Case: 22-1092 Document: 39 Page: 1 Filed: 12/16/2022
United States Court of Appeals for the Federal Circuit ______________________
ADASA INC., Plaintiff-Appellee
v.
AVERY DENNISON CORPORATION, Defendant-Appellant ______________________
2022-1092 ______________________
Appeal from the United States District Court for the District of Oregon in No. 6:17-cv-01685-MK, Magistrate Judge Mustafa T. Kasubhai. ______________________
Decided: December 16, 2022 ______________________
ROBERT GREENSPOON, Dunlap Bennett & Ludwig PLLC, Chicago, IL, argued for plaintiff-appellee. Also rep- resented by WILLIAM W. FLACHSBART; GLENN SCHUYLER ORMAN, JONATHAN TAD SUDER, Friedman, Suder & Cooke, Fort Worth, TX.
DEREK L. SHAFFER, Quinn Emanuel Urquhart & Sulli- van, LLP, Washington, DC, argued for defendant-appel- lant. Also represented by JOSEPH MILOWIC, III, OWEN ROBERTS, New York, NY; MARK YEH-KAI TUNG, Redwood Shores, CA. ______________________ Case: 22-1092 Document: 39 Page: 2 Filed: 12/16/2022
Before MOORE, Chief Judge, HUGHES and STARK, Circuit Judges. MOORE, Chief Judge. Avery Dennison Corporation appeals the United States District Court for the District of Oregon’s grant of sum- mary judgment that claim 1 of U.S. Patent No. 9,798,967 is directed to eligible subject matter under 35 U.S.C § 101 and is valid under 35 U.S.C. §§ 102 and 103. Avery Den- nison also appeals the district court’s order denying its mo- tion for a new trial and imposing sanctions for its discovery misconduct. For the reasons set forth below, we affirm in part, reverse in part, vacate in part, and remand for further proceedings. BACKGROUND A The ’967 patent relates, in part, to methods and sys- tems for commissioning radio-frequency identification (RFID) transponders. ’967 patent at 3:27–32. RFID tran- sponders, also known as RFID tags, are used, like barcodes, to identify and track objects by encoding data electronically in a compact label. Id. at 1:32–34. But unlike traditional barcodes, RFID tags need not include external, machine- or human-readable labels and can communicate the data they encode over a distance using radio-frequency transmission. Id. at 1:34–53, 6:28–59. To facilitate identifying and tracking an object in the stream of commerce, RFID tags are encoded with infor- mation associated with the object through a process known as “commissioning.” Id. at 1:40–53. The encoded data may include various categories of information, “for example, data representing an object identifier, the date-code, batch, customer name, origin, destination, quantity,” etc. Id. at 1:45–50. Regardless of the specific categories included, to ensure accurate tracking, it is critical that the data Case: 22-1092 Document: 39 Page: 3 Filed: 12/16/2022
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uniquely identify the tagged object. Id. at 2:21–22, 2:48–50. In the RFID industry, uniqueness is ensured by assign- ing RFID tags an Electronic Product Code (EPC or EPCglobal) in accordance with certain global formatting standards. An EPC is a serialized object number compris- ing object class information and a serial number that to- gether uniquely identify the associated object. See id. at 9:7–15. For example, the EPC may be a Serialized Global Trade Item Number (SGTIN), which consists of a Global Trade Item Number identifying the brand and class of the item (i.e., object class information) followed by a serial number uniquely identifying the tagged item within the brand and class. Id. Since objects from the same brand and class will share the same object class information, en- suring the uniqueness of the overall EPC amounts to en- suring uniqueness of the serial number. Ensuring uniqueness, however, is not necessarily straightforward. Id. at 2:49–50. Serialization generally “requires a central issuing authority of numbers for manu- facturers, products, and items to guarantee uniqueness and to avoid duplication of numbers.” Id. at 2:23–25. The issuing authority assigns blocks of numbers to remote lo- cations, wherein each remote location receives the num- bers one by one or where the numbering space is partitioned in some manner. Id. at 2:25–29. But, in either case, the encoded numbers must generally be reconciled by comparison to a central database “either one or several numbers at a time.” Id. at 2:30–32. In the case of EPCglobal numbers, the central issuing authority is known as GS1. Id. at 7:61–65, 9:7–15. GS1 distributes blocks of numbers to member companies in a hierarchical manner, wherein each company is authorized to then “further allocate numbers from its upper level da- tabase to as many lower database levels as it deems Case: 22-1092 Document: 39 Page: 4 Filed: 12/16/2022
necessary to distribute number authority throughout its enterprise.” Id. at 7:61–8:3. Using central databases to distribute the allocated numbers has certain drawbacks. It generally requires en- coders to maintain a continuous network connection with the database so that new serial numbers can be retrieved when an RFID tag is commissioned. See id. at 3:27–4:4. But a continuous connection is not always possible and, even when it is, may be plagued by network delays that slow down the commissioning process. See id. at 3:64–4:4. This in turn may delay or impair downstream activity, in- cluding manual steps in the commissioning or distribution process. Id. The ’967 patent seeks to “overcome[] these shortcom- ings” using systems and methods for commissioning RFID tags “on-demand” and “with no external authorizations or queries required on a transponder-by-transponder basis,” enabling commissioning to proceed without the need for continuous connectivity to a central database. Id. at 3:27–35, 3:64–67. In one embodiment, pre-authorized ranges of serial numbers for specific object classes are allo- cated to lower levels in the hierarchy, for example, individ- ual encoders. Id. at 8:4–11. In this embodiment, the object class serial number space is subdivided into sectors defined by a series of fixed “Most Significant Bits” (MSBs), wherein the number of allocatable sectors is determined by the number of MSBs. Id. at 8:11–15. For example, according to the SGTIN-96 standard, the serial number space con- sists of 38 bits which can encode 238 distinct serial num- bers. If the first 14 of these bits are designated as MSBs, then the serial number space is correspondingly subdivided into 214 sectors or “blocks” which can be allocated to as many as 214 different encoders. See id. at 8:21–29. The remaining 24 bits can then be used to encode a unique se- rial number space within a given block. Id. “Each allocated block of serial numbers represents authority for encoding objects of an object class that can either be used by an Case: 22-1092 Document: 39 Page: 5 Filed: 12/16/2022
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encoder for encoding transponders, or allocated to a lower level in the authority hierarchy.” Id. at 8:32–36. Critically, once a block is allocated to an encoder, there is no need to reconnect to a central database until the unique numbers within the block have been exhausted. See id. at 8:37–51. Thus, in the previous example, 224, or approximately 16.8 million, RFID tags could be commis- sioned before reconnection to a central database is re- quired. And by eliminating the need for a continuous connection to the database, the attendant delays are re- duced and the commissioning process is improved. The ’967 patent refers to such a system, where only intermit- tent connection to a central database is necessary, as quasi- autonomous encoding authority. Id. at 8:4–7. Claim 1 is the only claim at issue on appeal. As issued following a 2018 reexamination, it recites: 1. An RFID transponder comprising: a substrate; an antenna structure formed on the sub- strate; and an RFID integrated circuit chip which is electrically coupled to the antenna struc- ture; wherein the RFID integrated cir- cuit chip is encoded with a unique object number, the unique object number comprising an object class information space and a unique se- rial number space; wherein the unique serial number space is encoded with one serial number instance from an allocated block of serial numbers, the allo- cated block being assigned a Case: 22-1092 Document: 39 Page: 6 Filed: 12/16/2022
limited number of most significant bits; wherein the unique serial number space comprises the limited number of most significant bits uniquely corresponding to the limited num- ber of most significant bits of the al- located block and of remaining bits of lesser significance that together comprise the one serial number in- stance. ’967 patent at claim 1 (emphasis added). B In October 2017, ADASA sued Avery Dennison in the District of Oregon, alleging its manufacture and sale of cer- tain RFID tags infringed claims 1–6, 13, and 14 of the ’967 patent. The case was assigned to a magistrate judge and the parties consented that the magistrate judge’s decisions would be final, subject to appeal. Following discovery, both parties sought summary judgment. Relevant to this appeal, Avery Dennison moved for summary judgment of noninfringement of all asserted claims or, in the alternative, that the asserted claims were ineligible under § 101. ADASA moved for summary judg- ment of infringement and that the asserted claims are nei- ther anticipated by U.S. Patent No. 7,857,221 (Kuhno) or the book RFID for Dummies nor rendered obvious by RFID for Dummies in combination with certain EPC standards. The district court granted ADASA’s motion as to valid- ity, granted in part its motion as to infringement, and de- nied Avery Dennison’s motions in toto. See ADASA Inc. v. Avery Dennison Corp., No. 6:17-CV-01685-MK, 2020 WL 5518184 (D. Or. Sept. 14, 2020) (Summary Judgment Or- der). In addition, while denying Avery Dennison’s motion for summary judgment of ineligibility, the district court Case: 22-1092 Document: 39 Page: 7 Filed: 12/16/2022
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simultaneously granted judgment in ADASA’s favor that the asserted claims were directed to “an encoded RFID transponder implemented with a memory structure accom- modating a specific hardware-based number scheme” and thus patent-eligible. Summary Judgment Order, at *8. 1 Following summary judgment, ADASA moved to sever and stay its claims of infringement as to all claims except claim 1, which the district court granted. The court subsequently dismissed those claims without prejudice. J.A. 14589–90. Prior to trial, ADASA moved in limine to exclude Avery Dennison’s damages expert, Mr. David Yurkerwich’s, testi- mony related to certain Avery Dennison licenses, arguing Mr. Yurkerwich had failed to adequately establish the li- censes’ technological and economic comparability. The dis- trict court granted the motion, determining “Mr. Yurker[w]ich’s testimony relating to the non-comparable patents cannot pass the Daubert threshold.” J.A. 9477. The parties then proceeded to trial on the issues of in- fringement of claim 1 and damages. As part of its damages case, ADASA entered into evidence three licenses between itself and various licensees, licenses which Avery Dennison alleged reflected lump-sum agreements to practice the ’967 patent. As such, though it had not advanced a lump-sum damages theory during trial, Avery Dennison requested the district court instruct the jury on lump-sum damages and include a lump-sum option on the verdict form. See
1 Although the district court’s summary judgment decision was not explicit in granting judgment in favor of ADASA regarding subject matter eligibility, the post-trial order clarified that its denial of Avery Dennison’s motion for summary judgment “effectively granted summary judg- ment for Plaintiff as to the validity [i.e., eligibility] claim.” ADASA Inc. v. Avery Dennison Corp., No. 6:17-CV-01685- MK, 2021 WL 5921374, at *7 (D. Or. Dec. 15, 2021) (Post- Trial Order). Case: 22-1092 Document: 39 Page: 8 Filed: 12/16/2022
J.A. 15716–18; see also J.A. 17927–28 (proposed instruc- tion); J.A. 17906 (proposed verdict form). The district court denied the request, observing that Avery Dennison’s expert had not offered a lump-sum damages opinion and conclud- ing the licenses alone were insufficient for the jury to con- clude lump-sum damages were appropriate. J.A. 15742–47. Following trial, the jury returned a verdict of infringe- ment and awarded ADASA a running royalty of $0.0045 per infringing RFID tag for a total award of $26,641,876.75. J.A. 11533. Thereafter, Avery Dennison moved for a new trial pursuant to Rule 59, arguing the dis- trict court’s exclusion of Mr. Yurkerwich’s testimony and its decision not to include a lump-sum instruction were re- versible error. Before the district court ruled on this motion, however, Avery Dennison revealed to ADASA that it had discovered additional, previously undisclosed RFID tags in its data- bases. An investigation by a third-party auditor subse- quently determined the number of undisclosed tags was substantial, totaling more than two billion. Avery Den- nison, for its part, stipulated the late-disclosed tags in- fringed (subject to appeal) and agreed to pay an additional $9,417,343 in damages, corresponding to the jury’s rate of $0.0045 per tag. ADASA also moved for sanctions under Rule 37 and requested hearings to determine the appropri- ate remedy for Avery Dennison’s discovery violation. The district court agreed and, after multiple evidentiary hear- ings in which it heard testimony from several witnesses, indicated it would impose a financial sanction “attached to the number of infringing tags” at a rate of $0.0025 per tag with additional rationale to be set forth in its post-trial or- der. J.A. 14574 ll. 1–3. In its December 2021 post-trial order, the district court denied Avery Dennison’s motion for a new trial and de- tailed its findings regarding sanctions, as well as the basis Case: 22-1092 Document: 39 Page: 9 Filed: 12/16/2022
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for the sanction imposed. Post-Trial Order, at *11, *13–14. It explained “a sanction tied to the number of infringing tags determined to exist as of the date of the verdict” at a rate of $0.0025 per tag was warranted in view of Avery Dennison’s “protracted discovery failures” and “its patent and continuous disregard for the seriousness of this litiga- tion and its expected obligations.” Id. at *14. Pursuant to those findings, the district court entered a sanction of $20,032,889.80, corresponding to a $0.0025 per-tag rate ap- plied to both the adjudicated and late-disclosed tags. Id. Avery Dennison appeals the district court’s summary judgment rulings, its denial of a new trial, and its imposi- tion of sanctions. We have jurisdiction under 28 U.S.C. § 1295(a)(1). DISCUSSION I We first address the district court’s grant of summary judgment that claim 1 is eligible under § 101 and not inva- lid under §§ 102 or 103. We review summary judgment rulings under the law of the regional circuit, here the Ninth Circuit. Landmark Screens, LLC v. Morgan, Lewis & Bock- ius, LLP, 676 F.3d 1354, 1361 (Fed. Cir. 2012). The Ninth Circuit “review[s] the district court’s grant of summary judgment de novo, determining whether, viewing all evi- dence in the light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.” Kraus v. Presidio Tr. Facilities Div./Residential Mgmt. Branch, 572 F.3d 1039, 1043–44 (9th Cir. 2009). “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Ander- son v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A We begin with the district court’s ruling that claim 1 is directed to eligible subject matter, a question we review de Case: 22-1092 Document: 39 Page: 10 Filed: 12/16/2022
novo. See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016). Section 101 provides that whoever “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor.” 35 U.S.C. § 101. The Supreme Court has explained that § 101 implicitly excludes from patentability “[l]aws of na- ture, natural phenomena, and abstract ideas.” Mayo Col- laborative Servs. v. Prometheus Labs, Inc., 566 U.S. 66, 70 (2012). To determine whether a claim falls within these implicit exceptions, we apply the two-step analytical framework set forth in Alice. First, we “determine whether the claims at issue are directed to a patent-ineligible con- cept.” Alice Corp. Pty. v. CLS Bank Int’l, 573 U.S. 208, 217 (2014). If the focus of the claim is a specific and concrete technological advance, for example an improvement to a technological process or in the underlying operation of a machine, our inquiry ends and the claim is eligible. See, e.g., Enfish, 822 F.3d at 1336; Uniloc USA, Inc. v. LG Elecs. USA, Inc., 957 F.3d 1303, 1309 (Fed. Cir. 2020); SRI Int’l, Inc. v. Cisco Sys., Inc., 930 F.3d 1295, 1304 (Fed. Cir. 2019); Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1305–06 (Fed. Cir. 2018); Ancora Techs., Inc. v. HTC Am., Inc., 908 F.3d 1343, 1349 (Fed. Cir. 2018), as amended (Nov. 20, 2018). If, however, the claim is directed to an ineligible concept, we proceed to step two and assess whether the “el- ements of the claim both individually and ‘as an ordered combination’ . . . ‘transform the nature of the claim’ into a patent eligible application.” Alice, 573 U.S. at 217 (quoting Mayo, 566 U.S. at 78). Here, the district court held claim 1 was not directed to an abstract idea but rather to “an encoded RFID tran- sponder implemented with a memory structure accommo- dating a specific hardware-based number scheme.” Summary Judgment Order, at *8; see also Post-Trial Or- der, at *7. Avery Dennison argues claim 1 is directed to the abstract idea of mentally assigning meaning to a sub- Case: 22-1092 Document: 39 Page: 11 Filed: 12/16/2022
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section of a data field and does not recite any eligibility- conferring inventive concepts. 2 We do not agree. Considered as a whole, and in view of the specification, claim 1 is not directed to an abstract idea. Rather, it is directed to a specific, hardware-based RFID serial number data structure designed to enable technological improve- ments to the commissioning process. Setting aside the con- ventional RFID hardware components, claim 1 as a whole focuses on the data structure of the serial number space. It requires that this space include a serial number selected from an allocated block and that this serial number com- prise two components: (1) a limited number of MSBs, i.e., a limited, predefined sequence of higher order bits at the leading end of the serial number, see ADASA Inc. v. Avery Dennison Corp., No. 6:17-CV-01685-TC, 2019 WL 281298, at *1 (D. Or. Jan. 22, 2019) (Markman Order), and (2) re- maining bits of lesser significance. ’967 patent at claim 1. Claim 1 further specifies that the claimed MSBs “uniquely correspond” to the MSBs assigned to the allocated block from which the serial number is drawn. Id.; see also Mark- man Order, at *3 (construing “uniquely corresponding” ac- cording to its plain and ordinary meaning). In other words, for any set of MSBs there is exactly one corresponding al- located block, and for each allocated block there is exactly one set of MSBs. In essence, the claimed MSBs function as an additional data field within the serial number space that uniquely identifies the allocated block from which it came. This one-to-one correspondence has important techno- logical consequences. Because the predefined sequence of
2 ADASA contends Avery Dennison waived or for- feited various arguments raised on appeal, including that claim 1 is ineligible in view of the district court’s claim con- struction. We find these arguments unpersuasive and ac- cordingly reach the merits of the parties’ disputes. Case: 22-1092 Document: 39 Page: 12 Filed: 12/16/2022
MSBs in a given serial number uniquely corresponds to an allocated block, and vice versa, serial numbers drawn from different blocks are guaranteed to be unique. It is this cen- tral feature of the claim that enables improvements in the commissioning process. As the written description details, by appropriate assignment of the allocated blocks to lower levels in the commissioning hierarchy, for example, to in- dividual encoders, unique serial numbers can be guaran- teed without the need for a continuous connection to a central database. See ’967 patent at 8:4–51. This, in turn, reduces delays in the commissioning process relative to prior art RFID tags utilizing conventional data structures and allows tags to be commissioned on-demand, without needing to establish or reestablish a connection. Id. at 3:27–35, 3:64–4:12. We thus reject Avery Dennison’s contention that claim 1 is directed to nothing more than mentally ascribing meaning to a pre-existing data field. The meaning of the MSB data field—and the improvements that flow there- from—is the result of the unique correspondence between the data physically encoded on the claimed RFID tags with pre-authorized blocks of serial numbers. That is not a mere mental process, but a hardware-based data structure fo- cused on improvements to the technological process by which that data is encoded. We therefore conclude claim 1 is directed to eligible subject matter as a matter of law. Our conclusion is bolstered by prior decisions finding similar claims eligible. See Enfish, 822 F.3d at 1334 (“[B]oth this court and the Supreme Court have found it sufficient to compare the claims at issue to those claims al- ready found to be directed to an abstract idea in previous cases.”). For example, in Uniloc, we held eligible claims appending an additional data field to a prior art data struc- ture used for polling stations in a communication system. 957 F.3d at 1307. We explained the additional data field enabled eligibility-conferring improvements within the communication system, namely reducing or eliminating Case: 22-1092 Document: 39 Page: 13 Filed: 12/16/2022
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communication latency. Id. at 1307–08. The same is true here. Claim 1 of the ’967 patent adds an additional data field to the prior art serial number space, namely MSBs, which must uniquely correspond to an allocated block of serial numbers. ’967 patent at claim 1. This unique corre- spondence in turn permits unique serial numbers to be as- signed without need for a continuous database connection, reducing associated network delays and allowing encoders to operate on-demand. Id. at 3:65–4:12, 8:4–51. Similarly, in Enfish, we held eligible at step one claims related to a “specific type of [self-referential] data structure designed to improve the way a computer stores and re- trieves memory.” 822 F.3d at 1339. The claimed self-ref- erential data structure was directed to a patent-eligible improvement because it enabled greater flexibility for pro- grammers, faster search times, and smaller memory re- quirements. Id. at 1337. So, too, the data structure of claim 1 of the ’967 patent is designed to enable greater flex- ibility by allowing encoders to commission tags on-demand without consulting a central database, while simultane- ously expediting the commissioning process by reducing communication delays. We conclude claim 1, viewed in light of the specification and considered as a whole, is directed to patent eligible subject matter. We need not address step two. Accord- ingly, we affirm the district court’s holding that claim 1 is eligible under § 101. B Next, we turn to the district court’s grant of summary judgment that claim 1 is neither anticipated nor rendered obvious by RFID for Dummies. 3 To anticipate a claim, a
3 ADASA contends that Avery Dennison did not raise an obviousness defense as to claim 1 and that obvi- ousness is therefore not before us on appeal. On the record Case: 22-1092 Document: 39 Page: 14 Filed: 12/16/2022
prior art reference must disclose each and every element of the claim, either explicitly or inherently. Eli Lilly & Co. v. Zenith Goldline Pharms., Inc., 471 F.3d 1369, 1375 (Fed. Cir. 2006). While those elements must be arranged or com- bined in the same way as in the claim, the reference need not disclose the elements in the very same terms used by the patent. In re Gleave, 560 F.3d 1331, 1334 (Fed. Cir. 2009) (“[T]he reference need not satisfy an ipsissimis verbis test.” (citing In re Bond, 910 F.2d 831, 832–33 (Fed. Cir. 1990)). And “[e]ven if a reference’s teachings are insuffi- cient to find anticipation, that same reference’s teachings may be used to find obviousness” where it suggests some reason to modify the prior art to obtain the claimed limita- tions. CRFD Rsch., Inc. v. Matal, 876 F.3d 1330, 1345 (Fed. Cir. 2017). “The question of what a reference teaches and whether it describes every element of a claim is a question for the finder of fact.” Med. Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1221 (Fed. Cir. 2003).
before us, it is not clear whether Avery Dennison raised a single-reference obviousness defense against claim 1 based on RFID for Dummies. While Avery Dennison’s expert ev- idently did not opine that claim 1 would have been obvious in view of RFID for Dummies alone, in its Answer to ADASA’s Second Amended Complaint, Avery Dennison as- serted obviousness as an affirmative defense to ADASA’s allegations of infringement of claim 1. J.A. 1965; J.A. 1972. Further, the district court’s summary judgment order, while not expressly delineating the claims at issue, acknowledges that Avery Dennison asserted “RFID for Dummies also renders the ’967 patent obvious,” without reference to any secondary references. Summary Judg- ment Order, at *9. That order goes on to address whether RFID for Dummies renders obvious the MSB limitations of claim 1. Id. at *11–12. Accordingly, we interpret the dis- trict court’s order as resolving the validity of claim 1 under § 103, as well as § 102. Case: 22-1092 Document: 39 Page: 15 Filed: 12/16/2022
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Thus, summary judgment that a reference does not teach or suggest a particular claim element should be granted only if no reasonable juror could find the reference provides the necessary disclosure. Id. The district court granted summary judgment because it believed Avery Dennison’s evidence, including witness testimony, did not establish a triable dispute that RFID for Dummies discloses or suggests the claimed MSBs. Sum- mary Judgment Order, at *11–12. On appeal, Avery Den- nison argues the district court erred by reading RFID for Dummies too narrowly and by failing to view the relevant witness testimony in its favor. We agree. Considering the evidence in the light most favorable to Avery Dennison, a reasonable juror could find RFID for Dummies discloses each element of claim 1, including the claimed MSBs. RFID for Dummies describes a methodol- ogy for ensuring the assignment of unique serial numbers to RFID tags when a central numbering authority is inac- cessible or impractical, for example, when a company uti- lizes multiple manufacturing lines to produce the same product. J.A. 3877–78. To decentralize and make feasible the allocation of unique serial numbers across all manufac- turing lines, RFID for Dummies discloses an “intelligent hierarchy” in which “a range of serial numbers for each product is allocated to each manufacturing facility.” Id. “Within a facility, a range of numbers from those allocated to the facility is allocated to each line” thereby effectively subdividing the serial number “into a facility number, line number, and subserial number in which the allocation hi- erarchy is maintained between facility number and line number.” Id. Read in the light most favorable to Avery Dennison, this passage could reasonably be interpreted as disclosing the MSBs of claim 1. It describes a unique serial number selected from a range, i.e., a block, allocated to a given man- ufacturing line. And it further describes that this serial Case: 22-1092 Document: 39 Page: 16 Filed: 12/16/2022
number includes facility and line numbers unique to that manufacturing line which would necessarily remain invar- iant across products produced on the line. A reasonable juror could find that a skilled artisan would interpret the disclosed combination of facility and line number as map- ping onto the MSBs of claim 1. Indeed, ADASA’s witness, Mr. Williams, testified to that effect, stating the cited pas- sage of RFID for Dummies, while not specifically mention- ing MSBs, “exactly describes” the concept of MSBs as recited in the claim. J.A. 5311; see also J.A. 5312–13. The district court disregarded this testimony because Mr. Williams subsequently testified that, notwithstanding the apparent similarities, RFID for Dummies does not say MSBs are utilized to accomplish its hierarchical scheme. J.A. 5311. Drawing all justifiable inferences in Avery Den- nison’s favor, as we must at the summary judgment stage, Mr. Williams’ testimony is also reasonably understood as merely observing that RFID for Dummies does not disclose MSBs in those terms, not that it fails to disclose them alto- gether. See In re Gleave, 560 F.3d at 1334 (“[An anticipa- tory prior art] reference need not satisfy an ipsissimis verbis test.”). To the extent Mr. Williams’ testimony was unclear or inconsistent regarding RFID for Dummies’ dis- closure, Avery Dennison was entitled to have a jury deter- mine its weight and import. Payne v. Norwest Corp., 113 F.3d 1079, 1080 (9th Cir. 1997) (reversing summary judg- ment because “the weighing of [a witness’ conflicting testi- mony] is for a jury, not a judge” (citing Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 410 (9th Cir.1996))); see also Optical Disc Corp. v. Del Mar Avionics, 208 F.3d 1324, 1338 (Fed. Cir. 2000) (applying Ninth Circuit law and re- versing grant of summary judgment in view of conflicting testimony). In short, we conclude the district court erred in con- cluding there was no triable issue of fact whether RFID for Dummies discloses the MSBs of claim 1. The cited passage alone was sufficient to warrant submission to the jury, but Case: 22-1092 Document: 39 Page: 17 Filed: 12/16/2022
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certainly in view of Mr. Williams’ corroborating testimony, there was a genuine dispute regarding the scope of RFID for Dummies’ disclosure.4 We therefore reverse the district court’s grant of summary judgment that RFID for Dum- mies does not anticipate or render obvious claim 1 and re- mand for a trial limited to claim 1’s validity.5 C We now turn to the district court’s finding that Kuhno does not anticipate claim 1. Summary Judgment Order, at *10–11. As it did for RFID for Dummies, the district court found there was no genuine dispute that Kuhno does not disclose MSBs. Id. It also determined Avery Dennison failed to offer sufficient evidence that Kuhno discloses a data structure that includes data beyond a serial number, namely object class information. Id. As above, we hold that
4 Because we determine this evidence was sufficient to preclude summary judgment, we do not reach the dis- trict court’s determination that Avery Dennison’s expert testimony was so conclusory as to not raise a triable fact dispute. On remand, the district court should consider whether that testimony meets the standards of admissibil- ity under Rule 702 and Daubert and thus may be presented to the jury. 5 The district court’s grant of summary judgment of no anticipation and nonobviousness of claims 2–6, 13, and 14 was predicated on its finding that RFID for Dummies does not disclose or suggest MSBs. Summary Judgment Order, at *11–12. Those claims, however, were subse- quently dismissed without prejudice, J.A. 14589–90, and thus are not before us on appeal. To the extent ADASA reasserts those claims, as it retained the right to do in the event of a remand from this court, id., the district court should consider, consistent with this opinion, whether summary judgment of no anticipation and nonobviousness remains appropriate. Case: 22-1092 Document: 39 Page: 18 Filed: 12/16/2022
Kuhno’s disclosures raise a genuine dispute of fact as to the anticipation of claim 1. Kuhno discloses a system for printing labels encoding information about cartons or pallets (i.e., collections of car- tons) of products to which they are affixed. J.A. 3958 at 6:27–36. Kuhno’s labels include both traditional barcodes and an embedded RFID tag, which, like conventional RFID tags, consists of an encodable radio-frequency device and antenna attached to a substrate. Id. at 5:4–22. The bar- codes contain “information specific to the cartons and pal- lets on which the label will be placed,” while the RFID tag is encoded with “the same and, optionally, additional infor- mation.” Id. at 5:25–29. For example, this information may include data regarding the product’s manufacturer, the product’s Unique Product Code (UPC), along with ad- ditional information supplied by a retailer or wholesaler which “may depend on the specific needs of the re- tailer/wholesaler and may be product specific.” Id. at 6:27–43. Kuhno refers to this collection of information as RFID Printer Data. Id. at 6:52–64. The RFID Printer Data may also include a “unique car- ton identifier,” i.e., a “serial number generated by the sys- tem that is unique to each carton” on which an RFID tag is affixed. J.A. 3959 at 7:4–28. In one embodiment, the car- ton serial number is the combination of a “predetermined number,” for example the Julian calendar date, a “produc- tion line number” consisting of the workstation ID and line number, 6 and a trailing “least significant portion” selected from a range of serial numbers determined by the system operator. See J.A. 3692 at 14:20–28; J.A. 3963 at 16:8–13. A similar scheme is used to assign unique pallet identifiers
6 Kuhno defines a production line as the set of car- tons and pallets labeled by a given workstation. J.A. 3959 at 7:50–52. Case: 22-1092 Document: 39 Page: 19 Filed: 12/16/2022
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to RFID tags affixed to pallets. J.A. 3963 at 16:28–34; see also J.A. 3959 at 7:29–49. Read in the light most favorable to Avery Dennison, Kuhno could be reasonably interpreted as disclosing the claimed MSBs and object class information. The parties agreed that MSBs should be construed as a “predefined se- quence of higher order bits at the leading end” of a serial number within a pre-authorized range. Markman Order, at *1, *3. A reasonable juror could find that Kuhno’s “pre- determined number” and/or production line number satisfy this limitation. In addition to being predetermined, Kuhno explains these numbers are found at the leading end of the unique carton serial number, wherein the “least signifi- cant” end portion is determined by a range selected by the system operator. J.A. 3963 at 16:8–22. Further, because the production line number is unique to a given work- station, see J.A. 3959 at 7:50–52, the encoded production line number is reasonably understood as uniquely corre- sponding to the block of serial numbers defined by the workstation ID and the range of serial numbers selected by the workstation operator. Kuhno could also be reasonably interpreted as disclos- ing data beyond a serial number, including object class in- formation. The parties agreed “object class information space” means a “data field within the memory of the RFID integrated chip for information identifying the class of an object, such as a company prefix, item reference code, par- tition value, and/or filter value.” Markman Order, at *1. As discussed above, the RFID Printer Data encoded in Kuhno’s RFID tags may include information specifying a product’s manufacturer and/or UPC, along with other data supplied by a product’s retailer or wholesaler. J.A. 3958 at 6:31–44. At the very least, there is a genuine dispute of fact whether this information satisfies the object class in- formation limitation. Case: 22-1092 Document: 39 Page: 20 Filed: 12/16/2022
We acknowledge Kuhno discusses these concepts in dif- ferent terms and with different points of emphasis than the ’967 patent. But the district court erred in interpreting these linguistic differences as fatal to a finding of anticipa- tion. “The invention is not the language of the [claim] but the subject matter thereby defined.” Dow Chem. Co. v. As- tro-Valcour, Inc., 267 F.3d 1334, 1341 (Fed. Cir. 2001). Thus, a prior art inventor need not “conceive of its inven- tion using the same words as the patentee would later use to claim it.” Teva Pharm. Indus. Ltd. v. AstraZeneca Pharms. LP, 661 F.3d 1378, 1384 (Fed. Cir. 2011). These disclosures create a genuine dispute of fact as to whether Kuhno anticipates claim 1. Accordingly, we reverse the district court’s grant of summary judgment of no anticipa- tion based on Kuhno and remand for further proceedings.7 II We now turn to the district court’s denial of Avery Den- nison’s motion for a new trial under Rule 59(a). We review such decisions under regional circuit law. Columbia Sportswear N. Am., Inc. v. Seirus Innovative Accessories, Inc., 942 F.3d 1119, 1124 (Fed. Cir. 2019). The Ninth Cir- cuit reviews the denial of a motion for a new trial for abuse of discretion. Molski v. M.J. Cable, Inc., 481 F.3d 724, 728 (9th Cir. 2007). A “trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice.” Passantino v. Johnson & Johnson
7 As it did when assessing RFID for Dummies, the district court disregarded as conclusory Avery Dennison’s expert testimony that Kuhno anticipates claim 1. We do not reach that question here because we find Kuhno’s dis- closure alone creates a triable fact dispute. On remand, the district court may consider whether Avery Dennison’s ex- pert testimony is admissible at trial, applying the stand- ards of Federal Rule of Evidence 702 and Daubert. Case: 22-1092 Document: 39 Page: 21 Filed: 12/16/2022
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Consumer Prods., Inc., 212 F.3d 493, 510 n.15 (9th Cir. 2000). Avery Dennison contends a new trial is necessary for two reasons. First, it argues the district court committed reversible error by declining to instruct the jury on lump- sum damages or include a lump-sum option on the verdict form, despite the admission of certain lump-sum licenses into evidence. Second, it argues a new trial is warranted because the district court excluded certain allegedly com- parable licenses from evidence. We address each issue in turn. A As an initial matter, the parties dispute the standard of review applicable to the district court’s decision that a lump-sum jury instruction was inappropriate because there was insufficient evidence to support a lump-sum damages award. See J.A. 15747. ADASA contends we re- view such decisions under regional circuit law, here the Ninth Circuit, which reviews “whether there is sufficient evidence to support an instruction” for abuse of discretion, Gantt v. City of Los Angeles, 717 F.3d 702, 707 (9th Cir. 2013), while Avery Dennison contends we review the dis- trict court’s decision de novo. We need not resolve this dis- pute because, even adopting the most liberal standard of de novo review, we see no error in the district court’s deci- sion. Avery Dennison does not dispute it did not advance a lump-sum damages theory before the jury or offer any tes- timony that lump-sum damages were appropriate. Indeed, Avery Dennison’s expert expressly disclaimed any such opinions. J.A. 15675 (Q: “You have no opinions that there would be a lump sum payment as a result of this hypothet- ical negotiation? There’s no opinion in your report about a lump sum payment, is there?” A: “There is not.”); J.A. 15688 (Q: “You don’t have an opinion as to what the amount would be at this hypothetical negotiation, did you?” Case: 22-1092 Document: 39 Page: 22 Filed: 12/16/2022
A: “I’m leaving that in the hands of the jury.”). Instead, it contends a lump-sum instruction was required because cer- tain admitted licenses, offered by ADASA, reflect lump- sum payments to practice the ’967 patent claims. 8 It may be that in some circumstances licenses, stand- ing alone without supporting lay or expert testimony, can support a lump-sum instruction. This is not such a case. Here, Avery Dennison clearly and repeatedly argued against the relevancy of the licenses upon which it now re- lies. Its damages expert opined at least two of the three licenses were not helpful to understanding the value of a hypothetical negotiation. J.A. 15649 ll. 9–16; J.A. 15654 ll. 1–2; J.A. 15654 ll. 25–J.A. 15655 ll. 12. Avery Dennison’s counsel likewise characterized the licenses as unhelpful to “figur[ing] out what a reasonable royalty would have been.” J.A. 15658 ll. 10–12. Avery Dennison instead focused its damages theory at trial on design-around costs, which it presented to the jury as a starting-point in a hypothetical negotiation for a running royalty, not a lump-sum pay- ment. Where Avery Dennison failed to present a lump-sum damages theory to the jury and, moreover, actively under- mined the very evidentiary basis it now contends required a lump-sum instruction, the district court did not err in de- clining to include such an instruction. Further, because there was insufficient evidence to warrant a lump-sum in- struction, the district court appropriately declined to in- clude a lump-sum option on the verdict form.
8 The parties dispute whether each of the licenses at issue is accurately characterized as lump-sum. Because we find the district court did not err in omitting a lump-sum instruction even if the licenses are all lump-sum, we need not resolve that dispute. Case: 22-1092 Document: 39 Page: 23 Filed: 12/16/2022
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B Next, we address the district court’s exclusion of cer- tain Avery Dennison licenses and related expert testimony from evidence. We apply regional circuit law to evidentiary rulings. Tokai Corp. v. Easton Enters., Inc., 632 F.3d 1358, 1364 (Fed. Cir. 2011). The Ninth Circuit reviews eviden- tiary decisions, including the exclusion of expert testimony under Daubert, for abuse of discretion and reverses only if the ruling is both erroneous and prejudicial. Wagner v. City of Maricopa, 747 F.3d 1048, 1052 (9th Cir. 2013). The district court excluded these licenses because Avery Den- nison did not adequately establish their economic and tech- nological comparability. After reviewing the relevant testimony, we see no abuse of discretion in the district court’s decision. The party proffering a license bears the burden of es- tablishing it is sufficiently comparable to support a pro- posed damages award. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1329 (Fed. Cir. 2009). When relying on al- legedly comparable licenses, the proponent “must account for differences in the technologies and economic circum- stances of the contracting parties.” Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed. Cir. 2010). “[A]lleging a loose or vague comparability between differ- ent technologies or licenses does not suffice.” LaserDynam- ics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 79 (Fed. Cir. 2012). The district court did not abuse its discretion in de- termining Avery Dennison failed to meet this standard. In support of its contention that the excluded licenses were sufficiently comparable, Avery Dennison relied on the opinions of its technical expert, Dr. Sweeney. Dr. Sweeney’s analysis, however, was inadequate to establish the technological comparability of the ’967 and licensed pa- tents. As Dr. Sweeney acknowledges, the licenses at issue involved hundreds or thousands of patents that spanned a broad range of technologies. Nevertheless, Dr. Sweeney Case: 22-1092 Document: 39 Page: 24 Filed: 12/16/2022
did not undertake any meaningful comparison of the li- censed technology with the invention disclosed by the ’967 patent. Instead, in a single brief paragraph, he observed that the licensed portfolios “include patents that cover RFID transponders,” that one of the portfolios included pa- tents cited by ADASA during the prosecution of the ’967 patent, and that Avery Dennison allegedly obtained the right to sell the RFID transponders accused of infringing the ’967 patent. J.A. 5765–66. The district court did not abuse its discretion in deter- mining these conclusory observations are insufficient to es- tablish comparability. That the licensed portfolios “include” patents that cover “RFID technology” says little, if anything, about their relation to the ’967 patent. “RFID technology” is too broad and vague a category, without more, to serve as a meaningful comparison point to the spe- cific technology at issue in this case. Indeed, Mr. Sweeney later distinguished these patents from the ’967 patent pre- cisely because they allegedly cover a range of “foundational technologies” or “fundamental aspects” in the “RFID space,” in contrast to the ’967 patent’s specific claims. J.A. 5766. Moreover, merely observing that some patents in a portfolio cover RFID technology, or were cited during the ’967 patent’s prosecution, says nothing about the compara- bility of the thousands of remaining patents in the portfo- lio. And even for the unidentified patents cited during prosecution, Mr. Sweeney does not attempt any independ- ent or meaningful comparison to the ’967 patent claims. Mr. Sweeney’s conclusory opinions were inadequate to carry Avery Dennison’s burden to establish comparability. The district court was thus well within its discretion to ex- clude this testimony and the related licenses from evi- dence. Because we conclude the district court did not commit any reversible error, we affirm its denial of Avery Dennison’s motion for a new trial. Case: 22-1092 Document: 39 Page: 25 Filed: 12/16/2022
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III Last, we turn to the district court’s imposition of sanc- tions under Rule 37(c)(1) for Avery Dennison’s late disclo- sure of more than two billion additional infringing RFID tags. “A decision to sanction a litigant pursuant to [Rule] 37 is one that is not unique to patent law, and we therefore apply regional circuit law to that issue.” Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364, 1370 (Fed. Cir. 2002) (internal citations omitted). The Ninth Circuit re- views discovery sanctions for abuse of discretion and “gives particularly wide latitude to the district court’s discretion to issue sanctions under Rule 37(c)(1).” R&R Sails, Inc. v. Ins. Co. of Pa., 673 F.3d 1240, 1245 (9th Cir. 2012). After reviewing the record before us, we find no abuse of discretion in the district court’s decision to impose mon- etary sanctions. Avery Dennison does not dispute on ap- peal that it did not meet its discovery obligations under Federal Rule of Civil Procedure 26(e) by failing to discover and disclose the additional RFID tags until after trial. Rule 37(c)(1) authorizes the district court to impose appro- priate sanctions, including monetary sanctions, for such an unjustified and harmful discovery failure, provided the sanctioned party is given an opportunity to be heard. Fed. R. Civ. P. 37(c)(1); Niazi Licensing Corp. v. St. Jude Med. S.C., Inc., 30 F.4th 1339, 1355 (Fed. Cir. 2022) (“Rule 37(c)(1)(A) permits a court to impose monetary sanctions caused by the failure to disclose.” (internal quotation omit- ted)). Moreover, as the district court explained, sanctions were appropriate not just because of Avery Dennison’s un- timely disclosure, but also because of its “patent and con- tinuous disregard for the seriousness of this litigation and its expected obligations” throughout this dispute. J.A. 14627; see also J.A. 14571 ll. 9–J.A. 14574 ll. 3. Having presided over the litigation for several years and observed Avery Dennison’s conduct firsthand, the district court is Case: 22-1092 Document: 39 Page: 26 Filed: 12/16/2022
best positioned to determine whether Avery Dennison’s col- lective conduct warrants sanctions. Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 649 (9th Cir. 1997) (“[The] district court is intimately familiar with the course of the litigation and occupies the best position from which to determine whether to award sanctions.”). Avery Den- nison has given us no reason to question the district court’s finding in this respect, and we thus find no abuse of discre- tion in the district court’s finding that Avery Dennison’s conduct warranted sanctions. Avery Dennison does, however, argue that sanctions are nevertheless inappropriate because it was not given no- tice and opportunity to address the form of sanctions ulti- mately imposed, namely a monetary sanction tied to the number of infringing tags, in violation of its due process rights. We are not persuaded. The district court held multiple hearings to address the parties’ sanctions dispute. At the first of those hearings, in September of 2021, ADASA explicitly suggested a mone- tary sanction based on the number of infringing tags, with- out response by Avery Dennison. See J.A. 14452 ll. 3–20. ADASA then repeated its request during the October 2021 hearing. J.A. 14535 ll. 23–J.A. 14537 ll. 25. Again, despite the opportunity, Avery Dennison did not respond to those arguments. Moreover, later in that same hearing, the dis- trict court indicated it would impose a monetary sanction of $0.0025 per infringing tag, J.A. 14573 ll. 24–J.A. 14574 ll. 14, again without response from Avery Dennison. It was not until three days later, on October 4, that Avery Den- nison filed a written opposition to the award of such a sanc- tion. See J.A. 14581. Avery Dennison thus not only had notice and opportunity to address the sanctions ultimately imposed, it did address them. Accordingly, there was no due process violation. See Hudson v. Moore Bus. Forms, Inc., 898 F.2d 684, 686 (9th Cir. 1990) (“The necessary pro- tections [of procedural due process] are notice and an op- portunity to respond [to sanctions motion].”); see also Pac. Case: 22-1092 Document: 39 Page: 27 Filed: 12/16/2022
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Harbor Cap., Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th Cir. 2000) (“The opportunity to brief the issue fully satisfies due process requirements.”). While we find the district court was well within its dis- cretion to impose sanctions and did not violate Avery Den- nison’s due process rights in doing so, in view of the district court’s chosen method for calculating the remedy, the sanc- tion award cannot stand. In crafting the sanction, the dis- trict court tied the monetary award to the “number of infringing tags determined to exist as of the date of the ver- dict.” Post-Trial Order, at *14; see also J.A. 14574 ll. 1–2 (describing sanction as “attached to the number of infring- ing tags”). The district court’s award inappropriately in- cludes in the sanction the timely disclosed RFID tags, for which there was no discovery violation and no established harm to ADASA. Cf. Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573, 581 (9th Cir. 1992) (finding an abuse of discretion where the sanction award “did not flow” from the discovery violation); see also Stillman v. Edmund Sci. Co., 522 F.2d 798, 801 (4th Cir. 1975) (“[T]he sanctions au- thorized under the Rule [37] must pertain to the discovery process.”). And, while district courts may impose sanctions for deterrent effects, the size of the award must bear a rea- sonable relationship to the harm that occurred. SynQor, Inc. v. Artesyn Techs., Inc., 709 F.3d 1365, 1386 (Fed. Cir. 2013) (citing BMW of N. Am. v. Gore, 517 U.S. 559, 580–81 (1996)). While the district court invoked this deterrent purpose, by tying the award to the timely, as well as un- timely, disclosed tags, it divorced the remedy from the harm that flowed from Avery Dennison’s discovery viola- tion. We therefore vacate the sanctions award and remand for the district court to reconsider the appropriate remedy. 9
9 Our decision should not be interpreted to condition the availability of sanctions on the judgment of infringe- ment being sustained. As the district court thoroughly Case: 22-1092 Document: 39 Page: 28 Filed: 12/16/2022
Because we vacate the sanctions award, we do not address Avery Dennison’s remaining arguments regarding its pro- priety. CONCLUSION We have considered the parties’ remaining arguments and find them unpersuasive. For the reasons given above, we affirm the district court’s grant of summary judgment with respect to eligibility and reverse with respect to antic- ipation and obviousness. We also affirm the district court’s denial of a new trial. Finally, we vacate the district court’s award of sanctions and remand for further consideration consistent with this opinion. AFFIRMED-IN-PART, REVERSED-IN-PART, VA- CATED-IN-PART, AND REMANDED-IN-PART COSTS No costs.
explained, sanctions were warranted because of Avery Dennison’s discovery failures and litigation misconduct, not because it was ultimately adjudicated to infringe. We merely hold that, in tying that award to the liability asso- ciated with properly disclosed tags, the district court strayed from the proper focus of Rule 37 sanctions: reme- dying the harm caused by the discovery violation and de- terring similar violations in the future.