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Power Integrations, Inc. v. Fairchild Semiconductor International, Inc.

United States Court of Appeals, Federal Circuit

July 3, 2018

POWER INTEGRATIONS, INC., Plaintiff-Appellee
v.
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC., FAIRCHILD SEMICONDUCTOR CORPORATION, FAIRCHILD (TAIWAN) CORPORATION, Defendants-Appellants

          Appeals from the United States District Court for the Northern District of California in No. 3:09-cv-05235-MMC, Judge Maxine M. Chesney.

          Frank Scherkenbach, Fish & Richardson, PC, Boston, MA, argued for plaintiff-appellee. Also represented by Craig E. Countryman, John Winston Thornburgh, San Diego, CA; Michael R. Headley, Howard G. Pollack, Redwood City, CA.

          Kathleen M. Sullivan, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, argued for defendants-appellants. Also represented by Joshua L. Sohn, Wash- ington, DC; Kevin Alexander Smith, San Francisco, CA; Blair Martin Jacobs, Stephen Blake Kinnaird, Christina Ann Ondrick, Patrick Stafford, Paul Hastings LLP, Washington, DC.

          Before Dyk, Clevenger, and Chen, Circuit Judges.

          DYK, CIRCUIT JUDGE.

         Power Integrations, Inc. owns U.S. Patent Nos. 6, 212, 079 ("the '079 patent") and 6, 538, 908 ("the '908 patent"). Power Integrations sued Fairchild Semiconductor Corporation and Fairchild (Taiwan) Corporation (collectively "Fairchild") for infringement. A jury found Fairchild literally infringed claims 31, 34, 38, and 42 of the '079 patent and infringed claims 26 and 27 of the '908 patent under the doctrine of equivalents. In a second trial, a jury awarded damages of roughly $140 million, finding that the entire market value rule applied in calculating damages for infringement of the '079 patent. The district court denied Fairchild's motions for judgment as a matter of law. Fairchild appeals.

         We affirm the district court's judgments of infringement. We conclude that the entire market value rule cannot be used here to calculate damages. We vacate the damages award and remand for further proceedings.

         BACKGROUND

         I

         Power Integrations and Fairchild are both manufacturers of power supply controller chips. Power supply controller chips are integrated circuits used in power supplies, such as chargers for electronic devices. These power supplies transform alternating current ("AC") electricity, which comes from an AC outlet, into direct current ("DC") electricity, which is needed to power cell phones, laptops, and other electronic devices.

         After AC electricity has been converted to DC electricity, a switching regulator directs the transistor in the circuit when to turn on and off in order to provide the desired amount of power to the electronic device. The electronic device is referred to as the "DC output" because it receives the DC current. The transistor turns on and off at defined intervals. For example, if there is a need for power at the DC output, the switching regulator will direct the transistor to stay "on" for a longer period of time so more power will flow to the DC output.

         The controversy here involves the '079 and '908 patents owned by Power Integrations. The asserted claims of the '079 patent cover switching regulators. Prior-art switching regulators were inefficient during periods when the DC output required little power. During these low power periods, prior-art switching regulators would skip on/off cycles to decrease the DC power provided; the power remained off during the skipped cycle. However, skipping cycles created loud noise and delivered power in an intermittent fashion. The '079 patent addressed this problem by reducing the frequency of on/off cycles rather than by skipping cycles altogether. The frequency of on/off cycles is determined by feedback signals. Thus, the switching frequency varies based on the feedback signal. However, for a certain range of feedback signals, the frequency of the on/off cycles does not change. Each of the asserted claims requires a "fixed switching frequency for a first range of feedback signals."

         The '908 patent covers a "power supply controller," which is an integrated circuit that can perform a variety of power-regulation functions. '908 pat., col. 1, ll. 32-33, 52-60. Each of the asserted claims requires a power supply controller comprising "a multi-function circuit coupled to receive a signal at a multi-function terminal for adjusting a current limit of a power switch." Id., col. 25, l. 63-col. 26, l. 14. The current limit is a value of current that can be used by the circuit to turn off the power switch when the amount of current passing through the power switch reaches the threshold value.

         II

         Power Integrations filed suit against Fairchild, alleging infringement of various claims of the '079 patent and the '908 patent.[1] In February and March 2014, the district court held a sixteen-day jury trial. The jury found Fairchild literally infringed claims 31, 34, 38, and 42 of the '079 patent and infringed claims 26 and 27 of the '908 patent under the doctrine of equivalents.[2] The jury awarded Power Integrations $105 million in reasonable royalty damages. Fairchild sought judgment as a matter of law that it did not infringe claims of the '079 or '908 patents, or in the alternative a new trial, which the district court denied.

         Six months after the jury verdict, and while the case was still pending in the district court, our court decided VirnetX, Inc. v. Cisco Systems, Inc., 767 F.3d 1308, 1329 (Fed. Cir. 2014), which concerned the general rule that a patentee seeking damages based on an infringing product with both patented and unpatented features must "apportion damages only to the patented features." VirnetX explained that simply identifying the smallest salable unit is not necessarily sufficient to satisfy a patentee's obligation to apportion for multi-component products with significant unpatented features. Id. Because Power Integrations' royalty calculation in the first trial did not apportion beyond the "smallest salable unit" and Power Integrations had disclaimed reliance on the entire market value rule, the district court granted a new trial on the issue of damages in light of VirnetX.

         The district court held a second damages trial in December 2015. The district court granted a Daubert motion to exclude Power Integrations' expert testimony based on apportionment, but allowed its expert to present testimony based on the entire market value rule. The jury awarded $139.8 million in damages, based on damages testimony that relied solely on the entire market value rule. Fairchild then moved for judgment as a matter of law, or in the alternative a new trial, arguing that the damages award was not supported by substantial evidence and that the use of the entire market value rule was improper. The district court denied this motion.

         Fairchild now appeals the determination of literal infringement of the '079 patent, the determination of infringement under doctrine of equivalents of the '908 patent, and the damages award. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

         Discussion

         I

         We first address infringement of the '079 patent. The key issue here is whether the accused products have a "fixed switching frequency for a first range of feedback signal values."[3] On appeal, Fairchild does not dispute that the other claim limitations were satisfied. The jury found that all accused products infringed the asserted claims, and the district court denied judgment as a matter of law of no infringement. We review the denial of a motion for judgment as a matter of law de novo. We review a jury determination of infringement for substantial evidence.

         In a Markman order, the district court construed "fixed switching frequency" to mean "[a] non-varying number of switching cycles per second." J.A. 2142. On appeal, Fairchild disputes: (1) whether all accused products include a "fixed" switching frequency because the frequency varies due to operating conditions, and (2) whether a particular subset of accused products, known as "frequency-hopping" products, has a "fixed" frequency. This second issue turns primarily on claim construction-whether the district court properly construed "fixed frequency" to include a per second limitation. But Fairchild contends that even if the claim construction were correct, there was not substantial evidence to support the jury verdict.

         Claim terms are given their ordinary and customary meaning, which is the meaning the term would have to a person of ordinary skill in the art at the time of the invention. Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (en banc). We review claim construction de novo, except for subsidiary facts based on extrinsic evidence, which we review for clear error. Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S.Ct. 831, 841 (2015).

         A

         Fairchild argues that the jury verdict is not supported by substantial evidence because none of the Fairchild products has a "fixed switching frequency" according to the language of the claims or a "non-varying frequency" under the district court's claim construction, because even during "fixed" frequency mode, the products operate with 5% to 15% variance in frequency. This variance is due to operating conditions, such as temperature and ...


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