Windsurfing Intern., Inc. v. Fred Ostermann GmbH

• Decision Date: 21 August 1987
• Docket Number: 83 Civ. 3774 (MEL).,83 Civ. 1691 (MEL),No. 81 Civ. 254 (MEL),81 Civ. 254 (MEL)
• Citation: 668 F. Supp. 812
• Parties: WINDSURFING INTERNATIONAL, INC., Plaintiff, and James R. Drake, Intervenor-Plaintiff, v. FRED OSTERMANN GmbH, et al., Defendants. AMF INCORPORATED, Plaintiff, v. WINDSURFING INTERNATIONAL, INC., Defendant, and James R. Drake, Intervenor-Defendant. BIC LEISURE PRODUCTS, INC. and Windglider Fred Ostermann, GmbH, Plaintiffs, v. WINDSURFING INTERNATIONAL, INC., Defendant, and James R. Drake, Intervenor-Defendant. James R. DRAKE, Cross-Claimant, v. WINDSURFING INTERNATIONAL, INC., Cross-Defendant.
• Court: U.S. District Court — Southern District of New York

668 F. Supp. 812

WINDSURFING INTERNATIONAL, INC., Plaintiff, and James R. Drake, Intervenor-Plaintiff, v. FRED OSTERMANN GmbH, et al., Defendants.

AMF INCORPORATED, Plaintiff, v. WINDSURFING INTERNATIONAL, INC., Defendant, and James R. Drake, Intervenor-Defendant.

BIC LEISURE PRODUCTS, INC. and Windglider Fred Ostermann, GmbH, Plaintiffs, v. WINDSURFING INTERNATIONAL, INC., Defendant, and James R. Drake, Intervenor-Defendant.

James R. DRAKE, Cross-Claimant, v. WINDSURFING INTERNATIONAL, INC., Cross-Defendant.

Nos. 81 Civ. 254 (MEL), 83 Civ. 1691 (MEL), 83 Civ. 3774 (MEL).

United States District Court, S.D. New York.

August 21, 1987.

Pennie & Edmonds, New York City for BIC Leisure Products, Inc.; Jonathan A. Marshall, Brian M. Poissant, of counsel.

Harold E. Wurst, Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst, Los Angeles, Cal., for Windsurfing Intern., Inc.; Michael J. Sweedler, Beverly Goodwin, Darby & Darby, New York City, of counsel.

LASKER, District Judge.

In the liability phase of this patent suit involving windsurfing boards, all of the claims of Windsurfing International Inc.'s U.S. Patent Re. 31,167 ("WSI reissue patent") were found to be valid. BIC Leisure Products, Inc. ("BIC Leisure")¹ was found to have infringed the WSI reissue patent,² see Windsurfing International, Inc. v. Fred Ostermann GMBH, 613 F.Supp. 933 (S.D.N.Y.1985) ("Windsurfing I"), aff'd in relevant part, rev'd in part, vacated in part and remanded sub nom Windsurfing International, Inc. v. AMF, Inc., 782 F.2d 995 (Fed.Cir.), cert. denied, ___ U.S. ___, 106 S.Ct. 3275, 91 L.Ed.2d 565 (1986),³ and was subsequently enjoined from any further infringement of the patent.⁴ WSI now seeks enhanced damages and attorney fees from BIC under 35 U.S.C. §§ 284-285 (1982). After a three-day trial on these damage issues, during which six witnesses testified and numerous documents were received, it is determined that WSI has not established that BIC Leisure's infringement of the WSI reissue patent was willful, and, accordingly, neither enhanced damages nor attorney fees are awarded to WSI.

Enhanced Damages

35 U.S.C. § 284 (1982) provides that in a patent action "the court may increase ... damages up to three times the amount found or assessed." Enhancement of damages under § 284 must be premised on a finding of either willful infringement or bad faith. Yarway Corp. v. Eur-Control USA, Inc., 775 F.2d 268, 277 (Fed.Cir. 1985). Here, WSI—which does not allege bad faith—has the burden of proof to show by clear and convincing evidence willful infringement on BIC Leisure's part. See Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613, 628 (Fed.Cir.), cert. dismissed, 474 U.S. 976, 106 S.Ct. 340, 88 L.Ed.2d 326 (1985).

A determination of willful infringement depends on the totality of the circumstances. Important factors to be considered include 1) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; 2) whether the infringer deliberately copied the ideas or design of another; and 3) the infringer's behavior as a party to the litigation. See Bott v. Four Star Corp., 807 F.2d 1567, 1572 (Fed.Cir.1986).

I. BIC Leisure's Good Faith Belief on the Invalidity of the WSI Reissue Patent

Where a potential infringer has actual notice of another's patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Bott, 807 F.2d at 1572; Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed.Cir.1983). To meet this duty, the potential infringer must investigate the scope of the patent and form a good-faith belief that it is invalid or that it is not infringed. Bott, 807 F.2d at 1572. Here, it is clear that BIC Leisure did have notice of WSI's patent rights, and hence it must be determined whether BIC Leisure had a good-faith belief that the WSI patent was invalid.

1) BIC Leisure's Notice of WSI's Patent Rights

The BIC businesses first entered the sailboard market in the late 1970s when Tabur Marine, S.A. ("Tabur Marine"), a French corporation then owned by Marcel Bich, founder of Societe Bic, began to manufacture sailboards.⁵ Around the same time, Dufour, Inc. ("Dufour"), a Delaware corporation owned by Tabur Marine,⁶ began to sell in the United States the Tabur Marine sailboards made in France. In addition, Tabur Marine Ltd. ("Tabur UK"), a British corporation, sold Tabur Marine sailboards in Britain.⁷ BIC Leisure was incorporated in November, 1981, and, when Dufour was dissolved in March, 1982, BIC Leisure assumed Dufour's sailboard business and continued to sell Tabur Marine sailboards in the United States.⁸

There is no question that BIC Leisure had actual notice of WSI's United States patent when it began selling sailboards in 1981.⁹ Bruno Bich, Chief Executive Officer of BIC Corporation and President of BIC Leisure, testified that he became aware of "a question of a patent" owned by WSI in the United States around 1979-1980.¹⁰ In September 1979, WSI sued Tabur UK in Britain for infringement of WSI's British sailboard patent.¹¹ In January 1981, WSI sued Tabur Marine and Dufour in the United States for infringement of WSI's original United States patent.¹²

2) Basis for BIC Leisure's Belief that the WSI Reissue Patent was Invalid

Four witnesses testified as to BIC Leisure's belief that the WSI reissue patent was invalid and the basis for that belief: 1) William H. Meserole, a patent attorney who participated in the challenges to the WSI patent before the Patent and Trademark Office ("PTO"); 2) Charles G.C.N. Livsey, a British chartered patent agent who was involved in the successful challenge to WSI's British patent; 3) Bruno Bich, Chief Executive Officer of BIC Corporation and President of BIC Leisure; and 4) Alan Lipson, Corporate Counsel of BIC Corporation and Corporate Secretary of BIC Leisure. Based on the testimony of these witnesses and the documentary evidence presented, the following facts were established concerning the basis for WSI's belief that the WSI patent was invalid.

In early 1981, Dufour, BIC Leisure's predecessor corporation, retained William Meserole, a patent attorney, with regard to matters concerning the WSI reissue application. When BIC Leisure was incorporated in 1981, Meserole continued to work with BIC Leisure on the WSI reissue proceedings through 1982.¹³ Meserole, who impressed the court as both competent and experienced in patent matters, had been participating in the legal challenges to the validity of WSI's reissue patent on behalf of another client since WSI filed its reissue application in 1978,¹⁴ and was intimately knowledgeable as to both the history of the WSI patent proceedings and the legal issues involved. Meserole testified that by January, 1979, when the PTO first rejected WSI's reissue claims, he had reviewed all the prior art, including the Darby and Herreshoff articles, and all of the predecessor materials in the file wrapper, and had concluded that the reissue claims which were then pending were unpatentable as obvious under 35 U.S.C. § 103 (1982).¹⁵

From 1981-1982, Meserole was in continuous communication, both oral and written, with first, Bich and later, Lipson. Meserole first communicated with Bich by telephone in May, 1981, after the PTO Board of Appeals reinstated various of the reissue claims which had previously been rejected. During this initial conference, Meserole told Bich that in his opinion, based on his review of the prior art, the WSI reissue application would eventually fail.¹⁶ He explained in layman's terms that although the Board of Appeals had reinstated certain claims, he felt that the challenge to the reissue application had been strengthened by the discovery of new prior art, most importantly the Crosby reference.¹⁷ Bich testified that he recalled this initial telephone conversation and that he remembered that Meserole had told him generally that "we still had an opportunity to give our case to the Patent Office and that we had a chance to win there. But even if we lost there that if the case got to court we had a good chance to win on this issue."¹⁸

Meserole confirmed this opinion in a follow-up letter to Bich dated May 22, 1981.¹⁹ In this letter, which was three-and-a half pages long and single-spaced, Meserole told Bich that:

the essence of the situation is that the original WSI patent was submitted to the U.S. Patent and Trademark Office for reissue because of certain prior art which was developed after the issuance of the WSI patent some eleven years ago. This prior art, which was unknown to the Patent Examiner at the time of the original application, was believed, and is still believed, to threaten the validity of the patent and if this position proved to be true, WSI would be without the protective umbrella which the patent affords.²⁰

Meserole continued that, despite the Board of Appeal's decision,

the reissue application is still before the Patent Office and a number of procedural steps are open to us in order to convince the Patent Office that the claims are unpatentable and we are pursuing each of these avenues diligently with what appears to us, at this time, to be a realistic possibility of success.²¹

Finally, Meserole discussed the chances of success in federal district court if the reissue patent were eventually granted by the PTO:

The Federal District Court is the body charged with the ultimate determination of the validity or lack thereof of the patent and they are not bound by the action in the Patent Office, although it must be recognized that the potential validity of the patent would be strengthened by the granting of a reissue patent after a vigorous protest in which we have participated....

Notwithstanding the foregoing, we are of the opinion that even if the Patent Office does ultimately allow the Schweitzer patent, we still have a very

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