Docket No. 2013-1668
PROST, NEWMAN, HUGHES
December 19, 2014
Brief Summary: Actual profits are not a cap on a reasonably royalty. The DC erred in not considering willfulness under the Seagate standards.
Summary: Aqua Shield appealed DC royalty determination (set at 8%, or $10,800 in damages) and finding of no willful infringement of its US 6,637,160 directed to enclosures with arched sections that slide over or under one another for covering pools or creating sun rooms. The opinion explained that, after making a finding of infringement, the court must determine a reasonable royalty (“the amount [one] wold be willing to pay [and] be able to make[, use, or] sell the patented article…at a reasonable profit”) based on the “‘value of what was taken’-the value of the patented technology” determined from a “hypothetical negotiation” (Dowagiac, US 1915; Lucent, FC 2009). It also explained that the DC did not err in considering IPC’s actual profits earned from the infringing product but did err in treating those profits as a royalty cap (the DC “seems to have simply assumed that any royalty paid by IPC would have directly reduced its profits, dollar for dollar [that may] not be true, in general, if IPC could have raised its prices..to account (fully or partly) for a royalty payment.” (Douglas Dynamics, FC 2013)). Thus, the royalty determination was vacated and remanded. It was also determined that the DC “did not lay out its wilfullness analysis in Seagate’s two-part terms” and “gave only one reason for concluding that [IPC] ‘reasonably believed that their products did not infringe the ‘160 Patent’-namely, that ‘the Eastern District of New York denied Aqua Shield’s motion for preliminary injunction.’” However, under Seagate, “the significance of a preliminary-injunction denial depends on why [it] was denied” and, here, the denial of Aqua Shield’s preliminary injunction “cannot be reasonably read to support a conclusion that any substantial basis existed ro doubting infringement or validity.” The DC determination of no willfulness was therefore vacated and remanded “for an analysis that conforms to Seagate’s standards.” Aqua Shield also argued that one product model (the “Elegant”) was omitted from the royalty determination but the FC found no infringement by that model was determined so there was no error by the DC in refusing to include it in the calculation.