Attorneys' Fees Under Section 285
70. Glaverbel-Fosbel also seek an award of attorneys' fees
under Section 285. As Conclusions 30 and 31 reflect, the case-law
teaches that an attorneys' fees award requires a finding of an
"exceptional case" and that such a finding can properly be based
on either willful infringement or bad faith conduct. Where both
of those factors are present (as is true here), the basis for an
"exceptional case" finding becomes even stronger.
71. In light of the prior Findings of willful infringement and
bad faith conduct, further aggravated by the fact that Northlake
consistently could not make a prima facie case either at the
summary judgment stages or at trial, this Court exercises its
discretion and finds this to be a truly exceptional case
justifying an award of attorneys' fees.
Conclusions of Law
1. This Court's prior conclusions as to jurisdiction continue
to apply during the proceedings leading to these Findings and
Damages — General
2. Under Section 284 a patent owner is entitled to damages
"adequate to compensate for infringement but in no event less
than a reasonable royalty, for the use made of the invention by
the infringer, together with interest and costs as fixed by the
Court." Among the different elements of damages for which the
patent owner may recover such compensation are (1) lost profits
on sales that the patent owner lost as a result of the
infringement (State Indus., Inc. v. Mor-Flo Indus., Inc.,
883 F.2d 1573, 1577 (Fed.Cir. 1989)) and (2) a reasonable royalty on
infringing sales even if the patent owner would not have obtained
those sales (see Bio-Rad Labs., Inc. v. Nicolet Instrument
Corp., 739 F.2d 604, 616-17 (Fed.Cir. 1984)). As for the time
period for which Glaverbel-Fosbel are entitled to recover
damages, this Court has already held that their counterclaim
(because it is a compulsory counterclaim under Rule 13(a)) dates
back to the filing of their Answer by virtue of Rule 15(c)(2)(958
F. Supp. at 376 (1997); accord, 6 Charles A. Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice and Procedure: Civil
2d § 1430, at 228 (2d ed. 1990)). Despite this Court's
invitation in its 1997 opinion, Northlake has offered nothing to
support the notion that the Section 286 reference to "the filing
of the . . . counterclaim" should be read in terms of the file
stamp date rather than the effective date mandated by Rule
15(c)(2), while Glaverbel-Fosbel have cited one early case whose
holding conforms to the more normal (and more sensible) reading
that gives full effect to Rule 15(c)(2) — indeed, if Northlake's
position were accepted, a situation could arise in which a
later-tendered compulsory counterclaim could be filed but could
confer no relief at all on the injured patentee. All of that
being so, the six-year limitations period specified in Section
286 does encompass the entire period of the Northlake
infringement addressed in these Findings and Conclusions.*fn11
3. Damages need to be proved only by a preponderance of the
evidence, and the patent owner's burden of proof is not absolute
but rather one of reasonable probability. This Court is free to
use its discretion in choosing a method for calculating damages
as long as the measure of damages is just and reasonable (Kori
Corp. v. Wilco Marsh Buggies & Draglines, Inc., 761 F.2d 649,
653-54 (Fed.Cir. 1985).) Because the computation of damages is
not always amenable to precise determination, it is acceptable if
the evidence shows the extent of damages as a
matter of just and reasonable inferences, even though the result
is only approximate (Paper Converting Mach. Co. v.
Magna-Graphics Corp., 745 F.2d 11, 22 (Fed.Cir. 1984)). Any
doubt as to the correctness of a damages award is to be resolved
against the infringer (State Indus., 883 F.2d at 1577). If the
patent owner is able to establish a reasonable probability that
it would have made only some of the infringer's sales but for the
infringement, the damages award may be in the amount of lost
profits to the extent so established plus a reasonable royalty
for the remainder of the sales (id.).
Damages — Lost Profits
4. It is unnecessary to prove lost profits with absolute
certainty. It suffices to prove a reasonable probability that
Glaverbel-Fosbel would have made the sales of the ceramic welding
powder and would have provided the ceramic welding services (one
of the two patents is for the powder and the other for the method
of repair). There is no need to negate all possibilities that a
purchaser might have bought a different product or might have
forgone the purchase altogether (State Indus., id.).
5. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc.,
575 F.2d 1152 (6th Cir. 1978), cited with approval in various Federal
Circuit cases (see, e.g., Rite-Hite Corp. v. Kelley Co.,
56 F.3d 1538, 1545 (Fed.Cir. 1995) (en banc)), identifies four
factors to be considered (if and when present) in a lost profits
analysis. Those four factors are (a) a demand for the patented
product or method, (b) the absence of acceptable noninfringing
substitutes, (c) the manufacturing and marketing capability of
the patent owner to exploit the demand and (d) the amount of
profit the patent owner would have made on the infringing sales.
Under the Panduit-taught analysis, evidence of those four
factors permits a court to draw the reasonable inference that the
lost profits claimed were in fact caused by infringing sales,
thus establishing the patentee's prima facie case of "but for"
6. Here the demand for the patented invention was established,
among other things, by the infringers' sales and the infringers'
sales projections that were presented in the Indiana case and
were part of DX 140 and DX 141. This Court concludes that there
was a demand for the patented invention.
7. There are no acceptable non-infringing substitute methods
for ceramic welding. None of the other techniques or methods has
the considerable advantages of the patented invention. In
addition, even ceramic welding as practiced by other competitors
was not a substitute for the patented process and powder. In that
respect, because the other competitors' ceramic welding powders
lack the attributes of the patented invention, they are not
acceptable alternatives (TWM Mfg. Co. v. Dura Corp.,
789 F.2d 895, 901 (Fed.Cir. 1986)). Mere existence of such a competing
alternative does not make it an acceptable substitute (id.).
Hence a court should apply a two-supplier market approach when
products other than those of the infringer lack the advantages of
the patented invention (Kalman v. Berlyn Corp., 914 F.2d 1473,
1484 (Fed.Cir. 1990); Uniroyal, Inc. v. Rudkin-Wiley Corp.,
939 F.2d 1540, 1545-46 (Fed.Cir. 1991)). Under that approach the
damage calculation should be based on the premise that
Glaverbel-Fosbel would have made all of the Northlake sales, not
just a ratable or relative market share portion of those sales.
8. If the ceramic welding powders of the competitors other than
Northlake did not in fact infringe on the patents in suit, they
did not provide the benefits or advantages of the patented
invention. For damage calculation purposes the question is not
whether those powders were competing products, but rather whether
there were acceptable substitutes (see, e.g., Minco, Inc. v.
Combustion Eng'g, Inc., 95 F.3d 1109, 1119 (Fed.Cir. 1996) (per
curiam)). Moreover, Panduit, 575 F.2d at 1160-62 teaches that
the argument of "acceptable substitutes" must be viewed as of
influence where the infringer knowingly made and sold the
patented product for years while ignoring the claimed
"substitute" (Stryker Corp. v. Intermedics Orthopedics, Inc.,
96 F.3d 1409, 1418 (Fed.Cir. 1996)). Here Northlake continued
with its infringing powder for nine years (December 1988 through
1997), rather than making the purportedly simple change to a
refractory powder having a size range spread factor of less
9. Finally, the issue of assertedly acceptable noninfringing
ceramic welding alternatives may be considered in the context of
the Northlake antitrust claims that Glaverbel-Fosbel have
assertedly monopolized the ceramic welding repair market. But
that would mean that Glaverbel-Fosbel must have monopoly power
(which is not presumed in the patent-antitrust interface). To
look at the converse of that possibility, Abbott Labs. v.
Brennan, 952 F.2d 1346, 1355 (Fed.Cir. 1991) has quoted Justice
O'Connor's concurrence in Jefferson Parish Hosp. Dist. No. 2 v.
Hyde, 466 U.S. 2, 37 n. 7, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984)
A common misconception has been that a patent or
copyright, a high market share, or a unique product
that competitors are not able to offer suffices to
demonstrate market power. While each of these three
factors might help to give market power to a seller,
it is also possible that a seller in these situations
will have no market power: for example, a patent
holder has no market power in any relevant sense if
there are close substitutes for the patented
It follows as a logical matter that if a patentee does possess
market power (monopoly power), there cannot be close substitutes
for the patented product. And Northlake has indeed stated (it has
actually conceded in its pleading, albeit while looking in a
different direction) that there is monopoly power, a concession
that can be used against Northlake under Fed. R.Evid.
10. Accordingly the lost profits analysis applies to all of the
sales made by Northlake to its customers with whom Fosbel had any
contact before the Northlake infringement. That analysis applies
without any ratable reduction to take into account any
noninfringing ceramic welding.
11. Based upon the undisputed testimony, Glaverbel-Fosbel had
the marketing and manufacturing capability for a 10% to 20%
increase in sales, and Glaverbel-Fosbel's expert Dr. Koppel took
the cost of new machinery into consideration in his calculations.
Glaverbel-Fosbel had the full marketing capability to have made
all of the sales that Northlake made, if Northlake had in fact
not made them.
12. Panduit's fourth factor calls for a calculation of the
amount of the additional, or incremental, profit that
Glaverbel-Fosbel would have made if Northlake had not infringed.
That calculation is made by (1) determining the amount of
additional sales Glaverbel-Fosbel would have made and (2)
subtracting from it the additional costs Glaverbel-Fosbel would
have incurred in order to make the additional sales. That
incremental profit approach is well established in patent damages
cases (Paper Converting, 745 F.2d at 22).
13. This Court has approved Dr. Koppel's expert report with the
modifications reflected in the Findings. It concludes that the
lost profits award for Glaverbel-Fosbel is $694,231 (see Finding
Damages — Reasonable Royalty
14. "Reasonable royalty" is the amount that a willing licensee
would pay, and a willing licensor would accept, before the
commencement of the infringement (Section 284; Hanson v. Alpine
Area, Inc., 718 F.2d 1075, 1079 (Fed.Cir. 1983)).
15. Georgia-Pacific Corp. v. United States Plywood Corp.,
318 F. Supp. 1116 (S.D.N.Y. 1970), cited in such cases as Rite-Hite,
sets forth the factors generally to be considered (if and when
present) in a reasonable royalty analysis. Dr. Koppel's report
correctly analyzes the first fourteen factors, and that analysis
is accepted by this Court. And the fifteenth factor, about which
Dr. Koppel testified, is the amount upon which a licensor (such
as the patentee) and a licensee (such as the infringer) would
have agreed if both had been reasonable in trying to reach a
voluntary agreement — that is, the amount that a prudent licensee
who desired, as a business proposition, to obtain a license to
manufacture and sell a particular article embodying the patented
invention would have been willing to pay as a royalty and yet be
able to make a reasonable profit, and that would have been
acceptable by a prudent patentee who was willing to grant a
license (Georgia-Pacific, 318 F. Supp. at 1120).
16. Any reasonable royalty adequate to compensate
Glaverbel-Fosbel for any infringing sales made by Northlake for
which Glaverbel-Fosbel is not awarded lost profits should take
into account the incremental profit margin for Glaverbel-Fosbel
at the time infringement began (Rite-Hite, 56 F.3d at 1554).
Here Northlake's infringement began when the '468 Patent issued
on December 20, 1988. Hence the period of time closest to that
date for which a statistically valid royalty rate can be computed
is 1989, when the Glaverbel-Fosbel incremental profit margin was
16.2%. Next that incremental profit margin is adjusted for
relative market share, and Glaverbel-Fosbel had 85.69% of the
coke oven repair business in 1989. On that basis a reasonable
royalty rate would be in the range of 16.2% x 85.69% or 13.9%, a
figure reduced to 13.1% to adjust for a fractional error (see
17. Northlake's net profit was in the mid-teen percentage range
(without taking legal fees in its dispute with Glaverbel-Fosbel
into account). But in addition to the substantial salaries paid
to Northlake's three principals, once Zlamal left Northlake in
July 1989 he received continued compensation calculated at $2,200
per month plus six additional installments of $10,000 each (DX
140 at 227-4 to 227-15).
18. This Court concludes that taking into account Northlake's
gross profit in the 30% to 40% range and its net profit in the
mid-teen percentage range, plus the substantial compensation paid
to its principals, 13.1% is indeed a reasonable royalty rate.
This Court concludes that the reasonable royalty payable for the
infringement is $98,767 (see Finding 39).*fn14
19. Awards of prejudgment interest are the rule, not the
exception (Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566,
1574 (Fed.Cir. 1996), citing General Motors Corp. v. Devex
Corp.). As Finding 41 states, the purpose of prejudgment
interest is not to punish the infringer but to compensate the
patent owner for its losses. Because an award of prejudgment
interest is the rule, and because Northlake has proffered no
evidence to justify an exception, this Court concludes that an
award of prejudgment interest is proper.
20. Based on Findings 33 and 39, the total damages award (the
lost profits portion plus the reasonable royalty portion) is
$694,231 plus $98,767 or $792,998.
21. Northlake does not dispute that the prejudgment interest
rate should be the prime rate plus 1%. Dr. Koppel calculated the
damages (lost profits and reasonable royalty) by using that rate,
compounded on a quarterly basis. With the adjustments reflected
in Finding 42, the prejudgment interest calculated through August
1, 1998 was $489,866. This Court awards that
amount of prejudgment interest through August 1, 1998. It also
awards additional prejudgment interest at 8.75% compounded
quarterly from August 1, 1998 to the date of entry of an order of
judgment pursuant to these Findings and Conclusions.
Allocation of Liability
22. There is no justification for an allocation of liability
among the Northlake parties. Despite the fact that May resigned
from Northlake as of the beginning of 1995, it would be
inequitable for him to abdicate his responsibilities as an
officer-director, and thus to create a potential for avoiding
further liability, after his years of contributing to the
position in which Northlake found itself and his years of taking
a substantial salary, yet to remain in a position in which he
sought to reap benefits from any potential success of Northlake
(in its antitrust claims). At a minimum, to avoid further
liability for continued infringement May should have tendered his
stock (or had the corporation cancel his stock) at the same time
that he purportedly resigned his position as a Northlake officer
23. As Northlake acknowledged, its liabilities exceeded its
assets from 1989 to the present. Even though the technical
knowhow of the company was considered a valuable trade secret by
Northlake, May used some of that technical knowhow in his new
business without any payment to Northlake. Northlake has not paid
any part of the Belgian judgment, or even the taxable costs
awarded by the Federal Circuit in Northlake's unsuccessful
appeal. It thus appears to this Court that Northlake has
continued its infringing activities merely on the chance that it
might recoup on its antitrust claims, but with neither the
ability nor the intent to meet its legitimate financial
24. On balance, it would be inequitable to allow May to escape
even partial liability for the damages award here, even though it
is true that about 15% of the award, based on the proportion of
Northlake sales in the years 1995 through 1997 to the total
Northlake sales for 1998 through 1997, is attributable to those
post-1994 years. For the reasons already stated, no allocation is
25. Under Section 284 a court may increase the damages up to
three times the amount found or assessed by the factfinder. Any
award of enhanced damages requires a showing of either willful
infringement or bad faith (Cybor Corp. v. FAS Techs., Inc.,
138 F.3d 1448, 1460-61 (Fed.Cir. 1998) (en banc)). As with Section
285 awards of attorneys' fees in "exceptional cases," where as
here both of those factors are present the case for enhanced
damages becomes even stronger.
26. Any infringer has the obligation to avoid infringement once
it has knowledge of the patent. Several factors to be considered
on the issue of willfulness are explained in Read Corp. v.
Portec, Inc., 970 F.2d 816, 827 (Fed.Cir. 1992),*fn15 and the
single most important factor is whether or not there was reliance
on a competent opinion of counsel. Other factors include (but are
not limited to) whether evidence of infringement (or the
magnitude of infringement) was concealed, evidence of copying,
closeness of the case, duration of the infringement, remedial
action by the infringer (if any) and the infringer's motivation
27. There is an affirmative duty to obtain validity and
infringement opinions (Great Northern Corp. v. Davis Core & Pad
Co., 782 F.2d 159, 166-67 (Fed.Cir. 1986)). Any such opinion
must be sufficiently thorough to support the reasonableness of a
client's reliance on the opinion (Ortho Pharm. Corp. v. Smith,
959 F.2d 936, 944 (Fed.Cir. 1992)), because the required showing
is one of justifiable reliance on the opinion (see Datascope
v. SMEC, Inc., 879 F.2d 820, 828 (Fed.Cir.
1989)). Hence a cursory or conclusory opinion does not suffice
(Underwater Devices Inc. v. Morrison-Knudsen Co.,
717 F.2d 1380, 1390 (Fed.Cir. 1983); Kori Corp., 761 F.2d at 656), and
oral opinions are not favored (Minnesota Mining & Mfg. Co. v.
Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1580
(Fed.Cir. 1992)). When the situation here is judged against those
legal requirements, this Court concludes that Northlake did not
receive a competent opinion of counsel upon which a prudent
business person could reasonably rely.
28. This Conclusion addresses the remaining factors for
enhanced damages separately. There was a failure by Northlake to
cooperate appropriately in discovery (cf. Russell Box Co. v.
Grant Paper Box Co., 203 F.2d 177, 183 (1st Cir. 1953)), its
challenge to validity was not of substantial quality (cf.
Delta-X Corp. v. Baker Hughes Prod. Tools, Inc., 984 F.2d 410,
413 (Fed.Cir. 1993) (same requirement as to a challenge to
infringement)), it did not discontinue its infringing activities
or find a noninfringing alternative during the pendency of this
suit, even after a series of adverse rulings (Read, 970 F.2d at
827), and it demonstrated a motivation to harm Glaverbel-Fosbel.
For example, Northlake received technical information from former
Fosbel employee Whisman (DX 141 at 8-1 to 8-6 and at 128-2 to
128-14) and had access to Fosbel pricing to the same customers
where Northlake was bidding for work (id. at 11-17 to 11-19,
13-12 to 13-20; 14-18 to 14-23; 24-18 to 24-22 and 26-18 to
26-25). Northlake's corporate minute book (DX 109) contains no
references, at any time from 1988 to the present, to the
Glaverbel-Fosbel claims, to Northlake's alleged defense, to the
present litigation or to the claimed opinion of counsel.
29. Based on all of the foregoing, this Court concludes both
that the infringement was willful and that Northlake acted in bad
faith. It therefore awards additional enhanced damages of twice
the amount of the actual damages award. Prejudgment interest will
not be applied to the enhanced damages portion of the judgment.
Attorneys' Fees and Costs
30. Any determination of whether a case is "exceptional" so as
to be eligible for an award of attorneys' fees under Section 285
is a two-step process. First the court must determine if the case
is exceptional and then, if the answer is affirmative, it must
decide whether an award of such fees is appropriate (Cybor
Corp., 138 F.3d at 1460).
31. Exceptional circumstances (the first step) may be found if
there was misconduct during litigation, vexatious or unjustified
litigation or a frivolous suit (Bayer Aktiengesellschaft v.
Duphar Int'l Research B.V., 738 F.2d 1237, 1242 (Fed. Cir.
1984)). Willful infringement alone will suffice to support a
finding of an "exceptional case" for an award of attorneys' fees,
though it does not mandate such relief (Cybor Corp., 138 F.3d
32. As already found and concluded, here there was both willful
infringement and bad faith conduct. There was no basis for
Northlake to commence the present suit encompassing all of the
issues it sought to advance, and there was no basis for it to
continue infringement (or continue with the suit) in the face of
successive adverse summary judgment or exclusionary rulings. This
Court concludes that Glaverbel-Fosbel have demonstrated by clear
and convincing evidence that this is indeed an exceptional case
within the meaning of the statute.
3. Having made that "exceptional case" determination, this
Court exercises its discretion in favor of awarding attorney fees
to Glaverbel-Fosbel. In that respect counsel for the parties are
ordered to proceed in accordance with this District Court's
General Rules ("GR") 46 and 47. Under Budinich v. Becton
Dickinson & Co., 486 U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178
(1988) the pendency of proceedings looking to such an award does
affect the finality of the substantive judgment to be entered at
an early date.
34. Finally, this Court awards taxable costs in favor of
Glaverbel-Fosbel and against Northlake.
It is hereby ordered that judgment shall be entered on June 25,
1999 in favor of Glaverbel S.A. and Fosbel, Inc. and against
Northlake Marketing & Supply, Inc., James Hamilton and Samuel
May, jointly and severally, in the following amount:
1. $792,998, representing the sum of lost profits
and a reasonable royalty; plus
2. prejudgment interest on that sum to and
including that date of judgment;*fn16 plus
3. enhanced damages in the sum of $1,585,996 (2 x
$792,998), without prejudgment interest.
In accordance with the Findings and Conclusions, Glaverbel, S.A.
and Fosbel, Inc. shall also be awarded their reasonable
attorneys' fees (to be determined in accordance with GR 46 and
47) and are hereby awarded their taxable costs.
This Court's lengthy June 10, 1999 Findings of Fact and
Conclusions of Law ended by anticipating the entry of a judgment
order on June 25, 1999, with counsel for the parties being
directed to have previously submitted a statement as to the
agreed amount of that judgment (if agreement were possible).
Counsel have indeed since succeeded in reaching an "Agree[ment]
as to arithmetic only," with "All other objections reserved" (a
copy of their calculations is attached to this judgment order).
In accordance with that agreement, it is ordered that judgment be
entered in favor of Glaverbel S.A. and Fosbel, Inc. and against
Northlake Marketing & Supply, Inc., James Hamilton and Samuel
May, jointly and severally, in the sum of $2,992,918.