Vonage Verdict Upheld Amidst Claim Construction Differences

"We have made clear the methods by which claims must be construed. "

- Judge Michel, dissenting-in-part,

Verizon Services Corp. v. Vonage Holdings Corp. (2007-1240), September 26, 2007

Verizon successfully sued Vonage for infringing 3 patents related to IP telephony, and was awarded $58 million of compensatory damages, a 5.5% royalty rate on any future infringing sales, and an injunction barring Vonage from using certain methods and devices. Vonage appealed, arguing that (1) the lower court improperly construed the claims, (2) the injunction was unwarranted, and (3) the judge's instructions on obviousness didn't square with KSR.

On claim construction, the majority opinion upheld the construction on all the patents, except for one patent, where the CAFC found that the patentee disclaimed subject matter through argument during prosecution.

We have held that a statement made by the patentee during prosecution history of a patent in the same family as the patent-in-suit can operate as a disclaimer. Microsoft Corp. v. Multi-tech Sys., Inc., 357 F.3d 1340, 1350 (Fed. Cir. 2004) . . . The applicants gained allowance of the claims of the [] application after stating that the prior art systems "all appear to be directed to non-localized systems," and that the "present invention," by contrast, was "restricted to operate within a few feet from a base station (i.e. wireless handsets)." . . . We think that this language clearly disclaimed coverage of systems operating with a range greater than a "few feet," and that the district court erred in failing to construe the localized system as requiring a range of a few feet.

Notably, Judge Michel dissented from the disclaimer ruling and stated that the entire judgment should be affirmed. Judge Gajarsa dissented from the claim construction of one of the other patents-in-suit, and thought a remand was necessary. Of the three patents, only one managed to get a unanimous claim construction from the bench.

Regarding the injunction, the CAFC found no error in the district court's ruling which relied on the eBay v. MercExchange factors. In a footnote, the court added the following comment:

One factor that is relevant to the balance of the hardships required by the Supreme Court’s decision in eBay was not considered by the district court, namely whether the district court should have allowed time for Vonage to implement a workaround that would avoid continued infringement of the ’574 and ’711 patents before issuing its injunction. Verizon had a cognizable interest in obtaining an injunction to put an end to infringement of its patents; it did not have a cognizable interest in putting Vonage out of business. However, as Verizon points out, Vonage made no request for a workaround period to the district court, and Vonage has already had several months since the district court’s judgment to implement a workaround.

Finally, Vonage challenged the district court’s instructions to the jury on obviousness concerning the need to find a "suggestion in the prior art to combine the elements." The CAFC noted that, since only one reference was being considered on the patents in question, the error in those cases was harmless:

[W]e note that there cannot be prejudicial error with respect to the ’574 and ’711 patents because Vonage does not dispute that the obviousness testimony at trial centered on a single reference ["Jonas"], and thus any alleged error in instructions requiring a finding of motivation to combine several references would have been harmless.