Fleming v. Escort, Inc. et al
MEMORANDUM DECISION AND ORDER, granting in part and denying in part 33 MOTION to Dismiss Counts One and Two of the Complaint; granting in pary and denying in part 42 MOTION to Dismiss Counts One and Two of the Complaint; granting MO TION to Stay the Remaining Claims. This action is stayed against all defendants except Escort until further order of this Court. The action against Escort shall proceed and is not subject to this stay. Claim Construction Hearing set for 11/8/2013 09:00 AM in Boise - Courtroom 3 before Judge B. Lynn Winmill. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
HOYT A. FLEMING,
Case No. 1:12-CV-066-BLW
MEMORANDUM DECISION AND
ESCORT, INC., et al.,
The Court has before it a motion to dismiss Counts One and Two filed by
defendant Escort, and a motion to dismiss the same two Counts and stay the rest of the
case filed by twenty other defendants, known as the “Customer Defendants.” The
motions are fully briefed and at issue. For the reasons explained below, the Court will
grant the motions to dismiss in part, and stay the remaining claims against the Customer
Defendants until the remaining claims against Escort are resolved.
In an earlier-filed action, plaintiff Fleming claimed that defendant Escort
manufactured and sold radar detectors that infringed Fleming’s ‘038 and ‘653 patents. A
jury found that Escort had infringed a number of claims of both patents, and awarded
Fleming $750,000. See Special Verdict Form (Dkt. No. 304) in Fleming v. Escort
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CV-09-105-BLW. Specifically the jury found that the following Escort products were
infringing: GX65, Passport 9500, Passport 9500i, and Passport IQ. The Court directed
Escort to place the $750,000 sum in escrow, and Escort has now complied with that
Fleming filed this action against Escort and twenty of its distributors – referred to
as the Customer Defendants – claiming that the radar detectors they sold infringed
Fleming’s ‘038 and ‘653 patents, along with a third patent that was not litigated in the
earlier case, the ‘905 patent. This suit is referred to as a “customer suit” because it is an
action against the manufacturer’s customers (as well as the manufacturer) who are
distributing the allegedly infringing devices. The Customer Defendants include
companies such as Amazon, Best Buy, and Sears. The earlier-filed action is known as a
manufacturer’s suit – that is, it is an action solely against the manufacturer (Escort) of the
Fleming filed another action – a second manufacturer suit – against Cobra
Electronics Corp. and The Whistler Group, two manufacturers of competing radar
detectors. See Fleming v. Cobra, 1:12-CV-392-BLW. In that action, Fleming accused
Cobra and Whistler of infringing the ‘038, ‘695, and ‘905 patents. That case has since
settled and been dismissed.
Returning to the present case, the Court earlier denied Escort’s motion to stay this
action, granted in part Fleming’s motion to dismiss some of Escort’s affirmative
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defenses, and required that Escort plead other defenses – and a part of its counterclaim –
with more specificity. Escort filed a more specific pleading, and Fleming has not
challenged its sufficiency.
Escort has now filed a motion to dismiss those portions of Counts One and Two of
Fleming’s complaint that Escort argues were resolved in the earlier trial. Count One
alleges that Escort sells radar detectors that infringe Fleming’s ‘038 patent, and Count
Two alleges that Escort sells radar detectors that infringe Fleming’s ‘653 patent. Escort
alleges that the jury award was intended to cover past and future use of the patented
technology, and that Fleming is essentially seeking a double recovery in this case by
asking for those same damages. Fleming counters that the earlier case did not consider
the future use of the patented technology.
Escort’s motion to dismiss does not challenge Count Three that alleges that Escort
sells radar detectors that infringe Fleming’s ‘905 patent. That patent was not litigated in
the earlier trial.
The Customer Defendants have filed their own motion to dismiss Counts One and
Two, based on the same grounds raised by Escort. If that motion is granted, the
remaining claims against the Customer Defendants would be that they distributed (1)
Escort radar detectors that infringed Fleming’s ‘905 patent, and (2) Cobra radar detectors
that violated Fleming’s ‘038, ‘653, and ‘905 patents. Whether Escort infringed the ‘905
patent will be resolved in this case; whether Cobra infringed the 3 patents would have
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been resolved in the case discussed above, Fleming v. Cobra, 1:12-CV-392-BLW, but that
case recently settled and has been dismissed.
The Customer Defendants argue that these remaining claims should be stayed as to
them because their liability defends on a threshold finding that Escort is an infringer. If
the Customer Defendants are forced to incur litigation expenses now, and Escort is later
cleared of the infringement charges, those expenses would be wasted – hence, the
Customer Defendants seek a stay of the remaining claims against them until the
underlying infringement charges are resolved.
The Court will turn first to Escort’s motion to dismiss Counts One and Two and
then turn to the Customer Defendants’ motion.
Escort’s Motion to Dismiss Counts One and Two
Escort argues that the earlier jury verdict bars Fleming from suing it in this case
for damages from selling radar detectors that infringe the ‘038 patent (Count One) and
the ‘653 patent (Count Two). Escort argues that the jury’s verdict included a lump sum
that represented a paid-up license covering both past and future use of the patented
technology. This argument requires an examination of the jury’s verdict.
The verdict form asked the following question on damages: “What royalty do
you find that Mr. Fleming has proven is more likely than not to fairly and reasonably
compensate him for Escort’s infringement of the ‘038 patent and the ‘653 patent?” See
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Special Verdict Form (Dkt. No. 304) at p. 11. That question was followed by a blank for
the jury to fill their answer and was labeled as follows: “A royalty payment of
$__________.” Id. On that line, the jury wrote “750,000.00,” and then next to it wrote
This award does not expressly state whether it compensates Fleming for Escort’s
past and future use of the patented technology or only compensates him for the past use
of that technology. In other words, it is ambiguous on this point. In interpreting an
ambiguous verdict form, this Court has “broad discretion” to determine if “the verdict
figure represented past infringement as well as ongoing infringement.” Telecordia
Technologies Inc. v. Cisco Systems Inc., 612 F.3d 1365, 1377 (Fed. Cir. 2010). The
Federal Circuit has directed district courts to review the jury instructions to determine
whether a jury’s verdict was meant to include future use. Whitserve, LLC v. Computer
Packages, Inc., 694 F.3d 10, 34 (Fed.Cir. 2012).
In this case, the jury instructions provide an answer that is not apparent from the
Special Verdict Form. See Jury Instructions (Dkt. No. 305). Jury Instruction 23 gives
various options to the jury to calculate a reasonable royalty. Id. at p. 34-35. One option
described a method of calculating an “ongoing royalty” for each infringing item sold.
Another option described a
one-time lump sum payment that the infringer would have paid, and the
patentee would have accepted, at the time of the hypothetical negotiation
for a license covering all sales of the licensed product both past and future.
This differs from payment of an ongoing royalty because, with an ongoing
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royalty, the licensee pays based on the revenue of actual licensed products
it sells. When a one-time lump sum is paid, the infringer pays a single price
for a license covering both past and future infringing sales.
Id. at p. 35 (emphasis added). The Court took this wording from the Model Patent
Jury Instructions (§ 5.7) for the Northern District of California. This instruction shows
that the jury award of – in their own words – a “lump sum” meant that they were
awarding “a single price for a license covering both past and future infringing sales.”
This is almost the same wording used in the verdict form in Personal Audio LLC v.
Apple, Inc., 2011 WL 3269330 (E.D.Tex. July 29, 2011). There, the jury awarded $8
million in answer to a verdict form question asking: “What sum of money, in the form of
a reasonable lump sum royalty covering all past and future sales of Apple products, do
you find is adequate to compensate Personal Audio for the conduct you found to
infringe?” See Exhibit 6 (Dkt. No. 34-6) at p. 11. In reviewing that award, the court
held that it “represents a lump sum award giving Apple a fully paid up license to the
patents-in-suit, covering all past and future use of the patented technology in Apple
products.” Id. at *13. In that case, there was evidence during the trial that a lump sum
for a paid-up license covering all past and future use would be $5 million. Id. at *12.
Likewise, in the present case, the lump sum awarded by the jury – $750,000 – had a basis
in Fleming’s testimony that he originally sought $1 million for a paid-up license that
would cover all past and future use of his patented technology. See Exhibit F (Dkt. No.
41-6) at pp. 37-38.
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Fleming cites a number of cases to counter this conclusion, but none of them
involved jury instructions similar to the present case. In Paice LLC v. Toyota Motor
Corp., 609 F.Supp. 2d 620 (E.D.Tex. 2009), the court reviewed the jury instructions and
found that “the jury did not consider the issue of prospective relief.” Id. at 625. In
Whitserve, the jury instructions only covered past harm. Whitserve, 694 F.3d at 35. In
Fractus, S.A. v. Samsung Electronics Co. , LTD., 2013 WL 1136964 (E.D.Tex. March
15, 2013), the jury instructions – provided to the Court by Escort – contain none of the
wording existing here about calculating a lump sum that applies to past and future sales.
See Exhibit A (Dkt. No. 41-1).
In conclusion, the jury’s verdict, when read together with the jury instructions,
demonstrates that the jury’s verdict was intended to require Escort to pay $750,000 for a
paid-up license covering all past and future use of the technology set forth in ‘038 and
‘653 patents. Escort has paid that sum into an escrow account as requested by Fleming
until all appeals are completed. In essence, Escort has a paid-up license. Fleming’s
attempt to receive further damages in this lawsuit for selling devices infringing the ‘038
and ‘653 patents is barred by the prohibition against a double recovery. See
Ortho-McNeil Pharmaceutical, Inc. v. Mylan Laboratories, Inc., 569 F.3d 1353 (Fed.Cir.
2009) (holding that in a patent infringement action the “prevailing party may receive only
one satisfaction of costs”).
The Court must be careful, however, to dismiss only those portions of Counts One
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and Two that were actually litigated in the prior trial. While both Counts refer to Escort
devices that were litigated in the earlier trial, they also include Escort devices that have
not been litigated. Consequently, the Court will limit the dismissal to apply only to
those infringing devices that have been litigated, specifically the GX65, Passport 9500,
Passport 9500i, and Passport iQ devices.
Customer Defendants’ Motion to Dismiss and Stay
The Customer Defendants seek to dismiss (1) those portions of Counts One and
Two that the Court has dismissed against Escort, and (2) the claims that they sold
infringing Cobra products. As discussed, the separate lawsuit in which Fleming alleged
that Cobra infringed his patents has been settled and dismissed. Consequently, the
claims in this case that the Customer Defendants infringed by selling Cobra devices must
With regard to the claim that the Customer Defendants sold infringing Escort
devices, the jury in the earlier case awarded Fleming $750,000, finding that the four
Escort devices were infringing. To the degree that Counts One and Two seek recovery
from the Customer Defendants for reselling the same four Escort devices, the claims seek
a double recovery that cannot be allowed. See Shifferaw v. Emson USA, 2010 WL
1064380 (E.D.Tex 2010); LG Electronics, Inc. v. Asustek Computers, 126 F.Supp.2d
414, 422 (E.D.Va. 2000).
The Court’s understanding is that the settlement of the Cobra litigation will end the claims against the Customer
Defendants in this lawsuit for selling allegedly infringing Cobra devices. If the Court’s understanding is incorrect,
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This analysis does not apply, however, to Fleming’s claim in Counts One and Two
that the Customer Defendants committed willful infringement. While the earlier jury
found that Escort’s infringement was not willful, that finding does not apply to the
Customer Defendants because willful infringement depends on the conduct and
knowledge of the party against whom the claim is made – it is not a derivative liability.
In re Seagate Technology, LLC, 497 F.3d 1360 (Fed.Cir. 2007). Because the claim for
willful infringement against the Customer Defendants has never been litigated, there is no
danger of Fleming receiving a double recovery. Moreover, an award for willful
infringement is an “enhanced” damage award that does not duplicate, or overlap with, the
award for basic infringement. Id. at 1368. Thus, an award for willful infringement
against the Customer Defendants in this case for their own conduct does not give
Fleming a double recovery when added to the damages awarded in the earlier trial against
Escort for its own conduct. See Shifferaw, supra at *3 (stating that although bar on
double recovery precluded patent holder from obtaining damages for infringement
against both manufacturer and retailers for same products, patent holder could still
maintain willful infringement action against retailers).
To recognize the continuing validity of the willful infringement claims, the Court
will not dismiss Counts One and Two as to the Customer Defendants. At the same time,
the Court will ensure that Fleming does not receive a double recovery. He has already
been compensated for the infringement of the ‘038 and ‘653 patents as to the four Escort
the parties may request reconsideration.
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devices listed above and he cannot receive from the Customer Defendants a second
recovery for those sums. The Court’s jury instructions and other measures can ensure
that Fleming does not receive a double recovery against the Customer Defendants. But
Fleming is entitled to proceed with his willful infringement claim against the Customer
Defendants and seek damages above and beyond those already awarded by the earlier
In summary, the Court will order, as to the Customer Defendants, the dismissal of
those portions of Counts One and Two alleging that the Customer Defendants are liable
for selling infringing Cobra products. The Court will deny the remainder of the motion
to dismiss but will protect the Customer Defendants from any double recovery as set
The remaining claims against the Customer Defendants are as follows: (1) Count
One – that the Customer Defendants sold Escort products that infringed the ‘038 patent
and committed willful infringement; (2) Count Two – that the Customer Defendants sold
Escort products that infringed the ‘653 patent and committed willful infringement; and
(3) Count Three – that the Customer Defendants sold Escort products that infringed the
‘905 patent, and committed willful infringement. The Customer Defendants ask the
Court to stay these claims as to them until the real dispute between Fleming and Escort is
As this Court discussed in an earlier decision, the Federal Circuit has recognized a
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customer-suit exception whereby “litigation against or brought by the manufacturer of
infringing goods takes precedence over a suit by the patent owner against customers of
the manufacturer.” Spread Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d
1349, 1357 (Fed. Cir. 2011). The customer suit exception is based on the recognition
that a manufacturer is presumed to have a “greater interest in defending its actions against
charges of patent infringement [than a customer may]; and to guard against the possibility
of abuse.” Kahn v. Gen. Motors Corp., 899 F.2d 1078, 1081 (Fed. Cir. 1989). “The
guiding principles in the customer suit exception cases are efficiency and judicial
economy.” See Memorandum Decision (Dkt. No. 31) at p. 2.
With regard to Count Three – alleging infringement of the ‘905 patent – that claim
has never been litigated and the liability of the Customer Defendants depends on a
threshold finding of infringement against their supplier, Escort. See Katz v. Lear Siegler
Inc., 909 F.2d 1459, 1464 (Fed.Cir. 1990) (holding that “[a]lthough there may be
additional issues involving the defendants in [the customer suit], their prosecution will be
advanced if [the plaintiff] is successful on the major premises being litigated in [the
manufacturer suit], and may well be mooted if he is unsuccessful”). If the action against
the Customer Defendants as to the ‘905 patent is not stayed, and Escort is exonerated of
that infringement charge, the Customer Defendants will have wasted substantial costs in
proceeding with discovery. On the other hand, if this action is stayed against the
Customer Defendants, and Escort is found to have infringed the ‘905 patent a year or two
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hence, all of that time – when the Customer Defendants could have been engaging in
discovery – has been wasted as the Customer Defendants sat on the sidelines.
In balancing these factors, the Court finds that the potential cost savings resulting
from a stay of the allegations in Count Three regarding the ‘905 patent outweigh the
potential costs of a delay. The cost savings could be substantial and must be given
special weight because the Customer Defendants are, according to Fleming’s allegations,
mere resellers who had no role in the manufacturing. See Kahn v. General Motors
Corp., 889 F.2d 1078, 1082 (Fed.Cir. 1989)(collecting cases granting stays in favor of a
“mere customer who had no part in the manufacture of the accused infringing
equipment”). While the potential for delay must be considered, it should not be
extensive, given that a major issue – the infringement of the manufacturer – will have
been resolved and the remaining issues should not be complex.
The analysis is somewhat different, however, for Counts One and Two. As
discussed above, while the Court will prevent a double recovery for the infringement
claims against the Customer Defendants in these two Counts, the Court will allow the
willful infringement claims to proceed. For a portion of the willful infringement claims
against the Customer Defendants, Fleming is not awaiting a threshold finding of
infringement against Escort, but has already received that finding. The earlier jury
found that Escort infringed the ‘038 and ‘653 patents with regard to the four Escort
devices listed above. As to those four devices and two patents, the willful infringement
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claim against the Customer Defendants is not awaiting any further findings of
infringement against Escort.
This creates a dilemma. While that particular portion of the willful infringement
claim is ready to proceed, another portion still awaits infringement findings. More
specifically, a portion of Fleming’s willful infringement claim against the Customer
Defendants still awaits the following findings: (1) the infringement of the ‘905 patent,
and (2) the infringement of the ‘038 and ‘653 patents by Escort devices other than the
four already resolved.
Thus, while a portion of the willful infringement claim could proceed, a
substantial portion is still awaiting findings and could not proceed. That compels the
Court to place the entire willful infringement claim against the Customer Defendants
within the stay, so that the claim will not proceed in a piecemeal fashion.
For all of these reasons, the Court finds that a stay is warranted. Consequently,
the Court will grant the motion for stay filed by the Customer Defendants.
Claim Construction Hearing
Finally, the Court will set a claim construction hearing between Fleming and
Escort for November 8, 2013, at 9:00 a.m. in the Federal Courthouse in Boise Idaho.
In accordance with the Memorandum Decision set forth above,
NOW THEREFORE IT IS HEREBY ORDERED, that Escort’s motion to dismiss
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(docket no. 33) is GRANTED IN PART AND DENIED IN PART. It is granted to the
extent it seeks to dismiss those portions of Counts One and Two alleging that Escort is
liable for infringing the ‘038 and ‘653 patents by selling or distributing four Escort
products: The GX65, Passport 9500, Passport 9500i, and Passport iQ. It is denied in all
IT IS FURTHER ORDERED, that the motion to dismiss filed by the Customer
Defendants (docket no. 42) is GRANTED IN PART AND DENIED IN PART. It is
granted to the extent it seeks to dismiss those portions of Counts One and Two alleging
that the Customer Defendants are liable for selling or distributing infringing Cobra
products. It is denied in all other respects. As stated above, the Court will ensure that
Fleming does not receive a double recovery with regard to his claims against the
Customer Defendants in Counts One and Two.
IT IS FURTHER ORDERED, that the motion to stay (docket no. 42) is
GRANTED, and that this action is stayed against all defendants except Escort until
further order of this Court. The action against Escort shall proceed and is not subject to
IT IS FURTHER ORDERED, that the claim construction hearing between
Fleming and Escort is set for November 8, 2013, at 9:00 a.m. in the Federal Courthouse
in Boise Idaho.
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DATED: August 5, 2013
B. Lynn Winmill
United States District Court
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