District Court Did Not Deny Due Process in Entering Judgment on Dropped Patents: Fed. Cir. | Practical Law

District Court Did Not Deny Due Process in Entering Judgment on Dropped Patents: Fed. Cir. | Practical Law

In Nuance Communications, Inc. v. ABBYY USA Software House, Inc., the US Court of Appeals for the Federal Circuit held that the district court did not violate Nuance Communications, Inc.'s due process rights when the court found that ABBYY USA Software House, Inc. did not infringe eight Nuance patents, despite the fact Nuance only presented three of the patents at trial, because Nuance did not timely notify the district court of its objections to the court's narrowing procedures or its intent to hold a second trial for patents which it voluntarily removed from the original suit.

District Court Did Not Deny Due Process in Entering Judgment on Dropped Patents: Fed. Cir.

by Practical Law Intellectual Property & Technology
Published on 23 Feb 2016 • USA (National/Federal)
In Nuance Communications, Inc. v. ABBYY USA Software House, Inc., the US Court of Appeals for the Federal Circuit held that the district court did not violate Nuance Communications, Inc.'s due process rights when the court found that ABBYY USA Software House, Inc. did not infringe eight Nuance patents, despite the fact Nuance only presented three of the patents at trial, because Nuance did not timely notify the district court of its objections to the court's narrowing procedures or its intent to hold a second trial for patents which it voluntarily removed from the original suit.
On February 22, 2016, the US Court of Appeals for the Federal Circuit issued an opinion in Nuance Communications, Inc. v. ABBYY USA Software House, Inc. (Nuance), affirming the US District Court for the Northern District of California's ruling that Nuance Communications, Inc., did not suffer a violation of due process when the district court refused to allow it to proceed with a second trial on certain patents after Nuance voluntarily removed those patents from its original suit ( (Fed. Cir. Feb. 22, 2016)).
Nuance Communications sued ABBYY USA Software House, Inc., alleging patent infringement on eight of its patents. After a case management conference with a special master, Nuance agreed to limit its total patents at trial to four, with no more than fifteen claims. Ultimately, Nuance selected seven claims from three patents. At trial, Nuance lost on its claims of infringement relating to the three patents it selected.
After ABBYY filed a motion to compel costs, Nuance took the position that costs should be stayed until the remaining patents had been tried. The district court rejected Nuance's claims, finding:
  • The court had entered judgment after a full and fair trial on the issues Nuance selected.
  • The final judgment did not exempt any of Nuance's causes of action or reserve judgment on the patents Nuance chose not to pursue.
  • Nuance had had the opportunity to pursue discovery and claim construction on all of its patents, but it had decided to conduct a single trial on a smaller set of patents.
  • Nuance had failed to make any timely objections to the special master's proposal to streamline the focus of the trial.
On appeal, Nuance argued it was denied due process when the district court entered final judgment on all of eight of its patents, including the ones it did not assert at trial.
The Federal Circuit, however, affirmed the district court's ruling. The Federal Circuit found ample support in the record showing that Nuance had not properly reserved any right to present the remaining patents in a separate, second trial. In particular, the court noted:
  • If Nuance had an objection to the special master's recommendation to narrow the focus of the case or the district court's intention to narrow the scope of patents at issue, it failed to timely notify the court of its objection.
  • In several instances during the case management stage, Nuance stated it was opposed to multiple trials, and instead stated that it intended to have a single trial on a limited number of its patents.
  • Not only did Nuance elect to move forward with a limited number of patents and claims, but it also twice voluntarily narrowed that number even further. In fact, despite agreeing to a limit of four patents and fifteen claims, Nuance ultimately asserted only three patents and seven claims at trial, abandoning its full allotment.
Although Nuance argued it never abandoned the unselected patents, it relied only on statements Nuance's counsel made in arguments before the district court adopted the single-trial approach, not after. In particular Nuance pointed to the moment when it identified the patents that would proceed to trial, where it stated that it reserved its rights to reassert the non-selected patents at a later time in this suit or in a future suit. The Federal Circuit rejected this boilerplate reservation of rights as insufficient to overcome the fact that:
  • Nuance did not challenge the special master's recommendation to limit the patents to one trial.
  • Significant evidence in the record suggested that Nuance also intended to have one trial on a subset of patents.
The court also reasoned that Nuance could not show that it had suffered a due process violation when Nuance was actively involved in winnowing the number of claims and patents it would assert.
The Federal Circuit's decision in Nuance emphasizes that when a court forces a patentee to participate in case narrowing, the patentee must be careful to preserve its right to seek a later trial on any dropped claims. Patentees can use a number of strategies to preserve their rights, including:
  • Obtaining dismissal without prejudice of the dropped patents or claims prior to any final narrowing, so that the dropped patents or claims can potentially be reasserted at a later time in another action.
  • Reaching agreement with the other parties and seeking an order of the court preserving the right to a later trial in the same action on the dropped patents and claims.
  • Attempting to preserve the right to a later trial in the same action on the dropped patents, pending the initial outcome, by timely objecting to any narrowing proposals or orders.
Patentees who do not preserve their right to assert dropped claims at a later point risk a judgment on all initially asserted claims, given the holding of Nuance.