Michael S. POWELL, Plaintiff-Cross Appellant, v. The HOME DEPOT U.S.A., INC., Defendant-Appellant.
Nos. 2010-1409, 2010–1416
United States Court of Appeals, Federal Circuit
Nov. 14, 2011
Rehearing En Banc Denied Feb. 10, 2012
663 F.3d 1221
If Sections 506(b) and 1325(a)(5)(B) both apply post-confirmation, the creditor would receive a windfall. Id. at 424-25. The amount of the secured claim is set at confirmation and includes accrued post-petition contract interest under
IV.
For the foregoing reasons, the district court‘s judgment is affirmed.
AFFIRMED.
George M. Sirilla, Pillsbury Winthrop Shaw Pittman, LLP, of McLean, VA, argued for defendant-appellant. With him on the brief were Bryan P. Collins, Jack S. Barufka and Sarah R. Greene. Of counsel on the brief were Bart A. Starr and Jonathan N. Zerger, of Shook, Hardy & Bacon, LLP, of Kansas City, MO; and Edward A. Moss and Eileen Tilghman Moss, of Miami, FL.
Before LINN, DYK, and PROST, Circuit Judges.
Opinion for the court filed by Circuit Judge PROST. Opinion concurring-in-part and dissenting-in-part filed by Circuit Judge DYK.
PROST, Circuit Judge.
This is a patent infringement case involving radial arm saw (or “radial saw“) guard safety technology. Mr. Michael S. Powell brought suit against Home Depot, alleging that it infringed his patent,
On appeal, Home Depot challenges the district court‘s denial of its renewed motion for judgment as a matter of law (“JMOL“) on the issues of infringement, willfulness, and damages. It also challenges the district court‘s claim construction, inequitable conduct, and attorney fees determinations.
Mr. Powell conditionally cross appeals on the issue of enhanced damages seeking additional enhanced damages if, for example, the compensatory damage award were reduced.
The jury‘s verdict of willful infringement and damages determination are supported by substantial evidence. We affirm the district court, having detected no reversible error in its denial of judgment as a matter of law in favor of Home Depot on the issues of infringement, willfulness, and damages. Further, we affirm the district court‘s conclusions as to claim construction, inequitable conduct, and attorney fees.
BACKGROUND
Home Depot is one of the largest, most profitable home improvement retailers in the United States. For many years, Mr. Powell had a business relationship with Home Depot as its point-of-contact for the installation and repair of radial arm saws. Home Depot uses radial arm saws in its stores to cut the raw lumber it sells down to a smaller size, based on a customer‘s preference.
In 2002 and 2003, Home Depot took note of an alarming trend. Its employees were suffering injuries including lacerations and finger amputations caused while operating in-store radial arm saws to cut lumber for customers. Top corporate officers, including the CEO, learned of the employee injuries and directed Home Depot‘s safety personnel to either fix the radial saws to prevent injuries or remove them from all stores.
Home Depot studied the repercussions of removing the radial saws from its stores and ceasing to offer its customers the option to have lumber cut into smaller pieces. It concluded that the benefits of keeping the radial saws outweighed the risks and chose to find a solution to employee injuries, rather than remove them from its stores. Employee injury claims had already cost the company nearly $800,000, but its competitors still offered lumber cutting services and it feared the loss of its customers that utilized the service at Home Depot. Further, it risked losing the “considerable sales” in lumber and other departments that sell goods related to lumber purchases. J.A. 19000. Seeking a solution to the problem, it turned to Mr. Powell.
Mr. Powell—recognizing that removal of radial arm saws in Home Depot stores would hurt his business—set out to develop a solution to employee injuries. In July 2004, he presented a saw guard prototype to Home Depot, which then ordered eight production units for use and testing in stores. By August 2004, those production saw guard units were installed in Home
Unbeknownst to Mr. Powell at the time he installed his invention for in-store testing, Home Depot contacted another company, Industriaplex, to build and install saw guards for its radial arm saws. Home Depot invited Industriaplex to view Mr. Powell‘s invention and asked it to build nearly identical copies at a price less than the $2,000 per saw guard it paid Mr. Powell for the in-store testing units. Industriaplex agreed. Home Depot eventually ordered nearly 2,000 saw guards built by Industriaplex for approximately $1,295 per unit.
Mr. Powell continued to confer with Home Depot through the end of 2004, but could not reach an agreement to supply it with the saw guards at the price it offered to pay—$1,200 per unit, including installation. Mr. Powell‘s ‘039 patent issued on May 16, 2006, and he sued Home Depot for infringement in May 2007.
After a fourteen-day jury trial, the jury reached a unanimous verdict that Home Depot willfully and literally infringed the ‘039 patent. It awarded $15 million in damages. The district court enhanced damages by an additional $3 million and also awarded attorney fees totaling $2.8 million. When all the dust had settled, the final judgment against Home Depot totaled $23,950,889.13, including pre-judgment interest.
Home Depot now appeals. We have jurisdiction pursuant to
STANDARD OF REVIEW
JMOL is appropriate when “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.”
The proper construction of a patent‘s claims is an issue of Federal Circuit law, and we review a district court‘s claim construction de novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454-55 (Fed. Cir. 1998) (en banc). To ascertain the scope and meaning of the asserted claims, we look to the words of the claims themselves, the specification, the prosecution history, and any relevant extrinsic evidence. Phillips v. AWH Corp., 415 F.3d 1303, 1315-17 (Fed. Cir. 2005) (en banc).
“This court reviews a district court‘s determination of inequitable conduct under a two-tiered standard: we review the underlying factual determinations of materiality and intent for clear error, and we review the ultimate decision as to inequitable conduct for an abuse of discretion.” Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d 1318, 1334 (Fed. Cir. 2011).
Willfulness is a question of fact, and our review on appeal is “limited to asking whether [the jury‘s] verdict is supported by substantial evidence.” i4i Ltd. P‘ship v. Microsoft Corp., 598 F.3d 831, 859 (Fed. Cir. 2010).
This court reviews “the jury‘s determination of the amount of damages,
DISCUSSION
This appeal raises several issues: claim construction, infringement, willfulness, inequitable conduct, damages, enhanced damages, and attorney fees. We address each issue in turn.
A. Claim Construction
As part of its challenge of the district court‘s denial of JMOL of noninfringement, Home Depot disagrees with that court‘s claim construction of two terms, “dust collection structure” and “table top.” These terms appear in independent claims 1 and 4. Claim 1 is reproduced below.
1. In combination with a radial arm saw assembly comprising a table having a top and a rip fence projecting upward therefrom, a vertical column extending upwardly near the rear of the top, a radial arm extending horizontally from the top of the column, a rotary power saw suspended below the radial arm by a carriage adapted for travel along the length of radial arm, the saw including a rotating blade, a protective blade shroud, and a handle, the improvement comprising: a work surface mounted to the table top; at least one push handle in slidable engagement with said work surface for movement toward and away from said rip fence; a cutting box disposed on top of the work surface, said cutting box defining an interior bounded by a top in spaced relation with said work surface, opposing side walls, and front and rear walls; at least one of said side walls defining an opening therein with brush bristles disposed in said opening to allow a work piece to be at least partially inserted within said cutting box through said opening; said cutting box top defining an elongate slotted aperture for receiving the lower portion of the saw blade as the blade travels during the sawing process; and said cutting box interior in fluid communication with dust collection structure for collecting sawdust.
‘039 patent col.7 ll.8-33 (emphases added). Each of these claim construction and infringement issues are discussed below.
1. “Dust Collection Structure”
a. Claim Construction
While the district court initially construed “dust collection structure” as a means-plus-function element under
Mr. Powell responds, asserting that the district court was correct to change its initial claim construction. He argues that in the absence of the word “means,” there is a strong presumption against construing “dust collection structure” as a means-plus-function element. Further, he asserts that the full limitation, in context, recites a structural requirement that the dust collection structure be in fluid communication with the cutting box interior. See ‘039 patent col.7 ll.32-33, col.8 ll.26-27 (“said cutting box interior in fluid communication with dust collection structure for collecting sawdust“). This, he contends, recites sufficiently definite structure because the claim requires that the “dust collection structure” and the “cutting box” be coupled together to allow air and sawdust to flow to the “dust collection structure” when the saw blade is in motion.
We agree with Mr. Powell and conclude that the claim term “dust collection structure” is not subject to construction as a means-plus-function element under
The patent‘s written description further confirms that the presumption against means-plus-function treatment is not rebutted. The written description depicts component parts of the dust collection structure, including a cutting box, dust collection outlet ports, and a dust collection tray. ‘039 patent figs. 2-4. The details of how this structure functions to collect dust are also disclosed, including that the “[c]utting box 130 ... functions to contain the sawdust and wood chips generated as the blade cuts through the wood” and is “adapted for connection to an external dust collection system.” ‘039 patent col.5 ll.35-40.
Additionally, the written description identifies several prior art patents that disclose various types of dust collection structures. ‘039 patent col.2 ll.9-23. (”
In sum, the claim language, the disclosure in the written description, and the meaning to persons of ordinary skill indicate that Home Depot has failed to rebut the presumption that the claimed “dust collection structure” is not a means-plus-function limitation.
b. Infringement
The jury found that Home Depot‘s saw guard literally infringes claims 1 and 4 of the ‘039 patent, which require a “cutting box interior in fluid communication with dust collection structure for collecting sawdust.” ‘039 patent col.7 ll.32-33. The district court denied Home Depot‘s motion for JMOL of noninfringement. Home Depot challenges the jury‘s infringement verdict and district court‘s denial of JMOL in its favor, asserting that even under the court‘s claim construction for “dust collection structure,” it does not infringe. It argues that the terms “cutting box” and “dust collection structure” are distinct terms and can only be infringed by a device that has separate structures corresponding to the distinct claim elements. Citing Becton, Dickinson & Co. v. Tyco Healthcare Group, 616 F.3d 1249 (Fed. Cir. 2010), Home Depot contends that when a claim lists elements separately, the accused device cannot infringe if it does not also contain separate elements corresponding to the claimed elements. It asserts that Mr. Powell‘s infringement theory improperly divided the cutting box of the accused device to have a front half that allegedly meets the “cutting box” limitation and a rear half that allegedly meets the “dust collection structure.” This division of the accused device‘s cutting box cannot meet the claim‘s requirement of having a separate “cutting box” and “dust collection structure,” Home Depot contends.
Mr. Powell responds, arguing that the jury‘s infringement verdict is supported by substantial evidence because even Home Depot‘s expert agreed that the rear portion of the cutting box on the accused product serves to collect sawdust and woodchips and has at least one port to allow for extraction of the sawdust and wood chips.
We agree. Becton is not to the contrary. There, the claim language did not “suggest that the hinged arm and the spring means [could] be the same structure.” Becton, 616 F.3d at 1254. Further, “[t]he specification ... confirm[ed] that the spring means [was] a separate element from the hinged arm.” Id. Thus, based on the intrinsic record, the terms “hinged arm” and “spring means” were construed to require separate structures—a requirement which carried through to the infringement analysis. Id.
Here, the disclosure in the specification cuts against Home Depot‘s argument that the “cutting box” and “dust collection structure” must be separate components for purposes of the infringement analysis. The specification discloses that the “[c]utting box ... defines an internal chamber wherein the rotating saw blade meets the work piece during the cutting process and functions to contain the sawdust and wood chips generated as the blade cuts through the wood.” ‘039 patent col.5 ll.35-38. Thus, the specification teaches that the cutting box may also func-
Turning back to the true infringement issue, under the district court‘s claim construction for “dust collection structure,” the jury‘s verdict is supported by substantial evidence. The experts agreed that the rear of the cutting box of the accused device was a place where sawdust and wood chips generated by the cutting process could collect. Further, they agreed that the rear portion of the cutting box contained a port allowing for the extraction of sawdust and woodchips. Thus, according to the experts, the two requirements of the district court‘s claim construction for “dust collecting structure” were embodied within the accused product. The jury was entitled to rely on this testimony in finding that Home Depot infringed the ‘039 patent.
2. “Table Top”
a. Claim Construction
Like the term “dust collection structure,” the district court changed its initial construction of the term “table top.” From the bench, the court gave an oral charge, construing the term “table top” to mean:
The word table is a well understood concept in everyday parlance, in everyday language. The ‘039 patent uses it in this sense.
It refers to a structure often used as a piece of furniture in a home or in a work setting. It is used to carry out a function at some height above the floor. Now, the height of the table will depend on the function for which it is intended, and I‘ve used these examples, for example, under today‘s custom, a coffee table is often lower than a dining table, while an altar table might be higher than a dining table. So the height of the table really depends on what it is going to be used for.
The top surface of the table is raised above the floor by one or more legs or a base or other supporting structure. Normally, the top of the table is a horizontal surface on which an intended function can be performed, for example, eating, writing or working or displaying objects.
A table top is usually solid, but it may contain openings of various shapes and sizes to permit different functions. As one example, you will note the tables in the courtroom that are being used by the lawyers have a hole that has been cut in the top to accommodate electrical cables. Now, the presence of these holes does not diminish the fact that the tables have tops, that is, there are horizontal surfaces on which functions are performed.
J.A. 12707-08.
Home Depot challenges the district court‘s construction, arguing that it is erroneous because it fails to impose an additional requirement that the “table top” function as a horizontal work surface to
We agree with the district court‘s construction of “table top,” which does not impose an additional functional limitation. Independent claims 1 and 4 require “a work surface mounted to the table top” and “a planar top work surface mounted on the table top,” respectively. ‘039 patent col.7 l.17, col.8 l.9. Because this claim language already indicates that the “table top” functions to support the work surface, imposing the functional limitation that Home Depot seeks was not required. Indeed, Home Depot‘s argument conflates the role of the claimed “table top” and “work surface.” The work surface is mounted to the table top and it is the work surface that supports the workpiece, not the table top, as Home Depot argues.
The specification confirms the construed meaning of the claim language. In describing the related art, the specification indicates that “[a] typical radial arm saw includes a work table having a horizontal flat top work surface.... The material to be cut, such as a piece of wood, is supported on the work surface.” ‘039 patent col.1 ll.38-42. In describing the actual invention, the patent discloses that “[s]afety top 100 includes a generally planar work surface 102.” Id. at col.4 ll.23-24. Further, Fig. 3 shows that work surface 102 supports the workpiece during the cutting process. In view of the consistent disclosure in the claims and specification, the district court‘s construction of “table top” is correct.
FIG. 3
b. Infringement
The jury found that the “table top” limitation of claims 1 and 4 was literally infringed and the district court denied Home Depot‘s motion for JMOL in its favor. Its noninfringement argument regarding “table top” is dependent on its claim construction argument for the same term, which we have rejected. It does not alternatively argue that the jury verdict is not supported by substantial evidence under the claim construction adopted by the district court.
It is undisputed that the assembly instructions for the accused device require removal of the original work surface and use of boards to create a structure used to support a new work surface, including the complete safety device assembly. Indeed, Mr. Powell‘s expert testified that the accused product is modified to create a “table top” through the use of mounting boards affixed to the structure of the radial saw after the work surface is removed. Home Depot‘s expert agreed that the mounting boards support the work surface that is later mounted to the existing radial saw assembly. Thus, the jury was entitled to rely on this testimony in concluding that Home Depot infringes the ‘039 patent‘s “table top” element under the district court‘s claim construction.
B. Inequitable Conduct
We next turn to Home Depot‘s argument that—during a bench trial following the jury verdict—the district court erroneously determined that Mr. Powell did not commit inequitable conduct. In contrast to most inequitable conduct allegations, which involve the failure to disclose prior art, this case involves the patentee‘s failure to update a Petition to Make Special.
Based on the evidence, the district court determined that Mr. Powell—with intent to deceive—failed to inform the PTO that he was no longer under an obligation to manufacture. Further, his intentional omission was deemed material. Ultimately, however, the district court concluded that Home Depot failed to establish by clear and convincing evidence that the ‘039 patent was unenforceable based, in part, on the balance of equities.
During the pendency of this appeal, this court, sitting en banc, tackled issues surrounding inequitable conduct and raised the level of materiality required before a court may render a patent unenforceable. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc). Though the parties’ briefs focus on issues that are no longer relevant under current law, Home Depot maintained at oral argument that Mr. Powell‘s conduct, in failing to correct the Petition, constitutes inequitable conduct under Therasense. (“They knew that the statement in the Petition to Make Special was not accurate.... He let it stand.“) Oral Argument at 8:25-9:55, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1409/all. Mr. Powell contends that his conduct cannot constitute inequitable conduct under the but-for materiality and affirmative egregious misconduct standards outlined by Therasense. Id. at 21:00-23:15.
Where, as here, the patent applicant fails to update the record to inform the PTO that the circumstances which support a Petition to Make Special no longer exist—that conduct does not constitute inequitable conduct. Therasense, 649 F.3d at 1290. That is so because Mr. Powell‘s conduct obviously fails the but-for materiality standard and is not the type of unequivocal act, “such as the filing of an unmistakably false affidavit,” that would rise to the level of “affirmative egregious misconduct.” Id. at 1292-93. Thus, based on the intervening change in law, we affirm the district court‘s conclusion that “Home Depot did not establish by clear and convincing evidence that the ‘039 [patent] is unenforceable due to inequitable conduct.” J.A. 17.
C. Willful Infringement
The jury determined that Mr. Powell had proven by clear and convincing evidence that Home Depot willfully infringed the asserted claims of the ‘039 patent. The district court denied Home Depot‘s motion for JMOL in its favor. On appeal, it argues that it did not willfully infringe because its actions did not satisfy the objective prong of the willful infringement inquiry. For instance, it argues that the district court‘s denial of Mr. Powell‘s request for a preliminary injunction and the closeness of the inequitable conduct
Mr. Powell responds with two points. First, he contends that Home Depot‘s only argument regarding the objective reasonableness of its non-liability positions concerns issues that were not presented to the jury. Thus, he asserts that the jury‘s verdict is supported by substantial evidence based on the evidence that was before it. Second, he contends that the question of willful infringement, under the objective prong, is a question of fact reserved only for the jury. Appellee‘s Br. 63. He faults Home Depot for never contending that it should have been allowed to present evidence to the jury regarding the district court‘s initial claim construction and the bench trial on inequitable conduct. Thus, the parties disagree as to whether the jury is the sole decider of the objective prong of the willful infringement inquiry and the type of evidence that may be presented to the jury regarding willful infringement. We address these disputes in turn.
Under In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), a willful infringement determination requires a two-pronged analysis entailing separate objective and subjective inquiries. As to the former, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.... The state of mind of the accused infringer is not relevant to this objective inquiry.” Seagate, 497 F.3d at 1371. As to the latter, if the former is satisfied, “the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Id.
Since Seagate, this court has required patentees to prove the objective prong of the willful infringement inquiry by clear and convincing evidence as a predicate to the jury‘s consideration of the subjective prong. See DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1335-37 (Fed. Cir. 2009) (declining to address the subjective prong when the objective prong had not been established); see also Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1311 (Fed. Cir. 2011). “[W]here an accused infringer relies on a reasonable defense to a charge of infringement,” the objective prong tends not to be met. Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010).
Under the objective prong, the answer to whether an accused infringer‘s reliance on a particular issue or defense is reasonable is a question for the court when the resolution of that particular issue or defense is a matter of law. See Cohesive Techs., Inc. v. Waters Corp., 543 F.3d 1351, 1374 (Fed. Cir. 2008) (applying the clearly erroneous standard of review to the district court‘s willful infringement determination under the objective prong based on the closeness of the claim construction inquiry). Should the court determine that the infringer‘s reliance on a defense was not objectively reckless, it cannot send the question of willfulness to the jury, since proving the objective prong is a predicate to consideration of the subjective prong. See DePuy, 567 F.3d at 1335-37. When the resolution of a particular issue or defense is a factual matter, however, whether reliance on that issue or defense was reasonable under the objective prong is properly considered by the
Turning to the facts of this case, the denial of a preliminary injunction and the question of unenforceability are both issues of law. Thus, the district court properly considered both issues in analyzing whether the patentee proved the objective prong of the willful infringement inquiry. We detect no error in the district court‘s determination that the objective prong of the willful infringement inquiry was met despite the denial of the preliminary injunction requested by Mr. Powell. The court‘s preliminary injunction denial was premised on a claim construction determination that the court ultimately abandoned or modified after the trial commenced. Thus, we are not persuaded by the strength of Home Depot‘s non-liability positions based on the preliminary injunction denial. Likewise, we reach the same conclusion regarding the effect of Home Depot‘s inequitable conduct argument on the objective prong of the willful infringement determination. After Therasense, Mr. Powell‘s conduct, in failing to update his Petition to Make Special, is not but-for material or affirmative egregious misconduct. Thus, we determine that the jury‘s verdict is supported by substantial evidence and affirm the district court‘s determination to deny judgment as a matter of law in favor of Home Depot on the issue of willful infringement.
D. Damages
This case presents an issue regarding a use-based reasonable royalty. As sent to the jury, the question it was required to answer was what amount “would [Mr. Powell] have received from [Home Depot] for the right to use his patented invention in the United States.” J.A. 409. The jury awarded $15 million, or approximately $7,736 per unit, in damages as a reasonable royalty that Mr. Powell would have received from Home Depot for
First, we address Home Depot‘s argument that a reasonable royalty cannot exceed lost profits. On this point, we note that Mr. Powell‘s citation to Golight, Inc. v. Wal-Mart Stores, Inc. for the proposition that “[t]here is no rule that a royalty be no higher than the infringer‘s net profit margin” is not controlling. 355 F.3d 1327, 1338 (Fed. Cir. 2004). Here, the point made by Home Depot is not that its net profit margin should set the upper bound of the reasonable royalty calculation. That argument is foreclosed by Golight. Rather, its argument is that Mr. Powell cannot recover more than his expected profits from selling saw guard units to Home Depot as a reasonable royalty. We disagree with Home Depot for two reasons.
The evidence presented to the jury indicates that had Mr. Powell successfully negotiated a deal with Home Depot in 2004—prior to receiving his patent—a conservative estimate of his expected profits from building and installing saw guards in each of Home Depot‘s stores was $2,180 per unit. Here, however, the reasonable royalty must be based on the “terms of a [hypothetical] licensing agreement reached ... between the patentee and the infringer at the time infringement began.” Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. Cir. 1995) (en banc); see also Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1313 (Fed. Cir. 2002) (“A reasonable royalty determination for purposes of making a damages evaluation must relate to the time infringement occurred, and not be an after-the-fact assessment.“); Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1158 (6th Cir. 1978) (Markey, J., sitting by designation) (“The key element in setting a reasonable royalty after determination of validity and infringement is the necessity for return to the date when the infringement began.“). At the time the infringement began, in May 2006, Home Depot had the luxury of nearly two additional years after its initial negotiation with Mr. Powell to observe the effectiveness of the saw guard solution created by Industriaplex, which was based on his design. Thus, we are not persuaded that Mr. Powell‘s expected profit of $2,180 per unit in 2004 is a reliable approximation of the upper limit that the parties would have reached during a hypothetical negotiation in May 2006.
Next, it is settled law that an infringer‘s net profit margin is not the ceiling by which a reasonable royalty is capped. Golight, 355 F.3d at 1338; see also State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989) (“The determination of a reasonable royalty, however, is based not on the infringer‘s profit margin, but on what a willing licensor and licensee would bargain for at hypothetical negotiations on the date infringement started.“). It is equally appropriate to impose that rule when, as here, the infringer argues that the patentee‘s profit expectation must be a cap on the reasonable royalty that the patentee may receive. While either the infringer‘s or the patentee‘s profit expectation may be considered in the overall reasonable royalty analysis, Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), neither is an absolute limit
Turning next to the question of whether the jury‘s reasonable royalty calculation is supported by substantial evidence, we note that each party presented several damages theories. Home Depot based one of its theories (discussed above) on the estimated profit per unit that Mr. Powell would have received in 2004—a theory by which we are not persuaded—and other theories which derive from the $1,295 per unit price it agreed to pay Industriaplex in 2004 for saw guards modeled after Mr. Powell‘s design.
Using the $1,295 per unit price it paid Industriaplex for the infringing saw guards, Home Depot presented the jury with damages theories ranging from $38-$65 per unit based on a 3-5% royalty of Industriaplex‘s sales price. On appeal, it further argues that even at a “grossly high royalty rate of 50%,” of the $1,295 per unit price it paid Industriaplex, Mr. Powell would recover less than $1.3 million. Appellant‘s Br. at 54-55. In addition, during its closing argument to the jury, Home Depot went so far as to suggest that Mr. Powell might have offered to allow it to use his patented invention for free.
In contrast, Mr. Powell‘s expert focused his damages theory on a range bounded by $2,180 per unit in estimated profit that he stood to receive from a deal negotiated in 2004 up to approximately $8,500 per unit, representing the amount that Home Depot spent at seventy-one stores in late 2005 to replace radial saws that were incompatible with Industriaplex‘s saw guard design. He testified as to reasons why the parties would have negotiated a reasonable royalty that was higher than Mr. Powell‘s lost profits and why the parties would have settled on a lump-sum royalty for use of the saw guard invention over the life of the patent. He further presented evidence to the jury regarding various inquiries under the Georgia-Pacific factors that are relevant to determining the reasonable royalty rate that Home Depot would have paid to use his invention for the life of his patent.3
Based on the extensive evidence presented to the jury by Mr. Powell regarding a reasonable royalty that Home Depot would have been willing to pay for the ongoing use of his invention, we are not convinced that the jury‘s damages award is unsupported by substantial evidence. His evidence included the amount that Home Depot was willing to spend to replace radial saws that were incompatible with the Industriaplex saw guards as well as evidence of cost savings that Home Depot could expect to achieve by reducing claims from employee accidents while using radial arm saws. “Reliance upon estimated cost savings from use of the infringing product is a well settled method of determining a reasonable royalty.” Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1080-81 (Fed. Cir. 1983). Further, we have held that when considering the amount of a use-based reasonable royalty “adequate to compensate for the infringement,”
In contrast, Home Depot‘s damages theories focused on amounts based on negotiations that occurred in 2004, well before infringement began, and on amounts based upon what Home Depot paid Industria-
Further, we are not persuaded by Home Depot‘s argument that the jury‘s award of $7,736 per unit was unreasonable given the concession by Mr. Powell‘s expert that a reasonable royalty would be some amount less than $7,000 per unit. That expert testified that the scope of possible reasonable royalties was bounded by a range from $2,180 per unit up to approximately $8,500 per unit. He also testified that a $7,000 per unit royalty amounted to roughly $1 per store, per day for Home Depot‘s use of Mr. Powell‘s invention over the life of the patent. “The jury was entitled to choose a damages award within the amounts advocated by the opposing parties.” Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1347 (Fed. Cir. 2011) (citing Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005) (“[T]he jury is not bound to accept a rate proffered by one party‘s expert but rather may choose an intermediate royalty rate.“)). Its award is not “so outrageously high ... as to be unsupportable as an estimation of a reasonable royalty,” Rite-Hite, 56 F.3d at 1554, and is “within the range encompassed by the record as a whole.” Unisplay, S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 519 (Fed. Cir. 1995).
Having detected no reversible error, we affirm the district court‘s denial of JMOL in favor Home Depot on the issue of damages.
E. Enhanced Damages
Following a thorough analysis under the Read factors, the district court declined to treble the jury‘s $15 million damages award. It did, however, award Mr. Powell an additional $3 million based on the “all the facts and circumstances.” Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992). Mr. Powell‘s conditional cross-appeal requests a remand if the “totality of the circumstances” change. Upon reviewing the district court‘s findings and conclusions based on the record before us, we detect no abuse of discretion in the enhanced damages award. See i4i, 598 F.3d at 858-859. We do not view this case as one which requires remand on the enhanced damages issue.
F. Attorney Fees
The district court did not clearly err in its determination that this case is “exceptional” based on Home Depot‘s “litigation misconduct and vexatious and bad faith litigation.” J.A. 25. Mr. Powell remains the “prevailing party” under
CONCLUSION
The jury‘s verdict that Home Depot willfully infringed the ‘039 patent and its decision to award $15 million in damages is supported by substantial evidence. We affirm the district court‘s denial of judgment as a matter of law in favor of Home
AFFIRMED
DYK, Circuit Judge, concurring-in-part and dissenting-in-part.
Although I agree with the majority with respect to claim construction, infringement, inequitable conduct, damages, and the legal framework for willfulness, I would find that Home Depot‘s defense was not objectively unreasonable, at least with respect to its proposed claim construction of the term “table top.” I respectfully dissent from the majority‘s contrary holding. Because I would hold that Mr. Powell did not prove the objective prong of the willful infringement inquiry by clear and convincing evidence, I would set aside the willfulness finding and the enhanced damages award.1