Mitutoyo Corp. v. Central Purchasing, LLC
| Decision Date | 05 September 2007 |
| Docket Number | No. 2006-1343.,No. 2006-1312.,2006-1312.,2006-1343. |
| Citation | 499 F.3d 1284 |
| Parties | MITUTOYO CORPORATION, Mitutoyo America Corp., and Hexagon Metrology Nordic AB, Plaintiffs-Cross Appellants, v. CENTRAL PURCHASING, LLC, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Federal Circuit |
Marc S. Friedman, Sills Cummis Epstein & Gross P.C., of New York, New York, argued for defendant-appellant. Of counsel was Mark J. Rosenberg.
Before MAYER, RADER and MOORE, Circuit Judges.
Central Purchasing, LLC ("Central"), appeals the judgment of the United States District Court for the Northern District of Illinois, granting summary judgment of infringement of U.S. Patent No. 4,743,902 ("'902 patent") in favor of Mitutoyo Corporation and Hexagon Metrology Nordic AB (collectively "Mitutoyo"), and awarding damages using a 29.2% royalty rate and including sales of the alleged infringing goods by both Central and Harbor Freight Tools USA, Inc. ("HFTUSA"), in the royalty base. Mitutoyo Corp. v. Central Purchasing, LLC, No. 03-CV-990, 2006 WL 644482, 2006 U.S. Dist. LEXIS 9301 (N.D.Ill., Mar. 9, 2006) ("Damages Order"); Mitutoyo Corp. v. Central Purchasing, LLC, No. 03-CV-990, 2005 WL 1026710, 2005 U.S. Dist. LEXIS 8280 (N.D.Ill., April 20, 2005) ("Liability Order"). Mitutoyo and Mitutoyo America Corporation ("MAC") cross-appeal the trial court's judgment, dismissing their willful infringement claim, dismissing MAC as a party, and denying lost profit damages. Mitutoyo Corp. v. Central Purchasing, LLC, No. 03-CV990 (N.D.Ill., Apr. 21, 2006) ("Willful Infringement Order"); Damages Order; Liability Order. Because the trial court erred by dismissing Mitutoyo's willful infringement claim and including HFTUSA's sales in the royalty base, but rendered a proper judgment in all other respects, we affirm-in-part, reverse-in-part, and remand.
Mitutoyo owns the '902 patent, which recites a device for electronically measuring the movement of one object in relation to another, e.g., the movement of a caliper's slide relative to its scale. On February 10, 2003, Mitutoyu and MAC filed suit against Central for patent infringement and breach of contract. They alleged that Central's sale of digital calipers manufactured by Guanglu Measuring Instrument Company, Ltd, infringed the '902 patent, both literally and willfully, and breached their 1994 settlement agreement—which resolved a 1992 patent infringement dispute, also involving the '902 patent, and provided that Central would refrain from any future importation or sale of infringing products. Central counterclaimed for invalidity, unenforceability, and non-infringement. In 1995, however, Central had brought a declaratory judgment action against Mitutoyo, alleging that the '902 patent was invalid and unenforceable; and it lost. Accordingly, under principles of res judicata, the trial court granted summary judgment on validity and enforceability in favor of Mitutoyo; Central does not challenge this ruling.
With respect to infringement, the parties' dispute turned only on whether the accused devices meet the "phase position identification" limitation of claim 1 of the '902 patent.* The parties stipulated to the following construction of "phase position": Based on this claim construction and Central's admissions, the trial court found that Central literally infringed, because its devices determined "phase angle" in accordance with claim 1. Liability Order, 2005 WL 1026710, *6, 2005 U.S. Dist. LEXIS 8280, at *18-19. When calculating the phase angle, however, Central's calipers do not directly compare the received signal to the supply signal, but rather compare the received signal to a reference signal, which is generated from the same clock as the supply signal. Therefore, the trial court necessarily concluded, although without explicitly so stating, that Central infringes under the stipulated claim construction, because the "phase position identification" limitation is met regardless of whether the phase angle is ascertained via a direct or an indirect comparison of the received signal to the supply signal.
In light of the infringement finding, the trial court also found Central liable for breach of contract. Id. at 2005 WL 1026710, *6-7, 2005 U.S. Dist. LEXIS 8280, at *21. To the extent that it is liable for infringement, Central does not dispute breach of contract liability. However, the trial court found that Mitutoyo had insufficiently pled, and failed to properly prosecute, its claim for willful infringement. Accordingly, but without citing any authority as a basis for its action, it dismissed the willfulness claim and denied a jury trial on the issue. Willful Infringement Order.
Next, the trial court found that MAC was not a proper party to the action, because it concluded that it lacked standing. Although MAC is the exclusive distributor of Mitutoyo products in the United States, Mitutoyo admitted that it allowed other parties, namely General Tool Corp., to sell products covered by the '902 patent in the United States. The trial court, therefore, concluded that MAC did not possess the exclusive right to sell in the United States under the '902 patent, as required to maintain licensee standing under Ortho Pharmaceutical Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1032 (Fed.Cir.1995). Damages Order, 2006 WL 644482. *3-4, 2006 U.S. Dist. LEXIS 9301, at *10-11.
With respect to damages, the trial court found that Mitutoyo was not entitled to a lost profit award, either for infringement or breach of contract, because it failed to establish any market overlap between its goods and Central's. Whereas Mitutoyo's calipers retailed from $40.00 to $397.00 and have advanced functionality, Central's calipers sold from $19.12 to $48.98 and have more basic features. Given these facts and Mitutoyo's failure to introduce any direct evidence of market overlap, the trial court accepted Central's argument that its calipers were directed exclusively at "do-it-yourselfers" who, in the absence of its products, would have either purchased another low-end caliper or not purchased one at all. Id. at 2006 WL 644482, *4-6, 2006 U.S. Dist. LEXIS 9301, at *12-16. The trial court did, however, award Mitutoyo damages based on a reasonable royalty. It determined that 29.2% was an appropriate rate based on its conclusion that Mitutoyo would not have accepted less than its profit margin of 29.2% and Central's anticipated profit margin was 70%. But, without offering any explanation for its decision, it used both Central's and HFTUSA's sales of the accused calipers in calculating the royalty base. Id. at 2006 WL 644482, *7, 2006 U.S. Dist. LEXIS 9301, at *20. While the two companies have a strong business relationship, they are independent corporate entities, with different owners, and Mitutoyo introduced no evidence that Central would have otherwise agreed to pay royalties based on HFTUSA's sales.
Central appeals as to infringement and the royalty; Mitutoyo and MAC cross-appeal as to willful infringement, MAC's standing, and lost profits. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
Beginning with infringement, we address each of the parties' challenges in turn.
We review the trial court's grant of summary judgment of infringement de novo. OddzOn Prods., Inc. v. Just Toys, 122 F.3d 1396, 1401 (Fed.Cir.1997). Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); AquaTex Indus., Inc. v. Techniche Solutions, 419 F.3d 1374, 1379 (Fed.Cir. 2005). Thus, summary judgment may be granted when no "reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Because Central admits that its products meet all other limitations of claim 1, the only question is whether the trial court properly applied the parties' stipulated claim construction for the "phase position identification" limitation to the undisputed facts of this case. We conclude that it did.
Central argues that it does not literally infringe because the signal recorded by the receiving electrode in its devices is a sinusoidal wave, whereas the signal generated by the supply electrode is a square wave. Because these waves cannot be directly compared to determine the phase angle between them, it argues that its accused devices do not satisfy the "phase position identification" limitation. This argument, however, is without merit, and is based on an impermissibly narrow understanding of what claim 1 and the stipulated claim construction embody.
Neither the stipulated claim construction nor the language of claim 1 require calculation of the phase angle by direct comparison of the supply signal and the received signal. Instead, they merely require the phase angle to be calculated based on some comparison of those two signals, even an indirect one. Therefore, a reference signal, generated by the same signal clock as the supply signal, and which has not undergone any phase shifting, provides an appropriate basis from which to calculate phase angle based on a comparison between that reference signal and the received signal. Moreover, this understanding of the "phase position identification" limitation is consistent with the specification, which expressly provides for determination of the phase angle via an indirect comparison of the supply signal and the received signal using a reference signal. '902 patent, col. 5, ll. 22-66; see also Phillips v....
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