Opinion
Case No. 97 C 2199.
March 23, 2000.
MEMORANDUM OPINION AND ORDER
Before the Court are the following post-trial motions: (1) plaintiff Square D's post-trial motion for judgment as a matter of law (the "JMOL") and for new trial pursuant to Federal Rules of Civil Procedure 50 and 59; (2) defendant Calabrese's motion to enhance the award of patent infringement damages and for attorneys fees pursuant to 35 U.S.C. § 284 and 285; and (3) defendant Calabrese's motion to amend the judgment to add prejudgment interest.
BACKGROUND
This is a patent infringement suit brought by Frank Calabrese against Square D Company ("Square D") for infringement of his U.S. Patent No. 4,322,849 ("the `849 Patent") relating to a data relay system for accessing large quantities of data. The case was tried to a jury and a verdict was returned in favor of Mr. Calabrese. Specifically, the jury found both direct and contributory infringement of the `849 Patent on the part of Square D with its Seriplex product. The jury also found that Square D willfully infringed the `849 Patent by clear and convincing evidence. The jury awarded Mr. Calabrese $13.2 million in damages.
DISCUSSION Square D's Motion for JMOL
The Court will first address Square D's motion for JMOL. Judgment as a matter of law is appropriate only if the movant shows that the jury's verdict is unsupported by substantial evidence or premised on incorrect legal standards. Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1266 (Fed. Cir. 1999). In evaluating whether the movant has met this standard, the court must view the evidence taken from the record "as a whole," Texas Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1563 (Fed. Cir. 1996), cert. denied, 520 U.S. 1228 (1997) (citation omitted, internal quotes omitted), drawing all reasonable inferences in favor of the non — movant, "without disturbing the jury's credibility determinations or substituting [the court's] resolutions of conflicting evidence for those of the jury." Tec Air, Inc. v. Denso Mfg. Michigan, Inc., 192 F.3d 1353, 1357-58 (Fed. Cir. 1999) (citation omitted, internal quotes omitted).
In this case, Square D challenges the jury's findings on the following grounds: (1) that the Court's instructions to the jury relating to claim construction was contrary to law, namely, the Court misinterpreted the claim element "through" and erred in its refusal to instruct as to the meaning of any of the other claim elements; (2) that no substantial evidence supports the finding of direct infringement; (3) that no substantial evidence supports the finding of contributory infringement; (4) that no substantial evidence supports the finding of literal infringement; and (5) that no substantial evidence supports the finding of willful infringement. Upon review of the evidentiary record in light of the applicable legal standards, the Court finds Square D's contentions unpersuasive.
Claim Interpretation
First, the Court notes that it has already twice rejected Square D's arguments as to the meaning of the claim term "through." The Court continues to stand by its December 21, 1999 Memorandum Opinion and Order that construed the term and finds no reason to revisit that decision here.
Second, the Court rejects Square D's general proposition that a trial court must, in all patent infringement case, instruct the jury as to the meaning of each and every element of a relevant patent claim regardless of whether the meaning of the elements is disputed. Such a proposition flies in the face of the wide discretion trial courts have "to manage proceedings before them to insure both expedition and fairness . . . ."Glaros v. H.H. Robertson Co., 797 F.2d 1564, 1573 (Fed. Cir. 1986),cert. denied, 479 U.S. 1072 (1987).
Exxon Chemical Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553 (Fed. Cir. 1995), Square D's sole authority cited in support of its proposition, is not to the contrary. In that case, the Federal Circuit did not lay down an affirmative duty for trial courts to construe all the elements of a claim each and every time. Instead, the court simply reiterated what is obvious; that when claim terms are contested, a court may not simply rely on proffered definitions but must exercise its judgment and construe the elements itself. Exxon Chemical Patents, Inc., 64 F.3d at 1556.
In this case, both parties consistently represented to the Court that "through" was the only relevant, contested claim term. Therefore, rather than lengthen an already lengthy and complex set of instructions, the Court chose not to encumber the jurors with definitions of additional claim terms that were not going to be an issue in this case. (Tr. 794-97). See, Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 854 (Fed. Cir. 1991), cert. denied, 504 U.S. 980 (1992) (". . . jury instructions must be both legally correct and sufficiently comprehensive to address factual issues for which there is disputed evidence of record.") (emphasis added).
Besides, Square D offers no evidence, other than mere conjecture, that instructing the jury as to the other claim terms would have cured any alleged error in the verdict. Id. (to warrant reversal on the basis of jury instructions, the movant must "demonstrate that the suggested instruction could have cured the error"). Square D suggests that an "evidentiary conflict" was raised during trial as to whether one of the elements of Claim 1 — the "means for sequencing" — must be understood to be located inside another element, the data relay. (Def. Reply at 16). But Mr. Calabrese never contested that the "means for sequencing," as understood in the `849 Patent, was to be located inside the data rely. The only "evidentiary conflict" was whether Seriplex, Square D's accused product, had such a means inside its own data relay — a factual inquiry properly before the jury. Southwall Technologies, Inc. v. Cardinal IG Co., 54 F.3d 1570, 1575 (Fed. Cir.),cert. denied, 516 U.S. 987 (1995) ("the trier of fact determines whether the claims as thus construed read on the accused product"). As such, the Court rejects Square D's contention that the jury instructions warrant a JMOL.
Direct Infringement
In accordance with agreed instructions, the jury was instructed to find direct infringement if Mr. Calabrese proved by a preponderance of the evidence that Square D has made, used, offered for sale, imported, or sold the invention as defined in at least one claim of the `894 Patent. (Tr. 936). Square D asserts that Mr. Calabrese failed to present sufficient evidence that Square D made, used, offered for sale, imported, or sold any product that included all the elements of the invention. The Court finds otherwise.
Square D insisted before the jury, as it does now, that it could not have infringed the `849 Patent because the accused Seriplex system was only made and sold as individual components, allowing individual consumers to configure the components together in accordance with their own needs. Therefore, Square D argues, even if the complete Seriplex system was infringing, Square D never directly infringed because it never made, sold, or used a complete Seriplex system.
But Mr. Calabrese presented evidence that Square D made and sold components that corresponded to each of the elements of the `849 Patent, and that Square D's own marketing documents showed how all the components could and should work together in a way that infringed the `849 Patent. (See, PX-117). Mr. Calabrese presented testimony suggesting that Square D itself put the components of the infringing system together and used it in order to test the system. (Riley Dep. at 50-52). Evidence was also presented that Seriplex sold software that allowed the user to put the infringing system together and operate it in a way that infringed the `849 Patent. (Tr. 122-23; 343). While Square D certainly presented conflicting evidence, the jury was entitled to accept or reject such evidence as it saw fit. Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 1192 (Fed. Cir. 1998) ("Simply because evidence is offered at trial does not mean that the court must assume the jury believed the evidence or gave it the same weight as does the profferor of such evidence.") Drawing all inferences in favor of Mr. Calabrese, the Court finds the juror's finding of direct infringement supported by substantial evidence.
Contributory Infringement
Also in accordance with agreed instructions, the jury was instructed to find contributory infringement if Mr. Calabrese proved by a preponderance of the evidence (1) that someone directly infringed the `849 Patent; (2) that Square D sold or supplied a material component of the patented invention that is not a staple article of commerce capable of substantial non-infringing use; and (3) with knowledge that the component was especially made or adapted for use in an infringing product. (Tr. 937). Square D attacks the sufficiency of the evidence as to each of the elements of the contributory infringement claim. The Court again finds otherwise.
Mr. Calabrese presented evidence suggesting that even though Square D sold the infringing Seriplex system in component pieces, the real value of the components is their ability to be configured into a system that infringed the `849 Patent. (PX-117; Tr. 629-30; Riley Dep. at 50-51). Further evidence was presented indicating that the Seriplex components are made specifically for use only with the accused Seriplex system and could not be used with other systems that may not infringe. (Tr. 171, 360-61). Mr. Calabrese also sought to show that Square D encouraged and instructed customers by way of publications to install and use the Seriplex components in a manner that infringed the `849 Patent. (Tr. 112-13; 132-34). Looking at the evidence in a light most favorable to Mr. Calabrese, such evidence was sufficient for the jury to draw the conclusion that customers directly infringed the `849 patent, that the Seriplex components had no other substantial non-infringing use, and that Square D knew about the infringement.
Literal Infringement
Mr. Calabrese's claims of direct and contributory infringement were both premised solely on a finding of literal infringement. In order for an accused device to literally infringe, each and every limitation of the relevant patent claim must appear in the accused device. Cortland Line Co., Inc. v. The Orvis Co., Inc., F.3d 2000 WL 156553, at *5 (Fed. Cir., Feb. 14, 2000). When a claim includes a means-plus-function limitation, literal infringement is found only when the accused device both performs the identical function recited in the means limitation and performs that function using the identical or equivalent structure as disclosed in the specification. Carroll Touch, Inc. v. Electro Mechanical Sys., Inc., 15 F.3d 1573, 1578 (Fed. Cir. 1993).
In this case, the `849 Patent includes a means-plus-function limitation respecting a "means for sequencing a plurality of parallel data groups." Square D submits that because Mr. Calabrese failed to present any evidence of an identical or equivalent structure in Square D's product that performs the same means as in the invention, JMOL is warranted.
While much conflicting and confusing testimony was presented with regards to this particular limitation, the Court cannot conclude that the jury lacked sufficient evidence to support its finding of infringement. Rather than do a circuit-by-circuit comparative analysis between the invention and the Seriplex system to show structural and functional identity, Mr. Calabrese chose to rely on what he considered admissions from Square D's own witnesses and documents that the Seriplex system also included the "means for sequencing a plurality of data" limitation. (See, e.g., Calabrese Dep. at 71-73; PX-163; Tr. 236; Tr. 88). This is enough. Square D's demand for a circuit-by-circuit comparison in order to establish structural equivalence finds no support in the law. Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1266-68 (Fed. Cir. 1999). Furthermore, even if Square D witnesses elaborated upon, refined, or downright contradicted these "admissions" at trial, the jury is not bound, therefore, completely to discredit the inferences and conclusions that could be drawn from the evidence proffered by Mr. Calabrese. Tec Air, Inc., 192 F.3d at 1358 (holding that a Court may not substitute its own resolution of conflicting evidence for those of the jury in ruling on a JMOL). Thus, a JMOL is not warranted on the issue of literal infringement.
Willful Infringement
A finding of willful infringement is warranted where the plaintiff proves, by clear and convincing evidence, that the defendant had no sound reason to believe that its actions were not infringing. SRI Int'l Inc. v. Advanced Tech. Lab, Inc., 127 F.3d 1462, 1464-65 (Fed. Cir. 1997). Square D's objections to the jury's finding of willful infringement are not well taken. The evidence is sufficiently conflicting as to the competency of the non-infringing opinions written by Square D's outside counsel and Square D's reliance upon the opinions. For example, Mr. Calabrese forcefully raised the issue of whether anyone at Square D ever intended to rely in good faith upon the opinions given the fact that those in management appeared never to have received and evaluated first-hand a copy of any of the opinions. (See, e.g., Tr. 371-73). In such situations, the court lacks discretion to reweigh the evidence. See Jurgens v. CBK, Ltd., 80 F.3d 1566, 1572 (Fed. Cir. 1996). In sum, Square D's motion for JMOL is denied.
Square D's Motion for New Trial
The Court will next address Square D's motion for a new trial. A new trial is warranted only where an error occurred in the conduct of the trial "that was so grievous as to have rendered the trial unfair." Tec Air, Inc. v. Denso Manufacturing Michigan, Inc., 192 F.3d 1353, 1361 (Fed. Cir. 1999) (internal quotes omitted, citation omitted). Square D believes that a new trial is appropriate because (1) Mr. Calabrese's counsel improperly appealed to the jury's sympathy in closing arguments by referring to Mr. Calabrese's terminal illness, and (2) the amount of damages lacks evidentiary basis. The Court rejects both grounds.
Upon review of the closing arguments of plaintiff's counsel, the Court finds that any references to Mr. Calabrese's illness were oblique at best and does not rise to the level of grievous error. Square D's reference to a post-trial communication between a member of the jury and Mr. Calabrese does not change that conclusion. Mr. Calabrese's attorney has disclosed to the Court the contents of a letter between the foreperson and Mr. Calabrese, and the Court has had an opportunity to examine the letter thoroughly. The Court finds that the communication clearly took place after the verdict had been rendered and contains only benign congratulations. In sum, nothing in the letter indicates that the verdict was driven by sympathy for Mr. Calabrese's condition.
The Court also finds that the jury's determination of damages was not against the clear or great weight of the evidence. Unisplay, S.A. v. American Electronic Sign Co., Inc., 69 F.3d 512, 517 (Fed. Cir. 1995) (new trial on damages warranted only where the verdict is against the clear or great weight of the evidence). In awarding damages, the jury was instructed to determine a reasonable royalty for the use of the `849 Patent as would have resulted from a hypothetical negotiation between Mr. Calabrese and Square D at the time the infringement began. (Tr. 945); see also, Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1554 (Fed. Cir.), cert. denied, 516 U.S. 867 (1995) (holding that any damages determined on the basis of hypothetical negotiations should be based on a supposed meeting between the parties at the time the infringement began). The jury was also instructed that a reasonable royalty may be calculated as a lump-sum, paid-up license based on projected royalties as of the date the infringement began. (Tr. 947). See also, Snellman v. Ricoh Co., Ltd., 862 F.2d 283, 289 (Fed. Cir. 1988), cert. denied, 491 U.S. 910 (1989) (upholding an award of lump-sum royalty based on projected sales). In accordance with these instructions, the jury awarded Mr. Calabrese $13.3 million. Both parties agree that the figure can be broken down to represent a royalty rate of about 17% applied to one of Square D's 1995 projected sales figures for the Seriplex products of about $77 million.
The law does not mandate a specific royalty rate or a particular damage methodology since the "[c]alculation of a reasonable royalty depends on the particular facts of each case. Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1579 (Fed. Cir. 1996). In the end, the jury's calculations will not be overturned if it is "within the range encompassed by the record as a whole." Unisplay, S.A., 69 F.3d at 519.
In this case, Mr. Calabrese presented evidence that Square D was willing to pay a third party a rate as high as 17% of cost for the right to sell a critical component of the infringing system. (Tr. 622). Mr. Calabrese also presented evidence that when Square D began infringing the `849 Patent, Square D was projecting sales figures of anywhere between $74 million and $91 million. (Tr. 155, 401, PX-120, PX-161, PX-135). While Square D denied to the jury, as it does now, that the 17% rate makes any sense as a royalty rate and that the projected sales figures should be ignored because they turned out to be greatly inflated, the jury was entitled to credit Mr. Calabrese's evidence over that of Square D. Cost figures are relevant factors in calculating a reasonable royalty rate. Cf., Mahurkar, 79 F.3d at 1580 (upholding district court's calculation of a 25.88% royalty rate on the basis of profit margin calculations); TWM Mfg. Co., Inc. v. Dura Corp., 739 F.2d 895, 899 (Fed. Cir.), cert. denied, 479 U.S. 852 (1986) (upholding 20% royalty rate on the basis of profit margin calculations). Furthermore, projected sales figures are also relevant factors in calculating damages, even if plaintiff counters those figures with actual sales that turn out to be much lower than anticipated. See Snellman, 862 F.2d at 289 (holding that the jury justifiably could have calculated a lump sum royalty based on defendant's expected sales of the infringing product); TWM Manufacturing Co., 789 F.2d at 899 (approving reliance on projected profit figures as opposed to actual profits calculated after the fact). As such, the Court will not disturb the jury's damage figures.
Calabrese's Motion for Enhanced Damages and Attorneys Fees
The Court now turns to Mr. Calabrese's motion for enhanced damages and attorneys fees. A court may enhance damages "up to three times the amount found or assessed" where a party has been found to have willfully infringed or to have acted in bad faith. 35 U.S.C. § 284; Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448, 1461. (Fed. Cir. 1998). The penalty, however, need not be assessed in every case where willful infringement or bad faith has been found. See e.g., Modine Mfg. Co. v. The Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990), cert. denied, 500 U.S. 918 (1991). A trial court's decision to enhance damages and by how much is discretionary, made in light of the totality of the circumstances. SRI Int'l. Inc. v. Advanced Tech. Lab., Inc., 127 F.3d 1462, 1465 (Fed. Cir. 1997).
In this case, while the jury's finding of willful infringement was supported by sufficient evidence, the Court nevertheless finds the evidence to be too close to warrant an award of enhanced damages. See, Modine Mfg. Co., 917 F.2d at 543 (upholding denial of enhanced damages where evidence of willfulness sufficiently close); Cybor Corp., 138 F.3d at 1461 (same). The technology represented in this patent suit and the corresponding factual questions were exceedingly complex. The complexity and closeness of the issues are highlighted by the fact that Square D actually succeeded in convincing a prior court to grant summary judgment in its favor against Mr. Calabrese, Calabrese v. Square D Co., 14 F. Supp.2d 1050 (N.D. Ill. 1998), a decision eventually overturned by the Federal Circuit. Calabrese v. Square D Co., 1999 U.S. App. LEXIS 21930 (Fed. Cir. Sept. 13, 1999). It is noteworthy that in that previous district court decision, Judge Shadur disagreed with the eventual conclusion of this Court as to the meaning of the critical claim term "through." Calabrese, 14 F. Supp.2d at 1054. While the Court is convinced that the correct interpretation was reached here, it finds that the disagreement is illustrative of the complexity and closeness of the issues and, accordingly, denies Mr. Calabrese's motion for enhanced damages.
Likewise, for the above reasons, the Court finds that this case is not sufficiently "exceptional" to warrant the awarding of attorneys fees.Modine Mfg. Co., 917 F.2d at 543. The Patent Act provides for an award of attorneys fees to the prevailing party in "exceptional cases" such as when there has been an express finding of willful infringement. 35 U.S.C. § 285; Modine Mfg. Co., 917 F.2d at 543. But, again, as with enhanced damages, not every case of willful infringement deserves an award of attorneys fees. S.C. Johnson Sons, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed. Cir. 1986).
As noted above, the Court finds that this case involved exceedingly complex and difficult issues of fact, which made the issue of willful infringement close. Cybor Corp., 138 F.3d at 1460 (closeness of the issues relevant in denying motion for attorneys fees under § 285). The Court also rejects Mr. Calabrese' s contentions that the litigation tactics of Square D's counsel warrants attorneys fees. Id. at 1461 (infringer's litigation behavior relevant in denying motion for attorneys fees under § 285). The Court finds that Square D's actions during discovery and at trial in what was a hotly contested litigation for both sides do not take this case into the realm of the exceptional. In fact, this case was hurried to trial with Square D's cooperation due to Mr. Calabrese's failing health. In sum, Mr. Calabrese' s motion for enhanced damages and attorneys fees are denied.
Calabrese Motion for Prejudgment Interest
Finally, the Court addresses Mr. Calabrese's motion for amendment of judgment to include prejudgment interest. A prevailing plaintiff in a patent infringement suit is ordinarily entitled to an award of prejudgment interest in order to provide complete compensation to the owners of the infringed patents. 35 U.S.C. § 284; General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56 (1983). Square D contends, however, that prejudgment interest should not be awarded in this case because the awarded damages are so large as to indicate that the jury already took into account the time-value of money. In the alternative, Square D urges the Court calculate any prejudgment award on the basis of a simple interest rate actually paid by Square D, applied to prorated portions of the damage award per year.
First, the Court finds that prejudgment award is appropriate as nothing indicates that the jury took into account the time-value of money in determining damages. The jury was not instructed to take into account such a factor and the Court, on the basis of mere speculation, will not assume that the jurors disregarded the instructions. Amsted Industries Inc. v. National Castings, Inc., No. 88 C 0924, 1990 U.S. Dist. LEXIS 16657, at *7-8 (N.D. Ill., Dec. 6, 1990) (in the absence of jury instructions to the contrary, the court finds the jury did not include time-value of money in awarding patent infringement damages); Malta v. Schulmerich Carillions, Inc., 952 F.2d 1320, 1342 (Fed. Cir. 1991),cert. denied, 504 U.S. 974 (1992) (jury is assumed to have followed instructions).
Second, the Court finds the appropriate prejudgment interest award is calculated at the prime rate on the entirety of the $13.3 million damages, compounded monthly beginning February 1, 1995 through the date of entry of judgment, January 26, 2000. "The rate of prejudgment interest and whether it should be compounded or not compounded are matters left largely to the discretion of the district court." Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed. Cir. 1986),cert. denied, 482 U.S. 915 (1987).
The Court chooses the prime rate because the prime — in the absence of any other rate affirmatively demonstrated by the parties as more appropriate — is a rate sufficient to "compensate plaintiffs not only for the loss of the use of their money but also for the risk of default." Gorstein Enterprises, Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 436-37 (7th Cir. 1989). Square D urges the Court to apply rates lower than prime because Square D apparently was able to actually secure some loans at lower rates. But Square D does not sufficiently demonstrate that its suggested rates are applicable in this case. It is clear from the declaration of Square D's Vice President and Treasurer, that the suggested rates were obtained only as to certain "short-term" loans. (See Declaration of Richard O'Shanna, Def. Opp. at Ex. C). However, Square D offers no evidence that the particular conditions that applied to these "short term" loans are applicable here to fairly compensate Mr. Calabrese, especially for any risk of default given the length of time he was deprived of compensation. Gorstein, 874 F.2d at 436. In the absence of an affirmative demonstration of a more appropriate rate, the prime shall serve as the applicable rate.
Furthermore, the calculation will be applied to the whole of the $13.2 million damages award at the outset and compounded monthly. The jurors were instructed that damages may be calculated as a lump-sum, paid-up license and Square D offers no challenge to Mr. Calabrese's characterization of the awarded damages as one reflecting such a lump-sum payment. Instead, Square D urges a pro rata calculation simply on the basis of an unsupported assertion that the typical licensing relationship requires that the rates be based on the percentage of the royalty attributable to each year of sales. (Def. Opp. at 3). The Court finds no such requirement in this case and concludes that full compensation will be accomplished by calculating the interest on the entirety of the damages award, compounded monthly. See Amsted Industries Inc., 1990 U.S. Dist. LEXIS 16657 at *14 (holding that compounding is consistent with the goal of fully compensating the plaintiff for the lost time value of the money it would have earned absent the defendant's infringement). In sum, the Court accepts the calculations submitted by Mr. Calabrese for prejudgment interest, (Pltf. Motion to Amend the Judgment to Add Prejudgment Interest, Ex. B), and accordingly awards $6,819,780.00 in prejudgment interest.
CONCLUSION
For the reasons stated herein, the Court orders the following:
(1) Square D's Post-Verdict Motion for Judgment as a Matter of Law and for New Trial is denied;
(2) Frank Calabrese's Motion to Enhance the Award of Patent Infringement Damages and for Attorneys Fees is denied;
(3) Frank Calabrese's the Judgment to Add Prejudgment Interest is granted $6,819,730.00.
IT IS SO ORDERED.