Probatter Sports, LLC v. Sports Tutor, Inc
Filing
570
DAMAGES AWARD. Signed by Judge Vanessa L. Bryant on 2/18/2022. (Burlingham, Corinne)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
PROBATTER SPORTS, LLC
Plaintiff,
v.
SPORTS TUTOR, INC.
Defendant.
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: No. 05-cv-1975
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DAMAGES AWARD
This is a patent infringement case. In earlier decisions, the Court found that
the patents-in-suit owned by Probatter Sports, LLC (“Probatter” or “patent holder”
or “patentee”) were valid and that Sports Tutor, Inc. (“Sports Tutor” or “infringer”)
infringed on those patents. Part. Summ. J. Dec., Dkt. 439; Validity Dec., Dkt. 439;
Infringement Dec., Dkt. 468.
The Court now determines what damages are
adequate to compensate for the infringement pursuant to 35 U.S.C. § 284.
After
careful review of the record, which spans over fourteen years, including evidence
presented over seven days of trial, the Court makes the following factual findings
and legal conclusions.
I.
BACKGROUND AND PROCEDURAL HISTORY
This is a long-running patent infringement case filed in December 2005.
Compl., Dkt. 1. The Court has delineated the facts and procedural history of this
case in many prior decisions and assumes the parties’ familiarity therewith.
After multiple stays for Patent and Trademark Office proceedings, the Court
found the patents valid and conducted a trial and issued a written decision finding
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and articulating its reasons for finding Defendant infringed Plaintiff’s patent. Part.
Summ. J. Dec., Dkt. 439; Validity Dec., Dkt. 439; Infringement Dec., Dkt. 468. That
decision was appealed and affirmed. In this decision the Court resolves the sole
remaining issue, damages, delineating only the facts and procedural history
necessary to articulate the reasoning for its calculation and award of damages.
Probatter designs, manufactures, sells, installs and services a line of
baseball pitching machines.
Probatter designed and manufactured a three-
wheeled pitching machine, which contained patented features such as
regenerative braking, a programmable controller, and horizontal and vertical linear
actuators. The two patents at issue are United States Patent Number 6,182,649 (the
“’649 Patent”) and United States Patent Number 6,546,924 (the “’924 Patent”)
(collectively hereinafter, the “Patents-in-Suit”). The patented feature at issue here
is dynamic braking, a feature that causes the rapid deceleration of the wheels
inside the ball throwing machine. With rapid deceleration, the machine can rapidly
eject a variety of unpredictable pitches, allowing the user to experience a real atthe-bat experience. Probatter’s more commercially successful patented invention
is a video system which when integrated with dynamic breaking creates a life-like
batting experience.
On July 15, 2015, the Court granted partial summary judgment in favor of
Probatter against Sports Tutor. The Court found Probatter established Sports
Tutor infringed upon the Patents-in-Suit by incorporating dynamic braking in its
ball-throwing machine without a license to do so beginning in March 2003. Part.
Summ. J. Dec. Dkt. 439. That same month, a five-day bench trial was held on issues
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relating to the validity of the infringement claims, willfulness of the infringement,
damages, and prejudgment interest. Tr. 7/13/2015, Dkt. 455; Tr. 7/14/2015, Dkt. 456;
Tr. 7/15/2015, Dkt. 452; Tr. 7/16/2015, Dkt. 453; Tr. 7/21/2015, Dkt. 454. On March 23,
2016, the Court entered judgment in favor of Probatter on the issue of validity and
enjoined Sports Tutor from making, using, offering for sale, or selling HomePlate
machines (the “infringing machine”).
Validity Dec. Dkt. 468.
Approximately
thirteen years passed between when the infringement began and when Sports
Tutor was enjoined.
The Court could not rule on the issue of damages when it rendered its
decision on infringement because Probatter disclosed the method and measure of
damages on the eve of trial. Damages Disc. Dec., Dkt. 469. Probatter initially
disclosed that it would be seeking damages under the loss profits measure of
damages. Id. at 1. However, after the close of discovery and shortly before trial,
Probatter changed counsel and disclosed that it would be seeking damages under
the reasonable royalty measure of damages, a method suggested in its earlier
filings.
Id.
To fairly adjudicate damages on the merits, the Court reopened
discovery on that issue alone, affording Sports Tutor two months to conduct
discovery on Probatter’s claim and affording Probatter one month to conduct
rebuttal discovery on Sports Tutor’s defenses. Id. at 21.
During the interim, Sports Tutor appealed the Court’s infringement and
validity decisions, which the Federal Circuit affirmed. Dkt. 471, 486. Thereupon
the Court resumed consideration of the issue of damages and conducted an
evidentiary hearing over two days, beginning on October 31, 2019 and ending
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November 1, 2019. Dkt. 539; Tr. 10/31/2019, Dkt. 562; Tr. 11/1/19, Dkt. 563. Briefing
ensued and the Court conducted a final teleconference on April 12, 2021, resolving
the final issue precedent to ruling on the issue of damages.
II.
REASONABLE ROYALTY RATE
A. Legal Standard
Section 284 of Title 35 of the United States Code specifies the measure of
damages for patent infringement. “Upon finding for the claimant the court shall
award the claimant damages adequate to compensate for the infringement, but in
no event less than a reasonable royalty for the use made of the invention by the
infringer, together with interest and costs as fixed by the court.” Section 284 “is
unequivocal that the district court must award damages in an amount no less than
a reasonable royalty.” Dow Chem. Co. v. Mee Indus., Inc., 341 F.3d 1370, 1381 (Fed.
Cir. 2003).
Though a court “must award damages in an amount no less than a
reasonable royalty”; id.; “[t]he burden of proving [the amount of] damages falls on
the patentee.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir.
2009). See also Lindemann Maschinenfabrik GmbH v. Am. Hoist & Derrick Co.,
Harris Press & Shear Div., 895 F.2d 1403, 1406 (Fed. Cir. 1990) (hereinafter
Lindemann). These concepts are at cross purposes when a patentee has not met
its burden of proving damages but the record suggests that a reasonable royalty
would be more than $0.
There is little guidance on what a district court should do when a patentee
fails to present evidence of a single comparable royalty from which a reasonable
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royalty can be discerned. Further, before the enactment of § 284 the Supreme
Court suggested that an award of damages required at least a minimal showing of
damages. Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641 (1915).
In Dowagiac, the Court also discussed the importance of not over-compensating a
patentee that presents minimal evidence.
A patentee is only entitled to the reasonable royalty for its patented feature;
and is not entitled to damages for the entire product when the product contains
other non-infringing features. Id. at 646–47. The Court cited to the reasoning in
Tilghman v. Proctor, 125 U.S. 136, 145 (1888) that
[i]t is inconsistent with the ordinary principles of practice of courts of
chancery, either, on the one hand, to permit the wrongdoer to profit by
his own wrong, or, on the other hand, to make no allowance for the
cost and expense of conducting his business or to undertake to
punish him by obliging him to pay more than a fair compensation to
the person wronged.
Id. at 647. In applying these standards to the case before it, the Supreme Court
held that “the evidence did not present sufficient data to justify an assessment of
substantial damages” finding no evidence of an established royalty, the nature of
the invention, the inventions utility and advantages, the extend of its use, or hurtful
competition. Id. at 648–50. The Court reversed and remanded for further factual
findings. Id. at 651.
How a patentee proves a reasonable royalty rate logically would vary from
case to case. However, Federal Circuit case law has held unequivocally that a
patentee is not required to set forth expert testimony in support of its claim of
damages. See 35 U.S.C. § 284 (“The court may receive expert testimony as an aid
to determination of damages or what royalty would be reasonable under the
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circumstances.”) (emphasis added); Dow Chem. Co., 341 F.3d at 1382 (“[S]ection
284 is clear that expert testimony is not necessary to the award of damages . . . .”).
The trial court has broad discretion in deciding the reasonable royalty
where the patentee introduced little or no credible evidence of a reasonable royalty.
The Federal Circuit has declared that a district court's obligation to award some
amount of damages “does not mean that a patentee who puts on little or no
satisfactory evidence of a reasonable royalty can successfully appeal on the
ground that the amount awarded by the court is not ‘reasonable’ and therefore
contravenes section 284.” Id. at 1382 (citing Lindemann, 895 F.2d at 1406).
Nor is exactitude required. “[A] finding that a royalty estimate may suffer
from factual flaws does not, by itself, support the legal conclusion that zero is a
reasonable royalty.” Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1327 (Fed. Cir.
2014), overruled on other grounds by Williamson v. Citrix Online, LLC, 792 F.3d
1339 (Fed. Cir. 2015). “[A] fact finder may award no damages only when the record
supports a zero-royalty award.” Id. “Determining a reasonable royalty does not
require ‘mathematical exactness,’ but a ‘reasonable approximation’ under the
circumstances of a given case.” See Gaylord v. United States, 777 F.3d 1363, 1368
(Fed. Cir. 2015).
There are several legal theories for establishing damages in a patent
infringement case.
Here, Probatter has elected to seek damages under the
hypothetical negotiation theory of damages.
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1. Hypothetical Negotiation Theory of Damages
“[T]he hypothetical negotiation or the “willing licensor-willing licensee”
approach, attempts to ascertain the royalty upon which the parties would have
agreed had they successfully negotiated an agreement just before infringement
began.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009)
(citing to Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 116, 1120
(S.D.N.Y. 1970) (hereinafter “Georgia-Pacific”)). The hypothetical negotiation
methodology encompasses fantasy and flexibility; fantasy because it
requires a court to imagine what warring parties would have agreed to
as willing negotiators; flexibility because it speaks of negotiations as
of the time infringement began, yet permits and often requires a court
to look to events and facts that occurred thereafter and that could not
have been known to or predicted by the hypothesized negotiators.
Fromson v. W. Litho Plate & Supply Co., 853 F.2d 1568, 1575 (Fed. Cir. 1988),
overruled on other grounds by Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH
v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004).
Like all methodologies based on a hypothetical, there will be an
element of uncertainty; yet, a court is not at liberty, in conducting the
methodology, to abandon entirely the statutory standard of damages
“adequate to compensate” for the infringement. The royalty arrived at
must be “reasonable” under all the circumstances; i.e., it must be at
least a close approximation of what would be “adequate to
compensate” for the “use made of the invention by the infringer.”
Id.
In determining a reasonable royalty rate, courts are instructed to consider
the Georgia-Pacific factors, which is a comprehensive, unprioritized, and often
overlapping list of relevant factors for a reasonable royalty calculation.
ResQNet.com, Inv. v. Lansa, Inc., 594 F.3d 860, 869 (Fed. Cir. 2010) (discussing
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Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 116 (S.D.N.Y. 1970)). The
Georgia-Pacific factors are:
1. The royalties received by the patentee for the licensing of the patent
in suit, proving or tending to prove an established royalty.
2. The rates paid by the licensee for the use of other patents
comparable to the patent in suit.
3. The nature and scope of the license, as exclusive or non-exclusive;
or as restricted or non-restricted in terms of territory or with respect
to whom the manufactured product may be sold.
4. The licensor's established policy and marketing program to
maintain his patent monopoly by not licensing others to use the
invention or by granting licenses under special conditions designed
to preserve that monopoly.
5. The commercial relationship between the licensor and licensee,
such as, whether they are competitors in the same territory in the
same line of business; or whether they are inventor and promoter.
6. The effect of selling the patented specialty in promoting sales of
other products of the licensee; that existing value of the invention to
the licensor as a generator of sales of his non-patented items; and the
extent of such derivative or convoyed sales.
7. The duration of the patent and the term of the license.
8. The established profitability of the product made under the patent;
its commercial success; and its current popularity.
9. The utility and advantages of the patent property over the old modes
or devices, if any, that had been used for working out similar results.
10. The nature of the patented invention; the character of the
commercial embodiment of it as owned and produced by the licensor;
and the benefits to those who have used the invention.
11. The extent to which the infringer has made use of the invention;
and any evidence probative of the value of that use.
12. The portion of the profit or of the selling price that may be
customary in the particular business or in comparable businesses to
allow for the use of the invention or analogous inventions.
13. The portion of the realizable profit that should be credited to the
invention as distinguished from non-patented elements, the
manufacturing process, business risks, or significant features or
improvements added by the infringer.
14. The opinion testimony of qualified experts.
15. The amount that a licensor (such as the patentee) and a licensee
(such as the infringer) would have agreed upon (at the time the
infringement began) if both had been reasonably and voluntarily trying
to reach an agreement; that is, the amount which a prudent licensee—
who desired, as a business proposition, to obtain a license to
manufacture and sell a particular article embodying the patented
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invention— would have been willing to pay as a royalty and yet be able
to make a reasonable profit and which amount would have been
acceptable by a prudent patentee who was willing to grant a license.
Georgia Pacific, 318 F. Supp. at 1120.
The court’s reasoning in Lucent Technologies illustrates the application of
the Georgia-Pacific factors in a case with a fact pattern similar to the case before
the Court. 580 F.3d 1301. In Lucent Technologies, the Federal Circuit was asked
to determine whether a jury award on damages was supported by substantial
evidence. Id. at 1323–24. There, the Federal Circuit concluded that the award was
not. Id. at 1324. In reaching this conclusion, the Federal Circuit first discussed the
general rules in establishing a reasonable royalty for the purposes of calculating
damages, highlighting particularly the burden on the patentee in proving damages.
Id. It explained that, even though determining a reasonable royalty rate under the
hypothetical negotiation “involves an element of approximation and uncertainty”
the evidence did not warrant the jury award. Id. at 1325. One key issue was the
comparability of licenses the patentee presented to evidence an established
royalty.
The Federal Circuit found that “some of the license agreements [were]
radically different from the hypothetical agreement” and “the other agreements,
[the court was] simply unable to ascertain from the evidence presented the subject
matter of the agreement.” Id. at 1327–28. The Federal Circuit also took issue with
the jury award because of the “glaring imbalance between infringing and noninfringing features.” Id. at 1333.
There, the court characterizes the infringed
feature as a minor aspect of the much larger product. Id. The Federal Circuit
concluded that they were “left with the unmistakable conclusion that the jury’s
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damages award [was] not supported by substantial evidence, but [was] based
mainly on speculation and guesswork.” Id. at 1335. Lucent Technologies teaches
that a damages award must be based on more than speculation and basing a
damages award on a record that lacks sufficient evidence will not be upheld.
2. Book of Wisdom
As explained above, the hypothetical negotiation theory of damages requires
a degree of flexibility because courts can and sometimes must rely on facts that
came into existence after the hypothetical negotiation. This concept has been
referred to as the “book of wisdom.” Sinclair Refining Co. v. Jenkins Petroleum
Process Co., 289 U.S. 689, 698 (1933). Some cases discussing the book of wisdom
hold a reasonable royalty can be based on facts and circumstances that did not
exist, but which could have been predicted at the time of the hypothetical
negotiation while other cases say future facts and circumstances need not have
been predictable. Compare Unisplay, S.A. v. American Elec. Sign Co., 69 F.3d 512,
518 n.9 (Fed. Cir. 1995) (“The trial court properly instructed the jury to base its
verdict on actual sales, not projected sales.”) with Interactive Pictures Corp. v.
Infinite Pictures, Inc., 274 F.3d 1371, 1385 (Fed. Cir. 2001) (expected sales figures
in the infringer’s business plan, which bears some relationship to actual sales, in
existence around the time of the hypothetical negotiation was not speculative and
“sales expectations at the time when infringement begins as a basis for a royalty,
as opposed to an after-the-fact counting of actual sales,” was proper, as the actual
sales could not have been known at the time of the hypothetical negotiation).
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The earliest discussion of reliance on post-hypothetical negotiation
evidence in calculating damages was by Judge Cardozo in Sinclair Refining Co.,
289 U.S. 689. In Sinclair, the Court held that “[t]he use that has been made of the
patented device is a legitimate aid to the appraisal of the value of the patent at the
time of the breach.”
Id. at 697.
The Court explained that post-infringement
evidence may correct “uncertain prophecy.” Id. at 698. In narrowing the use of
this evidence, the Court also stated that “[t]o correct uncertain prophecy in such
circumstances is not to charge the offender with elements of value nonexistent at
the time of his offense. It is to bring out and expose to light the elements of value
that were there from the beginning.” Id. Sinclair contemplates consideration of
elements of value neither known nor predicted by the parties to the hypothetical
negotiation to compensate for the unauthorized use of a nascent patented
invention.
In Fromson the Federal Circuit stated that:
The methodology encompasses fantasy and flexibility; fantasy
because it requires a court to imagine what warring parties would have
agreed to as willing negotiators; flexibility because it speaks of
negotiations as of the time infringement began, yet permits and often
requires a court to look to events and facts that occurred thereafter
and that could not have been known to or predicted by the
hypothesized negotiators.
853 F.2d at 1575 (emphasis added). The “that could not have been known to or
predicted” language was dicta as it was not supported by any citation nor did the
facts in that case actually apply post-negotiation facts that the parties did not know
or could not predict at the time of the negotiation. Rather, the case was remanded
for the purpose of allowing the district court to consider post-hypothetical
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negotiation facts. Id. at 1578. In reaching this conclusion, the Federal Circuit cited
to Trans-World Mfg. Corp. v. Nyman & Sons, Inc., 750 F.2d 1552, 1568 (Fed. Cir.
1984).
Before remanding, the court provided guidance to the district court,
explaining that the book of wisdom is particularly suited to the determination of a
reasonable royalty years after the infringement began when elements of value,
present at the time of the hypothesized negotiation, are known, even if specific
subsequent events could not have been predicted.
In Trans-World, the Federal Circuit held that the district court erred in
excluding post-hypothetical negotiation information in its entirety. Id. at 1568.
However, the Federal Circuit also stated that “we express no opinion concerning
the weight, if any, to be given such evidence or any conditions that might properly
be imposed upon its admissions; we indicate only that we do not think the district
court should have excluded it.” 750 F.2d at 1568. Fromson and Trans-World stand
for the proposition that to fairly compensate a patentee for the value of its
misappropriated invention, a court has discretion to rely on elements of the
infringed inventions’ value, present at the time of the hypothesized negotiation,
even where subsequent events which affect their actual value were unknown and
unforeseeable by the hypothetical negotiators; and the court has discretion to
determine what if any weight to give such evidence.
Other Federal Circuit cases illustrate how post-hypothetical negotiation
evidence is relevant. For example, in Hanson v. Alpine Valley Ski Area, Inc., 718
F.2d 1075, 1081 (Fed. Cir. 1983), decided after Sinclair and TransWorld, but before
Fromsom, the Federal Circuit rejected an argument that the royalty award would
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not have allowed the infringer to make a profit, explaining that “[t]he issue of the
infringer's profit is to be determined not on the basis of a hindsight evaluation of
profits actually realized, but on the basis of what the parties to the hypothetical
license negotiations would have considered at the time of the negotiations.” Also,
in Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384 (Fed. Cir.
2001), the Federal Circuit clarified that “the negotiation must be hypothesized as
of the time infringement began.” In applying this principal, the court affirmed a jury
verdict based on projected future sales versus actual future sales where, at the
time of the hypothetical negotiation, there was evidence, or elements of value,
supporting the projected future sales. Id. at 1385. This case illustrates the point
made by the Fromsom court that the then present elements of value not the
subsequent realized value are used in applying the book of wisdom method.
Further, in 2009 the Federal Circuit cited to Sinclair in supporting its
conclusion that post-hypothetical negotiation developments can be probative in
determining a reasonable royalty rate in certain circumstances.
Lucent
Technologies, 580 F.3d at 1333–34. Though the court in Lucent Technologies cited
to Fromson’s statement that the hypothetical negotiation analysis “permits and
often requires a court to look to events and facts that occurred thereafter and that
could not have been known to or predicted by the hypothesized negotiators,” the
court in Lucent Technologies also stated that certain post-negotiation evidence
“may provide information that the parties would frequently have estimated during
the negotiation,” suggesting future events must have been predictable as opposed
to conceivable or imaginable. Id. at 1334. Future events may shed light on the
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existence and weight a hypothetical negotiator would have given to facts known at
the time.
More recently, the Federal Circuit in Aqua Shield v. Inter Pool Cover Team,
774 F.3d 766, 772 (Fed. Cir. 2014) held that the district court erred in treating actual
profits as a royalty cap, finding that “[t]hat treatment incorrectly replaces the
hypothetical inquiry into what the parties would have anticipated, looking forward
when negotiating, with a backward-looking inquiry into what turned out to have
happened.”
The Court concludes that post-hypothetical negotiation facts and
circumstances are only relevant when facts known at the time of the hypothetical
negotiation were predictive of future facts and events which later materialized.
Such predictive facts are ones which the hypothetical negotiators could have
rationally projected based on then-known facts.
In other words, the book of
wisdom does not authorize rank speculation; but authorizes instead consideration
of facts the hypothetical negotiators could have known at the time of the
hypothetical negotiation, as well as facts and events they could have reasonably
inferred or extrapolated from the known facts. Finally, future events may enlighten
the court as to the facts known at the time of the hypothetical negotiation and the
weight the negotiators may have given those facts.
B. Analysis
Prior to the July 2015 trial, Probatter submitted a trial memorandum
asserting that a just and reasonable royalty rate in this case is 10% of the revenues
generated by Sports Tutor for selling Sports Tutor’s HomePlate machines (“the
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infringing machines”). Dkt. 424. Following the 2019 trial on damages, Probatter’s
post-trial brief reduced its claim, asserting that the Court should conclude that the
reasonable royalty rate ranges between $723,591 and $1,109,181 with a most likely
outcome of the hypothetical negotiation being a royalty rate of 8% on infringing
sales, for a total award of $887,345. Pl.’s Post-Trial Br. at 22, Dkt. 564. Sports Tutor
argues that a reasonable royalty in this case is a lump sum payment of $50,000.
Def.’s Post-Trial Br., Dkt. 565.
Probatter’s request for damages based on the reasonable royalty rate theory
requires consideration of the Georgia-Pacific factors. See supra. Probatter’s posttrial brief addresses some but not all the Georgia-Pacific factors. Probatter claims
that the Court is not required to consider all of the factors, citing to Mars, Inc. v.
Coin Acceptors, Inc., 527 F.3d 1359, 1372 (Fed. Cir. 2008), mandate recalled and
reissued on other grounds, 557 F.3d 1377 (Fed. Cir. 2009)), Minco v. Combustion
Engineering, Inc., 95 F.3d 1109, 1119–20 (Fed. Cir. 1996), and SmithKline
Diagnostics, Inc. v. Helena Lab. Corp., 926 F.2d 1161, 1168 (Fed. Cir. 1991)). Sports
Tutor argues that the cases cited by Probatter do not stand for the proposition
Probatter asserts and addresses all the factors in its briefing.
The cases cited by Probatter do not stand for the proposition that district
courts are not required to consider all the Georgia-Pacific factors. First, Probatter
cites to Mars, Inc. for its pronouncement that the Federal Circuit gives broad
deference to conclusions reached by the fact finder.
(citing to Mars, Inc., 527 F.3d at 1372).
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Pl.’s Post-Trial Br. at 20
Deference to a fact finder’s factual
conclusions is not leave for the fact finder to engage in less than a complete legal
analysis. Mars, Inc. does not support Probatter’s argument.
Second, Probatter cites to Minco and SmithKline, noting that in those cases
the Federal Circuit did not engage in a factor-by-factor analysis of the evidence
presented. Pl.’s Post-Trial Br. at 20–21. In Minco, the Federal Circuit merely
summarized the key factual findings by the district court that were considered in
determining a reasonable royalty, but the Minco court did not hold that a district
court only needs to consider some of the Georgia-Pacific factors. 95 F.3d 1109.
And in SmithKline, the Federal Circuit said that the district court did consider the
Georgia-Pacific factors. 926 F.2d at 1168. Thus, Minco and SmithKline do not stand
for the proposition that this Court is not required to consider all the Georgia-Pacific
factors in determining damages.
With that said, the Court recognizes that not all the factors apply in every
case and under the facts of this case, some of the factors overlap and would afford
no weight in favor of either party. There are also instances in which there are no
facts from which a factor could be analyzed, in which case the court could not apply
it. In the interest of completeness and finality, the Court will consider each factor,
but analyze only those which apply in determining the reasonable royalty for the
use of the Patents-in-Suit by Sports Tutor, articulating whether and how they apply.
1. “The royalties received by the patentee for the licensing of the patent in suit,
proving or tending to prove an established royalty.”
The first Georgia-Pacific factor requires the Court to consider other royalties
received by Probatter for the licensing of the Patents-in-Suit, which prove or tend
to prove an established royalty. The Federal Circuit has explained that “using
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sufficiently comparable licenses is a generally reliable method of estimating the
value of a patent.” Apple Inc., 757 F.3d at 1325. “Actual licenses to the patented
technology are highly probative as to what constitutes a reasonable royalty for
those patent rights because such actual licenses most clearly reflect the economic
value of the patented technology in the marketplace.” LaserDynamics, Inc. v.
Quanta Computer, Inc., 694 F.3d 51, 79 (Fed. Cir. 2012). “When relying on licenses
to prove a reasonable royalty, alleging a loose or vague comparability between
different technologies or licenses does not suffice.” Id. Even when a past license
is not identical to what the outcome of the hypothetical negotiation was going to
be, a court may still consider the past license but “must account for [evidence
presented of] the differences in technologies and economic circumstances of the
contracting parties.” Virnetx, Inv. v. Cisco Systems, Inc., 767 F.3d 1308, 1330 (Fed.
Cir. 2014).
The parties set forth several commercial agreements between Probatter and
third parties for the purpose of proving an established royalty for the Patents-inSuit. However, as detailed below, none of the agreements are principally a license
agreement, nor is the economic substance of any of the underlying business
transactions comparable to a license that would have resulted from the
hypothetical negotiation.
a. Sports Attack Agreement
Sports Tutor asks the Court to consider a 2008 agreement between Probatter
and Sports Attack, LLC (“Sports Attack”) as a comparable license to the license
that would have resulted from the hypothetical negotiation. Sports Attack and
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Probatter entered into a written agreement (the “Sports Attack Agreement”),
wherein the signatories characterize it as a “joint collaboration” agreement. Def.’s
Ex. DA. Generally, under the Sports Attack Agreement, Probatter agreed to provide
consulting services to Sports Attack in its continued development of a three-wheel
pitching machine known as the E-Hack Attack machine. Id. In addition, Probatter
granted Sports Attack a “royalty free license” to all of its patents for programmable
pitching machines “subject to entering into an appropriate license agreement.” Id.
The parties never entered into a separate license agreement. In exchange for the
consulting services and the royalty free license, Sports Attack agreed to sell EHack Attack machines to Probatter “at its lowest dealer or ‘favored customer’
price.” Id.
In addition, Probatter would be the exclusive provider of video
technology for the machine developed by their joint venture for at least two years,
provided Probatter purchased 5 machines from Sports Attack within the twelve
months after the product became available on the market. Id. Sports Attack’s
representative testified that Probatter’s motivation in entering into the Sports
Attack Agreement was “to reduce their cost and to provide a better system for their
marking, they wanted to secure another pitching machine for the company who
could affordably make them and was in the business.” Tr. 10/31/2019 at 152.
Relevant to the discussion of the Sports Attack Agreement is how the Sports
Attack Agreement first came before the Court. As stated above, the issue of
damages in this case has spanned years. Probatter presented its case-in-chief on
the issue of damages in 2015. However, Sports Tutor was not prepared to present
its defense to Probatter’s case because Probatter failed to give proper notice of its
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method of calculating damages and the factual basis for its damages claim.
Damages Disc. Dec. After the 2015 trial, the Court decided an award of damages
was warranted and the prejudice to Sports Tutor from Probatter’s untimely
disclosure would be cured by giving Sports Tutor additional time to conduct
discovery on the issue of damages. Id. When Sports Tutor did, it uncovered the
Sports Attack Agreement and filed a motion to exclude all evidence and argument
concerning damages based on Probatter’s failure to produce it. Dkt. 511. The
Court issued a decision on Sports Tutor’s motion finding that the parties to the
Sports Attack Agreement intended to be bound by the Agreement, that the Sports
Attack Agreement by its own terms, included a license, and ordered Probatter to
pay all reasonable legal fees and costs incurred by Sports Tutor occasioned by its
failure to disclose the Sports Attack Agreement. Dkt. 535.
With that said, Probatter did not present evidence relating to the Sports
Attack Agreement in its case-in-chief. Rather, Sports Tutor presented the Sports
Attack Agreement in its defense. In its post-trial briefing, Probatter argues that the
Sports Attack Agreement should not be considered by the Court in formulating the
reasonable royalty rate because it is radically different from the hypothetical
negotiation. In attempting to prove a ‘radical’ difference, Probatter first states that
the Sports Attack Agreement is a “joint collaboration agreement,” unlike what the
result of the hypothetical negotiation would have been, which is a legal right to sell
what would otherwise be an infringing product. Sports Tutor’s expert argued that
the Sports Attack Agreement is the most comparable license because it involved
the Patents-in-Suit. Further, Sports Tutor’s expert opined that the Sports Attack
19
Agreement had a value of $7,139, which represented the sum total of the discount
Probatter received from purchasing four E-Hack Attack machines from Sports
Attack pursuant to the agreement.
The Court agrees with Probatter, the Sports Attack Agreement is not
comparable. This is because the Sports Attack Agreement is not primarily a license
for Sports Attack to sell machines with the patented features. It is primarily a
research and development joint venture agreement. Its object is for the parties to
develop a new ball throwing machine compatible with Probatter’s video
technology.
In furtherance of that objective, the parties agree to share their
respective technologies. The object of the agreement was not to license the
Patents-in-Suit to Sports Attack for its own commercial exploitation. The licenses
are integral to the research and development objective of the agreement.
Even if the Sports Attack agreement was principally a license, it would not
be comparable because Probatter licensed all its pitching machine patents, not just
the Patents-in-Suit and has introduced no evidence apportioning the value among
the various unidentified patents licensed.
Even if the Court could find that the Sports Attack Agreement is at all
comparable, the Court has been provided insufficient evidence to account for the
differences between the Sports Attack Agreement and the hypothetical negotiation.
Insufficient evidence was presented on the value of the licenses contemplated
under the Sports Attack Agreement as opposed to the research and development
collaboration and the exclusivity provision.
20
Sports Tutor’s expert attributes a value of $7,139 to the joint collaboration
agreement, but his reasoning is flawed for three reasons. First, the value Sports
Tutor’s expert found was based solely on one part of the equation: the discounted
price. However, as detailed above, Probatter both gave and received additional
consideration. Second, Sports Tutor’s expert’s valuation provides a valuation of
all the included patents, not just the Patents-in-Suit.
The Court could only
impermissibly speculate the portion of the value attributable to the Patents-in-Suit.
Third, Sports Tutor’s expert’s valuation is based on the actual outcome of the
agreement and not what the parties to the agreement contemplated. What the
parties contemplated at the time they entered the agreement is a better
representation of value for the sake of determining an established royalty than the
actual result from a particular agreement. This is even more apparent here, where
it appears just based on the face of the agreement, that it did not materialize as
intended. The Sports Attack Agreement contemplated a discounted rate only if
Probatter bought at least five E-Hack Attack machines in a 12-month period.
However, Probatter never reached that threshold, having only bought 4 E-Hack
Attack machines over the life of the agreement.
In addition, the Sports Attack Agreement contemplated the creation of “an
appropriate license agreement,” which never materialized. In fact, Probatter did
not even monitor Sprots Attack’s use of the Patents-in-Suit. When it tested the
prototype developed under the agreement Probatter did not even attempt to
determine whether it incorporated the Patents-in-Suit, undermining the argument
Probatter assigned any value to them. Thus, the Court cannot find that the actual
21
value of the agreement is indicative of the intended value of a license to the
Patents-in-Suit.
For the foregoing reasons, the Court finds the Sports Attack Agreement is
not comparable to a license of the infringed patents derived from a hypothetical
negotiation. To the extent it may be comparable its value is not ascertainable from
the record before the Court and arguably negligible.
b. Battersby Security Agreement
The next agreement presented for consideration is a 2002 security
agreement between Greg Battersby, a then-owner of Probatter, and Probatter (the
“Battersby Security Agreement”). Def.’s Ex. DB. Pursuant to that agreement,
Battersby loaned $100,000 to Probatter and guaranteed an additional $200,000 of
Probatter debt in return for a pledge of “all assets of [Probatter] now owned or
[t]hereafter acquired” and “all proceeds of any of the foregoing after acquired
property and accounts.” Id. The Battersby Security Agreement was recorded with
the Patent and Trademark Office (“PTO”), which shows that at the time of the
agreement Probatter owned the ‘649 patent but not the ‘924 patent. Id., McLean
Report at 28. Thus, the agreement could only be instructive of the value of a
license on one of the Patents-in-Suit, the ‘649 patent.
The Security Agreement is not a proxy for determining a reasonable royalty
because it was not comparable in purpose. The Battersby Security Agreement
incorporates by reference a Guarantee and Indemnification Agreement, that
separately states that “Probatter is unable to meet its obligation to refinance an
existing loan in the amount of $100,000 from Cornerstone Bank . . . and has been
22
guaranteed by Battersby and Charles Grimes.” Id. Consequently, the purpose of
the Security Agreement was not to enable Battersby to exploit the Patents-in-Suit.
Probatter argues that the Court should conclude that the Battersby Security
Agreement is not sufficiently comparable to a license agreement reached through
a hypothetical negotiation and thus provides no basis to determine the reasonable
royalty rate. To support this conclusion, Probatter points out that the ‘924 patent
was not accounted for in this agreement. Probatter also argues that the Battersby
Security Agreement was not an arms-length negotiation evidenced by Mr.
Battersby’s interest in Probatter. Sports Tutor argues that the Battersby Security
Agreement at least provides a ceiling of the value of the Patents-in-Suit.
The Security Agreement was not the product of two willing parties as
contemplated by the hypothetical negotiation theory. Mr. Battersby was an owner
of Probatter. Tr. 11/1/19 at 24 (Pellegrino). Probatter was insolvent and unable to
pay its debt guaranteed by Battersby. Def.’s Ex. DB. He entered into the Security
Agreement, not to acquire use of the Patents-in-Suit, but to salvage his investment
in Probatter, stave-off a call on his guarantee and preserve the viability of Probatter
in hopes of obtaining a return on his investment. Consequently, he was acting in
his own financial interest irrespective of the value of the Patents-in-Suit.
The Security Agreement was issued to secure Probatter’s debt. A lender is
concerned that the total package of security and guarantees equal or exceed their
debt. Thus, the value of the collateral pledged reflects the amount of debt Probatter
owed, not the value of the Patents-in-Suit; and there is no evidence the debt
Probatter owed bore any relationship to the value of the Patents-in-Suit.
23
The ‘924 Patent was not issued at the time the Security Agreement was
negotiated and signed. While it is entirely possible Battersby and Probatter
expected the Patent and Trademark Office (“PTO”) to issue the ‘924 Patent and
thus it is not unreasonable to infer the value of the collateral assumed the issuance
of the patent, quite possibly with some discount attributable to the risk that a patent
would not issue. This inference would however require the Court to speculate
impermissibly as there is no evidence on the record to support this was a
consideration. In fact, there is no evidence the value of the Patents-in-Suit bore
any relationship to the amount of debt Probatter assumed and Battersby
guaranteed.
On the contrary, the nature, substance and circumstances of the transaction
does not suggest the amount of debt secured and money loaned was reflective of
or based on the value of the Patents-in-Suit. ProBatter had other assets, including
lucrative video patent and patent application, the ‘134 and ‘512 patents. The video
patents were Probatter’s principle product and there is no evidence distinguishing
the value of the video patents from the value of the Patents-in-Suit.
In sum, the Security Agreement did not have the same object as, was not
valued like, and is thus not comparable to a license. Second, because Battersby
was granted an interest in all Probatter’s assets, its monetary value is overly
inclusive and there are no facts on the record from which the Court could credibly
attribute any particular portion of its value to the Patents-in-Suit.
The Court finds the Battersby Security Agreement does not prove or tend to
prove a reasonable royalty for the Patents-in-Suit.
24
c. Joyner Settlement Agreement
The next agreement before the Court is a settlement agreement between
Joyner Technologies, Inc. (“Joyner”) and Probatter, hereinafter referred to as the
“Joyner Settlement Agreement.”
Joyner was Probatter’s competitor in the video market. Tr. 10/31/2019 at 72.
Joyner is owned and operated by James Joyner, the business is conducted out of
Mr. Joyner’s home in Georgia, and Mr. Joyner does not have any employees. Tr.
10/31/2019 at 71, 141–42.
In May 2005, Probatter filed suit against Joyner in the District of Iowa alleging
patent infringement on its ‘134 patent and ‘512 patent. Def’s Ex. BW. These are
patents for video display features, not the dynamic braking features at issue here.
Tr. 10/31/2019 at 48–49 (Battersby). In December 2005, Probatter filed a second suit
against Joyner, this time in the District of Connecticut, alleging patent infringement
on the Patents-in-Suit. Def.’s Ex. BW. Probatter also filed lawsuits against Joyner’s
customers in several jurisdictions throughout the country claiming infringement of
its patents. Tr. 10/31/2019 at 71; Def.’s Ex. BV. In the action relating to the Patentsin-Suit, Joyner filed a counterclaim seeking declaratory judgment of noninfringement, invalidity, and/or unenforceability. Id. Probatter filed a motion to
dismiss the counterclaim for lack of jurisdiction. Id.
In June 2006, Joyner and Probatter executed a mutual “Covenant Not to Sue”
in the action relating to the Patents-in-Suit.
Def.’s Ex. BW.
In the covenant,
Probatter agreed not to prosecute the action against Joyner for infringement of the
Patents-in-Suit in exchange for Joyner withdrawing its counterclaim. Id. The
25
covenant applies only to the use, purchase and sale of the Patents-in-Suit. Id. It
also called for withdrawal of all lawsuits against Joyner’s customers. Id. There
was no monetary or other quantifiable consideration for the mutual covenants, and
they did not resolve or have any relationship to a later settlement of Probatter’s
separate claim that Joyner was infringing its ‘134 and ‘512 patents. Id.
Over a year later in October 2007, Joyner and Probatter executed a
“Settlement Agreement,” resolving a separate case in which Probatter claimed
Joyner infringed upon Probatter’s video display patents.
Def.’s Ex. BV; Tr.
10/31/2019 at 75, 78. The Joyner Settlement Agreement resolved the patent
infringement case involving the ‘134 and ‘512 patents, not the Patents-in-Suit. The
Joyner Settlement Agreement clearly does not affect the Patents-in-Suit, in that it
expressly states that it does not supersede the 2006 covenant. Def.’s Ex. BV.
Under this settlement agreement Joyner agreed to, inter alia, (1) not sell its video
machine design in connection with any machine other than the infringing machine
for 18 months, (2) pay $60,000 for “all past claims,” and (3) pay 7.5% of its gross
revenues from the sale or lease of its video machines and pitching machines with
its video machine until May 2012 or up to $425,000, whichever comes sooner. Id.
In exchange, Probatter agreed to dismiss its ‘134 and ‘512 patent action against
Joyner as well as the lawsuits against Joyner’s customers, and Probatter agreed
to release Joyner and related parties from any and all claims. Id.
Probatter argues that the Court should conclude that the Joyner Settlement
Agreement is sufficiently comparable to allow the Court to determine a royalty for
the Patents-in-Suit. Probatter points to its expert’s testimony that the Joyner
26
Settlement Agreement is the one license that is more comparable than the others
because Joyner agreed to pay 7.5% royalty of the infringing machines at issue in
this case. This argument ignores the fact that settlement resolved the litigation
over, and licensed the use of, the video patents not the Patents-in-Suit. In addition,
the video patent litigation settlement was reached over a year after the dynamic
breaking litigation settlement over the Patents-in-Suit and there is nothing in the
record to suggest a nexus between the settlements.
The Court cannot equate these sets of patents, and neither could the parties
to the Joyner Settlement Agreement based on the fact that there were two lawsuits
addressing these sets of patents separately, there were two agreements
addressing these sets of patents separately, and the two sets of patents reflect
entirely different features. The video patents and the Patents-in-Suit are not the
same. It is also clear that the dynamic braking of the Patents-in-Suit and the video
display had different pricing structures. The pricing structure of Joyner’s video
pitching machines is more than $40,000, where the pricing structure for Sports
Tutor’s non-video pitching machines is less than $7,000. Pellegrino Report at 24–
25.
The Court finds Probatter has failed to establish the video patents and the
pitching machine patents are comparable.
Further, the Joyner Settlement Agreement is not a proxy for an arms-length
negotiation of a royalty for the Patents-in-Suit. The very nature of a settlement
agreement is distinct from an arms-length negotiation on which the hypothetical
negotiation is based. See Uniloc USA, Inc. v. Microsoft Corp., 632 F. Supp. 2d 147,
159 (D.R.I. 2009) (“settlements offered, negotiated or made under threat of litigation
27
are generally not considered probative of a reasonable royalty because in the usual
course they do not provide an accurate reflection of what a willing licensor would
do in an arm's length transaction.”) (citing to Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075, 1078–79 (Fed. Cir. 1983)). Both parties to the Joyner Settlement
Agreement had incentives to pay more or accept less than what the reasonable
royalty was at the time. For example, Mr. Joyner was facing the reality of litigation
far from his home-office in Georgia and likely did not have the means to fund a
protracted litigation even if he would have been successful in his counterclaims
and defenses. He also had an interest in preserving his business reputation and
client base by having the suits against his customers withdrawn. Probatter also
had an interest in ensuring the court did not rule against them on the validity of the
Patents-in-Suit in advance of this case against Sports Tutor. The experts did not
quantify the impact of these external considerations on the amount of the
settlement.
In summary, even if the patents affected by the Joyner Settlement Agreement
were limited or similar to the Patents-in-Suit, the circumstances surrounding the
formation of the agreement create too many unknown variables for the Court to
properly rely on it as evidence of an established royalty. The Court finds that the
Joyner Settlement Agreement does not prove or tend to prove an established
royalty for the Patents-in-Suit.
The Joyner Settlement Agreement does tend to support the Probatter would
have been willing to enter into a royalty based on a percentage of total revenue,
which was one of the aspects of the Joyner Settlement Agreement. As detailed
28
above the video patents were much more valuable than the Patents-in-Suit, which
is evidenced by the very different pricing structures and by the fact that Probatter
only entered into a monetary settlement for the video patents and not the Patentsin-Suit. Thus, the Joyner Settlement Agreement in principle, which included inter
alia a capped 7.5% royalty on total revenues, is the ceiling of what the hypothetical
negotiation would have yielded.
2. “The rates paid by the licensee for the use of other patents comparable to
the patent in suit.”
The second Georgia-Pacific factor requires the Court to consider rates
Sports Tutor paid for the use of other patents comparable to the Patents-in-Suit.
The only somewhat relevant transaction would be the 2002 Scott Patent
Purchase.
The Court addressed the incomparability of this machine to ones
incorporating the Patents-in-Suit in its infringement decision ad recites only those
facts essential to the issue of damages. In 2002, approximately one year before
infringement began, Sports Tutor purchased a patent from Jack Scott (the “Scott
Patent”) for $10,000. Pl.’s Ex. 77I; Def.’s Ex Z; Pellegrino Report at 29; Tr. 7/14/15
at 39. The Scott Patent was granted on July 22, 1997 and was for a three-wheeled
pitching machine. Def.’s Ex. Z. However, the Scott Patent makes no mention of
regenerative braking or the benefits of rapidly decelerating wheel speeds. Tr.
7/14/2015 at 39–40.
In addition to the Scott Patent, Sports Tutor purchased a pending patent
application (“Scott Application”) for a baseball pitching system from Scott for
$40,000.
Pellegrino Report at 29; Pl.’s Ex. 77M.
29
The Scott Application was
ultimately abandoned. Pl.’s Ex. 77M. The sum total paid for the Scott Patent and
the Scott Application (collectively “Scott Patent Purchase”) was $50,000.
Probatter argues that the Court should not consider the Scott Patent
Purchase as a comparable for two reasons. First, Probatter argues the Scott Patent
Purchase was not given any economic value by Sports Tutor’s expert.
More
specifically, Probatter’s expert stated in his report and during his testimony that
Sports Tutor’s expert did not consider circumstances other than the price paid in
determining the value of the Scott Patents. McLean Report at 29; Tr. 11/1/19 at 144.
The Court does not find that this justifies not considering the Scott Patent
Purchase in its entirety.
Probatter’s argument about Sports Tutor’s expert’s
valuation generally tries to point to what is missing but does nothing to fill the
gaps. Sports Tutor’s expert did not discuss how the Scott Patent Purchases were
made in the absence of extraordinary circumstances that would affect the value of
the agreement. But there is no reason in the record to think such circumstances
existed. Probatter has the burden of proof and has not proven an extraordinary
circumstance affecting the face value of the Scott Patent Purchases. Therefore,
the Court finds that the value given to the Scott Patent Purchases is $50,000.
Second, Probatter generally argues that the Scott Patent is not comparable
to the Patents-in-Suit because unlike the Patents-in-Suit: (i) they did not receive
industry praise, (ii) they had not been copied by third parties, (iii) they had never
been practiced, and (iv) they never enjoyed commercial success. Consequently,
the Scott Patent features were not as valuable as the Patents-in-Suit. The Court
agrees that the patented features in the Patents-in-Suit are more valuable than the
30
patented features in the Scott Patent. The Court has already found that the Patentsin-Suit satisfied a long felt need for a ball-throwing machine that could generate
any pitch, at any speed, at any location within a very short time frame. Validity Dec.
Sports Tutor did not provide any evidence that would allow the Court to compare
the patented features in the Scott Patent Purchase and the features to the Patentsin-Suit. Without such evidence, the Court cannot discern how the value of the Scott
Patent Purchase compares to the value of the hypothetical negotiation.
There is another key distinction between the license that would have
resulted from the hypothetical negotiation and the Scott Patent, which is that
through the Scott Patent purchase Sports Tutor became the owner of the Scott
Patent and the Scott Application. The hypothetical negotiation would have resulted
in a simple license.
Actual ownership of the patent would be more valuable
because the purchaser has rights over the patent that a licensor does not. A
license can also be of limited duration and it need not be exclusive while the owner
of a patent has exclusive ownership for the life of the patent unless it chooses to
monetize the patent by issuing a license.
Neither party presented evidence
explaining the difference in value between a purchase and a license other than to
simply point out that they are different.
Without evidence on how the patented features at issue compare to the Scott
Patent Purchase or evidence on the difference in value of a patent purchase versus
a patent license, the Court does not have sufficient evidence to determine if the
Scott Patent Purchase is comparable or how to account for differences. No other
potential transaction related to this factor has been presented to the Court.
31
The Court also questions the comparability of the Scott assets to the
Patents-in-Suit. Had they been comparable it is irrational for Sports Tutor to have
infringed and persisted in infringing on the Patents-in-Suit, pursued the matter
before the PTO, and litigated this case for so many years if it had a viable
alternative. The Court is dubious the parties would have incurred the cost of
litigating and administratively disputing validity and infringement of the Patentsin-Suit for more than a decade if Sports Tutor believed they were comparable and
a license was only worth $50,000.
Finally, the testimony and evidence introduced at trial and the physical
characteristics of the Scott machine cast critical doubt on the proposition that the
Scott patents had any value. This conclusion is further supported by the fact that
the Scott machine sat outside under a tarp for several years. That is not the way
an object of value would be stored.
Therefore, because there are no other comparable patents to determine rates
paid by Sports Tutor, the Court finds that the second Georgia Pacific factor does
not support either parties proposed reasonable royalty calculations.
3. “The nature and scope of the license, as exclusive or non-exclusive; or as
restricted or non-restricted in terms of territory or with respect to whom the
manufactured product may be sold.”
The third Georgia-Pacific factor requires the Court to consider the nature and
scope of the license. “Non-exclusive licenses generally command lower royalties.”
Lucent Techs., Inc., 580 F.3d at 1335. Here, as detailed above, none of the proffered
agreements are a comparable license to what the hypothetical negotiation would
have yielded. However, the most arguably analogous agreements would be the
32
Sports Attack Agreement and the Joyner Settlement Agreement.
Neither
agreement contemplated creating an exclusive license. To the contrary, Probatter
was free to license the Patents-in-Suit following both agreements. Therefore, the
third Georgia-Pacific factor suggests that the hypothetical negotiation would have
yielded a non-exclusive license, supporting a lower royalty.
4. “The licensor's established policy and marketing program to maintain his
patent monopoly by not licensing others to use the invention or by granting
licenses under special conditions designed to preserve that monopoly.”
The fourth Georgia-Pacific factor requires the Court to consider Probatter’s
established policy and marketing to maintain the Patents-in-Suit. “In terms of
hypothetical negotiation, if the patent owner had a policy of not licensing the
patent-in-suit, the patent owner would not have been a "willing licensor" at the time
of the negotiation. This would mean that the infringer would have had to pay a
higher royalty rate to induce the patent owner to ignore the policy and license the
patent.” Patent Damages Law and Practice § 3:24.
Three pieces of evidence tend to suggest that Probatter did not maintain a
policy of protecting its monopoly over the Patents-in-Suit: (1) the Joyner Covenant
Not to Sue, (2) the Sports Attack Agreement, and (3) Probatter’s accessory
infringement of its own patents.
a. Joyner Covenant Not to Sue
As explained in greater detail above, Probatter brought two suits against
Joyner; one for infringement of the Patents-in-Suit and one for infringement of the
video patents. The suit involving the Patents-in-Suit settled through a covenant
not to sue, where Probatter agreed to not sue Joyner for the use of the Patents-in-
33
Suit in exchange for Joyner withdrawing its counterclaims against Probatter. The
suit involving the video patents settled, where Probatter would receive a large
monetary sum from Joyner for the use of the video patents. The two outcomes of
the two suits when juxtaposed shows that the Patents-in-Suit have a negligible
value when compared to the video patents and Probatter was more inclined to
exact monetary value for the use of the video patents and not the Patents-in-Suit.
This shows that Probatter was less inclined to protect its property interest in the
Patents-in-Suit.
b. Sports Attack Agreement
In addition, Probatter’s conduct during the joint collaboration agreement
with Sports Attack further shows that Probatter was not inclined to protect its
rights in the Patents-in-Suit. The Sports Attack Agreement expressly contemplated
the creation of “an appropriate license.” Def.’s Ex. DA. When the E-Hack Attack
machine was created and given to Probatter to test, neither the President of
Probatter nor Probatter’s engineer bothered to determine if the machine used the
Patents-in-Suit. Tr. 10/31/2019 at 100–02, 113. Rather, Probatter only tested if the
E-Hack Attack machine properly synchronized with the video technology. Id. at
114–15. This suggests Probatter was not interested in exercising property interest
over the use of the Patents-in-Suit.
Probatter never entered into the “appropriate license” contemplated by the
Sports Attack Agreement even though Sports Attack was marginally successful in
selling the machine to parties other than Probatter. The evidence shows that
Sports Attack generated $1.4 million in sales on the E-Hack Attack machine and
34
Probatter did not seek to receive a royalty from Sports Attack for the use of the
Patents-in-Suit on those sales.
This tends to suggest either Probatter lacked
diligence in protecting its patent rights or Probatter did not believe it could exact a
royalty from Sports Attack for the use of the patents. Either way, this evidence
shows that Probatter did not exercise patent protection.
c. Accessory Infringement
Lastly, Probatter’s conduct in selling the infringing machine shows that
Probatter was not protecting its rights in the Patents-in-Suit. Probatter purchased
the infringing machines from Sports Tutor while the litigation was ongoing. Def.’s
Ex. Dr. In addition, while believing Sports Tutor was infringing on the Patents-inSuit, Probatter created a conversion kit that would allow owners of the infringing
machine to add Probatter’s video technology.
In essence, Probatter was an
accessory in the infringement of its own patent. This is further evidence that
Probatter was not inclined to protect its patent rights.
In summary, the third Georgia-Pacific factor weighs in favor of a lower
royalty because of Probatter’s policy, as exhibited by its conduct, in not protecting
its monopoly and rights over the Patents-in-Suit.
5. “The commercial relationship between the licensor and licensee, such as,
whether they are competitors in the same territory in the same line of
business; or whether they are inventor and promoter.”
The fifth Georgia-Pacific factor requires the Court to consider the
commercial relationship between the parties.
When the parties are direct
competitors, such factor weighs in favor of a higher royalty because the patent
35
holder would be less willing to enter into a license agreement that would take away
from its own profits. See Georgia-Pacific, 318 F. Supp. at 1123–24.
The parties are not direct competitors. At trial, Michael Suba, engineer for
Probatter, testified that Sports Tutor was a direct competitor to Probatter in the
multi-pitch programmable pitching machine market. Tr. 7/13/2015 at 118. However,
Probatter’s core competency is video systems. Tr. 10/31/2019 at 91. Probatter sells
pitching machines with video simulators attached. Id. at 142. Principally, Probatter
does not sell its own ball-throwing machine; it sells its video system attached to
ball-throwing machines made by other companies, including Sports Tutor. Id. at
34; Tr. 10/31/2019 at 84 (Battersby). Since Probatter did not sell ball throwing
machines incorporating the Patents-in-Suit principally, it was not a direct
competitor of Sports Tutor for purposes of this factor.
The parties do not contend that they are competitors. Each party’s expert
opined that the relationship between Probatter and Sports Tutor is not one of direct
competition. Pellegrino Report at 34; McLean Report at 38. Sports Tutor’s expert
opined that the relationship is more of inventor and promoter. Pellegrino Report
at 34.
The Court finds that Probatter and Sports Tutor’s commercial relationship is
not of direct competitors. This tends to support a lower royalty rate because the
license of the Patents-in-Suit would not have limited Probatter’s core business.
6. “The effect of selling the patented specialty in promoting sales of other
products of the licensee; that existing value of the invention to the licensor
as a generator of sales of his non-patented items; and the extent of such
derivative or convoyed sales.”
36
The sixth Georgia-Pacific factor requires the Court to consider the effect of
selling the infringing machines had on Sports Tutors’ convoyed sales.
Sports Tutor sold accessories for the infringing machine. Ex. 56 at 52.
Based on its September 2006 price list, it sold the following add-ons at retail price:
(1) control center for $1,995, (2) wired remote for $200, (3) protective cover for $95,
(4) extended warranties non-commercial for $300, and (5) extended warranties
commercial for $800. Id. at 39. Sports Tutor’s expert opined that these revenue
streams cumulatively represent about 5% of Sports Tutor’s total revenue.
Pellegrino Report at 37. Sports Tutor’s expert found that this factor did not weigh
in favor of either party in the hypothetical negotiation, to which Probatter’s expert
agreed. Pellegrino Report at 38; McLean Report at 39. The Court finds this factor
is neutral.
7. “The duration of the patent and the term of the license.”
The seventh Georgia-Pacific factor requires the Court to consider the
duration of the patents in suit and the term of an associated license.
Probatter’s briefing does not address this factor. Both experts agree that at
the time of the hypothetical negotiation, the remaining exclusivity period was 16
years. Pellegrino Report at 39, McLean Report at 40. This is a considerable amount
of time, which indicates that Sports Tutor would have been willing to pay a higher
royalty than wait for the patent term to expire.
With respect to the term of an associate license, Sports Tutor’s expert
discussed the Joyner Settlement Agreement, which has a term of 5 years.
Pellegrino Report at 40. Sports Tutor’s expert opined that Probatter’s bargaining
37
position as it relates to duration would have been less compared to that in Joyner
because Joyner was a direct competitor, unlike Sports Tutor. Id. Sports Tutor’s
expert concluded that this factor weighs in favor of Sports Tutor. Probatter’s expert
disagrees, finding no reason why a five-year cap would apply to this negotiation,
particularly based on the amount of time remaining on the patent term. McLean
Report at 40.
As discussed in greater detail above, the Court did not find a comparable
license.
However, as mentioned above, the Joyner Settlement Agreement
involving the video patents did have a value/time cap. The Court is not convinced
that simply because the Joyner had a value/time cap, the hypothetical negotiation
would have yielded a value/time cap. There is nothing in the record showing why
such cap was instituted in the agreement with Joyner. It is not apparent why a cap
would have been in place in the hypothetical negotiation especially because
Probatter was not selling its own pitching machine by itself and would rely on
distributors like Sports Tutor in order to receive a regular profit from the Patentsin-Suit.
Accordingly, the Court finds that the hypothetical negotiation would have
yielded a higher royalty based on the amount of time Probatter had on the patents
and that the license term would not have been limited by a value or time cap.
8. “The established profitability of the product made under the patent; its
commercial success; and its current popularity.”
The eighth Georgia-Pacific factor requires the Court to consider the
established profitability of products made with the Patents-in-Suit incorporated,
their commercial success, and its current popularity.
38
As the Court previously found:
Probatter Simulator has been a commercial success, and its success
is in some way due to the nature of the claimed invention. Probatter
has sold approximately 500 machines in 48 states and 12 countries,
and the buyers have included Major League Baseball teams,
professional baseball players, and college programs. ECF No. 455 at
88:13–90:18 (Suba Testimony); Pl. Ex. 64 (Video). Probatter Simulator
has generated approximately 20 million dollars in gross revenue, and
Probatter earns approximately 35–70% in gross profit margins from
selling its machine. ECF No. 455 at 108:6–11 (Suba Testimony).
Probatter Simulator costs significantly more than other pitching
machines, and this premium is justified by its patented features. Id. at
106:7–14.
Invalidity Dec. at 19. The Court also previously found that:
HomePlate Machines have also been a commercial success, and their
success is due to the use of Probatter’s patented technology. Sports
Tutor has sold over 2,000 machines, and the buyers have included
Major League Baseball teams, professional baseball players, and
college programs. ECF No. 455 at 224:3–21; Pl. Exs. 56 (Financials), 92
(Stipulation of Sales). HomePlate Machines generated approximately
$10 million in gross revenue, and Probatter earns at least 20–30% in
gross profit margins from selling its machine. ECF Nos. 455 at 224:16–
21 (Greene Testimony); 456 at 70:9–71:7 (Green Testimony).
HomePlate Machines cost significantly more than other Sports Tutor
machines, and “one of the reasons” justifying the significantly higher
price is the use of features patented by Probatter. ECF No. 456 at
68:21–69:12 (Greene Testimony). Probatter Simulator sells for
approximately $40,000; HomePlate Machines sold “for right around
that $5,000 price—psychological price point.” ECF No. 455 at 106:7–
13 (Suba Testimony); ECF No. 69:13–22 (Greene Testimony).
Id. at 19–20.
These findings still rein true and lean in favor of a higher royalty because the
products made with the Patents-in-Suit features incorporated were profitable to
Probatter and enjoyed commercial success.
However, the extent of this
profitability to Probatter was never established. At trial, neither party introduced
evidence of the sale price of a Probatter ball-throwing machine incorporating the
39
Patents-in-Suit.
Nor was there evidence of whether Probatter sold machines
incorporating the Patents-in-Suit without video.
As stated above, Probatter’s
primary book of business was selling video display for another company’s ball
throwing machine.
Meaning, there is no evidence to establish how much of
Probatter’s profits are attributable to the video display and how much is
attributable to the machine with dynamic breaking. In other words, Probatter’s
profits from the Patents-in-Suit are not established, leaving only Sports Tutor’s
profits for consideration.
Probatter’s proposed findings of fact and conclusions of law are replete with
calculations based on Sport’s Tutor’s profits from infringement, but it does not
show that Probatter’s profits suffered because of the infringement. Such evidence
could be critical to calculating a reasonable royalty, the measure of damages
Probatter has elected rather than lost profits. Sports Tutor’s profits alone are not
instructive.
Probatter introduced insufficient evidence establishing the profit Sports
Tutor made from selling infringing machines. Probatter cites to over 100 pages of
accounting data without any analysis and asks the Court to find that it represents
a 34% profit margin. The Court is unpersuaded that this unexplained conclusion
is correct.
Probatter’s citation to Sports Tutor’s CEO’s testimony also does not
establish the profit margin. This is because the cited testimony relates to the profit
margin goals for dealers, not Sports Tutor. Tr. 7/14/2015 at 70–71.
40
Sports Tutor’s expert testified that Sports Tutor made a profit of
approximately 10% of the sales price of each infringing machine. Tr. 11/1/2019 at
11. Because the Court does not have clear evidence to the contrary, the Court finds
that Sports Tutor enjoyed a 10% profit on the infringing machine.
Sports Tutor’s expert opined that a 10% royalty would cause Sports Tutor to
disgorge their entire profit.
Id.
Damages for the entirety of the profit of an
infringing machine is permitted under the “entire market value rule” when certain
narrow circumstances are met. LaserDynamics, Inc. v. Quanta Computer, Inc., 694
F.3d 51, 66–67 (Fed. Cir. 2012).
Where small elements of multi-component products are accused of
infringement, calculating a royalty on the entire product carries a
considerable risk that the patentee will be improperly compensated
for non-infringing components of that product. Thus, it is generally
required that royalties be based not on the entire product, but instead
on the “smallest salable patent-practicing unit.” . . .
The entire market value rule is a narrow exception to this general rule.
If it can be shown that the patented feature drives the demand for an
entire multi-component product, a patentee may be awarded damages
as a percentage of revenues or profits attributable to the entire
product
Id. The entire market value rule does not apply in this case because the infringing
feature is dynamic braking not the entire ball-throwing machine.
In addition, to the extent the measure of damages is a reasonable royalty
based on a hypothetical negotiation, it is axiomatic that no negotiator would agree
to a license fee equal to the entire profit derived from the license.
Therefore, this factor weighs in favor of a royalty of less than 10% because,
even though products with the patented features incorporated enjoyed success,
41
those features were not the sole driving feature attributable to the demand for the
product or profits from its sale.
9. “The utility and advantages of the patent property over the old modes or
devices, if any, that had been used for working out similar results.”
The ninth Georgia-Pacific factor requires consideration of the utility and
advantages of the patent technology over old modes or devices. Here, the Court
has previously found in the decision on invalidity, that “Probatter Simulator has
been a commercial success, and its success is in some way due to the nature of
the claimed invention.”
Invalidity Dec. at 19.
Further, the Court found that
“HomePlate Machines have also been a commercial success, and their success is
due to the use of Probatter’s patented technology.” Id. The Court found that
“[t]here was a long-felt need for designing a ball-throwing machine that could
generate any pitch, at any speed, at any location within a very short period of time.”
Id. at 20. Evidence was presented that the ability to throw any pitch at any speed
at any location within seven to ten seconds is beneficial. Michael Suba, engineer
for Probatter, credibly testified that:
The main thing that everybody’s impressed with is that the machine
can throw any type of pitch that an actual pitcher can throw at any
speed. It can throw to any location that the batter wants it to, and it
can do that one after another every seven to ten seconds. You can
continue to do it all day long.
Tr. 7/13/2015 at 81.
These conclusions were reached for the purpose of finding validity and
infringement, not to quantify damages. As noted earlier, Probatter’s core
competency was its video technology and Probatter sold that technology attached
42
to the ball-throwing machines of other manufacturers. The Court finds the Patentsin-Suit were not wholly responsible for Probatter’s marketing success.
Probatter offered no evidence of the contribution the Patents-in-Suit
contributed to the marketing success of its ball-throwing machines. While
Probatter did present a list of industry praise it received for its pitching machines
that contained the patented features, the praise reported does not attribute the
success to the patented features. For example, Fox Sports Network reported:
[I]t’s already a hit in the major leagues, the Yankees, the Red Sox, the
Mets, Indians, and the White Sox are all stepping up to the plate and
signing the hottest free agent in the game – the ProBatter pitching
simulator, the PX2. The unique pitching machine that has incorporated
technology and video to nearly duplicate the experience facing a real
life pitcher.”
Pl. Ex. 64. This praise focuses on the technology, equating the dynamic-breaking
and video technologies.
The Patents-in-Suit undoubtedly distinguish Probatter’s ball-throwing
machine from its competitors’. Former third baseman for the Kansas City Royals,
Kevin Seitzer, proclaimed: “It’s an incredible piece of equipment . . . it will throw 40
to 100 miles an hour and it will throw any pitch that you can possibly ask for. I mean
it is absolutely amazing . . . it’s exactly like you’re facing the guy out on the mound.”
Pl. Ex. 69. This testimonial does not quantify the value of the patented features as
compared to the other features of the machine, but it indicates the Patens-in-Suit
have substantial value, even in the absence of its other features, in particular its
video display.
Cutting at Probatter’s claim of utility is the fact that Probatter sold its video
display with machines that did not have dynamic braking. Approximately half of
43
the machines sold by Probatter did not have dynamic braking. Tr. 11/1/19 at 15–
16. This shows that while dynamic braking may have been an improvement, it was
not the kind of improvement that eliminated the market for old modes.
Based on the testimonial, the infringement and other evidence in the record,
the Court finds that the Patents-in-Suit were a material contribution to the
marketing success but not the entire basis of success.
10. “The nature of the patented invention; the character of the commercial
embodiment of it as owned and produced by the licensor; and the benefits
to those who have used the invention.”
The Court has discussed these features in its analysis of the eighth and ninth
factors.
11. “The extent to which the infringer has made use of the invention; and any
evidence probative of the value of that use.”
The eleventh Georgia-Pacific factor requires the Court to consider the extent
to which the infringer made use of the invention and any evidence probative to the
value of that use. Probatter argues that Sports Tutors profits establish the Patentsin-Suit were valuable. Sports Tutor’s expert provided in his report information
about Sports Tutor’s post-infringement sale of like-machines that did not infringe
on the patents-in-suit.
a. Sports Tutor’s Profits
Probatter argues that the Court should conclude that infringing the Patentsin-Suit proved very valuable to Sports Tutor because it allowed it to increase its
overall net operating income by $226,831 to $356,015, per year comparing the years
2011 (during infringement period) and 2017 (two years after infringement period).
Pl.’s Proposed Findings of Fact at 23. Comparing these years is misleading. 2011
44
took place eight years after infringement began, where 2017 was only two years
after the infringement ended.
Though Sports Tutor was able to release a non-infringing ball throwing
machine quickly after being enjoined, its not reasonable to believe that the new
machine’s marketing success would be comparable to the success of a machine
that had been on the market for six years longer. In addition, no evidence was
presented as to the market for ball throwing machines during those time periods
that could address how market variability impacted sales. Thus, the Court is
unpersuaded that a comparison of 2011 and 2017 sales establishes value credible
evidence.
b. Design Around
Sports Tutor’s expert explained that after the court order enjoining Sports
Tutor from selling the infringing machine, Sports Tutor redesigned their machine
and began selling those machines on the market. He argues that this is evidence
that patented features at issue here are not so valuable because Sports Tutor was
able to remove them and still sell machines at a comparable rate.
As explained more fully above, the book of wisdom does not require a court
to consider post-hypothetical negotiation evidence the parties could not have
reasonably known at the time of the hypothetical negotiation. The hypothetical
negotiation would have taken place in March 2003, which was more than thirteen
years before the introduction of the non-infringing product. There is no evidence
showing that either party knew about this design-around option at the time of the
hypothetical negotiation or that they could have known about it, especially without
45
access to the Patents-in-Suit and the intervening technological advances.
A
significant amount of time passed between the hypothetical negotiation and the
design-around during which Sports Tutor had the benefit of learning about the
technology behind the Patents-in-Suit and other technological advances. It is not
reasonable to believe the parties could have predicted this design-around option.
Further, if this design-around option was available to Sports Tutor, it defies logic
that it would have infringed and litigated this matter for so many years.
Therefore, the Court finds that the evidence relating to the design-around
does little to detract from the value of the patented features.
12. “The portion of the profit or of the selling price that may be customary in the
particular business or in comparable businesses to allow for the use of the
invention or analogous inventions.”
The twelfth Georgia-Pacific factor requires the Court to consider custom
within the relevant industry and comparable licenses or sales. Probatter did not
present evidence on this factor. Probatter’s rebuttal expert found that “this factor
provides no additional guidance here.” McLean Report at 55. Sports Tutor’s expert
reported not finding any comparable license agreements. Pellegrino Report at 62.
The Court finds this factor does not tend to establish what the hypothetical
negotiation would have yielded.
13. “The portion of the realizable profit that should be credited to the invention
as distinguished from non-patented elements, the manufacturing process,
business risks, or significant features or improvements added by the
infringer.”
The thirteenth Georgia-Pacific factor focuses on the portion of realizable
profit credited to the Patents-in-Suit. “The patentee ‘must in every case give
evidence tending to separate or apportion the defendant’s profits and the
46
patentee’s damages between the patented feature and the unpatented features.’”
Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 904 F.3d 965, 977
(Fed. Cir. 2018), cert. denied, 139 S. Ct. 1265 (2019). Here, under the facts of this
case, this type of evidence was not presented.
Factors 8 and 11 sufficiently
address the considerations relevant for factor 13.
14. “The opinion testimony of qualified experts.”
The fourteenth Georgia-Pacific factor focuses on opinions of qualified
experts. Here, Defendant offered expert testimony on damages alone and Plaintiff
offered expert testimony challenging Defendant’s expert’s opinions. The parties
offered no credible evidence of what the parties would have considered in a
hypothetical negotiation. The proffered evidence relevant to this factor is not
credible for the reasons stated above.
15. “The amount that a licensor (such as the patentee) and a licensee (such as
the infringer) would have agreed upon (at the time the infringement began)
if both had been reasonably and voluntarily trying to reach an agreement;
that is, the amount which a prudent licensee— who desired, as a business
proposition, to obtain a license to manufacture and sell a particular article
embodying the patented invention— would have been willing to pay as a
royalty and yet be able to make a reasonable profit and which amount
would have been acceptable by a prudent patentee who was willing to
grant a license.”
The fifteenth and final Georgia-Pacific factor requires the Court to consider
what a licensor and a licensee would have agreed to in a hypothetical negotiation
to license the Patents-in-Suit. Sports Tutor’s expert focuses some of his analysis
of this factor on the bargaining positions of the parties at the time of the
hypothetical negotiation. The Federal Circuit has explained that “emphasis on an
individual inventor's lack of money and manufacturing capacity can tend to
47
distinguish the respect due the patent rights of impecunious individual inventors
from that due the patent rights of well-funded, well-lawyered, large manufacturing
corporations.” Fromson, 853 F.2d at 1575. The Court does not find the bargaining
position of the parties at the time of the hypothetical negotiation favors Sports
Tutor.
The Court finds that the bargaining position, while not determinative, favors
a higher royalty. There is no evidence Sports Tutor knew Probatter’s financial
condition. The evidence suggests it would not have known because Probatter was
a private closely held company whose financial position was unlikely to be in the
public domain or the subject of public interest. Moreover, Sports Tutor offered no
evidence of its knowledge of Probatter’s financial position at the time of the
hypothetical negotiation.
In addition, Probatter was unlikely to license the Patents-in-Suit at a
depressed price to secure funding to remain in business because Mr. Battersby
was its financial deep-pocket. On the contrary, because Probatter had a financial
backer and was insolvent it is more likely Mr. Battersby would have influenced
Probatter to exact as high a royalty as it could negotiate. In addition, the industry
acceptance of the Patents-in-suit would have made a licensee desirous of
obtaining a license. For these reasons, this factor favors a higher royalty.
Aside from the relative bargaining strength, the relative bargaining position
of the parties would depend on reasons some of which are not addressed by Sports
Tutor’s expert report. Those reasons include the uniqueness of the technology
embodied in the Patents-in-Suit, the demand for the product, the ability of Probatter
48
to meet the demand and the cost of developing a competing machine with
comparable features at the time of the hypothetical negotiation cost-effectively,
and not 13 years later with the benefit of technological advances and knowledge of
the functioning of the Patents-in-Suit.
Here the evidence is that the Patents-in-Suit were embodied in a unique and
highly praised product which was in high demand. There is nothing in the record
which suggests Probatter lacked the manufacturing capacity or financial ability to
meet the market demand, thus providing an incentive to grant a license on terms
favorable to a licensee despite Probatter’s financial distress at one point in time.
Sports Tutor has presented no persuasive evidence that it could have invented
dynamic breaking and manufactured a machine which could throw the array of
pitches in rapid succession which Probatter’s ball-throwing machine could throw,
at the time of the hypothetical negotiation, much less at a cost-effective price in a
timely manner. Consideration of this factor necessarily includes all relevant
considerations made thus far and those considerations weigh in favor of Probatter.
C. Summary and Conclusion on Reasonable Royalty Rate
After carefully reviewing over fifteen years of pleadings, seven days of trial,
the parties’ post-trial briefs, and thousands of pages of exhibits, the Court makes
the following findings.
There was very little empirical evidence to aid the Court in determining what
the parties would have agreed to had they successfully negotiated a licensing
agreement just before the infringement began. Though the parties spent a great
deal of time arguing that the only agreements they had to offer were comparable to
49
a license for the Patents-in-Suit, they were unpersuasive because none of the
agreements was a license or a reasonable facsimile of a license. The agreements
presented were too unlike what the hypothetical negotiation would have yielded.
Despite the Court’s skepticism, Probatter chose to change its measure of
damages, foreclosing the designation of an expert because the oft-extended
discovery deadline had expired. In response to the Court’s express skepticism that
it could offer persuasive evidence of damages without an expert, Probatter insisted
on seeking damages measured by the reasonable royalty method, and that it did
not need a damages expert because it was confident the court would be able to
calculate damages based on the evidence it intended to present.
At this late date, reopening discovery on damages for a third time to allow
Probatter a third bite at the apple would be prejudicial to Sports Tutor, which
endured the litigation for longer than a decade. Reopening discovery would be a
waste of judicial resources, especially since the Court raised the issue at the time
Probatter insisted on changing its measure of damages. Having raised the issue
several years ago, there is no reason for the Court to believe reopening discovery
would be fruitful and neither party has asked to conduct more discovery.
Without comparable licenses, without a credible expert calculation and
explanation, and without a basis for determining how the patented features are
valued, the parties have not offered so much as a starting point for the Court to
quantify the damages to which Probatter is legally entitled. That having been said,
as an aggrieved party Probatter is entitled to some measure of damages.
50
The hypothetical negotiation likely would have resulted in a royalty rate
rather than a lump sum up front payment. That rate would not have been higher
than 10%, which was Sports Tutor’s profits on the infringing machine because the
success of the infringing machines was not entirely attributable to the Patents-inSuit. The rate also would not have been higher than 7.5%, which was the simplified
rate paid by Joyner for use of the much more valuable video patents. Probatter
would have had some leverage during the negotiation considering the amount of
time it had remaining on the Patents-in-Suit and the utility of the Patents-in-Suit
that Sports Tutor wished to incorporate in their pitching machines. However,
Sports Tutor also would have had leverage because Probatter was not successful
in manufacturing a profitable ball-throwing machine incorporating the Patents-inSuit and the best method of monetizing the Patents-in-Suit would be through
engaging in a license agreement with a company capable of profiting. Probatter
would have been more inclined to enter into a license agreement with Sports Tutor
because Sports Tutor was not its competitor and the license would not have
impacted Probatter’s core business of selling video simulators. In fact, licensing
the Patents-in-suit to Sports Tutor would have created another market for its
flagship simulator. In addition, Sports Tutor would have likely secured a lower
royalty because the license would have likely been non-exclusive or restrictive.
The Court ultimately finds that the hypothetical negotiation would have
yielded a 3.5% royalty on the total revenue Sports Tutor received for selling the
infringing machines. This ultimate conclusion pulls from all of the considerations
addressed above, by the parties in the briefing, and by the damages experts. The
51
parties have stipulated that the total amount of sales of the infringing machine is
$11,091.815.
Thus, the damages for infringement, prior to consideration of
enhanced damages and prejudgment interest, is $388,213.53.
III.
ENHANCED DAMAGES
The next issue before the Court is whether Sports Tutor should be subject
to enhanced damages for the infringement. Probatter seeks enhanced damages of
three times the amount found because, inter alia, Sports Tutor knew of Probatter’s
patents and their validity but continued to utilize those patents for thirteen years
to their benefit, only stopping when enjoined by the Court. Sports Tutor argues
that the damages should not be enhanced because, inter alia, Sports Tutor was not
aware of the dynamic braking patents at the time of copying, and thus Probatter
has not met its burden in proving subjective willfulness.
A. Legal Standard
35 U.S.C. § 284 provides that “the court may increase the damages up to
three times the amount found or assessed.” “A party seeking enhanced damages
under § 284 bears the burden of proof by a preponderance of the evidence.” Arctic
Cat Inc. v. Bombardier Recreational Prod. Inc., 876 F.3d 1350, 1371 (Fed. Cir. 2017)
(citing to Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932 (2016)).
“[A]lthough there is no precise rule or formula for awarding damages under
§ 284, a district court's discretion should be exercised in light of the considerations
underlying the grant of that discretion.” Halo, 136 S. Ct. at 1932 (internal quotation
marks omitted). As recently as 2016, the Supreme Court explained that over the
last two centuries of discretionary enhanced damages awards, the channel for
52
exercising this discretion has narrowed reserving such damages for “egregious
cases of culpable behavior,” that is “beyond typical infringement.” Id. at 1932,
1935. “The sort of conduct warranting enhanced damages has been variously
described in [the Supreme Court] cases as willful, wanton, malicious, bad-faith,
deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”
Id. at 1932. Even if a court finds egregious misconduct, the court is not required
to afford enhanced damages. WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1342 (Fed.
Cir. 2016) (citing to Halo, 136 S. Ct. at 1933)).
In measuring culpability, the court is to consider “the knowledge of the actor
at the time of the challenged conduct.” Halo, 136 S. Ct. at 1933; Polara Eng’g, Inc.
v. Campbell Co., 894 F.3d 1339, 1354–55 (Fed. Cir. 2018).
Prior to the Court’s ruling in Halo, the controlling standard was that under In
re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), which required “at least
a showing of objective recklessness.” Id. at 1371. The Court in Halo rejected the
objective recklessness standard. 136 S. Ct. at 1932; WCM Indus., Inc. v. IPS Corp.,
721 Fed. Appx. 959, 969 (Fed. Cir. 2018). Rather, “[t]he subjective willfulness of a
patent infringer, intentional or knowing, may warrant enhanced damages, without
regard to whether his infringement was objectively reckless.” Halo Elecs., Inc., 136
S. Ct. at 1932.
Prior to Halo, the Federal Circuit provided a non-exclusive list of factors
courts could use in determining whether to afford enhanced damages. Read Corp.
v. Portec, Inc., 970 F.2d 816, 826–27 (Fed. Cir. 1992). These factors are commonly
referred to as the Read factors. The Read factors are:
53
(1) whether the infringer deliberately copied the ideas or design of another;
(2) whether the infringer, when he knew of the other’s patent protection,
investigated the scope of the patent and formed a good-faith belief that it
was invalid or that it was not infringed; . . .
(3) the infringer’s behavior as a party to the litigation; . . .
(4) [the d]efendant’s size and financial condition; . . .
(5) [c]looseness of the case; . . .
(6) [d]uration of defendant’s misconduct; . . .
(7) [r]emedial action by the defendant; . . .
(8) [the d]efendant’s motivation for harm; [and] . . .
(9) [w]hether [the] defendant attempted to conceal its misconduct . . . .
Id. (internal footnotes and citations omitted).
“Because a finding of willful infringement does not command the
enhancement of damages, the Read factors, although not mandatory, do assist the
trial court in evaluating the degree of the infringer's culpability and in determining
whether to exercise its discretion to award enhanced damages at all, and if so, by
how much the damages should be increased.” WCM Indus., Inc., 721 F. App'x at
972 (citing to Read Corp., 970 F.2d 816). “Although the district court is not required
to discuss the Read factors . . . it is obligated to explain the basis for the [enhanced
damages] award, particularly where the maximum amount is imposed.” Polara
Eng'g Inc, 894 F.3d at 1355 (internal citations and quotation marks omitted). In
exercising its discretion, a district court should consider all relevant factors as they
apply to the circumstances of each case. Id.
While the Read factors are not exclusive nor required to be considered, the
Court will consider the factors to assist in explaining the Court’s rationale for
granting enhanced damages and for the amount of enhanced damages being
awarded.
54
B. Analysis
In order to determine willfulness, the Court must first determine what
conduct the Court may consider in reaching this conclusion. Sports Tutor argues
that, because Probatter did not file for a preliminary injunction at any time in this
suit, Sports Tutor’s post-filing conduct is insufficient to establish willfulness. To
support this position, Sports Tutor cites to In re Seagate Tech., LLC, 497 F.3d 1360,
1374 (Fed. Cir. 2007), where the Federal Circuit states that “[a] patentee who does
not attempt to stop an accused infringer's activities [by filing for a preliminary
injunction] should not be allowed to accrue enhanced damages based solely on
the infringer's post-filing conduct.” This citation comes from the Federal Circuit’s
discussion about what the appropriate scope of waiver of the attorney-client
privilege when the advice of counsel is used to respond to a charge of willful
infringement. Id. at 1372–75. The Federal Circuit did not cite to any authority
supporting this proposition, nor was this proposition key to its conclusion on the
unrelated issue. It would appear this language is simply dicta, but other Courts
have relied on this statement in determining enhanced damages. See Inv. Tech.
Group, Inc. v. Liquidnet Holdings, Inc., 759 F. Supp. 2d 387, 412–13 (S.D.N.Y. 2010).
However, even courts that apply this purported rule have found an exception when
a patent survived reexamination proceedings without narrowed claims. Id. at 412.
As discussed below, this exception would apply here.
Regardless, the Supreme Court in Halo was quite clear that Seagate’s test
for willfulness was unduly rigid. Halo, 136 S. Ct. at 1932. While the discussion in
Halo was centered on the misguided “objective recklessness” requirement found
55
in Seagate, the policy behind Halo guides the Court’s conclusion that a failure to
seek preliminary injunction does not wholly remove any post-filing conduct from
the Court’s decision into willfulness. However, the Court notes that other “courts
have split on whether the prohibition for enhanced damages based solely on postsuit conduct remains” post-Halo. TecSec, Inc. v. Adobe, Inc., 1:10-cv-115, 2009 WL
1233882, at *1 (E.D. Va. Mar. 14, 2019) (collecting cases for both sides).
Based on Halo and the general reasoning stated in Seagate, the Court finds
that it may take into consideration the fact that the patentee did not seek
preliminary injunction when determining whether enhanced penalties are
appropriate but the failure to seek such injunction does not prohibit the Court from
considering post-filing conduct by the infringer. This finding is consistent with
Read, where the Court is directed to consider litigation conduct of the infringer.
See Read Corp., 970 F.2d at 826–27.
The Court finds that Sports Tutor’s willful misconduct rises to the level of
the type of egregious case where enhanced damages are warranted. The Read
factors are helpful in organizing the evidence the Court considered in reaching this
conclusion and are discussed below, but the Read factors merely guided the
Court’s analysis and were not dispositive on the Court’s conclusion.
The
conclusion is reached after considering all relevant facts and circumstances and
finding that the infringing conduct was egregious beyond typical infringement.
1. Deliberate copying
The Court has previously found that Sports Tutor did copy Probatter’s use
of dynamic braking. Dkt. 468 at 20.
56
From 1991 until 2002, Sports Tutor did not manufacture a pitching
machine with dynamic braking. ECF No. 455 at 196:15–198:14 (Greene
Testimony). In January 2003, Sports Tutor’s CEO attended a trade
show where he saw the Probatter pitching machine being
demonstrated. Id. at 197:24–198:10. When he first saw Probatter’s
pitching machine, Sports Tutor’s CEO was admittedly “impressed,”
thought it was “pretty cool,” and continues to believe that to this day.
Id. at 198:15–199:1. Only after Sports Tutor’s CEO saw Probatter’s
pitching machine at the trade show in January 2003 did Sports Tutor
design its HomePlate machine with dynamic braking. Id. at 198:11–19;
ECF No. 456 at 15:22–16:8 (Greene Testimony).
Id. This evidence collectively leads to the conclusion that Sports Tutor deliberately
copied Probatter’s patented technology.
However, whether and, if so, when Sports Tutor knew the braking feature
was subject to Probatter’s patents is in dispute. The prelitigation conduct between
the parties is relevant to this discussion. Sports Tutor began selling the infringing
machine in March 2003. Pellegrino Report at 10. Five months later, in August 2003,
Probatter’s legal counsel sent a letter to Sports Tutor where it introduced Probatter
as the owner of several pitching machine patents, including the Patents-in-Suit.
Pl.’s Ex. 9. The August 2003 letter indicates that Probatter recently became aware
of Sports Tutor’s “HomePlate” machine and based on Sports Tutor’s website, said
machine is covered by certain patents. Id. Probatter’s counsel states that it
searched for patents covering that machine independently to no avail and
requested that Sports Tutor provide the patent number for the HomePlate machine
along with any technical information or specifications. Id. The letter states that
“[t]he purpose of this letter is to bring Probatter’s patent portfolio to your attention.
. . . If, after reviewing the attached material, you have any questions or would like
to discuss the differences between the HomePlate machine and the Probatter®
57
pitching systems, we would be happy to speak with either you or your patent
attorney at your convenience.” Id.
Sports Tutor sent a response to Probatter’s August 2003 letter approximately
a month later. Pl.’s Ex. 10. In the letter, Sports Tutor directs Probatter to its Scott
Patent and a 1989 patent ending in ‘060. Id. Then in November 2003, Plaintiff’s
counsel sent a letter to Sports Tutor’s CEO that references a telephone call from
September 2003, but the contents of that conversation were not provided to the
Court. Def.’s Ex. AA. The letter did not discuss the Patents-in-Suit, rather focused
on rumors that Sports Tutor was intending on competing in the video pitching
machine market though Sports Tutor claimed it was not. Id. There is nothing in
the record that shows the parties communicated with one another at any point
thereafter until the instant litigation ensued two years later.
Sports Tutor argues that the August 2003 letter did not put it on notice that
it was infringing on the patented features. The Court rejects this argument. As
stated earlier, Sports Tutor deliberately copied the braking feature after viewing
Probatter’s machine at a trade show. Sports Tutor was given copies of the Patentsin-Suit in August 2003, which included a patent for the dynamic braking. Within a
five-month period of deliberately copying the braking feature, Sports Tutor
received a copy of the patent for the feature it copied. Sports Tutor cannot now
claim it did not know that it was infringing on the Patents-in-suit.
While it is
possible that Sports Tutor did not know that it was deliberately copying the patents
owned by Probatter at the time it manufactured the HomePlate Machine, at the very
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least it knew it was infringing on the patents when it was sent copies of the Patentsin-Suit.
Deliberately copying a patent-protected feature leans in favor of affording
enhanced damages because it exhibits a willful disregard for the rights of the
patent holder.
2. Investigation Efforts and Good Faith Defenses
Sports Tutor’s conduct following the notice of alleged infringement is
relevant in determining the degree of culpability. As stated above, after receiving
the August 2003 letter, Sports Tutor sent a response attaching two if its patents.
No other evidence was presented to show what other efforts Sports Tutor took to
determine whether it was infringing on valid patents. While the Court is prohibited
by statute from considering the failure to seek or set forth as evidence of legal
advice sought; § 298; there was no other evidence presented about other
investigative efforts taken. Sports Tutor’s CEO testified that he did not believe they
violated the Patents-in-Suit because he purchased the Scott Patent and tooling that
included regenerative drives, which led him to believe he either did not violate the
patent or that the patent would be invalidated due to prior art. Tr. 7/14/2015 at 38.
However, he also testified that the Scott Patent does not explicitly say anything
about braking, let alone dynamic or regenerative braking. Tr. 7/14/2015 at 39–40,
44. There was no evidence presented that showed why Sports Tutor would think
that the dynamic braking feature it saw for the first time in 2003 and copied was
subject to its prior patents. Therefore, Sports Tutor’s CEO’s claimed belief that it
was not infringing on a valid patent is not credible.
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Further, Sports Tutor did not seek reexamination of the Patents-in-Suit until
2008, approximately five years after the initial letter and three years after the instant
litigation was brought. Pl.’s Ex. 36. The parties stipulated to the facts relating to
reexamination as follows:
In the Reexamination proceeding, the USPTO Reexamination
Examiner issued final rejections of all claims of both Patents In Suit
on June 18, 2010 (the '924 Patent) and June 18, 2010 (the '649 Patent).
Plaintiff appealed the final rejections to the Patent Trial and Appeal
Board, which reversed the USPTO Examiner, and did not find its
claims to the combination of dynamic braking with a pitching machine
unpatentable over the patents and printed publications considered of
record.
On February 14, 2012, Defendant filed two additional requests for ExParte Reexaminations of both Patents. This time, the Examiner found
no substantial new question of patentability in light of the patents and
printed publications considered of record.
As a result of these two rounds of Reexamination proceedings, two
separate Reexamination Certificates were issued with claims 25, 26,
and 27 of the ‘649 patent having been amended.
Dkt. 357-6. The Court takes into consideration the fact that the USPTO Examiner
originally rejected all claims of both Patents-in-Suit but was later reversed. The
initial rejection tends to support Sports Tutor’s claim that it had a good faith
defense to invalidity because it shows at least one USPTO examiner tended to
agree with Sports Tutor. However, this must be balanced against the fact that the
Patent Trial and Appeal Board, this Court, and the Federal Circuit all found that
such defense failed. This evidence tends to slightly support enhanced damages.
3. Litigation Conduct
In determining the degree of culpability, the conduct of the infringer during
litigation may be relevant. Probatter points to two types of conduct that it states
supports a finding that Sports Tutor’s conduct gives rise to enhanced damages.
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Probatter first claims that all of Sports Tutor’s six dispositive motions were
denied, which it believes is proof of litigation misconduct. Instead of extensively
summarizing the thousands of pages of pleadings relating to these motions, the
Court will briefly reiterate the key takeaways from these dispositive motions.
The first dispositive motion filed by Sports Tutor was a motion to dismiss
the “Second Cause of Action” of the complaint, wherein it claims that the second
cause of action asserted under the Connecticut Unfair Trade Practices Act
(“CUTPA”) failed to state a claim upon which relief may be granted. Dkt. 20, 21.
Judge Underhill, the presiding judge at the time, orally granted the motion to
dismiss without prejudice to repleading the CUTPA count.
Probatter filed an
amended complaint approximately one month later. Dkt. 71.
The second dispositive motion filed by Sports Tutor was a motion for
summary judgment generally asserting the invalidity of the Patents-in-Suit. Dkt.
50, 51. This motion was denied without prejudice in order to afford the parties the
opportunity to revisit disputed issues of fact through continual discovery. Dkt. 127.
The third dispositive motion filed by Sports Tutor was a second motion to
dismiss the second cause of action under CUTPA, with an “in the alternative”
argument for a more definite statement. Dkt. 72. The Court denied this motion.
Dkt. 125. The Court found that Sports Tutor’s argument that it should be entitled
to dismissal failed because it did not contest that the facts alleged, when taken as
true, constitute a valid claim under CUTPA, a fundamental failure. Id. The Court
also found that Sports Tutor’s request for a more definite statement was not
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required by Rule 8 and that Sports Tutor would have ample opportunity to
investigate the factual basis for the CUTPA claim in discovery. Id.
The fourth dispositive motion filed by Sports Tutor was a second motion for
summary judgment generally asserting the invalidity of the Patents-in-Suit and that
judgment on the CUTPA claim should be entered in its favor. Dkt. 172. The Court
denied this motion without prejudice to re-raising the motion after the conclusion
of the reexamination proceedings before the PTO. Dkt. 200.
The fifth dispositive motion filed by Sports Tutor was a third motion for
summary judgment generally asserting non-infringement. Dkt. 276.
The Court
denied this motion finding that Sports Tutors “only argument [wa]s meritless.”
Dkt. 439 at 3 n.2.
The sixth dispositive motion filed by Sports Tutor was a fourth motion for
summary judgment generally asserting invalidity of the Patents-in-Suit because
Sports Tutor alleged that dynamic braking had already been used on pitching
machines. Dkt. 293. The Court denied this motion because Sports Tutor’s 56(a)1
Statement was unusable as written and failed to establish there was no material
undisputed fact obviating the need for a trial. Dkt. 467. In addition, the Court found
that Sports Tutor’s motion did not address certain elements necessary to
determine invalidity. Id.
In summary, the case was poorly and inefficiently litigated. Some of the
dispositive motions filed by Sports Tutor were meritless or procedurally improper.
Other dispositive motions were dismissed on procedural grounds.
deficiencies do not rise to the level of litigation misconduct.
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These
Probatter’s second argument in establishing litigation misconduct on the
part of Sports Tutor relates to evidence Sports Tutor set forth to “trick” the Court.
This argument relates to conduct during the 2015 trial when Sports Tutor brought
to the Court a pitching machine. Sports Tutor’s CEO testified unequivocally that
the machine brought into the court for the trial was assembled in or around 1995
or 1996. Tr. 7/14/2015 at 99. However, when asked about certain labels throughout
the machine, it became clear that the machine could not have been fully assembled
during that time period, rather it was assembled sometime after 2000. Id. at 102–
06. The Court finds that Sports Tutor presented false evidence in an effort to
manufacture a prior art defense. Setting forth evidence that was clearly false in
order to avoid liability is the kind of conduct that constitutes egregious behavior
beyond mere infringement. This was particularly egregious because Sports Tutor
persistently contended that there was prior art, leave for which the Court afforded
it repeatedly the opportunity to prove, bur sports Tutor never did. On the day of
reckoning, Sports Tutor offered into evidence at trial the ball-throwing machine
which was patently not what Sports Tutor represented it to be.
The Court rejects Sports Tutor’s argument that it did not engage in litigation
misconduct because it was not subject to sanctions or Rule 11 motions. Likewise,
the Court’s restraint does not mean misconduct did not occur. Whether Probatter
should have sought or would have received sanctions is not relevant to the
determination of whether Sports Tutor engaged in litigation misconduct. While
evidence of sanctions would certainly provide additional evidence of litigation
misconduct, Sports Tutor has presented no citation as to why prior sanctions
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would be required. Such a requirement would be counterproductive to the efficient
adjudication of cases because it would require patentees to seek sanctions and
then enhanced damages for the same conduct. Sports Tutor has not provided to
the Court any legal basis for imposing such a requirement.
Sports Tutor also argues that the Court should consider Probatter’s
litigation misconduct in mitigating enhanced damages, citing to Power Mosfet
Technologies, LLC v. Siemens AG, 378 F.3d 1396, 1415 (Fed. Cir. 2004). In Power
Mosfet, the Federal Circuit states that, in the context of sanctions under Rule 11
and attorney fees under section 285, “[a] party subjected to behavior warranting an
award of sanctions or fees might justifiably be denied those fees in a district court's
discretion for the behavior to which it subjected others.” Id. Power Mosfet does
not stand for the proposition that a patentee’s litigation conduct must be
considered for the purposes of enhanced damages under section 284. Sports
Tutor had the opportunity to seek sanctions and in fact did seek sanctions for
Probatter’s litigation misconduct. See Dkt. 511, 512. 1 The Court’s decision is the
law of the case on that issue. Sports Tutor is not entitled to benefit twice from the
misconduct that the Court has already addressed.
4. Sports Tutor’s Size and Financial Condition
Sports Tutor filed a motion to exclude all evidence and argument concerning
damages citing to Probatter’s failure to provide in discovery the Sports Attack
Agreement. Dkt. 512. Though Sports Tutor did not request monetary sanctions
directly, it did request sanctions in the form of excluding all evidence on the issue
of damages. Id. The Court afforded Sports Tutor sanctions, ordering Probatter to
pay all reasonable legal fees and costs incurred by Sports Tutor in connection with
the damages discovery relating to the Sports Attack Agreement. Dkt. 535.
1
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The court in Read found that the infringer’s size and financial condition is
relevant in determining enhanced damages. Read, 970 F.2d at 827. In discussing
this factor, the Court cited to Kori Corp. v. Wilco Marsh Buggies and Draglines, Inc.,
561 F. Supp. 512, 533 (E.D. La. 1982), aff'd, 761 F.2d 649 (Fed. Cir.), cert. denied, 474
U.S. 902 (1985) for the proposition that “[e]xemplary damages ‘should not unduly
prejudice the defendants’ non-infringing business.’” Read, 970 F.2d at 827.
Probatter argues that Sports Tutor sells many other product lines and no
evidence was introduced at trial to suggest its financial condition was weak.
Sports Tutor states that it is a “modestly-sized company, with no evidence of
financial distress” and concludes that this factor does not weight in favor of or
against enhancement. The Court finds Sports Tutor has failed to show enhanced
damages would not unduly prejudice its non-infringing business.
5. Closeness of the Case
The Federal Circuit has discussed some of the considerations relevant for
determining the closeness of the case such as: whether infringement was based
on the doctrine of equivalents rather than literal infringement; Funai Elec. Co., Ltd.
v. Daewoo Elecs. Corp., 616 F.3d 1357, 1376–77 (Fed. Cir. 2010); whether
infringement was determined in pre-trial motions for summary judgment; Id.; and
whether the overall evidence strongly support the patentee’s case; WCM
Industries, Inc. v. IPS Corp., 721 Fed. Appx. 959, 973 (Fed. Cir. 2018).
Here, the Court found literal infringement on a pre-trial motion for summary
judgment. Dkt. 439 at 16–20. The evidence strongly supported Probatter’s case on
literal infringement considering that Sports Tutor’s own CEO, consultant of
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baseball, and expert all admitted that the infringing machine had all the elements
of every purported infringed claim on the Patents-in-Suit. Id. at 16. The Court found
that no genuine issue of material fact remained as to whether Sports Tutor literally
infringed. Id. at 19. In addition, the Court rejected all of Sports Tutor’s invalidity
claims. Dkt 467 (holding that Sports Tutor failed to demonstrate invalidity); Dkt.
468 (holding that no claim at issue is invalid for obviousness).
Sports Tutor
appealed the Court’s decisions on invalidity, which was affirmed by the Federal
Circuit. Dkt. 471 (Notice of Appeal); 486 (Mandate). In the Federal Circuit’s decision
on the appeal, it found that “Sports Tutor did not satisfy [it’s burden of proving
obviousness] here because it failed to articulate a clear theory of obviousness.”
Fed. Cir. 16-1800, Dkt. 34-2 (Fed. Cir. Dec.). After reaching its conclusion, the
Federal Circuit stated that: “Because we conclude that Sports Tutor failed to
establish obviousness by clear and convincing evidence even without considering
Probatter’s contrary evidence, we need not address Probatter’s evidence of
objective indicia of nonobviousness.” Id. at 9.
With that said, Sports Tutor is correct that after the infringement began and
while this litigation was underway, a USPTO examiner rejected all claims of the
Patents-in-Suit. That USPTO examiner concluded there was prior art that raised a
substantial new question of patentability. Ex. 41 (Board of Patent Appeals decision
summarizing examiners conclusions). Though this decision was later reversed on
appeal, it does tend to show some closeness on the issue of invalidity.
Id.
However, the misjudgment of that examiner is to be tempered by the Boards
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reversal of that decision, this Court’s rejection of the invalidity defense, and the
Federal Circuit’s decision affirming this Court’s decision.
Therefore, the Court finds that this case was not so close to justify no
enhanced damages, yet not so clear to justify treble damages.
6. Duration of Misconduct
The next Read factor focuses on the duration of misconduct; where a long
duration tends to support enhanced damages more than a short duration. Other
Courts have found that a duration as short as 10 months and as long as 10 years
have all weighed in favor of enhanced damages. See PPC Broadband, Inc. v.
Corning Optical Communications RF, Inc., Np. 5:11-cv-761, 2016 WL 6537977, at *8
(N.D.N.Y. Nov. 3, 2016) (finding ten years of misconduct weighed in favor of an
enhancement) (citing to I-Flow Corp. v. Apex Med. Tech., Inc., No. 07cv1200, 2010
WL 114005, at *3 (S.D. Cal. Jan. 6, 2010) (finding six years of misconduct was
“substantial,” favoring enhancement); Broadcom Corp. v. Qualcomm Inc., No.
SACV 05-467-JVS, 2007 WL 2326838, at *3 (C.D. Cal. Aug. 10, 2007) (“The length of
[the infringer’s] infringement (approximately two years), coupled with the fact that
infringement continued after [the patentee] filed its suit, supports an increase in
damages.”), vacated on other grounds, 2007 WL 8030058 (C.D. Cal. Nov. 21, 2007)).
See also Milwaukee Elec. Tool Corp. v. Snap-On Inc., 288 F. Supp. 3d 872, 903 (E.D.
Wis. 2017) (finding a period of five years pre-suit and three years post constituted
a lengthy infringement); Apple Inc. v. Samsung Elecs. Co., 258 F. Supp. 3d 1013,
1034 (N.D. Cal. 2017) (finding a period of infringement of 10 to 12 months after being
put on notice of the infringed upon patent weighs in favor of enhanced damages);
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Powell v. Home Depot U.S.A., Inc., 715 F. Supp. 2d 1285, 1298 (S.D. Fla. 2010), aff'd,
663 F.3d 1221 (Fed. Cir. 2011) (finding that four year infringement period weighed
in favor of enhanced damages). Some courts have found that “continuing to sell
the infringing products after notice of infringement and during the course of
litigation supports enhancement.” PPC Broadband, 2016 WL 6537977 at *8 (citing
to Novozymes A/S v. Genencor Int'l, Inc., 474 F. Supp. 2d 592, 611 (D. Del. 2007)).
Here, Sports Tutor began infringing in March 2003. However, the Court will
only count the time in which Sports Tutor undoubtfully had notice of its
infringement, which started with the August 2003 letter as discussed above. The
infringement ended when the Court enjoined the further sale of the infringing
machine in March 2016. The time between notice of infringement and the order
enjoining future sales was over twelve years. Consistent with the above cited case
law, this duration of misconduct supports enhanced penalties.
7. Remedial Efforts
The next Read factor suggests consideration of remedial efforts taken by the
infringer. In Read, the court cited to Intra Corp. v. Hamar Laser Instruments, Inc.,
662 F. Supp. 1420, 1439 (E.D. Mich. 1987), aff'd without opinion, 862 F.2d 320 (Fed.
Cir. 1988), cert. denied, 490 U.S. 1021 (1989) in support of the conclusion that
double damages was sufficient where the defendant “voluntarily ceased
manufacture and sale of infringing systems during the pendency of this litigation.”
Here, Sports Tutor’s CEO testified in 2015 that Sports Tutor did not make any
efforts to redesign the HomePlate machine to avoid infringing on Probatter’s
patents. Tr. 7/14/15 at 28. Not until the Court enjoined the future sale of the
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HomePlate machine did Sports Tutor make an effort to redesigning the product so
it no longer infringed on Probatter’s patents.
Sports Tutor did not even begin this
process of taking remedial efforts when it lost the appeal before the Patent Board.
In addition, for more than a decade Sports Tutor insisted it was not infringing
because there existed prior art. It presented the purported prior art at trial.
Assuming it did not intentionally commit a fraud on the court, it failed to even
cursorily examine the machine on which its claim rested. The Court’s cursory
examination revealed the purported prior art did not exist at the time the
infringement began or during much of the pendency of this case.
Therefore, the Court finds that Sports Tutors failure to take any remedial
efforts supports enhanced damages.
8. Motivation
The next Read factor suggests consideration of the infringer’s motivation;
where a motivation to harm the patentee would support enhanced damages. See
Canon, Inc. v. Color Imaging, Inc., 292 F. Supp. 3d 1357, 1368–69 (N.D. Ga. 2018)
(collecting cases). When the infringer is a direct competitor, this factor generally
weighs in favor of enhanced damages. See Polara Engineering, Inc. v. Campbell
Co., 237 F. Supp. 3d 956, 993–94 (C.D. Cal. 2017), aff’d in part vacated in part, 894
F.3d 1339 (Fed. Cir. 2018).
Here, Sports Tutor and Probatter were not direct competitors. Probatter
operated in the video pitching machine marketplace primarily and Sports Tutor
only sold pitching machines.
Probatter did not address this factor, let alone
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present evidence that would tend to support a conclusion that Sports Tutor was
motivated to harm Probatter by infringing on its patents.
Therefore, the Court finds that this factor weighs against awarding enhanced
damages.
9. Concealment
The last Read factor suggests consideration of any efforts taken by the
infringer to conceal their infringement; where evidence of concealment would
support enhanced damages. Here, there is no evidence Sports Tutor tried to
conceal the infringement. Rather it is clear that they put their product and the
infringement in the open marketplace, which allowed Probatter to quickly pick up
on the infringement within months of the product entering the marketplace.
Therefore, the Court finds that this factor weighs against awarding enhanced
damages.
C. Conclusion
The Court has carefully reviewed the arguments presented by the parties,
which wholly relied on the framework of Read as outlined above. Though the Court
followed the Read framework, as did the parties, it considered all evidence
presented in the parties’ briefing and throughout the case.
After careful review of the arguments presented by the parties and the
evidence available to the Court, the Court finds that Probatter has established by a
preponderance of the evidence that Sports Tutor willfully, intentionally, and
knowingly infringed on Probatter’s patents. The infringement was deliberate.
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Sports Tutor benefited from the use of this patent for over twelve years after
receiving notice that it was infringing upon Probatter’s patents and did nothing to
remediate the infringement until enjoined by the Court.
Though Sports Tutor
claims to have had a good faith defense, such defense was unreasonable at best,
as it was only supported by a single USPTO examiner and rejected by the appeal
board, this Court, and the Federal Circuit and soundly refuted by Sports Tutor’s
physical evidence of a ball-throwing machine which was patently not prior art.
Sports Tutor has on multiple occasions filed pleadings in this case that were
meritless or so substantially procedurally improper that the Court was unable to
reach an issue on the merits. Sports Tutor presented knowingly false evidence to
the Court in an attempt to manufacture its invalidity defense.
Sports Tutor is capable of withstanding enhanced damages as a modestly
sized company with no evidence of financial distress.
With that said, this case was not so close to justify no enhanced damages
but not so clear to justify treble damages either. Further, there is no evidence that
Sports Tutor was motivated to harm Probatter nor evidence that Sports Tutor tried
to conceal the infringement.
Therefore, the Court finds that double damages is appropriate under the
facts of this case.
IV.
PREJUDGMENT INTEREST
A. Legal Standard
The Supreme Court has said that:
prejudgment interest should ordinarily be awarded. In the typical case
an award of prejudgment interest is necessary to ensure that the
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patent owner is placed in as good a position as he would have been in
had the infringer entered into a reasonable royalty agreement. An
award of interest from the time that the royalty payments would have
been received merely serves to make the patent owner whole, since
his damages consist not only of the value of the royalty payments but
also of the forgone use of the money between the time of infringement
and the date of the judgment.
Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655–56, (1983) (internal footnote
omitted).
When prejudgment interest is appropriate, it is within the court’s discretion
on how much to award in prejudgment interest. Id. at 656–57; Bio-Rad Labs., Inc.
v. Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed. Cir. 1986) (“The rate of
prejudgment interest and whether it should be compounded or uncompounded are
matters left largely to the discretion of the district court.”). “In exercising that
discretion, however, the district court must be guided by the purpose of
prejudgment interest, which is ‘to ensure that the patent owner is placed in as good
a position as he would have been had the infringer entered into a reasonable
royalty agreement.’” Bio-Rad Labs, 807 F.2d at 969.
Prejudgment interest requests generally come down to the higher-prime rate
or the lower-T-Bill rate.
While some courts have discussed evidence that a
patentee borrowed at the prime rate as relevant to determining the appropriate
prejudgment interest rate; see Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed.
Cir. 1997) (discussing trial court’s finding of a lack of evidence that the plaintiff
borrowed money at a higher rate when affirming prejudgment interest at T-Bill rate
compounded annually); Mars, Inc. v. Coin Acceptors, Inc., 513 F. Supp. 2d 128, 136
(D.N.J. 2007) (collecting cases); “it is not necessary that a patentee demonstrate
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that it borrowed at the prime rate in order to be entitled to prejudgment interest at
that rate.” Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991);
see also Studiengesellschaft Kohle, m.b.H. v. Dart Industries, Inc., 862 F.2d 1564,
1579 (Fed. Cir. 1988).
“District courts have discretion to limit prejudgment interest where, for
example, the patent owner has caused undue delay in the lawsuit . . . but there must
be a justification bearing a relationship to the award.” Nickson Indus., Inc. v. Rol
Mfg. Co., 847 F.2d 795, 800 (Fed. Cir. 1988). See also Gen. Motors Corp., 461 U.S.
at 657; Century Wrecker Corp. v. E.R. Buske Mfg. Co., Inc., 913 F. Supp. 1256, 1282–
83 (N.D. Iowa 1996).
Prejudgment interest is generally awarded from the date of the infringement
to the date of judgment absent justification otherwise. Nickson Industries, 847 F.2d
800–01 (remanding judgment on prejudgment interest from date of filing rather
than date of infringement because the trial court did not articulate justification).
Further, “[p]rejudgment interest cannot be assessed on the increased or
punitive portion of the damage award.” Lam, Inc. v. Johns-Manville Corp., 718 F.2d
1056, 1066 (Fed. Cir. 1983).
B. Analysis
Probatter argues that the Court should afford prejudgment interest at the
prime rate, arguing that the Court should consider the evidence that it had
borrowed money at a far higher interest rate in awarding a prime rate, citing to Lam,
718 F.2d at 1066. Sports Tutor argues that Probatter failed to prove its borrowing
history at trial, other than a personal loan from its owner and made no effort to
73
prove a causal connection between any borrowing and loss of use of the money
award in issued. Sports Tutor argues prejudgment interest on the award should
be calculated at the 1-year T-Bill rate, compounded annually.
In Uniroyal, the Federal Circuit affirmed a prejudgment interest rate award at
the prime rate compounded daily based on the district court’s finding that “(1) the
litigation was, by patent case standards, of a protracted and comprehensive nature,
and (2) [the patentee’s] poor financial condition during the pendency of the
litigation required it to finance its operations with monies borrowed at rates above
the prime rate.” 939 F.2d at 1545.
The case is analogous to Uniroyal because this litigation was protracted and
comprehensive. While the delay in adjudication of this case is in part due to
Probatter, who, as explained above, unjustifiably changed the theory of damages
shortly before the case was scheduled for trial. However, the delay was in part due
to Sports Tutor, who filed multiple meritless pleadings.
More importantly, this case is analogous to Uniroyal because there is
evidence Probatter was in a poor financial condition around the time of the
hypothetical negotiation.
discussed above.
That evidence is the Battersby Security Agreement
As previously explained, in January 2002—approximately
fourteen months before infringement—Greg Battersby, a then-partial owner of
Probatter, loaned $100,000 to Probatter secured by Probatter’s assets and
proceeds. The interest rate on this loan was 12%, which was approximately three
74
times the average prime rate in 2002. 2
The Guarantee and Indemnification
Agreement that accompanying the Battersby Security Agreement states “Probatter
is unable to meet its obligation to refinance an existing loan in the amount of
$100,000 to Cornerstone Bank . . . that has been guaranteed by Battersby and
Charles Grimes.” Def.’s Ex. DB. Though Battersby was an insider, which in some
circumstances would warrant a finding that the agreement is not a reliable basis
for showing what Probatter could have borrowed money for at the time, the more
important evidence from the Battersby Security Agreement shows that Probatter
was insolvent and having difficulty meeting its obligations. This tends to show that
Probatter was in poor financial condition. Sports Tutor did not rebut this evidence
of poor financial condition. Thus, the only evidence before the Court on this issue
is the Battersby Security Agreement, which demonstrates Probatter’s poor
financial condition. Probatter had to borrow money at rates much higher than the
T-Bill rate in order to meet its obligations. Prejudgment interest at the T-Bill rate
would fail to place Probatter in as good a position as it would have been had it
received the licensing fee at the time of the hypothetical negotiation.
Therefore, for the above reasons, the Court finds that the appropriate
prejudgment interest award in this case is at the prime rate to be compounded
annually and applied to only the damages award of $388,213.53 beginning on the
date of the infringement, March 12, 2003.
According to the Federal Reserve, the average prime rate in 2002 was between
4.25 and 4.75%. See 1.33 Prime Rate Charged by Banks, Short-Term Business
Loans, The Federal Reserve Board, available at:
https://www.federalreserve.gov/pubs/supplement/2004/01/table1_33.htm#2002
(Jan. 2004).
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V.
CONCLUSION
After consideration of all the pleadings and arguments raised by the parties
at the trial on damages, the Court makes the following conclusions. The reasonable
royalty for the use made of the Patents-in-Suit is $388,213.53, which represents a
reasonable approximation of what the parties would have agreed to in a
hypothetical negotiation to license the Patents-in-Suit immediately prior to the
infringement. Probatter is entitled to enhanced damages, representing double the
damages awarded, for a total of $776,427.05.
Sports Tutor is responsible for
prejudgment interest on the reasonable royalty at the prime rate to be compounded
annually beginning from March 12, 2003. The prejudgment interest only applies to
the reasonable royalty damages. This is imminently fair as the Prime Rate is lower
now than it was during the majority of the time Sprots Tutor infringed Probatter’s
patent. 3
The Clerk is to enter judgment in favor of Probatter.
IT IS SO ORDERED.
_____/s/_____________
Hon. Vanessa L. Bryant
United States District Judge
Dated this day in Hartford, Connecticut: February 18, 2022
Selected Interest Rates, FederalReserve.gov, available at:
https://www.federalreserve.gov/releases/h15/ (last visited Feb. 18, 2022) (prime
rate for February 2022 is 3.25%) compare 1.33 Prime Rate Charged by Banks,
Short-Term Business Loans, FederalReserve.Gov, available at:
https://www.federalreserve.gov/pubs/supplement/2008/01/table1_33.htm#per_year
(last visited Feb. 18, 2022) (prime rate between November 6, 2002 and June 26,
2003 was 4.0%).
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