Nordock, Inc. v. Sys., Inc.
| Decision Date | 21 November 2017 |
| Docket Number | Case No. 11-CV-118 |
| Parties | NORDOCK, INC., Plaintiff, v. SYSTEMS, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Nordock, Inc. holds a design patent regarding a "lip and hinge plate for a dock leveler." U.S. Patent No. D579,754 (the 'D754 Patent). When a semi-trailer is backed into a loading dock, a dock leveler bridges the gap between the floor of a loading dock and the bed of a semi-trailer. (ECF Nos. 258-1, ¶ 5; 221 at 17.) A dock leveler allows people and equipment such as forklifts to easily pass between the building and the trailer when loading or unloading cargo onto or from the trailer. (Id.)
The lip and hinge plate is the portion of the dock leveler that actually spans any gap between the building and the trailer and makes contact with the trailer bed. (See ECF Nos. 164 at 12, 13, 22-23, 64; 221 at 15.) When not in use, the lip normally hangs down perpendicular to the deck of the dock leveler; when in use, it comes up to be generally parallel with the deck. (ECF No. 164 at 23.)
Nordock filed this action alleging that Systems, Inc. was selling products that infringed the 'D754 Patent. On March 26, 2013, the jury returned a verdict in favor of Nordock. (ECF No. 172.) Concluding that Systems had no profit on the sales of its infringing dock levelers, the jury awarded Nordock $46,825 as a reasonable royalty. (ECF No. 172 at 3.)
Both sides appealed. The Court of Appeals for the Federal Circuit concluded that there was no evidence to support the jury's conclusion that Systems did not have any profit on the sales of its infringing dock levelers, Nordock, Inc. v. Sys., Inc., 803 F.3d 1344, 1356 (Fed. Cir. 2015), and remanded the matter for a new trial on damages. Id. The Federal Circuit stated that at that new trial damages under 35 U.S.C. § 289 must be based on the profit from the sale of the entire dock leveler and not just the profit attributable to the lip and hinge plate. Nordock, 803 F.3d at 1355.
The United States Supreme Court granted Systems's request for review, summarily reversed, and remanded the case to the Federal Circuit in light of its recent decision in Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429, 196 L.Ed.2d 363 (2016). Sys., Inc. v. Nordock, Inc., 137 S. Ct. 589, 196 L.Ed.2d 471 (2016).
In Samsung Apple alleged that Samsung infringed its design patents for mobile phones. The design patents covered "a rectangular front face with rounded edges and agrid of colorful icons on a black screen." Id. at 431. A jury found that several Samsung smartphones infringed Apple's design patents and awarded Apple nearly $400 million in damages--the entire profit Samsung made from its sales of the infringing smartphones.
On appeal Samsung argued "that the profits awarded should have been limited to the infringing 'article of manufacture'" (for example, the case of the Samsung smartphone) and not the entire smartphone. Apple Inc. v. Samsung Elecs.Co., 786 F.3d 983, 1002 (2015). The Federal Circuit rejected that argument, reasoning that limiting the damages award in this manner was not appropriate because the "innards of Samsung's smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers." Id.
The Supreme Court disagreed with the Federal Circuit's conclusion that the article of manufacture must always be the product sold to consumers. It concluded that the term "article of manufacture" as used in § 289 "encompasses both a product sold to a consumer and a component of that product." Samsung, 137 S. Ct. at 434. However, the Supreme Court did not articulate how a court is to identify the "article of manufacture."
Following the Supreme Court's decision remanding Nordock to the Federal Circuit, Systems, 137 S. Ct. 589, the Federal Circuit in a brief per curiam opinion remanded the case to this court for a new trial on damages. Nordock, Inc. v. Sys., Inc., 681 F. App'x 965 (Fed. Cir. 2017). The Federal Circuit stated, "The trial court will alsohave the opportunity to consider the parties' arguments with respect to the relevant 'article of manufacture' in the first instance." Id. at 966.
Following the death of the prior presiding judge, the case was randomly assigned to this court. All parties consented to this court's jurisdiction. Thus, it is now for this court to decide how the article of manufacture should be determined. The issue comes before the court on the parties' cross motions for partial summary judgment.
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Factual disputes are 'material' only when they 'might affect the outcome of the suit under the governing law'" and "'genuine' only 'if the evidence is such that a reasonable jury could return a verdict for the [nonmovant].'" Oest v. Ill. Dep't of Corr., 240 F.3d 605, 610 (7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "The burden on the moving party may be discharged by demonstrating 'that there is an absence of evidence to support the nonmoving party's case.'" Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). "The controlling question is whether a reasonable trier of fact could find in favor of the non-moving party on the evidence submitted in support of and [in] opposition to the motion for summary judgment." White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016).
In support of its motion for summary judgment Nordock submitted 75 proposed findings of fact (ECF No. 258-1) supported by voluminous documentation (ECF Nos. 258-3 — 261-15; 268-1 — 268-9; 266-1 — 266-3). Systems requested "that it be relieved from responding to each of Nordock's proposed statements of fact at this time and that, if the Court believes Nordock's statements are material or otherwise potentially dispositive, it be given a meaningful opportunity to depose these witnesses before responding specifically and individually to each of these statements under Local Rule 56(b)(2)(B)." (ECF No. 269 at 11.) Given the posture of this case and the context of the present dispute, where the foremost issue is determining the test that should apply for identifying the article of manufacture, the court grants this unusual request. Many of Nordock's proposed findings of fact are not material. Others are not properly proposed findings of fact but rather represent legal conclusions. And others are not properly supported by appropriate citations. Of those material proposed findings of fact that are properly presented, the court does not find that any is reasonably subject to dispute. Therefore, as referenced below, the court will consider certain of the relevant proposed findings of fact for purposes of this motion.
Systems argues that, in the absence of clarification from the Supreme Court or the Federal Circuit as to which party bears the burden of proof on what constitutes thearticle of manufacture, "the ordinary rule that a plaintiff bears the initial burden of proof on all issues, including the issue of damages, should not be disturbed." (ECF No. 262 at 9.) Nordock argues that it should be presumed that the article of manufacture is the product that is sold, and the burden should be placed on the alleged infringer to prove that the article of manufacture is something less than the entire product. (ECF No. 258 at 18.)
The parties refer to the "burden of proof," but that term can encompass both the burden of persuasion and the burden of production. Cf. Director v. Greenwich Collieries, 512 U.S. 267, 272 (1994). For the sake of clarity, the court will refer to these concepts separately.
The plaintiff normally bears the burden of persuasion on all issues, including damages. See Schaffer v. Weast, 546 U.S. 49, 56 (2005); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009); Smithkline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). The identification of the article of manufacture is part and parcel to damages under § 289. Thus, the court concludes that the plaintiff bears the burden of persuasion with respect to identifying the article of manufacture and proving the defendant's total profit from that article of manufacture. Apple, 2017 U.S. Dist. LEXIS 177199, at *90.
However, once the plaintiff meets its initial burden of production with respect to the article of manufacture and the defendant's total profit on that article, if thedefendant contends that the article of manufacture is something else, the defendant has the burden to produce evidence as to this alternative article of manufacture. The defendant also has the burden to produce evidence as to any deductions it believes are appropriate from the total profit identified by the plaintiff. Apple, 2017 U.S. Dist. LEXIS 177199, at *96-97 (citing Henry Hanger & Display Fixture Corp. of Am. v. Sel-O-Rak Corp., 270 F.2d 635, 643 (5th Cir. 1959); Rocket Jewelry Box, Inc. v. Quality Int'l Packaging, Ltd., 250 F. Supp. 2d 333, 341 (S.D.N.Y. 2003) vacated in part on other grounds, 90 F. App'x 543 (Fed. Cir. 2004) (unpublished); Bergstrom v. Sears, Roebuck & Co., 496 F. Supp. 476, 497 (D. Minn. 1980).
Although § 289 does not explicitly impose any burden on the defendant, this shift in the burden of production is consistent with the disgorgement of profits in other contexts. See SEC v. First City Fin. Corp., 281 U.S. App. D.C. 410, 890 F.2d 1215, 1232 (1989); SEC v. Teo, 746 F.3d 90, 112 (3d Cir. 2014) (). Similar burden shifting is countenanced with respect to...
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