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
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 ...