Kolcraft Enterprises, Inc. v. Graco Children's Products, Inc. et al
Filing
473
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang on 9/6/2019: For the reasons stated in the Opinion, the defense motions for judgment as a matter of law and for new trial 430 432 are denied. Plaintiff's motion 423 for prejudgment interest is granted in part and denied in part. Plaintiff's motion for permanent injunction 438 is granted in part and denied in part. Plaintiff's motion for attorney fees 440 and enhanced damages is denied, but post-judgmen t interest shall apply. The motion for bill of costs 444 is terminated as moot in light of the parties' settlement of costs. The parties' joint statement on the prejudgment interest calculation is due by 09/16/2019. After the filing of that statement, the Court will enter the combined judgment and injunction using the AO-450 form. Emailed notice(eec)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KOLCRAFT ENTERPRISES, INC.
Plaintiff,
v.
CHICCO USA, INC. d/b/a ARTSANA USA
INC.,
Defendant.
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No. 09-CV-03339
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Plaintiff Kolcraft Enterprises owns United States Patent No. 7,376,993 (the
’993 Patent), which covers methods and apparatuses related to infant play gyms.
Kolcraft accused Artsana USA, Inc. of infringing this patent with its own line of infant
play gyms. After many years of litigation, including before the Patent & Trademark
Office, the parties took the case to trial in August 2018. The jury returned a verdict
in favor of Kolcraft on all claims and awarded $3,245,213.10 in damages. Artsana
now moves for judgment as a matter of law, or, in the alternative, a new trial. For its
part, Kolcraft moves for a permanent injunction, prejudgment interest, enhanced
damages, attorneys’ fees, and post-judgment interest. For the reasons explained
below, Artsana is denied judgment as a matter of law. The Court also denies Artsana’s
motion for a new trial, but the motion does present a very close question on whether
to remit the damages award. Ultimately, the Court concludes no. Kolcraft’s motions
for a permanent injunction, prejudgment interest, and post-judgment interest are all
granted. But the Court denies Kolcraft’s motions for enhanced damages and
attorneys’ fees.
I. Background
A. The ’993 Patent
Kolcraft, a manufacturer of baby products, began developing its Travelin’ Tot
play gym and play-yard product in October 2001. Trial Tr. at 150:21-151:3. To state
the obvious (at least to parents), play gyms are arches from which toys dangle. R.
438.6, ’993 Patent col. 1 ll. 53-62. Two Kolcraft employees—Pete Myers and Joe
Sejnowski—were initially tasked with designing the product. Trial Tr. at 151:19-23.
According to Kolcraft’s President and CEO, Tom Koltun, Myers came up with the idea
to give the play gym four legs that were all connected to a central hub, which allowed
the user to fold the legs down and place the play gym into a carry bag for easy
transportation. Id. at 153:6-16. The play gym could also be connected to a play yard,
a play mat, or a bassinet, which was a unique combination of features in the market.
Id. at 154:1-9. Kolcraft used a Chinese manufacturer, Lerado, to manufacture the
product. Id. at 186:18-23. The Travelin’ Tot launched in December 2002. Id. at 153:2225.
Later on, Kolcraft decided to pursue a patent for the Travelin’ Tot product and
filed an application in May 2003. Id. at 155:6-24, 156:9-11. The application listed both
Myers and Sejnowski as inventors. Id. at 157:7-18. Kolcraft added the words “patent
pending” to the product’s packaging, id. at 158:14-18, although the ’993 patent did
not issue until May 2008, id. at 156:12-13. But by that point, Kolcraft had pulled the
Travelin’ Tot product from the market. Id. at 158:11-13.
2
The ’993 patent included 31 claims, although only Claims 28-31 and Claim 20
are at issue in this case. Claim 28 describes a method for using the play gym,
specifically:
A method comprising:
securing a play gym at least partially above at least one of a
bassinet and a play yard;
removing the play gym from at least one of the bassinet and the
play yard;
securing the play gym to a mat apart from the play gym and the
bassinet;
removing the play gym from the mat; and
collapsing the play gym, wherein collapsing the play gym
comprises:
pulling a leg of the play gym in a direction away from a hub; and
pivoting the leg into a stored position.
’993 Patent col. 10 ll. 6-18. Claims 29-31 depend on Claim 28, and describe specific
methods of collapsing the play gym for storage. Id. col. 10 ll. 19-27.
Claim 20, on the other hand, describes an apparatus (rather than a method),
specifically:
an apparatus comprising
a floor mat;
a play gym to suspend an object above the floor mat;
at least one connector to couple the play gym to the floor mat; and
at least one fastener to couple the floor mat to at least one of a
play yard and a bassinet,
3
wherein the at least one connector comprises a plurality of
connectors, and the play gym comprises:
a hub; and
at least two legs, each of the legs having a first end coupled
to the hub and a second end dimensioned to be removably
coupled to a respective one of the connectors, wherein the
at least two legs are pivotably coupled to the hub,
wherein the connectors are pivotably coupled to the mat.
R. 247, Def. Claim 20 Claim Const. Br. at 3.1
B. Artsana’s Original Lullaby Play Gym
In 2003, a rival manufacturer of baby products, Artsana (doing business as
Chicco at the time), decided to look into designing and producing its own play yard.
Trial Tr. at 502:3-503:1. It reached out to Lerado for help because Mark Messner, the
Vice President of Marketing and Product Development at Chicco, id. at 499:23-25,
had previously worked with the company on various stroller designs for Chicco, id. at
504:7-10. Messner was aware that Lerado was designing products for other
companies at the time. Id. at 505:4-14. After Messner reached out, Lerado employees
showed him a design for a play yard that he believed to have been created by Lerado.
Id. at 505:15-20. The Lerado employees referred to the design as an “open item,”
which, to Messner, meant any customer who wanted to use the design could purchase
it. Id. at 505:15-20, 506:18-25. Artsana first started selling its play yard—the
Lullaby—in 2005. Id. at 507:5-7.
1Claim
20 was amended during reexamination proceedings, so the text of the current
Claim 20 is slightly different than the text that appeared in the original patent. Def. Claim
20 Claim Const. Br. at 2-3.
4
The parties dispute when Kolcraft first notified Artsana that it believed the
Lullaby was infringing the ’993 patent. Artsana asserts that it was first notified when
Kolcraft served its Complaint in June 2009. Trial Tr. at 507:8-22. Kolcraft, on the
other hand, put forth evidence that Kolcraft CEO Tom Koltun called Artsana’s CEO,
Greg Mansker, several months before the lawsuit was filed—in March or early April
2009—to give him a “heads up” that Kolcraft believed that the Lullaby was infringing
the patent. Id. at 159:13-161:15. Koltun testified that he told Mansker he should look
into licensing the product from Kolcraft. Id. at 169:1-10. According to Koltun,
Mansker eventually called him back and told him Artsana’s lawyers advised against
licensing, but also that he wanted to avoid litigation. Id. at 168:2-169:10. Koltun
testified that, after that conversation, he felt like he had no choice but to sue Artsana.
Id. at 169:11-13.
B. The 2009 Lawsuit and Fallout
Kolcraft sued both Artsana and Graco (another manufacturer of baby products)
for patent infringement in June 2009. R. 1, Compl. Koltun explained at trial that
Kolcraft discovered Graco’s infringing product, Baby Einstein, after it began
investigating the market for similar products following his conversation with Koltun.
Trial Tr. at 170:12-23. The Complaint initially accused Artsana of infringing claims
1-12 and 18-21, while it accused Graco of infringing claims 22 and 23. Compl. ¶¶ 8,
9. Shortly after the suit was filed, Kolcraft and Graco settled and negotiated a license
for the ’993 patent, which included a 5% royalty on the allegedly infringing Baby
Einstein product. Trial Tr. at 171:8-18. Artsana, on the other hand, requested that
the Patent & Trademark Office (PTO) reexamine the validity of Kolcraft’s patent,
5
which delayed the litigation between the parties. Id. at 177:19-23. The Court detailed
the lengthy procedural history of the reexamination process in the first claim
construction opinion. R. 216, 9/2/16 Claim Const. Order at 2-4. To summarize, the
Patent Trial and Appeal Board eventually affirmed the patentability of Claims 28-31
and Kolcraft amended Claim 20 to be an independent claim. Id. In April 2012,
Kolcraft issued its Initial Infringement Contentions in this case, alleging that in
addition to the claims originally asserted in its Complaint, Artsana had also infringed
Claims 28-31. Id. at 3.
At the same time as the PTO was reexamining the ’993 patent, Artsana made
several changes to the “Original Design” of the Lullaby product, purportedly to avoid
infringing the ’993 patent. These changes are described and depicted below:
6
Despite these changes, Kolcraft proceeded with the litigation and the case
eventually went to trial in the fall of 2018. Kolcraft argued at trial that the original
Lullaby design, as well as all of the redesigns, infringed Claims 20 and 28-31 of the
’993 patent. Trial Tr. at 108:22-109:4. Kolcraft also argued that Artsana induced its
customers to infringe Claims 28-31, id. at 109:15-17; Artsana contributed to that
infringement, id. at 110:1-3; and Artsana infringed the patent willfully, id. at 110:1920. Both parties presented fact and expert witnesses at trial, including damages
experts. Both of the damages experts opined on a hypothetical reasonable royalty rate
to award Kolcraft if the jury found Artsana liable. Kolcraft’s expert estimated a
reasonable royalty rate of 5.8%. Id. at 578:21-24. Artsana’s expert estimated a
reasonable royalty rate of 2% at the very, very most. Id. at 870:17-20.
At trial’s end, the jury found for Kolcraft on all claims, concluding that all of
the accused products infringed each asserted Claim of the ’993 patent. R. 413, Verdict
Form. Indeed, the jury found in favor of Kolcraft on all 55 special interrogatories. Id.
It awarded Kolcraft $3,245,213.10, which equates to a 7% royalty rate on Artsana’s
sales of the Lullaby products. Verdict Form at 7. The parties now bring a series of
post-trial motions. Artsana asks for judgment as a matter of law under Rule 50 on all
of Kolcraft’s claims. R. 398, Def.’s 50(a) JMOL; R. 407, Def.’s Renewed 50(a) JMOL;
R. 432, Def.’s 50(b) JMOL. In the alternative, Artsana requests a new trial under
Rule 59. R. 430, Def.’s Mot. New Trial. For its part, Kolcraft has filed motions for a
permanent injunction, R. 438, Pl.’s PI Mot., enhanced damages and attorney’s fees,
R. 440, Pl.’s Mot. Enhanced Damages, and prejudgment interest, R. 423, Pl.’s Mot.
Prejudgment Int.
II. Legal Standards
A. Rule 50
Under Rule 50(a) of the Federal Rules of Civil Procedure, a district court may
enter judgment against a party who has been fully heard on an issue during a jury
trial if “a reasonable jury would not have a legally sufficient evidentiary basis to find
for the party on that issue.” Fed. R. Civ. P. 50(a). The Court “must construe the facts
strictly in favor of the party that prevailed at trial.” Schandelmeier–Bartels v. Chi.
Park Dist., 634 F.3d 372, 376 (7th Cir. 2011). “Although the court examines the
evidence to determine whether the jury's verdict was based on that evidence, the
court does not make credibility determinations or weigh the evidence.” Id. And the
Court “can strike a piece of evidence from its weighing process only if reasonable
persons could not believe it because it contradicts indisputable physical facts or laws.”
Mejia v. Cook County, Ill., 650 F.3d 631, 633 (7th Cir. 2011) (cleaned up).3 Put another
way, “[d]iscrepancies arising from impeachment, inconsistent prior statements, or
the existence of a motive” will not render testimony excludable. Whitehead v. Bond,
680 F.3d 919, 926 (7th Cir. 2012) (cleaned up).
3This
Opinion uses (cleaned up) to indicate that internal quotation marks, alterations,
and citaions have been omitted from quotations. See Jack Metzler, Cleaning Up Quotations,
18 Journal of Appellate Practice and Process 143 (2017).
12
B. Rule 59
A court may grant a motion for a new trial under Rule 59 if the verdict is
against the clear weight of the evidence or the trial was unfair to the moving party.
Clarett v. Roberts, 657 F.3d 664, 674 (7th Cir. 2011). “In passing on a motion for a
new trial, the district court has the power to get a general sense of the weight of the
evidence, assessing the credibility of the witnesses and the comparative strength of
the facts put forth at trial.” Mejia, 650 F.3d at 633 (cleaned up). The district court,
however, may not simply substitute its judgment for the jury’s. “Since the credibility
of witnesses is peculiarly for the jury, it is an invasion of the jury’s province to grant
a new trial merely because the evidence was sharply in conflict.” Whitehead, 680 F.3d
at 928. The standard for granting a new trial is thus relatively high and a motion
requesting as much will only be granted “when the record shows that the jury’s
verdict resulted in a miscarriage of justice or where the verdict, on the record, cries
out to be overturned or shocks our conscience.” Id. at 927-28.
C. Permanent Injunction
“A plaintiff seeking a permanent injunction must satisfy a four-factor test
before a court may grant such relief. A plaintiff must demonstrate: (1) that it has
suffered an irreparable injury; (2) that remedies available at law, such as monetary
damages, are inadequate to compensate for that injury (3) that, considering the
balance of hardships between the plaintiff and defendant, a remedy in equity is
warranted; and (4) that the public interest would not be disserved by a permanent
injunction.” Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 156-57 (2010)
13
(cleaned up). These principles apply equally to disputes arising under the Patent Act.
eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
D. Prejudgment Interest
If a defendant is found liable for infringement, the Court will often award
prejudgment interest, which is the rule, not the exception. Gen. Motors Corp. v. Devex
Corp., 461 U.S. 648, 655-56 (1983). “An award of prejudgment interest serves to make
the patentee whole because the patentee also lost the use of its money due to
infringement.” Crystal Semiconductor Corp. v. TriTech Microelectronics Intern, Inc.,
246 F.3d 1336, 1361 (Fed. Cir. 2001). Any justification for withholding the award
must bear a relationship to the award of prejudgment interest itself. Gen. Motors, 461
U.S. at 655.
E. Enhanced Damages, Fees, and Post-Judgment Interest
Finally, § 284 of the Patent Act allows courts to “increase the damages up to
three times the amount found or assessed.” 35 U.S.C. § 284. District Courts, then,
have discretion to decide whether to award enhanced damages and in what amount.
Halo Elecs. v. Pulse Elecs., 136 S.Ct. 1923, 1931-32 (2016). The Supreme Court,
though, has clarified that enhanced damages are reserved for “egregious cases of
culpable behavior.” Id. at 1932. The Court also has discretion to award attorneys’ fees
and post-judgment interest. 35 U.S.C. § 285; 28 U.S.C. § 1961.
III. Analysis
A. Defendant’s Rule 50 Motions
Artsana currently has three motions for judgment as a matter of law pending
before this Court. First, Artsana made two pre-verdict motions under Rule 50(a), R.
14
398 and R. 407, on which the Court reserved ruling. Second, Artsana brought one
post-verdict motion under Rule 50(b). R. 432. Typically, the issues addressed in a
party’s post-verdict motion mirror those addressed in its pre-verdict motion, because
a post-verdict Rule 50(b) motion “can be granted only on grounds advanced in the
pre[-]verdict motion.” Fed. R. Civ. P. 50, Advisory Comm. Notes. 2006 Am. Here, in
its post-verdict briefing, Artsana abandons two of its pre-verdict arguments for
judgment as a matter of law: (1) Kolcraft failed to establish damages prior to June 3,
2009, Def.’s 50(a) JMOL at 20-21; Def.’s Renewed 50(a) JMOL at 20-21; and (2) the
patent is invalid for failing to identify the correct inventors, Def.’s 50(a) JMOL at 2326; Def.’s Renewed 50(a) JMOL at 23-26.4
Because the Court has not yet ruled on Artsana’s Rule 50(a) motions, it will
address all of the arguments made in those motions, even if they were not specifically
renewed in Artsana’s Rule 50(b) motion. The Seventh Circuit has expressly “rejected
the formalistic renewal requirements for motions for judgment as a matter of law
where they serve no purpose.” Holder v. Illinois Dept. of Corrections, 751 F.3d 486,
492 (7th Cir. 2014). Deeming Artsana’s 50(a) arguments to be waived holds no
discernible purpose here, especially when “[a] party who knows the court has taken
a motion for a verdict under advisement has no reason to be surprised that the motion
is still in play.” Id. at 491.
4Artsana’s
initial Rule 50(a) Motion for Judgment as a Matter of Law and its Renewed
Rule 50(a) Motion for Judgment as a Matter of Law make identical arguments.
15
1. Infringement of Claim 20
Artsana makes two arguments on Claim 20 of the ’993 patent. First, Artsana
contends that none of its products fit the limitation “wherein the connectors are
pivotably coupled to the mat.” Def.’s Rule 50(b) Mot. at 2-5. Artsana asserts that all
of its models—PTX-7, PTX-8, PTX-9, and DTX-296—do not have connectors
“pivotably coupled” to the mat because the stitching—which connects either the
pocket, the plastic ring, or the Velcro attachment to the mat—cannot (in Artsana’s
view) “rotate, turn, or move around a fixed point,” as required by the Court’s
construction of Claim 20. Id. at 4-5.
Artsana made this same argument to the jury (and in summary judgment
briefing). The jury rejected it, and the evidence readily supports the verdict. The jury
was free to credit testimony from Myers—who is listed as an inventor on the ‘993
patent—that the “connectors” consisted of, depending on the particular design: (1) the
pocket on each corner of the mat and the snap inside; (2) the plastic D-ring on each
corner; or (3) the Velcro attachment, all of which secured the four legs to the mat.
Trial Tr. at 272:11-273:8. These parts pivot along the stitch seam in each corner, so
the jury reasonably found that they fit the definition of “pivotably coupled,” that is,
the parts rotated, turned, or moved around a fixed point. Id. at 273:13-17 (“So if you
take this out, you can see there is a stitch line along the fabric here. And basically—
I will kind of hold this up so you guys can see it—this piece will rotate back and forth
(indicating). So that shows that it’s pivotably coupled along that stitch line.”). There
was nothing inherently “conclusory” about this testimony, as Artsana asserts. See
Def.’s Rule 50(b) Mot. at 4. Myers simply stated his view on the pivotability of the
16
connectors on each model, and testified that the stitching was not a “connector,” but,
rather, a pivot point around which the connectors moved. The jury was free to take
Myers’ testimony at face value and use that (as well as their common sense) to assess
the coupling on the three designs.
Artsana’s second argument on Claim 20 likewise fails. Artsana argues its
redesigned models, PTX-8 and PTX-9, do not have “at least two legs [that] are
pivotably coupled to the hub,” because a person is only able to move and rotate the
legs around the hub when they are disconnected from the hub. Def.’s Rule 50(b) Mot.
at 5-6. Again, though, Myers’ testimony presented a factual basis for the jury’s
verdict, that is, that the legs “rotate to go into that folded position.” Trial Tr. at
277:17-18. See also id. at 277:20-278:8. He demonstrated to the jurors that all of the
models had legs that could be pulled away from the hub—while still connected—and
then rotated down into a folded position. If the jury credited his interpretation of the
claim’s terms, which they were free to do, the products clearly meet the requirements
of the claim. Construing the evidence reasonably in Kolcraft’s favor, as the Court is
obligated to do, this was enough to find that all Artsana’s Lullaby models infringed
Claim 20.
2. Infringement of Claims 28-31
Artsana next offers several arguments for the contention that there was
insufficient evidence to find that PTX-8 and PTX-9 infringed Claim 28. First,
according to Artsana, PTX-8 and PTX-9 do not meet the requirements of the term
“pivoting the leg into a stored position” because the legs on those models do not move
around a fixed point. Def.’s Rule 50(b) Mot. at 6-7; Def.’s Rule 50(a) Mot. at 10-11;
17
Def.’s Renewed Rule 50(a) Mot. at 10-11. Like before, Myers’s testimony defeats
Artsana’s argument. Myers testified that the user will “pull away and then rotate”
the legs around the hub into the stored position. Trial Tr. at 282:8-19. To be sure,
Myers did not say the literal word “pivot” in that piece of testimony, but he did not
have to. The testimony made clear that the legs were rotating around a fixed point—
their permanent connection to the hub. Id. at 282:10-13 (“So you will see it’s actually
spring-loaded. So you have to pull it away, because normally it’s locked in that open
position. So you have to pull away, and then you can (indicating).”). This was enough
for the jury to find that PTX-8 and PTX-9 infringed that term of Claim 28.
Second, Artsana argues that no evidence showed that either PTX-8 and PTX9 include a specific structure in which the legs would rest when the product is stored,
and, as a result, the redesigned hubs do not infringe Claim 28. Def.’s Renewed Rule
50(a) Mot. at 12-13. This argument likewise fails because Myers testified that the
Artsana hubs had “a pocket for the leg to rest into” and that there was “very much a
resting place for that leg in the [Artsana] product.” Trial Tr. at 318:11-319:23.
Although Myers admitted that the “exact nuances and shapes and details” varied
between Kolcraft’s product and Artsana’s product, that is not nearly the same as
conceding that Artsana’s products altogether lacked a place to put the legs in the
stored position. Indeed, he stated the opposite: the product had a specific position
where the legs rested when it was not in use. So it was not unreasonable for the jury
to find that the redesigned hubs practiced that limitation of Claim 28.
18
Finally, Artsana argues that Kolcraft presented insufficient evidence of direct
infringement of Claim 28, because there was no evidence Artsana, or someone under
its control, performed all the steps of the claimed method. Def.’s Rule 50(b) Mot. at 7
(citing Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1317 (Fed. Cir. 2009)). See
also Def.’s Rule 50(a) Mot. at 8-9; Def.’s Renewed Rule 50(a) Mot. at 8-9. Artsana also
argues that Kolcraft’s consumer witness, Tiffany Manzella, did not provide enough
support for this claim because she did not own or use PTX-8 or PTX-9, only PTX-7.
Artsana is right about one thing—Manzella was not able to testify about using
PTX-8 or the PTX-9. But that is not the end of the story. Circumstantial evidence can
be enough to prove direct infringement of a method claim. See, e.g., Lucent
Technologies, 580 F.3d at 1317-18; Cascades Computer Innovation, LLC v. Samsung
Electronics Co. Ltd., 77 F. Supp. 3d 756, 768 (N.D. Ill. 2015); Bayer Healthcare, LLC
v. Zoetis Inc., 2016 WL 4179087, *29 (N.D. Ill. Aug. 8, 2016). Here, the jury was free
to infer from the evidence that a typical user of PTX-8 or PTX-9 would use the product
in the way set forth in Claim 28. For example, Manzella testified that she used PTX7, which incorporated many of the same functions as the later redesigns, in the exact
manner outlined in Claim 28. Trial Tr. at 367:19-368:19. And Artsana’s own witness,
Mark Messner, testified that Artsana provides instruction manuals, toll-free 800
customer-service numbers, and other information that help end-users use Lullaby
products, including in ways that infringe Claim 28. Id. at 496:14-497:18.
What’s more, Artsana’s insistence on direct evidence misapprehends the power
of circumstantial evidence. It is only common sense that a customer would take
19
advantage of all the features offered in a pricey baby product. Put another way,
whatever the initial motivation to buy a Lullaby product, once the consumer owns a
product that can do all of those useful things—separate the play gym from the
bassinet, remove the play gym from the mat, and collapse the play gym—it is common
sense that they would take advantage of all those features. At the very least, a jury
could reasonably so find. Artsana also half-heartedly argues that a jury could not
infer direct infringement of Claim 28 because “there are substantial non-infringing
uses for the [Lullaby] Products.” Def.’s Rule 50(b) Mot. at 8. See also Def.’s Rule 50(a)
Mot. at 9. This argument is unpersuasive. Here, the alleged non-infringing uses—
using the play yard, bassinet, and changing table without the play gym—were not so
dominant that the jury was required to reject the circumstantial evidence of direct
infringement. For these reasons, the Court will not disturb the verdict on Claims 2831.
3. Indirect Infringement5
Under 35 U.S.C. § 271(b), a party who “actively induces infringement of a
patent shall be liable as an infringer.” Induced infringement requires knowledge that
the inducing conduct amounts to patent infringement. Global-Tech Appliances, Inc.
v. SEB S.A., 563 U.S. 754, 766 (2011). In determining whether a defendant possessed
5In
its Rule 50(a) motions, Artsana refers to Kolcraft’s indirect infringement claim as
“induced infringement.” Def.’s Rule 50(a) Mot. at 9; Def.’s Renewed Rule 50(a) Mot. at 9. It
also includes a separate section on contributory infringement, although this argument is
sparse and conclusory. Def.’s Rule 50(a) Mot. at 10; Def.’s Renewed Rule 50(a) Mot. at 10.
Artsana combines these arguments into one section on indirect infringement in its Rule 50(b)
motion. Def.’s Rule 50(b) Mot. at 8. The Court addresses the substance of Artsana’s
arguments on induced infringement, contributory infringement, and indirect infringement in
this section.
20
that knowledge, again “direct evidence is not required; rather, circumstantial
evidence may suffice.” Lucent, 580 F.3d at 1322 (cleaned up). Artsana offers three
objections to the jury’s verdict on indirect infringement. First, Artsana asserts that
Kolcraft failed to show direct infringement, a necessary element of an indirect
infringement claim. Def.’s Rule 50(b) Mot. at 8 (citing Lucent Techs, 580 F.3d at 132122). The Court has already held that there was sufficient evidence to find direct
infringement, so this argument is rejected.
Second, Artsana argues that there was no evidence that it “aided, encouraged,
or instructed others to use the [Lullaby] Products in a manner that infringed claims
20 and 28-31 of the ‘993 Patent.” Def.’s Rule 50(b) Mot. at 9. This is directly
contradicted by testimony that Artsana provided instruction manuals to consumers
and demonstrations to retailers about how to use the Lullaby products. Trial Tr. at
496:14-497:18. Artsana attempts to undermine this evidence by pointing out that
“Kolcraft never identified what parts of the instruction manuals aided, instructed, or
encouraged consumers to infringe the asserted claims.” Def.’s Rule 50(b) Mot. at 9.
But that was not necessary. Circumstantial evidence can be enough to prove intent
to infringe, and Kolcraft was not required to call a witness to testify about the
common-sense use of instruction manuals.
Finally, Artsana argues that Kolcraft failed to present evidence that the
Lullaby products “do not have substantial non-infringing uses” and that this defeats
the claim as a matter of law. Def.’s Rule 50(b) Mot. at 9 (quoting Vita-Mix v. Basic
Holding, 581 F.3d 1317, 1328 (Fed. Cir. 2009)). But as the Court already explained,
21
the non-infringing uses are neither substantial nor integral to the overall product,
and thus do not undermine a finding of indirect infringement. See Fujitsu Ltd. v.
Netgear, Inc., 620 F.3d 1321, 1330-31 (Fed. Cir. 2010). The jury’s verdict on this claim
will stand.
4. Willful Infringement
Next, Artsana objects to the jury’s finding that it willfully infringed the ’993
patent. Def.’s Rule 50(b) Mot. at 9-12. “Willful infringement is reserved for only the
most egregious behavior such as where the infringement is ‘wanton, malicious, [in]
bad faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a
pirate.” Id. at 9 (quoting Halo Elecs., 136 S. Ct. at 1932). According to Artsana, its
behavior did not exhibit willfulness because (1) when it began making the Lullaby
product, the patent application was still pending, Def.’s Rule 50(b) Mot. at 10; (2)
Artsana believed that Lerado owned the design for the play gym, id. at 11; and (3)
Artsana’s design-arounds were made in good faith, even if they were not successful
in avoiding infringement, id.
Artsana’s first two arguments relate to its original design, PTX-7. Artsana is
right that the patent had not issued when it first started selling PTX-7, but the
evidence showed that Artsana continued to sell the product even after Kolcraft
notified Artsana of the patent and after this lawsuit was filed. Trial Tr. at 169:1-21;
529:5-22. Artsana also declined to present evidence—from attorneys who supposedly
rendered non-infringement opinions or from anyone else—substantiating its
assertion that it believed PTX-7 was not infringing the patent and that it was acting
in good faith. Finally, Artsana’s own expert conceded that PTX-7 infringes Claim 28
22
of the ’993 patent. Trial Tr. at 766:13-23. This evidence was enough to find that
Artsana willfully infringed the patent via the original design.
Artsana’s redesigns present a closer call. Although the jury found that PTX-8
and PTX-9 ultimately still infringed the ’993 patent, a redesign undertaken in good
faith will not support a finding of willful infringement. See, e.g., Westvaco Corp. v.
Int’l Paper Co., 991 F.2d 735, 745 (Fed. Cir. 1993); Alloc, Inc. v. Norman D. Lifton
Co., 653 F. Supp. 2d 469, 476 (S.D.N.Y. 2009). Unfortunately for Artsana, it did not
advance any argument that the willfulness finding should have been different as to
the different versions of the Lullaby product.6 Artsana also conceded at trial that it
made no changes to the product packaging or marketing literature of the Lullaby
product to reflect the redesign. Trial Tr. 495:1-496:13. This tended to undermine the
conclusion that the redesigned models were significantly different than the original
design. Id. at 495:6-9 (“Q. There was no way for an end user to know, if they walked
into a store, whether they were buying Plaintiff’s Exhibit 7 or 8 and 9, right? A. If
they didn’t take the unit apart, no.”).
5. Reasonable Royalty Rate
Artsana next contends that Kolcraft did not meet its burden of proof for
establishing reasonable royalty damages, and that the jury’s award of what in effect
is a 7% royalty rate is not supported by the evidence as a matter of law. Def.’s Rule
6To
be more specific: Artsana declined to argue in the alternative that, even if it
willfully infringed the ’993 patent with its original design, there was insufficient evidence to
find that it did so with the redesigns. The Court might very well have been receptive to this
argument because the question of infringement was much closer regarding PTX-8 and PTX9. The Court cannot supply an argument for a party, though, because doing so would deny
the opposing party an opportunity to respond.
23
50(b) Mot. at 12-20. This argument falls short because Artsana has not shown that,
as a matter of law under Rule 50, the jury’s verdict is so outrageously high “as to be
unsupportable as an estimation of a reasonable royalty.” Rite-Hill Corp. v. Kelley Co.,
56 F.3d 1538, 1554 (Fed. Cir. 1995) (en banc) (cleaned up). But this is a very close
call.
A patentee is entitled to a reasonable royalty on the infringer’s sales, but the
reasonable royalty is “merely the floor below which damages shall not fall.” Lucent
Techs., 580 F.3d at 1324 (cleaned up); see also Rite-Hite Corp.., 56 F.3d at 1544 (“[T]he
language of the statute is expansive, rather than limiting. It affirmatively states that
damages must be adequate, while providing only a lower limit and no other
limitation.”). The jury need not accept the reasonable royalty rate presented by either
party but can instead decide for itself what is a reasonable royalty based on the
evidence submitted. SmithKline Diagnostics, Inc. v. Helena Lab. Corp., 926 F.2d
1161, 1168 (Fed. Cir. 1991). That said, the jury’s award must be reasonably supported
by evidence in the record. Unisplay v. American Elec. Sign, 69 F.3d 512, 517 (Fed.
Cir. 1995).
Here, both sides presented reasonable royalty rates below the 7% that the jury
eventually awarded. Artsana’s expert, Michael Chapman, opined that a “reasonable
royalty rate shouldn’t be any higher than 2 percent of net sales.” Trial Tr. at 870:1920. Kolcraft’s expert, Frank Bernatowicz estimated that a reasonable royalty rate
was 5.8%. Id. at 578:21-24. Despite the gap between these estimates and the final
verdict, evidence presented to the jury supported their award. Bernatowicz provided
24
testimony that supports the jury’s decision to go above his estimate reasonable
royalty rate, at least when the evidence is viewed in a light most favorable to Kolcraft
under Rule 50 (it is a different standard and story under Rule 59, as explained later).
First, Bernatowicz emphasized that his 5.8% estimation was, in his opinion,
the minimum acceptable royalty rate needed to properly compensate Kolcraft. See
Trial Tr. at 579:2-14. Second, Berntowicz calculated his rate, in part, by looking at a
license agreement for the ’993 patent between Artsana and Graco, which applied a
5% royalty rate. Berntowicz explained to the jury that he believed the 5% royalty rate
applied in that license was “conservative,” because it was negotiated as part of a
settlement agreement between two parties engaged in active litigation. Id. at 546:22549:10 (“So as I developed this baseline royalty rate, I looked for the best licensing
evidence, found it in the ’993 Graco license, realizing that it was conservative and
likely less than full value.”).
Finally, to formulate his opinion, Bernatowicz conducted an analysis of the
well-known Georgia-Pacific factors. Trial Tr. at 545:12-557:19, 563:16-579:1; see also
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).
Factors 12 and 13 in the Georgia-Pacific analysis are (12) the part of the profit or
selling price that is customary to allow for the use of the invention; and (13) the part
of the realizable corresponding profit that should be credited to the invention. Id.
Bernatowicz analyzed these factors together and found that, based on that analysis
alone, the reasonable royalty rate was 7.7%. Trial Tr. at 577:22-578:1. This analysis
could have served as a basis for the jury’s award, even though it exceeded
25
Bernatowicz’s final estimation of a reasonable royalty, when combined with the other
evidence that the 5.8% rate was conservative (because the Graco license was
conservative). In Powell v. Home Depot U.S.A., Inc., the jury awarded the plaintiff a
royalty of $7,736 per unit sold, even though the plaintiff’s expert testified that a
reasonable royalty would be no more than $7,000 per unit. 663 F.3d 1221, 1239-41
(Fed. Cir. 2011). Nonetheless, the Federal Circuit upheld the denial of judgment as a
matter of law sought by the infringer, because the same expert “testified that the
scope of possible reasonable royalties was bounded by a range of $2,180 per unit up
to approximately $8,500 per unit.” Id. at 1241. Given Bernatowicz’s analysis and
opinion to the effect that the 5.8% rate was conservative, combined with Rule 50’s
deferential standard, the jury’s chosen royalty rate is supported by a legally sufficient
evidentiary basis.
6. Graco License
Artsana objects to the damages award on the related but separate ground that
Kolcraft failed to show that the Graco license—relied on by Bernatowicz for his
royalty estimate—was a comparable license to the hypothetical negotiation between
Artsana and Kolcraft. Def.’s Rule 50(b) Mot. at 14-20.7 Artsana alleges that
Bernatowicz failed to account for four unique characteristics of the Graco license that
make it too different from the hypothetical license between Artsana and Kolcraft: (1)
the Graco license resulted from litigation, id. at 16-17; (2) it is not clear whether the
Graco license considered the apportionment between patented and non-patented
7Artsana
did not make this argument in its Rule 50(a) motions. Because Kolcraft did
not object to this argument as forfeited, though, the Court will proceed to the merits.
26
features, id. at 17-18; (3) the Graco license includes additional intellectual property
outside of the intellectual property Artsana would have licensed, id. at 18; and (4) the
Graco license pre-cleared multiple products from future infringement, id. at 19.
It is true that these characteristics of the Graco license provide Artsana with
ammunition against the license’s probative force in the hypothetical negotiation
between Kolcraft and Artsana. But the differences are not so strong that they render
the jury’s damage award unreasonable or unsubstantiated as a matter of law. Indeed,
weighing the other way, there are similarities between the Graco license and the
hypothetical license between Kolcraft and Artsana. Both deal primarily with the
same intellectual property (the ’993 patent), arise from the same lawsuit, involve the
same primary negotiator (Kolcraft CEO Koltun), and involve competitors in the same
industry making similar products. Bernatowicz told the jury that it was rare to find
a comparable license that involved the exact same patent and products as the
hypothetical license. Trial Tr. at 463:13-22. Artsana’s expert, although stopping short
of condoning the 5% baseline rate, conceded that the Grace license was “comparable
enough to merit further consideration.” Id. at 854:13-15. So the jury was free to find
that the similarities overcame the differences between the two licenses, making the
comparison between the two acceptable. Virnetx, Inc. v. Cisco Systems, Inc., 767 F.3d
1308, 1330 (Fed. Cir. 2014) (“[W]e have never required identity of circumstances; on
the contrary, we have long acknowledged that any reasonable royalty analysis
necessarily involves an element of approximation and uncertainty.”) (cleaned up).
27
Artsana also overstates Bernatowicz’s failure to account for the differences
between the licenses in his analysis. Bernatowicz actually did discuss the impact of
the litigation posture on the outcome of the Graco license. Trial Tr. at 546:22-549:10.
He came to a different conclusion about the impact of such a posture than Artsana—
which argues that Graco may have paid a premium to settle litigation quickly—and
the jury could reasonably accept his opinion. Bernatowicz also testified that he spoke
with Koltun about Koltun’s rationale for awarding the license to Graco for a 5%
royalty rate. Id. at 550:17-551:2. Although Bernatowicz did not elaborate on the exact
information he exchanged with Koltun, the jury was free to infer from this fact that
Bernatowicz researched the basis for using the Graco license as a comparison. And
the jury heard the pluses and minuses of the Graco license as a comparator. Artsana
elucidated all the differences during its cross-examination of Bernatowicz. Id. at
586:15-591:14, 594:12-599:6, 602:16-609:19, 611:14-614:21. In light of the record
evidence, this was enough to support the use of the Graco license as a comparable
license in the royalty rate analysis. See Virnetx, Inc., 767 F.3d at 1330 (“[A]ll of the
other differences that Apple complains of were presented to the jury, allowing the
jury to fully evaluate the relevance of the licenses… No more is required in these
circumstances.”).
7. Georgia-Pacific Factors
Artsana next argues that Bernatowicz’s analysis of the Georgia-Pacific factors
did not justify increasing the reasonably royalty rate from 5% to 5.8%. Def.’s Rule
28
50(b) Mot. at 20-23.8 Artsana takes issue with Bernatowicz’s analysis of four of the
Georgia-Pacific factors—5, 12, 13, and 14. Factor 5 is the “commercial relationship
between the licensor and the licensee, such as[] whether they are competitors in the
same territory in the same line of business; or whether they are inventor and
promotor.” Georgia-Pacific Corp., 318 F. Supp. at 1120. Artsana alleges that
Bernatowicz did not properly consider this factor because he did not elaborate on how
the commercial relationship between Kolcraft and Graco may have differed from the
commercial relationship between Kolcraft and Artsana. Def.’s Rule 50(b) Mot. at 2021. But that comparison is not necessarily required under Georgia-Pacific, and,
indeed, Artsana cites no case law to support this argument. See Def.’s Rule 50(b) Mot.
at 20-21. Instead, it was enough that Bernatowicz detailed the competitive
relationship between Artsana and Kolcraft as part of his analysis. Trial Tr. at 555:24556:24. And if Artsana was so concerned about this alleged shortcoming in
Bernatowicz’s analysis, then they should have brought it up during his crossexamination. Their failure to do so is no reason to throw out the jury’s damages
award.
Artsana next objects to Bernatowicz’s analysis of Georgia-Pacific Factors 12
and 13, which (to repeat) instruct consideration of (12) the portion of the profit or
selling price that is customary to allow for the use of the invention; and (13) the
portion of the realizable corresponding profit that should be credited to the invention.
8Like
its other arguments on damages, Artsana failed to make this argument in its
Rule 50(a) motions, but the Court will, nonetheless, consider it because Kolcraft failed to
object.
29
Artsana asserts that Bernatowicz’s analysis was fundamentally flawed because it
relied on his estimation that one-third of the incremental profit of Artsana’s product
should be attributed to the patented features. Def.’s Rule 50(b) Mot. at 21-23. Artsana
takes issue with this estimate because the Court prohibited Bernatowicz from relying
on that same apportionment calculation to determine the baseline royalty rate in his
analysis. R. 343, Pre-Pretrial Conference Order at 5. The Court explained that
“[a]lthough Bernatowicz discusses the value added by the patented features in
abstract terms… he does not explain how those advantages translate to the one-third
apportionment number he chose.” Id. So the Court specifically excluded testimony
“about the one-third apportionment figure, or any conclusions flowing from that
figure.” Id.
After excluding that evidence, the Court invited both sides to file position
papers on the issue. Pre-Pretrial Conference Order at 6. Along with its position paper,
Kolcraft filed an amended report from Bernatowicz that included an entirely different
methodology for calculating the baseline royalty rate. R. 347.2, Bernatowicz Supp.
Report at 8-9. In a separately filed declaration, Bernatowicz also provided additional
justification and evidence for his use of the 33% apportionment rate. R. 347.5,
Bernatowicz Dec. at 1-2. The Court decided it would allow the filing of the
supplemental report, but also gave Artsana another opportunity to depose
Bernatowicz on his new report and declaration. R. 349, Bernatowicz Order at 3.
At trial, Artsana asserted that Bernatowicz continued to rely on the 33%
apportionment rate in his supplemental report and sought to impeach him with this
30
fact on cross-examination. Trial Tr. at 345:12-19. The Court determined that Artsana
could ask Bernatowicz (1) if he “authored a first report, in which he decided to
apportion one-third of the incremental profit to the patented features,” and (2) “isn’t
it true the Court entered an order that excluded the first report because the report
did not adequately explain how the patented features result in a one-third
apportionment.” Id. at 350:8-20. When Bernatowicz testified about his estimation of
the baseline royalty rate on direct examination, he did not mention the 33%
apportionment rate. Id. at 541:18-543:20, 544:25-551:2. But, when he got to GeorgiaPacific Factors 12 and 13, he began to discuss the analysis he laid out in his
declaration that supported the 33% apportionment figure. Id. at 557:5-18.
Artsana objected to this testimony because the declaration was not part of
Bernatowicz’s expert report and his analysis of Factors 12 and 13 relied on the
excluded 33%-apportionment figure. Trial Tr. at 557:24-558:4. At a sidebar
conference, the Court explained that the objection presented a “close call,” because
Kolcraft seemed to be sneaking in the apportionment through the back door. Id. at
558:22-559:14. Ultimately, however, the Court overruled the objection and allowed
Bernatowicz to testify about the apportionment figure in the context of the GeorgiaPacific factors because: (1) Artsana was on sufficient notice that Bernatowicz might
testify about the apportionment number, as it was referenced in the supplemental
report and explained in his declaration; (2) Artsana failed to question Bernatowicz on
the apportionment number at his deposition; and (3) the apportionment number was
properly relied on in relation to the Georgia-Pacific factors because less detail is
31
required in that analysis in comparison to the determination of the baseline royalty
rate. Id. at 562:18-563:7.
These justifications still hold post-verdict. Bernatowicz’s supplemental report
and declaration made clear that, with the additional support he provided, he would
try to testify on the apportionment rate, even after the exclusion of his first report. It
was up to Artsana to question Bernatowicz about his analysis and estimation of the
33% number at his deposition. Although this still presents a close call, the
apportionment number was appropriately used in Bernatowicz’s Georgia-Pacific
analysis, because those fifteen factors are all applied to the underlying premise of the
baseline royalty rate. Moreover, Artsana highlighted the flaws in Bernatowicz’s
apportionment
estimation—and
his
overall
damages
calculation—on
cross-
examination. Trial Tr. at 615:13-621:8. In sum, Bernatowicz’s apportionment figure
was properly presented to the jury as part of his Georgia-Pacific analysis, and the
jury was free to credit it.
8. Damages on Method Claims 28-31
Artsana asserts that the damages award must be overturned because Kolcraft
presented no evidence to “quantify the extent to which the accused method [in claims
28-31] is actually practiced by users of the Artsana Products.” Def.’s Rule 50(b) Mot.
at 23. Like Artsana’s other arguments on Claims 28-31, this overstates Kolcraft’s
evidentiary burden. There is no requirement “that damages in all circumstances be
limited to specific instances of infringement proven with direct evidence.” Lucent, 580
F.3d 1334. Here, Kolcraft presented direct evidence that the original design was used
in a way that infringed Claims 28-31. Trial Tr. at 367:19-368:19. The jury was free to
32
infer from this evidence and their own common sense about the product that it was
used this way by pretty much every other consumer. As the Court explained in its
summary judgment opinion, “the appeal of the accused products is their ability to
practice the methods described in Claims 28-31.” R. 338, Summary Judgment Op. at
14-15. This was a sufficient basis for the jury to award damages on Claims 28-31.
9. Damages Prior to June 3, 2009
In its Rule 50(a) motions, Artsana argued that Kolcraft could not establish
damages before June 3, 2009—the date the Complaint was filed—because that was
the earliest they had actual notice of the ‘993 patent. Def.’s Rule 50(a) Mot. at 20;
Def.’s Renewed 50(a) Mot. at 20. Artsana abandoned this argument in its post-verdict
motion, likely because Kolcraft presented evidence that Koltun told Mansker about
the patent at least a few months before the Complaint was filed, and the jury must
have found that to be true. That evidence was enough to establish damages prior to
the date of the Complaint.
10. Inventorship
Artsana’s final argument in its Rule 50(a) motions was that the ’993 patent
failed to identify the correct inventors. Def.’s Rule 50(a) Mot. at 23; Def.’s Renewed
50(a) Mot. at 23. This argument was likewise abandoned in Artsana’s Rule 50(b)
motion. In any event, Artsana faces an uphill battle in challenging inventorship, and
“must meet the heavy burden of proving its case by clear and convincing evidence.”
Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1358 (Fed. Cir. 2004). Artsana has
not met that burden. It fails to cite to any exhibits or portions of the record to support
its argument. Without more, the jury’s verdict will not be disturbed.
33
B. Defendant’s Rule 59 Motion
Along with its Rule 50 motions, Artsana moved for a new trial under Rule 59.
Def.’s Mot. New Trial. Artsana asserts several arguments in support of this motion.
1. Jury Verdict
Artsana first argues that a new trial is warranted because the verdict is
against the manifest weight of the evidence. Def.’s Mot. New Trial at 2. In support,
Artsana refers back to its Rule 50(b) motion. Id. at n. 2. Artsana also points out that,
in assessing a new-trial motion, the Court may consider the credibility of the
witnesses and the strength of the facts put forth at trial (in contrast to a Rule 50
motion for judgment as a matter of law). Id. at 2 (citing Mejia, 650 F.3d at 634). To
the extent this argument is even preserved in light of its sparse presentation, there
is nothing about the credibility of the witnesses or strength of the evidence that leads
to a different outcome than Artsana’s Rule 50 motion.
2. Bernatowicz’s Supplemental Report and Testimony
Artsana next objects to the allowance of Bernatowicz’s supplemental expert
report and his trial testimony. Def.’s Mot. New Trial at 3-7. Like many of its
objections, Artsana has divided this one into two parts.
First, Artsana asserts that, under Federal Rule of Civil Procedure 16(b),
Kolcraft was required to show “good cause” to submit the supplemental report, which
Kolcraft allegedy failed to do. Def.’s Mot. New Trial at 4 (citing Fed. R. Civ. P.
16(b)(4)). But the admission of a late expert disclosure is governed by Federal Rule of
Civil Procedure 37, not Rule 16. See Karum Holdings LLC v. Lowe’s Companies
Incorporated, 895 F.3d 944, 951-52 (7th Cir. 2018) (affirming application of Rule
34
37(c)(1) to exclude delayed expert disclosure). There is no good cause requirement
under Rule 37(c)(1). Rather, the “exclusion of non-disclosed [expert] evidence is
automatic and mandatory under Rule 37(c)(1) unless non-disclosure was justified or
harmless.” Id. at 951. So, the Court applied the governing standard in Rule 37(c)(1)
and minimized any prejudice from the late disclosure, including ordering Kolcraft to
bear deposition costs. Bernatowicz Order at 3. The Court also pushed back the trial
schedule to give Artsana time to review the new report, file a response, and depose
Bernatowicz. Id. Although the timing was still tight, there was very little information
or analysis in the supplemental report that was brand new to Artsana or its expert.
As a result, the admission of the supplemental report was authorized.9
Second, Artsana argues that the supplemental report and Bernatowicz’s
testimony failed to establish the Graco license as comparable and was, thus,
improperly admitted at trial. Def.’s Mot. New Trial at 6-7. As already discussed, the
jury was free to find that any differences between the Graco license and the
hypothetical license between Kolcraft and Artsana were outweighed by the
similarities between the two—including that the two involved the same patent, the
9Artsana
objects to the admission of Bernatowicz’s supplemental report on the
separate but related ground that the supplement violated Local Patent Rule 5.3, which
requires a showing of “good cause that the amendment or supplementation could not
reasonably have been made earlier.” Mot. for New Trial at 4 (quoting LPR 5.3). “Local patent
rules are essentially a series of case management orders that fall within a district court’s
broad power to control its docket and enforce its order.” Keranos, LLC v. Silicon Storage
Tech., Inc., 797 F.3d 1025, 1035 (Fed. Cir. 2015). The Court has broad discretion to enforce
the Local Patent Rules. Oil-Dri Corp. of America v. Nestle Purina PetCare Co., 2018 WL
3130943, at *4 (N.D. Ill. June 26, 2018) (citing Accent Packaging, Inc. v. Leggett & Platt, Inc.,
707 F.3d 1318, 1329 (Fed. Cir. 2013)). As a result, and because the admission of the
supplemental report was proper under the Federal Rules of Civil Procedure, the Court
upholds its prior decision.
35
same licensor, and the same individual negotiator for Kolcraft. The introduction of
the Graco license does not warrant a new trial.
3. Georgia-Pacific Factors 12 and 13
Artsana’s third argument for a new trial is that Bernatowicz should not have
been allowed to rely on his 33% apportionment figure when analyzing Georgia-Pacific
factors 12 and 13. Def.’s Mot. for New Trial at 7-8. Although Artsana made multiple
objections to this testimony, and it was not an obvious call from the Court’s
perspective, the admission of the testimony was not so unfair as to warrant a new
trial. As previously discussed, Artsana was on notice that Kolcraft might seek to
admit Bernatowicz’s apportionment estimation based on his supplemental report and
declaration. Artsana also had the chance to depose Bernatowicz about that figure.
The apportionment estimation was also properly used in the Georgia-Pacific analysis,
even though it was not sufficient to support Bernatowicz’s initial baseline royalty
estimate, because less detail is required when applying the Georgia-Pacific factors.
Finally, Artsana had the opportunity to expose any flaws in the apportionment
analysis at trial during its cross-examination of Bernatowicz and its direct
examination of Chapman. This contention too does not support a new trial.
4. Mansker’s Phone Call
At trial, the Court allowed Koltun, Kolcraft’s President and CEO, to testify
about a phone call that he made to Mansker, Artsana’s CEO, about the ’993 patent,
as well as an alleged return phone call Mansker made to Koltun. Trial Tr. at 162:3166:20. Artsana objects to the admission of this evidence because Kolcraft allegedly
failed to properly notify Artsana about this return phone call in its answers to
36
interrogatories. Def.’s Mot. New Trial at 8-9. This argument fails to move the needle
for Artsana. First, as the Court articulated at trial, Kolcraft did not commit any
discovery violation. Trial Tr. at 164:24-165:24. Artsana was unable to point to an
interrogatory it served that would have covered Mansker’s call to Koltun, meaning
the Court was not able to conclude that Kolcraft had committed a discovery violation.
Id. at 165:18-24. Artsana also could not say for sure whether this call came up at
Koltun’s deposition. Id. at 166:7-14. So there was no record evidence that Koltun
denied receiving a return phone call from Mansker or even gave an evasive answer
on the topic.10 As the Court pointed out at the time, Artsana should have requested
to reopen Koltun’s deposition to explore the substance of Mansker’s phone call. Id. at
166:15-20. Without establishing a discovery violation, the evidence was properly
allowed at trial.
5. Evidence of Unasserted Claims
Artsana asserts that it is entitled to a new trial because the Court precluded
reference to the unasserted claims of the ’993 Patent, and particularly the PTO’s
reexamination of those claims. Def.’s Mot. New Trial at 9-11. Kolcraft initially
asserted these claims against Artsana in its first complaint, and Artsana’s
reexamination resulted in amendments to all of them. Id. at 9. Evidence of this,
10If
anything, the evidence in the record seems to show that Kolcraft properly disclosed
the communication between Koltun and Mansker. In Kolcraft’s Response to Artsana’s Third
Set of Interrogatories, it stated that “Artsana was put on notice of its infringement of the ‘993
patent at least as early as May 2009 through a communication between Tom Kulton and
Greg Mansker, during which Mr. Koltun informed Mr. Mansker about the ’993 patent and
Artsana’s infringement.” DTX-313, Kolcraft’s Resp. to 3d Rogs, ¶ 20. That being said, Kolcraft
failed to cite to this in their response to Artsana’s motion for a new trial, so the Court will
not base its decision on this interrogatory answer.
37
according to Artsana, was relevant to Kolcraft’s claim for willful infringement
because it tends to undermine Kolcraft’s argument that the reexamination was a
litigation tactic used to delay the lawsuit. Id. at 9-10.
As the Court explained in its prior decisions, “Artsana’s good-faith belief that
it was not infringing other claims is not relevant to whether Artsana willfully
infringed the asserted claims.” Pre-Pretrial Conference Order at 3. To make that type
of argument would violate Federal Rule of Evidence 404(a). The evidence was also
properly excluded for the independent reason that it presented a problem under
Federal Rule of Evidence 403. Any probative value was vastly outweighed by the
potential for undue delay and jury confusion—especially in an already complex patent
trial—because to truly evaluate the proposed evidence, the jury would have to hear a
lot more about the other claims.11
6. References to Travelin’ Tot Product as the “Patented Product”
Next, Artsana argues that Kolcraft’s references to the Travelin’ Tot product as
the “patented product” were confusing to the jury and warrant a new trial. Def.’s Mot.
New Trial at 11-12. Artsana admits that Kolcraft made only three references to the
“patented product” throughout the trial. R. 457, Def.’s Reply Mot. New Trial at 7
(citing Trial Tr. at 191:21-24, 293:11-13, 773:25-774:4). This is not enough to be
Artsana also argues that Kolcraft’s patent expert, Nicholas Godici, should not have
been allowed to testify that “’substantially all’ of the prior art relied on in Artsana’s
contentions were already rejected by the PTO and the claims were patentable.” Def.’s Mot.
New Trial at 11. It is not clear that Godici ever made that point. Instead, when referencing
the original patent, he explained that the list of prior art presented at trial amounted to “all
U.S. patents that were under consideration by the examiner during the examination of the
‘993.” Trial Tr. at 415:23-25. But, regardless, Artsana did not object to this specific testimony
at trial, so the argument is forfeited.
11
38
prejudicial to Artsana. The term itself is hardly prejudicial, as it is clearly shorthand
for a product that was eventually patented, albeit after Artsana produced its first
Lullaby product. What’s more, both parties went to great lengths to clarify the actual
issuance date of the patent. Nor was it prejudicial to allow Kolcraft to show the
Travelin’ Tot product during its opening statement. As the Court explained to
Artsana at the time, demonstratives used in opening arguments are “not evidence,”
and, by using it, Kolcraft was “taking the risk” that it would not be allowed in later
on. Trial Tr. at 96:25-97:4. Neither of these evidentiary decisions warrant a new trial.
7. Jury Instruction on Willful Infringement
Artsana further argues that a new trial must be awarded because the Court
improperly instructed the jury on willful infringement. Def.’s Mot. New Trial at 1315. The Court must look to Federal Circuit law to determine if a jury instruction on
an issue of patent law is erroneous. Sulzer Textil A.G. v. Picanol N.V., 358 F.3d 1356,
1363 (Fed. Cir. 2004). “[A] jury verdict will be set aside, based on erroneous jury
instructions, if the party seeking to set aside the verdict can establish that those
instructions were legally erroneous, and that the errors had prejudicial effect.”
Bettcher Industries v. Bunzl USA, Inc., 661 F.3d 629, 641 (Fed. Cir. 2011) (cleaned
up). Prejudicial error occurs when it is “inconsistent with substantial justice.” Id. at
641-42 (cleaned up). Even where an error has occurred, though, if the error is
harmless or was cured by another instruction, “a new trial would be mere waste and
affirmance of the judgment is required.” Id. at 642 (cleaned up).
Artsana’s argument here is unpersuasive because it has not explained why the
willfulness instruction was legally flawed. Artsana takes issue with the Court’s
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decision to modify the American Intellectual Property Law Association’s model
instruction on willful infringement in the following ways: (1) adding the words “but
need not” in the following phrase “Some of the circumstances you may, but need not,
consider include;” (2) removing the phrase “malicious, wanton, deliberate, consciously
wrongful, flagrant, or in bad faith” as a factor for the jury to consider; and (3) adding
the phrase “whether or not defendant intentionally copied a product or a method of
plaintiff’s that is covered by the ’993 patent” as a factor for the jury to consider. Def.’s
Reply Mot. New Trial at 9-10. But none of these changes are contrary to Federal
Circuit law, nor did they present a risk of juror confusion.
First, the addition of “but need not” to the term “may” barely changes the
meaning of the term “may” in the first place. And it certainly does not signal that the
jury need not consider the totality of the circumstances, because it was specifically
instructed to do so. Trial Tr. at 947:6-9. The point of “but need not” is to ensure the
jury understands that it is up to them to decide whether the particular circumstance
even existed, as well as to the decide the strength of the probative force. Second,
removing the phrase “malicious, wanton, deliberate, consciously wrongful, flagrant,
or in bad faith” did not modify the overall meaning of the instruction. The jury was
still instructed that the plaintiff needed to “intentionally infringe” the patent, and
that it could not find willfulness “merely because the defendant knew about the
patent without more.” Id. at 946:23-947:3. In other words, contrary to Artsana’s
argument, the jury knew how to “determin[e] what type of knowing infringement
rises to the level of willfulness.” Def.’s Reply Mot. New Trial at 10. Nor does the
40
instruction conflict with the holding in Halo. There, the Supreme Court explained
that enhanced damages are warranted when the defendant’s conduct is “willful,
wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant or—indeed—
characteristic of a pirate.” Halo Electronics, Inc., 136 S.Ct. at 1932. The Court’s
willfulness instruction at the beginning of the trial makes clear that the jury needed
to find Artsana’s conduct “consciously wrongful” or “deliberate.” Trial Tr. at 110:25111:4. And the final instruction reiterated that the infringement needed to be
intentional. Id. at 947:4-5. As previously explained in deciding what instructions to
give, the Court removed unnecessarily duplicative and vague terms from what would
have been a string of adjectives. As Halo’s reference to a “pirate” colorfully
demonstrates, trial courts are not required to explain legal concepts to non-lawyer
jurors via the verbatim words from Federal Circuit or Supreme Court opinions that
are intended to describe concepts for the bench and the bar (unless, of course, the
higher courts are specifically and expressly providing the wording of jury
instructions, an occasion that trial courts always cheer).
Finally, instructing the jury to consider “whether or not defendant
intentionally copied a product or a method of plaintiff’s that is covered by the ’993
patent” actually reinforces the standard articulated in Halo, which is that willfulness
requires something more than mere knowledge of the patent. No new trial is
warranted for any instructional error.
8. Claim Construction
Artsana’s next argument is that the Court “rendered erroneous claim
constructions that prejudiced Artsana’s case on infringement, invalidity, or both.”
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Def.’s Mot. New Trial at 15-18. Artsana’s briefing on this argument amounts to little
more than a motion to reconsider the Court’s prior claim construction opinions. 9/2/16
Claim Const. Order; R. 285. 4/13/18 Claim Const. Order. In those opinions, the Court
considered and rejected Artsana’s alternative constructions. Artsana now cites to its
previous briefing on the issue, but absent anything new, the Court will not reconsider
its previous constructions.
To be sure, Artsana argues that the trial testimony demonstrates that the
constructions were erroneous. Def.’s Mot. New Trial at 16. But Artsana only cites to
testimony from its own expert, who restated the same argument Artsana made at the
claim-construction stage. Id. at 17 (citing Drobinski’s testimony that Claim 20 failed
to describe the device in any detail, and the use of the term “connectors” rendered the
claim indefinite). And Kolcraft managed to undermine this testimony on crossexamination by pointing out that Drobinski’s opinion put him at odds with four patent
examiners and three administrative law judges in the Patent Office. Trial Tr. at
774:11-775:9. The jury was free to discredit Drobinski’s testimony.
9. Damages
Artsana’s final argument for a new trial is that the jury’s damages award was
excessive and not sufficiently supported by the evidence presented at trial. Def.’s Mot.
New Trial at 19-21. If the Court declines to award a new trial, then Artsana
alternatively advocates for a remittitur of the award. Id. at 22. The Court may vacate
a jury’s damages award only if it is “against the clear or great weight of the evidence.”
Unisplay, 69 F.3d at 517. But “any rate determined by the trier of fact must be
supported by relevant evidence in the record.” Id. By statute, a patentee whose patent
42
has been infringed is entitled to 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 the interest and costs as fixed by the court.”
35 U.S.C. § 284. It was Kolcraft’s burden to prove damages by a preponderance of the
evidence. Oiness v. Walgreen Co., 88 F.3d 1025, 1029 (Fed. Cir. 1996).
This is a very close question. Unlike when deciding the Rule 50 motion, the
Court defers less to the jury in assessing the new-trial motion, and is permitted to
weigh the comparative strength of the evidence. Here, as already detailed at length,
Kolcraft sought damages based on a reasonable royalty rate and presented evidence
of the factors set out in Georgia-Pacific Corp. as support for its estimation. The
elephant in the room is that the jury awarded damages at a rate of 7.7%, which is
higher than the 5.8% proposed by Bernatowicz and Kolcraft’s counsel during closing
arguments. It would go without saying that a jury does not typically give more money
than what the plaintiff asks for. At the end of the day, however, the Court cannot say
that the 7.7% rate is against the manifest weight of the evidence.
First, as noted earlier, it is not as if the jury picked 7.7% out of thin air: this is
the rate resulting from Bernatowicz’s analysis of Georgia-Pacific Factors 12 and 13,
namely, (12) the part of the profit or selling price that is customary to allow for the
use of the invention; and (13) the part of the realizable corresponding profit that
should be credited to the invention. Trial Tr. at 577:22-578:1. The jury also could rely
on Bernatowicz’s opinion that the 5.8% rate was the “minimum amount of damages”
that would compensate Kolcraft. Id. at 579:2-14. This opinion sprung from
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Bernatowicz’s explanation that the Graco license (which was a 5% royalty rate) was
“conservative,” because it was negotiated as part of a settlement agreement between
two parties engaged in active litigation. Id. at 546:22-549:10 (“So as I developed this
baseline royalty rate, I looked for the best licensing evidence, found it in the ’993
Graco license, realizing that it was conservative and likely less than full value.”). Put
another way, it was not manifestly wrong for the jury to conclude that the rate should
be north of 5.8%, and with that premise in place, then rely on the 7.7% analysis of
Factors 12 and 13. After all, Kolcraft’s creativity in designing a play gym that was
easy to transport and to store could readily be viewed by the jury as a key innovation
that differentiated the patent from other products, which is what Factors 12 and 13
are getting at. Ultimately, though the question is close, the Court affirms the jury’s
damages award.
C. Motion for Permanent Injunction
With the verdict intact, it is time to turn to Kolcraft’s motions. Kolcraft first
moves for a permanent injunction under Federal Rule of Civil Procedure 65. R. 438,
Pl.’s PI Mot. Kolcraft argues that Artsana must be enjoined from “making, using,
selling, offering to sell, distributing, importing, advertising, and/or promoting” the
Lullaby products within the United States because Artsana has disregarded the jury
verdict to date. Id. at 1, 34. Federal courts have long required a plaintiff seeking a
permanent injunction to show four things: (1) the plaintiff has suffered an irreparable
injury; (2) remedies available at law, like monetary damages, are inadequate to
compensate for the injury; (3) considering the balance of hardships between the
44
plaintiff and defendant, a remedy in equity is warranted; and (4) a permanent
injunction is in the public’s best interest. eBay, 547 U.S. at 391.
1. Irreparable Injury and Remedies Available at Law
Beginning with the first and second elements—irreparable harm and
inadequacy of money damages—Kolcraft argues that it is not enough that Artsana
alleges that it has stopped selling Lullaby products. Pl.’s PI Mot. at 2-3. Kolcraft
instead contends that it is sure to suffer irreparable harm unless there is persuasive
evidence that further infringement will not take place. Id. at 2 (quoting Black &
Decker v. Robert Bosch Tool Corp., 2006 WL 3446144, at *3 (N.D. Ill. Nov. 29, 2006)).
Kolcraft further asserts that there is evidence that infringement is still currently
happening. Pl.’s PI Mot. at 3. CEO Koltun testified at trial that he was able to find
Lullaby products sold on some e-commerce websites, Trial Tr. at 178:1-9, and Kolcraft
asserts that Artsana continued to provide instruction manuals for the Lullaby
products on its website, Pl.’s PI Mot. at 3.
On the last point, the Court was unable to find manuals for the infringing
products on the websites for either Artsana or Chicco, but the fact that the accused
Lullaby products were sold on e-commerce websites after Artsana ceased making
them is relevant. Artsana has also not presented any evidence that it is incapable of
again producing the Lullaby products. There is no indication that it lacks the capacity
or the capital to produce them or renter the market. This is enough to show that there
is a risk of future infringement. See W.L. Gore & Assoc., Inc. v. Garlock, Inc., 842 F.2d
1275, 1282 (Fed. Cir. 1988), abrogated on other grounds as recognized in Zoltek Corp.
v. U.S., 672 F.3d 1309 (Fed. Cir. 2012); Black & Decker, 2006 WL 3446144, at *4.
45
In addition, Kolcraft and Artsana are competitors in the same market.
Artsana’s argument that the two cannot be considered competitors because their two
respective products were sold at different price points is not convincing. It is still
likely that Kolcraft lost market share to Artsana when the first Lullaby product was
introduced. Mytee Products, Inc. v. Harris Research, Inc., 439 Fed. App’x 882, 887
(Fed. Cir. 2011) (non-precedential disposition) (“In this case, the district court
rationally concluded that Harris had shown irreparable harm based on its finding
that Mytee and Harris were indirectly competing through their customers.”). The
addition of another very similar product to the market may have also confused
customers or altered Kolcraft’s brand reputation, even if just for the few years that
both products were sold. “[L]oss of market share, brand recognition, and customer
goodwill … may frequently defy attempts at valuation, particularly when the
infringing acts significantly change the relevant market.” i4i Ltd. Partnership v.
Microsoft Corp., 598 F.3d 831, 862 (Fed. Cir. 2010).
Finally, Kolcraft’s license agreement with Graco does not preclude a
permanent injunction here. “While the fact that a patentee has previously chosen to
license the patent may indicate that a reasonable royalty does compensate for an
infringement, that is but one factor for the district court to consider.” Acumed LLC v.
Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008). A reasonable royalty is sufficient
to compensate Kolcraft for Artsana’s past infringement. But there is no adequate
remedy at law for Artsana’s potential future infringement.
46
2. Balance of Hardships
Both parties argue that the balance of hardships tips in its favor, but Kolcraft
has the better argument. Artsana’s witness, Messner, testified at trial that the
company has stopped selling the infringing products and moved away from play yards
with toy gyms altogether. Trial Tr. at 523:10-525:22. He specifically stated that
Artsana’s newest model of the its toy gym, the Lullaby Magic Playard, was designed
to be a “refresh” and was selling quite well. Id. at 524:17-525:17. This significantly
undermines Artsana’s argument that it will be burdened by a permanent injunction.
It clearly no longer relies on sales of the infringing product and is not at risk of going
out of business or even losing any nominal amount of money from sales as a result of
the injunction. This is enough to tip the scales in favor of Kolcraft. See Douglas
Dynamics, LLC v. Buyers Products Co., 717 F.3d 1336, 1345 (Fed. Cir. 2013); Black
& Decker, 2006 WL 3446144, at *5.
3. Public Interest
The final factor is whether the permanent injunction would be in the best
interest of the public. The Federal Circuit has long held that public policy favors the
enforcement of patent rights. See Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d 1331,
1348 (Fed. Cir. 2006); PPG Indus., Inc. v. Guardian Indus., Corp., 75 F.3d 1558, 1567
(Fed. Cir. 1996). This again favors issuing a permanent injunction. But it is worth
noting that there are times when an injunction may be contrary to health or safety
concerns, and thus undermine the public interest. That is the case for one aspect of
Kolcraft’s requested injunction: that the Court enjoin Artsana from providing
instruction manuals for the discontinued infringing products on its website. As
47
already mentioned, the Court was unable to find these on Artsana’s current website.
But if Artsana decides to make them accessible, whether online or in response to a
consumer’s request, providing the manual would serve the public interest: the
manuals provide numerous warnings and safety information. Trial Tr. at 515:10519:3. For this reason, Artsana should not be enjoined from posting manuals online
or otherwise providing them to the public.
In sum, Kolcraft has demonstrated that it will suffer an irreparable injury
without an injunction, the available remedies at law are inadequate, the balance of
hardships weighs in its favor, and an injunction will serve the public interest (with
the exception on the manuals discussed above). The Court thus permanently enjoins
Artsana from making, using, selling, offering to sell, distributing, importing,
advertising, or promoting the infringing products, represented by PTX-7, PTX-8,
PTX-9, and DTX-296. But Artsana remains free to continue to provide instruction
manuals for those products.
D. Motion for Prejudgment Interest
Kolcraft argues that an award of prejudgment interest is necessary to make it
whole. Pl.’s Mot. Prejudgment Int. at 1 (quoting Gen. Motors Corp. v. Devex Corp.,
461 U.S. 648, 655 (1983)). Awarding prejudgment interest is the default in patent
cases. Crystal Semiconductor Corp., 246 F.3d at 1361 (describing prejudgment
interest as the rule, not the exception). But the Court may decline to award it in
certain circumstances, including when the patentee unduly delays prosecuting the
infringement. Id. Artsana argues that, here, Kolcraft delayed in bringing this
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litigation and, as a result, is not entitled to prejudgment interest. R. 427, Def.’s Opp.
Prejudgment Int. at 3.
The one year that passed between the issuance of the ’993 patent in May 2008
and the filing of this lawsuit in June 2009 does not justify forgoing prejudgment
interest. See Bio-Rad Labs, Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 968 (Fed.
Cir. 1986) (holding that a complaint filed one year after the first instance of
infringement did not represent undue delay). This case is distinguishable from those
in which the Federal Circuit declined to award prejudgment interest. For example,
in Crystal Semiconductor Corp., the patentee waited two years after discovering
infringement before suing the defendant. 246 F.3d at 1344. There was also persuasive
evidence that the delay was in fact both a business and litigation tactic, as the
patentee sent letters to dozens of other companies about potential infringement
before setting its sights on the defendant. Id. at 1362. Considering this, the Federal
Circuit determined that the “delay was self-serving and resulted in prejudice to the
defendants.” Id.
There is nothing like that here. There is no evidence that Kolcraft
unreasonably delayed suing Artsana to bolster its litigation position or pad its bottom
line. Nor is there evidence that Artsana was prejudiced in any unusual way by
Kolcraft’s decision to wait one year to file suit. Lummus Indus., Inc. v. D.M. & E.
Corp., 862 F.2d 267, 275 (Fed. Cir. 1988) (delays by the patentee do not justify
denying prejudgment interest “absent prejudice to the Defendants”). Moreover,
49
Artsana contributed to the delay when it moved for reexamination of the patent.
There is no basis to deny prejudgment interest.
The parties also disagree about the appropriate prejudgment interest rate to
apply. Kolcraft urges the Court to apply the prime rate and to compound interest
monthly. Pl.’s Mot. Prejudgment Int. at 4. Artsana, on the other hand, argues that
prejudgment interest should be based on the T-bill rate and compounded annually.
Def.’s Opp. Prejudgment Int. at 4-8. “A trial court is afforded wide latitude in the
selection of interest rates and may award interest at or above the prime rate.”
Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991) (cleaned
up). Although relevant, a patentee is not required to show that it borrowed at the
prime rate, or higher, in order to win prejudgment interest at that rate. Id. In any
event, Kolcraft has provided some evidence that it had to borrow money at a rate
higher than the prime rate on at least three occasions between 2008 and 2013. R.
429.3, Koltun Aff. ¶¶ 5-6. This is persuasive evidence that the prime rate should be
applied.
The Court is not persuaded by Artsana’s argument that the T-Bill rate is
appropriate because there is little risk of Artsana defaulting on its obligations.
Although Artsana’s parent company appears to be well funded, the judgment will be
imposed on Artsana, not the parent company. And even if that was not the case, the
evidence that Kolcraft borrowed at a rate higher than the prime rate is enough to
justify the prime rate, regardless of Artsana’s ability to pay, because the evidence
establishes a “causal connection between [the] borrowing and the loss of the use of
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the money awarded as a result of [Artsana’s] infringement.” Laitram Corp. v. NEC
Corp., 115 F.3d 947, 955 (Fed. Cir. 1997); see also Chamberlain Group, Inc. v.
Techtronic Industries Co., Ltd., 315 F.Supp.3d 977, 1015-16 (N.D. Ill. 2018) (awarding
prejudgment interest at T-bill rate because the patentee made no showing that it
borrowed money at a higher rate or what that rate was).
Finally, contrary to both parties’ request, interest will be compounded
quarterly. In its license agreement with Kolcraft, Graco committed to making
quarterly payments in the event it sold any of its allegedly infringing products. DTX251, Graco License Agmt ¶ 7(c). Artsana should be held to the same parameters.
Because neither party calculated the total amount of prejudgment interest based on
the prime rate compounded quarterly, the parties shall file a joint statement on the
correct amount by September 16, 2019.
E. Motion for Enhanced Damages, Attorney’s Fees,
and Post-Judgment Interest
Kolcraft’s last motion is a request for enhanced damages, attorneys’ fees, and
post-judgment interest. Pl.’s Mot. Enhanced Dam. Beginning with its first request,
enhanced damages are reserved for “egregious cases of culpable behavior.” Halo
Elecs., 136 S. Ct. at 1932. Even when a jury returns a verdict finding willfulness,
enhanced damages are not automatic. WCM Indus., Inc. v. IPS Corp., 721 Fed. App’x
959, 972 (Fed. Cir. 2018). “As with any exercise of discretion, courts should continue
to take into account the particular circumstances of each case in deciding whether to
award damages, and in what amount.” Halo, 136 S. Ct. at 1933. In light of this, many
courts turn to the nine factors laid out in Read Corp. v. Portec, Inc., to help them
51
determine whether enhanced damages are warranted. 970 F.2d 816, 827 (Fed. Cir.
1992); see Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369,
1382-83 (Fed. Cir. 2017).
Here, four of the Read factors support awarding enhanced damages, one
weighs against it, and four are neutral and have no effect on the analysis. Beginning
with those factors that weigh in favor of enhanced damages, the first factor in Read
is “whether the infringer deliberately copied the ideas of another.” Read Corp, 970
F.2d at 827. This question must be answered yes, because the jury credited Koltun’s
testimony that he notified Artsana about the patent and its likely infringement of it,
yet Artsana kept selling the products. The second factor is “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.” Id.
This is a subjective analysis. WCM Indus., Inc., 721 Fed. App’x at 972. The jury, when
they found in favor of willfulness, determined that Artsana did not have a good-faith
belief that the patent was invalid or that they were not infringing it. This makes
sense when Artsana never presented opinion testimony from its patent counsel
supporting its invalidity argument. Pl.’s Mot. Enhanced Damages at 6.
The sixth factor is the duration of the misconduct. Read Corp, 970 F.2d at 827.
According to the verdict, Artsana willfully infringed Artsana’s products from 2009,
when it was notified of the patent, until 2016, when Artsana discontinued the
infringing Lullaby products. That is a long time to be willfully infringing a patent, so
this factor also weighs in favor of enhanced damages. Lastly, the seventh factor,
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remedial action by the defendant, also supports an enhanced damages award, albeit
slightly. Id. Artsana did redesign its original Lullaby play yard several times, but all
of the redesigned models continued to infringe the existing patent. In fact, the jury
found that the redesigns continued to willfully infringe the patent. So factors 1, 6,
and 7 all weigh in favor of enhanced damages.
On the other hand, the fifth factor—the closeness of the case on the question
of willfulness—weighs against enhanced damages. Read Corp, 970 F.2d at 827. The
determination of willful infringement in relation to Artsana’s original design—which
they continued to manufacture after Koltun notified them of the patent—is a
relatively easy call. But Artsana made major changes to its product in October 2009,
when it introduced a version with a new hub. R. 301.1, Longnecker Dec. ¶¶ 14-23.
These redesigned versions of the product were represented by PTX-8 and PTX-9 at
trial. Although the jury ultimately found that Artsana did not undertake these
redesigns in good faith, the issue was highly disputed and a rational jury could have
gone the other way.
Factors three, four, eight, and nine are all neutral. Kolcraft argues that the
third factor—litigation misconduct—weighs in favor of enhanced damages because
Artsana caused “great cost and disruption to Kolcraft and this Court” for a number
of different reasons. Pl.’s Mot. Enhanced Damages at 7-11; see Read Corp, 970 F.2d
at 827. None of the reasons put forth by Kolcraft justify increasing the damages
award. First, Kolcraft argues that the trial was improperly delayed when Artsana
was given extra time to depose Bernatowicz. Pl.’s Mot. Enhanced Damages at 7-8.
53
Kolcraft omits the true underlying cause of the delay: Kolcraft’s request to submit a
late supplemental report from Bernatowicz. If anyone is to blame for the delay, it is
Kolcraft. Second, although Artsana pursued its non-infringement defense in the face
of strong contrary evidence, the argument was not frivolous. Id. at 8. Next, Artsana’s
request to stay the litigation pending resolution of the reexamination, although
ultimately denied, was not an improper litigation stall tactic. Id. at 8-9. Finally,
Kolcraft’s remaining arguments all amount to accusations that Artsana misled either
the Court or the jury. Id. at 9-11. None of the examples Kolcraft provides amount to
litigation misconduct, and they all seem relatively minor in light of the contentious
relationship between the parties.
The fourth factor—Artsana’s size and financial condition—also has no impact
on the strength of the argument for enhanced damages. Read Corp, 970 F.2d at 827.
It is worth noting that the parties also discussed Artsana’s financial condition when
arguing Kolcraft’s motion for prejudgment interest. Def.’s Opp. Mot. Prejudgment Int.
at 6; R. 429, Pl.’s Reply Mot. Prejudgment Int. at 10. There, Artsana argued that the
financial condition of its parent company should be factored into the Court’s
assessment, while Kolcraft argued the opposite. The parties reversed their arguments
in the briefing on enhanced damages. Pl.’s Mot. Enhanced Damages at 11; R. 454,
Def.’s Resp. Mot. Enhanced Damages at 13-14. No matter. Like the motion for
prejudgment interest, the Court is unpersuaded that Artsana’s parent company is
relevant to this analysis. There will be no judgment against the parent company, and
Kolcraft has not argued that the corporate veil should be pierced to hold the parent
54
liable. It is Artsana’s financial condition that is at issue here. Artsana is far from a
small business, but Kolcraft has presented no evidence that it is a multi-billion-dollar
operation like its parent. For that reason, this factor neither strengthens or weakens
the case for enhanced damages.
The eighth and ninth factors both relate to Artsana’s infringement—whether
it was driven by a motivation to harm and whether Artsana attempted to conceal its
behavior, respectively. Read Corp, 970 F.2d at 827. Neither of these factors sway the
analysis in one direction or the other. Although it is true that Artsana and Kolcraft
were direct competitors, it is not clear that Artsana sought to harm Kolcraft
specifically when it began producing the Lullaby products. It instead appears that it
was motivated by a general desire to increase sales and profits. Kolcraft also
withdrew its product from the market shortly after Artsana introduced its Lullaby
line, meaning there was no longer market share to poach directly from Kolcraft.
Likewise, Artsana did not blatantly conceal its infringement. Kolcraft points out that
Artsana must have considered its redesigns insignificant because it did not notify
consumers when they were implemented, and Messner described the changes as
“invisible to consumers.” Trial Tr. at 514:9-11. But Artsana’s decision not to widely
publicize its redesign is not indicative of an attempt to conceal. Consumers are
unlikely to purchase more than one mobile play gym. The need to notify consumers
of changes in design is greatly diminished for this reason. So this factor is neutral as
well.
55
To sum up, the Read factors weigh slightly in favor of enhancing damages here.
The strongest factors supporting enhanced damages are intentional copying and,
most of all, the duration of the infringement. Ultimately, however, the Read factors
are not exclusive—the bottom line is always to examine the circumstances of the
particular case. Here, with the Read factors weighing only slightly in Kolcraft’s favor,
there is a unique circumstance that dictates, in the Court’s view, rejection of
enhanced damages: the jury’s decision to use the 7.7% royalty rate. Although the
Court has rejected the need for a new trial on damages, the rate still resulted in
almost a half-million dollars more compensation than what Kolcraft asked for. This
premium amount outweighs the slight advantage that the Read factors give to
Kolcraft; the balance flips back in favor of declining enhanced damages.
Next is Kolcraft’s request for attorneys’ fees. Pl.’s Mot. Enhanced Dam. at 1415. Section 285 provides that “[t]he court in exceptional cases may award reasonable
attorney fees to the prevailing party.” 35 U.S.C. § 285. The Supreme Court has
explained that an “exceptional” case is “one that stands out from others with respect
to the substantive strength of a party’s litigating position (considering both the
governing law and the facts of the case) or the unreasonable manner in which the
case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545,
554 (2014). In determining whether to award attorneys’ fees, a court should consider
“the closeness of the case, the tactics of counsel, the conduct of the parties, and any
other factors that may contribute to a fair allocation of the burdens of litigation as
56
between winner and loser.” S.C. Johnson & Son, Inc. v. Carter–Wallace, Inc., 781 F.2d
198, 201 (Fed. Cir. 1986).
This case is not exceptional enough for the award of attorney’s fees. It is not
enough to simply point to the verdict on willfulness and demand attorneys’ fees; there
must be additional evidence that the case is unusual. Stryker Corp. v. Zimmer, Inc.,
837 F.3d 1268, 1279 (Fed. Cir. 2016). Although Kolcraft’s victory at trial was decisive,
the overall case—especially on the redesigned versions of the Lullaby product—was
relatively close. And the case was not, in the grand scheme of things, litigated in such
an unreasonable manner that fee-shifting is justified. Yes, the parties were certainly
and unnecessarily contentious, and Artsana has taken a kitchen-sink approach to
many issues. But Artsana and its counsel did not act in a manner that made this case
stand far enough apart from other high-stakes, high-cost litigation. For these reasons,
attorneys’ fees are not warranted.
Finally, Kolcraft asks for post-judgment interest. Pl.’s Mot. Enhanced Dam. at
15. Artsana did not bother to respond to this request, even to explain that they
concede the point. A professional presentation would have included at least a footnote
acknowledging this request and conceding it, instead of forcing the Court to check,
double-check, and triple-check that it was not addressed at all. Not surprisingly,
Kolcraft’s request is granted. The Court awards Kolcraft post-judgment interest from
September 4, 2018 to the date of payment. Interest is computed daily at a rate equal
to the weekly average 1-year constant maturity Treasury yield, as published by the
57
Board of Governors of the Federal Reserve System, for the calendar week preceding
the date of the judgment, and shall be compounded annually.
IV. Conclusion
The Court denies Artsana’s motions for judgment as a matter of law and
motion for a new trial. Kolcraft’s motions for a permanent injunction and
prejudgment interest are granted. As noted earlier, the parties’ joint statement on
the amount of prejudgment interest is due by September 16, 2019. Prejudgment
interest applies at the prime rate, compounded quarterly. Kolcraft is also awarded
post-judgment interest, but no enhanced damages or attorneys’ fees shall be granted.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: September 6, 2019
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