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Krippelz v. Ford Motor Co.

November 18, 2009

JACOB KRIPPELZ, SR., PLAINTIFF,
v.
FORD MOTOR COMPANY, DEFENDANT.



The opinion of the court was delivered by: James B. Zagel United States District Judge

Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

The Jury awarded Plaintiff Jacob Krippelz $23 million in royalties to compensate him for Defendant Ford's infringement of Krippelz's puddle lamp patent. Krippelz now moves for prejudgment interest and costs, as well as enhanced damages. For the following reasons, Krippelz's motions are granted in large part.

II. DISCUSSION

A. Prejudgment Interest and Costs

The Supreme Court has held that under 35 U.S.C. § 284, "prejudgment interest should ordinarily be awarded" when a plaintiff in a patent infringement suit prevails on his claim. General Motors Corp. v. Devex Corp., 461 U.S. 648, 654-55 (1983). However, an award of prejudgment interest is not required whenever a defendant is found to have infringed. Id. at 656. Prejudgment interest may be limited or denied where, for example, the patent owner has caused undue delay in prosecution of the suit. Id. at 657.

Ford argues that Krippelz unduly delayed prosecuting this suit by (1) failing to file a motion for preliminary injunction; (2) filing for a reexamination of his patent; and (3) failing to file a motion for summary judgment earlier in the course of the litigation. In support of its position, Ford cites Crystal Semiconductor Corp. v. TriTech Microelectronics International, Inc., where the Federal Circuit upheld the district court's denial of prejudgment interest where the plaintiff's two-year delay in filing suit against the defendant caused the damages owed by the defendant to escalate. 246 F.3d 1336, 1362 (Fed. Cir. 2001). In that case, the plaintiff had reverse engineered the product at issue, determined that it infringed plaintiff's patent, but waited two years before filing suit. Id. In the interim, the plaintiff failed to notify the defendant of the existence of plaintiff's patent, although it had notified 30 to 40 other companies. The Court affirmed the district court's finding that delay had been a self-serving litigation tactic on the part of the plaintiffs, resulting in prejudice to the defendant. Id. The district court had, according to the Federal Circuit, correctly denied the plaintiff prejudgment interest.

In this case, Ford does not allege any delay in filing of the suit, and it is unclear how Krippelz's failure to file for a preliminary injunction and summary judgment, and the reexamination, "caused" the damages owed by Ford to escalate. When Krippelz filed suit in 1998, Ford was on notice of the possibility of infringement, and, unlike the defendants in Crystal, was in a position to discontinue the sale of infringing puddle lamps. Ford points to no authority requiring a plaintiff to file for preliminary injunction or for summary judgment in order to recover prejudgment interest. Neither does Ford point to an authority suggesting that a reexamination or stay of litigation results in the forfeiture of prejudgment interest by the plaintiff. Ford argues that it should not be punished for the three-year delay caused when the litigation was stayed pending the reexamination requested by Krippelz. During that time, "Ford introduced several new courtesy lamp designs, some of which were later found to infringe." However, the decision to introduce these products and to continue the sale of other infringing products was entirely within Ford's control. Ford was on notice of the potential infringement and brought these new products to market anyway. It is difficult to see how anyone but Ford caused the damages owed to Krippelz to escalate.

1. The Appropriate Interest Rate

Krippelz argues that because "there is a significant risk of default by the defendant[,]" the appropriate prejudgment interest rate in this case is prime plus one percent. Ford argues that the T-Bill rate is appropriate here as it will adequately compensate Krippelz.

The Seventh Circuit has directed district courts to use the prime rate in determining prejudgment interest. Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 436 (7th Cir. 1989). "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. The T-Bill rate, the Court noted, is "too low, because there is no default risk with Treasury Bills." Id. at 437.

Ford points to several patent cases in which courts have held that the T-Bill interest rate adequately compensated the plaintiff for the lost use of the money owed to him. But only one of these cases addresses the risk of non-repayment, and notes that the prime rate would be more appropriate than the T-Bill rate in order to compensate a plaintiff for the risk of non repayment, a risk that was nonexistent in that case. Black & Decker Inc. v. Robert Bosch Tool Corp., No. 04 C 7955, 2006 WL 3359349 at *11 (N.D. Ill. 2006), vacated on other grounds, 260 Fed. Appx. 284 (Fed. Cir. 2008).*fn1 Krippelz argues that because in 2005 Ford's credit rating was downgraded from "investment grade" to "speculative grade," and because lenders to Ford are now subject to "high credit risk," a prejudgment interest rate higher than prime is warranted here. Furthermore, argues Krippelz, Ford's financial performance has been in decline since 2008, and it has depleted its cash reserves. It is true that at the close of the third quarter of 2009, Ford reported a profit of nearly $1 billion, however, Ford's current $26.9 billion debt exceeds its $23.8 billion gross cash.

As evidenced by Ford's credit rating and current financial situation there is a risk of non-repayment here, and thus the T-Bill rate is inappropriate here. But should the rate be higher than prime, or prime plus one percent as suggested by Krippelz? "The plaintiff is an unsecured, uninsured creditor, and the risk of default must be considered in deciding what a compensatory rate of interest would be." Gorenstein, 874 F.2d at 436. The Court in Gorenstein chose the prime rate for convenience, but "a more precise estimate would be the interest rate paid by the defendant for unsecured loans." Id. at 437. During the ten-year period of infringement, Ford's long-term and short-term borrowing rate has averaged between .7% and 1.47% above prime. Because of the large risk of non-repayment, the rate of prime plus one percent is appropriate here.

2. Compounding Interest

There is no dispute that the question of whether interest should be compounded is a matter of discretion for the district court. However, "[i]t has been recognized that an award of compound rather than simple interest assures that the patent owner is fully compensated." Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1555 (Fed. Cir. 1995) (quotations and citation omitted). The Seventh Circuit has noted that "compound interest ought to be the norm in federal matters," absent any special circumstances.*fn2 Amer. Nat. Fire Ins. Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 938 (7th Cir. 2003) (emphasis in original). According to Ford, delays caused by Krippelz warrant an award of simple, rather than compounding interest. However, as discussed supra, Krippelz caused no unreasonable delay in the proceedings. In my opinion on the issue of Ford's infringement, I found that delay in resolving the question of which Ford lamps were infringing was a consequence of flawed testing procedures used by Ford. Ford has failed to demonstrate the existence of any special circumstance warranting a deviation from the norm put forth by the Seventh Circuit, and as a result, the interest in this case must be compounded.

Krippelz argues that interest awarded him be compounded on a quarterly basis, but Ford further asks the court to compound any interest annually rather than quarterly. Because Ford offers no argument as to why annual compounding is more appropriate in this case than ...


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