The opinion of the court was delivered by: Samuel Conti, United States District Judge
ORDER RE: PREJUDGMENT INTEREST,
ENHANCED DAMAGES AND ATTORNEY FEES
On April 26, 2002, a jury awarded Plaintiff Atmel Corporation ("Atmel")
$19,969,640 in compensatory damages in its patent infringement lawsuit
against Silicon Storage Technology, Inc. ("SST"). Now before the Court is
the issue of pre-judgment interest, Atmel's request that its damages be
enhanced to reflect the jury's willful infringement finding and Atmel's
attorney fees demand. For the reasons discussed more fully below, the
Court awards Atmel pre-judgment interest in the amount of $9,415,758 and
willfulness damages in the amount of $7,092,360. The Court denies Atmel's
request for attorney fees.
The jury awarded two kinds of damages — price erosion and a
reasonable royalty — each distributed over two different time
periods. For the period beginning September 12, 1994 until March 1998, the
jury awarded Atmel $4,184,720 in reasonable royalties and $10 million in
price erosion damages, totaling $14,184,720 for the period. For the period
beginning March 1998 until the infringement ended, the jury awarded Atmel
$5,384,920 in reasonable royalties and $400,000 in price erosion
damages, totaling $5,784,920 for the period.*fn1 The jury also found
that SST willfully infringed the '811 and '829 patents.
According to the patent statute's damages provision, it is the job of
the court to fix interest and costs on a judgment. 35 U.S.C. § 284.
This includes pre-judgment interest, which according to the Supreme
Court, "should ordinarily be awarded where necessary to afford the
plaintiff full compensation for the infringement." General Motors Corp.
v. Devex Corp., 461 U.S. 648, 654 (1983). A court is afforded complete
discretion to decide the interest rate to be used. Studiengesellschaft
Kohle, m.b.H. v. Dart Indus., Inc., 862 F.2d 1564, 1580 (Fed. Cir.
In addition, the court may, in its discretion, increase a jury's damage
award by up to three times if the jury finds that the infringement was
willful. 35 U.S.C. § 284. A court is not required to do so, however.
Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1274 (Fed. Cir.
1999) ("The law is clear that while willful infringement may allow
enhanced damages, such a finding does not compel the district court to
grant them."); State Indus. Inc. v. Mor-Flo Indus. Inc., 948 F.2d 1573,
1576 (Fed. Cir. 1991).
In deciding whether enhanced damages should be awarded, a court should
consider the totality of the circumstances including: 1) whether the
infringer deliberately copied the ideas or design of another; 2) whether
the infringer, when he knew of the other patent's protection,
investigated the scope of the patent and formed a good-faith belief that
it was invalid or that it was not infringed; 3) the infringer's behavior
as a party to the litigation; 4) defendant's size and financial
condition; 5) the closeness of the case; 6) the duration of defendant's
misconduct; 7) remedial action by the defendant; 8) defendant's
motivation for harm; and 9) whether defendant attempted to conceal its
misconduct. Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir.
1992), abrogated in part on other grounds by Markman v. Westview
Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc) (internal
The patent law provides that "[t]he court in exceptional cases may
award reasonable attorney fees to the prevailing party."
35 U.S.C. § 285. Exceptional circumstances include "inequitable
conduct before the PTO; litigation misconduct; vexatious, unjustified,
and otherwise bad faith litigation; a frivolous suit or willful
infringement." Epcon Gas Sys., Inc. v. Bauer Compressors, Inc.,
279 F.3d 1022, 1034 (Fed. Cir. 2002) (citing Hoffmann-La Roche Inc. v.
Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000)).
The parties' primary dispute centers not around whether pre-judgment
interest should be awarded at all, but rather, the rate at which it
should be assessed. At a post-trial hearing held April 29, 2002, the
Court heard evidence from the parties and their experts on the
appropriate measure of pre-judgment interest. The Court has also
considered the parties' briefs submitted prior to the hearing.
In its brief and at the hearing Atmel argued that the prime rate
reflects the approximate rate at which it had to borrow money during the
period of infringement. Atmel referred the Court to its 1994 and 1995
Annual Reports which indicate that the company was borrowing at rates
between 5.6 and 10 percent.*fn4 (Decl. of Steven G. Mason in Supp. of
Atmel's Prejudgment Interest Brief ("Mason Decl."), Ex. B:13, Ex.
C:13-14.) In those years, according to Plaintiff's research, the prime
rate fluctuated not far off, or between 6 and 9 percent. (Mason Decl.,
Ex. K.) For sake of comparison, during 1994 and 1995 LIBOR fluctuated
between 5.5 and 7 percent. (Amended Declaration of Paul K. Meyer in
Support of Def.'s Brief Respecting Pre-Judgment Interest ("Meyer Decl.",
SST sees things differently. SST claims that Atmel has never borrowed
at prime, but has consistently borrowed at lower rates closer to LIBOR.
As evidence, SST presented the testimony of its expert, Paul Meyer, who
studied Atmel's reports in detail and drew from them the conclusion that
Atmel borrowed at or around LIBOR during the years in question at amounts
ranging from $16 to $138 million. SST's theory is that any money it would
have owed Atmel during the damages period would have gone toward reducing
these debts. (4/29/02 Hearing, Tr. 36:2-5.)
As an initial matter, the Court finds it difficult, and indeed,
ineffectual, to attempt to extrapolate from Atmel's Annual Reports any
kind of accurate measure of the rate of interest that would have been
applied to the "loaned" judgment in question, given that the instruments
described in the reports arose under circumstances that vary from those
in this case; some of the loans described there were collateralized,
others were discounted, and still others reflect capital leases. Nor is
the Court inclined to guess at how Atmel might have used the money had it
benefitted from having it at the time. The Court will focus, instead, on
attempting to come up with a figure that best reflects the specific
circumstances of this case, what amounts to a $20 million loan to another
To begin with, the Court declines to entertain the possibility that the
straight LIBOR rate applies. SST's expert, Mr. Meyer, conceded as much
when he said "I believe that [Atmel] borrowed at LIBOR plus." (4/29/2002
Hearing, Tr. 48:22.) The only matter left to decide, therefore, is
whether the interest rate should be LIBOR "plus" or prime.
At the hearing, when asked to justify the prime rate as opposed to a
treasury bill, Atmel's royalties expert Stephen Degnan explained that the
prime rate reflects the amount of risk involved in corporate loans:
(4/29/2002 Hearing, Tr. 18:11-20.)
The Court is persuaded that a loan to SST would have borne a greater
risk of default than treasury bills, or even than that contemplated by
London banks lending money amongst themselves.*fn5 It is true that when
pressed, Mr. Degnan did not give a direct response to the Court's inquiry
about why the Annual Reports never showed a rate as high as prime in
certain years. See, e.g., Mason Decl., Ex. C, 13-14 (listing interest
rates on Atmel's loans ranging from 5.6 to 8.2 percent). As discussed
above, however, the circumstances surrounding the loans in the Annual
Reports were different; two of the notes were discounted, one was based
on LIBOR, one was a capital lease, and one was collateralized with
certain manufacturing equipment. Id.
As for SST's argument that LIBOR "plus one" reflects the best estimate
of pre-judgment interest, on cross-examination SST's expert agreed that
the rates disclosed in Atmel's annual reports did riot account for losses
sustained in currency fluctuations (a risk inherent in LIBOR, PIBOR and
other foreign currency-based instruments) and he admitted that he did not
consider in his calculations the effect of the memory-market crash in
1997-1998, which forced Atmel to incur heavy losses. (4/29/2002 Hearing,
Tr. 49:4-24; 51:19-24). Perhaps most importantly, however, the evidence
established that SST's reliance on Atmel's LIBOR loans detailed in its
annual reports may have been misplaced. As Mr. Meyer acknowledged, Atmel
reported that its loans were LIBOR based, or "LIBOR plus some amount."
(Id. at 48:6-16.) While Mr. Meyer did account for this in his alternative
LIBOR plus-one-percent calculations, the Court is not convinced that the
additional one percent is enough of a boost, especially given the added
risk that would have been involved in such a business-to-business loan.
Plaintiff's price erosion damages expert Dr. Marc Vellrath also
testified to the risk involved in a loan to SST. According to Dr.
The prime rate, in my view, compensates Atmel both
for the time value of money here and for the business
risk that Atmel bore here. That's the problem with the
Treasury Bill rate, in my opinion, or the LIBOR rate.
The LIBOR rate — the Treasury Bill rate is a
government rate, and those who lend to the government
are not subject to business risk.
The LIBOR rate is the London Inter-Bank Offer Rate.
It's for overnight loans between very large and secure
banks, so that rate also, although it is a little bit
higher than the T-Bill rate, does not really include any
return for business risk. The prime rate, on the other
hand, does include a return for business risk, which
Atmel bore in this case.
In addition, as Mr. Degnan pointed out, some of
Atmel's borrowing did occur, apparently, at the prime
rate. There are references to the prime rate in Atmel's
report, so it struck me that