Datascope Corp. v. SMEC, Inc.
| Decision Date | 06 July 1989 |
| Docket Number | Nos. 88-1266,89-1104 and 89-1154,88-1279,s. 88-1266 |
| Citation | 11 USPQ2d 1321,879 F.2d 820 |
| Parties | DATASCOPE CORP., Plaintiff-Appellant, v. SMEC, INC., Defendant/Cross-Appellant. |
| Court | U.S. Court of Appeals — Federal Circuit |
Stevan J. Bosses, of Fitzpatrick, Cella, Harper & Scinto, New York City, argued for plaintiff-appellant. Of counsel were Nina Shreve and Errol B. Taylor, of Fitzpatrick, Cella, Harper & Scinto, New York City.
Charles A. Reid, III, of Shanley & Fisher, Morristown, N.J., argued for defendant/cross-appellant. With him on the brief were Arthur R. Schmauder and Renate A. Coombs of counsel, of Shanley & Fisher, Morristown, N.J.
Before MARKEY, Chief Judge, FRIEDMAN and ARCHER, Circuit Judges.
Datascope Corp. (Datascope) appeals from a judgment of the United States District Court for the District of New Jersey, 678 F.Supp. 457, 5 USPQ2d 1963 (D.N.J.1988), requiring SMEC, Inc. (SMEC) to pay reasonable royalty damages of $113,442.05 and finding SMEC's infringement not willful, and from orders for annually compounded prejudgment interest and post-judgment interest at the Treasury bill rate. We affirm-in-part, reverse-in-part, and remand-in-part the court's damage award; reverse the finding of nonwillful infringement; remand for determination of enhanced damages and attorney fees; and affirm the prejudgment and post-judgment interest awards. 1
Datascope owns United States Patent No. 4,261,339 ('339 patent) on a percutaneous intra-aortic balloon catheter (percutaneous IAB). After this court affirmed the district court's judgment that SMEC infringed the '339 patent under the doctrine of equivalents and had not shown the '339 patent to be invalid, 776 F.2d 320, 227 USPQ 838 (Fed.Cir.1985), the district court conducted a trial on damages. 2 On January 19, 1988, the court issued an order and final judgment that: (1) made the preliminary injunction permanent; (2) awarded $113,442.05 to Datascope, "representing a reasonable royalty, equivalent to 5% of the infringing sales"; and (3) directed SMEC to pay prejudgment interest and costs.
Two days later, the court filed its opinion. Noting 35 U.S.C. Sec. 284's requirement of "damages adequate to compensate" and this court's precedent that a successful claimant may recover its lost profits where it shows it would have made the sales "but for" the infringing activity, see, e.g., Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 616, 222 USPQ 654, 663 (Fed.Cir.1984), the court analyzed whether Datascope was "entitled" to its lost profits or whether it "is entitled only to a reasonable royalty." 678 F.Supp. at 458, 5 USPQ2d at 1964-65. Using the recognized four-prong test of Panduit Corp. v. Stahlin Bros. Fibreworks, 575 F.2d 1152, 1156, 197 USPQ 726, 729-30 (6th Cir.1978) The court based the former finding on subsidiary findings that Kontron, Inc.'s (Kontron) dual lumen IAB does not infringe the '339 patent and that it is an acceptable substitute. Id. at 460, 462, 5 USPQ2d at 1966-68. 3 It based the latter finding on other subsidiary findings that: (1) "in early 1981 and for a short time thereafter, the market demand for the product was significantly less than it would later become" (678 F.Supp. at 461, 5 USPQ2d at 1967); and (2) Datascope made no showing it could have "captured" SMEC's foreign sales (13% of SMEC's infringing sales), having no sales representatives assigned to foreign customers and never attempting to make inroads "in the area." Id. at 461-62, 5 USPQ2d at 1967.
the district court denied Datascope its lost profits because it had not "carried its burden of proof in establishing entitlement to lost profits." 678 F.2d at 461, 5 USPQ2d at 1967. The court specifically found that Datascope failed to prove elements two and three of the Panduit test--absence of acceptable noninfringing substitutes and manufacturing and marketing capability to exploit the demand
The court stated:
The evidence clearly shows that many of the sales made [in early 1981 and for a short time thereafter] by SMEC were made because of the doctors' confidence in [SMEC's President] Schiff. Further, the evidence showed that many of SMEC's customers would not have switched from using surgical balloons to percutaneous balloons but for that faith in Schiff.
The court then hypothesized a negotiation between willing licensee and licensor at the time infringement began. It rejected SMEC's suggested royalties of 1.75%, 2.5%, or in the range of 2%-4%, and awarded a 5% royalty because "circumstances as they existed would have compelled willing negotiators to go even beyond a 4% royalty." Id. 678 F.Supp. at 464, 5 USPQ2d at 1968-69.
The district court found SMEC's infringement nonwillful. It credited SMEC's obtaining of an opinion of counsel "concerning the validity and possible infringements" of Datascope patents "at a time when Schiff was still attempting to develop his noninfringing prewrapped prototype," id. at 464, 5 USPQ2d at 1970, and concluded that "an honest doubt existed as to the validity and infringement of Datascope's patents." Id. at 464-65, 5 USPQ2d at 1970. It particularly noted that a panel of this court, "in affirming the judgment of liability was not unanimous." Id. at 465, 5 USPQ2d at 1970. Based on its finding of nonwillfulness, the district court denied increased damages under 35 U.S.C. Sec. 284 and attorney fees under 35 U.S.C. Sec. 285.
In supplemental orders, the court awarded Datascope $57,354.18 in prejudgment interest, representing the prime rate compounded annually, and post-judgment interest at the Treasury bill rate. See 28 U.S.C. Sec. 1961.
I. Whether through clear errors of fact and law the district court abused its discretion in awarding damages.
II. Whether the court's finding of nonwillful infringement is clearly erroneous.
III. Whether the court abused its discretion in awarding prejudgment and postjudgment interest.
Datascope argues errors of fact and law in the district court's determination that it did not prove its "entitlement" to its lost profits as compensation for SMEC's infringement. We review asserted factual errors cognizant of the clearly erroneous standard of Fed.R.Civ.P. 52(a). See Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (citing United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-542, 92 L.Ed. 746 (1948)).
Datascope says the district court's finding that Kontron's dual lumen IAB was an acceptable noninfringing alternative is clearly erroneous. We agree. 4 Perhaps led astray by SMEC's cross-examination of Datascope witness Hanson, which focused only on comparison of the hollow support means of the Kontron IAB and the "rod" or "wire" (hence "solid") support means of embodiments disclosed in the '339 specification, the district court lost sight of this court's repeated caution that it is claims, not commercial embodiments, that are infringed. See, e.g., Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1545, 3 USPQ2d 1412, 1417 (Fed.Cir.1987). The claims of the '339 patent do not limit "support means" to solid objects and the specification states in several places that illustrations are provided for purposes of "example and not limitation." SMEC proffered no evidence suggesting the propriety of anything other than a plain and ordinary reading of the claims. Indeed, SMEC presented no testimony whatever, but relied entirely on its cross-examination of Hanson.
Also clearly erroneous is the district court's finding that the dual lumen IAB of Kontron could not infringe because the Datascope product if operated as a dual lumen device would cause blood and gas to mix (a "fact" supported in the appendix before this court only by an assertion of counsel). Again, it is the claims that control and the claims of the '339 patent do not limit Datascope to any particular configuration here relevant. Nor has SMEC offered any legal justification whatever for limiting the claims.
Contrary to SMEC's argument in its brief, the district court's finding cannot be supported by the ongoing litigation between Datascope and Kontron. That case has not yet resulted, and may never result, in a finding of noninfringement by Kontron's dual lumen IAB. Moreover, the district court there imposed a preliminary injunction based in part on Datascope's showing of likelihood of success on the merits, and this court affirmed. Nothing in the appeal from that injunction supports a finding here that Kontron's dual lumen IAB is a noninfringing substitute. We are confined here to the record in the case before us. It is beyond cavil that a case is decided on and only on the evidence as presented in that case. 5 Whether Kontron will succeed in submitting evidence in support of noninfringement must await the event.
Both parties cite non-record, post-appeal events. SMEC says one claim has been rejected on reexamination and Datascope says that rejection has been appealed. Except for noting their impropriety, we disregard both assertions.
We also reject SMEC's argument for affirming the judgment on the alternative ground that the district court was clearly We are surprised at SMEC's reliance on Smith International, Inc. v. Hughes Tool Co., 229 USPQ 81, 1986 WL 4795 (C.D.Cal.1986...
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