Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp.

• Decision Date: 16 December 1986
• Docket Number: BIO-RAD,No. 86-840,86-840
• Citation: 1 USPQ2d 1191,807 F.2d 964
• Parties: , 1 U.S.P.Q.2d 1191 LABORATORIES, INC., etc., Appellant, v. NICOLET INSTRUMENT CORPORATION, etc., Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 964

807 F.2d 964

55 USLW 2372, 1 U.S.P.Q.2d 1191

BIO-RAD LABORATORIES, INC., etc., Appellant, v. NICOLET INSTRUMENT CORPORATION, etc., Appellee.

Appeal No. 86-840.

United States Court of Appeals, Federal Circuit.

Dec. 16, 1986.

Roger L. Cook, Townsend & Townsend, San Francisco, Cal., argued, for appellant. With him on brief, were J. Georg Seka, David N. Slone and Robert Barr.

Robert J. Sheran, Lindquist & Vennum, Minneapolis, Minn., argued, for appellee. With him on brief, was Robert J. Sheran.

Before FRIEDMAN, Circuit Judge, and NICHOLS and BALDWIN, Senior Circuit Judges. ^*

FRIEDMAN, Circuit Judge.

The sole issue in this case, here on appeal from an order of the United States District Court for the Northern District of California, is whether the court improperly limited the amount of prejudgment interest awarded to the prevailing plaintiff in a patent suit. The award of prejudgment interest was made pursuant to our remand in the earlier appeal in this case. Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 222 USPQ 654 (Fed.Cir.), cert. denied, 469 U.S. 1038, 105 S.Ct. 516, 83 L.Ed.2d 405 (1984). We vacate the district court's award of prejudgment interest and remand for further proceedings in accordance with this opinion.

I

A. In June 1980, appellant Bio-Rad Laboratories, Inc. (Bio-Rad) informed appellee Nicolet Instrument Corporation (Nicolet) that Nicolet's "MX-ECO" epitaxial thickness gauge, an electronic device that rapidly measures the crystalline surface layer on semi-conductors, which Nicolet had begun selling in 1980, appeared to infringe U.S. Patent No. 3,319,515, of which Bio-Rad was the exclusive licensee. Bio-Rad demanded that Nicolet cease all infringing activities.

Nicolet denied infringement, disputed the validity of the patent, and continued its activities. The parties exchanged contentions through letters dated August 4, 1980, September 9, 1980, and October 30, 1980, but were unable to resolve the dispute.

Bio-Rad filed suit on June 22, 1981. At the first status conference, held in November 1981, a discovery schedule was established and trial was scheduled for October 4, 1982. During discovery, Bio-Rad resisted After a 44-day jury trial before Judge Burke, to whom the case was assigned four days before the trial began on October 5, 1982, the jury found all claims of the patent valid and infringed, and awarded Bio-Rad $3,078,000 in compensatory damages. Nicolet moved for judgment notwithstanding the verdict, alternatively for a new trial, and to deny enforcement of the patent for misuse. The trial court denied all three motions, and entered judgment on the verdict effective January 7, 1983. The court granted postjudgment but denied prejudgment interest.

producing a number of documents--the record is ambiguous regarding the sequence of actions by counsel for the parties, the district judge, and the magistrate in charge of discovery. Although Nicolet alleges that Bio-Rad wrongfully withheld documents that were ordered produced, Nicolet did not seek and the court did not impose sanctions for Bio-Rad's conduct.

In the prior appeal, we affirmed the district court's judgment in all respects other than the denial of prejudgment interest. We vacated that denial and remanded to the district court "for an award of prejudgment interest or a determination that some specific justification exists for denying prejudgment interest." 739 F.2d at 618, 222 USPQ at 665.

B. On remand to the district court, Bio-Rad sought prejudgment interest at the rate of 15 percent, based on the average rate it paid on its corporate borrowings from early 1980 through the end of the trial in December 1982. At a hearing, the district court requested that Bio-Rad submit a modified calculation, using the rate that a "reasonably sound corporate borrower" would have paid during the period in question, and calculated from the date of each infringement, adjusted for the normal time lag between delivery and payment. Bio-Rad submitted the requested calculation, using the average annual prime rate, compounded annually. Bio-Rad also submitted Federal Reserve statistics and an affidavit of an expert supporting its new calculations. The revised calculation resulted in $737,074 prejudgment interest through June 28, 1985.

Nicolet apparently presented no evidence or argument regarding appropriate prejudgment interest, but instead urged the trial court to deny or reduce Bio-Rad's prejudgment interest because of Bio-Rad's recalcitrance in producing documents before and during the trial.

In a brief order, the district court awarded Bio-Rad prejudgment interest for a nine-month period, based upon "the California state rate of prejudgment interest, 7%, uncompounded," of $161,595. The court made the following findings explaining the basis for that award:

(1) Bio-Rad's conduct during discovery led to unreasonable delays in bringing the case to trial and in entry of judgment; (2) but for those delays, trial of the case could have commenced in nine months, rather than in the approximately 15 month period actually consumed from filing of the Complaint on June 22, 1981 until commencement of trial on October 4 [sic: 5], 1982 and judgment could therefore have been entered earlier; (3) all but 9 months of the time spent by Bio-Rad in prosecuting the case prior to commencement of trial represents a period of undue delay and Bio-Rad should not be awarded prejudgment interest for that period of delay; (4) Bio-Rad's counsel engaged in dilatory action during the discovery process, which should be taken into account when determining Bio-Rad's entitlement to prejudgment interest; and (5) based on the findings (1), (2), (3) and (4) above, the appropriate term over which prejudgment interest shall be calculated is nine months and an appropriate rate of interest in this case is the California state rate of prejudgment interest, 7%, uncompounded.

The Court recognizes the necessarily inexact nature of its finding that the case could have been brought to trial within nine months; however, this is based upon the Court's estimate that such is the speed with which such a case could have been brought to trial if prosecuted with

reasonable diligence and without Bio-Rad's unreasonable delay in producing documents. The Court adopts in principle the arguments presented by Nicolet to that effect.

II

In General Motors Corp. v. Devex Corp., 461 U.S. 648, 103 S.Ct. 2058, 76 L.Ed.2d 211, 217 USPQ 1185 (1983), the Supreme Court held that in view of the requirement in 35 U.S.C. Sec. 284 (1982) that the court "shall award" the successful plaintiff in a patent infringement suit "damages adequate to compensate for the infringement,"

prejudgment interest should ordinarily be awarded. In the typical case an award of prejudgment interest is necessary to ensure that the patent owner is placed in as good a position as he would have been had the infringer entered into a reasonable royalty agreement. An award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the foregone use of the money between the time of the infringement and the date of the judgment.

Id., 461 U.S. at 655-56, 103 S.Ct. at 2062, 217 USPQ at 1188.

The Court did not, however,

construe Sec. 284 as requiring the award of prejudgment interest whenever infringement is found. That provision states that interest shall be "fixed by the court," and in our view it leaves the court some discretion in awarding prejudgment interest. For example, it may be appropriate to limit prejudgment interest, or perhaps even deny it altogether, where the patent owner has been responsible for undue delay in prosecuting the lawsuit. There may be other circumstances in which it may be appropriate not to award prejudgment interest. We need not delineate those circumstances in this case.

Id., 461 U.S. at 656-57, 103 S.Ct. at 2062-63, 217 USPQ at 1189.

Justice Stevens wrote a brief concurring opinion, in which no other member of the Court joined, stating that "[i]n exercising its discretion to deny [prejudgment] interest in appropriate cases, the trial court may properly take into account the nature of the patent and the strength of the defendant's challenge." Id., 461 U.S. at 658, 103 S.Ct. at 2063, 217 USPQ at 1189.

This court, however, recently held that a district court's justification for limiting prejudgment interest "must have some relationship to the award of prejudgment interest." Radio Steel & Mfg. Co. v. MTD Products, 788 F.2d 1554, 1557-58, 229 USPQ 431, 434 (Fed.Cir.1986).

A. The normal procedure under Devex is to award prejudgment interest from the date of infringement to the date of payment, since only such award will satisfy "Congress' overriding purpose [in section 284] of affording patent owners complete compensation." Devex, 461 U.S. at 655, 103 S.Ct. at 2062; see, e.g., Smith Int'l, Inc. v. Hughes Tool Co., 229 USPQ 81, 102-03 (C.D.Cal.1986); Shiley, Inc. v. Bentley Laboratories, Inc., 601 F.Supp. 964, 225 USPQ 1013, 1020 (C.D.Cal.1985) (supplemental memorandum), aff'd, 794 F.2d 1561, 1571, 230 USPQ 112, 117 (Fed.Cir.1986).

Nicolet apparently began selling its infringing device in 1980, and the final judgment was entered in January 1983. Prejudgment interest thus ordinarily would have been awarded for at least 30 months. The district court, however, awarded such interest for only nine months, apparently on the theory that had it not been for Bio-Rad's undue delay and dilatory tactics during discovery, the case could have been brought to trial within nine months after filing.

The question is whether the grounds upon which the district court determined to award prejudgment interest only for nine months, as set forth in its findings, justified the district court's action. We conclude The district court gave two grounds for...