Ball Aerosol and Specialty v. Limited Brands

• Decision Date: 04 September 2007
• Docket Number: No. 05 C 3684.,05 C 3684.
• Citation: 514 F.Supp.2d 1051
• Parties: BALL AEROSOL AND SPECIALTY CONTAINER, INC., Plaintiff, v. LIMITED BRANDS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

514 F.Supp.2d 1051

BALL AEROSOL AND SPECIALTY CONTAINER, INC., Plaintiff, v. LIMITED BRANDS, INC., et al., Defendants.

No. 05 C 3684.

United States District Court, N.D. Illinois, Eastern Division.

September 4, 2007.

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Edward John Manzke, Robert L. Dawidiuk, The Collins Law Firm, David J. Fish, The Fish Law Firm, Naperville, IL, Douglas D. Churovich, McPherson D. Moore, Ned W. Randle, Scott A. Smith, William B Cunningham, Jr., Polster, Lieder, Woodruff & Lucchesi, L.C., St. Louis, MO, for Plaintiff.

Marc Scott Blackman, Jones Day, Chicago, IL, David M. Hill, John F. Ward, Michael J. Zinna, Ward & Olivo, New York, NY, for Defendants.

MEMORANDUM OPINION

SAMUEL DER-YEGHIAYAN, District Judge.

This matter is before the court on Plaintiff Ball Aerosol and Specialty Container, Inc.'s ("BASC") motion for summary judgment on the issue of patent damages. This matter is also before the court on Defendant Limited Brands, Inc.'s ("Limited"), Defendant Bath & Body Works, Inc.'s ("BBW"), Defendant Henri Bendel, Inc.'s ("Bendel"), and Defendant Bath & Body Works, Inc. D/B/A/ The White Barn Candle Co.'s (collectively referred to as "Limited Defendants") motion for summary judgment on the issue of patent damages. For the reasons stated below, we grant BASC's motion for summary judgment and deny Limited Defendants' motion for summary judgment.

BACKGROUND

BASC alleges that U.S. Can Company, Inc., BASC's predecessor, is the assignee of U.S. Patent No. 6,457,969 ("'969 Patent"). Claims 1 and 5 of the '969 Patent generally cover a candle tin comprised of a hollow candle holder in which a candle is placed and a cover that, when the candle is lit, is to be used as a base upon which to place the candle so that heat transferred through the bottom of the candle tin does not scorch the surface that the candle tin would otherwise be placed upon. BBW and Bendel began selling the Henri Bendel Home Scented Travel Candle ("Accused Candle Tin") in March and April of 2004, respectively. Bendel purchased the Accused Candle Tin from BBW up to the Fall of 2005, and BBW has stopped manufacturing the Accused Candle Tin.

BASC brought the instant patent infringement action against Limited Defendants, alleging that the Accused Candle Tin infringes claims 1 and 5 of the '969 Patent. On April 19, 2006, we construed the terms "Protrusions Formed," "Seat," and "Cup Shaped." On June 28, 2006, this court granted summary judgment to BASC, finding the '969 Patent valid and Limited Defendants to be infringing the '969 Patent. BASC and Limited Defendants move for summary judgment on the issue of patent damages.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). In seeking a grant of summary judgment the moving party must identify "those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. 2548. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must consider the record as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

DISCUSSION

BASC argues that it is entitled to $1,425,523 in lost royalties trebled to $4,276,569 from BBW for sales on the Accused Candle Tin from March 2004 through June 24, 2007. BASC also contends that it is entitled to $49,697 in lost royalties from Bendel, which should be trebled to $149,091. BASC also claims that it is entitled to prejudgment interest. Limited Defendants argue that an award of damages is inappropriate. Limited Defendants also argue alternatively that, if the court awards damages to BASC, damages should be measured by BASC's lost profits on the tin component and subsequently limited to one-seventh of the total, which equals an approximate royalty rate of 1%.

Damages for patent infringement are governed by Title 35, United States Code, Section 284 ("Section 284"), which is intended to "ensure that the patent owner would in fact receive full compensation for `any damages' he suffered as a result of the infringement." SmithKline Diagnostics, Inc. v. Helena. Laboratories Corp., 926 F.2d 1161, 1164 (Fed.Cir.1991) (quoting General Motors Corp. v. Devex Corp., 461 U.S. 648, 654-55, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983)). The appropriate amount of damages is a factual determination for which "the plaintiff bears the burden of proof by a preponderance of the evidence." SmithKline Diagnostics, Inc., 926 F.2d at 1164; Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364, 1370 (Fed.Cir.2002).

A court may divide damages between lost profits "to the extent they are proven" by the plaintiff, "and a reasonable royalty for the remainder." State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577 (Fed.Cir.1989). Lost profits are the profits that a patentee would have enjoyed "but for" the infringement by the defendant. Micro Chemical, Inc. v. Lextron, Inc., 318 F.3d 1119, 1122 (Fed.Cir. 2003). Once the patentee has shown that an inference of "but for" causation is reasonable, "the burden shifts to the infringer to show that the inference is unreasonable for some or all of the lost profits." Id. While there are multiple ways to satisfy this "but-for" test for causation, the most common method is to prove the four factors provided in Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir.1978) ("Panduit Test"). See Micro Chemical, Inc. v. Lextron, Inc., 318 F.3d 1119, 1122 (Fed.Cir.2003) (stating that "the Panduit [Test is a] recognized method[] of showing `but for' causation" in regard to damages).

If lost profits cannot be proved to a reasonable probability, the patentee may instead pursue reasonable royalties. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1554 (Fed.Cir.1995) (citing Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed.Cir.1983)). Reasonable royalties provide the minimum guaranteed damages a patentee may be awarded for infringement. 35 U.S.C. § 284. A reasonable royalty is commonly defined as the amount that would have been agreed upon had there been a hypothetical negotiation often called a " licensor/willing licensee' negotiation," between a willing patentee and a willing potential user "at the time the infringement began." Rite-Hite Corp., 56 F.3d at 1554; Minco, Inc. v. Combustion Engineering, Inc., 95 F.3d 1109, 1119 (Fed.Cir.1996) (stating that "this hypothetical construct seeks the percentage of sales or profit likely to have induced the hypothetical negotiators to license use of the invention"). Such a determination should not be made in hindsight, but rather courts should only look at what the parties would have considered at the time of the hypothetical negotiation. Hanson, 718 F.2d at 1081. To determine the amount of royalties that would have induced the parties to buy or sell a license at the time the infringement began, the Federal Circuit endorses, among other methods, the fifteen factor-approach first set out in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116 (S.D.N.Y.1970) ("Georgia-Pacific Factors"), which is discussed below. See Micro Chemical, Inc. v. Lextron, Inc., 317 F.3d 1387, 1393 (Fed.Cir.2003) (stating that "factors relevant in a reasonable royalty determination using [the hypothetical negotiation] method include those set out in Georgia-Pacific").

I. Measure of Damages

Limited Defendants argue that the calculation of BASC's lost profits on sales of the tin component of the Accused Candle Tin is the most accurate method of determining damages to compensate BASC for Limited Defendants' infringement of the '969 Patent. BASC contends that the best calculation of damages should be determined based on a reasonable royalty rate. Section 284 states, in part:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

35 U.S.C. § 284. A district court has discretion "both in selecting the methodology for and in calculating a damage award." Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1579 (Fed.Cir.1996); see also Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1576 (Fed.Cir.1988) (overruled on other grounds) (noting that "[a]ssessing and computing damages under 35 U.S.C. § 284 is a matter within the sound discretion of the district court"). As noted above, the two typical measures of monetary damages in patent cases are lost...