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`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`WESTERN DIVISION
`
`Case No. 2:13-cv-07245-MRP-JEM
`
`ORDER GRANTING IN PART
`AND DENYING IN PART
`DEFENDANTS’ MOTION FOR
`SUMMARY JUDGMENT
`
`The CALIFORNIA INSTITUTE OF
`TECHNOLOGY,
`Plaintiff,
`
` v.
`HUGHES COMMUNICATIONS
`INC., HUGHES NETWORK
`SYSTEMS LLC, DISH NETWORK
`CORPORATION, DISH NETWORK
`L.L.C., and DISHNET SATELLITE
`BROADBAND L.L.C.,
`Defendants.
`
`
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`Hughes, Exh. 1077, p. 1
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`I.
`Introduction
` Plaintiff California Institute of Technology (“Caltech”) has asserted U.S. Patent
`Nos. 7,116,710 (“the ’710 patent”), 7,421,032 (“the ’032 patent”), 7,916,781 (“the
`’781 patent”), and 8,284,833 (“the ’833 patent,”) against Defendants Hughes
`Communications, Inc., Hughes Network Systems, LLC, DISH Network
`Corporation, DISH Network L.L.C., and dishNET Satellite Broadband L.L.C.
`(collectively, “Hughes”). The Court issued a claim construction order on August
`6, 2014. See Cal. Inst. of Tech. v. Hughes Commc’ns Inc., 35 F. Supp. 3d 1176
`(C.D. Cal. 2014). The Court denied Hughes’ motion for summary judgment for
`ineligibility under 35 U.S.C. § 101 on November 3, 2014. See Cal. Inst. of Tech. v.
`Hughes Commc’ns Inc., No. 2:13-cv-07245, 2014 WL 5661290 (C.D. Cal. Nov. 3,
`2014). Hughes now moves for summary judgment of: invalidity of the patents-in-
`suit on a variety of theories; non-infringement by DISH and dishNET products;
`and invalidity of Caltech’s damages theory.1 The Court grants Hughes’ motion as
`to damages and DISH; the Court denies Hughes’ motion as to the other issues.
`II. Background
` The asserted claims are method and apparatus claims relating to error
`correction.2 In modern electronic systems, data are stored in the form of bits
`having the value “1” or “0.” During data transmission, a random or irregular
`fluctuation (known as noise) can occur in the signal and corrupt data. For
`example, a transmitter may send a bit with the value “1,” but noise may corrupt
`this bit and cause the receiver to read the value as “0.” To mitigate this problem,
`electronic systems use error correction. Error correction depends on redundancy,
`
`
`1 Additionally, Hughes also addresses Caltech’s doctrine of equivalents argument.
`This Court has already barred the introduction of this argument. Therefore, this
`Order will not discuss Hughes’ objections on this matter.
`2 All four patents share a common specification and claim priority to the same
`patent application U.S. Serial Application No. 09/861,102.
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`Hughes, Exh. 1077, p. 2
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`which refers to “extra” bits that may be duplicates of original information bits3 and
`are transmitted along with the original bits. These extra bits are not necessary, in
`the sense that the original information exists without them, but they serve an
`important purpose. Using these extra bits, the receiver can ensure that the original
`information bits were not corrupted during transmission.
` Caltech’s patents are directed to a form of error correction code called an
`irregular repeat and accumulate (“IRA”) code. An IRA code operates as follows:
`the code can introduce redundancy by repeating (i.e., duplicating) different original
`bits irregularly (i.e., a different number of times). These information bits may then
`be randomly permuted and combined to form intermediate bits, which are
`accumulated to form parity bits. Parity bits reflect the values of a selection of
`original information bits. These parity bits are transmitted along with the original
`information bits. The receiver ensures that the received original information bits
`were not corrupted during transmission. It can do this by modulo-2 adding the
`original information bits and parity bits.4 The receiver knows whether this sum is
`supposed to be odd or even. If the sum is supposed to be odd but is instead even,
`the receiver will know that an error occurred and can perhaps correct the error
`using other information it has received.
` The benefit of an IRA code is that not all bits are repeated the same number of
`times. The repetition of certain bits provides redundancy. Although greater
`repetition of every bit would allow for better error correction, it would also force
`
`
`3 The ’032 patent uses the term “message bits” rather than “information bits.” This
`Court will generally use the term “information bits” when discussing error
`correction.
`4 For an explanation of mod-2 arithmetic, see Modular Arithmetic – An
`Introduction, Rutgers University,
`http://www.math.rutgers.edu/~erowland/modulararithmetic.html.
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`Hughes, Exh. 1077, p. 3
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`the transmitter to send more bits, decreasing the coding rate and increasing data
`transfer time.5 IRA codes balance competing goals: data accuracy and efficiency.
`The asserted claims recite generally encoding and decoding bits in accordance with
`an IRA code.
`
`III. Standard for Summary Judgment
`
` The Court shall grant summary judgment if there is no genuine dispute as to
`any material fact, as supported by facts on the record that would be admissible in
`evidence, and if the moving party is entitled to judgment as a matter of law. Fed.
`R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v.
`Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In order to grant summary
`judgment, the Court must identify material facts by reference to the governing
`substantive law, while disregarding irrelevant or unnecessary factual disputes.
`Anderson, 477 U.S. at 248. If there is any genuine dispute about a material fact
`such that a reasonable jury could return a verdict for the nonmoving party,
`summary judgment cannot be granted. Id. The Court must view facts and draw
`reasonable inferences in favor of the nonmoving party. Scott v. Harris, 550 U.S.
`372, 378 (2007). If the party moving for summary judgment does not bear the
`burden of proof as to a particular material fact, the moving party need only give
`notice of the absence of a genuine issue of material fact so that the nonmoving
`party may come forward with all of its evidence. See Celotex, 477 U.S. at 325.
`IV. Discussion
`A. Invalidity of ’781 patent in View of Divsalar Reference
`Hughes argues that the ’781 patent is invalid in view of a conference
`proceeding, “Coding Theorems for ‘Turbo-Like’ Codes” (“Divsalar”).
`Specifically, Hughes argues that independent claim 19 is anticipated by Divsalar
`
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`5 Coding rate is calculated through the following equation: Coding Rate =
`(Original information bits) / (Original information bits + Extra bits). The closer
`the coding rate is to 1, the more efficient it is.
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`Hughes, Exh. 1077, p. 4
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`and dependent claim 16 is anticipated by and obvious in light of Divsalar. This
`Court finds Hughes’ argument unpersuasive as to claim 16 and undeveloped as to
`claim 19.
`Divsalar concerns RA codes. It describes an encoder that receives a block of
`data, including information bits, and performs an encoding operation using these
`information bits in its input. The information bits are repeated and reordered, then
`encoded by a rate 1 accumulator. Finally, the encoding operation generates a
`codeword.
`Hughes argues that Divsalar discloses each and every element of claim 19 of
`the ’781 patent. Claim 19 reads:
`A method of encoding a signal, comprising:
`receiving a block of data in the signal to be encoded, the block of data
`including information bits; and
`performing an encoding operation using the information bits as an
`input, the encoding operation including an accumulation of mod-2 or
`exclusive-OR sums of bits in subsets of the information bits, the encoding
`operation generating at least a portion of a codeword, wherein at least two of
`the information bits appear in three subsets of the information bits.
`Further Hughes argues that Divsalar renders obvious claim 16, which ultimately
`depends on independent claim 13:
` A method of encoding a signal, comprising:
`receiving a block of data in the signal to be encoded, the block of data
`including information bits; and
`performing an encoding operation using the information bits as an
`input, the encoding operation including an accumulation of mod-2 or
`exclusive-OR sums of bits in subsets of the information bits, the encoding
`operation generating at least a portion of a codeword,
`wherein the information bits appear in a variable number of subsets.
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`Hughes, Exh. 1077, p. 5
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`Caltech’s primary argument against Hughes’ position is that Divsalar does not
`disclose irregular degree profiles as required by the ’781 patent. Hughes counters
`that the ’781 patent does not recite such a requirement, primarily because the claim
`does not use the word “repetition.” This Court finds that irregular degree profiles
`are a requirement of claim 16 of ’the 781 patent and that Divsalar does not disclose
`this limitation. This Court is less certain that irregular degree profiles are a
`requirement of claim 19.
`The claim language of the ’781 patent does not explicitly mention irregular
`degree profiles. However, Caltech points out that the claim language does describe
`encoding operations that require irregular degree profiles of information.
`The relevant limitations of the claims at issue provide for “an accumulation of
`mod-2 or exclusive-OR sums of bits in subsets of the information bits” wherein
`“the information bits appear in a variable number of subsets” (claim 16) and “at
`least two of the information bits appear in three subsets of the information bits”
`(claim 19).6 The term “subsets” refers to the information bits to be combined at a
`given parity check node. Caltech contends that a person of ordinary skill in the art
`would understand that the presence of information bits in different numbers of
`subsets, in light of check nodes that combine subsets of information bits, requires
`the use of irregular degree profiles. The expert testimony of Dr. Stephen B.
`Wicker comports with this argument. See Wicker Decl. Sec. IX. The presence of
`information bits in a variable number of subsets necessitates irregularity (meaning
`information bits will be repeated a different number of times) as those bits are
`transmitted and checked.
`The specification of the ’781 patent appears to further support Caltech’s
`argument, as the encoding operation described therein requires the use of irregular
`
`6 These terms regarding subsets and information bit appearance in subsets were not
`presented to this Court for construction. As a result, this Court will give those
`terms their ordinary meaning. See Phillips v. AWH Corp., 415 F.3d 1303, 1313
`(Fed. Cir. 2005) (en banc).
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`Hughes, Exh. 1077, p. 6
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`degree profiles. Put most simply, the operation describes input information bits,
`which are repeated, i.e. duplicated, to check nodes and then summed. Input bits
`are connected to multiple check nodes, though the number of check nodes
`connected to any particular information bit is variable. Accordingly, some
`information bits appear in more subsets than others.7 This reinforces this Court’s
`finding of irregularity as a limitation of claim 16.
`The ordinary meaning of “variable” in connection with the appearance of
`information bits as used in claim 13 (upon which claim 16 depends) requires an
`irregular degree profile. Hughes’ various arguments to the contrary are
`unpersuasive. Divsalar discloses no such limitation. Accordingly, Divsalar does
`not invalidate or otherwise render obvious claim 16.
`Claim 19, however, does not use “variable” in connection with the appearance
`of information bits in subsets. Instead, claim 19 describes an invention “wherein
`at least two of the information bits appear in three subsets of the information bits.”
`The Court is troubled by Caltech’s treatment of this language as essentially
`identical to “variable number.” The ordinary meaning of “at least two” is simply
`two or more. Hughes rightly points out that this limitation would be met by a code
`in which all the information bits appear in exactly three subsets. In such a
`scenario, information bits would appear in the same number of subsets,
`conceivably removing irregularity from the code. Frustratingly, Hughes barely
`
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`7 Hughes argues that this Court would commit one of the cardinal sins of patent
`law if this Court were to read a limitation from the specification. See Phillips, 415
`F.3d at 1319-20 (quoting SciMed Life Sys., Inc. v. Advanced Cardiovascular Sys.,
`Inc., 242 F.3d 1337, 1340 (Fed. Cir. 2001)). However, this limitation follows from
`the claim’s use of “variable” in connection to subsets. Caltech correctly shows that
`this understanding is further demonstrated in the specification, but this Court does
`not rely on the specification to supply this limitation. See id. at 1313 (noting that
`skilled person in art “is deemed to read the claim term not in only in the context of
`the particular claim in which the disputed term appears, but in the context of the
`entire patent, including the specification”).
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`Hughes, Exh. 1077, p. 7
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`touches on this argument, spending only two sentences in its reply brief on the
`subject of irregularity as it relates to information bits appearance in subsets in
`claim 19. The paucity of briefing on this issue provides little clarity. The Court
`declines to grant summary judgment on the basis of a skeletal, though promising,
`theory.
`This Court denies Hughes’ motion for summary judgment for invalidity of the
`’781 patent in light of Divsalar.
`B. Improper Inventorship of ’781 Patent
`Hughes claims that Dr. Dariush Divsalar contributed to the development the
`’781 patent and was improperly omitted as an inventor of that patent. Thus,
`Hughes concludes, the asserted claims are invalid. The Court finds unpersuasive
`this conspicuously unsupported argument.
`It is well established that the named inventors of a patent are presumed correct
`and that a nonjoinder challenge based on inventorship must be sustained by clear
`and convincing evidence. Hess v. Advanced Cardiovascular Sys., Inc., 106 F.3d
`976, 979–80 (Fed. Cir. 1997). Hughes does not come close to meeting this burden.
`Instead, Hughes presents a conspiracy, bereft of evidence, wherein Dr. Divsalar
`gleans from a colleague the idea to “make his RA codes irregular,” shares this idea
`with the named inventors of the patent, inventors who in turn omit Dr. Divsalar
`from the patent in order to keep the whole episode secret. The emails that Hughes
`has offered up to buttress this elaborate scenario are neither clear nor convincing.
`This Court denies Hughes’ motion for summary judgment for invalidity of the
`’781 patent for improper inventorship.
`C. Invalidity of ’833 Patent with Regard to “Memory Locations”
`Hughes contends that the claims of the ’833 patent are invalid under Section
`112 for lack of written description concerning “memory locations.” Caltech
`counters that the use of separate memory locations is a well-known concept in the
`art. Moreover, Caltech argues that an ordinarily-skilled person would understand
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`Hughes, Exh. 1077, p. 8
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`that the ’833 patent implicitly discloses the use of memory locations. This Court
`finds a dispute of fact as to whether a person of ordinary skill in the art would
`understand that the inventors were in possession of the invention using memory
`locations to store information and parity bits.
`The asserted ’833 patent claims contain numerous limitations concerning
`“memory locations.” See, e.g., ’833 patent, 7:21–36 (limitations of claim 1
`including “a first set of memory locations to store information bits; a second set of
`memory locations to store parity bits”). However, the patent’s specification does
`not describe “memory locations.” Hughes argues that this omission dooms the
`’833 patent under Section 112, which requires a written description sufficient to
`“convey[] to those skilled in the art that the inventor ha[d] possession of the
`claimed subject matter as of the filing date.” Ariad Pharm., Inc. v. Eli Lilly & Co.,
`598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc).
`A specification does not require the recitation of well-known structures.
`Falko-Gunter Falkner v. Inglis, 448 F.3d 1357, 1367 (Fed. Cir. 2006). Similarly,
`“[a] patentee may rely on information that is ‘well-known in the art’ for purposes
`of meeting the written description requirement.” Boston Scientific Corp. v.
`Johnson & Johnson, 647 F.3d 1353, 1366 (Fed. Cir. 2011). Caltech has offered
`expert testimony in support of the argument that memory locations and indices
`were well known to skilled persons. See Wicker Decl. Sec. X. Hughes contends
`otherwise and has presented expert testimony from Dr. Brendan Frey to support
`this contention. See Frey Decl. ¶ 33–34. As there exists a question of material fact
`as to whether the use of memory locations was well known at the time of the
`invention, this Court denies Hughes motion for summary judgment for invalidity
`of the ’833 patent.
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`Hughes, Exh. 1077, p. 9
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`D. Caltech’s Damages Theory
`Of more consequence is Hughes’ argument regarding Caltech’s allegedly
`improper royalty apportionment in its damages theory. Hughes protests that
`Caltech’s theory is invalid under the entire market value rule. This Court agrees.
`Caltech does not itself make or use the instant invention. Accordingly,
`Caltech’s damages claim is limited to a reasonable royalty. Such a damages figure
`may be calculated from the royalty base and the royalty rate. See, e.g., Virnetx,
`Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1325–26 (Fed. Cir. 2014). Caltech’s
`damages theory posits a royalty base of all of the revenue Hughes received for the
`sale of accused products, as well as revenue from goods and services that are sold
`with the accused products. Caltech seeks a 4% royal rate.
`Hughes contends that Caltech has not sufficiently tailored the royalty base to
`conform to the nature of the allegedly infringing products. These products have
`multiple components, but the invention at issue concerns only one component.
`Hughes argues that Caltech must therefore apportion both the royalty rate and the
`royalty base. This dual tailoring is necessary to prevent possible juror confusion
`and to reflect the fact that only a portion of sales of the infringing products may be
`attributable to the allegedly infringing component. Ericsson, Inc. v. D-Link
`Systems, 773 F.3d 1201, 1226–27 (Fed. Cir. 2014); Virnetx, 767 F.3d at 1326 –27.
`Caltech admits that that it did not apportion the revenue base for the allegedly
`infringing products. However, Caltech argues that this is unnecessary because the
`royalty rate has been adjusted downward to account for the multicomponent nature
`of the accused products. In essence, Caltech argues that when considering
`apportionment in light of royalty base and royalty rate, a party may focus entirely
`on royalty rate.
`Caltech’s argument hinges on an incorrect reading of Ericsson, Inc. v. D-Link
`Systems, 773 F.3d 1201 (Fed. Cir. 2014). There, the Federal Circuit made clear
`that a royalty-rate-only apportionment approach is typically barred with respect to
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`Hughes, Exh. 1077, p. 10
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`multi-component products unless the entire value of the accused products is
`attributable to the patented feature. Caltech argues that Ericsson stands for the
`legal rule that “an economist could [achieve apportionment] in various ways—by
`careful selection of the royalty base to reflect the value added by the patented
`feature, where that differentiation is possible; by adjustment of the royalty rate so
`as to discount the value of a product’s non-patented features; or by a combination
`thereof.” Id. at 1226. However, the opinion carefully explains that this legal rule
`is limited by “an important evidentiary principle.”
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` “The principle, applicable specifically to the choice of a royalty base, is
`that, where a multi-component product is at issue and the patented feature is
`not the item which imbues the combination of the other features with value,
`care must be taken to avoid misleading the jury by placing undue emphasis
`on the value of the entire product. It is not that an appropriately apportioned
`royalty award could never be fashioned by starting with the entire market
`value of a multi-component product—by, for instance, dramatically reducing
`the royalty rate to be applied in those cases—it is that reliance on the entire
`market value might mislead the jury, who may be less equipped to
`understand the extent to which the royalty rate would need to do the work in
`such instances. Thus, where the entire value of a machine as a marketable
`article is properly and legally attributable to the patented feature, the
`damages owed to the patentee may be calculated by reference to that value.
`Where it is not, however, courts must insist on a more realistic starting point
`for the royalty calculations by juries—often, the smallest salable unit and, at
`times, even less.”
`
`Id. at 1226–27 (citations omitted) (internal quotation marks omitted).
`
`Alternatively, Caltech argues that even if this Court finds that rate-only
`apportionment is typically improper for multiple component products, no such bar
`would apply in this case because the patented invention is the basis for consumer
`demand. See id. However, both of Caltech’s damages experts have admitted that
`the features associated with the patents-in-suit are not the sole basis of demand for
`the accused products. One expert noted that this was the very reason he performed
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`Hughes, Exh. 1077, p. 11
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`apportionment. Further, the other expert noted that consumers would not be
`“aware of what coding or modulation is being used to provide [satellite Internet]
`services.” While the patented invention may concern capacity and speed, there are
`other drivers in the satellite broadband industry.
`As the entire value of the accused products is not dependent on the invention at
`issue, Caltech must apportion the royalty base in its damages theory. It has failed
`to do so here.
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`E. Dismissal of DISH Products
`Hughes seeks dismissal with prejudice of claims Caltech laid out in its
`complaint against DISH products and services, namely the Hopper. Caltech, no
`doubt wary of the possible impact of a broad dismissal on its later filed suit against
`DISH, seeks a tailored dismissal with conditions. This Court grants Hughes’
`motion for summary judgment with respect to the Dish products and services
`mentioned in Caltech’s complaint.
`V. Conclusion
`The Court grants Hughes’ motion for summary judgment as to Caltech’s
`damages theory and the dismissal of DISH products and services named in
`Caltech’s complaint. The Court denies Hughes’ motion for summary judgment as
`to all other issues.
`
` _________________________________
`Hon. Mariana R. Pfaelzer
`United States District Judge
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`IT IS SO ORDERED.
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`DATED: May 5, 2015
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`Hughes, Exh. 1077, p. 12