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Archived updates for Tuesday, May 24, 2005

Notice to Low-Level Employees Triggers Enhanced Patent Damages

In one of its first opinions on willful infringement following the Knorr-Bremse decision, the Federal Circuit concluded that there was substantial evidence for a jury to find willfulness in Imonex Services, Inc. v. W.H. Munzprufer Dietmar Trenner GMBH, et al. (Fed. Cir.; May 20, 2005; citations removed) even though the defendant had obtained non-infringement opinions shortly after the lawsuit was filed:

"The defendants dispute the district court’s denial of JMOL on the jury’s verdict of willful infringement. Willfulness requires a showing that the totality of the circumstances evince the egregious conduct that constitutes willful infringement. Actual notice of another’s patent rights triggers an affirmative duty of due care. Constructive notice, as by marking a product with a patent number, is insufficient to trigger this duty. This court has identified several criteria for assessing damages, including, inter alia, 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, and the duration of defendant’s misconduct.

"Willful infringement in this case hinges on when the defendants had actual knowledge of Imonex’s patent rights, and their actions after that time. The record shows that Imonex disclosed its coin selection devices to employees of the original equipment manufacturer, or OEM, defendants at trade shows years before it filed suit. Those Imonex devices were marked with the numbers of both of the patents in suit. Imonex also distributed advertising literature which stated that the products were patented. Imonex corresponded with employees of the OEMs about use of the patented devices in the OEMs’ products. The record also disclosed that none of the OEM defendants commissioned an opinion of counsel about infringement, until after they were sued for infringement. The defendants do not deny that Imonex displayed its properly marked products at trade shows, but insist that this notice was insufficient to trigger its duty of due care, because no defendant employees with decision-making capacity received notice or studied the patents themselves.

"The jury could have reasonably concluded that several instances recounted in the record triggered the OEM’s duty of care. Those instances that provide actual notice to the OEMs of the patents on Imonex’s products include Imonex’s display of its products at trade shows, the widespread distribution of literature depicting the products as patented, and correspondence with OEM employees about the use of patented devices in the OEM products.

"The defendants also argue that they exercised their duty of due care by obtaining
opinions of counsel regarding possible infringement of the patents in suit shortly after being served with the complaint. Imonex argues that the defendants should have obtained these opinions as soon as they learned of their possible infringement of Munzprufer’s patents.

"This issue is informed, however, by this court’s recent decision in Knorr-Bremse, which was decided shortly after the briefs in this case were submitted. In that case, the affirmative duty of due care to avoid infringement was reiterated, but it was found no longer appropriate to draw an adverse inference with respect to willful infringement from failure to obtain legal advice. Therefore, while early receipt of legal advice would have strengthened the defendants’ argument that they had not willfully infringed, failure to have solicited such advice does not give rise to an inference of willfulness. Overall, the jury had substantial evidence to find willfulness, and this court affirms the district court’s denial of JMOL on this point."

It's quite likely that Munzprufer could have avoided at least some of this problem with a little "proactive intellectual property lawyering," including free watch services and free intellectual property training. For more information, click on the previous links or contact me on how to avaoid a similar fate for your company. What have you got to lose?
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Anonymous Anonymous said...

As for the willfulness, there are some facts that the CAFC did not
discuss in its opinion. Defendants in this case, in trying to assist Imonex in designing a coin selector that they would find acceptable, sent Imonex the later accused device years before Imonex filed suit. Imonex said nothing to any of the defendants about potential infringement by these
devices until filing suit.

It would seem that the defendant should be able to rely on Imonex's silence. It also clearly shows that the defendants made no connection between the Imonex patents the accused products. If the defendants were knowingly infringing Imonex's patents, then the they would not have sent Imonex samples of the infringing device!

The CAFC, however, does not discuss any of this. It looks to me like they were pointing to
evidence that the jury could have relied upon, and, since there arguably was such evidence, they let the jury verdict stand.

There are other things in the record that can be pointed to to show why the defendants never made any connection between the patents and the accused device. The method of operation in the patents is different than the method of operation of the accused device. The accused device tips the coins to one side so that gravity pulls the coins toward and against the gaging aperture so that smaller coins fall through the aperture and are rejected. In the Imonex patents, the coins are maintained in a vertical orientation, so gravity cannot pull the coins against the aperture.

Instead, Imonex teaches deflecting the coins with a protrusion or deflecting surface to steer the coins toward the gaging aperture. If a coin is not deflected in the device taught in the Imonex patents, then it is not gaged and the device fails to function. Hence the "each coin" claim element at the heart of the defendants non-infringement argument.

In the accused devices, the smaller coins often miss the protrusion and fall by the force of gravity through the aperture. Coins are rejected by the accused device without ever being deflected by any protrusion or surface.

Due to this difference in mode of operation, none of the defendants
ever appreciated that anyone could read the Imonex claims on the accused device until Imonex filed suit and placed them on actual notice.

As for infringement, again, it looks to me like the CAFC simply pointed to evidence that the jury could have relied upon, and since they found some evidence the jury could have relied upon, they upheld the jury verdict. Given the burden of proof was on Imonex for infringement, Imonex should have had to do more than say they think that if a large number of coins were sent through the coin selector, just a few may miss.
This is the best Imonex could do on the each coin limitation.

This looks to me like a failure to prove a claim element is infringed by the accused device. Imonex THINKS it is possible that given a large number of coins some may miss. Imonex could not say that it THINKS "each coin" hits. Forget about saying that they know each coin hits, since they know this
not to be true. That is my take anyway.

I guess I feel the same for willfulness and the BoP, Imonex merely showed that the defendants were at some level aware of its patents because Imonex marked the product and literature with the patent number, and the defendants had at least one or both of a marked product and literature. Imonex never showed that there was ever any recognition by the defendants that the patents could have any relation to the accused device and never even tried to prove this. The jury instruction in this district, however, merely states that for willfulness the defendant must have been aware of the patent and says no more. So, according to that instruction, I guess the jury is correct. I feel that is incorrect law and does not state reasons sufficient for enhancement of damages.

June 01, 2005 6:48 AM  

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