Failure to Substantiate Royalty Rate Leads to Vacatur of Damages Award
Exmark Manufacturing Co. v. Briggs & Stratton Power Products Group, 2018 U.S. App. LEXIS 783 (Fed. Cir. Jan. 12, 2018) (Wallach, Chen, STOLL) (D. Neb.: Bataillon) (3 of 5 stars)
Fed Cir vacates summary judgment of no invalidity, vacates jury’s willfulness finding and its damages award, but affirms denial of summary judgment of indefiniteness and denial of laches defense. The case concerned Exmark’s patent to a lawn mower having improved flow control baffles.
SJ of no invalidity: The district court erred by basing its judgment solely on the fact that claim 1 of Exmark’s patent had survived multiple reexaminations over the same prior art. “Surviving a reexamination does not warrant ipso facto summary judgment that a patent is not invalid.” Op. at 9. While Briggs’s validity attack, because it focused on the same art in reexamination, faced the “added burden of overcoming the deference due a qualified government agency,” summary judgment could not be granted based on the reexamination outcome alone. Op. at 11–12 (quoting SRI Int’l, 45 F.3d 443, 1994 WL 712487 (Fed. Cir. 1994) (non-precedential)). The opinion also rejects Exmark’s argument in the alternative that no reasonable juror could have found anticipation or obviousness, where these issues were not clearly presented or addressed by the district court.
Denial of SJ of indefiniteness: The district court did not err in denying summary judgment. The opinion rejects Briggs’ argument that the claim’s reference to a “elongated and substantially straight” baffle portion was indefinite. “[N]o such numerical precision is required when using such terms of degree.” Op. at 18. Here, a skilled artisan would understand that the baffles must be “sufficiently straight” to connect two other baffle portions. That “elongated” was found indefinite in GE Lighting, 663 F. App’x 938 (Fed. Cir. 2016), is not contradictory, as that case involved a different disclosure.
Damages: The district court did not err when it allowed Exmark to use a royalty base not apportioned so as to account for the value of the patentee’s invention. “[T]he patent owner must apportion or separate the damages between the patented improvement and the conventional components of the multicomponent product.” Op. at 22. However, this apportionment could be performed using the royalty rate, rather than the base, so there was no error in the district court permitting use of a broad royalty base (sales of the accused lawn mower). The opinion also notes that use of such a base is “consistent with the realities of a hypothetical negotiation.” Op. at 23.
The district court abused its discretion, however, in denying Briggs’ motion for a new damages trial. “Exmark’s damages expert’s opinion was inadmissible as it failed to adequately tie the expert’s proposed royalty rate to the facts of this case.” Op. at 24. Exmark proposed a 5% royalty rate, but did not tie this to the relevant Georgia-Pacific factors, or explain how this rate was reached. “[I]t was not enough for Exmark’s expert to explain the advantages of the baffle claimed in the ’863 patent and state that they would have been important in a hypothetical negotiation.” Op. at 26. The opinion also notes that Exmark’s expert, though noting that other elements of the mowers affected sales and profits, failed to analyze how those would affect the suggested royalty rate.
The district court also erred by holding that non-commercialized prior art was irrelevant to damages. “The fact that some prior art mowers were not commercialized does not make them immaterial to determining the extent to which the mower claimed in the ’863 patent provides utility and advantages over the prior art.” Op. at 29. The district court did not abuse its discretion, however, by limiting the damages evidence to prior art side discharge (as opposed to mulching) mowers, as the asserted claim required a side-discharge mower. The district court also did not abuse its discretion by excluding evidence of Exmark’s purportedly delated decision to sue for damages, as the record indicated that there were many reasons for Exmark’s delay in suing, such as a lack of resources.
Willfulness: This trial proceeded under the now-deprecated Seagate willfulness standard, and the district court precluded Briggs from presenting evidence regarding validity as mitigating willfulness, as the district court found the validity defense unreasonable. Per Halo, 136 S. Ct. 1923 (2016), “the entire willfulness determination is to be decided by the jury,” Op. at 31. On remand, the district court must reconsider its decision to exclude evidence about the prior art. “Whether there is a genuine issue of material fact about when Briggs knew of its prior art defenses, and thus whether a new jury trial is required, we leave to the district court to determine in the first instance.” Id. at 32.
Laches: The district court did not err when it dismissed Briggs’ laches defense. As per SCA Hygiene, 137 S. Ct. 954 (2017), the fact that Exmark was only seeking damages for the six-year period prior to its complaint meant that Briggs could not assert laches as a defense.
KEYWORDS: SUMMARY JUDGMENT; ANTICIPATION (NO); OBVIOUSNESS (NO); INDEFINITENESS (NO); DAMAGES; APPORTIONMENT; ROYALTY BASE; ROYALTY RATE; PRIOR ART; WILLFULNESS; LACHES