Imonex Services v. W.H. Munzprufer Dietmar Trenner

• Decision Date: 27 June 2005
• Docket Number: No. 04-1262.,No. 04-1290.,04-1262.,04-1290.
• Citation: 408 F.3d 1374
• Parties: IMONEX SERVICES, INC., Plaintiff-Appellant, v. W.H. MUNZPRUFER DIETMAR TRENNER GMBH, Alliance Laundry Systems, L.L.C., American Dryer, Inc., Maytag Corporation, and the Dexter Company, Defendants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

408 F.3d 1374

IMONEX SERVICES, INC., Plaintiff-Appellant, v. W.H. MUNZPRUFER DIETMAR TRENNER GMBH, Alliance Laundry Systems, L.L.C., American Dryer, Inc., Maytag Corporation, and the Dexter Company, Defendants-Cross Appellants.

No. 04-1262.

No. 04-1290.

United States Court of Appeals, Federal Circuit.

May 23, 2005.

Rehearing and Rehearing En Banc Denied June 27, 2005.

COPYRIGHT MATERIAL OMITTED

Gregory M. Luck and Thomas W. Sankey, Sankey & Luck, L.L.P., of Houston, Texas, argued for plaintiff-appellant. With Gregory M. Luck on the brief was Michael T. McLemore. Of counsel was Randy J. McClanahan, McClanahan & Clearman, L.L.P., of Houston, Texas.

Scott F. Partridge, Baker Botts LLP, of Houston, Texas, argued for defendants-cross appellants. With him on the brief were Gene Spears, R. William Beard, Jr., Michael Hawes, and Amanda Woodall Mayor.

Before RADER, Circuit Judge, ARCHER, Senior Circuit Judge, and BRYSON, Circuit Judge.

RADER, Circuit Judge.

A jury decided that Imonex's U.S. Patents No. 4,911,280 (the '280 patent) and No. 5,988,349 (the '349 patent) were valid, enforceable, and willfully infringed, and awarded damages of $10,350,000 to Imonex. The United States District Court for the Eastern District of Texas later denied the defendants' JMOL motions of non-infringement and non-willfulness, but found that the jury had not heard sufficient evidence for the damages award. Therefore, the trial court ordered and held a second trial on damages. The second jury awarded damages of $1,396,872 to Imonex. The district court also declared this an "exceptional case" and awarded attorney fees to Imonex. Imonex appeals the district court's finding that a second trial was necessary because of insufficient evidence; the exclusion of certain testimony of its damages expert in the first trial; and the inclusion of the testimony of the defendants' damages expert in the second. The defendants cross-appeal the district court's denial of their JMOL motions as well as the award of attorney fees to Imonex. Because the judgments and decisions of the trial court are supported by the record, this court affirms.

I.

The '280 and '349 patents claim coin selectors. These particular inventions differentiate between coins of different diameters. In the claimed devices, a coin enters the selector at the top of a vertical or near-vertical coin race. This race holds the coin on edge. A protrusion on one side wall of the race deflects the coin toward an opening on the opposite wall. If the coin is equal to or smaller than the opening in diameter, it falls through; otherwise it continues down the race. Claims 24, 25, and 29 of the '280 patent claim the protrusion feature in the following terms:

a coin deflecting protrusion situated along the primary coin race and positioned downstream from the inlet portal and proximate the aperture, said protrusion having a contact edge laterally protruding toward said aperture so as to deflect coins traveling down the primary coin race toward the aperture.

Claim 2 of the '349 patent claims the same feature as "a means for applying a lateral force." Claim 4 in the same patent claims "a first curvilinear protrusion."

The district court construed the "coin deflecting protrusion" as "a surface which extends or juts into the primary coin race so as to engage each coin as the coin proceeds downwardly in the primary coin race" (Emphasis added). The district court also noted that the "first curvilinear protrusion" means a surface that "contact[s] each coin." (Emphasis added).

The defendants argue that the W2000 coin selector cannot infringe the patents in suit because some coins do not contact the protrusion. In other words, "each coin" does not hit the protrusion. As evidence, the defendants offered the testimony of their own experts, and also that of Imonex's expert, who stated under cross-examination that he was not sure that the protrusion in the W2000 device would act to move every coin toward the aperture. On the other side, Imonex asserts that the credibility of the defendant's technical expert was undermined by his own cross-examination testimony, that the testimony of Munzprufer's owner on infringement was self-serving, and that its own expert's testimony was only the truthful admission that if an infinite number of coins were introduced into the coin slot, it is possible that one or more coins might not engage the protrusion.

"The grant or denial of a motion for judgment as a matter of law is a procedural issue not unique to patent law, reviewed under the law of the regional circuit in which the appeal from the district court would usually lie." Summit Tech., Inc. v. Nidek Co., 363 F.3d 1219, 1223 (Fed.Cir. 2004). In the United States Court of Appeals for the Fifth Circuit, "[a] jury verdict must be upheld unless `there is no legally sufficient evidentiary basis for a reasonable jury to find' as the jury did." Hiltgen v. Sumrall, 47 F.3d 695, 699-700 (5th Cir. 1995). On this record, substantial evidence from Imonex's expert supports the verdict of infringement. This court affirms the denial of JMOL on this issue.

II.

The defendants dispute the district court's denial of JMOL on the jury's verdict of willful infringement. Willfulness requires a showing that the totality of the circumstances evince the egregious conduct that constitutes willful infringement. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1342 (Fed.Cir.2004) (en banc). Actual notice of another's patent rights triggers an affirmative duty of due care. See Rolls-Royce Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1109 (Fed.Cir.1986). Constructive notice, as by marking a product with a patent number, is insufficient to trigger this duty. See Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1446 (Fed.Cir. 1998). This court has identified several criteria for assessing damages, including, inter alia, 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, and the duration of defendant's misconduct. Read Corp. v. Portec, Inc., 970 F.2d 816, 826-28 (Fed.Cir.1992).

Willful infringement in this case hinges on when the defendants had actual knowledge of Imonex's patent rights, and their actions after that time. The record shows that Imonex disclosed its coin selection devices to employees of the original equipment manufacturer, or OEM, defendants at trade shows years before it filed suit. Those Imonex devices were marked with the numbers of both of the patents in suit. Imonex also distributed advertising literature which stated that the products were patented. Imonex corresponded with employees of the OEMs about use of the patented devices in the OEMs' products. The record also disclosed that none of the OEM defendants commissioned an opinion of counsel about infringement, until after they were sued for infringement. The defendants do not deny that Imonex displayed its properly marked products at trade shows, but insist that this notice was insufficient to trigger its duty of due care, because no defendant employees with decision-making capacity received notice or studied the patents themselves. The jury could have reasonably concluded that several instances recounted in the record triggered the OEM's duty of care. Those instances that provide actual notice to the OEMs of the patents on Imonex's products include Imonex's display of its products at trade shows, the widespread distribution of literature depicting the products as patented, and correspondence with OEM employees about the use of patented devices in the OEM products.

The defendants also argue that they exercised their duty of due care by obtaining opinions of counsel regarding possible infringement of the patents in suit shortly after being served with the complaint. Imonex argues that the defendants should have obtained these opinions as soon as they learned of their possible infringement of Munzprufer's patents. This issue is informed, however, by this court's recent decision in Knorr-Bremse, which was decided shortly after the briefs in this case were submitted. In that case, the affirmative duty of due care to avoid infringement was reiterated, but it was found no longer appropriate to draw an adverse inference with respect to willful infringement from failure to obtain legal advice. Knorr-Bremse, 383 F.3d at 1345-46. Therefore, while early receipt of legal advice would have strengthened the defendants' argument that they had not willfully infringed, failure to have solicited such advice does not give rise to an inference of willfulness. Overall, the jury had substantial evidence to find willfulness, and this court affirms the district court's denial of JMOL on this point.

Defendants also dispute the finding by the trial court that this case is exceptional, and the court's award of attorney fees and costs. In an exceptional case, a court may award attorney fees. 35 U.S.C. § 285 (2000). This court reviews a district court's exceptional case finding for clear error. Pharmacia & Upjohn Co. v. Mylan Pharms., Inc., 182 F.3d 1356, 1359 (Fed.Cir.1999). The criteria for declaring a case exceptional include willful infringement, bad faith, litigation misconduct and unprofessional behavior. See Sensonics, Inc. v. Aerosonic Corp. 81 F.3d 1566, 1574 (Fed.Cir.1996). "[T]he trial court has broad discretion in the criteria by which it determines whether to award attorney fees." Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1582 (Fed. Cir.1992).

In this case, although the jury found willfulness in the first trial, the court assessed fees only from the time of the first verdict to the end of the case. The first verdict certainly placed defendants on notice of the patent, and that they were likely infringing it. Yet, the record includes evidence that the defendants sold more than one hundred thousand...