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Nox Medical EHF v. Natus Neurology Inc.

United States District Court, D. Delaware

August 27, 2018

NOX MEDICAL EHF, Plaintiff,
v.
NATUS NEUROLOGY INC., Defendant.

          David E. Moore, Bindu A. Palapuru, Stephanie E. O'Byrne, POTTER ANDERSON & CORROON LLP, Wilmington, DE; Chad E. Nydegger, Brent P. Lorimer, Brittany Frandsen, WORKMAN NYDEGGER, Salt Lake City, UT. Attorneys for Plaintiff.

          Arthur G. Connolly, III, Ryan P. Newell, Mary I. Akhimien, CONNOLLY GALLAGHER LLP, Wilmington, DE; Thomas S. Reynolds II, Alan W. Nicgorski, John W. McCauley, Jeremy Adelson, HANSEN REYNOLDS LLC, Milwaukee, WI. Attorneys for Defendant.

          MEMORANDUM OPINION

          ANDREWS U.S DISTRICT JUDGE.

         On August 7, 2015, Plaintiff sued Defendant for infringement of U.S. Patent No. 9, 059, 532 ("the'532 patent"). (D.I.I). I held a jury trial from April 30-May 8, 2018. (D.I. 273-278 ("Tr.")).[1] The jury found each of the asserted claims infringed and not invalid, and decided that Plaintiff had proven, by a preponderance of the evidence, that Defendant's infringement was willful.[2] (D.I. 261). The jury awarded Plaintiff $623, 175 in damages for Defendant's infringement. (Id.).

         Presently before the Court are Plaintiffs Post-Trial Motions for (1) Enhanced Damages, (2) Exceptionality and Attorneys' Fees, (3) Pre-Judgment Interest and (4) Post-Judgment Interest (D.I. 288) and related briefing (D.I. 292, 311, 317); Plaintiffs Motion to Strike Evidence Outside of the Trial Record (and to Strike Accompanying Arguments) Proffered in Support of Defendant's Inequitable Conduct Defense (D.I. 301) and related briefing (D.I. 302, 313, 216); Defendant's Motion for Judgment that U.S. Patent No. 9, 059, 532 is Unenforceable Under the Doctrine of Inequitable Conduct (D.I. 289) and related briefing (D.I. 290, 300, 315); Defendant's Renewed Motion for Judgment as a Matter of Law of Invalidity and No. Willfulness and Alternative Motion for a New Trial (D.I. 286) and related briefing (D.I. 287, 310, 314); and Defendant's Motion for Leave to File Sur-Reply in Opposition to Nox's Post-Trial Motions (D.I. 324).

         I. LEGAL STANDARDS

         A. Judgment as a Matter of Law

         Judgment as a matter of law is appropriate if "the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for [a] party" on an issue. Fed.R.Civ.P. 50(a)(1). "Entry of judgment as a matter of law is a 'sparingly' invoked remedy, granted only if, viewing the evidence in the light most favorable to the nonmovant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury reasonably could find liability." Marra v. Phila. Hous. Auth, 497 F.3d 286, 300 (3d Cir. 2007) (citation omitted).

         In assessing the sufficiency of the evidence, the Court must give the nonmovant, "as [the] verdict winner, the benefit of all logical inferences that could be drawn from the evidence presented, resolve all conflicts in the evidence in his favor and, in general, view the record in the light most favorable to him." Williamson v. Consol. Rail Corp., 926 F.2d 1344, 1348 (3d Cir. 1991). The Court may "not determine the credibility of the witnesses [nor] substitute its choice for that of the jury between conflicting elements in the evidence." Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 893 (Fed. Cir. 1984). Rather, the Court must determine whether the evidence reasonably supports the jury's verdict. See Gomez v. Allegheny Health Servs. Inc., 71 F.3d 1079, 1083 (3d Cir. 1995); 9B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2524 (3d ed. 2008) ("The question is not whether there is literally no evidence supporting the party against whom the motion is directed but whether there is evidence upon which the jury might reasonably find a verdict for that party.").

         Where the movant bears the burden of proof, the Third Circuit applies a stricter standard. Fireman's Fund Ins. Co. v. Videfreeze Corp., 540 F.2d 1171, 1177 (3d Cir. 1976). To grant judgment as a matter of law in favor of a party that bears the burden of proof on an issue, the Court "must be able to say not only that there is sufficient evidence to support the [movant's proposed] finding, even though other evidence could support as well a contrary finding, but additionally that there is insufficient evidence for permitting any different finding." Id.

         B. New Trial

         Federal Rule of Civil Procedure 59(a)(1)(A) provides, in pertinent part: "The court may, on motion, grant a new trial on all or some of the issues-and to any party- .. . after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court. . .." Among the most common reasons for granting a new trial are: (1) the jury's verdict is against the clear weight of the evidence, and a new trial must be granted to prevent a miscarriage of justice; (2) newly discovered evidence exists that would likely alter the outcome of the trial; (3) improper conduct by an attorney or the court unfairly influenced the verdict; or (4) the jury's verdict was facially inconsistent. See Zarow-Smith v. N.J. Transit Rail Operations, Inc., 953 F.Supp. 581, 584-85 (D.N.J. 1997).

         The decision to grant or deny a new trial is committed to the sound discretion of the district court. Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33, 36 (1980); Olefins Trading, Inc. v. Han Yang Chem Corp., 9 F.3d 282, 289 (3d Cir. 1993). Although the standard for granting a new trial is less rigorous than the standard for granting judgment as a matter of law-in that the Court need not view the evidence in the light most favorable to the verdict winner-a new trial should only be granted where "a miscarriage of justice would result if the verdict were to stand" or where the verdict "cries out to be overturned" or "shocks [the] conscience." Williamson, 926 F.2d at 1352-53.

         C. Enhanced Damages

         The Patent Act gives the Court discretion to "increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. The Court's discretion "should be exercised in light of the considerations underlying the grant of that discretion." Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1926 (2016). Enhanced damages are "designed as a 'punitive' or 'vindictive' sanction for egregious infringement behavior," which is "willful, wanton, malicious, bad-faith, deliberate, consciously wrong, flagrant, or-indeed-characteristic of a pirate." Id. at 1932. Enhanced damages are "not to be meted out in a typical infringement case." Id. A jury's finding of willful infringement is a prerequisite to enhancement of damages, but is not by itself sufficient. Id.

         Where an infringer's behavior is willful, the Court may evaluate a set of "non-exclusive" factors set forth in Read Corp. v. Portec, Inc., to determine if damages should be enhanced and the extent to which they should be enhanced. 970 F.2d 816, 826-27 (Fed. Cir. 1992); Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1382-83 (Fed. Cir. 2017), pet. for cert, pending, No. 17-1649 (filed June 8, 2018), No. 17-1497 (filed May 1, 2018). The Read factors include: "(1) whether the infringer deliberately copied the ideas or design of another"; "(2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed"; "(3) the infringer's behavior as a party to the litigation"; "(4) [defendant's size and financial condition"; "(5) [c]loseness of the case"; "(6) [d]uration of defendant's misconduct"; "(7) [r]emedial action by the defendant"; "(8) [d]efendant's motivation for harm"; and "(9) "[w]hether defendant attempted to conceal its misconduct." Read Corp., 970 F.2d at 826-27.

         A movant must establish its entitlement to enhanced damages under § 284 by a preponderance of the evidence. Halo, 136 S.Ct. at 1934.

         D. Exceptionality and Attorneys' Fees

         The Patent Act provides that the court "in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The Supreme Court has defined an "exceptional" case as "simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014). When considering whether a case is exceptional, district courts are to exercise their discretion on a case-by-case basis, considering the totality of the circumstances. Id. Relevant factors for consideration include "frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 1756 n.6 (citation omitted). A movant must establish its entitlement to attorney fees under § 285 by a preponderance of the evidence. Id. at 1758.

         E. Inequitable Conduct

         "Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of the patent." Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc). "To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO." Id.

         "In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference." Id. at 1290 (citing Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995)) (emphasis omitted).

         To be material, withheld information must be "but-for" material, meaning that the "PTO would not have allowed a claim if it had been aware of the information. Therasense, 649 F.3d at 1291. Courts evaluating materiality must "apply the preponderance of the evidence standard and give the claims their broadest reasonable interpretation." Id. at 1291-92.

         II. DISCUSSION

         A. Plaintiffs Post-Trial Motions for (1) Enhanced Damages, (2) Exceptionality and Attorneys' Fees, (3) Pre-Judgment Interest and (4) Post-Judgment Interest

         i. Enhanced Damages

         Plaintiff argues that the Read factors support an award of enhanced damages. (D.I. 292 at 3-20; D.I. 317 at 1 -8). Defendant argues the opposite. (D.I. 311 at 9-20).

         The first factor, "whether the infringer deliberately copied the ideas or design of another," supports enhancement of damages. Plaintiff presented evidence that Defendant sent Plaintiffs commercial product to Defendant's Chinese manufacturer, and told the manufacturer to copy Plaintiffs product. (Tr. 302:24-303:10, 289:1-22; PTX0046 at 4). Furthermore, Defendant's director of marketing described the accused product as the "Nox knock off." (PTX0022).

         Defendant does not deny that it copied Plaintiffs product. Rather, Defendant argues that Plaintiff "cannot satisfy its burden under Read Factor[] 1 . . . simply by pointing to pre-issuance conduct." (D.I. 311 at 9-10). However, as I instructed the jury, "[d]eliberate copying of the commercial product of the patent owner before issuance of the patent. . . can be evidence of willfulness to the extent it demonstrates [Defendant's] state of mind after the '532 patent issued and after [Defendant] became aware of it." (D.I. 259 at 33). Defendant "deliberately copied the ideas [and] design" of Plaintiff, and continued to produce copied belts after receiving notice of the '532 patent's existence. (D.I. 287 at 24). This action supports enhancement of damages. That Defendant's deliberate copying pre-dates the patent does not negate this finding, but does reduce its weight.

         The second factor, "whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed," does not support enhancement of damages. In the face of evidence that it copied the commercial embodiment of the '532 patent and continued to produce copies after receiving notice of the patent's existence, Defendant presented no evidence during the jury trial that it possessed a good-faith belief that the patent was invalid.[3] Defendant tried to elicit such evidence from its damages expert, Richard Bero. (Tr. 561:4-24). However, Plaintiff objected to Defendant's effort. (Id.). I sustained Plaintiffs objection, stating that "trying to get what [Defendant] thought about whether or not the patent was invalid or not by having Mr. Bero testify about it is improper." (Tr. 617:23-618:15). I also stated, "There's actually no evidence in the record that the jury could use [to show that Defendant] thought the patent was invalid." (Id.). During the subsequent inequitable conduct trial, however, Defendant presented evidence that it challenged the validity of the European counterpart to the '532 patent before the '532 patent issued. (Tr. 996:16-1000:4; DTX1025). Accordingly, even though Defendant knew that it was copying the commercial embodiment of the '532 patent almost immediately upon the patent's issuance, it can be inferred that Defendant did so with a good-faith belief that the patent was invalid.

         The third factor, "the infringer's behavior as a party to the litigation," is neutral. Plaintiff argues that Defendant engaged in litigation misconduct. (D.I. 292 at 6-10). In support of its argument, Plaintiff points to several actions taken by Defendant. Plaintiff notes that Defendant "conceded infringement" after Plaintiff "had spent the time and resources to brief summary judgment and prepare for argument on the motion." (D.I. 292 at 6 (citing D.I. 71, 59:25-63:8; D.I. 72-73)). Plaintiff also argues that Defendant "maintain[ed] a large number of invalidity theories until the eve of trial," and represented to the Court that it did not intend to file a petition for inter partes review, but later did so. (D.I. 292 at 7 (citing D.I. 235-1, p. 185; D.I. 121)). Plaintiff further notes that Defendant demanded that Plaintiffs CEO Petur Halldorsson return from Iceland for the bench trial on inequitable conduct, and argues that this ...


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