Reweighing Evidence in Reducing Compensatory Damages Award Requires the Option of a New Trial
October 17, 2008
Last Month at the Federal Circuit - November 2008
Judges: Newman, Plager, Gajarsa (author)
[Appealed from: M.D. Fla., Judge Presnell]
In Minks v. Polaris Industries, Inc., Nos. 07-1490, -1491 (Fed. Cir. Oct. 17, 2008), the Federal Circuit vacated a district court’s judgment reducing the jury’s damages award without offering the plaintiff the option of a new trial. The Court also held that the jury instruction regarding actual notice of infringement was erroneous and prejudicial to the plaintiff. Finally, the Court affirmed the award of attorneys’ fees and the jury’s verdicts of infringement and willfulness.
Floyd M. Minks sued Polaris Industries, Inc. (“Polaris”) for infringement of U.S. Patent No. 4,664,080 (“the ’080 patent”). The ’080 patent is directed to an electronic system designed to limit the speed of an all-terrain vehicle when it is operated in the reverse direction—i.e., a reverse speed limiter. The system inhibits ignition according to engine speed. After trial in which the jury found willful infringement and awarded damages of $1,294,620.91, the district court reduced the award to $55,809.60 (after doubling). The court also awarded attorneys’ fees of $117,316.50, which was about half the amount Minks requested. Minks appealed the reduction in damages, as well as the amount of attorneys’ fees awarded. He also asserted on appeal that the jury instruction as to the date Polaris received actual notice of the alleged infringement was erroneous. Polaris cross-appealed from the denial of its JMOL motion on noninfringement and from the jury’s finding of willfulness. Polaris also appealed the enhancement of damages and grant of attorneys’ fees on the ground that the jury instruction on willfulness was plain error under In re Seagate Technology, LLC, 174 F.3d 1360 (Fed. Cir. 2007) (en banc).
On appeal, the Federal Circuit first considered whether the Seventh Amendment required the district court to offer Minks the option of a new trial in lieu of accepting the reduced damages award. Applying Eleventh Circuit law, the Court found that it did. The Court first noted that in Hetzel v. Prince William County, 523 U.S. 208, 211 (1998), the Supreme Court held that a district court reducing an excessive jury award must offer the plaintiff the option of a new trial if the reduction is premised on a finding that the factual record does not support the award.
In the Eleventh Circuit, however, when a jury’s award is premised on “legal error,” a court may reduce the award and enter an absolute judgment in the amount sufficient to correct the legal error without offering the plaintiff the option of a new trial.
The Federal Circuit concluded that, because the district court identified no legal principle that would limit the amount of reasonable royalty, its reduction of the jury’s compensatory damages award was governed squarely by Hetzel. The Court found that the district court “necessarily engaged in an independent review of the evidence and substituted its conclusion for that of the jury on the factual issue of compensatory damages.” Slip op. at 10. Rather than consider the amount of a reasonable royalty supported by the evidence, the Court concluded that “the district court’s exercise of discretion to assess the evidence and overturn the jury’s verdict upon a determination that it is excessive may only result in the order of a new trial, either unqualified or conditioned on Minks’ refusal to accept a reduction.” Id. at 13. Accordingly, the Court vacated the district court’s order reducing the jury’s compensatory damages award and remanded for a new trial on damages.
In doing so, the Court noted that its previous decision in Tronzo v. Biomet, 236 F.3d 1342 (Fed. Cir. 2001) (“Tronzo II”), could be distinguished and did not compel a contrary result. In Tronzo II, which was also decided under Eleventh Circuit law, the Court affirmed a reduction of a jury’s compensatory damages award without offering the plaintiff a new trial. In that case, the Court concluded that the district court was under no obligation to offer a new trial because the plaintiff had adduced no evidence to support its damages assessment. Thus, the Court found that, unlike here, the district court did not reweigh any evidence and the reduction in damages had been made on purely legal grounds. Thus, the option of a new trial was not necessary in Tronzo II under Eleventh Circuit law. The Federal Circuit next affirmed the award of attorneys’ fees. Because the Court found that Minks was unable or unwilling to articulate a coherent damages theory, even on appeal, the Court concluded that the award of attorneys’ fees was not an abuse of the district court’s discretion.
The Court then reviewed the jury instruction for actual notice de novo for legal error. The district court gave the following instruction for actual notice: “The date notice was given is the date on which Minks communicated to Polaris a specific charge that one of its products may infringe claim two of the ’080 patent.” Minks objected to this instruction on the ground that it precludes a jury from finding notice prior to discovery of Polaris’s infringement. Minks thus requested the following instruction: “The date notice was given is the date on which Minks communicated to Polaris a specific charge that one of its products infringed or would infringe claim two of the ’080 patent.”
The Court agreed with Minks that the given instruction did not fairly and correctly state the issues and the law, and that the jury should have been more clearly instructed that it was permitted to find notice prior to the date Minks discovered Polaris’s infringement. According to the Court, a specific charge of infringement does not require the patentee to make an “unqualified” charge of infringement. Rather, plaintiff may satisfy the statutory notice requirement merely by making a qualified charge of infringement. Thus, a letter to Polaris written by Minks prior to his discovery of infringement, in which he described the elements of an infringing device, constituted a qualified charge of infringement possibly sufficient to fulfill the statutory notice requirement.
The Court next considered the question of infringement of claim 2 of the ’080 patent, which is a means-plus-function claim. Polaris argued that the accused devices do not perform an identical function to the claimed function because the accused devices sense the frequency of an alternator’s AC output rather than its peak voltage. The Court rejected this argument, noting that the function for which the accused device must be identical is the function specified in the claim, which made no such distinction. Because it was undisputed that the accused device performed the claimed function of “inhibit[ing] ignition responsive to the speed of said engine,” the Federal Circuit found that the district court’s denial of Polaris’s motion was not improper.
With regard to structure, Polaris argued that the accused frequency-sensitive devices do not contain components equivalent to a voltage divider and a switching transistor and, thus, the frequency-sensing circuitry of the accused devices cannot be equivalent as a matter of law. The Court rejected this argument, noting that differences in physical structure alone are not determinative of § 112, ¶ 6 equivalence. Rather, the Court reiterated that, “once identity of function is established, the test for infringement is whether the structure of the accused device performs in substantially the same way to achieve substantially the same result” as the disclosed structure. Slip op. at 24.
The Court agreed with the district court that the jury’s verdict of infringement was supported by substantial evidence that the accused devices meet claim 2 of the ’080 patent. Specifically, the Court found that both expert testimony and the ’080 patent itself indicated that a person of ordinary skill would know that circuitry responsive to the frequency of an AC current is interchangeable with circuitry responsive to the voltage of an AC current. The Court concluded, therefore, that the record constituted substantial evidence upon which a reasonable jury could conclude that the accused devices perform the requisite function in substantially the same way— sensing the frequency of the alternator’s AC output rather than the voltage of that output—to achieve an identical result—interrupting the engine ignition. Accordingly, the Court affirmed the district court’s denial of Polaris’s JMOL motion on infringement.
Finally, the Federal Circuit affirmed the district court’s denial of Polaris’s motion for JMOL on the charge of willfulness. Polaris argued that the jury instruction on willful infringement was plain error because it applied a negligence standard instead of one of objective recklessness, contrary to the Court’s opinion in In re Seagate. The Court rejected this argument, citing Polaris’s failure to proffer any evidence that it had been prejudiced by the error. Noting the district court’s finding that Polaris had deliberately copied Minks’s design, the Court concluded that the mistaken instruction was not prejudicial. According to the Court, Polaris’s deliberate act of copying would have satisfied either the negligence or the recklessness standard and the jury would have arrived at the same result under either instruction.