IN RE HAYES MICROCOMPUTER PRODUCTS PATENT LIT.

• Decision Date: 23 April 1991
• Docket Number: C 88-1444 (SC) and C 88-2901 (SC).,C 84-6315 (SC),No. C 84-4882 (SC),C 88-0066 (SC),C 84-4882 (SC)
• Citation: 766 F. Supp. 818
• Court: U.S. District Court — Northern District of California
• Parties: In re HAYES MICROCOMPUTER PRODUCTS, INC. PATENT LITIGATION. This order relates to all cases.

766 F. Supp. 818

In re HAYES MICROCOMPUTER PRODUCTS, INC. PATENT LITIGATION.

This order relates to all cases.

Nos. C 84-4882 (SC), C 84-6315 (SC), C 88-0066 (SC), C 88-1444 (SC) and C 88-2901 (SC).

United States District Court, N.D. California.

April 22, 1991.

As Amended April 23, 1991.

COPYRIGHT MATERIAL OMITTED

James W. Hawkins, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for plaintiff.

Robert Charles Hill, San Francisco, Cal., for Prometheus Products, Inc. and Omnitel, Inc.

Terence Bruiniers, Farrand, Cooper, Metzler & Bruiniers and Henry C. Bunsow, San Francisco, Cal., for Everex Systems, Inc.

Thomas Schatzel, Santa Clara, Cal.

JUDGMENT AND ORDER

CONTI, District Judge.

This case involves a patent infringement dispute between Hayes Microcomputer Products, Inc. ("Hayes" or "plaintiff") and Everex Systems, Inc. ("Everex"), Ven-Tel, Inc. ("Ven-Tel"), and Omnitel, Inc. ("Omnitel") (collectively "defendants"). This order decides the following motions currently before the court:

(1) Defendants' Motions for Judgment Notwithstanding the Verdict;

(2) Hayes' Motion for Permanent Injunction;

(3) Defendants' Motion for Stay of Injunction;

(4) Hayes' Motion for Prejudgment Interest;

(5) Hayes' Motion for Enhancement of Damages and Attorney Fees;

(6) Hayes' Motion for Accounting of Infringing Sales Subsequent to December 31, 1990 and for Entry of Supplemental Judgment; and (7) Hayes' Motion for Rule 11 Sanctions.

I. BACKGROUND

This case arose out of a patent, relating to computer modems, issued to Dale Heatherington on October 22, 1985, and assigned to Hayes. On January 25, 1991, following a lengthy trial before this court and a jury, the jury returned a verdict in favor of Hayes and against all three defendants. The jury found that U.S. Letters Patent 4,549,302 is valid and that each defendant had willfully infringed it. The jury awarded as damages to Hayes a reasonable royalty of 1.75% of each defendant's net sales of infringing products.

Specifically, the jury awarded Hayes damages from each defendant as follows: Everex: $1,614,839.50; Ven-Tel: $1,010,116.50; and Omnitel: $884,854.92. On January 28, 1991, the court entered judgment pursuant to these findings, taxed costs against defendants under Local Rule 265, and specifically reserved judgment on the issues of injunction, prejudgment interest, enhancement of damages, and attorney fees. Subsequently, defendants filed motions for judgment notwithstanding the verdict and to stay the injunction pending appeal and Hayes moved for sanctions under Fed.R.Civ.P. 11 and for accounting of infringing sales subsequent to December 31, 1990 and entry of supplemental judgment. The court now addresses each of these issues in turn.

II. DISCUSSION

A. Defendants' Motions for Judgment Notwithstanding the Verdict

Defendants have moved, under Fed.R. Civ.P. 50(b), for judgment notwithstanding the verdict ("JNOV") on virtually every issue conceivably decided by the jury. Although the three defendants have presented their asserted grounds for JNOV in a number of separate motions, the court will rule on all motions together.

At the outset, the court stresses the heavy burden that defendants must carry in order to sustain their motions for JNOV. In this circuit,¹ a court is bound to deny a JNOV motion, "unless the evidence, viewed in the light most favorable to the prevailing party at trial, permits only one reasonable conclusion i.e., against the jury's verdict. Cordero v. CIA Mexicana De Aviacion, S.A., 681 F.2d 669, 672 (9th Cir.1982).

Put another way, JNOV should not be granted unless:

(1) there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture, or (2) there is such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded men could not arrive at a verdict against him.

Jamesbury Corp. v. Litton Indus. Products, Inc., 756 F.2d 1556, 1558 (Fed.Cir. 1985) (quoting Mattivi v. South African Marine Corp., 618 F.2d 163, 168 (2d Cir. 1980)

Specifically, in patent cases, a trial judge: must consider all the evidence in a light most favorable to the nonmover, must draw reasonable inferences favorable to the nonmover, must not determine credibility of witnesses, and must not substitute its choice for that of the jury between conflicting elements in the evidence. Following these guidelines, the court determines whether the evidence so viewed constitutes "substantial evidence" in support of the jury's findings and, if so, whether those findings can support the legal conclusions necessarily drawn by the jury.

Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 893 (Fed.Cir.1984) (citations omitted).

"Substantial evidence," moreover, is "such relevant evidence from the record taken as a whole as might be accepted by a reasonable mind as adequate to support the finding under review." Id. Defendants carry a particularly heavy burden on the issue of validity of the patent because, on that issue, "a patentee need submit no evidence in support of a conclusion of validity by a ... jury." Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1570 (Fed.Cir.1986) (emphasis in original).

The court presided over a lengthy jury trial in this matter, in which plaintiff and all three defendants presented voluminous testimony, including that of expert witnesses. After a careful review of the evidence presented to the jury at trial and the legal arguments presented in the parties' JNOV briefs, the court finds that the evidence, viewed in the light most favorable to Hayes, clearly permits the "reasonable conclusion" that the jury made. Because the court finds that the evidence so viewed constitutes "substantial" evidence in support of the jury's findings, and that those findings support the legal conclusions necessarily drawn by the jury, the court will not overrule the jury in this case. Consequently, the court hereby DENIES the motions for judgment notwithstanding the verdict of all defendants on all grounds.

B. Hayes' Motion for Permanent Injunction

Under 35 U.S.C. § 283, the court is authorized to issue an injunction "to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." This statute makes the grant or denial of an injunction by the court discretionary within the facts of each case. See, e.g., Windsurfing Int'l, Inc. v. AMF, Inc., 782 F.2d 995, 1002 (Fed.Cir.1986).

In the instant case, as noted above, the jury found that the patent in question was valid and that each defendant had willfully infringed it. In light of that finding, Hayes has the right to exclude others from further use of its property. See, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed.Cir.1983).

As all parties agree, while the court is not required to issue an injunction, "it is the general rule that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it." Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1247 (Fed.Cir.1989). Having thoroughly reviewed the facts of this particular case and the law cited by Hayes and by all three defendants, the court is unpersuaded that the requisite "sound reason" exists for denying Hayes' motion for injunction. Accordingly, Hayes' motion for injunction against defendants Everex, Ven-Tel, and Omnitel is hereby GRANTED, under the terms set out at the conclusion of this order.

C. Defendants' Motion to Stay Imposition of Injunction²

Federal Rule of Civil Procedure 62(c) states that a district court "in its discretion may suspend, modify, restore, or grant an injunction during the pendency of the appeal." There are four factors to be considered in deciding whether to grant a stay of injunction pending appeal under Rule 62(c): "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of a stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Standard Havens Products, Inc. v. Gencor Industries, Inc., 897 F.2d 511, 512 (Fed.Cir.1990) (quoting Hilton v. Braunskill, 481 U.S. 770, 776, 107 S.Ct. 2113, 2119, 95 L.Ed.2d 724 (1987)).

These, however, are guidelines designed to assist the court in deciding a motion to stay injunction, rather than rigid factors which must each be given equal weight. Id. at 512-513. Indeed, the Federal Circuit has adopted a "sliding scale approach" to balancing the equities, such that when "harm to applicant is great enough, a court will not require `a strong showing' that applicant is `likely to succeed on the merits.'" Id. at 513 (quoting Hilton, 481 U.S. at 776, 107 S.Ct. at 2119).

The court, after a careful review of all the relevant evidence and legal authority, is doubtful as to the strength of defendants' showing of likely success on appeal. Nonetheless, the court is faced, in this case, with a difficult balancing act, both on the issue of the hardship to the parties involved and in terms of the public interest. The court is not unsympathetic to Hayes' argument that parties found by clear and convincing evidence to be willful infringers should be made to pay a stiff penalty for such knowing disregard of valid patent rights. Likewise, valid patent holders have a right to expect that their property rights will be protected.

At the same time, however, defendants have presented the court with persuasive evidence of the severe hardship they will suffer if the injunction is not stayed pending appeal. At least in the cases of Ven-Tel and Omnitel, it appears to the court highly likely that, when and if the injunction is finally enforced, they will be forced out of business. Even the much larger Everex has presented evidence of significant potential injury once an injunction is enforced against it.

In the...