Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories

RESPONSE in Opposition re MOTION Prejudgment Interest and an Accounting for Supplemental Profits

S.D. Cal.November 30, 2017

SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Christopher S. Marchese (SBN 170239), marchese@fr.com Seth M. Sproul (SBN 217711), sproul@fr.com Michael A. Amon (SBN 226221), amon@fr.com Garrett K. Sakimae (SBN 288453), sakimae@fr.com Tucker N. Terhufen (SBN 311038), terhufen@fr.com FISH & RICHARDSON P.C. 12390 El Camino Real San Diego, CA 92130 Tel: (858) 678-5070, Fax: (858) 678-5099 Renée Rothauge, (SBN 271239), reneerothauge@markowitzherbold.com MARKOWITZ HERBOLD PC 1211 SW Fifth Avenue, Suite 3000 Portland, OR 97204 Tel: (503) 295-3085, Fax: (503) 323-9105 Attorneys for Defendant, Seirus Innovative Accessories, Inc. IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA COLUMBIA SPORTSWEAR NORTH AMERICA, INC., an Oregon corporation, Plaintiff, v. SEIRUS INNOVATIVE ACCESSORIES, INC., a Utah corporation Defendants. Case No. 3:17-cv-01781 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA SPORTSWEAR NORTH AMERICA, INC.’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Judge: Marco A. Hernandez Date Action Filed: January 12, 2015 Trial Date: September 18, 2017 Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18275 Page 1 of 9 1 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 INTRODUCTION The jury awarded Columbia damages in the amount of over $3 million— Seirus’s entire profit for the sales of the accused products. This amount is more than six times the amount that same jury determined would be “adequate” to compensate Columbia for its actual losses due to Seirus’s alleged infringement. Despite having already received a huge windfall, Columbia now complains that the jury’s award is not enough and demands another some half a million dollars in prejudgment interest. Notably, the amount Columbia seeks in interest alone is more than the amount the jury decided would be adequate compensation. Because Columbia has more than fairly been compensated, an award of prejudgment interest is not appropriate. If the Court chooses to award prejudgment interest, it should apply the T-Bill rate typically used by the 9th Circuit, not Columbia’s exorbitant proposed interest rates. As to Columbia’s demand for an accounting, Seirus has provided Columbia the information it seeks. Seirus promised to do so prior to Columbia’s motion and would have done so without the motion. In any event, Columbia’s motion in this respect is now moot. ARGUMENT A. Prejudgment Interest is Not Warranted in this Case Because Columbia Has Been More than Adequately Compensated for Its Alleged Loss As this Court will recall, the Patent Act provides two measures of damages for a design patent owner in an infringement suit. A design patent owner may, in line with damages awarded for infringement of a utility patent, recover “damages adequate to compensate for the infringement . . . together with interest and costs as fixed by the court” under section 284 of the Patent Act. 35 U.S.C. § 284. In the alternative, a design patent owner may seek to recover an alleged infringer’s “total profit” for sale of a “patented article of manufacture” under section 289. 35 U.S.C. § 289. Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18276 Page 2 of 9 2 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In this case, the jury was asked to determine an award of damages under each statutory provision. The jury awarded Columbia $435,175 under Section 284 and awarded Columbia roughly $3 million under Section 289. As indicated in the judgment, Columbia has elected to receive the larger damages award under Section 289. Now Columbia, despite having already received an award more than six times larger than what the jury already decided was “adequate to compensate” it for Seirus’s alleged infringement, complains that it has not received enough and asks this Court to award it yet another $538,529 in prejudgment interest—an amount itself larger that the jury’s award of damages under Section 284. Columbia justifies this request by arguing that prejudgment interest should ordinarily be awarded absent some justification for not providing it. See Mot. at 4. Columbia cites GM Corp. v. Devex Corp., 461 U.S. 648 (1983), for this proposition, but leaves out entirely that this case specifically dealt with the interpretation of Section 284 of the Patent Act. As the Supreme Court explained, the case before it “concern[ed] the proper standard governing the award of prejudgment interest in a patent infringement suit under 35 U.S.C. § 284.” Id. at 649 (emphasis added). Ultimately, the Supreme Court decided “[t]he standard governing the award of prejudgment interest under § 284 should be consistent with Congress’ overriding purpose of affording patent owners complete compensation” and thus prejudgment interest should normally be awarded because it “ensure[s] that the patent owner is placed in as good a position as he would have been in had the infringer entered into a reasonable royalty agreement.” Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983). Thus, under Section 284, when a patent owner can show that she has, for example, suffered pecuniary loss or has been forced to take out loans because of a loss of income due to infringement, an award of prejudgment interest is warranted. See, e.g., Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 23 (Fed. Cir. 1984); see also, e.g., Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1574 (Fed. Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18277 Page 3 of 9 3 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cir. 1996) (cited by Columbia at Mot. 3) (addressing prejudgment interest under section 284); Ecolab, Inc. v. FMC Corp., 569 F.3d 1335, 1353 (Fed. Cir. 2009) (again cited by Columbia at Mot. 3) (again addressing prejudgment interest under section 284).1 However, Columbia elected to forgo Section 284 damages, opting instead for a measure of damages that is not designed to compensate it for its actual loss. Columbia has instead elected to receive damages under Section 289 of the Patent Act. Unlike Section 284, Section 289 is not about making the plaintiff whole—it is about disgorging a defendant from allegedly ill-gotten gains. And, also unlike Section 284, Section 289 makes no mention of interest. Columbia ignores these differences and argues that Section 289 prohibits such an exclusion because it states that “[n]othing 1 Columbia also cites a number of other cases addressing prejudgment interest in the context of completely different statutes. For example, Columbia cites Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., but this case addressed whether prejudgment interest was appropriate under the 1909 version of the Copyright Act. Columbia also cites, for example, 4 Pillar Dynasty LLC v. N.Y. & Co., 2017 U.S. Dist. LEXIS131712, *15 (S.D.N.Y. Aug. 8, 2017) (addressing prejudgment interest in the context of section 1117(a) of the Lanham Act). The only cases cited by Columbia that actually address prejudgment interest under Section 289 are ones that do so without any real consideration of the issue, e.g., Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277, 1292 (Fed. Cir. 2002) (affirming, without any discussion, an award of prejudgment interest in an appeal that had nothing to do with prejudgment interest); ones where the defendant made no argument to contest prejudgment interest, e.g. John Mezzalingua Assocs. v. Antec Corp., 2002 U.S. Dist . LEXIS 26294, *6 (“Defendant offers no justification for the Court to rely on in declining to award prejudgment interest. The Court will not create a justification out of whole cloth, particularly where Defendant offers none.”); or ones that correctly recognize (as will be discussed below) that in the absence of a statute, whether to award prejudgment interest is committed to the sound judgment of the trial court, e.g. Rocket Jewelry Box, Inc. v. Quality Intern. Packaging, Ltd., 250 F. Supp. 2d 333, 339 (S.D.N.Y. 2003), aff'd in part, vacated in part on other grounds (noting that courts have discretion and that “case law provides little guidance as to whether prejudgment interest is available for an award of infringer’s profits” under § 289). Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18278 Page 4 of 9 4 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 in [§ 289] shall prevent, lessen, or impeach any other remedy which an owner of an infringe patent has under the provisions of [Title 35].” See Mot. at 4 (quoting 35 U.S.C. § 289). This provision of the statute, though, simply makes clear that a design patent owner may also elect to pursue, for example, damages under Section 284 or pursue other remedies such as an injunction. It does not mean that a patent owner can choose to elect damages under Section 289 and then rely on the non-elected damages section to justify asking for more money. Indeed, as courts have explained, “[s]ection 289 provides an alternative remedy to section 284, for infringement of design patents.” Junker v. HDC Corp., C-07-05094 JCS, 2008 WL 3385819, at *3 (N.D. Cal. July 28, 2008) (emphasis added). What’s more, the amount Columbia has elected to receive far exceeds the amount found by the jury to actually compensate it for the infringement. The truth is that neither the statute nor what little caselaw there is on the subject requires an award of prejudgment interest for Section 289 damages. In the “absence of a statutory provision” or any other applicable law, “the generally applicable federal rule” is that an “award of prejudgment interest is in the discretion of the trial court.” See Conoco Inc. v. J.M. Huber Corp., 289 F.3d 819, 823 (Fed. Cir. 2002); see also Rodgers v. U.S., 332 U.S. 371, 373 (1947) (stating that “in the absence of an unequivocal prohibition of interest on such obligations, this Court has fashioned rules which granted or denied interest on particular statutory obligations by an appraisal of the congressional purpose in imposing them and in the light of general principles deemed relevant by the Court.”). “[A] persuasive consideration” in whether prejudgment interest should be awarded is “the relative equities between the beneficiaries of the obligation and those upon whom it has been imposed.” Rodgers, 332 U.S. at 373. Courts have “generally weighed these relative equities in accordance with the historic judicial principle that one for whose financial advantage an obligation was assumed or imposed, and who has suffered actual money damages by another's Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18279 Page 5 of 9 5 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 breach of that obligation, should be fairly compensated for the loss thereby sustained.” Id.; see Princess Cruises, Inc. v. U.S., 397 F.3d 1358, 1368 (Fed. Cir. 2005) (noting that Rodgers instructs courts to “focus[] on the principle of full compensation”). Here, Columbia has received full compensation for the infringement of its wave design patent. The jury determined that “adequate” compensation for Columbia’s loss was $435,175. Applying Columbia’s maximum interest rate (7% compounded annually) to that amount results in a total of $564,030.32. The amount Columbia is actually receiving in disgorgement far exceeds this sum—by approximately $2.5 million. It would be an unfair windfall to Columbia, and an inequitable penalty to Seirus, if Columbia were allowed to disgorge every dollar Seirus made on the products subject to the damages verdict—and, on top of that, be ordered to pay more than $500,000 in interest. Columbia should not be allowed to receive such a windfall, nor Seirus to suffer such a penalty. Thus, Columbia should not be awarded prejudgment interest. B. If Prejudgment Interest Is To Be Awarded, the T-Bill Rate Should Be Used “The rate of prejudgment interest and whether it should be compounded or uncompounded 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). However, in the exercise of that discussion, Courts should be “guided by the purpose of prejudgment interest.” See id.; see also Chuck Olsen Co., Inc. v. F.P.D., Inc., 698 Fed. Appx. 409, 410 (9th Cir. 2017) (“We review the district court's decision to award prejudgment interest and the rate of interest for abuse of discretion.”). As discussed above, the general purpose of awarding prejudgment interest is to ensure that a plaintiff has been adequately compensated. Here, as also discussed above, Columbia has already been more than adequately compensated, so if this Court decides to award Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18280 Page 6 of 9 6 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 prejudgment interest, it should do so at a rate no higher than what the Ninth Circuit typically uses. In the Ninth Circuit, “the treasury-bill rate is the rate typically used in most cases for prejudgment interest calculation.” Cave Consulting Group, LLC v. OptumInsight, Inc., 2016 U.S. Dist. LEXIS 120932, at *77 (citing SEC v. Platforms Wireless Int’l Corp., 617 F.3d 1072, 1083 (9th Cir. 2010)); see also In Re Nuvocorp Energy, Inc., 902 F.2d 729, 734 (9th Cir. 1990) (“Title 28 U.S.C § 1961 is to be used for the calculation of prejudgment interest unless the equities of a particular case demand a different rate.”). The Ninth Circuit has found that, in the absence of “substantial evidence that the equities of the particular case require a different rate,” “the measure of interest rates prescribed for post-judgment interest in 28 U.S.C. § 1961(a) [which calls for the treasury-bill rate to be used] is also appropriate for fixing the rate for pre-judgment interest.” W. P. Fisheries, Inc. v. SS Pres. Grant, 730 F.2d 1280, 1289 (9th Cir. 1984). During the relevant time period, the average T-Bill rate was 0.5044%.2 Compounded annually (as Columbia suggests), this results in prejudgment interest of $64,394.34. Columbia has failed to provide any reason to depart from this normal practice. Throughout its briefing, Columbia tries to justify a higher rate by pointing to the rate at which Seirus might borrow money. However, even Columbia admits that this discussion is no more than pure speculation, blaming Seirus for not producing evidence about its borrowing rate. See Mot. at 6. Columbia, not Seirus, has the burden of proving damages. Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 26 (Fed. Cir. 2012) (“The patentee bears the burden of proving damages.”). As Columbia has not come forward with any evidence to suggest that Seirus’s borrowing rate should 2 See U.S. Department of Treasury, Daily Treasury Long Term Rate Data, available at https://goo.gl/UrsgiX. This rate was obtained by averaging the 1-year treasury bill (the T-Bill) rates from September 1, 2013 through November 22, 2017. Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18281 Page 7 of 9 7 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 be used, much less any evidence as to what that borrowing rate was, there is no reason to depart from typical Ninth Circuit practice. Columbia also suggests that state law should govern prejudgment interest. While it is true that some district courts have looked to state law to determine the rate of prejudgment interest, Columbia points to no reason why that should be the case here. Columbia would be hard pressed to find such a reason, because, as discussed above, Columbia has already received more than adequate compensation. Besides, this is a federal case, involving questions of federal patent law. Columbia’s attempt to invoke state law thus falls flat. C. Columbia’s Complaints Regarding an Accounting Are Moot Lastly, Columbia complains that Seirus has not produced an accounting of its profits post-February 28, 2017. Columbia’s motion on this topic was filed prematurely. Prior to the motion being filed, Seirus promised Columbia that it would produce this information once it was able to gather and tabulate all of the relevant information. Rather than waiting for Seirus to do so, Columbia filed the instant motion. Seirus has now provided the information Columbia seeks in its motion, so the motion for an accounting is moot. CONCLUSION For the reasons described above, Columbia’s motion for prejudgment interest should be denied because Columbia has already been adequately compensated, and Columbia’s motion for an accounting should be denied as moot. Dated: November 30, 2017 FISH & RICHARDSON P.C. By: /s/ Christopher S. Marchese Christopher S. Marchese marchese@fr.com Attorneys for Defendant, Seirus Innovative Accessories, Inc. Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18282 Page 8 of 9 8 SEIRUS’ RESPONSE IN OPPOSITION TO COLUMBIA’S MOTION FOR PREJUDGMENT INTEREST AND AN ACCOUNTING FOR SUPPLEMENTAL PROFITS Case No. Case No. 3:17-cv-01781 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the above and foregoing document has been served on November 30, 2017, to all counsel of record who are deemed to have consented to electronic service via the Court’s CM/ECF system per Civil Local Rule 5.4. Any other counsel of record will be served by electronic mail, facsimile and/or overnight delivery. /s/ Christopher S. Marchese Christopher S. Marchese marchese@fr.com Case 3:17-cv-01781-HZ Document 405 Filed 11/30/17 PageID.18283 Page 9 of 9