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Sunnyvale, Calif.’s Finisar was sitting pretty two years ago with $104 million in damages from a patent infringement case against DirecTV in the Eastern District of Texas. But on April 18, the Federal Circuit U.S. Court of Appeals threw out the verdict because terms used to describe the patent at issue were interpreted too broadly by the district court. The case is now headed back to Texas for another go-around. Finisar says in a press release that it is “disappointed” with the ruling by the three-judge panel. The company makes high-speed data transmission equipment and claimed that satellite provider DirecTV infringed on its patents with its direct broadcast satellite system. “We remain confident that the questions of infringement and validity, upon further review by the trial court, will be decided in favor of Finisar,” says the company’s primary trial counsel, Larry Laycock, of Utah law firm Workman Nydegger. DirecTV was represented by lawyers from Jones Day, who did not return calls seeking comment. While the ruling has a big impact on Finisar and DirecTV, observers are not surprised by the outcome because the appeals court frequently vacates verdicts based on disagreements with the trial court’s claims construction — the portion of a patent trial where the terms of the patents in question are defined. A recent study by David Schwartz, an assistant professor at the John Marshall Law School, found that over the past decade, 38 percent of the cases had at least one term found on appeal to have been wrongly construed. He also found that 30 percent of the cases had to be reversed or vacated because of an erroneous claim construction, according to the results of the study reported on the Patently-O blog . For some lawyers, the high reversal rate is worrisome. “It’s higher than everyone would like,” says Michael Barclay, an IP lawyer at Wilson Sonsini Goodrich & Rosati. “You can’t advise your clients on what’s going to happen.” One fix for the issue was proposed in the patent reform bill that is stalled in the Senate. It would change the rules to permit an interlocutory appeal to the Federal Circuit after the hearing on claims construction instead of waiting until the trial is finished. Proponents said the change would cut out all the time wasted on trials that ultimately get overturned by the appeals court. But opponents, including Federal Circuit Chief Judge Paul Michel, said that the change would clog the appeals court and cause even more delays in patent cases. In the Finisar case, a Texas jury originally awarded the tech company $78.9 million in damages after it found that DirecTV willfully infringed on a patent involving methods for transmitting and broadcasting digital information. U.S. District Judge Ron Clark denied Finisar’s request for an injunction but awarded $25 million in enhanced damages. DirecTV was also on the hook for prejudgment interest, post-judgment interest and a compulsory license. The appellate panel vacated the verdict, ruled that the alleged infringement wasn’t willful and invalidated one of the seven patent claims in question. DirecTV’s appeal had challenged the construction of two terms in the district court’s claim construction as too broad. The appeals court agreed, though it ruled that only one of the misinterpretations was harmful. Zusha Elinson is a reporter withThe Recorder , a San Francisco affiliate ofTexas Lawyer in which this article originally appeared.

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