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Liqwd, Inc. v. L'Oreal USA, Inc.

United States District Court, D. Delaware

December 16, 2019

LIQWD, INC. and OLAPLEX LLC, Plaintiffs,


          Joseph F. Bataillon Senior United States District Judge

         This matter is before the Court on the following post-trial motions:

1. Motion For Approval of Stay of Any Execution or Enforcement of the Judgment by Bond, D.I. 1089, filed by defendants;
2. Motion to Alter Judgment or Amend the August 20th Judgment (D.I. 1078), D.I. 1093, filed by plaintiffs;
3. Defendants' Renewed Motion for Judgment as a Matter of Law Pursuant to Federal Rule of Civil Procedure 50(b), D.I. 1095;
4. Motion to Enhance Patent and Trade Secret Damages, D.I. 1097, filed by plaintiffs;
5. Motion for new trial, D.I. 1098, filed by defendants;
6. Motion for Attorney Fees, D.I. 1101, filed by plaintiffs;
7. Motion to Alter Judgment Defendants' Motion to Alter or Amend the Judgment, D.I. 1102, filed by defendants; and
8. Defendants' Motion for Trial on Their Unclean Hands Defense, D.I. 1106, filed by defendants.

         I. BACKGROUND

         The Court conducted a trial in this case. The jury issued a verdict on August 12, 2019. D.I.'s 1059-1060. The Court thereafter signed a Memorandum and Order denying defendants' motions for a judgment as a matter of law (JMOL), D.I. 1051 and 1055. D.I. 1064. The Court also entered a permanent injunction. D.I. 1073. The Court then signed a memorandum and judgment. D.I. 1078. On August 12, 2019, the jury returned a verdict finding L'Oréal liable for willful trade secret misappropriation, willful patent infringement, and breach of contract. D.I. 1060. The verdict form specified damages of $22, 265, 000 for the trade secret claims and breach of contract claims, $21, 818, 000 for infringement of U.S. Patent No. 9, 498, 419 and $24, 960, 000 for infringement of U.S. Patent No. 9, 668, 954. Id. The jury rejected each of L'Oréal's patent invalidity claims. Id. On August 20, 2019, the Court entered a Memorandum and Judgment in favor of Plaintiffs Olaplex LLC and Liqwd, Inc. (“Olaplex”) and against L'Oréal USA for $49, 920, 000.00 (D.I. 1078).


         A. Motion For Approval of Stay of Any Execution or Enforcement of the Judgment by Bond, D.I. 1089, filed by defendants.

         L'Oreal requests that it be permitted to post a $60, 000, 000 bond and to obtain a stay of any execution or enforcement of the judgment, pending resolution to its post-trial motions herein and its appeal. Federal Rule of Civil Procedure 62(b) provides that “[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security.” L'Oréal USA has obtained a bond in the amount of $60, 000, 000.00 with Liberty Mutual Insurance Company. D.I. 1089, Ex. A. The amount of the bond includes the amount of damages awarded in the Judgment, $49, 920, 000.00, plus an additional 20%, which is more than sufficient to cover one year of interest using the interest rate set forth in 28 U.S.C. § 1961. This interest rate is 1.77%, based on the weekly average for the 1-year constant maturity Treasury yield for the week ending August 16, 2019 (the calendar week preceding the August 20, 2019, Judgment).

         Plaintiffs do not oppose this motion. The Court will grant this motion. Defendants' shall post the $60, 000, 000.00 bond and the Court will stay any execution or enforcement of judgment.

         B. Motion to Alter Judgment or Amend the August 20th Judgment (D.I. 1078), D.I. 1093, filed by plaintiffs.

         Federal Rule of Civil Procedure 59(e) permits a party to move “to alter or amend a judgment.” Fed. R. Civ. P. 59(e). Such a motion “must rely on one of three major grounds: (1) an intervening change in controlling law; (2) the availability of new evidence not available previously; or (3) the need to correct clear error of law or prevent manifest injustice.” Evonik Degussa GmbH v. Materia, Inc., 305 F.Supp.3d 563, 575 (D. Del. 2018) (Citations omitted).

         Plaintiffs ask this Court to amend the August 20, 2019 judgment, D.I. 1078, against the defendants. In particular, the plaintiffs ask the Court to amend its August 20thJudgment to recognize the jury's full damages award, $22, 265, 000 for the trade secrets claims. Further, plaintiffs contend that the reducing the damages is neither procedurally nor substantively proper.

         Plaintiffs agree that the overlapping portion of the two patent infringement awards are duplicative within the same period of time. The plaintiffs also agree that the Court appropriately treated the breach of contract as coextensive with damages for misappropriation of trade secrets. However, plaintiffs argue that the Court treated the trade secret misappropriation as subsumed by the patent damages, and the Court also overruled the jury's trade secret award by 57%. The Court erred, argues plaintiffs, when it prorated the trade secret damages by dividing $22, 265, 00 by the number of days in the twenty-month period x 9 months. This calculation, contends plaintiffs, reduced the jury's $22, 265, 000 trade secret award to $9, 499, 732.48.

         Plaintiffs also contend that the Court should amend this judgment to correctly calculate non-duplicative compensatory recover for the claims. Plaintiffs argue that the total non-duplicative compensatory damages are $37, 410, 000, and the Court should eliminate overlapping time periods of damages but should allow non-duplicative damages representing unique periods of time not subsumed into each other be allowed. In addition, argue the plaintiffs, the defendants failed to move for JMOL regarding the trade secret damages. Second, when long after trial the defendants did move for JMOL, plaintiffs contend they did not do so on the two-player market, thus not arguing that trade secrets are limited to a period before publication. Delaware courts have adopted this approach to the “head-start” doctrine. See, e.g., Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *26 & n.230 (Del. Ch. Feb. 18, 2010).

         With regard to the amount of damages, plaintiffs contend that under a chronological approach, plaintiffs are entitled to $97, 085, 000. D.I. 1094 at 14-16. Under the award size approach, plaintiffs contend they are entitled to $87, 270, 000. Id. at 15-18.

         Finally, plaintiffs request that the Court amend the judgment so as to include both prejudgment and post-judgment interest. Under 35 U.S.C. § 284, “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, . . . together with interest . . .” (emphasis added). For patent infringement, “prejudgment interest should ordinarily be awarded.” Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983); accord Comcast IP Holdings I LLC v. Sprint Comms. Co., L.P., 850 F.3d 1302, 1313 (Fed. Cir. 2017). “Delaware courts award prejudgment interest as a matter of right.” Beard Research, Inc. v. Kates, 8 A.3d 573, 620 (Del. Ch. 2010) (awarding pre-judgment interest on recovery for trade secret misappropriation).

         The purpose of pre-judgment interest is “to ensure that the patent owner is placed in as good a position as he would have been had the infringer entered into a reasonable royalty agreement.” Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983). In a patent case, “[g]enerally, the interest rate should be fixed as of the date of infringement, with interest then being awarded from that date to the date [the judgment is actually paid.]” Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prod. Grp., LLC, No. 8:10CV187, 2016 WL 6246590, at *2 (D. Neb. May 11, 2016).

         Pre-judgment interest may be permitted on attorneys' fees where the court determines there is bad faith or other exceptional circumstances. Mathis v. Spears, 857 F.2d 749, 761 (Fed.Cir.1988) (quoting General Motors Corp. v. Devex Corp., 461 U.S. 648, 653, 103 S.Ct. 2058, 2061, 76 L.Ed.2d 211 (1983)). The District Court has an inherent equitable power to determine the appropriateness of an award under those circumstances. Id.; Water Tech. Corp. v. Calco Ltd., 714 F.Supp. 899, 909-910 (N.D. Ill. 1989). “Since the defendants' willful infringement made it necessary for the plaintiffs to bring this suit, an award of prejudgment interest is proper to fully compensate the plaintiffs for the expenses they incurred during litigation.” Id. at 910. As stated in Stryker,

The plaintiff also seeks prejudgment interest on the portion of its requested attorneys' fees and costs that has already been expended. The amount of such interest is calculated by the plaintiff to be $679, 004. The Court, however, declines to grant such prejudgment interest on the attorneys' fees and costs. An award of attorney's fees and costs under section 285 is not compensatory, but rather is punitive in nature. Granting such an award is a “fee shifting sanction” imposed in exceptional circumstances. See, e.g., L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527, 1533-34 (Fed.Cir.1995) (Judge Schall, concurring in part and dissenting in part). Because pre-judgment interest is only to be awarded on the compensatory portion of a damage award, Beatrice Foods, 923 F.2d at 1580, in the Court's view, it is improper to grant prejudgment interest on any portion of the plaintiff's attorneys' fees and costs.

Stryker Corp. v. Intermedics Orthopedics, Inc., 898 F.Supp. 116, 123 (E.D.N.Y. 1995).

         The Court has discretion when determining how pre-judgment interest should be awarded. While the Court finds the award of pre-judgment interest on the compensatory damages is appropriate in this case, the Court finds that pre-judgment interest in this case on the attorneys' fee award is unnecessary. The pre-judgment interest award is to make the patent owner whole. General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56 (1983). However, the purpose of pre-judgment interest is to compensate and make whole the patent holder, not to punish the infringer. In this case, the Court believes the combination of the jury verdict, the enhanced awards and the finding of willfulness, and the award of attorney fees fully compensates and makes whole the patent holder. Accordingly, the Court determines that there is no need to further award pre-judgment interest on the attorneys' fees.

         Under § 284 absent some justification for withholding such an award”). For trade secret and contract damages plaintiffs ask the Court to amend the judgment and give the jury's full damages in the amount of $22, 265, 000 for the trade secret claims. Further, plaintiffs request a rate of 5.25 % compounded quarterly from the beginning of the damages period. Further, plaintiffs indicate that the Court should specify in its amended judgment that Olaplex is also entitled to this pre-judgment interest on any award of attorneys' fees, to ensure that Olaplex is fully compensated for the money it had to spend prosecuting this action. See, e.g., Regeneron Pharmas., Inc. v. Merus N.V., 2018 WL 3425013, at *7 (S.D.N.Y. June 25, 2018) (awarding pre-judgment interest on attorneys' fee award because doing so was “necessary to make [the prevailing party] whole, as [it] lost capital in defense of this litigation”); Norwest Fin., Inc. v. Fernandez, 121 F.Supp.2d 258, 263 (S.D.N.Y. 2000) (approving costs for business-class airfare and “first class” but not “luxurious” hotels); Ply Gem Indus., Inc. v. Argonaut Ins. Co., No. 87-cv-7327, 1988 WL 132911, at *2 (S.D.N.Y. Dec. 6, 1988) (“Air fare may be business class or equivalent....”).

         Post-judgment interest pursuant to 28 U.S.C. § 1961 is mandatory. In re USN Comms., Inc., 280 B.R. 573, 602 (Bankr. D. Del. 2002). “‘Any judgment' in Section 1961 includes a judgment awarding attorney fees.” Mathis v. Spears, 857 F.2d 749, 760 (Fed. Cir. 1988). Courts in this district apply the prime rate in patent cases absent a reason to do otherwise. See, e.g., Godo Kaisha IP Bridge 1 v. TCL Comm. Tech. Holdings Ltd., 2019 WL 1877189, at *5 (D. Del. April 26, 2019); Hologic, Inc. v. Minerva Surgical, Inc., 2019 WL 1958020, at *10 (D. Del. May 2, 2019) (“The Court agrees with Hologic and finds prejudgment interest at the prime rate, compounded quarterly, from and after August of 2015 to the date of judgment is appropriate (D.I. 536, Declaration of Christopher C. Barry at 8-10; Schedule D).”) “[I]t is not necessary that a patentee demonstrate that it borrowed at the prime rate in order to be entitled to prejudgment interest at that rate.” Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed.Cir.1991) (citation omitted).

         In conclusion, plaintiffs ask this court to grant its motion to amend and permit $97, 085, 00 in damages plus pre- and post-judgment interest.

         Defendants disagree on all issues requested by plaintiffs. Defendants argue that plaintiffs are attempting to shift their lost-profit damages to its trade secret claim, based on the wrong period of head-start months, and the duplicative damages. Defendants contend the verdict on damages must be thrown out and defendants must be granted JMOL on at least head-start damages or remit the verdict to the maximum royalty rate as is supported by the evidence.

         As for increased damages, defendants argue that while a court may reduce an excessive jury award. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 433 (1996), the Constitution “forb[ids] the court to increase the amount of damages awarded by a jury in actions such as th[is].” Dimick v. Schiedt, 293 U.S. 474, 482 (1935). Defendants also contend that the 7th Amendment bars the Court from making its own findings on issues of fact, particularly on materials not admitted into trial as evidence. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1183 (3d Cir. 1993); see also McLaughlin v. Fellows Gear Shaper Co., 786 F.2d 592, 596 (3d Cir. 1986) (“[F]acts as found by the jury cannot be redetermined by a court”). Further, defendants argue that the court was correct in subsuming trade secret damages into patent damages. Additionally, the defendants argue plaintiffs are not entitled to prejudgment interest, arguing it would be inequitable to do so. Prejudgment interest is only appropriate where “the underlying liability is reasonably capable of ascertainment . . . where liability and the amount of damages are fairly certain.” Anthuis v. Colt Indus. Operating Corp., 971 F.2d 999, 1010 (3d Cir. 1992) (citation omitted). Further, argues defendants, prejudgment interest must be at the Treasury Bill rate which is currently 1.58% - rather than the prime rate. “In federal question cases, the rate of prejudgment interest is committed to the discretion of the district court.” Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 63 (3d Cir. 1986); see also Montgomery Cellular Hldg. Co. v. Dobler, 880 A.2d 206, 226 (Del. 2005) (same). “The Court may be guided by the rate set out in 28 U.S.C. § 1961, ” i.e., the T-Bill rate. Sun Ship, 785 F.2d at 63.

         Consequently, the defendants urge this Court to deny plaintiffs' motion to alter or amend the judgment.

         Based on the arguments of the plaintiffs, the Court agrees that there was plenty of evidence at trial to support the period of secrecy plus a period of time during the misappropriation. The Court is of the opinion that the damages calculations made by this Court are an accurate assessment of the damages found by the jury, less duplicative recovery. For the reasons stated in its previous Memorandum and Order, D.I. 1078, the Court determines that the damages assessment is accurate and complete. The Court does not believe it “subsumed” the damages into one category. On the contrary, the Court carefully calculated the dates that overlapping occurred and subtracted those amounts. Accordingly, the Court will deny plaintiffs' motion to alter or amend.

         With regard to the interest issues, the Court rules as follows. Plaintiff is entitled to prejudgment issue at a rate to be determined by the district court. Sun Ship, 785 F.2d at 63. The Court will allow it to accrue at the prime rate as determined in the Hologic case. Sun Ship, 785 F.2d at 63. In addition, the Court finds that in order to make plaintiffs whole, they will be permitted to collect this same interest on their attorneys' fees.

         With regard to the post-judgment interest, plaintiffs are entitled to this recovery as a matter of law. 28 U.S.C. § 1961. The Court will order that this interest be at the prime rate. See, e.g., Godo Kaisha IP Bridge 1 v. TCL Comm. Tech. Holdings Ltd., 2019 WL 1877189, at *5 (D. Del. April 26, 2019); Hologic, Inc. v. Minerva Surgical, Inc., 2019 WL 1958020, at *10 (D. Del. May 2, 2019).

         C. Motion Defendants' Renewed Motion for Judgment as a Matter of Law Pursuant to Federal Rule of Civil Procedure 50(b)], D.I. 1095, filed by defendants.

         Defendants renew their motion for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(b) for judgment as a matter of law concerning damages, willful patent infringement, trade secret misappropriation, willful and malicious trade secret misappropriation, breach of contract, and patent invalidity. The Court has carefully reviewed the briefs and arguments by counsel. The Court will deny the motion. The Court will uphold the jury verdict in this case, the record made by the Court at trial, and on the memorandum and orders by the Court on these issues, and the Court does not find grounds for a JMOL on any of the issues set forth by the defendants.

         D. Motion to Enhance Patent and Trade Secret Damages, D.I. 1097, filed by plaintiffs.

         Plaintiffs move to support the Court's findings that enhancement of the patent and trade secret damages are appropriate in this case. Plaintiffs want to confirm the exemplary damage awards set forth in the August 20, 2019 Memorandum and Judgment (D.I. 1078), awarding an aggregate two times enhancement of patent damages and three times enhancement of trade secret damages.

         This Court instructed the jury regarding willful and exemplary damages, and the jury found the plaintiffs' patents valid and found willful infringement by the defendants. D.I. 1060. The jury also found that defendants willfully misappropriated plaintiffs' trade secrets. Id. The jury's verdict awarded Olaplex $22, 265, 000 in damages for trade secret misappropriation, $21, 810, 000 in damages for infringement of the '419 Patent, and $24, 960, 000 in damages for infringement of the '954 Patent. The Court awarded exemplary damages in the amount of twice the award in the verdict (so two times plus the exemplary). D.I. 1078 at 3-4. The Court also awarded damages of one time the verdict for exemplary damages thus ordering an additional $24, 960.000.

         Defendants contend that the Court's ruling on these damages was premature. D.I. 1103 at 2-7. Defendants also contend that the amount already rewarded - $24.96 million - is greatly inflated, particularly since the Court found that the “lost profits” damages were skinny. Modi Decl., Ex. A at 1277:13-19. Defendants argue that the plaintiffs would have received even less under a reasonable royalty theory. ...

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