U.S. Court of Appeals, Federal Circuit
October 30, 1998
APTARGROUP, INC., PLAINTIFF/CROSS-APPELLANT,
SUMMIT PACKAGING SYSTEMS, INC., DEFENDANT/APPELLANT.
Before Rich, Bryson, and Gajarsa, Circuit Judges.
The opinion of the court was delivered by: Rich, Circuit Judge.
Summit Packaging Systems, Inc. (Summit) appeals from the judgment of the United States District Court for the Northern District of Illinois, 94-CV-2304, finding Summit was infringing six claims of AptarGroup, Inc.'s (Aptar) U.S. Patent No. 4,792,067 (the '067 patent). The patent is generally directed to mounting cups used in the manufacture of aerosol cans.
The district court held inter alia that: (1) Summit infringed the '067 patent, both literally and under the doctrine of equivalents; (2) Summit's infringement was willful; (3) Summit owed a reasonable royalty of $.75 per thousand mounting cups; (4) Aptar was not entitled to lost profits; and (5) Aptar was not entitled to attorney fees. Summit appeals the holdings on infringement and willfulness, and challenges the reasonable royalty calculation. Aptar cross-appeals the holdings denying it lost profits and attorney fees. We affirm.
Summit and Aptar are both in the business of wholesaling aerosol valve assemblies for aerosol containers. An aerosol container holds a product under pressure. The container is generally constructed by assembling two parts: a can and a valve assembly. The valve assembly is generally comprised of a button or actuator, a valve and a mounting cup. Depressing a button or actuator at the top of the aerosol container serves to open the valve to release the product from the can. The mounting cup serves to cap the can and maintain the contents under pressure. The mounting cup is affixed to the can by way of a "roll" at the edge of the mounting cup, placed over a bead at the top of the can and then the mounting cup is crimped into place. The mounting cup is the component of the valve assembly at issue on appeal.
In the prior art there was a space between the cup and the bead which was filled with an injection of rubber to create a seal. As technology advanced, a laminated mounting cup covered with a plastic sealing material was developed, specifically designed to eliminate the rubber sealant step of the assembly process. However, with the old design, the bead and the roll did not have to fit together very snugly because the rubber sealant was very forgiving. With the new laminate material, the bead and the cup had to be counter-shaped to fit together snugly to avoid leaks. The `067 patent teaches altering the shape of a particular region of the mounting cup in such a way that when the mounting cup is crimped onto the annular bead, a superior seal is formed between the mounting cup and the bead.
Summit began producing a mounting cup of a laminate material. Unfortunately, they had problems with the new mounting cup leaking. They did a study of the various manufacturers' bead specifications in an attempt to solve this problem. The team studying the problem noted that the inner surface contour of a typical bead is usually flattened. Summit reshaped the inner region contour of its cup such that it was slightly flattened to match the bead. Mounting cups with this configuration were known as Digital Cups. After several years Summit re-engineered its Digital Cup to eliminate a 0.003 inch space between the cup and the can bead. It called the new mounting cup the Diamond Digital Cup. Aptar alleges that the Diamond Digital Cup infringes the '067 patent.
Aptar is the assignee of the '067 patent, entitled "Mounting Cup" and issued December 20, 1988. The patent is generally directed to the mounting cup portion of the valve assembly, designed to be crimped onto the top of an aerosol can. The claimed invention of the `067 patent provides an improved seal between the cup and the can by using a cup rim shape that is "substantially different" from the contour of the annular bead, but that conforms to the shape of the annular bead when crimped. Figures 5 and 8 are representative of the claimed invention. Figure 5 shows the mounting cup before it is placed on the aerosol can.
The improved inner region contour (41A) of the mounting cup is flattened so that the interior space (43A) has a substantially different shape than the annular bead (not shown in Figure 5). When the mounting cup is placed over the annular bead, the flattened inner region contour (41A) inhibits the complete reception of the annular bead into the interior space (43A).
Figure 8 shows a completed aerosol device, a fragment of the can being shown at 40 with an annular bead (44) to which the mounting cup is crimped.
The six claims at issue on appeal are 1, 4, 7, 10, 15, and 17. Claim 1 is representative:
"1. An improved mounting cup for sealing with a container of an aerosol dispensing device, the container having an annular bead extending about an opening in the container with the annular bead having an inner surface contour, comprising in combination:"
"a metallic mounting cup comprising a central area, a sidewall and a peripheral rim with said sidewall interconnecting said central area and said peripheral rim; said peripheral rim having an inner region contour being substantially different from the inner surface contour of the annular bead of the container for allowing only a portion of said inner region contour of said peripheral rim to contact the inner surface contour of the annular bead when said mounting cup is disposed upon the container; said inner region contour of said peripheral rim being deformed when said mounting cup is crimped to the annular bead of the container to reform said inner region contour of said peripheral rim to be substantially the same as the inner surface contour of the annular bead to provide a seal engagement between said mounting cup and the container; and said crimping of said mounting cup to the annular bead of the container being accomplished solely by an outward radial expansion of said sidewall of said mounting cup to reform said inner region contour of said peripheral rim to be substantially the same as the inner surface contour of the annular bead to provide said sealing engagement between said mounting cup and the container."
Aptar filed an action against Summit alleging patent infringement. A jury trial ensued. The jury failed to reach a verdict on the `067 patent infringement liability issues. The parties submitted the liability issues to the court on the existing record. The court heard evidence relating to damages. The court found damages based on royalty damages of $0.75 per thousand devices ($3.9 million). It found willfulness and doubled damages to approximately $7.8 million. It later awarded pre-judgment interest of approximately $762,000. The court declined to award attorney fees or lost profits to Aptar. This appeal and cross-appeal followed.
A literal infringement determination involves two steps. First, we determine the scope of the right to exclude by determining the metes and bounds of the claim and, second, the properly construed claim is compared with the accused device to determine whether all of the claim limitations are present. Young Dental Mfg. Co. v. Q3 Special Prods., Inc., 112 F.3d 1137, 1141, 42 USPQ2d 1589, 1592 (Fed. Cir. 1997).
We review a district court's judgment for errors of law and clearly erroneous findings of fact. Fed. R. Civ. P. 52(a). Claim construction is a question of law, which we review de novo. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976, 34 USPQ2d 1321, 1326 (Fed. Cir. 1995) (in banc), aff'd, 517 U.S. 370 (1996); Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1456, 46 USPQ2d 1169, 1174 (Fed. Cir. 1998) (in banc) ("[W]e review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction."). Whether a properly construed claim reads on an accused device is a question of fact.
A. Claim Construction
When construing a claim, a court should first look to the plain language of the claims and then consult the evidence intrinsic to the patent, namely the written description and the prosecution history. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582-83, 39 USPQ2d 1573, 1576-77 (Fed. Cir. 1996). At issue in this case is the construction of the phrases "annular bead" and "substantially different."
The district court concluded that the claims were "plain and unambiguous, in light of the specification, drawings, and prosecution history of the patent", and, further, that "the parties did not submit evidence to dispute the meaning of any claim terms." The court also stated that "further claim construction beyond that stated in this court's summary judgment opinion is not required." In the summary judgment opinion, the court stated that:
"The key feature of the `067 patent is that the inner region contour of the mounting cup peripheral rim is different in shape from the annular bead of the aerosol container. During crimping, the peripheral rim's inner contour is deformed and reformed to match the shape of the annular bead of the container. . . . The parties agree that the inner region contour is defined as "the region of the curl of the mounting cup between the apex and the `three o'clock' position of the uncrimped cup.""
Contrary to Summit's position, the court did not overlook claim construction, it merely focused in on the characteristics relevant to infringement; the two determinations are inextricably intertwined.
We conclude that the district court properly determined, based on the claim language, the written description, and the prosecution history, that the claims require a mounting cup that "exhibits a flattening in the inner region contour, an area depicted as between 12 o'clock and 3 o'clock in Figures 4-11 of the `067 patent," wherein the "flattening extends substantially into the semi-circular region defined by the peripheral rim of conventional prior art mounting cups illustrated in Figures 1-3 of the `067 patent." The district court also concluded that the claimed cup must "not match the bead in that location before crimping . . . [and that the cup] when placed on can beads, does not fully seat on the can bead before crimping, but rather rests on the can bead in a manner resulting in a gap between the apex of the mounting cup and the apex of the can bead." In sum, the district court interpreted the claim to require a "flattening" sufficient to prevent the rim from properly seating on the annular bead, and creating a gap between the rim apex and the bead apex.
Not surprisingly, Aptar advocates this interpretation. Summit argues that this interpretation is in error because it fails to construe the requirement that the inner region contour be "substantially different" from the can beads, and instead relies solely on a "gap test", i.e., a gap existing between the apex of the mounting cup and the apex of the can bead. According to Summit, a proper interpretation must identify "how different a mounting cup inner region contour must be from a bead contour to meet the requirement that it be `substantially different.'" We disagree. The district court determined this issue when it deemed that the flattening must merely be sufficient to prevent the rim from properly seating.
Summit further contends that the written description acknowledges that prior art mounting cups and can beads have "nominal variations" which are within quality control limits. Therefore, Summit contends that the term "substantially" should be limited to gaps that are much greater than the differences attributable to nominal manufacturing variations. However, the claims require that the shape of the inner surface contour be substantially different at a particular point (the inner region of the rim), intentionally creating a gap at a particular point (between the bead apex and the rim apex). That the prior art occasionally exhibited deviations at different places along the rim due to uncontrollable manufacturing effects does not require that the claims be limited to an intentional deviation at a particular point that extends further than any prior art unintentional deviation.
Further, none of the prior art "tolerance ranges" pointed to by Summit concern the size of gaps between the apex of the annular bead and the apex of the peripheral rim as required by the claims. Summit's data merely addresses variations in the inside and outside diameters of the beads and, according to Summit, "bead height." Summit's argument requires drawing numerous inferences from this data, such as the size of gaps between the bead apex and peripheral rim apex in the prior art. There is no evidence that the prior art exhibited deviations only at the "inner contour region" of the peripheral rim sufficient to cause a gap between the apex of the bead and the apex of the rim.
Finally, Summit argues that the term "can bead" is indefinite. It argues that the claims refer to mounting cups that are mounted on a particular can bead and that can bead is not specifically described in the claims. Hence, it is impossible to determine whether Summit's accused cups infringe. However, the claims require an "annular bead extending about an opening in the container" having an "inner surface contour" or having a "partially circular cross-section defining a bead radius of curvature." The district court found that "guidelines published by the can manufacturers' industry typically illustrate can beads as circular, but size and configuration variations arise in production causing can beads to deviate in size and circularity within manufacturing tolerances."
The district court also found, based on cans "collected randomly," that Summit's accused cup "does not match the bead in that location before crimping." The district court noted that Aptar introduced evidence including "various can beads," including an image of Summit's accused product overlaid on a circular can bead that was illustrated in the `067 patent, can bead images obtained from Summit, can beads obtained from Summit's own customers, and actual cans "from the field." In view of the claims, the written description, and the fact that actual can beads were obtained from Summit's own customers, Summit cannot legitimately complain that the district court failed to address the term "can beads." We find no claim references to can beads to be indefinite. Mere breadth of a claim limitation is not indefiniteness if it is understandable.
B. Comparison of Accused Devices to Claims
Summit argues that district court clearly erred in concluding that its Diamond Digital cups infringe because (1) the inner contour region of its Diamond Digital cup does not deviate by more than accepted industry tolerances from the "ideal" shape (i.e., a perfectly circular rim shape); (2) the court improperly applied a "gap test" for infringement which ignored the word "substantially" in the claims; (3) at least one Diamond Digital cup conforms nearly perfectly to at least one can bead that was undisputably within industry standards hence it could not be "substantially different;" (4) the court compared the accused device to Figure 9 of the '067 patent instead of to the claims; (5) Figure 7 of the '067 illustrates that "close proximity" includes gaps of the size found in the Diamond Digital cup; and, (6) that the court misapplied the "doctrine of imperfect infringement." See Paper Converting Mach. Co. v. Magna Graphics Corp., 745 F.2d 11, 20, 223 USPQ 591, 587 (Fed. Cir. 1984). We see no merit to any of these arguments. The first three arguments are dealt with above in the context of the claim construction Discussion.
The argument that the court compared the accused device to Figure 9 and that figure was surreptitiously modified during the course of prosecution appears to be baseless. The district court, although citing to Figure 9, properly analyzed the allegedly infringing devices in view of the claims. Summit has failed to identify any discrepancy in Figure 9 and fails to convincingly explain how such a discrepancy, if any, would have any bearing on an infringement analysis.
Similarly we find that the argument that Figure 7 illustrates "close proximity" and yet contains a gap is disingenuous. Summit has provided us with a greatly magnified version of a small portion of Figure 7. Reference to the original does not evidence a similar gap. This appears to be an unwarranted inference.
Finally, the argument that the district court improperly applied the "doctrine of imperfect infringement" is baseless in light of the weight of evidence that Summit made or sold devices that infringed the claimed invention. Aptar presented evidence showing that the Diamond Digital cups made by Summit included the claimed "substantially different" shape in its inner region contour that prevents the rim from fully seating on the can bead before crimping. Under our claim interpretation, the following evidence provides a sufficient basis for a finding of infringement: (1) the admission by Summit's vice president, Mr. Coerver, that the Diamond Digital design represented a "flattening [of] the curve"; particularly at "the 2:00 o'clock position" of the contour; (2) evidence that Summit's manufacturing die for the Diamond Digital was modified to flatten its curve at a particular point; (3) expert testimony that the inner region contour of the Diamond Digital design extends into the semi-circular peripheral rim; (4) expert testimony comparing Summit's own Diamond Digital design drawings with the circular beads shown in the `067 patent, showing that the accused cup does not seat on the can bead, creating a gap between the rim and bead apices; (5) expert testimony and computer analysis showing how the accused cup fails to seat on other non-circular beads, including can bead drawings prepared by Summit itself; (6) Summit's own quality control data showing that the products that Summit manufactured conformed to its design drawings; (7) actual Digital Diamond mounting cup samples obtained from various Summit customers, which Aptar's expert analyzed under a microscope to establish that they matched Summit's own drawings and then placed them on various can beads to established infringement; and (8) additional Digital Diamond samples were potted and cross-sectioned after crimping, which established that the accused cups deformed at the inner region contour as a result of the crimping.
Summit's contention that there was a "deficiency of proof" in light of all the evidence is not convincing. Aptar relied not only on actual samples, but also showed that Summit's own tooling dies were set up for infringement and introduced quality control data showing that Summit actually produced devices according to its infringing design.
Finally, we acknowledge that the district court may have failed to state its basis for finding infringement under the doctrine of equivalents. However, because we are affirming the court's ruling on literal infringement this renders any such error harmless.
The district court's finding that infringement was willful is one of fact, and subject to the "clearly erroneous" standard of review. See, e.g., SRI Int'l v. Advanced Tech. Labs., 127 F.3d 1462, 1465, 44 USPQ2d 1422, 1424 (Fed. Cir. 1997). "A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948); see also SmithKline Diagnostics, Inc. v. Helena Lab. Corp., 926 F.2d 1161, 1164, 17 USPQ2d 1922, 1925 (Fed. Cir. 1991). After careful review of the record, we hold that the district court did not clearly err in finding willful infringement.
35 U.S.C. § 284 (1994) authorizes a court to "increase the damages up to three times the amount found or assessed." The statute does not outline the standard for such increase; the statute merely serves to recognize the public interest in a stable patent right by enhancing damages to punish culpable conduct. See, e.g., Beatrice Foods Co. v. New England Printing and Lith. Co., 923 F.2d 1576, 1580, 17 USPQ2d 1553, 1556 (Fed. Cir. 1991) (enhanced damages are a penalty for culpable conduct).
The primary consideration in determining "willful infringement," is whether the infringer, acting in good faith and upon due inquiry, had sound reason to believe that it had the right to act in the manner that was found to be infringing. SRI Int'l., 127 F.3d at 1465, 44 USPQ2d at 1424. "The law of willful infringement does not search for minimally tolerable behavior, but requires prudent, and ethical, legal and commercial actions. Thus precedent displays the consistent theme of whether a prudent person would have had sound reason to believe that the patent was not infringed or was invalid or unenforceable, and would be so held if litigated." Id. (citations omitted).
The court may determine willfulness based on the totality of the circumstances. Id. at 1466. This determination may include not only such aspects as the closeness or complexity of the legal and factual questions presented, but also commercial factors that may have affected the infringer's actions. Aspects in mitigation, such as whether there was independent invention or attempts to design around and avoid the patent or any other factors tending to show good faith, should be taken into account and given appropriate weight. Id.
Summit argues that the district court erred in finding willful infringement because it ostensibly based its willfulness determination on irrelevant facts, an improperly drawn "adverse inference" and a clearly erroneous transposition of testimony. Specifically, Summit argues that the court erred because (1) it relied on the fact that Summit adopted the trademark "TaperLock", which was intended to be confusingly similar to Aptar's "TaperSeal" mark; (2) it incorrectly concluded that Summit had concealed the development of the Diamond Digital cup; (3) it incorrectly concluded that Summit had studied Aptar's design and the '067 patent "at the time of the design of the Diamond Digital cup;" (4) it incorrectly relied on the testimony that "Mr. Coerver testified that he informed Mr. Gilroy [president of Summit] of Summit's Diamond Digital design effort, and of the possibility that the design would infringe the '067 patent"; (5) it improperly inferred that Mr. Gilroy "routinely sought advice" from counsel regarding infringement issues; and, finally, (6) it erred by drawing an "adverse inference" based on the nondisclosure of a prior infringement opinion concerning the Digital mounting cup.
While Summit may be correct that it adopted its "TaperLock" mark "years before the Diamond Digital mounting cups, and years before the `067 patent issued," the timing of the adoption of the mark is not entirely relevant to the inference the court drew from its existence. Summit does not contend that it actually used its mark before Aptar was using the TaperSeal mark. The mere fact that Summit adopted the "TaperLock" mark would tend to show knowledge about the competitor's product line and an intention to compete for the same customers with similar products.
Second, Summit contends that the district court erroneously found that Summit had concealed the development of the Diamond Digital cups from its customers. Summit cites to various points in the record where it maintains that its customers were given this information. However, a close review of the record does not disclose any mention of the redesign of the "Diamond Digital" cups in these documents.
Third, Summit asserts that the district court erred in concluding that Summit studied Aptar's design and the `067 patent "at the time of the design of the Diamond Digital cup". This argument is also without merit. Summit's own brief , admits that "[w]hen Summit later made the Diamond Digital design, Summit's executive vice-president Mr. Coerver, who believed he understood the `067 patent, reviewed it again." It was undisputed that Summit studied both the `067 patent and Aptar's design prior to designing the Diamond Digital mounting cup. Moreover, the district court specifically found that "[t]here was no credible evidence that Summit arrived at the Diamond Digital design by independent efforts. The evidence supports a clear inference of copying."
Fourth, Summit contends that the district court erred when it stated that "Mr. Coerver testified that he informed Mr. Gilroy [president of Summit] of Summit's Diamond Digital design effort, and of the possibility that the design would infringe the `067 patent." That argument has no substance, because the evidence clearly showed that both men were aware of the patent and that, according to Coerver, "what [they] were making" did not infringe the patent. The fact that Summit had previously obtained an infringement opinion for its Digital mounting cups but failed to obtain an opinion for its Diamond Digital cups suggests that it knew of potential infringement risks.
Fifth, Summit contends that the district court erred by inferring that Mr. Gilroy "routinely sought advice" from counsel regarding infringement issues. This mischaracterizes the district court's position, however, which merely noted that when notified by Aptar in 1989 regarding the `067 patent, Summit obtained an infringement opinion for its Digital mounting cup that it was then making, but that when it modified its design thereafter, Summit inexplicably failed to obtain an updated infringement opinion. This court has held that "the duty of care normally requires that a potential infringer obtain competent legal advice before infringing or continuing to infringe." See Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418, 1428, 8 USPQ2d 1323, 1332 (Fed. Cir. 1988). See also id. ("Although failure to obtain legal advice is not determinative, it is one of the factors supporting a finding of willfulness.") The district court properly relied on the fact that Summit was sophisticated enough to obtain an opinion for the predecessor Digital cup yet inexplicably failed to do so for the "improved" cup. Summit has not provided any evidence showing why it reasonably believed that it did not infringe or that the patent was invalid.
Finally, Summit contends that the district court erred by drawing an "adverse inference" based on the non-disclosure of a prior infringement opinion concerning the (non-infringing) Digital mounting cup. We have previously stated that "[a] factor to be considered [in willfulness] is whether the adJudged infringer relied on legal advice." SRI Int'l v. Advanced Tech. Labs, 127 F.3d 1462, 1465, 44 USPQ2d 1422, 1424 (Fed. Cir. 1997). Any error in the district court's characterization of the previous opinion is harmless because Summit still failed to provide any good faith basis for believing that the Diamond Digital mounting cups did not infringe the patent. The lack of an opinion regarding the modified device is probative as to the issue of willfulness.
We review a district court's calculation of damages for errors of law, clearly erroneous factual findings, or clear error in judgment that amounts to an abuse of discretion. Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1543, 35 USPQ2d 1065, 1067-68 (Fed. Cir. 1995). The Patent Act provides compensation for the violation of a patentee's right to exclude others from making, using, or selling the patented invention, see 35 U.S.C. § 284 (1994), whether or not the patentee manufactures or sells products embodying its patented invention. Where the patentee is unable to establish lost profits, the district court may fix damages on what it finds to be a reasonable royalty for the infringer's sales. Rite-Hite, 56 F.3d at 1554, 35 USPQ2d at 1076-77. Where the record does not show an established royalty, the district court may calculate a reasonable royalty based on "evidence about hypothetical results of hypothetical negotiations between the patentee and infringer (both hypothetically willing)". Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1579, 38 USPQ2d 1288, 1292 (Fed. Cir. 1996). In this case, the district court opted to find reasonable royalties.
In cases where awarding damages based on a reasonable royalty does not adequately compensate the patentee, it is also within the district court's discretion to award damages that exceed a reasonable royalty. King Instruments Corp. v. Perego, 65 F.3d 941, 951 n.2, 36 USPQ2d 1129, 1145 n.2 (Fed. Cir. 1995) ("Congress set the reasonable royalty as the floor, not the ceiling of damages for infringement"). As long as the royalty base and royalty rate together are reasonably related to the infringement and not so high as to be unsupportable as an estimation of a reasonable royalty, we will not invade the court's discretion. See, e.g., Mahurkar, 79 F.3d at 1579, 38 USPQ2d at 1293; King Instruments, 65 F.3d at 945, 36 USPQ2d at 1131.
A. Reasonable Royalty Rate
Summit contends that the district court abused its discretion by setting a reasonable royalty rate of $0.75 per thousand units. Summit argues that the district court (1) rested its royalty determination on clearly erroneous findings of fact about Aptar's actual licenses and (2) failed to consider all of the Georgia-Pacific factors.
First, Summit contends that the district court clearly erred in assuming that Aptar was not willing to license competitors when in decided on a royalty rate. However, our review of the court's opinion does not disclose such an "assumption." The court merely noted that Summit was a much bigger competitor of Aptar's and thus Aptar would have likely demanded a higher royalty rate from Summit than the established $0.50 rate that it demanded of other companies that were less of a threat.
Second, Summit argues that the court erred by improperly ignoring another license under the '067 patent on the ground that it did not specify a royalty rate. However, Aptar points out that the license in question was not entered into until long after the time of the hypothetical negotiation in July 1990, and thus is not relevant to such hypothetical negotiations. Consequently, any error in that respect is entirely harmless. Aptar also points out that the license in question included cross-licenses and was the result of a settlement against Aptar, also rendering suspect any royalty rates under that license. The district court thus properly considered existing royalty rates (e.g., Cap & Seal's $0.50 per thousand) as one factor in setting a reasonable rate.
Third, Summit argues that the district court erred by failing to consider Summit's non-infringing alternative to a license - the original Digital mounting cup, to which Summit reverted after the lawsuit was filed. According to Summit, the district court failed to consider the "success" of Summit's noninfringing Digital mounting cup, and it suggests that "complaints about the Digital mounting cup were trivial compared to complaints about other valve components." According to Summit, "the patented technology offered essentially no advantage to Summit over the noninfringing alternative."
In order for a non-infringing alternative to be relevant to the analysis, it must be comparable. The district court properly considered the nature of the problems encountered by Summit arising from its original Digital mounting cups, "smoking gun" evidence that Summit was under extreme pressure to solve its leakage problems, a problem it believed could be solved by moving to the Diamond Digital design. We conclude that the district court did not abuse its discretion in selecting a reasonable royalty rate of $0.75 per thousand units.
B. Lost Profits
Aptar contends that the district court erroneously failed to award its lost profits instead of a reasonable royalty. An award of lost profits requires a showing that (1) Aptar would have made additional sales "but for" Summit's infringement; and (2) evidence establishing the amount of the lost profits. Kaufman Co. v. Lantech, Inc., 926 F.2d 1136, 1140, 17 USPQ2d 1828, 1831 (Fed. Cir. 1991). The district court refused to award Aptar lost profits because "it cannot be determined on this record that but for Summit's infringement Aptar would have achieved higher sales and profits." That Conclusion was based in part on the district court's exclusion of any evidence-due to Aptar's discovery misconduct--that Aptar's TaperSeal mounting cups had no leakage problems. Because Aptar denied Summit the opportunity of full discovery on the issue of leakage, the court concluded that its damages defense was hampered and it could not find or conclude that Aptar proved lost profits.
Aptar contends that the district court's Conclusion that Aptar failed to establish the "but for" requirement of lost profits is clearly erroneous. According to Aptar, (1) the district court should not have "reintroduced" its prior sanctions order, (2) Summit's own expert admitted that the excluded evidence was merely "anecdotal"; and (3) Aptar's lost profits analysis did not depend on the proposition that its TaperSeal mounting cup was leak-free. We disagree.
First, Aptar did not, and is not, appealing the original sanctions; yet now it objects to its enforcement. The district court made it clear that the sanction order would likely affect Aptar's proof on damages. Since that was the sanction the court imposed, there is no merit to Aptar's contention that the court was "double sanctioning" Aptar. Second, the purported "admission" of the anecdotal nature of the evidence by Summit's expert is of no value. While Aptar belatedly offered some customer complaint data after the close of discovery, there is no indication Summit got all of the information it sought or needed to prove that Aptar's products were leaky.
Finally, Aptar contends that its damages theory did not depend on showing that its products were leak-proof. It suggests that proof of "but for" damages exists in the form of changes in Summit's own sales as a result of reverting to its old Digital mounting cup design. This evidence essentially comes down to saying that "Aptar picked up sales, and Summit lost sales, when Summit was competing with its inferior Digital mounting cup design against Aptar." This is presented in the form of a lengthy exposition of numbers and anecdotes. Aptar points to specific customers who switched their purchases of "valves" to Aptar after 1995, when Summit reverted to its non-infringing cup. On the other hand, Summit points out that its sales and profits have increased, while Aptar's have decreased. Given this record, we can not conclude that there has been a clearly erroneous factual finding or a clear error in judgment.
C. Attorney Fees
Aptar contends that the district court erred in failing to award it attorney fees because the court did not explicitly make a determination as to whether the case was "exceptional" within the meaning of 35 U.S.C. § 285 (1994). The district court denied Aptar attorney fees because of Aptar's discovery misconduct. While in S.C. Johnson & Sons, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201, 228 USPQ 367, 369 (Fed. Cir. 1986), we indicated that when a court denies attorney fees in spite of a finding of willful infringement, the court must explain why the case is not an exceptional case, the court there provided no reasons for its failure to declare the case exceptional.
The district court expressly refused to award attorney fees here on the basis of Aptar's litigation misconduct. Indeed, the district court acknowledged that "a finding that the defendant's infringement was willful is a sufficient basis for finding that the case is `exceptional' under section 285 for purposes of awarding attorney fees." It appears that the district court exercised its discretion not to award attorney fees on the basis of litigation conduct. This is not an abuse of discretion.