By George Basharis, J.D.
Damages for patent infringement and breach of confidentiality agreement tossed; misappropriation damages upheld.
A $12.6 million award to an inventor of flea and tick applicator, who accused a product manufacturer of stealing her idea, was reduced by the federal district court in New Jersey after the court vacated the jury’s patent infringement verdict and determined that breach of contract damages were duplicative. However, the court upheld the jury’s award of over $11 million for misappropriation, finding that there was ample evidence for the jury to conclude that the product manufacturer began to develop the applicator using the inventor’s ideas before her applicator idea was published in a patent application (Nite Glow Industries, Inc. v. Central Garden & Pet Co., June 1, 2020, Hayden, K.).
In 2009, an inventor of pet care products met with representatives of Central Garden & Pet Company subsidiary Four Paws Pet Company (Four Paws) to present an idea for a flea and tick medication applicator in hopes that Four Paws would license the idea from the inventor and develop the product. The Four Paws representatives signed a non-disclosure agreement and expressed interest in the applicator idea. Following the presentation, the inventor sent Four Paws prototypes and product designs of her applicator as well as a patent application. However, in 2012, the inventor discovered that Four Paws had developed their own applicator using the inventor’s designs. The inventor sued Four Paws for misappropriation, breach of contract based on the non-disclosure agreement, and patent infringement.
Following a three-week trial, a jury returned a verdict finding that Four Paws infringed the inventor’s patent, misappropriated her applicator idea, and breached the parties’ non-disclosure agreement. The a jury awarded plaintiffs $12,656,900 in damages, consisting of $825,450 as reasonable royalties for infringement of claim 1 of U.S. Patent No. 8,057,445, $825,450 for breach of contract, and $11,006,000 for misappropriation. Four Paws sought to modify the judgment as to both liability and damages.
Misappropriation. The court rejected Four Paws’ argument that the inventor’s misappropriation claim was barred by the economic loss doctrine because it was based on the same conduct as her breach of contract claim. The court noted that the claims were based on separate conduct: the breach of contract claim was based on Four Paws’ failure to disclose and assign the applicator idea to the inventor while the misappropriation claim was based on the wrongful use of the invention. The court also rejected Four Paws’ novelty of use argument. According to Four Paws, the inventor’s applicator idea was not novel at the time Four Paws developed its own flea and tick medicine applicator because the inventor had published her applicator idea in a patent application before the Four Paws applicator was developed. However, there was ample evidence that Four Paws stole the inventor’s idea after she first met with representatives of the company and presented them with prototypes, drawings, and other materials laying out her applicator idea. There also was testimony that Four Paws began to explore improved methods of delivering flea and tick medicines years before it met with the inventor but only developed the applicator after seeing the inventor’s prototype and other design materials. The court finally rejected Four Paws’ argument that "use" only begins with design or marketing as not being supported by any authority.
Damages. The court found that the jury had properly used net profits rather than net sales when calculating damages for misappropriation. The jury also was correctly instructed as to the causation requirement. Turning to the jury’s finding that Four Paws breached the parties’ non-disclosure agreement, the court rejected Four Paws’ argument that the agreement ceased to obligate the parties after the inventor’s patent application was published, and there was sufficient evidence from which the jury could conclude that Four Paws used the inventor’s confidential information both before and after her patent application was published. However, the damages awarded for breach were duplicative of the damages awarded for misappropriation because the inventor failed to identify the specific amount she would have received absent Four Paws’ breach of the non-disclosure agreement. The damages were instead based on the entire amount of Four Paws’ net profits from using the inventor’s applicator idea. Consequently, the jury’s award for breach of contract damages was vacated.
Patent infringement. The court also vacated the jury’s award of damages arising from patent infringement. The inventor’s patent was earlier construed to require the use of a "flexible deformable material" made from rubber. During testimony at trial, the inventor’s expert witness equated rubber with plastic and revealed that the Four Paws applicator was made from a material that was not with the scope of the inventor’s patent. The jury evaluated samples of the Four Paws applicator and found that plastic compositions of the applicator to be within the patent’s scope. However, the court rejected the finding as an improper delegation of claim construction to the jury.
Finally, the court refused to award the inventor specific performance of the non-disclosure agreement by assigning to her Four Paws’ applicator patents as there was insufficient evidence to establish the required nexus between the agreement and the patents. However, the court awarded the inventor pre- and post-judgment interest on her misappropriation damages and rejected Four Paws’ argument that the award was excessive or duplicative.
This case is No. 2:12-cv-04047-KSH-CLW.
Attorneys: Ernest D. Buff (Ernest D. Buff & Associates, LLC) and James Simon Coons (Ansa Assuncao, LLP) for Nite Glow Industries Inc. and I Did It, Inc. Linda G. Harvey (Greenberg, Dauber, Epstein & Tucker, PC) for Central Garden & Pet Co. and Four Paws Pet Co. d/b/a Four Paws Products, Ltd.
Companies: Nite Glow Industries Inc.; I Did It, Inc.; Central Garden & Pet Co.; Four Paws Pet Co.
MainStory: TopStory Patent TradeSecrets GCNNews NewJerseyNews
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