Kenall Mfg. Co. v. Cooper Lighting, LLC

• Decision Date: 29 December 2022
• Docket Number: 17 C 4575
• Parties: KENALL MANUFACTURING COMPANY, Plaintiff, v. COOPER LIGHTING, LLC, and EATON CORPORATION, Defendants.
• Court: U.S. District Court — Northern District of Illinois

KENALL MANUFACTURING COMPANY, Plaintiff,
v.
COOPER LIGHTING, LLC, and EATON CORPORATION, Defendants.

No. 17 C 4575

United States District Court, N.D. Illinois, Eastern Division

December 29, 2022

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, JUDGE

Kenall Manufacturing Company brought this suit against Cooper Lighting, LLC and Eaton Corporation (together, “Cooper”), alleging patent infringement and breach of contract. Doc. 1. With discovery completed, the parties move to bar the testimony of certain experts and for partial summary judgment on several issues. Docs. 474, 479, 484, 490, 496, 504, 508. At the parties' and the Magistrate Judge's request, the court focuses on certain motions pertinent to patent infringement damages-Cooper's motion to bar Kenall's experts, Doc. 504; the parties' cross-motions for summary judgment regarding lost profits, Docs. 496, 508; and Cooper's motion for summary judgment limiting a reasonable royalty to five percent, Doc. 508. The summary judgment motions are denied, and Cooper's motion to bar is granted in part and denied in part.

Background

Because the parties cross-move for summary judgment, the court will view the disputed facts in the light most favorable to Kenall when considering Cooper's motions and in the light most favorable to Cooper when considering Kenall's motion. See First State Bank of Monticello v. Ohio Cas. Ins. Co., 555 F.3d 564, 567 (7th Cir. 2009) (“[B]ecause the district court had

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cross-motions for summary judgment before it, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.”) (internal quotation marks omitted). At this juncture, the court must assume the truth of those facts, but does not vouch for them. See Gates v. Bd. of Educ. of Chi., 916 F.3d 631, 633 (7th Cir. 2019).

Kenall and Cooper are competing commercial lighting manufacturers. Doc. 510 at ¶¶ 1, 3; Doc. 549 at ¶ 40. In 2012, Eaton acquired Cooper, which operates as “Eaton's Lighting Division.” Doc. 500-1 at ¶ 4. For ease of reference, and because Eaton may be ignored for present purposes, Eaton and Cooper are referred to together as “Cooper.”

Kenall holds several patents on technology practiced in its Millenium Stretch lighting products. Doc. 510 at ¶¶ 4, 8. The first, U.S. Patent No. 6,984,055 (“the '055 patent”), issued on January 10, 2006, covers a “modular lighting fixture adaptable for being implemented in various shapes and configurations.” Doc. 500-1 at ¶ 8; Doc. 1-2 at 11. In 2007, Kenall sued Cooper, alleging that Cooper's Fail-Safe Harmony VR Linear Series (“HVL”) lighting fixtures infringed the '055 patent. Doc. 500-1 at ¶ 1; Doc. 510 at ¶¶ 10, 13; see Kenall Mfg. Co. v. Cooper Lighting, Inc., No. 07 C 603 (N.D. Ill. filed Jan. 31, 2007). The parties resolved that suit pursuant to a Settlement Agreement and a Confidential License Agreement. Doc. 510 at ¶ 14; Doc. 500-1 at ¶ 1. The Settlement Agreement provided that, “[s]ubject to full compliance by Cooper with this Agreement and with the terms of the Confidential License Agreement, Kenall waives ... its claims against Cooper for patent infringement damages with respect to manufacture and sale occurring before the date of this Agreement.” Doc. 1-1 at p. 3, ¶ 3.

The License Agreement granted Cooper “a worldwide, nonexclusive license” under the '055 patent and any patents stemming therefrom (collectively, the “Subject Patents”) and, “[s]ubject to the terms, conditions and limitations in th[e] Agreement,” to manufacture and sell

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Cooper's “Linear Continuous” and “Linear Single” products, which the Agreement refers to as the “Subject Continuous Products” and “Subject Single Products,” respectively, and collectively as the “Subject Products.” Id. at pp. 35-36, § 1. In return, Cooper agreed to place a patent notice on every licensed product starting no later than December 31, 2007; to make a one-time payment of $30,000 within seven days of executing the Agreement; and to make quarterly royalty payments of five percent of net sales of the Subject Continuous Products starting on January 1, 2008 and continuing through the expiration of the last Subject Patent. Id. at pp. 37-39, §§ 5.A, 5.B, 9. Cooper also agreed to redesign its Subject Single Products “to have a one-piece end unit instead of the current two-piece end unit, such redesigned product being referred to .. as the ‘Re-Designed Single Product,'” by January 1, 2008. Id. at p. 36, § 2. If Cooper needed additional time for the redesign, it could continue to sell the Subject Single Products until April 1, 2008, subject to a five percent royalty. Id. at pp. 36-37, §§ 2, 5.C.

The License Agreement included a “No Challenge Clause,” which provided that, although “Cooper does not admit infringement, validity or enforceability of the Subject Patents, and reserves all defenses to any allegation of infringement ...[,] Cooper shall refrain from contesting the validity, enforceability, or infringement of the Subject Patents in any court of law or other forum unless Kenall asserts the Subject Patents against Cooper products other than the Subject Products.” Id. at pp. 41-42, § 15. The License Agreement also included a “Most Favored Nation” provision, which provided that, “[i]f in the future Kenall grants to a third party another license under the Subject Patents for similar products in similar volumes at a more favorable royalty rate than that granted to Cooper,” Cooper would be entitled to the more favorable rate as of the other license's effective date. Id. at p. 38, § 6.

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After Kenall and Cooper executed the Settlement Agreement, Kenall obtained additional patents for modular lighting technology stemming from the '055 patent, including U.S. Patent No. 7,494,241 (“the '241 patent”), issued on February 24, 2009, and U.S. Patent No. 8,550,656 (“the '656 patent”), issued on October 8, 2013. Doc. 500-1 at ¶ 8; Doc. 540 at ¶ 4. The '241 patent was reissued as U.S. Patent No. RE45,563 (“the '563 patent”) on June 16, 2015, and the '055 patent was reissued as U.S. Patent No. RE45,591 (“the '591 patent”) on June 30, 2015. Doc. 500-1 at ¶ 8; Doc. 540 at ¶ 4.

In the present suit, Kenall alleges that, beginning in 2008, Cooper breached the License Agreement by failing to make royalty payments, failing to place the required patent notices on its products, and failing to redesign the Subject Single Product to have a one-piece end unit. Doc. 1 at ¶¶ 48-53. Kenall also alleges that Cooper infringed its patents by continuing to sell Subject Single Products after April 1, 2008. Doc. 1 at ¶¶ 48, 71-76; see Docs. 86-87 (reported at 338 F.Supp.3d 841, 850-51 (N.D. Ill. 2018)) (limiting Kenall's patent infringement claim to Subject Single Products sold after April 1, 2008).

It is undisputed that Cooper sold Subject Single Products after April 1, 2008 and until 2016, when it redesigned its products. Doc. 549 at ¶¶ 17-19. Cooper applied for a patent for its redesigned HVL products on July 27, 2016, and it obtained U.S. Patent No. 10,234,109 (“the '109 patent”) on March 19, 2019. Id. at ¶ 48.

Cooper asserted a variety of affirmative defenses, Doc. 93, which Kenall moved to strike, Doc. 95. In striking Cooper's noninfringement defense, the court held that the No Challenge Clause barred “Cooper's defense that the Subject Patents do not cover the Subject Products.” Docs. 123-124 (reported at 354 F.Supp.3d 877, 888 (N.D. Ill. 2018)). Because Cooper cannot

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contest Kenall's assertion that the Subject Patents cover the Subject Products, the court determined that a Markman hearing was unnecessary. Doc. 201.

Discussion

As noted, the court focuses on Cooper motion to bar Kenall's experts, Cooper's motion for summary judgment on the question whether Kenall is entitled to lost profits or a reasonable royalty rate exceeding five percent, and Kenall's motion for summary judgment on the question whether it is entitled to lost profits.

I. Cooper's Motion to Bar Kenall's Experts

Cooper moves under Evidence Rule 702 to bar Kenall's experts. See Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589-95 (1993); Lees v. Carthage Coll., 714 F.3d 516, 521 (7th Cir. 2013) (“[T]he Daubert analysis applies to all expert testimony under Rule 702, not just scientific testimony.”) (citing Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999)).

Rule 702 provides: “A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.” Fed.R.Evid. 702. The district court serves as the “gate-keeper who determines whether proffered expert testimony is reliable and relevant before accepting a witness as an expert,” Winters v. Fru-Con Inc., 498 F.3d 734, 741 (7th Cir. 2007) (internal quotation marks omitted), and “has ‘broad latitude' to determine how to evaluate expert testimony,” United States v. Hill, 818 F.3d 289, 297 (7th Cir. 2016) (quoting Kumho Tire, 526 U.S. at 153). The expert's proponent bears the burden

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of proving by a preponderance of the evidence that the expert's testimony satisfies Rule 702. See Varlen Corp. v. Liberty Mut. Ins. Co., 924 F.3d 456, 459 (7th Cir. 2019).

A. Francis Reid

Francis Reid is an electrical engineer who serves as a specifier for electrical lighting products. Doc. 505-2 at 3. Kenall offers Reid as an expert on the advantages of Kenall's Millenium Stretch products and whether any other products qualify as acceptable substitutes. Id. at 2. Based on his two decades experience specifying lighting products,...