$19.5M Judgment That Citrix GoTo Products Infringed Patents Upheld by Federal Circuit

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By Tony Dutra

Oct. 14 — SSL Services LLC generally walked away the winner after an Oct. 14 Federal Circuit decision that added to the court's standards on a number of patent law issues and left in place a multimillion dollar judgment against Citrix Systems Inc.

Citrix, provider of GoToMyPC and other popular computer-to-computer connection products, failed to convince the court to upset a $10 million infringement award, plus $5 million for willfulness and $4.5 million more in prejudgment interest. The appeals court also reversed the district court's judgment that SSL was not the prevailing party, though it hinted that, on remand, the lower court need not award attorneys' fees and costs.

Along the way, the court enhanced its jurisprudence on patent infringement cases as to a general jury verdict, what it means to be the prevailing party, construction of software-related claim terms, willfulness and the use of comparable licenses in a damages determination.

One Patent Infringed, One Not

V-One Inc. was granted related patents (U.S. Patent Nos. 6,061,796 and 6,158,011) in 2000 on a virtual private network—a communication over an open network like the Internet but with encrypted data transfer.

Between 2000 and 2003, V-One and Citrix collaborated under a joint development and licensing agreement, but the SmartGate software that was the focus of that collaboration was not an embodiment of the patented invention.

Citrix acquired ExpertCity.com in 2004 and rebranded its products as GoToAssist, GoToMyPC and GoToMeeting.

SSL acquired the rights to V-One's patents in June 2005, but it did not assert patent infringement against Citrix until April 2008. It amended its complaint in May 2009 and, for the first time, alleged infringement of specific claims of the '011 patent by specific products that underlie the GoTo products.

Pre-trial, Judge J. Rodney Gilstrap of the U.S. District Court for the Eastern District of Texas construed claims and determined that Citrix met the “objective prong” of the willfulness inquiry, with its knowledge of the patents evidenced by its prior association with V-One.

A jury then found claim 27 of the '796 patent not infringed, three claims of the '011 patent not invalid and infringed and Citrix liable for willfulness. As to the '796 patent, the verdict form was general, not allowing the jury to identify which limitation was not infringed.

Post-trial, Gilstrap enhanced damages for willfulness and accumulated prejudgment interest beginning in June 2005. However, he determined that SSL was not the prevailing party because Citrix had success as to the '796 patent, and he thus denied SSL's request for fees and costs. Both parties appealed.

One Limitation Clearly Not Met

Judge Kathleen M. O'Malley wrote the opinion of the court, first addressing SSL's appeal.

SSL contested a claim construction judgment related to the '796 patent, that the term “destination address” had to be a network identification address of the second computer. Citrix arguably did not infringe because it used an intermediary server, whereby the communication from the first computer used an identifier of the second computer other than a network address.

The court affirmed the construction in a fact-specific analysis, but SSL also argued that the general verdict form allowed for the possibility that (a) the jury determined that Citrix identifier was infringing in any case, and (b) the jury's noninfringement decision was based on one of two other claim construction decisions at issue on appeal.

The “general verdict rule”—requiring a new trial “where one or more of multiple claims is found legally invalid”—applies as much to patent law as in other cases, the court said, but not when no reasonable jury would have found one limitation not met, as here. The court said, “the record commands the finding that the Citrix GoTo Products do not contain the ‘destination address' limitation.”

But SSL Was Prevailing Party

The court next turned to whether SSL was the prevailing party despite the noninfringement judgment as to the '796 patent. It determined that the district court erred by assuming the answer to the question would dictate whether SSL should be awarded fees and costs.

The judgment of damages alone was enough to determine that SSL prevailed, the court said, citing Farrar v. Hobby, 506 U.S. 103 (1992), for support. But that only means that SSL was “eligible for fees as the prevailing party,” the court said, with the district court still having discretion to award fees or not.

“[T]he degree of the overall success impacts only the reasonableness of the fee award,” the court said. “Therefore, a district court may award minimal or no fees after considering the amount of success to the prevailing party.”

The court thus ruled that SSL was the prevailing party, but said that “does not automatically entitle it to any particular level of fees.”

Infringed Patent Not Obvious

Citrix's first argument on cross-appeal was that its system did not meet the “encrypt files” limitation of the '011 patent. In another fact-specific analysis, the court noted that the district court's construction—not contested here—did not refer to a “file” but rather to “a set of data.”

Citrix encrypts packets, not files, but SSL's expert presented to the jury a flow of encrypted data to the server that a reasonable jury could conclude met the “set of data” construction, the court said.

Citrix also appealed the judgment of no invalidity of the claims of the '011 patent, but the court affirmed the judgment that a prior art reference did not disclose the positioning of the encryption module that SSL claimed. Encryption may take place in the Internet communication protocol, at the level of the applications that are communicating with one another, or in a level between the two. The patented claims encrypted at the application level and the prior art “separates the applications from the encryption software at issue,” the court said.

Willful Infringement Judgment Upheld

Citrix contested, to no avail, the willfulness judgment as to both the objective and subjective prongs of In re Seagate Tech. LLC, 497 F.3d 1360, 2007 BL 83845, 83 U.S.P.Q.2d 1865 (Fed. Cir. 2007) (en banc).

Citrix had initiated an ex parte reexamination where it presented the same prior art that failed it in this appeal. Ultimately, the Patent and Trademark Office rejected those arguments under the lower preponderance of the evidence standard. That one fact was not dispositive of the judgment that the objective prong was met, the court said.

In addition, though, “most of the limitations for the asserted claims of the '011 patent were uncontested,” it said, and “the only limitation raised on appeal of ‘encrypted files' was clearly supported by substantial evidence.”

As to the subjective prong, Citrix's collaboration with V-One was dispositive of the fact that Citrix knew of the patent.

Citrix argued, though, that the district court improperly barred it from presenting testimony in two areas that would have shown a good-faith belief that its products were noninfringing. But the appeals court said that neither was an abuse of discretion.

First, it said that testimony of Citrix's chief engineer presented personal beliefs of noninfringement “formed by a lay person without the benefit of the court's claim construction determinations [that] rendered them of little probative value and potentially prejudicial.”

Second, in the initial phases of the ex parte reexamination, the PTO had rejected the relevant '011 patent claims, but the court cited “the limited value of [non-final] actions by the PTO,” as it had just recently ruled in VirnetX, Inc. v. Cisco Sys., Inc., No. 2013-1489, 2014 BL 256078 (Fed. Cir. Sept. 16, 2014).

Damages Evidence, Prejudgment Interest OK

Another evidentiary ruling applied to the damages judgment. Citrix argued that the agreement it had with V-One was not a comparable license to be considered because it was not specifically for use of the patented invention.

“As the district court concluded, the V-One agreements are sufficiently probative of the circumstances which would surround a hypothetical negotiation to be admissible,” the appeals court said. “We do not discount all agreements regarding the technology at issue other than licenses addressing the price terms and circumstances at issue in the case at bar.”

Finally, the issue as to prejudgment interest was the start date. Citrix contended that it should only be counted from SSL's filing of the amended complaint in 2009.

The court rejected Citrix's reliance on an argument that SSL had delayed bringing the lawsuit, agreeing with the district court that the date assigned to the onset of Citrix's willful infringement—in June 2004—was the proper start date.

“By awarding SSL prejudgment interest to 2004, the district court placed SSL in the position it would have been in had Citrix paid a reasonable royalty upon notice of the '011 Patent and its relevance to the technology it chose to market,” the court said.

Judges Alan D. Lourie and Richard Linn joined the opinion.

Gregory G. Garre of Latham & Watkins LLP, Washington, represented SSL. J. Anthony Downs of Goodwin Procter LLP, Boston, represented Citrix.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Tom P. Taylor at ttaylor@bna.com

Full text at http://www.bloomberglaw.com/public/document/SSL_Services_LLC_v_Citrix_Systems_Inc_Docket_No_1301419_Fed_Cir_M.