Three Strikes

Submitted by patentadmin on Mon, 02/01/2010 - 12:40

Every now and then, justice prevails and an infringer (scum sucker) is found guilty of infringement. Unfortunately, it seems that even in those cases where the patentee wins, the fruits of victory are being either snatched away or diminished. (Electro-Mechanical Industries, Inc. v. Universal Support Systems LLC)

Universal is the owner of a patent directed to a foot design for metal racks that hold telecommunications equipment. The only asserted independent claim recites a “support apparatus comprising a planar base and a hollow receptacle for receiving an object.” The claim requires spacing of the receptacle above the base that “permits the passage of air, wind, or water” (we are not making this up).

The district court found the patent was not invalid and that certain of the accused products did infringe. The Court determined that the patent owner was entitled to a reasonable royalty of 11% of the sale price of “all infringing feet.” The Court went on to find the infringement to be willful and doubled the damages amount. Further, the Court found the case to be “exceptional” and awarded attorney’s fees, which it found to be $700K.

The Court enhanced the fee award to $1.0M because of the complexity of the case and because the scum sucker had “provided inaccurate and unreliable information during the pendency of the litigation.” A grand slam home run for the plaintiff. So far, good.

EMI appealed. At this point, things started to turn south for the plaintiff. First, the appellate court noted that, before selling some of the accused feet, EMI filled the gaps in the feet with silicone. Once the gaps were filled, the feet no longer infringed. Since the district court’s damage award was based upon infringing sales, these products should be excluded from the damage calculation. Strike one.

Next, the appellate court ruled that the original award of attorney’s fees ($700K) impermissibly included $200K in “expert fees and other expenses.” This is not permitted under the law except upon “a finding of fraud or abuse of the judicial process.” Since the trial court had made no such finding, the $200K was stricken. Strike two.

Finally, the appellate court noted that the law does not allow for the enhancement of the “reasonable [attorney’s] fees” – as if attorney’s fees are ever reasonable. Therefore, the district court’s enhancement ($300K) was disallowed. Strike three.

THE LESSON TO BE LEARNED: Even in the absence of an outright reversal on appeal, a prevailing patent owner may ultimately collect less than the judgment amount awarded by the trial court. This is one of the reasons parties often negotiate a settlement after judgment is entered and before an appeal is decided.

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