Aqua Shield v. Interpool Pool Cover Team
774 F.3d 766
| Fed. Cir. | 2014

Background

  • Aqua Shield sued Inter Pool Cover Team (IPC) in the District of Utah for infringement of U.S. Patent No. 6,637,160.
  • Aqua Shield obtained summary judgment that IPC infringed and that the asserted validity issues did not defeat infringement.
  • Bench trial determined Aqua Shield entitled to a damages royalty of $10,800 and found IPC was not willful; Aqua Shield challenged these rulings on appeal.
  • District court initially denied lost profits and awarded no royalty, then on reconsideration awarded $10,800 based on a hypothetical-negotiation framework with an eight percent royalty.
  • On appeal, the Federal Circuit vacated the royalty award and willfulness ruling, affirmed a discrete infringement issue, and remanded for further proceedings consistent with the opinion.
  • Aqua Shield argued about including the Elegant model in the royalty computation; the district court did not include it, and the appeal affirmed that exclusion.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Royalty calculation method Aqua Shield contends the district court erred by anchoring the royalty to IPC's actual profits rather than to anticipated profits in a hypothetical negotiation. IPC argues the district court properly considered IPC's profits in determining a reasonable royalty. Royalty must be based on anticipated profits, not IPC's actual post-hoc profits; remand for recalculation.
Willful infringement standard Aqua Shield argues IPC willfully infringed and should face enhanced damages and fees. IPC asserts no willful infringement given defenses and prior non-infringement views. Willfulness vacated; remand for analysis under Seagate framework with focus on defenses raised during litigation.
Elegant model inclusion Aqua Shield claimed Elegant model should be included in damages and injunction calculations. District court did not find the Elegant model infringed, so inclusion was improper. No error in excluding the Elegant model from royalty calculation or injunction.

Key Cases Cited

  • Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009) (hypothetical negotiation framework; describe need to recreate ex ante royalty)
  • Dowagiac Mfg. Co. v. Minn. Moline Plow Co., 235 U.S. 641 (U.S. 1915) (royalty as value of use of patent technology)
  • Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552 (Fed. Cir. 1984) (profits evidence relevant to anticipated profits)
  • Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008) (economic considerations in royalty determinations)
  • Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (principles of royalty determination in hypothetical negotiations)
  • Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327 (Fed. Cir. 2004) (structure of royalty-law framework and evidence consideration)
  • State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573 (Fed. Cir. 1989) (case on damages and royalty assessment factors)
  • Douglas Dynamics, LLC v. Buyers Prod. Co., 717 F.3d 1336 (Fed. Cir. 2013) (infringer can raise prices to accommodate higher royalty; district court error if guaranteed profit)
  • Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371 (Fed. Cir. 2001) (post-infringement evidence as ancillary to hypothetical profits)
  • Seagate Tech., LLC v. In-re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) (Seagate two-part willfulness standard; analysis guidance)
  • Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003 (Fed. Cir. 2012) (objective baselessness and its bearing on exceptionality under § 285)
  • Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009) (reiterates hypothetical negotiation and evidence considerations)
  • Kilopass Tech., Inc. v. Sidense Corp., 738 F.3d 1302 (Fed. Cir. 2013) (objective baselessness and evidence bearing on bad faith reasoning)
  • Oracle Corp. v. SAP AG, 765 F.3d 1081 (9th Cir. 2014) (evidence and admissibility standards in licensing disputes (9th Cir.))
  • LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012) (evidence as to economic value of the patented technology in market)
  • Sinclair Ref. Co. v. Jenkins Petrol. Process Co., 289 U.S. 689 (U.S. 1933) (historical perspective on post-infringement evidence as persuasive)
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