By Mark Engstrom, J.D.
The federal district court in Milwaukee could not identify the relevant "article of manufacture" that was subject to an award of profits in a patent infringement suit by Nordock Inc., the holder of a design patent on a "lip and hinge plate for a dock leveler" that was infringed by Systems Inc. A jury found that Systems had infringed U.S. Patent No. D579,754, but the damages award was appealed to the Federal Circuit and the U.S. Supreme Court. Ultimately, the case was remanded to the district court for a new trial on damages. The district court found that the four-factor test proposed by the United States as amicus curiae in Samsung Electronics Co. v. Apple Inc., 137 S. Ct. 429 (2016), was the proper test for determining the appropriate article of manufacture in this case. Nevertheless, the court concluded that the finder of fact should identify that article. In light of the "evidentiary gap" in the record—and the "general notion" that the article of manufacture should be determined by the jury, not the court—the district court denied the parties’ cross motions for summary judgment (Nordock, Inc. v. Systems, Inc., November 21, 2017, Duffin, W.).
Nordock’s patent. Nordock held a design patent on a "lip and hinge plate for a dock leveler." When a semi-trailer backs into a loading dock, the dock leveler bridged the gap between the floor of the dock and the bed of the trailer, and thus allowed people and equipment, such as forklifts, to easily pass between the warehouse and the trailer. The "lip and hinge plate" was the part of the leveler that spanned the gap between the warehouse and the trailer.
Procedural posture. Nordock sued Systems for the patent infringement, and a jury found that Systems had infringed the Nordock patent. After concluding that Systems had no profit on the sales of its infringing dock levelers, the jury awarded Nordock a reasonable royalty of $46,825. Both parties appealed.
The Federal Circuit found that the record lacked evidence to support the jury’s conclusion that Systems did not derive any profits from the sales of its infringing dock levelers. It also found that a new trial on damages—under 35 U.S.C. §289—should be based on profits from the sales of the entire dock leveler, not merely the profits that were attributable to the lip and hinge plate.
Systems filed a petition for certiorari, which was granted by the Supreme Court. The High Court summarily reversed the Federal Circuit and remanded the case for a decision that was consistent with the Court’s 2016 opinion in Samsung. In Samsung, the Supreme Court concluded that the term "article of manufacture," as used in Section 289, encompassed "both a product sold to a consumer and a component of that product," but it did not explain how a court should identify the article of manufacture.
On remand, the Federal Circuit issued a brief opinion that returned the case to the district court for a new trial on damages. The district court had to decide how to determine the appropriate article of manufacture for the purpose of awarding damages.
Burden. Because the identification of an article of manufacture was "part and parcel to damages under §289," the district court found that the plaintiff bore the burden of persuasion with respect to the identification of the article of manufacture and the proof of the defendant’s total profits. The court also found that, once the plaintiff met its initial burden of production with respect to the article of manufacture and corresponding profits, if the defendant argued that the article of manufacture was something else, the defendant had the burden to produce evidence regarding the alternative article. In addition, the defendant had the burden to produce evidence for any appropriate deductions from the total profits that were identified by the plaintiff. That shift in the burden of production was consistent with the disgorgement of profits in other contexts, the court explained. And similar burden shifting was permitted for lost profits under Section 284.
Moreover, the defendant—as the manufacturer or seller of the accused product—had superior knowledge of the identity of the product’s components, as well as of some of the factors that were relevant to the determination of the article of manufacture, including the physical relationship between the design and product, the manner in which the product was manufactured, and the extent to which the product reflected the innovations of parties other than the plaintiff.
Method of identification. The court acknowledged that design patent holders could experience difficulty in identifying profits that were subject to disgorgement when the design was applied to an article of manufacture that was not sold independently. Nevertheless, the court rejected the notion that difficulties that a patent holder might have in identifying profits from something less than the entire product, by itself, supported the conclusion that the entire product was the article of manufacture.
The court decided that the four-factor test proposed by the United States as amicus curiae in Samsung was appropriate, consistent with the relevant statutory law, and supported by case law. The proposed test considered: (1) the scope of the design that was claimed in the patent, including the drawing and written description; (2) the relative prominence of the design within the product as a whole; (3) whether the design was conceptually distinct from the product as a whole; and (4) the physical relationship between the patented design and the rest of the product.
The court rejected the factors that were proposed by Nordock, but emphasized that the accepted factors would not always be the only factors that were relevant to an "article of manufacture" determination. Because each case presented its own problems, and because the identification of all factors that would apply in every instance might not be possible, each design patent had to be considered in context, "from all viewpoints, technical, mechanical, popular, and commercial."
The court noted that a finished product might "appear to be a unitary structure," but if it were considered in light of how the product was manufactured, it might be recognized as a collection of components. Or vice versa. Ultimately, facts relating to the manufacturing process might be relevant—in a myriad of ways—to the requisite identification of the article of manufacture, and for that reason, the court concluded that "how" a product was manufactured merited "explicit consideration" as a factor, when attempting to determine the relevant article of manufacture.
Identification. According to Nordock’s CEO, the patented design was unique because it combined an "open lug hinge" with a "header plate." In addition, the patent clearly stated that the claimed lip and hinge plate was "for a dock leveler," the patent partially depicted the leveler, and the evidence did not indicate that Systems had ever sold an infringing dock leveler without a lip and hinge plate. Finally, because the lip and hinge plate was welded to the dock leveler, the repair or replacement of those components would be difficult or impractical without replacing the leveler.
The court acknowledged that the patented components were welded to the dock leveler and were not readily severable from the leveler. But it also found that the lip and hinge plate were conceptually distinct from the dock leveler. Significantly, Nordock’s CEO had testified that the dock leveler had three main components—the lower portion, or frame; the deck or platform; and the "front top section" or "lip assembly"—and all of those components had to function together for the dock leveler to perform its intended purpose.
Nevertheless, the leveler’s attributes did not indicate that the leveler was not a system of conceptually distinct components—like the components of an automobile, which were distinct, but which worked together to achieve the vehicle’s intended function. Significantly, the design element in the instant case was relevant "only to the lip and hinge plate"; it had "no relevance to any other component of the dock leveler."
The distinction between the lip and hinge plate and the rest of the dock leveler was evident, the court explained, because the design patent depicted only the lip and hinge plate. It did depict a fragment of the dock leveler, but only in the form of broken lines, and only to show the lip and hinge plate in context. The patent expressly stated that the broken lines represented an "environmental structure" that showed the claim "in a condition of use." According to the patent, the structure formed "no part of the claimed design."
With respect to "how" the object was manufactured, the court found no evidence regarding the manufacturing methods of Systems. However, Nordock welded and painted each component before assembling the dock leveler, so the court had reason to suspect that a Systems leveler was manufactured in a similar manner. Nevertheless, the court refused to grant summary judgment based on the assumption that the manufacturing methods of Systems were the same as those of Nordock.
Because the court was unable to identify the article of manufacture, the identification issue would be resolved by the finder of fact. Summary judgment was denied to both parties.
The case is No. 11-CV-118.
Attorneys: Jeffrey S. Sokol (Sokol Law Office) for Nordock Inc. Philip P. Mann (Mann Law Group) for Systems Inc., d/b/a Poweramp, d/b/a DLM Inc., d/b/a McGuire.
Companies: Nordock Inc.; Systems Inc., d/b/a Poweramp, d/b/a DLM Inc., d/b/a McGuire
MainStory: TopStory Patent WisconsinNews
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