Don't Mess With A Judge. Just Don't. • 2011 12 10 DontMessJudgeNow That’s Gotta Hurt!

O2 Micro International, Ltd. v. Beyond Innovation Technology Co., No. 2011–1054 (Fed. Cir. Nov. 18, 2011) (Chief Judge Rader, and Judges Lourie and Prost) (non-precedential)

This is a story about the price you pay when you disobey a trial judge. Beyond Innovation Technology (BiTEK for short) learned a painful lesson about that. It also learned that you can be found to infringe even if there’s no direct evidence that any infringing products ever made it into the U.S.

O2 sued BiTEK for inducing infringement of two of its integrated circuit patents used in electronic displays. BiTEK is based in Asia and manufactures parts that are sold to other manufacturers in Asia, which then sell larger modules to companies that manufacture LCD displays, some of which find their way into the U.S. O2 claimed that BiTEK induced infringement by Samsung and LG.

Before trial, O2 asked the judge to exclude any evidence relating to O2’s selection of the Cayman Islands for its headquarters. (O2 was apparently concerned that the defendants would make it look bad for moving offshore to reduce its U.S. taxes.) The court allowed the defendants to mention the fact that O2 is a Cayman Island corporation, but prohibited them from discussing any evidence about taxes.

During jury selection, BiTEK’s counsel asked the jury panel, “Now, are there any of you who have a problem with a company that puts its headquarters off-shore on a Caribbean island in order to avoid paying U.S. taxes?”

That didn’t go over well with the judge.

The judge found BiTEK’s counsel in contempt and declared a mistrial. The judge also imposed a number of sanctions on BiTEK, with the most severe being that it was not allowed to present expert testimony on the issue of infringement. O2 sought only an injunction, so in the end the case was tried to the judge. (Under the Seventh Amendment to the Constitution, if money damages are sought, there is a right to a jury trial. There is no right to a jury trial if the only remedy the injured party asks for is equitable, such as an injunction.)

BiTEK lost at trial. The district court entered a permanent injunction, using language proposed by BiTEK. BiTEK appealed the finding of infringement, the sanction regarding exclusion of its expert testimony, and the injunction.

No Evidence of U.S. Sales

There was actually no direct evidence that infringing LCDs were sold in the U.S. (Samsung was eventually licensed under the patent, so BiTEK argued that those LCDs didn’t count because they were authorized.) Instead, the trial court inferred that LG sold infringing LCDs in the U.S. mainly based on the fact that 1) LG sold monitors with BiTEK’s accused circuits somewhere in the world, and 2) the U.S. is the largest market for LG’s monitors.

The Federal Circuit was satisfied that this enough to show that it was more likely than not that LG had sold infringing monitors in the U.S. Judge Prost, however, dissented on this point. She felt that the evidence was simply too weak.

BiTEK also appealed the sanctions. It argued that preventing it from offering its own expert testimony amounted to a “death sentence.” The court disagreed, pointing out that BiTEK could still cross-examine O2’s expert and could offer fact witnesses of its own to contradict that testimony.

Lastly, the court allowed the injunction. After all, the language the trial court used was proposed by BiTEK, so they could hardly complain now that they didn’t like its terms.

Did the trial court go too far? Was there enough proof of direct infringement? You can read the court’s opinion to see what you think.