By Brian Craig, J.D.
Following a jury trial, the court entered judgment of $5,385,843 on the patent infringement claim and but ordered a new trial on the breach of contract claim after the jury awarded $4,085,899 in unpaid royalties.
In a mixed decision following a jury trial, the federal district court in Chicago has declined to disturb the jury’s verdict on Rehco, LLC’s patent infringement claim against Spin Master over a remote-controlled toy helicopter, but ordered a new trial on the breach of contract claim for unpaid royalties. The court found that substantial evidence supported the jury verdict of patent infringement and award of $5,385,843 in damages, along with $1,555,926 in pre-judgment interest, but that the case did not qualify as an exceptional warranting an award of attorney fees. The court refused to entered judgment on the jury’s verdict of $4,085,899 in damages for unpaid royalties for a breach of contract claim based on the evidence presented at trial, and ordered a new trial on that issue (Rehco LLC v. Spin Master Ltd., November 30, 2020, Blakey, J.).
Rehco and Spin Master make remote-controlled toys, and had entered into two agreements, one regarding the development of a radio-controlled helicopter and another regarding the development of a radio-controlled airplane. In 2013, Rehco filed suit against Spin Master, alleging breach of these two agreements along with infringement of U.S. Patent Nos. 7,100,866 (the ’866 patent) and 6,612,893 (the ’893 patent). On December 19, 2019, a jury determined that Spin Master breached the helicopter agreement it executed with Rehco by failing to pay Rehco royalties on the Havoc Heli toy helicopter product, and also infringed the ’866 patent in connection with Spin Master’s sales of its Vectron Wave, Atmosphere, and Flutterbye Fairy products. The jury awarded Rehco damages in the amount of $4,085,899.20 on Rehco’s breach contract claim and $5,385,843 on the infringement claim. Both parties filed various post-trial motions. Rehco sought judgment on the breach of contract claim and infringement claim as well as enhanced damages, attorney fees, interest, costs, and royalties on products other than those tried to the jury. Spin Master sought to overturn the jury’s verdict on both the breach of contract and infringement claims, seeking judgment notwithstanding the verdict or, alternatively, a new trial, on both claims.
Breach of contract. The court concluded that the jury’s verdict on the breach of contract claim for unpaid royalties went against the manifest weight of the evidence, and the court granted a new trial on the breach of contract claim. Rehco failed at trial to submit any admissible, factual testimony to establish that the Havoc’s design constituted an "Item" as that term was understood by the parties. The court also declined to award royalties on products other than tried to the jury. Therefore, the court granted a new trial on the breach of contract claim.
Patent infringement. The court found that substantial evidence supported the jury’s infringement finding. Rehco’s expert testified that each accused product contained each limitation in the patent, as construed by the court. While Spin Master presented contrary evidence, the jury was free to accept or reject aspects of the evidence and to credit the testimony it found most credible. The court could not say that the jury’s finding ran contrary to the manifest weight of the evidence. Therefore, the court entered judgment on the patent infringement claim.
Enhanced damages. The court declined to award enhanced damages for willfulness on the patent infringement claim. Upon a finding of patent infringement, a court may increase the damages up to three times the amount found or assessed. Even when a jury returns a verdict finding willfulness, enhanced damages are not automatic. The court found that Spin Master paid Rehco millions in royalties, and the suggestion that Spin Master shirked its obligation to pay royalties to inventors was not well-supported in the evidence. The court concluded that this was a hard-fought, hotly-contested case involving factual and legal issues about which reasonable minds could differ. Neither the evidence nor the parties’ litigation conduct justified a punitive, vindictive damages award.
Attorney fees. The court also declined to award attorney fees finding that the case was not exceptional. The court recognized that the issue was significant, as the parties have been litigating the case for seven years, and any fee award would be substantial. Under the Patent Act, a district court in exceptional cases may award reasonable attorney fees to the prevailing party. Spin Master’s handling of this case—both the underlying facts and the litigation itself—counseled against enhanced damages. Spin Master did not act in bad faith. And other than the fact that it lost at trial, nothing demonstrated any exceptional culpability on Spin Master’s part.
Interest. The court awarded both prejudgment interest and post-judgment interest to Rehco, including $1,555,926 in pre-judgment interest. The court determined that Rehco’s prejudgment interest calculation started in 2010, the first full year of sales of Spin Master’s infringing products. The court rejected Spin Master’s argument that prejudgment interest should be limited to the period after Rehco filed suit.
Costs. Finally, the court concluded that Rehco was entitled to costs as a prevailing party on its patent infringement claim. The court ordered the parties to meet and confer on costs, as well as the precise pre- and post-judgment interest calculations.
This case is No. 1:13-cv-02245.
Attorneys: Timothy E. Grochocinski (Nelson Bumgardner Albritton PC) for Rehco LLC. Caroline Anne Bader (Erise IP, P.A.) for Spin Master Ltd.
Companies: Rehco LLC; Spin Master Ltd.
MainStory: TopStory Patent IllinoisNews GCNNews
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