Wechsler v. Macke Intern. Trade, Inc.

• Decision Date: 18 May 2007
• Docket Number: No. 05-1243.,No. 05-1242.,05-1242.,05-1243.
• Citation: 486 F.3d 1286
• Parties: Lawrence I. WECHSLER, Plaintiff-Cross Appellant, v. MACKE INTERNATIONAL TRADE, INC., Defendant-Appellant, and Anthony O'Rourke, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

486 F.3d 1286

Lawrence I. WECHSLER, Plaintiff-Cross Appellant, v. MACKE INTERNATIONAL TRADE, INC., Defendant-Appellant, and Anthony O'Rourke, Defendant-Appellant.

No. 05-1242.

No. 05-1243.

United States Court of Appeals, Federal Circuit.

May 18, 2007.

Robert E. Wechsler, Wechsler & Wechsler, P.C., of Great Neck, NY, argued for plaintiff-cross appellant.

Neil A. Smith, Sheppard Mullin Richter & Hampton LLP, of San Francisco, CA, argued for defendants-appellants. With him on the brief for Anthony O'Rourke was Darren M. Franklin, of Los Angeles, CA. On the brief for Macke International Trade, Inc., was Richard S. Luskin, of Malibu, CA.

Before MAYER, GAJARSA, and PROST, Circuit Judges.

Opinion for the court filed by Circuit Judge PROST. Opinion dissenting in part filed by Circuit Judge MAYER.

PROST, Circuit Judge.

Macke International Trade, Inc. ("Macke") and Anthony O'Rourke appeal decisions of the United States District Court for the Central District of California granting judgment as a matter of law ("JMOL") that O'Rourke was personally liable for inducing Macke's infringement of U.S. Patent No. 5,636,592 ("the '592 patent") owned by Lawrence I. Wechsler, Wechsler v. Macke Int'l Trade, Inc., 232 F.R.D. 355 (C.D.Cal.2005) ("Wechsler II"), and denying JMOL that the jury's award of lost profit damages to Wechsler for Macke's infringement of the '592 patent was not supported by substantial evidence. Wechsler v. Macke Int'l Trade, Inc., 399 F.Supp.2d 1088 (C.D.Cal.2005) ("Wechsler III"). Wechsler cross-appeals the district court's grant of summary judgment that Macke is not the alter ego of O'Rourke. Wechsler v. Macke Int'l Trade, Inc., 327 F.Supp.2d 1139 (C.D.Cal.2004) ("Wechsler I"). We reverse the district court's grant of JMOL that O'Rourke was personally liable for inducing infringement of the '592 patent and the district court's award of lost profit damages. We affirm the district court's grant of summary judgment that Macke is not the alter ego of O'Rourke.

I. BACKGROUND

Anthony O'Rourke is the president, lone stockholder, and sole employee of Macke, a company O'Rourke formed in 1991 to develop, manufacture, and market pet products. In early 1998, O'Rourke and a co-inventor developed a portable device for carrying and dispensing water for a pet, and filed a patent application on the device shortly thereafter. In late 1998, Macke began distributing this device under the name "Handi-Drink."

In 1999, during the prosecution of his patent application on the Handi-Drink device, O'Rourke learned of the '592 patent, which had been issued to Wechsler in 1997. Rather than securing an opinion of counsel regarding the validity of the '592 patent, O'Rourke analyzed the '592 patent, the prior art, and his own device himself and formed a belief that the '592 patent was invalid and not infringed by the Handi-Drink device. Nonetheless, O'Rourke had counsel for Macke enter into licensing negotiations with Wechsler. These licensing negotiations broke down in August 1999 when Wechsler filed suit against Macke and O'Rourke for infringement of the '592 patent. At that time, O'Rourke redesigned the Handi-Drink device. However, Macke kept the original Handi-Drink device on the market until April 2000.

On motions for summary judgment, the district court ruled that O'Rourke was not the alter ego of Macke and was not liable for infringement under 35 U.S.C. § 271(a). Wechsler I, 327 F.Supp.2d at 1146. However, the district court ruled that there was a genuine issue of material fact as to when O'Rourke learned of the '592 patent and whether he possessed the personal culpability to be liable for inducing infringement under 35 U.S.C. § 271(b). Id. at 1148.

After a jury trial, the jury returned special verdicts finding that Macke and O'Rourke willfully infringed the '592 patent based on their becoming aware of the patent in April 1999 and continuing to sell the original Handi-Drink device until April 2000 ("Special Verdict No. 3"), but that O'Rourke was not personally liable for inducing Macke's infringement ("Special Verdict No. 1"). Wechsler II, 232 F.R.D. at 357. Nonetheless, the district court granted Wechsler's motion for JMOL that O'Rourke was personally liable for inducing infringement of the '592 patent, essentially reversing the jury's special verdict to the contrary. Id. at 360.

Having found that Macke and O'Rourke infringed the '592 patent, the jury awarded Wechsler approximately $630,000 in lost profits and approximately $25,000 in reasonable royalties for the infringement. Macke and O'Rourke moved for JMOL setting aside the lost profit damages since Wechsler did not manufacture a product until after the Handi-Drink device was off the market. That motion was denied by the district court. Wechsler III, 399 F.Supp.2d at 1094.

This appeal followed. O'Rourke appeals the grant of JMOL that he is personally liable for inducing infringement of the '592 patent. Macke and O'Rourke appeal the denial of JMOL that the lost profit award was not supported by substantial evidence. Wechsler cross-appeals the grant of summary judgment that Macke is not O'Rourke's alter ego. We have jurisdiction over each pursuant to 28 U.S.C. § 1295(a)(1).

II. DISCUSSION

A. Grant of JMOL that O'Rourke was Personally Liable for Infringement

O'Rourke appeals the district court's grant of JMOL that he was personally liable, despite the jury's special verdict that he was not. In granting JMOL, the district court determined that Special Verdict No. 1, i.e., that O'Rourke was not personally liable for inducing infringement, was inconsistent with Special Verdict No. 3, i.e., that the defendants willfully infringed the '592 patent. However, in reconciling these two special verdicts, the district court essentially discarded Special Verdict No. 1. O'Rourke contends this was error.

This court "applies the same standard of review as that applied by the trial court when reviewing a JMOL motion following a jury verdict." nCube Corp. v. SeaChange Int'l, Inc., 436 F.3d 1317, 1319 (Fed.Cir.2006). The grant or denial of JMOL is reviewed under the law of the regional circuit in which an appeal from the district court would normally lie. Union Carbide Chems. & Plastics Tech. Corp v. Shell Oil Co., 425 F.3d 1366, 1372 (Fed. Cir.2005). The regional circuit in this case is the Ninth Circuit, which reviews de novo an order granting or denying JMOL. See Acosta v. City & County of S.F., 83 F.3d 1143, 1145 (9th Cir.1996) (grant); Rivero v. City & County of S.F., 316 F.3d 857, 863 (9th Cir.2002) (denial). Under Ninth Circuit law, JMOL requires that "the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to the jury's verdict." Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002).

With regard to allegedly inconsistent jury verdicts, we also apply regional circuit law. EMI Group N. Am., Inc. v. Cypress Semiconductor Corp., 268 F.3d 1342, 1348 (Fed.Cir.2001). The Ninth Circuit "review[s] de novo a claim that the jury's verdict is inconsistent and decide[s] whether its responses can be harmonized." Affordable Hous. Dev. Corp. v. City of Fresno, 433 F.3d 1182, 1193 (9th Cir.2006). "A trial court is rarely entitled to disregard jury verdicts that are supported by substantial evidence," Duk v. MGM Grand Hotel, Inc., 320 F.3d 1052, 1058 (9th Cir. 2003), and "cannot choose to ignore a legitimate finding that is part of the special verdict." Floyd v. Laws, 929 F.2d 1390, 1397 (9th Cir.1991).

Here, the district court did not hold that Special Verdict No. 1 was not supported by substantial evidence. Instead, the district court held that two special verdicts returned by the jury were inconsistent. After the being instructed that "[t]he defendants are Macke International Trade, Inc. [a]nd Anthony O'Rourke, referred to respectively as `Macke' and `O'Rourke,'" the jury was asked:

1. Do you find that Mr. Wechsler has shown by a preponderance of the evidence that Mr. O'Rourke is personally liable for infringement of the ['592] patent?

"YES" is a finding for Mr. Wechsler. "NO" is a finding for Mr. O'Rourke.

* * *

3. Do you find by clear and convincing evidence that Defendants have willfully infringed based upon Defendants becoming aware of the content of the ['592] patent in April 1999 and then continuing to sell the original Handi-Drink?

"YES" is a finding for Mr. Wechsler. "NO" is a finding for Mr. O'Rourke.

(emphases added). The jury answered "NO" to the former question and "YES" to the latter. In light of these responses, the district court "recognize[d] that an inconsistency may arguably exist in the special verdicts returned by the jury, and that the Court `has a duty to reconcile the jury's special verdict responses on any reasonable theory consistent with the evidence.'" Wechsler II, 232 F.R.D. at 359 (quoting Pierce v. S. Pac. Transp. Co., 823 F.2d 1366, 1370 (9th Cir.1987)).

In attempting to reconcile the verdicts, the district court essentially reversed the jury's finding on Special Verdict No. 1. However, the district court did not find that the verdict was not supported by substantial evidence. Instead, the district court stated that "the record fully supports and makes reasonable the conclusion that the jury intended to find O'Rourke personally liable for infringing the '592 patent . . . ." Wechsler II, 232 F.R.D. at 360. Were it to find Macke liable for willful infringement yet exonerate O'Rourke, the only person through whom Macke acted, the district court felt such a result "would be inconsistent and unreasonable because the record does not support any finding that Macke acted independently of O'Rourke." Id.

However, the district court's conclusion that the "record fully supports . . . that the jury intended to find O'Rourke personally liable" is in direct conflict with the jury's special verdict that Wechsler had not shown by a preponderance of the evidence that...