Engineered Products, Co. v. Donalson Co., Inc.

NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition
is not citable as precedent. It is a public record.
United States Court of Appeals for the Federal Circuit
04-1596, 05-1002, 05-1037
ENGINEERED PRODUCTS CO.,
Plaintiff-Cross Appellant,
v.
DONALDSON COMPANY, INC.,
Defendant-Appellant.
__________________________
DECIDED: August 31, 2005
__________________________
Before NEWMAN, Circuit Judge, ARCHER, Senior Circuit Judge, and SCHALL, Circuit
Judge.
SCHALL, Circuit Judge.
DECISION
Donaldson Company, Inc. (“Donaldson”) appeals from the judgment of the United
States District Court for the Northern District of Iowa awarding Engineered Products Co.
(“EPC”) damages in the amount of $15,839,004 for infringement of U.S. Patent No.
4,445,456 (“the ’456 patent”) by two of Donaldson’s products. Engineered Prods. Co. v.
Donaldson Co., C98-2106MWB (N.D. Iowa Sept. 23, 2004) (“Amended Judgment”).
For its part, EPC conditionally cross-appeals the district court’s decisions allowing
Donaldson to assert the defense of obviousness-type double patenting, Engineered
Prods. Co. v. Donaldson Co., 225 F. Supp. 2d 1069, 1082-86 (N.D. Iowa 2002)
(“Summary Judgment II”), and denying EPC’s motion to reassert infringement of U.S.
Patent No. 4,369,728 (“the ’728 patent”), id. at 1131. For the reasons stated herein, we
affirm-in-part, reverse-in-part, vacate-in-part, and remand for further proceedings
consistent with this opinion.
DISCUSSION
I.
EPC owns the ’456 and ’728 patents. The patents, both titled “Air Filter
Restriction Indicating Device,” relate to devices that detect the level of contamination of
an air filter of an internal combustion engine. The patents generally claim an indicator
device that is comprised of a chamber that is divided by a diaphragm into a first
chamber and a second chamber. The first chamber contains an indicating member and
is connected to the air flow between an engine’s air filter and air intake. The indicating
member is in turn attached to the top of the diaphragm. The air pressure in the first
chamber decreases as the contamination of the air filter increases, which in turn causes
the diaphragm and, thus, the indicating member, to move upward in the chamber. A
transparent wall of the chamber allows an individual to see the position of the indicating
member within the chamber and thereby gauge the contamination level of the air filter in
order to determine whether it is in need of replacement. See generally ’456 patent, col.
3, l. 33 to col. 5, l. 2; id. claim 1, col. 6, l. 38 to col. 7, l. 55; ’728 patent, claim 1, col. 5, l.
66 to col. 7, l. 33.
An important feature of the device is its “lock-up means,” which is comprised in
part of a “locking member.” The lock-up means allows the locking member to only
04-1596, 05-1002, 05-1037 2
move in one direction within the chamber, i.e., the direction in which the diaphragm
moves as the pressure in the first chamber decreases. This is important because,
without the lock-up means, the indicating member would return to its original position at
the bottom of the chamber when the engine was turned off. The lock-up means
therefore allows an individual to monitor the air filter’s contamination when the engine is
on or off. The lock-up means also makes the indicator a “progressive indicator” in that it
provides information as to the degree of contamination of the air filter. See ’456 patent,
col. 5, ll. 3-31. Finally, the claimed device also has a “means for selectively
disengaging” the lock-up means. This allows an operator to reset the indicator after, for
example, a new air filter is installed. See id. col. 5, l. 36 to col. 6, l.18.
EPC initially sued Donaldson for infringement of the ’456 and ’728 patents.1 EPC
specifically accused two of Donaldson’s products, the Air Alert and the NG Air Alert, of
infringing one or more claims of the patents. However, EPC and Donaldson
subsequently entered into a joint stipulation in which EPC agreed to dismiss its
infringement claims under the ’728 patent. EPC’s stipulation was based at least in part
on Donaldson’s concession of infringement of the ’456 patent by the Air Alert.
Donaldson also agreed to drop its claim of invalidity of the ’728 patent. The district
court thereafter dismissed EPC’s infringement claim under the ’728 patent with
prejudice, along with “any other claims or defenses of either party to the extent they rely
upon the ’728 patent.” Engineered Prods. Co. v. Donaldson Co., 165 F. Supp. 2d 836,
841 n.1 (N.D. Iowa 2001) (“Summary Judgment I”).
1
EPC also sued Donaldson for trade dress infringement. However, the
district court granted summary judgment for Donaldson on the issue and EPC has not
appealed.
04-1596, 05-1002, 05-1037 3
The court subsequently denied EPC’s motion for summary judgment of
infringement of the ’456 patent by the NG Air Alert and also denied the parties’ cross-
motions for summary judgment on Donaldson’s defense of invalidity of the ’456 patent
by reason of the on-sale or public-use bars of 35 U.S.C. § 102(b). Id. at 885.
Therefore, the main issues remaining for trial were EPC’s claim that the NG Air Alert
infringed the ’456 patent, EPC’s claim that infringement by the Air Alert was willful, and
Donaldson’s allegation that the ’456 patent was invalid under the on-sale and public-use
bars of 35 U.S.C. § 102(b). However, about one month before trial, Donaldson moved
for summary judgment of invalidity of the ’456 patent based on a newly asserted theory
of obviousness-type double patenting over the ’728 patent. EPC argued that the
defense was untimely and prejudicial and should not be allowed. The district court
disagreed with EPC and allowed Donaldson to assert the defense, though the court
ultimately denied Donaldson’s motion for summary judgment of invalidity. Summary
Judgment II, 225 F. Supp. 2d at 1131.2
A trial was subsequently held in which the jury found that the NG Air Alert
infringed claims 2 and 3 of the ’456 patent, both literally and under the doctrine of
equivalents. The jury also found that infringement by the Air Alert was willful and that
claims 2 and 3 were not invalid under the on-sale or public-use bars of 35 U.S.C.
§ 102(b). As a result, the jury awarded EPC a total of almost $6 million in damages,
consisting of $5,269,270 in lost profits caused by Donaldson’s sales of the Air Alert (of
2
The district court held that while claim 1 of the ’456 patent was not
patentably distinct over claim 1 of the ’728 patent, Donaldson had not shown that claims
2 and 3 of the ’456 patent were not patentably distinct. Summary Judgment II, 225 F.
Supp. 2d at 1116-31. Therefore, claims 2 and 3 of the ’456 patent remained for trial.
04-1596, 05-1002, 05-1037 4
which $3,826,889 was attributed to lost sales and $1,442,381 was attributed to price
erosion) and a reasonable royalty for infringement by the Air Alert and the NG Air Alert.
Both parties then submitted post trial motions. Donaldson reasserted, among
other things, its defense of invalidity of the ’456 patent by reason of obviousness-type
double patenting over the ’728 patent. The district court again rejected the defense.
Engineered Prods. Co. v. Donaldson Co., 330 F. Supp. 2d 1013, 1022-23 (N.D. Iowa
2004) (“Post-Trial Motions”). EPC in turn moved for, among other things, enhanced
damages, pre- and post-judgment interest, and costs and attorney’s fees. Id. at 1043 &
n.3. The district court granted EPC’s motions for enhanced damages, pre- and post-
judgment interest, and costs and attorney’s fees. Engineered Prods. Co. v. Donaldson
Co., 335 F. Supp. 2d 973, 988-89 (N.D. Iowa 2004) (“Attorney’s Fees”); Post-Trial
Motions, 330 F. Supp. 2d at 1048-49. In an amended judgment, the district court
ultimately awarded EPC $15,807,810 in trebled damages for infringement by the Air
Alert, $31,194 as a reasonable royalty for infringement by the NG Air Alert,3 and, finally,
pre- and post-judgment interest. Amended Judgment. In a separate order, the court
awarded EPC $1,844,933 in attorney’s fees and $132,725.20 in expenses. Attorney’s
Fees, 335 F. Supp. 2d at 988.
Donaldson subsequently filed a timely appeal to this court and EPC cross
appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
3
In order to avoid duplicative recovery, the court eliminated the royalty
award with respect to the Air Alert and reduced the amount of the NG Air Alert royalty to
$31,194.
04-1596, 05-1002, 05-1037 5
II.
We turn first to Donaldson’s contention that the NG Air Alert does not, as a
matter of law, infringe claims 2 or 3 of the ’456 patent. Donaldson makes two primary
arguments: (1) that the district court erred in its construction of the limitation “means for
selectively disengaging,” and (2) that the court erred in applying its construction of the
limitation “interengagable notches” to the NG Air Alert. Because we agree with
Donaldson that the district court erred in its construction of “means for selectively
disengaging,” and because we further agree that under the proper construction the NG
Air Alert does not infringe as a matter of law, we do not reach Donaldson’s second
argument.
Claims 2 and 3 of the ’456 patent are dependent upon claim 1. Therefore, both
contain the limitation “means for selectively disengaging the interengagable notches so
as to permit the diaphragm to return to its infold position when the vacuum in the first
chamber is relatively low.” The limitation is in means-plus-function form. Accordingly, in
construing it, we must “first . . . identify the claimed function and then . . . determine the
structure in the specification that corresponds to that function.” Frank’s Casing Crew &
Rental Tools, Inc. v. Weatherford Int’l, Inc., 389 F.3d 1370, 1376 (Fed. Cir. 2004). “A
structure disclosed in the specification qualifies as ‘corresponding’ structure only if the
specification or prosecution history clearly links or associates that structure to the
function recited in the claim.” Default Proof Credit Card Sys., Inc. v. Home Depot
U.S.A., Inc., 412 F.3d 1291, 1298 (Fed. Cir. 2005).
The district court identified the function of the limitation at issue as “selectively
disengaging the interegagable notches so as to permit the diaphragm to return to its
04-1596, 05-1002, 05-1037 6
infold position when the vacuum in the first chamber is relatively low.” Summary
Judgment I, 165 F. Supp. 2d at 878-79. The court then identified the corresponding
structure as the “button,” stating that it “receives and transfers forces which overcome
the reset button spring and move the locking member away from its engaged position
so that the coiled compression spring can then push the diaphragm back to its infold
position.” Id. at 880. The court rejected Donaldson’s argument that the corresponding
structure must also include the flange. In doing so, the court stated that the flange of
the locking member was identified as performing a “pivoting function.” Consequently,
the court stated, including the flange as corresponding structure would impermissibly
read a limitation of pivoting into the claim. Id. at 879-80 (citing Wenger Mfg., Inc. v.
Coating Mach. Sys., Inc., 239 F.3d 1225 (Fed. Cir. 2001)).
On appeal, Donaldson contends that the district court’s construction is too broad
because it does not account for all of the structure disclosed in the specification as
necessary for performing the claimed function of “selectively disengaging the
interengagable notches.” In particular, Donaldson contends that, in addition to the
button, the flange, bottom wall, and enlarged hole are also necessary for disengaging
the notches. The mere fact that the flange may perform the claimed function by
pivoting, Donaldson asserts, does not mean that including the flange within the
corresponding structure reads a “pivoting function” into the claim limitations.
EPC responds that the district court correctly identified the button as the
corresponding structure for performing the claimed disengaging function. EPC asserts
that the specification indicates that it is only the button and spring that are necessary to
perform the claimed function. ’456 patent, col. 6, ll. 9-12 (“If it is desired to permit the
04-1596, 05-1002, 05-1037 7
diaphragm to return to its infold position, as shown in FIG. 3, a person need only push
the button, as shown in FIG. 4, against the bias of spring.” (numerals omitted)). In
addition, EPC asserts that dependent claims 5 and 6 specifically add the pivoting
function and related structure that is omitted from claims 2 and 3. Therefore, EPC
argues the court correctly excluded the flange and bottom wall from the corresponding
structure of “means for selectively disengaging.”
We agree with Donaldson that the district court construed “means for selectively
disengaging” too broadly by not identifying all of the structure necessary to perform the
stated function. The specification of the ’456 patent expressly states
When it is desired to reset the indicator after cleaning
or replacement of the air filter and after the member has
been locked up, . . . the thumb of the operator . . . is pressed
against the button to move the member from its off-center
position to a vertical dotted line position by reason of the
cooperation between the flange and the bottom wall and the
enlarged hole . . . to release the notches and . . . permit [the]
spring to return the indicating assembly to its lower home
position . . . .
****
If it is desired to permit the diaphragm to return to its
infold position, . . . a person need only push the button . . .
against the bias of [the] spring. This will cause the locking
member to pivot, about the flange, from its cocked, off-center
position, . . . to a vertical position where the notches can no
longer engage the notches.
Id. col. 5., ll. 50-60 & col. 6, ll. 9-17 (emphases added) (numerals omitted). The
specification therefore clearly links the button, flange, bottom wall, and enlarged
opening to the function of disengaging the interengagable notches. It is true that an
individual initiates the process of disengaging the notches by pushing the button located
at the bottom of the chamber. However, it is the resulting action of the flange against
the bottom wall that actually causes the interengagable notches to disengage. See
04-1596, 05-1002, 05-1037 8
Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 296 F.3d 1106, 1119 (Fed. Cir. 2002)
(“It remains true, of course, that corresponding structure need not include all things
necessary to enable the claimed invention to work. It is equally true, however, that
corresponding structure must include all structure that actually performs the recited
function.” (emphasis added)).
Our construction also does not read in a functional limitation of “pivoting.” It is
true that the flange, as disclosed in the specification, pivots about the bottom wall to
cause the locking member to disengage the interengagable notches. However,
corresponding structure will almost always perform some additional function in the
course of executing the claimed function. See, e.g., Kemco Sales, Inc. v. Control
Papers Co., 208 F.3d 1352, 1359-63 (Fed. Cir. 2000) (holding that the corresponding
structure was not just a “flat rectangle, but a plastic flap that folds over [an] envelope’s
opening and is secured to the outside of one or both panels of the envelope” (emphasis
added)). In this case, the pivoting of the flange on the bottom wall is simply how the
flange operates to disengage the locking member from the notches.
Under our construction, we further conclude that a reasonable juror could not find
that the NG Air Alert infringes claims 2 or 3 of the ’456 patent. See Genthe v. Lincoln,
383 F.3d 713, 716 (8th Cir. 2004) (“Judgment as a matter of law is appropriate where
the evidence adduced at trial is entirely insufficient to support the verdict.”). That is
because, even assuming the NG Air Alert has structure that performs the function of
“selectively disengaging interengagable notches,” that structure is not the same or
equivalent to the corresponding structure of claims 2 and 3—namely, the flange, bottom
wall, and enlarged opening. See Frank’s Casing Crew, 389 F.3d at 1378 (“Th[e] inquiry
04-1596, 05-1002, 05-1037 9
for equivalent structure under § 112, ¶ 6 examines whether ‘the assertedly equivalent
structure performs the claimed function in substantially the same way to achieve
substantially the same result as the corresponding structure described in the
specification.’” (citation omitted)). In particular, instead of a flange that works in
conjunction with a bottom wall to cause the locking member to tilt back toward the
vertical position and disengage the interengagable notches, the accused structure
consists of flared fingers that are pushed inward when the operator of the NG Air Alert
pushes a button. Therefore, the flared fingers of the NG Air Alert perform the claimed
function in a substantially different way than the flange and bottom wall of claims 2 and
3. Accordingly, we reverse the district court’s decision denying Donaldson’s motion for
JMOL of non-infringement and remand with instructions to enter judgment for
Donaldson of non-infringement by the NG Air Alert.
III.
We next turn to Donaldson’s contention that claims 2 and 3 of the ’456 patent are
invalid by reason of obviousness-type double patenting over claim 1 of the ’728 patent.
As noted, the district court ruled that the claims were not invalid for obviousness-type
double patenting. Post-Trial Motions, 330 F. Supp. 2d at 1022-23; Summary Judgment
II, 225 F. Supp. 2d at 1082-1131. On appeal, Donaldson’s primary argument is that the
district court erred in its analysis by not considering the teachings of various prior art
patents. Donaldson concedes that one must only compare the claims of the ’456 patent
to the claims of the ’728 patent in determining the differences between the subject
matter claimed by the two patents. However, Donaldson asserts that after doing this
the district court should have then looked to the prior art to determine whether one of
04-1596, 05-1002, 05-1037 10
skill in the art would have considered the differences obvious. Donaldson contends that
under such an analysis, claims 2 and 3 of the ’456 patent are invalid for obviousness-
type double patenting over claim 1 of the ’728 patent.
EPC disagrees with Donaldson and maintains that claims 2 and 3 of the ’456
patent are not invalid for obviousness-type double patenting. However, in addition, EPC
contends the district court abused its discretion in even allowing Donaldson to assert
the defense. According to EPC, that is because Donaldson did not have a valid reason
for its delay in asserting the defense. EPC points out that the court even found that
Donaldson’s timing had “some smack of gamesmanship.” EPC further asserts that
although the court found that not allowing the defense would result in “possible
prejudice to Donaldson,” that factor is present in any delayed filing and is not significant
where there is no valid reason for the delay. Finally, EPC asserts that the court
understated the potential prejudice to EPC in light of the stipulation to dismiss the
claims and defenses relating to the ’728 patent.
As mentioned, the parties stipulated to dismiss with prejudice all claims and
defenses as to the ’728 patent. The stipulation was made after discovery had closed
and the time for amending pleadings had passed. In addition, at the time of the
stipulation Donaldson had conceded infringement of the ’456 patent by the Air Alert and
had indicated that its only invalidity defense as to the ’456 patent was based on the on-
sale and public-use bars of § 102(b). See Summary Judgment II, 225 F. Supp. 2d at
1080-81. It was only after the stipulated dismissal of the ’728 patent that Donaldson
sought to assert its defense of invalidity of the ’456 patent by reason of obviousness-
type double patenting over the ’728 patent. Donaldson did not file a motion for leave to
04-1596, 05-1002, 05-1037 11
amend its pleadings, but simply asserted the obviousness-type double patenting
defense in a motion for summary judgment of invalidity.
EPC opposed Donaldson’s motion for summary judgment on the ground that
obviousness-type double patenting was a newly asserted defense that was untimely
and prejudicial to EPC. In light of EPC’s position, and considering that Donaldson had
previously made no mention of the defense, the district court treated Donaldson’s
summary judgment motion as a motion to amend the pleadings under Rule 15(a) of the
Federal Rules of Civil Procedure. Applying the pleading standard of Rule 15(a), the
court first found “little justification” for Donaldson’s belated assertion of the double
patenting defense. Id. at 1085. The court also found that the timing of Donaldson
motion had “some smack of gamesmanship.” Id. However, the court concluded that
the balance of the potential hardships between the parties, along with the liberal
pleading standard of Rule 15(a), favored allowing Donaldson to assert the defense. In
particular, the court found that while there was little risk of prejudice to EPC in allowing
the defense,4 there was risk of “substantial” prejudice to Donaldson in not allowing it.
Id. at 1085-86.
The Eighth Circuit reviews a district court’s decision to grant or deny a motion to
amend the pleadings for abuse of discretion. United States v. Fairview Health Sys., 413
F.3d 748, 749 (8th Cir. 2005); Williams v. Little Rock Mun. Water Works, 21 F.3d 218,
225 (8th Cir. 1994). Rule 15(a) states, in relevant part, that leave to amend a party’s
4
The district court found little risk of prejudice to EPC because it concluded
that EPC had sufficient time to address the merits of the defense. Summary Judgment
II, 225 F. Supp. 2d at 1086.
04-1596, 05-1002, 05-1037 12
pleading “shall be freely given when justice so requires.” Fed. R. Civ. P. 15(a). The
Supreme Court has interpreted this to mean that
[i]n the absence of any apparent or declared reason—such
as undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment,
futility of amendment, etc.—the leave sought should . . . be
“freely given.”
Foman v. Davis, 371 U.S. 178, 230 (1962); see also Perkins v. Spivey, 911 F.2d 22, 35
(8th Cir. 1990) (same). The Eighth Circuit has further held that
[w]hen a considerable amount of time has passed since the
filing of a complaint and the motion to amend is made on the
eve of trial and will cause prejudice and further delay, courts
require the movant to provide some valid reason for the
belatedness of the motion.
Thompson-El v. Jones, 876 F.2d 66, 67 (8th Cir. 1989) (emphasis added); see also
Williams, 21 F.3d at 225 (same).
In this case, we agree with EPC that the district court abused its discretion in
allowing Donaldson to assert its obviousness-type double patenting defense. See
Maune v. Int’l Brotherhood of Elec. Workers, 83 F.3d 959, 964 (8th Cir. 1996) (“An
abuse of discretion occurs when the district court ‘commits a clear error of judgment’ in
weighing the relevant factors.” (citation omitted)). First, Donaldson’s motion to assert
the new defense occurred about one month before trial, which was long after the initial
complaint was filed and the time for amending pleadings had passed. Second, the
district court found, and we agree, that Donaldson offered “little justification” for the
delay and that its conduct had “some smack of gamesmanship.” Therefore, the critical
issue was whether granting the motion would be prejudicial to EPC. See Thompson-El,
04-1596, 05-1002, 05-1037 13
876 F.2d at 67. It was in its consideration of this last factor that we find the district court
clearly erred.
In particular, we think the court’s analysis greatly understates the potential harm
to EPC in allowing Donaldson to assert the double patenting defense. Before the
parties agreed to the stipulated dismissal, EPC could have proceeded with its
infringement claims on either the ’456 or ’728 patents. Accordingly, if Donaldson had
made out a successful obviousness-type double patenting defense as to the ’456
patent, EPC could have still proceeded with its case of infringement of the ’728 patent.
However, EPC no longer has that option because of its prior stipulation to dismiss its
claims of infringement of the ’728 patent. EPC only agreed to dismiss the ’728 patent
after Donaldson conceded infringement of the ’456 patent by the Air Alert. More
importantly, the stipulation occurred after the time for amending the pleadings had
passed. Therefore, at the time of the stipulation, EPC had no reasonable basis for
believing it would have to defend the validity of the ’456 patent over the ’728 patent
based on a double patenting defense.
It is true that Donaldson is also subject to potential hardship if it is not allowed to
assert the double patenting defense. Donaldson has only itself to blame for its delay,
however. Obviousness-type double patenting is not a new defense. Donaldson was
obviously aware of the ’728 patent from the outset of the litigation. Accordingly, we hold
that the district court made a clear error of judgment in concluding that the potential
prejudice to Donaldson in not allowing the defense outweighed the potential prejudice to
EPC in allowing the defense. We therefore vacate the court’s rulings on Donaldson’s
defense of obviousness-type double patenting. The end result, however, is that we
04-1596, 05-1002, 05-1037 14
affirm the court’s judgment. The ground for affirming is our ruling that Donaldson should
not have been allowed, late in the day, to challenge the validity of the ’456 patent.
IV.
Donaldson also challenges the damages awarded for infringement by the Air
Alert. As noted, the district court awarded EPC $5,269,270 in lost profits for
infringement by the Air Alert and a royalty of $31,194 for infringement by the NG Air
Alert. At the outset, we reverse the reasonable royalty award, as we have reversed the
judgment of infringement by the NG Air Alert and have directed the district court to enter
JMOL of non-infringement.
As for the $5,269,270 awarded for lost profits, as noted, the jury attributed
$3,826,889 to lost sales and $1,442,381 to price erosion damages. Donaldson
contends that neither award is supported by substantial evidence. Turning first to the
lost sales award, Donaldson argues that the award must be vacated because over half
of the “lost sales” relate to sales of the non-infringing NG Air Alert rather than sales of
the infringing Air Alert. Donaldson recognizes that EPC’s damages theory at trial was
that it lost all of the sales under the 1996 GMT-800 contract as a result of Donaldson’s
infringing bid (i.e., Donaldson’s bid that was based on the Air Alert). However,
Donaldson asserts that EPC failed to prove the existence of a long-term contract
between Delphi, a manufacturer of automobile components, and EPC. Donaldson
therefore contends that EPC failed to prove that Donaldson’s infringement by the Air
Alert caused EPC to lose sales to the NG Air Alert. In any event, Donaldson contends,
even if substantial evidence supports EPC’s lost sales theory, a new trial is needed in
04-1596, 05-1002, 05-1037 15
order to assess whether the NG Air Alert was an available and acceptable non-
infringing substitute.
In response, EPC contends that substantial evidence supports the jury’s full
award of lost sales. According to EPC, that is because Donaldson, by submitting the
infringing Air Alert bid, secured a long-term contract with Delphi, which in turn allowed
Donaldson to switch from the infringing Air Alert to the non-infringing NG Air Alert
without having to secure a new contract. EPC asserts that its sales lost to the NG Air
Alert were therefore caused by Donaldson’s original sale of the infringing Air Alert.
We conclude that substantial evidence supports the jury’s verdict on this aspect
of the damages award. Most importantly, EPC submitted evidence to support its
assertion that Donaldson’s infringing bid secured a long-term contract with Delphi. This
evidence included a copy of the contract and a letter of confirmation sent by Delphi to
Donaldson. As a result of the contract, Donaldson was able to substitute the Air Alert
with the NG Air Alert without having to submit a new bid to Delphi for the units required
in connection with the 1996 GMT-800 contract. This is supported by testimony EPC
submitted at trial. Substantial evidence therefore supports EPC’s theory that Donaldson
was able to make its non-infringing NG Air Alert sales only as a result of its initially
infringing sales of the Air Alert. In addition, EPC and Donaldson were the only two
available suppliers of progressive air filter restriction indicators. It thus is reasonable to
conclude that EPC would have made all of the sales under the 1996 GMT-800 contract
but for Donaldson’s infringing bid. In sum, substantial evidence supports the jury’s
award of $3,826,889 for lost sales. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545
(Fed. Cir. 1995) (holding that patent infringement damages “should approximate those
04-1596, 05-1002, 05-1037 16
damages that will fully compensate the patentee for infringement” (emphasis in original)
(citation omitted)).5
Donaldson also contends that substantial evidence does not support the
$1,442,381 awarded for price erosion damages. EPC’s theory was that Donaldson’s
infringing bid on the 1996 GMT-800 platform forced EPC to lower its bid to ABC, a
manufacturer of automobile components, on the 1996 GMT-360 platform to $2.24 per
indicator, which in turn forced EPC to submit a bid of $2.25 per indicator to Delphi for
the 2000 GMT-800 platform. Donaldson asserts that EPC’s theory does not hold up
because EPC did not submit evidence showing that the bid to ABC was communicated
to Delphi.
In response, EPC contends that but for Donaldson’s infringing 1996 bid, EPC
would have won the 1996 GMT-800 contract and would have done so with a higher bid
“unaffected by competition.” However, due to Donaldson’s infringement, EPC contends
it was forced to make price concessions in bidding on the 2000 GMT-800 platform.
According to EPC, that is because, after Delphi awarded Donaldson the 1996 GMT-800
contract, EPC was forced to lower its bid on ABC’s 1996 GMT-360 contract to $2.24 per
unit. As a result of this previous bid to ABC, EPC contends that it was then “basically
stuck” with that same bid when it submitted its offer to Delphi for the 2000 GMT-800
platform.
5
We also reject Donaldson’s contention that a new trial is needed to
determine whether the NG Air Alert was an available and acceptable non-infringing
substitute. Aside from the fact that the NG Air Alert was not in existence at the time
Donaldson submitted its bid for the 1996 GMT-800 platform, Delphi terminated its
agreement with Donaldson because it found the NG Air Alert unacceptable.
04-1596, 05-1002, 05-1037 17
To prove price erosion damages, a plaintiff must “show that ‘but for’ infringement,
it would have sold its product at higher prices.” Crystal Semiconductor Corp. v. Tritech
Microelectronics Int’l, Inc., 246 F.3d 1336, 1357 (Fed. Cir. 2001). In this case, EPC has
not submitted such evidence. In particular, EPC’s theory seems to hinge on the
assumption that the bid to ABC was somehow communicated to Delphi, thereby locking
EPC into the $2.24 bid it submitted to ABC when it bid four years later in connection
with the 2000 GMT-800 contract. For instance, EPC’s expert stated that “Engineered
Products felt that that price had already essentially been set for them by virtue of the
price that they were -- by the price relationship they’d established in the ABC contract.”
However, EPC has not offered substantial evidence showing that the bid to ABC was
communicated to Delphi. The only evidence offered by EPC appears to be testimony
that “ball park” figures for the 1996 GMT-360 project were communicated to a design
engineer at GM, and that this design engineer had an office in close proximity to the
design engineer for the GMT-800 project. EPC asserts that the jury could have inferred
from this testimony that Delphi knew of the bid to ABC. We disagree.
As an initial matter, EPC only alleges that ball park figures were communicated
to the design engineer at GM. Therefore, EPC has not shown that ABC disclosed to
GM the actual bid by EPC. In fact, ABC’s corporate representative testified that EPC’s
$2.24 bid was not disclosed to anyone at GM. However, even assuming that the bid
was disclosed to the GMT-360 design engineer, the jury would need to further infer that
the information was subsequently passed on to the GMT-800 design engineer, and that
it was then passed on to people at Delphi. EPC’s only support for these inferences is
that the GMT-360 and GMT-800 design engineers had office space in close proximity to
04-1596, 05-1002, 05-1037 18
one another. We think this evidence is simply too speculative to support the necessary
inferences. See Neb. Plastics, Inc. v. Holland Colors Americas, Inc., 408 F.3d 410, 417
(8th Cir. 2005) (“A reasonable inference is one which may be drawn from the evidence
without resort to speculation. Thus, judgment as a matter of law is appropriate when
the record contains no proof beyond speculation to support a verdict.” (citation
omitted)). Accordingly, we reverse the jury’s award of $1,442,381 for price erosion
damages as not supported by substantial evidence.
V.
As noted, the jury also found that Donaldson’s infringement by the Air Alert was
willful. Donaldson contends that we must vacate this finding because the jury
instruction emphasized that Donaldson did not obtain an opinion of counsel as to
whether the Air Alert infringed the ’456 patent. In response, EPC first contends that
Donaldson waived this argument by not objecting to the jury instruction at trial. In any
event, EPC asserts, the instruction did not direct the jury to draw an adverse inference
from the failure of Donaldson to seek legal counsel, but rather, simply instructed the jury
to consider consultation of counsel, vel non, as one factor in its willfulness deliberation.
We see no reason to disturb the jury’s finding of willful infringement. As an initial
matter, it appears that Donaldson did not object to the jury instruction during the trial.6
Fed. R. Civ. P. 51(c); Chem-Trend, Inc. v. Newport Indus., Inc., 279 F.3d 625, 629 (8th
Cir. 2002) (holding that failure to timely object to jury instructions results in waiver of the
objection). In situations where a party has waived its objection, the Eighth Circuit
reviews the instructions for “plain error,” only reversing in “the exceptional case where
6
We note that Donaldson’s Reply brief does not respond to the waiver
argument advanced by EPC.
04-1596, 05-1002, 05-1037 19
the error has seriously affected the fairness, integrity, or public reputation of judicial
proceedings.” Daggitt v. United Food & Commercial Workers Int’l Union, 245 F.3d 981,
985 (8th Cir. 2001). In the instant case, we do not see any error, let alone plain error, in
the instructions submitted to the jury. That is because the instructions merely directed
the jury to consider whether Donaldson sought a legal opinion as one factor in
assessing whether, under the totality of the circumstances, infringement by the Air Alert
was willful. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d
1337, 1342-43 (Fed. Cir. 2004) (en banc) (“Determination of willfulness is made on
consideration of the totality of the circumstances.”). The instructions did not instruct the
jury that it could draw an adverse inference based on Donaldson’s failure to seek legal
advice. Accordingly, we affirm the district court’s denial of Donaldson’s motion for
JMOL or, in the alternative, a new trial on the issue of willfulness.
VI.
Donaldson next challenges the district court’s decision to grant EPC’s post-trial
motion for enhanced damages. As noted, the court ultimately decided to treble the
$5,269,270 awarded for lost profits. Post Trial Motions, 330 F. Supp. 2d at 1046. In
reaching its decision, the court first determined that Donaldson had engaged in culpable
conduct vis-à-vis its willful infringement by the Air Alert. Id. at 1045. The court then
performed a careful, well-reasoned analysis of the various factors identified in Read
Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992), as relevant to determining
whether and to what extent enhancement of damages is warranted. Post Trial Motions,
330 F. Supp. 2d at 1045-46.
04-1596, 05-1002, 05-1037 20
On appeal, Donaldson contends that we must vacate, or at least reduce, the
district court’s award of enhanced damages in view of our conclusion that the NG Air
Alert does not infringe the ’456 patent. Donaldson asserts that that is because the jury’s
lost sales award includes sales of the non-infringing NG Air Alert. Donaldson also
asserts that the district court, by upholding the jury’s finding of infringement by the NG
Air Alert, improperly discounted Donaldson’s good-faith efforts to design around the
’456 patent. Therefore, Donaldson argues, the issue of enhanced damages needs to
be remanded to determine whether Donaldson’s successful remedial efforts to design
around the ’456 patent offset the other factors the court found to favor enhancement of
damages. In response, EPC contends the district court did not abuse its discretion in
view of its findings as to the egregiousness of Donaldson’s infringement by the Air Alert.
We agree with EPC that even though the district court erred in not granting
Donaldson JMOL of non-infringement by the NG Air Alert, the court did not abuse its
discretion in trebling the damages attributed to the sales of the Air Alert. In particular,
the court found that Donaldson engaged in “deliberate copying” and failed to make a
good-faith effort to avoid infringement by the Air Alert. Id. at 1045. The court further
found that this was not a close case of infringement, as evidenced by the strong
showing of willful infringement. Id. In addition, the court found that Donaldson’s
remedial efforts, “even viewed in the light most favorable to Donaldson, do not offset the
weight of other ‘egregiousness’ factors weighing in favor of enhancement of EPC’s
damages.” Id. at 1046 (emphasis added). Accordingly, we do not think the district court
04-1596, 05-1002, 05-1037 21
abused its discretion in trebling the damages for infringement by the Air Alert even
though we have reversed the court’s decision as to infringement by the NG Air Alert.7
However, we must nevertheless reduce the total amount of the enhanced
damages awarded in order to account for the fact that while we affirm the jury’s award
of $3,826,889 for lost sales, we reverse the jury’s award of $1,442,381 for price erosion
damages. The base from which damages are trebled is therefore $3,826,889 instead of
$5,269,270. Taking that into account, the proper amount of trebled damages is
$11,480,667. Accordingly, we vacate the portion of the district court’s judgment
awarding EPC $15,807,810 and remand with directions to enter judgment of
$11,480,667.
VII.
Finally, Donaldson contends that we must vacate the district court’s awards of
attorney’s fees, costs, and interest so that the court can assess the extent to which EPC
prevailed in view of our holding of non-infringement by the NG Air Alert and our
reduction in the amount of damages caused by infringement by the Air Alert. Turning
first to attorney’s fees and expenses, the district court granted EPC’s motion for
$1,844,933 in attorney’s fees and $132,725.20 in expenses. Attorney’s Fees, 335 F.
Supp. 2d at 981, 986. In granting the motion, the court first determined that the case
was exceptional under 35 U.S.C. § 285 as a result of the jury’s finding of willful
infringement. Id. at 984. Second, the court determined that an award of attorney’s fees
and expenses was appropriate given the culpable nature of Donaldson’s infringement,
7
We also find no error in the district court’s decision to treble the full lost
sales award, as we have already determined that substantial evidence supports that
award.
04-1596, 05-1002, 05-1037 22
at least as to the Air Alert. The court also noted that Donaldson’s “concede-nothing-
and-take-no-prisoners approach to th[e] litigation added significantly to EPC’s attorney
fees and expenses, such that it would be inequitable to force EPC to bear all of those
fees and expenses.” Id. Lastly, the court determined that the full amount of fees and
expenses sought by EPC was reasonable given the extent to which EPC “prevailed”
and the extent to which the case was deemed “exceptional.” Id. at 985.
We review a district court’s finding that a case is “exceptional” under 35 U.S.C.
§ 285 for clear error, while we review the court’s ultimate decision to award attorney’s
fees and costs for abuse of discretion. See Imonex Servs., Inc. v. W.H. Munzprufer
Dietmar Trenner GmbH, 408 F.3d 1374, 1378 (Fed. Cir. 2005). In this case, given the
finding of willful infringement, we do not think the district court clearly erred in finding the
case exceptional. Id. (“The criteria for declaring a case exceptional include willful
infringement, bad faith, litigation misconduct and unprofessional behavior.”). Nor do we
think the court abused its discretion in deciding to award fees. Brooktree Corp. v.
Advanced Micro Devices, Inc., 977 F.2d 1555, 1582 (Fed. Cir. 1992) (“[T]he trial court
has broad discretion in the criteria by which it determines whether to award attorney
fees.”). However, in reversing the finding of infringement as to the NG Air Alert, and in
reversing the damages awarded for price erosion, we have necessarily altered the
extent to which EPC “prevailed” before the trial court. Accordingly, because this was
one factor the district court took into consideration in awarding EPC attorney’s fees and
expenses, we vacate the court’s award and remand for reconsideration of what
constitutes a reasonable award.
04-1596, 05-1002, 05-1037 23
As to the pre- and post-judgment interest, we vacate the court’s award and
remand with instructions to adjust the interest awarded in order to account for our
reversal of the price erosion and reasonable royalty damages.
VIII.
In sum,
(1) We hold that the district court erred in its construction of the limitation
“means for selectively disengaging.” We further hold that, under the proper claim
construction, no reasonable juror could find infringement by the NG Air Alert. We
therefore reverse the court’s denial of Donaldson’s motion for JMOL of non-infringement
by the NG Air Alert and remand with instructions to enter judgment of non-infringement
for Donaldson.
(2) We hold that the district court abused its discretion in allowing Donaldson
to assert its obviousness-type double patenting defense. We therefore vacate the
court’s rulings on that defense. However, we still affirm the court’s judgment that claims
2 and 3 of the ’456 patent are not invalid.
(3) We affirm the district court’s award of $3,826,889 for lost sales. However,
because the award is not supported by substantial evidence, we reverse the $1,442,381
awarded for price erosion damages. We also reverse the $31,194 awarded as a
reasonable royalty for infringement by the NG Air Alert.
(4) We affirm the jury’s finding of willful infringement of the ’456 patent by the
Air Alert.
(5) We find no abuse of discretion in the district court’s decision to treble the
damages associated with infringement by the Air Alert. However, because we have
04-1596, 05-1002, 05-1037 24
reversed the price erosion damages, we vacate the $15,807,810 awarded by the district
court and remand with instructions to enter judgment for EPC in the amount of
$11,480,667.
(6) We find no abuse of discretion in the district court’s decision to award
costs and attorney’s fees. However, in light of our finding of no infringement by the NG
Air Alert and our reversal of the price erosion damages, we vacate the court’s award
and remand for reconsideration of what constitutes a reasonable award. We similarly
vacate the court’s award of pre- and post-judgment interest and remand with
instructions to adjust the interest awarded so as to account for our reversal of the price
erosion and reasonable royalty damages.
Each party shall bear its own costs.
04-1596, 05-1002, 05-1037 25