Presidio v. American Technical Ceramics was decided on November 21, 2017 on appeal from the Southern District of California. The invention concerned capacitors for storing and releasing energy. The district court granted defendant ATC’s motion for summary judgment on absolute intervening rights. The jury then returned a verdict of direct and induced infringement, and found that ATC’s infringement was willful. The jury awarded $2,166,654 in lost profits, and issued an advisory verdict that the claims were not invalid as indefinite. The district court then rejected ATC’s indefiniteness contentions, and denied ATC’s JMOL motion that plaintiff Presidio failed to prove lost profits. The district court also denied Presidio’s motion for enhanced damages, and entered a permanent injunction against ATC. Both parties appealed.
The Federal Circuit affirmed the finding of definiteness, affirmed the grant of absolute intervening rights, affirmed the denial of enhanced damages, reversed the award of lost profits, vacated the permanent injunction, and remanded.
ATC was entitled to absolute intervening rights because there was a substantive change between the scope of the original claims and those of the reexamined claims.
The jury award of lost profits was not supported by substantial evidence. To recover lost profits under Panduit, the patentee must show “(1) demand for the patented product; (2) an absence of acceptable, non-infringing substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit that would have been made.”
Presidio did not satisfy the second prong. “To prove the absence of acceptable, non-infringing alternatives, the patentee may prove either that the potential alternative was not acceptable to potential customers or was not available at the time.”
At the time of infringement, ATC sold two types of capacitors, one of which was found to infringe (“the 550”), and the other was never accused of infringement (“the 560L”). The district court erred by relying on evidence about sales of ATC non-infringing capacitor in competition with ATC’s currently infringing product. The district court should have instead compared ATC’s non-infringing capacitor to Presidio’s capacitor in a hypothetical market without the infringing capacitor. “The correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringing product.” There was not substantial evidence to show that the 560L was not an acceptable, non-infringing alternative for Presidio’s capacitor: undisputed evidence showed that the 560L capacitor was less expensive than Presidio’s, and that it may have performed better.
The district court erred in finding that ATC’s non-infringing capacitor was not an available substitute. “An alternative does not need to be on the market to be available.” And here, ATC sold 88,000 of the non-infringing capacitors to one single customer. “[T]hat the 560L capacitor was not widely advertised when sold in a market with the 550 capacitor does not show a lack of availability.” The Federal Circuit thus set aside the jury lost profits award. Presidio is only entitled to a reasonable royalty, which will be determined in a new trial on royalty damages.
The district court did not abuse its discretion in declining to enhance damages. “[A]n award of enhanced damages does not necessarily flow from a willfulness finding.” The district court properly analyzed ATC’s culpability during the period after the reexamination certificate issued. The district court did not err as a matter of law “by failing to explicitly address each of the Read factors.” The Read factors are relevant to an award of enhanced damages, but a district court is not required to discuss them. When the Supreme Court articulated the test for enhanced damages, it did not require to Read factors to be part of the analysis. “The Halo test merely requires the district court to consider the particular circumstances of the case to determine whether it is egregious.”
Presidio had not established irreparable injury to merit a permanent injunction. “Where irreparable injury is based on lost sales, a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct.” The district court based its irreparable harm finding on the jury’s lost profits award, reasoning that the jury “necessarily found” that ATC’s infringing capacitors caused Presidio to lose sales. Because the Federal Circuit reversed the lost profit award, it vacated the permanent injunction. On remand the district court will have the “discretion to determine whether other evidence could support a finding of irreparable injury.”
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