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23 January 2019Patents

Adobe appeal sent back to district court in licensing row

Software company  Adobe has suffered a setback in its bid to win costs and fees in an IP licensing dispute with Princeton Digital Image Corporation (PDIC).

The US Court of Appeals for the Federal Circuit  ruled yesterday, January 22, that it had no jurisdiction over the case as it had not been resolved in the district court.

PDIC licensed its patent for “modified statistical coding of digital signals” (US number (4,813,056) to Adobe in June 2011. The patent covers methods of encoding image data.

As part of the licensing agreement, PDIC undertook not to sue Adobe or its customers in relation to an Adobe-licensed product.

In December 2012, PDIC sued “numerous” customers of Adobe in the US District Court for the District of Delaware, claiming that the encoding of JPEG images on their websites infringed the ‘056 patent.

Adobe filed an intervening complaint in May 2015, arguing that PDIC had breached the licensing agreement by suing Adobe’s customers. By July, all of PDIC’s litigation against Adobe customers had been voluntarily dismissed.

Following PDIC’s dropping of its lawsuits, Adobe claimed that it was the “prevailing party” in the case and was entitled to costs. The district court ruled that it could not “determine at this time whether PDIC or Adobe is the prevailing party”.

The court awarded “defensive costs” to Adobe, ruling that it could only collect costs arising from its defence of its customers in PDIC’s infringement litigation, and not from the assertion of its contract rights.

Both parties appealed against the decision to the Federal Circuit. Adobe claimed that it was entitled to full costs and fees, while PDIC argued that the court had “erred in imposing monetary sanctions” on the company.

In its decision, the Federal Circuit ruled that it had no jurisdiction over the case as the ruling of the district court was not final. Before it could consider an appeal, the Federal Circuit said, the district court “must determine whether PDIC breached its licence agreement with Adobe” and, if so, determine the damages to be awarded.

Similarly, the Federal Circuit ruled that it could not rule on PDIC’s cross appeal until the district court had resolved the case.

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