Asetek Danmark v. CMI USA was decided on April 3, 2017 on appeal from the Northern District of California. In an earlier December 6, 2016 decision, the Federal Circuit maintained the permanent injunction during the remand, and Chief Judge Prost dissented because she would have vacated the injunction. In the April 3, 2017 decision, the Federal Circuit vacated the injunction on remand, but otherwise held the same as the earlier decision.
In the case, plaintiff Asetek prevailed at trial, receiving a judgment of infringement and of no invalidity, plus a damages award against defendant CMI of $404,941 on a 14.5% royalty rate. The district court also entered an injunction covering the specific “Cooler Master” products found to infringe. The injunction ran not only against CMI (American) but also against Cooler Master (Taiwanese), a supplier of computer components which was not then a party and which was not adjudicated liable for infringement. Cooler Master later intervened and became a party. The injunction enjoined CMI and Cooler Master from “making, using, offering for sale or selling in the United States, or importing into the United States… the Infringing Products.” CMI (Cooler Master USA Inc.) collaborated with the Taiwanese company Cooler Master in designing and selling “Cooler Master”-branded products in the United States. Earlier in the case, Asetek agreed to dismiss claims against Cooler Master with prejudice. CMI and Cooler Master appeal.
The Federal Circuit affirmed the district court’s rulings on infringement and invalidity, affirmed the jury’s royalty rate, affirmed-in-part and vacated-in-part the permanent injunction against Cooler Master, and remanded as to the scope of the injunction.
Section 284 of the Patent Act permits a patent holder, having prevailed on liability, to receive a reasonable royalty or lost profits, “but not both” for the same infringing units. Under the hypothetical-negotiation approach to calculating a reasonable royalty, “the finder of fact attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began.”
CMI argued that Asetek’s expert, Dr. Mody, in calculating the 14.5% royalty award, improperly relied on Asetek’s per-unit profit margin under its licensing agreement with another company (Corsair). The Court rejected this argument. When relying on the patentee’s profits for reasonable royalties (unlike with lost profits), the patent holder doesn’t have to show that it would have made the infringer’s sales but for the infringement. The fact that a royalty calculation relies in part on the patent owner’s per-unit profits does not make it an unreasonable award. Negotiating for a per-unit royalty payment equal to its per-unit profit is a “logical approach” for a patent owner that is “uncertain of how many sales might be lost by granting the license at issue”, or that “is just using its own experience to place a value on the right to use the technology at issue.” Further, Dr. Mody adjusted her model to account for considerations other than Asetek’s per-unit profits (eg, the scope of the nature of the license at issue, Asetek’s established policy and marketing program, and the commercial relationship between Asetek and CMI).
Substantial evidence supported the jury’s 14.5% royalty rate despite that one portion of the Corsair license included a maximum royalty rate of 7%. Dr. Mody testified that the Corsair license included an effective royalty rate between 10% and 19% based on the actual royalty rate (between 2% and 7%) and the minimum-purchase requirement. Second, Asetek would have sought a higher royalty rate from CMI than from Corsair because CMI (unlike Corsair) was a competitor, and not a valued customer.
The permanent injunction against Cooler Master was proper despite the earlier dismissal of claims against the Taiwanese company with prejudice. Claim preclusion from the dismissal with prejudice did not bar the injunction. Injunctive relief covers future conduct, and “claim preclusion does not bar relief as to future conduct.” The difference in timing between pre-dismissal conduct and post-injunction conduct “means that the two situations do not involve the same claim for claim-preclusion purposes, even if all the conduct is alleged to be unlawful for the same reason.” Claim preclusion requires a party to assert all claims that the party could have asserted in the earlier lawsuit; and a party cannot assert claims based on tortious conduct that had not occurred at that time.
As to the scope of the injunction (reaching Cooler Master in its own capacity despite no finding of liability), the Federal Circuit remanded. Under FRCP 65(d), an injunction “binds only” “the parties,” “the parties’ [agents],” and “other persons who are in active concert or participation” with the parties or their agents “who receive actual notice of [the injunction] by personal service or otherwise.” Under the “active concert or participation” language, persons not held liable may be enjoined by the court if they either abet the liable party, or they are “legally identified” with the liable party. The Court held that it was not advisable to resolve the issue “whether Cooler Master may be legally identified with CMI” without a fuller picture of the facts. The Federal Circuit suggested some facts to further develop below: (1) the nature of the exclusivity relationship between the firms; (2) trademarks and other aspects of the two companies’ relations; (3) the origins of CMI and its relationship to Cooler Master; (4) the details of and intent behind changes in the companies’ relations, particularly since liability was found in the case; and (5) the companies’ relationship in the conduct of the litigation, in which Cooler Master products were at stake. The Court vacated the injunction “insofar as the injunction reache[d] conduct by Cooler Master that does not abet new violations by CMI,” and remanded.
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