Court Enters Judgment Against NexStep After Damages and Infringement Setbacks

July 10, 2022

Delaware District Judge Richard G. Andrews has entered final judgment for Comcast in litigation filed by NexStep Inc., the latest in a series of setbacks suffered by the inventor-controlled plaintiff since late last year. In September, just four days before a scheduled trial, Judge Andrews threw out NexStep’s entire damages theory as based on a “rule of thumb” without sufficient linkage to the facts of the case—and later tossed an alternate, last-minute theory with a similar flaw. With no damages on the table, the trial proceeded to a liability-only verdict of infringement via the doctrine of equivalents. In May, however, Judge Andrews overturned that verdict in a post-trial order—a decision that will now proceed to the Federal Circuit along with those other rulings.

The setbacks noted above began in mid-2021, as NexStep’s case—filed against Comcast two years prior over the provision of various Xfinity services—headed toward trial. That May, Comcast filed a Daubert motion challenging the opinions of the plaintiff’s damages expert, Marcus Reading, as “not based on sufficient facts or data” and “not the produce of reliable principles and methods”. Reading had argued that the technology claimed in two of the nine asserted patents (8,280,009 and 9,866,697; characterized as the “Customer Troubleshooting” patents) saved Comcast costs by avoiding calls to customer service agents and/or visits by service technicians, and that a hypothetical negotiation would have started with a 50/50 split of those cost savings between NexStep and Comcast (adjusted to a 40/60 split, respectively, under Reading’s purported application of the Georgia-Pacific factors).

Magistrate Judge Sherry R. Fallon recommended that Comcast’s motion be denied in favor of weighing the parties’ experts’ competing opinions at trial, but Judge Andrews disagreed as to Reading—striking his opinion as unreliable just four days before trial on September 16, 2021. Per that order, Reading had “failed to support a 50/50 starting point with facts specific to the case at hand”, impermissibly relying on a “rule of thumb”—a “fundamentally flawed premise” foreclosed by the Federal Circuit’s Uniloc USA v. Microsoft and VirnetX v. Cisco Systems decisions, regardless of any subsequent application of the Georgia-Pacific factors.

Suddenly finding itself without a damages theory on the eve of trial, NexStep then proposed an alternative theory, under which the plaintiff’s CEO Robert Stepanian, also the asserted patents’ named inventor, would testify about a NexStep business plan that purportedly identified a 30% royalty rate for the asserted patents. That rate, in turn, would serve as the starting point for an opinion from Reading based on cost savings. Comcast objected to the use of a starting point that had not been previously disclosed, while NexStep countered that the business plan had been produced during discovery (though not, apparently, cited on the present basis). Yet that motion remained unresolved by the end of trial, at which point the jury returned a verdict finding infringement of claims 1, 16, and 22 of the ‘009 patent under a doctrine of equivalents theory (not literally), finding no infringement under either theory for claim 1 of the ‘697 patent, and finding that Comcast did not prove any of the infringed claims invalid.

Around two months later, Judge Andrews granted Comcast’s motion to exclude NexStep’s new theory, agreeing that it had not been sufficiently disclosed—finding, in particular, that the proposed 30% rate had been “plucked out of thin air” and included in the business plan, and that this rate failed to account for what Comcast might have asked for. As with its prior theory, Judge Andrews held that this one also failed because it, too, was insufficiently tethered to the facts of case—providing no starting point from which an expert may begin to apply the Georgia-Pacific factors.

Seven months later, the plaintiff’s verdict of infringement under the doctrine of equivalents also ran into trouble, yet again as the result of an expert opinion—this time, from a technical expert, Ted Selker—that failed to make the requisite connections to the case. At trial, Selker testified about the claims underpinning the jury’s verdict, each of which require a “home gateway” to perform four specific steps “responsive to a single action performed by the user”. That testimony, per Comcast, fell short of the standard required to show that the accused product performs “substantially the same function in substantially the same way with substantially the same result as each claim limitation” as required under the doctrine of equivalents: it argued, in part, that Selker’s testimony, was “conclusory and insufficient” and “untethered from the claim language and the details of the operation of the [accused] My Account app”.

Judge Andrews agreed in a May 12 decision addressing various post-trial motions, finding that his testimony was “too vague to support the jury’s verdict”. More specifically, he found that the testimony “suffers from a lack of precision regarding both the claim limitations and the purported equivalent. The fatal flaw in Dr. Selker’s testimony, however, is failure to provide a linking argument” as required to show the “‘insubstantiality of the differences’ between the claimed invention and the accused device or process, or with respect to the function, way, result test when such evidence is presented to support a finding of infringement under the doctrine of equivalents” as required by the Federal Circuit under its 2007 Aquatex v. Techniche opinion. Although Judge Andrews found that “the vagueness regarding the claim limitations and purported equivalent are possibly supplemented with other evidence from the case, NexStep has simply not met its burden of providing the jury with a linking argument, and for that reason the jury’s verdict cannot be sustained”.

In addition to that key ruling on the doctrine of equivalents issue, Judge Andrews also denied Comcast’s motion for a judgment of no damages, as NexStep had never gotten the chance to present a damages case to the jury, and rejected the plaintiff’s motion for judgment in its favor on the other claims that the jury found not to be infringed, among other issues addressed.

Shortly after Judge Andrews issued that May 12 opinion, NexStep filed a notice of appeal as to several of the court’s rulings, including those with respect to damages and infringement—characterizing the May 12 order as a final judgment enabling that appeal to proceed. However, Comcast disagreed that the order had served as a final judgment, leading the parties to instead jointly request, on July 6, that the court enter a final judgment of noninfringement and no invalidity of the asserted claims. Judge Andrews entered that final judgment the following day.

For more on NexStep and this case, including parallels between this damages saga and one involving a different, well-known plaintiff, see “Triggering a Bit of Déjà Vu, Delaware Judge Throws Out Flawed Damages Case on Eve of Trial” (November 2021).