Taurus IP, LLC v. Daimlerchrysler Corp. ( 2013 )

United States Court of Appeals
for the Federal Circuit
______________________
TAURUS IP, LLC (now known as Manufacturing
System Technologies, LLC),
Plaintiff/Third Party Defendant-Appellant,
AND
ORION IP, LLC (now known as Clear With Comput-
ers LLC) AND ERICH SPANGENBERG,
Third Party Defendants-Appellants,
v.
DAIMLERCHRYSLER CORPORATION, CHRYSLER
FINANCIAL, LLC, AND DAIMLERCHRYSLER
COMPANY, LLC,
Defendants,
AND
CHRYSLER HOLDING, LLC,
Defendant,
AND
MERCEDES-BENZ USA, INC. AND CHRYSLER
GROUP LLC,
Defendants/Third Party Plaintiffs-Cross Appellants.
______________________
2008-1462, -1463, -1464, -1465
______________________
2 TAURUS IP v. DAIMLERCHRYSLER
Appeals from the United States District Court for the
Western District of Wisconsin in No. 07-CV-158, Chief
Judge Barbara B. Crabb.
______________________
Decided: August 9, 2013
______________________
JON E. WRIGHT, Sterne, Kessler, Goldstein & Fox,
PLLC, of Washington, DC, argued for plaintiff/third party
defendant-appellant. With him on the brief was BRYON L.
PICKARD.
PAUL H. BERGHOFF, McDonnell Boehnen Hulbert &
Berghoff, LLP, of Chicago, Illinois, argued for third party
defendant-appellants. With him on the brief were
JEREMY E. NOE and KURT W. RHODE. Of counsel on the
brief was ELIZABETH A. WILEY, The Wiley Firm PC, of
Austin, Texas.
MITCHELL G. STOCKWELL, Kilpatrick Townsend &
Stockton LLP, of Atlanta, Georgia, argued for defend-
ant/third party plaintiff-cross appellant, Mercedes-Benz
USA, Inc. and MEGAN S. WOODWORTH, Dickstein Shapiro
LLP, of Washington, DC, argued for defendant/third party
plaintiff-cross appellant, Chrysler Group LLC. On the
brief was FRANK C. CIMINO, JR., Dickstein Shapiro LLP, of
Washington, DC, for defendant/third party plaintiff-cross
appellant, Chrysler Group LLC. Of counsel were BONNIE
M. GRANT, VAIBHAV P. KADABA, RONALD L. RAIDER and
VANESSA M. SPENCER, Kilpatrick Stockton LLP, of Atlan-
ta, Georgia, for defendants/third party plaintiffs-cross
appellants.
______________________
Before PROST, SCHALL, and REYNA, Circuit Judges.
TAURUS IP v. DAIMLERCHRYSLER 3
SCHALL, Circuit Judge.
These appeals come to us from the United States Dis-
trict Court for the Western District of Wisconsin. There,
in two separate actions, Taurus IP, LLC (“Taurus”) sued
various defendants, alleging that their external websites
infringed independent claim 16, as well as dependent
claims 19, 22, 23, and 27, of Taurus’s U.S. Patent No.
6,141,658 (the “’658 patent”). The ’658 patent generally
relates to “a computer system for managing product
knowledge related to products offered for sale by a selling
entity.” ’658 patent col. 2 ll. 52–54.
In the first action, Taurus sued DaimlerChrysler Cor-
poration; Chrysler Financial, LLC; DaimlerChrysler
Company, LLC; Chrysler Holding, LLC; Mercedes-Benz
USA, Inc.; and Chrysler LLC for infringement (the “Daim-
lerChrysler Patent Suit”). In the second action, Taurus
sued Hyundai Motor America; Reebok International, Ltd.;
Polo Ralph Lauren Corporation; and Michelin North
America, Inc. (the “Hyundai Patent Suit.”).
In the DaimlerChrysler Patent Suit, the Chrysler-
related defendants (“Chrysler”) and Mercedes-related
defendants (“Mercedes”) asserted license and release
defenses. They also asserted a breach of contract counter-
claim against Taurus, and filed a contract claim against
third-party defendants Orion IP, LLC; Constellation IP,
LLC; Plutus IP Wisconsin, LLC; Plutus IP, LLC; and
Erich Spangenberg. 1 See Taurus IP, LLC v. Daim-
lerChrysler Corp., 519 F. Supp. 2d 905, 911–12 (W.D. Wis.
1 At all times relevant to these appeals, Spangen-
berg served as the managing member of Taurus; Orion IP,
LLC; Constellation IP, LLC; Plutus IP Wisconsin, LLC;
and Plutus IP, LLC. Taurus IP, LLC v. DaimlerChrysler
Corp., 519 F. Supp. 2d 905, 913 (W.D. Wis. 2007).
4 TAURUS IP v. DAIMLERCHRYSLER
2007) (the “Jurisdiction Decision”). In those claims and
counterclaims, Chrysler and Mercedes alleged that, by
filing the DaimlerChrysler Patent Suit, Taurus and/or
certain third-party defendants violated various provisions
of a 2006 patent licensing agreement (the “2006 Settle-
ment Agreement”) entered into by DaimlerChrysler
Corporation and Orion IP, LLC (“Orion”) to settle two
prior patent infringement suits. 2
On February 25, 2008, a few months after construing
the relevant claim terms in the ’658 patent, the district
court entered summary judgment in the DaimlerChrysler
Patent Suit, finding that neither Chrysler’s nor Mer-
cedes’s accused websites infringed any of the asserted
claims and finding claims 16 and 27 invalid as anticipated
by a prior art patent. Taurus IP, LLC v. DaimlerChrysler
Corp., 534 F. Supp. 2d 849, 873–82 (W.D. Wis. 2008) (the
“Summary Judgment Decision”); see also Taurus IP, LLC
v. DaimlerChrysler Corp., No. 07-cv-158, 2007 WL
5601495 (W.D. Wis. Nov. 9, 2007) (the “Claim Construc-
tion Decision”). Based on the Summary Judgment Deci-
sion and the Claim Construction Decision in the
DaimlerChrysler Patent Suit, the parties to the Hyundai
Patent Suit stipulated to dismissal of all pending claims
and counterclaims to permit appeal of those two decisions.
Subsequently, in a decision dated June 3, 2008, the dis-
trict court found the DaimlerChrysler Patent Suit to be
exceptional under 35 U.S.C. § 285. See Taurus IP, LLC v.
DaimlerChrysler Corp., 559 F. Supp. 2d 947, 966–69
(W.D. Wis. 2008) (the “Post-Trial Decision”). As a result,
the district court awarded damages in the amount of
2 Based on the nature of the provision of the 2006
Settlement Agreement most relevant to these appeals, the
claims and counterclaims filed by Chrysler and Mercedes
will be collectively referred to as the “Breach of Warranty
Suit.”
TAURUS IP v. DAIMLERCHRYSLER 5
$1,644,906.12, representing the costs incurred by Chrys-
ler and Mercedes in defending against the suit. See id. at
969, 976.
The Breach of Warranty Suit presented the district
court with a host of non-patent issues. First, the court
was required to determine whether it could exercise
personal jurisdiction over third-party defendant Spangen-
berg, a resident of Texas, and over third-party defendant
corporations Orion; Constellation IP, LLC; and Plutus IP,
LLC, all organized under the laws of Texas. 3 In a decision
dated October 16, 2007, the court denied a motion to
dismiss for lack of personal jurisdiction filed by the Texas
Third-Party Defendants, finding that Taurus and the
Texas Third-Party Defendants were alter egos of one
another. Jurisdiction Decision, 519 F. Supp. 2d at 917–
21. Alternatively, the court found personal jurisdiction
over Spangenberg proper under Wisconsin’s long-arm
statute. Id. at 921–23.
After finding jurisdiction, the district court addressed,
at the summary judgment stage, two separate challenges
to the merits of the claims in the Breach of Warranty
Suit. The district court granted a motion for summary
judgment filed by Taurus and the Third-Party Defend-
ants, finding that Articles 2.1 and 3.5 of the 2006 Settle-
ment Agreement did not provide a release to the
infringement alleged in the DaimlerChrysler Patent Suit.
Summary Judgment Decision, 534 F. Supp. 2d at 870, 881
¶ 9(a). In addition, the district court denied a motion for
3 Taurus and third-party defendant Plutus IP Wis-
consin, LLC are corporations organized under the laws of
Wisconsin. Spangenberg; Orion; Constellation IP, LLC;
and Plutus IP, LLC will be referred to, collectively, as the
“Texas Third-Party Defendants.” Plutus IP Wisconsin,
LLC and the Texas Third-Party Defendants will be re-
ferred to, collectively, as the “Third-Party Defendants.”
6 TAURUS IP v. DAIMLERCHRYSLER
summary judgment filed by Taurus and the Third-Party
Defendants, finding that triable issues of fact remained as
to whether Orion or Spangenberg breached a warranty
provision in Article 8.1(a)(iii) of the 2006 Settlement
Agreement (the “Warranty Provision”). Summary Judg-
ment Decision, 534 F. Supp. 2d at 871–873, 881 ¶ 10.
Later, at trial, a jury determined that Orion had breached
the Warranty Provision. Post-Trial Decision, 559 F. Supp.
2d at 957. Based on this finding, the district court award-
ed damages against Orion. Id. at 961–66, 976–77 ¶¶ 7,
11.
The trial in the Breach of Warranty Suit resulted in
one additional ruling relevant to this appeal. The district
court imposed sanctions on Orion and Spangenberg for
pre-trial witness tampering. Id. at 957. Under the sanc-
tions, Spangenberg and Orion were not permitted to put
on evidence at trial to support their defense that neither
Chrysler nor Mercedes relied on the Warranty Provision.
Id. at 975.
In due course, the district court entered judgments in
the DaimlerChrysler Patent Suit, the Breach of Warranty
Suit, and the Hyundai Patent Suit. 4 Taurus now appeals
various rulings from the DaimlerChrysler Patent Suit: (1)
the district court’s claim construction of various claim
terms; (2) the judgment of invalidity of claims 16 and 27;
(3) the judgment of noninfringement of asserted claims
16, 19, 22, 23, and 27; and (4) the finding of an exception-
al case under 35 U.S.C. § 285 and the resulting award of
damages.
4 After oral argument, this court granted a joint
motion to dismiss the appeals from the Hyundai Patent
Suit. Taurus IP, LLC v. Hyundai Motor N. Am., Nos.
2012-1474, -1477 (Fed. Cir. Apr. 25, 2013). This decision
will not further address those appeals.
TAURUS IP v. DAIMLERCHRYSLER 7
Orion and Spangenberg appeal various rulings from
the Breach of Warranty Suit: (1) the denial of the motion
to dismiss for lack of personal jurisdiction; (2) the denial
of judgment as a matter of law reversing the jury’s finding
of breach of the Warranty Provision; (3) the denial of
judgment as a matter of law regarding the award of
damages and attorney fees based on the breach; and (4)
the imposition of sanctions based on the finding of witness
tampering.
Finally, Chrysler and Mercedes conditionally cross-
appeal the ruling in the Breach of Warranty Suit that
Articles 2.1 and 3.5 of the 2006 Settlement Agreement did
not provide a release to the alleged infringement.
For the reasons set forth below, we rule as follows on
the issues presented: In the appeals from the Daim-
lerChrysler Patent Suit, (1) we affirm the district
court’s constructions of all the disputed claim terms; (2)
we affirm the judgment of invalidity of claims 16 and 27
of the ’658 patent; (3) we affirm the judgment of nonin-
fringement; and (4) we affirm the finding of an exception-
al case under 35 U.S.C. § 285 and the resulting award of
damages. In the appeals from the Breach of Warran-
ty Suit, (1) we affirm the denial of the motion to dismiss
for lack of personal jurisdiction over Orion and Spangen-
berg; (2) we affirm liability for breach of the Warranty
Provision; (3) we affirm the award of damages consisting
of attorney fees incurred by Chrysler and Mercedes in
prosecuting the Breach of Warranty Suit, but reverse the
award of damages consisting of attorney fees incurred by
Chrysler and Mercedes in defending against the Daim-
lerChrysler Patent Suit; and (4) we affirm the imposition
of evidentiary sanctions based on witness tampering.
Based on these rulings, we do not reach the conditional
cross-appeal.
8 TAURUS IP v. DAIMLERCHRYSLER
I. THE DAIMLERCHRYSLER PATENT SUIT
A. BACKGROUND
1. THE PATENT AND THE ACCUSED PRODUCTS
As noted, the ’658 patent generally relates to “a com-
puter system for managing product knowledge related to
products offered for sale by a selling entity.” ’658 patent
col. 2 ll. 52–54. As shown in figure 1, reproduced below,
the patent discloses a system consisting of a data source
104, a data importer 102, an editor 106, a user system
108, a data model 110, and data exporters 112.
The disclosed purpose of the system is to (i) import
various sources of data into a “data warehouse,” (ii)
enable management of that data by creating relationships
between various categories of data, known as “objects,”
and (iii) then export the appropriate type of data to users
with access rights. See id., col. 4 l. 28 – col. 5 l. 6. Utiliz-
ing a user system 108, a “user” can control editor 106 to
create hierarchical relationships between objects within
data model 110. Id., col. 5 ll. 7–32. The patent explicitly
discloses that more than one user system 108 can be
coupled to editor 106, with, for example, each department
TAURUS IP v. DAIMLERCHRYSLER 9
in a corporation operating one or more user systems. See
id., col. 5 ll. 13–17. The system thus enables an entity to
hierarchically organize data related to various product
lines, that data potentially including the various compo-
nents used in each product line and those components’
characteristics. Figure 18, shown below, depicts an
example hierarchy, with arrows representing the rela-
tionships created between various objects, shown in the
ovals. See id., col. 5 ll. 32–65.
Each object may represent customer information,
product information, or configuration information. Id.,col. 5 ll. 37–40. The patent discloses that “editor 106 uses
rules governing the objects, such as relationships and
other rules governing the objects, to construct a GUI [or
10 TAURUS IP v. DAIMLERCHRYSLER
graphical user interface] for presenting the information to
a user.” Id., col. 5 l. 66 – col. 6 l. 2. One of the interfaces
disclosed in the ’658 patent, shown in figure 17, repro-
duced below, allows a user to define “rules that describe
relationships between information.” Id., col. 11 ll. 32–65.
With this interface, a user can create the relation-
ships to build a hierarchical data structure like the one
depicted in figure 18, shown above.
In the complaint in the DaimlerChrysler Patent Suit,
Taurus accused both the internal websites (i.e., dealer-to-
dealer sales portals) and various external public websites
of both Chrysler and Mercedes of infringing independent
claim 16, as well as dependent claims 19, 22, 23, and 27 of
the ’658 patent. Summary Judgment Decision, 534 F.
Supp. 2d at 861–64, 873, 881–82. At issue with regard to
TAURUS IP v. DAIMLERCHRYSLER 11
the external websites was functionality allowing someone
visiting an automobile manufacturer’s website (a “web
surfer” 5) to configure a hypothetical vehicle with certain
optional equipment, to then save that configuration
information to his or her profile, and to then identify the
nearest dealership, if any, with such a vehicle in stock.
See Summary Judgment Decision, 534 F. Supp. 2d at862–64. Independent claim 16 recites as follows, with
claim terms at issue shown in italics:
16. A computer system implemented method for
managing product knowledge comprising a plural-
ity of data items related to products offered for
sale by a selling entity, the computer system in-
cluding a memory arrangement and at least one
processing unit, the method comprising:
defining a data model of data categories, the data
model establishing relationships between data
categories;
receiving in the computer system one or more par-
ticular data items corresponding to one or more of
the data categories;
receiving user-defined relationship information for
the particular data item, the relationship infor-
mation relating the particular data item to one or
more other data items; and
presenting the product knowledge, including in-
formation about the particular data item, to a user
of the system in a manner established by the data
model and the user-defined relationship;
5 In the Summary Judgment Decision, the district
court used the term “web surfer” to identify a generic
member of the public capable of visiting Chrysler’s or
Mercedes’s external websites. For consistency, we will do
the same.
12 TAURUS IP v. DAIMLERCHRYSLER
wherein the data model is constructed from one or
more data instance items interconnected using the
user-defined relationship items for each data in-
stance item.
’658 patent col. 15 ll. 5–26.
2. PROCEEDINGS IN THE DISTRICT COURT
In its Claim Construction Decision, the district court
construed the claim terms italicized above as follows: (1)
“user” means “a person who is capable of creating and
editing user-defined relationship information;” (2) “user-
defined relationship information” means “the set of rules
specified by the user that governs the relationship be-
tween data items within the data model;” and (3) “user-
defined relationship items” means “individual rules
specified by the user that belong to and interconnect data
instance items.” Claim Construction Decision, 2007 WL
5601495 at *12.
Based on its constructions of the above terms, and
based on its findings as to the accused external websites,
the district court granted summary judgment in favor of
Chrysler and Mercedes, finding that use of their external
websites does not infringe any of the asserted claims.
Summary Judgment Decision, 534 F. Supp. 2d at 873–75;
see also id. at 881–82 ¶ 11 (granting summary judgment
of noninfringement based on use of the internal web-
sites). 6 The district court based its conclusion on two
independent grounds: (1) that Taurus had failed to show
6 As noted in the Summary Judgment Decision,
Taurus had previously dropped its allegations of in-
fringement based on Chrysler’s internal websites. See
Summary Judgment Decision, 534 F. Supp. 2d at 873.
The reasoning as to noninfringement by Mercedes’s
internal websites is unclear. Infringement by internal
websites is not at issue in this appeal.
TAURUS IP v. DAIMLERCHRYSLER 13
the presence of a “user” of the external websites, as re-
quired by the fourth step of claim 16, which recites “pre-
senting the product knowledge . . . to a user of the system”
and (2) that Taurus had failed to show that the accused
websites “receiv[e] user-defined relationship information”
as required by the third step of claim 16. See id. at 873.
More specifically, the district court found that, by ac-
cessing the accused external websites, a web surfer does
not “create, edit or specify rules; in every instance, [Tau-
rus] has failed to show that a web surfer does any more
than submit variables for the system to process in accord-
ance with predetermined rules.” Id. at 874. In other
words, a web surfer is not a “user” as recited in claim 16
because a web surfer is not “capable of creating and
editing” “the set of rules specified by the user that governs
the relationship between data items within the data
model.” A web surfer is only capable of using rules al-
ready predetermined by others.
In the Summary Judgment Decision, the district court
also found claims 16 and 27 anticipated under former 35
U.S.C. § 102(e)(2) 7 by U.S. Patent No. 5,825,651 (the
“Trilogy patent”) 8. See Summary Judgment Decision, 534
F. Supp. 2d at 875–81. The Trilogy patent discloses “a
framework for defining a systems [sic] by defining the
components of the system using elements contained in a
parts catalog and defining relationships between the
7 The relevant provisions of § 102(e)(2) were reor-
ganized into newly designated § 102(d)(2) when certain
aspects of the Leahy-Smith America Invents Act (“AIA”),
Pub. L. No. 112-29, took effect on March 16, 2013. Be-
cause this case was filed before that date, we will refer to
the pre-AIA version of § 102.
8 To avoid confusion with the ’658 patent, we will
reference this patent, as did the district court, by the
original assignee, Trilogy Development Group, Inc.
14 TAURUS IP v. DAIMLERCHRYSLER
components of a system.” Trilogy patent, abstract. The
written description of the Trilogy patent summarizes how
relationships can be defined:
Relationships can be defined between the parts in
a product definition. A relationship relates a first
set of parts with a second set of parts. A set can
include multiple parts. The incorporation of parts
in a set can be arbitrary. That is, a multi-part set
can contain parts that are otherwise unrelated.
For example, a set can contain parts such as an
engine, sun roof and a color. These parts seem to
be unrelated, however, it is possible to combine
them into a relationship set for purposes of form-
ing a relationship using the present invention.
Id., col. 2 ll. 12–21.
In its analysis, the district court first rejected Tau-
rus’s argument that the subject matter of the ’658 pa-
tent—filed on September 10, 1997—was invented prior to
September 3, 1996, the filing date of the Trilogy patent.
See Summary Judgment Decision, 534 F. Supp. 2d at877–78. In so doing, the district court found that a
lengthy document filed with the ’658 patent and referred
to as “Appendix A” therein, see ’658 patent col. 13 ll. 50–
52, did not provide evidence of conception and reduction
to practice sufficient to predate the Trilogy patent. See
Summary Judgment Decision, 534 F. Supp. 2d at 877–78.
The district court relied on the fact that, although Appen-
dix A has a date stamp showing it was created on June
10, 1996, almost every page has a stamp showing it was
modified on December 11, 1996, more than three months
after the filing date of the Trilogy patent, September 3,
1996. See Summary Judgment Decision, 534 F. Supp. 2d
at 877–78.
After concluding that the Trilogy patent was, in fact,
prior art, the district court found that Chrysler and
Mercedes had demonstrated that that patent discloses
TAURUS IP v. DAIMLERCHRYSLER 15
each limitation in claims 16 and 27. Summary Judgment
Decision, 534 F. Supp. 2d at 878–81. Relevant to this
appeal, the district court found that the Trilogy patent’s
disclosure of “sets of parts” and the related “groups of
parts” with defined relationships between sets of parts
satisfied the requirement for “data categories” as recited
in the first and second steps of claim 16 of the ’658 patent.
Summary Judgment Decision, 534 F. Supp. 2d at 878–79.
In the Post-Trial Decision, the district court found the
DaimlerChrysler Patent Suit to be exceptional under 35
U.S.C. § 285. Post-Trial Decision, 559 F. Supp. 2d at 966–
69. Specifically, the court found Taurus’s pre-filing inves-
tigation to be deficient and determined that Taurus
improperly “prolonged the litigation in bad faith” after
construction of the disputed claim terms. Id. at 967–68.
In addition, the district court found that the Daim-
lerChrysler Patent Suit was carried out “vexatiously”
because Spangenberg set up Taurus for “jurisdictional
reasons” and asserted the ’658 patent against Chrysler
and Mercedes rather than discuss his contentions of
infringement with them. Id. at 968. The district court
also relied on its findings that Taurus and “Spangenberg’s
other companies” filed repetitive motions and that, in the
Breach of Warranty Suit, Spangenberg engaged in wit-
ness tampering after Taurus had left the case. Id. The
district court found that Taurus did not challenge the
amount of attorney fees requested, and awarded damages
in the amount of $1,644,906.12, the cost of defending the
DaimlerChrysler Patent Suit. Id. at 969, 976.
Taurus appeals (1) the construction of various claim
terms, (2) the judgment of invalidity of claims 16 and 27,
(3) the judgment of noninfringement of asserted claims
16, 19, 22, 23, and 27, and (4) the finding of an exception-
al case under 35 U.S.C. § 285 and the resulting award of
damages. We have jurisdiction pursuant to 28 U.S.C.
§ 1295(a)(1).
16 TAURUS IP v. DAIMLERCHRYSLER
B. DISCUSSION
1. CLAIM CONSTRUCTION
This court reviews a district court’s claim construction
de novo. See Cybor Corp. v. FAS Techs., 138 F.3d 1448,
1456 (Fed. Cir. 1998) (en banc).
A. “USER”
On appeal, Taurus repeats its prior argument that ei-
ther no construction is necessary for this term or that it
should be construed as “a person who uses the claimed
computer system.” See Claim Construction Decision, 2007
WL 5601495 at *5. As noted, the district court construed
“user” as “a person who is capable of creating and editing
user-defined relationship information.” Id. at *12. Tau-
rus argues that the district court’s construction “effective-
ly limited ‘users’ of the system to those capable of
‘creating and editing’ rules, rather than those simply
capable of ‘creating and editing’ information used by the
system to define a rule.” Although acknowledging that
“the patent is generally described from the viewpoint of a
database manager,” Taurus argues that there is no indi-
cation that the applicants imparted a specific or limiting
definition to the generic term “user.” In other words,
Taurus asserts that the district court improperly limited
the term to a preferred embodiment.
Chrysler and Mercedes respond that the preamble of
claim 16 recites a method for “managing product
knowledge,” and that all examples of “users” in the writ-
ten description are internal personnel, such as “database
administrators” and “data entry clerks,” that are capable
of creating and editing user-defined relationship infor-
mation.
We agree with Chrysler and Mercedes and conclude
that the district court properly construed “user” as “a
person who is capable of creating and editing user-defined
relationship information.” As discussed above, the lan-
TAURUS IP v. DAIMLERCHRYSLER 17
guage of claim 16 makes clear that the “user” must define
the relationship information. Further, the written de-
scription firmly supports this construction, only disclosing
“users” with sufficient internal access to the data model to
allow the creation and editing of relationship information.
For example, the ’658 patent discloses that “[e]ach type of
user is responsible for certain goals of the system” such as
“system management” or “data management.” ’658 pa-
tent col. 12 ll. 2–11. Similarly, the patent discloses that
“the system can ensure that each type of user can perform
the tasks assigned to him or her, while maintaining
database security.” Id., col. 13 ll. 45–48.
The term “user” cannot be construed in a vacuum, as
required by Taurus’s proposed construction. Instead, it
must be construed in light of the written description in
which it resides. See Phillips v. AWH Corp., 415 F.3d
1303, 1313 (Fed. Cir. 2005) (en banc) (“‘We cannot look at
the ordinary meaning of the term . . . in a vacuum. Ra-
ther, we must look at the ordinary meaning in the context
of the written description and the prosecution history.’”)
(quoting Medrad, Inc. v. MRI Devices Corp., 401 F.3d
1313, 1319 (Fed. Cir. 2005)). As admitted by Taurus, the
invention is described from the viewpoint of the database
manager, not from the viewpoint of a web surfer. Because
Taurus’s proposed construction of “user” is improperly
broad, we affirm the construction of the district court.
b. “USER-DEFINED RELATIONSHIP INFORMATION”
Taurus argues, as it did to the district court, that this
term should be construed as “input from a user of the
computer system that is used by the system to define a
rule between two or more instance items.” See Claim
Construction Decision, 2007 WL 5601495 at *3. As noted,
the district court construed “user-defined relationship
information” as “the set of rules specified by the user that
governs the relationship between data items within the
data model.” Id. at *12. Taurus’s proposed construction
18 TAURUS IP v. DAIMLERCHRYSLER
and the district court’s construction differ in that they
identify different stages of the rule-building process.
Specifically, Taurus’s proposed construction identifies the
keystrokes and other related “inputs” by a user that are
received by the system while a rule is being defined. In
contrast, the district court’s construction identifies the
result of those keystrokes and other inputs, i.e., the “set of
rules specified by the user.” Taurus asserts that the
district court’s construction is inconsistent with figure 17
of the ’658 patent and other disclosures showing that a
wide variety of information can be used in creating a rule.
Chrysler and Mercedes respond that the district court
correctly construed “user-defined relationship infor-
mation” and that, in construing the term, the district
court did not ignore figure 17, but instead relied upon it to
support its construction.
We conclude that the district court properly construed
“user-defined relationship information” as “the set of rules
specified by the user that governs the relationship be-
tween data items within the data model.” The specifica-
tion does not support Taurus’s proposed construction,
which requires the system, not the user, to define the
rules between various data items. In the discussion of the
“RuleBuilder” interface shown in figure 17, the ’658
patent clearly discloses that the user, not the system,
defines the rules:
[U]sing the dialog box 1700, the user can define a
relationship between one type of data object rep-
resenting product lines and another representing
technical specifications. . . . A text entry box 1702
allows the user to enter rules in textual form. Al-
ternatively, the user can use a variety of active
screen regions to reduce the number of keystrokes
involved in defining a rule.
’658 patent col. 11 ll. 34–43 (emphasis added).
TAURUS IP v. DAIMLERCHRYSLER 19
Moreover, Taurus’s proposed construction conflicts
with the plain language of claim 16. By accepting Tau-
rus’s proposed construction, the district court would have
effectively rewritten the claim language from “user-
defined relationship information” to “system-defined
relationship information.” See K-2 Corp. v. Salomon S.A.,
191 F.3d 1356, 1364 (Fed. Cir. 1999) (“Courts do not
rewrite claims; instead, we give effect to the terms chosen
by the patentee.”). We affirm the district court’s construc-
tion of this term.
c. “USER-DEFINED RELATIONSHIP ITEMS”
As acknowledged by Taurus, the district court did not
rely on the construction of this term in the Summary
Judgment Decision. See Taurus Opening Br. 33 n.7. On
appeal, Taurus argues for a different construction “in
order to obtain a ruling for guidance on remand.” Id.Because we do not remand on any issue implicating the
construction of this term, we will not address Taurus’s
arguments.
For these reasons, we affirm the district court’s con-
structions of “user” and “user-defined relationship infor-
mation” and do not address the construction of “user-
defined relationship items.”
2. INVALIDITY
We now address the district court’s findings on validi-
ty, namely (1) that the invention claimed in the ’658
patent does not predate the Trilogy patent and (2) that
claims 16 and 27 of the ’658 patent are invalid as antici-
pated by the Trilogy patent. Former 35 U.S.C. § 102(e)(2)
provides grounds for invalidating the claims of an issued
patent if “[t]he invention was described in . . . a patent
granted on an application for patent by another filed in
the United States before the invention by the applicant
for patent . . . .” In other words, the claims of a patent are
invalid if they read on the invention disclosed in a differ-
20 TAURUS IP v. DAIMLERCHRYSLER
ent U.S. patent application that was filed before, but
issued after, the filing date of the inventor’s patent.
Anticipation is a question of fact, and a district court’s
finding on this issue is reviewed for clear error. See
Sanofi-Synthelabo v. Apotex, Inc., 550 F.3d 1075, 1082
(Fed. Cir. 2008). The issue of the conception date of an
invention is a legal conclusion based on underlying factu-
al findings. See Invitrogen Corp. v. Clontech Labs., Inc.,
429 F.3d 1052, 1063 (Fed. Cir. 2005). We apply the law of
the regional circuit when reviewing a district court’s grant
of summary judgment. See Teva Pharm. Indus., Ltd. v.
AstraZeneca Pharm. LP, 661 F.3d 1378, 1381 (Fed. Cir.
2011). The Seventh Circuit reviews a grant of summary
judgment de novo. See Cummins, Inc. v. TAS Distrib. Co.,
700 F.3d 1329, 1335 (Fed. Cir. 2012) (citing Staats v.
Cnty. of Sawyer, 220 F.3d 511, 514 (7th Cir. 2000)).
a. DATE OF INVENTION OF THE ’658 PATENT
As to the date of invention, Taurus argues that a jury
could have reasonably found that Appendix A represents
either a complete data model created using the invention
claimed in the ’658 patent or a data model upon which the
complete invention was reduced to practice. Taurus
highlights the testimony of inventor Jerome Johnson—
who stated that Appendix A would not have been created
before he conceived of the invention in the ’658 patent—as
direct evidence of a conception date prior to June 10,
1996. Further, Taurus asserts that alleged factual dis-
putes about the inventor’s testimony and Appendix A
were improperly decided on summary judgment.
Chrysler and Mercedes respond that Appendix A
shows a modification date of December 11, 1996, more
than three months after the September 3, 1996, filing
date of the Trilogy patent, and emphasize that the inven-
tors had no specific recollections regarding a conception
date. According to Chrysler and Mercedes, Taurus (1) did
not prove that Appendix A met all the limitations of
TAURUS IP v. DAIMLERCHRYSLER 21
claims 16 and 27, (2) ignored the corroboration require-
ment, and (3) failed to prove diligence in reducing the
invention to practice.
After an accused infringer has put forth a prima facie
case of invalidity, the burden of production shifts to the
patent owner to produce sufficient rebuttal evidence to
prove entitlement to an earlier invention date. See Inno-
vative Scuba Concepts, Inc. v. Feder Indus., Inc., 26 F.3d
1112, 1115 (Fed. Cir. 1994). The ultimate burden of
proving invalidity by clear and convincing evidence—i.e.,
the burden of persuasion—however, remains with the
accused infringer. See id.“[P]riority of invention ‘goes to the first party to re-
duce an invention to practice unless the other party can
show that it was the first to conceive the invention and
that it exercised reasonable diligence in later reducing
that invention to practice.’” Mahurkar v. C.R. Bard, Inc.,
79 F.3d 1572, 1577 (Fed. Cir. 1996) (quoting Price, 988
F.2d at 1190). Thus, to remove the Trilogy patent as a
prior art reference, Taurus needed to either prove (1) a
conception and reduction to practice before the filing date
of the Trilogy patent or (2) a conception before the filing
date of the Trilogy patent combined with diligence and
reduction to practice after that date. See Singh v. Brake,
317 F.3d 1334, 1340 (Fed. Cir. 2003); see also 37 C.F.R.
§ 1.131(b). 9 In either scenario, Taurus had to prove a
conception date earlier than September 3, 1996—the
filing date of the Trilogy patent. The only such evidence
presented by Taurus, however, was (1) the creation date
of June 10, 1996, printed on Appendix A, and (2) Mr.
Johnson’s testimony. Based on this evidence, a reasona-
ble juror could not find that the ’658 patent predated the
Trilogy patent. We address each potential basis in turn.
9 Taurus does not address diligence at all; it relies
solely on the first of these two options.
22 TAURUS IP v. DAIMLERCHRYSLER
First, although Appendix A included a creation date of
June 10, 1996, nearly every page also included a modifi-
cation date of December 11, 1996—more than three
months after the filing date of the Trilogy patent. Based
on that modification date, a juror could only conclude with
reasonable certainty that Appendix A was in its current
form no later than December 11, 1996. Indeed, as admit-
ted by Taurus, “[t]here is no evidence of what changes, if
any, were made between the creation date [of June 10,
1996] and the last edit date [of December 11, 1996].” See
Taurus Opening Br. 20 n.4. In other words, no evidence
precludes the possibility that Taurus created Appendix A
with little or no text on June 10, 1996, and “modified” it,
by adding all or most of the text now present, some time
on or before December 11, 1996. This does not provide
sufficient evidence for a reasonable juror to find a concep-
tion date prior to the filing date of the Trilogy patent.
Further, even assuming Appendix A was in its pre-
sent form prior to September 3, 1996, Taurus failed to
demonstrate how Appendix A satisfies all the limitations
recited in claims 16 and 27, as necessary to demonstrate
conception. See Singh, 317 F.3d at 1340 (“A conception
must encompass all limitations of the claimed invention . .
. .”). Similarly, Taurus has not proven that Appendix A
represents an actual reduction to practice of the entire
process recited in claims 16 and 27. See Scott v. Koyama,
281 F.3d 1243, 1247 (Fed. Cir. 2002) (“‘A process is re-
duced to practice when it is successfully performed.’”)
(quoting Corona Cord Tire Co. v. Dovan Chem. Corp., 276
U.S. 358, 383 (1928)). Instead, Taurus merely states that
a reasonable juror could find that Appendix A was either
created using the invention or represents conception
before a later reduction to practice. Taurus fails, howev-
er, to set forth an evidentiary basis for that finding.
As to the second potential basis, Mr. Johnson’s testi-
mony allegedly supporting an earlier invention date is
both limited and conclusory. Although he could not
TAURUS IP v. DAIMLERCHRYSLER 23
pinpoint the precise date of conception and did not know
who created Appendix A, he nevertheless summarily
concluded, during direct examination by Taurus’s counsel,
that Appendix A would not have been created before
conception:
Q. And is [Appendix A] something that would
have been created before you conceived of the in-
vention of the ’658 patent?
A. No.
J.A. 4462 at 150:1–4; see also J.A. 4461 at 148:25–149:25
(addressing the date of conception and who created Ap-
pendix A).
Even if this testimony were sufficient to support an
earlier invention date, it lacks corroboration, which is
required by this court’s case law. See Singh v. Brake, 222
F.3d 1362, 1367 (Fed. Cir. 2000) (“It is well-established
that when a party seeks to prove conception via the oral
testimony of a putative inventor, that party must proffer
evidence corroborating that testimony. This rule address-
es the concern that a party claiming inventorship might
be tempted to describe his actions in an unjustifiably self-
serving manner in order to obtain a patent or to maintain
an existing patent.”). Instead of corroborating Mr. John-
son’s testimony, Appendix A serves as the sole basis for it.
Indeed, independent of that document, neither inventor
had any recollection of the date of invention. For the
reasons set forth above, however, Appendix A does not
independently support an earlier invention date; it there-
fore cannot corroborate Mr. Johnson’s testimony.
Thus, we conclude that the district court did not err in
determining that no reasonable juror could find that
Taurus had proven an earlier date of invention for the
’658 patent. See Summary Judgment Decision, 534 F.
Supp. 2d at 877–78. Because the Trilogy patent is prior
24 TAURUS IP v. DAIMLERCHRYSLER
art under former 35 U.S.C. § 102(e)(2), we now address
the district court’s finding of anticipation.
b. ANTICIPATION
The district court found, on summary judgment, that
the Trilogy patent anticipated claims 16 and 27 of the ’658
patent because it disclosed every step recited in those
claims. 10 Summary Judgment Decision, 534 F. Supp. 2d
at 878–81. According to Taurus, the district court erred
in finding claims 16 and 27 anticipated because the
Trilogy patent does not disclose “data categories,” as
recited in the first and second steps in claim 16. See ’658
patent col. 15 ll. 10–14. Taurus argues that whether
disclosures of “set of parts” or “group of parts” in the
Trilogy patent, see, e.g., Trilogy patent, col. 2 ll. 12–37,
satisfies the requirement for “data categories” was a
disputed issue of material fact that the district court
improperly resolved on summary judgment.
Chrysler and Mercedes respond that the sole issue—
the scope of the term “data categories”—is legal, not
factual, in nature. In addition, Chrysler and Mercedes
assert that, during the claim construction hearing, coun-
sel for Taurus argued for a broad understanding of the
term “data categories.”
Although anticipation is a question of fact, a district
court may, on summary judgment, invalidate a patent
claim as anticipated by a prior art reference if the patent-
ee does not identify a genuine issue of material fact to
avoid summary judgment. See Golden Bridge Tech., Inc.
v. Nokia, Inc., 527 F.3d 1318, 1321 (Fed. Cir. 2008); see
10 Independent claim 16 is quoted above. Dependent
claim 27 recites “[a] method, according to claim 16, fur-
ther comprising using a graphic user interface configured
and arranged to facilitate creating the user-defined rela-
tionship item.”
TAURUS IP v. DAIMLERCHRYSLER 25
also Telemac Cellular Corp. v. Topp Telecom, Inc., 247
F.3d 1316, 1327 (Fed. Cir. 2001) (“Summary judgment is
proper if no reasonable jury could find that the patent is
not anticipated.”). Here, summary judgment was proper
because Taurus failed to set forth any specific facts pre-
cluding summary judgment. See Fed. R. Civ. P. 56(e); see
also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986) (noting that “a party opposing a properly supported
motion for summary judgment may not rest upon the
mere allegations or denials of his pleading, but . . . must
set forth specific facts showing that there is a genuine
issue for trial”) (internal quotations omitted). Taurus’s
assertion that unspecified factual disputes remain cannot
preclude summary judgment. See Enzo Biochem, Inc. v.
Gen-Probe, Inc., 424 F.3d 1276, 1284 (Fed. Cir. 2005)
(finding that attorney argument did not demonstrate a
genuine issue of material fact sufficient to avoid summary
judgment).
Further, although the term “data categories” was not
construed, Taurus did advocate a broad understanding of
that term, which the district court paraphrased as a
“general grouping of information shown externally.” See
Summary Judgment Decision, 534 F. Supp. 2d at 879
(citing testimony from the claim construction hearing in
which counsel for Taurus stated: “Data categories is just
what you see on the interface when you’re on the screen
and I see a category and it says you can pick red, yellow,
or green”). We see no error in the district court’s conclu-
sion as to the scope of “data categories.” In addition, we
agree with the district court that the Trilogy patent
discloses relationships between general groups of infor-
mation, such as automotive parts. See Trilogy patent, col.
2 ll. 12–37. Taurus has not set forth evidence showing
error in either of these conclusions. Because a reasonable
jury could only have found claims 16 and 27 anticipated
by the Trilogy patent, we affirm summary judgment of
invalidity.
26 TAURUS IP v. DAIMLERCHRYSLER
3. NONINFRINGEMENT
We now turn to the district court’s ruling, on sum-
mary judgment, that neither Chrysler’s nor Mercedes’s
external websites infringe the asserted claims of the ’658
patent. 11 Taurus argues that the district court erred in
determining that a web surfer cannot satisfy the require-
ment for a “user” under the court’s construction of that
term. In addition, Taurus argues that the district court
did not explicitly exclude web surfers from the scope of
“users” until the Summary Judgment Decision, and that,
by doing so, the court improperly took that issue from the
jury. In response, Chrysler and Mercedes argue that
Taurus identified no evidence that a web surfer can create
and edit rules that “govern the relationship” between data
items, as required by the district court’s claim construc-
tion.
We apply the law of the regional circuit to review the
grant of summary judgment, see Teva, 661 F.3d at 1381,
and thus review this issue without deference, see Cum-
mins, 700 F.3d at 1335. Summary judgment should be
granted “if the movant shows that there is no genuine
11 Although we affirm the invalidity of claims 16 and
27, remaining asserted claims 19, 22, and 23 have not
been found invalid. This section addresses the potential
infringement of claims 19, 22, and 23, all of which depend,
either directly or indirectly, from independent claim 16.
Because, for reasons discussed in this section, Chrysler’s
and Mercedes’s websites do not practice certain limita-
tions of claim 16, those websites cannot practice claims
19, 22, and 23. See Wahpeton Canvas Co., Inc. v. Frontier,
Inc., 870 F.2d 1546, 1553 (Fed. Cir. 1989) (“It is axiomatic
that dependent claims cannot be found infringed unless
the claims from which they depend have been found to
have been infringed . . . .”).
TAURUS IP v. DAIMLERCHRYSLER 27
dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
On appeal, Taurus has failed to identify any specific
factual issues that would preclude summary judgment.
See TechSearch, L.L.C. v. Intel Corp., 286 F.3d 1360,
1369–70 (Fed. Cir. 2002) (“Whether the accused device
contains an element corresponding to each claim limita-
tion or its equivalent is a question of fact, which, on
summary judgment, is a question we review to determine
whether a material factual issue remains genuinely in
dispute.”). Instead, Taurus merely disagrees with the
district court’s legal conclusion that web surfers do not
fall within the court’s construction of “users.”
We see no error in that legal conclusion, and agree
that Taurus “has failed to show that a web surfer does
any more than submit variables for the system to process
in accordance with predetermined rules.” See Summary
Judgment Decision, 534 F. Supp. 2d at 874. In other
words, as argued by Chrysler and Mercedes, Taurus has
not identified any evidence that web surfers can create or
edit the rules that govern the relationships between data
items, as required by the court’s claim construction. See
Novartis Corp. v. Ben Venue Labs., Inc., 271 F.3d 1043,
1046 (Fed. Cir. 2001) (“Since the ultimate burden of
proving infringement rests with the patentee, an accused
infringer seeking summary judgment of noninfringement
may meet its initial responsibility either by providing
evidence that would preclude a finding of infringement, or
by showing that the evidence on file fails to establish a
material issue of fact essential to the patentee’s case.”).
Because Taurus has failed to identify any genuine issue of
material fact precluding summary judgment and because
we discern no error in the district court’s legal conclusion,
we affirm the finding of no infringement.
28 TAURUS IP v. DAIMLERCHRYSLER
4. EXCEPTIONAL CASE
We now turn to the last issue on appeal from the
DaimlerChrysler Patent Suit, the finding of an exception-
al case under 35 U.S.C. § 285 and the award of attorney
fees to Chrysler and Mercedes for defending against the
allegations of infringement in that suit. Taurus asserts
that the district court erred in finding an exceptional case
because Taurus argued infringement both in good faith
and as supported by expert testimony, and because its
counsel had a duty to represent it “zealously.” In addi-
tion, Taurus notes that, since the finding of an exception-
al case, this court has reversed two of the decisions relied
on by the district court for the proposition that a party’s
decision to assert infringement after an adverse claim
construction may support an exceptional case finding.
Taurus also argues that it had a non-frivolous infringe-
ment theory here because the claim construction was
vague until the issuance of the Summary Judgment
Decision. Further, Taurus highlights that it dropped
infringement allegations against the internal websites.
Chrysler and Mercedes respond that Taurus’s entire
case has been frivolous. In addition, they argue that the
district court’s claim construction ruling should have
caused Taurus to reevaluate and pare down its infringe-
ment case. Further, Chrysler and Mercedes note that
Taurus has not challenged the amount of the award of
attorney fees flowing from the exceptional case finding.
When assessing whether to award attorney fees under
35 U.S.C. § 285, a district court engages in a two-step
inquiry. The court must first determine whether the
prevailing party has proved, by clear and convincing
evidence, that the case is exceptional. MarcTec, LLC v.
Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012),
reh’g and reh’g en banc denied (2012). If the court finds
the case exceptional, it must determine whether an award
TAURUS IP v. DAIMLERCHRYSLER 29
of attorney fees is appropriate, and, if so, the amount of
that award. Id. at 916.
Absent misconduct in litigation or in securing the pa-
tent, a case may be found exceptional under § 285 only if
(1) the litigation is brought in subjective bad faith, and (2)
the litigation is objectively baseless. Brooks Furniture
Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed.
Cir. 2005). Subjective bad faith by the offending party
can be upheld on review if, despite the lack of an explicit
finding by the district court, other findings of fact are
compatible with, and only with, that view. See Eltech Sys.
Corp. v. PPG Indus., Inc., 903 F.2d 805, 810–11 (Fed. Cir.
1990). There exists a “presumption that the assertion of
infringement of a duly granted patent is made in good
faith.” Brooks Furniture, 393 F.3d at 1382. Factual
findings regarding subjective bad faith are reviewed for
clear error. Highmark, Inc. v. Allcare Health Mgmt. Sys.,
Inc., 687 F.3d 1300, 1310 (Fed. Cir. 2012), reh’g and reh’g
en banc denied, 701 F.3d 1351 (2012).
To be objectively baseless, the patentee’s assertions—
whether manifested in its infringement allegations or its
claim construction positions—“must be such that no
reasonable litigant could reasonably expect success on the
merits.” Dominant Semiconductors Sdn. Bhd. v. OSRAM
GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008), quoted in
iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir.
2011). As a question of law, this court reviews a district
court’s determination of whether a party’s claim or de-
fense in a patent case is objectively baseless without
deference. Highmark, 687 F.3d at 1308–09.
Because of the reputational and economic impact of
sanctions, this court must carefully examine the record
when reviewing an exceptional case finding. Medtronic
Navigation, Inc. v. BrainLAB Medizinische Computersys-
teme GmbH, 603 F.3d 943, 953 (Fed. Cir. 2010). We are,
however, also mindful of the fact that the district court,
30 TAURUS IP v. DAIMLERCHRYSLER
with its first-hand knowledge of the parties and their
positions, should not be unduly second-guessed. Eon-Net
LP v. Flagstar Bancorp, 653 F.3d 1314, 1324 (Fed. Cir.
2011), reh’g and reh’g en banc denied (2011).
Having carefully considered the record before us, we
conclude that the district court properly found the Daim-
lerChrysler Patent Suit to be exceptional. In reaching
this conclusion, we find sufficient basis in the district
court’s findings that Taurus improperly asserted and
maintained its positions in the litigation. See Post-Trial
Decision, 559 F. Supp. 2d at 967–68. We need not rely on
the findings related to vexatious litigation or witness
tampering. See id. at 968. Rather, no reasonable litigant
in Taurus’s position could have expected a finding that a
web surfer accessing the accused external websites satis-
fied the requirement for a “user,” as recited in claim 16.
Although reasonable minds can differ on claim construc-
tion positions, Taurus’s proposed constructions of “user,”
and the related terms discussed above, fall below the
threshold required to avoid a finding of objective base-
lessness. See Raylon, LLC v. Complus Data Innovations,
Inc., 700 F.3d 1361, 1368 (Fed. Cir. 2012) (citing iLOR,
631 F.3d at 1378).
Taurus proposed that “user” either not be construed
at all, or effectively not construed, as “a person who uses
the claimed computer system.” See Claim Construction
Decision, 2007 WL 5601495 at *5. As discussed above,
however, the written description provides no support for
Taurus’s unreasonably broad construction and instead
limits the term to those with sufficient internal access to
the data model to allow the creation and editing of rela-
tionship information. When patentees have sought un-
reasonable claim constructions divorced from the written
description, this court has found infringement claims
objectively baseless. See, e.g., MarcTec, 664 F.3d at 919
(“Because the specification and prosecution history clearly
refute [the patentee’s] proposed claim construction, the
TAURUS IP v. DAIMLERCHRYSLER 31
district court did not err in finding that [the patentee’s]
infringement claims were objectively baseless.”); Eon-Net,
653 F.3d at 1326 (“[B]ecause the written description
clearly refutes [the patentee’s] claim construction, the
district court did not clearly err in finding [the patentee]
pursued objectively baseless infringement claims.”); see
also Raylon, 700 F.3d at 1368–71 (reversing denial of
Rule 11 sanctions and remanding to reassess the denial of
an exceptional case under § 285, finding that the patentee
relied on a proposed construction that was “contrary to all
the intrinsic evidence and does not conform to the stand-
ard canons of claim construction”).
We are not persuaded by Taurus’s argument that the
claim construction of “user” was vague until issuance of
the Summary Judgment Decision. When read in light of
the specification, the district court’s construction provided
clear limitations on the scope of “user.” Indeed, as the
briefing to this court demonstrates, Taurus appears to
have understood, but merely disagreed with the court’s
construction. See Taurus Opening Br. 34 (asserting that
the claim construction “effectively defined ‘user’ as the
programmer, not a user of the program”).
Taurus is correct that this court reversed two district
court decisions relied on in the Post-Trial Decision for the
proposition that “Taurus’s decision to proceed in the face
of this court’s constructions prolonged the litigation in bad
faith.” See Post-Trial Decision, 559 F. Supp. 2d at 968; see
also DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.,
567 F.3d 1314, 1339 (Fed. Cir. 2009) (reversing, in rele-
vant part, 534 F. Supp. 2d 244 (D. Mass 2008)); Medtronic
Navigation, 603 F.3d at 954 (reversing 2008 WL 410413(D. Colo. Feb. 12, 2008)). Those reversals did not, howev-
er, disturb the rule that a case can be found exceptional
when a party prolongs litigation in bad faith. See MarcT-
ec, 664 F.3d at 916 (“Where a patentee ‘prolongs litigation
in bad faith, an exceptional finding may be warranted.’”)
(quoting Computer Docking Station Corp. v. Dell, Inc., 519
32 TAURUS IP v. DAIMLERCHRYSLER
F.3d 1366, 1379 (Fed. Cir. 2008)). While an adverse claim
construction generally cannot, alone, form the basis for an
exceptional case finding, this court’s decisions in DePuy
Spine and Medtronic Navigation do not undermine the
rule that a party cannot assert baseless infringement
claims and must continually assess the soundness of
pending infringement claims, especially after an adverse
claim construction. See Medtronic Navigation, 603 F.3d
at 954 (“The salient inquiry is whether Medtronic’s claims
were so lacking in merit that [the plaintiff] was legally
obligated either to abandon its case altogether or to limit
itself to challenging the district court’s claim construction
order on appeal.”). In both cases, this court reversed
because it determined that the arguments posited were
not, in fact, baseless. See id. at 959; see also DePuy Spine,
567 F.3d at 1339 (reversing an exceptional case finding
because “there is no indication, much less a finding, that
[the sanctioned party’s] arguments were baseless, frivo-
lous, or intended primarily to mislead the jury”). For the
reasons set forth above, such is not the case here. Thus,
the reversals in DePuy Spine and Medtronic Navigation
do not carry the day for Taurus.
We also conclude that the district court did not clearly
err in implicitly finding subjective bad faith. Although
the district court did not explicitly state the facts support-
ing a finding of subjective bad faith, it did make sufficient
factual findings for this court to uphold the implicit
finding. See MarcTec, 664 F.3d at 917–18; Eltech Sys.,
903 F.2d at 810 (“Though the court did not expressly find
that [the plaintiff] knew its suit was baseless, many of its
findings are compatible with and only with that view.”).
Specifically, the district court found that:
• Although the ’658 patent, entitled “Com-
puter System and Method for Managing
Sales Information,” is directed to database
administration, Taurus asserted claims
against defendants on the theory that an
TAURUS IP v. DAIMLERCHRYSLER 33
internet user of their website could be a
“user” of that system. At trial, Spangen-
berg described the ’658 patent as “go[ing] to
the server side of the equation, not the user
side of the equation,” and “related to the
data management that was occurring be-
hind the websites.”
• On September 9, 2007, [the district court]
construed certain claim terms, including
“user,” which [was] construed to mean “a
person who is capable of creating and edit-
ing” a set of rules “that governs the rela-
tionship between data items within the
data model.” Taurus continued to assert its
infringement claims, contending at sum-
mary judgment that an internet user was a
“user” of certain of defendants websites be-
cause he could enter a zip code and pre-
ferred vehicle configuration to search for
products in his area or view “configured”
vehicles. [The district court] concluded that
Taurus had failed to show that internet us-
ers were “users” as required by the only in-
dependent claim asserted by Taurus,
because the internet user could do no more
than plug in variables to be processed in ac-
cordance with predefined rules.
Post-Trial Decision, 559 F. Supp. 2d at 966–67 (internal
citations omitted). Each of these findings supports the
court’s implicit conclusion that Taurus subjectively knew
that the DaimlerChrysler Patent Suit lacked a reasonable
basis and was, therefore, pursued and maintained in bad
faith. See MarcTec, 664 F.3d at 918 (“After careful con-
sideration and review of the record, we agree with the
district court that [the patentee’s] proposed claim con-
struction, which ignored the entirety of the specification
and the prosecution history, and thus was unsupported by
34 TAURUS IP v. DAIMLERCHRYSLER
the intrinsic record, was frivolous and supports a finding
of bad faith.”).
We are not persuaded by Taurus’s argument that it
lacked bad faith because it dropped its infringement
claims against the internal websites. Although Taurus
was correct (and required) to abandon any infringement
claims that had no basis in fact or law, that abandonment
does not permit Taurus to maintain other infringement
claims that fail to meet or exceed a reasonable threshold.
See Raylon, 700 F.3d at 1368 (citing iLOR, 631 F.3d at
1378). In other words, doing something required of it does
not grant Taurus leave to do something not permitted. In
addition, although counsel for Taurus is generally correct
that it can and should represent its client “zealously,”
attorneys are always charged with the “obligation to file
cases reasonably based in law and fact and to litigate
those cases in good faith.” See Eon-Net, 653 F.3d at 1328.
Because the findings of the district court support the
conclusion that this case was exceptional under 35 U.S.C.
§ 285, we affirm that ruling. As Taurus does not assert
that the amount of attorney fees was improper, we do not
address that issue.
II. THE BREACH OF WARRANTY SUIT
A. BACKGROUND
1. THE NATURE OF THE CLAIMS
The Breach of Warranty Suit included a series of de-
fenses raised and counterclaims filed by Chrysler (and, in
some instances, Mercedes) in response to the Daim-
lerChrysler Patent Suit. The only aspect of the Breach of
Warranty Suit at issue in this appeal, however, is a single
counterclaim asserting that Orion breached the Warranty
Provision found in Article 8.1(a)(iii) of the 2006 Settle-
ment Agreement (the “Breach of Warranty Counter-
claim”).
TAURUS IP v. DAIMLERCHRYSLER 35
DaimlerChrysler Corporation and Orion entered into
the 2006 Settlement Agreement to settle two prior patent
infringement suits filed by Orion against Chrysler and
Mercedes, respectively, in the United States District
Court for the Eastern District of Texas (the “Texas
Suits”). Post-Trial Decision, 559 F. Supp. 2d at 955–56.
Prior to filing the Texas Suits, Orion had, in February of
2004, acquired the rights to fourteen patents, including
the ’658 patent. Id. at 955. Although Orion asserted
some of these newly acquired patents in the Texas Suits,
it did not assert the ’658 patent. Id. Instead, Orion
transferred that patent to a company called Caelum IP on
August 30, 2004, five days after Orion filed the first of the
Texas Suits. Id. at 956. Documentation reflecting this
transfer was produced to Chrysler in discovery in the
Texas Suits. See id.In early February of 2006, after a merger with Cae-
lum IP, Constellation IP acquired rights to the ’658 pa-
tent, with the final assignment being recorded in the
United States Patent and Trademark Office on February
14, 2006. See id. The next day, DaimlerChrysler Corpo-
ration and Orion signed the 2006 Settlement Agreement,
ending the Texas Suits. Id. at 955. 12 Under that Agree-
ment, Orion received $2.3 million. Id. The Warranty
Provision at issue in this appeal, found in Article 8.1(a) of
the 2006 Settlement Agreement, recites, in part:
Orion represents and warrants as of the Effective
Date that . . . (iii) it has not assigned or otherwise
transferred to any other Person any rights to any
causes of action, damages, or other remedies, or
12 Although the issue is not addressed in the brief-
ing, Mercedes appears to receive the benefit of the 2006
Settlement Agreement based on its corporate relationship
to DaimlerChrysler Corporation.
36 TAURUS IP v. DAIMLERCHRYSLER
any Orion Patents, claims counterclaims or de-
fenses, relating to the Litigation.
See id. at 955–56. “Effective Date” was defined in the
2006 Settlement Agreement as February 15, 2006. The
definition of “Orion Patents” in the 2006 Settlement
Agreement did not explicitly include the ’658 patent. Id.
at 956. On March 10, 2007, five days after Taurus was
formed and ten days before it filed the DaimlerChrysler
Patent Suit, Constellation IP assigned its rights in the
’658 patent to Taurus. See id. As manager of Constella-
tion IP, Spangenberg authorized the assignment to Tau-
rus. Id. In the counterclaim relevant to this appeal,
Chrysler and Mercedes asserted that Orion breached the
Warranty Provision by transferring the ’658 patent prior
to it being asserted in the DaimlerChrysler Patent Suit.
2. PROCEEDINGS IN THE DISTRICT COURT
a. PERSONAL JURISDICTION
In its Jurisdiction Decision, the district court ad-
dressed a motion to dismiss asserting that it did not have
personal jurisdiction over Orion and Spangenberg—a
Texas corporation and Texas resident, respectively. First,
the district court determined that Orion, Taurus (a Wis-
consin company), and other entities are merely alter egos
of Spangenberg, and thus (under the alter ego doctrine)
should be considered one and the same for jurisdictional
purposes. Jurisdictional Decision, 519 F. Supp. 2d at918–20. Based on this finding and Taurus’s consent to
personal jurisdiction by filing the DaimlerChrysler Patent
Suit, the district court found personal jurisdiction over
Orion and Spangenberg proper. See id. at 921.
Second, and in the alternative, the district court also
found personal jurisdiction over Spangenberg proper
under subsection 8 of Wisconsin’s long-arm statute, based
on his role as managing member of various Wisconsin
corporations, including Taurus. Id. at 921–22; see also
TAURUS IP v. DAIMLERCHRYSLER 37
Wis. Stat. Ann. § 801.05(8) (West 2008). 13 Finding that
Spangenberg established minimum contacts by forming
Taurus as a Wisconsin corporation and by directing
Taurus to file the DaimlerChrysler Patent Suit in Wis-
consin, the district court determined that its assertion of
personal jurisdiction over Spangenberg would not violate
due process. Jurisdictional Decision, 519 F. Supp. 2d at922–23.
B. THE MERITS OF THE BREACH OF WARRANTY SUIT
In the same decision, the district court addressed the
merits, denying a motion to dismiss the Breach of War-
ranty Counterclaim. Jurisdiction Decision, 519 F. Supp.
2d at 925–26. First, the district court noted that the
Warranty Provision clearly distinguished between “rights
to any causes of action . . . relating to the [Texas] Litiga-
tion” and “Orion Patents, claims, counterclaims, or de-
fenses.” Id. at 926. The district court interpreted
“relating to the [Texas] Litigation” as “arising from the
same set of facts.” Id. In that regard, it found that the
accused technology in the Texas Suits was identical to
that accused in the DaimlerChrysler Patent Suit, i.e.,
Chrysler’s and Mercedes’s websites. Id. With that, the
court concluded that the Breach of Warranty Counter-
claim “stated a claim that Orion . . . assigned a right to a
cause of action ‘related’ to the Texas [Suits] when it
13 This subsection provides personal jurisdiction in
the following circumstance: “Director, officer or man-
ager of a domestic corporation or limited liability
company. In any action against a defendant who is or
was an officer, director or manager of a domestic corpora-
tion or domestic limited liability company where the
action arises out of the defendant’s conduct as such of-
ficer, director or manager or out of the activities of such
corporation or limited liability company while the defend-
ant held office as a director, officer or manager.”
38 TAURUS IP v. DAIMLERCHRYSLER
assigned the ’658 patent because it could have brought a
claim of infringement for the ’658 patent under the same
set of facts crucial to alleged infringement in the Texas
[Suits].” Id.Months later, in the Summary Judgment Decision,
the district court again addressed the Breach of Warranty
Counterclaim, denying a motion for summary judgment
filed by Orion and Spangenberg. The district court found
triable issues of fact as to whether Orion’s transfer of the
’658 patent constituted breach. Summary Judgment
Decision, 534 F. Supp. 2d at 871, 873, 881 ¶ 10. In addi-
tion, it rejected, as inappropriate on summary judgment,
the argument that Chrysler and Mercedes knew or should
have known about the transfer of the ’658 patent, thereby
allegedly undermining the Breach of Warranty Counter-
claim. Id. at 870.
The Breach of Warranty Counterclaim then proceeded
to trial, where a jury found for Chrysler and Mercedes.
Post-Trial Decision, 559 F. Supp. 2d at 957. After trial,
the district court imposed damages against Orion in the
amount of $3,839,416.37—comprising (1) $2,487,328.85 as
damages for Orion’s breach, based on the attorney fees
incurred in defending against the DaimlerChrysler Patent
Suit, and (2) $1,352,087.52 in attorney fees for prosecu-
tion of the Breach of Warranty Suit, based on § 38.001 of
the Texas Civil Practice and Remedies Code, which,
according to the district court, permits attorney fees in
breach of contract actions involving Texas contracts. 14
See Post-Trial Decision, 559 F. Supp. 2d at 961–66, 976.
14 Section 8.5 of the 2006 Settlement Agreement re-
cites that the “[a]greement and matters connected with
the performance thereof shall be construed, interpreted,
applied and governed in all respects in accordance with
the laws of the United States of America and the State of
TAURUS IP v. DAIMLERCHRYSLER 39
As part of its analysis, the district court determined
that Chrysler and Mercedes were not required to put on
expert testimony regarding the reasonableness of the fees
incurred in defending the DaimlerChrysler Patent Suit
because the relevant Texas law was evidentiary, not
substantive. Id. at 962–64. In addition, the district court
took judicial notice of the reasonableness of the fees for
prosecution of the Breach of Warranty Suit. Id. at 964–
65. The district court also found that Orion and Span-
genberg did not have a right to a jury trial on contract
damages, and, if they did, that right had been waived. Id.
at 962.
C. MATTERS RELATED TO THE BREACH OF WARRANTY SUIT
(i) EXPERT TESTIMONY ON DAMAGES
Approximately a week before trial, Orion and Span-
genberg moved to strike the damages claim in the Breach
of Warranty Suit and dismiss that action, arguing that
Chrysler and Mercedes had failed to identify an expert to
testify on the reasonableness of the attorney fees incurred
in defending against the DaimlerChrysler Patent Suit,
which was required, according to Orion and Spangenberg,
under Texas law. In opposition, Chrysler and Mercedes
argued that the attorney fees for defending against the
DaimlerChrysler Patent Suit could be properly estab-
lished in a post-trial filing under Federal Rule of Civil
Procedure 54. See Chrysler, LLC and Mercedes-Benz
USA, Inc. Opposition to Defendants’ Motion to Strike and
Motion to Dismiss the Action, Chrysler, LLC v. Orion IP,
LLC, No. 07-cv-0158 (W.D. Wisc. Mar. 5, 2008), ECF No.
445.
The district court did not rule on the motion to strike
prior to trial. On the second day of trial, it did, however,
Texas, without reference to conflict of laws principles.”
See J.A. 9286.
40 TAURUS IP v. DAIMLERCHRYSLER
echo the underlying concern that expert witnesses had not
yet been identified but appeared necessary under Texas
law. The next day, though, the district court reversed
course, stating that Chrysler and Mercedes could present
their attorney fees to the jury using a client representa-
tive and without the need for expert testimony on the
reasonableness issue. Based on the alleged failure of
Chrysler and Mercedes to produce certain materials
related to fees, Orion and Spangenberg requested that the
process of assessing the reasonableness of fees be ad-
dressed not at trial, but by filings after trial. Counsel for
Chrysler and Mercedes agreed, stating that “we can . . .
handle this on papers.” With that agreement in place,
Chrysler and Mercedes did not put on evidence on damag-
es for the Breach of Warranty Counterclaim.
A few weeks after trial, Chrysler and Mercedes filed
various declarations, legal bills, and other documents
seeking to demonstrate the reasonableness of their
claimed attorney fees. Included was the declaration of a
partner at a law firm in Tyler, Texas. In his declaration,
the attorney reviewed his “expert assignment” and pro-
vided his “expert opinion as to the reasonableness of
attorneys’ and experts’ fees and costs, as claimed in
Chrysler’s and MBUSA’s Petition for Fees and Expenses
for their successful contract breach claims and under 35
U.S.C. § 285.” In the brief filed in support of their claim
for attorney fees, Chrysler and Mercedes stated that their
opposition to Orion and Spangenberg’s motion to strike
had “confirmed that the appropriate procedure for resolv-
ing the amount of damages in this federal case is a motion
under Rule 54 of the Federal Rules of Civil Procedure.”
J.A. 8084 (citing Rissman v. Rissman, 229 F.3d 586, 588
(7th Cir. 2000); McGuire v. Russell Miller, Inc., 1 F.3d
1306, 1313–15 (2d Cir. 1993); Resolution Trust Corp. v.
Marshall, 939 F.2d 274, 279 (5th Cir. 1991)).
TAURUS IP v. DAIMLERCHRYSLER 41
(ii) THE IMPOSITION OF EVIDENTIARY SANCTIONS FOR
WITNESS TAMPERING
On March 11, 2008, three days before trial, the court
held a hearing and determined that Spangenberg and an
attorney named Patrick Anderson, who was working for
one of Spangenberg’s companies, had recently engaged in
witness tampering. Post-Trial Decision, 559 F. Supp. 2d
at 957. At the March 11 hearing, the district court made
various factual findings, which are set forth in the Post-
Trial Decision, 559 F. Supp. 2d at 971–73, and, for suffi-
cient background, are summarized here.
Before graduating from law school in 2005, Patrick
Anderson was employed by a law firm in Detroit, which
placed him in a temporary position with Chrysler as a
patent agent working on patent prosecution. Id. at 971.
Anderson left his contract position at Chrysler and re-
turned to his firm in May of 2006, with the understanding
that everything he learned during his time at Chrysler
was confidential. Id. In the fall of 2006, Anderson sent
his resume, which included his experience with Chrysler,
to an attorney working at Intellectual Property Naviga-
tion, another of Spangenberg’s business entities. Id.Anderson interviewed for an attorney position but did not
receive a job offer at that time. Id. In the fall of 2007,
after the district court denied the motion to dismiss for
lack of personal jurisdiction filed by Orion and Spangen-
berg, Anderson received a call from Spangenberg with a
job offer. Id.On March 6, 2008, the district court directed Orion
and Spangenberg to make a written offer of proof as to
what, if anything, Chrysler and Mercedes knew about the
’658 patent before the 2006 Settlement Agreement was
signed. 15 Id. That same evening, Spangenberg called
15 In the district court, Orion and Spangenberg ar-
gued that, under Texas law, a party alleging breach of an
42 TAURUS IP v. DAIMLERCHRYSLER
Anderson and told him that Sean Butler, one of Chrysler’s
potential witnesses, was going to commit perjury in his
testimony relating to the reliance issue. Id. at 972.
Spangenberg reminded Anderson that Butler and Ander-
son had worked together at Chrysler. Id. In addition,
Spangenberg suggested that it may “cause some kind of
problems” for Anderson to not take steps to “deal with”
the potential perjury. Id.By the following day, to familiarize himself with the
relevant facts, Anderson had read the 73-page Summary
Judgment Decision, researched the local ethics rules,
contacted a state bar hotline and an ethics attorney, and
drafted a letter to Butler. Id. Then, Anderson called
Butler and asked whether he would be testifying for
Chrysler. Id. Butler told Anderson that decision was not
his to make. Id. Anderson then sent Butler the previous-
ly drafted letter, in which Anderson stated that, based on
his review of the Summary Judgment Decision, it ap-
peared that Chrysler is representing “that it was not
aware that the ’658 patent was transferred away from
Orion IP prior to the settlement.” Id. In the letter, An-
derson “reminded” Butler of “certain facts,” including
Anderson’s obligation under the Michigan ethics rules to
persuade a former client to testify truthfully, to take
remedial measures if the client refuses, and to report
conduct that “raises a substantial question to a lawyer’s
fitness to practice law.” Id. Anderson continued: “Please
contact me and assure me that you will testify truthfully
on all matters asked during your testimony, no later than
9AM, Monday March 10, 2008.” Id. Anderson did not
reveal his employer to Butler. Id. at 972–73.
express warranty must show reliance on the warranty
provision, which Chrysler and Mercedes arguably could
not have shown if they knew that Orion had previously
transferred the ’658 patent.
TAURUS IP v. DAIMLERCHRYSLER 43
The district court found that Anderson had drafted
the letter and made the call to Butler on Spangenberg’s
office equipment, but that Anderson had not consulted
with Spangenberg or anyone else prior to contacting
Butler. See id. at 973. Anderson also drafted a declara-
tion for the court, stating that he believed that Chrysler
and Mercedes were untruthful in their interrogatory
response answering that their only analyses of the ’658
patent were conducted after the filing of the Daim-
lerChrysler Patent Suit. Id. The declaration was filed in
support of Orion and Spangenberg’s offer of proof at
approximately 1:30 a.m. on March 10, 2008, several hours
before the deadline Anderson had set in the letter to
Butler. Id. Later that same day, Chrysler and Mercedes
filed a motion seeking to exclude Anderson’s testimony
from trial and requesting a hearing regarding Anderson’s
recent conduct. The district court granted the request,
and held the hearing on March 11, 2008.
In an open portion of the March 11 hearing, the court
made the findings discussed above. Later, in a closed
portion of the hearing (attended only by counsel for
Chrysler and Mercedes to protect allegedly confidential
information), the district court found that, insofar as it
spoke to Chrysler’s prior knowledge of the ’658 patent,
Anderson’s declaration was based on a search relating to
the ’658 patent carried out more than two years before
Anderson contacted Butler. See id. The district court
found that, while Anderson was working at Chrysler, he
“was asked to run a search for a particular outcome, and
for a particular reason.” Id. 16 The district court found
that Anderson did not document that search, and that his
work computer did not contain evidence of such a search.
16 Although the district court did not release an un-
redacted transcript from the closed hearing, the Post-
Trial Decision did contain certain information regarding
Anderson’s testimony.
44 TAURUS IP v. DAIMLERCHRYSLER
Id. With these findings, the district court seemed to draw
into question the sufficiency of Anderson’s basis for con-
tacting Butler.
Based on these factual findings, the district court
found clear and convincing evidence of sanctionable
behavior for two reasons See id. at 974. First, the district
court concluded that “Anderson’s communication with
Butler was designed to intimidate Butler and influence
his testimony.” Id. Second, the court found that “Span-
genberg’s relationship with Anderson and his involvement
in Anderson’s witness tampering show that Spangenberg
intended Anderson to improperly influence Butler’s
testimony and that he put Anderson up to unethical
behavior for Spangenberg’s (and Orion’s) benefit.” Id.The district court found two “problems” with Spangen-
berg’s call to Anderson: (1) Anderson should have been
behind a “Chinese Wall,” based on his prior employment
with Chrysler, and (2) Spangenberg’s suggestion that
Anderson call Butler was “manipulative and improper”
because of Anderson’s employment with Spangenberg. Id.Finding Spangenberg’s conduct sanctionable, the dis-
trict court precluded Orion and Spangenberg from evok-
ing testimony regarding Chrysler’s or Mercedes’s alleged
knowledge of the transfer of the ’658 patent. Id. at 975.
With that, the district court essentially prevented Orion
or Spangenberg from asserting that Chrysler and Mer-
cedes did not rely on the Warranty Provision. See id.According to Orion and Spangenberg, if Chrysler and
Mercedes did not rely on the warranty provision, Orion
could not be found liable for breach of the Settlement
Agreement.
In the Post-Trial Decision, the district court denied a
motion for reconsideration of the finding of witness tam-
pering and the sanction imposed. Post-Trial Decision, 559
F. Supp. 2d at 970–75. Soon after the Post-Trial Decision,
the district court issued a brief order denying judgment as
TAURUS IP v. DAIMLERCHRYSLER 45
a matter of law as to liability and damages for the Breach
of Warranty Counterclaim, as well as on the sanctions
issue. Orion and Spangenberg now appeal (1) the finding
of personal jurisdiction over them, (2) the finding of
liability on the Breach of Warranty Counterclaim, (3) the
award of damages and attorney fees based on the Breach
of Warranty Counterclaim, and (4) the finding of witness
tampering and the evidentiary sanction imposed. We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
B. DISCUSSION
1. PERSONAL JURISDICTION
We first address whether the district court properly
exercised personal jurisdiction over Orion (a Texas limited
liability corporation) and Spangenberg (a Texas resident).
Orion and Spangenberg argue that the alter ego doctrine,
under either Texas or Wisconsin law, did not provide a
proper basis for the exercise of personal jurisdiction by
the district court. First, they address the general re-
quirement of control under both states’ law. According to
Orion and Spangenberg, the district court failed to show
how any control exercised by Spangenberg over Taurus
related to an alleged unjust act by Taurus because Taurus
was not formed at the time of the 2006 Settlement
Agreement. Similarly, Orion and Spangenberg assert
that the unity of two entities—i.e., Spangenberg and
Taurus or Spangenberg and Orion—required to pierce the
corporate veil under Texas law was not present.
Next, they assert that the facts do not show the fraud,
injustice, or dishonest act generally required under Texas
and Wisconsin law. Specifically, Orion and Spangenberg
assert that the district court erroneously found “suspi-
cious” cash flow and improperly faulted Taurus’s low
capitalization, see Jurisdictional Decision, 519 F. Supp. 2d
at 920, even though no laws mandate a required amount
of capitalization. According to Orion and Spangenberg,
the requirement of fraud or injustice cannot be met by the
46 TAURUS IP v. DAIMLERCHRYSLER
normal acts of a single manager acting separately with
respect to each business unit.
As to the required control under the alter ego doc-
trine, Chrysler and Mercedes argue that Spangenberg did
not need to use Taurus as his “personal cash box,” but,
under both Wisconsin and Texas law, only needed to have
asserted dominion over its internal policy and daily
business operations. Chrysler and Mercedes assert that,
for jurisdictional veil-piercing, the “injustice” required is
less than for substantive veil-piercing and that, here, the
injustice is found in “the attempt to use the corporate
façade to avoid the reach of the [2006] Settlement Agree-
ment by transferring the [’658] patent between allegedly
separate and distinct companies.”
Regarding the district court’s application of the Wis-
consin long-arm statute, Orion and Spangenberg assert
that, under the relevant subsection, the action must arise
out of conduct as a manager of a Wisconsin company.
They argue that the Breach of Warranty Counterclaim
cannot arise out of Spangenberg’s conduct as manager of
Taurus because Taurus was not formed until 2007, after
the 2006 Settlement Agreement was signed. Chrysler
and Mercedes respond that the district court properly
found personal jurisdiction over Spangenberg under
subsection 8 of the Wisconsin long-arm statute, and also
argue that Orion is subject to jurisdiction under subsec-
tion (5)(a) of that statute 17 because the Breach of Warran-
ty Suit arose from the “promise” Orion made in the
Warranty Provision.
17 This subsection provides personal jurisdiction
over an entity in an action that “[a]rises out of a promise,
made anywhere . . . by the defendant to perform services
within this state . . . .” Wis. Stat. Ann. 801.05(5)(a) (West
2008).
TAURUS IP v. DAIMLERCHRYSLER 47
Chrysler and Mercedes also maintain that Orion and
Spangenberg waived any arguments against personal
jurisdiction by “actively participating in the Wisconsin
Litigation” and by not addressing jurisdiction at trial.
Orion and Spangenberg respond that Chrysler and Mer-
cedes have never argued waiver before this appeal and
that Orion and Spangenberg have continuously asserted
lack of jurisdiction throughout the Breach of Warranty
Suit.
This court reviews the issue of personal jurisdiction
with respect to non-patent claims under the law of the
regional circuit. See Silent Drive, Inc. v. Strong Indus.,
Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003). The Seventh
Circuit reviews de novo the denial of a motion to dismiss
for lack of personal jurisdiction. See Illinois v. Hemi Gp.
LLC, 622 F.3d 754, 756 (7th Cir. 2010). In such situa-
tions, any factual inferences must be drawn in favor of the
non-movant. See Textor v. Bd. of Regents of N. Illinois
Univ., 711 F.2d 1387, 1393 (7th Cir. 1983).
“A federal district court in a diversity case has per-
sonal jurisdiction over a non-consenting, nonresident
defendant if and only if a court of the state in which the
district court sits would have jurisdiction (in our case
Wisconsin).” See Giotis v. Apollo of the Ozarks, Inc., 800
F.2d 660, 664–65 (7th Cir. 1986). The Wisconsin Supreme
Court has recognized the alter ego doctrine as an excep-
tion to the presumed “nonliability” of a shareholder,
director, or officer of a corporate entity. Under that
doctrine, a state court can, in certain circumstances,
assert personal jurisdiction over such a person. Consum-
er’s Co-op of Walworth Cnty. v. Olsen, 419 N.W.2d 211,
217–18 (Wis. 1988). To assess whether the district court
properly pierced Taurus to reach Spangenberg, as alter
egos of each other, we will (as would a Wisconsin state
court) apply the law of Wisconsin, the state of Taurus’s
incorporation. See Restatement (Second) of Conflict of
Laws § 309 (1971) (“The local law of the state of incorpo-
48 TAURUS IP v. DAIMLERCHRYSLER
ration will be applied to determine the existence and
extent of a director’s or officer’s liability to the corpora-
tion, its creditors and shareholders . . . .”).
“Although the alter ego doctrine is typically employed
to pierce the corporate veil of a controlled entity to reach
the assets of the controlling party . . . the doctrine can
also be applied in reverse to reach the assets of a con-
trolled entity. It is particularly appropriate to apply the
alter ego doctrine in ‘reverse’ when the controlling party
uses the controlled entity to hide assets or secretly to
conduct business to avoid the pre-existing liability of the
controlling party.” Olen v. Phelps, 546 N.W.2d 176, 181
(Wis. Ct. App. 1996) (quoting Select Creations, Inc. v.
Paliafito Am., Inc., 852 F. Supp. 740, 774 (E.D. Wis.
1994)); Cappuccitti v. Gulf Indus. Prods., Inc., 222 S.W.3d
468, 481 (Tex. App. 2007) (recognizing reverse veil-
piercing under Texas law in a jurisdictional context); see
also Zahra Spiritual Trust v. United States, 910 F.2d 240,
243–44 (5th Cir. 1990) (in a liability context, recognizing
that Texas courts can reverse pierce based on a finding of
alter egos); see generally 1 William W. Fletcher, Cyclope-
dia of the Law of Corporations § 41.70 (“In a case of
‘reverse piercing of the corporate veil,’ the plaintiff seeks
to hold the corporation liable for the actions of its share-
holder.”). To assess whether the district court properly
performed a reverse veil-piercing to reach Orion (a Texas
corporation) via Spangenberg (a Texas resident), we will
(as would a Wisconsin state court) apply the law of Texas.
See Restatement (Second) of Conflict of Laws § 302 (1971);
see also Select Creations, 852 F. Supp. at 774 (“A court
applies the law of the state of incorporation of the con-
trolled corporation to determine whether the corporate
form should be disregarded.”).
We first turn to the district court’s piercing of the cor-
porate veil to assert personal jurisdiction over Spangen-
berg as an alter ego of Taurus. Under Wisconsin law, the
alter ego doctrine requires proof of:
TAURUS IP v. DAIMLERCHRYSLER 49
(1) Control, not mere majority or complete stock
control, but complete domination, not only of fi-
nances but of policy and business practice in re-
spect to the transaction attacked so that the
corporate entity as to this transaction had at the
time no separate mind, will or existence of its
own;
(2) Such control must have been used by the de-
fendant to commit fraud or wrong, to perpetrate
the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention
of plaintiff’s legal rights; and
(3) The aforesaid control and breach of duty must
proximately cause the injury or unjust loss com-
plained of.
Consumer’s Co-op, 419 N.W.2d at 217–18. Orion and
Spangenberg assert error with the district court’s findings
as to the first two elements, which we will refer to as the
Control element and the Unjust Act element, respectively.
As to the Control element, we must first clarify the
identity of the “transaction attacked.” Contrary to the
position taken by Orion and Spangenberg, the relevant
transaction is not the signing of the 2006 Settlement
Agreement or prior negotiations. These are not relevant
for precisely the reason raised by Orion and Spangen-
berg—Taurus was not yet in existence. Instead, the
relevant transactions are Taurus’s formation in Wisconsin
and its filing of the DaimlerChrysler Patent Suit because
those were, given the totality of the circumstances, the
allegedly unjust acts during which Spangenberg dominat-
ed and controlled Taurus. See Consumer’s Co-op, 419
N.W.2d at 217–18. As found by the district court, Span-
genberg is the owner and managing member of Taurus,
and authorized (1) its formation in Wisconsin, (2) the
assignment of the ’658 patent to it, (3) its initial capitali-
zation, and (4) the filing by it of the DaimlerChrysler
50 TAURUS IP v. DAIMLERCHRYSLER
Patent Suit. See Jurisdiction Decision, 519 F. Supp. 2d at
917. In addition, Spangenberg manages Taurus on behalf
of its parent entity, which is owned by Spangenberg’s wife
and son. See id. Moreover, as found by the district court,
“[i]t is highly unlikely that [Taurus] could have engaged
in an independent decision to file” the DaimlerChrysler
Patent Suit without Spangenberg. See Jurisdiction
Decision, 519 F. Supp. 2d at 920.
Based on the record before us, we conclude that Span-
genberg had “complete domination” over all aspects of the
relevant transactions, so that Taurus had “no separate
mind, will or existence of its own.” See Consumer’s Co-op,
419 N.W.2d at 217–18. Indeed, we can discern no aspect
of Taurus’s business affairs not controlled in their entire-
ty by Spangenberg. Although, as argued by Orion and
Spangenberg, this level of control by a single manager is
not improper in its own right, it is sufficient to satisfy this
element of the analysis. See id. at 218 (“[I]t is apparent
that just as control, absent a showing of injustice, would
not justify exception to the general rule of corporate
nonliability, injustice, absent the establishment of control,
would not constitute adequate grounds to pierce the
corporate veil.”).
As to the Unjust Act element, we agree with Chrysler
and Mercedes, who have framed the relevant contraven-
tion of their rights as Spangenberg’s “attempt to use the
corporate façade to avoid the reach of the [2006] Settle-
ment Agreement by transferring the [’658] patent be-
tween allegedly separate and distinct companies” and, we
would add, controlling Taurus to file suit asserting that
patent. In other words, through the acts discussed above,
Spangenberg sought to use Taurus to assert a patent that
Orion, under the 2006 Settlement Agreement, was argua-
bly prohibited from asserting against Chrysler and Mer-
cedes. With these acts, Spangenberg hoped to nullify the
Warranty Provision “in contravention of [Chrysler’s and
Mercedes’s] legal rights.” See Consumer’s Co-op, 419
TAURUS IP v. DAIMLERCHRYSLER 51
N.W.2d at 218. For these reasons, the district court
properly found personal jurisdiction over Spangenberg as
an alter ego of Taurus.
With personal jurisdiction over Spangenberg estab-
lished, we turn to the other half of our jurisdictional
analysis and assess whether the district court properly
applied Texas law to reverse pierce from Spangenberg to
Orion. We conclude that it did. Texas law permits find-
ing jurisdiction under the alter ego doctrine “when there
is [1] such unity between a corporation and an individual
that the separateness of the corporation has ceased and
[2] asserting jurisdiction over only the corporation would
result in an injustice.” Cappuccitti, 222 S.W.3d at 481; see
also Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228
(Tex. 1990) (citing Castleberry v. Branscum, 721 S.W.2d
270, 272 (Tex. 1986)). 18 This same standard also applies
to reverse-piercing situations to assess whether asserting
jurisdiction over only the individual (as opposed to the
corporation) would result in injustice. See Cappuccitti,
222 S.W.3d at 481. Because of the similarities between
Wisconsin and Texas law, we will also refer to the ele-
ments set forth in Cappuccitti as the Control element and
the Unjust Act element, respectively. See Bolloré S.A. v.
Import Warehouse, Inc., 448 F.3d 317, 325 (5th Cir. 2006)
18 The parties have stated, we think correctly, that
the tests under Texas and Wisconsin law are all but
identical. Indeed, in its seminal decision on this issue,
the Wisconsin Supreme Court set forth an alternative
two-prong test that it acknowledged was “essentially
identical” to its three-prong test. See Consumer’s Co-op,
419 N.W.2d at 218 n.5. We note that this alternative test
is, in turn, essentially identical to the standard under
Texas law. Cf. id. with Mancorp, 802 S.W.2d at 228.
52 TAURUS IP v. DAIMLERCHRYSLER
(quoting Castleberry, 721 S.W.2d at 272)19 (including as
one factor relevant in the alter ego analysis, “the amount
of financial interest, ownership and control the individual
maintains over the corporation”) (emphasis added).
As to the Control element, Spangenberg exerted con-
trol over Orion similar to that he exercised over Taurus.
Specifically, as the manager of Orion, Spangenberg coor-
dinated the transfer of the ’658 patent from a predecessor
of Orion to Taurus, via two other controlled entities.
Jurisdiction Decision, 519 F. Supp. 2d at 913–17. In
addition, Spangenberg authorized the predecessor of
Orion to enter into the 2006 Settlement Agreement and
authorized that entity’s subsequent merger to create
Orion. Id. at 915–17. Moreover, Spangenberg and Orion
entered into a license agreement for the ’658 patent with
Harley Davidson in 2006, even though Orion’s predeces-
sor had already transferred its ownership in that patent
prior to the negotiations. Id. at 917; see also Dainippon
Screen Manuf. Co. v. CFMT, Inc., 142 F.3d 1266, 1270
(Fed. Cir. 1998) (finding jurisdiction over an out-of-state
patent holding company under a long-arm statute, in
part, because counsel for the in-state parent made state-
ments improperly indicating ownership of the patents by
the parent during negotiations). Further, Spangenberg
manages Orion, like Taurus, on behalf of a parent entity
owned by Spangenberg’s wife and son. Jurisdiction
Decision, 519 F. Supp. 2d at 917. Based on the record
before us, we conclude that Spangenberg and Orion were
united as one with respect to all matters relevant here.
19 As noted in various Texas decisions, Castleberry
was superseded by statute only to the extent that failure
to observe corporate formalities is no longer a factor in
proving alter ego. See, e.g., Aluminum Chems. (Bolivia),
Inc. v. Bechtel Corp., 28 S.W.3d 64, 67 n.3 (Tex. App.
2000).
TAURUS IP v. DAIMLERCHRYSLER 53
We now turn to the Unjust Act element. Under Texas
law, the “injustice” relevant to that element is the possi-
bility of a party being unable to collect on a valid judg-
ment. Mancorp, Inc. v. Culpepper, 836 S.W.2d 844, 846
(Tex. App. 1992). That is the situation here. Without
jurisdiction over Orion—successor to the signatory of the
2006 Settlement Agreement—the district court could not
provide the remedy sought by Chrysler and Mercedes,
namely monetary damages for the Breach of Warranty
Counterclaim. Indeed, that counterclaim is, in effect, a
license-related defense to the infringement alleged in the
DaimlerChrysler Patent Suit. See Dainippon Screen, 142
F.3d at 1271 (rejecting the contention, in a long-arm
statute jurisdictional analysis, that “a parent company
can incorporate a holding company in another state,
transfer its patents to the holding company, . . . and
threaten its competitors with infringement” without fear
of personal jurisdiction). Thus, this element has been
satisfied as well. For these reasons, we affirm the district
court’s finding of personal jurisdiction over both Spangen-
berg and Orion under the alter ego doctrine.
Having found the exercise of jurisdiction proper under
the alter ego doctrine, we need not address the alternative
basis for finding jurisdiction over Spangenberg, the Wis-
consin long-arm statute, see Jurisdiction Decision, 519 F.
Supp. 2d at 921–23, and we need not address Chrysler’s
and Mercedes’s arguments based on waiver and other
subsections of the long-arm statute.
2. BREACH OF WARRANTY
We now address the jury verdict finding breach of the
Warranty Provision. Orion and Spangenberg argue that
the district court should have granted judgment as a
matter of law overturning the verdict because the court
improperly broadened the scope of the Warranty Provi-
sion to include the ’658 patent. In their view, the court
should have taken into account that (1) the ’658 patent
54 TAURUS IP v. DAIMLERCHRYSLER
was transferred eighteen months before settlement of the
Texas Suits, (2) Orion disclosed the transfer of the ’658
patent in discovery in the Texas Suits, and (3) Chrysler
and Mercedes allegedly knew the transfer had occurred.
According to Orion and Spangenberg, the court’s ruling
leads to the absurd result that they made, and Daim-
lerChrysler Corporation accepted, a warranty all knew
was breached at the time the 2006 Settlement Agreement
was signed. Orion and Spangenberg also assert that the
district court erred by not granting summary judgment in
their favor because a breach of express warranty claim in
Texas requires showing reliance on the warranty, which
could not have been shown based on Chrysler’s and Mer-
cedes’s alleged knowledge of the transfer of the ’658
patent.
Chrysler and Mercedes respond that the district court
did not hold that the Warranty Provision included the
’658 patent, but that, rather, it determined that the
phrase “relating to the Texas Litigation,” found in that
provision, included “any cause of action arising from the
same set of facts.” According to Chrysler and Mercedes,
the evidence shows that Orion had more knowledge of the
transferred patents, including the ’658 patent, than they
had. Chrysler and Mercedes also argue that the jury
heard and rejected Orion’s and Spangenberg’s current
arguments. As to summary judgment, Chrysler and
Mercedes assert that, under Texas law, any reliance
requirement is satisfied when the warranty is incorpo-
rated into a final written contract.
We review denial of judgment as a matter of law un-
der the law of the regional circuit. Seachange Int’l, Inc. v.
C-COR, Inc., 413 F.3d 1361, 1367–68 (Fed. Cir. 2005).
The Seventh Circuit reviews de novo a denial of judgment
as a matter of law. Krippelz v. Ford Motor Co., 667 F.3d
1261, 1265 (Fed. Cir. 2012) (citing Waters v. City of Chi-
cago, 580 F.3d 575, 580 (7th Cir. 2009)). “Reversal is
warranted only if no reasonable juror could have found for
TAURUS IP v. DAIMLERCHRYSLER 55
the nonmoving party.” Waters, 580 F.3d at 580. We
review a denial of summary judgment under the law of
the regional circuit. Lexicon Med., LLC v. Northgate
Techs., Inc., 641 F.3d 1352, 1358 (Fed. Cir. 2011). The
Seventh Circuit also reviews a denial of summary judg-
ment de novo. Belcher v. Norton, 497 F.3d 742, 747 (7th
Cir. 2007). “A denial of a motion for summary judgment
may be appealed, even after a final judgment at trial, if
the motion involved a purely legal question and the
factual disputes resolved at trial do not affect the resolu-
tion of that legal question.” United Techs. Corp. v. Chro-
malloy Gas Turbine Corp., 189 F.3d 1338, 1344 (Fed. Cir.
1999) (citing Rekhi v. Wildwood Indus., Inc., 61 F.3d
1313, 1318 (7th Cir. 1995)).
We conclude that the district court properly denied
judgment as a matter of law on the Breach of Warranty
Counterclaim because a reasonable juror could have found
for Chrysler and Mercedes. We see no error in the district
court’s conclusion that “relating to the [Texas] Litiga-
tion[s]” includes causes of action involving the same set of
facts—here, the same or similar accused websites. Nota-
bly, the day before the jury verdict on this issue, Orion
and Spangenberg proposed post-trial jury instructions
linking issues “relating to the [Texas] Litigation[s]” with
issues involving “the same set of crucial facts.” J.A. 6018
(“When determining whether Orion’s transfer of the ’658
patent was ‘related to the Litigation,’ you should consider
whether the Wisconsin lawsuit (in which Taurus asserted
the ’658 patent) involved the same set of crucial facts that
were at issue in the Texas lawsuit (in which Orion assert-
ed the ’342 and ’627 patents).”). Further, contrary to
Orion’s and Spangenberg’s argument, this conclusion does
not lead to an absurd result because the record does not
establish that Chrysler or Mercedes had assessed the
scope of the ’658 patent and had concluded that it could be
asserted against the same websites accused in the Texas
Suits. The fact that those entities potentially knew or
56 TAURUS IP v. DAIMLERCHRYSLER
should have known about the transfer of the ’658 patent
does not necessarily mean that they understood the scope
of that patent, thereby implicating the Warranty Provi-
sion. For similar reasons, we see no error in the court’s
denial of summary judgment.
3. DAMAGES
We now turn to the attorney fees and damages im-
posed on Orion: (1) $1,352,087.52 in attorney fees for
prosecution of the Breach of Warranty Suit based on
§ 38.001 of the Texas Civil Practice and Remedies Code, 20
and (2) $2,487,328.85 for attorney fees incurred by Chrys-
ler and Mercedes in defending against the DaimlerChrys-
ler Patent Suit. Post-Trial Decision, 559 F. Supp. 2d at961–66, 976. The first is an award of traditional post-trial
attorney fees based on prevailing in the Breach of War-
ranty Suit. The second award, however, was based on the
jury’s finding that “Orion’s transfer of the ’658 patent
breached a warranty it had made with defendants in an
earlier settlement agreement and that the fees and ex-
penses defendants expended in defense of Taurus’s law-
suit resulted from that breach.” Post-Trial Decision, 559
F. Supp. 2d at 967. In other words, the jury found that
Orion’s breach of the Warranty Provision caused Chrysler
and Mercedes to incur the attorney fees in the Daim-
lerChrysler Patent Suit. Thus, although quantified in
terms of attorney fees, the second award is properly
viewed as damages for the Breach of Warranty Counter-
claim, not as post-trial attorney fees. Post-Trial Decision,
559 F. Supp. 2d at 962 (drawing a distinction between
“‘traditional’ attorney fees available to prevailing parties
20 This section states: “A person may recover rea-
sonable attorney’s fees from an individual or corporation,
in addition to the amount of a valid claim and costs, if the
claim is for: . . . (8) an oral or written contract.”
TAURUS IP v. DAIMLERCHRYSLER 57
in Texas breach of contract suits” and “attorney fees
available as damages”).
Orion and Spangenberg assert that the district court
erred in taking judicial notice of the amount of attorney
fees sought for prosecution of the Breach of Warranty Suit
rather than requiring expert testimony. In addition, they
argue that the district court erred by not applying Texas
law, which requires expert testimony to determine the
reasonableness of the attorney fees in defending the
DaimlerChrysler Patent Suit, because the requirement for
expert testimony is “substantive,” not merely “eviden-
tiary,” as found by the district court. According to Orion
and Spangenberg, Chrysler and Mercedes failed to put on
sufficient evidence (including expert testimony) at trial to
support damages, and cannot rely on post-trial submis-
sions.
Chrysler and Mercedes respond that the district court
correctly determined that the Texas law regarding ex-
perts was not binding because it was an evidentiary rule
not reflective of any substantive policy. In addition, they
argue that the bar for expert testimony was low, as coun-
sel for a party can provide expert testimony supporting
the reasonableness of attorney fees.
Finally, Orion and Spangenberg argue that the Sev-
enth Amendment guarantees a right to a jury trial on
damages in a breach of contract action. They also assert
that the cases relied on by the district court to avoid that
jury right do not apply here. According to Orion and
Spangenberg, the record makes clear that they did not
ask for a “paper trial” on damages, and instead consist-
ently requested a jury and demanded expert testimony.
In addition, they assert that they did not waive their right
to a jury trial and, thus, the district court erred in taking
judicial notice of the reasonableness of damages.
Chrysler and Mercedes respond that no jury right ex-
ists to an assessment of reasonable attorney fees. If such
58 TAURUS IP v. DAIMLERCHRYSLER
a right does exist, Chrysler and Mercedes assert that
Orion and Spangenberg waived their right.
The Seventh Circuit reviews a district court’s findings
regarding the sufficiency of proof for damages for clear
error. See Durasys, Inc. v. Leyba, 992 F.2d 1465, 1470
(7th Cir. 1993).
a. ATTORNEY FEES INCURRED IN PROSECUTING THE BREACH
OF WARRANTY SUIT
As to the approximately $1.35 million awarded under
§ 38.001 of the Texas Civil Procedures and Remedies Code
for fees incurred by Chrysler and Mercedes in prosecuting
the Breach of Warranty Suit, we conclude that (1) Orion
and Spangenberg did not have a right to a jury trial on
that issue, and (2) expert testimony was not required.
Although Orion and Spangenberg are correct that a party
has a Seventh Amendment right to a jury trial on damag-
es in a breach of contract case, a party is not entitled to a
jury trial on attorney fees assessed after trial. Compare
Ross v. Bernhard, 396 U.S. 531, 542 (1970) (stockholders
entitled to a jury trial where the complaint included
allegations of breach of contract and sought damages)
with Resolution Trust, 939 F.2d at 279 (“Since there is no
common law right to recover attorneys fees, the Seventh
Amendment does not guarantee a trial by jury to deter-
mine the amount of reasonable attorneys fees.”); see also
McGuire, 1 F.3d at 1313–15 (finding that a jury right
exists to assess whether attorney fees should be paid but
that a jury right does not exist to determine the amount of
the fee award). The amount now at issue was awarded
not as damages for breach, but as, in the words of the
district court, “‘traditional’ attorneys fees.” Post-Trial
Decision, 559 F. Supp. 2d at 962 (“Aside from the attorney
fees available as damages, defendants seek the ‘tradition-
al’ attorney fees available to prevailing parties in Texas
breach of contract suits.”). Thus, Orion and Spangenberg
TAURUS IP v. DAIMLERCHRYSLER 59
did not have a Seventh Amendment right to a jury on that
award.
Further, Orion and Spangenberg are incorrect that
“[e]xpert testimony also is required to support a district
court’s finding that attorneys’ fees are reasonable under
section 38.001.” See Orion Opening Br. 46. First, neither
of the decisions relied on even mentions that section of the
Texas Civil Practice and Remedies Code. See Gulf Paving
Co. v. Lofstedt, 188 S.W.2d 155, 161 (Tex. 1945); Twin
City Fire Ins. Co. v. Vega-Garcia, 223 S.W.3d 762, 770
(Tex. App. 2007). Second, in a decision directly address-
ing this issue, the United States Court of Appeals for the
Fifth Circuit explicitly rejected the argument that expert
testimony is required to recover attorney fees under
§ 38.001 for a breach of contract action. See Am. Home
Assurance Co. v. United Space Alliance, LLC, 378 F.3d
482, 493 (5th Cir. 2004). For these reasons, we conclude
that the district court did not err in awarding attorney
fees against Orion in the amount of $1,352,087.52.
b. DAMAGES INCURRED IN DEFENDING THE
DAIMLERCHRYSLER PATENT SUIT
We turn now to the damages of approximately $2.487
million awarded to Chrysler and Mercedes for fees in-
curred in defending against the DaimlerChrysler Patent
Suit. Based on the nature of this second award—breach
of contract damages quantified in the form of attorney
fees—we need not address the two primary issues disput-
ed by the parties: whether the Texas rule requiring expert
testimony should apply and whether Orion and Spangen-
berg had a right to a jury trial on this award. Instead, we
can dispose of this issue by assessing whether Chrysler
and Mercedes satisfied their burden to prove all elements
of the Breach of Warranty Counterclaim. We find that, by
not putting on any evidence at trial to prove damages
sustained based on the breach, Chrysler and Mercedes
failed to prove damages, a required element of a breach of
60 TAURUS IP v. DAIMLERCHRYSLER
contract claim under Texas law. See Domingo v. Mitchell,
257 S.W.3d 34, 39 (Tex. App. 2008).
As noted, a jury heard the issue of liability on the
Breach of Warranty Counterclaim. The jury did not,
however, hear evidence regarding the damages allegedly
flowing from that breach—i.e., the attorney fees in de-
fending against the DaimlerChrysler Patent Suit—
because Chrysler and Mercedes decided to only submit
that evidence in post-trial filings to the court. For the
reasons set forth below, the evidence submitted to the
district court cannot support the damages sought by—and
awarded to—Chrysler and Mercedes.
The post-trial filings under Rule 54, relied on by
Chrysler and Mercedes, cannot support this award be-
cause that rule does not apply when “the substantive law
requires those fees to be proved at trial as an element of
damages.” Fed. R. Civ. P. 54(d)(2)(A); see also Fed. R. Civ.
P. 54(d)(2) advisory committee’s notes to the 1993
Amendments (noting that subparagraph (A) “does not . . .
apply to fees recoverable as an element of damages, as
when sought under the terms of a contract; such damages
typically are to be claimed in a pleading and may involve
issues to be resolved by a jury”); J.R. Simplot v. Chevron
Pipeline Co., 563 F.3d 1102, 1115–16 (10th Cir. 2009)
(noting the distinction in Rule 54(d)(2)(A) and the com-
mittee’s notes in a case where the claimant “seeks the
[attorney] fees as the measure of damages resulting from .
. . breach, ‘as an element of damages under a contract’”).
That is precisely the situation here. This award was
attorney fees given as an element of damages based on
Orion’s breach of the Warranty Provision; it was not an
award for traditional attorney fees. Because their sub-
missions under Rule 54 were inadequate to prove this
award, Chrysler and Mercedes have no evidence from
trial to support the damages element of their Breach of
Warranty Counterclaim.
TAURUS IP v. DAIMLERCHRYSLER 61
We are not persuaded by the decisions previously cit-
ed by Chrysler and Mercedes to support their reliance on
a post-trial filing under Rule 54. Specifically, each of
those decisions involved post-trial recovery of traditional
attorney fees, not attorney fees used as a measure of
damages for, for example, a breach of contract. See Riss-
man, 229 F.3d at 588; McGuire, 1 F.3d at 1316; Resolution
Trust, 939 F.2d at 278–80. Further, in their opposition to
the motion to strike, Chrysler and Mercedes included a
summary chart, shown below, in which they conceded
that only a jury, not a post-trial filing under Rule 54, can
support the damages currently at issue. Specifically, as
set forth in the boxes added by this court, the chart shows
that for “[Attorney] Fees for defending Taurus’s Patent
Claims” sought as “Damages awarded for a breach of
contract under Texas law,” the issue is properly resolved
by a “Jury,” not by a “Court, under Rule 54.”
See Chrysler, LLC and Mercedes-Benz USA, Inc. Opposi-
tion to Defendants’ Motion to Strike and Motion to Dis-
miss the Action, supra, at 3 (boxes added); see also
Richardson v. Wells Fargo Bank, No. 4:11-cv-359, 2012
WL 6028912, at *4 (N.D. Tex. Dec. 3, 2012) (finding a
filing under Rule 54 inappropriate when “[t]he litigation
expenses defendants are seeking to recover quite clearly
are contractual damages to be proved at trial”).
Although it appears that Orion and Spangenberg did
indeed initiate the entry of evidence “on paper” rather
than at trial, Chrysler and Mercedes—who retained the
burden of proof on damages—agreed to this improper
62 TAURUS IP v. DAIMLERCHRYSLER
procedure. Because Chrysler and Mercedes did not set
forth sufficient evidence at trial to support this second
award of damages for its Breach of Warranty Counter-
claim, we reverse the district court’s denial of the motion
for judgment as a matter of law filed by Orion and Span-
genberg.
We thus reverse the judgment as a matter of law re-
garding the award of $2,487,328.85 in damages for the
Breach of Warranty Counterclaim, see Post-Trial Deci-
sion, 559 F. Supp. 2d at 966, but affirm the award of
$1,352,087.52 in attorney fees for prosecution of the
Breach of Warranty Suit. 21
4. SANCTIONS
The final issue in this appeal is the evidentiary sanc-
tions imposed based on the finding that Spangenberg
21 This ruling does not affect the award of
$1,644,906.12 under 35 U.S.C. § 285 based on attorney
fees incurred in defending against the DaimlerChrysler
Patent Suit. See Post-Trial Decision, 559 F. Supp. 2d at
976, ¶ 8. As set forth in the Post-Trial Decision, that
amount was awarded against Taurus and Orion, jointly
and severally. See id., ¶ 11. After this appeal, the
following judgments remain from the Post-Trial Decision:
(1) $1,644,906.12 under 35 U.S.C. § 285 payable to
Chrysler and Mercedes by Taurus and Orion, jointly and
severally, and (2) $1,352,087.52 under § 38.001 of the
Texas Civil Practice and Remedies Code payable to
Chrysler and Mercedes by Orion. See id. at 976; see also
Oral Argument at 32:15–34:00, Taurus IP, LLC v.
DaimlerChrysler Corp., Nos. 2008-1462, -1463, -1464, -
1465 (Fed. Cir. Feb. 7, 2013), available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
08-1462.mp3 (counsel for Chrysler and Mercedes
discussing apportionment of the damages awards between
Orion and Taurus to avoid “double-counting”).
TAURUS IP v. DAIMLERCHRYSLER 63
engaged in sanctionable witness tampering on the eve of
trial. Orion and Spangenberg argue that they did not
receive sufficient notice of the specific conduct for which
sanctions would be imposed before the imposition of those
sanctions. According to Orion and Spangenberg, the
district court erred by (1) only hearing from Anderson
prior to imposing sanctions, (2) not letting Spangenberg
or Orion testify or present evidence in their defense, and
(3) not allowing Spangenberg to see the testimony used
against him. Orion and Spangenberg also assert that the
district court abused its discretion in imposing sanctions
because it lacked clear and convincing evidence of sanc-
tionable conduct. According to Orion and Spangenberg,
the conduct for which they were sanctioned was required
by the applicable ethics rules.
As to the due process challenges, Chrysler and Mer-
cedes respond that Anderson was initially examined in
open court and that Orion had a chance to cross-examine
him there. As to the merits, Chrysler and Mercedes argue
that clear and convincing evidence supports a finding of
sanctionable conduct, especially given the efforts to hire
Anderson to access confidential information learned by
Anderson while employed by Chrysler.
A court may impose sanctions under its inherent pow-
ers “where the party ‘acted in bad faith, vexatiously,
wantonly, or for oppressive reasons.’” Corley v. Rosewood
Care Ctr., Inc., 142 F.3d 1041, 1058 (7th Cir. 1998) (quot-
ing Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991)).
Sanctionable conduct must be shown by clear and con-
vincing evidence. Ty Inc. v. Softbelly’s, Inc., 517 F.3d 494,
498–99 (7th Cir. 2008). In the Seventh Circuit, “the
imposition of sanctions requires that the party to be
sanctioned receive notice of the possible sanction and an
opportunity to be heard.” Larsen v. City of Beloit, 130
F.3d 1279, 1286 (7th Cir. 1997). As issues of law, a court
of appeals reviews de novo whether the district court
provided sufficient notice and opportunity to be heard. In
64 TAURUS IP v. DAIMLERCHRYSLER
re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir. 2000). A
district court’s decision to impose sanctions is reviewed
for an abuse of discretion. Johnson v. Cherry, 422 F.3d
540, 549 (7th Cir. 2005). “[R]arely will [a court of appeals]
disturb a district judge’s reasoned decision to choose a
particular level of sanctions.” Cleveland Hair Clinic, Inc.
v. Puig, 200 F.3d 1063, 1066 (7th Cir. 2000).
We first address the due process challenges raised.
Based on the record before us, we conclude that the
district court provided Orion and Spangenberg the neces-
sary notice and opportunity to be heard to satisfy due
process. The Seventh Circuit has held that notice of
potential sanctions can come from either the court or from
an opposing party. See In re Rimsat, Ltd., 212 F.3d at
1045. Here, a “Brief in Support of Motions in Limine and
Request for Hearing Regarding Witness Patrick Ander-
son,” filed under seal by Chrysler and Mercedes, J.A.
5931–59, set forth the possibility of and the bases for
evidentiary sanctions. See J.A. 5938 (“Dismissal (or
suppression of defenses) may be appropriate.”). Further,
despite its styling, that document sets forth significant
detail as to the specific conduct later found sanctionable
by the district court. See J.A. 5932–38. Cf. Johnson, 422
F.3d at 551–52 (noting that “the offending party must be
on notice of the specific conduct for which she is potential-
ly subject to sanctions”). In addition, the court held a
thorough evidentiary hearing regarding the issue, and
only relied on publicly available evidence (rather than
evidence from the closed hearing) to support its finding of
sanctionable conduct.
As to the opportunity to be heard, the Seventh Circuit
has held that that opportunity includes a chance for a
party to “present his or her case at a meaningful time and
in a meaningful manner, but [that] a hearing is not
invariably required before sanctions may be imposed.” In
re Rimsat, 212 F.3d at 1046. Here, before actually impos-
ing sanctions during the hearing, J.A.10226–27, the
TAURUS IP v. DAIMLERCHRYSLER 65
district court raised the possibility of sanctions and dis-
cussed the propriety of such sanctions with counsel for all
parties, J.A.10200–26. In that discussion, counsel did not
argue the proper level of sanctions, but instead set forth
arguments why sanctions should or should not be im-
posed. See id. For example, counsel for Orion and Span-
genberg argued that the conduct later found to be
sanctionable was necessary because Chrysler and Mer-
cedes knew Orion transferred the ’658 patent, but did not
admit so until right before trial. J.A.10205–07. In addi-
tion, counsel for Orion and Spangenberg argued that the
record merely shows lawyers “fulfilling their duty as they
understood that duty to be,” not engaging in sanctionable
conduct. J.A.10223–26. Following that discussion, the
district court imposed an evidentiary sanction—Orion and
Spangenberg would not be able to present “evidence on
the question of reliance.” J.A.10226–27. We conclude
based on the hearing transcript that Orion and Spangen-
berg had the opportunity to, and did, make arguments as
to whether or not sanctions should be imposed. In other
words, they had an opportunity to be heard “at a mean-
ingful time and in a meaningful manner.” See In re
Rimsat, 212 F.3d at 1046. The district court heard those
arguments and simply disagreed with them. That does
not, however, violate due process.
As to the merits, we conclude that the district court
did not abuse its discretion, but, instead, imposed appro-
priate and proportional evidentiary sanctions on Orion
and Spangenberg. We agree with the reasoning of the
district court, see Post-Trial Decision, 559 F. Supp. 2d at974–75, that Spangenberg engaged in sanctionable con-
duct. In particular, we are persuaded by the failure of
Spangenberg, an experienced attorney, to erect the ap-
propriate “Chinese wall” to preclude access to confidential
information, known by Anderson only based on his time
spent as an attorney with Chrysler.
66 TAURUS IP v. DAIMLERCHRYSLER
Further, we are not persuaded by the efforts to cloak
the sanctioned conduct in the guise of compliance with
applicable ethical obligations. Contrary to the argument
by Orion and Spangenberg, rule 3.3(b) of the Michigan
Rules of Professional Conduct did not require Anderson to
“dissuade Butler from what [Anderson] perceived could be
perjury.” See Orion Opening Br. 57. As set forth in the
first sentence of the cited comment, and inferable from
the text of rule 3.3(b) itself, that rule only “governs the
conduct of a lawyer who is representing a client in a
tribunal.” Anderson was not, however, representing
Orion or Spangenberg in the Breach of Warranty Suit,
and thus, had no obligation under the cited rule.
For these reasons, the district court did not violate
due process in its procedures and did not abuse its discre-
tion by imposing evidentiary sanctions against Orion and
Spangenberg. Thus, we affirm the district court as to this
issue.
CONCLUSION
For the reasons set forth above, we rule as follows: In
the appeals from the DaimlerChrysler Patent Suit,
(1) we affirm the district court’s constructions of all the
disputed claim terms; (2) we affirm the judgment of
invalidity of claims 16 and 27 of the ’658 patent; (3) we
affirm the judgment of noninfringement of the ’658 pa-
tent; and (4) we affirm the finding of an exceptional case
under 35 U.S.C. § 285 and the resulting award of damag-
es. In the appeals from the Breach of Warranty
Suit, (1) we affirm the denial of the motion to dismiss for
lack of personal jurisdiction over Orion and Spangenberg;
(2) we affirm liability for breach of the Warranty Provi-
sion; (3) we affirm the award of damages consisting of
attorney fees incurred by Chrysler and Mercedes in
prosecuting the Breach of Warranty Suit, but reverse the
award of damages consisting of attorney fees incurred by
Chrysler and Mercedes in defending against the Daim-
TAURUS IP v. DAIMLERCHRYSLER 67
lerChrysler Patent Suit; and (4) we affirm the imposition
of evidentiary sanctions based on witness tampering. We
do not reach the conditional cross-appeal raised by Chrys-
ler and Mercedes.
AFFIRMED-IN-PART AND REVERSED-IN-PART
COSTS
Costs to Chrysler and Mercedes.