ABT Systems, LLC et al v. Emerson Climate Technologies, Inc. et al
MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendants motion for a finding that Plaintiffs engaged in inequitable conduct rendering this an exceptional case under 35 U.S.C. § 285, is DENIED. (Doc. No. 492.)IT IS FURTHER ORDERED that Plaintif fs motion for a determination thatDefendants pre-lawsuit infringement was willful under 35 U.S.C. § 284 is DENIED. Doc. No. 500.)All claims and issues having been resolved, a separate Judgment shall accompany this Memorandum and Order. Signed by District Judge Audrey G. Fleissig on 2/13/14. (JWJ)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
ABT SYSTEMS, LLC, and THE
UNIVERSITY OF CENTRAL FLORIDA
BOARD OF TRUSTEES,
Plaintiffs / Counterclaim Defendants, )
EMERSON ELECTRIC CO.,
Defendant / Counterclaim Plaintiff. )
Case No. 4:11CV00374 AGF
MEMORANDUM AND ORDER
This patent infringement action was filed on November 5, 2009. Following an
eight-day jury trial conducted from February 11 to 21, 2013, the jury returned its verdict
finding that Defendant Emerson Electric Co. had infringed certain claims of “the ’017
patent,” owned by Plaintiffs, and awarding Plaintiffs $311,379 in damages. The patent at
issue claims an air conditioning control (the “fan recycling control”), invented by Armin
Rudd, which, when incorporated into a thermostat that is installed in a building or home,
operates as part of an air conditioning system to periodically activate and deactivate the fan
of the system at preselected intervals after the end of the call for heating or cooling.
The suit initially involved another patent for a fan recycling control invented by
Rudd, “the ’268 patent.” One of Defendant’s counterclaims sought a declaratory
judgment that the ’268 patent was unenforceable because, during the patenting process,
Rudd withheld information from the United States Patent and Trademark Office (“PTO”)
regarding the scope and content of prior art. On February 9, 2013, two days before trial,
Plaintiffs executed a Covenant Not to Sue Defendant for any infringement and/or damages
related to the ’268 patent. An evidentiary hearing was held on February 21, 2013, before
the Court only, on Defendant’s allegation of inequitable conduct.
Now before the Court are two post-trial motions: (1) Defendant’s motion (Doc. No.
492) for a finding that Plaintiffs engaged in inequitable conduct during the prosecution of
the ’268 patent by misrepresenting the scope of prior art, and during this lawsuit by
pursuing the claim of infringement of that patent, entitling Defendant, under 35 U.S.C.
§ 285, to attorney’s fees it incurred related to that claim; and (2) Plaintiffs’ motion (Doc.
No. 500) for a determination that Defendant’s infringement of the ’017 patent prior to the
filing date of this lawsuit was willful, thereby entitling Plaintiffs to enhanced damages
under 35 U.S.C. § 284.
For the reasons set forth below, the Court finds that Defendant is not entitled to
attorney’s fees incurred in defending the claim of infringement of the ’268 patent, and that
Defendant cannot be found to have been a willful infringer of the ’017 patent during the
period prior to the filing of this action.
The accused products are eight models of Emerson thermostats that have a
“Comfort Circulating Fan Feature.” On the first day of trial, the Court granted
Defendant’s motion in limine to exclude Plaintiffs’ evidence that Plaintiffs had engaged in
“marking” its products that incorporated the ’017 patent and had thereby provided
Defendant with constructive notice of the patent prior to the date this action was filed.
Other than the alleged “marking,” Plaintiffs provided no notice of their infringement
claims to Defendant prior to filing suit.
Defendant’s defenses at trial included that the accused products’ fan activation
feature did not use the ’017 patent, but rather the prior art technology of another patent, the
“Vogelzang” patent; that a combination of prior art patents, including Vogelzang, rendered
the ’017 patent obvious, and therefore, invalid; and that Plaintiffs lacked evidence that the
accused feature in Defendant’s thermostats was ever used in an infringing manner by
The record shows that the application for the ’017 patent was filed on January 5,
1995. There is evidence in the record, though not conclusive evidence, that in July 1995,
Honeywell, Inc., a competitor of Defendant’s, introduced nationwide the Honeywell
PC8900 thermostat, a thermostat that caused the fan to run periodically, beginning a set
period of time after the end of the call for heating or cooling. The ’017 patent issued on
August 20, 1996. Later that year, Rudd sent Defendant a copy of the patent. In April
1997, Rudd tested the Honeywell PC8900 because, based upon the PC8900 Product Data
and Owner’s Guide (both dated 1995), he thought it might infringe the ’017 patent. Based
on his tests, he determined that it did infringe the ’017 patent, and he informed Honeywell
of such on July 22, 1997.
On March 15, 1999, Rudd filed the application that became the ’268 patent,
claiming priority to a patent application filed on August 18, 1997. He submitted the
Product Data, Owner’s Guide, and Product Brochure related to the PC8900 to the PTO, but
did not file the test results he had obtained in April 1997. In the application, Rudd
represented, as was then required by the PTO, that he did not know or believe that his
invention was in public use or on sale in the United States more than one year prior to the
application.1 On August 13, 2002, the ’268 patent issued. On November 20, 2002, Rudd
sued Honeywell for infringement of the ’017 patent. This suit was settled on March 12,
2003, pursuant to which Honeywell took a license under the ’017 patent and an option for a
license under the ’268 patent. (Doc. No. 313-1.)
Evidence was presented at trial that in 2005, Defendant decided to develop a
thermostat to compete with the 2004 Honeywell VisionPRO, a thermostat with a
touchscreen, as well as many other features, including a fan recycle feature. Defendant
believed that the fan recycle feature of the VisionPRO used the Vogelzang patent and upon
inquiry, was told by a member of its legal department (who became a lawyer two years
later) that because the Vogelzang patent had been abandoned, the technology was available
for use. Defendant decided to go ahead with its new thermostats, including the accused
At the February 21, 2013 hearing on the claim of Plaintiffs’ inequitable conduct,
Rudd testified that the literature about the Honeywell PC8900 thermostat that he submitted
to the PTO in connection with the ’238 patent application clearly indicated to anyone
skilled in the art, including patent examiners, that the PC8900’s fan began to cycle at a
predetermined time after the end of the heating or cooling cycle, as did his claimed
See 37 C.F.R. § 1.63 (1996). The PTO does not currently require inventors to file a
statement regarding such knowledge or belief.
The Jury’s Findings on Royalty Rate and Willfulness
By agreement of the parties, the jury was instructed that November 5, 2009, the date
the lawsuit was filed, was the date for the start of damages and that Defendant sold a total
of 138,391 accused thermostats from that date until April 30, 2011. This end date for
damages was agreed to by Plaintiffs and was based on the only disclosures they had made
in their trial materials and expert reports.
The jury was instructed as follows on the question of willfulness:
If you find that it is more likely than not that Emerson infringed at least one
claim of the ’017 patent, then you must also determine if this infringement
was willful. Willfulness means that it is highly probable that:
1. Emerson was aware of the ’017 patent,
2. Emerson acted despite an objectively high likelihood that its actions
infringed a valid patent, and
3. This objectively high likelihood of infringement was either known or so
obvious that it should have been known to Emerson.
In making the determination of whether Emerson acted despite an
objectively high likelihood that its actions infringed a valid patent, you may
not consider Emerson’s actual state of mind.
In determining willfulness, you must consider the totality of the
circumstances. The totality of the circumstances includes a number of
factors, such as but not limited to, whether Emerson intentionally copied the
claimed invention, whether Emerson received notice of or a copy of the ’017
patent from Mr. Rudd, whether Emerson relied on competent legal advice,
and whether Emerson presented a substantial defense to infringement,
including the defense that the patent is invalid.
In assessing when Emerson had knowledge of the ’017 patent, you are
instructed that proper mailing of a document raises a rebuttable presumption
that the document has been received by the addressee in the usual time.
In considering the totality of the circumstances with regard to whether or not
Emerson acted willfully, you should separately consider whether willfulness
existed prior to the lawsuit, and whether willfulness existed after the lawsuit
filing date. As to the pre-lawsuit filing time, the things you may consider
include but are not limited to whether the verbal opinion that Emerson
obtained from its legal counsel regarding the Vogelzang patent was
competent, and whether Emerson had a good faith belief that it was using the
Vogelzang technology. As to the post lawsuit filing time, in addition to the
issues you may consider for the pre-lawsuit filing time, the things you may
consider include but are not limited to whether Emerson had a good faith
belief that the ’017 patent was invalid because of the prior art, including the
Vogelzang patent, in your determination of the totality of circumstances.
(Doc. No. 464 at 35-36, Instruction No. 28.)
The jury was also asked to answer the following special interrogatory:
Do you find that [Plaintiffs] have proven by a preponderance of the evidence
that as of the Fall of 2006:
(a) Emerson knew of the ’017 patent, or showed willful blindness to its
(b) Emerson knew, or should have known, that its actions would result in
infringement of at least one claim of the ’017 patent? You are instructed
that to find willful blindness: (1) Emerson must have subjectively believed
that there was a high probability that a patent existed covering the accused
thermostats; and (2) Emerson must have taken deliberate actions to avoid
learning of that patent.
(Doc. No. 466 at 3.)
The jury found that the reasonable royalty rate for the infringing sales was $2.25 per
unit, for a total of $311,379 ($2.25 x 138,391), as the amount that would reasonably
compensate Plaintiffs for the infringement the jury found. With respect to the issue of
willful infringement, the jury found that Plaintiff did prove willful infringement from the
Fall of 2006 to the November 5, 2009 filing date of the lawsuit, but did not prove willful
infringement from the filing date of the lawsuit until the alleged end of sales of the accused
products in October 2012. Id. at 6-7.
According to Defendant, it is the prevailing party with respect to the claim that it
infringed the ’268 patent, and thus the Court may award its attorney’s fees related to that
claim, under 35 U.S.C. § 285, which provides that a “court in exceptional cases may award
reasonable attorney fees to the prevailing party.” Defendant argues that Rudd’s failure to
submit his test results with respect to the Honeywell PC8900 in prosecuting his application
for the ’268 patent and representing on the ’268 patent application that his invention was
not in public use, as well as Plaintiffs’ pursuit of this litigation with respect to the ’268
patent, render this an exceptional case under § 285.
Defendant asserts that the Covenant Not to Sue on the ’268 patent, and the resultant
dismissal of Plaintiffs’ infringement claims and Defendant’s corresponding counterclaims
for invalidity with respect to that patent, do not deprive the Court of jurisdiction to consider
Defendant’s motion for a finding of inequitable conduct warranting the award of fees to
The Court agrees that it has jurisdiction to resolve Defendant’s motion. See, e.g.,
Highway Equip. Co. v. FECO, Ltd., No. C03-0076, 2005 WL 936469, at *4-5 (N.D. Iowa
Apr. 22, 2005) (citing cases). The Court, however, concludes that this is not an
“exceptional” case warranting the award of fees associated with defending the claim that
Defendant infringed the ’268 patent.
“A determination of whether to award attorneys’ fees under § 285 involves a
two-step process. First, a district court must determine whether the prevailing party has
proved by clear and convincing evidence that the case is ‘exceptional.’” Kilopass Tech.,
Inc. v. Sidense Corp., 738 F.3d 1302, 1308 (Fed. Cir. 2013). A case may be deemed
exceptional when there has been “some material inappropriate conduct related to the
matter in litigation,” such as “fraud or inequitable conduct in procuring the patent” or
“vexatious or unjustified litigation.” Id. (citations omitted). Absent misconduct in the
litigation or in securing the patent, fees may be imposed against the patentee “only if both
(1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively
baseless.” Id. at 1309. (citing Brooks Furniture Mfg. v. Dutailier Int’l, Inc., 393 F.3d
1378, 1381 (Fed. Cir. 2005).
To establish inequitable conduct based on misrepresentation of the prior art to the
PTO, absent affirmative egregious misconduct such as the manufacture of false evidence, a
defendant must prove by clear and convincing evidence that “the patentee acted with the
specific intent to deceive the PTO,” and by a preponderance of the evidence that the
misrepresentation was but-for material, that is, but for the misrepresentation the patent
would not have issued. Therasense v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-92
(Fed. Cir. 2011) (en banc).
“Proving that the applicant knew of a reference, should have known of its
materiality, and decided not to submit it to the PTO does not prove specific intent to
deceive.” Id. at 1290. “Although deceptive intent may be inferred from circumstantial
evidence, the inference must not only be based on sufficient evidence and be reasonable in
light of that evidence, but it must also be the single most reasonable inference able to be
drawn from the evidence to meet the clear and convincing standard.” In re Rosuvastatin
Calcium Patent Litig., 703 F.3d 511, 520 (Fed. Cir. 2012) (citation omitted). Moreover, a
patentee need not offer any good faith explanation for his conduct unless and until an
accused infringer has met his burden to prove an intent to deceive by clear and convincing
evidence. Therasense, 649 F.3d at 1291.
Here, the Court first concludes that there is insufficient evidence of a deceptive
intent on Rudd’s part in not providing the PTO with his Honeywell PC8900 test results,
especially in light of the fact that he did provide the literature from Honeywell about the
PC8900. See 1st Media, LLC v. Elec. Arts, Inc., 694 F.3d 1367, 1375-76 (Fed. Cir. 2012)
(holding that the district court clearly erred in finding inequitable conduct in the
prosecution of a patent application in relying on evidence showing, at best, that the
inventor and his lawyer knew that nondisclosed prior art was material, and the inability of
the inventor and his lawyer to offer a good faith explanation for the nondisclosure, as a
basis to infer a deliberate decision to withhold prior art reference.) Nor have Defendants
shown by a preponderance of the evidence that had the test results been provided, the ’268
Patent would not have been granted.
Similarly, there is not clear and convincing evidence that Rudd’s ’268 application
statement that he did not know or believe that his invention was in public use or on sale in
the United States more than one year prior to the application was made with the intent to
deceive the PTO with respect to the scope of the prior art.
When a defendant seeks fee shifting under § 285 based on the allegation that the
plaintiff’s claims of infringement were baseless, “actual knowledge of baselessness is not
required. Like a plaintiff seeking to recover attorneys’ fees under § 285 based on alleged
willful infringement, a defendant need only prove reckless conduct to satisfy the subjective
component of the § 285 analysis.” Kilopass Tech., Inc., 738 F.3d at 1310. “To be
objectively baseless, the patentee's assertions — whether manifested in its infringement
allegations or its claim construction positions — must be such that no reasonable litigant
could reasonably expect success on the merits.” Taurus IP, LLC v. DaimlerChrysler
Corp., 726 F.3d 1306, 1327 (Fed. Cir. 2013) (citation omitted).
The Court finds that Plaintiffs were not reckless in pursuing the ’268 patent
infringement claim in this case until they dropped that claim on February 9, 2013. The
Court cannot say that the objective merits of the claim were unreasonable in that Plaintiffs
knew that the ’268 patent was invalid, as Defendant posits. See Kilopass Tech., Inc., 738
F.3d at 1310-11 (explaining that in this context, a court should consider the objective
merits of the claim). In sum, Defendant’s request for an award of fees under 35 U.S.C.
§ 285 shall be denied.
The Court notes that it would reach the same decision under the less stringent
preponderance-of-the-evidence and “equitable discretion” standards for finding an
“exceptional case” urged by the petitioners for a writ of certiorari in Icon Health & Fitness,
Inc. v. Octane Fitness, LLC, 496 F. App’x 57 (Fed. Cir. 2012), cert. granted, 134 S. Ct. 49
(2013). Here, although Defendant is technically the prevailing party with respect to
Plaintiffs’ claims of infringement of the ’268 patent, Defendant did not actually prove
noninfringement and Plaintiffs’ claims of infringement were not unreasonably weak. Nor
is there evidence that Plaintiffs acted in bad faith in bringing the ’268 infringement claims.
Plaintiffs seek a determination by the Court that Defendant’s infringement of the
’017 patent during the period prior to the filing of this lawsuit was willful.2 Under 35
U.S.C. § 284, such a determination would authorize the Court to award Plaintiffs up to
three times the amount of royalty damages. Plaintiffs argue that the record establishes
pre-lawsuit willfulness from the fall of 2006.
Defendant argues that there was no willful infringement of the ’017 patent because
Defendant’s defenses of obviousness and non-infringement were reasonable, and it had a
reasonable belief that it was practicing an abandoned prior art patent (the Vogelzang
patent). Defendant also argues that the Court should not find willfulness because
Plaintiffs did not file a motion for a finding on the objective prong of willful infringement
prior to the submission to the jury of the subjective prong. Defendant argues that, in any
event, Plaintiffs cannot recover enhanced damages for pre-lawsuit conduct, as the jury was
only asked to consider, and only awarded, damages for post-lawsuit conduct.
In response to Defendant’s argument that it cannot be a willful infringer where it
was not found to infringe, Plaintiffs state as follows:
The jury found that Emerson willfully infringed starting in 2006. Emerson
provide [sic] significant evidence of pre-suit sales, and it was only because of
the Court’s ruling on the patent marking issue that the jury was not permitted
Plaintiffs specifically limit their motion for a finding of willfulness to the pre-lawsuit
to consider any damages prior to the filing of the suit. Emerson cannot
plausibly argue that the jury’s findings would not extend to pre-lawsuit sales.
(Doc. No. 505 at 7.)
The Court rejects Defendant’s procedural argument that submitting the question of
willfulness to the jury first, somehow precludes the Court from now making a willfulness
determination at this time. The Court, however, agrees with Defendant that enhanced
damages for pre-lawsuit willfulness would not be appropriate in this case, as Plaintiffs
were not awarded any damages, and there was no finding that there were infringing sales,
for that period of time. Plaintiffs have not cited any cases, nor has the Court found any,
permitting enhanced damages under § 284 where no damages were awarded. The Court is
not in a position to make findings of pre-lawsuit infringement, and to determine the number
of pre-lawsuit infringing sales, if any, both of which findings would be necessary to award
enhanced damages for the pre-lawsuit period.
IT IS HEREBY ORDERED that Defendant’s motion for a finding that Plaintiffs
engaged in inequitable conduct rendering this an “exceptional” case under 35 U.S.C.
§ 285, is DENIED. (Doc. No. 492.)
IT IS FURTHER ORDERED that Plaintiffs’ motion for a determination that
Defendant’s pre-lawsuit infringement was willful under 35 U.S.C. § 284 is DENIED.
(Doc. No. 500.)
All claims and issues having been resolved, a separate Judgment shall accompany
this Memorandum and Order.
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this13th day of February, 2014.
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