Nox Medical Ehf v. Natus Neurology Inc.

Filing 344

MEMORANDUM ORDER: Plaintiff's Motion for Reconsideration on Enhancement of Damages (D.I. 332 ) is GRANTED. Plaintiff's Post-Trial Motion, as to Enhanced Damages (D.I. 288 ), remains DENIED. Signed by Judge Richard G. Andrews on 12/7/2018. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

NOX MEDICAL EHF,
Plaintiff,
Civil Action No. 1: 15-cv-00709-RGA

V.

NATUS NEUROLOGY INC.,
Defendant.

MEMORANDUM ORDER

Presently before me is Plaintiffs Motion for Reconsideration on Enhancement of
Damages. (D.I. 332). The Parties have fully briefed the issues. (D.I. 333,337,343). Because I
did not previously appreciate the differences between the related U.S. and European patents, I
will GRANT Plaintiffs motion.
The Parties are familiar with the facts of this case. The subject of the present motion is
whether I erred by inferring that Defendant had a good faith belief in the invalidity of U.S. Pat.
No. 9,059,532 ("'532 Patent") based on Defendant's invalidity challenge to the '532 Patent's
European counterpart. Because my inference was erroneous, I must also consider what impact,
if any, that error has on my decision not to enhance damages.

I.

LEGAL STANDARD

A. Reargument

The purpose of a motion for reargume~t or reconsideration is to "correct manifest errors
of law or fact or to present newly discovered evidence." Max's Seafood Cafe ex rel. Lou-Ann,
Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). "[M]otions for reconsideration 'should not

be used to rehash arguments already briefed."' BP Amoco Chem. Co. v. Sun Oil Co., 200 F.
Supp. 2d 429,432 (D. Del. 2002) (quoting Schering Corp. v. Amgen, Inc., 25 F.Supp.2d 293,295
(D. Del. 1998)). To succeed on a motion for reconsideration, a party must demonstrate one of
the following: "(1) an intervening change in the controlling law; (2) the availability of new
evidence that was not available when the court [issued its order]; or (3) the need to correct a clear
error oflaw or fact or to prevent manifest injustice." Max's Seafood Cafe, 176 F.3d at 677.
B. Enhanced Damages

The Patent Act gives the Court discretion to "increase the damages up to three times the
amount found or assessed." 35 U.S.C. § 284. The Court's discretion "should be exercised in
light of the considerations underlying the grant of that discretion." Halo Elecs., Inc. v. Pulse
Elecs., Inc., 136 S. Ct. 1923, 1926 (2016). Enhanced damages are "designed as a 'punitive' or

'vindictive' sanction for egregious infringement behavior," which is "willful, wanton, malicious,
bad-faith, deliberate, consciously wrong, flagrant, or-indeed-characteristic of a pirate." Id. at
1932. Enhanced damages are "not to be meted out in a typical infringement ca_se." Id. A jury's
finding of willful infringement is a prerequisite to enhancement of damages but is not by itself
sufficient. Id.
Where an infringer's behavior is willful, the Court may evaluate a set of "non-exclusive"
factors set forth in Read Corp. v. Portee, Inc., to determine if damages should be enhanced and
the extent to which they should be enhanced. 970 F.2d 816, 826-27 (Fed. Cir. 1992); Presidio
Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1382-83 (Fed. Cir. 2017). The
Read factors include:

(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)
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defendant's size and financial condition; (5) closeness of the case; (6) duration of
defendant's misconduct; (7) remedial action by the defendant; (8) defendant's
motivation for harm; and (9) whether defendant attempted to conceal its
misconduct.

Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1348 (Fed. Cir. 2011) (citing Read Corp., 970
F.2d at 826-27).
A movant must establish its entitlement to enhanced damages under Section 284 by a
preponderance of the evidence. Halo, 136 S. Ct. at 1934.

II.

DISCUSSION

A. Significance of Defendant's Challenge to the European Counterpart of the '532 Patent

In my Memorandum Opinion, which addressed the Parties' post-trial motions, I
considered the Read factors to determine whether Plaintiff is entitled to enhanced damages .. (D .I.
329 at 7-13). Plaintiff has identified an issue with my analysis of the second Read factor which
considers Defendant's good faith belief in invalidity. 970 F.2d at 827. When deciding whether
Defendant had a good faith belief that the '532 Patent was invalid I noted (1) Defendant's failure
to present evidence of a good faith belief of invalidity during the jury trial, and (2) Defendant's
introduction of evidence during the inequitable conduct trial of its pre-issuance challenge to the
European counterpart to the '532 Patent. (D.I. 329 at 8). I concluded, "[E]ven though Defendant
knew that it was copying the commercial embodiment of the '532 patent almost immediately
upon the patent's issuance, it can be inferred [from its European invalidity challenge] that
Defendant did so with a good-faith belief that the patent was invalid." (Id.).
Plaintiff argues that, considering the differences between the European patent and the
'532 Patent, my inference was inappropriate. It notes claim elements which are unique to the
'532 Patent and were significant at trial: "(i) a conductor 'passing through the receiving hole,'
(ii) a conductor 'wrapped around the engaging member,' [and] (iii) that the conductor be a
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conductor 'of the electrode belt' .... " (D.I. 333 at 4 (quoting '532 Patent, claim 1)). Plaintiff
concludes, "It is impossible to have a good faith belief of invalidity of the '532 patent without
addressing these claim limitations, which are not in the European counterpart." (Id.). After
additional review of the record, I agree. I did not previously appreciate the differences between
the U.S. and European patents. Compare '532 Patent, claim 1, with European Pat. No.
2,584,962, claim 1. Thus, I must admit that Plaintiff is correct. I overstated the significance of
Defendant's challenge to the European counterpart to the '532 Patent. A good faith belief that a
broader patent is invalid does not, by itself, establish a good faith belief tµat a narrower patent on
the same matter is invalid. Perhaps it supports the conclusion that Defendant was not acting in
bad faith. It does not, however, establish that Defendant had a good faith belief of invalidity
based on its evaluation of the claims of the '532 Patent.

B. Modified Analysis of the Read Factors
I addressed each of the nine Read factors in my Memorandum Opinion. (D.I. 329 at 713). I summarize and clarify my reasoning on each of those factors below. On balance, despite
changing my view on the second Read factor, I do not find that Defendant's behavior was
"willful, wanton, malicious, bad-faith, deliberate, consciously wrong, flagrant, or-indeedcharacteristic of a pirate." Halo Elecs., 136 S. Ct. at 1932. Thus, I do not believe enhanced
damages are appropriate. I will again deny Plaintiffs Post-Trial Motion, as to.Enhanced
Damages. (D.I. 288).
I previously found that the first Read factor, whether Defendant deliberately copied
Plaintiffs design, supports enhancement of damages. (D.I. 329 at 7). The evidence shows that
Defendant sent Plaintiffs commercial product to Defendant's Chinese manufacturer and told the
manufacturer to copy it, calling it the "Nox knock off." (Id.). However, I found that the weight

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of Defendant's copying in the overall analysis was reduced because the actions pre-dated the
issuance of Plaintiffs patent. (Id.).
As I address above, I previously found that the second factor, whether Defendant had a
good faith belief in the invalidity of the '532 Patent, does not support enhancement of damages.
(Id. at 8). Specifically, I found that Defendant's pre-suit challenge to the European counterpart

supported an inference of Defendant's good faith. (Id.). That inference was faulty. However, I
take note of Defendant's consistent course of action regarding the invalidity of patents on
Plaintiffs invention. Defendant challenged the broader claims in Europe, contested the claims
through trial here, and instituted inter partes review challenging the claims at the Patent Office.
These actions are circumstantial evidence that Defendant held a good faith belief that the '532
Patent was invalid. This evidence does not support a conclusive finding that Defendant was
acting in good faith, but it does make it a close question. Accordingly, I find that the second
Read factor weighs against enhancing damages, albeit weakly.

In the Memorandum Opinion, I found that the third Read factor, Defendant's behavior
during the litigation, did not support enhancing damages. (Id.). I rejected Plaintiffs position,
stating, "Plaintiffs argument is ultimately devoid of any persuasive evidence that Defendant
engaged in bad faith behaviors over the course of the litigation." (Id. at 9-10). My view of this
factor remains unchanged. 1
I also found that the fourth factor, Defendant's size and financial condition, is neutral.
(Id. at 10). I noted, "Plaintiff offers no information about Defendant's size or financial

condition." (Id.). Thus, Plaintiff did not establish that this factor supports enhancing damages.

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Although I maintain that this factor is on balance a wash, I note that the neutrality of any given factor generally
favors a finding for Defendant. That is, when a factor is neutral it indicates that the case looks like most other
infringement cases in that respect. The fewer facts, and factors, favoring Plaintiff's position, the less likely the case
is to stand out as egregious.

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I found that the fifth factor, closeness of the case, weighs against enhancement of
damages. (Id.). l based this determination on the strength of Defendant's invalidity defense.
(Id.). I found, "No claim element among the asserted claims of the '532 patent stands out as

being nakedly absent from the prior art." (Id. at 11). Plaintiff takes issue with this finding. (See
D.I. 333 at 7 n.4). It argues that I considered only whether all elements were present in the prior
art and failed to acknowledge the requirement that there be a reason to combine. (Id.). It also
notes that Defendant's defenses were developed, "long after it knew about the '532 Patent and
long after it had decided to infringe it." (Id. at 7).
Plaintiffs arguments on this point do not persuade me that this was not a close case on
the invalidity question. Defendant presented prior art references containing every element of the
asserted claims. (D.I. 329 at 11). In the obviousness analysis, finding prior art that maps onto
each of the claim elements is a major part of the inquiry. Having accomplished this, Defendant
was inarguably close to making a_successful obviousness argument. Defendant's failure to win
on the issue does not negate that fact. Moreover, the fifth Read factor deals with the closeness of
the case, not how close the Defendant felt the case was at the time of first infringement. Thus, I
maintain that the fifth factor weighs against enhancement of damages.
I found that the sixth Read factor, duration of Defendant's misconduct, supports
enhancement of damages. (Id. at 11). Plaintiff willfully infringed the '532 Patent for three
years, starting on the date of its issuance. (Id. at 11-12). Three years is an objectively lengthy
time to knowingly infringe a valid patent.
I found that the seventh Read factor, Defendant's remedial action, weakly supports
enhancement of damages. (Id. at 12). In reaching that conclusion, I balanced Defendant's

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voluntary replacement of the infringing belt in January 2018 against the ease of avoiding
significant infringement by moving the product out of the country. (Id.).
I found that the eighth factor, Defendant's motivation for harm, does not support
enhancement. (Id.). Plaintiff did not present persuasive evidence that Defendant acted with a
motivation to cause harm other than the harm incidental to direct business competition.
I found that the ninth factor, Defendant's attempts to conceal misconduct, does not
support enhancement. (Id. at 13). Plaintiff did not present evidence that Defendant attempted to
hide its product or sales.
Weighing the Read factors and considering the totality of the circumstances, I again find
that enhancement of damages is not warranted. The evidence establishes that Defendant
deliberately copied Plaintiff's product, willfully sold its infringing product for three years, and
failed to take an apparently easy remedial action. However, Defendant's deliberate copying
occurred before the '532 Patent issued and Defendant did, eventually, voluntarily end its
infringing activity. Overall, the three facts supporting enhancement are weak. Thus, even absent
any offsetting factors, I do not find that Defendant's behavior rose to the level of "willful,
wanton, malicious, bad faith, deliberate, consciously wrong, flagrant," or pirate-like. With
counterbalancing factors such as Defendant's likely good faith belief of invalidity and the
strength of Defendant's case, I am convinced that enhancement is inappropriate in this case.
Accordingly, I decline to enhance the damages awarded by the jury. I will again deny Plaintiffs
Post-Trial Motion, as to Enhanced Damages. (D.I. 288).

III.

CONCLUSION

Plaintiff identified a clear error of fact which required me to reconsider a portion of the
Memorandum Order. (D.I. 329). However, after reconsidering the Read factors, I still believe
enhanced damages are inappropriate in this case. Plaintiff's Motion for Reconsideration on
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Enhancement of Damages (D.I. 332) is GRANTED. Plaintiffs Post-Trial Motion, as to
Enhanced Damages (D.I. 288), remains DENIED.
IT IS SO ORDERED this

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day of December 2018.

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