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Recent Cases
United States
Court of Appeals for the Federal Circuit
02-1588, -1589,
03-1008
STATE CONTRACTING
& ENGINEERING CORPORATION,
Plaintiff-Appellant,
v.
CONDOTTE AMERICA,
INC. (formerly known as Recchi America, Inc.),
THE MURPHY
CONSTRUCTION COMPANY,
THE HARDAWAY
COMPANY, HUBBARD CONSTRUCTION COMPANY,
BALFOUR BEATTY CONSTRUCTION,
INC.,
COMMUNITY ASPHALT
CORPORATION,
and HANSON PIPE
& PRODUCTS SOUTHEAST, INC.
(formerly known
as Joelson Concrete Pipe Company, Inc.),
Defendants-Cross Appellants.
Richard
S. Ross, of Ft. Lauderdale, Florida,
argued for plaintiff-appellant.
Of counsel on the brief was John H. Faro, Faro &
Associates, of Miami, Florida.
Stefan
V. Stein and Steven L. Brannock, Holland & Knight LLP, of Tampa,
Florida, argued for defendants-cross
appellants. With them on the
brief was Harvey S. Kauget.
Appealed from: United
States District Court for the Southern
District of Florida
Judge William P. Dimitrouleas
United States Court of Appeals for the Federal Circuit
02-1588, -1589,
03-1008
STATE CONTRACTING
& ENGINEERING CORPORATION,
Plaintiff-Appellant,
v.
CONDOTTE AMERICA,
INC. (formerly known as Recchi America, Inc.),
THE MURPHY
CONSTRUCTION COMPANY,
THE HARDAWAY
COMPANY, HUBBARD CONSTRUCTION COMPANY,
BALFOUR BEATTY
CONSTRUCTION, INC.,
COMMUNITY ASPHALT
CORPORATION,
and HANSON PIPE
& PRODUCTS SOUTHEAST, INC.
(formerly known
as Joelson Concrete Pipe Company, Inc.),
Defendants-Cross Appellants.
___________________________
DECIDED: October 7, 2003
___________________________
Before MICHEL, BRYSON, and
DYK, Circuit Judges.
BRYSON, Circuit Judge.
State Contracting &
Engineering Corporation (“State Contracting”) sued the State of
Florida and a number of
private contractors in the United States District Court for the Southern
District of Florida, charging them with patent infringement. The State was dismissed from the
case, and after an appeal to this court and a jury trial on remand, the
district court entered judgment for State Contracting. Although it obtained an award of
damages, State Contracting has appealed the district court’s ruling
that the contractors’ infringement was not willful. For their part, the contractors have
appealed from the judgment on a number of grounds, including State
Contracting’s standing to assert infringement of the two
patents-in-suit, the district court’s rejection of the
contractors’ defenses of laches and patent invalidity, and the
jury’s award of reasonable royalty damages. We uphold most of the district
court’s rulings, but reverse and remand for further proceedings on
the issue of obviousness.
I. Background
This action stems from work done under a contract in
which State Paving Corporation (“State Paving”) constructed a
set of sound barrier walls for the Florida Department of Transportation
(“FDOT”). Sound
barrier walls serve to reduce the level of highway noise reaching
surrounding neighborhoods.
During the construction, State Paving submitted a Value Engineering
Change Proposal (“VECP”) for a new integrated column and pile
design to be used to support the sound barrier walls. FDOT accepted the proposal and
incorporated it into the specifications for the project. In accordance with the VECP
contract, FDOT paid State Paving half of the cost savings realized from the
use of the VECP in the project.
Subsequently, State Paving applied for and was issued
two patents related to the subject matter of the VECP: U.S. Patent No.
5,234,288 (“the ’288 patent”) and U.S. Patent No.
5,429,455 (“the ’455 patent”). The ’288 patent contains
method claims directed to the formation of an integrated column and pile
for use in building structures in sandy soil. Claim 1 of the ’288 patent,
the only independent claim, provides:
A method of
forming a ground-supported column or post, comprising the steps of
providing a ground situs of suitable depth and width, filling said situs
with a cementitious slurry, providing a reinforced, precast concrete member
whose reinforcing bars extend out of the bottom of said member a
substantial length beyond said bottom to form an exposed portion, inserting
said exposed portion into said slurry until said member merges with said
slurry, and permitting said slurry to harden, thus providing an integral
column and pile set in the ground.
’288 patent, col. 4,
ll. 2-12. Dependent claim 2
adds the limitation of using auger casting for the ground situs and slurry,
while dependent claim 3 adds the use of falsework to keep the concrete
member in position while the slurry hardens. Id.,
col. 4, ll. 13-19. According to
the written description, an auger rotates to cut through the soil and
create the hole. Cementitious
material can then be pumped through the central channel of the auger so
that when a retaining means or valve in the auger is opened, the
cementitious material fills the hole.
Id., col. 1, l.
61, to col. 2, l. 4.
The ’455 patent contains three apparatus
claims. Claim 1 is
representative:
A precise
reinforced concrete member containing reinforcing bars which have exposed
portions extending beyond one end of the member and parallel to the
longitudinal dimension of the member; the number, size and length of such
exposed portions being such as to provide sufficient strength when the end
of said concrete member is merged with and the bars inserted into a
foundation pile of initially wet, cementitious material, which material is
then allowed to set; said exposed portions being further characterized in
being completely surrounded by said cementitious material; said concrete
member and said pile being merged without mechanical attachment.
’455 patent, col. 3, l.
23, to col. 4, l. 3.
On May 9,
1997, State Paving entered into an agreement to transfer the
invention disclosed in the two patents to State Contracting. State Contracting then sued FDOT and
several highway construction contractors for infringement of the two
patents. State Contracting
alleged that FDOT had improperly incorporated the VECP into subsequent
requests for bids and that the contractors had then infringed the patents
when they carried out the construction contracts that resulted from those
bids. The district court
granted the defendants’ motions for summary judgment with respect to
State Contracting’s claims of patent infringement, holding that, when
it executed the VECP contract, State Paving had granted FDOT a license that
authorized FDOT and its contractors to practice the asserted patents.
On State Contracting’s appeal, we affirmed the
district court’s ruling in favor of FDOT, but we held that the
district court had erred in granting summary judgment to the private
contractors on the patent infringement claims. State Contracting &
Eng’g Corp. v. Florida,
258 F.3d 1329, 1340 (Fed. Cir. 2001).
We held that the VECP contract did not grant FDOT a license to
practice the patents in future soundwall construction projects.
After the case was remanded to the district court,
the contractors filed a motion to dismiss, arguing that State Contracting
lacked standing to sue for patent infringement because State Paving had not
validly assigned the patents to State Contracting. The district court denied that
motion. In a joint pretrial
stipulation, the contractors then admitted literal infringement of both of
the asserted patents, subject to their affirmative defenses. At the close of the evidence at
trial, the district court ruled as a matter of law that the
contractors’ infringement was not willful, that the asserted patent
claims were not invalid, and that the contractors did not have a valid
defense of laches.
The jury returned a verdict in favor of State
Contracting. Although the jury
declined to award lost profits, it assessed damages against four of the
contractors in the form of a reasonable royalty to State Contracting. The district court denied the
contractors’ motion for a new trial or remittitur of the jury verdict
award.
II. Standing
We first address the issue of standing raised by the
contractors in their cross-appeal.
The contractors contend that State Contracting lacked standing to
seek recovery for patent infringement because it did not have the requisite
interest in the patents-in-suit at the time the action was filed. According to the contractors, the May 9, 1997, contract between
State Paving and State Contracting merely granted a license under the
asserted patents and did not transfer ownership of the patent rights.
Section 281 of the Patent Act, 35 U.S.C. § 281,
authorizes a “patentee” to bring an action for patent
infringement. A patentee
“includes not only the patentee to whom the patent was issued but
also the successors in title to the patentee.” 35 U.S.C. § 100(d). We have held that “[a]
conveyance of legal title by the patentee can be made only of the entire
patent, an undivided part or share of the entire patent, or all rights
under the patent in a specified geographical region of the United
States.” Rite-Hite Corp v. Kelley Co.,
56 F.3d 1538, 1551 (Fed. Cir. 1995) (en banc) (citing Waterman v.
Mackenzie, 138 U.S.
252, 255 (1891)). Such a
transfer is an assignment, vesting the assignee with both title in the
patent and the right to sue infringers. Rite-Hite, 56 F.3d at
1551. In contrast, less than a
complete transfer of those interests constitutes a license and generally
affords the licensee no right to sue for infringement. Id. We must therefore determine whether
the transfer from State Paving to State Contracting was an assignment or a
license.
“To determine whether a provision in an
agreement constitutes an assignment or a license, one must ascertain the
intention of the parties and examine the substance of what was
granted.” Vaupel
Textilmaschinen KG v. Meccanica
Euro Italia S.P.A., 944 F.2d 870, 873 (Fed. Cir. 1991). A party that has been granted all
substantial rights under the patent is considered the owner regardless of
how the parties characterize the transaction that conveyed those rights. Speedplay, Inc. v. Bebop, Inc.,
211 F.3d 1245, 1250 (Fed. Cir. 2000).
The relevant contract in this case specifies that State Paving
“sells, assigns, and transfers” to State Contracting
the entire right title and interest in the
inventions relating to an Integrated Column & Pile, to any component
part and subassemblies thereof, and to any improvements in the foregoing
Integrated Column & Pile, component part and subassemblies thereof,
including, but not limited [to] subject matter disclosed in [the ’288
patent and the ’455 patent].
It
is understood that this assignment is inclusive of all claims against third
parties for infringement, past and present; and, that the recovery for
infringement, if any, is and remains the property of the assignee.
That language has the effect of conveying full legal
title in the patents to State Contracting and thus makes clear that State
Contracting is the assignee of the two patents. The defendants contend that the
contract omits language explicitly assigning the patents and that it does
not transfer all rights in the patents. We disagree. The contract’s transfer of the
“entire right title and interest in the inventions,” including
the subject matter of the two patents, constitutes an assignment because it
transfers the “exclusive right to make, use and vend the invention
through the United States,” Waterman, 138 U.S. at 255. The contract grants State
Contracting the right to exclude others from making, using, or selling the
claimed invention by transferring the right to sue third parties for
infringement. See Vaupel,
944 F.2d at 875 (it is “particularly dispositive” that the
agreement included the right to sue for infringement).
In determining whether a grant of all substantial
rights was intended, it is useful to examine what rights, if any, were retained
by the transferor. Vaupel,
944 F.2d at 875. State Paving
did not expressly retain any rights in the patents; indeed, it did not even
reserve the right to practice the patent itself. See Abbott Labs. v.
Diamedix Corp., 47 F.3d 1128, 1131 (Fed. Cir. 1995) (requiring
transferor to be joined in suit when transferor retained, inter alia,
a limited right to make, use, and sell the patented product as well as the
option to sue for infringement if the transferee declined to do so).
The contractors contend that State Paving retained
the right to sue for future infringement, having expressly granted the
right to sue only for past and present infringement. That argument rests on a strained
reading of the agreement. The
most reasonable interpretation of the agreement is that the right to sue
for future infringement is subsumed within the right to sue for present
infringement. It is unlikely
that the parties included the reference to “present” infringement
only to transfer the right to sue for infringement occurring at the precise
moment the agreement was executed, and the contractors have not put forward
any reason to conclude that the parties intended State Paving to retain the
right to sue for future infringement.
Accordingly, we affirm the district court’s holding that State
Paving transferred all substantial rights to State Contracting and that
State Contracting had standing to bring this infringement suit against the
contractors.
On a related
matter, after the contractors raised the standing issue, State Paving
executed a new assignment to State Contracting, and State Contracting filed
a new action designed to avoid the loss of potential damages if this court
reversed the district court’s ruling on standing. The district court dismissed that
new action on res judicata grounds, and State Contracting appealed
from that dismissal. In light
of our conclusion that the May 9, 1997, document transferred ownership of
the asserted patents to State Contracting, we need not address State
Contracting’s appeal on that issue.
III.
Willfulness
At trial, the district court granted the
contractors’ motion, pursuant to Federal Rule of Civil Procedure 50,
to dismiss State Contracting’s claim that the contractors’
infringement was willful. State
Contracting appeals from that ruling.
“To establish willful infringement, a plaintiff
must prove by clear and convincing evidence that the defendant acted
without a reasonable belief that its action avoided
infringement.” Crystal
Semiconductor Corp. v. Tritech Microelectronics Int’l, Inc., 246
F.3d 1336, 1351 (Fed. Cir. 2001).
State Contracting argues that the evidence supports its contention
that the contractors failed to exercise due care to avoid infringement. We disagree and hold that a jury
could not find by clear and convincing evidence that the contractors acted
without a reasonable belief that their conduct was lawful.
From the outset, the contractors’ principal
defense to infringement was that they were acting under a license granted
to FDOT. It was entirely
reasonable for FDOT and the contractors to construe the VECP contract as
granting FDOT a license to practice the inventions recited in the asserted
patents. See Paper
Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 20 (Fed.
Cir. 1984) (“An increase in damages for willfulness . . . is
generally inappropriate when the infringer mounts a good faith and
substantial challenge to the existence of infringement.”).
The VECP agreement states that State Contracting
“hereby grants to [FDOT] all rights to use, duplicate or disclose, in
whole or in part, in any manner and for any purpose whatsoever, and to have
or to permit others to do so, data reasonably necessary to fully utilize
such proposal on this and any other Department contract.” While we did not sustain the
contention that FDOT obtained a license as a result of the agreement, it
was reasonable for the contractors to believe, based on the language of
that agreement, that FDOT had a license to practice the VECP inventions. Significantly, the district court so
concluded in its ruling that led to the first appeal in this case.
State Contracting does not dispute that, because of
communications with FDOT, the contractors believed the VECP contract had
given FDOT a license to practice the inventions recited in the two
patents. Erol Clay McGonagill,
Jr., FDOT’s special counsel for construction claims, testified that
“[w]hen we got the VECP it was fully understood that we were going to
incorporate this design into the remainder of our projects. It was not only the reasonable thing
to do, it was exactly what the VECP spec provided for us, and State Paving
knew that because they had been involved in our project for a long
time.” Because the
contractors had a substantial defense to infringement, the trial court
correctly concluded that State Contracting could not prove by clear and
convincing evidence that the contractors had no reasonable belief that they
were not infringing.
State Contracting argues that the district court
should have denied the contractors’ Rule 50 motion on willfulness
because the contractors failed to produce and rely on a written opinion of
counsel. In addition, State
Contracting contends that because at trial the contractors did not rely on
the opinion of FDOT’s in-house counsel as to the effect of the VECP
agreement, it should be inferred that the opinion was adverse to the
contractors’ interests.
While we have stated that due care is often achieved
by seeking the advice of competent counsel and receiving exculpatory
advice, Vulcan Eng’g Co., Inc. v. FATA Aluminum, Inc., 278
F.3d 1366, 1378 (Fed. Cir. 2002), we have not held that obtaining the
advice of counsel is the only means to avoid a finding of willfulness,
regardless of the circumstances.
See Kloster Speedsteel, AB v. Crucible, Inc., 793 F.2d
1565, 1579 (Fed. Cir. 1986) (“[N]ot every failure to seek an opinion
of competent counsel will mandate an ultimate finding of
willfulness.”). In the
circumstances of this case, it was reasonable for the contractors not to
seek the advice of counsel.
This is not a case in which the contractors concluded, without
seeking the advice of counsel, that their actions fell outside the scope of
the patents or that the patents were invalid. Instead, FDOT made a specific
representation that it had a license to practice the invention, and it
incorporated the invention in the contract specifications, thus requiring
the contractors to use the patented process. It was not unreasonable for the
contractors to rely on FDOT’s representation without seeking the
advice of counsel to confirm the accuracy of that representation. As for the contractors’
failure to rely at trial on the opinion of FDOT’s counsel, there is
no evidence that the contractors were even aware of the existence of the
opinion. Accordingly, no adverse
inference can be drawn from the contractors’ failure to introduce
evidence regarding the contents of that opinion. Because it was reasonable for the
contractors to conclude that they were licensed to practice the VECP
design, and because they had no obligation to introduce evidence regarding
the advice of FDOT’s counsel, we uphold the district court’s
ruling on the willfulness issue.
IV. Laches
The contractors initially raised four affirmative
defenses: laches, equitable estoppel, implied license, and acquiescence and
consent. The trial judge
submitted only the latter two to the jury. The judge granted State
Contracting’s Rule 50 motion to dismiss the equitable estoppel
defense because he deemed that defense duplicative of the acquiescence and
consent defense. Later in the
same hearing, the judge stated that he had also granted a Rule 50 motion on
laches, although he did not explain his reasons for rejecting that defense.
The contractors assume that the district court
rejected the laches defense because the court believed that defense was
duplicative of the other affirmative defenses the contractors raised at
trial. Based on that
assumption, they argue that the district court should not have rejected their
laches defense because laches, unlike the other defenses raised at trial,
does not require an affirmative act by the plaintiff other than delay in
filing suit. See A.C.
Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041 (Fed.
Cir. 1992) (en banc) (“laches focuses on the reasonableness of the
plaintiff’s delay in suit . . . [while] equitable estoppel focuses on
what the defendant has been led to reasonably believe from the
plaintiff’s conduct”; equitable estoppel requires
misrepresentation by the plaintiff and reliance on the misrepresentation by
the alleged infringer).
State Contracting argues that we should affirm the
trial court’s ruling on laches because the contractors failed to
present any evidence of material prejudice, which is an element of
laches. To successfully invoke
laches, a defendant must prove that the plaintiff delayed filing suit an
unreasonable and inexcusable length of time after the plaintiff knew or
reasonably should have known of its claim against the defendant and that
the delay resulted in material prejudice to the defendant. Gasser Chair Co., Inc. v. Infanti
Chair Mfg. Corp., 60 F.3d 770, 773 (Fed. Cir. 1995). Once those factual premises are
established, the court weighs the equities in order to assess whether
laches should apply to bar those damages that accrued prior to suit. See Advanced
Cardiovascular Sys., Inc. v. SciMed
Life Sys., Inc., 988 F.2d 1157, 1161 (Fed. Cir. 1993); Aukerman,
960 F.2d at 1041.
Because the period of delay in this case was less
than six years, prejudice is not presumed. See Aukerman, 960 F.2d
at 1035-36. The earliest that
an infringement suit could have been brought was the ’288
patent’s issuance date, which was approximately four years before
suit was actually filed. See
Meyers v. Asics Corp., 974
F.2d 1304, 1307 (Fed. Cir. 1992) (laches period does not begin to run until
the patent issues).
Accordingly, in order to establish their defense of laches, the
contractors had to prove that the delay materially prejudiced them.
We have stated that material prejudice may be either economic
or evidentiary. Aukerman,
960 F.2d at 1033. The
contractors do not allege evidentiary prejudice, so the prejudice inquiry
in this case is directed solely to economic prejudice. Economic prejudice arises when a
defendant suffers the loss of monetary investments or incurs damages that
likely would have been prevented by earlier suit. Id. A nexus must be shown between the
patentee’s delay in filing suit and the expenditures; the alleged
infringer must change his position “because of and as a result of the
delay.” Hemstreet v.
Computer Entry Sys. Corp., 972 F.2d 1290, 1294 (Fed. Cir. 1992); see
also Gasser Chair, 60 F.3d at 775 (“We reiterate that a
change in the economic position of the infringer during the period of delay
must be as a result of the delay; the infringer must prove that the change
in economic position would not have occurred had the patentee sued
earlier.”).
The contractors contend that they were prejudiced
because, as a result of the delay in filing suit, FDOT continued to incorporate
the invention from the VECP into bids and contracts with them. If State Paving had promptly
notified FDOT of the patent, the contractors argue, FDOT and the
contractors could have avoided the controversy entirely simply by changing
the soundwall specifications or returning to the original design. The contractors point to testimony
by Mr. McGonagill, FDOT’s special counsel, who said that State Paving
was aware that it was FDOT’s practice to incorporate VECP
improvements in future projects.
They also point to his testimony that FDOT may not have agreed to
the VECP in the first place if it had known that State Paving intended to
seek patent protection for the invention.
The evidence adduced by the contractors does not
establish the kind of prejudice that is required to support a finding of
laches. First, the contractors
have failed to show that they changed their economic position during the
period of delay by making the types of expenditures that are recognized as
giving rise to material prejudice.
“Such damages or monetary losses are not merely those
attributable to a finding of liability for infringement. Economic prejudice would then arise
in every suit. The courts must
look for a change in the economic position of the alleged infringer during
the period of delay.” Aukerman,
960 F.2d at 1033 (internal citations omitted). The economic prejudice asserted by
the contractors is limited to the amount of their infringement liability
and thus is not sufficient to support the laches defense.
Second, the contractors have failed to establish a
nexus between the delay in filing suit and their asserted economic
injury. Mr. McGonagill’s
testimony that FDOT may not have entered into the VECP had it been made aware
of the pending patent application is irrelevant to a finding of laches,
which applies only to the period after patent issuance when suit could have
been brought. The contractors
also have failed to show that they would not have entered into the
contracts with FDOT to construct the sound barrier walls if suit had been
brought earlier. Mr. McGonagill
did not testify that an earlier filing would have led FDOT to adopt a
non-infringing alternative, and the contractors have not directed us to
evidence that an earlier filing would have led them to alter their behavior
or avoid incurring certain expenditures.
To the contrary, the evidence indicates that it is
unlikely that FDOT or the contractors would have ceased using the VECP
design in the construction projects even if the lawsuit had been filed
earlier. See Gasser
Chair, 60 F.3d at 775 (“[T]he evidence of record showed that [the
alleged infringer] was indifferent to whether [the patentee] would sue
because of his personal belief that the patent was invalid.”); Meyers
v. Brooks Shoe, Inc., 912 F.2d 1459, 1463 (Fed. Cir. 1990) (failure to
show prejudice from delay in filing suit when evidence indicated that the
accused infringer would have continued its activity anyway; “From all
that appears, [the accused infringer] would have followed the same course
regardless of what [the plaintiff] did or did not do.”). In 1992 and 1995, for example, State
Paving contacted several contractors and told them about either the pending
patent application or the issued ’288 patent, yet the contractors
continued to construct the sound walls in accordance with FDOT’s
specifications. See Hemstreet,
972 F.2d at 1294 (the infringer’s prejudice argument was
“severely undercut” by the patentee’s provision of notice
of other litigation and “implicit suggestion that CES would soon face
litigation if it refused to license.”). Because the contractors have failed
to put forward sufficient evidence of material prejudice to support a
finding of laches, it was not error for the court to reject that defense.
V. Validity
The contractors contend that the district court erred
in granting judgment as a matter of law (“JMOL”) to State
Contracting with respect to the contractors’ contention that the
asserted claims of the patents-in-suit are invalid. A party seeking to establish that
particular claims are invalid must overcome the presumption of validity in
35 U.S.C. § 282 by clear and convincing evidence. Beckson Marine, Inc. v. NFM, Inc.,
292 F.3d 718, 725 (Fed. Cir. 2002).
The contractors argue that the asserted claims are invalid because
they are both anticipated and obvious in light of the prior art. Although the contractors contend
that the district court erred in denying their pretrial motion for summary
judgment with respect to validity, the denial of a pretrial motion for
summary judgment is not reviewable on appeal from a final judgment. Novo Nordisk A/S v. Becton
Dickinson & Co., 304 F.3d 1216, 1221 (Fed. Cir. 2002). Accordingly, our inquiry will be
directed solely to whether the district court erred in granting State
Contracting’s motion for JMOL at the conclusion of the trial.
The district court did not issue a written order
explaining its ruling when it granted State Contracting’s Rule 50
motion on validity. The extent
of the record of the court’s ruling with respect to validity was to
say: “I think it’s
a new invention. I think that
the defendant hasn’t shown by clear and convincing evidence that the
patent was invalid, so I am going to grant the Rule 50 on the counterclaim
and on the affirmative defenses.” The court also did not construe any
of the disputed claim terms before entering its JMOL order with respect to
validity, even though we have held that a claim “must be construed
before determining its validity just as it is first construed before
deciding infringement.” Markman
v. Westview Instruments, Inc., 52 F.3d 967, 997 n.7 (Fed. Cir. 1995)
(en banc), aff’d, 517 U.S. 370 (1996); Amazon.com, Inc. v.
Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001). The parties raised questions at
least with respect to the meaning of the claim terms “substantial
length” and “length . . . providing sufficient
strength.” There also
appears to be disagreement as to the meaning of the term “mechanical
attachment.” It was
incumbent upon the court to set forth its construction of the disputed
terms prior to ruling on validity, or at least to explain why resolution of
the claim construction would not impact the court’s ruling.
State Contracting argues that the district court did
construe the claims. However,
characterizing the invention as an integrated column and pile (which is
simply the title of the two patents) does not constitute a construction of
the pertinent limitations. As a
part of our validity analysis, we must examine whether the absence of a
claim construction is harmless error or whether the construction could
impact the conclusion of anticipation or obviousness.
A
With respect to anticipation, the contractors contend
that Petro Xanthakos’s book “Slurry Walls” anticipates
the claims of the patents-in-suit.
State Contracting responds that the Xanthakos reference cannot
anticipate because it is non-analogous art and does not disclose every
limitation of the asserted claims.
We reject State Contracting’s argument that the
Xanthakos reference cannot anticipate the asserted claims because it is
non-analogous art. “[T]he
question whether a reference is analogous art is irrelevant to whether that
reference anticipates.” In
re Schreiber, 128 F.3d 1473, 1478 (Fed. Cir. 1997). To the contrary, “a reference
may be from an entirely different field of endeavor than that of the
claimed invention or may be directed to an entirely different problem from
the one addressed by the inventor, yet the reference will still anticipate
if it explicitly or inherently discloses every limitation recited in the
claims.” Id.
Nonetheless, we conclude that the Xanthakos reference
cannot be found to anticipate the asserted claims. While anticipation is a question of
fact, Scripps Clinic & Research Found. v. Genentech, Inc., 927
F.2d 1565, 1576 (Fed. Cir. 1991), a factfinder could not reasonably find,
on the present record, that Xanthakos discloses every limitation of the
claims of the patents-in-suit.
The process described in Xanthakos begins with the
step of filling a hole with a bentonite slurry. The bentonite apparently preserves
the shape of the hole and keeps the walls from caving in. A steel column or a column of
precast concrete with “starter bars” protruding from the bottom
is then lowered into the hole.
Concrete (cementitious slurry) is then added, displacing the
bentonite slurry, so that the column is embedded in the concrete once it
hardens. The Xanthakos
reference differs from the asserted claims in at least one respect: In Xanthakos, the cementitious
slurry is poured over the starter bars after they are already in the hole,
while the asserted claims require that the exposed portions of the
reinforcing bars be inserted into the cementitious slurry. Claim 1 of the ’288 patent,
for example, recites the limitation of “inserting said exposed
portion [of the reinforcing bars] into said slurry.” Similarly, claim 1 of the ’455
patent requires that the bars be “inserted into a foundation pile of
initially wet, cementitious material.” While the district court did not
construe the term “inserting into,” that limitation cannot be
construed in a way that would include pouring the slurry over the exposed
bars after they were already in the holes. That conclusion is supported by the
inventor’s statement in the prosecution history that, “in the present
invention, a hole is indeed formed in the ground but the hole is first
filled with cementitious slurry.
It is only after the slurry has filled the hole that a precast
column or post having its reinforcing rods extending out from the bottom is
placed in position in the slurry.” Thus, the claims require that the
bars be inserted into the slurry, which is not taught by Xanthakos. Because Xanthakos does not disclose
that step, it does not anticipate the asserted claims.
B
Obviousness presents a more difficult question. Whether a claim is invalid for
obviousness is a legal conclusion that is based on underlying questions of
fact. Beckson Marine,
292 F.3d at 725. The underlying
factual inquiries include the scope and content of the prior art; the differences
between the claimed invention and the prior art; the level of ordinary
skill in the art; and objective evidence of nonobviousness, including
commercial success, copying, and long-felt need. See Graham v. John Deere
Co., 383 U.S. 1, 17-18 (1966).
1
A prerequisite to making a finding on the scope and
content of the prior art is to determine what prior art references are
pertinent. In re Clay,
966 F.2d 656, 658 (Fed. Cir. 1992).
Whether a prior art reference is analogous is a question of
fact. Id. A reference is analogous if it is from the same
field of endeavor as the invention.
Id. at 658-59.
Similarity in the structure and function of the invention and the
prior art is indicative that the prior art is within the inventor’s
field of endeavor. In re
Deminski, 796 F.2d 436, 442 (Fed. Cir. 1986). If a reference is outside the
inventor's field of endeavor, it is still analogous art if the reference
“is reasonably pertinent to the particular problem with which the
inventor is involved.” Clay,
966 F.2d at 659.
At a minimum, the record presents a factual question
as to whether Xanthakos is analogous art. George Tamaro, an expert in civil
and structural engineering who testified for the contractors, stated that
the different pieces of prior art that he discussed, which included
Xanthakos, are in the same field of endeavor as the two patented
inventions. Based on Mr.
Tamaro’s testimony and other evidence in the record, a factfinder
could reasonably conclude that the inventor’s field was the use of integrated
column and pile structures to provide support. The written descriptions of the two
patents indicate that the inventions are directed to an integral column and
pile for use in building structures in sandy soil, and there is at least a
question of fact as to whether Xanthakos is within the field of integral
column and pile support structures, since Xanthakos teaches a
“prefounded column” consisting of a column that merges with the
pile when the concrete of the pile hardens around the column, and explains
that the prefounded columns are used to support a superstructure.
State Contracting looks to the title of
Xanthakos’s book and most of the teachings in the book to conclude
that the book is solely within the scope of “slurry wall art”
and thus is outside the pertinent field of endeavor. State Contracting’s expert,
Thomas J. Tepper, described slurry wall technology as “a method that
is utilized to stabilize excavation side walls and bottoms to enable that
excavation to receive a subterranean structure.” Mr. Tepper testified that the
patents did not involve slurry wall technology, “[s]imply due to the
fact that the foundation element that is part of the patent is an auger
cast pile that involves the use of a fluid grout to fill in excavation once
it’s been made.”
State Contracting, however, is mistaken in looking to the general
scope of the Xanthakos reference to assess whether it contains disclosures
in the pertinent field of endeavor.
The relevant part of Xanthakos deals with creating an integral column
and foundation pile as support for a larger structure in construction. The fact that Xanthakos also
describes the formation of slurry walls does not negate its teaching of
integrated columns and piles for use as support in construction.
State Contracting characterizes the relevant field of
endeavor as being limited to the use of auger casting in the formation of
the situs for the integrated column and pile. An auger, however, is specified only
in claim 2 of the ’288 patent.
Moreover, the summary of the invention of both patents addresses the
subject of integrated column and pile designs within which, it states,
“One method of providing the mass of cementitious material in a hole
of suitable depth and width is to use an auger having a central channel.” ’288 patent, col. 1, ll.
61-63; ’455 patent, col. 1, ll. 61-63. Thus, in this respect as well, there
is at least a factual dispute as to the relevant field of art.
A factfinder could also conclude that the cited prior
art references are reasonably pertinent to the problem that the patents
address. “A reference is
reasonably pertinent if . . . it is one which, because of the matter with
which it deals, logically would have commended itself to an inventor’s
attention in considering his problem.
Thus, the purposes of both the invention and the prior art are
important in determining whether the reference is reasonably pertinent to
the problem the invention attempts to solve.” In re Clay, 966 F.2d at 659.
In its response to the contractors’ motion for
summary judgment, State Contracting suggested that the problem the patents
address is “the complexity, cost, exposed metal fittings required for
the mechanical coupling of a pre-cast column to a cap or plate on a
foundation pile.” In
support of that characterization, State Contracting cites portions of the
’288 patent, including the statement that the described method
“avoids the necessity for attaching a column or post to a set of
reinforcing bars and/or anchor bolts separately inserted into the pool of
cementitious material,” ’288 patent, col. 2, ll. 9-13, and the
statement that the invention “provides a unitary, integral column and
pile seated in the ground, with no anchor bolts or the like being
required,” id.,
col. 1, ll. 38-44. Even if that
is a fair characterization of the problem the invention addresses, a
factfinder could reasonably conclude that the pertinent portion of the
Xanthakos reference is relevant to and directed to that problem, as it
provides a column and pile merged without anchor bolts or separately
installed reinforcement.
2
In their briefs to this court, the contractors point
to references that disclose particular limitations in the asserted
claims. For example, they point
to Xanthakos for the integrated column and pile formed by merging a
concrete column having exposed bars with a cementitious slurry in a ground
situs; to Kubota’s Japanese Patent No. 62-194,319 for full-depth
exposed reinforcement; to Kubota and U.S. Patent No. 3,654,767, owned by
Raymond International, Inc., for filling the holes with cementitious slurry
without pre-filling the hole with bentonite slurry; and to the Raymond
patent for the use of auger casting.
Upon review of the record, we conclude that there are factual questions
as to the scope of the prior art references and the differences between the
prior art and the claimed invention, as well as whether there was a
“motivation, teaching, suggestion, or reason” to combine the
prior art references to derive the patented inventions. See Gambro Lundia AB v.
Baxter Healthcare Corp., 110 F.3d 1573, 1579 (Fed. Cir. 1997).
In particular, there is a factual question as to the
scope of the Kubota and Raymond references. A finder of fact could understand Kubota
to disclose integrating a steel tube having reinforcing bars with a
concrete pile by penetrating the steel tube and bars into concrete in an
excavation pit before the concrete hardens. A finder of fact could understand
Raymond, which discloses a concrete column with reinforcement, to teach the
use of an auger in forming the ground situs, as provided in claim 2 of the
’288 patent.
State Contracting argues that Kubota teaches away
from the claimed invention because it discloses a steel column that is welded
to a steel extension. According
to State Contracting, welding is a form of mechanical attachment and the
asserted claims exclude a mechanical connection between the concrete column
and the pile. To resolve that
question, the district court will have to determine whether the
“without mechanical attachment” limitation excludes only
bolt-type joints or also excludes welded connections. State Contracting also argues that
references dealing with steel columns, such as Kubota, have no application
to the concrete structures of the asserted claims. However, evidence at trial, such as
Mr. Tamaro’s testimony that the choice of concrete or steel
extensions is a design decision, raises a factual question as to that
issue.
There is also a factual question whether the starter
bars disclosed in the Xanthakos reference are “reinforcing
bars,” as that term is used in the asserted claims. The resolution of that factual
question, moreover, depends on the proper construction of critical terms in
the asserted claims. The
’288 patent claims “reinforcing bars” of
“substantial length,” and claim 1 of the ’455 patent
recites “reinforcing bars” with exposed portions “being such
as to provide sufficient strength.” In order to determine whether the
Xanthakos starter bars satisfy those limitations, the district court will
have to determine whether the Xanthakos starter bars can be considered
reinforcing bars and, if so, whether those bars satisfy the claim
limitations as to length and strength.
In sum, viewing the evidence in the light most
favorable to the contractors, we conclude that there is a genuine factual
dispute as to what the prior art references teach and what the differences
are between the prior art and the asserted claims. To be sure, claim construction may
narrow those factual issues.
Because the trial court has not yet construed the critical
limitations, we leave that task to the court on remand. The question whether there is a
motivation to combine the pertinent elements of the prior art references in
a manner that would read on the asserted claims depends, in turn, on the
resolution of the factual questions and claim construction issues discussed
above. If those issues are
resolved in the contractors’ favor, the evidence in the record, such
as Mr. Tamaro’s testimony that the decision to insert the columns
before adding cementitious slurry was simply a scheduling decision, is
sufficient to raise a factual question as to the presence of a motivation
or suggestion to combine the elements of the prior art. We also leave to the district court
the question whether, as State Contracting argues, the contractors have
waived their right to a jury trial on obviousness and thus consented for
that issue to be decided by the court on the basis of the record made at
trial.
VI. Damages
The jury rejected State Contracting’s lost
profits theory of damages, but awarded State Contracting $5,199,429 on a
“reasonable royalty” theory. The contractors raise several
objections to the damages award based on the evidence presented and the
jury instructions given by the court.
The contractors seek a new trial on damages or, at a minimum, a
reduction in the award to $1,103,284.40.
A
The contractors argue that State Contracting’s
evidence related only to lost profits and did not support the jury’s
reasonable royalty award. In
particular, the contractors contend that State Contracting’s expert
failed to analyze and apply the traditional factors bearing on reasonable
royalty that were set out in Georgia-Pacific Corp. v. United States Plywood
Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).
A jury’s decision with respect to an award of
damages “must be upheld unless the amount is ‘grossly excessive
or monstrous’, clearly not supported by the evidence, or based only
on speculation or guesswork.”
Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d
1555, 1580 (Fed. Cir. 1992). We
agree with the district court in rejecting the contractors’ argument
that the reasonable royalty award was clearly unsupported by evidence or
based only on guesswork. State
Contracting’s expert, Dr. John Leslie Livingstone, provided testimony
on reasonable royalty and addressed the Georgia-Pacific factors,
albeit at times in abbreviated fashion. Although Dr. Livingstone found some
of those factors irrelevant to the case at hand, the contractors are
incorrect to suggest that he did not “apply the Georgia-Pacific
test.” Dr. Livingstone
provided testimony about a hypothetical negotiation between the plaintiff
and accused infringers. While
Dr. Livingstone used the contractors’ profit margins in his royalty
determination, that was not legal error, because “an actual
infringer’s profit margin can be relevant to the determination of a
royalty rate in a hypothetical negotiation.” Interactive Pictures Corp. v.
Infinite Pictures, Inc., 274 F.3d 1371, 1385 (Fed. Cir. 2001).
Although the contractors disagree with some of the
assumptions and analysis that Dr. Livingstone used in constructing his
hypothetical negotiation, they have not pointed to any legal flaw that
fatally infected his testimony.
The contractors contend that Dr. Livingstone erred in assuming that
they would be forced to use the patented invention in the construction
projects, ignoring the fact that the hypothetical contractors could have
chosen to use an alternative design rather than pay a royalty. We disagree. Because FDOT incorporated the
patented process into its bid specifications, the contractors were not free
to disregard the bid specifications and implement an alternative
design. The contractors’
choice was therefore to use the patented process or to decline to bid on
the contracts.
The contractors also allege that Dr. Livingstone
erred by basing his royalty calculation on the entire construction project,
rather than on just the soundwall.
The contractors argue that even though FDOT sought a single bidder
for the project, FDOT would have specified an alternative design to allow
for competitive bids if it had known that the designated design
infringed. The contractors,
however, point to no evidentiary support for their theory. In that respect as well, they have
not shown that Dr. Livingstone’s testimony was so seriously flawed
that it may not be used as evidentiary support for the jury verdict.
The contractors further object to the jury’s
award of a royalty much larger than the royalty that State Paving requested
at one time. It is true that in
1995 State Paving sent letters to various contractors requesting a royalty
of only $0.95 per square foot of soundwall. That request was made early in the
process and by a party other than the plaintiff in this case. Dr. Livingstone’s testimony
that a reasonable royalty was considerably higher suggested, in effect,
that State Paving’s offer was very favorable to the contractors. The jury was entitled to weigh Dr.
Livingstone’s testimony in concluding that a reasonable royalty was
larger than the amount for which State Paving would have settled. We cannot say that the jury’s
award, which was, in turn, substantially smaller than the amount calculated
by Dr. Livingstone, was grossly excessive or clearly unsupported by the
evidence, especially in light of the contractors’ failure to present
competing expert testimony as to a reasonable royalty.
The contractors contend that the district court erred
in barring its damages expert, Herbert W. Larson, from testifying as to a
reasonable royalty. On the
record before us, however, we cannot conclude that the court abused its
discretion in rejecting Mr. Larson’s testimony, especially in light
of Mr. Larson’s statement that he had no experience in placing a
value on a patent and did not have any knowledge regarding reasonable
royalties for construction-related patents. See Gen. Elec. Co. v.
Joiner, 522 U.S. 136, 141-42 (1997) (review of a trial court’s
decision to exclude expert testimony is for an abuse of discretion).
B
The contractors object to the jury instructions with
respect to damages on two grounds.
First, they contend that the court failed to instruct the jury
properly as to the date that damages could begin to accrue. The district court instructed the
jury: “You must calculate
damages from the moment of infringement, either August 10, 1993 [the
issuance date of the ’288 patent], or the moment the individual
defendants were put on actual notice, whichever is later, but no later than
August 21, 1997 [the date the lawsuit was filed].” The contractors contend that the
instruction impermissibly allowed the jury to award damages for the time
period prior to actual notice of the issued patents because it did not
specify that the notice must be of an issued, rather than a pending,
patent. They contend that the
instruction could lead the jury to award damages based on notice of the
pending patent application.
Section 287 of
the Patent Act provides that patentees shall give notice of infringement by
marking “any patented article” and that damages shall be
limited to the time period subsequent to that notice. 35 U.S. C. § 287(a). It is “settled in the case law
that the notice requirement of this statute does not apply where the patent
is directed to a process or method.” Bandag, Inc. v. Gerrard Tire Co.,
704 F.2d 1578, 1581 (Fed. Cir. 1983).
We conclude that the jury instruction at issue is not
legally erroneous, at least with respect to the ’288 patent. The instruction correctly barred the
accumulation of damages prior to the issuance date of the ’288
patent, a method patent for which no notice is required. In this case, the parties did not
separate the charge of infringement of the ’288 patent and the
’455 patent or assert them independently. The jury verdict form did not
differentiate between the two patents for the award of damages, nor did the
defendants’ proposed verdict form. Accordingly, the damages could begin
accruing as of the issuance date of the ’288 patent, regardless of
when there was notice of either a pending or issued patent. In fact, if there was any harm done
by the wording of the instruction, then it is more likely to have been done
to State Contracting because the jury could have determined, for example,
that damages could not accrue for a specific contractor until a 1995 letter
giving notice of the ’288 patent. There is no contention that
eliminating damages as to the ’455 patent would reduce the overall
damages awarded to State Contracting.
Therefore, we need not address the notice issue as to the
later-issued ’455 patent.
The
contractors cite American Medical
Systems v. Medical
Engineering Corp., 6 F.3d 1523 (Fed. Cir. 1993), for the proposition
that “[w]here the patent contains both apparatus and method claims,
to the extent that there is a tangible item to mark by which notice of the
asserted method claims can be given, a party is obliged to do so if it
intends to avail itself of the constructive notice provisions of 35 U.S.C.
§ 287(a).” Id.
at 1538. That case is
inapposite because here an asserted patent—the ’288
patent—contains only method claims, and we look to the asserted
patents independently. We have
not previously held that a patent containing only method claims is examined
to see if something could have been marked in order to assess whether the
notice provision applies, and we decline to do so now. Cf. Hanson v. Alpine
Valley Ski Area, Inc., 718 F.2d 1075, 1083 (Fed. Cir. 1983) (upholding
decision that section 287 did not apply when only process claims were found
infringed and the patent contained apparatus claims).
AFFIRMED-IN-PART, REVERSED-IN-PART, and REMANDED
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