No. 13- IN THE Supreme Court of the United States ___________ RUDOLPH TECHNOLOGIES, INC. AND MARINER ACQUISITION COMPANY LLC, Petitioner, v. INTEGRATED TECHNOLOGY CORPORATION AND NEVADA INTEGRATED TECHNOLOGY CORPORATION, Respondents. ___________ On Petition for a Writ of Certiorari to the United States Court of Appeals for the Federal Circuit ___________ PETITION FOR A WRIT OF CERTIORARI ___________ CARTER G. PHILLIPS DANIEL W. MCDONALD* JONATHAN F. COHN RACHEL C. HUGHEY ERIKA L. MYERS WILLIAM D. SCHULTZ NOAH T. KATZEN JOSEPH E. LEE SIDLEY AUSTIN LLP MERCHANT & GOULD P.C. 1501 K Street, N.W. 3200 IDS Center Washington, D.C. 20005 80 South Eighth Street (202) 736-8000 Minneapolis, MN 55402 (612) 332-5300 mcdonald@ merchantgould.com Counsel for Petitioner March 4, 2014 * Counsel of Record [Additional Counsel on Inside Cover]
Transcript
No. 13-
IN THE
Supreme Court of the United States ___________
RUDOLPH TECHNOLOGIES, INC. AND MARINER ACQUISITION COMPANY LLC,
Petitioner, v.
INTEGRATED TECHNOLOGY CORPORATION AND NEVADA INTEGRATED TECHNOLOGY CORPORATION,
Respondents. ___________
On Petition for a Writ of Certiorari to the United States Court of Appeals
for the Federal Circuit ___________
PETITION FOR A WRIT OF CERTIORARI ___________
CARTER G. PHILLIPS DANIEL W. MCDONALD* JONATHAN F. COHN RACHEL C. HUGHEY ERIKA L. MYERS WILLIAM D. SCHULTZ NOAH T. KATZEN JOSEPH E. LEE SIDLEY AUSTIN LLP MERCHANT & GOULD P.C. 1501 K Street, N.W. 3200 IDS Center Washington, D.C. 20005 80 South Eighth Street (202) 736-8000 Minneapolis, MN 55402 (612) 332-5300 mcdonald@ merchantgould.com
Counsel for Petitioner March 4, 2014 * Counsel of Record
[Additional Counsel on Inside Cover]
THOMAS F. COTTER UNIVERSITY OF MINNESOTA LAW SCHOOL 229 19th Avenue South Minneapolis, MN 55455 (612) 624-7527 Counsel for Petitioner
(i)
QUESTIONS PRESENTED 1. Whether issues of law impacting patent dam-
ages should be reviewed de novo—like all other issues of law—or whether they should be reviewed under the deferential substantial evidence standard.
2. Whether a patentee may obtain “lost profits” damages under a “two-supplier market” theory even when there are non-infringing alternatives.
ii
PARTIES TO THE PROCEEDINGS The petitioner herein, which was the defendant-
appellant below, is Rudolph Technologies, Inc. The respondents herein, which were the plaintiffs-
appellees below, are Integrated Technology Corporation and Nevada Integrated Technology Corporation.
RULE 29.6 STATEMENT Mariner Acquisition Company LLC was merged in-
to August Technology Corporation (a wholly owned subsidiary of Rudolph Technologies, Inc.) in 2008. In 2012, August Technology Corporation was merged into Rudolph Technologies, Inc. Rudolph Technolo-gies, Inc. has no parent corporation and no publicly held company owns 10% or more of its stock.
(iii)
TABLE OF CONTENTS Page
QUESTIONS PRESENTED ................................. i PARTIES TO THE PROCEEDINGS ................... ii RULE 29.6 STATEMENT .................................... ii TABLE OF AUTHORITIES ................................. v OPINIONS BELOW ............................................. 1 JURISDICTION ................................................... 1 CONSTITUTIONAL AND STATUTORY PRO-
VISIONS ............................................................ 1 INTRODUCTION ................................................. 1 STATEMENT OF THE CASE.............................. 3 REASONS FOR GRANTING THE PETITION ... 6
I. THE DECISION BELOW DEEPENS A SPLIT WITHIN THE FEDERAL CIRCUIT AND CONFLICTS WITH THIS COURT’S PRECEDENT REQUIRING ALL LEGAL ISSUES TO BE REVIEWED DE NOVO...... 7 A. Federal Circuit Cases Are Hopelessly
Split As To Whether Damages Issues In Patent Cases Must Be Reviewed For Substantial Evidence Or De Novo ............ 7
B. The Decision Below Conflicts With This Court’s Precedent ...................................... 10
C. The Federal Circuit’s Rule Will Hamper Innovation ................................................. 13
iv
TABLE OF CONTENTS—continued Page
II. THIS COURT SHOULD GRANT CERTI-ORARI TO CLARIFY THAT DAMAGES IN PATENT CASES MUST BE LIMITED TO THE LOSSES CAUSED BY THE IN-FRINGEMENT .............................................. 15 A. The Decision Below Directly Contradicts
Precedent Of This Court And The Fed-eral Circuit Requiring Proof Of ‘But-For’ Causation Of Damages ............................. 16
B. The Federal Circuit’s Two-Supplier Mar-ket Rule Damages Innovation .................. 20
APPENDIX B: Integrated Tech. Corp. v. Ru-dolph Techs., Inc., No. CV-06-2182-PHX-ROS (D. Ariz. July 23, 2012) ........................... 16a
v
TABLE OF AUTHORITIES CASES Page
A.A. Profiles, Inc. v. City of Fort Lauderdale, 253 F.3d 576 (11th Cir. 2001) ........................................................... 12
In re Air Disaster at Lockerbie, Scotland on Dec. 21, 1988, 928 F.2d 1267 (2d Cir. 1991), overruled on other grounds, Zicherman v. Korean Air Lines Co., 516 U.S. 217 (1996) ........................................... 21
Aro Mfg. Co. v. Convertible Top Replace-ment Co., 377 U.S. 476 (1964) ....... 3, 16, 17, 19
Atl. Works v. Brady, 107 U.S. 192 (1883) ..... 13 Bilski v. Kappos, 130 S. Ct. 3218 (2010) ...... 12 Black v. Thorne, 111 U.S. 122 (1884) ........... 17 Bose Corp. v. Consumers Union of United
States, Inc., 466 U.S. 485 (1984) ................ 10 Brooktree Corp. v. Advanced Micro Devices,
Inc., 977 F.2d 1555 (Fed. Cir. 1992) .......... 8 Comcast Corp. v. Behrend, 133 S. Ct. 1426
(2013) .......................................................... 18 Coryn Grp. II, LLC v. O.C. Seacrets, Inc.,
868 F. Supp. 2d 468 (D. Md. 2012) ............ 20 eBay Inc. v. MercExchange, L.L.C., 547
U.S. 388 (2006) .......................................... 12, 15 Elder v. Holloway, 510 U.S. 510 (1994) ........ 10 Festo Corp. v. Shoketsu Kinzoku Kogyo
Kabushiki Co., 72 F.3d 857 (Fed. Cir. 1995), vacated on other grounds, 520 U.S. 1111 (1997) ................................................. 8
Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002) ...... 5, 10, 13
State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573 (Fed. Cir. 1989) .................. 17
vii
TABLE OF AUTHORITIES—continued Page
Tristrata Tech., Inc. v. ICN Pharm., Inc., 314 F. Supp. 2d 356 (D. Del.), appeal dismissed, 101 F. App’x 341 (Fed. Cir. 2004) ........................................................... 21
Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17 (1997) ................... 4, 10
Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660 (Fed. Cir. 1988) .................................... 19
SCHOLARLY AUTHORITIES Martin J. Adelman, Patent Perspectives (2d
ed. 1998) ..................................................... 5, 18 James Bessen et al., The Private and So-
cial Costs of Patent Trolls, 34 Regulation 26 (2011-2012), available at http:// object.cato.org/sites/cato.org/files/serials/ files/regulation/2012/5/v34n4-1.pdf ........... 14
Roger D. Blair & Thomas F. Cotter, Rethinking Patent Damages, 10 Tex. Intell. Prop. L.J. 1 (2001) ........................... 19
Robert P. Merges, Patent Law (2d ed. 1997) ........................................................... 20
Cecil D. Quillen, Jr., Commentary on Bessen and Meurer’s Patent Failure: An Industry Perspective, 16 J. Intell. Prop. L. 57 (2008) ................................................. 14
viii
TABLE OF AUTHORITIES—continued Page
Cecil D. Quillen, Jr., Innovation and the U.S. Patent System, 1 Va. L. & Bus. Rev. 207 (2006) .................................................. 20, 21
John W. Schlicher, Patent Law: Legal and Economic Principles (1997) ........................ 20
Ranganath Sudarshan, Nuisance-Value Patent Suits: An Economic Model and Proposal, 25 Santa Clara Computer & High Tech. L.J. 159 (2008) ......................... 14
OTHER AUTHORITIES
Litigations Over Time, Patent Freedom, https://www.patentfreedom.com/about- npes/litigations/ (accessed Feb. 20, 2014) . 14
7 Donald S. Chisum, Chisum on Patents (2011) .................................................. 12, 16, 18
Dep’t of Commerce, Patent Reform: Un-leashing Innovation, Promoting Econ-omic Growth & Producing High-Paying Jobs (Apr. 13, 2010), available at http:// www.commerce.gov/sites/default/files/ documents/migrated/Patent_Reform- paper.pdf ..................................................... 15
Exec. Office of the President, Patent Asser-tion and U.S. Innovation (June 2013), available at http://www.whitehouse.gov/ sites/default/files/docs/ patent_report.pdf . 14
Fed. Trade Comm’n, The Evolving IP Marketplace: Aligning Patent Notice and Remedies With Competition, 2011 WL 838912 (Mar. 1, 2011) ................................ 21
9C Charles Wright & Arthur Miller, Federal Practice and Procedure (3d ed. 2008) ........................................................... 11
PETITION FOR A WRIT OF CERTIORARI The petitioner, Rudolph Technologies, Inc. (Peti-
tioner), respectfully petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Federal Circuit.
OPINIONS BELOW The Federal Circuit’s opinion is reported at 734
F.3d 1352, and reproduced at Petition Appendix (Pet. App.) 1a-15a. The district court’s unpublished opin-ion is reproduced at Pet. App. 16a-44a.
JURISDICTION The Federal Circuit entered its judgment on No-
vember 4, 2013. On December 19, 2013, the Chief Justice extended the time for filing a petition for cer-tiorari to and including March 4, 2014. This Court has jurisdiction over this timely filed petition pursu-ant to 28 U.S.C. § 1254(1).
CONSTITUTIONAL AND STATUTORY PROVISIONS
Section 284 of the Patent Act, 35 U.S.C. § 284, pro-vides: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a rea-sonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.”
INTRODUCTION This case raises fundamental questions regarding
the Federal Circuit’s review of “lost profits” damages awards for patent infringement. Disregarding this
2
Court’s precedent, the Federal Circuit held that it must review such awards under the deferential “sub-stantial evidence” standard, even when the award was predicated on an error of law. This decision ef-fectively insulates lost profits awards from meaning-ful judicial review and contravenes the bedrock prin-ciple that appellate courts must review errors of law de novo.
This Court’s review is necessary for three reasons. First, Federal Circuit precedent is hopelessly con-fused as to the standard of review applicable to pa-tent damages: while some cases correctly recognize that legal issues underlying damages awards must be reviewed de novo, other cases, including this one, in-correctly treat all damages questions as issues of fact to be reviewed deferentially for substantial evidence. See SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 n.2 (Fed. Cir. 1991). This intra-circuit conflict threatens the uniformity of pa-tent law that Congress intended when it created the Federal Circuit. Second, the decision below conflicts with this Court’s precedent requiring that courts of appeals review all issues of law de novo. And third, the decision represents yet another ad hoc deviation by the Federal Circuit from basic legal principles to create special rules in the patent realm that will sti-fle innovation in a wide array of technology sectors.
For similar reasons, this Court urgently needs to review the Federal Circuit’s decision that a patentee may obtain lost profits damages under a “two-supplier market” theory, even when there are non-infringing alternatives to the patented product. The Federal Circuit’s ruling that the two-supplier market theory is “independent” of the existence of non-infringing alternatives will allow patentees to obtain “lost profits” even on sales they never would have
3
made absent the infringement, contrary to longstand-ing precedent of this Court, Aro Mfg. Co. v. Converti-ble Top Replacement Co., 377 U.S. 476, 507 (1964), and the Federal Circuit itself. By subjecting innova-tors to unsupportable damages awards, the decision below threatens to discourage the very innovation that patent law is intended to promote. Certiorari should be granted.
STATEMENT OF THE CASE 1. This is a patent infringement case involving a
technology known as a probe card analyzer. Pet. App. 2a. Probe cards are devices used to test semi-conductor chips. Id. Probe card analyzers, in turn, are devices that test the testers.
Respondent Integrated Technology Corp. (ITC) pa-tented a probe card analyzer that takes two images of the probe tip. Both images must be taken when the “probe tip is driven in contact with [a viewing] win-dow.” Pet. App. 3a (emphasis omitted). ITC original-ly sought to patent a broader claim, which did not re-quire contact for both images, id. at 5a, but the pa-tent examiner rejected it. Id. To overcome the objec-tion, ITC narrowed its claim as quoted above and ob-tained the patent. Id.
Petitioner makes two models of probe card analyz-ers. In 2006, ITC sued Petitioner, asserting that both of these models infringed ITC’s patent. Pet. App. 2a-3a. Although Petitioner did not intend for its probe tips to make contact when both images were taken, the tips on one of Petitioner’s models sometimes in-advertently did. Id. at 3a. (The tips on the other model did not.) Id. Once notified of the infringement allegations, Petitioner modified this product in 2007 to ensure that the probe tips would never touch the viewing window when the first image was taken. Id.
4
at 6a. This “straightforward software change” took all of 80 hours to complete and cost less than $20,000. See id.
The parties filed cross-motions for summary judg-ment. The district court granted ITC’s motion on the model whose probe tips sometimes touched the view-ing window for both images. Pet. App. 3a. The court denied summary judgment, however, on the revised products, as well as on the other model whose probe tips never touched the window for the first image and thus did not need to be modified. Id.
For these “no touch” probe card analyzers, the court allowed the jury to decide infringement. Pet. App. 3a. Petitioner had argued on summary judgment that the “no touch” products did not infringe as a matter of law because ITC had narrowed its patent in response to the examiner’s objection, and thus estoppel barred ITC’s infringement argument. See id. at 20a. As narrowed, Petitioner argued, the patent covered only analyzers whose probe tips actually touch the viewing window when the first image is taken, not those that almost touch. But the district court rejected this le-gal argument. Id. at 21a.
The jury returned a verdict for ITC, finding that the “no touch” products infringed under the doctrine of equivalents,1 and awarding lost profits damages
1 The “doctrine of equivalents” permits a finding that “a prod-
uct or process that does not literally infringe upon the express terms of a patent claim” nonetheless infringes because it is “equivalen[t]” to the “claimed elements of the patented inven-tion.” Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997). However, under the doctrine of “prosecution history estoppel,” a patentee is estopped from relying on the doc-trine of equivalents to prove infringement if the patentee nar-rowed the relevant patent claims during the patent prosecution
5
for both the “touch” products and the “no touch” products. Pet. App. 4a. Petitioner moved for judg-ment as a matter of law, re-raising the estoppel issue, but the district court denied the motion. Id.
2. On appeal, Petitioner once again challenged the finding of infringement for the “no touch” prod-ucts, as well as the damages award for the “touch” products, which squarely rested on that finding. As Petitioner explained, because the “no touch” products did not infringe, they were non-infringing alterna-tives, and thus should reduce any damages award.2 See Micro Chem., Inc. v. Lextron, Inc., 318 F.3d 1119, 1125 (Fed. Cir. 2003) (noting that “absent the in-fringement, customers may have selected the infring-er’s available, noninfringing alternative over the pa-tented invention”); see also Martin J. Adelman, Pa-tent Perspectives § 5.2[2] (2d ed. 1998) (when there are non-infringing alternatives, “sales that [the in-fringer] made of the infringing products were not sales that the patentee would otherwise have made”). The jury never considered this issue because it found that these “no touch” products themselves infringed. Accordingly, Petitioner sought a remand on damages for the “touch” products.
process in order to obtain the patent. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 734 (2002).
2 Although the redesigned product was not on the market un-til 2007, Petitioner argued that it was an available non-infringing alternative for the “touch” product because Petitioner possessed the requisite equipment, know-how, and experience to implement this non-infringing redesign earlier, as evidenced by the easy redesign. See Pet. App. 12a; Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1354 (Fed. Cir. 1999). In any event, the separate model that never infringed was on the market starting in 2002; thus, it clearly was a non-infringing alternative.
6
The Federal Circuit reversed in part and affirmed in part. Pet. App. 15a. On infringement, the Federal Circuit agreed with Petitioner that prosecution histo-ry estoppel barred ITC’s claim that the “no touch” products infringed. Id. at 12a. But, on damages, the court affirmed the award of nearly $8 million in lost profits damages for the “touch” products. Id. at 12a-13a. According to the Federal Circuit, “[t]he jury’s determination of the amount of damages is an issue of fact that we review for substantial evidence,” and it must be upheld unless it is “grossly excessive or mon-strous, clearly not supported by the evidence, or based only on speculation.” Id. at 12a (emphasis added). Applying this highly deferential standard of review, the court upheld the damages award, con-cluding that “substantial evidence supported” it. Id. The Federal Circuit further held that the award of lost profits was appropriate even if there were non-infringing alternatives, because the “two-supplier theory of lost profits” is “independent of the existence of non-infringing alternatives.” Id. at 13a.
REASONS FOR GRANTING THE PETITION The Federal Circuit’s tangled precedent and depar-
ture from ordinary legal principles calls out for this Court’s immediate review. Federal Circuit precedent is hopelessly confused as to whether legal issues per-taining to patent damages are to be reviewed for sub-stantial evidence or de novo, even though this Court’s precedent clearly requires courts of appeals to review all legal issues de novo. There is no ground for creat-ing a special exception for patent law. Indeed, if left uncorrected, the decision below would risk stifling innovation across a broad range of industries. Infra Part I.
7
Second, certiorari should be granted to review the Federal Circuit’s erroneous decision that lost profits damages may be awarded even when there are non-infringing alternatives to the patented product. This decision directly contradicts the fundamental princi-ple—established by this Court and the Federal Cir-cuit itself—that damages for patent infringement may not exceed the losses that the infringement ac-tually caused to the patentee. Again, if this ruling is allowed to stand, it will hamper innovation by award-ing significant windfalls to patentees for purported “lost profits,” when, in the absence of infringement, those sales would have gone to alternative, non-infringing products. Infra Part II.
I. THE DECISION BELOW DEEPENS A SPLIT WITHIN THE FEDERAL CIRCUIT AND CONFLICTS WITH THIS COURT’S PRECEDENT REQUIRING ALL LEGAL IS-SUES TO BE REVIEWED DE NOVO. A. Federal Circuit Cases Are Hopelessly
Split As To Whether Damages Issues In Patent Cases Must Be Reviewed For Substantial Evidence Or De Novo.
Federal Circuit case law has long been hopelessly confused as to the standard of review applicable to damages issues in patent cases. Over two decades ago, the Federal Circuit acknowledged this morass: “We have reviewed our precedent and find some con-fusing, if not conflicting, statements with respect to the nature of damage issues and the standard of re-view.” SmithKline Diagnostics, Inc., 926 F.2d at 1164 n.2. Since then, the uncertainty and confusion have not abated.
Some Federal Circuit cases hold that patent dam-ages issues must be reviewed under the deferential
8
substantial evidence standard, even when the partic-ular issue presented is a question of law. For exam-ple, in Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555 (Fed. Cir. 1992), the defendant argued “that the damages calculations were incorrect as a matter of law, since they included events occur-ring before any infringement began.” Id. at 1578. Nonetheless, the Federal Circuit applied a deferential standard of review, holding that “the jury’s finding must be upheld unless the amount is grossly exces-sive or monstrous, clearly not supported by the evi-dence, or based only on speculation or guesswork.” Id. at 1578-80 (internal quotation omitted).
Following Brooktree, some Federal Circuit cases have continued to state generally and without excep-tion that “[t]his court reviews a jury’s damages award for substantial evidence.” Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1308 (Fed. Cir. 2002); see also, e.g., Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1228-29 (Fed. Cir. 2011) (“This court reviews ‘the jury’s determination of the amount of damages, an issue of fact, for substantial evidence.’”) (quoting Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1310 (Fed. Cir. 2009)); Festo Corp. v. Shoketsu Kinzo-ku Kogyo Kabushiki Co., 72 F.3d 857, 866 (Fed. Cir. 1995) (“The assessment of damages is a question of fact, and is decided by the jury when trial is to a ju-ry.”), vacated on other grounds, 520 U.S. 1111 (1997).
The decision below took this approach, holding that “[t]he jury’s determination of the amount of damages is an issue of fact that we review for substantial evi-dence,” Pet. App. 12a, even though the particular damages issue Petitioner raised was indisputably one of law. As Petitioner argued, the damages award for the “touch” products was legally infirm because it was based on the unquestionably flawed legal prem-
9
ise that the “no touch” products infringed. Id. The Federal Circuit agreed that this infringement deter-mination was erroneous, that estoppel barred the finding, and that estoppel was “a question of law.” Id. at 5a, 8a. Yet the court nevertheless held that the damages question had to be treated as an issue of fact and reviewed for substantial evidence. Id. at 12a.
Other Federal Circuit cases, however, take a con-trary approach, recognizing that the standard of re-view depends upon the nature of the particular dam-ages issue: some damages issues are issues of fact, while others are issues of law. For instance, Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc), holds that “[i]n order to prevail on an issue of damages, an appellant must convince us that the de-termination was based on an erroneous conclusion of law, clearly erroneous factual findings, or a clear er-ror of judgment amounting to an abuse of discretion.” Id. at 1543 (emphasis added); see Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1542 (Fed. Cir. 1987) (same). Indeed, in other cases the Federal Cir-cuit has recognized that the particular damages issue involved here, the “[a]vailability of lost profits” is “a question of law reviewed without deference.” Micro Chem., Inc., 318 F.3d at 1122; see also Am. Seating Co. v. USSC Grp., Inc., 514 F.3d 1262, 1268 (Fed. Cir. 2008) (“Whether a party may be awarded lost profits is a question of law that we review de novo.”); Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1293 (Fed. Cir. 2007) (“Whether lost profits are legal-ly compensable in a particular situation is a question of law that we review de novo.”). These opinions squarely conflict with the panel decision, and the oth-er Federal Circuit cases holding that damages awards are subject to a deferential substantial evi-dence standard of review.
10
Because the Federal Circuit has exclusive jurisdic-tion over patent appeals, its rulings have an immedi-ate nationwide impact. 28 U.S.C. § 1295. The Feder-al Circuit’s exclusive jurisdiction means that guid-ance from other circuits will not be forthcoming. Fur-ther, a “significant disagreement within the Court of Appeals for the Federal Circuit” threatens the uni-formity of patent law that Congress intended when it created the specialized court. Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997). Such intra-circuit splits within the Federal Circuit therefore warrant this Court’s review. Id.; see Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 727 (2002) (granting certiorari when the Federal Circuit’s “holding departed from its own cas-es”). Review is especially needed here because the outcome of cases should not depend on the composi-tion of the panel hearing the appeal.
B. The Decision Below Conflicts With This Court’s Precedent.
The Federal Circuit’s decision also squarely con-flicts with this Court’s precedent requiring the courts of appeals to review issues of law de novo. See, e.g., Elder v. Holloway, 510 U.S. 510, 516 (1994) (“[Q]uestion[s] of law . . . must be resolved de novo on appeal.”). This rule applies equally to pure “errors of law” and to “those that may infect a so-called mixed finding of law and fact, or a finding of fact that is predicated on a misunderstanding of the governing rule of law.” Bose Corp. v. Consumers Union of Unit-ed States, Inc., 466 U.S. 485, 501 (1984); see also Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991).
The rule is grounded in the fundamental principle that it is the duty of the courts of appeals to say what the law is. Salve Regina Coll., 499 U.S. at 231; cf.
11
Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803). Plenary review of legal questions by appellate courts “best serves the dual goals of doctrinal coher-ence and economy of judicial administration.” Salve Regina Coll., 499 U.S. at 231. While district courts “devote much of their energy and resources to hear-ing witnesses and reviewing evidence,” courts of ap-peals “are able to devote their primary attention to legal issues.” Id. at 231-32. For these reasons, it is a basic principle of our legal system that, while courts of appeals defer to district court’s rulings on issues of fact, they must review issues of law independently, without deference. Pullman-Standard v. Swint, 456 U.S. 273, 291-92 (1982); 9C Charles Wright & Arthur Miller, Federal Practice and Procedure § 2588 (3d ed. 2008) (courts of appeals “review the district court’s factual findings for clear error and its legal conclu-sions de novo”).
Indeed, all courts of appeals other than the Federal Circuit adhere to this fundamental rule, and review de novo any legal issues underlying damages awards. See, e.g., LHC Nashua P’ship, Ltd. v. PDNED Sagamore Nashua, L.C.C., 659 F.3d 450, 456 (5th Cir. 2011) (“Regarding the amount of damages awarded, legal conclusions underlying the award are reviewed de novo.”); Rexam Beverage Can Co. v. Bol-ger, 620 F.3d 718, 727 (7th Cir. 2010) (“The amount of recoverable damages is a question of fact, while the measure of damages upon which the factual computa-tion is based is a question of law.”); Sw. Stainless, LP v. Sappington, 582 F.3d 1176, 1183 (10th Cir. 2009) (“While we review the amount of a damage award for clear error, the methodology the district court uses in calculating a damage award, such as determining the proper elements of the award or the proper scope of recovery, is a question of law we review de novo.”)
12
(quoting FTC v. Kuykendall, 371 F.3d 745, 763 (10th Cir. 2004)); A.A. Profiles, Inc. v. City of Fort Lauder-dale, 253 F.3d 576, 581 (11th Cir. 2001) (“We review the district court’s determination of the proper legal standard to compute damages de novo.”).
As in previous Federal Circuit cases, see supra at 7-8, the court here refused to apply this basic legal principle. The district court’s erroneous ruling on an issue of law—whether estoppel barred a finding of infringement for the “no touch” products—infected the jury’s consideration of whether those products were non-infringing alternatives, and thus the jury’s award of damages for the “touch” products. See 7 Donald S. Chisum, Chisum on Patents § 20.05 (2011). Because the legal basis for the jury’s award was re-versed, the Federal Circuit should not have deferred. Instead, the court was legally required to vacate the award and remand for a new trial. “[W]here findings are infirm because of an erroneous view of the law, a remand is the proper course unless the record per-mits only one resolution of the factual issue.” Pull-man-Standard, 456 U.S. at 292. Indeed, “this is ele-mentary.” Id.
As this Court has recently held, the basic principles of our legal system “apply with equal force to disputes arising under the Patent Act,” unless the text of the Act provides otherwise. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Indeed, this Court “has ‘more than once cautioned that courts should not read into the patent laws limitations and conditions which the legislature has not expressed.’” Bilski v. Kappos, 130 S. Ct. 3218, 3226 (2010) (quoting Dia-mond v. Diehr, 450 U.S. 175, 182 (1981)); see also, e.g., Medtronic v. Mirowski Family Ventures, LLC, 134 S. Ct. 843, 852 (2014) (“general public interest considerations . . . . do not favor a change in the ordi-
13
nary rule” in patent infringement cases). Here, the damages provision of the Patent Act is silent as to the appropriate standard of review on appeal. 35 U.S.C. § 284. Therefore, the general rule applies: courts of appeals must review issues of law de novo. The Fed-eral Circuit cannot depart from the settled precedent of this Court to create special rules for patent cases with no grounding in the text of the Patent Act. Cer-tiorari should be granted.
C. The Federal Circuit’s Rule Will Hamper Innovation.
Further, certiorari should be granted because the decision below will greatly impede the fundamental purpose of patent law: to promote innovation. U.S. Const. art. I, § 8, cl. 8 (granting Congress power to create patents “[t]o promote the Progress of Science and useful Arts”); Atl. Works v. Brady, 107 U.S. 192, 200 (1883) (“The design of the patent laws is to re-ward those who make some substantial discovery or invention, which adds to our knowledge and makes a step in advance in the useful arts.”). By perpetuating an intra-circuit split as to the proper standard of re-view, the Federal Circuit’s decision creates unneces-sary confusion. Supra at 7-10. And the holding that damages awards must be reviewed deferentially, even when the award is challenged on legal grounds, will itself increase doctrinal uncertainty, by prevent-ing the Federal Circuit from resolving recurring legal issues and leaving intact grossly inflated damages awards.
Both the increase in doctrinal uncertainty and the potential for inflated awards will deeply hamper in-novation. As this Court has observed, doctrinal “clar-ity is essential to promote progress, because it ena-bles efficient investment in innovation.” Festo Corp., 535 U.S. at 730-31. Legal uncertainty, on the other
14
hand, will increase both the number of lawsuits and the costs of litigation, forcing “many patent owners and users . . . to settle out of court for amounts that have not so much to do with the economic value of their patents or the probability that they have in-fringed” as their need to avoid crushing legal expens-es. Exec. Office of the President, Patent Assertion and U.S. Innovation 6 (June 2013), available at http: //www.whitehouse.gov/ sites/ defa ult/files/ docs/ patent_report.pdf.
Finally, the potential for inflated awards will fur-ther increase the pressure to settle patent suits, in-cluding “nuisance” suits brought by those with inva-lid or inapplicable patents. See Ranganath Sudarshan, Nuisance-Value Patent Suits: An Eco-nomic Model and Proposal, 25 Santa Clara Computer & High Tech. L.J. 159, 172-73 (2008); James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 31 (2011-2012), available at http: //object.cato.org/ sites/cato.org/files/serials/files/ regulation/2012/5/v34n4-1.pdf (noting that “the payoff from winning might be so large that the threat of a lawsuit is credible even if the probability of winning is low”). Indeed, “[i]nnovators accused of infringe-ment of such patents frequently find it safer to settle and pay the extortionist rather than stick it out and face the risk of a crippling damages award, even if they believe they should win.” Cecil D. Quillen, Jr., Commentary on Bessen and Meurer’s Patent Failure: An Industry Perspective, 16 J. Intell. Prop. L. 57, 69 (2008). These problems are further exacerbated by the rise of patent assertion entities, sometimes known as “patent trolls,” who collect patents, but do not practice any inventions, and use the threat of huge damages awards to force innovators to pay roy-alties or settle suits. See Litigations Over Time, Pa-
15
tent Freedom, https://www.patentfreedom.com/about-npes/litigations/ (accessed Mar. 4, 2014) (Since 2004, lawsuits brought by patent assertion entities have increased by an average of 22% per year.); see also eBay, Inc., 547 U.S. at 396 (Kennedy, J., concurring). The same problems arise whether the damages take the form of “lost profits,” as in this case, or the form of a royalty.
To ensure that patent law can serve its crucial function of promoting innovation, and that low-quality patents cannot “be profitably asserted against genuine innovators in litigation,” Dep’t of Commerce, Patent Reform: Unleashing Innovation, Promoting Economic Growth & Producing High-Paying Jobs 5 (Apr. 13, 2010), available at http:/ /www. commerce.gov/ sites/default/files/ documents/migrated/ Patent_Reform-paper.pdf, this Court should grant certiorari and hold that legal issues underlying dam-ages awards must be reviewed de novo. II. THIS COURT SHOULD GRANT CERTIO-
RARI TO CLARIFY THAT DAMAGES IN PATENT CASES MUST BE LIMITED TO THE LOSSES CAUSED BY THE IN-FRINGEMENT.
Further, this Court should grant certiorari or summarily reverse to clarify that damages in patent cases must be limited to the amount of actual injury caused by the infringement. The Federal Circuit’s holding that the two-supplier market theory of lost profits is “independent” of the existence of non-infringing alternatives makes no sense and ignores this long-standing rule, recognized by both this Court and the Federal Circuit itself. The decision will also artificially inflate “lost profits” awards by allowing patentees to recover damages for sales they never
16
would have made if there had been no infringement, further hampering innovation.
A. The Decision Below Directly Contra-dicts Precedent Of This Court And The Federal Circuit Requiring Proof Of ‘But-For’ Causation Of Damages.
The decision below directly contradicts the funda-mental rule that a patentee may recover only the amount of damages that it “suffered from the in-fringement.” Aro Mfg. Co., 377 U.S. at 507. Prior to 1946, the Patent Act allowed patentees to recover the “profits” made by the infringer, as well as the “dam-ages” suffered by patentee. Id. at 505. Congress, however, amended the Act to its current form, provid-ing that “[u]pon finding for the claimant the court shall award the claimant damages adequate to com-pensate for the infringement.” 35 U.S.C. § 284 (em-phasis added). As this Court explained, “[t]he pur-pose of the change was precisely to eliminate the re-covery of profits as such and allow recovery of dam-ages only.” Aro Mfg. Co., 377 U.S. at 505. Damages may take the form of either “lost profits” that the pa-tentee would have obtained by selling its patented product absent the infringement, or, if the patentee cannot demonstrate that it would have lost profits, a reasonable royalty that the patentee could have charged for licensing its patented technology. 35 U.S.C. § 284; 7 Chisum, supra, § 20.05. The measure of “damages” under the statute is ‘“the difference be-tween [the patent owner’s] pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.’” Aro Mfg. Co., 377 U.S. at 507 (quoting Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536, 552 (1886)). In other words, the decision-maker must measure damages by ask-ing, “had the Infringer not infringed, what would the
17
Patent Holder-Licensee have made?” Id. This basic rule prevents patentees from obtaining a windfall by recovering more in damages than they could have ob-tained by selling their patented product in the ab-sence of infringement.
Accordingly, it is well-established that a patentee may not recover damages for its “lost profits” where, absent the infringement, the defendant would have competed with the patented product as effectively by selling an available non-infringing alternative prod-uct. Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1350-51 (Fed. Cir. 1999) (“[A] fair and accurate reconstruction of the ‘but for’ market . . . must take into account, where relevant, alternative actions the infringer foreseeably would have under-taken had he not infringed,” including “offer[ing] an acceptable noninfringing alternative, if available, to compete with the patent owner.”). “[O]nly by compar-ing the patented invention to its next-best available alternative(s) . . . can the court discern the market value of the patent owner’s exclusive right, and there-fore his expected profit or reward” absent the in-fringement. Id. at 1351. And, as this Court held in Black v. Thorne, “damages must necessarily be nomi-nal” if “other methods in common use produce the same results, with equal facility and cost.” 111 U.S. 122, 124 (1884) (interpreting prior version of Patent Act); see Mowry v. Whitney, 81 U.S. (14 Wall.) 620, 651 (1871) (same).
Contrary to this settled precedent, the Federal Cir-cuit held below that the “two-supplier theory of lost profits,” in which the patentee and the infringer are the only two companies selling products in the rele-vant market, “was independent of the existence of noninfringing alternatives.” Pet. App. 13a. To sup-port this ruling, the court relied on State Indus., Inc.
18
v. Mor-Flo Indus., Inc., 883 F.2d 1573 (Fed. Cir. 1989), which held that ‘“[i]n the two-supplier market, it is reasonable to assume, provided the patent owner has the manufacturing and marketing capabilities, that it would have made the infringer’s sales.’” Pet. App. 13a (quoting State Indus., 883 F.2d at 1578). This reasoning, however, is deeply flawed.
Indeed, as other Federal Circuit cases have recog-nized, the availability of non-infringing alternatives is just as relevant to damages in a two-supplier mar-ket as it is in any other market. Regardless of the number of suppliers, if there are non-infringing al-ternatives, those products may have taken sales away from the patentee. Micro Chem., Inc., 318 F.3d at 1125 (noting that “absent the infringement, custom-ers may have selected the infringer’s available, noninfringing alternative over the patented inven-tion”); 7 Chisum, supra, § 20.05. “Where an infringer demonstrates that it could have chosen to market a noninfringing alternative and that it would have done so had it known that it was infringing . . . the sales that it made of the infringing products were not sales that the patentee would otherwise have made,” and therefore cannot properly be factored into the pa-tentee’s damages. Adelman, supra, § 5.2[2]; see Grain Processing, 185 F.3d at 1348.
Excluding evidence of non-infringing alternatives in a two-supplier market thus ignores common sense and economic reality. As this Court recently ex-plained, “‘[t]he first step in a damages study’” must be “‘the translation of the legal theory of the harmful event into an analysis of the economic impact of that event,’” through a careful reconstruction of the rele-vant market. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1435 (2013) (emphases omitted) (quoting Fed. Judicial Ctr., Reference Manual on Scientific Evi-
19
dence 432 (3d ed. 2011)); see also Grain Processing, 185 F.3d at 1350 (“To prevent the hypothetical from lapsing into pure speculation, this court requires sound economic proof of the nature of the market and likely outcomes with infringement factored out of the economic picture.”). In patent infringement cases, this analysis must take into account the availability of any non-infringing alternatives to the patented product. Oiness v. Walgreen Co., 88 F.3d 1025, 1029-30 (Fed. Cir. 1996); Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 673 (Fed. Cir. 1988). Indeed, it should “center on whether the ‘realities of the marketplace’ are such that, but for the infringement, purchasers would have bought the patented product or would have been satisfied with products lacking the patent-ed product’s unique features.” Roger D. Blair & Thomas F. Cotter, Rethinking Patent Damages, 10 Tex. Intell. Prop. L.J. 1, 19 (2001). Other Federal Circuit cases have even remarked that the court’s precedent “has not reconciled completely the two-supplier test” with the general principle that the availability of non-infringing alternatives must be taken into account in calculating damages from pa-tent infringement. Micro Chem. Inc., 318 F.3d at 1124; see id. at 1125 (allowing an accused infringer in a two-supplier market to rebut the presumption that the patent owner would have made the infringer’s sales “by showing that it sold another available, noninfringing substitute in the relevant market”).
The Court should grant certiorari or summarily re-verse to correct the Federal Circuit’s deviation from the fundamental and long-standing principle that damages must be limited to the amount that the pa-tentee “suffered from the infringement,” Aro Mfg. Co., 377 U.S. at 507, and to clarify that non-infringing al-
20
ternatives must be considered in calculating damages in a two-supplier market.
B. The Federal Circuit’s Two-Supplier Mar-ket Rule Damages Innovation.
The Federal Circuit’s rigid two-supplier market theory stifles innovation by artificially inflating dam-ages awards. Indeed, “if the defendant is not permit-ted to present evidence [of non-infringing alternatives that it could have created], the analysis is quite skewed: only the patentee’s ‘best case’ scenario is pre-sented, rather than a more realistic scenario.” Robert P. Merges, Patent Law 1080 (2d ed. 1997). Ignoring “the nature and value of the product that the infring-er could have made had he not infringed” will “sys-tematically overreward patented inventions,” creat-ing unfair windfalls for patent owners. John W. Schlicher, Patent Law: Legal and Economic Princi-ples § 9.05[2][l] (1997). Granting excessive “lost prof-its” damages even when the defendant had a non-infringing alternative available will also create an in-centive for patentees to sandbag potential infringers, waiting until the last moment to inform them of the patent claims in hopes of running up the award. See generally Cecil D. Quillen, Jr., Innovation and the U.S. Patent System, 1 Va. L. & Bus. Rev. 207, 218 (2006) (noting that excessive lost profits awards lead to suits “pursued by patentees hoping to ‘win the lot-tery’”).
This creates the potential for systemic overvalua-tion of patents, overtaxing accused infringers and sti-fling competition with no offsetting benefits. Indeed, courts have repeatedly cautioned that damages awards that overcompensate plaintiffs also discour-age innovation. Coryn Grp. II, LLC v. O.C. Seacrets, Inc., 868 F. Supp. 2d 468, 496 (D. Md. 2012) (“[I]ncreasing the damages award might hinder inno-
21
vation.”); see also, e.g., In re Air Disaster at Lockerbie, Scotland on Dec. 21, 1988, 928 F.2d 1267, 1288 (2d Cir. 1991); Tristrata Tech., Inc. v. ICN Pharm., Inc., 314 F. Supp. 2d 356, 360 (D. Del.), appeal dismissed 101 F. App’x 341 (Fed. Cir. 2004). Likewise, the Fed-eral Trade Commission has warned that “[a]s patent awards increase relative to harm from infringement, innovation that is distinct from, but at the fringes of, patented technology may be abandoned.” Fed. Trade Comm’n, The Evolving IP Marketplace: Aligning Pa-tent Notice and Remedies With Competition, 2011 WL 838912, at *67 (Mar. 2011); see also Quillen, Innova-tion, supra, at 225 (explaining that inflated damages awards impose innovation costs, and “[b]y increasing the cost of innovation, we get less innovation and it costs us more”). Put simply, lost profits “[d]amages that overcompensate patentees can distort competi-tion and decrease innovation.” Fed. Trade Comm’n, supra, at *68. Review by this Court is necessary to avoid these severely adverse consequences.
22
CONCLUSION For the foregoing reasons, the petition for a writ of
certiorari should be granted, or the decision below should be summarily reversed.
Respectfully submitted, CARTER G. PHILLIPS DANIEL W. MCDONALD* JONATHAN F. COHN RACHEL C. HUGHEY ERIKA L. MYERS WILLIAM D. SCHULTZ NOAH T. KATZEN JOSEPH E. LEE SIDLEY AUSTIN LLP MERCHANT & GOULD P.C. 1501 K Street, N.W. 3200 IDS Center Washington, D.C. 20005 80 South Eighth Street (202) 736-8000 Minneapolis, MN 55402 (612) 332-5300 THOMAS F. COTTER mcdonald@ UNIVERSITY OF merchantgould.com MINNESOTA LAW SCHOOL 229 19th Avenue South Minneapolis, MN 55455 (612) 624-7527
Counsel for Petitioner March 4, 2014 * Counsel of Record
APPENDIX
1a
APPENDIX A
UNITED STATES COURT OF APPEALS FEDERAL CIRCUIT
—————
Nos. 2012-1593, 2012-1618
—————
INTEGRATED TECHNOLOGY CORPORATION AND NEVADA INTEGRATED TECHNOLOGY CORPORATION,
Plaintiffs-Appellees,
v.
RUDOLPH TECHNOLOGIES, INC. AND MARINER ACQUISITION COMPANY LLC,
Defendants-Appellants.
—————
Nov. 4, 2013
—————
OPINION
Before RADER, Chief Judge, CLEVENGER, and MOORE, Circuit Judges.
MOORE, Circuit Judge.
Rudolph Technologies, Inc. (Rudolph) appeals from the district court’s judgment that it infringes U.S. Patent No. 6,118,894 (’894 patent). Rudolph challenges the court’s denial of its motion for judgment as a matter of law (JMOL) that prosecution history estoppel bars the application of the doctrine of equivalents. Rudolph also challenges the award of damages, the court’s determination that this was an exceptional case under 35 U.S.C. § 285, and that
2a
Rudolph failed to prove laches. We hold that prosecu-tion history estoppel precludes the application of the doctrine of equivalents and therefore reverse the judgment of infringement under the doctrine of equiva-lents. We also reverse the willfulness finding predicated on that judgment and vacate the corresponding award of enhanced damages.1 We affirm the award of damages for literal infringement. We vacate the award of attorneys’ fees and costs and remand because we find that the court’s exceptional case analysis relied in part on the willfulness finding. Finally, we hold that the court did not abuse its discretion in finding no laches.
BACKGROUND
This case relates to inspection equipment for probe cards used to test chips on semiconductor wafers. Probe cards contain structures called probes, whose tips make contact with bonding pads located on the periphery of each chip. The probe tips initially pierce the oxide layer atop the conductive layer of the bonding pad. The probe tips are subsequently moved along the pads to a second position to create a reliable electrical contact, leaving a “scrub mark” on the bonding pad in the process.
Integrated Technology Corp. (ITC) sued Rudolph for infringement of the ’894 patent. The ’894 patent discloses a digital viewing system to assess whether probes have become misaligned relative to each other by predicting the length and location of scrub marks.
1 Rudolph also challenges the denial of its motion for JMOL
that claim vitiation precludes the application of the doctrine of equivalents and that its defenses to willful infringement were objectively reasonable. Because we hold that prosecution history estoppel precludes the application of the doctrine of equivalents, we need not reach this other issue.
3a
’894 patent, col. 6 ll. 1-5. The system includes a camera under a viewing window that obtains the three-dimensional coordinates of the probe tips in first and second states. Id. at col. 15 ll. 1-20. Asserted claim 1 of the ’894 patent is representative (emphasis added):
An integrated circuit probe card inspection system . . . comprising: . . .
a window with a flat surface contacted by said probe tip, said viewing system obtaining said digital image through said window in a first state where said probe tip is driven in contact with said window with a first force, and in a second state where said probe tip is driven in contact with said window with a second force, said second force being different from said first force. . . .
ITC alleged that two categories of Rudolph products infringe the asserted claims. The first includes products in which the probe tips make physical contact with the viewing window before, or at, the moment an image is taken (pre-2007 products). The second includes three products that obtain a first image when the probe tips are approximately five microns above the viewing window (no-touch products)—ITC alleges that this design infringes by equivalence.
The district court granted summary judgment of literal infringement as to the pre-2007 products. The parties proceeded to trial on three issues: (1) whether Rudolph’s literal infringement with the pre-2007 products was willful; (2) whether the no-touch products met the “in a first state where said probe tip is driven in contact with said window with a first force” limitation of the asserted claims; and (3) damages.
4a
The jury returned a verdict of no willfulness as to the pre-2007 products and awarded ITC lost profits of nearly $7.7 million. The jury found willful infringe-ment under the doctrine of equivalents by the no-touch products and awarded lost profits of nearly $7.8 million.
Following the verdict, the court denied Rudolph’s motion for JMOL that prosecution history estoppel bars the application of the doctrine of equivalents. The court determined that Rudolph did not prove laches. The court trebled damages for willful infringement. The court also determined that the case was exceptional and awarded ITC attorneys’ fees and costs. Rudolph appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
ANALYSIS
We review the denial of a motion for JMOL under the law of the regional circuit. Summit Tech., Inc. v. Nidek Co., 363 F.3d 1219, 1223 (Fed.Cir.2004). The Ninth Circuit reviews the denial of JMOL de novo. Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998, 1005 (9th Cir.2004). In the Ninth Circuit, JMOL is appropriate after a jury trial “when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” Id. (internal quotation marks omitted).
I. Infringement Under the Doctrine of Equivalents
A. Applicable Law
Prosecution history estoppel prevents a patentee from recapturing through the doctrine of equivalents the subject matter that the applicant surrendered during prosecution. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 734, 122 S.Ct.
5a
1831, 152 L.Ed.2d 944 (2002). It presumptively applies when the applicant made a narrowing claim amend-ment related to patentability. Id. at 736-37, 122 S.Ct. 1831.
A patentee bears the burden to rebut the pre-sumptive application of prosecution history estoppel by establishing one of three exceptions by a preponder-ance of the evidence. First, “[t]he equivalent may have been unforeseeable at the time of the application.” Id. at 740, 122 S.Ct. 1831. Second, “the rationale under-lying the amendment may bear no more than a tangential relation to the equivalent in question.” Id. Third, “there may be some other reason suggesting that the patentee could not reasonably be expected to have described the [equivalent].” Id. at 740-41, 122 S.Ct. 1831. Whether a patentee has rebutted the presumption is a question of law that we review de novo. Chimie v. PPG Indus. Inc., 402 F.3d 1371, 1376 (Fed.Cir.2005).
B. Application of Prosecution History Estoppel
As originally filed, claim 1 recited in relevant part only “a window with a flat surface contacted by said probe tip.” The Examiner rejected the original claim as indefinite under 35 U.S.C. § 112, paragraph 2, and anticipated under § 102(b) by U.S. Patent No. 4,757,256 (Sato). J.A. 10637, 10640. ITC responded by amending the claim to also recite “in a first state where said probe tip is driven in contact with said window with a first force.” J.A. 10648-49, 10653-56.
The district court concluded that prosecution history estoppel does not preclude a finding of infringement by equivalence. It determined that the original and issued claims “both required contact between the plate and the probe tip,” and therefore held that ITC did not make a narrowing amendment. Integrated Tech. Corp.
6a
v. Rudolph Techs., Inc., No. 2:06-cv-2182, ECF No. 546, slip op. at 5 (D.Ariz. July 23, 2012).
Rudolph argues that the court erred as a matter of law by concluding that the amendment was not narrowing. It contends that the equivalent was literally within the scope of the original claim. Rudolph argues that the amendment narrowed the scope of the claim by reciting that the probe tip must be “driven in contact with said window” in both recited states. It argues that prosecution history estoppel presumptively applies because the narrowing amendment was in response to patentability rejections.
Rudolph also argues that ITC cannot satisfy its burden to rebut the presumption of prosecution history estoppel. First, Rudolph argues that the equivalent bears a direct—as opposed to tangential—relationship to the amendment. It contends that, even if ITC did not need to distinguish the prior art on the basis of whether the probe tip and window are in physical contact, it chose to do so. Rudolph argues that the prosecution history does not provide a discernible tangential rationale for the amendment because ITC relied on the difference between the equivalent and the amended limitation to obtain claim 1’s allowance.
Second, Rudolph argues that the equivalent was objectively foreseeable at the time of the amendment because the original claim literally covered the equivalent. Rudolph also contends that the equivalent was not technically unforeseeable at the time of the amendment. It argues that the redesign of its pre-2007 product involved a straightforward software change to regulate the placement of the probe tip above the viewing window when obtaining the image in a first state.
7a
ITC responds that the doctrine of equivalents applies. It argues that the court correctly held that the amendment was not narrowing. ITC contends that the original claim implied measuring the probe tip at two different points of actual physical contact with the viewing window. It argues that the amendment merely expressed that implication, and relies on the specification’s reference to the probe tip’s first position as the location where the tip “would initially contact the video window.” ’894 patent, col. 15 l.4.
Even if its amendment was narrowing, ITC argues that it rebutted any presumption that prosecution history estoppel applies. First, it contends that the amendment bore only a tangential relationship to the equivalent. ITC argues that the prior art cited during prosecution failed to disclose either taking two images of the probe tip or taking an image of the probe tip at the point where it would initially contact the viewing window. It contends that the amendment therefore distinguished the prior art solely on the basis of obtaining two images of the probe tip at different positions. ITC thus argues that it did not distinguish the prior art based on the invention requiring physical contact between the probe tip and the viewing window.
Second, ITC argues that the equivalent was objectively unforeseeable at the time of the amend-ment. It contends that Rudolph developed its own commercial no-touch technology after considerable effort and expense. In support, ITC argues that Rudolph obtained a patent on its no-touch technology based on an application that was filed seven years after the amendment. It also contends that the district court found that the specification of the ’894 patent does not disclose the no-touch equivalent, and
8a
therefore ITC could not have originally claimed the equivalent.
As an initial matter, we agree with Rudolph that prosecution history estoppel presumptively applies because the amendment narrowed the scope of the original claim in response to patentability rejections. By its plain language, the amendment added that there must be two different forces that drive the probe tip in contact with the viewing window in two separate states. Accordingly, we hold that ITC surrendered the territory between the original and issued claims, including the equivalent.
The remaining question is whether ITC met its burden of proving that an exception to prosecution history estoppel applies. We hold that it has not, and therefore prosecution history estoppel bars the application of the doctrine of equivalents.
1. Tangential Relation
The tangential relation exception is “very narrow.” Cross Med. Prods., Inc. v. Medtronic Sofamor Danek, Inc., 480 F.3d 1335, 1342 (Fed.Cir.2007). We ask “whether the reason for the narrowing amendment was peripheral, or not directly relevant, to the alleged equivalent.” Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 344 F.3d 1359, 1369 (Fed.Cir.2003) (en banc). “[A]n amendment made to avoid prior art that contains the equivalent in question is not tangential.” Chimie, 402 F.3d at 1383 (quoting Festo, 344 F.3d at 1369). “It does not follow, however, that equivalents not within the prior art must be tangential to the amendment.” Id.
The tangential relation inquiry “focuses on the patentee’s objectively apparent reason for the narrowing amendment,” which “should be discernible
9a
from the prosecution history record.” Festo, 344 F.3d at 1369 (internal citations omitted). For example, in Felix v. American Honda Motor Co., we rejected the patentee’s argument that a limitation was tangential because he had expressly relied on a second limitation to distinguish prior art during prosecution. 562 F.3d 1167, 1184 (Fed.Cir.2009). We found that the patentee “could easily have simply amended” the original claim to recite only the non-tangential limitation, yet he chose to recite both. Id.
Here, a tangential rationale for the amendment is not objectively apparent from the prosecution history. As the Examiner observed when rejecting the original claim, Sato discloses “a surface contacted by a probe.” J.A. 10640. It may be that ITC did not need to surrender a lack of physical contact between the probe tip and window in either state to overcome Sato. The dispositive fact is that ITC chose to do so.
In response to the Examiner’s patentability rejec-tions, ITC explained that the invention generally included a preferred embodiment in which “a video camera . . . inspects the position of each probe tip as the probes are engaged in contact with the flat surface of a window.” J.A. 10652 (emphasis added). It also stated that, “[i]n another embodiment, the video camera provides a digital image of a probe contacting the surface of the window in [a first and second state] where the probe tip is driven in contact [with two different forces].” Id. (emphases added). ITC expressly stated that the prior art did not “teach or suggest such features,” without limiting which features it meant. J.A. 10653.
To distinguish the amended claim, in particular, from Sato, ITC stated that the claim “calls for the viewing system to obtain a digital image of the probe
10a
tip . . . in [first and second states in which] said probe tip is driven in contact with said window.” J.A. 10656 (emphasis added). ITC also told the Examiner that the aspect of the invention at issue was “best exemplified” by Figure 6(a), id., which discloses an embodiment where the probe tip is in the “zero overdrive position,” ’894 patent, col. 15 ll. 5-6. That statement, however, does not establish a tangential rationale because “zero overdrive” still encompasses physical contact between the probe tip and the window.
ITC again relied on contact between the probe tip and window in responding to a subsequent rejection based on different prior art. It stated that “[t]he claims of the present invention are directed towards predict-ing . . . the movement . . . of probe tips . . . after initial contact with the bonding pad.” J.A. 10815 (emphasis in original). ITC reiterated that “[i]n the context of the specific language of the claims, [the claims] each recite that the probe tip is driven at two different forces or overdrives . . . after contacting a window. . . .” Id. (emphasis added).
ITC’s representations convey to the public that it was relying on physical contact to overcome the prior art. The public is entitled to rely on those representations. Whether ITC’s interpretation of the prosecution history is plausible is irrelevant. It must prove by a preponderance of the evidence that, based on the prosecution history, the “objectively apparent reason for the narrowing amendment” was only tangentially related to the equivalent. Festo, 344 F.3d at 1369. We hold that it has not met that burden.
2. Foreseeability
The patentee may rebut the application of prosecu-tion history estoppel by establishing that the equiva-lent would have been objectively unforeseeable to one
11a
of ordinary skill in the art at the time of the amendment. Festo, 344 F.3d at 1369; Honeywell Int’l, Inc. v. Hamilton Sundstrand Corp., 523 F.3d 1304, 1313 (Fed.Cir.2008). Technology developed after an amendment is not necessarily objectively unfore-seeable. Festo, 344 F.3d at 1369.
We agree with Rudolph that ITC has not proven that the equivalent was objectively unforeseeable. The no-touch products obtain an image in a first state when the probe tip is five microns above the viewing window, and in a second state when the probe tip touches the window. Accordingly, the no-touch prod-ucts literally satisfy the original claim’s limitation of “a window with a flat surface contacted by said probe tip.” When the patentee “originally claimed the subject matter alleged to infringe but then narrowed the claim in response to a rejection, he may not argue that the surrendered territory comprised unforeseen subject matter.” Festo, 535 U.S. at 733-34, 122 S.Ct. 1831. That principle controls in this case regardless of when Rudolph developed its no-touch products.
Moreover, the record does not demonstrate that the equivalent is the innovative aspect of Rudolph’s patented no-touch products. We hold that ITC did not prove that the equivalent was objectively unforesee-able.
ITC’s argument that literal infringement by the no-touch products is an alternative basis to affirm the judgment is without merit. Substantial evidence supported the jury’s verdict of no literal infringement by these products. See, e.g., J.A. A9879-80, 9676, 9894-95, 9903 (testimony by Rudolph witnesses that probe tips in the no-touch products do not physically contact the viewing window in the first state); J.A. 14310 (product manual stating that “[s]ystem . . . captures
12a
images at both the no touch and overtravel positions”). We will not upset that verdict.
* * *
We hold that ITC’s narrowing amendment during prosecution surrendered the equivalent from the scope of the asserted claims and that prosecution history estoppel bars the application of the doctrine of equivalents. We thus reverse the denial of Rudolph’s motion for JMOL that its accused no-touch products do not infringe under the doctrine of equivalents. Because the finding of willfulness was predicated on that finding of infringement, we also reverse it and vacate the corresponding award of treble damages.
II. Damages for Literal Infringement
The jury’s determination of the amount of damages is an issue of fact that we review for substantial evidence. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1310 (Fed.Cir.2009). We uphold the jury’s finding unless “the amount is grossly excessive or monstrous, clearly not supported by the evidence, or based only on speculation or guesswork.” Id. (internal quotation omitted).
Rudolph argues that we should vacate the award of lost profits as to the pre-2007 products held to literally infringe. It argues that its damages expert testified at trial that, if the no-touch products did not infringe, they would be non-infringing alternatives. Rudolph argues that the jury’s award of lost profits for the pre-2007 products was based on the erroneous premise that the no-touch products could not be noninfringing alternatives.
We agree with ITC that substantial evidence sup-ported the jury’s general verdict award of lost profits
13a
for literal infringement. ITC proffered a two-supplier theory of lost profits that was independent of the existence of non-infringing alternatives. J.A. 7231; see also State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1578 (Fed.Cir.1989) (“In the two-supplier mar-ket, it is reasonable to assume, provided the patent owner has the manufacturing and marketing capabilities, that it would have made the infringer’s sales.”). The jury could have relied on the two-supplier theory, and accordingly we uphold the award of lost profits for literal infringement.
III. Exceptional Case Finding Under 35 U.S.C. § 285
A district court may award reasonable attorney fees to a prevailing party in a patent case if it determines that the case is exceptional under § 285. MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed.Cir.2012) (citation omitted). The court must first determine whether the prevailing party has proved by clear and convincing evidence that the case is exceptional, which we review for clear error. Id. at 915-16. Next, the court must determine whether an award of fees is justified, which we review for abuse of discretion. Id. at 916.
In finding the case exceptional, the court cited “Rudolph’s conduct during this litigation and the willfulness finding” as “ample support.” Integrated Tech. Corp., No. 06-2182, ECF No. 546, slip op. at 17. The court stated the award of fees and costs was justified “based on the entirety of the record.” Id. It explained that “Rudolph had no serious defense to the pre-2007 infringement allegations, refused to acknow-ledge that reality, and the jury determined Rudolph’s post-2007 conduct constituted willful infringement.” Id.
14a
Rudolph argues that we should reverse the district court’s exceptional case finding and vacate the corre-sponding award because they were based on the erroneous willfulness finding and a mischaracteri-zation of its litigation conduct. It argues that the district court never held that Rudolph’s misconduct alone was sufficient to support the award of fees and costs.
ITC responds that the finding of misconduct is sufficient to support the exceptional case determination. It also argues that the award was justified in light of Rudolph’s litigation misconduct, which ITC contends is an indication that Rudolph lacked a good faith basis for its defenses to literal infringement.
We agree with Rudolph that the court’s analysis depended in part on the finding of willfulness. Indeed, the court’s repeated references to Rudolph’s litigation conduct “and” the willfulness finding inextricably link both to the exceptional case determination. Accord-ingly, we vacate the court’s finding of an exceptional case and the corresponding award of attorneys’ fees and costs.
IV. Laches
Laches is an equitable defense for which the accused infringer must prove that: (1) the patentee’s delay in bringing suit was unreasonable and inexcusable, and (2) the alleged infringer suffered material prejudice attributable to the delay. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed.Cir.1992) (en banc). We review a district court’s determination about laches for an abuse of discretion. Id.
The district court determined that Rudolph did not prove laches based on its finding that ITC did not
15a
unreasonably delay filing suit. The court also deter-mined that any purported delay did not prejudice Rudolph because the no-touch design it allegedly could have developed earlier was nevertheless found to infringe under the doctrine of equivalents.
Rudolph argues that we should vacate the court’s determination because it focused on the prejudice prong and gave only cursory treatment to the unreasonable delay prong. It argues prejudice from ITC’s delay because it contends that it could have redesigned its pre-2007 product sooner and at lower cost had ITC filed suit sooner.
We agree with ITC that there was no clear error in the district court’s finding of no unreasonable delay. Therefore, Rudolph’s arguments are irrelevant, and we affirm the determination of no laches.
CONCLUSION
We have considered the remainder of the parties’ arguments and do not find them persuasive.
AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART AND REMANDED.
COSTS
No costs awarded to either party.
16a APPENDIX B
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA
————
No. CV-06-2182-PHX-ROS
————
INTEGRATED TECHNOLOGY CORPORATION, et al., Plaintiffs,
vs.
RUDOLPH TECHNOLOGIES, INC., et al., Defendants.
————
ORDER
The parties have filed a wide variety of post-trial motions. This Order disposes of all pending motions.
BACKGROUND
In 2006, Plaintiff Integrated Technology Corporation (“ITC”) filed this suit against Applied Precision LLC (“Applied Precision”). After the case began, Rudolph Technologies, Inc. (“Rudolph”) purchased Applied Precision and became the named defendant.1 The case originally involved numerous patents and claims but by the time the jury trial began the case had been narrowed to disputes regarding Claims 1 and 3 of ITC’s Patent No. 6,118,894 (“the ‘894 Patent”). Prior to trial, the Court concluded there was no genuine dispute of material fact that Rudolph’s pre-2007 PRVX System infringed Claims 1 and 3 of the ‘894 Patent.
1 Because of this substitution and in the interest of simplicity,
the Court will refer to various systems as belong to Rudolph even though the systems were developed by Applied Precision.
17a (Doc. 282 at 12). Therefore, the only issue left for trial regarding the pre-2007 PRVX System was ITC’s damages. As for the other systems—the post-2007 PRVX3 System, the PRVX4 System, and the ProbeWoRx System—trial was necessary to resolve both infringement and damages.
During trial, the parties made admirable efforts to explain the technology and patent at issue and the jury so confirmed the Court’s opinion. The main dispute came down to whether the allegedly infringing systems allowed the probe tips to touch the glass plates or, if the probe tips did not actually touch the glass plates, whether that difference was immaterial such that the systems still infringed under the doctrine of equivalents. The most pivotal portion of the trial occurred on the fourth day when Ron Seubert, the former President and CEO of Applied Precision, testified.
During his testimony, Mr. Seubert explained the pre-2007 PRVX System was designed such that the probe tips would be an “infinitesimal” distance away from the glass plates. (Doc. 489 at 128-29). In 2007, approximately seven months after this infringement suit was filed, Mr. Seubert tested the plates used in the pre-2007 PRVX System. In doing so, Mr. Seubert learned the system was “not operating like [Applied Precision] wanted it to operate.” (Doc. 489 at 179). This was an understatement. Under further questioning, Mr. Seubert admitted the improper operation at issue was that the pre-2007 PRVX System was allowing the probe tips to touch the glass plate.
Q. You determined that the machine actually was covered by the claims in the patent; right?
[Mr. Seubert]: Yes.
18a Q. And that was around April of 2007?
[Mr. Seubert]: Yes.
(Doc. 489 at 179). In short, as of April 2007 the President and CEO of Applied Precision knew the pre-2007 PRVX System was practicing the ‘894 Patent.
This was a startling admission under oath. After close to five years of discovery and extensive motion practice, including a motion for summary judgment claiming the pre-2007 PRVX System did not infringe, Mr. Seubert admitted he had first-hand knowledge that the pre-2007 PRVX System did infringe. Mr. Seubert, and many other witnesses, went on to explain that changes were made in 2007 to prevent continued infringement. There is no reasonable dispute, however, that the change merely provided the probe tips would be an “infinitesimal” distance away from the glass plate.
At the conclusion of trial, the jury returned a verdict in favor of ITC. That verdict stated the post-2007 PRVX3 System, the PRVX4 System, and the ProbeWoRx System infringed claims 1 and 3 of the ‘894 Patent under the doctrine of equivalents. The jury also concluded that as of October 2000 ITC began to “substantially and consistently mark its products with the patent number.” (Doc. 485 at 5). For damages, the jury awarded ITC lost profits in the amount of $7,684,047 based on Rudolph’s pre-2007 PRVX System, $825,919 in lost profits based on the post-2007 PRVX3 System, $642,061 in lost profits based on the PRVX4 System, and $6,323,455 in lost profits due to the ProbeWoRx System. Finally, the jury determined Rudolph’s infringement was willful regarding all systems except for the pre-2007 PRVX System. (Doc. 485 at 8).
19a After the verdict, Rudolph filed a motion for judg-
ment as a matter of law (“JMOL”) as well as a motion for new trial or remittitur. ITC opposed those motions, claiming the record contains enough evidence to sustain most of the jury’s verdict. ITC also argued, however, that the jury erred on the issue of literal infringement. Thus, ITC claimed it is entitled to JMOL in its favor regarding literal infringement. In addition to its JMOL, ITC filed motions for a permanent injunction, prejudgment interest, enhanced damages, and attorneys’ fees and costs. As set forth below, the jury’s verdict will be left intact and ITC’s requests for a permanent injunction, prejudgment interest, enhanced damages, and attorneys’ fees and costs will be granted.
ANALYSIS
I. Framework for JMOL Motions
The parties believe the jury’s findings were erroneous in various respects. This is a difficult argument on which to prevail. In the Ninth Circuit, a jury verdict must be “upheld if it is supported by substantial evidence, even if it is also possible to draw a contrary conclusion.”2 First Nat. Mortgage Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058, 1067 (9th Cir. 2011). When evaluating the jury’s verdict, the evidence must be viewed “in the light most favorable to the party in whose favor the jury returned a verdict” and the Court must “draw all reasonable inferences” in that party’s favor. Id. Judgment as a matter of law is appropriate
2 “The grant or denial of a motion for judgment as a matter of
law is a procedural issue not unique to patent law, reviewed under the law of the regional circuit in which the appeal from the district court would usually lie.” Summit Tech. Inc. v. Nidek Co., 363 F.3d 1219, 1223 (Fed. Cir. 2004).
20a only if the Court concludes the evidence permits “one reasonable conclusion, and that conclusion is contrary to that of the jury.” White v. Ford Motor Co., 312 F.3d 998, 1010 (9th Cir. 2002).
II. Rudolph’s JMOL
Rudolph’s JMOL argues various doctrines prevent the verdict of infringement and that, assuming infringement did occur, there was insufficient evidence to support a finding of willfulness.
A. Doctrine of Prosecution History Estoppel Does Not Apply
Rudolph’s primary argument in support of its JMOL is that the “jury’s finding based on the doctrine of equivalents cannot form the basis for infringement in this case because the doctrine of equivalents is legally barred” by the doctrine of prosecution history estoppel. (Doc. 501). Rudolph reads the record as establishing “the estoppel issue has been presented to the court on several occasions, [but] the issue remains open for decision, and the record shows no specific findings on the issue of whether ITC made amendments or arguments before the [Patent Office] which would give rise to estoppel.”3 (Doc. 501 at 6). ITC disagrees and claims the Court has repeatedly ruled that prosecution history estoppel does not apply. ITC also argues prosecution history estoppel fails on the merits.
Setting aside the issue of whether this issue has been addressed before, the Court now makes clear that based on a review of the record and applicable law, prosecution history estoppel does not apply. The
3 Rudolph does not cite to any requirement that the Court issue
detailed findings of fact and conclusions of law when it decides this issue.
21a amendments ITC made during the patent application process were not “narrowing amendments” as contemplated by the doctrine of prosecution history estoppel. The original claim and the amended claim both required contact between the plate and the probe tip. Thus, the amendments did not “surrender the particular equivalents at issue,” i.e. the equivalents of no-touch. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 535 U.S. 722, 741 (2002). The portion of Rudolph’s JMOL based on prosecution history estoppel will be denied.
B. Doctrines of Claim Vitiation and Public Dedication Do Not Apply
Rudolph’s backup JMOL arguments are that ITC cannot enforce its patent due to the doctrines of claim vitiation and dedication to the public. According to Rudolph,“[u]nder the principle of vitiation, a patentee cannot assert the doctrine of equivalents to cover [a] feature of a product that is ‘not X’ if the claim specifically requires ‘X.’” (Doc. 501 at 13). Rudolph is correct that there is an apparent tension between a patent claim requiring “contact” and an infringement finding based on a device utilizing a “no contact” design. But Rudolph’s argument that a device infringes a patent only when the exact requirements of the patent’s claims are met would effectively eliminate the doctrine of equivalents. See Ethicon Endo-Surgery, Inc. v. U.S. Surgical Corp., 149 F.3d 1309, 1317 (Fed. Cir. 1998) (noting claim vitiation might “swallow the doctrine of equivalents”). For purposes of this case, it is sufficient to conclude that the “principle of vitiation” does not apply when the patent requires contact and the infringing system’s probe tips are, according to an individual with first-hand knowledge, an “infinitesimal” distance away from making contact.
22a Rudolph’s “public dedication” argument is that the
‘894 Patent disclosed the “no touch” idea in the ‘894 Patent but declined to claim it. (Doc. 501 at 15). This argument finds no support in the record. Numerous witnesses claimed Rudolph’s “no touch” systems were proprietary and revolutionary. Rudolph does not explain how its systems could be both proprietary and revolutionary if those systems were disclosed by the ‘894 Patent. The “no touch” idea was not dedicated to the public.
C. Willfulness
In addition to its defenses to infringement, Rudolph’s JMOL also argues the evidence introduced at trial was not sufficient to support a finding of willful patent infringement. A “willful infringement determination requires a two-pronged analysis entailing separate objective and subjective inquiries.” Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1236 (Fed. Cir. 2011). To satisfy the objective prong, “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.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 2012 WL 2149495, at *1 (Fed. Cir. June 14, 2012). If able to make that showing, the patentee must satisfy the subjective prong by demonstrating “that this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer.” Id. The Federal Circuit recently made clear that the objective prong “should always be decided as a matter of law by the judge.” Id. at *4. The subjective prong, however, remains for the jury. Given the procedural posture of this case, the Court must determine “based on the record ultimately made in the infringement proceed-
23a ings” whether the objective prong was met. Id. Only after determining the objective prong was met can the inquiry turn to the sufficiency of the evidence supporting the subjective prong.
The jury concluded the subjective prong was not satisfied for the pre-2007 PRVX System and that conclusion is supported by sufficient evidence in the record. Therefore, the Court will not revisit the willfulness finding for the pre-2007 PRVX System. As for the post 2007 PRVX3 System, the PRVX4 System, and the ProbeWoRx System, there is clear and convincing evidence that Rudolph acted despite an objectively high likelihood that its actions infringed ITC’s patent. Mr. Seubert testified that Rudolph made no serious attempt to determine whether patents existed which might cover Rudolph’s systems. After this lawsuit was filed, Rudolph waited approximately seven months to test its systems and determine whether those systems did in fact infringe. And after determining its systems did infringe, Rudolph imple-mented an “infinitesimal” change. That change was so minor that it was not communicated to Rudolph’s customers and there was substantial question whether it even occurred. Rudolph did not present any reasonable explanation of how it reached the conclu-sion that the “infinitesimal” change would avoid infringement. The jury concluded the change was immaterial and that Rudolph’s modified systems constituted infringement under the doctrine of equiva-lents. These actions are clear and convincing evidence that Rudolph “was aware of the asserted patent, but nonetheless acted despite an objectively high likeli-hood that its actions constituted infringement.” i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 860 (Fed. Cir. 2010) (finding objective prong met where
24a Microsoft knew of patent and made no “good faith effort to avoid infringement”).
Having satisfied the objective prong, the Court must evaluate whether there was sufficient evidence for the jury’s conclusion that the subjective prong was also satisfied. The same evidence supporting the objective prong applies to the subjective prong. Id. (noting “same evidence” can support objective and subjective prongs). There is no question that Rudolph knew it was at risk of infringing the ‘894 Patent. Rudolph provided no reasonable explanation for its belief that its minuscule change was sufficient to avoid infringe-ment and, in fact, the jury concluded it was not. There was unequivocal evidence that Rudolph knew of the ‘894 Patent as of 2007. Thus, the jury’s verdict regard-ing willfulness easily survives Rudolph’s JMOL.
III. Rudolph’s Motion for New Trial or Remittitur
In addition to its JMOL, Rudolph has also moved for a new trial or remittutur. Rudolph’s arguments are addressed below.
A. Alleged Error in Jury Instructions
Rudolph argues the Court erred when instructing the jury regarding ITC’s lost profits. The Court gave the jury two lost profit alternatives in a single jury instruction: the two-supplier market alternative and the four-factor Panduit4 alternative. Rudolph claims the two-supplier market instruction was error as it defined the relevant market despite that issue being a disputed question of fact. The Court does not agree an error occurred but, even if an error occurred, it was harmless.
erroneous jury instructions must establish that (1) it made a proper and timely objection to the jury instruc-tions, (2) those instructions were legally erroneous, (3) the errors had prejudicial effect, and (4) it requested alternative instructions that would have remedied the error.” NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1311-12 (Fed. Cir. 2005). Assuming Rudolph is capable of establishing factors one, two, and four, its argument founders on the third factor.
“[P]rejudicial error results when, looking to the instructions as a whole, the substance of the applicable law was not fairly and correctly covered.” Swinton v. Potomac Corp., 270 F.3d 794, 807 (9th Cir. 2001). The instruction at issue gave the jury two options, it could either conclude ITC had “demonstrate[d] that there are two suppliers in the probe card analyzer market” or it could establish the four-factor Panduit test. (Doc. 484 at 28). Rudolph’s argument seems to depend on a hypertechnical parsing of the first option and an allegation that the Court instructed the jury that the probe card analyzer market was the relevant market. Reading the instruction as a whole, however, the burden properly remained on ITC to “demonstrate that there are two suppliers in the probe card analyzer market.” This required ITC establish two distinct factual propositions: 1) there are two suppliers in the relevant market 2) the relevant market is the probe card analyzer market. Rudolph remained free to argue against both of these propositions by claiming the “probe card analyzer market” contained more than two suppliers or that the relevant market was not the “probe card analyzer market.” Rudolph did, in fact, make these arguments. The jury instructions, taken as a whole, fairly explained the applicable law and there was no prejudicial error.
26a B. Other Challenges to Two-Supplier Instruction
Rudolph makes extensive arguments that the two-supplier option was not timely disclosed and that there was insufficient evidence to support an award under the two-supplier option. On the issue of disclosure, there is ample evidence that the two-supplier option was disclosed before trial. (Doc. 522 at 14). And during trial Rudolph had ample opportunity to contest the option, including testimony by its own expert witness on damages and cross-examination of ITC’s witness. Morover, even if the disclosure of this option had been untimely, Rudolph has not established prejudice.
On the issue of inadequate evidence to support the jury’s use of the two-supplier option to award lost profits, the presence of a general verdict forbids this inquiry. The jury could have used the two-supplier option or it could have used the four-factor Panduit test. As set forth below, there was ample factual evidence to support a lost profits award under the Panduit test. Therefore, the factual challenge to the two-supplier option is meritless. i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 849 (Fed. Cir. 2010) (a verdict must be upheld “if there was sufficient evidence to support any of the plaintiff’s alternative factual theories”).
C. Evidence to Support Panduit Factors
Rudolph claims ITC failed to establish any of the four Panduit factors. All four factors were the subject of extensive factual disputes during trial. Rudolph points to a small subset of the evidence and claims it was insufficient to establish the factors. If the evidence cited by Rudolph was the only evidence, Rudolph might be correct. But as exhaustively detailed in ITC’s brief, the evidence cited by Rudolph is only a portion
27a of the admitted evidence. In light of the voluminous evidence presented by ITC on each factor, it is not plausible to claim that no reasonable jury could conclude the four factors were met. The jury’s verdict regarding lost profits will not be disturbed.
D. ITC’s Expert Was Reliable
Rudolph argues ITC’s expert was not sufficiently reliable. At trial, the Court allowed the expert to testify and he was subjected to extensive cross-exam-ination. Rudolph obviously disagrees with the expert’s opinions but it does not present any convincing argument that the expert should have been excluded. The expert was qualified and offered opinions within the area of his expertise and the jury could have disregarded them based on the cross-examination and if they chose to believe Rudolph’s expert. Rudolph is not entitled to any relief on this basis.
E. Not Entitled to Remittitur
Rudoph argues the damages award is excessive because ITC did not have sufficient evidence to establish lost profits. As set forth above, a reasonable jury could have concluded ITC was entitled to lost profits. And because ITC could recover lost profits, the amount awarded is far from “grossly excessive or monstrous.” Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282, 1297 (9th Cir. 1984). The request for remittitur will be denied.
F. Marking
Rudolph claims the “jury did not have a legally sufficient evidentiary basis to find that ITC continuously and substantially marked its products.” (Doc. 498 at 30). ITC presented documentary evidence as well as testimony that it marked its products. The
28a jury made a specific finding on this issue, including the exact date when the marking began. In light of this, Rudolph’s argument is meritless.
G. ITC’s Ownership Issues
Rudolph claims “[t]hroughout this litigation, ITC maintained that Nevada ITC owned the patent in suit.” (Doc. 498 at 31). This is just not true. The evidence at trial was that ITC owned the patent and Rudolph points to no evidence, let alone evidence sufficient to merit relief, that ITC does not own the patent. Rudolph’s arguments regarding ownership border on frivolous.
IV. ITC’s JMOL
ITC’s JMOL presents three arguments: 1) claims 1 and 3 of the ‘894 were literally infringed by Rudolph’s post-2007 PRVX System, PRVX4 System, and ProbeWoRx System (collectively, the “post-2007 Rudolph Systems”); 2) the equitable defense of laches does not apply; and 3) the ‘894 Patent is valid and enforceable.
A. Literal Infringement
The jury was presented with differing views of how the post-2007 Rudolph Systems operated. There was evidence from Mr. Greenberg, Dr. Wright, and Mr. Seubert that the post-2007 Rudolph Systems did not allow the probe tips to touch the glass plates at the time the first image is obtained. ITC vigorously disputed this evidence and points to other evidence showing even Dr. Wright was confused and seemed to indicate he was unsure how the post-2007 Rudolph Systems actually operated. While the Court might have reached a different conclusion than the jury, that is not the standard for evaluating the jury’s verdict.
29a First Nat. Mortgage Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058, 1067 (9th Cir. 2011) (JMOL not appropriate merely because it is “possible to draw a contrary conclusion”). A reasonable jury could have accepted the evidence that the post-2007 Rudolph Systems were redesigned to prevent literal infringement. The jury’s verdict regarding literal infringement will not be disturbed.
B. Laches
ITC seeks JMOL on Rudolph’s laches defense. This is a question solely for the Court. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1032 (Fed. Cir. 1992) (“The application of the defense of laches is committed to the sound discretion of the district court.”). To prevail on its laches defense, Rudolph was required to prove two elements: 1) ITC “delayed filing suit for an unreasonable and inexcusable length of time from the time it knew or reasonable [sic] should have known of its claim against” Rudolph; and 2) “the delay operated to the prejudice or injury of [Rudolph].” Hearing Components, Inc. v. Shure Inc., 600 F.3d 1357, 1375 (Fed. Cir. 2010). ITC did not unreasonably delay filing suit but more importantly, Rudolph has not established any prejudice as a result of ITC’s alleged delay.
At trial, Rudolph claimed ITC’s delay resulted in prejudice because, had ITC informed Rudolph of infringement concerns earlier, Rudolph could have implemented its “no touch” design earlier. But this argument makes no sense because the “no touch” design was still found to infringe. That is, Rudolph cannot claim prejudice due to its failure to switch to an infringing alternative earlier than it did. Rudolph has not carried its burden of establishing laches.
30a C. The ‘894 Patent is Valid and Enforceable
Rudolph filed a counterclaim for a declaration that the ‘894 Patent was invalid. Prior to trial, the parties entered into a stipulation that Rudolph would not challenge the validity of the ‘894 Patent. At trial, Rudolph did not present any evidence regarding its counterclaim. Rudolph now opposes ITC’s request, but the Court is unable to determine why. If Rudolph wanted to pursue it [sic] counterclaim, it should have done so at trial. Having decided not to present any evidence or argument on its counterclaim, ITC is entitled to judgment as a matter of law that the ‘894 Patent is valid and enforceable.
V. Enhanced Damages
ITC seeks an award of enhanced damages. Pursuant to 35 U.S.C. § 284, the Court has discretion to “increase the damages up to three times the amount found or assessed” by the jury. 35 U.S.C. § 284. An enhancement is appropriate in this case.
A finding of willful infringement is a prerequisite to awarding enhanced damages. i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 858 (Fed. Cir. 2010). Once willful infringement is found, the Court must evaluate the nine factors outlined in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), to deter-mine if enhanced damages are appropriate. See i4i Ltd Partnership, 598 F.3d at 858 (“The test for willfulness is distinct and separate from the factors guiding a district court’s discretion regarding enhanced damages.”). All of those factors weigh in favor of enhancing the damages.
31a (1) Rudolph Set Out to Copy ITC’s Design
The first factor is “whether the infringer deliberately copied the ideas or design of another.” Read Corp., 970 F.2d at 827. On this factor, ITC introduced evidence that Rudolph had expressed concern about ITC’s product and Rudolph’s need to create a similar system.5 There was no evidence that Rudolph obtained one of ITC’s systems and then slavishly copied that machine. The evidence was clear, however, that Rudolph set out to copy ITC’s visual scrub analysis technology. Stryker Corp. v. Intermedics Orthopedics, Inc., 96 F.3d 1409, 1414 (Fed. Cir. 1996) (“slavish copying” not required). This weighs slightly in favor of enhancing damages.
(2) Rudolph Made No Investigation
The second factor is “whether the infringer, when he knew of the other’s patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed.” Read Corp., 970 F.2d at 827. The evidence at trial established Rudolph did not conduct a meaningful investigation regarding the ‘894 patent prior to developing its product. In fact, even after being sued in this case, Rudolph waited approximately seven months to determine if its products infringed the ‘894 Patent. After learning that is [sic] products did infringe the ‘894 Patent, Rudolph made an “infinitesimal” change in an apparent attempt to stop future infringement. There was no evidence how Rudolph concluded this change was sufficient to prevent future infringement and, in fact, it was unclear whether the change was even made to all of Rudolph’s systems.
5 The reference in Rudolph’s document was to an unnamed
competitor but that reference clearly was to ITC.
32a Throughout this litigation Rudolph has maintained
that it had a good faith belief that either the ‘894 Patent was invalid or that its products did not infringe. Rudolph’s arguments regarding the invalidity of the patent are strange considering much of the evidence allegedly supporting this belief was not discovered until long after this litigation began. Also, Rudolph chose not to attack the patent’s validity at trial. Based on familiarity with this case from the very beginning, Rudolph’s actions before and after this suit was filed were far from the good-faith actions of someone concerned with infringing another’s patent rights. This factor weighs in ITC’s favor.
(3) Rudolph’s Behavior in the Litigation
The third factor is the “infringer’s behavior as a party to the litigation.” Read Corp., 970 F.2d at 827. Rudolph’s behavior during this litigation left much to be desired. Despite learning in April 2007 that some of its products infringed, Rudolph did not concede that portion of the case or indicate in any manner that it had no defense to the pre-2007 infringement allegations. Instead, Rudolph argued at summary judgment that its systems did not infringe. Based on the parties’ summary judgment briefings, that argu-ment appeared incredible and the Court observed as much when it stated Rudolph presented no “serious defense” regarding the pre-2007 PRVX System. The Court’s view of the pre-2007 PRVX System was vindicated when Mr. Seubert testified of his first-hand knowledge regarding infringement. It is difficult to comprehend that Rudolph was acting in good faith in its discovery responses and other behavior in light of Mr. Seubert’s knowledge. See i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 859 (Fed. Cir. 2010)
33a (describing litigation misconduct as including “discovery abuses”).
Besides not admitting infringement, Rudolph’s other behavior throughout this litigation veered close to inappropriate. Rudolph presented the same arguments many times, requiring duplicative effort by opposing counsel and the Court. This behavior “unnecessarily prolong[ed] [the] litigation.” Id. Rudolph also presented far-fetched arguments with seemingly no support in the evidence. For example, Rudolph has repeatedly claimed ITC does not own the ‘894 Patent. Perhaps there is some imperceptible nuance to this argument but on the present record Rudolph’s ownership claims appear to be completely divorced from reality. Rudolph’s actions during this litigation support an award of enhanced damages.
(4) Rudolph’s Size and Financial Condition
The fourth factor is Rudolph’s “size and financial condition.” Read Corp., 970 F.2d at 827. As of 2011, Rudolph had well over one hundred million dollars in cash. (Doc. 508 at 12). This weighs in favor of enhanced damages.
(5) Closeness of the Case
The fifth factor is the “closeness of the case.” Read Corp., 970 F.2d at 827. Mr. Seubert admitted he knew certain products infringed and that there was no meaningful effort to prevent such infringement prior to April 2007 6. Thus, the case for literal infringement
6 The Court recognizes that the pre-2007 infringement was not
willful and, therefore, cannot support an award of enhanced damages. The pre-2007 infringement is referenced merely to show Rudolph’s behavior after it had unmistakable knowledge of infringement.
34a of the pre-2007 PRVX was not close. Rudolph subsequently made the absolute minimum and ineffective change necessary to avoid obvious infringe-ment. The jury concluded that change was immaterial and the doctrine of equivalents applied. Based on this, the case was not close regarding Rudolph’s post-2007 activities.
(6) Duration of Rudolph’s Conduct
The sixth factor is the “duration of defendant’s misconduct.” Read Corp., 970 F.2d at 827. Rudolph’s conduct started many years ago and never stopped. The minuscule change made in an attempt to prevent future infringement did not do so. Thus, Rudolph has engaged in uninterrupted patent infringement for over a decade.
(7) Remedial Action by the Defendant
The seventh factor is “remedial action by the defendant.” Read Corp., 970 F.2d at 827. Rudolph did not identify any meaningful remedial action it took after learning of the infringement. In fact, the evidence established precisely the opposite. Rather than making substantive changes which would resolve the infringement issue, Rudolph made the smallest change possible. Rudolph did not alert its customers that changes were necessary to avoid infringement and there was no evidence of serious internal discussions that Rudolph’s minuscule change might still infringe under the doctrine of equivalents. Instead, Rudolph simply assumed either its infinitesimal change was sufficient or that its behavior would go undetected. Rudolph’s failure to take remedial action supports an award of enhanced damages.
35a (8) Rudolph’s Motivation for Harm
The eighth factor is the “defendant’s motivation for harm.” Read Corp., 970 F.2d at 827. The evidence established Rudolph was concerned about losing market share to ITC and that it set out to create a system similar to that developed by ITC.7 Rudolph adopted a “scorched earth” sales policy in an attempt to harm ITC. Based on the jury findings, Rudolph’s plan to harm ITC was successful. This supports enhanced damages.
(9) Rudolph Attempt to Conceal its Misconduct
The final factor is “whether defendant attempted to conceal its misconduct.” Read Corp., 970 F.2d at 827. Rudolph learned it was infringing in 2007 but did not disclose that until 2011. Between 2007 and 2011, Rudolph vigorously argued that no evidence existed which would establish infringement. Moreover, Rudolph did not alert its customers to the alleged changes in its systems meant to prevent future infringement and there were no meaningful changes to its system manuals reflecting that the operations had been altered. Viewed as a whole, Rudolph’s actions were clear attempts to conceal the fact that its products infringed.
Based on all nine factors supporting an award of enhanced damages, the Court will enhance the damages. Rudolph conducted no meaningful investigation of patents prior to developing its product, engaged in unnecessary actions which prolonged the litigation, and evinced an overall
7 Rudolph’s claims that it was more concerned with other companies were not credible in light of the extensive evidence and testimony that Rudolph viewed ITC as its sole competitor in this area.
36a callousness to ITC’s patent rights. The damages awarded for post-2007 behavior will be tripled.
VI. Attorneys’ Fees
ITC seeks attorneys’ fee and costs pursuant to 35 U.S.C. § 285 as well as the Court’s inherent authority. An award of attorneys’ fees and costs is appropriate.
“A district court has discretion to award reasonable attorney fees to a prevailing party in a patent case if the court determines that the case is ‘exceptional.’” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012) (citing 35 U.S.C. § 285). Deciding whether to award attorneys’ fees is a two-step process. “First, the court must determine whether the prevailing party has proved by clear and convincing evidence that the case is exceptional.” Id. Second, if the Court finds the case exceptional, “it must then determine whether an award of attorney fees is justified.” Id. at 916.
A. Exceptional
“A case may be deemed exceptional . . . where there has been willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Federal Rule of Civil Procedure 11, or like infractions.” Id. At summary judgment, the Court found Rudolph had no serious defense for its pre-2007 conduct. And at trial, the jury found Rudolph had engaged in willful infringement beginning in 2007. Rudolph’s conduct during this litigation and the willfulness finding are ample support for finding this case exceptional. See nCube Corp. v. Seachange Intern., Inc., 436 F.3d 1317, 1325 (Fed. Cir. 2006) (affirming award of attorneys’ fees based on willfulness finding).
37a B. Justified
An award of attorneys’ fees is justified in limited circumstances “to prevent a gross injustice.” Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329 (Fed. Cir. 2003). Awarding attorneys’ fees carries “serious economic and reputational consequences,” requiring the Court exercise great care when deciding whether to make such an award. iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1376 (Fed. Cir. 2011). Rudolph had no serious defense to the pre-2007 infringement allegations, refused to acknowledge that reality, and the jury determined Rudolph’s post-2007 conduct constituted willful infringement. See Rambus Inc. v. Infineon Technologies AG, 318 F.3d 1081, 1106 (Fed. Cir. 2003) (“Litigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.”). Based on the entirety of the record, an award of attorneys’ fees and costs is justified.
VII. Prejudgment Interest
ITC has applied for an award of prejudgment interest. “When a patentee asserts a patent claim that is held to be valid and infringed, prejudgment interest is generally awarded.” Ecolab, Inc. v. FMC Corp., 569 F.3d 1335, 1353 (Fed. Cir. 2009). Rudolph has not presented any valid basis for withholding an award of prejudgment interest. The appropriate interest rate is left to the Court’s discretion. Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed. Cir. 1997). The Court will use Arizona’s statutory interest rate. A.R.S. § 44-1201(B). That rate is simple interest calculated using the prime rate plus one percent. In this case, that results in an interest rate of 4.25%. The prejudgment interest will be awarded on the verdict as well as the attorneys’ fees. See Mathis v. Spears, 857 F.2d 749,
38a 761 (Fed. Cir. 1988) (allowing for prejudgment interest on awards of attorneys’ fees). ITC will be directed to submit updated calculations.
VIII. Permanent Injunction
ITC seeks entry of a permanent injunction. Rudolph opposes the request, but only in part.
A. Standard for Permanent Injunction
A patentee seeking a permanent injunction must satisfy the traditional four-factor test for injunctions. eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006). That test requires the patentee demonstrate: “(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the [patentee] and [infringer], a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” Id. There is no automatic right to an injunction once infringement is found, but “courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.” Id. at 395 (Roberts, C.J., concurring).
Based on an evaluation of the four factors, ITC is entitled to a permanent injunction. There is no question ITC has suffered irreparable harm in the form of “loss of goodwill, damage to reputation, and loss of business opportunities.” Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012). Monetary damages are inadequate to compensate for these injuries. Moreover, the balance of hardship clearly tips in favor of ITC. Rudolph has not identified any hardship it will suffer if an injunction is granted but ITC will continue to suffer the harm of having a substantially devalued patent if Rudolph’s infringe-
39a ment were to continue.8 And finally, there is no overriding public interest, such as public health, weighing against an injunction. See Acumed, 551 F.3d at 1331 (citing public-health issue as possible public interest in not granting injunction). The public interest weighs in favor of enforcing ITC’s valid patent.
Because all four factors weigh in favor of a permanent injunction, the Court must address the appropriate scope of that injunction.
B. Injunction Requested by ITC
The permanent injunction proposed by ITC contains three provisions. First, a provision forbidding Rudolph from infringing the ‘894 Patent. Second, a provision forbidding Rudolph from “making, using, offering to sell, selling, or importing” a system that performs “scrub or predictive scrub testing” or “that compare[s] in any fashion the image of a probe made at a first position to the image of the same probe made at an overtravel position.” In connection with this, ITC proposes Rudolph be required to present to the Court and ITC any proposed modifications made in an attempt to avoid future infringement. And third, a provision forbidding Rudolph from “making, using, offering to sell, selling, or importing . . . motherboards or upgrades for the infringing PRVX or ProbeWoRx systems.” (Doc. 504 at 17). Rudolph opposes only the second and third provisions.
8 Rudolph argues that its customers will be harmed as the
injunction will prevent them from continuing to use and upgrade machines purchased from Rudolph. The law is clear, however, that the possible harm to Rudolph’s past customers is irrelevant. See Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1330 (Fed. Cir. 2008) (balance of hardships “is only between a plaintiff and a defendant,” not third parties).
40a C. Predictive Scrub
Rudolph argues it would be inappropriate to issue an injunction covering scrub or predictive scrub because such an injunction would extend “well beyond the adjudicated products and colorable imitations.” (Doc. 517 at 9). Thus, Rudolph claims the proposed injunction would “improperly deter[] Rudolph from permissibly designing around the claims of the patent.” (Doc. 517 at 10). These arguments are in direct conflict with Rudolph’s previous positions on the issue of scrub.
Throughout the trial, Rudolph’s evidence was that scrub testing was not important, that its customers did not want or use that feature, and that customers did not select Rudolph’s machines based on that feature. In fact, Rudolph recently represented in an SEC filing that it “has removed from all of its future tools the predictive scrub feature that was found to be at issue in the litigation.” (Doc. 528 at 4). It is unclear why Rudolph opposes an injunction which, according to Rudolph itself, would have no impact.
Based on Rudolph’s inability to honestly and accurately represent its position on the issue, the provision regarding predictive scrub will be approved.9 That provision is meant to cover only the scrub and predictive scrub recited by Claims 1 and 3 of the ‘894 Patent. Rudolph will be required to present any
9 Rudolph has been unwilling to be forthright regarding how
its machines operate and whether its machines are practicing the claims at issue. Thus, this portion of the injunction is not meant to cover more ground than the patent claims at issue but is an attempt to prevent Rudolph from simply redefining certain terms in such a manner so it can claim its machines are outside literal coverage.
41a proposed modification to ITC.10 Given Rudolph’s past behavior, this is the only way of ensuring Rudolph’s infringing behavior will not recur. Cf. Valmet Paper Machinery, Inc. v. Beloit Corp., 894 F. Supp. 1158, 1174 (W.D. Wis. 1995) (injunction requiring approval of modification is draconian “in the absence of a finding of willfulness”).
D. Sale of Motherboards and Upgrades
Rudolph claims the provision forbidding the sale of motherboards or upgrades “would result in double-dipping with respect to its remedies.” (Doc. 517 at 12). This argument is difficult to follow but Rudolph apparently believes ITC has already been compen-sated for all sales which occurred prior to the jury’s verdict. That is true but irrelevant. The jury awarded ITC damages for past sales of motherboards and upgrades but did not award damages for future sales of motherboards and upgrades. Under long-standing law, a patentee may obtain an injunction prohibiting future sales which it would have received but for the infringer’s actions. Carborundum Co. v. Molten Metal Equipment Innovations, Inc., 72 F.3d 872, 881-82 (Fed. Cir. 1995). Such an injunction can cover non-patented parts sold in conjunction with an infringing device. Id. Given the jury’s findings that Rudolph’s post-2007 Systems willfully infringe the ‘894 Patent, an injunction prohibiting the future sale of parts used in those systems is appropriate.
10 Rudolph need not present proposed modifications to the
Court. If the parties are unable to reach an agreement regarding proposed modifications, they may then seek relief from the Court.
42a Accordingly,
IT IS ORDERED the Motion to Seal (Doc. 457) is GRANTED.
IT IS FURTHER ORDERED the following motions are DENIED:
Motion for Directed Verdict (Doc. 467);
Motion for Judgment as a Matter of Law (Doc. 473);
Motion for New Trial or Remittitur (Doc. 498);
Motion for Judgment as a Matter of Law (Doc. 501);
Motion for Judgment as a Matter of Law (Doc. 503);
Motion to Stay the Proceedings (Doc. 532);
Motion for Leave to File Notice (Doc. 538);
Motion for Leave to File Notice (Doc. 540).
IT IS FURTHER ORDERED the Motion for Prejudgment Interest (Doc. 506) is GRANTED.
IT IS FURTHER ORDERED the Motion for Enhanced Damages (Doc. 508) is GRANTED.
IT IS FURTHER ORDERED the Motion for Attorney Fees (Doc. 510) is GRANTED.
IT IS FURTHER ORDERED the Motion for Permanent Injunction (Doc. 504) is GRANTED. Rudolph is permanently enjoined as set forth below:
(1) Rudolph, its agents, and anyone working in concert with Rudolph is enjoined from making, using, offering to sell, selling, or importing into the United States, or supplying from the United States, or causing to be made, used, offered for sale, sold, imported into the United States, or supplied from the United States the infringing PRVX and ProbeWoRx systems as well as any
43a systems that are only colorably different therefrom in the context of the infringed claims, whether individually or in combination with other products or as a part of another product, and from otherwise infringing the asserted claims of the ‘894 Patent until the expiration of the ‘894 Patent.
(2) Rudolph, its agents, and anyone working in concert with Rudolph is further enjoined from making, using, offering to sell, selling, or importing into the United States, or supplying from the United States, or causing to be made, used, offered for sale, sold, imported into the United States, or supplied from the United States any PRVX or ProbeWoRx systems that: (1) perform scrub or predictive scrub testing; or (2) that compare in any fashion the image of a probe made at a first position to the image of the same probe made at an overtravel position. If Rudolph proposes a modification to its enjoined systems that it contends will render the modified designs non-infringing, Rudolph shall present to ITC the details of the proposed modification the results that such systems will report to the user. Within 14 days therefrom, ITC shall consent to the proposed modification or present any objections to the Court for resolution.
(3) Rudolph, its agents, and anyone working in concert with Rudolph is enjoined from making, using, offering to sell, selling, or importing into the United States, or supplying from the United States, or causing to be made, used, offered for sale, sold, imported into the United States, or supplied from the United States motherboards or upgrades for the infringing PRVX or ProbeWoRx systems.
44a IT IS FURTHER ORDERED within fifteen days of
this Order Plaintiff shall submit a proposed form of judgment containing the appropriate amount in light of the trebling of post-2007 damages and prejudgment interest.
IT IS FURTHER ORDERED Plaintiffs shall file their request for attorneys’ fees as required by Local Rule 54.2. Defendants’ response shall address the amount of the fees but shall not contest Plaintiffs’ entitlement to fees.
DATED this 23rd day of July, 2012.
/s/ Roslyn O. Silver Roslyn O. Silver Chief United States District Judge
