Kori Corp. v. Wilco Marsh Buggies and Draglines, Inc.
| Decision Date | 02 May 1985 |
| Docket Number | No. 84-1143,84-1143 |
| Citation | 225 USPQ 985,761 F.2d 649 |
| Parties | KORI CORPORATION, Huey J. Rivet, and Louis Woodson, Appellees, v. WILCO MARSH BUGGIES AND DRAGLINES, INC., John M. Wilson, Sr., Dean R. Wilson, and Robert J. Wilson, Jr., Appellants. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Jeffrey W. Tayon, Butler & Binion, Houston, Tex., argued for appellants. With him on the brief was Ned L. Conley, Houston, Tex.
Nathan Greenberg, Greenberg & Dallam, Gretna, La., was on the brief for appellants.
Bernarr R. Pravel, Pravel, Gambrell, Hewitt & Kimball, Houston, Tex., argued for appellees. With him on the brief were James B. Gambrell, Charles C. Garvey, Jr., Charles M. Cox and Charles D. Simmons, Houston, Tex.
Before RICH, BENNETT and BISSELL, Circuit Judges.
This appeal is from the judgment of the United States District Court for the Eastern District of Louisiana (Judge Robert F. Collins) in the damages portion of a bifurcated bench trial, holding Wilco Marsh Buggies and Draglines, Inc., et al. (Wilco) liable for damages of $1,113,660.11 for infringement of U.S. Patent No. 3,482,785 ('785 patent). 561 F.Supp. 512, 217 USPQ 1302 (E.D.La.1982). 1 The United States Court of Appeals for the Fifth Circuit (Fifth Circuit) has already affirmed the judgment of the district court, holding the Kori Corporation et al. (Kori) '785 patent valid and infringed, 708 F.2d 151, 219 USPQ 286 (5th Cir.1983), and on Wilco's motion, has transferred the damages portion of the bifurcated proceedings to this court. We affirm.
Kori Corporation is an exclusive sub-licensee under the '785 patent. The '785 patent was originally issued to Huey J. Rivet on October 22, 1974, for an invention entitled "Amphibious Marsh Craft." Rivet subsequently granted Louis J. Woodson, whose family owns Kori Corporation, an exclusive license under the '785 patent. Woodson then granted an exclusive sub-license to Kori Corporation.
The '785 patent concerns an improved pontoon-type endless-track amphibious vehicle which will operate in swamps. The patented improvement relates primarily to the vehicle's ability to carry heavy equipment through obstruction-ridden, tree Robert J. Wilson, Sr., learned the design details of the Rivet pontoon when he worked for Rivet during 1974 as a contract welder. After completion of his welding contract with Rivet, Wilson began building Rivet-type pontoons for defendant Wilco Marsh Buggies and Draglines, Inc., a corporation formed and owned by his three sons, defendants-appellants John M. Wilson, Sr., Dean R. Wilson, and Robert J. Wilson, Jr. Wilco bought a Rivet craft, obtained a copy of the '785 patent, and began making and selling a vehicle strikingly similar to the Rivet amphibious marsh craft manufactured by Kori.
stump-studded swamps. Previously, marsh craft of this type were suited only for hauling equipment through open marshes, frequently broke down, and required the use of huge timber mats ("matting") to support earthmovers in order to clear away tree stumps when it was necessary to venture into the swamps. The marsh craft developed by Rivet was structurally stronger and more watertight than earlier marsh craft, and was capable of traversing stump-dotted swampland without matting or preclearing.
Rivet, Woodson, and Kori filed this suit against Wilco and the Wilson brothers, seeking injunctive relief and damages for patent infringement. The district court issued separate decisions on the issues of liability and damages. In its liability decision, the district court held that the '785 patent was valid and infringed, and that the defendants, by actively inducing infringement of the '785 patent, were liable as infringers. 561 F.Supp. at 521-22. The Fifth Circuit affirmed on June 27, 1983.
After its initial decision on liability, the district court issued its separate memorandum opinion on damages on August 30, 1982, deciding four issues: pecuniary damages, prejudgment interest, attorney fees, and exemplary damages. 561 F.Supp. at 523, 217 USPQ at 1302.
The district court awarded Kori pecuniary damages of $516,803.30, calculating damages on the basis of profits lost because of defendants' sales of infringing units for use outside the United States and profits lost on rental of infringing units within the United States. Lost profits were calculated at $379,497, based on defendants' sale of six machines. The court also determined that lost rental profits amounted to $137,311.30, based on the defendants' profits for 4850 hours rental at a profit of $28.31 per hour.
The district court concluded that prejudgment interest should not be awarded because the record was not clear with regard to the date or dates from which interest should run. However, the court noted that it would consider the fact that plaintiffs should be compensated for the delay in receiving the lost profits owed to them in determining whether to impose exemplary damages. The court also awarded plaintiffs $50,000.00 in attorney fees and $28,943.51 in costs.
Finally, pursuant to 35 U.S.C. Sec. 284, the district court doubled the pecuniary damage award to $1,033,616.60. The court found that defendants willfully and deliberately infringed, having copied the essential parts of the amphibious craft, knowing it to be patented, and having no good faith belief that the patent was invalid. The court noted that the defendants willfully copied the invention of the '785 patent without soliciting the advice of counsel, and only sought the advice of a qualified patent attorney after plaintiffs had brought suit to enforce the patent. In determining the amount of exemplary damages, the court considered the fact that the actual pecuniary damages it had calculated were not "sufficient to fully compensate plaintiffs," and included the portion of damages which the court found it had been unable to determine exactly, including prejudgment interest.
OPINIONIn pertinent part, 35 U.S.C. Sec. 284 provides that "the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use of the invention by the infringer...." In Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S.Ct. 1526, 1543, 12 L.Ed.2d 457, 141 USPQ 681, 694 (1964), the Supreme Court said that a patent holder's damages
have been said to constitute "the difference between his pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred." ... The question to be asked in determining damages is .... [Citations omitted.]
The district court found that Wilco built at least twelve infringing machines. Kori sought to base damages on the profit derived from Wilco's sale of six of these machines, as well as profits from Wilco's rental of other infringing units. Wilco contended that a reasonable royalty was the appropriate measure of damages.
Wilco's argument that Kori is entitled only to a reasonable royalty is grounded on the assertion, based on the district court's Finding of Fact No. 8, that Kori Corporation is merely a non-exclusive licensee. Finding of Fact No. 8, in the district court's liability opinion, reads: "Plaintiff Kori Corporation ... is named as a non-exclusive sub-licensee under the patent in suit." 561 F.Supp. at 515. However, counsel for Wilco stipulated to the fact that Kori Corporation was an "exclusive sub-licensee" in a pre-trial order. Moreover, in its damages opinion, the district court indicated that Rivet had granted an "exclusive license to Louis Woodson and Kori Corporation." 561 F.Supp. at 524, 217 USPQ at 1304.
The record before this court on appeal includes all original papers filed in the district court, including pre-trial orders. Fed.R.App.P. 10(a), United States Court of Appeals for the Federal Circuit Rule 11. The district court's Finding of Fact No. 8, that Kori is a "non-exclusive sub-licensee," is either a "slip of the pen" or is clearly erroneous. Wilco's argument that a reasonable royalty is the proper measure of damages is therefore based on an erroneous assumption. Kori is entitled to be compensated on the basis of its ability to exploit the patent. See Bio-Rad Laboratories v. Nicolet Instrument Corp., 739 F.2d 604, 616, 222 USPQ 654, 663 (Fed.Cir.1984).
When a patent holder would have made the sale of a product "but for" the infringement, the award of his lost profits is proper. Paper Converting Machine Co. v. Magna Graphics Corp., 745 F.2d 11, 21, 223 USPQ 591, 598 (Fed.Cir.1984); Bio-Rad, 739 F.2d at 616, 222 USPQ at 663. Moreover, when the parties involved in an action are the only suppliers in the market, lost profits are a particularly appropriate measure of damages. Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065, 1068, 219 USPQ 670, 675, 678 (Fed.Cir.1983).
The district court found that Kori would have sold or rented the machines built by Wilco were it not for Wilco's infringement. Although Wilco argued that there were non-infringing substitutes available, the district court's conclusion was based on findings that Wilco "directly competed" for the sale of these machines with Kori, and that "from a buyer's perspective, the only acceptable substitute for the patented Kori machines were the infringing machines." 561 F.Supp. at 526, 217 USPQ at 1306. The court therefore properly awarded damages based on Kori's lost profits for the infringing sales and rentals of Wilco's machines.
In proving damages, the patent owner's burden of proof is not absolute, but rather one of reasonable probability. Lam, Inc. v....
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