Appeals Court Upholds Funai’s Patent Infringement Claims Against Daewoo

In a court decision that hearkens back to when VCRs were state-of-the-art, a federal appeals court upheld Funai’s VCR-related infringement patent claims against Daewoo, backing a lower court’s awarding $8.6 million in damages and legal costs. The U.S. Appeals Court for the Federal Circuit returned the case to U.S. District Court Judge Joseph Spero, in San Jose, Calif, after deciding Daewoo infringed three of Funai’s six VCR-related patents that were at the heart of the case.

Spero entered a default judgement against Daewoo Electronics Corporation of America (DECA) and Daewoo Electronics Corp. Ltd (DECL) in 2005, awarding $6.9 million in damages for infringement and another $1 million for attorneys fees and court costs. Earlier, a jury found Daewoo “willfully” infringed the three patents, awarding $7.2 million for damages stemming from lost sales between January 2001 and Oct. 25, 2002.

Among the patents that were infringed was one granted in 2000 that covered a VCR’s oscillation circuit for magnetic erase heads. Magnetic heads have electrical coils that read the magnetic information on a video cassette tape and transmit an electrical signal that erases data stored on it. Daewoo argued that three of the patent’s claims didn’t meet the legal requirement for “definiteness” because of their wording. The appeals court backed Spero in finding that claims construction was correct. “An ungainly claim is not indefinite when its meaning can be understood by a person experienced in the field of the invention,” the court wrote.

Daewoo also was found to have infringed a second patent, issued in 2002, that describes a method for reducing motor noise and vibration in a VCR by adding insulating material to the bearing holder that contains a stator core. Funai used a Lexan polycarbonate resin for insulation. The third patent covered a VCR loading mechanism that was designed to improve the movement of the cassette holder between the initial and play positions.

While the appeals court backed Spero’s finding of infringement, it reversed his ruling that there was no successor liability. When the suit was filed, four Daewoo business groups were named as defendants. DECL transferred its VCR business to Daewoo Electronics Corp. (DEC) and DECA shifted its operations to Daewoo Electronics America (DEA). While the initial judgement was against DECL and DECA, Funai argued that it should be applied to DEC and DEA as well. Spero ruled that DEC and DEA weren’t liable for the damages because South Korean law doesn’t recognize a successor’s liability unless included in a contract. The appeals court found Korean law doesn’t apply.

"This is not a question of conflict with foreign law, or choice between domestic and foreign law,” the appeals court ruled. “No foreign law is involved in this question of successor liability for a default judgement for a violation of United States law.”