WBIP, LLC v. Kohler Co.
Filing
274
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER, granting in part and denying in part 232 MOTION for an accounting and for pre- and post-judgment interest, filed by WBIP, LLC, granting in part and denying in part 225 MOTI ON for New Trial filed by Kohler Co., denying 259 MOTION for Reconsideration of Court's Order Denying Motion for Permanent Injunction filed by WBIP, LLC, granting in part and taking under advisement 230 MOTION for Enhanced damages and Attorney Fees and costs filed by WBIP, LLC, and granting 223 Motion for an ongoing royalty. See Order for details. (Patch, Christine)
United States District Court
District of Massachusetts
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WBIP, LLC,
Plaintiff,
v.
KOHLER CO.,
Defendant.
Civil Action No.
11-10374-NMG
MEMORANDUM & ORDER
GORTON, J.
In this patent infringement action plaintiff WBIP, LLC
(“WBIP”) alleges that defendant Kohler Co. (“Kohler”) infringes
WBIP’s patents directed to marine power generators that include
a catalyst component in their exhaust systems to reduce
emissions.
In May, 2013, a jury found that the subject patents
were valid and willfully infringed by Kohler and awarded
$9,641,206 in damages to WBIP.
After the verdict, Kohler moved for a new trial or, in the
alternative, a remittitur and renewed its previous motion for
judgment as a matter of law.
WBIP moved for a permanent
injunction or in the alternative an ongoing royalty, enhanced
damages and attorneys’ fees and an accounting and pre- and postjudgment interest.
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In an August, 2013 Memorandum and Order, the Court denied
Kohler’s motion for judgment as a matter of law and WBIP’s
motion for a permanent injunction but otherwise took WBIP’s
motion for an ongoing royalty and the other pending motions
under advisement.
WBIP moved for the Court to reconsider its
denial of a preliminary injunction and both parties submitted
supplemental briefs with respect to an impending royalty.
The Court held a hearing on the pending motions on January
14, 2014 and took the matters under advisement.
I.
Kohler’s Motion for a New Trial or Remittitur
At trial, both parties presented evidence that damages for
infringement should be based on $26,858,470 in sales of
infringing products by Kohler.
Kohler argued for a royalty rate
of 2% to be awarded on the basis of those sales while WBIP
suggested a 14.7% rate.
Nevertheless, on the special verdict
form provided, the jury applied a royalty rate of 13.5% to sales
of $71,416,345 for a total damages award of $9,641,206.
Kohler maintains that the damages award is not supported by
the evidence because neither the sales figure of $71,416,345 nor
the royalty rate of 13.5% is supported by the evidence.
It
contends that those errors warrant a new trial or at the very
least remittitur.
Kohler also asserts that a new trial is
warranted because WBIP’s damages expert improperly aggregated
WBIP and Westerbeke Corporation for the purposes of calculating
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damages and Kohler was unfairly prejudiced by WBIP’s
introduction of evidence pertaining to prior carbon monoxide
lawsuits.
A.
Legal Standard
A jury’s award of damages is a factual finding that is
reviewed to determine whether it is supported by substantial
evidence. Powell v. Home Depot U.S.A., 663 F.3d 1221, 1228-29
(Fed. Cir. 2011).
A verdict is supported by substantial
evidence if
reasonable jurors viewing the evidence as a whole
could have found the facts needed to support the
verdict in light of the applicable law.
Baxter Healthcare Corp. v. Spectramed, Inc., 49 F.3d 1575, 158283 (Fed. Cir. 1995) (internal citation and quotation marks
omitted).
Furthermore, a jury’s verdict with respect to an
award of damages must be upheld unless it is
grossly excessive or monstrous, clearly not supported
by the evidence, or based on speculation or guesswork.
Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555,
1580 (Fed. Cir. 1992) (internal citations and quotation marks
omitted).
If the reviewing court finds that the jury’s verdict was
excessive in light of the evidence, it may in some instances
grant a remittitur.
The decision to do so is generally
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discretionary but the First Circuit Court of Appeals has held
that
[i]n exercising this discretion, the court is obliged
to impose a remittitur “only when the award exceeds
any rational appraisal or estimate of the damages that
could be based upon the evidence before it.”
Trainor v. HEI Hospitality, LLC, 699 F.3d 19, 29 (1st Cir. 2012)
(quoting Kelley v. Airborne Freight Corp., 140 F.3d 335, 355
(1st Cir. 1998)).
Courts in the First Circuit follow the
“maximum recovery rule” which holds that any remittitur must
represent the “highest reasonable total of damages for which
there is adequate evidentiary support.” Marchant v. Dayton Tire
& Rubber Co., 836 F.2d 695, 704 (1st Cir. 1988).
In the context of a reasonable royalty in a patent
infringement case, the maximum recovery rule does not require
that both the sales upon which the royalty is based and the
royalty rate be adjusted to the maximum amount supported by
evidence at trial when the jury makes specific findings as to
both but only one of them is unsupported by substantial
evidence.
For example, Judge Rader of the Federal Circuit Court
of Appeals has reasoned that a rule requiring district court
judges to change both the royalty base and royalty rate when
only the royalty base lacked evidentiary support would undermine
the purpose of the maximum recovery rule to minimize
interference with the jury’s damages award. See Cornell Univ. v.
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Hewlett-Packard Co., 609 F. Supp. 2d 279, 292-93 (N.D.N.Y. 2009)
(Rader, J., sitting by designation), amended on other grounds,
No. 01-1974, 2009 WL 1405208 (N.D.N.Y. May 15, 2009).
In the alternative, the Court has broad discretion to order
a new trial when the verdict is against the clear weight of the
evidence or to prevent injustice. Jennings v. Jones, 587 F.3d
430, 436 (1st Cir. 2009).
Moreover, a second trial limited to
damages is proper when there is no “substantial indication that
the liability and damages issues are inextricably interwoven.”
Phav v. Trueblood, Inc., 915 F.2d 764, 767 (1st Cir. 1990)
(quoting Spell v. McDaniel, 824 F.2d 1380, 1400 (4th Cir. 1987),
cert. denied, 484 U.S. 1027 (1988)).
B.
Application
The Court finds, initially, that the royalty base used by
the jury, i.e., the amount of sales to be subject to royalty
payment, $71,416,345, is not supported by substantial evidence.
Damages experts for both parties testified that damages should
be based on sales amounting to $26,858,470, and the jury was
asked to find a sales amount as part of its damages calculation
on the special verdict form.
Furthermore, there is insufficient
evidence to support WBIP’s theory that the jury inflated the
sales figure in order to add an “upfront royalty” of nearly
double that which is otherwise due on the basis of actual sales.
As a result, the Court finds that the largest royalty base
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supported by the evidence is $26,858,470, the amount of
infringing sales as agreed to by the parties.
On the other hand, the 13.5% royalty rate is supported by
substantial evidence.
The jury was charged on the Georgia-
Pacific factors and it selected a rate that fell between the
rates of 2% and 14.7% proffered by the parties’ experts.
The
Federal Circuit has upheld royalty rates that fall between the
figures advanced by the parties even when they are not clearly
derived from figures advanced at trial. See Fuji Photo Film Co.
v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005)
(“[T]he jury is not bound to accept a rate proffered by one
party’s expert but rather may choose an intermediate royalty
rate.”); Smithkline Diagnostics, Inc. v. Helena Labs. Corp., 926
F.2d 1161, 1167-68 (Fed. Cir. 1991) (explaining that a
reasonable royalty rate need not be supported by specific
figures advanced by either party).
Moreover, evidence that Kohler was operating at a loss does
not mandate Kohler’s preferred 2% rate, especially in light of
evidence that Kohler sold its infringing generators for 15% less
than WBIP charged its customers.
The Federal Circuit has held
that
an infringer’s net profit margin is not the ceiling by
which a reasonable royalty is capped. The infringer’s
selling price can be raised if necessary to
accommodate a higher royalty rate, and indeed,
requiring the infringer to do so may be the only way
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to adequately compensate the patentee for the use of
its technology.
Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F.3d 1336, 1346
(Fed. Cir. 2013) (citing Golight, Inc. v. Wal-Mart Stores, Inc.,
355 F.3d 1327, 1338 (Fed. Cir. 2004) (rejecting Wal-Mart’s
argument that it could not raise its prices to cover the cost of
a royalty because it was already selling at a loss)).
Moreover,
WBIP’s expert testified that a 14.7% royalty, which is higher
than what the jury awarded, would allow Kohler to maintain the
profit margin that it required to stay in business.
As a result, the Court proffers WBIP the choice between
accepting a remittitur of $3,625,893, which is a 13.5% royalty
on sales of $26,858,470, or a new trial on damages.
It will
not, however, order a new trial based on the other grounds
offered by Kohler.
Kohler argued before trial that WBIP should
not be permitted to aggregate Westerbeke and WBIP for the
purposes of damages or introduce evidence of prior carbon
monoxide lawsuits.
The Court rejected those contentions and
Kohler has presented no new arguments to dissuade it.
II.
WBIP’s Motion for an Accounting and for Pre- and PostJudgment Interest
WBIP has moved for the Court to amend its Judgment to add
1) reasonable royalties for Kohler’s infringing sales made
between September, 2012 and the date of entry of judgment, by
way of an “accounting”, 2) pre-judgment interest, preferably at
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the Massachusetts statutory rate of 12% and 3) post-judgment
interest after resolving the post-trial motions at a rate of
0.12%.
The Court will amend the judgment to account for sales
totaling $1,107,586 between September, 2012 and the entry of
judgment in May, 2013, i.e., $149,524 in additional damages
based on a royalty of 13.5%.
As a result, the total
compensatory damages award, if WBIP accepts the remittitur, is
$3,775,418.
The Court will also award pre-judgment interest because
there is no evidence that Kohler was prejudiced by any delay of
WBIP in filing suit and, indeed, Kohler abandoned its defense of
laches before trial began. See Lummus Indus., Inc. v. D.M. & E.
Corp., 862 F.2d 267, 275 (Fed. Cir. 1988) (holding that delay
does not justify withholding pretrial interest absent
prejudice).
The Court declines, however, to award pre-judgment interest
at the Massachusetts statutory rate of 12% and will instead
apply the prime rate, compounded quarterly.
The Court is
persuaded that the prime rate is an appropriate compromise
between the Massachusetts statutory rate, which is excessive,
and the miniscule Treasury Bill rate, which will not adequately
compensate WBIP for the pre-judgment period of infringement. See
Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed.
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Cir. 1991) (explaining that it is not necessary for a plaintiff
to show that it borrowed money at the prime rate to be awarded
interest at that rate); NTP, Inc. v. Research in Motion, Ltd.,
270 F. Supp. 2d 751, 763 (E.D. Va. 2003) (finding the prime rate
compounded quarterly to be a “conservative, middle-of-the-road
approach” that places the patent-holder in as good of a position
as if the infringer had taken a license rather than infringed).
Finally, the Court will award post-judgment interest at the
Treasury Bill rate of 0.12%, compounded annually, to be applied
to the total money judgment, including pre-judgment interest,
enhanced damages, attorneys’ fees and ongoing royalties.
III. WBIP’s Motion for Enhanced Damages and Attorneys’ Fees
WBIP submits that the Court would be justified in enhancing
damages and awarding attorneys’ fees based on a finding that
Kohler’s infringement was willful.
A.
Enhanced Damages
1.
Legal Standard
Under 35 U.S.C. § 284, a district court may increase
damages up to three times the amount assessed as compensatory
damages when the jury finds infringement of a valid patent.
The
Federal Circuit employs a two-step test to determine if enhanced
damages are warranted:
First, the fact-finder must determine if an accused
infringer is guilty of conduct, such as willfulness,
upon which increased damages may be based. If so, the
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court then exercises its discretion to determine if
damages should be increased given the totality of the
circumstances.
Mentor H/S, Inc. v. Med. Device Alliance, Inc., 244 F.3d 1365,
1380 (Fed. Cir. 2001) (citing Jurgens v. CBK, Ltd., 80 F.3d
1566, 1570 (Fed. Cir. 1996)).
2.
Willfulness
a.
The Seagate test
In order to prove that Kohler willfully infringed its
patents at the first step of the test for enhanced damages, WBIP
must establish, by clear and convincing evidence, that 1) Kohler
acted despite an “objectively high likelihood” that its actions
infringed a valid patent and 2) Kohler either knew about that
objectively high likelihood or the likelihood was so obvious
that it should have known about it. In re Seagate Tech., LLC,
497 F.3d 1360, 1371 (Fed. Cir. 2007).
The Federal Circuit has
explained that the so-called “objective” prong of the test, i.e.
the objectively high likelihood of infringement, is a question
for the court to determine rather than the jury. Bard Peripheral
Vascular v. W.L. Gore & Assoc., 682 F.3d 1003, 1006-07 (Fed.
Cir. 2012).
The trial court must make a
threshold determination of objective recklessness
[which] entails an objective assessment of potential
defenses based on the risk presented by the patent.
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Id. at 1006.
The question of “subjective” recklessness, i.e. if
the infringer knew or should have known about the objective
risk, is a question of fact for the jury. Id.
The Federal Circuit has described the former question as a
“threshold determination” which “entails an objective assessment
of potential defenses based on the risk presented by the
patent.”
Id.
It has explained that the objective prong “tends
not to be met where an accused infringer relies on a reasonable
defense to a charge of infringement.” Spine Solutions, Inc. v.
Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed.
Cir. 2010) (citations omitted).
Moreover, it has cautioned that
the fact that the jury rejected the defense is not dispositive
when the evidence shows that the question was close. DePuy
Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314,
1337 (Fed. Cir. 2009).
b.
Application
As an initial matter, the Court does not read Bard as
foreclosing it from deciding the objective prong of willfulness
after submitting the question of subjective willfulness to the
jury, notwithstanding the fact that the Federal Circuit referred
to the objective prong as a “threshold requirement”. Bard, 682
F.3d at 1006.
This Court agrees with other district courts that
it is appropriate to delay ruling on the objective prong until
after the jury has reached a verdict with respect to defenses
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involving questions of fact. See Ill. Tool Works, Inc. v. MOC
Prods. Co., 946 F. Supp. 2d 1042, 1046-47 (S.D. Cal. 2012); Cook
Inc. v. Endologix, Inc., No. 09-01248, 2012 WL 3779198, at *2
(S.D. Ind. Aug. 30, 2012); see also Powell, 663 F.3d at 1237 n.2
(acknowledging that district courts have broad discretion to set
the order of trial and suggesting that such discretion extends
to the order of consideration of the two prongs of willfulness).
In this case, Kohler relied upon defenses of obviousness
and non-infringement.
The jury found that WBIP had proved, by a
preponderance of the evidence, that its patents were infringed.
It also found that Kohler had failed to prove, by clear and
convincing evidence, that WBIP’s patents were obvious.
Nevertheless, the “objective recklessness” prong is not met if
either defense was reasonable or presented a close question.
Spine Solutions, Inc., 620 F.3d at 1319; DePuy Spine, Inc., 567
F.3d at 1337.
The Court finds that Kohler was objectively reckless under
the first prong of the Seagate test.
As to obviousness, the
fact that all of the claim limitations of WBIP’s Low-CO marine
generator patents were found in combination in the prior art
Phipps and Fujimoto patents does not preclude the Court from
finding the defense unreasonable.
Instead, the fact that
Kohler’s own chief engineer testified one year after
Westerbeke’s invention that it was impossible to design a marine
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generator that did not produce carbon monoxide severely
undercuts Kohler’s argument that combining those elements would
have been obvious to a person having ordinary skill in the art.
Obviousness was not a reasonable defense.
With respect to non-infringement, the Court disagrees with
Kohler that it was objectively reasonable for Kohler to rely on
the fact that Kohler and Westerbeke employed different vendors
to manufacture their respective engine controllers.
Infringement is assessed by comparing the accused product and
the patent claims, not the accused product and a commercial
embodiment of the patent, Amgen Inc. v. Hoechst Marion Roussel,
Inc., 314 F.3d 1313, 1346-47 (Fed. Cir. 2003), and therefore the
source of Westerbeke’s commercial embodiments is simply
irrelevant to a defense of non-infringement.
Finally, the Court discounts the fact that the Patent
Office allowed Kohler’s requests to reexamine the infringed
patents because the Federal Circuit has held that the occurrence
of a reexamination is not probative on the issues of validity or
willfulness. See Hoechst Celanese Corp. v. BP Chems. Ltd., 78
F.3d 1575, 1584 (Fed. Cir. 1996).
3.
Circumstances justifying enhanced damages
a.
Read factors
Kohler’s willful infringement justifies enhanced damages.
In determining the appropriate amount of enhancement, district
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courts apply the Read factors, which include (1) whether the
infringer deliberately copied the ideas or design of the patentholder; (2) whether it investigated the scope of the patent and
formed a good-faith belief that it was invalid or that it was
not infringed; (3) the infringer’s behavior during the
litigation; (4) the infringer’s size and financial condition;
(5) the closeness of the case; (6) the duration of the
infringer’s misconduct; (7) any remedial actions taken by the
infringer; (8) whether the infringer was motivated by a wish to
harm the patent holder; and (9) whether the infringer attempted
to conceal its misconduct. See Read Corp. v. Portec, Inc., 970
F.2d 816, 826-27 (Fed. Cir. 1992), abrogated in part on other
grounds by Markman v. Westview Instruments, Inc., 52 F.3d 967,
975-78 (Fed. Cir. 1995) (en banc).
The Federal Circuit has
repeatedly explained that
the paramount determination in deciding to grant
enhancement and the amount thereof is the
egregiousness of the defendant’s conduct based on all
the facts and circumstances.
Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1349 (Fed.
Cir. 2011) (quoting Read, 970 F.2d at 826).
b.
Application
i.
Factors favoring no enhancement
Read factors (2), (6), (7) and (8) weigh against enhancing
damages.
First, the relatively short duration of infringement
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does not justify enhanced damages especially when WBIP will be
compensated with an ongoing royalty for post-verdict
infringement.
Second, the fact that this Court denied injunctive relief
in favor of an ongoing royalty weighs against penalizing Kohler
for failing to take remedial action post-verdict while preverdict infringement is adequately compensated by the royalties
awarded by the jury.
Moreover, Kohler’s defenses, while
unreasonable, were not “totally unsupportable” or “frivolous”
such that it would be fair to enhance damages based on ongoing
infringement during the course of the litigation. See Gustafson,
Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 511
(Fed. Cir. 1990).
Third, there is insufficient evidence that Kohler acted
improperly upon learning of the patent.
The absence of opinion
letters from outside counsel is not persuasive evidence of bad
faith or willful blindness as to infringement when there is
evidence that Kohler at least consulted with in-house counsel.
Finally, the Court agrees with Kohler that its project
manager’s reference in an internal memorandum in 2007 to
“shutting the door” on competition from Westerbeke is, at most,
evidence of normal business competition rather than of an
improper motive justifying enhanced damages. Cf. i4i Ltd. P’ship
v. Microsoft Corp., 598 F.3d 831, 858 (Fed. Cir. 2010) (finding
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enhanced damages justified when infringer was motivated to
render patentee’s products “obsolete”).
Moreover, Kohler had
substantial reasons to address its carbon monoxide problems
aside from driving out a competitor.
ii.
Factors favoring enhancement
On the other hand, Read factors (1), (3), (4), (5) and (9)
favor enhancing damages although a few of those factors present
a close call.
First, while there is no “smoking gun” evidence
of copying, evidence that Kohler developed its Low-CO generators
with catalytic converters and electronic fuel injection
components after learning about Westerbeke’s product at a trade
show supports the inference that Kohler was at least reckless as
to whether it copied. Cf. Va. Panel Corp. v. MAC Panel Co., 133
F.3d 860, 867 (Fed. Cir. 1997) (upholding 10% enhancement based
on part on finding that any copying was merely reckless and not
deliberate).
Kohler adduces no authority in support of its
argument at the hearing that its conduct before the subject
patents issued cannot be considered under Read.
Second, Kohler’s conduct as a party to the litigation
justifies enhancement.
WBIP overstates Kohler’s misconduct but
the Court agrees that on several occasions, Kohler’s litigation
strategy went beyond zealous advocacy and unnecessarily burdened
the Court and its opponent.
For instance, Kohler had a third
party designate documents “for outside attorneys’ eyes only”
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thus prohibiting WBIP’s expert from viewing them and then
subsequently argued that the expert’s opinion was unreliable
because he did not address those “key” documents.
Third, for the reasons discussed above, the case was not
particularly close because, while not frivolous or advanced in
bad faith, Kohler’s defenses were not objectively reasonable.
Fourth, a reasonable inference to draw from the fact that
Kohler did not make available at trial current and recent
employees is that Kohler was content to conceal the fact that
its witnesses might have revealed that Kohler knew of WBIP’s
patent sooner than 2010.
It is not a strong inference, however,
because the decision not to call a witness has many
ramifications, including compliance with time limits imposed by
this Court.
As a result, the Court applies only marginal weight
to this factor in deciding whether to enhance damages.
Finally, there is no dispute that Kohler is a much larger
company than Westerbeke and has significantly more resources.
iii. Analysis
Based on the Read factors and all of the facts and
circumstances in this case, the Court concludes that it is
appropriate to enhance WBIP’s damages award by 50%.
Kohler’s
conduct was not so egregious as to warrant double or treble
damages for willful infringement and, as noted above, about onehalf of the Read factors weighed against enhancing damages.
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Assuming that WBIP accepts the remittitur, the Court will award
it $5,633,126 in damages.
B.
Attorneys’ fees
1.
Legal standard
Under 35 U.S.C. § 285, district courts may award reasonable
attorneys’ fees to the prevailing party only in “exceptional”
cases.
The prevailing party must establish the “exceptional”
nature of a case by clear and convincing evidence. Cambridge
Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050 (Fed.
Cir. 1992).
Many forms of misconduct can support finding a case
exceptional, including
litigation misconduct; vexatious, unjustified, and
otherwise bad faith litigation; a frivolous suit; or
willful infringement.
Monolithic Power Sys., Inc. v. O2 Micro Int’l Ltd., 726 F.3d
1359, 1366 (Fed. Cir. 2013).
Even in exceptional cases,
however, the decision to award attorneys’ fees and the amount to
be awarded are within the sound discretion of the district
court. Brooks Furniture Mfg., Inc. v. Dutalier Int’l, Inc., 393
F.3d 1378, 1382 (Fed. Cir. 2005).
2.
Application
The Court finds that Kohler’s willful infringement renders
this case exceptional and justifies the award of reasonable
attorneys’ fees and costs.
It will base the award on
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submissions of the parties according to a supplemental briefing
schedule that will be issued forthwith.
IV.
WBIP’s Motion to Reconsider Denial of Permanent Injunction
With respect to post-trial relief, the Court will not
reconsider its denial of WBIP’s motion for a permanent
injunction to prevent Kohler from selling its infringing
products.
A motion for reconsideration is an “extraordinary
remedy” granted only when the movant demonstrates that the court
committed a “manifest error of law” or that newly discovered
evidence that was not previously available has come to light.
Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir. 2006)
(internal citations omitted).
Even if the plaintiff has a
larger manufacturing capability than previously estimated, the
Court is persuaded that it is in the public interest to have
more than one company manufacture low-carbon monoxide generators
and a more appropriate solution than a permanent injunction is
to require Kohler to pay a fair, ongoing royalty for its use of
WBIP’s patents.
V.
WBIP’s Motion for an Ongoing Royalty
The Court advised the parties in its Order denying WBIP’s
motion for a preliminary injunction that it would determine the
rate of an ongoing royalty if the parties were unable to agree
upon one.
The parties failed to agree and therefore the issue
of an appropriate ongoing royalty is before the Court.
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WBIP
urges the Court to set the rate at 13.5%, the same rate found by
the jury.
Kohler argues that the rate should be set at 3%
because a higher rate would be tantamount to injunctive relief.
A.
Legal standard
An ongoing royalty for patent infringement is an
appropriate alternative to permanent injunctive relief but
should not be awarded as a matter of course. Paice LLC v. Toyota
Motor Corp., 504 F.3d 1293, 1314-15 (Fed. Cir. 2007).
The
Federal Circuit has explained that the amount awarded should
reflect the “fundamental difference” between pre-verdict and
post-verdict infringement due to changes in the relative
bargaining positions of the patentee and the infringer:
Prior to judgment, liability for infringement, as well
as the validity of the patent, is uncertain, and
damages are determined in the context of that
uncertainty. Once a judgment of validity and
infringement has been entered, however, the calculus
is markedly different because different economic
factors are involved.
Amado v. Microsoft Corp., 517 F.3d 1353, 1361-62 (Fed. Cir.
2008) (citing Paice, 504 F.3d at 1315, 1317).
Many district
courts have therefore set the post-verdict rate higher than the
pre-verdict rate based on the fact that the post-verdict
infringer knows that it is infringing and the post-verdict
patentee has a strong claim to enhanced damages should it
abandon the hypothetical royalty negotiations and pursue a
patent infringement lawsuit. See, e.g., Mondis Tech. Ltd. v.
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Chimei InnoLux Corp., 822 F. Supp. 2d 639, 649 (E.D. Tex. 2011)
(increasing rate from 0.5% to 0.75%); Creative Internet Adver.
Corp. v. Yahoo! Inc., 674 F. Supp. 2d 847, 861 (E.D. Tex. 2009)
(increasing from 20% to 23%).
Paice, however, does not
foreclose setting an identical rate to that found by the jury.
See Paice, 504 F.3d at 1315.
B.
Application
The Court agrees with WBIP that 13.5% is an appropriate
ongoing royalty rate.
It is not persuaded by Kohler’s argument
that 13.5% is excessive because the damages award was not
supported by the evidence.
Kohler adduces no authority for the
proposition that the Court must conclude that all aspects of the
damages award are tainted merely because the jury erred in
setting the royalty base.
Moreover, the jury already presumably
considered and rejected Kohler’s argument that it could not
afford to pay a higher royalty when it set the rate at 13.5% and
the Court gives the jury’s finding, which was made after due
consideration and a comprehensive charge on the law,
considerable deference in setting the ongoing royalty.
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ORDER
For the foregoing reasons,
1)
Defendant’s motion for a new trial or remittitur
(Docket No. 225) is ALLOWED, in part, and DENIED, in
part. If plaintiff agrees to a remittitur reducing
the jury award of compensatory damages to $3,775,418,
it will file written notice of its acceptance thereof
on or before Wednesday, February 26, 2014. In default
of such notice, the Court will schedule a new trial
limited to the issue of damages.
2)
Plaintiff’s motion for an accounting and for pre- and
post-judgment interest (Docket No. 232) is ALLOWED, in
part, and DENIED, in part. The Court will amend the
judgment to include royalties of $149,524 based upon
infringing sales of $1,107,586 between September, 2012
and the date of entry of judgment in May, 2013.
Defendant will pay pre-judgment interest at the prime
rate,1 compounded quarterly, and post-judgment interest
at the weekly average 1-year constant maturity
Treasury rate of 0.12%, compounded annually. Postjudgment interest is to be applied to the total money
judgment, including pre-judgment interest, enhanced
damages, attorneys’ fees and ongoing royalties.
3)
Plaintiff’s motion for enhanced damages and attorneys’
fees and costs (Docket No. 230) is ALLOWED, in part,
and otherwise taken under advisement. The Court will
enhance compensatory damages by 50% for a total award
of $5,663,126 and will award reasonable attorneys’
fees and costs. The plaintiff is directed to submit a
supplemental memorandum on or before Wednesday, March
5, 2014 with respect to the amount of fees and costs
to be awarded. Defendant’s opposition, if any, is due
by Wednesday, March 19, 2014.
4)
Plaintiff’s motion for reconsideration of its motion
for a permanent injunction (Docket No. 259) is DENIED.
1
See Average Majority Prime Rate Charged by Banks on Short-Term
Loans to Business (1956-2013), available at
http://www.federalreserve.gov/releases/h15/data.htm (last
updated Dec. 19, 2013).
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5)
Plaintiff’s motion for an ongoing royalty (Docket No.
223) is ALLOWED and is set at a rate of 13.5%.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated February 12, 2014
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