Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 1 of 29
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`LAZARE KAPLAN INTERNATIONAL INC.,
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`Plaintiff,
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`Plaintiff Lazare Kaplan International Inc. (“LKI”) sued defendants
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`Photoscribe Technologies, Inc. (“Photoscribe”) and Gemological Institute of
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`America (“GIA”), alleging patent infringement for diamond inscription
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`machines. Following jury and bench trials, this court entered a final judgment
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`against plaintiff, finding that the patent claims were valid but not infringed by
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`defendants under the claim construction determined in this court. Plaintiff
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`appealed, and the United States Court of Appeals for the Federal Circuit
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`remanded a portion of the case for further proceedings. In its opinion, the
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`Federal Circuit broadened the scope of the patent claims at issue.
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`Plaintiff has filed a motion for summary judgment, arguing that
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`defendants have infringed the patent under the Federal Circuit’s broader claim
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`construction. Defendants also move for summary judgment, arguing that the
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`patent claims are invalid under this broader claim construction. Defendants
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`06 Civ. 4005 (TPG)
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`
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`OPINION
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`– against –
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`PHOTOSCRIBE TECHNOLOGIES, INC., and
`GEMOLOGICAL INSTITUTE OF AMERICA,
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`Defendants.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 1
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`LAZARE KAPLAN INTERNATIONAL INC.,
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`Plaintiff,
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`Plaintiff Lazare Kaplan International Inc. (“LKI”) sued defendants
`
`Photoscribe Technologies, Inc. (“Photoscribe”) and Gemological Institute of
`
`America (“GIA”), alleging patent infringement for diamond inscription
`
`machines. Following jury and bench trials, this court entered a final judgment
`
`against plaintiff, finding that the patent claims were valid but not infringed by
`
`defendants under the claim construction determined in this court. Plaintiff
`
`appealed, and the United States Court of Appeals for the Federal Circuit
`
`remanded a portion of the case for further proceedings. In its opinion, the
`
`Federal Circuit broadened the scope of the patent claims at issue.
`
`Plaintiff has filed a motion for summary judgment, arguing that
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`defendants have infringed the patent under the Federal Circuit’s broader claim
`
`construction. Defendants also move for summary judgment, arguing that the
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`patent claims are invalid under this broader claim construction. Defendants
`
`
`
`
`
`06 Civ. 4005 (TPG)
`
`
`
`OPINION
`
`
`
`
`– against –
`
`PHOTOSCRIBE TECHNOLOGIES, INC., and
`GEMOLOGICAL INSTITUTE OF AMERICA,
`
`
`Defendants.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 1
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 2 of 29
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`have also filed a motion for relief from the prior judgment of validity of the
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`patent claims.
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`Defendants’ motions for relief from the prior judgment of validity and for
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`summary judgment of invalidity are granted. Plaintiff’s motion for summary
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`judgment of infringement is denied.
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`Facts
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`The following facts are taken from the parties’ submissions in support of
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`their motions for summary judgment. For the purposes of these motions, they
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`are assumed to be true.
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`The ‘351 Patent
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`LKI is the owner of United States Patent No. 6,476,351 (“the ‘351
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`patent”), which claims a method of laser microinscription of gemstones, as well
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`as an apparatus for microinscribing gemstones. The patent was issued
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`November 5, 2002. It claims priority to a patent filed on July 30, 1996 and a
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`provisional patent application filed on January 5, 1996. Thus, January 5,
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`1996 is the earliest possible effective filing date of the ‘351 patent. This date is
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`relevant to the validity issue discussed in this opinion.
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`The ‘351 patent discloses a system that uses a laser to create a series of
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`microscopic spots on the surface of a gemstone, such as a diamond. Together
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`these spots form a “microinscription” that is visible with the aid of a jeweler’s
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`loupe and can be used to authenticate and track gemstones.
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`Only claims 1 and 7 of the patent remain relevant on remand. Claim 1
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`reads as follows:
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 2
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 3 of 29
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`1. A method of microinscribing a gemstone with laser
`energy from a pulse laser energy source, focused by
`an optical system on the workpiece, comprising the
`steps of: mounting a gemstone in a mounting
`system; directing the focused laser energy onto a
`desired portion of the gemstone; imaging the
`gemstone from at least one vantage point; receiving
`marking instructions as at least one input; and
`controlling the directing of the focused laser energy
`based on the marking instructions and the imaging,
`to selectively generate a marking on the gemstone
`based on the instructions.
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`(Emphasis added.) Claim 7 reads as follows:
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`7. A laser energy microinscribing system, for
`gemstones, said system comprising: a laser energy
`source; a gemstone mounting system, allowing
`optical access to a mounted workpiece; an optical
`system for focusing laser energy from the laser
`energy source, onto the gemstone to create an
`ablation pattern thereon; means for directing said
`focused laser energy onto a desired portion of the
`gemstone, having a control input; an imaging
`system for viewing the gemstone from at least one
`vantage point and obtaining image information
`from the gemstone; an input for receiving marking
`instructions; and a processor for controlling said
`directing means based on said marking instructions
`and said imaging system, to selectively generate a
`marking based on said instructions and a
`predetermined program.
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`(Emphasis added.)
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`During the process of applying for the patent, LKI submitted an
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`amendment to the United States Patent and Trademark Office (“Patent Office”)
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`stating that issued claim 1:
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`provides the step of: “controlling the directing of the
`focused laser energy based on the marking
`instructions and the imaging, to selectively generate a
`marking on the gemstone based on said instructions,”
`which therefore requires an analysis of the image.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 3
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 4 of 29
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`None of the prior art references disclose using the
`imaging as a basis for controlling the inscription
`process.
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`Allcock Decl., ¶ 5, Ex. D. LKI did not assert that the other limitations of claims
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`1 and 7 were not in the prior art. The Patent Office subsequently allowed the
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`claims to issue.
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`The patent specification includes additional language regarding
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`controlling the directing of the laser based on the marking instructions and the
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`imaging. For example, the patent specification states:
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`The user-entered portion of the content of the
`inscription is typed on a keyboard or entered by a bar-
`code reader into a computer. . . . The entered
`inscription and logo are shown on the video screen
`superimposed on an area corresponding to the girdle
`of the diamond. Using the mouse and keyboard, the
`user can change all inscription characteristics in order
`to fit it correctly in the girdle.
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`‘351 patent, 17:9-18. The patent specification also describes how the
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`projection of a complete inscription on an image of the desired area of the
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`gemstone provides the user with the ability to interactively change all
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`characteristics of the inscription before marking:
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`The complete inscription . . . is projected on an
`image from a vertically oriented camera of the girdle
`providing the user with the ability to interactively
`change length of inscription, height of characters [sic]
`remove and align the whole inscription. . . .
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`The operator can thus observe the inscription
`before making; observe the marking process itself, and
`then observe the result and decide if the inscription is
`complete or not.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 4
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 5 of 29
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`Id. at 20:52-62. A portion of this language was quoted in the Federal Circuit’s
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`opinion in its interpretation of the “controlling the directing” language of the
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`claims. Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc., et al., 628 F.3d
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`1359, 1369 (Fed. Cir. 2010). Finally, the specification also describes the ability
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`to store a combined image of the gemstone and the inscription: “The optical
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`feedback system also allows the operator to design an inscription, locate the
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`inscription on the workpiece, verify the marking process and archive or store
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`an image of the workpiece and formed markings.” ‘351 patent, 3:14-17. In
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`their submissions, the parties refer to the projection of an image of the
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`inscription onto an image of the gemstone as a “graphic overlay.”
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`As discussed in more detail below, the language of claims 1 and 7 has
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`now been construed by the Federal Circuit.
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`Procedural History
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`This case was brought to trial in early 2008. Prior to trial, the court
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`held a hearing pursuant to Markman v. Westview Instruments, Inc., 52 F.3d
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`967 (Fed. Cir. 1995) (en banc), to construe the “controlling the directing”
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`language of claims 1 and 7 of the ‘351 patent. The court noted that “the patent
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`language describing control based on the imaging made no mention of a role
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`for the operator of the machine in that process.” Lazare Kaplan Int’l, Inc. v.
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`GIA Enters., Inc., et al., 2008 U.S. Dist. LEXIS 8228, at *3 (S.D.N.Y. Feb. 5,
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`2008). The court therefore defined “controlling the directing” to mean “that the
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`controlling is based on the marking instructions generated by the operator of
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 5
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 6 of 29
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`the machine, and automatic feedback derived from optical images of the
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`gemstone during the laser burn process.” Id.
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`Based on this claim construction and the fact that the Photoscribe
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`machines do not have an automatic feedback feature, the court determined
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`that claims 1 and 7 of the ‘351 patent were not literally infringed. On February
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`5, 2008, the court therefore granted summary judgment of no literal
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`infringement of these claims in favor of defendants. The court, however,
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`permitted LKI to argue at trial that these claims were infringed under the
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`doctrine of equivalents. The court denied the parties’ cross-motions for
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`summary judgment on validity.
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`The case was brought to trial on February 25, 2008. At trial, the court
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`instructed the jury that the “controlling the directing” language required
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`automatic feedback. After a two-week jury trial, the jury found that claims 1
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`and 7 of the ‘351 patent were not invalid and that defendants had not infringed
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`those claims under the doctrine of equivalents.
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`LKI appealed the noninfringement findings to the Federal Circuit. In its
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`appeal, LKI argued that the court erroneously construed the “controlling the
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`directing” language to require automatic feedback derived from optical images
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`of a gemstone during the laser burn process. LKI asserted that the claims do
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`not specify what “control[s] the directing” or when this type of control occurs.
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`LKI contended that the specification makes clear that “controlling the directing
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`. . . based on the marking instructions and the imaging” encompasses control
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`based on both automated and manual feedback that occurs either before or
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 6
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 7 of 29
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`during the laser burn process. LKI also argued that it was entitled to judgment
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`as a matter of law that the accused devices infringe claim 1 of the ‘351 patent
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`under a proper construction of the claim. Alternatively, LKI requested a new
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`trial on both literal infringement and infringement under the doctrine of
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`equivalents.
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`Defendants did not appeal the finding on validity.
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`In a decision filed February 1, 2011, the Federal Circuit affirmed-in-part,
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`vacated-in-part, and remanded-in-part for further proceedings. The Federal
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`Circuit reviewed the court’s claim construction de novo, and construed the
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`“controlling the directing” language to include control based on either
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`automated or manual feedback derived from optical images of a gemstone,
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`before or during the laser burn process. The Federal Circuit quoted the patent
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`specification, noting that:
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`the specification discloses that where a single pass of
`the laser is sufficient to inscribe a gemstone “an
`automated optical feedback system may reliably
`control operation.” The specification goes on to
`explain, however, that when multiple passes are
`necessary “user control may be desirable, and such
`control is possible through use of the video cameras
`which are directed at the workpiece, which display a
`real time image on a computer monitor.”
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`Lazare Kaplan, 628 F.3d at 1370 (quoting ‘351 patent, 5:57-60 & 5:67-6:4).
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`The Federal Circuit went on to state:
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`We therefore vacate the grant of summary judgment of
`no literal infringement and the jury verdict of no
`infringement under the doctrine of equivalents, as
`both are based on [the District Court’s] erroneous
`construction. Although Lazare argues that it is
`entitled to judgment as a matter of law based on the
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 7
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 8 of 29
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`record before us, prudence counsels that we remand
`this portion of the judgment for further proceedings,
`as we cannot determine with any certainty that the
`accused machines infringe the asserted claims under
`this new construction.
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`Lazare Kaplan, 628 F.3d at 1370.
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`Following the remand, this court held a case management conference on
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`May 4, 2011, to discuss what the issues would be for the retrial. Plaintiff
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`argued that only the issue of infringement should be retried, not the issue of
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`validity. Plaintiff noted that the question of validity was sent to the jury and
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`was decided in plaintiff’s favor and that defendants did not appeal this ruling.
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`As such, plaintiff argued that defendants are precluded from raising the
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`question of validity on the remand. Defendants argued that both validity and
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`infringement are at issue on remand because the Federal Circuit revised the
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`scope of the patent claims at issue. The court resolved the issue as follows:
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`[W]e are going to retry it on validity, because the
`validity decision of the jury in the first trial was on the
`basis of a claim construction which the Court of
`Appeals has reversed. So it makes no sense to let that
`stand, and I am not going to do something that makes
`no sense. We are going to have a retrial of the issue of
`validity and the issue of infringement.
`
`Transcript at 10.
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`The Prior Art
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`Defendants allege that the prior art included laser inscription machines
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`developed by Dr. Paul Christensen of Potomac Photonics in the early 1990s
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`(the “Potomac Photonics Lab Machine”) and Herb Gresser of Group II
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`Manufacturing, Ltd. in the early 1980s (the “Gresser Machine”). Defendants
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 8
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 9 of 29
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`assert that all of the elements in claims 1 and 7 list elements that were present
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`in the prior art, including the Potomac Photonics Lab Machine and the Gresser
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`Machine. Defendants did not provide an expert opinion supporting their
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`position.
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`Plaintiff denies that the Potomac Photonics Lab Machine and the Gresser
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`Machine anticipate the elements in claims 1 and 7. Plaintiff’s expert Dr. Klopp
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`was deposed and concluded that neither the Gresser Machine nor the Potomac
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`Photonics Lab Machine controlled the directing of the laser energy based on the
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`marking instructions and the imaging. Dr. Klopp testified that the only way he
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`could conceive of to meet the Federal Circuit construction, as construed by
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`him, is with the use of a graphic overlay of the image to be inscribed on an
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`image of the gemstone. Klopp Dep. Tr., 9/26/11 at 64:24-65:7. In other
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`words, in plaintiff’s expert’s view, in order for the controlling of the directing of
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`the laser to be based on both the marking instructions and the imaging, the
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`machine must enable the operator to use a graphic overlay. It is undisputed
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`that neither the Gresser Machine nor the Potomac Photonics Lab Machine used
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`a graphic overlay. Plaintiff also argues that the Gresser Machine did not
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`perform “imaging the gemstone from at least one vantage point.”
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`The Potomac Photonics Lab Machine needs to be further described. Dr.
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`Paul Christensen developed several commercial laser micromachining systems
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`in the early 1990s based on a machine he created at Potomac Photonics (the
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`Potomac Photonics Lab Machine). The timing regarding the Potomac Photonics
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`Lab Machine is relevant. Thus, the following evidence is germane. Dr.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 9
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 10 of 29
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`Christensen used the Potomac Photonics Lab Machine to inscribe gemstones
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`for LKI in 1994, and in a research project funded by the National Science
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`Foundation in 1993. Dr. Christensen testified in a deposition that the Potomac
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`Photonics Lab Machine was used to inscribe diamonds for the purpose of
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`encouraging LKI to buy machines and/or services from Potomac Photonics.
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`There is an entry in George Kaplan’s notebook for November 24, 1992, stating
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`that LKI had received some samples from Potomac and were going to send him
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`additional diamonds.
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`To use the Potomac Photonics Lab Machine, an operator could view
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`images of the gemstone using the video camera and viewing optics. The
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`operator input marking instructions to the computer to control what the
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`inscription would look like and the starting point for the inscription. The
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`operator could use a cross-hair to locate the starting point for the inscription.
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`The laser would then inscribe the diamond based on the manually-selected
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`starting point and the marking instructions.
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`Dr. Christensen published an article, Fine Diamonds with Laser
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`Machining (“Fine Diamonds”) in November 1993. The article described the
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`Potomac Photonics Lab Machine and the process Christensen used. The
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`configuration of the Potomac Photonics Lab Machine was depicted in Figure 2
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`of Fine Diamonds. As described above, defendants also allege that Dr.
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`Christensen inscribed diamonds provided by LKI as part of a research project
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`funded by the National Science Foundation (“NSF”) in 1993. The final project
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`report for Dr. Christensen’s NSF project (“the NSF Report”) was submitted to
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 10
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 11 of 29
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`NSF no later than December 1993. Figure 1 of the NSF Report also depicted
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`the configuration of the Potomac Photonics Lab Machine. The figures
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`demonstrate that the Potomac Photonics Lab Machine had a UV laser as the
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`laser energy source, x-y stages where the gemstone was mounted, a video
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`camera and viewing optics serving as an imaging system to image the
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`gemstone, and a computer and stage controller to control the directing of the
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`focused laser energy based on instructions input by the user. The NSF Report
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`states that the material used for the NSF project was a gemstone furnished by
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`LKI.
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`Plaintiff points out that the figures depicted in Fine Diamonds and the
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`NSF Report do not disclose a connection between the video camera and the
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`computer. Plaintiff’s expert Dr. Klopp concludes that, without such a
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`connection, the systems could not be used to superimpose an inscription on an
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`image of the desired area of the gemstone to allow adjustment of size, position,
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`orientation, etc., as described in the ‘351 patent. In other words, as noted
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`above, Dr. Klopp concludes that a graphic overlay is required in order to
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`control the directing of laser energy based on the marking instructions and the
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`imaging, and he concludes that the Potomac Photonics Lab Machine did not
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`include that function.
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`The second relevant prior art is the Gresser Machine. LKI contracted
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`with Herb Gresser of Group II Manufacturing, Ltd. on April 4, 1980, to build a
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`laser inscription machine (the “Gresser Contract”). The resulting machine is
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`referred to in this litigation as the Gresser Machine. Mr. Gresser testified at
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 11
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 12 of 29
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`trial and in deposition about the operation of the Gresser Machine. It included
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`the following hardware: a unit processor, a scanner, a laser, a keyboard input,
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`a display, and a frame. The Gresser Contract provided specific hardware
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`requirements for the Gresser Machine, including that: (1) the unit processor be
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`a digital microprocessor to translate manual information into automatic
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`operating instructions; (2) the scanner be a device to move the focused laser
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`across the object being inscribed in a predetermined fashion; (3) the keyboard
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`contain alphanumeric keys that translate operator’s input to digital commands
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`to the system followed by automatic operation and control of the system; and
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`(4) the machine include two displays, (a) a visual magnified display of the
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`diamond to assure proper orientation and final view of the inscription, and (b)
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`an electro-optic display of the keyboard input. The operator of the Gresser
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`Machine used the viewing microscope image of the gemstone to input the
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`curvature of the girdle into the computer control system, and the system used
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`that information to rotate the gemstone during the inscription.
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`The parties appear to disagree on whether LKI disclosed the Gresser
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`Machine to the Patent Office when applying for the ‘351 patent. Defendants
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`claim that LKI never disclosed the machine, while plaintiff states that the
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`Patent Office did examine the Gresser patent. The record implies that the
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`Gresser patent covers the same Gresser Machine to which defendants refer,
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`but this fact is not entirely certain from the materials currently before the
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`court. However, two points related to the Gresser patent are particularly
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`relevant here. First, during the examination of the ‘351 patent, the patent
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 12
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 13 of 29
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`office examiner reviewed U.S. Patent No. 4,392,476, which was held by Gresser
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`and others (the “Gresser patent”), and found that it met all of the limitations of
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`what eventually issued as claim 11 of the ‘351 patent “except imaging the
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`gemstone from at least one vantage point and contemporaneously storing
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`information relating to [sic] image of the gemstone containing the marking.”
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`Hough Decl., Exh. B. Second, during the Markman hearing held before this
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`court in October, 2007, defendants’ attorney, John Allcock, discussing that
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`language from the patent office examiner, stated that his interpretation was
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`that “Gresser has everything except for imaging the gemstone.” See Transcript
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`of Markman Hearing at 383, No. 06 Civ. 4005 (S.D.N.Y. Oct. 25, 2007), ECF
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`No. 161.
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`The Alleged Infringing Devices
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`Photoscribe makes laser inscription machines for inscribing gemstones,
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`and GIA uses these machines to inscribe gemstones. Photoscribe has made
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`four models of laser inscription machines for inscribing gemstones: the LMS-
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`550, LMS-650, LMS-2000, and LMS-2500. Aside from some immaterial
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`differences, the Photoscribe machines all have the same basic arrangement and
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`operate in essentially the same manner.
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`Plaintiff alleges that Photoscribe infringes the ‘351 patent by making the
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`machines, that GIA infringes the patent by using the machines, and that
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`Photoscribe induces GIA’s infringement. Defendants concede that making and
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`
` 1
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` During this stage of the patent application process, what eventually issued as
`claim 1 in the final ‘351 patent was then being considered as claim 102.
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`Lazare Kaplan International, Inc. Exhibit 2002 Page 13
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`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 14 of 29
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`using these machines meet all but one of the limitations of the asserted
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`claims—the “controlling the directing” limitations.
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`According to testimony from David Benderly of Photoscribe, the process
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`of inscribing a gemstone with the LMS-650 works as follows2: The operator
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`first places the gemstone on a diamond holder and moves an objective lens to
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`view the diamond via a CCD camera, on a computer monitor. The operator
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`then enters, via a keyboard or barcode, the information to be inscribed. The
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`operator then decides on the placement and size of the inscription by
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`referencing, and adjusting, if necessary, a graphic overlay of the inscription
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`information on the image of the gemstone on the monitor. By referencing the
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`overlay and the image, the operator decides on the placement and size of the
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`inscription and adjusts the overlay accordingly. “The decision to change the
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`graphical overlay make[s] two changes: One, it change[s] a graphical overlay
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`on the screen[,] . . . and [two, it sends] commands to the motion control board
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`to inscribe in a certain way.” Benderly 7/26/11 Tr. at 103:18-25 (Hough Decl.,
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`Ex. J). The operator can also change the placement of the inscription by
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`moving the machine’s stage, which moves the diamond. The operator then
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`presses “fire,” and the system inscribes the gemstone based on the marking
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`instructions and the size and placement of the inscription as shown in the
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`graphic overlay.
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` 2
`
` As noted above, the four models of Photoscribe laser inscription machines
`operate in essentially the same manner. Aside from some small differences,
`the process for inscribing a gemstone with the LMS-550, LMS-2000, and LMS-
`2500 is essentially the same as the process with the LMS-650.
`
`- 14 -
`
`
`Lazare Kaplan International, Inc. Exhibit 2002 Page 14
`
`
`
`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 15 of 29
`
`Photoscribe’s promotional materials and former website discuss the
`
`overlay features of the Photoscribe machines. “One unique feature of the LMS-
`
`2000 is its ability to precisely size and position text over the live video. Once
`
`text is entered, the user can proportionally increase the size of the text string,
`
`or relocate its position relative to the gem.” Hough Decl., Ex. V (Photoscribe
`
`documents mentioning overlay features of the LMS-2000). “Additionally, our
`
`software allows you to see an overlay of the inscription superimposed on the
`
`diamond before it is engraved, so that ‘what you see is what you get’ . . . .
`
`Graphics, character height and position can easily be adjusted by ‘drag & drop’
`
`with just a click of a mouse.” Hough Decl., Ex. W (printout of Photoscribe’s
`
`former website mentioning overlay features of LMS-2500).
`
`Current Motions
`
`Plaintiff LKI seeks summary judgment that defendants have infringed
`
`claims 1 and 7 of the ‘351 patent under the Federal Circuit’s construction of
`
`those claims. Defendants Photoscribe and GIA seek summary judgment that
`
`claims 1 and 7 of the ‘351 patent are invalid because they are anticipated.
`
`Defendants also seek relief from this court’s prior judgment of validity of
`
`claims 1 and 7 of the ‘351 patent pursuant to Federal Rule of Civil Procedure
`
`60(b)(5) and/or 60(b)(6).
`
`Motion for Relief from Prior Judgment of Validity
`
`Discussion
`
`As noted above, defendants move pursuant to Rule 60(b) for relief from
`
`the prior judgment that claims 1 and 7 of the ‘351 patent were valid. A jury
`
`
`
`
`- 15 -
`
`Lazare Kaplan International, Inc. Exhibit 2002 Page 15
`
`
`
`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 16 of 29
`
`found claims 1 and 7 of the ‘351 patent to be valid under this court’s definition
`
`of the “controlling the directing” language to mean “controlling is based on the
`
`marking instructions generated by the operator of the machine, and automatic
`
`feedback derived from optical images of the gemstone during the laser burn
`
`process.” The validity of the claims was determined under a claim construction
`
`that has been reversed by the Federal Circuit, and this court therefore never
`
`considered—and defendants never had an opportunity to argue—invalidity
`
`under the claim construction that the Federal Circuit adopted. Under the
`
`Federal Circuit’s construction, the “controlling the directing” language includes
`
`control based on either automated or manual feedback.
`
`Plaintiff argues that defendants’ Rule 60(b) motion should be denied on
`
`two grounds: that it is untimely, and that defendants’ decision not to take a
`
`direct appeal precludes relief.
`
`
`
`Rule 60(b) reads, in relevant part:
`
`On motion and just terms, the court may relieve a
`party or its legal representative from a final judgment,
`order, or proceeding for the following reasons:
`
`. . .
`
`(5) the judgment has been satisfied, released, or
`discharged; it is based on an earlier judgment
`that has been reversed or vacated; or applying it
`prospectively is no longer equitable; or
`
`(6) any other reason that justifies relief.
`
`“A motion under Rule 60(b) must be made within a reasonable time . . . .”
`
`FED. R. CIV. P. 60(c)(1). The grant of a Rule 60(b) motion is left to the sound
`
`discretion of the court. Quevedo v. Postmaster, U.S. Postal Service, 774 F.
`
`
`
`
`- 16 -
`
`Lazare Kaplan International, Inc. Exhibit 2002 Page 16
`
`
`
`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 17 of 29
`
`Supp. 837, 839 (S.D.N.Y. 1991). The motion should be granted when
`
`“appropriate to accomplish justice.” Klapprott v. United States, 335 U.S. 601,
`
`614-15 (1949).
`
`In this case, defendants’ motion was filed approximately 30 months after
`
`entry of the judgment from which they seek relief, and approximately seven
`
`months after the Federal Circuit’s decision altering the underlying claim
`
`construction. Prior to filing this motion, defendants argued the issue of validity
`
`at the case management conference on May 4, 2011. Because the motion was
`
`necessary only because of the Federal Circuit’s revised claim construction, and
`
`because defendants’ timely raised the issue during the case management
`
`conference, the motion was timely.
`
`On remand, a party may not ordinarily reargue issues on which it lost
`
`but did not appeal. Radio Steel & Mfg. Co. v. MTD Products, Inc., 731 F.2d
`
`840, 844 (Fed. Cir. 1984). Unless remanded by the appellate court, “all issues
`
`within the scope of the appealed judgment are deemed incorporated within the
`
`mandate and thus are precluded from further adjudication.” Engel Industries,
`
`Inc. v. Lockformer Co., 166 F.3d 1379, 1383 (Fed. Cir. 1999).
`
`In patent cases, where the issues of validity and infringement are
`
`distinct, a party who lost on the validity issue must appeal that loss in order to
`
`preserve the validity issue on remand. Radio Steel, 731 F.2d at 843 (“The
`
`judgment in favor of Radio on validity was distinct from the judgment against it
`
`on infringement. It would seem that the only way [defendant] could challenge
`
`the judgment of validity was by noting an appeal from that portion of the
`
`
`
`
`- 17 -
`
`Lazare Kaplan International, Inc. Exhibit 2002 Page 17
`
`
`
`Case 1:06-cv-04005-TPG Document 433 Filed 02/15/12 Page 18 of 29
`
`judgment.”); Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259, 1275
`
`(Fed. Cir. 1999) (Defendant’s “failure to appeal the judgment of no invalidity
`
`precluded the continued litigation of that issue. The entry of a distinct
`
`judgment of no invalidity after the first jury trial unquestionably put the
`
`patentability of the ‘151 patent in play when the overall judgment of liability
`
`was appealed.” (emphasis added)).
`
`In this case, the issues of validity and infringement cannot be said to be
`
`distinct; they are closely interrelated. Defendants’ essential argument is that
`
`the patent claims were either invalid or not infringed, but not both, because
`
`defendants’ machines are remarkably similar to the prior art. Therefore,
`
`defendants argue that their machines either do not infringe the patent (because
`
`the prior art was sufficiently different from the patent claims such that it did
`
`not anticipate the claims; and defendants’ machines are, similarly, sufficiently
`
`different from the patent claims such that they do not infringe) or the patent
`
`claims are invalid (because the prior art anticipated the claims).
`
`Because the validity and infringement issues cannot be said to be
`
`distinct, it was not necessary for defendants to appeal the validity issue in
`
`order for the court to hear the issue on remand. Because the Federal Circuit’s
`
`decision fundamentally changed the claim construction, the issue of validity
`
`must be retried under the revised construction. Furthermore, the court
`
`already decided at the May 4, 2011 case management conference that the issue
`
`of validity would be retried.
`
`
`
`
`- 18 -
`
`Lazare Kaplan International, Inc. Exhibit 2002
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