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BROOKTREE CORP. v. ADVANCED MICRO DEVICES

December 18, 1990

BROOKTREE CORPORATION, Plaintiff,
v.
ADVANCED MICRO DEVICES, INC., Defendant


William B. Enright, United States District Judge.


The opinion of the court was delivered by: ENRIGHT

WILLIAM B. ENRIGHT, UNITED STATES DISTRICT JUDGE

 INTRODUCTION

 Brooktree is a California corporation in the business of designing, manufacturing, and selling semiconductor chip products used in computer graphic displays. AMD is a competitor and is one of the five largest manufacturers of chip products in the United States, with sales almost 30 times that of Brooktree.

 This action was originally brought by Brooktree Corporation (Brooktree) against Advanced Micro Devices, Inc. (AMD) for mask work infringement. A bifurcated jury trial began on August 7, 1990, and ended on October 1, 1990. The jury found AMD liable on all but one of the patent claims, on all of the mask work claims, and found that AMD's infringement of Brooktree's patents had been willful. The jury awarded damages of over $ 25 million. On November 19, 1990, this court held a hearing on AMD's motions for JNOV or, in the alternative, for a new trial, and Brooktree's motions for enhanced damages, attorneys' fees and prejudgment interest. In a memorandum decision dated December 10, 1990, this court denied AMD's motions for JNOV or a new trial, and also denied Brooktree's motions for enhanced damages and attorneys' fees. Brooktree's motion for an award of prejudgment interest on its patent claims was conditionally granted, the condition being that Brooktree supply additional figures clearly segregating the amounts awarded for the patent infringement claims from those awarded for violations of the Chip Act -- upon which Brooktree's motion for prejudgment interest was denied. The court also instructed both parties to submit supplemental briefs concerning the rate of interest at which these damages should be calculated and whether that interest should be calculated at a simple or compound rate. This court also requested supplemental briefing on the issues of whether a stay of execution should be issued without requiring AMD to post a supersedeas bond; and whether the language of the injunction issued by this court on September 27, 1990, should be modified now that the proceedings before this court have been concluded.

 PREJUDGMENT INTEREST

 Brooktree has asked this court to award prejudgment interest for damages from AMD's infringement of Brooktree's patents under § 284 of the federal patent laws. 35 U.S.C. § 284. Prejudgment interest is a proper element of damages in a patent infringement suit under 35 U.S.C. § 284, and should generally be awarded to a successful plaintiff absent some justification. General Motors Corp. v. Devex Corp., 461 U.S. 648, 656-657, 76 L. Ed. 2d 211, 103 S. Ct. 2058 (1983). However, even though Brooktree is entitled to prejudgment interest under the patent statute, it can only recover such interest if it can segregate the damage award between the patent and mask work damages with sufficient certainty.

 Brooktree has filed a second Declaration of Robert Wallace, Brooktree's damages expert, in conjunction with its supplemental brief in support of an award of prejudgment interest. This Declaration does segregate those damages attributable to the patent claims with sufficient certainty to allow this court to make such an award. The only question that remains is the interest rate upon which that award should be based, and whether the interest should be calculated on a simple or compound basis.

 Brooktree argues that the award should be calculated at either 20% -- which according to Brooktree represents its "lost rate of return on investment" -- or 10% -- the prevailing prime rate during the relevant period. Brooktree further argues that this rate should be compounded quarterly.

 AMD, for its part, contends that the California statutory rate of 7% should be used to calculate the prejudgment interest award, and that this rate should not be compounded.

 ANALYSIS

 The trial court has discretion to determine the rate of prejudgment interest to be awarded in patent infringement cases. Lam v. Johns-Manville Corporation, 718 F.2d 1056, 1066, 219 U.S.P.Q. (BNA) 670 (Fed. Cir. 1983). The focus of the prejudgment interest inquiry is on the adequate compensation of the aggrieved party. Koehler v. Pulvers, 614 F. Supp. 829, 850 (S.D. Cal. 1985). Further, the district court may award interest at a rate above the statutory rate where the claimant has affirmatively demonstrated that a higher rate should be used. Lam at 1066.

 Brooktree's request for a rate of 20% based upon its "lost rate of return on investment" is on its face too speculative to be granted. The figure is based solely upon the testimony of Brooktree's own expert, and assumes that the "lost profits" would have been reinvested into the firm and would have earned the same rate of return as other funds invested in the firm. Further, Brooktree has not pointed to any case law in which such a rate has been approved.

 In addition, Brooktree has not made an affirmative showing that the interest award should be calculated at a rate above the California statutory rate of 7%. According to the Federal Circuit Court, the claimant has the burden to affirmatively demonstrate that an award above the statutory rate should be granted. Lam at 1066. While it is true that the state statutory rate is not controlling in the context of a suit based on a federal claim, Koehler at 850, courts do often use the statutory rate in the state in which they sit to calculate an award of prejudgment interest. See e.g., Gyromat Corp. v. Champion Spark Plug Co., 735 F.2d 549, 551, 557, 222 U.S.P.Q. (BNA) 4 (Fed. Cir. 1984). In addition, courts in other jurisdictions have held that an award based upon the prime rate is not appropriate unless the claimant was actually forced to borrow money at that rate. See, e.g., TWM Manufacturing Co. v. Dura Corp., 231 U.S.P.Q. (BNA) 525, 533 (E.D. Mich. 1986). Since Brooktree has made no showing that it was forced to borrow at or above the prime rate, and has in fact given no reason why a higher rate should be used, Brooktree's claim for prejudgment interest on its patent claims shall be calculated at the ...


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