freal Foods LLC et al v. Hamilton Beach Brands, Inc. et al

Filing 366

MEMORANDUM OPINION Signed by Judge Colm F. Connolly on 6/9/2020. (nmf)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELA WARE
F'REAL FOODS, LLC and RICH
PRODUCTS CORPORATION,

Plaintiff,
Civil Action No. 16-41-CFC

V.

HAMILTON BEACH BRANDS,
INC. and HERSHEY CREAMERY
COMPANY,

Defendant.

Rodger D. Smith II, Michael J. Flynn, and Taylor Haga, MORRIS, NICHOLS,
ARSHT & TUNNELL LLP, Wilmington, Delaware; Guy W. Chambers and Peter
Colosi, SIDEMAN & BANCROFT LLP, San Francisco, California

Counsel for Plaintiff
Francis Di Giovanni and Thatcher A. Rahmeier, FAEGRE DRINKER BIDDLE &
REA TH LLP, Wilmington, Delaware; William S. Foster Jr., Kenneth M. V orrasi,
and Brianna L. Silverstein, FAEGRE DRINKER BIDDLE & REATH LLP,
Washington, D.C.

Counsel for Defendant

MEMORANDUM OPINION

June 9, 2020
Wilmington, Delaware

COLM F. CONNOLLY
UNITED STATES DISTRICT JUDGE
The Court held a four-day jury trial in this patent infringement case filed by
Plaintiffs freal Foods LLC and Rich Products Corporation against Defendants
Hamilton Beach Brands, Inc. (Hamilton Beach) and Hershey Creamery Company
(Hershey). The jury awarded Plaintiffs $2,988,869.00 in lost profits. D.I. 264,
Question 7(b). Pending before me is Defendants' Renewed Motion for Judgment
as a Matter of Law of No Lost Profits or, in the Alternative, Motion for a New
Trial on or Remittitur of Lost Profits. D.I. 296.
I.

BACKGROUND

Plaintiffs' only evidence of lost profits concerned the MIC2000 blenders
used in Hershey's Shake Shop Express program. See Trial Tr. at 599:8-16.
Plaintiffs hired a damages expert, Dr. Akemann, to model the profits Plaintiffs lost
due to the Shake Shop Express Program. When Dr. Akemann calculated lost
profits, he divided the time period of Hershey's infringement into when Hershey
profited by renting its machines to retailers and when Hershey let retailers use its
machines for free and profited by adding an upcharge to the cups used in its
blenders. Trial Tr. at 607:8-16. He then modelled freal's lost profits on
Hershey's business model at the relevant time: part of the model was based on

adding an upcharge to cups and part of the model was based on renting machines.
Id.

When determining Plaintiffs' market share, Dr. Akemann relied on an email
written by freal's COO Jens Voges (the "Voges Email") in which Voges
summarized information from external sources regarding freal's competitors.
Trial Tr. 656:2-657:2.
When modeling Plaintiffs' lost profits due to lost sales on upcharged cups,
Dr. Akemann looked to freal's history of using an upcharge model at certain highvolume places. Trial Tr. at 387:21-388:2; Trial Tr. at 607:18-25. Dr. Akemann
also looked to a "business document that f real generated in the 2013 time period,"
which was when infringement from the Shake Shop Express program began. Trial
Tr. at 608:5-7. In that document, freal "focused on 70 cents as the appropriate
upcharge." Trial Tr. at 608:14-15. Dr. Akemann testified that he relied on the 70cents upcharge suggested in that document because the infringing blenders in the
Shake Shop Express program had been located in a similar business context. Trial
Tr. at 608:1-20.
When modeling Plaintiffs lost profits due to lost rentals, Dr. Akemann
"assume[d] that [Plaintiffs] would have matched whatever rental fees [Hershey]
charged." Trial Tr. at 664:5-6. Hershey charged customers roughly $150.00 per
month. Trial Tr. at 664:1-12. When Defendants confronted Dr. Akemann with a

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f'real document that showed f'real rented its machines for a $500.00 down
payment and $350.00 per month, Dr. Akemann explained that he used Hershey's
pricing to "control for the differences in pricing to do my analysis." Trial Tr. at
666:3-4.
Dr. Akemann calculated upcharge lost profits as $3,015,367.00; lost rental
profits as $897,028.00; and total lost profits as $3,912,395.00. Trial Tr. at 615:45. The jury found the Defendants liable for $2,988,869.00 in lost profits. D.I. 264,
Question 7(b ).

II.

LEGAL STANDARDS FOR NEW TRIAL OR REMITTITUR
The law of the regional circuit governs the standard for ordering a new trial

or remittitur in a patent case. SynQor, Inc. v. Artesyn Techs., Inc., 709 F.3d 1365,
1383 (Fed. Cir. 2013) (new trial); Power Integrations, Inc. v. Fairchild

Semiconductor Int'l, Inc., 711 F.3d 1348, 1356 (Fed. Cir. 2013) (remittitur). A
district court has the discretion to order a new trial when the verdict is contrary to
the evidence, a miscarriage of justice would result if the jury's verdict were left to
stand, or the court believes the verdict resulted from confusion. Cf Blancha v.

Raymark Indus., 972 F.2d 507, 512 (3d Cir. 1992) ("Where a new trial has been
granted on the basis that the jury's verdict was tainted by confusion or that a new
trial is required to prevent injustice, [the Court of Appeals] reviews [the district
court's ruling] for abuse of discretion"). "A remittitur is in order when a trial

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judge concludes that a jury verdict is clearly unsupported by the evidence and
exceeds the amount needed to make the plaintiff whole .... " Starceski v.
Westinghouse Elec. Corp., 54 F.3d 1089, 1100 (3d Cir. 1995) (quotation marks and

citation omitted).

III.

ANALYSIS
While this motion was pending, I granted Defendants' Renewed Motion for

Judgment as a Matter of Law ofNoninfringement of Claim 21 of the '662 Patent.
D.I. 355. Where, as here, a judge makes a posttrial ruling ofnoninfringement of a
patent claim as a matter of law and "the jury rendered a single verdict on damages,
without breaking down the damages attributable to each patent, the normal rule
would require a new trial as to damages." Verizon Servs. Corp. v. Vonage
Holdings Corp., 503 F.3d 1295, 1310 (Fed. Cir. 2007). But the Federal Circuit

has also directed courts to "apply a harmlessness analysis" before ordering a new
trial and has said that a new trial is not "automatically required" if a reasonable
jury would have found the same damages award even without the error.
WesternGeco L.L.C. v. ION Geophysical Corp., 913 F.3d 1067, 1074 (Fed.

Cir. 2019).
In addition to the jury's finding that the MIC2000 infringed claim 21 of the
#662 Patent, the jury found that the MIC2000 infringed claims 20 and 22 of U.S.
Patent No. 7,144,150 and claims 1 and 5 of U.S. Patent No. 7,520,658. See D.I.

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263. Those other findings of infringement independently support the jury's lost
profits award because those apparatus claims cover the entire MIC2000.
Accordingly, my ruling of noninfringement of claim 21 of the #662 Patent does not
make it necessary to order a new trial on damages.
Defendants argue that a new trial on lost profits is warranted because I erred
in admitting the testimony of Plaintiffs' damages expert, Dr. Akemann. D.I. 298 at
32-34. Defendants initially made this argument in a pretrial motion to exclude.
See D.I. 174. Defendants' posttrial brief does not present any new arguments on

why Dr. Akemann' s testimony should have been excluded but merely incorporates
by reference the arguments Defendants made in their pretrial motion to exclude.
See D.I. 298 at 33. Accordingly, I stand by the rationale I articulated when I

denied the relevant portion of that pretrial motion. See D.I. 240 ~ l.
Defendants also argue that a new trial on damages is necessary because the
jury's damages award was not supported by sufficient evidence. See D.I. 298 at
25-32. A court should "sustain[] a jury's award of damages unless the amount is
grossly excessive or monstrous, clearly not supported by the evidence, or based
only on speculation or guesswork." DSU Med. Corp. v. JMS Co., 471 F.3d 1293,
1309 (Fed. Cir. 2006) (quotation marks and citation omitted).
Defendants first argue that Plaintiffs did not provide sufficient evidence of
Plaintiffs' market share. D.I. 298 at 27-29. Plaintiffs' damages expert, Dr.

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Akemann, based his market-share calculation on the Voges Email. Trial Tr.
656:2-657:2. At trial, Voges was cross examined about this email as follows:

Q.

This is not an exhaustive list of all of freal's
competitors ... you mentioned there are other competitors
of freal?
A. Correct.
Q. All right. And the e-mail does not provide any
information that would allow a person to make a reliable
market share calculation as to freal's market share; is that
correct?
A. Correct.
Q. Okay. And based on this e-mail or otherwise, you do
not know what freal's market share is, the percentage; is
that correct?
A. I do not.
Q. All right. And isn't it true then in order to determine
what freal's market share would be, you would have to
commission an individual study that would be in depth and
take some time to complete?
A. I'm not a marketing expert. I can't answer that
question for you. I don't know how exactly you would go
about doing that.
Q. All right. So in your mind, you are not even sure how
one would even calculate freal's market share?
A.
I mean, I would go to an expert to get a
recommendation.
Trial Tr. at 373: 19-374:17.
Defendants contend that "Voges' s testimony as to the incompleteness and
unreliability of his own email demonstrates that Akemann's market share
calculations were not based on the requisite sound economic proof .... " D.I. 298
at 28. But I interpret Voges's testimony differently. What Voges said was that the
Voges Email alone was not enough to determine market share, that he was not sure
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how to calculate market share, and that he would "go to an expert to get a
recommendation." He did not say the information contained in the email was
unreliable. Plaintiffs hired Dr. Akemann to perform the market share calculation.
Although Dr. Akemann's analysis used information from the Voges Email, his
analysis went beyond reiterating the contents of that email. See, e.g., Trial Tr. at
602. Defendants do not challenge whether that additional market share analysis
was sound. I do not find that Voges's testimony undermined Dr. Akemann's
model or the jury's damages award.
Defendants also argue that Plaintiffs did not provide sufficient evidence of
but-for pricing. D.I. 298 at 29-32. Defendants first object to Dr. Akemann using
"a model; a fictional construct" because "[t]he pricing Akemann used in his model
was never offered by freal or accepted by any actual customers." D.I. 298 at 30.
"The but for inquiry ... requires a reconstruction of the market, as it would have
developed absent the infringing product, to determine what the patentee would
have made." Grain Processing Corp. v. Am. Maize-Prod. Co., 185 F.3d 1341,
1350-51 (Fed. Cir. 1999) (quotation marks and citation omitted). Reconstructing
the market as it would have developed absent the infringing product is "by
definition a hypothetical enterprise" because it "requires the patentee to project
economic results that did not occur." Id. It was, therefore, not only permissible for
Dr. Akemann to use a model, it was required.

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Defendants next argue that "there is no evidence that freal would have ever
offered the 70-cent upcharge that Akemann assumed for his lost profits
calculation." D.I. 298 at 31. This is not accurate. Plaintiffs presented evidence at
trial that freal had put together a model for a potential customer in a similar
business context that used the 70-cent upcharge. See Trial Tr. at 388:16-389:7.
Defendants also argue that there is no evidence that any of Hershey's actual
customers would have accepted the 70-cent upcharge because Hershey had set its
upcharge at 25 cents and Hershey's director of strategic growth testified that was
the "absolute maximum that [Hershey] could really charge to allow that price point
to stay at a reasonable level." Trial Tr. at 738:14-16. But this argument ignores
that the average price of a f real cup was lower than a Hershey cup during the
relevant time period and, therefore, the total price of a freal cup plus a 70-cent
upcharge was competitive with the total price of a Hershey cup. Hershey's cups
ranged in price from $1.67 to $2.07 during the relevant time period, and the price
increased as Hershey switched from renting mixing machines to customers to
providing the machine for free and upcharging customers for cups. See D.I. 325
Ex. 31; D.I. 325 Ex. 32. During the same time period, the price of a freal cup with
a 70-cent upcharge ranged from $2.06 to $2.11. D.I. 325 Ex. 33. Retailers using
freal products also tended to sell more cups per day than retailers using Hershey
products. Trial Tr. at 609:3-22; D.I. 325 Ex. 34. The jury, therefore, had

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sufficient evidence from which it could conclude that customers would have
accepted the 70-cent upcharge.
Lastly, Defendants argue that the portion of the damages calculation
attributable to when Hershey rented its machines is flawed. When Dr. Akemann
calculated freal's lost profits due to Hershey renting machines, he used the fees
that Hershey charged its customers-roughly $150.00 per month. Trial Tr. at
664:1-12. But there was no evidence introduced at trial that freal ever rented its
machines for $150.00 per month or would rent its machines for $150.00 per month.
"To prevent the hypothetical from lapsing into pure speculation" the Federal
Circuit requires sound proof of the "likely outcomes with infringement factored out
of the economic picture." Grain Processing Corp., 185 F.3d at 1350. To calculate
lost profits as Dr. Akemann did, freal needed to provide some evidence that it
would have rented its machines for $150.00 per month had Hershey's infringing
blenders not been in the market. Alternatively, f real could have shown that even
with a higher rental price freal would have rented its machines to retailers that
used Hershey's infringing blenders-though, in that instance, freal would have
needed to account for the effect of increased rental price on the number of rentals.
As it stands, freal presented no evidence that but for Hershey's infringement freal
would have rented its machines for $150.00 per month. Therefore, the portion of

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the damages award attributable to lost rentals is clearly not supported by the
evidence.
Dr. Akemann calculated rental lost profits as $897,028.00. Trial Tr. at
615 :4. The jury's lost profits award reduced by that amount is $2,091,841.00.
Accordingly, I will deny the motion for new trial on the condition that Plaintiffs
accept a remittitur to the amount of $2,091,841.00.

IV.

CONCLUSION
For the foregoing reasons, I will deny the motion for new trial on the

condition that Plaintiffs accept a remittitur to the amount of $2,091,841.00.
The Court will issue an Order consistent with this Memorandum Opinion.

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