Exergen v. Kaz is a nonprecedential case decided on March 8, 2018 on appeal from the District of Massachusetts. Pre-trial, the district court granted defendant Kaz summary judgment of no willful infringement because its invalidity contentions were objectively reasonable. At trial, the jury found all asserted claims infringed and not invalid, and awarded plaintiff Exergen $9,802,228 in lost profits and $4,840,320 in reasonable royalties. Post-trial, the district court held the asserted claims valid under Section 101, denied Kaz’s motion for JMOL of noninfringement and for a new trial on damages, and denial Exergen’s motion for enhanced damages. Both parties appealed.
The Federal Circuit affirmed the denial of JMOL that the claims were patent ineligible, affirmed the denial of enhanced damages, reversed the verdict of infringement with respect to some claims, vacated the damages award, and remanded.
The Federal Circuit held that the jury’s reasonable royalty and lost profits awards were supported by substantial evidence, but vacated the damages award because of its reversal of the jury finding of infringement of some claims. The jury’s determination of the amount of damages is a fact question that is reviewed for substantial evidence; and the underlying methodology, including consistency of the award with governing legal principles, is reviewed for abuse of discretion.
Kaz argued that the royalty award was unsupported by the evidence because it translated to a per-unit rate of 32% of the projected sales price and 71% of Kaz’s projected per-unit net profit. The Federal Circuit rejected this argument. There “was substantial evidence presented at trial which supports the jury’s conclusion that in a hypothetical negotiation, Kaz would have been willing to pay such a price to enter the market.” Further, Exergen’s damages expert “went through each of the” Georgia Pacific factors, “explaining why each relevant factor weighed in favor of a high royalty rate.” And Kaz did not present “any evidence that the jury’s reasonable royalty would not have been feasible from a business perspective—indeed, Kaz would have still made 29% of its projected per-unit profit.”
Kaz argued that the lost profit award improperly included lost profits from stores where Exergen did not sell any products. The Federal Circuit also rejected this argument. Substantial evidence supported the jury finding that had Kaz’s infringing products not been on the market, this store would have chosen Exergen’s competing product to be its branded product. “Even though the inventor testified that [this store] did not carry Exergen’s products because Exergen previously sued them for patent infringement, the jury was entitled to find that in the absence of a feasible alternative product, [this store] would have turned to Exergen despite their history of litigation.”
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The district court did not abuse its discretion in applying the Read factors and declining to enhance damages. “For example, the district court found that no evidence of copying existed, that no concealment or litigation misconduct had occurred, and that Exergen was able to more than adequately vindicate its rights.” The Federal Circuit rejected Exergan’s argument that “a jury must consider willfulness before the district court may exercise its discretion to enhance damages.” Such “a blanket rule is directly contrary to the Supreme Court’s mandate that courts exercise their discretion free from inelastic rules.” “Even if the jury had found that Kaz’s infringement was willful, an award of enhanced damages does not necessarily flow from a willfulness finding.”
Judge Hughes dissented from the Section 101 holding.
Exergen Corp. v. Kaz USA, Inc., 725 F. App’x 959 (Fed. Cir. 2018)