Liqwd, Inc. v. L'Oréal USA, Inc.

• Decision Date: 16 December 2019
• Docket Number: CIVIL ACTION NO. 17-14-JFB-SRF
• Parties: LIQWD, INC. and OLAPLEX LLC, Plaintiffs, v. L'ORÉAL USA, INC., L'ORÉAL USA PRODUCTS, INC., L'ORÉAL USA S/D, INC., and REDKENS 5TH AVENUE, NYC, L.L.C., Defendant.
• Court: U.S. District Court — District of Delaware

LIQWD, INC. and OLAPLEX LLC, Plaintiffs, v. L'ORÉAL USA, INC., L'ORÉAL USA PRODUCTS, INC., L'ORÉAL USA S/D, INC.,and REDKENS 5^TH AVENUE, NYC, L.L.C., Defendant.

CIVIL ACTION NO. 17-14-JFB-SRF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

December 16, 2019

MEMORANDUM AND ORDER

This matter is before the Court on the following post-trial motions:

1. Motion For Approval of Stay of Any Execution or Enforcement of the Judgment by Bond, D.I. 1089, filed by defendants;

2. Motion to Alter Judgment or Amend the August 20th Judgment (D.I. 1078), D.I. 1093, filed by plaintiffs;

3. Defendants' Renewed Motion for Judgment as a Matter of Law Pursuant to Federal Rule of Civil Procedure 50(b), D.I. 1095;

4. Motion to Enhance Patent and Trade Secret Damages, D.I. 1097, filed by plaintiffs;

5. Motion for new trial, D.I. 1098, filed by defendants;

6. Motion for Attorney Fees, D.I. 1101, filed by plaintiffs;

7. Motion to Alter Judgment Defendants' Motion to Alter or Amend the Judgment, D.I. 1102, filed by defendants; and

8. Defendants' Motion for Trial on Their Unclean Hands Defense, D.I. 1106, filed by defendants.

I. BACKGROUND

The Court conducted a trial in this case. The jury issued a verdict on August 12, 2019. D.I.'s 1059-1060. The Court thereafter signed a Memorandum and Order denying defendants' motions for a judgment as a matter of law (JMOL), D.I. 1051 and 1055. D.I. 1064. The Court also entered a permanent injunction. D.I. 1073. The Court then signed a memorandum and judgment. D.I. 1078. On August 12, 2019, the jury returned a verdict finding L'Oréal liable for willful trade secret misappropriation, willful patent infringement, and breach of contract. D.I. 1060. The verdict form specified damages of $22,265,000 for the trade secret claims and breach of contract claims, $21,818,000 for infringement of U.S. Patent No. 9,498,419 and $24,960,000 for infringement of U.S. Patent No. 9,668,954. Id. The jury rejected each of L'Oréal's patent invalidity claims. Id. On August 20, 2019, the Court entered a Memorandum and Judgment in favor of Plaintiffs Olaplex LLC and Liqwd, Inc. ("Olaplex") and against L'Oréal USA for $49,920,000.00 (D.I. 1078).

II. DISCUSSION

A. Motion For Approval of Stay of Any Execution or Enforcement of the Judgment by Bond, D.I. 1089, filed by defendants.

L'Oreal requests that it be permitted to post a $60,000,000 bond and to obtain a stay of any execution or enforcement of the judgment, pending resolution to its post-trial motions herein and its appeal. Federal Rule of Civil Procedure 62(b) provides that "[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security." L'Oréal USA has obtained a bond in the amount of $60,000,000.00 with Liberty Mutual InsuranceCompany. D.I. 1089, Ex. A. The amount of the bond includes the amount of damages awarded in the Judgment, $49,920,000.00, plus an additional 20%, which is more than sufficient to cover one year of interest using the interest rate set forth in 28 U.S.C. § 1961. This interest rate is 1.77%, based on the weekly average for the 1-year constant maturity Treasury yield for the week ending August 16, 2019 (the calendar week preceding the August 20, 2019, Judgment).

Plaintiffs do not oppose this motion. The Court will grant this motion. Defendants' shall post the $60,000,000.00 bond and the Court will stay any execution or enforcement of judgment.

B. Motion to Alter Judgment or Amend the August 20th Judgment (D.I. 1078), D.I. 1093, filed by plaintiffs.

Federal Rule of Civil Procedure 59(e) permits a party to move "to alter or amend a judgment." Fed. R. Civ. P. 59(e). Such a motion "must rely on one of three major grounds: (1) an intervening change in controlling law; (2) the availability of new evidence not available previously; or (3) the need to correct clear error of law or prevent manifest injustice." Evonik Degussa GmbH v. Materia, Inc., 305 F. Supp. 3d 563, 575 (D. Del. 2018) (Citations omitted).

Plaintiffs ask this Court to amend the August 20, 2019 judgment, D.I. 1078, against the defendants. In particular, the plaintiffs ask the Court to amend its August 20^th Judgment to recognize the jury's full damages award, $22,265,000 for the trade secrets claims. Further, plaintiffs contend that the reducing the damages is neither procedurally nor substantively proper.

Plaintiffs agree that the overlapping portion of the two patent infringement awards are duplicative within the same period of time. The plaintiffs also agree that the Court appropriately treated the breach of contract as coextensive with damages for misappropriation of trade secrets. However, plaintiffs argue that the Court treated the trade secret misappropriation as subsumed by the patent damages, and the Court also overruled the jury's trade secret award by 57%. The Court erred, argues plaintiffs, when it prorated the trade secret damages by dividing $22,265,00 by the number of days in the twenty-month period x 9 months. This calculation, contends plaintiffs, reduced the jury's $22,265,000 trade secret award to $9,499,732.48.

Plaintiffs also contend that the Court should amend this judgment to correctly calculate non-duplicative compensatory recover for the claims. Plaintiffs argue that the total non-duplicative compensatory damages are $37,410,000, and the Court should eliminate overlapping time periods of damages but should allow non-duplicative damages representing unique periods of time not subsumed into each other be allowed. In addition, argue the plaintiffs, the defendants failed to move for JMOL regarding the trade secret damages. Second, when long after trial the defendants did move for JMOL, plaintiffs contend they did not do so on the two-player market, thus not arguing that trade secrets are limited to a period before publication. Delaware courts have adopted this approach to the "head-start" doctrine. See, e.g., Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *26 & n.230 (Del. Ch. Feb. 18, 2010).

With regard to the amount of damages, plaintiffs contend that under a chronological approach, plaintiffs are entitled to $97,085,000. D.I. 1094 at 14-16. Underthe award size approach, plaintiffs contend they are entitled to $87,270,000. Id. at 15-18.

Finally, plaintiffs request that the Court amend the judgment so as to include both prejudgment and post-judgment interest. Under 35 U.S.C. § 284, "[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, . . . together with interest . . ." (emphasis added). For patent infringement, "prejudgment interest should ordinarily be awarded." Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983); accord Comcast IP Holdings I LLC v. Sprint Comms. Co., L.P., 850 F.3d 1302, 1313 (Fed. Cir. 2017). "Delaware courts award prejudgment interest as a matter of right." Beard Research, Inc. v. Kates, 8 A.3d 573, 620 (Del. Ch. 2010) (awarding pre-judgment interest on recovery for trade secret misappropriation).

The purpose of pre-judgment interest is "to ensure that the patent owner is placed in as good a position as he would have been had the infringer entered into a reasonable royalty agreement." Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983). In a patent case, "[g]enerally, the interest rate should be fixed as of the date of infringement, with interest then being awarded from that date to the date [the judgment is actually paid.]" Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prod. Grp., LLC, No. 8:10CV187, 2016 WL 6246590, at *2 (D. Neb. May 11, 2016).

Pre-judgment interest may be permitted on attorneys' fees where the court determines there is bad faith or other exceptional circumstances. Mathis v. Spears, 857 F.2d 749, 761 (Fed.Cir.1988) (quoting General Motors Corp. v. Devex Corp., 461 U.S. 648, 653, 103 S.Ct. 2058, 2061, 76 L.Ed.2d 211 (1983)). The District Court has an inherent equitable power to determine the appropriateness of an award under thosecircumstances. Id.; Water Tech. Corp. v. Calco Ltd., 714 F. Supp. 899, 909-910 (N.D. Ill. 1989). "Since the defendants' willful infringement made it necessary for the plaintiffs to bring this suit, an award of prejudgment interest is proper to fully compensate the plaintiffs for the expenses they incurred during litigation." Id. at 910. As stated in Stryker,

The plaintiff also seeks prejudgment interest on the portion of its requested attorneys' fees and costs that has already been expended. The amount of such interest is calculated by the plaintiff to be $679,004. The Court, however, declines to grant such prejudgment interest on the attorneys' fees and costs. An award of attorney's fees and costs under section 285 is not compensatory, but rather is punitive in nature. Granting such an award is a "fee shifting sanction" imposed in exceptional circumstances. See, e.g., L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527, 1533-34 (Fed.Cir.1995) (Judge Schall, concurring in part and dissenting in part). Because pre-judgment interest is only to be awarded on the compensatory portion of a damage award, Beatrice Foods, 923 F.2d at 1580, in the Court's view, it is improper to grant prejudgment interest on any portion of the plaintiff's attorneys' fees and costs.

Stryker Corp. v. Intermedics Orthopedics, Inc., 898 F. Supp. 116, 123 (E.D.N.Y. 1995).

The Court has discretion when determining how pre-judgment interest should be awarded. While the Court finds the award of pre-judgment interest on the compensatory damages is appropriate in this case, the Court finds that pre-judgment interest in this case on the attorneys' fee award is unnecessary. The pre-judgment interest award is to make the patent owner whole. General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56 (1983). However, the purpose of pre-judgment interest is to compensate and...