TROY SHOCKLEY, Plaintiff-Cross Appellant, and EXCALIBUR TOOL & EQUIPMENT CO., INC., Third Party Defendant-Cross Appellant, v. ARCAN, INC., Defendant-Appellant, and TELESIS CORPORATION, Defendant/Third Party Plaintiff-Appellant, and SUNEX INTERNATIONAL, INC., Defendant/Third Party Plaintiff-Appellee.
99-1580, -1603
United States Court of Appeals for the Federal Circuit
DECIDED: May 9, 2001
248 F.3d 1349
RADER, Circuit Judge.
Appealed from: United States District Court for the District of South Carolina. Magistrate Judge William M. Catoe, Jr.
Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., of Washington, DC, argued for defendant-appellant Arcan, Inc. and defendant-third party plaintiff-appellant Telesis, and defendant-third party appellee Sunex International, Inc.
Before RADER, SCHALL, and BRYSON, Circuit Judges.
RADER, Circuit Judge.
On a motion for summary judgment, the United States District Court for the District of South Carolina upheld the validity of Mr. Shockley‘s U.S. Patent No. Re. 35,732 (the ‘732 reissue). Before trial, Arcan, Inc., Telesis Corporation, and Sunex International, Inc. (collectively defendants) conceded that their accused devices contained all limitations of at least one of the asserted claims of the ‘732 reissue. After a jury trial, the district court awarded Mr. Shockley and Excalibur Tool & Equipment Co., Inc. (collectively plaintiffs) lost profit damages totaling $3,791,070, of which $3,000,000 was future lost profits. The district court denied defendants’ motion to remit the damage award. The district court also denied defendants’ motion for a new trial on damages.
Based on jury findings, the district court granted Arcan intervening rights for sales to Costco, but denied intervening rights for Arcan‘s sales to Sam‘s Wholesale Club (Sam‘s). Finally, the district court denied plaintiffs’ motion to clarify that Arcan and Telesis are jointly and severally liable.
Because the new rule for reissue patents,
However, because the jury‘s lost profit award was speculative and against the great weight of the evidence, this court vacates the district court‘s denial of a new trial on damages. On remand, the district court may alternatively offer Mr. Shockley a remitted damage award of $791,070 or a new damages trial. Finally, this court reverses the district court‘s joint and several liability ruling.
This case features a “mechanic‘s creeper“-a flat base surface on wheels that enables mechanics to lie on their backs while working under an automobile chassis. The ‘732 reissue patent discloses a mechanic‘s creeper, shown below, that transforms from a horizontal creeper position into a vertical seat configuration. Pivoting interlinking connectors between the seat and the base facilitate this transformation. The patented invention thus supports a mechanic in a supine position for work under the automobile, and in a seated position for work on the body of the automobile.
Mr. Shockley, the inventor of the ‘732 reissue patent, filed his patent application for a transformable creeper on May 17, 1994. During prosecution, the patent examiner rejected independent claim 1. The examiner, however, offered to allow dependent claims 6 and 11 if rewritten in independent form to include the limitations of independent claim 1. Claim 6 directly depended from claim 1 and was broader in scope than claim 11. Instead of rewriting the broader claim 6, Mr. Shockley‘s patent attorney rewrote narrower claim 11 in independent form to incorporate the limitations of claim 1. Mr. Shockley‘s patent attorney also made original claim 6 dependent on claim 11, thereby unnecessarily narrowing the scope of claim 6. The patent issued on September 19, 1995, as U.S. Patent No. 5,451,068 (the ‘068 patent).
In January of 1994, Excalibur, Mr. Shockley‘s company, began selling the inventive transformable creeper named the “Creep-or-Seat.” By October of 1995, transformable creepers similar to the Creep-or-Seat appeared in the United States. Excalibur‘s competitors imported these creepers from China and sold them at considerably lower prices than the Creep-or-Seat. The imported creepers, however, did not infringe the narrow claims of Mr. Shockley‘s patent. Recognizing his entitlement to broader claim scope, Mr. Shockley filed a reissue application on May 8, 1996.
Mr. Shockley‘s reissue application contained new claim 14, which is almost identical to claim 1 of the ‘068 patent, but with certain limitations removed (shown underlined below). Claims 1 and 14 recite:
1. A transformable mechanic‘s creeper for use by a worker, said creeper transforming between a horizontal position for supporting said worker working underneath said automobile in a supine position and a seat position for supporting said worker working in an upright seating position, said creeper comprising:
an elongated creeper frame; a base included in said elongated creeper frame;
a plurality of castors, depending from said elongated creeper frame, said castors supporting said elongated creeper frame on a work floor providing said elongated creeper frame with mobility; a seat assembly interconnected in said elongated creeper frame with said base;
at least one interlinking connector linking said seat assembly and base;
said interlinking connector having a first end pivotally connected to said base, and a second end pivotally connected to said seat assembly;
said interlinking connector having a first pivot position in which said seat assembly is positioned generally in horizontal alignment with said base to define a creeper position;
said interlinking connector having a second pivot position in which said seat assembly is positioned generally in vertical alignment with said base to define a seating position wherein said seat assembly and said base support said worker seated;
a first plurality of stops carried by one of said interlinking connector and said base, said first plurality of stops engaging the other of said base and interlinking connector to maintain said interlinking connector above said base; and
a second plurality of stops carried by one of said interlinking connector and said seat assembly, said second plurality of stops engaging the other of said seat assembly and interlinking connector to maintain said seat assembly above said base.
14. A transformable mechanic‘s creeper for use by a worker, said creeper transforming between a horizontal position for supporting said worker working underneath said automobile in a supine position and a seat position for supporting said worker working in an upright seating position, said creeper comprising:
an elongated creeper frame;
a base included in said elongated creeper frame;
[a plurality of castors, depending from said elongated creeper frame, said castors supporting said elongated creeper frame on a work floor providing said elongated creeper frame with mobility;]
a seat assembly interconnected in said elongated creeper frame with said base;
at least one interlinking connector linking said seat assembly and base;
said interlinking connector having a first end pivotally connected to said base, and a second end pivotally connected to said seat assembly;
said interlinking connector having a first pivot position in which said seat assembly is positioned generally in horizontal alignment with said base to define a creeper position;
said interlinking connector having a second pivot position in which said seat assembly is positioned generally in vertical alignment with said base to define a seating position wherein said seat assembly and said base support said worker when seated; and
said seat assembly including at least one castor providing said mechanic‘s creeper mobility when said interlinking connector is in said first pivot position.
(emphasis added). Claim 14 of the reissue application is identical to claim 6 of the original application as rewritten in independent form. However, when the ‘732 reissue patent issued, claim 14 was missing the “plurality of castors” limitation (shown in brackets above).
Mr. Shockley‘s declaration, which accompanied his reissue application, asserted that original claim 6 had been erroneously rewritten as a dependent claim instead of as an independent claim. The reissue examiner rejected Mr. Shockley‘s reissue claims because his declaration did not specify how this error was made, who made the error, and when the error was discovered, as required by
Mr. Shockley filed a third declaration to comply with this requirement. This declaration asserted: “New claim 14 is identical to claim 6 as originally allowed.” On May 17, 1997, the examiner issued a Notice of Allowability for reissue claims 1 through 17. During this time, the United States Patent and Trademark Office (USPTO) revised its reissue rules under
While Mr. Shockley‘s reissue patent was pending, he entered into a business agreement with Mr. Joseph O. Hawkins. Mr. Hawkins is president and shareholder of several companies, including Arcan, Telesis, and Sunex International, Inc. Mr. Hawkins’ companies manufacture automotive equipment in foreign countries, then import and sell those tools in the United States. Mr. Hawkins’ company Telesis had imported various products for Excalibur for about 20 years. Under the new agreement, Telesis was to find a foreign manufacturing source for the Creep-or-Seat and import this product into the United States for Excalibur.
In the fall of 1997, Telesis began importing and selling the Creep-or-Seat, manufactured at Mr. Hawkins’ Sunex facility in Shanghai, to Excalibur. Mr. Hawkins requested Mr. Shockley‘s permission to sell some creepers to his own customers through Sunex and Arcan. Because Excalibur did not sell in Sunex‘s professional mechanic market, Mr. Shockley gave Mr. Hawkins an oral license to sell creepers through Sunex to four private accounts. However, because Arcan competed directly with Excalibur, Mr. Shockley refused Mr. Hawkins a license to sell creepers through Arcan.
Nonetheless, Mr. Hawkins began selling the transformable creeper under the name “Z-Creeper” through Arcan in the summer of 1997. In December 1997, Mr. Hawkins and an Arcan salesman met with representatives of Sam‘s to discuss potential sales of the Z-Creeper for the 1998 Father‘s Day and Christmas promotionals. At the meeting, Mr. Hawkins and the Arcan salesman gave Sam‘s a price quote of $35.95 per creeper for a potential sale of 10,000 or more creepers. In April 1998, Arcan resubmitted its proposal to Sam‘s for the upcoming Christmas season. Sam‘s began to place orders for Z-Creepers in September 1998.
Mr. Shockley and Excalibur filed an infringement suit on April 22, 1998, asserting claims 14 through 17 of the ‘732 reissue against Arcan, Telesis, and Sunex. On June 9, 1998, Mr. Shockley filed an ex parte request for a Certificate of Correction under
On November 12, 1998, the district court granted Mr. Shockley‘s partial summary judgment motion that the ‘732 reissue was not invalid. The district court assumed that the old, more stringent reissue Rule 1.175 applied to the ‘732 reissue patent. The court still found that Mr. Shockley‘s reissue declaration adequately specified “the excesses and insufficienc[ies] in the claims and the errors justifying the addition of reissue claims 14-17.”
At trial, the jury awarded Excalibur infringement damages on 2,841 creeper sales by Telesis, and 11,403 creeper sales by Arcan. The jury further found that Excalibur lost additional sales of 40,000 creepers to Sam‘s for the 1998 Christmas season. The jury assessed against Arcan lost profit damages of $15 per creeper and future lost profit damages of $3,000,000 over the life of the ‘732 reissue patent.
After the jury verdict, defendants made motions for JMOL on entitlement to intervening rights, on damages, and for a new trial. The district court denied all of these motions. Plaintiffs made JMOL motions on enhanced damages and requested a clarification that Arcan and Telesis were jointly liable for Arcan‘s infringement. The court denied both of these motions. The district court did, however, grant plaintiffs attorneys fees, costs, and prejudgment interest.
Defendants appeal the summary judgment of validity of the ‘732 reissue, the denial of intervening rights for Arcan‘s sales to Sam‘s, and the damages award. Plaintiffs cross appeal the district court‘s denial of joint and several liability. This court has jurisdiction under
II.
This court reviews the district court‘s grant of a motion for summary judgment without deference. Conroy v. Reebok Int‘l, Ltd., 14 F.3d 1570, 1575 (Fed. Cir. 1994). A summary judgment stands when the record shows no genuine issues of material fact and entitlement to judgment as a matter of law. See
This court reviews the district court‘s JMOL rulings after a jury verdict by reapplying the district court‘s own standard. Applied Med. Res. Corp. v. United States Surgical Corp., 147 F.3d 1374, 1376 (Fed. Cir. 1998). A district court may overturn a jury‘s verdict on a motion for JMOL only if, upon the record before the jury, reasonable persons could not reach the jury‘s verdict. Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 893 (Fed. Cir. 1984). Thus, to prevail on appeal, defendants must show that substantial evidence does not support the jury‘s factual findings or that the district court erred in applying the law on JMOL motions. See id.
This court reviews a jury‘s factual findings, such as those relevant to intervening rights, for substantial evidence. Oiness v. Walgreen Co., 88 F.3d 1025, 1029 (Fed. Cir. 1996). This court also reviews a district court‘s denial of equitable intervening rights for an abuse of discretion. Westvaco Corp. v. Int‘l Paper Co., 991 F.2d 735, 743 (Fed. Cir. 1993). In addition, this court reviews a denial of a new trial based upon an alleged excessive jury damage award for an abuse of discretion. See Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 438-39 (1996); Oiness, 88 F.3d at 1028-29.
In reviewing district court judgments, this court applies its own law to patent law issues, but defers to regional circuit law on procedural issues. Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999) (en banc). The requirement of
To reissue original claims, a patentee must show that the changes will remedy errors that occurred without deceptive intent.
The USPTO examined the ‘732 reissue patent under old Rule 1.175. While the old rule was in effect, the USPTO issued a Notice of Allowability and closed the reissue examination. With the old rule still in effect, Mr. Shockley paid the issue fee for the ‘732 reissue patent. The ‘732 reissue patent issued, however, two months after the new rule became effective.
In proposing changes to Rule 1.175, the USPTO informed the public that it was “particularly interested in comments as to whether the proposed rules if adopted should be applied to already pending reissue oaths or declarations under the new proposed standards of Sec. 1.175.” 61 Fed. Reg. 49,819, 49,820 (Sept. 23, 1996). The few public comments addressing the effective date responded favorably to applying new Rule 1.175 to pending applications. E.g., Intellectual Prop. Owners, Comment 42 (December 5, 1996), available at http://www.uspto.gov/web/offices/pac/dapp/opla/comments/prop1996; Am. Intellectual Prop. Law Ass‘n, Comment 2 (November 6, 1999), available at http://www.uspto.gov/web/offices/pac/dapp/opla/comments/prop1996. When the final rule issued, the USPTO did not explicitly state that new Rule 1.175 applied to pending reissue applications. However, the USPTO training materials for new Rule 1.175 state: “All pending reissue applications (even if filed under old rules) are only subject to requirements of new rules.” USPTO, Training Book Slides on the Changes to Patent Practice and Procedure - Final Rule, p. 48 (February 12, 1998), available at http://www.uspto.gov/web/offices/pac/dapp/opla/frule/index.html.
Indeed, an effective date, unless expressly conditioned on other events, governs the application of a new rule. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988). This court declines to alter on a case-by-case basis the governing effective date of this administrative rule. Because the application which led to the ‘732 reissue patent was pending when the new rule took effect, the new rule applies in this case.
Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179 n.8 (Fed. Cir. 1996) does not require application of the old rule in this case. In Molins, the patent in question had issued before the effective date of a rule change. Therefore, this court properly applied the rule used to evaluate the patent because that same rule remained in effect at the time of issuance. See Bowen, 488 U.S. at 208 (“[A]dministrative rules will not be construed to have retroactive effect unless their language requires this result.“). In the present case, this court, as in Molins, declines to apply a rule change retroactively, but rather applies the rule in effect upon the date of issuance of the patent.
Defendants’ questions regarding the validity of the ‘732 reissue rely exclusively on application of old Rule 1.175 to the ‘732 reissue patent. Defendants raise no questions about validity of the ‘732 reissue patent under new Rule 1.175. The reissue declaration for the ‘732 patent fully complies with new Rule 1.175. The declaration identifies several errors and includes statements of lack of deceptive intent for each error.
Likewise, defendant‘s arguments regarding the ineffectiveness of Mr. Shockley‘s Certificate of Correction to add the “plurality of castors” limitation to the ‘732 reissue patent are moot under new Rule 1.175. Even in the unlikely event that this court determined that a Certificate of Correction would not suffice to add the “plurality of castors” limitation to the ‘732 reissue, the resulting broader claim 14 would still be valid under the less restrictive declaration requirements of new Rule 1.175. This court, therefore, affirms the district court‘s grant of summary judgment that the ‘732 reissue patent is not invalid for failure to comply with
The second paragraph of
A reissued patent shall not abridge or affect the right of any person or that person‘s successors in business who, prior to the grant of a reissue, made, purchased, offered to sell, or used within the United States, or imported into the United States, anything patented by the reissued patent, to continue the use of, to offer to sell, or to sell to others to be used, offered for sale, or sold, the specific thing so made, purchased, offered for sale, used, or imported unless the making, using, offering for sale, or selling of such thing infringes a valid claim of the reissued patent which was in the original patent.
The “offered to sell” language became part of
Section 252 states that a reissue patent “shall not abridge the right of any person who . . . offered to sell . . . anything patented by the reissued patent, to continue to . . . offer to sell . . . the specific thing . . . offered for sale” (emphasis added). These rights are absolute. BIC Leisure, 1 F.3d at 1221. The statute uses the term “the specific thing” to refer to the tangible article which qualifies for absolute intervening rights. This “specific thing” terminology suggests that the tangible article was in existence before the reissue date.
By comparison, the equitable intervening rights provisions of
The court before which such matter is in question may provide for the continued manufacture, use, offer for sale, or sale of the thing made, purchased, offered for sale, used, or imported as specified, or for the manufacture, use, offer for sale, or sale in the United States of which substantial preparation was made before the grant of the reissue, and the court may also provide for the continued practice of any process patented by the reissue that is practiced, or for the practice of which substantial preparation was made, before the grant of the reissue, to the extent and under such terms as the court deems equitable for the protection of investments made or business commenced before the grant of the reissue.
Arcan asserts that its December 1997 negotiation with Sam‘s resulted in an offer for sale qualifying for absolute intervening rights under
Although the district court did not make findings about Arcan‘s preparations, the record amply supports the district court‘s denial of equitable intervening rights. The jury found that Arcan‘s infringement of the ‘732 reissue was willful. Because Arcan did not have clean hands, the district court did not abuse its discretion in declining to exercise its equitable powers on Arcan‘s behalf. Equity‘s “unclean hands” doctrine demands that “[one] who seeks equity must do equity.” Mfr.‘s Fin. Co. v. McKey, 294 U.S. 442, 449 (1935). The record, with its finding of willful infringement, amply supports the district court‘s discretion to deny Arcan access to equity.
V.
Under the Federal Rules of Civil Procedure, a party may make a
The Fourth Circuit, in a rarely utilized exception, allows a party to make a
In Singer, the Fourth Circuit did reach a factual issue even though the defendant did not move for JMOL at the close of all evidence. Id. at 829. The defendant in Singer, however, moved for JMOL under
Although the district court correctly denied Arcan‘s
In the present case, defendants requested remittitur of damages and a new trial under
Upon a finding of infringement, title 35 permits an award of damages adequate to compensate the patentee for infringement, but in no event less than a reasonable royalty.
This court acknowledges that a patentee may be able to produce sufficient evidence to recover projected future losses. In fact, this court has affirmed future lost profit awards where the patentee has presented reliable economic evidence of “but for” causation. Although future lost profit calculations necessarily contain some speculative elements, a patentee may supply adequate evidence to enable the fact-finder to responsibly estimate future losses based on sound economic models and evidence, not pure guesswork. Oiness, 88 F.3d at 1031.
For example, in Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1068 (Fed. Cir. 1983), this court affirmed a district court award of projected lost profits, finding that in a two supplier market, “an award based on projected lost sales is neither remote nor speculative when there is evidence of actual pre-infringement and post-infringement growth rates . . . . These damages were not picked out by mere speculation or guess, but rather, found by the district court as the result of an extrapolation of actual data.”
In Oiness, however, this court rejected extrapolated lost profit calculations when the damages rested on unsupported assumptions “fraught with speculation.” Oiness, 88 F.3d at 1029-30. Oiness’ expert testified to an extrapolated demand curve for the patentee‘s product based on figures from the product‘s first few months in the marketplace. The expert admitted that he found very little sales history to support his projection. This court held that Oiness’ expert “offered no sound economic reasoning to support his assumption,” that his “projections lacked evidentiary support” and that the record, therefore, did not support the jury‘s future lost profit award. Id. at 1032. Similarly, in the present case, the jury award of future lost profits assumes continued demand and growth rates, profit margins, and other market factors against the clear weight of the evidence.
To establish future lost profits, plaintiffs put forth the testimony of an accounting expert, Mr. Gordon. Mr. Gordon‘s calculation assumed that, without infringement, “Excalibur would [have sold] eighty thousand [creepers to Sam‘s] per year for the next fifteen years throughout the life of the patent.” Mr. Gordon then multiplied the eighty thousand creepers per year by fifteen years to arrive at 2,200,000 lost future sales to Sam‘s. Mr. Gordon further assumed that the profit for each lost sale would remain at $15 over the entire fifteen year period. He multiplied this assumed profit per creeper by the number of assumed lost creeper sales to arrive at an $18,000,000 future lost profits calculation.1
Mr. Gordon further testified that his determination that Excalibur would have sold 80,000 units per year to Sam‘s was an assumption without factual underpinnings. Rather, Mr. Gordon testified that he based his opinion on the number of sales that Excalibur told him to assume it would have made. Thus, Mr. Gordon used a benchmark without any basis in economic reality.
Plaintiffs further put forth the testimony of Excalibur‘s salesperson, Mr. Tuck. He testified that Excalibur had been trying to sell various products to Sam‘s, including the Creep-or-Seat, since the mid-1990s with no success. Mr. Shockley‘s own testimony corroborated that Excalibur had not sold any articles to Sam‘s despite many attempts. Mr. Tuck also testified that Excalibur was unable to sell to Sam‘s in 1998 “because the buyer quit . . . . Ruined the whole deal.” Mr. Tuck‘s and Mr. Shockley‘s testimony cast significant doubts on Excalibur‘s ability to make 80,000 sales per year to Sam‘s as postulated by Mr. Gordon. Because the jury‘s $3,000,000 future lost profit award was based on evidence derived from speculative assumptions, it runs counter to the great weight of record evidence and cannot stand.
Arcan has explicitly declined to challenge the $600,000 in lost profits the district court awarded Excalibur for Sam‘s 1998 Christmas season. Defendants further do not question the $191,070 in lost profits awarded to Excalibur for defendants’ actual infringing sales. Thus, in keeping with Fourth Circuit Law, this court vacates the speculative damage award, remits the $3,791,070 award to $791,070, and remands to the district court to offer plaintiffs the option of the remitted damages award or a new damages trial.
VI.
Telesis and Sunex argue that joint and several liability does not apply in the present case. They vigorously contend that the verdict form explicitly apportioned damages among the three defendants; that the jury explicitly found that Sunex did not infringe the ‘732 reissue; and that the jury found Telesis accountable for 2,841 creepers not sold to Arcan or Excalibur.
Notwithstanding these arguments, both Telesis and Sunex sold creepers to purchasers other than Arcan. The apportioned damages, and jury findings of non-infringement by Sunex and separate infringement by Telesis apply to Sunex‘s and Telesis’ sales other than their creeper sales to Arcan. Thus, the damages apportionment and jury findings do not preclude joint and several liability for Arcan‘s liability.
Furthermore, other courts, including the Supreme Court, have held that parties that make and sell an infringing device are joint tort-feasors with parties that purchase an infringing device for use or resale. Birdsell v. Shaliol, 112 U.S. 485, 488-89 (1884); Dowagiac Mfg. Co. v. Deere & Webber Co., 284 F. 331, 337 (8th Cir. 1922). Each joint tort-feasor is liable for the full amount of damages (up to a full single recovery) suffered by the patentee. Birdsell at 488-89; Dowagiac at 337. Entry of judgment against one infringer does not automatically release other related infringers. Sherman, Clay & Co. v. Searchlight Horn Co., 225 F. 497, 500 (9th Cir. 1915) (“There may be as many causes of action as there are joint tort-feasors, and as many recoveries, but there can only be one satisfaction.“). This court agrees with and adopts this rule.
In the present case, the record shows that Sunex, Telesis, and Arcan benefitted from a manufacturing, supply and distribution relationship. Each infringing Z-Creeper made by Sunex was imported by Telesis into the United States and resold to Arcan. Telesis, therefore, is a joint tort-feasor and is jointly and severally liable for damages assessed against Arcan.
Sunex, however, cannot be held jointly and severally liable. To be liable for infringement under
This court affirms the district court‘s grant of summary judgment that the ‘732 reissue patent is not invalid. This court also affirms the district court‘s denial of both absolute and equitable intervening rights to Arcan. This court vacates the district court‘s judgment awarding damages to plaintiffs, remits the damages award to $791,070, and remands to the district court to offer plaintiffs a choice of the remitted damage award or a new damages trial in the alternative. Finally, this court reverses the district court‘s denial of plaintiffs’ motion to clarify, and remands to the district court to clarify its judgment to hold that Telesis is jointly and severally liable with Arcan.
COSTS
Each party shall bear its own costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART, and REMANDED