Lead Opinion
Smith & Nephew, Inc. (S & N) sued Arthrex, Inc. for infringement of U.S. Patent No. 5,601,557 in January 2004. In 2009, we affirmed a summary judgment rejecting the invalidity challenge but required a new infringement trial because of an error in the initial claim construction. In 2013, reversing a JMOL that had been entered in Arthrex’s favor, we reinstated a jury verdict finding that Arthrex had infringed the '557 patent. On remand to the district court, Arthrex sought to relitigate the '557 patent’s validity on the ground that our 2013 decision materially broadened the construction of a claim tern. The district court denied the request. It also denied Arthrex’s substantial-evidence-based challenge to the jury’s finding of lost-profits damages, and it awarded S & N supplemental damages for post-verdict infringement. Arthrex appeals. We affirm.
This litigation has included three trials and two previous appeals. See Smith & Nephew, Inc. v. Arthrex, Inc.,
The '557 patent claims a method used by surgeons to anchor a suture in bone, thereby helping to attach (or reattach) tissue to the bone. The surgeon drills a hole through the hard, outer shell of a patient’s bone and presses an anchor into the drilled hole. S & N II,
1. A method for anchoring in bone a member and attached suture, comprising the steps of:
forming a hole in the bone;
attaching a suture to a member;
lodging the member within the hole by pressing the member with attached suture into the hole; and
attaching tissue to the suture so that the tissue is secured against the bone.
’557 patent, col. 11, lines 2-10. This case involves S & N’s allegation that Arthrex indirectly infringed by selling certain Su-tureTak and PushLock anchors having attached sutures (“suture anchors”) that surgeons use to perform the claimed methods.
An initial trial in 2007 resulted in a hung jury. The district court then held a second trial in 2008, limited to the issues that the parties had raised in the first trial. After the jury found for S & N, Arthrex appealed. In 2009, we reversed the district court’s construction of a claim term “resile” — which appears in claim 2 but had been held, in an unappealed ruling, implicit in claim l’s “member” language. S & N I,
In 2011, after remand, a new trial (the third) produced a verdict of infringement as well as an award of damages consisting of lost profits-on sales lost to Arthrex’s Bio-SutureTak anchors ($67,793,868) plus a reasonable royalty for the patented invention’s use where S & N did not lose sales ($16,987,556). The district court, however, granted Arthrex JMOL of non-infringement after concluding that it had given the jury an incorrect construction of “lodging” and that no reasonable jury could find infringement under the correct construction. On S & N’s appeal, we reversed the district court’s JMOL construction of “lodging.” S & N II,
On remand, Arthrex filed two motions seeking to relitigate the issue of validity. Arthrex rested its motions on the contention that the construction of “lodging” we adopted in 2013, S & N II, 502 Fed.Appx.
Arthrex also renewed its post-trial motion challenging the lost-profits award, a motion it had originally filed after the second jury verdict. The district court denied the motion, stating that our mandate in S & N II prohibited it from reconsidering the lost-profits issue and that, in any event, “substantial evidence supported] the verdict.” J.A. 35553-55. In September 2013, the court entered a judgment for the above-stated lost-profits and royalty amounts plus $3,533,450 in prejudgment interest.
Finally, S & N moved for supplemental damages to compensate for Arthrex’s infringing sales made between the 2011 trial and March 2013. The district court granted S & N the requested supplemental damages. The court’s December 2013 order added to the amounts already awarded $6,775,893 in supplemental damages plus $174,618 in pre-judgment interest.
Arthrex appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
Discussion
A. Invalidity
In S & N I, we affirmed the district court’s grant of summary judgment rejecting Arthrex’s challenges to the validity of the '557 patent.
Despite the finality of resolution as to validity ordinarily inherent in that course of proceedings, Arthrex argues that, on remand in 2013, it was entitled to relitigate the validity of the '557 patent. Its premise is that our construction of “lodging” in S & N II actually is inconsistent with, ie., broader than, the construction used to reject its invalidity position earlier.
We need not decide whether Arthrex is now precluded from making its broadening argument either because S & N II implicitly rejected it (based on Arthrex’s invocation of S & N I) or because Arthrex forfeited it by not invoking judicial estop-pel or the same-construction-for-infringement-and-validity principle in S & N II. We also assume arguendo that our 2013 construction of “lodging” involved some broadening of the term’s scope. But we still reject Arthrex’s argument for reopening invalidity. Arthrex has not met its burden of showing that any such broadening is material, or therefore directly related, to the validity determination.
In the district court, Arthrex argued several grounds for reopening invalidity, but in this coui’t, its only argument relates to prior-art grounds for invalidity. It asserts that it presented “at least six new prior art references to the district court” that “would not have invalidated under the district court’s 2007 Construction ... but may invalidate under the revised construction.” Arthrex’s Br. at 29. It contends that each such reference “disclose[s] a device that stays in the hole, by resilience, when it is first inserted into the hole, just as the broadened claim construction requires. For each of those references, however, another force must be applied (unrelated to the device’s resilience) which keeps the device in the hole more permanently.” Id.
In its briefs in this court, however, Ar-threx has wholly failed to explain, or persuasively show, how the assumed broadening of claim construction newly made relevant any of the six references it cited in the district court. In the district court, Arthrex discussed in detail only one new reference: a published British patent application GB 2017503. It stated that the GB 2017503 reference discloses a “medical plug that is inserted into a preformed bone hole” with “resilient rings around its circumference that are bent upwards during insertion to maintain the plug in the bone hole.” J.A. 34196. But that assertion does not address why another force is required to keep the device in the bone throughout surgery. Thus, as Arthrex itself did not dispute, GB 2017503 would have been relevant even under Arthrex’s conception of the “narrower” claim construction. J.A. 34195-96.
Nothing in Cardiac Pacemakers permits invocation of a new ruling to upset finality on a previously settled issue without a concrete showing of how the new ruling changes the resolution of the settled issue. Principles of finality embodied in law of the case and the mandate rule require at least that much. But Arthrex did not make such a showing in the district court. And it has done even less on appeal. “He who seeks to have' a judgment set aside because of an erroneous ruling carries the burden of showing that prejudice resulted.” Palmer v. Hoffman,
B. Lost Profits
1. The district court erred in concluding that, in the 2013 remand proceedings, it was barred by the appellate mandate in S & N II from considering the merits of the challenge to the lost-profits award that Arthrex had raised after the last trial. Our mandate in S & N II did not resolve those issues, expressly or by implication.
In Laitram Corp. v. NEC Corp.,
S & N contends that Arthrex forfeited its challenge to the lost-profits award by not filing a cross-appeal presenting the issue to this court in S & N II. That contention is incorrect under Laitram, which ruled that NEC was not required to cross-appeal because “there were no rulings on the merits against its motions” and because “arguments ... directed to [the motions denied as moot] were neither themselves on appeal nor relevant to the sole issue that was: infringement.” Id. at 954. S & N’s argument is also wrong under the general standard for cross-appeals. Arthrex’s lost-profits challenge, if meritorious, would give it less relief than the judgment of non-infringement it was defending in S & N II. A cross-appeal for such a challenge is unnecessary and, in fact, improper. See, e.g., TypeRight Keyboard Corp. v. Microsoft Corp.,
2. On the merits, however, we reject Arthrex’s contention that the lost-profits award lacks substantial-evidence support. See Lucent Techs., Inc. v. Gateway, Inc.,
To establish entitlement to lost profits, “the burden rests on the patentee to show a reasonable probability that ‘but for’ the infringing activity, the patentee would have made the infringer’s sales,” Crystal Semiconductor Corp. v. TriTech Microelecs. Int’l, Inc.,
The only aspect of the calculation meaningfully challenged by Arthrex on appeal is the identification of “acceptable non-infringing substitutes,” Panduit,
S & N’s expert, Mr. Troxel, testified that the class of acceptable non-infringing alternatives in this case consisted of anchors that were (1) bioabsorbable, (2) pre-mounted on an inserter, (3) pre-loaded with a suture, and (4) inserted via a push-in or tap-in procedure. Arthrex’s challenge is that the alternatives should not have been limited to push-in anchors, but should also have included anchors using other insertion methods. But S & N offered substantial evidence from which the jury could find that the S & N definition properly reflected the anchor features that matter for the lost-profits inquiry, namely, the features that mattered to the group of surgeons who in fact chose to use (and therefore controlled the buying of) the specific Arthrex product at issue. The jury could properly find that the preference for particular anchor characteristics revealed by the actual market behavior of those surgeons determined where those surgeons would have taken their business if they could not have purchased what they in fact bought.
There was evidence that, while hospitals and surgical centers are the direct purchasers of surgical anchors, it is surgeons who are the decision makers, the ones who choose which anchors to use in a given surgery. J.A. 18205, 18630. And there was evidence that the “push-in” feature was a significant factor in surgeons’ choices generally. That evidence reinforces the fact that the specific sales at issue for the lost-profits inquiry were of anchors with the S & N-identified features that, particular surgeons chose over anchors with other features available in the market.
Thus, Mr. Mahoney, S & N’s Director of Medical Education, explained the selling points and drawbacks of each insertion method — explaining, in particular, that screw-in anchors, which require creating a “thread pattern” in the bone hole to match the screw threads on the anchor, can be troublesome for surgeons performing arthroscopic surgery, who may have trouble keeping the hole they prepared within their field of view. J.A. 18640-41; see J.A. 18641-42 (plastic screw-in anchors more likely to break). Mr. Mahoney added that screw-in anchors and push-in anchors “tend to be used for different techniques,
The jury’s conclusion that surgeons chose anchors based on their insertion methods (and therefore that only press-in anchors were acceptable, non-infringing alternatives here) is supported by substantial evidence. The jury was free to disbelieve or discount Arthrex’s limited evidence pointing the other way. See J.A. 19198 (Dr. Greenleaf); J.A. 19314 (Mr. Carlozzi). Moreover, although Arthrex cites the statement of S & N’s Dr. Warren that, if S & N’s push-in anchor were unavailable, he “might use somebody else’s screw-in device,” J.A. 19309-10, Dr. Warren also said that he prefers the S & N product partly because of its insertion method, noting difficulties with screw-in anchors, J.A. 19308-09. And Arthrex does not point us to evidence of such significant price-feature tradeoffs, or such distinctive brand loyalty (to Arthrex) or aversion (to S & N), or any other overriding preferences, that would require the jury to find that even the surgeons who in fact chose the features they did would have given up those features (still available in the market) in favor of others if the Bio-SutureTak had been unavailable. Arthrex thus does not identify evidence that makes the jury’s finding unreasonable as a matter of law.
In particular, Arthrex focuses at too high a level of generality when it asserts that “suture anchors of various insertion methods competed against each other in the market for shoulder surgery throughout the period of alleged infringement.” Arthrex’s Br. at 45 (footnote omitted). For the lost-profits inquiry, “the mere existence of a competing device does not necessarily make that device an acceptable substitute.” Standard Havens Prods., Inc. v. Gencor Indus., Inc.,
Accordingly, the jury’s finding is not undermined by internal S & N documents indicating an expectation that the BioRaptor would be competing against a variety of anchors other than push-in suture anchors. J.A. 33304, 33331-48. Those S & N documents can readily be understood to indicate no more than that S & N would be trying to persuade surgeons who were using any number of different kinds of anchors for a variety of surgeries to choose the push-in suture anchor (BioRaptor). That does not imply that the group of surgeons that actually did choose push-in suture anchors (from Arthrex) for certain surgeries, in preference to non-push-in anchors, would have chosen a product lacking the push-in features for those surgeries just because Arthrex could not supply those anchors though other sellers could. The jury could properly find that those surgeons would have stuck with the product features they had chosen, turning to other sellers offering those features.
Finally, Arthrex argues that S & N should have accounted for what Arthrex itself would have done in a “but for” world where it could not sell the Bio-SutureTak. Arthrex’s Br. at 49-50; see Grain Processing Corp. v. Am. Maize-Prods. Co.,
C. Supplemental Damages
“[T]he amount of supplemental damages following a jury verdict is a matter committed to the sound discretion of the district court.” SynQor, Inc. v. Artesyn Techs., Inc.,
1. Arthrex argues that, as a matter of law, it could not have had the knowledge required to indirectly infringe during the period after the district court granted JMOL to Arthrex (or perhaps even when, during the last trial, it announced its belief that Arthrex was likely to win the jury verdict or eventual JMOL) and before this court reversed in S & NII. In considering this contention, we apply the Supreme Court’s formulation: “induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.” Global-Tech Appliances,
Arthrex rests its argument entirely on the contention that a good-faith belief in non-infringement negates the required knowledge and is established as a matter of law by the district court’s ruling (or pronouncement). But such a good-faith belief presents a factual question. See, e.g., Commil USA, LLC v. Cisco Systems, Inc.,
2. Arthrex challenges the district court’s basing of supplemental damages on the same definition of what products were acceptable non-infringing alternatives that the jury used to calculate lost profits, contending that the suture-anchor market has changed critically since the 2011 trial. Ar--threx principally points to the emergence in 2010-2011 of so-called “all-suture” anchors. It argues that it was entitled to discovery on whether the emergence of all-suture anchors alters the required analysis of “what surgeons may find acceptable as non-infringing alternatives if Arthrex was no longer able to sell its Bio-SutureTak anchor.” Arthrex’s Br. at 55, 57.
The evidence that Arthrex advances is not sufficient to make the district court’s reliance on the 2011 lost-profits analysis an abuse of discretion, even without further discovery. The sales at issue were made to surgeons in 2011-13 who, despite the availability of all-suture anchors Arthrex touts as newly significant since 2010-11, chose the particular push-in Arthrex anchors at issue here. Lost-profits damages are awarded only for those sales. The question is what that particular group of surgeons would have chosen if the Arthrex suture anchors at issue had not been available. What those surgeons actually chose weighs heavily in answering that question. And the district court could readily conclude that a contrary answer is not suggested by the only evidence Arthrex advanced regarding all-suture anchors, namely, that surgeons as a whole, making purchases for a variety of surgeries, were increasingly choosing all-suture anchors over the type of suture anchors at issue here. Arthrex’s proffer regarding all-suture anchors thus did not preclude the district court from carrying forward the lost-profits calculation to award supplemental damages.
Nor did Arthrex’s secondary challenge, i.e., that two “biocomposite” anchors — Ar-threx’s BioComposite Suture-Tak and De-Puy Mitek’s Gryphon P anchors — should have been included in the market-share calculations for the 2011-13 period. Ar-threx’s Br. at 57. It is undisputed that, as shown by the discussion in S & N’s expert report, S & N’s damages calculation at
In short, Arthrex did not present evidence that required the district court to launch additional litigation on whether the calculation of supplemental damages had to depart from the calculation used for the lost-profits award. Without such evidence, the district court could properly rely on that calculation and bring it forward to the post-trial period.
Conclusion
For the foregoing reasons, we affirm the judgment of the district court.
AFFIRMED
Opinion for the court filed by Circuit Judge TARANTO.
Opinion concurring in part and dissenting in part filed by Circuit Judge DYK.
Notes
. The construction of "lodging” we approved in S & N II, and under which we decided infringement, was the construction given to the jury in the third trial. That construction is identical to the construction given to the jury in the first two trials, and used to affirm the summary judgment regarding validity, except that the third-trial instruction adds a paragraph stating that "lodging” need only render the anchor secure enough to stay in the bone initially, until a surgeon applies tension to the suture (which causes the legs of the anchor to dig into the bone and renders the anchor more secure, '557 patent, col. 3, lines 4-6). Compare Smith & Nephew Inc. v. Arthrex, Inc., No. 3:04-cv-00029-MO (D. Or. June 22, 2011) (Jury Instruction No. 13), with Smith & Nephew Inc. v. Arthrex, Inc., No.
Concurrence Opinion
concurring in part and dissenting in part.
I
“To recover lost profits, the patent owner must show ‘causation in fact,’ establishing that ‘but for’ the infringement, he would have made additional profits.” Grain Processing Corp. v. Am. Maize-Prods. Co.,
II
All of the asserted claims are to methods where a suture anchor is pressed into a
At trial, S & N presented expert testimony by Richard Troxel that S & N was entitled to a lost profits award as a result of lost sales. Troxel testified that lost profits were properly calculated by looking only to a market of products containing the patented features. Troxel defined the relevant market as suture anchors “inserted by a push-in or tap-in procedure — as contrasted ... to a screw-in or a toggle fit,” “preloaded with a suture,” and “pre-mounted on an inserter.” J.A. 18715. In other words, he excluded anchors which screw in or toggle fit. Troxel testified that he limited the market to only devices with those characteristics because “it seem[ed] to [him] that a surgeon has to make a specific decision as to the anchor ... that he or she is going to use in a particular procedure” and that “it seems to be a very explicit decision by the surgeon as to which item is appropriate for that particular surgery in that particular patient.” J.A. 18716. Based on market share, Trox-el calculated that, using the year 2008 as an example, S & N would have made 87.5 percent of Arthrex’s sales of the accused devices, had Arthrex not infringed. The jury verdict awarded the amount of lost profit damages that Troxel calculated, and judgment was entered against Arthrex for that same amount. If other non-infringing alternatives had been considered, S & N’s market share would have been reduced below that which Troxel calculated for a given year.
The problem is that Troxel had no basis for excluding screw-in and toggle-fit anchors. Troxel admitted that he “did not speak to any surgeons,” and that he did not conduct any surveys of surgeons. J.A. 18797. He further stated that he did not “recall any literature that ever addressed [the] issue” of what type of anchor a surgeon would turn to if the surgeon were unable to purchase the accused product. J.A. 18798. Troxel testified that he had not studied what the market would have been like were the infringing device never introduced, stating, “that would be completely a speculation.” J.A. 18781.
Ill
The majority appropriately does not rely on Troxel’s testimony as supporting the absence of non-infringing alternatives. Rather, the majority relies on the testimony of fact witnesses, which it says shows that “surgeons chose anchors based on their insertion methods (and therefore that only press-in anchors were acceptable, non-infringing alternatives here)....” Maj. Op. at 988. But these witnesses did not testify that a surgeon would not substitute a screw-in anchor or a toggle anchor had the infringing product not been on the market.
Much of the testimony that the majority relies on only establishes that, for certain surgeries, some surgeons may prefer a toggle-fit or screw-in anchor over a press-in anchor. This hardly shows that toggle-fit or screw-in anchors are not substitutes for press-in anchors. By contrast, the evidence addressing why surgeons would choose a press-in anchor over other types of anchors is meager. Mr. Mahoney, the patentee’s Director of Medical Education, only described the various characteristics of the different types of suture anchors, stating that S & N’s product is the closest competitor of Arthrex’s infringing product,
To the contrary, Arthrex’s expert Dr. Greenleaf testified that “the insertion method isn’t particularly important. What’s important is that the anchor do its job.... The mechanism of that per se isn’t particularly important.” J.A. 19198. There was also evidence from fact witnesses that other types of anchors could serve as substitutes for the infringing push-in suture anchor. Arthrex’s witness Mr. Carlozzi testified that “[i]n a clinical setting, whether you tap [i.e., push in an anchor] or screw it in, it really doesn’t matter, as long as once it’s in, it stays there and holds into the bone.” J.A. 19314. Dr. Warren, S & N’s witness, testified that if he could not use S & N’s push-in product, he might use the push-in anchor of another brand, or he “might use somebody else’s screw-in device.” J.A. 19309-10. He also stated that, while he liked using S & N’s push-in product, someone could use a screw-in anchor and “wouldn’t have any problem with it” because “[t]here is more than one way to skin a cat.” J.A. 19308. S & N’s own documents indicate that it saw its primary competition as coming from a toggle anchor and a screw-in anchor. Cases like Standard Havens Products, Inc. v. Gencor Industries, Inc.,
The majority also relies on the fact that the patented product was purchased, stating that “actual market behavior of ... surgeons determined where those surgeons would have taken their business if they could not have purchased what they in fact bought.” Maj. Op. at 987. But the fact that surgeons purchased the infringing anchor cannot establish the absence of non-infringing alternatives. The Panduit factor pertaining to non-infringing substitutes recognizes that, even where consum
To limit the market to devices containing the patented features, S & N had the burden of. showing that buyers specifically want a product having the advantages of the patent. See Slimfold Mfg. Co. v. Kinkead Indus., Inc.,
I join the majority opinion with the exception of the majority’s decision sustaining the lost profits award.