Opinion
Civil Action No. 95-2631.
August 31, 2004
MEMORANDUM AND ORDER
Now before the Court is Defendant's Motion for Reconsideration of its Motion for Judgment as a Matter of Law in light of the decision of the United States Court of Appeals for the Federal Circuit in Moba, B.V., et al. v. Diamond Automation, Inc., 325 F.3d 1306 (Fed. Cir. 2003). Plaintiffs filed a cross-motion for JMOL in their favor. For the reasons that follow, Defendant's Motion will be granted and Plaintiffs' Motion will be denied.
I. Factual Background and Procedural History
Plaintiffs Moba, B.V. and Staalkat, B.V. are Dutch companies that manufacture and sell high-speed egg processing machines, such as the Moba Omnia and the Staalkat Selecta. Plaintiff FPS Food Processing Systems, Inc. is a Pennsylvania corporation that sells Moba's and Staalkat's egg processing machines in the United States. Defendant Diamond Automation, Inc. ("Diamond") is a Michigan corporation that also manufactures and sells high-speed egg processing machines. Diamond has obtained various patents covering aspects of the high-speed egg processing technology.
In May 1995, Moba, B.V., Staalkat, B.V., and FPS Food Processing Systems, Inc. (collectively "FPS") instituted this action against Diamond seeking a declaratory judgment that United States Patents Nos. 4,569,444 (the "`444 patent"), 4,519,494 (the "`494 patent"), 4,505,373 (the "`373 patent"), and 4,519,505 (the "`505 patent") are invalid and, in any event, are not infringed by the equipment manufactured by FPS. Diamond, which owns the four patents at issue, filed a counterclaim for a declaratory judgment that the patents are valid and for damages and a permanent injunction barring FPS' manufacture, use or sale of the patented inventions.
The case was tried before a jury from January 28, 2000 to February 25, 2000. The jury returned a verdict that all four patents were valid but not infringed. Diamond made pre- and post-verdict motions for judgment as a matter of law that FPS infringed the asserted claims of the four patents in suit and that that infringement was willful, both of which the Court denied. Diamond then appealed the Court's denial of JMOL on two of the claims at issue. Specifically, Diamond argued that claim 24 of the `505 patent and claim 28 of the `494 patent covered methods used in both the Moba Omnia and the Staalkat Selecta. Diamond further argued that FPS induced its customers to infringe those claims by selling them the Moba Omnia and the Staalkat Selecta and training them to use those machines.
On appeal, the United States Court of Appeals for the Federal Circuit upheld the jury's finding that claim 28 of the `494 patent was not directly infringed, but reversed the jury's determination with respect to claim 24 of the `505 patent and held that that claim had, in fact, been infringed by the Moba Omnia method. Moba, B.V., et al., v. Diamond Automation, Inc., 325 F.3d 1306, 1313-14 (Fed. Cir. 2003). However, the Federal Circuit declined to hold as a matter of law that FPS induced infringement of the `505 patent, and remanded. Thus, the sole remaining issue is whether FPS actively induced infringement of claim 24 of the `505 patent.
II. Legal Standard
Pursuant to Federal Rule of Civil Procedure 50, judgment as a matter of law may be granted only when "there is no legally sufficient evidentiary basis for a reasonable jury to find" for the nonmoving party. Fed.R.Civ.P. 50(a)(1); Weisgram v. Marley Co., 528 U.S. 440, 448 n. 4 (2000). In order to determine whether a legally sufficient basis exists, "the trial court must consider all the evidence in a light most favorable to the non-mover, must draw reasonable inferences favorable to the non-mover, must not determine the credibility of witnesses, and must not substitute its choice for that of the jury." Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259, 1269 (Fed. Cir. 1999) (internal quotations omitted). "If . . . substantial evidence, being that minimum quantum of evidence from which a jury might reasonably afford relief, exists to support the jury's verdict, then the motion for JMOL must be denied." Id.
III. Analysis
A. Direct Infringement
The Federal Circuit determined as a matter of law that the Moba Omnia infringes claim 24 of the `505 patent. Diamond contends that the Federal Circuit also found FPS liable for direct infringement. However, Claim 24 is a method claim. It is axiomatic that only one who performs the method can be held liable for direct infringement under 35 U.S.C. § 271(a). See, e.g., Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773-74 (Fed. Cir. 1993). In this case, FPS did not perform the method itself, but rather sold the machines to its customers, who then performed the infringing method. As the Federal Circuit noted, "The sale or manufacture of equipment to perform a claimed method is not direct infringement within the meaning of 35 U.S.C. § 271(a)." Moba, 325 F.3d at 1313. Moreover, the issue of FPS' direct infringement of the `505 patent was not before the jury. T.T. 2/25/00 at 12-13. Thus, the Federal Circuit's holding that the Omnia method infringes claim 24 does not, in and of itself, impute any liability to FPS. Rather, as the Federal Circuit stated, "[T]he issue of infringement by FPS depends on whether FPS `actively induce[d] infringement' within the meaning of 35 U.S.C. § 271(b)." Id. at 1318.
The source of Diamond's confusion is that the Federal Circuit indicated in the opening paragraph of its opinion that it was remanding for a determination of damages. Moba, 325 F.3d at 1309. However, the remainder of the opinion makes clear that the Court had made no determination as to liability and merely remanded for further inquiry into Plaintiffs' potential liability for inducement.
B. Inducement of Infringement
The parties disagree regarding the legal standard governing inducement of infringement under § 271(b). That section provides, "whoever actively induces infringement of a patent shall be liable as an infringer." In its opinion remanding this case, the Federal Circuit explained:
Although § 271(b) does not use the word "knowingly," this court has uniformly imposed a knowledge requirement. Water Tech. Corp. v. Calco, Ltd., 850 F.2d 660, 7 USPQ2d 1097 (Fed. Cir. 1988); C.R. Bard, Inc. v. Advanced Card. Sys., Inc., 911 F.2d 670, 15 USPQ2d 1540 (Fed. Cir. 1990). This court defined the generally applicable intent standard in Hewlett-Packard Co. v. Bausch Lomb, Inc., 909 F.2d 1464, 1468-69, 15 USPQ2d 1525, 1528-29 (Fed. Cir. 1990). In Hewlett-Packard, this court held that "proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement" under § 271(b). Hewlett-Packard, 909 F.2d at 1469.Moba, 325 F.3d at 1318.
The Court then stated unequivocally,
In this case, the only intent required of FPS is the intent to cause the acts that constitute infringement. Hewlett-Packard, 909 F.2d at 1469. Although Diamond argues that the record shows that FPS sold its customers the Moba Omnia and trained them to use the infringing method, active inducement is nonetheless a factual inquiry. Accordingly, this court declines to make a determination that no reasonable jury could conclude that FPS did not intend that its customers perform acts that constitute infringement. Therefore, this court remands for further inquiry into whether FPS indirectly infringes claim 24 of the `505 patent.Id. at 1318-19 (emphasis added).
FPS argues that, in addition to the intent requirement described by the Federal Circuit in Moba, Defendant also bears the burden of demonstrating that "[the alleged infringer] knew or should have known his actions would induce actual infringements." Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 553 (Fed. Cir. 1990) (emphasis added). Defendant argues that the Federal Circuit's opinion in this case held that only Hewlett-Packard, not Manville Sales, applies.
This Court agrees with Defendant. The Federal Circuit's opinion makes clear that the only inquiry to be conducted on remand is whether FPS intended that its customers perform the acts that constitute infringement. FPS argued before the Federal Circuit that both Manville Sales and Hewlett-Packard should apply in this case; however, the Federal Circuit decided that only Hewlett-Packard was applicable. Further, subsequent Federal Circuit decisions indicate that the Court did not intend to applyManville Sales in this case. In Dynacore Holdings Corp. v. U.S. Phillips Corp., 363 F.3d 1263, 1273-74 (Fed. Cir. 2004), the Court specifically cited Hewlett-Packard and Moba, the decision in this case, for the proposition that "[i]n order to prove vicarious liability for indirect infringement, a plaintiff who demonstrates direct infringement must also establish that the defendant possessed the requisite knowledge or intent to be held vicariously liable." 363 F.3d at 1273. The Court then included abut see citation to Manville Sales. This Court will not speculate as to why the Federal Circuit did not apply theManville Sales standard in this case. However, when faced with a clear mandate from an appellate court, the district court must comply. See, e.g., Laitram Corp. v. NEC Corp., 115 F.3d 947, 951 (Fed. Cir. 1997). Accordingly, the only issue now before the Court is whether FPS possessed the requisite intent to cause the acts that constitute infringement.
Based on the record before it, this Court concludes as a matter of law that FPS intended that its customers perform the method covered by claim 24 of the `505 patent. FPS admits that "it is undisputed that FPS . . . sold Omnia machines in this country which have been found to practice the method [of claim 24 of the `505 patent] when used by FPS's customers." Pl. Mem. at 2. FPS further admits that "there is no dispute that the Omnia can be used in only one way." Pl. Mem. at 12. FPS's sale of a machine that can be used only in a manner that infringes a patent is itself sufficient to prove intent to infringe. See, e.g., Ziggity Systems, Inc. v. Val Watering Systems, 769 F. Supp. 752, 794 (E.D. Pa. 1990) ("the mere sale of devices . . . which are not usable in any manner other than in conjunction with infringing devices constitutes inducement."). Further, Defendant points to uncontroverted record evidence that Moba demonstrated the Moba Omnia machine at trade shows, T.T. 2/20/00 at 27-28; that Moba provided color advertising brochures describing the Moba Omnia, T.T. 2/3/00 at 37-46; and that Moba produced videos of the Omnia that showed the machine in operation, T.T. 2/8/00 at 5-7. The evidence thus leads inexorably to the conclusion that FPS intended that its customers run the Moba Omnia in a way that has been held to infringe Defendant's patent.
Defendant also argued that the evidence showed that Moba personnel "install, run, and train the customer" on how to use the Moba Omnia. T.T. 2/8/00 at 23. FPS countered that this testimony pertained only to the Staalkat Selecta, not the Moba Omnia. The Court need not resolve this issue because, even without evidence of installation and training, the undisputed evidence demonstrates that FPS intended that its customers run the Omnia in the way that has been held to infringe.
IV. Conclusion
Based on the foregoing, the Court finds that FPS induced infringement, and accordingly will grant judgment as a matter of law in favor of Defendant. FPS' Motion for judgment as a matter of law will be denied. An appropriate Order follows.
ORDER
AND NOW, this ____ day of August, 2004, upon consideration of Defendant's Request for Reconsideration of its Motion for Judgment as a Matter of Law Regarding the Jury's Verdict of No Inducement of Infringement of the `505 Patent (docket no. 309) and Plaintiffs' Motion for Entry of Final Judgment in their Favor (docket no. 311), and all responses thereto, it is ORDERED that:
1. Defendant's Motion is GRANTED for the reasons stated in the accompanying Memorandum. Accordingly, judgment is ENTERED in favor of Defendant on the issue of Plaintiffs' inducement of infringement.
2. Plaintiffs' Motion is DENIED.
3. Pursuant to the Court's Order of July 1, 2004, a status conference will be held on Thursday, September 16, 2004, at 3:00 p.m. in Chambers, at which time the Court will set a schedule for the remaining proceedings, including a date for trial on the issue of damages and equitable relief.