Rehco LLC v. Spin Master Ltd.
Filing
299
MOTION by Defendant Spin Master Ltd. for judgment as a Matter of Law and Memorandum in Support (Redmond, Megan)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
REHCO, LLC,
Plaintiff,
v.
SPIN MASTER, LTD.,
Defendant.
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)
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)
)
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CASE NO. 13-CV-02245
PATENT CASE
DEFENDANT SPIN MASTER, LTD.’S RENEWED MOTION FOR JUDGMENT AS A
MATTER OF LAW AND MEMORANDUM IN SUPPORT
i
Table of Contents
I.
INTRODUCTION .................................................................................................................. 1
II.
LEGAL STANDARD............................................................................................................. 3
III. ARGUMENT .......................................................................................................................... 4
A. Spin Master is Entitled to Judgment as a Matter of Law As Rehco Failed to Present
Legally Sufficient Evidence of Infringement. ............................................................................ 4
B.
The Damages Verdict Was Not Supported by Legally Sufficient Evidence. ..................... 9
1.
The Royalty Base Was Not Apportioned........................................................................ 9
2. The Royalty Rate Was Not Apportioned and Licenses Were Introduced Without
Demonstrating Comparability. .............................................................................................. 12
i. Rehco’s failure to establish comparability with the Item Licenses renders its royalty
rate arbitrary ...................................................................................................................... 14
C.
Spin Master is Entitled to Judgment as a Matter of Law on Willfulness. ........................ 17
D.
Spin Master is Entitled to Judgment as a Matter of Law on Rehco’s Breach Claim. ....... 19
1.
No Substantial Evidence that the Havoc is a Modification of the Item. ....................... 20
2.
No Substantial Evidence that the Havoc is an Improvement of the Item. .................... 23
i
Table of Authorities
Cases
Air Safety, Inc. v. Teachers Realty Corp., 185 Ill.2d 457, 463, 706 N.E.2d 882, 884 (Ill. 1999). 20
Alpex Computer Corp. v. Nintendo Co., 102 F.3d 1214, 1222 (Fed. Cir. 1996) ............................ 5
Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1366 (Fed. Cir. 2001) ............. 18
Biscotti Inc. v. Microsoft Corp., No. 2:13-cv-01015-JRG-RSP (E.D. Tex. May 25, 2017) ......... 14
Campbell v. Peters, 256 F.3d 695, 699 (7th Cir. 2001) .................................................................. 3
CSX Transp., Inc. v. Five Star Enter. of Ill., Inc., No. 16 C 9833, 2018 WL 6735705 (N.D. Ill.
Dec. 24, 2018) ........................................................................................................................... 21
Dispatch Automation, Inc. v. Richards, 280 F.3d 1116, 1119 (7th Cir. 2002) ............................. 22
Dominion Energy, Inc. v. Alstom Grid LLC, 725 Fed. Appx. 980, 986 (Fed. Cir. 2018)............... 4
Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., 2017 WL 2190055 (E.D. Tex. May 18,
2017) ......................................................................................................................................... 19
Evonik Degussa GmbH v. Materia, Inc., 305 F.Supp.3d 563, 577 (D. Del. 2018) ...................... 17
Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed.
Cir. 2018) .................................................................................................................................... 9
Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1312 (Fed. Cir. 2018) ................................... 9
Fontana v. TLD Builders, Inc. 362 Ill.App.3d 491, 510-11, 840 N.E.2d 767 (2005) .................. 22
Gordon v. Tiger Illinois, 2011 WL 10483249 (Ill. App. 2011) .................................................... 23
Greatbatch Ltd. v. AVX Corp., 2016 WL 7217625 (D. Del. 2016) .............................................. 18
Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1932 (2016) ........................................ 2, 17
Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078–79 (Fed. Cir. 1983) ..................... 14
Lane v. Le Brocq, No. 15 C 6177, 2016 WL 5955536 (N.D. Ill. Oct. 12, 2016) ......................... 19
LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 68 (Fed. Cir. 2012) ........... 2, 10, 14
Local 75, Intern. Broth. of Teamsters, Chauffeurs, Warehousemen & Helpers v. Schreiber
Foods, Inc., 213 F.3d 376, 380 (7th Cir. 2000) ........................................................................ 21
Loggerhead Tools, LLC v. Sears Holding Corp., 2016 WL 6778881 (N.D. Ill. Nov. 15, 2016) . 18
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009) ................................. 9
Mathur v. Bd. of Trustees of S. Illinois Univ., 207 F.3d 938, 941 (7th Cir. 2000) ......................... 3
Mercexchange, L.L.C. v. eBay, Inc., 275 F.Supp.2d 695, 720 (E.D. Va. 2003) ........................... 17
Mondis Tech. Ltd., v. LG Electronics, Inc. et al., No. 2:15-CV-4431-SRC at 30 (D. N.J. Sep. 24,
2019) ......................................................................................................................................... 13
Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1276–77 (Fed. Cir. 1999) ......................... 15
Pandya v. Edward Hosp., 1 Fed.Appx. 543, 545 (7th Cir. 2001)................................................... 3
Paradox Sec. Systems, Ltd. v. ADT Sec. Services, Inc., 2010 WL 2925404 (Fed. Cir. 2010) ........ 9
PharmaStem Therapeutics, Inc. v. ViaCell, Inc., 491 F.3d 1342, 1355 (Fed. Cir. 2007) ............... 7
Power Integrations, Inc. v. Fairchild Semiconductor Internat’l, Inc., 904 F.3d 965, 977 (Fed.
Cir. 2018) ........................................................................................................................ 9, 10, 11
Princeton Digital Image Corp. v. Ubisoft Entm’t, No. 13-335-LPS-CJB, 2017 WL 6337188
(D. Del. Dec. 12, 2017) ............................................................................................................. 23
Promega Corp. v. Life Tech. Corp., 875 F.3d 651, 660 (Fed. Cir. 2017)....................................... 9
Rohm and Haas Co. v. Brotech Corp., 127 F.3d 1089, 1092 (Fed. Cir. 1997) .......................... 4, 8
TecSec, Inc. v. Adobe, Inc., No. 1:10-cv-115, 2019 WL 1233882 (E.D. Va. Mar. 14, 2019) ...... 19
United States v. Rogers Cartage Co., 794 F.3d 854, 861 (7th Cir. 2015). .................................... 19
ii
Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1328 (Fed. Cir. 2014) ................................... 9, 10
VNUS Med. Techs., Inc. v. Diomed Holdings, Inc., 527 F.Supp.2d 1072, 1074 (N.D. Cal. Oct. 24,
2007) ......................................................................................................................................... 17
Wachta v. First Federal Sav. & Loan, Ass'n., 103 Ill.App.3d 174, 181, 430 N.E.2d 708, 714 (Ill.
App. Ct. 1981)........................................................................................................................... 22
Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1319 (Fed. Cir. 2010)
................................................................................................................................................... 16
Yoon Ja Kim v. ConAgra Foods, Inc., 465 F.3d 1312, 1320 (Fed. Cir. 2006) ............................... 5
Rules
Fed. R. Civ. P. 50(a) ....................................................................................................................... 7
iii
I.
INTRODUCTION
The jury found in favor of Rehco on its breach of contract and patent infringement claims
and awarded it approximately $9.4 million in damages. Dkt. 284. To secure that verdict, Rehco
presented theories that fostered jury confusion, and which were rife with expert ipse dixit and an
absence of any real evidence. And Rehco led the jury to reach a conclusion contradicted by the
undisputed facts and this Court’s claim construction. That finding is not supported by substantial
evidence and judgment as a matter of law should be granted.
Regarding the ‘866 patent, Rehco’s case lacks any substantial evidence to support the
jury’s verdict, and
Spin Master moves for renewed judgment as a matter of law on: (1)
infringement; (2) damages; and (3) willfulness. First, this Court’s claim construction required that
Rehco demonstrate that the circuit boards in the Vectron Wave, Flutterbye Fairy, and Atmosphere
products were programmed in advance of vehicle operation with a first and second speed, and
Rehco’s expert agreed he needed to look at source code to know how something is programmed.
But Dr. Spenko admitted he rendered his opinion of infringement without looking at the source
code. Rehco attempted to substitute the testimony of T.W. Wong instead of evidence of
programming, but Mr. Wong did not look at the source code for the accused products, and his
testimony is not evidence of how those products are programmed. And with respect to the Vectron
Wave, Dr. Spenko agreed that product went through a start-up process after operation of the
vehicle, during which it performed the calculations its programming later relied on to set a “Fly
Up” and “Go Down” speed. The jury’s verdict is not supported by substantial evidence and
judgment of non-infringement is warranted.
Regarding damages, evidence was admitted at trial, over Spin Master’s objections and
directly contrary to Federal Circuit authority, of Spin Master’s unapportioned revenues and of
1
license agreements without any demonstration of apportionment or comparability. And Rehco
invited the jury to do exactly what the Federal Circuit warned against—consider Spin Master’s
revenues and apportion damages itself. The prejudicial error to Spin Master was apparent in
Rehco’s closing argument, where counsel told the jury “we’re asking for five percent”, “they keep
95 percent”, “that’s not greedy”. Trial Tr. 988:10-13. This is precisely why the Federal Circuit
requires apportionment of the revenues before that figure goes to the jury—because any ask by
the plaintiff for a smaller percentage, by comparison, appears reasonable. LaserDynamics, Inc. v.
Quanta Computer, Inc., 694 F.3d 51, 68 (Fed. Cir. 2012). Rehco also introduced unapportioned
license agreements, which were not comparable, further skewing the jury’s award. And Rehco
failed to apportion the value of Spin Master’s separately patented, innovative toy designs from the
incremental value of its claimed control system.
Finally, Rehco came forward with no evidence of willfulness outside of Spin Master’s
knowledge of the patent, and certainly had no evidence of wanton behavior akin to the “actions of
a pirate.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1932 (2016). There is no evidence
in the record to support the jury’s finding of willfulness, and that finding should be reversed as a
matter of law.
Regarding its breach of contract claim, Rehco’s evidence was insufficient to support the
verdict the Havoc helicopter was a modification of an Item described in the Helicopter Agreement.
Instead of providing any evidence regarding how an Item was modified under the terms of the
contract1, Rehco utilized comparisons with other helicopters and patents, which are outside the
1
It is still not clear which Item description Rehco contends the Havoc is a modification of. In closing argument,
Rehco pointed to the RC Mini Item description, but in response to Spin Master’s motion for judgment as a matter of
law, Rehco pointed to the Radio Controlled Helicopter Item description. This simply further demonstrates that Rehco
has not met its burden to show the Havoc is a modification or improvement of the Item, where it is not even clear
which Item description applies.
2
plain language of the Item descriptions and are irrelevant. Moreover, the only evidence Rehco
offered about the Item descriptions was that the Havoc uses a stacked rotor of a different size.
Rehco went on to explain another helicopter falling under a completely different agreement also
has a stacked rotor. In other words, the parties agreed a stacked rotor was not enough for that
product to fall under the Helicopter Agreement’s modification clause. Rehco also tried to offer
evidence of a pivot connection in the helicopter, but that is not in the Item descriptions. In fact,
Rehco only connected the “pivot point” to an unrelated helicopter patent, which is not a claim at
issue. In short, Rehco only offered evidence that the Havoc was a different toy helicopter,
developed after the parties entered the Helicopter Agreement. Based on the plain language of the
agreement and as a matter of law, judgment is warranted on Rehco’s breach claim.
II.
LEGAL STANDARD
A court should render judgment as a matter of law when “a party has been fully heard on
an issue” and there is no “legally sufficient evidentiary basis” for a reasonable jury to find for that
party on that issue. Fed. R. Civ. P. 50(a). The standard for granting judgment as a matter of law
“mirrors the standard for granting summary judgment.” Pandya v. Edward Hosp., 1 Fed.Appx.
543, 545 (7th Cir. 2001) (internal quotations omitted). Thus, the Court examines the record in its
entirety and views the evidence in the light most favorable to the nonmoving party. Id. After doing
so, the Court determines “whether the evidence presented, combined with all reasonable inferences
permissibly drawn therefrom, is sufficient to support [a] verdict.” Mathur v. Bd. of Trustees of S.
Illinois Univ., 207 F.3d 938, 941 (7th Cir. 2000) (quotations omitted). Judgment as a matter of law
is proper “if a reasonable person could not find that the evidence supports a decision for a party on
each essential element of the case.” Campbell v. Peters, 256 F.3d 695, 699 (7th Cir. 2001).
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III.
ARGUMENT
A.
Spin Master is Entitled to Judgment as a Matter of Law As Rehco Failed to
Present Legally Sufficient Evidence of Infringement.
Claim 1 of the ‘866 patent requires “a first speed being predefined as a speed that causes
the vehicle to gain altitude and the second speed being predefined as a speed that causes the vehicle
to lose altitude.” Ex. 19, at claim 12. This Court expressly construed these limitations to require
the first and second speeds be programmed on circuit board 136 in advance of operation of the
vehicle. Dkt. 256 at 10. At trial, Rehco’s technical expert, Dr. Spenko, testified that he would need
to see how the circuit board on the Vectron Wave, Flutterbye Fairy, and Atmosphere were
programmed with source code to determine infringement. Trial Tr. at 241:2-9. Dr. Spenko also
plainly admitted that he rendered his opinion regarding infringement for the Vectron Wave,
Flutterbye Fairy, and Atmosphere without looking at Spin Master’s source code. Trial Tr. at 215:312. Instead, he relied on user manuals, toy play, and a high level planning document (a flow chart)
and then provided conclusory and unsupported opinions, leaving the jury with no evidentiary basis
at all from which it could determine how the circuit boards for the Vectron Wave, Flutterbye Fairy,
and Atmosphere were programmed. Dominion Energy, Inc. v. Alstom Grid LLC, 725 Fed. Appx.
980, 986 (Fed. Cir. 2018) (reversing denial of JMOL of noninfringement where infringement was
based on a conclusory and unsupported expert opinion).
Where an expert does not provide substantial evidence to support a jury verdict of
infringement and offers nothing more than his general opinion the accused product infringes the
asserted patent, judgment as a matter of law of non-infringement is proper. Rohm and Haas Co. v.
Brotech Corp., 127 F.3d 1089, 1092 (Fed. Cir. 1997). Here, Dr. Spenko’s opinion was entirely
conclusory. Dr. Spenko rendered his opinion without reviewing the source code, something he
2
All Exhibits cited are to exhibits admitted at trial.
4
admitted you needed to do to determine the circuit board programming. Trial Tr. at 241:2-9. Dr.
Spenko provided zero evidence of how the circuit boards on the accused products were
programmed, but instead, merely said “it was programmed” a certain way without explaining how
he made that determination. As the Federal Circuit noted before, an expert “saying that something
is so does not make it true, especially where there is not record to support.” Dominion Energy, 725
Fed. Appx. at 986. Instead, Dr. Spenko merely testified that he looked at the code and it
“confirmed” his opinions, but he never explained how it confirmed his opinions. Trial Tr. 148:1214; 155:4-7; 170:5-7; 172:16-25; 184:25-185:17. And, in fact, Dr. Spenko admitted there are many
parts of the code he did not understand. Id., at 211:1-20; 241:10-17.
First, for the Vectron Wave, Dr. Spenko never provided any testimony regarding how the
source code operated, though Spin Master produced code for the Vectron Wave Battle3. Trial Tr.
250:11-24. Instead, he merely concluded the Vectron Wave product worked in a certain manner
because of testimony of Mr. Wong, a Spin Master employee who did not read the code and cannot
read code, regarding a high level flow chart creating for planning purposes. Id., at 237:22-238:25.
In other words, Dr. Spenko offered conclusory testimony without any examination of the source
code or other tests of the actual accused products to determine speeds. Yoon Ja Kim v. ConAgra
Foods, Inc., 465 F.3d 1312, 1320 (Fed. Cir. 2006) (affirming JMOL of non-infringement where
conclusory expert testimony was the basis for infringement). Thus, any theory of infringement,
both direct and under the doctrine of equivalents, fails because Dr. Spenko’s conclusory opinions
lack any factual basis. Alpex Computer Corp. v. Nintendo Co., 102 F.3d 1214, 1222 (Fed. Cir.
3
Dr. Spenko testified that he relied on the testimony of Mr. Wong relating to the Vectron Wave Battle for his
infringement opinion relating to the Vectron Wave. Trial Tr. 250:5-10. Dr. Spenko explained that he did so because
Mr. Wong said his testimony for the Vectron Wave Battle was the same for the Vectron Wave. Id. Dr. Spenko also
testified on direct that the Vectron Wave code was not produced. Id., at 99:15-17. But Dr. Spenko had the source code
for the Vectron Wave Battle but could not read that code. Id. 250:11-24.
5
1996) (holding that conclusory expert testimony did not support a finding of infringement). For
further example, Dr. Spenko offered a summary conclusion that PWM values in the Vectron Wave
flow chart equates to motor speed and rotor speed without any factual basis of how that applies to
the accused products and is reflected in the source code. Id., at 242:4-6 (did not do any of the
testing of Vectron Wave); 245:23-245:5 (did not confirm Vectron Wave flow chart against code).
In other words, he just provided testimony that PWM and speed were equal, and programmed as
such in the code, but cited nothing to support his opinion.
Dr. Spenko’s conclusory infringement opinions relating to the Vectron Wave also
contradict his admission that the speeds he identified were not programmed prior to vehicle
operation and, therefore, were not predefined under the Court’s claim construction. Specifically,
Dr. Spenko admitted that the Vectron Wave product does not set the PWM percentage of “go
down” or “fly up” until it goes through a start-up process. Trial Tr., at 245:13-247:5. In Dr.
Spenko’s own words – this is after vehicle operation, and is, therefore, not programmed in advance
of vehicle of operation. Id., at 245:24-246:247:5. Rehco attempted to repair Dr. Spenko’s
testimony, asking if the control systems for the accused products were programmed on the circuit
board in advance. Id., at 258:16-19. But the critical issue under this Court’s claim construction is
whether the predefined speed is programmed on the circuit board in advance of operation of the
vehicle, not whether the control system is programmed in advance. Dkt. 256, at 10. And Dr.
Spenko confirmed that Claim 1 requires the first and second speeds to be programmed on the
circuit board in advance of operation. Id., at 282:7-23. Here, the evidence relied on by Dr. Spenko
does not support his opinion and just saying that something is so does not make it true, especially
when there is no factual support and, in fact, the Vectron Wave flowchart says otherwise.
Dominion, 725 Fed. Appx. at 986. Thus, the evidence admitted at trial shows that the Vectron
6
Wave’s PWM percentages are determined after the vehicle is operated, and judgment as a matter
of law of non-infringement on the Vectron Wave product is necessary.
Second, for the Flutterbye Fairy and the Atmosphere, Dr. Spenko also admitted he offered
those opinions without looking at the source code. He offered lip service to the source code with
a one liner that he “confirmed in source code.” Trial Tr. 148:12-13, 155:5, 170:5-6, 172:16-25,
185:7-17. But just saying so, without any facts, is again not evidence. Dominion, 725 Fed. Appx.
at 986. An expert’s ipse dixit, without guidance as to how or why evidence supports his or her
opinion, is not evidence sufficient to sustain an infringement verdict. PharmaStem Therapeutics,
Inc. v. ViaCell, Inc., 491 F.3d 1342, 1355 (Fed. Cir. 2007) (rejecting expert testimony and materials
as insufficient to prove infringement where expert “stated in conclusory terms” that she relied on
certain materials but “did not explain how her reliance on any of the other sources of information
supported her inference”). Moreover, Dr. Spenko was not tendered as an expert in source code but
in the field of robotics (Trial Tr. 78:10-11), thus any testimony from him regarding source code,
even if not ipse dixit, is nothing more than unsupported lay opinion.
Similarly, Dr. Spenko offered a summary conclusion that PWM values in the flow charts
equate to motor speed and rotor speed without any factual basis for how that applies to the accused
products and is reflected in the source code. Id., at 220:23-221:18 (did not test motor speed or rotor
speed), 224:15-25 (did not measure motor speed), 225:1-227:3 (did not compare weights of
products), 245:23-245:5 (did not confirm Vectron Wave flow chart against code). Dr. Spenko
readily admitted that things like vehicle weight impact the product programming in the source
code. Id., 225:4-6. But Dr. Spenko failed to explain how two products (e.g. Fairy and Atmosphere),
which have different product weights, would have to be programmed with the two claimed
7
predefined speeds. In other words, he just provided testimony that PWM and speed were equal and
programmed in the code but cited nothing to support his opinion.
For example, Dr. Spenko cited +35 as the first speed being predefined that causes the
vehicle to go up and -3 as the second speed being predefined that causes the vehicle to go down.
Id., at 147:10-23, 184:6-17. Dr. Spenko provided no evidence that this is actually how the product
is programmed in the source code. Id. In contrast, the evidence shows this is not correct because
the code itself reflects that the PWM values identified by Dr. Spenko are not speeds programmed
in advance of operation that cause the vehicle to go up or down. Id. at 711:22-726:12.
This case is very similar to Dominion Energy. 725 Fed. Appx. at 986. In that case, the
claim required a comparison between measured data to a controller voltage band. The Federal
Circuit reversed the jury’s verdict because the evidence was that the accused system compared the
measured data to a single calculated voltage as opposed to the voltage band required by the claims.
Id. So too here, the claims require a first speed being predefined (i.e. programmed in advance of
vehicle operation) that causes the vehicle to go up and a second speed being predefined that causes
the vehicle to go down. Ex. 19, at claim 1; Dkt. 256, at 10. Dr. Spenko did not point to any
predefined speeds programmed in the code, pointing to PWM values that used a series of
calculations to adjust height not speed, and Dr. Spenko admitted he did no testing or other analysis
to confirm his opinion. And he provided no explanation for where these PWM values were found
in the source code to establish that the PWM values were in fact speeds that caused the vehicle to
go up or go down. Thus, any theory of infringement, both literal and under the doctrine of
equivalents, fails as a matter of law because of Dr. Spenko’s conclusory opinions lack any factual
basis. Dominion Energy, 725 Fed. Appx. at 986. And this lack of evidence is fatal to Rehco’s
infringement case under this Court’s claim construction. Rohm and Haas, 127 F.3d at 1092;
8
Paradox Sec. Systems, Ltd. v. ADT Sec. Services, Inc., 2010 WL 2925404, *4-5 (Fed. Cir. 2010)
(affirming a JMOL of non-infringement where the patentee’s expert’s statements regarding
infringement were “entirely conclusory” and untethered to the evidence).
B.
The Damages Verdict Was Not Supported by Legally Sufficient Evidence.
Rehco has the burden of proving damages. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d
1301, 1324 (Fed. Cir. 2009). Damages must not be left to conjecture by the jury. Promega Corp.
v. Life Tech. Corp., 875 F.3d 651, 660 (Fed. Cir. 2017). The patentee must “give evidence tending
to separate or apportion the defendant’s profits and the patentee’s damages between the patented
features and the unpatented features.” Power Integrations, Inc. v. Fairchild Semiconductor
Internat’l, Inc., 904 F.3d 965, 977 (Fed. Cir. 2018). Without apportioning the value of the
unpatented features in Spin Master’s products from the value of the claimed invention, Rehco’s
damages theory fails and judgment as a matter of law is warranted. Exmark Mfg. Co. Inc. v. Briggs
& Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed. Cir. 2018) (vacating a damages
award where plaintiff did not apportion for “the incremental value that the patented invention adds
to the end product”); Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1328 (Fed. Cir. 2014)
(vacating damages award and noting “the district court should have exercised its gatekeeping
authority to ensure that only theories comporting with settled principles of apportionment were
allowed to reach the jury”). Where Rehco has not sought damages under any other theory,
judgment as a matter of law is appropriate. Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299,
1312 (Fed. Cir. 2018) (citation omitted).
1. The Royalty Base Was Not Apportioned.
Rehco relied on Spin Master’s revenues for sales of the accused products without
apportioning those revenues. Rehco relies on the “smallest saleable patent practicing unit”
doctrine, but ignores that the Federal Circuit requires, where the smallest saleable unit is a multi9
component product containing several non-infringing features, further apportionment is required.
Virnetx, 767 F.3d at 1327. Rehco must come forward with some evidence of the claimed
invention’s value. Id., at 1328.
The only exception to the rule of apportionment is the entire market value rule, which
allows for the recovery of damages based on the value of an entire apparatus only when the
patented feature is the sole driver of consumer demand or substantially creates the value of the
component parts. Power Integrations, 904 F.3d at 978 (citations omitted). It is Rehco’s burden to
demonstrate that the patented feature is the sole driver of consumer demand. Id., at 978. To do so,
Rehco must do more than simply introduce conclusory testimony that the patented feature “is
viewed as valuable, important, or even essential to the use of the [infringing product].” Id., at 979
(citing LaserDynamics, 694 F.3d at 67).
First, Rehco’s only evidence relating to customer demand is the lay opinion of its technical
expert, Dr. Spenko, that the claimed invention added “a wow factor” (Trial Tr. at 132:16-23),
“magic”, and made the toys “cool” (Id. at 199:1-9). Dr. Spenko’s lay testimony is irrelevant to
the issue, as it is not evidence of the sole driver of demand. And his opinion was merely that
consumers would not purchase these products absent the claimed control system—i.e., the control
system is “essential.” But “essential” is not enough because, as noted below, there was evidence
of other valuable features. Power Integrations, 904 F.3d at 979. Dr. Spenko’s testimony falls
squarely within that rejected by the Federal Circuit, as he did not offer any opinion as to the portion
of revenue attributable to the claimed invention. Id.; Trial Tr. 256:24-257:16.
Further, when a product contains multiple valuable features, it is not enough for Rehco to
show that its patented control system is “essential” or that the accused products would not be
commercially viable without the claimed control system, or even that consumers would not
10
purchase the accused products without the claimed control system. Power Integrations, 904 F.3d
at 979. Rehco has to demonstrate other valuable features in the accused products do not cause
consumers to purchase the product. Id. Here, the undisputed evidence is the opposite. Mr. Dermer
testified that the “magic” of Spin Master’s toys is that it is unexpected that they would fly, which
is, in turn, due to the patented designs for the products using rotors integrated into the body of the
toys. The Flutterbye Fairy’s propellers are her skirt, and the “magic” of the toy is that it’s a doll
that flies. Trial Tr., at 429:14-430:8. Likewise, the rotors in the Atmosphere are within the spherical
cage, so it looks like a ball that is floating. Id., at 430:21-431:7. And the Vectron Wave’s rotors
are hidden within the UFO. Id., at 428:17-429:11. And this was not disputed by Rehco. Id., at
585:9-21; 585:1-24. These design features were all covered by Spin Master’s separate patents on
these features. Ex. 321, 322 (Vectron Wave); Ex. 323 (Fairy); Ex. 324 (Atmosphere).
Additionally, the Vectron product was already a successful toy prior to addition of the auto hover
feature, and Rehco did nothing to apportion this value. Id. at 255:15-18; 431:17-24. Where the
accused products contain other valuable features, Rehco has the burden to “prove that those other
features do not cause consumers to purchase the product.” Power Integrations, 904 F.3d at 979.
Rehco did not introduce any evidence to meet its burden, and judgment should be granted.
Rehco relies on Exmark, 879 F.3d 1332, to suggest that because it identified the smallest
saleable patent practicing unit and because the claim is to a “vehicle” and not just the control
system, Rehco was free to rely on the entirety of the Accused Products’ revenues. That is wrong.
Identifying a smallest saleable unit “does not insulate [the patent owner] from the ‘essential
requirement’ that the ‘ultimate reasonable royalty award must be based on the incremental value
that the patented invention adds to the end product.’” Finjan, Inc, 879 F.3d at 1311. Instead, “if
the smallest saleable unit contains non-infringing features, additional apportionment is still
11
required.” Id. (emphasis added). In Exmark, it was not just that the claim was to “a lawnmower”
that justified using entire revenue as the base; the claim itself claimed known, conventional
features of the lawnmower in addition to the novel baffles. Exmark, 879 F.3d at 1348. Thus, the
infringing lawnmower did not contain any non-infringing features. Id. By contrast, claim 1 of the
’866 patent, while directed to a “vehicle,” only includes limitations related to a control system. Ex.
19, at claim 1. Even in Exmark, the Federal Circuit rejected Rehco’s contention that no further
apportionment is required where the claim covers the entire infringing product. Exmark, 879 F.3d
at 1348 (“Nonetheless, ‘[w]hen a patent covers the infringing product as a whole, and the claims
recite both conventional elements and unconventional elements, the court must determine how to
account for the relative value of the patentee’s invention in comparison to the value of the
conventional elements recited in the claim, standing alone.’”) (citations omitted).
2. The Royalty Rate Was Not Apportioned and Licenses Were Introduced
Without Demonstrating Comparability.
Rehco failed to properly apportion its proposed royalty rate of 5% to ensure it was limited
to the incremental value of the patented invention. Exmark, 879 F.3d at 1348. It is undisputed that
Spin Master owns a number of patents regarding the innovative design of the accused products,
including the integrated propeller designs, and those designs drove the value of the accused
products. Exs. 321, 322, 323, 324. As a result, Rehco was required to downwardly adjust its rate
to ensure that Rehco would only be compensated for the value of its control system and not unjustly
compensated for Spin Master’s own unique innovations driving the success of its products.
Exmark, 897 F.3d at 1350 (“We are skeptical that other patented components of the mower bear
no relation to the overall value of the accused mowers, which would influence the relative value
of the patented baffle and thus the royalty rate.”). Rehco failed to do so.
12
Specifically, the evidence at trial was that Rehco’s license agreements were not straight
licenses to the ‘866 patent but to specific Items described in those agreements. For example,
Exhibit 191, licensed a Toy Satellite Item, which was described as having “a single rotor
mechanical platform having ‘sails’ (in the form of solar panels) for counter rotation, and where
propellers are integral to the style of the toy.” Ex. 191. Likewise, Exhibit 198 licensed a drone
Item described as having “four propellers enclosed in a cage, with auto-hover feature and object
sensing”. Ex. 198. Exhibit 201 licensed a Bumblebee Item, described as a Flying Bumblebee,
shown as a bee with propellers in the middle of the body of the bee, similar to wings. Ex. 201. And
Exhibit 190 describes an auto-hover sphere, necessitating a specific form of the Item. Ex. 190.
Rehco did no apportionment of the value of its invention from the value of the Items specifically
described in these agreements, and those agreements cannot support the damages verdict. See, e.g.,
Mondis Tech. Ltd., v. LG Electronics, Inc. et al., No. 2:15-CV-4431-SRC at 30 (D. N.J. Sep. 24,
2019) (“Plaintiff’s damages case, as a matter of law, is insufficient to support the damages verdict,
due to the failure to apportion” the prior licenses relied upon for the royalty rate). Notably, Rehco
did not introduce any evidence that it designed toys with propellers integrated into the body of the
toy (like the Flutterbye Fairy) or with propellers within a spherical cage (like the Atmosphere)
before Spin Master released those products. Instead, Rehco only pointed to its hand command
prototype, where an astronaut hung below the propellers. Trial Tr. 426:10-427:9.
Rehco cites Commonwealth for the proposition that apportionment is built into the royalty
rates where there is evidence concerning the actual or negotiated license rates for a patent-in-suit.
This is wrong. In Commonwealth, the district court relied on actual negotiations between the
parties themselves to set bounds on the reasonable royalty rate, noting “because the parties’
discussions centered on a license rate for the [asserted patent], this starting point for the district
13
court’s analysis already built in apportionment” because “the parties negotiated over the value of
the asserted patent, ‘and no more.’” 809 F.3d at 1303. No such negotiations between the parties
exists here, and Commonwealth is inapplicable.
i.
Rehco’s failure to establish comparability with the Item Licenses
renders its royalty rate arbitrary
Additionally, to rely on past licenses to support a proposed royalty rate, the patentee must
establish that they are “sufficiently comparable to the hypothetical license at issue in suit.” Virnetx,
Inc., 767 F.3d at 1330. Rehco must establish that the licenses are both technologically and
economically comparable to the hypothetical license. Id. Rehco failure to establish either renders
its proposed royalty arbitrary. LaserDynamics, 694 F.3d at 81 (proposed royalty rate arbitrary
where it “was untethered from the patented technology at issue and the many licenses thereto.”).
Regarding technological comparability, Spin Master acknowledges that where the patent
is specifically identified in a prior patent license, that will generally be evidence of technological
comparability. But Rehco’s licenses are to specific Items, not to the ’866 patent’s control system.
Thus, the Item licenses are technologically comparable only if the Items are actually embodiments
of the ’866 patent. And Rehco has no evidence that any of the licensed items embody the claims
of the ’866 patent because Rehco, and its expert, Dr. Spenko, testified he did not offer an opinion
regarding any of Rehco’s products and whether they were commercial embodiments. Trial Tr.
257:20-25. Absent that analysis, the licenses should have been excluded. Biscotti Inc. v. Microsoft
Corp., No. 2:13-cv-01015-JRG-RSP at *3 (E.D. Tex. May 25, 2017) (“While the comparability of
previous licenses is generally fertile ground for cross-examination, a complete failure to provide
any analysis regarding technological comparability warrants exclusion.”).
14
Regarding economic comparability, it is improper as a matter of law for Rehco to rely on
the Five Below license (Ex. 190) because, as Mr. Rehkemper admitted, it was entered into under
the threat of litigation. Trial Tr. 593:13-21; Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075,
1078–79 (Fed. Cir. 1983). Additionally, all four license agreements relied upon by Rehco (Exs.
190, 191, 198, and 201) were entered into over 6 years after the hypothetical date of negotiation,
making them “irrelevant for the hypothetical negotiation analysis.” Odetics, Inc. v. Storage Tech.
Corp., 185 F.3d 1259, 1276–77 (Fed. Cir. 1999) (excluding licenses dated 4 and 5 years after the
hypothetical date of negotiation). Specifically, Ex. 190 was entered into in 2015; Ex. 191 was
entered into in 2016; and Exs. 198 and 201 were entered into in 2019.
Further, no evidence was introduced demonstrating any economic comparability with any
of these licenses. To the contrary, Steve Rehkemper testified:
•
Ex. 190 - he did not know how many units had been sold under the Five Below
license, and also testified that the products retailed at $5 and did not know if Five
Below had any patent rights to the Item (Trial Tr. 594:5-595:17);
•
Ex. 1914 - he did not know the volume of sales, whether the product was even sold
in the US, what royalties had been paid thus far, or whether MerchSource has any
patent rights in the Item (Trial Tr. 592:21-593:9);
•
Ex. 198 - he did not know the volume of sales or whether Kaliber had any patent
rights in the Item (Id. 588:22-590:17);
4
Ex. 198 is also problematic because the royalty rate is $1 per unit, unlike the other licenses including Spin Master’s
own licenses with Toytec, applying a percentage. Rehco never explained or introduced evidence regarding how a $1
royalty compares to a royalty rate, or how that dollar figure is relevant to the claimed invention.
15
•
Ex. 201 - he did not know volume sales, total revenue, or whether Funtime had
other patent rights in the Item; he also testified the product was only sold in the UK
and not in the US (Id. 591:1-592:2).
Rehco’s licenses showing that certain parties would pay a 5% royalty to sell specific Items
“is not indicative of how much the parties would have paid to license a patent.” Finjan, Inc., 879
F.3d at 1312 (emphasis added).
Moreover, Mr. Rehkemper testified with respect to each of Rehco’s license agreements,
Rehco did not develop any of the Items. Id. at 571:3-7, 573:12-16, 575:16-17, 578:8-10. This
differs from Spin Master’s license with Toytec, where evidence was introduced regarding Toytec’s
development work on the Vectron Wave. Id. at 332:11-14; 350:2-4. Further, evidence was
introduced that Toytec’s system was much cheaper, and Spin Master was looking for ways to
reduce cost on the Vectron Wave. Id. at 325:21-326:7; 331:18-332:3. Rehco did not account for
any of the differences, either in Rehco’s license agreements with third parties, or Spin Master’s
own license agreements, and this failure to demonstrate comparability leaves the jury to speculate.
Finjan, Inc., 879 F.3d at 1311-12.
Rehco is also wrong as a matter of law that economic comparability is purely a fact issue
for the jury. Trial Tr. 668:10-16. Apportionment is a gatekeeping function for the Court before the
matter reaches the jury. Virnetx, Inc., 767 F.3d at 1328 (“[T]he district court should have exercised
its gatekeeping authority to ensure that only theories comporting with settled principles of
apportionment were allowed to reach the jury.”). Before licenses can be relied upon to support a
damages theory, they must be found “sufficiently comparable” to the hypothetical negotiation.
Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1319 (Fed. Cir. 2010).
16
No such finding was made here, and Rehco’s license agreements are not legally sufficient evidence
to support the jury’s verdict5.
C.
Spin Master is Entitled to Judgment as a Matter of Law on Willfulness.
Enhanced damages are reserved only for the most egregious cases. Halo Elecs., Inc., 136
S.Ct. at 1932 (enhanced damages reserved for egregious infringement behavior). This conduct
must be so egregious as to be considered “willful, wanton, malicious, bad-faith, deliberate,
consciously wrongful, flagrant, or-indeed-characteristic of a pirate.” Id. Rehco bears the burden of
satisfying this high standard. Id. Viewing the entire trial record, Rehco unequivocally failed to
meet its burden.
Rehco’s evidence presented at trial fails to establish any deliberate or intentional infringing
conduct by Spin Master. Rehco’s claim for willful infringement stems solely from Spin Master’s
alleged knowledge of the ‘866 patent. However, Rehco must show more than mere knowledge to
satisfy its burden. Halo, 136 S.Ct. at 1936; Evonik Degussa GmbH v. Materia, Inc., 305 F.Supp.3d
563, 577 (D. Del. 2018). Specifically, Rehco relies on evidence that it showed a hand command
flying toy prototype to Spin Master in December 2004 (Trial Tr. 319:4-320:19)—prior to the filing
of the application that would eventually issue as the ’866 Patent—in October 2005 (Id., at 321:523)—prior to the issuance of the ’866 Patent—and in May 2008 (Id. at 326:19-329:20). Rehco
introduced no evidence that Spin Master copied that prototype when it developed the Vectron
Wave. Nor was there any evidence that Spin Master even could have copied the prototype if it
wanted to, as there was no evidence that Spin Master learned anything about the control system
utilized by Rehco’s prototype. Mercexchange, L.L.C. v. eBay, Inc., 275 F.Supp.2d 695, 720 (E.D.
5
Likewise, Rehco’s license agreements cannot support an established royalty rate as they: (1) were not paid or secured
before infringement began; were not uniform in amount; one was paid under threat of litigation; and there is no
evidence they are for comparable rights or activity under the patent. Trell v. Marlee Elecs. Corp., 912 F.2d 1443, 1446
(Fed. Cir. 1990); Mobile Oil Corp. v. Amoco Chemicals Corp., 915 F. Supp. 1333, 1342 (D. Del. 1994).
17
Va. 2003) (finding that copying did not weigh in favor of enhanced damages where the defendant
had no guidance from which the defendant could have copied the patented design). Again, Rehco
points only to evidence that Spin Master knew of Rehco’s prototype when it worked with Toytec
on the Vectron Wave, but mere knowledge of a product is not evidence of copying. VNUS Med.
Techs., Inc. v. Diomed Holdings, Inc., 527 F.Supp.2d 1072, 1074 (N.D. Cal. Oct. 24, 2007)
(finding an admission from the defendant’s CEO’s that he was aware of the patentee’s process
“does not give rise to a reasonable inference that [defendant] copied [plaintiff’s] claimed
methods.”).
Even if there were such evidence, that evidence would only be relevant to willfulness if the
prototype actually practiced the ’866 patent. Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239
F.3d 1343, 1366 (Fed. Cir. 2001) (“Evidence of copying [the patentee’s product] is legally
irrelevant unless the [product] is shown to be an embodiment of the claims.”). But there is no
evidence that the prototype Rehco provided to Spin Master actually practiced the ‘866 patent. And
Rehco’s expert, Dr. Spenko, testified that he was not offering any opinion on whether Rehco’s
prototypes practiced the ’866 patent. Trial Tr. 257:23-25.
Rehco also did not introduce any evidence of any bad faith on the part of Spin Master based
on its knowledge of the ’866 patent—rather, the opposite. Spin Master consistently informed
Rehco that it communicated with its external patent attorneys and engineers and did not infringe
the ’866 patent because the Vectron Wave did not set any predefined speeds. Trial Tr., at 339:1023. This in and of itself suggests good faith by Spin Master. Loggerhead Tools, LLC v. Sears
Holding Corp., 2016 WL 6778881, *2 (N.D. Ill. Nov. 15, 2016) (Finding that “ongoing
consultation with a patent lawyer remains a consideration and is ‘highly probative evidence of
good faith,’”). And this is the very same noninfringement defense Spin Master presented at trial.
18
This consistency extending back several years prior to litigation demonstrates that Spin Master’s
subjective intent was not to infringe the ’866 patent, and mere evidence of two products that hover
cannot be sufficient where the claims require more. Greatbatch Ltd. v. AVX Corp., 2016 WL
7217625, *4 (D. Del. 2016) (reasonableness of defense is pertinent to willfulness because defenses
were developed before litigation).
Finally, Spin Master’s continued sale of the Accused Products after initiation of this suit is
not a proper basis for enhanced damages. TecSec, Inc. v. Adobe, Inc., No. 1:10-cv-115, 2019 WL
1233882, at *2 (E.D. Va. Mar. 14, 2019) (granting JMOL of no willful infringement and finding
continued sale of infringing products after filing suit “typical infringement behavior,” particularly
in light of nonfrivolous defenses maintained throughout the litigation). There is no basis for a
reasonable juror to find willfulness on this record, and the Court should enter judgment.
Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., 2017 WL 2190055, at *1 (E.D. Tex. May
18, 2017) (granting Rule 50(a) motion for JMOL of no willfulness where plaintiff presented only
circumstantial evidence).
D.
Spin Master is Entitled to Judgment as a Matter of Law on Rehco’s Breach
Claim.
Rehco’s evidence at trial, under the plain language of the Helicopter Agreement, does not
support the jury’s verdict of breach. Rehco stipulated that the Havoc did not meet any of the Item
descriptions under the Helicopter Agreement. Trial Tr. 821:6-10. Rehco’s theory, instead, was that
the Havoc was a modification or improvement of the Item, as defined in the Helicopter Agreement.
Id. Contracts “must be construed as a whole, viewing each provision in light of the other
provisions.” United States v. Rogers Cartage Co., 794 F.3d 854, 861 (7th Cir. 2015). The Court’s
“‘primary objective in construing a contract is to give effect to the intent of the parties.’” Lane v.
19
Le Brocq, No. 15 C 6177, 2016 WL 5955536, at *2 (N.D. Ill. Oct. 12, 2016). Unambiguous
contract terms must be given their “plain and ordinary meaning.” Id.
In its effort to meet its burden at trial, Rehco made two arguments: (1) the Havoc was a
modification of the Item because it had stacked rotors and a pivot point; and (2) the Havoc was an
improvement on Rehco’s development work reflected in its patents. Neither argument is supported
by substantial evidence, runs contrary to the plain language of the Helicopter Agreement, and is
insufficient to support the jury’s verdict as a matter of law.
1. No Substantial Evidence that the Havoc is a Modification of the Item.
It is Rehco’s burden to show the Havoc is an “improvement, modification, enhancement
or derivation of the Item” under the Helicopter Agreement. Ex. 1, at Para. 1.c. “Item” is a defined
term. To determine if the Havoc is a modification/improvement, Rehco must compare the Havoc
to the Item descriptions, contained in the Second Amendment to the Helicopter Agreement. Ex. 3.
The only evidence at trial relating to Rehco’s breach claim was Mr. Jeff Rehkemper’s testimony.
First, Mr. Rehkemper testified the Havoc had two “stacked rotors.” Trial Tr. 497:22-24.
But he provided no testimony explaining how the Havoc’s stacked rotors would be a modification
of the rotors set forth in the Item descriptions. There was no evidence how those rotors were
modified or improved under the Agreement. Significantly, Mr. Rehkemper compared the Havoc’s
stacked rotors to another Spin Master Helicopter – the Reflex. Id. at 495:17-22, 497:22-24.
Importantly, even though the Reflex had dual rotors, it was covered by the separate Helix
Commission Agreement. Id. at 495:4-22; 502:23-504:8. Thus, Mr. Rehkemper’s testimony made
clear that merely having dual rotors is not enough for a helicopter to fall within the Helicopter
Agreement. Here, Rehco’s breach claim was under the Helicopter Agreement. Evidence
comparing the Havoc’s dual rotors to another helicopter covered by a separate agreement is plainly
20
outside the four corners of the Helicopter Agreement and irrelevant. Air Safety, Inc. v. Teachers
Realty Corp., 185 Ill.2d 457, 463, 706 N.E.2d 882, 884 (Ill. 1999).
Second, Mr. Rehkemper testified the Havoc has “a pivotal connection between the
propeller and the drive shaft” with a “leading edge of the rotor above the pivot point.” Trial Tr.
497:25-498:6. But this is not in any Item description and Mr. Rehkemper provided no testimony
linking this feature in the Havoc to an Item description or any purported modification. This makes
sense because Mr. Rehkemper explained that the Havoc design was different, as it used the BellHiller stabilization design used in real world helicopters. Id. at 512:9-20. To the extent Rehco is
offering “a pivotal connection between the propeller and the drive shaft” with a “leading edge of
the rotor above the pivot point” as evidence under the Helicopter Agreement, that too improperly
reaches outside the plain language of the agreement. Air Safety, Inc., 185 Ill.2d at 463.
Third, Mr. Rehkemper offered testimony that the Havoc did not have “safety guards.” Trial
Tr. 518:4-520:6. But he never explained how this was related to the Item descriptions or
modifications of the Item. To the extent Rehco was suggesting that rotors without safety guards
were also somehow covered by the Item description or a modification of the Item, that is contrary
to the plain language of the Helicopter Agreement, which requires rotors with safety guards. See
Ex. 3, at Item descriptions (“patent safety guards”); CSX Transp., Inc. v. Five Star Enter. of Ill.,
Inc., No. 16 C 9833, 2018 WL 6735705, *8 (N.D. Ill. Dec. 24, 2018) (granting summary judgment
of no breach on defendant’s breach claim where “defendants’ proposed reading ignores the plain
language of the contract and is thus contrary to Illinois law’s emphasis on the language used by
the parties when they form a contract.”).
In sum, Rehco’s entire breach of contract claim is based on different features in the Havoc,
contending those differences were just “modifications”. Trial Tr. 932:1-25. This interpretation
21
completely deletes the Item descriptions, which is improper. Local 75, Intern. Broth. of Teamsters,
Chauffeurs, Warehousemen & Helpers v. Schreiber Foods, Inc., 213 F.3d 376, 380 (7th Cir. 2000).
Under Rehco’s theory, it never explains how the Havoc is a modified Item, but instead, contends
any differences render it a modification, which is nonsensical. Rehco’s theory also means that any
toy helicopter would fall within the modifications clause, and the Court already rejected this
position under the plain language of the Helicopter Agreement. Dkt. 187, at 24, n.2. And this
makes sense where such an overbroad interpretation of the contract results in the modifications
clause swallowing the entire agreement and renders absurd results. Wachta v. First Federal Sav.
& Loan, Ass'n., 103 Ill.App.3d 174, 181, 430 N.E.2d 708, 714 (Ill. App. Ct. 1981) (holding that
contracts will be interpreted “reasonably to avoid absurd results”).
Rehco’s breach theory improperly reads the modifications provision (Ex. 1, at 1.c.) in
isolation, and does not consider the contract as a whole. Fontana v. TLD Builders, Inc. 362
Ill.App.3d 491, 510-11, 840 N.E.2d 767 (2005). And Rehco’s reading of Paragraph 1.c. renders
other provisions in the Helicopter Agreement meaningless, such as Paragraph 19.c. Paragraph 19.c.
requires that “additional potentially marketable products” be “added to the scope of this Agreement
and added to the definition of the ‘Item’ herein only through the execution of an acknowledgment
by both Parties that expressly refers to this Agreement.” Ex. 1, at 19.c. Spin Master and Rehco
performed under Paragraph 19.c. at least twice by amending the Helicopter Agreement to add
additional Items. Exs. 2 and 3; Dispatch Automation, Inc. v. Richards, 280 F.3d 1116, 1119 (7th
Cir. 2002) (common sense is as much a part of contract interpretation as is the dictionary or the
arsenal of canons). The jury’s verdict of breach is contrary to the plain language of the agreement,
renders the absurd result that any toy helicopter would fall within the scope of the agreement, and
must be overturned.
22
In the vacuum of any evidence, Rehco then waved unrelated helicopter patents in front of
the jury, but never provided any evidence linking those patents to the Items. And Mr. Rehkemper
admitted that Rehco did not have a claim for patent infringement on the Havoc. Trial Tr. 502:1517. To the extent Rehco is offering its patents as evidence of anything under the Helicopter
Agreement, that is legal error because it is outside the plain language of the agreement. Air Safety,
Inc., 185 Ill.2d at 463. Essentially, Rehco’s argument boiled down to the idea that Rehco developed
helicopters and patented those helicopters, therefore, it was owed royalties for the Havoc,
regardless of what the Helicopter Agreement says. But Rehco’s breach claim must be rooted in the
actual language of the Helicopter Agreement, not what they wish that Agreement said. Gordon v.
Tiger Illinois, 2011 WL 10483249, at *6 (Ill. App. 2011) (noting “Gordon might have believed
that the coal leases gave him timber rights, but the leases themselves do not include timber
rights.”).
2. No Substantial Evidence that the Havoc is an Improvement of the Item.
Rehco offered U.S. Patent No. 7,815,482, listing Alexander Van de Rostyne into evidence
(Ex. 272), which covers the Havoc. Trial Tr. 558:25-559:1. Rehco pointed out that some of its
patents were listed in the prior art for the Rostyne patent. Id., 559:18-20. Again, Rehco offered no
evidence linking its helicopter patents and the Helicopter Agreement. This evidence is irrelevant
to the breach of contract claims. Additionally, there is no evidence that Mr. Rostyne actually had
the Rehco patents or those were cited by the Patent Examiner or patent attorney obtaining that
patent. More importantly, there was zero evidence in the record to support Rehco’s claim in closing
that Mr. Rostyne “had them and he improved on them and came up with this [indicating Havoc].”
Id., at 931:2-25. Rehco offered no evidence of what Mr. Rostyne actually used when designing the
Havoc, let alone any evidence he possessed, or that he knew about Rehco’s helicopters, the
23
Helicopter Agreement, or Rehco’s patents. Like patent infringement claims, to even plead a
colorable inference that an accused infringer had pre-suit knowledge of a patent, a plaintiff must
plead more than simply a patent was cited during prosecution. Princeton Digital Image Corp. v.
Ubisoft Entm’t, No. 13-335-LPS-CJB, 2017 WL 6337188 at *1 (D. Del. Dec. 12, 2017). Instead,
the only evidence that was introduced at trial was that Rehco sought and obtained five patents
related to toy helicopters. Trial Tr., at 492:7-11. Critically, Rehco did not offer any testimony or
evidence that the five patents were related to the Item descriptions, the Helicopter Agreement or,
more importantly, to any modification or improvement of the Item. As a matter of law, citation to
five Rehkemper patents in Mr. Rostyne’s patent is legally insufficient to support Rehco’s argument
that the Havoc was an “improvement” of the Items described in the Helicopter Agreement, and
judgment as a matter of law in favor of Spin Master on Rehco’s breach claim is required.
DATED: January 16, 2020
Respectfully submitted,
Erise IP, P.A.
By: /s/ Megan J. Redmond
Megan J. Redmond (#6280970)
Eric A. Buresh (pro hac vice)
Caroline A. Bader (pro hac vice)
6201 College Blvd., Suite 300
Overland Park, Kansas 66211
(913) 777-5600
(913) 777-5601 – fax
megan.redmond@eriseip.com
carrie.bader@eriseip.com
24
Nicholas T. Peters
Joseph F. Marinelli
Fitch, Even, Tabin & Flannery
120 South LaSalle Street
Suite 1600
Chicago, Illinois 60603
(312) 577-7000
(312) 577-7007 – fax
ntpete@fitcheven.com
jmarinelli@fitcheven.com
Attorneys for Spin Master, Ltd.
CERTIFICATE OF SERVICE
The undersigned hereby certifies that all counsel of record have been served with a copy
of this document via e-mail and the Court’s CM/ECF system this 16th day of January, 2020.
/s/ Megan J. Redmond
Megan J. Redmond
25
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