No Due Process Violation Where Judgment Entered on Patents Not Asserted at Trial

21 March 2016 IP Litigation Current Blog

A recent case reminds litigators to be diligent in protecting their clients’ due-process rights when narrowing a case for trial or risk forfeiting the right to trial altogether.  In Nuance Communications v. ABBYY USA Software House, Inc., the Federal Circuit ruled that due process rights were not violated when a district court entered judgment of non-infringement of eight patents, even though trial was held on only three of those patents.

Nuance Communications Inc. (“Nuance”) sued ABBYY USA Software House, Inc., ABBYY Software, Ltd., ABBYY Production LLC, and Lexmark International, Inc. (collectively, “ABBYY”) for infringement of eight patents.  Three of those patents relate to optical character recognition (“OCR”) technology, which involves recognizing characters in digital images of text so the text can be translated into a searchable format.  Before trial, Nuance narrowed its case several times on its own accord and ultimately tried only the three patents related to OCR technology.  The jury found that ABBYY did not infringe the three patents.  However, the district court entered judgment for ABBYY on all eight patents that Nuance initially asserted in its complaint, including the five patents not tried before the jury.

On appeal, Nuance argued that it was denied due process when the district court entered final judgment on all eight patents.  ABBYY responded that Nuance voluntarily narrowed the case and should not get a second chance to litigate simply because it lost at trial.  The Federal Circuit agreed with ABBYY and affirmed the judgment.

In particular, the Federal Circuit explained that it was Nuance’s responsibility to timely notify the district court as to any objections it had to the court’s procedures and Nuance had not objected to the proceedings.  In fact, the Federal Circuit cited several examples where it appeared that Nuance intended to have a single trial on a subset of patents that would be representative of the asserted patents.  For example, Nuance consistently opposed multiple trials in its case management statements.  Nuance also expressed concern about multiple trials after the district court decided to hold two separate Markman hearings – one for the patents related to OCR technology and one for the other five patents.  Moreover, the Federal Circuit noted that Nuance voluntarily elected to proceed on a subset of patents, without instruction from the district court.  Further, a special master, who was appointed to handle the case management scheduling after the first Markman hearing, adopted Nuance’s proposal that the district court proceed with having a trial on both sets of patents but limiting the total patents at trial to four.  There was no reference to a second trial and Nuance never objected to the special master’s recommendations, which were adopted by the district court.  Nuance later narrowed the case to the three patents that it eventually brought to trial.

Although Nuance pointed to other instances to show that it intended to try all eight patents and that it expressly reserved its rights as to those patents, the Federal Circuit explained that this showing was insufficient to overcome the special master’s recommendation and the other examples showing an intent to proceed on a single trial on a subset of Nuance’s best patents.  Ultimately, the Federal Circuit held that Nuance failed to protect its due process rights by not objecting to any of the court procedures until after it lost at trial.

Thus, practitioners should be strategic about any decision to narrow their cases to a subset of asserted patents.  In particular, a party must be clear if it intends to seek multiple trials throughout the district court proceedings and a party should consider timely objections to any rulings to the contrary.

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