Oiness v. Walgreen Co.

• Decision Date: 09 August 1991
• Docket Number: Civ. A. No. 90-F-727.
• Citation: 774 F. Supp. 1277
• Parties: Phillip OINESS, an individual residing in the State of Washington, and Sun Products Group, Inc., a Washington corporation, Plaintiffs, v. WALGREEN COMPANY, an Illinois corporation, Atico International Incorporated, a Delaware corporation, formerly known as J & M Enterprises, d/b/a Atico, and New Atico International, Ltd., a Delaware corporation (a wholly owned subsidiary of Atico International Incorporated) d/b/a New Atico and a/k/a Atico, Defendants.
• Court: U.S. District Court — District of Colorado

774 F. Supp. 1277

Phillip OINESS, an individual residing in the State of Washington, and Sun Products Group, Inc., a Washington corporation, Plaintiffs, v. WALGREEN COMPANY, an Illinois corporation, Atico International Incorporated, a Delaware corporation, formerly known as J & M Enterprises, d/b/a Atico, and New Atico International, Ltd., a Delaware corporation (a wholly owned subsidiary of Atico International Incorporated) d/b/a New Atico and a/k/a Atico, Defendants.

Civ. A. No. 90-F-727.

United States District Court, D. Colorado.

June 28, 1991.

Order on Motion to Alter or Amend August 9, 1991.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

James A. Lowe, James A. Lowe, P.C., Duane Burton, Denver, Colo., for plaintiffs.

Robert E. Benson, Gregg I. Anderson, Holland & Hart, Denver, Colo., Jerome M. Berliner, Ostrolenk, Faber, Gerb & Soffen, New York City, Stephen A. Soffen, Ostrolenk, Faber, Gerb & Soffen, Washington, D.C., for defendants.

ORDER

SHERMAN G. FINESILVER, Chief Judge.

THIS MATTER comes before the court on several post-trial Motions: Defendants' Motion for Judgment Notwithstanding the Verdict and Plaintiffs' Motion for a New Trial on the Issue of Damages, and for Prejudgment Interest, Costs, Increased Damages, and Attorneys' Fees. By this Order we deny defendants' Motion for Judgment Notwithstanding the Verdict and plaintiffs' Motion for a New Trial on the issue of damages and for prejudgment interest and fees, and grant plaintiffs' request for increased damages based upon a finding of willful infringement.

This suit involves claims of infringement of United States Patent 4,544,203 (later reference 203) and conspiracy to infringe the same. Patent 203 involves a folding headrest product designed for use while reclining at the beach, the park, or other outdoor locations. The jury returned an unanimous special verdict in which it found that: (1) plaintiff Oiness owned the entire right, title, and interest in the patent in suit, (2) defendants infringed the patent, (3) the infringement was willful and deliberate, (4) the patent claims would not have been obvious to a person having ordinary skill in the pertinent art, and (5) defendants did not conspire to infringe the patent. The jury awarded $300,000.00 in actual damages for the infringement and denied exemplary damages. See Special Verdict Form, Appendix A. Judgment was entered on May 20, 1991. Execution of the judgment has been stayed.

As to legal and equitable issues not before the jury, the following includes and constitutes our findings of fact and conclusions of law as required by Fed.R.Civ.P. 52(a).¹ By this Order, we also consider and adjudicate the post-trial Motions.

Chronology of Events:

The patent in suit, No. 203, was issued on October 1, 1985 to Steven K. Younger and Rudolf A. Fiedelak. The patent is for a foldable headrest, which plaintiffs later marketed under the name Headchair.² All headrests marketed before issuance of the patent were marked "U.S. Patent Applied For." Headrests marketed after that date were stamped with a patent notice. Younger and Fiedelak were co-inventors of the product. Defendant Walgreen is a national drug store chain with approximately 1600 stores in 31 states. Forty stores are located in Colorado. Defendant Atico is a trading company which locates and supplies products for defendant Walgreen. Atico sourced the infringing headrest sold in the Walgreen stores.

Younger and Fiedelak formed Sun Global Enterprises, a Washington corporation, to market the Headchair. The product received a great deal of free publicity through magazine articles and television spots. On June 18, 1984, a Venture Capital Agreement was entered into by the co-inventors and other investors. The Agreement provided for an assignment of the Headchair patent by Younger and Fiedelak to Sun Global. In exchange, Younger and Fiedelak signed employment agreements with Sun Global. Testimony indicated that it was the intent of the signatories to the Venture Capital Agreement that all rights in the patent be assigned to Sun Global through the Venture Capital Agreement. The Headchair patent was the sole asset of the corporation.

In 1984, Sun Global entered into a license agreement with a Taiwanese manufacturer, Hyman Products Company. Hyman was to manufacture the Headchair for plaintiffs and thereby avoid the high production costs associated with domestic manufacturing. Hyman also made direct sales of the product. The license provided for a royalty of six percent. The license was, however, terminated in 1985.

Testimony indicated that a formal assignment of all patent rights was executed by Younger and Fiedelak in October 1985. This document was not produced at trial nor are its whereabouts known. The court specifically finds that both co-inventor's interests under the patent were assigned to Sun Global.

In 1985, Sun Global obtained a loan from plaintiff Oiness. The loan was secured by an interest in all of the assets of Sun Global. Sun Global later defaulted on the loan. In December 1985, the employment agreement between Sun Global and Fiedelak was terminated prematurely. Oiness commenced foreclosure on the assets and obtained an assignment of the patent in August, 1986. In January, 1986, Sun Global, a Washington corporation, was administratively dissolved by the Washington Secretary of State.

In June 1986, Oiness incorporated Sun Products Group, Inc., for the purpose of marketing the Headchair. Oiness, Younger, and Dr. George Mayon continued as investors in the new Sun entity. Oiness granted Sun Products an exclusive license under the patent. Sun Products continued to market the Headchair. Sun Products was administratively dissolved by the Washington Secretary of State in 1987.

In 1985 or 1986, an unidentified party approached a Walgreen buyer, John Cochran, with a sample headrest. The headrest was similar or identical to the Headchair product. It was packaged in a box bearing the identical photograph displayed on plaintiffs' box. Cochran gave the sample to Pat Ross, an Atico representative, for sourcing. Atico located a source for the product in Taiwan. The product was approved for sales and advertising by Walgreen. Testimony indicated that Walgreen did not conduct any inquiry into possible patent violations concerning the headrest.

In April 1986, Walgreen test marketed their headrest in Florida. The product was advertised nationally in April 1987 in a newspaper supplement distributed in all Walgreen market areas. The headrest was offered for sale at $.99. The headrest normally sold for between $1.49 and $1.69. Plaintiffs' Headchair was sold at a substantially higher price, usually around $5.00 or $6.00. The price differential resulted in a decrease in the perceived value of the product. Testimony by Walgreen officials indicated that Walgreen purchased approximately 170,000 headrests between 1986 and 1989. Walgreen's gross sales were approximately $200,000.00.

Immediately after viewing the April 1987 advertisement, Younger wrote a letter to the president and the general counsel of Walgreen identifying the claimed infringement. A follow-up letter was mailed to Walgreen from Sun Product's counsel. Walgreen notified Atico of the claimed infringement. Atico turned the matter over to their patent counsel, who determined that, in his opinion, the Walgreen product was noninfringing. The opinion was by no means conclusive or unequivocal. Some communication ensued, but the matter was not resolved. Plaintiffs filed suit in the present matter in April 1990.

Ownership of the patent:

Defendants maintain that judgment notwithstanding the verdict should be entered as neither Oiness nor Sun Products is a proper party to pursue the litigation. It is argued by defendants that plaintiff Oiness, as a mere co-owner of the patent, does not have standing to sue without joining the other co-owner, co-inventor Fiedelak. In response to a special interrogatory on factual issues, the jury found that Fiedelak had conveyed his ownership interest in the patent to Sun Global, Inc. Special Verdict Form, Question No. 2. The jury further found that Oiness was the present owner of the entire right, title, and interest in the patent. Special Verdict Form, Question No. 4. The court cannot say as a matter of law that these findings are not supported by the evidence. The Venture Capital Agreement between the investors of Sun Global Enterprises, Inc., included a provision for transfer of the patent to the company by both co-inventors. Plaintiffs' Exhibit 326. The document was signed by Steven Younger and Fiedelak. Testimony of Steven Younger, Phillip Oiness, and George Mayon, M.D., indicated that the Headchair product was the sole asset of the company, and that the parties to the Agreement believed that the patent had been assigned. Further, Younger testified that an assignment was executed by both Fiedelak and Steven Younger in October of 1985. The assignment was last seen in the possession of Fiedelak. There is adequate evidence to support the jury's conclusion that Fiedelak effectively transferred his interest in the patent to Sun Global. The interest in the patent was then transferred from Sun Global to Phillip Oiness and then to Sun Products. See Testimony of Steven Younger, Phillip Oiness.

Defendants further contend that Sun Products Group, Inc., is an improper plaintiff as the corporation was administratively dissolved in 1987. Defendants' Exhibit I. The current Sun Products entity was not formed until January 1991. Testimony of Phillip Oiness. Phillip Oiness, George Mayon, and Steven Younger are the directors and shareholders of both Sun Products entities. Testimony indicated that the shareholders had agreed that Oiness would be allowed to pursue the claim on behalf of the shareholders and the corporation. Testimony of Phillip Oiness; Testimony of George Mayon. Under Washington state law, the claims of a dissolved corporation can be brought by the...