01/03/15

SSL Services, Inc. v. Citrix Systems: Fed. Circuits upholds $10 million dollar verdict awarded to SSL for willful infringement of its patents by Citrix

Category: Infringement
 
 
 
By: Roy Rabindranath, Contributor 
 
TitleSSL Services, Inc. v. Citrix Systems, Inc. (Fed. Circ. October 14, 2014).
IssueSSL appeals the district court’s denial of a new trial on non-infringement of claim 27 of [U.S. Pat. 6,061,796], arguing that the district court erred in its claim construction of the terms “intercepting” and “destination address,” and in imposing a set step order requirement for the claim. SSL also appeals the district court’s finding that it was not the prevailing party in the litigation overall. Citrix cross-appeals the district court’s denial of JMOL [“judgment as a matter of law”] of no willful infringement and invalidity of claims 2, 4, and 7 of [U.S. Pat. 6,158,011]. Citrix further contends the district court’s award of prejudgment interest and asserts that certain of its evidentiary rulings justify a new trial on willful infringement and damages.
SSL Services, at *2-3 (text added).
HoldingsBased on the “destination address” limitation, we affirm the denial of a new trial on non-infringement of claim 27 of the ‘796 Patent. Furthermore, we affirm the district court’s denial of JMOL requesting a finding of no willful infringement and invalidity of the asserted claims of the ‘011 Patent. We also affirm the denial of a new trial based on the district court’s evidentiary rulings, and affirm the award of prejudgment interest. Finally, we vacate the district court’s denial of prevailing party status to SSL because we find that SSL is the prevailing party, and remand for an assessment of costs and fees.
Id. at *3.
 
 
Procedural History
In April 2008, SSL filed suit in the United States District Court for the Eastern District of Texas alleging that Citrix’s GoTo Products infringe claim 27 of the ‘796 Patent. In May 2009, SSL amended its complaint to assert infringement of claims 2, 4, and 7 of the ‘011 Patent by Citrix’s Access Gateway and Netscaler Products.
On May 18, 2011, the district court held a Markman hearing. Relevant to this appeal, the district court construed the term “destination address” as used in claim 27 of the ‘796 Patent as “the network address of a computer or server.” The court construed the term “encrypt files” as used claims 2, 4, and 7 of the ‘011 Patent as unintelligible without decrypting.”
After a jury trial, the jury found that: (1) Citrix’s GoTo Products did not infringe claim 27 of the ‘796 Patent; (2) Citrix’s Access Gateway and Netscaler products directly and indirectly infringed claims 2, 4, and 7 of the ‘011 Patent; (3) Citrix willfully infringed the asserted claims of the ‘011 Patent; and (4) Citrix had not proved that the asserted claims of the ‘011 Patent were invalid. Consequently, the jury awarded $10 million in damages.
SSL then filed a motion for: (1) prejudgment interest, (2) post-judgment interest, (3) enhanced damages, and (4) entry of final judgment. Citrix filed a motion for entry of final judgment and an award of prevailing party status. The district court granted-in-part and denied-in-part SSL’s motion by: (1) awarding prejudgment interest, (2) awarding post-judgment interest as agreed by the parties, (3) awarding an additional $5 million in enhanced damages for a total of $15 million in damages, and (4) denying prevailing party status to SSL and refusing to impose costs on that ground. Addressing Citrix’s motion, the district court entered a Final Judgment on September 17, 2012, but denied Citrix’s request for prevailing party status and costs.
The parties subsequently filed post-trial motions. The district court denied Citrix’s motions for [JMOL …] and for a new trial on non-infringement, and damages relating to the claims of the ‘011 Patent. The court also denied SSL’s motion for JMOL on its infringement claim relating to claim 27 of the ‘796 Patent and/or for a new trial on that claim.
SSL and Citrix filed notices of appeal on May 17, 2013.
SSL Services, at *10-11(text added, internal citations omitted).
 
 
Legal Reasoning (Lourie, Lynn, O'MALEY)
Background
The SSL PatentsSSL acquired the ‘796 Patent and ‘011 Patent from V-One, Inc. (“V-One”) in June 2005. Both patents are titled “Multi-Access Virtual Private Network.” The ‘011 Patent is a continuation of the ‘796 Patent. The patents contain virtually identical specifications. The key difference is that the claims of the ‘011 Patent are directed to allowing users to establish encrypted connections with a server, whereas the claims of the ’796 Patent are directed to allowing users to establish encrypted communications with another client computer.
SSL Services, at *3.
Representative Claim[Claim 27 of the ‘796 is representative of the claims at issue]. It states: A method of carrying out communications over a multi-tiered virtual private network including a server and a plurality of client computers, the server and client computers each including means for transmitting data to and receiving data from an open network, comprising the steps of:

intercepting function calls and requests for service sent by an applications program in one of said client computers to a lower level set of communications drivers;

causing an applications level authentication and encryption program said one of said client computers to communicate with the server, generate a session key, and use the session key generated by the applications level authentication and encryption program to encrypt files sent by the applications program before transmittal over said open network;

intercepting a destination address during initialization of communications between said one of said client computers and a second of said client computers on said virtual private network;

causing said applications level authentication and encryption program to communicate with the server in order to enable the applications level authentication and encryption program to generate said session key;

transmitting said destination address to said server;
causing said server to communicate with the second of said two client computers;

enabling said second of said two client computers to recreate the session key;

causing said authentication software to encrypt files to be sent to the destination address using the session key; and
transmitting the encrypted files directly to the destination address.

Id. at *5-6 (text added).
The Citrix Accused ProductsIn 2004, Citrix acquired ExpertCity.Com. Citrix rebranded ExpertCity.com’s products as GoToAssist, GoToMyPC, and GoToMeeting (collectively, “GoTo Products”). The GoTo Products allow directed encrypted communication between two computers while bypassing a broker server that cannot access the encrypted data. All of the GoTo Products use a broker server to initialize the communication and that server carries out communications between the computers.
Id. at *7-8.
Standard of ReviewThe Federal Circuit reviews decisions on motions for JMOL, motions for a new trial, and evidentiary rulings under the law of the regional circuit. Here, the applicable regional circuit is the Fifth Circuit. Under Fifth Circuit law, we review the denial of a motion for JMOL de novo while applying the same standards as the district court. “[JMOL] is appropriate only when a ‘reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.’” […] The Fifth Circuit reviews the denial of a new trial for an abuse of discretion. […] The Fifth Circuit also reviews evidentiary rulings for an abuse of discretion. Claim construction is a question of law reviewed de novo.
Id. at *11-12 (text added, internal citations omitted).
Analysis
SSL'S AppealOn appeal, SSL asserts that the district court erred in failing: (1) to grant SSL’s motion for a new trial on infringement of claim 27 of the ‘796 Patent, and (2) to find that SSL was the prevailing party.
SSL Services, at *12.
The '796 Patent - "Destination Address"Although SSL agrees that “[t]he plain meaning of ‘destination address’ is the address of the destination – here, the second client computer or server,” it asserts that the district court erred in interpreting the term to require a network address, and then further equating “network address” with IP address. SSL argues that the district court should adopt its construction: an “[i]dentifier for a desired location.” Citrix responds that the district court correctly construed the claim language in the context of a claim covering transmissions between computers on an open network as network address of a computer. We agree with Citrix that the district court correctly construed the term “destination address.” To determine the scope and meaning of the asserted claims, we look to the words of the claims, the specification, the prosecution history, and any relevant extrinsic evidence. We find the claim language regarding the destination address informative. Claim 27 requires “means for transmitting data to and receiving data from an open network.” The claim further states “intercepting a destination address during initialization of communications between said one of said client computers and a second of said client computers on said virtual private network,” and “transmitting the encrypted files directly to the destination address.” Consequently, the destination address is the address for a second client computer on the network, which is the network address of that specific computer. […] The written description further supports the district court’s construction. It states that the most commonly used set of software routines for the transport or TDI layer is the transport control protocol (“TCP”)/IP protocol, where the TCP packages the data into datagrams and provides addressing functions, and the IP “further packages those datagrams into packets by adding additional headers used in routing the packets to a destination address.” […] This language suggests that the “destination address” is a part of the address portion of data packets in a network address format. Therefore, we conclude that the district court correctly construed the term “destination address” to mean “network address.”
Id. at *13-14 (text added, internal citations omitted).
Request for a New TrialSSL argues that even if we agree that the district court correctly construed the term “destination address,” our analysis of the infringement verdict must continue. SSL asserts that it is entitled to a new trial if we agree that any one of the disputed claim constructions was erroneous, arguing that we must assess the constructions relating to all the disputed limitations before we can rest assured that the jury’s non-infringement finding was not infected by some error. Because the jury returned a general verdict of non-infringement after hearing multiple theories of non-infringement, SSL argues that “it would be impossible for this Court to discern whether the jury rested its verdict of non-infringement on the erroneous claim construction.” We agree that the general verdict rule applies with the same force in patent cases as it does in all other cases. We also agree that Citrix misreads our decision in Verizon Servs. Corp. v Cox Fibernet VA, Inc. [….] We find however, that there is no evidence in the record from which a good faith argument can be made that the Citrix GoTo Products’ identifiers are “network addresses” as that term was construed by the district court. Because we now affirm that construction, we conclude that, even if the district court erred in its construction of the other challenged limitations, the result the jury reached – the finding of non-infringement – would not change. In these circumstances, we soundly can base our conclusion that the non-infringement verdict stands on the fact that the single network address limitation is not practiced by the accused products.
Id. at *15-16 (text added, internal citations omitted).
Prevailing PartyThe district court found that Citrix prevailed on non-infringement of the ‘796 patent and SSL prevailed on willful infringement of the ‘011 Patent. Accordingly, the district court concluded that neither party is the prevailing party because “both parties achieved some success and sustained some failure.” […] We find that the district court erred in holding that SSL was not the prevailing party. It is well-established that there is a distinction between being eligible for fees as the prevailing party and the discretionary decision to award fees. A party “prevails” when “actual relief on the merits of his claim materially alters the legal relationship between the parties…in a way that directly benefits the [party].” […] In this case, the district court found that SSL proved willful infringement of the three asserted claims of the ‘011 Patent by Citrix’s [products]. In light of this infringement finding, the jury awarded lump-sum damages of ten million dollars, which the district court enhanced to a total of fifteen million dollars. In contrast, while Citrix did obtain a finding of non-infringement as to claim 27 of the ‘796 Patent, it did not prove the asserted claims of the ‘011 Patent were invalid, and it was found to have infringed the ‘011 Patent. Despite some success by Citrix in defending against some of SSL’s claims, we agree with SSL that it is the prevailing party. SSL has a judgment for damages Citrix. This judgment is a “relief on the merits [that] materially alters the legal relationship” of the parties.
Id. at *20-21 (text added, internal citations omitted).
Citrix's Cross AppealOn cross-appeal, Citrix argues that this court should grant JMOL of non-infringement or remand for a new trial on SSL’s claims under the ‘011 Patent. Citrix raises several issues in its cross-appeal: (1) non-infringement based on the “encrypt files” limitation; (2) invalidity; (3) willful infringement; (4) the proprietary of the district court’s evidentiary ruling regarding expert reliance on the V-One Agreements; and (5) the award of prejudgment interest.
Id. at *21-22.
"Encrypt Files"The asserted claims of the ‘011 Patent include a limitation to “encrypt files.” The district court construed the term as “to render a set of data used by a program unintelligible without decrypting.” […] In considering Citrix’s motion for JMOL of non-infringement, the district court found that the jury’s infringement verdict – that the [Citrix products] “encrypt files” as construed by the court – was supported by substantial evidence. In support, the court pointed to the testimony of SSL’s expert and demonstrative slides, which provided evidence from which a jury could determine that the products encrypted files. […] We agree that substantial evidence supports the jury’s verdict of infringement. Although the district court distinguished between encrypting files and packets, it construed the term “encrypt files” as “to render a set of data used by a program unintelligible without decrypting.” […] The testimony of SSL’s expert on the encryption of files supports the conclusion that the [Citrix products] do, in fact, “render a set of data used by a program unintelligible without decrypting.”
Id. at *22-23 (text added, internal citations omitted).
Invalidity of the SSL PatentsOn appeal, Citrix asserts that claims 2, 4, and 7 of the ‘011 Patent would have been obvious under Takahashi, et al, […in view the RFC1508 reference….] We agree with SSL that substantial evidence supports the finding that Takahashi does not disclose the authentication and encryption software at the applications level.
Id. at *23-25 (text added, internal citations omitted).
Willful InfringementTo establish willful infringement, the patent holder must show clear and convincing evidence that: (1) “the infringer acted despite an objectively high likelihood that its actions constituted infringement” and (2) “that this objectively-defined risk…was either known or so obvious that it should have been known to the accused infringer.” […] The district court first found that Citrix acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. The jury then addressed the subjective prong – whether Citrix actually knew or should have known that its actions constituted an unjustifiable high risk of infringement of a valid and enforceable patent. [As a result, the] jury found that Citrix willfully infringed the ‘011 Patent. […] The district court’s finding that SSL met the threshold objective prong is supported by the record. The jury soundly rejected Citrix’s invalidity argument and non-infringement arguments. As noted […], the Takahashi reference does not disclose an applications level program. […] [Moreover, we] agree [with the jury] that SSL presented evidence that substantial evidence that Citrix knew of the objectively high risk that its products infringed the asserted claims of the ‘011 Patent. SSL presented that Citrix first became aware of the ‘011 Patent in 2000 based on the V-One agreements. Citrix negotiated and executed the agreements with V-One. The V-One agreements specifically identified and incorporated the ‘011 Patent. Furthermore, a former Citrix executive, Bill Mangum, testified that he knew of the ‘011 Patent as a result of Citrix’s relationship with V-One. […] Based on this evidence, we do not find that the district court erred in denying Citrix’s motion for JMOL on the subjective prong of SSL’s claim of willful infringement.
Id. at *27-30.
Evidentiary Ruling on DamagesCitrix argues that the district court abused its discretion by allowing SSL’s damages experts to rely on the V-One Agreements, which were not patent licenses, in his damages analysis. These 2000 and 2001 agreements were between V-One and Citrix, and referenced the ‘011 Patent as intellectual property that was relevant to the technology underlying the agreements. […] As the district court concluded, the V-One agreements are sufficiently probative of the circumstances which would surround a hypothetical negotiation to be admissible. We do not discount all agreements regarding technology at issue other than licenses addressing the price terms and circumstances at issue in the case at bar. The trial court carefully assessed the probative value of the V-One agreements and properly concluded that any issues regarding their fit to the precise facts presented should be addressed by way of cross-examination. We agree. In these circumstances, we find that the district court did not abuse its discretion in allowing SSL’s expert to rely on the V-One Agreements.
Id. at *32-33 (text added, internal citations omitted).
Prejudgment InterestAs part of the willful infringement finding discussed above […] the district court found that Citrix knew of the ‘011 Patent as early as 2000, when it entered into the V-One Agreements. Consequently, we find that the district court did not abuse its discretion in awarding prejudgment interest back to 2004 – the date the infringement began. By awarding SSL prejudgment interest to 2004, the district court placed SSL in the position it would have been in had Citrix paid a reasonably royalty upon notice of the ‘011 Patent and its relevance to the technology it chose to market.
Id. at * 33-34 (text added).
Conclusion
[…] we affirm the district court’s judgment of non-infringement of the ‘796 Patent, willful infringement of the ‘011 Patent, no invalidity of the ‘011 Patent, award of prejudgment interest, and find no error in its evidentiary rulings. We also vacate the district court’s finding of no prevailing party and remand for further proceedings consistent with this opinion.
SSL Services, at *34.
 
 Image Attribution Statement: Fig. 3, U.S. Patent 6,061,796.
 
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