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Knorr-Bremse Does Not Prohibit Patentee from Challenging Competency of Opinions Produced to Rebut a Charge of Willfulness

04-1609
February 15, 2006

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Last Month at the Federal Circuit - March 2006

Judges: Michel, Lourie, Linn (author)

In Golden Blount, Inc. v. Robert H. Peterson Co., Nos. 04-1609, 05-1141, -1202 (Fed. Cir. Feb. 15, 2006), the Federal Circuit affirmed a district court’s decision that U.S. Patent No. 5,988,159 (“the ’159 patent”) was willfully infringed by the Robert H. Peterson Company (“Peterson”). However, the Court vacated the damages award and remanded for the district court to determine whether certain units were actually returned to Peterson before being assembled into an infringing configuration

Golden Blount, Inc. (“Golden Blount”) filed suit against Peterson for infringement of the ’159 patent. After a bench trial, the district court found willful infringement and awarded damages and attorney fees. On appeal, the Federal Circuit construed certain claims of the’159 patent and affirmed the validity determination, but vacated the judgment as to infringement and remanded for specific factual findings. See Golden Blount, Inc. v. Robert G. Peterson Co., 365 F.3d 1054 (Fed. Cir. 2004) (“Golden Blount I”). On remand, the district court initially adopted Peterson’s proposed findings of fact of noninfringement, but latervacated those same findings in response to oral arguments heard from Golden Blount on its motion to amend the judgment under Fed. R. Civ. P. (“Rule”) 52(b). In response to a request from the district court, Golden Blount submitted new findings of fact that were subsequently adopted. As a result, the district court found that Peterson willfully infringed the ’159 patent and awarded damages and attorney fees.

On appeal, the Federal Circuit first dismissed Peterson’s argument that the district court had erred in vacating all of its findings when Golden Blount’s Rule 52(b) motion only sought to amend some of the findings. The Court held that the district court did not abuse its discretion in amending all of its findings because a district court may reverse any or all of its findings in acting on a Rule 52(b) motion, and because a Rule 52(b) motion provides the district court discretion to amend any of its own findings.

The Court next turned to infringement. The ’159 patent is directed to a fireplace assembly that includes a combination of primary and secondary gas burner tubes. In Golden Blount I, the Federal Circuit concluded that claims 1 and 17 of the ’159 patent require that the top of the primary burner tube be above the top of the secondary burner tube. Although Peterson sells its secondary burner (also called an “ember burner” or “EMB”) to distributors packaged separately from the primary burner, the district court found that Peterson directly infringed by assembling the entire apparatus itself on a number of occasions, and indirectly infringed by selling the EMB with instructions leading end-users to assemble the device in the claimed configuration.

Upon examination of the instructions provided by Peterson and the testimony of various witnesses, the Federal Circuit concluded that the district court did not clearly err in finding that the instructions taught assembly of an infringing configuration with the top of the primary tube above the top of the EMB. Furthermore, noting that “[c]ircumstantial evidence can support a finding of infringement,” slip op. at 12, the Federal Circuit found that the district court did not clearly err in concluding that (1) direct infringement by Peterson could be inferred from Peterson’s assembly of eleven units in light of the instructions; and (2) direct infringement by the customers could be inferred from Peterson’s sales of the EMB packaged with the instructions. Moreover, nothing in the record suggested that Peterson or any end-users ignored the instructions or assembled the burners in a noninfringing way.

The Federal Circuit also held that the district court did not clearly err in finding that there were no substantial noninfringing uses of the EMB and thus that Peterson acted as a contributory infringer each time it sold an EMB that was ultimately assembled into an infringing device. The Court noted that theinstructions taught only the infringing configuration, and Peterson did not present any evidence that EMB end-users assembled the burners in a noninfringing way. Further, the Court agreed that because Peterson packaged the instructions with the EMB, it intended to have customers assemble the device in accordance with the instructions and thus was liable for inducing infringement.

Regarding the issue of willfulness, the Federal Circuit dismissed Peterson’s arguments that (1) the district court improperly drew an adverse inference of the type prohibited by Knorr-Bremse Systeme Fuer Nutzfahrzeuge GMBH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc), by considering the competency of the oral opinions of counsel obtained by Peterson; and (2)Peterson did not act in reckless disregard of the ’159 patent because it had a good-faith belief that it did not infringe the ’159 patent. As to the first argument, the Court explained that when an alleged infringer fails to obtain or produce an exculpatory opinion of counsel, Knorr-Bremse prohibits drawing an adverse inference that an opinion was or would have been unfavorable. But the Court elaborated that “if the privilege is not asserted, the patentee in making its threshold showing of culpable conduct is free to introduce as evidence whatever opinions were obtained and to challenge the competence of those opinions in satisfaction of the patentee’s burden on willfulness.” Slip op. at 24. Thus, the Court held that because Peterson did not assert attorney-client privilege with respect to the oral opinions it obtained from counsel, the competence of those opinions and the facts surrounding Peterson’s obtaining those opinions were properly considered by the district court.

Regarding the second argument, the Court concluded that the district court did not clearly err in dismissing Peterson’s asserted goodfaith belief in noninfringement and thus in finding willfulness. The Court highlighted that (1) Peterson made little or no effort to assess whether it infringed or whether the patent was invalid after receiving notice of the patent, (2) Peterson’s outside counsel did not have the prosecution history or the accused device when he gave his oral opinions, and (3) Peterson did not respond substantively to Golden Blount’s notice letters and only sought a thorough opinion of counsel after suit was filed, and then only out of a concern to avoid a willfulness finding and possible judgment for attorney fees.

Regarding the determination of lost-profit damages, the Court rejected Peterson’s argument that the district court clearly erred in finding that the parties did not compete for sales of two-burner assemblies. The Court noted that a properly configured assembly infringes regardless of whether the two burners were bought separately. Further, the Court pointed to testimony that the standard practice in the industry is to sell the primary burner as part of the entire burner assembly— evidence that Peterson did not rebut. However, the Court vacated the damages award and remanded for the purpose of determining whether 802 EMBs were returned to Peterson from distributors before being sold to retailers and before being assembled into an infringing configuration, and therefore should not have been included in the damages award.