IP Law Daily Infringement verdict, enhanced damages survive appeal in suit over exhaust systems for houseboat generators
Tuesday, July 19, 2016

Infringement verdict, enhanced damages survive appeal in suit over exhaust systems for houseboat generators

By Robert Margolis, J.D.

An infringement verdict against Kohler Co., which violated the patent rights of WBIP LLC by selling houseboat generators that infringed WBIP’s patents on low-carbon-monoxide exhaust systems, was supported by substantial evidence, the U.S. Court of Appeals for the Federal Circuit has held. In addition to affirming the judgment of infringement, the Federal Circuit affirmed the district court’s finding that WBIP was entitled to enhanced damages and attorney fees for willful infringement. The appellate court reversed and remanded the lower court’s denial of a permanent injunction to WBIP (WBIP, LLC v. Kohler Co., July 19, 2016, Moore, K.).

Westerbeke Corporation (the assignor, to WBIP, of the patents in suit) and Kohler are competitors who manufacture and sell marine generators for houseboats. WBIP owns the patents in suit—U.S. Patent Nos. 7,314,044 ("the ‘044 patent") and 7,832,196 ("the ‘196 patent")—which cover marine engine exhaust systems that are designed to reduce carbon monoxide (CO) emissions. Westerbeke introduced generators that incorporated the two patents (the "Safe-CO generators") at a boat show in 2004, where two Kohler employees had asked Westerbeke questions about how they worked. About a year later, Kohler launched its own low CO generators. The ‘044 and ‘196 patents were issued in 2008 and 2010, respectively. In 2011, WBIP sued Kohler for patent infringement.

After a six-day trial, a jury found that Kohler had infringed the WBIP patents. The jury rejected Kohler’s invalidity defenses of obviousness and lack of written description, awarded WBIP $9,641,206, and set a reasonable royalty rate. The district court then: (1) denied Kohler’s renewed motion for judgment as a matter of law on its defenses; (2) held that WPIB was entitled to enhanced damages and attorney fees because Kohler’s infringement was willful; (3) granted Kohler remittitur, reducing the damages to $3,775,418; and (4) denied WBIP’s motion for a permanent injunction. Both parties appealed portions of the district court’s judgment.

Obviousness. Calling obviousness a "question of law based on underlying facts," the appellate court examined the record to determine if substantial evidence supported the jury’s findings that the patents were not obvious. The court found that it did.

Kohler made two main obviousness arguments. First, it argued that that the district court had erred when it failed to grant Kohler judgment as a matter of law. According to Kohler, the asserted claims of the patents in suit would have been obvious in light of a prior patent (the "Phipps patent") and standard elements that would have been known to an ordinarily skilled artisan. Second, Kohler contended that: (1) WBIP’s objective evidence of non-obviousness could not overcome the evidence based on the Phipps patent and (2) WBIP failed to establish the required nexus between the objective evidence of non-obviousness and the Safe-CO generators.

As to first argument, the appellate court examined conflicting evidence of whether a person of skill in the art would have been motivated to convert the Phipps patent, which related to a land-based system, into marine engines. After weighing conflicting expert testimony and other evidence, the appellate court found sufficient evidence to support a jury finding that no such motivation existed, which supported non-obviousness.

Next, the appellate court looked at objective indicia of non-obviousness. Kohler first argued that the evidence of the objective indicia should not be considered because there was no nexus between that evidence and the merits of the claimed invention. However, there is a rebuttable presumption of that nexus when the objective evidence is tied to a specific product and that product is the invention that is disclosed and claimed in the patent.

The appellate court then analyzed five types of evidence of non-obviousness that WBIP had presented at trial—(1) long-felt need; (2) praise; (3) skepticism; (4) Kohler’s copying of the Safe-CO generators; and (5) commercial success—and found "substantial evidence for the jury’s fact findings as to each," which "collectively support the jury’s verdict." This evidence supported WBIP’s nexus presumption, as it showed the Safe-CO generators "are embodiments of the claimed invention" and "the proffered objective evidence relates" to them.

The appellate court also rejected Kohler’s legal argument that objective evidence must be tied exclusively to the claim elements that were not disclosed in prior art, holding that the obviousness of the claimed invention as a whole needed to be shown.

Written description. The appellate court declined to consider one of Kohler’s arguments on lack of written description that was not presented to the jury. Based only on what was presented to the jury, the appellate court found sufficient evidence to support the rejection of this invalidity defense.

Willful infringement and enhanced damages. At the time of trial, proof of willful infringement required "clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent" and that the objective risk "was either known or so obvious that it should have been known." In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). The jury found that WBIP’s evidence met that standard. In Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the Supreme Court decided that enhanced damages should be review under an "abuse of discretion" standard. Halo further noted that Seagate’s injection of an objective element into the test for willful infringement was "unduly rigid" and impermissibly encumbered the district court’s discretion.

Because Kohler’s first argument for reversal was based on the argument that its defenses were objectively reasonable, the appellate court dismissed it as not pertinent under Halo, which expressly rejected the requirement that objective recklessness be found in every case. Halo also establishes that the appropriate time to consider an infringer’s culpability is at the time of the infringement, so that defenses later constructed for litigation should not be considered. Because Kohler conceded that its obviousness defenses were created during litigation, those defenses could not be considered under Halo and thus provided no basis for reversal.

Kohler’s second argument was that it did not know of the patents at the time of the infringement, but the appellate court found that there was substantial evidence that it did. Finally, the appellate court held that the district court did not abuse its discretion by deciding not to treble damages, but to enhance damages by 50 percent.

Injunction. The district court denied WBIP’s permanent injunction request because it concluded that the public interest would not be served, since Kohler was a much larger producer of low-carbon emission generators, and the public would be deprived of access to a potentially life-saving product if Kohler were enjoined. The district court did not consider any other injunction factors. The appellate court found this analysis "sufficiently flawed to constitute an abuse of discretion," vacated the judgment, and remanded the case to the district court for consideration of all relevant injunction factors.

The case is Nos. 2015-1038 and 2015-1044.

Attorneys: David Andrew Simons, Andrea B. Reed, and Michael E. Zeliger (K&L Gates LLP) for WBIP, LLC. E. Joshua Rosenkranz, Rachel Wainer Apter, Brian Philip Goldman, Katherine M. Kopp, T. Vann Pearce Jr., and Eric Shumsky (Orrick, Herrington & Sutcliffe, LLP) and Steven M. Bauer, William David Dalsen, and Safraz Ishmael (Proskauer Rose LLP) for Kohler Co.

Companies: Kohler Co.; WBIP, LLC; Westerbeke Corp.

MainStory: TopStory Patent FedCirNews

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