Spectralytics Inc. v. Cordis Corp..

• Decision Date: 12 August 2011
• Docket Number: Nos. 2009–1564,2010–1004.,s. 2009–1564
• Citation: 649 F.3d 1336,99 U.S.P.Q.2d 1012
• Parties: SPECTRALYTICS, INC., Plaintiff–Appellant,v.CORDIS CORPORATION, Defendant–Cross Appellant,andNorman Noble, Inc., Defendant–Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

649 F.3d 1336
99 U.S.P.Q.2d 1012

SPECTRALYTICS, INC., Plaintiff–Appellant,
v.
CORDIS CORPORATION, Defendant–Cross Appellant,andNorman Noble, Inc., Defendant–Cross Appellant.

Nos. 2009–1564

2010–1004.

United States Court of Appeals, Federal Circuit.

June 13, 2011.Rehearing and Rehearing En Banc Denied Aug. 12, 2011.

[649 F.3d 1339]

J. Derek Vandenburgh, Carlson Caspers Vandenburgh & Lindquist, P.A., of Minneapolis, MN, argued for plaintiff-appellant. With him on the brief were Alan G. Carlson, Matthew J. Goggin and Dennis C. Bremer.Gregory L. Diskant, Patterson, Belknap Webb & Tyler LLP, of New York, NY, argued for defendants-cross appellants. With him on the brief were Eugene M. Gelernter and Robert W. Lehrburger. Of counsel on the brief was James B. Niehaus, Frantz Ward LLP, of Cleveland, OH, for defendant-cross appellant Norman Noble Inc.Before NEWMAN, CLEVENGER and BRYSON Circuit Judges.NEWMAN, Circuit Judge.

In this suit for infringement of United States Patent No. 5,852,277 (“the '277 patent”), brought by Spectralytics, Inc., trial was held in the United States District Court for the District of Minnesota. The jury sustained the validity of the patent, found that the defendants Cordis Corporation and Norman Noble, Inc. willfully infringed the patent, and awarded damages calculated as a 5–percent royalty on Norman Noble's infringing sales to Cordis. The district court granted Spectralytics' motion for a permanent injunction, an accounting, and pre- and post-judgment interest. The court denied the defendants' motions for a new trial, for judgment as a matter of law, or for remittitur. The court also denied Spectralytics' motion for enhanced damages and attorney fees based on the jury verdict of willful infringement.¹

Each side challenges rulings adverse to it, although the defendants do not appeal the judgment of infringement. We affirm on all aspects, except for the district court's application of the law of willful infringement. We vacate that portion of the judgment, and remand for reapplication of the law to the issues of enhanced damages and attorney fees.

Background

Spectralytics manufactures medical devices, including the coronary stents that are the subject of the '277 patent. Norman Noble manufactures the coronary stents that were found to infringe the '277 patent, and provides these stents to the Cordis Corporation in accordance with an exclusive supply contract.

The patented stents are stainless steel tubes that are designed to be surgically inserted into an occluded artery and expanded in place, thereby opening the artery to blood flow. In order to expand the steel tube, the tube is cut into a pattern, described as “lace-like,” that permits expansion and retention of shape after insertion into the artery. A laser metal-cutting device is used to manufacture such stents, whereby a laser beam cuts the desired pattern into the steel tube. Various machines had been designed for this use, but

[649 F.3d 1340]

cardiac surgeons sought ever more complex stent patterns, requiring manufacturing techniques of extreme accuracy. The evidence at trial was that the Spectralytics device achieved a precision that was not achieved by the laser-cutting machines then in use.

Previously, two producers of stents, LPL Systems and RMS Laser, had adapted a “Swiss-style” laser machine to the cutting of steel stents. A Swiss-style machine typically has a workpiece fixture that holds the workpiece in a cantilevered manner, and both the workpiece fixture and the laser cutting tool are rigidly mounted in order to suppress movement and vibration. Applying this machine to laser cutting of steel stents, LPL Systems and RMS Laser produced an improved stent. However, this machine still did not provide the pattern accuracy that was desired by surgeons, and in turn by Cordis as a supplier of medical devices.

Spectralytics undertook to develop improved stent products. Spectralytics started with a Swiss-style machine, but changed its structure in a manner that significantly increased the precision of the laser cut, and permitted more complex and versatile patterns. Unlike the prior Swiss-style machines, the Spectralytics machine was not based on suppressing vibration of the machine, but worked by essentially eliminating relative movement between the workpiece fixture and the cutting tool. The Spectralytics machine thus eliminated the deleterious effects of vibration by a design that ensured that if the laser tool and the workpiece did move or vibrate, they moved in precise unison. Spectralytics achieved this result by mounting the workpiece fixture directly on the laser cutting head so that it was “rigidly carried on” the cutting tool, as the '277 patent describes the apparatus. It was not disputed at trial that the Spectralytics '277 machine achieved improved precision and enabled more intricate pattern design as compared with prior steel stents.

The '277 patent issued on December 22, 1998. Claim 1 is as follows:

1. An apparatus for manufacturing a hollow, generally tubular workpiece having a pattern cut around the circumference and along the length thereof, which comprises:

(a) a laser cutting tool, the laser cutting tool having means for generating a laser beam used as a cutting implement; and

(b) a workpiece fixture rigidly carried on the cutting tool in a fixed spatial arrangement during use of the fixture, the fixture having a cantilever support for supporting a piece of stock tubing beneath the laser cutting tool in a cantilever manner with the cantilever support being located on just one side of the laser beam with the tubing extending from the cantilever support past the laser beam and the tubing being unsupported on the other side of the laser beam, and wherein the workpiece fixture comprises:

(i) a fixture body secured to the cutting tool; and

(ii) a generally horizontal bushing carried on the fixture body and extending beneath the cutting tool, the bushing having a central bore which is sized to be slightly greater than an outside diameter of the stock tubing.

The testimony at trial included the following: both Spectralytics and Norman Noble were producers of coronary stents, and both hoped that Cordis would select it as the producer, for further provision by Cordis to users. In April of 1995 Spectralytics hired a sales representative named Jack Lundeen, who stated that he had

[649 F.3d 1341]

close connections with key Cordis executives. Unbeknownst to Spectralytics, two months later, in June of 1995, Lundeen was also hired by Norman Noble.

By early August of 1995 the Spectralytics machine was designed and constructed and had been successfully shown to produce the desired precise complex designs in steel stents. Spectralytics and Norman Noble entered into a confidentiality agreement for the purpose of facilitating discussions of a possible business arrangement between the companies. On August 24, 1995 Larry and Scott Noble traveled to the Spectralytics plant in Minneapolis, for the stated purpose of learning about Spectralytics' laser stent-cutting technology. Spectralytics' president, Gary Oberg, testified that he gave the Nobles a tour of the shop floor. Mr. Oberg testified that he did not recall all details of the visit, after ten years, but that Spectralytics' new laser cutting machine was on the shop floor, and there was no reason he would not have shown the machine to the Nobles when they toured the shop.

Norman Noble then built a Swiss-style stent cutting machine that had the workpiece fixture carried on the laser cutting tool. The stents produced by the new Noble machine were significantly improved over the stents previously produced by Noble, and Cordis entered into an exclusive supply contract with Noble. Cordis agreed to indemnify Noble for any patent infringement.

Spectralytics filed suit in July of 2005 against Cordis for patent infringement, and in August of 2006 Spectralytics added Norman Noble, Inc. as a defendant. Trial to a jury was held on the issues of validity, infringement, willful infringement of the '277 patent, and damages.

Validity

We review the district court's decision on a motion for judgment as a matter of law by reapplying the district court's standard of review. Sextant Avionique, S.A. v. Analog Devices, Inc., 172 F.3d 817, 824 (Fed.Cir.1999). In Reeves v. Sanderson Plumbing Products., Inc., 530 U.S. 133, 150–51, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000), the Court explained that a reviewing court must view the facts in the light most favorable to the prevailing party and must grant the benefit of all reasonable inferences to the party to whom the jury awarded the verdict. The Court explained that the reviewing court on JMOL must “give credence to the evidence favoring the nonmovant,” and must “disregard all evidence favorable to the moving party that the jury is not required to believe.” Id. at 151, 120 S.Ct. 2097. In discussing the jury role with respect to the issue of obviousness, the court stated in Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed.Cir.1984):

[I]t is neither error nor dangerous to justice to submit legal issues to juries, the submission being accompanied by appropriate instructions on the law from the trial judge. The rules relating to interrogatories, jury instructions, motions for directed verdict, JNOV, and new trial, and the rules governing appeals following jury trials, are fully adequate to provide for interposition of the judge as guardian of the law at the proper point and when necessary.

727 F.2d at 1515. In Tec Air, Inc. v. Denso Manufacturing Michigan, Inc., 192 F.3d 1353, 1357 (Fed.Cir.1999), this court reiterated that for a party to prevail on appeal of denial of JMOL “it must prove that the jury's factual findings were not supported by substantial evidence or that the facts were not sufficient to support the conclusions necessarily drawn by the jury on the way to its verdict.” The applicable standard of the Eighth Circuit, in which this...