Fujifilm Corp. v. Benun

• Decision Date: 13 July 2010
• Docket Number: No. 2009-1487.,2009-1487.
• Citation: Fujifilm Corp. v. Benun, 605 F.3d 1366 (Fed. Cir. 2010)
• Parties: FUJIFILM CORPORATION, Plaintiff-Appellee,v.Jack C. BENUN, Defendant-Appellant,andJazz Products LLC, Polytech Enterprises Ltd, and Polytech (Shenzhen) Camera Co. Ltd., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

605 F.3d 1366

FUJIFILM CORPORATION, Plaintiff-Appellee,v. Jack C. BENUN, Defendant-Appellant,andJazz Products LLC, Polytech Enterprises Ltd, and Polytech (Shenzhen) Camera Co. Ltd., Defendants-Appellants.

No. 2009-1487.

United States Court of Appeals Federal Circuit.

May 27, 2010.

Rehearing En Banc Denied July 13, 2010.

COPYRIGHT MATERIAL OMITTED

Lawrence Rosenthal, Stroock & Stroock & Lavan LLP, of New York, NY, argued for plaintiff-appellee. With him on the brief were Matthew W. Siegal, and Angie M. Hankins.

John M. Peterson, Neville Peterson LLP, of New York, NY, argued for defendants-appellants. With him on the brief were George W. Thompson, and Michael T. Cone. Of counsel on the brief was Jerry P. Wiskin, Simons & Wiskin, of South Amboy, NJ.

Before MICHEL, Chief Judge, MAYER, and LINN, Circuit Judges.

PER CURIAM.

Jack C. Benun (Benun), Jazz Products LLC (Jazz), Polytech Enterprise Ltd. (PE) and Polytech (Shenzhen) Camera Co. (PC) (collectively, defendants) appeal the judgment of the United States District Court for the District of New Jersey finding that defendants infringed patents owned by Fujifilm Corporation (Fuji). Fujifilm Corp. v. Benun, No. 2:05cv1863, 2009 WL 2232523 (D.N.J. July 24, 2009) (Final Order and Judgment). We affirm.

Background

This appeal concerns single-use cameras, or lens-fitted film packages (LFFPs). Fuji participates in the LFFP market and owns U.S. patents directed to LFFPs. Once a LFFP is used by a consumer it is taken to a film processor who opens the LFFP and processes the film. The film processor does not return the empty LFFP (shell) to the consumer. Jazz bought used LFFPs, refurbished them, and sold them as new.

This is the sixth appeal from decisions finding liability for infringing Fuji's LFFP patents by Benun and companies under his control. The case that is the subject of this appeal began in 2005 when Fuji sued Benun, Jazz, PE, and PC. Jazz is Benun's new company, initially formed as Ribi Tech Products LLC, after the Bankruptcy Court for the District of New Jersey shut down Jazz Photo Corp. PE supplied Jazz with LFFPs that were refurbished by PE's subsidiary, PC. PC operated a factory in China where the LFFPs were refurbished. On April 4, 2005, Jazz purchased Jazz Photo Corp.'s inventory of about 1.4 million LFFPs made by PE and PC (collectively, Polytech), essentially continuing the LFFP business where Jazz Photo Corp. left off after being shut down by the bankruptcy court.

On June 6, 2005, the district court's first preliminary injunction enjoined the defendants from infringing and inducing others to infringe, and ordered Jazz to maintain an inventory of LFFPs until the parties reached a sampling agreement. On June 15, 2005, the district court's second preliminary injunction enjoined defendants from selling in or to the United States: LFFPs not made from shells first sold in the United States by Fuji or its licensees; and LFFPs not having a back cover that replaces the full back cover sold with the original LFFP. We affirmed the court's second injunction in Fuji Photo Film Co., Ltd. v. Benun, 463 F.3d 1252 (Fed.Cir.2006).

The 1.4 million LFFPs Jazz purchased were detained due to International Trade Commission (ITC) orders prohibiting importation of LFFPs that infringe Fuji's patents. Based on the ITC orders, Jazz exported most of the detained LFFPs. From October 2005 to January 2006, however, PE sold almost a million of these previously detained LFFPs back to Jazz in the United States. These re-imported LFFPs were released by Customs based on an October 14, 2005, letter from defendants' counsel. Fuji discovered the re-importation in March 2006, while deposing Benun for this case.

On October 10, 2006, Fuji filed a contempt motion based on Jazz's re-importation. On December 5, 2006, the district court found defendants in contempt of the preliminary injunction based on clear and convincing evidence that the re-imported LFFPs were infringing as determined by the sampling process. The court later awarded Fuji $117,486 in attorneys fees based on the contempt citation. Defendants' appeal to this court was dismissed for lack of jurisdiction. Fuji Photo Film Co. v. Benun, 240 Fed.Appx. 862 (Fed.Cir.2007).

In this case, Fuji moved for partial summary judgment of infringement on all but certain LFFPs made by refurbishing Achiever-brand LFFPs. Defendants moved for summary judgment that (1) Fuji had already recovered damages from the Jazz Photo Corp. bankruptcy, (2) this action was mooted by Fuji's settlement of bankruptcy claims against Jazz Photo Corp., (3) the bankruptcy sale of Jazz Photo Corp.'s inventory to Jazz was a patent exhausting first sale, and (4) the LFFPs were permissibly repaired. On June 30, 2008, the district court granted Fuji's motion for partial summary judgment of infringement, and denied defendants' motions.

On March 16, 2009, defendants moved in limine to bar reference to prior litigations and administrative actions, and to collaterally estop Fuji from litigating whether defendants had met the process requirement for permissible repair. On April 6, 2009, the court ordered each side to attend a pretrial conference that would include “a specific offer of proof as to each side.” Defendants were tasked to show how they would prove less than 40% of Polytech's LFFPs made through December 13, 2003, were made from foreign shells, and consequently infringed Fuji's patents. Fuji was tasked to show how it would prove that defendants' LFFPs were reconstructed as opposed to permissibly repaired.

The court found both offers insufficient. Therefore, defendants were precluded from arguing that more than 60% of their LFFPs were refurbished from LFFP shells sold in the United States for the period prior to December 12, 2003. Fuji was similarly precluded from arguing reconstruction for the entire time period at issue.

A jury trial ensued. At the close of Fuji's case, defendants moved for judgment as a matter of law (JMOL) under Fed.R.Civ.P. 50(a) on Fuji's infringement claim based on defendants refurbishing Achiever-brand LFFPs. Defendants' JMOL motion, which contained no other issues, was denied. The jury found willful infringement of Fuji's patents and awarded a $2.00 per infringing LFFP running royalty, resulting in a verdict, including interest, of $16,191,406 against PE, of which Benun and Jazz are jointly and severally liable for $3,690,239; and an additional $2,500,000 lump sum royalty payment. The court denied defendants' post-trial motion for JMOL under Fed.R.Civ.P. 50(b) based on non-infringement by Achiever-brand LFFPs and inapplicability of a first sale's location, and its motion for a new trial on damages.

Discussion

For nonpatent issues we apply the law of the circuit in which the district court sits. In re Cambridge Biotech, 186 F.3d 1356, 1368 (Fed.Cir.1999). In this case, Third Circuit law governs procedures for preserving issues for appeal and denial of motions for JMOL or a new trial. Voda v. Cordis Corp., 536 F.3d 1311, 1318 (Fed.Cir.2008). Under Third Circuit law we have plenary review over a district court's rulings on motions for JMOL, applying the same standards as the district court. Gagliardo v. Connaught Labs., Inc., 311 F.3d 565, 568 (3d Cir.2002). We review for an abuse of discretion the district court's decision on whether to grant a new trial based on the verdict being against the weight of the evidence. Greenleaf v. Garlock, Inc., 174 F.3d 352, 365-66 (3d Cir.1999). In the Third Circuit, a district court has abused its discretion if its determinations are based on an erroneous view of the law or on a clearly erroneous assessment of the evidence. Simmerman v. Corino, 27 F.3d 58, 62 (3d Cir.1994).

For issues of substantive patent law and procedural issues pertinent to patent law, we apply our own law. Cambridge Biotech, 186 F.3d at 1368. Accordingly, we apply Federal Circuit law in reviewing, for an abuse of discretion, a district court's finding of contempt of an injunction by infringement. Int'l Rectifier Corp. v. Samsung Elecs. Co., 361 F.3d 1355, 1359 (Fed.Cir.2004).

I.

Defendants present four issues for review: (1) whether Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 128 S.Ct. 2109, 170 L.Ed.2d 996 (2008), eliminated the territoriality requirement for patent exhaustion announced in Jazz Photo Corp. v. International Trade Commission, 264 F.3d 1094 (Fed.Cir.2001) ( Quanta argument); (2) whether the court invoked non-mutual collateral estoppel and precluded Polytech from presenting its permissible repair and first sale defenses on the basis of court proceedings to which Polytech was not a party (estoppel argument); (3) was a new trial on damages warranted by the jury's $2.00 per infringing LFFP running royalty and $2.5 million lump sum award (new trial argument); and (4) whether the court properly held defendants in contempt of a preliminary order enjoining importation of infringing LFFPs (contempt argument). First, we consider whether issues (1) and (2) are waived.

Regarding defendants' Quanta argument, defendants can only appeal issues presented to the jury that were included in an earlier motion for JMOL under Fed.R.Civ.P. 50(a), and properly renewed in a Fed.R.Civ.P. 50(b) post-trial motion. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1172-73 (3d Cir.1993). Fuji, however, did not raise a timely objection to Jazz's 50(b) motion arguments, including the Quanta argument, that were not present in its 50(a) motion. Chainey v. Street, 523 F.3d 200, 218 (3d Cir.2008). Fuji's argument that defendants waived their Quanta argument by consenting to the jury instructions fails for similar reasons. Accordingly, defendants' Quanta argument is properly before this court.

Defendants' estoppel argument was not raised in defendants' 50(a) or 50(b) motions, and their failure to raise the argument in either motion precluded Fuji's objection because it lacked notice that the argument was maintained beyond the pre-trial motions....