Sealant Sys. Int'l, Inc. v. TEK Global S.R.L., Case No. 5:11-cv-00774-PSG

• Decision Date: 07 March 2014
• Docket Number: C/W Case No. 5:11-cv-01649-PSG,Case No. 5:11-cv-00774-PSG
• Court: U.S. District Court — Northern District of California
• Parties: SEALANT SYSTEMS INTERNATIONAL, INC. and ACCESSORIES MARKETING, INC., Plaintiffs, v. TEK GLOBAL S.R.L. and TEK CORPORATION, Defendants.

SEALANT SYSTEMS INTERNATIONAL, INC.and ACCESSORIES MARKETING, INC., Plaintiffs, v. TEK GLOBAL S.R.L. and TEK CORPORATION, Defendants.

Case No. 5:11-cv-00774-PSG

C/W Case No. 5:11-cv-01649-PSG

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

Dated: March 7, 2014

ORDER GRANTING-IN-PART

POST-TRIAL MOTIONS

(Re: Docket Nos. 243, 244, 245, 246 and 247)

Before the court in this patent case remain various post-trial motions. Accessories Marketing Inc. moves for (1) judgment as a matter of law that TEK's marking defense does not limit its damage recovery,¹ (2) supplemental damages and prejudgment interest,² (3) a permanent injunction³ and (4) attorney's fees.⁴ TEK Global S.R.L. and TEK Corporation(collectively, "TEK") in turn seek JMOL or a new trial based on (1) non-infringement of the asserted claims of U.S. Patent No. 6,789,581 ("the '581 patent"), (2) invalidity of the '581 pursuant to 35 U.S.C. §§ 102 and 103, (3) failure to prove damages, (4) failure to mark products and (5) remittitur.⁵ Each motion is opposed. The court appreciates the well-considered arguments presented by the parties - in their papers and at a hearing on these motions. After considering these arguments, the court GRANTS-IN-PART the motions, as set forth below.

I. BACKGROUND

AMI and Sealant Systems International, Inc. are California corporations engaged in the manufacture and sale of onboard tire repair kits. TEK is an Italian limited liability company involved in the same.⁶ On November 10, 2010, TEK initially sued AMI and SSI for infringement of U.S. Patent No. 7,789,110 ("the ' 110 patent") in the Southern District of New York. The '110 patent discloses "a kit for inflating and repairing inflatable articles, in particular, tires."⁷ The kit includes "a compressor assembly, a container of sealing liquid and connectors for connecting the container to the compressor assembly and to an inflatable article for repair or inflation."⁸ On February 18, 2011, AMI and SSI responded with suit against TEK in this district, seeking a declaratory judgment of noninfringement of the ' 110 patent. AMI and SSI moved successfully to transfer the New York case here⁹ and consolidate the two cases.¹⁰ AMI and SSI later amended their complaint to include an affirmative claim against TEK for infringement of the '581 patent.¹¹

In advance of trial, the parties moved for summary judgment on a number of key issues -certain motions were granted, others were denied.

A. Clear and Convincing Evidence Established the Asserted Claims of the '110 Patent Are Invalid as Obvious

In its summary judgment order, the court held that even with all genuine factual disputes resolved in TEK's favor, the record established by "clear and convincing evidence" that asserted claims 1-5, 11-15 and 21-31 of the ' 110 patent are "obvious in light of Eriksen, Bridgestone, and other prior art references."¹² Among other things, the court found that no reasonable jury could find other than that Bridgestone disclosed two key limitations, "a three-way valve" and "an additional hose." In light of the court's invalidity determination regarding the asserted claims of the '110 patent, the court denied-as-moot the parties' cross-motions on the issue of infringement of those same claims.¹³

B. The Asserted Claims of the '581 Patent Survived Summary Judgment

In that same summary judgment order, the court weighed TEK's motion for summary judgment that the '581 patent was anticipated by or, in the alternative, obvious in light of the prior art. Based on a variety of genuine issues of disputed fact, the court held that summary judgment of invalidity based on anticipation or obviousness was not warranted.¹⁴

1. A Genuine Dispute Existed Whether U.S. '282 Discloses "A Receptacle Formed in the Housing"

The patented apparatus described in claims 1-3, 8, 10, 11, 13, 15, 17, 21-24, 27-31, 34, 36, 40 and 43 of the '581 patent includes "a receptacle formed in said housing."¹⁵ The court construed this term as having its plain and ordinary meaning.¹⁶ The court further held that word "receptacle" connotes depth such that the device can receive a tire sealant container and provide for sealant to leave the container and enter the air flow path.¹⁷ Additionally, the court held the receptacle's function was "to connect to the flow of compressed air and to sealingly receive a container of sealant."¹⁸

The court found a genuine dispute of material fact as to whether U.S. Patent Publ. No. U.S. 2004/0173282 ("US '282") disclosed the receptacle required by the '581 patent. This dispute was drawn out through conflicting testimony from the parties' experts, Dr. King and Dr. Kazerooni. After considering this conflicting testimony, a "jury might properly conclude that due to the differences between the receptacles in the two inventions, a person skilled in the art would not have found" the'581 patent anticipated.¹⁹

2. A Genuine Dispute Existed Whether U.S. '282 Discloses the Claimed Port

Claims 27-28, 30-31, 37-41 and 45-47 all claim a port.²⁰ The court construed "port" to mean "an enclosure that may be formed within and as an integral part of the housing or a separate structure that sealingly receives air and/or tire sealant."²¹ Because of the conflictingtestimony presented on the sealing of the bottle of tire sealant and the presence of an intake and exhaust, the court held that AMI and SSI had raised "a triable issue of fact," regarding anticipation.²²

3. A Genuine Dispute Existed Whether U.S. '282 Discloses a Reservoir

Claim 42 requires a "reservoir formed in said housing in communication with said air flow path adapted to receive tire sealant."²³ The claim also states that "when said air compressor is activated and tire sealant is received in said reservoir, air from said air compressor is forced into said reservoir and pushes tire sealant out of said reservoir, into said air path, and into the tire."²⁴ Here, the court held that the testimony of Dr. King that "the hole in US '282 is not configured to receive sealant without leaking" the sealant was sufficient to create a genuine dispute as to whether U.S. '282 discloses a reservoir.²⁵

C. SSI Does Not Possess Standing To Seek Damages For Infringement of the '581 Patent

TEK next urged the court to hold that SSI lacked standing to seek infringement damages, because, unlike AMI, SSI is neither an owner nor an assignee of the '581 patent. In response, the court first observed the Federal Circuit has held that "a party has standing to receive damages only if it shows it has legal title to the patent - either by way of title to the entire patent, an undivided share of the entire patent, or exclusive rights to the patent in a specific geographical region of theUnited States."²⁶ After further observing that TEK's motion was essentially unopposed, the court concluded that "as agreed upon by the parties, only AMI has standing to seek damages from TEK on the '581 patent."²⁷

D. A Genuine Dispute Existed Whether AMI Could Claim Pre-Suit Damages

Relying on 35 U.S.C. § 287(a), TEK moved for summary judgment that AMI could not recover damages prior to the filing of this suit because they did not provide notice - actual or constructive - to TEK. Without addressing who bears the burden of proof on the issue, the court observed that "AMI and SSI stated in their interrogatory responses that their products do not practice the '581 patent."²⁸ The court further noted that where a patentee's products do not practice the product, no marking or notice obligation is triggered.²⁹ Because a reasonable jury could find that that neither AMI nor SSI practiced the '581 patent, summary judgment limiting damages based on the marking statute was not warranted.

E. The Jury Found Claims 27-31, 34, 38, 40 and 42 of the '581 Patent Valid and Infringed

On April 15, 2013, the court empanelled a nine-person jury to try all issues that remained ingenuine dispute.³⁰ AMI asserted sixteen claims at trial.³¹ At the close of the case both TEK and AMI brought Rule 50(a) motions. TEK moved for JMOL on the issues of infringement, validity, damages, marking and willfulness.³² AMI moved for JMOL on the issues of no anticipation, no willfulness, infringement and marking.³³ All Rule 50(a) motions were denied and the case was then submitted to the jury. Twelve claims were found infringed.³⁴ Four were invalidated as anticipated.³⁵ None were deemed obvious.³⁶ The jury found eight of the twelve infringed claims of the '581 patent valid.³⁷ As part of its obviousness findings, the jury found that the two-piece port and receptacle system was not disclosed in the prior art.³⁸ The jury invalidated as anticipated claims 22, 23, 24 and 38.³⁹ Claims 22, 23 and 24 require only a receptacle (but not a port) and claim 38 requires only a port (but not a receptacle). The claims that were infringed, but not invalidated, required either (1) a receptacle and a port (claims 27-31, 34, and 40) or (2) a reservoir (claim 42). The jury applied a 7% royalty rate to a royalty base of $17,965,000 and awarded damages of $1,256,920 to compensate AMI for TEK's infringement.⁴⁰

AMI v. TEK (Case No. 11-CV-774) VERDICT FORM

Based on the evidence admitted at trial and in accordance with the instructions as given by the Court, we, the jury, unanimously agree to the answers to the following questions and return them under the instructions of this court as our verdict in this case.

FINDINGS ON INFRINGEMENT CLAIMS

(The questions regarding infringement should be answered regardless of your findings with respect to the validity or invalidity of the patent.)

AMI has asserted infringement of claims 22, 23, 24, 27, 28, 29, 30, 31, 34, 36, 38, 40, 42, 45, 46, and 47.

1. Direct Infringement

a) Has AMI proven that it is more likely than not that every requirement of any asserted claim of U.S. Patent No. 6,789,581 is included in TEK's accused products?

YES × NO ___

If yes, which claim(s)? __________

FINDINGS ON INVALIDITY DEFENSES

(The questions regarding invalidity...