Federal Circuit Rules Against Microsoft Claim Construction Arguments, Reverses Denial of Prejudgment Interest for Inventor

On May 20, the U.S. Court of Appeals for the Federal Circuit issued a precedential decision in Kaufman v. Microsoft Corp. affirming a jury verdict of $7 million in reasonable royalty damages against Microsoft’s Dynamic Data for generating web applications. The Federal Circuit denied various claim construction arguments advanced by Microsoft on appeal, including several raised on the proper meaning of “automatically generating” within the preamble to asserted claim 1, and reversed the Southern District of New York’s denial of prejudgment interest to Kaufman.

SDNY Denies JMOL to Microsoft on ‘Automatically Generating,’ and ‘And’ Claim Constructions

The patent-at-issue in this case is U.S. Patent No. 7885981, System and Method for Generating Automatic User Interface for Arbitrarily Complex or Large Databases. It claims a method for operating a server to automatically generate an end-user interface for working with data in a relational database by: (a) providing an output stream from the server defining a user interface paradigm for interacting with a database table; (b) causing the server to scan the database and apply rules to determine table structures, constraints and relationships; and (c) causing the server to use representations created during the scanning step to construct a client application providing a connection to the database that provides displays of the database’s table contents and integrates display processes for representing, managing and navigating relationships across tables.

Kaufman sued Microsoft in 2016 for allegedly infringing the ‘981 patent and in 2019, Microsoft moved for summary judgment of noninfringement, arguing that the term “automatically generating” in the preamble to claim 1 was limiting and required that no human interaction be involved in the application generation process. Microsoft also argued that the plain and ordinary meaning of “and” should lead to a noninfringement ruling as its Dynamic Data service did not include processes in each mode display of the user interface for “representing, navigating and managing” relationships across tables. The court denied Microsoft’s motion for summary judgment and a jury verdict entered in early 2020 found all of Kaufman’s asserted claims valid and infringed.  Microsoft filed post-trial motions to renew its claim construction arguments surrounding the terms “automatically generating” and “and,” and raised those arguments on appeal after the Southern District of New York denied Microsoft’s motions for judgment as a matter of law (JMOL).

Federal Circuit: Microsoft Did Not Raise Dispute Sufficient for New Trial Under O2 Micro

At both the district court and the Federal Circuit, Microsoft argued that the district court failed to clarify the scope of the term “automatically,” which should have entitled it to a new trial under Federal Circuit precedent from O2 Micro International v. Beyond Innovation Technology (2008). Under O2 Micro, a new trial on infringement is warranted if the district court fails to clarify a disputed claim term and that clarification could have reasonably led the jury to a different verdict. At the district court, Microsoft had contended that “automatic” meant that there was no human labor required during any of the claimed steps of the method, a construction that arguably would have avoided infringement liability as the accused Dynamic Data functionality required significant developer effort to scan a database and complete the claimed steps of the method.

However, the Federal Circuit found that Microsoft did not raise a dispute regarding the claim term “automatically” sufficient to preserve its right to a new trial under O2 Micro. Citing to Lazare Kaplan International v. Photoscribe Technologies (2010), the Federal Circuit noted that the district court must be aware of the claim construction dispute and that an appellant cannot resurrect a claim construction argument by pointing to ambiguous statements on the record. Although Microsoft noted the O2 Micro issue in its summary judgment brief, it did not clarify that construction of the term “automatic” was needed to clarify the scope of the preamble term “automatically generating” to specify which functions of the method had to be performed automatically without human intervention.

At a pre-trial hearing in January 2020, which also served as the hearing on Microsoft’s summary judgment motion, Microsoft indicated that there was a claim construction dispute that required resolution under O2 Micro. However, “[a]fter some discussion, the parties appeared to agree that ‘automatic’ means that ‘no separate developer input occurs.’” The district court stated its belief that the dispute raised at the hearing was not related to the definition of “automatic” but rather related to “when an automatic operation comes into play and when it ends.” After counsel for Kaufman told the court that the parties had resolved the claim construction issue, Microsoft moved on to other arguments.

“[T]he above colloquy suggests that the district court reasonably thought that the only adequately presented claim-construction issue had been resolved. And in any event, if there was a further claim-construction issue about what human actions were permitted, Microsoft never defined a claim construction that would accommodate certain human actions Microsoft itself has acknowledged are permissible,… and that Mr. Kaufman and the district court could scrutinize and address. In these circumstances, the failure to pursue the matter at the jury-instruction stage constitutes a forfeiture.”

Claim Term ‘And’ Denotes Alternatives Within Context of ‘981 Patent Specification

The Federal Circuit also nixed two other arguments raised by Microsoft on the construction of “automatically generating.” Though it didn’t propose this construction in district court, Microsoft argued on appeal that the preamble term should have a broad construction that requires automated performance outside of the steps of claim 1’s method. However, the Federal Circuit found that Microsoft had already conceded that certain steps, such as the identification of a particular database, require input from a human developer. Further, the language of the preamble to claim 1 distinguishes the “method for operating a server” from the “processor for automatically generating an end-user interface,” and nothing in the claim precludes human users from configuring the processor. Finally, although Microsoft had identified manual steps completed by human developers using Dynamic Data that surrounded the scanning step of claim 1, the Federal Circuit found those steps to be either preparatory or follow-up actions that were not part of the scanning functionality itself.

On appeal, Microsoft also renewed its argument regarding the district court’s construction of the claim term “and,” arguing that the word should have its normal conjunctive meaning instead of the “and/or” definition applied by the district court. However, citing to Epos Technologies v. Pegasus Technologies (2009), the Federal Circuit noted that there exists a high evidentiary burden for a claim construction that would exclude a preferred embodiment. The sole embodiment described in the ‘981 patent specification does not include a process for managing relationships across tables. As well, the Federal Circuit cited Ortho-McNeil Pharmaceutical v. Mylan Laboratories (2008) as support for recognizing that, in certain contexts, “and” can be reasonably understood to denote alternatives rather than conjunctive requirements, and thus the Federal Circuit affirmed the district court’s construction of the term “and” in the present appeal.

Prejudgment Interest Not Precluded by General Question on Verdict Form or Undue Delay

The Federal Circuit did agree with Kaufman that the district court erred in denying his motion for adding prejudgment interest to the damages verdict awarded by the jury. The appellate court found that neither of the rationales provided by the district court for denying prejudgment interest were supportable by the record. While the district court found that the verdict form’s general question, “How much has Mr. Kaufman proved he is entitled to recover?” subsumed interest within the award amount, the Federal Circuit found that all of the expert testimony presented at trial discussed the value of a potential license in 2011 without any discussion on calculating interest between the 2011 value and today’s present value.

As well, the Federal Circuit disagreed that there was undue delay in Kaufman bringing patent infringement claims against Microsoft. While a defendant must show that it was at least generally prejudiced by a delay, Microsoft provided no evidence that it would have altered Dynamic Data back in 2011 so as not to infringe the ‘981 patent, only that it could have altered its allegedly infringing service. Further, the jury’s verdict of infringement showed that the jury did not credit Microsoft’s evidence of a non-infringing alternative, leading the Federal Circuit to find that the district court lacked reasonable support for finding that Microsoft demonstrated prejudice from Kaufman’s five-year delay in bringing suit.