Fujifilm v. Jack C. Benun and Jazz Products LLC... (CAFC 2009-1487) precedential

You don't see this often in precedential rulings: "per curium." Must be tired of seeing this case come up. Decision penned by Chief Judge Michel.

After an ocean of motions...

A jury trial ensued. At the close of Fuji's case, defendants moved for judgment as a matter of law (JMOL) under Fed. R. Civ. P. 50(a) on Fuji's infringement claim based on defendants refurbishing Achiever-brand LFFPs. Defendants' JMOL motion, which contained no other issues, was denied. The jury found willful infringement of Fuji's patents and awarded a $2.00 per infringing LFFP running royalty, resulting in a verdict, including interest, of $16,191,406 against PE, of which Benun and Jazz are jointly and severally liable for $3,690,239; and an additional $2,500,000 lump sum royalty payment. The court denied defendants' post-trial motion for JMOL under Fed. R. Civ. P. 50(b) based on non-infringement by Achiever-brand LFFPs and inapplicability of a first sale's location, and its motion for a new trial on damages.

Benun's lawyers argued patent exhaustion via a footnote in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. , 128 S. Ct. 2109 (2008), reading into case law the very opposite of the precedent's intent.

Defendants assert that Quanta created a rule of "strict exhaustion," that the Court's failure to recite the territoriality requirement eliminated it. That case, however, did not involve foreign sales. Defendants rely on Quanta's footnote 6 because it contains the phrase "[w]hether outside the country." This phrase, however, emphasizes that Univis required the product's only use be for practicing-not infringing-the patent; and a practicing use may be "outside the country," while an infringing use must occur in the country where the patent is enforceable. Read properly, the phrase defendants rely on supports, rather than undermines, the exhaustion doctrine's territoriality requirement.

Then, of course, a wrangle over damages.

We also consider defendants' new trial argument that the $2.00 per infringing LFFP running royalty and the $2.5 million lump sum, are excessive, punitive, and un- supported by substantial evidence. Under 35 U.S.C. § 284, Fuji was entitled to "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty." To determine a reasonable royalty, a jury must find the royalty that would have been agreed to in a hypothetical negotiation between a willing licensee and willing licensors at the time infringement began. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. Cir. 1995) (en banc). The jury's award should stand unless it is grossly excessive, not supported by evidence, or based on only speculation or guesswork. Oiness v. Walgreen Co., 88 F.3d 1025, 1031 (Fed. Cir. 1996).

Fuji presented testimony that in a hypothetical nego- tiation it would have enjoyed a strong bargaining position based on (1) defendants' entire business depending on a Fuji license; (2) Customs excluding infringing LFFPs; and (3) defendants' demonstrated inability to segregate in- fringing LFFPs from non-infringing LFFPs. Relying on these and other factors from Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), Fuji's expert testified that the parties would have agreed to a 40 cent royalty rate. Based on defendants' inability to separate the LFFPs, the expert testified at length about Georgia-Pacific factor 6 (collateral sales) and included both infringing and non-infringing LFFPs in the royalty base. In support of its all-product royalty base, Fuji presented the method as an accepted technique to avoid repeated disputes over what percentage of LFFPs infringe, a point of contention between Fuji and defendants.

Critically, Fuji's expert testified that in a hypothetical negotiation the royalty rate would have changed inversely to royalty-base changes, resulting in a consistent royalty amount. Specifically, if 50% of LFFPs infringed, and the royalty base only included infringing LFFPs (a reduction by one-half in the size of the potential royalty base of all LFFPs), then the royalty rate would double from 40 cents to 80 cents per infringing LFFP. In short, Fuji advocated a consistent royalty amount that would not vary with changes in the royalty-base size. To that end, Fuji's expert provided the jury with sufficient information to reach Fuji's proposed royalty amount, whether the royalty base included all LFFPs (a larger royalty base, driving the royalty rate down to reach Fuji's proposed royalty amount), or only infringing LFFPs (a smaller royalty base, driving the royalty rate up to reach Fuji's proposed royalty amount). By increasing the royalty rate in an amount proportionate to any reduction in the size of the royalty base, the jury could have reached a $2.21 royalty rate for application to a royalty base including only infringing LFFPs. $2.21 is even larger than the $2.00 per infringing LFFP royalty the jury awarded.

Defendants seize on the 40 cent royalty rate and argue that the royalty base for the proposed royalty rate can only include infringing LFFPs, thereby making the jury's $2.00 royalty rate excessive. This argument fails because the jury was entitled to rely on evidence of bundling and convoyed sales in determining the proper scope of the royalty base. Deere & Co. v. Int'l Harvester Co., 710 F.2d 1551, 1559 (Fed. Cir. 1983). "The fact that bundling and convoyed sales affected [Fuji's] estimate of both the royalty base and the royalty rate is thus not a sufficient reason to nullify the jury's award." Interactive Pictures v. Infinite Pictures, 274 F.3d 1371, 1385 (Fed. Cir. 2001). Because defendants apply similar logic in their assertion that the $2.5 million lump sum is excessive, these arguments also are unconvincing.

Affirming contempt was just as easy.

Finally, defendants challenge whether the court properly held them in contempt of a preliminary order enjoining importation of infringing LFFPs. They do not dispute the existence of a valid court order, or their knowledge of that order. Instead, they argue that contempt was not supported by sufficient evidence of infringement, the imported cameras were redesigned, and Fuji's patent rights were terminated during the bankruptcy sale. We need not reach defendants' third argument; it was waived by their failure to raise it in either the 50(a) or 50(b) motion.

Defendants' remaining arguments are unconvincing. The district court correctly relied on three fact witness reports and a statistical expert to show that imported LFFPs included shells that were not first sold in the United States, and not redesigned. Therefore, the court did not abuse its discretion in finding contempt of the preliminary injunction.

Affirmed.