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Presidio Components Inc. v. American Technical Ceramics Corp.

August 5, 2010

PRESIDIO COMPONENTS INC., PLAINTIFF,
v.
AMERICAN TECHNICAL CERAMICS CORP., DEFENDANT.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) SETTING SUPPLEMENTAL DAMAGES FOR PERIOD BETWEEN DECEMBER 1, 2009 AND APRIL 13, 2010; and (2) SETTING ONGOING ROYALTY RATE FOR PERIOD AFTER APRIL 13, 2010.

Currently before the Court in this patent infringement case are the parties' supplemental briefings on the issues of supplemental damages and the ongoing royalty rate, filed pursuant to the Court's previous Order on the post-trial motions. Having considered the parties' arguments, and for the reasons set forth below, the Court SETS the supplemental damages at $235,172.68 for the period between December 1, 2009 and April 13, 2010, and SETS the ongoing royalty at the rate of 12 % of the wholesale price for each infringing 545L capacitorfor the period after April 13, 2010.

BACKGROUND

The factual and procedural history of this case is set forth in great detail in this Court's prior order and need not be repeated herein. See Presidio Components, Inc. v. Am. Technical Ceramics Corp., - F. Supp. 2d -, 2010 WL 1462757, at **2-4 (S.D. Cal. 2010). As relevant to this Order, Presidio Components, Inc. ("Presidio") sued American Technical Ceramics Corporation ("ATC") for patent infringement, and ATC counterclaimed. The patent at issue is U.S. patent number 6,816,356 ("the '356 patent"), which discloses and claims a substantially monolithic, multilayer capacitor with fringe-effect capacitance between its external contacts. Presidio alleged ATC's manufacture of its 545L series of monolithic, multilayer capacitors infringed the '356 patent.

The case was tried to a jury in December 2009. The jury returned a verdict finding all of the asserted claims to be valid and infringed. The jury awarded Presidio $1,048,677 in lost profits. After hearing argument on the parties' post-trial motions, the Court upheld the jury's verdict in most respects and its award of damages in full. The Court also agreed with Presidio that it was entitled to supplemental damages for the period after December 1, 2009, when the jury trial started, and through the consideration of the post-trial motions. Accordingly, the Court ordered ATC to provide an accounting for any sales of 545L capacitors occurring during that time. On the other hand, the Court denied Presidio's motion for a permanent injunction, finding that Presidio has failed to demonstrate an irreparable injury in the absence of an injunction or that money damages are inadequate to compensate it, and because the public interest tipped in ATC's favor. The Court then ordered the parties to submit supplemental briefing on whether the Court should allow them to negotiate their own license agreement, or whether the Court should impose a specific amount of "ongoing royalty."

DISCUSSION

I. Supplemental Damages

At the post-trial motions stage, Presidio moved for supplemental damages in light of ATC's continued infringement. ATC did not oppose the motion at that time. (See Def. Opp. to Pl. Motion for Post Trial Remedies, at 15 [Doc. No. 321].) The Court accordingly granted Presidio's motion, finding that supplemental damages ought to be calculated consistent with the damages awarded in the jury verdict. ATC now objects to this determination, arguing instead that supplemental damages for the time period not considered by the jury be calculated on an ongoing royalty basis.

Under Section 284, a finding of infringement requires the Court to award damages that are "adequate to compensate" the plaintiff. See 35 U.S.C. § 284. As the Court previously noted, "'supplemental damages are calculated consistent with the damages awarded in the jury verdict.'" See Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. CV-03-0597-PHX-MHM, 2009 WL 920300, at *3 (D. Ariz. Mar. 31, 2009); accord Aero Prods. Int', Inc. v. Intex Recreation Corp., No. 02 C 2590, 2005 WL 1498667, at *2 (N.D. Ill. June 9, 2005) (setting supplemental damages for the period between the jury verdict and the imposition of permanent injunction at 13.5% based upon extrapolation from the jury's general verdict); Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 746, 746-47 (W.D. Mich. 1999) (setting supplemental damages for the period between the jury verdict and the imposition of a permanent injunction at 20%, which was the reasonable royalty found by the jury for the period of infringement); Oscar Mayer Foods Corp. v. Conagra, Inc., 869 F. Supp. 656, 668 (W.D. Wis. 1994) (setting additional damages for post-judgment infringing sales at the ratio of damages to sales determined from the jury's verdict). In the present case, the jury awarded Presidio $1,048,677 in lost profits based on the 782,000 545L capacitors sold by ATC between mid-2006 and September 30, 2009. (Trial Tr. Day 4, at 177:6-178:24.) Accordingly, based on the ratio of damages to sales, the Court can extrapolate that the jury awarded Presidio approximately $1.34 per 545L capacitor sold.

Finally, to determine the full amount of Presidio's supplemental damages, the Court will multiply the average lost profit per 545L capacitor by the total number of 545L capacitors sold by ATC between the commencement of the trial (December 1, 2009) and the Court's ruling on Presidio's motion for a permanent injunction (April 13, 2010).*fn1 Based on the additional sales information submitted by ATC, that number comes out to approximately 175,502 545L capacitors.*fn2 Thus, Presidio is entitled to $235,172.68 in supplemental damages for ATC's continued infringement.

II. Ongoing Royalty

In eBay v. MercExchange, LLC, the Supreme Court reiterated that "in patent disputes no less than in other cases" to be entitled to a permanent injunction, the plaintiff must satisfy the traditional four-factor test. 547 U.S. 388, 391 (2006). Where an injunction is not proper, however, the district court must next consider imposing a reasonable ongoing royalty in lieu of an injunction. Paice LLC v. Toyota Motor Corp. (Paice II), 504 F.3d 1293, 1314 (Fed. Cir. 2007). Such a remedy, however, is not always warranted. Id. ("But, awarding an ongoing royalty where 'necessary' to effectuate a remedy . . . does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed."). Moreover, "the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement." Id.

In this case, the Court's prior Order asked the parties to discuss whether the Court should allow them to negotiate their own license agreement, or whether the Court should impose a specific amount of "ongoing royalty." Not surprisingly, however, the parties could not agree on the course of action. On the one hand, ATC submits the Court should order the parties to have "reasonable" negotiations as between a reasonable licensor and licensee. On the other hand, Presidio indicates it is not likely that the parties would be able to reach an agreement on the terms of such a license agreement and accordingly urges the Court to impose a specific amount of ongoing royalty. In light of the parties' strongly held positions in this case, and in light of their extremely divergent views as to the appropriate royalty rate,*fn3 the Court is convinced that requiring them to negotiate is not likely to be fruitful. Accordingly, with the benefit of the parties' supplemental briefing, the Court will proceed to determine a specific amount of ongoing royalty that should be imposed in this case.

The Federal Circuit has approved the use of the Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D. N.Y. 1970), analysis for determining reasonable royalty damages. See Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387, 1393 (Fed. Cir. 2003). The Georgia-Pacific court set forth fifteen factors to be considered in a reasonable royalty analysis. 318 F. Supp. at 1120. The central premise is the hypothetical negotiation between a willing patentee and a willing infringer at the time the infringement began. Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384-85 (Fed. Cir. 2001). This framework changes, however, when the court has to determine the appropriate ongoing royalty once liability has been established. In such a case, "the hypothetical negotiation occurs post-judgment; therefore, the 'willing licensee' in this negotiation is an adjudged infringer, unlike the situation described in Georgia-Pacific." Paice LLC v. Toyota Motor Corp. (Paice III), 609 F. Supp. 2d 620, 624 (E.D. Tex. 2009). Thus, the main question post-judgment is what amount ...


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