Odetics, Inc. v. Storage Technology Corp.

• Decision Date: 17 July 1998
• Docket Number: No. Civ.A. 95-881-A.,Civ.A. 95-881-A.
• Citation: 14 F.Supp.2d 800
• Parties: ODETICS, INC., Plaintiff, v. STORAGE TECHNOLOGY CORP., et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

14 F.Supp.2d 800

ODETICS, INC., Plaintiff, v. STORAGE TECHNOLOGY CORP., et al., Defendants.

No. Civ.A. 95-881-A.

United States District Court, E.D. Virginia, Alexandria Division.

July 17, 1998.

Richard1 A. Simpson, Ross, Dixon & Masback, LLP, Los Angeles, CA, Vincent J. Belusko, Graham & James LLP, Los Angeles, CA, for plaintiff.

Craig C. Reilly, Richards McGettigan Reilly & West, PC, Alexandria, VA (Nanda K. Alapati, E. Bradley Gould, Pennie & Edmonds LLP, Washington, DC, Jon R. Stark, Mark R. Scadini, Pennie & Edmonds LLP, Pala Alto, CA, George C. Summerfield, Rader Fishman & Grauer, PLLC, Bloomfield Hills, Michigan, Herbert F. Schwartz, Mark H. Bloomberg, Fish & Neave, New York City, of counsel), for Storage Technology, defendant.

Craig C. Reilly, Richards McGettigan Reilly & West, PC, Alexandria, VA (Ron E. Shulman, Nina F. Locker, Roger J. Chin, Wilson Sonsini Goodrich & Rosati, PC, Pala Alto, CA, of counsel), for Visa International, defendant.

Thomas J. Scott, Jr., Scott L. Robertson, Hunton & Williams, Washington, DC, for Crestar Bank, defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

This patent infringement action is again before the Court following a jury's verdict of wilful literal infringement.¹ Two damages questions are addressed here: (i) whether the patentee, based on the facts of this case, should be awarded enhanced damages in addition to the reasonable royalty already awarded by the jury, and (ii) whether the Court's earlier laches finding, which truncated the period for which the patentee could recover damages, should be vacated in light of the jury's finding that the infringer wilfully infringed the patent, i.e., that the infringer acted inequitably. For the reasons that follow, both questions must be answered in the negative.

I

Plaintiff Odetics, Inc. is the owner of United States Letters Patent No. 4,779,151, issued on October 18, 1988. The '151 patent teaches a system for transporting cassette tapes from a storage library to a tape player. By way of example, the preferred embodiment contains an octagonal housing (often referred to as a silo) inside of which are seven columns of tapes and one column of tape drives, or tape players. Within this housing is a robotic arm that retrieves the tapes from their storage bins and places them into the tape drives. Claims 9 and 14 of the '151, the claims-in-suit, describe a "rotary means" that (i) allows a cassette to be loaded from outside the library, for example by a human operator, and (ii) then rotates to allow the cassette to be accessed by the robotic manipulator located inside the silo.

Storage Technology Corp. ("STK") manufactures and sells certain library systems that Odetics alleged infringed the '151 patent. STK's systems are used to store and play computer data tapes. The accused STK systems contain "pass-thru ports," devices that connect multiple libraries or silos to each other so that tapes can be passed from one silo to another. Specifically, the tapes are placed in the pass-thru port in one library, and the pass-thru port then translates and rotates to deliver the tape to a second, adjacent library.

Odetics filed this patent infringement action seeking damages from the date the '151 patent issued to the present. The crux of Odetics's infringement allegation was that the rotary means element of claims 9 and 14 read on STK's pass-thru ports. Early in the litigation, STK filed a motion for summary judgment on the ground of laches. This Court found that Odetics had unreasonably and inexcusably delayed in filing this action, and therefore granted the motion. Accordingly, Odetics was precluded from recovering damages for any infringement occurring prior to June 29, 1995, the date this action was filed. See Odetics, 919 F.Supp. 911.

Thereafter, the case was tried twice. The first jury found that STK's accused devices did not infringe the '151 patent. Odetics appealed this finding, but elected not to appeal the adverse laches determination; STK, for its part, appealed only one aspect of the laches determination, namely the Court's ruling that the finding of laches did not preclude Odetics from obtaining an injunction with respect to infringing systems sold during the laches period, that is, sold prior to the filing of the complaint.² On appeal, the Federal Circuit vacated the jury's verdict on the ground that this Court's original claim construction was erroneous. See Odetics, 1997 WL 357598. Thus, the matter was tried to a second jury using the claim construction mandated by the Federal Circuit's opinion. The second jury found infringement by STK, concluded that a 4% running royalty rate was reasonable, and awarded Odetics $70.6 million in damages for STK's manufacture and sale of the infringing products since June 29, 1995. The jury further found that STK wilfully infringed the patent.³

Given this verdict, and specifically the finding of wilfulness, Odetics has made two post-verdict motions that are at issue here.⁴ First, it has moved for an award of enhanced damages pursuant to 35 U.S.C. § 284. Second, it has moved the Court to reconsider its prior laches ruling in light of the jury's conclusion that STK wilfully infringed the '151 patent. Each of these motions has been argued fully, both orally and in writing, and thus each is now ripe for disposition.

II

A patentee is entitled to up to treble damages upon a finding of wilfulness. See 35 U.S.C. § 284; Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed.Cir.1992).⁵ A finding of wilfulness, however, does not mandate enhanced damages, much less treble damages. See Read, 970 F.2d at 826; Good-wall Constr. Co. v. Beers Constr. Co., 991 F.2d 751, 758 (Fed.Cir.1993). Instead, enhancement of damages is within the discretion of the district court and is informed by the totality of the circumstances. See State Indus., Inc. v. Mor-Flo Indus., Inc., 948 F.2d 1573, 1576 (Fed.Cir.1991). If a district court declines to increase the damages award, it must provide its reasons for doing so, taking care not to second-guess or contradict the jury's findings. See Jurgens v. CBK Ltd., 80 F.3d 1566, 1572 (Fed.Cir.1996).

The Federal Circuit has established a nine-factor test for determining whether enhanced damages are warranted, and if so, in what amount. See Read, 970 F.2d at 827-28. This test is designed to evaluate the egregiousness of the infringer's conduct, and thus contains both aggravating and mitigating factors. See Read, 970 F.2d at 826; see also Graco, Inc. v. Binks Mfg. Co., 60 F.3d 785, 794 n. 4 (Fed.Cir.1995) ("The amount of enhancement must bear some relationship to the level of culpability of the conduct."). The nine factors are listed below, with an analysis of each as it applies to the instant case.

1. Whether the infringer deliberately copied the invention

Odetics has never alleged that STK copied the invention claimed in the '151 patent.

2. Whether the infringer investigated the scope of the patent and formed a good-faith belief that it was invalid or not infringed

The jury's finding of wilfulness mandates a conclusion that STK did not have a good-faith belief in noninfringement. See Jurgens, 80 F.3d at 1572 (holding that district courts are bound by jury's determination of wilfulness). There was strong evidence, however, of a good-faith belief in invalidity. At the first trial, STK introduced a videotape showing that a prototype similar to the accused device existed prior to the conception date of the '151. Such evidence could certainly form the basis for a good-faith and meritorious argument for invalidity under 35 U.S.C. § 102(g).⁶

3. The infringer's behavior as a party to the litigation

There is no basis in the record for concluding that STK's conduct was either unethical or inappropriate at any point during this litigation.

4. The infringer's size and financial condition

Odetics has submitted a newspaper article that indicates (i) that STK's stock, which was trading at about seventy-five dollars, dropped only six cents the day after the jury's verdict, and (ii) that, according to an industry analyst, even treble damages would cause only a five- to fifteen-cent drop in STK's share price. These facts suggest that an enhanced damages award would not significantly jeopardize STK's financial well-being.

5. The closeness of the case

Here, the case was certainly a close one; the jury just as easily could have come back with a verdict of noninfringement based on the evidence it heard.⁷ In this regard, it is worth noting that Odetics's motions for summary judgment of infringement and for judgment as a matter of law were denied.

6. The duration of the infringer's conduct

Although the damages period dates back only to 1995, the infringement began in 1989. STK's unlawful conduct, then, spanned almost ten years; however, because Odetics was guilty of laches for a significant part of that period, the duration of the infringement does not weigh as heavily against STK as it otherwise might.

7. Remedial action by the infringer

STK did not take any remedial action once it was notified of the allegation of infringement.

8. The infringer's motivation for harm

There is no evidence that STK sought to harm Odetics; indeed, the inventor of the rotary means claimed in the '151 patent admitted that STK and Odetics do not compete with each other.

9. Whether the infringer attempted to conceal its infringement

STK widely publicized the accused devices. Even Odetics's Vice President of Corporate Development acknowledged that he knew of the STK products shortly after they were introduced to the market.

In sum, the following factors weigh in STK's favor: (i) there was no allegation of copying; (ii) STK had a good-faith belief of invalidity; (iii) STK engaged in no litigation misconduct; (iv) the case was close; (v) there was no motivation on STK's part to harm Odetics; and (vi) there was no attempt to conceal the infringement. And the following factors weigh in Odetics's...