IP Law Daily Jury award upheld in high voltage transformer patent infringement suit
Thursday, December 29, 2016

Jury award upheld in high voltage transformer patent infringement suit

By Linda O’Brien, J.D., LL.M.

In an action against a South Korea medical equipment manufacturer for infringement of a Spanish company’s U.S. patent for a high voltage transformer, a jury’s award of damages that was higher than minimum royalty rate calculated by the complaining x-ray equipment company’s expert was supported by substantial evidence at trial, the federal district court in Asheville, North Carolina has ruled. However, the plaintiff was not entitled to enhanced damages or attorney fees (Sociedad Espanola de Electromedicina y Calidad, S.A. v. Blue Ridge X-Ray Co., Inc., December 28, 2016, Reidinger, M.).

Sociedad Espanola de Electromedicina y Calidad, S.A. (Sedecal) is a Spanish corporation that designs and sells X-ray and digital radiography equipment for use in the medical industry. Sedecal owns U.S. Patent No. 6,642,829 (the ’829 Patent), for a "High voltage transformer."

Sedecal filed suit against South Korea-based DRGEM Corp., its U.S. subsidiary, DRGEM USA (collectively, DRGEM), and North Carolina-based medical equipment seller Blue Ridge X-Ray Company, Inc. (Blue Ridge)—manufactured, sold, and exported or imported for sale DRGEM X-ray generator products, alleging that they infringed the ’829 Patent. The defendants counterclaimed for a declaration of non-infringement and invalidity. In September 2014, the court held that the ’829 Patent was invalid and consequently non-infringed. However, the Federal Circuit reversed, finding that the court’s claim construction was erroneous.

Following a trial in January 2016, the jury returned a verdict finding that the defendants had infringed the ’829 Patent. Following a second trial, the same jury awarded Sedecal a total of $852,000 in damages against all three defendants and further found DRGEM USA, Inc. and DRGEM Corporation’s infringement to have been willful. In July 2016, the jury verdict was upheld by the district court. Before the court were the defendants’ motion for judgment as a matter of law on damages and the plaintiff’s motion for enhanced damages and attorney fees.

Judgment as a matter of law. The court found that the evidence supported the jury’s award of a significantly higher reasonable royalty rate than the minimum baseline rate calculated by the plaintiff’s expert. The jury was entitled to calculate an amount they believed would compensate the plaintiff for the defendants’ infringement. Sedecal presented significant evidence to the jury regarding any royalties its received for licensing the patent-at-issue, the rates the defendants paid to license comparable patents, the nature and scope of the hypothetical license, the nature of the patented invention, and the extent to which the defendants made use of the invention, as well as evidence that Sedecal had a policy of never licensing the ’829 Patent technology. Thus, there was substantial evidence to support the jury’s calculation of Sedecal’s damages and the defendants’ motion was denied.

Enhanced damages. The court also declined to award Sedecal enhanced damages in the light of the particular circumstances of the case. Despite the jury’s finding of willfulness, the court has discretion to decide whether to award enhanced damages and should keep in mind that enhanced damages are designed to punish "egregious infringement behavior." While Sedecal produced evidence at trial that DRGEM knowingly and intentionally copied its transformer design, the defendants presented evidence that they conducted a reasonable investigation of Sedecal’s patent claims and made a good faith determination that the patent was not infringed by their activities and likely invalid.

After the Federal Circuit reversed the district court’s claim construction, DRGEM altered its design and ceased importing the accused product into the United States. Although the defendants’ defenses of non-infringement and invalidity were ultimately rejected by the jury, they were not meritless, in the court’s view. Further, Sedecal recovered significant damages for the defendants’ conduct and it has been adequately compensated for the defendants’ infringement.

Attorney fees. Further, Sedecal failed to prove that its claimed fees, which were in excess of $2 million, were reasonable, the court determined. The burden was on the fee applicant to justify the reasonableness of the requested fee. The only evidence presented was the affidavit of its lead counsel. The affidavit was inadequate to support the request since it failed to (1) specify the specific work performed or hourly rate claimed for each task, (2) identify which attorneys or paralegals performed which tasks or the time spent performing specific tasks, and (3) or explain why the requested rates were reasonable.

Even if Sedecal presented evidence to support its request, the court noted, the case was not an "exceptional" case within the meaning of the Patent Act. While the jury found willful infringement, the defendants presented reasonable, legitimate defenses to Sedecal’s claim of infringement. None of the defendants’ actions during the course of the litigation rose to the level of misconduct to warrant the imposition of attorney fees.

The case is No. 1:10-cv-00159-MR.

Attorneys: Sociedad Espanola de Electromedicina y Calidad, S.A; Blue Ridge X-Ray Co., Inc.; DRGEM USA, Inc.; DRGEM Corp.

Companies: Larry S. McDevitt (The Van Winkle Law Firm) and Tanvi Patel (Neal, Gerber & Eisenberg LLP) for Sociedad Espanola de Electromedicina y Calidad, S.A. Brady James Fulton (Northup McConnell & Sizemore, PLLC) for Blue Ridge X-Ray Co., Inc., DRGEM USA, Inc., and DRGEM Corp.

MainStory: TopStory Patent NorthCarolinaNews

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