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LISLE CORP. v. A.J. MANUFACTURING CO.

April 6, 2004.

LISLE CORPORATION, an Iowa corporation Plaintiff,
v.
A.J. MANUFACTURING COMPANY, an Illinois Corporation Defendant



The opinion of the court was delivered by: DAVID COAR, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Lisle Corporation ("Plaintiff" or "Lisle") filed suit against Defendant A.J. Manufacturing Company ("Defendant" or "A.J.") alleging that it infringed U.S. Patent No. 5, 287,776 (the "`776 patent") by manufacturing and selling a specialized automotive inner tie rod tool. Following a jury trial, the jury returned a verdict in favor of the Plaintiff on February 12, 2004. The jury determined that the `776 patent was valid and that Defendant owed Plaintiff a 3 percent royalty on sales. This Court entered judgment of a 3 percent royalty, but it did not specify in the judgment the dollar amount that Defendant owed Plaintiff for sales. On February 25, 2004, the Court enjoined Defendant from producing or selling infringing tools for the life of the patent.

There are three issues presently before the Court: (1) Plaintiff's Motion to Amend the Judgment; (2) Defendant's Objections to Plaintiff's Bill of Costs; and (3) Defendant's Motion to Stay the Injunction pending appeal. The Court addresses these motions in the foregoing opinion. I. PLAINTIFF'S MOTION TO AMEND JUDGMENT

  Plaintiff seeks to amend the judgment to include a specific accounting of damages, prejudgment interest, and costs. As respects the issue of costs, the judgment need not be amended for Plaintiff to recover its costs. Plaintiffs Bill of Costs will be addressed below along with Defendant's Objections to the Bill of Costs. The other two issues addressed in Plaintiff's Motion, specific accounting of damages and prejudgment interest, will be resolved below.

  A. Specific Accounting of Damages

  According to the jury's verdict, Lisle is entitled to a reasonable royalty of 3 percent on sales of the infringing tools through the date of the injunction. The parties agree that the royalty amount from the Defendant's sales through January 12, 2004 is $25,760.48. Defendant's sales numbers from January 12, 2004 through the date of the injunction (February 25, 2004) are as yet undetermined. Consequently, the Plaintiff seeks an amended judgment that orders Defendant A.J. to pay damages in the amount of $25,760.48 for sales through January 12, 2004 plus a 3 percent royalty on sales in the period from January 12, 2004 to February 25, 2004.

  The Court assumes that the reason Plaintiff seeks to amend the judgment to include the specific accounting of damages is to diminish uncertainty in the amount of the royalty.*fn1 While the amended judgment Plaintiff requests would not eliminate uncertainty, it limits the uncertainty to approximately six weeks of sales. The Court can perceive no mischief in granting this request. The judgment will be amended to include a damage amount of $25,760.48 plus a 3 percent royalty on sales in the period from January 12, 2004 to February 25, 2004. B. Prejudgment Interest

  Plaintiff's Motion also requests that the Court amend the judgment to include an award of prejudgment interest. In patent cases, the Supreme Court has declared that "prejudgment interest should ordinarily be awarded." General Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983); see also Shott v. Rush-Presbyterian St. Luke's Medical Center, 338 F.3d 736, 745 (7th Cir. 2003) ("in most cases prejudgment interest is an element of full compensation"). Defendant opposes the award of prejudgment interest in this case based on the Plaintiff's six-year delay in filing this action to protect its patent. The Supreme Court's decision in General Motors offers some support for denying prejudgment interest based on unnecessary delays. See General Motors, 461 U.S. at 657 ("it may be appropriate to limit [or deny] prejudgment interest . . . where the patent owner has been responsible for undue delay in prosecuting the lawsuit"). In the years since General Motors, however, the Federal Circuit has adhered to the rule that delays by the patentee do not justify denying prejudgment interest "absent prejudice to the Defendants." Lummus Indus., Inc. v. D.M. & E. Corp., 862 F.2d 267, 275 (Fed. Cir. 1988) cited in Crystal Semiconductor Corp. v. Tritech Microelectronics, Int'l., Inc., 246 F.3d 1336, 1361-62 (Fed. Cir. 2001). Other than the amount of the interest that accrued with the passage of time, the Defendant has not alerted the Court of any prejudice it has suffered. Consequently, the Court finds that an award of prejudgment interest is justified in this case.

  C. Calculating the Amount of Prejudgment interest

  Plaintiffs seek prejudgment interest in the amount of $5,314.22. Plaintiff arrived at this amount by applying the applicable prime rate from the year to its royalty of the annual sales and compounding the interest annually. Defendants object to this calculation and urge that Plaintiff be awarded prejudgment interest in the amount of $878.07. Defendant A.J. asserts that this amount represents simple interest, but it does not provide a source for the interest rate it applied to reach this amount. A simple arithmetic calculation (interest amount/principle = interest rate) reveals a rate of 3.4 percent, but the Defendants do not offer a source for this interest rate,

  "The rate of prejudgment interest and whether it should be compounded or uncompounded are matters left largely to the discretion of the district court." Bio-Rad Laboratories, Inc. v. Nicolet Instrumental Corp., 807 F.2d 964, 969 (Fed. Cir. 1986). As a general matter, the Court finds that prejudgment interest should be compounded. During the period of infringement, the Defendant retained the royalties that should have been paid to Plaintiff. Compound interest more accurately accounts for the Defendant's increased financial obligation to Plaintiff over time and it comes closer to fully compensating Plaintiff for the infringement of its patent.

  Defendant's only argument against compounding the interest is that it results in an interest amount that is nearly 20 percent of the total judgment amount. This argument yields no principle of general application and, if accepted, it would impose a de facto limit on prejudgment interest awards that is inconsistent with the case law. See, e.g., In re Oil Spill by the Amoco. Cadiz off the Coast of France on Mar. 16, 1978, 954 F.2d 1259, 1335 (7th Cir. 1992) (awarding $65 million in damages and $148 million in prejudgment interest). The Court rejects Defendants argument and will compound the interest in this case.

  This leaves only the question of what interest rate should apply. The Seventh Circuit provides support for Plaintiff's suggestion of applying the prime rate. See Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 436 (7th Cir. 1989). The Seventh Circuit announced:
[W]e suggest that district judges use the prime rate for fixing prejudgment interest where there is no statutory interest rate. That is a readily ascertainable figure which provides a reasonable although rough estimate of the interest rate necessary to compensate plaintiffs not only for the loss of the use of their money but also for the risk of default.
Id. Consequently, the Court will apply the prime rate that was in effect at the time the royalties accrued.

  Plaintiff's calculations of the prejudgment interest, a summary of which is attached to its Motion as Exhibit F, are accurate. The Court will amend the judgment to award ...


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