Broadcom v. Emulex: Showing Irreparable Harm in a 'Design-Win' Market

Category: Injunctions
By: Jesus Hernandez, Blog Editor/Contributor  
TitleBroadcom Corp. v. Emulex Corp., No. 2012-1309 (Fed. Cir. Oct. 7, 2013).
Issues[1] The obviousness analysis here asks whether a person of ordinary skill in the art at the time of the invention— an electrical engineer with at least a bachelor’s degree and several years of CDR experience—would have had a reason to modify Pickering to include a ["a data path," of Pickering and the ’150 patent address two different problems.]
Broadcom, at *13 (text added).
[2] […] Emulex argues that the district court abused its discretion in granting the injunction [due to] a lack of irreparable harm because there was no link between Emulex’s and Broadcom’s market share changes and there was no causal nexus “show[ing] that the infringement caused harm in the first place.” […] Specifically, Emulex contends that Broadcom has shown no evidence of demand for the features claimed in the ’150 patent and the patented feature is only a “small” component of the infringing products.
Id. at *18 (text added, internal citations omitted).
Holdings[1] While a prior art reference may support any finding apparent to a person of ordinary skill in the art, prior art references that address different problems may not, depending on the art and circumstances, support an inference that the skilled artisan would consult both of them simultaneously. See Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1366 (Fed. Cir. 2012) (finding invention nonobvious when none of the “reference[s] relate to the [problem] described in the patents” and no evidence was proffered “indicating why a person having ordinary skill in the art would combine the references”)
Broadcom, at *14.
[2] Because of [the] market characteristics [of a 'design wins' market], the district court properly concluded that Broadcom’s “exclusion from a fair opportunity to compete for design wins constitutes irreparable harm.”
Id. at *20 (text added).

Procedural HistoryAfter a trial and post-trial motions, the United States District Court for the Central District of California de- termined that Emulex Corporation (Emulex) infringed Broadcom Corporation’s (Broadcom) U.S. Patent No. 7,058,150 (the ’150 patent). On appeal, the only issues remaining relate to the ’150 patent, and the district court’s grant of a permanent injunction and modifications to that permanent injunction.
Broadcom, at *2.
Legal Reasoning (Rader, CJ, Louria, and Wallach)
Claim at Issue
Claim 88. A COMMUNICATION DEVICE CONFIGURED TO RECEIVE MULTIPLE SERIAL DATA SIGNALS, COMPRISING: a master timing generator adapted to generate a master timing signal;
multiple receive-lanes each configured to receive an associated one of the multiple serial data signals, […], and a data path adapted to sample and quantize the associated serial data signal in accordance with the sampling signal; and an interpolator control module coupled to each receive-lane, […].
Broadcom, at *5.
[1] Obviousness
Background - Pickering Reference[T]he relevant prior art is European Patent No. EP0909035, the Pickering reference (Pickering). [...] Pickering teaches “an apparatus for producing an oscillating signal,” i.e., a clock, and “devices for synchronising an output signal with an input signal.” [...]Pickering also discloses “recover[ing] a corresponding clock signal at the receiver in order to demodulate the received signal.” [...] The record shows that Pickering discloses each limitation of claim 8 except for a “data path”—also referred to as a “receiving path.” [...]. In other words, Pickering teaches recovering the clock, but not the data; in contrast, the ’150 patent teaches recovering both the clock and the data. Broadcom, at *6 (internal citations omitted).
103 - Analysis
Prior Art and Patent at Issue Solve Different Problems
[…] Pickering and the ’150 patent addressed two different problems—clock recovery versus clock and data recovery, respectively. J.A. 245.
Id. at *13.
Specifically, at trial the expert testimony indicated that there was no “motive or reason [for Pickering] to seek a data path in order to broaden its function.” J.A. 751. Pickering’s system was described as a “self-contained” system. J.A. 751. Its task and purpose was to recover the clock data and to phase synchronize the signal— Pickering’s system accomplished its objective and provided no suggestion to broaden that objective. J.A. 751.
id. at *14.
"data path" Feature Not Taught by PickeringIn addition to solving a different problem than the ’150 patent, Pickering does not address the ’150 patent’s critical “data path,” i.e., the data recovery function. […] [T]he record does not support Emulex’s contention that Pickering implicitly requires a data path. Pickering’s device is designed to match transition points, or cross-over points, on a waveform. At the cross-over points there is no data to recover, so Pickering cannot inherently require recovering data. […] Pickering’s Figure 16 shows only clock recovery, not data recovery. J.A. 246. Further, Pickering does not teach data outputs or recovered data.
Id. at *14.
Combination of Pickering and "data path" would not be SuccessfulEven assuming that a person of ordinary skill might have some motivation to add a data path to Pickering, the record does not show any reasonable expectation that this significant change would be successful. […] Broadcom’s expert, Dr. Stojanovic, testified that combining Pickering with a data path function would result in an “unfunctional circuit.” J.A. 749–51. The combination of Pickering with a data path would have caused sampling in undefined zones resulting in undefined values. J.A. 750–51. In other words, adding data recovery functionality to Pickering would have defeated the ability to recover data. J.A. 750–51.
Id. at *15.
Objective Indicia of NonobviousnessFurther, the record contains evidence of objective indicia of nonobviousness. […] Substantial evidence supports the jury’s finding of commercial success. The products embodying the ’150 patent enjoyed acknowledged commercial success. But more important, the record contains unrebutted testimony establishing a nexus between the claimed technological advance of claim 8 and the success of the products. […] The jury’s finding of long-felt, but unsolved need is al- so supported by substantial evidence. The testimony reflected that others had tried and failed to develop a clock and data recovery circuit for use in a multi-lane product.
Id. at *15-16.
[2] Permanent Injunction - Irreparable Harm
Background - Nature of the Industry
Emulex and Broadcom competed in a market characterized by “design win” scenarios. J.A. 13. Their customers were original equipment manufacturers (OEMs)—Dell, HP, IBM, Cisco—who integrated various component parts into finished products like servers for data centers. J.A. 13. OEMs hold competitions to determine which supplier will provide a given chip or component for each generation of a product. These design competitions often occur well in advance because integrating various component parts together into the OEM’s final product can take extensive planning and modification. Once an OEM designs a supplier’s component part into the OEM’s final product, it is very difficult to alter the design of the OEM product. The district court noted that “[in] this kind of market, the exclusion has an effect on firms even if they do not have an immediately available product.” J.A. 13. The OEM essentially commits itself to a single supplier until the next design cycle.
Id. at *17.
[…] [S]uppliers who prevail in design-win competitions enjoy two benefits beyond merely making sales. First, a design-win effectively locks the OEM into using the winner’s component part and thus temporarily immunizes the winner from competition. J.A. 14. Second, winners enjoy an “incumbency effect” making them more likely to win subsequent design competitions because the OEM’s familiarity with the winning supplier creates goodwill.
Id. at *17.
Irreparable Harm
Legal StandardTo show irreparable harm, it is necessary to show that the infringement caused harm in the first place. Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the pa- tented feature. If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product.
Id. at *19.
Causal Nexus between Infringement and Harm[T]he evidence here shows that the infringement did cause the harm. Emulex and Broadcom were competitors in a “design wins” market, which is fundamentally different from the market in Apple [which was based on discrete sales of units]. In a design wins market, the sales are “design wins,” not a steady flow of discrete product sales as in Apple. Further, this market has a limited set of customers, e.g., the four “tier one” OEMs. J.A. 2436. And once a supplier is chosen to meet the needs of a new product line, the supplier’s component is essentially designed into the OEM product for its life cycle. J.A. 2438–39. Finally, in a design wins market, there is an incumbency effect which enhances a winning supplier’s ability to successfully compete in successive design competitions. J.A. 2439–40. All of these characteristics contrast the market in Apple where there were discrete sales to numerous consumers.
Id. at *19-20 (text added).
Link between Parties Related to Market ChangesThe evidence showed that Broadcom lost market share as a result of Emulex’s competition—a clear measure of competition and harm. J.A. 2625–26. Moreover, the incumbency effect compounded these ramifications because Broadcom and Emulex competed for design wins from a limited number of tier one OEMs. J.A. 2436, 2590. Further, the undisputed evidence at trial linked the claimed invention of the ’150 patent to the success of the products incorporating it. J.A. 752. As direct competitors in a limited market, Broadcom’s harm was clearly linked to Emulex’s infringement of Broadcom’s patent property rights.
Id. at *20.
For the foregoing reasons, this court affirms the dis- trict court’s finding that the ’150 patent was infringed and nonobvious, and the grant of a permanent injunction with a sunset period.
Broadcom, at *23.
Editor Note:
This case also included an infringement analysis of of some claim terms. For further reading, please click here
Image Attribution Statement: Peter Griffin, "Rope Knots," available under a Public Domain license, http://www.publicdomainpictures.net/view-image.php?image=48861&picture=rope-knots (last visited Oct. 8, 2013). 
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