented article.” (Emphasis added). Second, the court pointed out that the testimony provided by Packet Intelligence’s expert was for a product known as MeterWorks, which is a different product than MeterFlow. Third, Packet Intelligence’s expert testified that MeterFlow was removed from the provisional application to prevent market confusion, not to comment on whether MeterFlow practiced the patent. For all the above reasons, the Federal Circuit determined that Packet Intelligence did not show that the MeterFlow product did not practice the invention of the ‘798 patent.
Ultimately, the Federal Circuit reversed the determination for pre-suit damages and vacated the enhancement of such damages because Packet Intelligence failed meet its burden in showing that MeterFlow did not practice the invention for the system claims, and had insufficient support for its damage theory with respect to the method patents.
Lessons for Practice
The Federal Circuit’s decision regarding damages related to the method and system claims illustrates important pros and cons of each. With system claims, a patent owner may recover pre-suit damages for the mere sale of products embodying the claimed system (assuming marking requirements of § 287(a) are met). However, an alleged infringer in such situation may potentially avoid pre-suit damages with the defensive provisions of § 287(a) regarding alleging licensees selling specific unmarked products that are believed to practice the patent, thus shifting the burden of proof to patent owner to show such products do not practice the claimed invention. With method claims, the defensive portions of § 287(a) are not available to alleged infringers. However, the patent owner has the increased burden of showing the claimed method was actually performed, typically a higher burden then merely showing the sale of a product that could perform the method. When applying these pros and cons to the practice of drafting and enforcing patents, an understanding of a client’s business, e.g., do they sell product, license software, etc., and the activities of competitors, will be useful in determining whether to draft method claims and/or system claims, and in determining the best strategies to maximize the value of litigation to enforce such claims.