Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.

• Decision Date: 01 June 2009
• Docket Number: No. 2008-1240.,No. 2008-1401.,No. 2008-1253.,2008-1240.,2008-1253.,2008-1401.
• Citation: 567 F.3d 1314
• Parties: DEPUY SPINE, INC. (formerly known as Depuy Acromed, Inc.), Plaintiff-Cross Appellant, and Biedermann Motech GmbH, Plaintiff-Cross Appellant, v. MEDTRONIC SOFAMOR DANEK, INC. (formerly known as Sofamor Danek Group, Inc.) and Medtronic Sofamor Danek USA, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

567 F.3d 1314

DEPUY SPINE, INC. (formerly known as Depuy Acromed, Inc.), Plaintiff-Cross Appellant, and Biedermann Motech GmbH, Plaintiff-Cross Appellant, v. MEDTRONIC SOFAMOR DANEK, INC. (formerly known as Sofamor Danek Group, Inc.) and Medtronic Sofamor Danek USA, Inc., Defendants-Appellants.

No. 2008-1240.

No. 2008-1253.

No. 2008-1401.

United States Court of Appeals, Federal Circuit.

Decided June 1, 2009.

Calvin P. Griffith, Jones Day, of Cleveland, OH, argued for all plaintiffs-cross appellants. With him on the brief for Depuy Spine, Inc. (formerly know as Depuy Acromed, Inc.), were Patrick J. Norton; and Gregory A. Castanias, of Washington, DC. On the brief for Biedermann Motech GmbH were Luke L. Dauchot and Greer N. Shaw, Kirkland & Ellis LLP, of Los Angeles, CA.

Seth P. Waxman, Wilmer Cutler Pickering Hale and Dorr LLP, of Washington, DC, argued for defendants-appellants. With him on the brief were William G. McElwain; and Mark C. Fleming, Richard W. O'Neill, Timothy R. Shannon, Lauren B. Fletcher, and Sydenham B. Alexander, III, of Boston, MA. Of counsel on the brief were Dirk D. Thomas, André J. Bahou, and John K. Warren, Dewey & LeBoeuf LLP, of Washington, DC.

Before NEWMAN, BRYSON, and LINN, Circuit Judges.

LINN, Circuit Judge.

Medtronic Sofamor Danek, Inc. and Medtronic Sofamor Danek USA, Inc. (collectively "Medtronic") appeal from a final judgment of the United States District Court for the District of Massachusetts. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-CV-10165 (D.Mass. Dec.11, 2007). The district court denied Medtronic's ensnarement defense after a jury found that Medtronic had infringed U.S. Patent No. 5,207,678 ("the '678 patent") under the doctrine of equivalents and awarded $226.3 million in lost-profit damages to DePuy Spine, Inc. and Biedermann Motech GmbH (collectively "DePuy"). DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 526 F.Supp.2d 162 (D.Mass.2007) ("Ensnarement Order"). The district court also found that Medtronic had engaged in litigation misconduct, for which the court awarded DePuy $425,375 in attorney fees under 35 U.S.C. § 285 and imposed a further $10 million sanction against Medtronic under the court's inherent authority. Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 534 F.Supp.2d 224 (D.Mass.2008) ("Sanctions Order"). DePuy cross-appeals from the grant of Medtronic's motion for judgment as a matter of law ("JMOL") of no willful infringement and from the denial of DePuy's motion for new trial on reasonable royalty damages.

Because the district court correctly denied Medtronic's ensnarement defense and correctly denied Medtronic's motion for JMOL on lost profits of patented pedicle screws, we affirm the damages award as to those products. However, we reduce the damages award insofar as the lost profits were based partly on lost sales of unpatented "pull-through" products, which neither compete nor function with the patented invention. We also reverse the award of attorney fees and the imposition of sanctions, which were predicated on a legal error involving the application of the reverse doctrine of equivalents. Finally, we conclude that the district court correctly determined that Medtronic was entitled to JMOL of no willfulness, and that it did not abuse its discretion in denying DePuy's motion for new trial on royalty damages. Thus, we affirm-in-part, reverse-in-part, and remand for calculation of post-judgment interest.

BACKGROUND

This appeal involves Medtronic's Vertex® model of polyaxial pedicle screws used in spinal surgeries. In a prior appeal, we affirmed the district court's grant of summary judgment of no literal infringement of the '678 patent by the Vertex® model, but reversed the grant of summary judgment of noninfringement under the doctrine of equivalents. DePuy Acromed, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-CV-10165 (D.Mass. Feb.24, 2004), aff'd in part, rev'd in part sub nom. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005, 1026 (Fed.Cir.2006) ("DePuy Spine I"). We held that the Vertex® model, which contains a receiver member having an inner hollow space that is conical in shape, does not literally infringe because it does not meet the "spherically-shaped" limitation of claim 1. 469 F.3d at 1016. However, we concluded that a question of fact existed as to whether the Vertex® model's conical shape was insubstantially different from the claimed "spherically-shaped portion" under the doctrine of equivalents, and remanded for resolution of that issue. Id. at 1020. The patented device, as shown below in figures 1 through 3 of the '678 patent, includes a pedicle screw having a screw head that is surrounded by the spherically-shaped portion 9 of the receiver member 5:

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

On remand, Medtronic raised an "ensnarement" defense against the doctrine of equivalents, arguing that the asserted scope of equivalency would encompass, or "ensnare," the prior art. Specifically, Medtronic argued that the combination of U.S. Patent No. 5,474,555 ("Puno") and U.S. Patent No. 2,346,346 ("Anderson") would have rendered obvious a "hypothetical" version of claim 1 of the '678 patent, in which the phrase "conically-shaped" is substituted for the actual claim term "spherically-shaped." The district court took the question from the jury and held that ensnarement, like prosecution history estoppel, is a legal limitation on the doctrine of equivalents that would be decided by the court at the conclusion of the infringement proceeding. Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 515 F.Supp.2d 206 (D.Mass.2007).

A two-week jury trial was held on the issues of infringement, willfulness, and damages. At the close of evidence, the district court granted Medtronic's motion for JMOL of no willfulness. The case then went to the jury on infringement and damages. The jury, using a special verdict form, found that the Vertex® model infringed independent claim 1 and dependent claims 3, 5, and 6 of the '678 patent under the doctrine of equivalents, and awarded DePuy a total of $226.3 million in damages consisting of $149.1 million in lost profits on pedicle screws and $77.2 million in lost profits on "pull-through" products. But the jury awarded DePuy a 0% royalty rate on $237.2 million worth of infringing sales that were not subject to DePuy's claim for lost profits, even though Medtronic itself had argued for no less than a 6% royalty rate if its products were found to infringe. After the jury was dismissed, the district court denied Medtronic's post-trial motions for a new trial on infringement and for JMOL on lost profits. Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 533 F.Supp.2d 243 (D.Mass.2008) ("Feb. 6 Order"). DePuy also filed a post-trial motion seeking a new trial on royalty damages. The district court denied that motion, noting that DePuy had failed to timely object to the inconsistency in the verdict before the jury was discharged. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-CV-10165 (D.Mass. Feb.14, 2007) ("Feb. 14 Order").

After the jury trial, the district court conducted a separate bench trial on Medtronic's ensnarement defense. In a memorandum and order dated December 11, 2007, the district court held that the combination of Puno and Anderson did not render the hypothetical claim obvious. Ensnarement Order, 526 F.Supp.2d at 176. As part of that order, the district court directed entry of judgment on the jury verdict, including the jury determination of $226.3 million in damages. Id. at 177. Several months later, in a concurrent reexamination of the '678 patent requested by Medtronic (Control No. 90/008,589), the U.S. Patent & Trademark Office issued a Notice of Intent to Issue an Ex Parte Reexamination Certificate, indicating that all (actual) claims under reexamination were being confirmed over Puno and Anderson without change. A reexamination certificate issued on June 24, 2008.

DePuy next moved for enhanced damages under 35 U.S.C. § 284 and attorney fees under § 285, alleging a "litany" of litigation misconduct on the part of Medtronic. Sanctions Order, 534 F.Supp.2d at 225. The district court denied enhanced damages because willful infringement had not been shown. But, because the court perceived Medtronic to have attempted to relitigate at trial its argument from the first appeal regarding the construction of the "pressed against" limitation, in the guise of a reverse doctrine of equivalents defense, the court awarded DePuy 15% of its attorney fees, totaling $425,375. The court stated that Medtronic's reverse doctrine of equivalents defense "threatened to mislead and confuse the jury" and "flouted the governing claim construction as set forth by the Federal Circuit." Id. at 226-27. Based on this misconduct, the district court sua sponte imposed a further $10 million sanction under the court's inherent authority, remarking in a footnote that "[w]here the amount in controversy in a case is large (as was the case here), the prospective penalty for litigation misconduct, if it is to serve the purpose of deterring that conduct, should also be large." Id. at 227 n. 3.

Both parties appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

I. Ensnarement

Ensnarement bars a patentee from asserting a scope of equivalency that would encompass, or "ensnare," the prior art. See Wilson Sporting Goods Co. v. David Geoffrey & Assoc., 904 F.2d 677, 683 (Fed.Cir.1990), overruled in part on other grounds, Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 92 n. 12, 113 S.Ct. 1967, 124 L.Ed.2d 1 (1993). On appeal, Medtronic challenges the district court's denial of its ensnarement defense on the merits. Alternatively, Medtronic argues that it was entitled to present its defense to a jury rather than to the district court. We first address the jury issue and hold that ensnarement, like prosecution...