XY, LLC v. Trans Ova Genetics, LC

Filing 555

ORDER ON POST JUDGMENT MOTIONS the Court ORDERS as follows: XY's Motion to Alter or Amend the Judgment Under Rule 59(e) ECF No. 505 is DENIED; XY's Motion for Reconsideration Under Rule 60(b)(6) ECF No. 544 is GRANTED IN PART and D ENIED IN PART as follows: The Motion is GRANTED to the extent that the jury's willfulness finding ECF No. ( 461 at 3, Question #8) is REINSTATED; and The Motion is otherwise DENIED; and Trans Ova's Motion for Leave to File Sur-Reply ECF No. 551 is DENIED AS MOOT, by Judge William J. Martinez on 11/10/2016. (evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-0876-WJM-NYW
XY, LLC,
Plaintiff / Counterclaim Defendant,
v.
TRANS OVA GENETICS, LC,
Defendant / Counterclaim Plaintiff.

ORDER ON POST-JUDGMENT MOTIONS

Before the Court is XY’s Motion to Alter or Amend the Judgment Under Rule
59(e) (“Rule 59 Motion,” ECF No. 505), and XY’s Motion for Reconsideration Under
Rule 60(b)(6) (“Rule 60 Motion,” ECF No. 544). Both of these motions challenge
portions of this Court’s Order on Post-Trial Motions (“Post-Trial Order,” ECF No. 500).
Familiarity with the Post-Trial Order is presumed. For the reasons explained below, the
Court denies the Rule 59 Motion. As for the Rule 60 Motion, the Court grants it to the
limited extent that the jury’s willfulness finding is reinstated. The Rule 60 Motion is
otherwise denied.
I. RULE 59 ANALYSIS
A.

Legal Standard
XY brings its Rule 59 Motion specifically under Federal Rule of Civil Procedure

59(e): “A motion to alter or amend a judgment must be filed no later than 28 days after
the entry of judgment.” This Rule “was adopted to make clear that the district court

possesses the power to rectify its own mistakes in the period immediately following the
entry of judgment.” White v. N.H. Dep’t of Emp’t Sec., 455 U.S. 445, 450 (1982)
(internal quotation marks omitted; alterations incorporated). Accordingly, the Court may
amend the judgment in its discretion on account of “(1) an intervening change in the
controlling law, (2) new evidence previously unavailable, and (3) the need to correct
clear error or prevent manifest injustice.” Servants of the Paraclete v. Does, 204 F.3d
1005, 1012 (10th Cir. 2000). A motion under the clear error prong of this test “is
appropriate where the court has misapprehended the facts, a party’s position, or the
controlling law.” Id. However, motions to alter or amend the judgment pursuant to Rule
59(e) “are regarded with disfavor. . . [and are] ‘not appropriate to revisit issues already
addressed or advance arguments that could have been raised in prior briefing.’” Kerber
v. Qwest Group Life Ins. Plan, 727 F. Supp. 2d 1076, 1076 (D. Colo. 2010) (q uoting
Servants of the Paraclete, 204 F.3d at 1012).
B.

Analysis
In the Post-Trial Order, the Court elected to award XY an ongoing royalty in lieu

of an injunction or a requirement that XY and Trans Ova negotiate an ongoing royalty
amongst themselves. (ECF No. 500 at 21–23.) The Court found that the jury, in fixing
damages for past infringing sales, had accepted XY’s damages expert’s 19% royalty
rate. (Id. at 23.) The Court rejected, however, XY’s argument that the ongoing royalty
rate necessarily must exceed the rate set by the jury for past infringement. (Id. at
24–25.) The Court found that XY’s primary support for its position—the Federal
Circuit’s decision in Amado v. Microsoft Corp., 517 F.3d 1353 (Fed. Cir. 2008)—does

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not go as far as XY claims. (Id. at 24.) Applying various factors, the Court instead set a
royalty rate of 12.5% of gross sales, plus 2% for reverse sorting services, with a
minimum per-straw or per-service royalty of $5. (Id. at 25–28.)
In its Rule 59 Motion, XY vehemently protests this Court’s decision to award less
than 19%, once again citing Amado. (Compare ECF No. 471 at 3–4 with ECF No. 505
at 3–4.)1 XY also cites Bianco v. Globus Medical, Inc., 53 F. Supp. 3d 929 (E.D. Tex.
2014), in which Federal Circuit Judge William C. Bryson, sitting by designation in the
Eastern District of Texas, stated that, “[a]lthough individual considerations may weigh in
favor of decreasing the ongoing royalty rate relative to that awarded by the jury, the
Court notes that pursuant to Amado the ultimate ongoing royalty rate should not be
lower than the rate awarded by the jury for pre-verdict damages.” Id. at 939. XY also
cites a forthcoming scholarly article by Gregory Sidak, chairman of an expert economics
consulting firm, who concludes that none of the 35 post-Amado district court cases he
surveyed “specified an ongoing royalty below the jury-determined a reasonable royalty
for past damages.” J. Gregory Sidak, Ongoing Royalties for Patent Infringement 12
(Oct. 21, 2015), available at https://www.criterioneconomics.com/docs/ongoingroyalties-for-patent-infringement.pdf (last accessed Nov. 8, 2016) (24 Texas Intell. Prop.
L.J. forthcoming 2016) (hereafter, “Sidak”).2
Amado, of course, was raised and previously rejected, and is therefore not a

1

All ECF page citations are to the page number in the ECF header, which does not
always match the document’s internal pagination, particularly in XY’s briefing, which often
employs an unnumbered caption page, with the main text and page numbering beginning on
the second page.
2

XY also placed this article into the record at ECF No. 505-1.

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basis for Rule 59 relief. And although XY did not previously raise Bianco or the Sidak
article, neither was unavailable at the time of XY’s previous motion to set an ongoing
royalty rate, which was filed on February 29, 2016. (ECF No. 471.) Thus, those
authorities likewise present no basis for Rule 59 relief. Nonetheless, for clarity, the
Court notes the following.
Amado has certainly been interpreted by later courts as requiring that any
ongoing royalty be set no lower than the jury’s past-infringement royalty. But this is
largely based on two considerations. First, Amado endorsed previous non-precedential
statements to the effect that “[o]nce a judgment of validity and infringement has been
entered, . . . the [royalty] calculus is markedly different because different economic
factors are involved [as compared to a pre-judgment calculus].” 517 F.3d at 1362.
Second, Amado stated in a footnote that “logically, the eventual [ongoing royalty] award
[in that case] should fall somewhere between the $0.04 amount the jury found to be an
appropriate pre-verdict reasonably royalty and the $2.00 amount Amado was willing to
accept in exchange for a license.” Id. at 1362 n.2. The first statement is arguably a
holding, but it does not specify that a court setting an ongoing royalty rate cannot go
below the jury’s pre-verdict royalty rate. As for the second (footnoted) statement, it is
not a holding, but an observation heavily informed by the facts of that case. In
particular, the court does not specify whether the jury’s pre-verdict royalty was “logically”
the lowest possible ongoing royalty because the law dictates it to be so, because the
jury’s rate was the lower bound of the parties’ arguments, or because of some other
consideration. See id. at 1356.

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Moreover, the Sidak article is partially senseless if Amado amounted to a
holding. Sidak, among other things, empirically explores post-Amado district court
decisions to see whether those courts have “developed a consistent methodology for
determining an ongoing royalty.” Sidak at 3. He finds none, and therefore proposes “a
simple yet rigorous economic methodology that courts can apply when determining an
ongoing royalty.” Id. Sidak does not ask, “Can a judge award an ongoing royalty rate
lower than the jury’s royalty rate for past infringement?” His observation that the 35
district court cases surveyed always award at least the same royalty rate fixed by the
jury was an observation gleaned from his data and informing his opinions about the
proper method of calculating an ongoing royalty. See id. at 12. When it comes to
calculating that royalty, Sidak opines that the post-verdict context “will typically support
the award of an ongoing royalty that exceeds the reasonable royalty awarded for past
infringement,” id. at 25–26 (emphasis added), but he nowhere argues that any other
option is categorically off-limits.
Many of these findings and opinions would be misdirected if Amado indeed held
that the jury’s pre-verdict royalty rate is the lower limit. An observation that 35 courts
have adopted that lower limit would have no empirical relevance to Sidak’s proposed
royalty calculation method, given that the jury’s rate would necessarily be the starting
point under Amado. Nor would there be any need to discuss whether an ongoing
royalty rate can drop below the pre-verdict royalty rate.
In addition, the Court finds that the current trend in Supreme Court patent cases
is to preserve district courts’ traditional equitable discretion as much as possible. See,

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e.g., Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016); eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388 (2006). Accordingly, the Court reaffirms its
previous finding that, notwithstanding other courts’ and commentators’ interpretations of
Amado, district courts retain the equitable discretion to set any adequately reasoned
ongoing royalty rate, whether above or below the rate fixed by the jury for pre-verdict
infringement. (See ECF No. 500 at 24–28.)
As for the rate the Court selected here, the Court thoroug hly explained its
reasoning in the Post-Trial Order. (See id.) To that reasoning, the Court adds only
that—to the extent Federal Rule of Evidence 408 prevents the Court from considering
the parties’ failed license negotiations (see ECF No. 505 at 9)—the Court would
nonetheless have concluded that XY was not, in reality, a willing licensor based solely
on the jury’s finding that both parties breached their agreement (see ECF No. 500 at
26–27), a finding amply supported by evidence introduced at trial. The Court finds the
remainder of XY’s arguments to be meritless.
II. RULE 60 ANALYSIS
A.

Legal Standard
XY brings its Rule 60 Motion specifically under Rule 60(b)(6): “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: * * * (6) any other reason that justifies
relief.” While relief under clauses (1)–(5) of Rule 60(b) is “extraordinary and may only
be granted in exceptional circumstances,” relief under clause (6) “is even more difficult
to attain and is appropriate only when it offends justice to deny such relief.” Yapp v.

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Excel Corp., 186 F.3d 1222, 1231, 1232 (10th Cir. 1999) (internal q uotation marks
omitted).
“In this circuit, a change in relevant case law by the United States Supreme
Court warrants relief under Fed. R. Civ. P. 60(b)(6).” Adams v. Merrill Lynch, Pierce,
Fenner & Smith, 888 F.2d 696, 702 (10th Cir. 1989). Such a chang e is the basis of
XY’s Rule 60 Motion, as explained next.
B.

Analysis
At trial, the jury received a verdict form asking, “Do you find that XY has proven

by clear and convincing evidence that Trans Ova’s infringement was willful?” (ECF No.
461 at 3.) The jury answered affirmatively. (Id.) In the Post-Trial Order, however, the
Court agreed with Trans Ova that In re Seagate Technologies, LLC, 497 F.3d 1360
(Fed. Cir. 2007), required vacating that portion of the verdict. Specifically, the Court
found that willfulness under Seagate required a showing of an objectively high
likelihood that the infringer’s actions constituted infringement of a valid patent, but XY
had not demonstrated such objective unreasonableness. (ECF No. 500 at 10–15.)
On June 13, 2016—about two months after the Post-Trial Order—the Supreme
Court announced its decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., supra.
Halo abrogated Seagate’s objective unreasonableness requirement. 136 S. Ct. at
1932–34. XY therefore argues that the willfulness finding should be reinstated. (ECF
No. 544 at 4–6.) The Court agrees, and will therefore reinstate that portion of the
verdict.
The Court disagrees with XY, however, that such reinstatement should

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necessarily prompt the Court to reconsider its decision denying enhanced damages and
attorneys’ fees. (Compare ECF No. 500 at 17–21 with ECF No. 544 at 7–11, 13.) As
to both enhanced damages and attorneys’ fees, in its Post-Trial Order the Court
explicitly stated that it would have denied XY’s requests regardless of the jury’s
willfulness finding. (ECF No. 500 at 18 n.2 (“Even if the Court had not vacated the
willful infringement finding, the Court would still deny XY’s Fee Motion.”); id. at 20
(“even if the Court had not vacated the jury’s willful infringement finding, the Court
would still deny XY’s request for enhanced damages”).) The Court thoroughly
explained its reasons for concluding, under the totality of the circumstances, that
enhanced damages and attorneys’ fees are not appropriate, despite Trans Ova’s
infringing conduct. (Id. at 17–21.) XY provides no reason to cause the Court to depart
from that conclusion—and certainly no reason it could not have argued previously.
Moreover, the Court’s reasoning comports with Halo, which abrogated Seagate’s
objective test but nonetheless counseled that district courts “should continue to take
into account the particular circumstances of each case in deciding whether to award
[enhanced] damages,” and emphasized that enhanced damages “should generally be
reserved for egregious cases typified by willful misconduct.” Halo, 136 S. Ct. at 1933,
1934; see also id. at 1935 (“Th[e] balance [between encouraging innovation and
protecting it] can indeed be disrupted if enhanced damages are awarded in gardenvariety cases. As we have explained, however, they should not be.”). This case is not
“egregious,” nor is it outside the “garden-variety” of patent cases. The Court therefore
denies XY’s Rule 60 Motion to the extent XY seeks to parlay the finding of willfulness

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into an award of enhanced damages or attorneys’ fees.3
III. CONCLUSION
For the reasons set forth above the Court ORDERS as follows:
1.

XY’s Motion to Alter or Amend the Judgment Under Rule 59(e) (ECF No. 505) is
DENIED;

2.

XY’s Motion for Reconsideration Under Rule 60(b)(6) (ECF No. 544) is
GRANTED IN PART and DENIED IN PART as follows:
a.

The Motion is GRANTED to the extent that the jury’s willfulness finding
(ECF No. 461 at 3, Question #8) is REINSTATED; and

b.
3.

The Motion is otherwise DENIED; and

Trans Ova’s Motion for Leave to File Sur-Reply (ECF No. 551) is DENIED AS
MOOT.
Dated this 10th day of November, 2016.
BY THE COURT:

William J. Martínez
United States District Judge

3

XY further argues that the reinstatement should factor into the Court’s reconsideration
of the ongoing royalty rate. (ECF No. 44 at 11–12.) The Court has already concluded that it
will not reconsider the ongoing royalty rate.

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