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AERO PRODUCTS INT'L. v. INTEX RECREATION CORP.

July 15, 2004.

AERO PRODUCTS INTERNATIONAL, INC., a Florida corporation, and ROBERT B. CHAFFEE, an individual, Plaintiffs,
v.
INTEX RECREATION CORPORATION., a California corporation; QUALITY TRADING, INC., a California corporation; and WAL-MART STORES, INC., a Delaware corporation, Defendants.



The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

The Plaintiffs, Aero Products International, Inc. ("Aero") and Robert B. Chaffee, filed suit against the Defendants, Intex Recreation Corporation ("Intex"); Quality Trading, Inc.; and Wal-Mart Stores, Inc. A trial by jury was held, where Defendants were found liable for willfully infringing Plaintiffs' patent, United States Patent No. 5,367,726 ("the '726 patent"). The jury awarded Plaintiffs $2,950,000.00 in damages for Defendants' patent infringement. Presently before the Court is Plaintiffs' Motion for Enhanced Patent Damages and Attorney's Fees.

LEGAL STANDARD

  Section 284 of Title 35 of the United States Code provides that "[t]he court may increase the damages up to three times the amount found or assessed." Section 285 of Title 35 states that a court may award attorney's fees to prevailing parties in "exceptional cases." Determining whether an award of enhanced damages is merited is a two-step process:

  (1) the jury must determine whether an infringer is guilty of conduct warranting increased damages; and (2) the court determines, in its discretion, whether, and to what extent, to increase the damages award based upon the totality of the circumstances. Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 (Fed. Cir. 1996) (Jurgens).

  A finding of willful infringement satisfies the first step; and "[u]pon a finding of willful infringement, a trial court should provide reasons for not increasing a damages award or not finding a case exceptional for the purpose of awarding attorneys [sic] fees." Jurgens, 80 F.3d at 1570, 1572. However, a finding of willful infringement does not require that enhanced damages be awarded. Jurgens, 80 F.3d at 1573.

  In analyzing the second requirement, a court must consider all the facts and circumstances, including those that make a "defendant's conduct more culpable, as well as factors that are mitigating or ameliorating." Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992) (Read Corp.), abrogated on other grounds, Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995). These factors include: (1) whether the infringer deliberately copied the idea or design of the patentee; (2) whether the infringer, when he knew of the patent, investigated the scope of the patent and formed a good-faith belief that the accused device was non-infringing; (3) the infringer's behavior as a party to the litigation; (4) the infringer's size and financial condition; (5) the closeness of the case; (6) the duration of the infringer's misconduct; (7) the infringer's remedial actions; (8) the infringer's motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. Read Corp., 970 F.2d at 827. Similarly, determining whether attorney's fees are warranted is also a two-step process:

  (1) it must first be determined whether the case is exceptional and (2) whether an award of attorney's fees is warranted. Interspiro USA, Inc. v. Figgie, Int'l, Inc., 18 F.3d 927, 933-34 (Fed. Cir. 1994). A "district court must normally explain why a case is not exceptional when a factual finding of willful infringement has been established and, if exceptional, why it decides not to award attorney fees." Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364, 1379 (Fed. Cir. 2002) (Transclean Corp.).

  The factors used to determine whether attorney's fees should be awarded are similar to the factors used in determining whether enhanced damages should be awarded. See Transclean Corp., 290 F.3d at 1379; Jurgens, 80 F.3d at 1573 n. 4. However, the conduct used that supports an award under one statute does not necessarily mandate an award under the other statute. Jurgens, 80 F.3d at 1573 n. 4.

  ANALYSIS

  Plaintiffs, the prevailing parties, seek enhanced damages under 35 U.S.C. § 284 and attorney's fees under 35 U.S.C. § 285. Because the jury has found Defendants' infringement was willful, Plaintiffs have satisfied the first requirement for an award under each statute.

  The first factor, whether Intex deliberately copied the patent, weighs heavily in favor of Plaintiffs. As evidenced by Intex's e-mails, Intex employees obtained an Aero mattress and sent it to China; Intex marketed the similar mattress less than a year later. Dr. Albert Karvelis testified that Intex's valve was a copy of Plaintiffs' valve, and the valves themselves appear substantially the same in all material respects. The second factor, whether Intex, when it knew of the patent, investigated the scope of the patent and formed a good-faith belief that the accused device was non-infringing, does not weigh in favor of Intex. Intex learned of the '726 patent in April 2002, when Plaintiffs filed suit, and thereafter hired an attorney to render an opinion regarding any possible infringement by Intex. This opinion contains a detailed analysis of the '726 patent, its prosecution history, and the accused product. The opinion also contains a number of defenses that Intex could assert to defend itself. However, the attorney did not independently investigate the two devices.

  Thus, while an independent attorney may have rendered an opinion, the attorney's basis for knowledge here was not independent; and the opinion letter was not, therefore, reliable. Moreover, the opinion does not rely upon independent technical experts to determine the meaning of key terms. Instead, the opinion relied on Richard Saputo, Intex's Product Quality Manager, to provide information regarding the patented product and the Intex products. For instance, the opinion assumed that the Intex product did not contain a hermetic seal, but Saputo failed to perform any test to confirm this fact.

  The third factor, Intex's behavior as a party to the litigation, clearly favors the Plaintiffs. First, Intex destroyed e-mails for the first ten months of this litigation every thirty days. While Intex argues that it retrieved e-mails from before the filing of Plaintiffs' Complaint once it realized e-mails were being deleted pursuant to an established company policy, Plaintiffs were still forced to spend time to uncover the e-mails, ...


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