Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in ADASA Inc. v. Avery Dennison Corp., 2022-1092 (Dec. 16, 2022), partially affirming, reversing, vacating, and remanding a district court judgment in a patent infringement case.
In October of 2017, ADASA Inc. sued Avery Dennison Corp. alleging Avery’s manufacture and sale of certain RFID tags infringed ADASA’s patent. As relevant here, the district court granted summary judgment that claim 1 of the asserted patent is directed to patent eligible subject matter under 35 U.S.C. § 101 and is not invalid under §§ 102 and 103. At trial, a jury found infringement and awarded ADASA over $26 million in damages based on a running royalty rate of $0.0045 per infringing RFID tag. After trial, Avery notified ASADA it discovered more than 2 billion previously undisclosed RFID tags in its databases. ADASA moved for sanctions and the district court awarded another $20 million in sanctions at a rate of $0.0025 per RFID tag. Avery appealed.
First addressing 35 U.S.C. § 101, the Federal Circuit affirmed the district court’s holding that claim 1 is directed to patent eligible subject matter. Specifically, the Court held that the claimed invention was directed not to a “mere mental process, but [to] a hardware-based data structure focused on improvements to the technological process by which that data is encoded.” Next, the Court reversed the district court’s holdings on §§ 102 and 103, holding the district court improperly weighed witness testimony against the non-moving party, Avery, and that it is the role of a jury to make credibility findings on the parties’ competing positions as to what the prior art discloses. Finally, the Court addressed issues of damages. The Court affirmed the district court’s refusal to give a jury instruction on lump-sum damages because Avery did not present evidence that lump-sum damages were appropriate in this case. Indeed, Avery’s own damages expert testified he had offered no opinions on lump-sum damages. The Court also affirmed the district court’s exclusion of certain licenses and related testimony offered by Avery because Avery had failed to adequately establish comparability of those licenses to the hypothetical negotiation. Finally, the Court vacated and remanded the sanctions award, finding that, while sanctions were not unjustified, the amount of the sanctions award ($0.0025 per infringing RFID tag) was not linked to the harm ADASA experienced from Avery’s late disclosure.