Lead Opinion
In thе liability phase this court affirmed the district court’s judgment, reported at Beatrice Foods Co. v. New England Printing and Lithographing Co.,
After extensive discovery and other procedures, a trial of damages was held in March 1988. The district court awarded Webcraft damages for patent infringement in the amount of $22,107,837.69, and prejudgment interest. Beatrice Foods Co. v. New England Printing and Lithographing Co., No. B-80-335 (D.Conn. July 14, 1988). The district court imposed a personal sanction on New England’s attorneys under 28 U.S.C. § 1927 (1982) for “multiplying the proceedings unreasonably and vexatiously”, Order, filed November 19, 1987, and assessed costs, expenses, and attorney fees incurred by Webcraft, in the amount of $17,754.99. Order, July 20,
DAMAGES
A
Damages “adequate to compensate for the infringement”, in the words of 35 U.S.C. § 284 (1982), are usually measured, depending on the circumstances and the proof, as the patent owner’s lost profits or as a reasonable royalty. Del Mar Avionics, Inc. v. Quinton Instrument Co.,
Citing Panduit Corp. v. Stahlin Bros. Fibre Works,
New England argues that damages should be measured as a reasonable royalty, not lost profits. At the time Webcraft first gave notice of infringement, Webcraft had offered New England a license аt an apparently modest royalty rate or a paid-up license, and has since offered and granted royalty-bearing licenses to others. New England argues that Webcraft’s offers to license others “where no actual dispute has arisen” is probative of the damages that should be assessed against New England.
New England states that the district court refused to receive evidence of licenses offered to and royalties paid by others, that such evidence is admissible, and therefore that the court committed reversible еrror. However, the question is not whether such evidence is admissible under Rule 408, Federal Rules of Evidence, as New England argues, but whether it was required to be admitted. A trial judge has broad authority to manage the trial and to exclude irrelevant evidence. Further, it appears that New England’s expert testified without restraint on the subject of royalties offered to or paid by others.
The district court was not required to receive evidence pertinent to a determination of what royalty would be reasonable, when a royalty was correсtly held not to be the measure of damages. Accord, e.g., Greenwood Ranches, Inc. v. Skie Constr. Co.,
The court held that the appropriate measure of damages was Webcraft’s lost profits due to New England’s infringing activity. Although New England argues that Webcraft failed to carry its burden of proof, reversible error has not been shown. We affirm the district court’s holding that damages were properly measured by Web-crаft’s lost profits.
B
The accounting period covered July 7, 1974 (six years before the commencement of litigation in 1980) through February 1983, when New England ceased infringing activity. The liability phase came to trial in 1983, after éxtensive pre-trial procedures. In 1983 New England destroyed all of its
Webcraft, carrying the burden of proving damages, attempted to fill the gaps that were due to these incomplete records. Webcraft undertook third party discovery of customers that Webcraft identified, it appears, from accounts that it had lost to New England. Based bn purchase orders from such customers’ files, Webcraft tried to identify which of the entries in the “job order” book were for infringing goods, and to correlate these entries with invoices or purchase orders.
Beforе the district court, New England disputed the adequacy of the evidence compiled by Webcraft to show what New England had manufactured, in what quantities, and whether the items manufactured were of infringing structure. Webcraft reports, without contradiction, that New England refused to admit that it “maintained a record of production in job book entries.” New England also stated that it was unable to identify its nomenclature in the job book and on its invoices, or which product descriptions applied to infringing products.
New England argued at the accounting trial that the purchase orders that Web-craft had obtained from New England’s customers, even those with New England’s invoice numbers, were not a correct or probative measure of what had been manufactured and sold by New England. New England argued, and repeats on this appeal, that Webcraft’s attempts to reconstruct New England’s infringing activities were inadequate to meet Webcraft’s burden of proving damages for infringement.
New England also argues on this appeal that the parties “reduced the level of their disagreement to about 3 milliоn out of more than 950 million products sold,” and that infringement damages must be limited accordingly. Webcraft replies that there was no agreement as to the total amount of infringement, and that “any threshold agreement reached was only as to the absolute minimum infringing quantities.” The record supports Webcraft’s position. In response to a request for admissions, New England had replied: “For each request that asks the defendant to admit that a copy of an invoice ‘establishes a sale,’ the request is denied. An invoice only establishes that an invоice was prepared, it does not establish that the goods were actually made, or shipped, or that any payment was made or received.” In response to an interrogatory concerning sales to specific identified customers, New England answered: “Defendant has not yet completed the calculation by which it will formulate a contention in this regard. When and if such a contention has been formulated, this answer will be supplemented”. Webcraft states that New England never responded further, despite repeated requests.
This evidence clearly showed that the incompleteness of Webcraft’s proof was due to New England’s destruction of its job tickets and other records, New England’s refusal to admit that its own invoices established a sale or that its customers’ purchase orders established a sale, and New England’s lack of cooperation and refusals to respond in discovery and other procedures. New England stated before the district court that it had not deliberately destroyed its manufacturing records, that the destruction had been done routinely. The district court received testimony on the issue from New England’s witnesses. The court did not believe New England’s explanations. We have no basis for disturbing
New England’s procedures were not well received by the district court. In its opinion the court wrote: “The most outrageous is, of course, defendant’s intentional destruction of its job tickеts, the only yardstick to measure accurately defendant’s guilt in dollars, thus hindering plaintiff in proving defendant’s illegal use of its patents [sic, inventions].”
C
The district court held that Webcraft had proved its damages without the need for drawing adverse inferences against New England. The court measured damages by the amount of New England’s sales that Webcraft had proven to be infringing, plus certain “convoyed” sales. The court then used this sales figure as Webcraft’s lost profits, stating that since New England’s sales were illicit, New England was not entitled to deductions from this total. Damages were thus awarded of $22,107,-837.69.
Webcraft states that the district court made an equitable determination of the amount of damages suffered by Webcraft and that, in the absence of hard data due to New England’s misfeasances, this discretionary judgment should not be disturbed. Webcraft states that the figure of $22 million in sales was a conservative minimum, in that the job book showed billions of units produced, and that only those jobs that could be compared with invoices or with purchase orders obtained from third persons, and that could reasonably be presumеd to be infringements based on the available product descriptions, were counted by Webcraft.
Webcraft cites the example of jobs listed in the job book for National Liberty Insurance, an ex-customer of Webcraft, where no quantities or product descriptions were shown in the job book and the invoices were destroyed by New England, but New England’s ledger showed sales for these job numbers of over $281,000. Webcraft calls this an example of “infringing production which escaped the accounting” due to destruction of the probativе documents, and argues that the district court was entitled to take such factors into account in reaching an equitable measure of damages.
New England argues that Webcraft is not entitled to the inclusion of “convoyed” sales. Webcraft had identified as “convoyed” certain sales, including sales to ex-customers of Webcraft, for which it lacked proof of infringing structure. The law does not bar the inclusion of convoyed sales, Paper Converting,
New England continues to challenge the probative value of Webcraft’s figures; pointing out, for example, that one of the ostensible customers approached by Web-craft turned out to have bought its pamphlets not from New England but from Webcraft’s licensee. New England’s position appears to be that, absent the possibility of precise measure of actual infringement, damages must be limited to that minimum production as to which there was not substantial disagreement. This was not adopted by the district court. Such an outcome would simply reward New England’s actions.
An infringer can not destroy the evidence of the extent of its wrongdoing, and limit its liability to that which it failed to destroy. The uncertainty in the damages calculation is the direct result of New England’s procedures. “Fundamental principles of justice require us to throw any risk of uncertainty upon the wrongdoer rather than upon the injured party.” Kori,
Substantial discretion is reposed in the trial court when reaching a judgment following lack of cooperation of a party. The trial court may increase damages up to treble the amount of actual damages. See, e.g., Fox v. Knickerbocker Engraving Co.,
New England provided no actuаl amounts of infringing sales, offered no estimates of infringing sales, did not assist in their reconstruction, and consistently denied the accuracy of Webcraft’s evidence. While New England argues that the figure chosen by the court is clearly erroneous, it has not shown that there is better support for any other figure. Lindemann Maschinenfabrik GmbH v. American Hoist & Derrick Co.,
However, we can not agree with Webcraft that the district court had equitable discretion to equate New England’s gross sales with Webcraft’s lost profit damages. The court’s statеd reason for so doing — that New England as a tortfeasor had no manufacturing costs, does not implement the standard of Webcraft’s lost profits that the court had correctly adopted. We vacate the judgment that damages shall be $22,107,837.69, and remand to the district court for the purpose of determining Webcraft’s damages on the basis of lost profits. In so doing, the court may give consideration to Webcraft’s request that its actual damages be multiplied, as authorized by 35 U.S.C. § 284, and may in its equitable discretion grant said request, whether or not such an awаrd exceeds $22,107,837.69.
Further, we do not decide whether Web-craft is entitled to the elements or quantum of damages asserted in its brief, viz. a 35% profit margin, 3% overage on job book entry sales, or loss of freight profits. These aspects are appropriately subject to consideration by the district court on remand.
SANCTIONS UNDER SECTION 1927
The district court imposed sanctions under 28 U.S.C. § 1927 against New England’s attorneys, for “multiplying the proceedings unreasonably and vexatiously.” Specifically, the court found that New England’s weighty four motions and memoran-da filed on August 28, 1987, along with the oрpositions and replies generated by the motions, were made for the purpose of delay.
New England protests that these motions were filed concurrently with several motions by Webcraft, in a time frame that had been approved by the court; that the subject matter of the motions was relevant and material because Webcraft filed three motions on the same issues; and that the imposition of a monetary sanction without
A trial court has broad discretionary authority in managing the litigation before it, and the deterrence of intentional and unnecessary delay in the proceedings, the ground here cited by the district court, is a principal purpose of 28 U.S.C. § 1927. However, in Roadway Express, Inc. v. Piper,
Weberaft suggests that New England could have moved under Rule 59(e) for reconsideration of the court’s order imposing the sanction, thus obtaining a hearing. Such motions are to be favored under circumstances like the present. They can result in either a withdrawal of the order or a more detailed explication of the district court’s reasons for adhering to it. Thus they may eliminate either an appeal from the sanction order or the need for a remand. Nonetheless, reconsideration after a decision is rendered is not a substitute for a pre-decision hearing, when such hearing is otherwise required. Cleveland Bd. of Ed. v. Loudermill,
In the absence of a hearing or justification for its absence, see Boddie,
OTHER ISSUES
We have reviewed the issues raised in New England’s counter-claim with respect to claim 10 of the ’817 patent, including Webcraft’s assertion that New England did not press the issue at the liability trial. The district court correctly held that the issue of validity was precluded at the accounting trial, and that the parchment products were properly included in the total infringing sales.
With respect to patent marking and the other issues and arguments raised on appeal, we discern no reversible error.
COSTS
Each side shall bear its costs.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
Notes
. The court, in banc, holds that its authority to direct assignment of a remanded case to a different district court judge need not be addressed in this case.
Concurrence Opinion
with whom BENNETT, Senior Circuit Judge, and MAYER, Circuit Judge, join, concurring in the judgment.
On the major issue of this appeal I reach the same conclusion as does the court, for the reasons stated in the per curiam opinion. I agree that the damages must be redetermined, and the case remanded to the district court for this purpose. I also concur in the court’s implicit conclusion that New England’s concern with the trial judge’s asserted bias does not warrant the court’s taking action on New England’s request that the matter be retried and that further proceedings be conducted before a different judge.
I do, however, believe that the issue of judicial bias has been properly raised on this appeal, and that it is not frivolous. Therefore, I address the question of the court’s jurisdiction to determine the issue.
The issue of our appellate authority, when judicial bias is asserted, was considered in Petersen Mfg. Co. v. Central Purchasing, Inc.,
[W]e do not sit to judge the character of district court judges. Nor do we have the authority, as counsel asserts, to order assignment of this case to a different judge on remand. Unlike othеr Circuit Courts of Appeal we have no direct supervisory authority over district courts. Hence, we cannot act on Petersen’s request.
However, only a few months after the Petersen decision, this court took in banc action that appeared to resolve the matter. In Atari, Inc. v. JS & A Group, Inc.,
continuing uncertainty [as to the path of appellate jurisdiction] could result in unnecessary disputes, undue costs, and additional mid-process litigation concerning the proper appellate forum for individual claims, for interlocutory appeals, and for writs of mandamus.
A major reason for creating this court was to eliminate such sideline skirmishing.
Atari,
In Atari the Federal Circuit appeared fully to accept its obligation to decide all issues that require decision on appeals that reach us because of our assigned exclusive jurisdiction. This position has been reinforced by the Supreme Court. In United States v. Hohri,
The language of [28 U.S.C.] § 1295(a)(2) discusses jurisdiction over an appeal “in a case,” not over an appeal from decision of “a claim.” This strongly suggests that appeals of different parts of a single case should not go to different courts.... a bifurcated appeal of the different legal claims raised in any one case would result in an inefficient commitment of thе limited resources of the federal appellate courts.
This unanimous post-Petersen authority, that there should not be separate appellate routes depending on the claims or issues of a case, made clear that the Federal Circuit has both the obligation, and the authority, to consider any issue fairly raised in a case properly beforе us. This is no longer a matter of uncertainty.
Indeed, in Polaroid Corp. v. Eastman Kodak Co.,
Thus Petersen has been superseded by practicality and overruled by authority.
I do not denigrate the salutary restraint underlying the ruling in Petersen by the young Federal Cirсuit. But I think it unlikely that the Federal Circuit was intended to have less authority under 28 U.S.C. § 2106 than did the courts that received patent appeals before our formation.
We did not suggest who should preside over the retrial. We suggested who should not preside. When we believe that there is an inherent problem in a particular remand, we have the power, indeed the duty, to frame our opinion to provide for “further proceedings ... [which are] just under the circumstances.” 28 U.S.C. § 2106. [emphases in original]
Id. (footnotes omitted). In United States v. Clark,
The Second Circuit, whose law we apply to the issue of judicial bias, see Atari,
As a general rule, cases sent back to a district court for further proceedings are remanded without any directions or suggestions as to the judge before whom they are to be conducted. That matter is properly left to the district court. However, in a few instances there may be unusual circumstances where “both for the judge’s sake and the appearance of justice,” see United States v. Schwarz,500 F.2d 1350 , 1352 (2d Cir.1974), an assignment to a different judge “is salutary and in the public interest, especially as it minimizes even a suspicion of partiality”, see United States v. Simon,393 F.2d 90 , 91 (2d Cir.1968).
Id. at 9-10.
Other circuits have applied reasoning similar to that of Robin, supra. See, e.g., Bembenista v. United States,
Without doubt, New England’s requested remedy of a new trial аnd/or advising reassignment to a different judge are within appellate authority under 28 U.S.C. § 2106. The grant of such remedy, when warranted by the circumstances, is not a matter of intrusion into the supervision or internal management of district courts; it is simply a matter of doing the judicial job of justly resolving disputes between parties. For if the issue of judicial bias can not be reviewed on appeal to the Federal Circuit, jurisdiction must lie elsewhere — a possibility eliminated by the Hohri and Christian-son decisions. New England is entitled to full appellate review. See Deslions v. La Bourgogne,
Because the issues of judicial bias and remand would have been reviewable by the regional circuit, there can be little doubt that they are equally reviewable by the Federal Circuit. I would have preferred that the court address this matter in its oрinion so that it would be clear to the litigants whether it had been considered.
. Appellate remedial authority is stated in 28 U.S.C. § 2106:
§ 2106. The Supreme Court or any other court of appellate jurisdiction may affirm, modify, vacate, set aside or reverse any judgment, decree, or order of a court lawfully brought before it for review, and may remand the cause and direct the entry of such appropriate judgment, decree, or order, or require such further proceedings to be had as may be just under the circumstances.
. The court took this case in banc in order to delete from the proposed panel opinion the discussion of the issue of judicial bias.
