CREATIVE INTERNET ADVERTISING v. YAHOO! INC.
| Decision Date | 01 February 2010 |
| Docket Number | Civil Action No. 6:07cv354-JDL. |
| Citation | 689 F. Supp.2d 858 |
| Parties | CREATIVE INTERNET ADVERTISING CORPORATION, Plaintiff, v. YAHOO! INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
Anthony G. Simon, Timothy E. Grochocinski, The Simon Law Firm PC, St. Louis, MO, Adam A. Biggs, Eric M. Albritton, Albritton Law Firm, Longview, TX, Charles Craig Tadlock, Tadlock Law Firm, Irving, TX, for Plaintiff.
Brian A.E. Smith, Henry Charles Bunsow, Howrey Simon Arnold & White, San Francisco, CA, Deborah J. Race, Otis W. Carroll, Jr., Ireland Carroll & Kelley, Tyler, TX, Jason C. White, Howrey LLP, Chicago, IL, for Defendants.
Before the Court is Plaintiff Creative Internet Advertising Corporation's ("CIAC") Motion for Entry of Judgment on the Verdict and Request for Enhanced Damages, a Finding That the Case is Exceptional, Attorney's Fees, Prejudgment Interest, Post-Judgment Interest, Supplemental Damages and Post-Verdict Royalty (Doc. No. 286) ("Motion"). Defendant Yahoo! Inc. ("Yahoo") has filed a Response in Opposition (Doc. No. 292) ("Response"). CIAC also submitted a Reply in support of its Motion (Doc. No. 285). For the following reasons, Plaintiff's Motion is GRANTED in large part and DENIED in part.
On July 26, 2007, CIAC filed the instant action against Yahoo alleging infringement of U.S. Patent No. 6,205,432 ("the '432 patent"). On May 15, 2009, a jury found that claim 45 of the '432 patent was not invalid and willfully infringed by Defendant Yahoo, both literally and under the doctrine of equivalents. After the jury returned the verdict, Plaintiff filed the instant Motion requesting that the Court enter judgment against Yahoo in accordance with the verdict. MOTION at 1. CIAC further argues that it is entitled to supplemental damages1 based on revenues earned by Yahoo from IMVironments from December 1, 2008 through entry of judgment in this case. CIAC asks that all damages are enhanced by two-thirds, and that it is also awarded prejudgment interest, post-judgment interest, and an award of attorney's fees for a finding that this is an exceptional case. Id.
A court may, in its discretion, enhance damages up to three times when there is a finding of willful infringement on the part of an infringing party. 35 U.S.C. § 284; see SRI Int'l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1468-69 (Fed.Cir.1997). Enhanced damages are a punitive measure taken by the Court to penalize a willful infringer for his or her increased culpability. Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 (Fed.Cir.1996). However, a court may refrain from awarding enhanced damages in light of a finding of willfulness based on the weight of the evidence supporting willfulness and the closeness of the issues at trial. See Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1581-82 (Fed.Cir. 1992); Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed.Cir.1997).
The principles guiding a willfulness inquiry emphasize that "The paramount determination in deciding enhancement and the amount thereof is the egregiousness of the defendant's conduct based on all the facts and circumstances." Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed.Cir.1992). Factors courts consider in deciding whether to enhance damages and the amount of enhancement include: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer's behavior as a party to the litigation; (4) defendant's size and financial condition; (5) closeness of the case; (6) duration of defendant's misconduct; (7) remedial action by the defendant; (8) defendant's motivation for harm; (9) whether defendant attempted to conceal its misconduct. Id. at 827. Upon a finding of willful infringement, a trial court should provide reasons for not increasing a damages award. Jurgens, 80 F.3d at 1572.
Where willful infringement is proven, a case may, or may not, be deemed "exceptional" under § 285. Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1340 (Fed.Cir.2004); z4 Tech., Inc. v. Microsoft Corp., 2006 WL 2401099, at *22 (E.D.Tex. Aug. 18, 2006) (). In determining whether a case is "exceptional," the court may consider a number of factors, including, for example, whether the infringer engaged in litigation misconduct, advanced frivolous arguments, or willfully infringed the patent. Epcon Gas Systems, Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed.Cir.2002). A case may be exceptional based solely on litigation misconduct and unprofessional behavior. Rambus, Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1106 (Fed.Cir.2003); Epcon, 279 F.3d at 1034. A case may be deemed exceptional on a party's or its counsel's display of bad-faith during either the pre-trial or trial stages. Kloster Speedsteel AB v. Crucible, Inc., 793 F.2d 1565, 1580 (Fed.Cir.1986) (). The patentee bears the burden of establishing the exceptional nature of the case by clear and convincing evidence. Ruiz v. A.B. Chance Co., 234 F.3d 654, 669 (Fed.Cir.2000).
Whether a prevailing party is entitled to attorney's fees is a two-step inquiry. Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448, 1460 (Fed.Cir.1998) (en banc). First, the district court must make factual findings as to whether the case is "exceptional." Id. Second the Court must exercise its discretion as to whether or not attorney's fees are appropriate. Id. In cases where there has been an express finding of willfulness, the trial court must, in denying attorney's fees, "explain why the case is not "exceptional" within the meaning of 35 U.S.C. § 285." Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed.Cir. 1990).
Section 284 of the Patent Act indicates that a court should award interest in patent cases after a finding of infringement. 35 U.S.C. § 284. The Supreme Court has held that under this statute, "prejudgment interest should be ordinarily awarded" when a plaintiff in a patent infringement suit prevails on his claim. See Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983) ().
The purpose of prejudgment interest is to place the patentee in as good a position as he would have been had the infringer paid a reasonable royalty instead of infringing. z4 Tech., 2006 WL 2401099, at *26 (quoting Beatrice Foods v. New England Printing, 923 F.2d 1576, 1580 (Fed.Cir.1991)). The interest rate used to calculate prejudgment interest and the method and frequency of compounding is left to the discretion of the district court. Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed.Cir.1991); z4 Tech., 2006 WL 2401099, at *26. However, "it has been recognized than an award of compound rather than simple interest assures that the patent owner is fully compensated." Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1555 (Fed.Cir.1995). Prejudgment interest can only be applied to actual damages and not punitive or enhanced damages. z4 Tech., 2006 WL 2401099, at *26 (citing Beatrice Foods, 923 F.2d at 1580). Interest should be awarded from the date of infringement to the date of final judgment. Bio-Rod Labs. v. Nicolet Instrument Corp., 807 F.2d 964, 967 (Fed.Cir.1986); z4 Tech., 2006 WL 2401099, at *26.
A finding of willful infringement is a prerequisite to an award of enhanced damages. In re Seagate Technology, LLC., 497 F.3d 1360, 1368 (Fed.Cir.2007) (en banc). In this case, the question of whether Yahoo willfully infringed the '432 patent was submitted to the jury, which was instructed that CIAC had to prove by clear and convincing evidence that (1) Yahoo was aware of the issued '432 patent; (2) Yahoo acted despite an objectively high likelihood objectively high likelihood that its Yahoo Messenger with IMVironments was infringing a valid patent; and (3) this objectively defined risk that Yahoo's Messenger program with IMVironments infringed was either known or so obvious it should have been known to Yahoo. (Doc. No. 224) ("Jury Instructions"). The verdict form instructed the jury to answer "yes" or "no" to "Did Creative prove by clear and convincing evidence that Yahoo's infringement was willful?" The jury answered "yes." (Doc. No. 227) ("Jury Verdict").
The standard for deciding whether—and by how much—to enhance damages is set forth in Read Corp. v. Portec Inc. 970 F.2d 816, 826-27 (Fed.Cir.1992), abrogated in part on other grounds by Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed.Cir.1995) (en banc). The Federal Circuit set forth the factors for consideration in determining whether a plaintiff should be awarded enhanced damages for a defendant's willful infringement. Each factor will be discussed in turn.
CIAC argues that it has presented evidence of deliberate copying, and therefore, this factor weighs in favor of enhanced damages. CIAC relies on a March 17, 2000 meeting between Mr. Chuck Gabbard and Mr. Mike Gragg, representatives from Creative Internet Concepts—the owner of the '432 patent—and Mr. Sharat Israni, an employee from Yahoo. See MOTION at 5-6; CIAC EXHIBIT 1,2 TRANSCRIPT, MIKE GRAGG at 155:21-159:4 (May 11, 2009) ("Gragg Trial Testimony"); CIAC EXHIBIT 2, TRANSCRIPT, CHUCK GABBARD at 106:2-6, 107:7-108:14 (May 12, 2009) ...
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