Tuesday, April 4, 2023

Xbox fan's forum post on 'rapid fire mod' may save Valve (Steam) $4 million in patent infringement damages over handheld videogame controller: U.S. Court of Appeals for the Federal Circuit

This post here will be of interest to two parts of my audience: the patent litigation community as well as videogamers (including game industry professionals), many of whom have recently started following me on Twitter because of the Microsoft-ActivisionBlizzard merger reviews. With a view to the latter group, I'll explain things in more basic terms, but the ruling by a U.S. appeals court that I'm discussing in this post is definitely of interest to patent professionals as well.

Yesterday, the United States Court of Appeals for the Federal Circuit--which is based in Washington, D.C., and the only appeals court in the entire U.S. to which district court judgments in patent infringement cases can be appealed--handed down its decision in Ironburg Inventions Ltd. v. Valve Corporation (PDF). The (precedential) ruling and the case are interesting for more than one reason.

In 2015, Ironburg sued Valve--known for the Steam storefront (Wikipedia) and certain Steam-branded hardware--over U.S. Patent No. 8,641,525. The case was ultimately transferred to the United States District Court for the Western District of Washington (Seattle), where Steam is based. The title of that patent is Controller for video game console.

The patent-in-suit purports to improve video game controllers as they were known at the time (2011) by "remov[ing] the need for a user to remove his or her thumb from the left or right thumb stick in order to operate additional actions controlled by the four buttons and/or the direction pad." The controller is described as "having a hard outer case and a plurality of controls located on the front and top edge of the controller" and being "shaped to be held in both hands of the user such that the user's thumbs are positioned to operate controls located on the front of the controller and the user's index fingers are positioned to operate controls located on the top edge of the controller." In addition, the patented controller "includes one or more additional controls located on the back of the controller in a position to be operated by the user's other fingers."

If you wish to take a look at that Xbox forum post that may now decide the case (that Valve originally lost in 2021) in Valve's favor, just click here and you can always come back and read eveything else.

The Federal Circuit takes note of how the trial was conducted. Normally, jurors only see the evidence (including actual products) in a jury room. But in the trial in this case, which was held in January 2021, it worked differently:

"Due to the global pandemic caused by the novel coronavirus, the trial proceeded virtually, with each juror attending trial remotely through videoconferencing technology. Before closing arguments, the parties and the district court agreed that each juror should have the accused product in hand, and that device – a hand held controller for playing video games – was mailed to each juror."

If there were any gamers among the members of the jury, this means they got a Steam Controller--the accused device--for free to play around with until they had to return it by mail.

The jury determined that Valve infringed the patent and that Valve owed the patent holder $4 million in damages for past infringement. As Valve's infringement was furthermore found to be willful, that amount could have been increased ("enhanced damges"), possibly up to $12 million. Valve appealed because it wants to pay nothing; Ironburg cross-appealed because it wants the bill to increase to $12 million. In fact, the $4 million award won't exceed Ironburg's litigation expenses by much (if at all). But no: the Federal Circuit says that even though Valve's infringement was willful (because Valve had been made aware of the patent and infringed it nonetheless), Judge Thomas S. Zilly in Seattle didn't abuse his discretion when he found that this was a "garden variety" patent infringement case where even a finding of willfulness does not have to result in an enhancement of the damages award. That is a very defendant-friendly position (which some other U.S. judges would probably not have adopted), but justifiable in the appeals court's opinion.

While Valve's appeal failed to make the case go away at this stage (for the most part, its appeal was unsuccessful), yesterday's appellate opinion is good for Valve in two respects. The first one is what I just mentioned: the damages award won't go up from $4 million to a potential maximum of $12 million. The other win for Valve involves what I mentioned in the headline:

Valve still has the chance to defend itself by proving Ironburg's patent invalid. That is not going to be easy because U.S. juries typically have greater respect for the fact that a patent office--a government agency--granted a patent than the United States Patent & Trademark Office's own PTAB (Patent Trial and Appeal Board) judges when they make their post-grant review decisions. The invalidation rate in jury trials is low, while it is fairly high when the PTAB decides. Still, Valve has another chance to defend itself, so it may now be able to negotiate a settlement with the patent holder.

If they don't settle, there'll be further proceedings in Seattle where an Xbox fan's forum post could make a key contribution to a decision in Valve's favor.

On appeal, Valve wanted to resurrect various of its invalidity arguments, which the district court had decided Valve was "estopped" from raising.

There are/were three sets of invalidity arguments:

  1. arguments that Valve presented in its petition for an inter parties review (IPR) and which the PTAB found worth looking at (though it ultimately didn't result in a complete invalidation of all claims of the patent-in-suit; only some claims were deemed invalid);

  2. arguments that Valve presented in that petition, but which the PTAB did not consider worthy of a closer look; and

  3. arguments that a third party, a Canadian company named Collective Minds Gaming (Twitter account), raised in its own attack on Ironburg's patent and which were distinct from Valve's arguments. Collective Minds brought its petition later than Valve.

With respect to the second and third groups, the district court granted an estoppel motion, meaning he threw those invalidity arguments out because Valve was not allowed to make them at the time because of things that had already happened. The relevant statute says this (just skip it if you're not interested or already know it):

"The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review."

Valve asked the Federal Circuit to overturn that decision so it would get another bite at the apple, i.e., another chance to strike down Ironburg's videogame controller patent. With respect to the second group, Valve's appeal failed: the Federal Circuit essentially says Valve made the mistake of not appealing the PTAB decision to the effect of obligating the PTAB to analyze all of Valve's invalidity arguments as opposed to only a subset.

Valve could indeed have done so. In 2018, the Supreme Court decided in SAS Institute, Inc. v. Iancu--a decision on which I commented at the time--that it's all-or-nothing for a PTAB decision to review a patent: if only one of the arguments made by the petitioner (the party challenging the patent) looks meritorious, the PTAB must analyze them all.

The Federal Circuit decided that Valve has no one to blame but itself for not insisting on a review based on the entirety of its arguments. The appeals court rejects Valve's legal argument that estoppel doesn't kick in until the actual review starts. Instead, the decision on Valve's petition was already relevant.

But with respect to the third group--the Collective Minds arguments--Valve's apppeal succeeded.

The district court placed the burden of proof on Valve that it could not have reasonably identified those arguments back when it brought its own PTAB petition. The Federal Circuit says that the onus is on the patent holder, Ironburg.

If Ironburg can show that Valve could reasonably have raised those arguments years ago in its PTAB petition, then it's game over for Valve and it must pay $4 million. Otherwise, those Collective Minds invalidity arguments will be revived. In that case, Valve can ask the court for summary judgment (decision without a jury trial) that the patent is invalid. If it doesn't do that, or if the judge declines to invalidate the patent, then the case will be put before a new jury in a retrial--and this time around they won't get Steam Controllers sent to their homes but will have to carry out their duty at a federal courthouse.

The Collective Minds arguments involve a combination of different prior art references. Prior art--material that shows the claimed invention was either now new at the time or (which is the argument here) not inventive (because one could have easily combined what already existed at the time) can be an earlier-published patent application but also other publications.

The Collective Minds prior art reference that I wish to highlight is named (after its author) "Jimakos":

Jimakos Sn, Rapid Fire Mod for Wireless Xbox 360 Controller, Step by Step Tutorial with Pictures, (July 9, 2008), http://forums.xbox-scene.com/index.php?/topic/643928rapid-fire-mod-forwireless-xbox-360-controller/page-23 (posts 341 to 346) (“Jimakos”)

That forum post is no longer online, which is why I purposely didn't "linkify" it. But that doesn't matter: the information is in the record of the case anyway.

In that July 8, 2008 posting, a user named "Jimakos Sn" described how he modified an Xbox 360 controller. Here's an excerpt from the Collective Minds petition as well as images that were actually found in that forum post and show the modified controller (click on an image to enlarge or read the text below the image):


A. Ground 1 Claims 1, 9, 10, 21, 26, 28, and 30 of the ’688 Patent are Obvious Under Jimakos in View of the Knowledge of a Person of Ordinary Skill in the Art

i. Jimakos

“Rapid Fire Mod for Wireless Xbox 360 Controller” is an online forum discussion, where user “Jimakos Sn” posted details of his modification to an existing Xbox 360 controller. [...] The forum entry was posted in an active thread, with the substance relied upon in this Petition coming from a July 8, 2008 posting.

In its petition, Collective Minds also argued as follows:

"Like the ’688 Patent, Jimakos is based on a standard video game controller. It includes a case with controls located on the front and top of the case shaped to be held in the hands of the user such that the user’s thumbs operate the controls on the top of the case, and the user’s index fingers operate the controls on the front end of the case."

The PTAB never decided on the Collective Minds petition because the parties settled. That, however, may also mean that Ironburg was afraid of those challenges to its patent--including that Xbox forum post.

I think the district court may actually conclude--now that Ironburg, not Valve, has the burden of proof--that Valve couldn't reasonably have raised those arguments. That argument is particularly strong with a view to Jimakos: it was just a forum post, not a major industry publication or patent document.

Should Valve win the case thanks to that forum post, I hope they'll be able to find Jimakos Sn and reward that gamer!