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New Reissue Rules Apply to Reissue Patents and Pending Reissue Applications

May 09, 2001

Decision icon Decision

Last Month at the Federal Circuit - June 2001

Judges: Rader (author), Schall, and Bryson

In Shockley v. Arcan, Inc., No. 99-1580 (Fed. Cir. May 9, 2001), the Federal Circuit affirmed a district court’s grant of SJ, denial of intervening rights, and denial of postverdict damages motion. The Court, however, vacated the district court’s denial of a new trial on damages and reversed thedistrict court’s ruling on joint and several liability.

The Plaintiff, Troy Shockley, sued Arcan, Inc. (“Arcan”); Telesis Corporation (“Telesis”); and Sunex International, Inc. (“Sunex”) (collectively “Defendants”) for infringement of Shockley’s U.S. Reissue Patent No. RE 35,732 (“the ‘732 patent”). At trial, a jury found that the Defendants willfully infringed the ‘732 patent and awarded Shockley damages totaling $3,791,070, including a lostprofits award of $791,070 and a future lost-profits award of $3,000,000.

Shockley filed his reissue application to correct errors in U.S. Patent No. 5,451,068, which described and claimed a mechanic’s creeper. The Defendants argued that the ‘732 patent is invalid under old rule 35 C.F.R. § 1.175, which required that the patentee declare, in detail, the nature and origin of each error in the original patent. New rule 35 C.F.R. § 1.175, which became effective on December 1, 1997—after the issue fee was paid on the reissue application but before the reissue patent had issued—is less stringent and requires only a general statement that the errors involved no deceptive intent. The Court concluded that the validity of the ‘732 patent should be considered in light of the new rule since the reissue application had been pending when the new rule took effect. Because the Defendants did not present any arguments as to why the ‘732 patent was invalid under the new rule, the Court held that the ‘732 patent was not invalid.

The Defendants further argued that they were entitled to “intervening rights” claiming that the infringing products had been on sale before the ‘732 patent issued. The Federal Circuit ruled that regardless of the sale status, the products had not been manufactured as of the date the ‘732 patent issued. Therefore, absolute intervening rights did not apply. Moreover, because the jury had found the Defendants’ infringement to be willful, the Court concluded that the Defendants’ unclean hands supported the district court’s decision not to apply equitable intervening rights.

The Federal Circuit also reviewed the district court’s denial of the Defendants’ motion for a new trial on damages. The Federal Circuit found that the district court had correctly denied the motion for a new trial because the Defendants had failed to move for JMOL at the close of evidence. However, the Federal Circuit ruled that the district court should have applied the “maximum recovery” rule, which prevents excessive damage awards. In particular, the Court found that the jury’s award of future lost profits totaling $3,000,000 was excessive because the amount was based on speculative assumptions and not on sound economic models and evidence. Accordingly, the Court remitted the damages award to actual lost profits and remanded the case to the district court to offer Plaintiff the option of either a new trial on damages or the remitted damages totaling $791,070.

Finally, the Defendants argued that joint and several liability should not apply in the present case. The Court acknowledged that parties making and selling an infringing device are joint tort-feasors with and, thus, jointly liable with, parties that purchase an infringing device for resale. However, one of the Defendants, Sunex, merely made the infringing devices abroad while the other Defendants, Arcan and Telesis, imported the devices into the United States and sold them. Accordingly, the Court found that because Sunex did not infringe the ‘732 patent, it cannot be held jointly liable with Arcan and Telesis for infringement of the ‘732