Remittitur Acceptance Prevents Additional Recovery for Indirect Infringement Counterclaims Against Custumors

In Glenayre Electronics, Inc. v. Jackson, et al. (Fed. Cir. April 11, 2006), the court held that Jackson's acceptance of remittitur damages against Declaratory Judgment plaintiff Glenayre prevented Jackson from litigating indirect infringement counterclaims against Glenayre’s customers. According to Circuit Judge Prost,

the case did "not fit within one of the exceptions to the basic rule that when the indirect infringer does not cause the original infringement but merely prolongs an infringing use of a product by providing supplies or spare parts." See also, e.g., Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 508 (1964) ("Aro II") (noting that, in a proper case against a contributor infringer that prolongs use of an infringing product, a patent owner might be able to obtain an injunction; recover damages based on the prolongation of the use; obtain punitive or increased damages for willful or bad-faith infringement; and perhaps damages primarily caused by the direct infringer when those damages could not be recovered from the direct infringer); King Instrument Corp. v. Otari Corp., 814 F.2d 1560, 1563-64 (Fed. Cir. 1987) (authorizing separate proceedings to resolve the appropriate amount of damages for (1) infringing sales of machines and (2) potential indirect infringement in the form of sales of spare parts, including spare parts used for reconstruction to extend the useful life of the machines and spare parts associated with new machine sales for which the patentee had not already been compensated)

. . . We conclude that, as a matter of law, Jackson has been fully compensated for infringement of the ’900 patent by the manufacture and sale of Glenayre’s products and the use of the same products by Glenayre’s customers. Jackson may not collaterally challenge the district court’s previous judgment that he is entitled to only $2.65 million rather than $12 million in damages for the manufacture, sale, and use of Glenayre’s products that infringe the ’900 patent, because that judgment, which was affirmed in a previous appeal, disposed of his current argument that he should be awarded greater damages based on the benefits Glenayre’s customers enjoyed
by using products sold by Glenayre. Furthermore, Jackson is not entitled to a second trial as a matter of right simply because the district court stayed his counterclaims of indirect infringement.

. . . To summarize, the problem here boils down to the fact that Jackson accepted the district court’s remittitur, which rejected the same argument he makes here, that a jury should award damages based on evidence showing the benefits of Glenayre’s customers’ infringing use of Glenayre’s products. Even if Jackson were to succeed in convincing a new jury that the customers directly infringe the ’900 patent, the issue of the appropriate damages award based on that infringement has already been litigated to a final judgment. Jackson is therefore barred from raising arguments before us that he chose not to raise in the prior appeal.

In effect, Jackson attempts an end run around his collected, unappealable remitted damages award by arguing that that award does not fully compensate him for infringement of the ’900 patent. In the attempt, Jackson misapplies three Supreme Court cases, Birdsell, Union Tool, and Aro II, failing to come to terms with the significance of the fact that, after we affirmed the district court’s judgment, Glenayre subsequently paid the remitted damages award to Jackson in full. . . .

However, in Circuit Judge Newmann's dissenting view, the remittitur did not apply to the severed counterclaims relating to indirect infringement by customers and "the majority incorrectly held that there cannot be contributory infringement by a diect infringer:"

The judgment that was subject to the remittitur is the judgment after the
jury trial, a trial that was limited to Glenayre's direct infringement. That
judgment was appealed by Glenayre, not Jackson. That judgment and the remitted
damages for Glenayre's direct infringement are not under collateral attack by
Jackson. . . . and are not at issue.

This appeal relates solely to the stayed counterclaims for Glenayre's contributory and induced infringement based on direct infringement by Glenayre's customers. These counterclaims were excluded from the jury trial. The district court decided, after this court affirmed the Rule 54(b) judgment of direct infringement, to dismiss the counterclaims without further proceedings. The district court, today affirmed by the panel majority, incorrectly held that there cannot be contributory infringement by a direct infringer. From this ruling and its flawed premises, I respectfully dissent.