VARTA Microbattery GmbH v. Costco Wholesale Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: VARTA Microbattery GmbH (Germany)
  • Defendant: Costco Wholesale Corporation (Washington)
  • Plaintiff’s Counsel: Leydig, Voit & Mayer, LTD.
• Case Identification: 2:20-cv-00051, E.D. Tex., 02/24/2020
• Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Defendant Costco has committed acts of infringement in the district and maintains regular and established places of business (retail stores) within the district.
• Core Dispute: Plaintiff alleges that Defendant’s sale of products containing certain rechargeable microbatteries infringes three U.S. patents related to the internal construction of button cell batteries.
• Technical Context: The technology concerns the design of small, rechargeable button and coin cell batteries, focusing on a spiral-wound electrode configuration to improve mechanical stability and energy density for use in compact electronic devices like wireless earphones.
• Key Procedural History: The complaint asserts claims from three patents. However, Inter Partes Review (IPR) Certificates, attached to the provided patent documents, indicate that subsequent to the complaint's filing, all originally asserted claims in the '835, '581, and '913 patents were cancelled in IPR proceedings initiated in July 2020. New, substitute claims were entered for each patent during those proceedings.

Case Timeline

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 9,153,835 - Button Cells and Method for Producing Same, issued October 6, 2015

The Invention Explained

• Problem Addressed: The patent’s background section describes how conventional button cells, particularly rechargeable lithium-ion types, are susceptible to leaking. This is attributed to axial forces generated by the expansion and contraction of electrode materials during charge/discharge cycles, which can compromise the cell’s seal, especially in designs that are not sealed by "beading" the housing edge over. (’835 Patent, col. 2:20-35).
• The Patented Solution: The invention proposes a button cell design where the electrode and separator layers are formed into a spiral winding and oriented so the layers are "aligned essentially at right angles to the flat bottom and top areas" of the cell housing. (’835 Patent, col. 2:45-50). This orientation, illustrated in Figure 4, converts the mechanical stress from axial forces into radial forces, which the cylindrical cell housing can absorb more effectively, thereby improving the seal integrity. (’835 Patent, col. 4:47-55).
• Technical Importance: This design sought to create more mechanically robust and reliable microbatteries, a critical factor for the expanding market of small, portable electronics. (Compl. ¶9).

Key Claims at a Glance

• The complaint asserts independent product claim 1 and independent method claim 10. (Compl. ¶¶28, 34).
• Independent Claim 1 recites a button cell with:
  • A housing (cup and top) with flat, parallel top and bottom areas.
  • An internal electrode-separator assembly in the form of a spiral winding.
  • The electrode layers are aligned at right angles to the flat top/bottom areas.
  • The cell is "closed without being beaded over."
  • An "insulating means" is arranged between the end faces of the spiral winding and the housing cup and top.

U.S. Patent No. 9,496,581 - Button Cells and Method for Producing Same, issued November 15, 2016

The Invention Explained

• Problem Addressed: This patent addresses the challenge of making reliable and durable electrical contact between the internal electrode winding and the external metallic housing (the positive and negative terminals) within a button cell. (’581 Patent, col. 4:5-11).
• The Patented Solution: The invention discloses using a dedicated "output conductor comprising a foil resting flat between an end face of the spiral winding and the flat top or the flat bottom area" to establish the electrical connection. (’581 Patent, Abstract). This structure, shown conceptually in Figure 5 (elements 505, 506), creates a large, stable contact surface that is held in place by the cell's assembly pressure, ensuring a consistent electrical path.
• Technical Importance: This method provides a more robust and manufacturable solution for electrical connection compared to relying solely on direct contact of an electrode edge, which can be less reliable. (Compl. ¶13).

Key Claims at a Glance

• The complaint asserts independent product claim 1 and independent method claim 10. (Compl. ¶¶40, 46).
• Independent Claim 1 recites a button cell with:
  • A housing with flat, parallel top and bottom areas.
  • An internal electrode-separator assembly in the form of a spiral winding, with layers aligned at right angles to the housing’s top and bottom.
  • One of the electrodes connects to the housing via an "output conductor comprising a foil resting flat" between the winding's end face and the housing.

U.S. Patent No. 9,799,913 - Button Cells and Method for Producing Same, issued October 24, 2017

• Technology Synopsis: This patent combines and refines concepts from the related patents. It describes a button cell with a spiral-wound electrode assembly that uses foil-based output conductors to connect to the housing, similar to the ’581 Patent, and also includes separate insulators to prevent direct mechanical and electrical contact between the winding end faces and the housing, similar to the ’835 Patent. (’913 Patent, Abstract). The invention aims to provide both a reliable electrical connection and robust short-circuit prevention.
• Asserted Claims: Independent claim 1 and dependent claims 4 and 6. (Compl. ¶52).
• Accused Features: The complaint accuses the ICR 1254 battery of infringing by containing a spiral-wound assembly, an output conductor connecting an electrode to the housing, and an insulator that prevents direct contact between the winding and the housing surfaces. (Compl. ¶¶53-59).

III. The Accused Instrumentality

Product Identification

• The complaint identifies the accused products as microbatteries with part number ICR 1254, manufactured by EVE Energy of China. (Compl. ¶20). These batteries are allegedly found within consumer electronics, such as the Samsung Galaxy Buds True Wireless Earbud Headphones, which Defendant Costco is accused of selling. (Compl. ¶20). A screenshot from Costco's website shows the Samsung product for sale. (Compl. p. 6).

Functionality and Market Context

• The ICR 1254 batteries are alleged to be rechargeable power sources for the wireless earphones in which they are included. (Compl. ¶21). The complaint alleges these batteries embody the patented technology, featuring a housing with flat top and bottom areas and an internal electrode-separator assembly in the form of a spiral winding. (Compl. ¶¶22-24). An image provided in the complaint depicts the accused ICR 1254 battery and a cross-section showing its spirally wound internal assembly. (Compl. p. 7).

IV. Analysis of Infringement Allegations

’835 Patent Infringement Allegations

• Identified Points of Contention:
  • Technical Question: The claim requires a distinct "insulating means" arranged between the winding and the housing. What evidence the complaint can produce to show the existence and specific placement of this component in the ICR 1254 battery, separate from the electrodes and separator, will be a central factual issue.
  • Scope Question: A key dispute may center on the negative limitation "closed without being beaded over." The analysis will require determining the precise manufacturing process used to seal the accused battery and whether that process falls within the scope of what the patent considers "beading over."

’581 Patent Infringement Allegations

• Identified Points of Contention:
  • Technical Question: The primary factual dispute will be whether the accused ICR 1254 battery utilizes the specific connection structure required by the claim: an "output conductor comprising a foil resting flat" between the winding and the housing. Evidence from a product teardown will be necessary to determine if such a component exists or if electrical contact is made through a different mechanism (e.g., a bent current collector tab).
  • Scope Question: If a conductive element is present, a legal question will arise as to whether it meets the claim's definition of an "output conductor comprising a foil," which may become a central issue for claim construction.

V. Key Claim Terms for Construction

For the ’835 Patent:

• The Term: "closed without being beaded over"
• Context and Importance: This negative limitation is crucial for distinguishing the claimed invention from prior art sealing methods. The infringement analysis for the '835 patent will depend heavily on whether the sealing technique of the accused battery is factually distinct from "beading over" as understood in the patent.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification contrasts the invention with traditional cells "closed in a liquid-tight manner by beading the edge of the cell cup over the edge of the cell top." (’835 Patent, col. 2:5-9). A party could argue this defines what "beading over" is, meaning any other sealing method would satisfy the "without being beaded over" limitation.
  • Evidence for a Narrower Interpretation: The patent also describes an alternative "force-fitting connection" (’835 Patent, col. 2:13-16). A party could argue that "without being beaded over" should be construed in light of this disclosed alternative, potentially limiting its scope to force-fit seals or very similar methods, and excluding other novel sealing techniques that are neither beading nor force-fitting.

For the ’581 Patent:

• The Term: "output conductor comprising a foil"
• Context and Importance: This term defines the specific electrical connection mechanism that is a core feature of the patent. Whether the accused battery's connection method infringes will depend on the scope given to this term. Practitioners may focus on this term because it distinguishes the invention from simpler connection methods like direct electrode-to-casing contact.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification describes "output-conductor lugs composed of copper or some other suitable metal" and notes that uncovered portions of the electrode's current collectors can "themselves act as output conductors." (’581 Patent, col. 5:55-66). This could support a reading where "foil" is not limited to a separate, discrete component but could encompass an integral, flattened part of the electrode's own current collector.
  • Evidence for a Narrower Interpretation: The claim language "comprising a foil resting flat between an end face... and the flat top or... bottom area" suggests a distinct component sandwiched in that location, as illustrated conceptually in Figure 5 (elements 505, 506). A party could argue this requires a separate, pre-fabricated foil, and that a bent tab from an electrode's current collector would not meet this structural limitation.

VI. Other Allegations

• Indirect Infringement: The complaint does not plead separate counts for indirect infringement (inducement or contributory infringement). The infringement allegations are for direct infringement under 35 U.S.C. § 271(a) and importation of a product made by a patented process under § 271(g).
• Willful Infringement: The complaint does not contain specific factual allegations of pre-suit knowledge or willful misconduct by the Defendant. However, in its prayer for relief, Plaintiff requests a declaration that the case is "exceptional" and an award of attorneys' fees pursuant to 35 U.S.C. § 285, which is the statutory remedy for such findings. (Compl., Prayer for Relief ¶D).

VII. Analyst’s Conclusion: Key Questions for the Case

• A threshold, and likely dispositive, procedural question is the impact of the post-filing IPRs: given that the patent certificates show all originally asserted claims have been cancelled, can this action proceed as pleaded, or will Plaintiff be required to amend its complaint to assert the newly-issued substitute claims, and would such an amendment be permitted?
• A central evidentiary question will be one of structural correspondence: assuming the case proceeds, can Plaintiff produce physical evidence from product teardowns demonstrating that the accused ICR 1254 battery contains the specific internal structures required by the patents, namely the precise arrangement of a spiral winding, foil-based output conductors, and separate plastic insulators?
• A key legal issue will be one of definitional scope: how will the court construe key claim terms such as "closed without being beaded over" and "output conductor comprising a foil"? The outcome of the infringement analysis will hinge on whether the accused product's actual construction and sealing methods fall within the boundaries of these construed terms.