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New Medium LLC v. Barco N.V.

March 18, 2009


The opinion of the court was delivered by: Judge Richard A. Posner


Before the Court are six motions by Barco for partial summary judgment. I refer to the various plaintiff companies and individuals, and their agents and their predecessors‐in‐interest, collectively as "Plaintiffs." Barco's motion for partial summary judgment of non‐infringement of U.S. Pat‐ ent No. 4,573,070 based on a license to Matsushita [728] is granted.

Plaintiffs have alleged that Barco's BarcoGraphics 4000 projector, which Barco sold from 2000--2002, infringes their U.S. Patent No. 4,573,070. That projec‐ tor was manufactured for Barco by Panasonic Corporation, which entered into a license agreement with Plaintiffs in 2005. (Panasonic was at that time known as Matsushita Electric Industrial Co.; the corporation adopted the Panasonic name in 2008.) The agreement "release[d] and forever discharge[d]" Panasonic and "its end‐users, distributors, resellers, customers, including OEM customers and pri‐ vate label customers, dealers agents and suppliers . . . from any and all actions, causes of action, claims or demands whatsoever . . . as to all claims for infringe‐ ment" of the '070 patent, among others.

Plaintiffs have accepted Barco's submission that the BG4000 projector was manufactured by Panasonic and that the license applies. They therefore do not object to Barco's motion, which is hereby granted. Barco's motion for partial summary judgment of non‐infringement of U.S. Pat‐ ent Nos. 4,573,070 and 4,803,547 by reason of the patent exhaustion doctrine [732] is granted in part, and my ruling on it is deferred in part. In the early 1990s Plaintiffs entered into two other licensing agreements: one with Sony Corporation and another with Philips Electronics NV. Sony and Philips supplied Barco with integrated circuits that performed comb filtering. Barco contends that pursuant to the doctrine of patent exhaustion, Quanta Com‐ puter, Inc. v. LG Electronics, Inc., 128 S.Ct. 2109, 2115 (2008) ("The longstanding doctrine of patent exhaustion provides that the initial authorized sale of a pat‐ ented item terminates all patent rights to that item."), the licenses protect it from claims of infringement of U.S. Patent Nos. 4,573,070 and 4,803,547. On August 8, 2007, this court determined that Plaintiffs could not base a claim of infringement of the '070 patent on Barco's use of Sony circuits. Now Barco has requested that the same ruling be extended to the '547 patent. Plaintiffs do not oppose this request. But Plaintiffs emphasize, and I agree, that when the Sony circuit is used in conjunction with other circuits, a claim of infringement of either the '547 or '070 patents may be proper. The protection that Barco gets from the license extends only to its use of integrated circuits made by Sony.

Plaintiffs do not concede that Barco is entitled to the same protection from the Philips license. That license gave Philips a "non‐exclusive right to utilize the inventive features of the Licensed Patents to make, have made, sell, use, lease, or otherwise deal in Licensed Products on which a royalty has been paid here‐ under." But the license continues: "[Philips] shall for no purpose be deemed to have acquired any right with respect to the manufacture, sale, or use of . . . [cer‐ tain] integrated circuits . . . . Provided, however, that Licensor shall not assert any claim against [Philips] with respect to the [integrated circuits]." Plaintiffs pin their argument to the sentence which restricts Philips' rights to integrated cir‐ cuits, while Barco focuses on the covenant not to sue.

The apparent contradiction between those two sentences is made irrele‐ vant by the "Lump Sum Addendum" to the license. The Addendum provides that Philips will pay a lump sum of nearly $5,000,000 in full satisfaction of its royalty payments. It also states that "[a]ll products manufactured, sold, leased or otherwise used by [Philips] in conjunction with processing video signals shall be deemed to have been made a part of the . . . Schedule of Licensed Products."

Plaintiffs argue that the only function of the Addendum was to convert the stream of royalties into a single payment, and that it left the license's restriction on rights to integrated circuits in place. But the Addendum is explicit that "all products" used for processing video signals "shall be deemed to have been made" part of the schedule of licensed products. If, as Plaintiffs believe, the drafters of the Addendum had intended to leave the original restrictions in place, there would have been no reason to deem other products licensed. The Adden‐ dum makes clear that integrated circuits used to process video signals are now licensed products that Philips had an explicit right to "ma[k]e, sell, use, lease or otherwise deal." So Barco's use of Philips circuits is authorized under the Philips license.

On September 29, 2006, Philips sold a majority interest in its semiconduc‐ tor business to a group of private equity investors, including Kohlberg Kravis Roberts & Co. and Bain Capital. The spin‐off became known as NXP Semicon‐ ductors. Barco continued purchasing circuits from NXP, but the change in own‐ ership had consequences for the license. The Philips license defines "licensee" to include Philips and "any entity in which [Philips] directly owns a majority inter‐ est . . . so long as such majority interest in maintained." Thus, when Philips sold its majority interest in its semiconductor division the license did not transfer to NXP. But Barco believes it has a different defense regarding its use of the NXP circuits. It contends that received no circuits from NXP until after the '070 and '547 patents had expired. Recall that according to both parties' accounts, the ear‐ liest that NXP could have begun supplying Barco with allegedly infringing cir‐ cuits was September 29, 2006. The '070 patent expired on February 25, 2003, so Barco is correct that any use of the NXP circuits could not have infringed that patent. But the '547 patent didn't expire until April 10, 2007, nearly seven months after NXP was formed.

To show that it did not sell projectors with NXP circuits between Septem‐ ber 2006 and April 2007, Barco submitted the declaration of one of its employees, Martin Piepers. Piepers stated that Barco did not sell any products using NXP circuits prior to April 10, 2007. He reasoned that since Barco buys its circuits from wholesalers rather than directly from the manufacturer, and those whole‐ salers would have had a backlog of Philips circuits left to sell as of September 2006, it would have been at least two months, or the end of November, before the wholesalers would have shipped Barco an NXP circuit. But that leaves a five‐ month window between December and April. To close that window, Piepers as‐ serted that it takes Barco six months to install the circuits into the projectors, test the projectors and then ship them to the United States (Barco is a Belgian com‐ pany). Tacking Barco's six‐month product cycle onto its suppliers' two‐month inventory backlog, Piepers estimated that the earliest that Barco could have shipped or sold a projector with an NXP circuit was the end of May, a safe six weeks past the patent's expiration date. (Piepers' best estimate was that Barco began selling projectors with the NXP circuit in the United States in July or Au‐ gust.)

Plaintiffs do not present any contradictory evidence; instead they rely en‐ tirely on the contention that Piepers' declaration is based on inadmissible hear‐ say and is pure speculation. The argument is premature. The initial problem with the declaration, which must be resolved before the hearsay objection can be de‐ cided, is that although Piepers says that he is "employed by Barco," is "familiar with the products Barco has sold, and with Barco's operations generally," and has "personal knowledge of the facts stated in [his] declaration," he never reveals the basis of his personal knowledge. I am left to guess what position within the company he holds (or held during the crucial time period in 2006--07), and the extent of his contact with Barco's wholesale suppliers. Without this information, Piepers' declaration is insufficient.

Barco's motion for partial summary judgment of non‐infringement of the '070 and '547 patents is granted in part. Specifically, Barco's use of the Sony and Philips circuits are covered by Plaintiffs' licenses with those companies and did not infringe the '070 and '547 patents. As for Barco's use of the NXP circuits, Barco has ten days from the date of this opinion to supplement Piepers' declara‐ tion with information regarding the basis of his knowledge about when Barco would have begun selling projectors with NXP circuits in the United States. Barco must also give Plaintiffs an opportunity to depose Piepers.

Barco's motion for partial summary judgment of U.S. Patent No. 4,573,070 by reason of the use of Altera FPGA [733] is denied as premature.

In some of its projectors, Barco used Altera field programmable gate ar‐ rays, a special kind of integrated circuit that can be programmed by the user, yielding greater control and lower costs. Stephen D. Brown & Robert J. Francis, Field‐programmable Gate Arrays 1--2 (1992). This is an important feature because Plaintiffs charge that Barco programmed the Altera circuits to perform noise re‐ duction (noise in this context refers to distortion of the video signal) in ways that infringe U.S. Patent No. 4,573,070.

Barco's defense is that it programmed the circuits by means of a different, nonā€infringing set of algorithms that also accomplish noise reduction. Because of these algorithms, Barco ...

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