Micro Chemcial, Inc. v. Lextron, Inc.
| Decision Date | 14 September 2001 |
| Docket Number | No. CIV. A. 88-Z-499.,CIV. A. 88-Z-499. |
| Citation | 161 F.Supp.2d 1187 |
| Parties | MICRO CHEMICAL, INC., Plaintiff, v. LEXTRON, INC., Defendant. |
| Court | U.S. District Court — District of Colorado |
This matter came before the Court on remand from the Court of Appeals for the Federal Circuit for the purpose of assessing the amount of damages owed to plaintiff, Micro Chemical, Inc. (Micro), by defendant, Lextron, Inc. (Lextron), for infringement of U.S. Patent No. 4,733,971 (the '971 patent). A suit for patent infringement is brought under 35 U.S.C. §§ 1-307. The Court has subject matter jurisdiction under 28 U.S.C. § 1331 and § 1338(a), as well as in personam jurisdiction over the parties.
A trial was held commencing on November 2, 2000, and concluding on November 8, 2000, during which both parties presented evidence to address the remaining damages issues in the action. Prior to the hearing, the manner in which damages should be calculated was resolved through motions for summary judgment. Based on the Court's findings that noninfringing substitutes were available to Lextron throughout the period of infringement and that Micro had failed to demonstrate the requisite demand for the patented invention, the Court held that Micro was not entitled to damages based on its alleged lost profits, but only to a reasonable royalty for Lextron's use of the patented invention.
Having heard and considered all of the evidence and arguments presented by the parties in support of the summary judgment motions and during the trial on damages, the Court now enters the following Findings of Fact, Conclusions of Law and Order.
1. This action was commenced by Micro in April 1988, and the trial on liability and damages was bifurcated. The liability issues were tried to the Court for two weeks in March 1993. Following trial, the Court found that the '971 patent was invalid, that various claims of the patent were not infringed, that Lextron had not induced infringement of the patent, that Micro did not obtain the patent by inequitable conduct, and that Lextron had not engaged in willful or deliberate infringement. See Micro Chemical, Inc. v. Great Plains Chemical Co., 900 F.Supp. 1386 (D.Colo.1995)(Great Plains Chemical Co. changed its name to Lextron, Inc. in 1986).
2. On appeal, the Court of Appeals for the Federal Circuit in January 1997 reversed the judgment of invalidity, affirmed the Court's findings that the "isolation" claims of the patent were not infringed, affirmed the judgment that there had been no induced infringement, and affirmed the judgment that the patent was not obtained inequitably. The case was then remanded to this Court for a determination on whether other asserted patent claims were infringed. Micro Chemical, Inc. v. Great Plains Chemical Co., 103 F.3d 1538 (Fed. Cir.1997).
3. On remand, the Court found that the remaining patent claims were not infringed by Lextron's accused machines. On appeal, the Federal Circuit again affirmed in part and reversed in part, affirming this Court's holding that Lextron's president, Robert C. Hummel, was not personally liable for infringement and that claim 91 was not infringed, but finding infringement of claims 63, 74, 93 and 94. The case was then remanded to this Court for an assessment of damages. Micro Chemical, Inc. v. Great Plains Chemical Co., 194 F.3d 1250 (Fed.Cir.1999).
4. After remand, the parties took additional discovery, and each moved for partial summary judgment on Micro's claim that Lextron's weigh machines, which had been modified in 1997 by removing the mechanical mixer (the "Type 5" machine), continued to infringe the '971 patent. Briefs were submitted and a hearing was conducted on September 6, 2000. At the hearing, the Court held that the Type 5 machine did not infringe the asserted claims of '971 patent. The Court also found that the Type 5 machine was an acceptable, noninfringing substitute for the patented machine that was available during the period of Lextron's infringement and that Micro had not demonstrated a demand for the patented features of the machine. As a result, Micro's claim in the action for lost profit damages was precluded. (Hearing Transcript, September 6, 2000).
5. Micro moved for reconsideration of the Court's decision, in part because it claimed a lack of notice that it might be precluded from presenting a lost profits damages claim. Briefs were again submitted, and a hearing on the motion was held on September 28, 2000. Following oral argument, Micro's motion for reconsideration was denied. (Hearing Transcript, September 28, 2000).
6. Neither in its summary judgment papers nor in its motion for reconsideration did Micro offer any credible rebuttal to rebut Lextron's proof that the Type 5 machine was an acceptable noninfringing alternative and that there was no demand for the patented invention. Accordingly, Lextron was entitled to judgment barring Micro from presenting a lost profits damages theory. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
7. On November 2, 2000, the Court commenced a five-day trial on the question of Micro's damages due to Lextron's infringement of the '971 patent by the Type 2 machine. Closing arguments were held on December 18, 2000. The central issue at trial was the calculation of a reasonable royalty rate, and the determination of an appropriate royalty base.
8. Since the inception of this case, Micro has grouped Lextron's various weigh machines into five "types." All issues with respect to Type 1 machines, also known as "cumulative weigh" machines, have been settled by agreement of the parties. Type 2 machines, also known as "weigh/mix machines," are the focus of the instant action. Type 3 machines, also known as "no mix" machines, were admitted to be noninfringing by Micro. Type 4 machines, also known as "remote mix" machines, previously have been found to be noninfringing by the Court. Micro Chemical v. Great Plains Chemical Co., 900 F.Supp. 1386 (D.Colo.1995).
9. After the Federal Circuit issued its decision in January 1997, Lextron began modifying its infringing Type 2 machines. The modifications mainly involved removing the mechanical mixers, enlarging the receiving tank, adding an additional water source to the exit of the receiving tank, modifying the computer program that controls the machine, and adding a second pump to the output. The resulting machine is the Type 5 machine. By May 1997, nearly all of the existing Type 2 machines had been converted to Type 5 machines.
10. On September 5, 2000, the Court heard cross-motions for summary judgment on whether the Type 5 machine infringed the '971 patent, and whether the Type 5 machine was an acceptable, noninfringing alternative to the '971 patent. Micro claimed that the Type 5 machine infringed on claims 63, 69, 70, and 93 of the '971 patent, all of which contained the terms "intermixing" and "slurry". The Court found that in arguments before the Federal Circuit, Micro had distinguished the '971 patent from prior art by narrowing its claim construction to cover positive intermixing and the creation of a homogeneous slurry. The Court held that a finding that forming any slurry of water and microingredients or any mixing of water and microingredients by a pump or the discharge line violates the '971 patent would broaden the claims of the '971 patent so as to cover known prior art. While the Federal Circuit did not explicitly find such a narrowing of claim construction, in light of prior art, such a narrowing was implicit in its finding of validity. See Micro Chemical v. Great Plains Chemical Co., 103 F.3d 1538, 1546 (Fed.Cir.1997).
11. The Type 5 machine does not have a mechanical mixer. While mixing of water and microingredients occurs as the two are pumped down the discharge line, there is no "positive intermixing." Furthermore, Lextron provided an analysis, conducted by Dr. Mary I. Wray, of the effluent output of a Type 5 machine showing that the slurry produced by the Type 5 machine is not homogeneous within the industry meaning of that word. Defendant's Motion for Summary Judgment, Exhibit I, June 21, 2000. As a result, the Court found that the Type 5 machine did not infringe on the '971 patent.
12. One of the traditional lost-profit analyses in infringement cases is derived from a Sixth Circuit case, Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir.1978). The Panduit court looked at: 1) the demand for the patented product, 2) the absence of acceptable noninfringing alternatives, 3) the patent holder's capability of exploiting the demand, and 4) the amount of profit the patent-holder would have made. Id. In a later case, the Federal Cicuit held that an acceptable substitute that was not on the market at the time of the infringement must be both noninfringing and have been available during the period of infringement. Grain Processing Corp. v. American Maize-Products Co., 185 F.3d 1341, 1356 (Fed.Cir.1999). Micro's motion for summary judgment concerned whether the Type 5 machine was an acceptable, noninfringing alternative to the '971 patent, arguing that the Type 5 machine was not available during the infringement period and that the Type 5 machine infringes upon the '971 patent and other patents.
13. As noted above, this Court held that the Type 5 machine did not infringe the '971 patent, and that any allegations of infringement concerning other patents were not properly before the Court. Addressing the availability of the Type 5 machine, the Court found that it was not unreasonable for Lextron to have waited until the Federal Circuit overturned this Court's finding of invalidity for the '971 patent before designing the Type 5 machine. In Grain...
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