Georgetown Rail Equipment Co. v. Holland L.P.

United States Court of Appeals
for the Federal Circuit
______________________
GEORGETOWN RAIL EQUIPMENT COMPANY,
Plaintiff-Appellee
v.
HOLLAND L.P.,
Defendant-Appellant
______________________
2016-2297
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 6:13-cv-00366-RWS,
Judge Robert Schroeder III.
______________________
Decided: August 1, 2017
______________________
DANA M. HERBERHOLZ, Parsons Behle & Latimer, Boi-
se, ID, argued for plaintiff-appellee. Also represented by
CHRISTOPHER CUNEO, JAMIE K. ELLSWORTH; C. KEVIN
SPEIRS, Salt Lake City, UT.
DANIEL J. SCHWARTZ, Faegre Baker Daniels LLP, Chi-
cago, IL, argued for defendant-appellant. Also represent-
ed by KATHRYN ANN FEIEREISEL; LAUREN J. FRANK,
TIMOTHY E. GRIMSRUD, Minneapolis, MN.
______________________
Before REYNA, SCHALL, and WALLACH, Circuit Judges.
2 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
WALLACH, Circuit Judge.
Following a claim construction ruling adverse to Ap-
pellant Holland L.P. (“Holland”), a jury in the U.S. Dis-
trict Court for the Eastern District of Texas (“District
Court”) found that Holland infringed Appellee
Georgetown Rail Equipment Company’s (“Georgetown”)
U.S. Patent 7,616,329 (“the ’329 patent”) and awarded
Georgetown lost profits. The District Court later ap-
proved an additional award of enhanced damages based
on a finding of willful infringement. Holland appeals the
District Court’s conclusions as to claim construction,
willful infringement, and enhanced damages, as well as
its decision to deny Holland’s renewed motion for judg-
ment as a matter of law (“JMOL”) of noninfringement.
See Georgetown Rail Equip. Co. v. Holland L.P.
(Georgetown Rail II), No. 6:13-cv-366, 2016 WL 3346084,
at *1 (E.D. Tex. June 16, 2016) (denying JMOL and
granting Motions for Finding of Willful Infringement and
Enhanced Damages); Georgetown Rail Equip Co. v. Hol-
land L.P. (Georgetown Rail I), No. 6:13-cv-366-JDL, 2014
WL 11498109, at *1 (E.D. Tex. Nov. 13, 2014) (Claim
Construction Order); J.A. 162−63 (Final Judgment). We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1)
(2012). We affirm.
BACKGROUND
I. The Patented Technology
The ’329 patent generally relates to a “system and
method for inspecting railroad tracks” with the use of
digital technology. ’329 patent, Abstract. Specifically, it
discloses a system for inspecting tie plates, which are
steel plates that connect the steel rail tracks to wooden
ties. Id. col. 2 ll. 19−31; J.A. 928. Tie plates can sink or
cut into the wooden ties and disrupt railroad service. ’329
patent, Abstract. The ’329 patent purportedly improves
the prior art by automating the examination of misa-
ligned tie plates, a process that was historically per-
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 3
formed manually with certain software systems. See id.
col. 1 l. 39−col. 2 l. 6 (describing the prior art).
Claim 16, the only asserted claim, recites:
A system for inspecting a railroad track bed, in-
cluding the railroad track, to be mounted on a ve-
hicle for movement along the railroad track, the
system comprising:
at least one light generator positioned ad-
jacent the railroad track for projecting a
beam of light across the railroad track
bed;
at least one optical receiver positioned ad-
jacent the railroad track for receiving at
least a portion of the light reflected from
the railroad track bed and generating a
plurality of images representative of the
profile of at least a portion of the railroad
track bed; and
at least one processor for analyzing the
plurality of images and determining one or
more physical characteristics of the said
portion of the railroad track bed, the one
or more physical characteristics compris-
ing at least a geographic location of the
plurality of images along the railroad
track bed, wherein the processor includes
an algorithm for detecting a misaligned or
sunken tie plate of the railroad track bed,
the algorithm comprising the steps of:
(a) analyzing a frame of the plural-
ity of images, the frame compris-
ing a region of interest;
4 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
(b) determining whether the re-
gion of interest contains a tie
plate;
(c) if a tie plate is present, deter-
mining a crosstie contour and a tie
plate contour;
(d) comparing an orientation of the
crosstie contour and an orientation
of the tie plate contour; and
(e) determining whether the tie
plate is misaligned or sunken
based upon the comparison.
Id. col. 11 l. 40−col. 12 l. 2 (emphasis added).
II. Relevant Facts and Procedural History
Holland purchases track and crosstie measuring
technologies from Rail Vision Systems, J.A. 1072−73, and
then places those technologies on its own track inspection
vehicles, called TrackStar vehicles, J.A. 1564. Data from
the track is collected and then may be sent to third-party
companies, for example, Rail Vision Europe Ltd., a com-
pany based in the United Kingdom, for data processing.
See Georgetown Rail II, 2016 WL 3346084, at *6. Rail
Vision Europe Ltd. then sends finished reports back to
Holland for distribution to Holland’s customers. Id. at
*5−6; see J.A. 1103−04.
Georgetown markets similar products that practice
the ’329 patent as part of its Aurora Track Inspection
System. J.A. 850. Specifically, the Aurora Track Inspec-
tion System uses lasers and cameras mounted on a Hi-
Rail vehicle to collect and process information about track
ties. J.A. 817−19. The purpose of these types of systems
is generally to allow customers to use the processed data
to “manage the logistics of crosstie replacement and to
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 5
quantify the need for new crossties.” ’329 patent col. 1
ll. 39−40; see J.A. 1102−03.
Holland and Georgetown knew of each other’s place in
the track-tie market. In January 2012, both companies
participated in a “head-to-head challenge,” in which they
demonstrated their services to potential customer Union
Pacific Railroad (“Union Pacific”). Georgetown Rail II,
2016 WL 3346084, at *3 (citations omitted). Following
the demonstrations, Union Pacific and Holland entered
into a change order agreement (“Change Order”) to alter
an existing contract between Holland and Union Pacific to
allow Holland to provide Rail Vision Systems technology
to Union Pacific on an as needed basis. Id.; Appellant’s
Br. 23; Appellee’s Br. 13; J.A. 10741−44. The Change
Order was signed for a particular number of years and
included compensatory amounts for actual quantities of
work performed upon Union Pacific’s request. Appellant’s
Br. 25–26; J.A. 10742.
Georgetown sued Holland for infringement in 2013
and was granted a preliminary injunction in January
2014, ending any of Holland’s potential sales to Union
Pacific under the Change Order. Georgetown Rail II,
2016 WL 3346084, at *3. The parties proceeded to a jury
trial, and the jury found that Holland willfully infringed
the ’329 patent and awarded $1,541,333 in damages. Id.
The District Court then denied Holland’s motion for
JMOL and awarded Georgetown an additional $1,000,000
in enhanced damages based on a finding of willful in-
fringement pursuant to 35 U.S.C. § 284 (2012). Id. at
*12–21. 1
1 The District Court additionally found the case ex-
ceptional under 35 U.S.C. § 285 and awarded attorney
fees. Georgetown Rail II, 2016 WL 3346084, at *21−24.
6 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
DISCUSSION
Holland raises four issues on appeal. First, Holland
challenges the District Court’s finding that the term
“mounted on a vehicle for movement along the railroad
track” in the preamble of claim 16 is not a claim limita-
tion. Appellant’s Br. 62−66. Second, Holland challenges
the jury’s infringement finding. Id. at 33−45. Third,
Holland challenges the District Court’s approval of the
jury’s award of lost profits. Id. at 45−58. Fourth, Holland
argues that we should reverse the District Court’s award
of enhanced damages. Id. at 58−62. We address these
issues in turn.
I. Claim Construction
At the District Court, Holland argued that the phrase
“mounted on a vehicle for movement along the railroad
track” in the preamble of claim 16 was a claim limitation,
such that Holland’s product, which did not have a proces-
sor capable of mounting on a vehicle, could not infringe.
Georgetown Rail I, 2014 WL 11498109, at *2. The Dis-
trict Court rejected this argument for four reasons. First,
it found that the term did not recite an “essential struc-
ture” of the invention because the specification also in-
cluded the phrase “[a]lternatively, the computer analysis
can be performed by another computer system having
image processing software known in the art,” ’329 patent
col. 7 ll. 12−14, such that the system need not be per-
formed in a vehicle, Georgetown Rail I, 2014 WL
11498109, at *2−3. Second, it found that, for the same
reason, the phrase could not recite “additional structure
or steps . . . underscored as important by the specifica-
tion.” Id. at *3 (capitalization omitted). Third, it found
that the term was not an “antecedent basis” for the claim
Holland does not challenge this finding. See generally
Appellant’s Br.
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 7
terms because “[t]he claim body, neither in whole [n]or in
part, mentions the phrase ‘mounted on a vehicle.’” Id.
Finally, it found that Georgetown did not clearly rely on
the limitation during prosecution because the cited
statements from the prosecution history did not “distin-
guish the claimed invention from the prior art by refer-
ence to the system being mounted on a vehicle.” Id. at *4.
A. Standard of Review and Legal Standard
We review the district court’s ultimate construction of
the claim language de novo. Teva Pharm. USA, Inc. v.
Sandoz, Inc., 135 S. Ct. 831, 835 (2015). “[W]hen the
district court reviews only evidence intrinsic to the patent
(the patent claims and specifications, along with the
patent’s prosecution history[2]), the judge’s determination
will amount solely to a determination of law, and the
Court of Appeals will review that construction de novo.”
Id. at 841. “In cases where . . . subsidiary facts [relating
to claim construction] are in dispute, courts will need to
make subsidiary factual findings about that extrinsic
evidence. These are the evidentiary underpinnings of
claim construction . . . and this subsidiary factfinding
must be reviewed for clear error on appeal.” Id. (internal
quotation marks omitted). Because our analysis of the
relevant issue here, the preamble, involves an examina-
tion of only intrinsic evidence, we review the District
Court’s determination de novo.
“Whether to treat a preamble as a limitation is a de-
termination resolved only on review of the en-
2 A patent’s prosecution history “consists of the
complete record of the proceedings before the [U.S. Patent
and Trademark Office (‘USPTO’)],” providing “evidence of
how the [US]PTO and the inventor understood the pa-
tent.” Phillips v. AWH Corp., 415 F.3d 1303, 1317 (Fed.
Cir. 2005) (en banc) (citation omitted).
8 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
tire . . . patent to gain an understanding of what the
inventors actually invented and intended to encompass by
the claim.” Catalina Mktg. Int’l, Inc. v. Coolsavings.com,
Inc., 289 F.3d 801, 808 (Fed. Cir. 2002) (internal quota-
tion marks, brackets, and citation omitted); see Applied
Materials, Inc. v. Advanced Semiconductor Materials Am.,
Inc., 98 F.3d 1563, 1572−73 (Fed. Cir. 1996) (stating that
whether the preamble constitutes a limitation “is deter-
mined on the facts of each case in light of the overall form
of the claim, and the invention as described in the specifi-
cation and illuminated in the prosecution history”).
“[T]here is no simple test” for understanding the import of
the preamble, but “we have set forth some general princi-
ples to guide th[e] inquiry.” Am. Med. Sys., Inc. v. Bio-
litec, Inc., 618 F.3d 1354, 1358 (Fed. Cir. 2010).
“Generally, the preamble does not limit the claims.”
Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336,
1346 (Fed. Cir. 2002) (citation omitted). However, a
preamble may be limiting if: “it recites essential struc-
ture or steps”; claims “depend[] on a particular disputed
preamble phrase for antecedent basis”; the preamble “is
essential to understand limitations or terms in the claim
body”; the preamble “recit[es] additional structure or
steps underscored as important by the specification”; or
there was “clear reliance on the preamble during prosecu-
tion to distinguish the claimed invention from the prior
art.” Catalina Mktg., 289 F.3d at 808 (citations omitted).
The reverse is also true. A preamble is not a claim
limitation if the claim body “defines a structurally com-
plete invention . . . and uses the preamble only to state a
purpose or intended use for the invention.” Rowe v. Dror,
112 F.3d 473, 478 (Fed. Cir. 1997). “[P]reamble language
merely extolling benefits or features of the claimed inven-
tion does not limit the claim scope without clear reliance
on those benefits or features as patentably significant.”
Catalina Mktg., 289 F.3d at 809 (citations omitted).
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 9
B. The District Court Properly Found the Preamble Is Not
Limiting
In the context of the entire patent, it is apparent that
the term “mounted on a vehicle for movement along the
railroad track” is meant to describe the principal intended
use of the invention but not to import a structural limita-
tion or to exclude from the reach of the claims an assem-
bly that does not include a vehicle mount. Nothing in the
specification or prosecution history states, or even sug-
gests, that Georgetown intended to exclude use of tech-
nology that was structurally identical to its claimed
product but that was installed and performed analysis on
a non-vehicle mount. See generally ’329 patent; see J.A.
10967, 11034, 11043, 11057–58, 11067, 11070, 11078,
11092–94 (’329 patent prosecution history). The body of
the claim itself describes a “structurally complete inven-
tion,” Rowe, 112 F.3d at 478, because it describes a closed
“system” comprised of a “light generator,” “optical receiv-
er,” and “processor,” which are the objects required to
perform the stated purposes of gathering and processing
data on misaligned track ties, ’329 patent, col. 11 ll. 42,
43, 46, 51; see id., Abstract, col. 2 ll. 13−34 (Summary of
the Disclosure). The location of the system is not an
essential feature of the invention. Indeed, as the District
Court noted, the specification states that “[t]he computer
analysis can be performed by the processing device . . .
located on the inspection vehicle. Alternatively, the
computer analysis can be performed by another computer
system having image processing software known in the
art.” Georgetown Rail I, 2014 WL 11498109, at *2−3
(quoting ’329 patent col. 7 ll. 10−14).
Holland’s arguments do not require us to reach a dif-
ferent conclusion. First, Holland argues that the specifi-
cation describes all embodiments of the invention as
vehicle-based, such that the phrase is “underscored as
important” by the specification. Appellant’s Br. 63 (inter-
nal quotation marks and citation omitted). Holland is
10 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
incorrect. The specification states that the disclosed
inspection system “can be mounted on an inspection
vehicle . . . or other device moving along the track so as to
maintain the inspection system . . . in the proper posi-
tion.” ’329 patent col. 3 ll. 55−57 (emphasis added). It
gives additional options that are not vehicle mounts as
well, such as mounting the system on a “chassis that is
towed by a vehicle” or on a “locomotive” or “freight car.”
Id. col. 4 ll. 7−8. The specification also uses the verb “can
be,” indicating an option rather than a requirement. Id.
col. 3 l. 54. Moreover, the specification describes the
patented invention as the system itself, noting that to
mount the system “it is understood that other known
components . . . may be needed” but do not form the basis
for the patented invention. Id. col. 3 ll. 59–60. As the
District Court noted, the specification explicitly states
that the relevant computation and processing of the data
using the patented algorithms and the processing device,
respectively, also do not need to be performed on or af-
fixed to a vehicle. Georgetown Rail I, 2014 WL 11498109,
at *2–3; see ’329 patent col. 7 ll. 10−14. For these reasons,
the phrase “mounted on a vehicle for movement along the
railroad track” cannot be a part of the essential structure
of the invention or a “fundamental characteristic” re-
quired for any part of the claims. Poly-Am., L.P. v. GSE
Lining Tech., Inc., 383 F.3d 1303, 1310 (Fed. Cir. 2004).
Holland’s second argument, that the preamble is “es-
sential” to understand limitations in the claim body,
Appellant’s Br. 66 (internal quotation marks and citation
omitted), fails for the same reason. Contrary to Holland’s
assertion, the system described in the claim body and in
the specification is structurally complete without the
disclosure of how the technology moves over the tracks.
Holland argues as an example of the need to include the
preamble in the claim language that the claim terms
“plurality of images” and light generator and cameras
that are “positioned adjacent” to the track would not
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 11
make sense without the preamble. Id. (internal quotation
marks omitted). This puts the caboose before the locomo-
tive. It is easy to imagine that the patented system could
be manually carried or pulled across tracks, and that
software configured in any type of device, on-site or off,
could process the data. These claim terms still would
apply, because the system, i.e., the “lasers, cameras, and a
processor,” ’329 patent col. 2 ll. 14–15, still would gener-
ate a “plurality of images” using a light generator and
cameras that are “positioned adjacent” to the track, id.
col. 11 ll. 43−48. Such a preamble is not limiting “where a
patentee defines a structurally complete invention in the
claim body and uses the preamble only to state a purpose
or intended use for the invention.” Catalina Mktg., 289
F.3d at 808 (internal quotation marks and citation omit-
ted).
Finally, Holland argues that Georgetown relied upon
the preamble during prosecution to distinguish the inven-
tion from the prior art. Appellant’s Br. 66−67. Holland
relies upon Georgetown’s statements that various prior
art references teach away from the ’329 patent because
the prior art did not teach “analyzing or determin-
ing . . . characteristics . . . along the railroad track bed,”
J.A. 11092 (internal quotation marks and emphasis
omitted), “utiliz[ing] physical track measurements to
position the system,” J.A. 11058, or “correlat[ing] meas-
ured surface characteristics to geographic measured
locations along roadway/rail surfaces,” J.A. 11034. How-
ever, none of these statements distinguish the patented
invention from the prior art based on the mounting of the
data processor part of the invention onto a vehicle. Am-
biguous statements made during prosecution, especially
those that do not directly distinguish the element claimed
as essential for purposes of finding a limitation in the
preamble, “cannot fairly limit the characteristics of the
claim term.” Grober v. Mako Prods., Inc., 686 F.3d 1335,
1342 (Fed. Cir. 2012). For these reasons, we hold that the
12 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
District Court properly found the preamble does not limit
the asserted claim term.
II. Infringement
At the District Court, Holland argued that it could not
have infringed because it “did not benefit from or control”
the purported infringing technology. Georgetown Rail II,
2016 WL 3346084, at *5. In denying Holland’s request for
JMOL, the District Court found that “Holland has provid-
ed no basis for the [District] Court to reevaluate the
evidence,” because “[a] reasonable jury could find that
Holland exercised control of and benefited from” its in-
fringing Rail Vision Systems device, regardless of the fact
that a third party, Rail Vision Europe Ltd., processed the
gathered data. Id. at *6.
A. Standard of Review and Legal Standard
“For issues not unique to patent law, we apply the law
of the regional circuit in which this appeal would other-
wise lie,” here, the Fifth Circuit. i4i Ltd. P’ship v. Mi-
crosoft Corp., 598 F.3d 831, 841 (Fed. Cir. 2010). The
Fifth Circuit reviews denials of a renewed JMOL de novo.
Vanderbilt Mortg. & Fin., Inc. v. Flores, 692 F.3d 358, 364
(5th Cir. 2012). “When reviewing jury verdicts, the court
views all the evidence and draws all reasonable inferences
in the light most favorable to the verdict.” Black v. Pan
Am. Labs., L.L.C., 646 F.3d 254, 258 (5th Cir. 2011)
(citation omitted). A JMOL will be granted “[i]f the facts
and inferences point so strongly in favor of [appellant]
that a rational jury could not arrive at a contrary verdict.”
Id. (internal quotation marks, brackets, and citation
omitted).
“[D]irect infringement by use of a system claim re-
quires a party . . . to use each and every . . . element of a
claimed system.” Centillion Data Sys., LLC v. Qwest
Commc’ns Int’l, Inc., 631 F.3d 1279, 1284 (Fed. Cir. 2011)
(internal quotation marks and brackets omitted). “[T]o
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 13
use a system for purposes of infringement, a party must
put the invention into service, i.e., control the system as a
whole and obtain benefit from it.” Id. (internal quotation
marks and citation omitted). Significantly, use does not
require a party to “exercise physical or direct control over
each individual element of the system.” Id. In a situation
where a “back-end system[]” is used for processing certain
data or information, the party collecting the information
may still be said to be using the system because, “[i]f the
user did not make the request, then the back-end pro-
cessing would not be put into service,” demonstrating
“control” of the system. Id. at 1285.
B. The District Court Did Not Err in Denying JMOL for
Infringement
Holland presents two theories why it has not directly
infringed the ’329 patent pursuant to 35 U.S.C. § 271(a). 3
First, it alleges that “[n]o reasonable jury could have
found that Holland ‘used’ . . . the allegedly infringing data
processing equipment.” Appellant’s Br. 34; see id. at
34−41. Second, it claims that no reasonable jury could
have found that it “offer[ed] to sell” the entire invention
covered by the ’329 patent, as required under a separate
theory of infringement. Id. at 42 (internal quotation
marks and citation omitted); see id. at 42−45. Because we
resolve this question on the first theory argued by Hol-
land, we need not address Holland’s arguments related to
the offer to sell. See Novartis AG v. Noven Pharm., Inc.,
853 F.3d 1289, 1296 (Fed. Cir. 2017).
3 In relevant part, § 271 provides that “whoever
without authority makes, uses, offers to sell, or sells any
patented invention[] within the United
States . . . infringes the patent.” 35 U.S.C. § 271(a) (em-
phasis added). Section 271 was not amended in the
Leahy-Smith America Invents Act, Pub. L. No. 112-29,
§ 3, 125 Stat. 284, 285−93 (2011).
14 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
In Centillion, this court addressed infringement of a
system claim on information technology. The claim
recited a “front-end” system maintained by an end user
and a “back-end” system maintained by a service provid-
er. Centillion, 631 F.3d at 1281. The facts of the case
were that customers of the company accused of infringing
used the company’s front-end client application software
to trigger data processing by the company’s back-end
system. See id. at 1281−82. Relevant to this case, we
held that the company’s customers “used” the entire
system for purposes of § 271(a) because the customers
entered informational queries into the front-end, and
these queries caused the back-end to perform additional
processing as required by the patent claim. Id. at 1285.
Importantly, we held that “[i]t makes no difference that
the back-end processing is physically possessed by” a
third party. Id.
Holland’s use of Rail Vision Systems’s technology is
analogous to the system found “used” for purposes of the
infringement analysis in Centillion. As in Centillion,
Holland collects and gathers data by its system platform
on the front-end. J.A. 1137−39. Then, Holland sends the
gathered information to a back-end third-party company
with instructions to process and analyze the information.
J.A. 1106, 1139−40. The fact that the transmission from
the front-end to the back-end in this case involves “physi-
cally remov[ing] the hard drives with data . . . and
ship[ping] them overseas to Rail Vision [Europe Ltd.]” is
of no consequence. Appellant’s Br. 38 (citing J.A.
1103−04). The intermediary steps are still “put into
service” as a result of Holland’s front-end collection and
request for processing, demonstrating Holland’s ultimate
control of, and derivation of benefit from, the system. See
Centillion, 631 F.3d at 1285. Holland would have us look
to the part of Centillion that found the back-end processor
had not infringed because it only supplied software for the
customer to use on the front-end. Appellant’s Br. 39−40.
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 15
However, this analogy overlooks the finding of infringing
use by the company’s customers, who were actively using
and requesting the analysis of their data. J.A. 1126−27,
1139−40. Here, Holland acts like the customers in Centil-
lion―its trucks gather and collect the data, and it makes
the choice to send collected information to the third-party,
Rail Vision Europe Ltd., for processing.
Holland argues that, as a factual matter, it may have
collected and shipped the raw data to Rail Vision Europe
Ltd., but it has not been proven that Holland actually
ever gathered any data that was sent for processing.
Appellant’s Br. 34−37; see Oral Arg. at 3:45−4:09,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-2297.mp3. Specifically, Holland points to a line in the
District Court opinion stating that “Holland’s 2012
demonstration in Yuma is a use of the Rail Vision Sys-
tems,” Appellant’s Br. 20 (quoting Georgetown Rail II,
2016 WL 3346084, at *5), and alleges that there is “no
evidence that any data collected during the Yuma
Demonstration was processed by anyone,” id. at 34.
Regardless of whether the information shown at the
Yuma Demonstration was ever processed by Rail Vision
Europe Ltd., Holland’s expert affirmatively stated several
times on the record that Holland has collected data and
has directed Rail Vision Systems to process the collected
data. See J.A. 1135, 1138−39, 1141, 1143−44; see also J.A.
1103, 1106 (similar). 4 As such, a reasonable jury could
4 Although these pages have been designated as
confidential, the information generally contained therein
was discussed publically at oral argument. Oral Arg. at
2:19−5:05, 31:51−32:24 (statements made by Holland’s
attorney), 20:45−21:49 (statements made by Georgetown’s
attorney), http://oralarguments.cafc.
uscourts.gov/default.aspx?fl=2016-2297.mp3; see Appel-
lee’s Br. 36–37.
16 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
find evidence supporting its conclusion that Holland
infringed Georgetown’s ’329 patent by putting all ele-
ments of the infringing system into use. That is all that is
required to uphold the jury finding of infringement.
III. The District Court Did Not Err in Denying JMOL for
Damages Based on Lost Profits
Holland challenges the District Court’s denial of
JMOL on lost profits damages. At trial, Georgetown
asserted that Holland’s infringing sales of data collected
and analyzed from the Rail Vision Systems technology
caused it to lose profits that it otherwise would have made
from the ’329 patent. The jury awarded Georgetown
$1,541,333 in lost profits. Georgetown Rail II, 2016 WL
3346084, at *7.
A. Standard of Review and Legal Standard
As stated above, the Fifth Circuit reviews denials of a
renewed JMOL de novo. Vanderbilt Mortg., 692 F.3d at
364. To recover lost profits, “a patent owner must prove a
causal relation between the infringement and its loss of
profits.” Crystal Semiconductor Corp. v. TriTech Microe-
lecs. Int’l, Inc., 246 F.3d 1336, 1353 (Fed. Cir. 2001)
(internal quotation marks and citation omitted). “In other
words, the burden rests on the patentee to show a reason-
able probability that but for the infringing activity, the
patentee would have made the infringer’s sales.” Id.
(internal quotation marks and citation omitted). “There is
no particular required method to prove but for causation”
in patent cases. Mentor Graphics Corp. v. EVE-USA, Inc.,
851 F.3d 1275, 1284 (Fed. Cir. 2017). “One useful, but
non-exclusive method to establish the patentee’s entitle-
ment to lost profits is the . . . test first articulated by the
Sixth Circuit” in Panduit Corp. v. Stahlin Brothers Fibre
Works, Inc., 575 F.2d 1152 (6th Cir. 1978). Mentor
Graphics, 851 F.3d at 1284 (internal quotation marks and
citation omitted). Before the District Court, Georgetown
chose to calculate damages based on a lost profits model
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 17
under the four-factor Panduit test. See Georgetown Rail
II, 2016 WL 3346084, at *7−8. The Panduit test requires
the patentee to show: (1) “demand for the patented
product”; (2) “absence of acceptable noninfringing substi-
tutes”; (3) “manufacturing and marketing capability to
exploit the demand”; and (4) “the amount of profit
that . . . would have [been] made.” 575 F.2d at 1156.
B. Substantial Evidence Supports the Award of
Lost Profits
Holland challenges the sufficiency of evidence for
Panduit factors one and four, arguing that Georgetown’s
calculation of lost profits had “no legally sufficient eviden-
tiary basis” to support the District Court’s findings as to
these factors. Appellant’s Br. 46. We disagree.
1. Demand for the Patented Product
As to the first Panduit factor, Holland alleges that
there is no evidence that Union Pacific demanded
Georgetown’s patented invention and, instead, evidence
points to a conclusion that Union Pacific “repeatedly
rejected” Georgetown’s patented technology. Id. at 49; see
id. at 49−53. Holland further contends that the evidence
cannot support demand for the patented product because
it “consists only of generalized market projections by
Holland, not Union Pacific,” id. at 51−52 (citation omit-
ted), and that Georgetown “fail[ed] to show demand
during the period of allegedly infringing sales,” id. at 51.
Holland also states that evidence of demand by other
Class I railroads cannot satisfy the Panduit test because
it does not “establish that Union Pacific demanded its
technology.” Id.
Holland improperly narrows the scope of the inquiry
for the first Panduit factor. The proper inquiry asks
whether demand existed in the marketplace for the
patented product, i.e., a product “covered by the patent in
suit or that directly competes with the infringing device.”
18 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567
F.3d 1314, 1330 (Fed. Cir. 2009) (internal quotation
marks and citation omitted). Georgetown’s Aurora Sys-
tem and Holland’s Rail Vision Systems are covered by
claim 16 of the ’329 patent. See supra Section II. Holland
submitted its own evidence showing that there was de-
mand for the Rail Vision Systems device at least before
2011. See J.A. 1113−15, 1127−30. Georgetown submitted
evidence that its Aurora System generated millions in
revenue and was contracted out to four U.S. railroad
companies in long-term contracts, exhibiting strong
evidence of demand. See J.A. 66, 867−68, 1011−12, 1591,
10091−147. Although Holland attempts to discredit this
evidence by stating that Georgetown must show demand
“during the period of allegedly infringing sales,” Appel-
lant’s Br. 51 (internal quotation marks and citation
omitted), Holland again recites an incorrect standard. All
a patentee must do is “sell[] some item, the profits of
which have been lost due to infringing sales.” Versata
Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1265 (Fed.
Cir. 2013) (internal quotation marks and citation omit-
ted). Holland has not suggested, nor can it suggest, that
Georgetown was not selling its Aurora System from 2012
through 2015 (the period of allegedly infringing sales).
See generally Appellant’s Br. Thus, we find substantial
evidence supports a finding that demand for the patented
product existed, and we decline to disturb the jury’s
award or the District Court’s denial of Holland’s request
for JMOL on this basis.
2. Amount of Profits That Would Have Been Made
As to the fourth Panduit factor, Holland alleges that
Georgetown did not submit adequate evidence to show its
lost profits. Id. at 53−58. Georgetown submitted evi-
dence that its lost profits calculation was based on failure
to secure a contract with Union Pacific, which entered
into a deal with Holland instead through the Change
Order. See Georgetown Rail II, 2016 WL 3346084, at *8;
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 19
J.A. 1600. Holland contends that because it made no
profit under the Change Order signed with Union Pacific,
Georgetown could not have missed any potential profits.
Appellant’s Br. 47. It further alleges that the District
Court’s assumption that Holland made no profit on the
Change Order solely due to the January 2014 preliminary
injunction preventing sales was improper speculation
running contrary to actual commercial data. Id. at 48.
Georgetown’s expert calculated lost profits using the
following method. First, he assumed that had the Change
Order between Holland and Union Pacific not been im-
plemented, Union Pacific’s track maintenance business
would have gone to Georgetown. J.A. 1608−10. Second,
he calculated that Georgetown would have inspected a
certain mileage of Union Pacific’s track over a certain
period at a prevailing market rate. J.A. 1606, 1610−12.
Third, he accounted for the typical delay between the
contract’s effective date and the start of Georgetown’s
hypothetical work. J.A. 1610. He further stated that the
per-mile rate was on the higher end of comparable ranges
because it would not have included downward pressure on
price created with the entrance of the infringing technolo-
gy into the current market. J.A. 1599−600. Fourth, to
calculate the length of the contract, he looked at compa-
rable contracts already entered into between Georgetown
and four other U.S. railway companies. See J.A. 10148,
10170, 10179, 10091; see also J.A. 1586, 1608. His pro-
posed contract length, squarely in the middle of lengths
contracted with other railroads, was also the same num-
ber of years as Holland’s Change Order with Union Pacif-
ic. See J.A. 10742−45. 5 Finally, to keep the estimate
5 Holland makes an additional argument objecting
to the lost profits calculation as improper for calculating
subjective “future” profits that would accrue following
trial. See Appellant’s Br. 56−57. Georgetown counters
20 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
within a reasonable range, he did not include more specu-
lative damages, such as loss of market share or ancillary
costs. J.A. 1587−88, 1601, 1605.
Georgetown’s expert used the same method of review-
ing competitive market contracts to determine the num-
ber of miles of track to be inspected yearly and to
approximate the per-mile rates of inspection. See
J.A. 1585−618. Both of these numbers were within the
range of rates in the valid contracts Georgetown main-
tained with other U.S. railroads. See J.A. 10145, 10160,
10177, 10198; see also J.A. 860−63. The number used for
the per-mile rate was also the same calculation that
Georgetown had submitted in a revised proposal to Union
Pacific to use its technology in April 2012, an offer which
Union Pacific did not accept. J.A. 973, 10213. Finally,
Georgetown’s expert deducted costs to arrive at the final
calculation. J.A. 1612−18. These cost deductions includ-
ed job costs, capital expenditures, and deductions for net-
present value using a standard discount rate.
J.A. 1613−18.
Holland’s argument that the award does not reflect
market or economic variables is belied by the record. “We
have affirmed lost profits awards based on a wide variety
of reconstruction theories in which the patentee has
presented reliable economic evidence of but for causation.”
Ericsson, Inc. v. Harris Corp., 352 F.3d 1369, 1377 (Fed.
Cir. 2003) (internal quotation marks and citation omit-
that this argument has been waived because it was not
raised below. See Appellee’s Br. 56 (citing Golden Bridge
Tech., Inc. v. Nokia, Inc., 527 F.3d 1318, 1323 (Fed. Cir.
2008)). Because we find substantial evidence exists to
support the length of the contract calculation for lost
profits, we decline to address arguments related to future
lost profits that are encompassed within the reasonable
contract length.
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 21
ted). That is the case here. Georgetown’s lost profits
calculation, including contract length, per-mile rate, and
yearly miles of track to review, was based on sound eco-
nomic proof confirmed by the historical record. As such,
Georgetown “made a prima facie showing of lost profits
and the burden shifted to [Holland] to prove that a differ-
ent rate would have been more reasonable.” Versata, 717
F.3d at 1267 (citation omitted); see Mentor Graphics, 851
F.3d at 1285−89 (reviewing case law using the Panduit
test and using similar evidence to award lost profits in a
two-player market), Crystal Semiconductor, 246 F.3d at
1354−57 (calculating lost profits based on similar “market
variables”). Holland did not make any such showing, nor
has it alleged that it made a showing of a more reasonable
damages award. See generally Appellant’s Br.
Holland also contends that there is no but-for causa-
tion because Georgetown’s calculations assume that
Union Pacific would have ordered from Georgetown;
however, during the same period where Union Pacific
could have ordered data collection services “as needed”
from Holland under the Change Order, Union Pacific did
not purchase any services. Id. at 47−48. Losses must be
“reasonably related” to the infringing activity. Brooktree
Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555,
1579 (Fed. Cir. 1992). Georgetown presented evidence
that the market for its laser-based track inspection ser-
vices was a two-supplier market. See J.A. 828, 1264,
1522. Its expert stated that only Georgetown and Holland
were invited to demonstrate their technologies for Union
Pacific, J.A. 890−92, and that Union Pacific was interest-
ed in purchasing this technology and asked for it,
J.A. 1592. Georgetown provided further evidence that
Union Pacific entered into a Change Order with Holland
that contemplated providing the services, J.A. 1626−27,
and that Union Pacific purchased a certain amount of
inspection system technologies from Holland before the
preliminary injunction went into effect, J.A. 1179,
22 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
10521−24. We conclude that there was a legally sufficient
evidentiary basis in the record from which a reasonable
jury could have found that Georgetown would have re-
ceived business from Union Pacific for data collection
services if Holland’s infringing product was not in the
market. Holland presented evidence that: Georgetown
had offered its services unsuccessfully to Union Pacific
prior to the relevant time period, J.A. 1627; Union Pacific
had not authorized work under the Change Order, J.A.
1627−29; and at all times, even after the Change Order
was signed, Union Pacific was free to enter into a sepa-
rate contract for services with Georgetown, J.A. 10740−43
(demonstrating non-exclusivity of the Change Order).
The jury weighed that evidence against Georgetown’s and
found Georgetown’s evidence more persuasive. We may
not reweigh that evidence here. See Lighting Ballast
Control LLC v. Philips Elecs. N. Am. Corp., 790 F.3d
1329, 1342 (Fed. Cir. 2015). Thus, we affirm the District
Court’s entry of the jury award of lost profits.
IV. Willfulness and Enhanced Damages
The final issue before us concerns the District Court’s
finding of willful infringement and its related decision to
enhance damages. The District Court found, in relevant
part, that the jury verdict of willful infringement was
supported by substantial evidence and that “the totality of
the circumstances” warranted an award of enhanced
damages based, in part, on the fact that “Holland contin-
ued to rely on arguments through trial that were substan-
tially weak and rejected time and again.” Georgetown
Rail II, 2016 WL 3346084, at *15, *17; see id. at *15−21.
The District Court awarded Georgetown an additional
$1,000,000 in enhanced damages. Id. at *21.
A. Standard of Review and Legal Standard
“When reviewing damages in patent cases, we apply
regional circuit law to procedural issues and Federal
Circuit law to substantive . . . issues pertaining to patent
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 23
law.” Whitserve, LLC v. Comput. Packages, Inc., 694 F.3d
10, 26 (Fed. Cir. 2012) (internal quotation marks and
citation omitted) (reviewing willfulness and enhanced
damages under Federal Circuit law). A jury’s willfulness
finding is a question of fact reviewed for substantial
evidence. WBIP, LLC v. Kohler Co., 829 F.3d 1317,
1341−42 (Fed. Cir. 2016). A district court’s decision to
award enhanced damages upon a finding of willful in-
fringement is reviewed for abuse of discretion. Halo
Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1934
(2016).
When a court is assessing appropriate damages upon
a finding for the claimant, “the court may increase the
damages up to three times the amount found or assessed.”
35 U.S.C. § 284. This case was decided by the District
Court under the then-applicable willful infringement
standard. At the time of the decision, proof of willful
infringement required “clear and convincing evidence that
the infringer acted despite an objectively high likelihood
that its actions constituted infringement of a valid patent”
and that “this objectively-defined risk . . . was either
known or so obvious that it should have been known.” In
re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir.
2007). Since the District Court’s decision, the Supreme
Court issued Halo Electronics, which rejected the re-
quirement of “finding . . . objective recklessness in every
case before district courts may award enhanced damages.”
136 S. Ct. at 1932. Now, “[t]he subjective willfulness of a
patent infringer, intentional or knowing, may warrant
enhanced damages, without regard to whether his in-
fringement was objectively reckless.” Id.
The Supreme Court has made it clear that awards of
enhanced damages are discretionary, and “courts should
continue to take into account the particular circumstances
of each case in deciding whether to award damages, and
in what amount.” Id. When deciding how much to award
in enhanced damages, district courts often apply the non-
24 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
exclusive factors articulated in Read Corp. v. Portec, Inc.,
970 F.2d 816 (Fed. Cir. 1992), abrogated in part on other
grounds by Markman v. Westview Instruments, Inc., 517
U.S. 370 (1996). 6 See i4i Ltd. P’ship, 598 F.3d at 858−59
(affirming district court’s review of the Read factors);
Innovention Toys, LLC v. MGA Entm’t, Inc., 667 F. App’x
992, 993 (Fed. Cir. 2016) (similar).
B. The District Court Did Not Err in Its Willfulness
Finding or Award of Enhanced Damages
Holland argues that this court should reverse the
finding of willful infringement and the award of enhanced
damages because (1) there is no evidence to suggest that
Holland knew of the ’329 patent before the start of this
litigation; (2) there is no evidence to suggest that Holland
had access to the technical algorithms used in the ’329
patent, such that willful copying would be impossible;
(3) it is undisputed that Holland was not involved in
development of the Rail Vision Systems software; and
(4) Holland processes its data using different software
algorithms than those in the ’329 patent. Appellant’s
Br. 58−61.
6 The Read factors consider (1) “whether the in-
fringer deliberately copied the ideas of another”;
(2) “whether the infringer, when he knew of the other’s
patent protection, investigated the scope of the patent and
formed a good-faith belief that it was invalid or that it
was not infringed”; (3) “the infringer’s behavior as a party
to the litigation”; (4) the “[d]efendant’s size and financial
condition”; (5) the “[c]loseness of the case”; (6) the
“[d]uration of the defendant’s misconduct”; (7) “[r]emedial
action by the defendant”; (8) the “[d]efendant’s motivation
for harm”; and (9) “[w]hether the defendant attempted to
conceal its misconduct.” 970 F.2d at 827 (footnote and
citations omitted).
GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P. 25
Substantial evidence supports the jury’s finding that
subjective recklessness led to willful infringement in this
case. The jury heard evidence that Holland was aware of
the ’329 patent prior to the current litigation, see, e.g.,
J.A. 1180−87, 1340, 1384−85; see also J.A. 1161−62, 1277,
and believed that it was infringing the patent. Evidence
to support this latter proposition included evidence of the
parties’ prior business dealings from which the jury could
have inferred that Holland believed that it needed to
acquire or license Georgetown’s Aurora System to avoid
infringement, see, e.g., J.A. 1187−88, and “circumstantial
evidence that Holland copied [Georgetown’s] technology,”
Georgetown Rail II, 2016 WL 3346084, at *17. Although
Holland continues to dispute several of these facts, the
jury was free to decide whose evidence it found more
compelling on the question of willfulness and found in
Georgetown’s favor. Lighting Ballast Control, 790 F.3d at
1342. We will not disturb that finding here, where sub-
stantial evidence supports the jury’s conclusions. See id.
As for enhanced damages, on this record, we cannot
conclude that the District Court abused its discretion in
weighing the evidence or applying the Read factors. See
i4i Ltd. P’ship, 598 F.3d at 858. Holland makes no specif-
ic arguments with respect to the District Court’s applica-
tion of the Read factors in its Opening Brief. See
generally Appellant’s Br. In its Reply Brief, Holland
states that the same arguments it makes to reverse the
finding of willfulness go to certain Read factors, without
directly connecting its arguments to individual Read
factors. Reply Br. 28.
None of the arguments Holland makes with respect to
the findings of enhanced damages demonstrate abuse of
discretion by the District Court. The District Court made
detailed factual findings which, taken together, support
its award of enhanced damages. It did not merely look at
the jury’s finding of willfulness; rather, it applied and
considered all nine Read factors. Specifically, after ana-
26 GEORGETOWN RAIL EQUIP. CO. v. HOLLAND L.P.
lyzing each Read factor individually, the District Court
stated that “[f]actors 1, 2, and 5 support enhancement;
factors 3, 4, and 7 slightly support enhancement; and
factors 6, 8, and 9 are neutral.” Georgetown Rail II, 2016
WL 3346084, at *21. It also found that “no single factor
weighs against enhancement.” Id. Finally, the District
Court took into account the degree of willfulness and
found that it was “not warranted” to enhance damages to
the full maximum statutory amount of treble damages
(over $4,500,000); rather, it awarded only an additional
$1,000,000. Id. Considering all of the Read factors and
the District Court’s statutory authority to treble damages
under § 284, the award of $1,000,000 in addition to the
damages award of $1,544,333 was not an abuse of discre-
tion.
CONCLUSION
We have considered the parties’ remaining arguments
and find them unpersuasive. Accordingly, the Final
Judgment of the U.S. District Court for the Eastern
District of Texas is
AFFIRMED
COSTS
Costs to Georgetown Rail.