Nickson Industries, Inc. v. Rol Mfg. Co., Ltd.
| Decision Date | 17 May 1988 |
| Docket Number | No. 87-1644,87-1644 |
| Citation | 6 USPQ2d 1878,847 F.2d 795 |
| Parties | , 6 U.S.P.Q.2d 1878 NICKSON INDUSTRIES, INC., Plaintiff-Appellant, v. ROL MANUFACTURING CO., LTD., Rol Manufacturing (Canada), Ltd. and the Rol Manufacturing Company of America, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Federal Circuit |
Peter L. Costas, Costas and Montgomery, P.C., Hartford, Conn., argued for plaintiff-appellant.
Christopher B. Fagan, Fay, Sharpe, Beall, Fagan, Minnich & McKee, Cleveland, Ohio, argued for defendants-appellees.
Before MARKEY, Chief Judge, FRIEDMAN, Circuit Judge, and SKELTON, Senior Circuit Judge.
Appeal from a judgment of the United States District Court for the District of Connecticut, Nos. H-81-709 (MJB) and H-83-229 (MJB) (August 24, 1987), awarding Nickson Industries, Inc. (Nickson) $34,855.79 in damages for patent infringement. We vacate the district court's partial denial of prejudgment interest and remand for reconsideration of prejudgment interest and for consideration of Nickson's request for an injunction. We affirm the judgment in all other respects.
Nickson owns United States Patent Nos. 4,004,768, on a tailpipe hanger (hanger patent), and 4,209,155, on a tailpipe hanger bracket (bracket patent). On September 22, 1981, Nickson sued Rol Manufacturing Co., Ltd., a Quebec corporation, in the District of Connecticut, for infringement of both patents. Nickson later included Rol Manufacturing (Canada), Ltd., the successor of Rol Manufacturing Co., Ltd. (collectively Rol Canada).
On September 8, 1982, Nickson sued Rol Manufacturing Co. of America, Inc. (Rol America), U.S. distributor for Rol Canada, in the Middle District of Florida. In 1983, the Florida action was transferred and consolidated with the Connecticut action.
Rol Canada and Rol America (collectively, Rol) stipulated infringement of both patents and validity of the bracket patent. 1
After an August 1983 trial on the validity and enforceability of the hanger patent, the district court, in a May 1984 opinion, held the hanger patent invalid under 35 U.S.C. Sec. 103, Nickson guilty of inequitable conduct, and the case exceptional under 35 U.S.C. Sec. 285. Nickson Indus., Inc. v. Rol Mfg. Co., 224 USPQ 993 (D.Conn.1984). In an unpublished opinion, this court reversed and remanded. 765 F.2d 160 (Fed.Cir.1985) (per curiam), cert. denied, 474 U.S. 843, 106 S.Ct. 131, 88 L.Ed.2d 107 (1985).
Having conducted a damages trial on November 25, 1986, the district court issued a July 13, 1987 memorandum opinion. Noting that Rol's sales figures for part number TPH-20 included infringing and noninfringing hangers, the court said:
Although no business records distinguish between the infringing and noninfringing hangers, Michael Haller, one of the officers of both Rol Canada and Rol America, prepared an analysis of material usage to estimate the proportion of TPH-20 sales attributable to infringing hangers from July 1, 1979 to September 30, 1981. That analysis matches purchases of a certain material used only for manufacture of TPH-20s and several other parts with sales invoices for those parts and with amounts of material used to produce those parts. Based on his analysis, Haller estimates that about 41% of the TPH-20s were infringing hangers.
The district court awarded Nickson a reasonable royalty of 8.8% on 41% of Rol's gross invoice sales. The royalty rate is that paid by Nickson's established licensees.
The district court found Rol's infringement nonwillful. Michael Haller's testimony was that Rol decided to proceed with manufacture because it believed the hanger patent to be invalid. The court said:
There is no evidence that Haller or Rol held this belief in bad faith or without good cause, especially in light of the fact that this court was persuaded after careful consideration of the facts and law that [the hanger patent] was invalid for obviousness.
The court also credited Michael Haller's testimony that Rol was not aware of Nickson's claim of infringement until June 11, 1981. Based on its finding of nonwillfulness, the district court denied increased damages under 35 U.S.C. Sec. 284 and attorney fees under 35 U.S.C. Sec. 285.
Respecting prejudgment interest, the court said, "Since this case does not involve circumstances which would justify withholding of prejudgment interest, it shall be awarded." Nevertheless, and without explanation, the court awarded prejudgment interest only "until the date this suit was filed." The court did not compound interest.
The district court directed the parties to file a stipulation "containing the necessary calculations to arrive at the precise amount of damages consistent with these findings and conclusions." On receipt of that stipulation, the court entered a judgment on August 24, 1987, awarding Nickson $34,855.79.
The court nowhere mentioned Nickson's request that Rol be enjoined from further infringement.
I. Whether the district court committed reversible error in its award of damages.
II. Whether the issue of prejudgment interest must be remanded.
III. Whether the issue of Nickson's request for an injunction must be remanded.
OPINIONThe methodology of assessing and computing damages under 35 U.S.C. Sec. 284 is within the sound discretion of the district court. TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 898, 229 USPQ 525, 526 (Fed.Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 183, 93 L.Ed.2d 117 (1986). To prevail on appeal, Nickson must convince us that the district court abused its discretion by basing its award on clearly erroneous factual findings, legal error, or a manifest error of judgment. PPG Indus., Inc. v. Celanese Polymer Specialities Co., 840 F.2d 1565, 1571-72, 6 USPQ2d 1010, 1015-16 (Fed.Cir.1988) (Bissell, J., additional views); Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1542, 3 USPQ2d 1412, 1415 (Fed.Cir.1987).
Under 35 U.S.C. Sec. 284, Nickson is entitled to receive from Rol "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty...." Where an established royalty exists, it will usually be the best measure of what is a "reasonable" royalty. Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078, 219 USPQ 679, 682 (Fed.Cir.1983); accord Tektronix, Inc. v. United States, 552 F.2d 343, 347, 213 Ct.Cl. 257, 264-65, 193 USPQ 385, 390 (1977) (), cert. denied, 439 U.S. 1048, 99 S.Ct. 724, 58 L.Ed.2d 707 (1978). Nickson does not argue that it had proved actual damages, or that a reasonable royalty is not a proper basis for measuring damages in this case. Nickson simply challenges the royalty rate employed.
Nickson says use of the established royalty rate makes the award inadequate. Yet Nickson points to no evidence that would require employment of a different royalty rate. Similarly, Nickson's argument that the rate should be applied to Rol's selling price plus the royalty amount, is not based on evidence but merely reflects disagreement with the district court's approach. Such disagreement does not establish an abuse of discretion. TWM, 789 F.2d at 899, 229 USPQ at 527.
Nickson correctly states that a royalty "reasonable" under 35 U.S.C. Sec. 284 may be greater than an established royalty. Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 617, 222 USPQ 654, 664 (Fed.Cir.) (Bio-Rad I ), cert. denied, 469 U.S. 1038, 105 S.Ct. 516, 83 L.Ed.2d 405 (1984). For example, a higher figure may be awarded when the evidence clearly shows that widespread infringement made the established royalty artificially low. Trio Process Corp. v. L. Goldstein's Sons, Inc., 533 F.2d 126, 129-30, 189 USPQ 561, 563-64 (3d Cir.1976). Nickson, however, alleges no such circumstances and has pointed to no such evidence.
Challenging as clearly erroneous the district court's finding that 59% of Rol's sales of TPH-20 were noninfringing, Nickson says the document on which the district court relied, PX-1009, is not credible, and "was never sponsored by the ROL companies as a [sic] allocation of the sales between infringing and non-infringing hangers either at the trial or at the hearing on damages."
Though Rol prepared the report in PX-1009, Nickson introduced it into evidence. Rol need not, therefore, have "sponsored" it. Nickson says it was introduced only for a limited purpose (to establish discrepancies in sales reported by Rol), and that Rol's post-trial reliance on PX-1009 for the truth of its contents unfairly "ambushed" Nickson. Nothing in the record, however, shows that Nickson introduced PX-1009 for a limited purpose.
The record reveals the following exchange:
The second problem is that the document we have been given is inconsistent among themselves, and we believe we do not have all sales by Rol Canada reported.
We discern no "ambush" or unfairness in Rol's post-trial reliance on PX-1009 as showing reasonable estimates of infringing and noninfringing sales, or in the district court's reliance on PX-1009 for that purpose.
Nickson says the district court committed legal error by placing on Nickson "the burden of disproving" the allocation set forth in PX-1009, an exhibit too "flaw-riddled" to be credible, and that it must be assumed that 100% of TPH-20 sales were infringing. We...
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