Snellman v. Ricoh Co., Ltd., s. 87-1434

• Decision Date: 25 November 1988
• Docket Number: 87-1435,Nos. 87-1434,s. 87-1434
• Citation: 8 USPQ2d 1996,862 F.2d 283
• Parties: , 8 U.S.P.Q.2d 1996 Donald L. SNELLMAN d/b/a Norfin, Plaintiff-Appellant, v. RICOH COMPANY, LTD., Defendant/Cross-Appellant. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 283

862 F.2d 283

57 USLW 2344, 8 U.S.P.Q.2d 1996

Donald L. SNELLMAN d/b/a Norfin, Plaintiff-Appellant, v. RICOH COMPANY, LTD., Defendant/Cross-Appellant.

Appeal Nos. 87-1434, 87-1435.

United States Court of Appeals, Federal Circuit.

Nov. 25, 1988.

Rehearing Denied Feb. 2, 1989.

Suggestion for Rehearing In Banc Declined March 6, 1989.

James F. Davis, Howrey & Simon, Washington, D.C., argued for plaintiff-appellant. John Lockie and Karen Wuest, Metzger & Shadyac, Washington, D.C., were on the brief for plaintiff-appellant.

Gerald W. Griffin, Cooper & Dunham, New York City, argued for defendant/cross-appellant. Preston Moore and Robert D. Mullaney, Morrison and Foerster, of San Francisco, Cal., were on the brief for defendant/cross-appellant. Also on the brief were Arthur I. Neustadt and Richard D. Kelly, Oblon, Fisher, Spivak, McClelland and Maier, P.C., Arlington, Va.

Before MARKEY, Chief Judge, FRIEDMAN, Circuit Judge, and BALDWIN, Senior Circuit Judge.

FRIEDMAN, Circuit Judge.

The questions in this case, on appeal and cross-appeal from the United States District Court for the Northern District of California, are whether the district court erroneously (1) denied a motion for judgment n.o.v. on the jury finding that the defendant Ricoh Co., Ltd. (Ricoh) infringed the appellant Norfin's patent, and (2) held, in connection with setting aside the jury award of damages and granting a new trial on that issue, that certain evidence relating to damages had been improperly admitted. We (1) affirm the denial of judgment n.o.v. on infringement and (2) vacate the ruling on damages and remand for further proceedings on that issue.

I

The appellant Norfin, of which Mr. Snellman is the sole proprietor, manufactures and sells paper sorting, collating, and binding products used in photocopying and offset lithography. Mr. Snellman is co-inventor of U.S. Patent No. 3,414,254 (the '254 patent) for an improved paper sorter. The '254 paper sorter has fewer moving parts than most sorters, which makes it more reliable and cheaper to manufacture. The '254 patent has been commercially successful and has been the subject of previous litigation.

In a suit by Norfin against IBM, the '254 patent was held valid and infringed. Norfin, Inc. v. International Business Machs. Corp., 453 F.Supp. 1072, 199 USPQ 57 (D.Colo.1978), aff'd, 625 F.2d 357, 207 USPQ 737 (10th Cir.1980). As a result of that suit, IBM paid Norfin a lump sum royalty of $20.5 million, which included a post-litigation license under the '254 patent. That amount was agreed to by the parties before the final decision of the court of appeals, in an agreement that dealt with the various possible outcomes of the litigation.

Norfin granted Ricoh a license under the '254 patent for one of the Ricoh copiers Ricoh's engineers visited Norfin a number of times and observed each phase of Norfin's development of the sorters. When Mr. Snellman decided to redesign the sorter prototype, which would delay Ricoh's preparations for a trade show, Ricoh notified Norfin that it would rebuild its own prototypes for the trade show. Norfin did not object but requested that the prototype or drawings be sent to it.

Norfin ordinarily did not license its patents. When Norfin refused to license the '254 patent for use with other Ricoh copiers, Ricoh and Norfin then entered into a sales and purchase agreement under which Norfin would manufacture paper sorters for use with Ricoh's new mid-to-high speed copiers.

Following Ricoh's successful demonstration of its copiers at the trade show, Norfin finished its prototype sorter and tested it with Ricoh's copiers. Ricoh engineers were present at the tests and photographed the Norfin prototype.

Ricoh continued to develop its own sorter. After receiving an opinion from counsel that the Ricoh sorter would not infringe the '254 patent, Ricoh in September 1980 implemented a plan to manufacture and market its own sorters.

Due to Norfin's delays in shipping a finished collator, Ricoh terminated the purchase agreement and fitted its copiers with its own collators.

After observing and inspecting Ricoh collators at a trade show in Germany, Norfin advised Ricoh that "authorization to manufacture this equipment and/or to show it has not been given by my company. To the contrary, those rights are exclusively the property of Norfin." After further correspondence, Norfin filed the present infringement suit against Ricoh.

The case was tried to a jury, which found that Ricoh had infringed the '254 patent and awarded damages of $12,000,000. The jury further found that Ricoh had breached its contract with Norfin and awarded contract damages of $2,900,000.

The district court granted JNOV, or alternatively a new trial, on the contract issue and on the issue of damages for infringement, and denied a new trial or JNOV on infringement. (We affirmed the JNOV on the contract issue in an earlier, unpublished opinion. Snellman v. Ricoh Co., Ltd., 802 F.2d 469 (1986)). The court ruled that certain evidence relating to damages had been improperly admitted, and concluded that "[t]he verdict of $12,000,000 constitutes a miscarriage of justice in the opinion of this court."

Both parties began preparing for a second trial on the issue of damages for patent infringement. During discovery, the court issued an order precluding Norfin from introducing certain evidence.

Among the damage claim evidence identified by the plaintiff through discovery, the only damage calculation that complies with the Court's orders is plaintiff's calculation of a reasonable royalty on the basis of defendant's actual sales of infringing collators, to which a royalty rate of 10% was applied by plaintiff's expert. The royalty thus calculated by plaintiff's expert is $453,000.

The court barred Norfin from introducing the earlier IBM agreement or developing new damage estimates. It held that one of Norfin's calculations was

legally invalid and inadmissible in that it [was] arrived at on the basis of the $20,500,000 settlement negotiated by the plaintiff in a prior lawsuit against IBM. Repeatedly, the court has informed the plaintiff that this settlement agreement cannot be the basis for a damage award in this case.

There is no basis for permitting the plaintiff to attempt now to perform new damage calculations in an effort to generate new admissible evidence. The plaintiff has failed to meet four scheduled deadlines for provision of its damage claim information and the deposition of its designated expert--two of them set by Court Order. The plaintiff has known since January, 1985 that a retrial would occur on the issue of patent damages and has known since December, 1985 that the retrial would occur in June or July, 1986. Pursuant to Rules 16(f) and 37(b)(2)(B) As a result of these rulings, Norfin agreed to a judgment of $740,647 ($453,000 plus prejudgment interest), which merged with the earlier judgment that Ricoh had infringed the '254 patent. Both parties have appealed from this judgment. Ricoh raises the infringement issue on its cross-appeal, and Norfin raises the damages issue on its appeal. Norfin's appeal challenges the underlying predicate of the limitation of its damages to $740,647, namely the court's ruling that certain evidence relating to damages was improperly admitted and the court's setting aside the jury verdict on damages and ordering a new trial on that issue.

the Court concludes that plaintiff should be precluded from offering any damage claim evidence other than that already disclosed to defendant.

II

Ricoh alleges that the district court erred in denying its motion for judgment n.o.v. on patent infringement.

Where, as here, the overall question of infringement was answered by a jury and the losing party's motion for JNOV was denied, an appellate court's review of the denial is limited. The appellate court is permitted to review only the sufficiency of the evidence, a question of law. Such a review must be conducted within a set of guidelines which include: (1) a consideration of all the evidence, (2) in a light most favorable to the non-moving party, (3) drawing all reasonable inferences favorable to that party, (4) without determining the credibility of the witnesses, and (5) without substituting the court's choice for that of the jury between conflicting elements in the evidence.

To obtain a reversal, [Ricoh] (the moving party below) must persuade us that either (1) the jury's findings were not supported by substantial evidence or (2) those findings cannot support the legal conclusions which necessarily were drawn by the jury in forming its verdict. If, however, there was substantial evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment could reasonably return a verdict for the non-moving party, then the denial of the JNOV was correct.

McGill Inc. v. John Zink Co., 736 F.2d 666, 672, 221 USPQ 944, 948 (Fed.Cir.), cert. denied, 469 U.S. 1037, 105 S.Ct. 514, 83 L.Ed.2d 404 (1984) (citations omitted).

The determination of infringement is a two-step process. First, the meaning of the claim alleged to have been infringed must be determined. Second, the alleged infringing device must be compared to the claims to determine whether the claims cover the device, either literally or under the doctrine of equivalents. Mannesmann Demag Corp. v. Engineered Metal Prods. Co., 793 F.2d 1279, 1282, 230 USPQ 45, 46 (Fed.Cir.1986).

The parties agree that the issue of infringement was limited to claim 1 of the '254 patent. Ricoh has failed to show that the jury's finding that the Ricoh device infringes claim 1 rests upon a misinterpretation of the claim or is not supported by substantial evidence. McGill, 736 F.2d at 672, 221 USPQ at 948.

Claim 1 reads:

[a] In combination with a receiver having an upright column of spaced shelves;

[b] substantially vertically moving sheet conveyor means opposite said receiver for conveying...