IP Law Daily Infringement findings affirmed in bathtub drain dispute; treble damages reversed
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Monday, February 5, 2018

Infringement findings affirmed in bathtub drain dispute; treble damages reversed

By Thomas Long, J.D.

A manufacturer of plumbing products provided sufficient evidence for a jury to have reasonably found that a competitor’s products infringed three of the manufacturer’s patents for bathtub drain assemblies, under the doctrine of equivalents, the U.S. Court of Appeals for the Federal Circuit has decided. The appellate court reversed a district court’s grant of the defendant’s motion for judgment as a matter of law as to no infringement under the doctrine of equivalents and affirmed the district court’s denial of the defendant’s motion for judgment as a matter of law as to no willfulness. The appellate court also affirmed the district court’s denial of the defendant’s motion for judgment as a matter of law as to no indirect infringement. The Federal Circuit reversed, however, the district court’s award of maximum enhanced (trebled) damages because the district court failed to properly weigh the relevant factors and did not adequately explain the basis for its damages enhancement (WCM Industries, Inc. v. IPS Corp., February 5, 2018, Prost, S.).

Patents-in-suit. Plaintiff WCM Industries, Inc., alleged that defendant IPS Corp., through its predecessor, copied WCM’s "Innovator" bathtub waste and overflow drain assembly products, infringing three WCM utility patents, U.S. Patent Nos. 8,302,220, 8,321,970, and 8,584,272. WCM’s patents generally described improvements in bathtub overflow assemblies. The assemblies contained an overflow portion that prevented an accidental overflow of water from a bathtub and a drain portion that allowed the drainage of water from the bathtub. The patented inventions were designed to make installation easier, without the use of screws, and to prevent leakage problems present in traditional drain assemblies.

Accused products; infringement dispute. The accused products included IPS’s original "Classic Product" and its "Revised Product." IPS stopped producing the Classic Product after the lawsuit was filed, and it developed and released its Revised Product, which contained a modified locknut design that lacked finger indentations present in the Classic Product. The case was tried to a jury, and the jury found that as to the Classic Product, IPS infringed literally, contributorily infringed, and induced infringement. As to the Revised Product, while the jury found that while IPS had not literally infringed, it infringed under the doctrine of equivalents, contributorily infringed, and induced infringement. The jury awarded WCM over $1.38 million in damages, representing a royalty of one dollar per infringing unit sold. The district court awarded WCM the maximum enhanced damages amount of treble damages because of IPS’s willfulness. After trial, the district court granted IPS’s motion for judgment as a matter of law as to no infringement under the doctrine of equivalents as to the Revised Product, but it let stand the jury’s verdict of indirect infringement and willfulness.

Doctrine of equivalents. WCM appealed the district court’s judgment as a matter of law of no infringement under the doctrine of equivalents and to reinstate the jury’s verdict. WCM contended that the district court’s decision to disregard the jury’s verdict of infringement under the doctrine of equivalents rested on a misapprehension of the law. Specifically, WCM pointed to the district court’s holding that because it had excluded WCM’s expert opinion on the doctrine of equivalents and "WCM did not present opinion testimony on infringement, none of the evidence introduced at trial is sufficient to prove infringement under the doctrine of equivalents." The Federal Circuit agreed with WCM that precedent did not require opinion testimony, and certainly did not require expert opinion testimony, for a finding of equivalence.

Reviewing the issue de novo, the appellate court noted that the infringement dispute at trial focused on only a single claim limitation: the "lugs" on the nut element. The issue on appeal was whether there was sufficient evidence such that a reasonable jury could have found that the claimed "lugs" limitation was met by equivalents. It was not error to compare the accused product to a commercial embodiment of the patented invention. WCM’s Innovator Product met all of the claim limitations, and IPS did not dispute that its Classic Product also literally met all of the claim limitations. The Federal Circuit concluded that the comparisons between WCM’s Innovator Product and IPS’s Classic and Revised Products and the comparisons between IPS’s Classic and Revised Products were sufficient to establish infringement under the doctrine of equivalents. Therefore, the district court erred in granting IPS’s motion for judgment as a matter of law.

Indirect infringement. IPS appealed the district court’s denial of judgment as a matter of law that IPS’s Revised Product did not indirectly infringe. IPS’s sole argument on appeal was that it could not indirectly infringe as to this product line because the district court granted judgment as a matter of law of no infringement under the doctrine of equivalents, and WCM failed to prove any other underlying direct infringement. Because the appellate court reversed the district court’s grant of judgment as a matter of law of no infringement under the doctrine of equivalents, it affirmed the district court’s denial of judgment as a matter of law of no indirect infringement with respect to the Revised Product. In the Federal Circuit’s view, testimony supported a finding that the modified locknut functioned in the same way as IPS’s original locknut, and that both locknuts were interchangeable with WCM’s Innovator products.

Willfulness. IPS also appealed the district court’s denial of judgment as a matter of law of no willfulness. The Federal Circuit concluded that WCM provided sufficient evidence for a reasonable jury to have found that IPS’s infringement was willful. The jury was instructed on the old standard for subjective willfulness, set forth by In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007), and found that WCM proved, by clear and convincing evidence, that IPS’s infringement was willful. Before the Supreme Court’s decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the two-part Seagate test required a patentee to prove both an objective and a subjective prong to establish willfulness. The subjective prong required a showing that the risk of infringement was either known or so obvious that it should have been known to the accused infringer. Although While the Supreme Court rejected Seagate’s requirement that a patentee prove objective recklessness in every case, Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness, the Federal Circuit explained. Halo also rejected the Seagate test’s clear-and-convincing standard of proof, applying a less-demanding preponderance of the evidence standard. The district court concluded that sufficient evidence supported the jury’s verdict that WCM proved the subjective Seagate prong by clear-and-convincing evidence. WCM argued that the jury had more than enough testimonial evidence—including evidence purportedly revealing a "culture of copying" at IPS— to conclude that IPS knew of WCM’s patents as they issued (if not earlier) and that the risk of infringement was known to IPS or so obvious that it should have been known. The Federal Circuit concluded that WCM provided sufficient evidence for a reasonable jury to have found that IPS’s infringement was willful. Accordingly, it was not clear that the jury reached a "seriously erroneous result" and, therefore, the appellate court affirmed the district court’s denial of IPS’s motion for judgment as a matter of law.

Enhanced damages. Finally, IPS appealed the district court’s grant of WCM’s motion for enhanced damages and the district court’s decision to treble damages pursuant to 35 U.S.C. §284. Enhanced damages were generally reserved for egregious cases of bad-faith or otherwise wrongful behavior, the appellate court noted. Moreover, there was no requirement that enhanced damages must follow a finding of egregious misconduct. Although the district court was permitted to increase the damages award, when the maximum of treble damages were awarded, the court was obligated to explain its basis for the award. In this case, the district court provided only a single conclusory sentence as to why it was awarding the maximum amount. In addition, the court over-emphasized IPS’s failure to investigate the asserted patents, in the Federal Circuit’s view. The evidence that the court cited in support of its conclusion involved patents or products not at issue in this case. Other factors weighed against enhanced damages, such as the lack of litigation misconduct, the short duration of infringement, and IPS’s attempt to take remedial action by modifying its Classic Product. Accordingly, the Federal Circuit concluded that the district court made a clear error of judgment amounting to an abuse of discretion in deciding to award the maximum amount of damages. The appellate court therefore vacated the district court’s decision to award treble damages and remanded for the district court to reconsider, consistent with this opinion, the amount by which the damages should be enhanced, if any.

The case is Nos. 2016-2211 and 2016-2268.

Attorneys: J. Michael Jakes (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for WCM Industries Inc. David John Silvia (Locke Lord LLP) for IPS Corp. and American Brass & Aluminum Foundry Co.

Companies: WCM Industries Inc.; IPS Corp.; American Brass & Aluminum Foundry Co.

MainStory: TopStory Patent FedCirNews

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