Sociedad Espanola De Electromedicina Y Calidad, S.A. v. Blue Ridge X-Ray Co.

• Decision Date: 28 December 2016
• Docket Number: Civil Case No.: 1:10–cv–00159–MR
• Parties: SOCIEDAD ESPANOLA DE ELECTROMEDICINA Y CALIDAD, S.A., Plaintiff, v. BLUE RIDGE X–RAY CO, INC., DRGEM USA, Inc., and DRGEM Corp., Defendants.
• Court: U.S. District Court — Western District of North Carolina

226 F.Supp.3d 520

SOCIEDAD ESPANOLA DE ELECTROMEDICINA Y CALIDAD, S.A., Plaintiff,

v.BLUE RIDGE X–RAY CO, INC., DRGEM USA, Inc., and DRGEM Corp., Defendants.

Civil Case No.: 1:10–cv–00159–MR

United States District Court, W.D. North Carolina, Asheville Division .

Signed December 28, 2016

Larry S. McDevitt, David M. Wilkerson, The Van Winkle Law Firm, Asheville, NC, Tanvi Patel, Mike R. Turner, Bradley F. Rademaker, Neal, Gerber & Eisenberg LLP, Chicago, IL, for Plaintiff.

Brady James Fulton, Isaac Noyes Northup, Jr., Northup & McConnell, PLLC, Asheville, NC, for Defendants.

MEMORANDUM OF DECISION AND ORDER

Martin Reidinger, United States District Judge

THIS MATTER is before the Court on the Plaintiff's Motion for Attorney's Fees [Doc. 225]; the Defendants' Renewed Motion for Judgment as a Matter of Law on Damages, or for a New Trial on Damages, or for a Remittitur [Doc. 236]; the Plaintiff's Motion for Enhanced Damages [Doc. 250]; and the Plaintiff's Motion for Prejudgment Interest and Post–Judgment Interest [Doc. 256].

I. FACTUAL AND PROCEDURAL BACKGROUND

This is an action for patent infringement brought by Sociedad Espanola de Electromedicina y Calidad, S.A. ("Sedecal") against the Defendants Blue Ridge X–Ray Company, Inc. ("Blue Ridge X–Ray"), DRGEM USA, Inc. ("DRGEM USA"), and DRGEM Corporation ("DRGEM Corp.").¹ [Doc. 1]. Sedecal is a Spanish corporation which designs and sells X–ray and digital radiography equipment for use in the medical industry. [Doc. 49 at 3]. DRGEM USA is a Florida corporation and a subsidiary of DRGEM Corp., a South Korean corporation. [Id. at 2]. Blue Ridge X–Ray is a North Carolina corporation doing business in Arden, North Carolina, which sells X–ray and digital radiography equipment, including Sedecal and DRGEM products. [Id. ].

In its First Amended Complaint, Sedecal asserted one claim for infringement of U.S. Patent No. 6,642,829 ("the '829 Patent"), a patent for a high voltage transformer owned by Sedecal pursuant to assignment from the inventor, a Sedecal employee. [Doc. 21 at 4]. Specifically, Sedecal alleged that DRGEM Corp. manufactured, sold, and exported for sale X–ray generator products which infringed one or more claims of the '829 Patent. [Id. ]. Sedecal further alleged that DRGEM USA infringed the '829 Patent by selling these allegedly infringing DRGEM products to Blue Ridge X–Ray, and that Blue Ridge X–Ray in turn infringed the '829 Patent by selling and importing for sale the allegedly infringing DRGEM products. [Id. at 4–5].

In their Answer and Counterclaims, the Defendants raised numerous affirmative defenses, including the defenses of patent invalidity and failure to mark the products with the patent number. [Doc. 27]. They also counterclaimed for declarations of non-infringement and invalidity. [Id. ].

The parties proceeded in accord with all stages of the Amended Utility Patent Claim Construction Scheduling Order. [Doc. 37]. A Markman ² hearing was conducted on February 21, 2012, and the Court entered a Claim Construction Order on August 15, 2013 [Doc. 62]. Thereafter, the Court entered a Utility Patent Pretrial Order and Case Management Plan, setting deadlines for the completion of discovery and the filing of dispositive motions. [Doc. 66]. Upon the close of discovery, the Defendants moved for summary judgment on the issues of infringement and willfulness. [Doc. 86]. The Plaintiff, in turn, moved for summary judgment on the issue of validity. [Doc. 91]. On September 22, 2014, the Court entered an Order granting the Defendant's motion for summary judgment and denying the Plaintiff's motion for partial summary judgment on the grounds that the transformer claimed in the '829 Patent does not function and thus fails to comply with 35 U.S.C. §§ 101 and 112, thereby rendering the patent invalid. [Doc. 105].

Sedecal appealed to the Court of Appeals for the Federal Circuit. [Doc. 108]. On July 31, 2015, the Federal Circuit issued an opinion reversing this Court's grant of summary judgment and remanding for further proceedings. [Doc. 121]. Upon remand, this matter proceeded to a jury trial beginning on January 11, 2016. The trial was bifurcated into two phases. After finding infringement in the first phase [Doc. 202], the same jury heard evidence on damages and willfulness during the second phase.

During the second phase of the trial, Sedecal presented the testimony of Manuel Martinez–Garcia, the president and founder of Sedecal. Mr. Martinez–Garcia testified that Sedecal is one of the few players in the U.S. x-ray generator market [TR2³ at 98–99], and that prior to the Defendants' infringement, Sedecal was unique in the market with a transformer of the combination of small size and high power enabled by the '829 Patent [Id. at 31–32, 77–79]. Sedecal also presented the testimony of Angel Diaz–Carmena, the head of engineering at Sedecal and inventor of the '829 Patent. Mr. Diaz–Carmena testified regarding his work in developing the compact, light-weight transformer that produced very high voltages, allowing for the reduction in size, cost and weight for Sedecal's line of high frequency generators. [TR1 at 32–34].

Sedecal's technical expert, Melvin Siedband, then explained the patented innovation, and the time and investment required to develop the transformer that is covered by the '829 Patent. [TR1 at 129–30; TR2 at 192–94]. Manuel Martinez–Alvarez, the marketing and sales manager of Sedecal, testified as to the profound impact Sedecal's patented product had on the market. [TR2 at 377–80]. Both Sedecal's president, Mr. Martinez–Garcia, and Mr. Martinez–Alvarez testified that it was Sedecal's policy to not license its '829 Patent. [Id. at 80–81, 380–81].

Michael Jeffords, Sedecal's damages expert, opined that, based on the cost savings in shipping and manufacturing resulting from use of the patented technology, an approximate reasonable royalty rate would be at least $500 per infringing unit. [TR2 at 427]. Mr. Jeffords also provided the jury with a calculation of the average profits realized by DRGEM Corp. and DRGEM USA for the sale of the infringing products, which was $3,340 per unit. [Id. at 436]. Finally, Mr. Jeffords discussed various factors for the jury to consider in determining an appropriate damages award. [Id. at 424–42].

After Sedecal rested its case, Defendants presented essentially the same arguments now made in the present motion, in the form of a Rule 50 motion. [TR2 at 493–98]. The Court denied that motion. [Id. at 511]. The Defendants then put on evidence, after which they again presented the same arguments in a second Rule 50 motion.⁴ [Id. at 885–86]. The Court denied this motion also. [Id. at 886]. During closing argument, the Defendants' counsel argued that damages should be severely limited, urging the jury to award only $40,896 for the five-plus years of infringing sales, and characterizing the expert testimony of a minimum royalty as allegedly "pulled ... out of the air." [Id. at 931–32].

The Court then delivered the jury instructions, including several specifically requested by Defendants. This included instructions on the Georgia Pacific factors⁵ for determining a reasonable royalty, instruction on the "apportionment" of damages, and consideration of the "smallest salable unit" and the "entire market value" rule. [TR2 at 940–46]. On January 19, 2016, the jury rendered its verdict, finding the Defendants liable for damages in the amount of $852,000 and further finding that the infringement committed by DRGEM USA and DRGEM Corp. was willful.⁶ [Doc. 206].

The Defendants now move pursuant to Rules 50 and 59 of the Federal Rules of Civil Procedure for an Order entering judgment as a matter of law on the issue of damages under Rule 50 or, in the alternative, to enter an Order under Rule 59 giving Sedecal the option of choosing whether to have a new trial on damages or to accept a remittitur. [Doc. 236]. Sedecal opposes the Defendants' motion and in turn moves for an award of enhanced damages based on the jury's finding of willfulness. [Doc. 250]. Sedecal also moves for an award of attorneys' fees, as well as an award of prejudgment and post-judgment interest. [Docs. 225, 256].

Having been fully briefed, these matters are now ripe for disposition.

II. DISCUSSION

A. Defendants' Motion for Judgment as a Matter of Law

1. Standard of Review

In ruling on a motion for judgment as a matter of law or a motion for new trial in a patent case, a district court applies the law of the regional circuit in which the district court sits. See Bettcher Indus., Inc. v. Bunzl USA, Inc. , 661 F.3d 629, 638 (Fed. Cir. 2011).

Pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, a district court may grant a judgment as a matter of law "if there is no legally sufficient evidentiary basis for a reasonable jury to find for the [non-moving] party...." Cline v. Wal–Mart Stores, Inc. , 144 F.3d 294, 301 (4th Cir. 1998) (citing Fed. R. Civ. P. 50(b) ). The district court must deny a motion for judgment as a matter of law if, "giving the [non-movant] the benefit of every legitimate inference in his favor, there was evidence upon which a jury could reasonably return a verdict for him." Cline , 144 F.3d at 301 (quoting Abasiekong v. City of Shelby , 744 F.2d 1055, 1059 (4th Cir. 1984) ). In making such a determination, the court cannot re-weigh the evidence or the credibility of the witnesses; rather, the court must "assume that testimony in favor of the non-moving party is credible, unless totally incredible on its face, and ignore the substantive weight of any evidence supporting the moving party." Cline , 144 F.3d at 301 (internal quotation marks and citation omitted).

By contrast, when presented with a motion for a new trial pursuant to Rule 59(a), the court is permitted to weigh the evidence and consider the credibility of the witnesses. King v. McMillan , 594 F.3d 301, 314 (4th Cir. 2010). A new trial should be granted where "(1) the verdict is against the clear weight of the evidence,...