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Cobalt Boats, LLC v. Brunswick Corp.

United States District Court, E.D. Virginia, Norfolk Division

October 31, 2017


          OPINION & ORDER


         This matter came before the Court pursuant to Plaintiff Cobalt Boats, LLC's ("Cobalt's") five (5) post-trial motions: (1) Motion to Amend Judgment to Include Supplemental Damages, Doc. 358 ("Motion for Supplemental Damages"); (2) Motion for Prejudgment Interest, Post-judgment Interest, and Damages for Continuing Infringement, Doc. 364 ("Motion for Interest and a Continuing Royalty"); (3) Motion for Enhanced Damages Pursuant to 35 U.S.C. § 284, Doc. 370 ("Motion for Enhanced Damages"); (4) Motion for Attorneys' Fees, Doc. 368; and (5) Motion for a Permanent Injunction Against Defendant Brunswick Corporation ("Brunswick"), Doc. 366 ("Motion for a Permanent Injunction"), On August 10, 2017, the Court heard arguments on these Motions. For the reasons stated herein, the Court GRANTS the Motion for Supplemental Damages: GRANTS prejudgment interest at the prime rate, compounded quarterly, from November 19, 2015 through June 23, 2017; GRANTS post-judgment interest in accordance with 28 U.S.C. § 1961(a); GRANTS a separate judgment for $257, 500 which grants a royalty of $2, 500 per unit for the one hundred and three (103) infringing boats after the jury verdict; GRANTS enhanced damages of a factor of 1.5 times compensatory damages; GRANTS the Motion for Attorneys' Fees: and GRANTS the Motion for a Permanent Injunction.

         I. BACKGROUND[1]

         The Court held an eight (8) day trial in this matter between June 12, 2017 and June 21, 2017. See Docs. 317-337. The jury returned a verdict that Brunswick literally infringed claim 4 of U.S. Patent No. 8, 375, 880 ("the '880 patent"), infringed claims 4 and 5 of the '880 patent under the doctrine of equivalents, and willfully infringed both of those claims. The jury calculated the reasonable royalty per unit as $2, 500, with an award of $2, 690, 000. Id. The Court entered judgment on June 23, 2017. Doc. 347.

         Cobalt timely filed its post-trial Motions on July 21, 2017. Docs. 358, 364, 366, 368, 370.[2] The Parties filed a Joint Motion for Extension of Time to extend the deadline for responses and replies on the Motion for a Permanent Injunction. Doc. 377. The Court GRANTED the Motion and extended the deadlines until August 11, 2017 for a response and August 21, 2017 for a reply. Doc. 379. Brunswick responded to the other four (4) Motions on August 4, 2017. Docs. 380-83. Cobalt replied on August 10, 2017. Docs. 385-89. Brunswick responded to the Motion for a Permanent Injunction on August 11, 2017. Doc. 394. Cobalt replied in support of the Motion for a Permanent Injunction on August 21, 2017. Doc. 401. The Court ORDERED further necessary information from Brunswick on August 31, 2017. Doc. 406. Brunswick responded with an affidavit on September 29, 2017. Doc. 408.


         Federal Rule of Civil Procedure 59(e) allows the Court "to alter or amend a judgment" if a motion is filed within twenty-eight (28) days after entry. Fed.R.Civ.P. 59(e). Federal Rule of Civil Procedure 54(d)(2) requires a party seeking attorney's fees to file a motion no later than fourteen (14) days after the entry of judgment, unless a statute or court order provides otherwise. Fed.R.Civ.P. 54(d)(2).

         III. ANALYSIS

         A. Motion for Supplemental Damages

         Cobalt sought in this Motion to add two hundred and sixty (260) boats to the final judgment as the agreed number of boats with infringing swim steps that Brunswick sold from January 1, 2017 through June 23, 2017. Doc. 359 at 4. Brunswick reserved its opposition to the judgment in general but otherwise did not oppose this Motion. Doc. 380 at 1. Accordingly, the Court GRANTS the Motion for Supplemental Damages and added two hundred and sixty (260) boats to the final judgment, resulting in a final judgment of one thousand three hundred thirty six (1336) boats with infringing swim steps and $3, 340, 000 in compensatory damages when applying the jury's $2, 500 royalty rate.

         B. Motion for Interest and a Continuing Royalty

         Cobalt sought prejudgment interest, post-judgment interest, and damages for continued infringement after the entry of judgment. Doc. 364. Cobalt sought prejudgment interest at the prime rate, compounded quarterly; post-judgment interest at the statutory rate; and a continuing royalty of $3, 125 for any post-judgment infringing sales. Doc. 365 at 1. Brunswick reserved its opposition to the judgment in general, agreed that interest and continued damages are appropriate, and raised three (3) disputes regarding Cobalt's precise terms. Doc. 381 at 1-7.

         i. Rate for Prejudgment Interest

         The first dispute between the Parties concerned the appropriate interest rate for prejudgment interest. Cobalt sought the prime rate of interest for sales between April 2014 and June 23, 2017. Doc. 365 at 4. Brunswick argued that Cobalt must justify an award of the prime rate, has not provided any such justification, and as a result, was only entitled to the 52-week Treasury bill rate. Doc. 381 at 1-2. It further asserted that the 52-week Treasury bill rate "more accurately reflects what the patentee would have earned on any royalties." Id. at 3. Cobalt replied to note that the Federal Circuit does not apply any test for eligibility for the prime rate and that this District has never followed the other districts that apply such a test. Doc. 385 at 2-3. It defended its request for the prime rate by quoting the rationale for such an award in this District: "[the] prime rate best compensates a patentee for lost revenues during the period of infringement because the prime rate represents the cost of borrowing money, which is a better measure of the harm suffered as a result of the loss of the use of money over time." Morpho Detection. Inc. v. Smiths Detection. Inc.. No. 2:11cv498, 2013 WL 5701522 at *1 (E.D. Va. Oct. 17, 2013).

         "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 Instrument Corp.. 807 F.2d 964, 969 (Fed. Cir. 1986) (citations omitted). The court must exercise such discretion "to ensure that the patent owner is placed in as good a position as he would have been had the infringer entered into a reasonable royalty agreement." Id. at 967 (quoting General Motors Corp. v. Devex Corp.. 461 U.S. 648, 655-56 (1983)). Cobalt correctly observes that the Federal Circuit does not require any test before a patentee may receive pre-judgment interest at the prime rate, and this District's opinion in Morpho Detection is persuasive as to why this Court should award the prime rate rather than following other districts that have created a test for it. Thus, the Court GRANTS pre-judgment interest at the prime rate. The Court also observed that an award of interest for the entire infringement period would overcompensate Cobalt because the infringing sales occurred over time, not all at the beginning of the infringement period. Because the Parties specified that April 2014 was the start of infringement, the Court selects the middle of the month, April 15, for a starting point, and calculates the date halfway between April 15, 2014, and the judgment date of June 23, 2017. Accordingly, the Court GRANTS prejudgment interest calculated starting November 19, 2015 and ending on June 23, 2017 in order to recognize that damages were diffuse throughout the period.

         Brunswick also raised a conditional objection, arguing that prejudgment interest is not appropriate if the Court awards enhanced damages. Doc. 381 at 4. It contended that enhanced damages would adequately compensate Cobalt and that any prejudgment interest beyond that would be punitive. Id. Cobalt observed in reply that this District has previously awarded prejudgment interest limited to compensatory damages. Doc. 385 at 4 (citing NTP. Inc., 270 F.Supp.2d at 762-63). Because the Parties appear in agreement on the typical practice, the Court GRANTS prejudgment interest limited to the compensatory damages.

         ii. Frequency of Compounding for Prejudgment Interest

         The second dispute between the Parties concerned the frequency of compounding of prejudgment interest. Cobalt sought interest compounded quarterly, citing several examples of such an award in this District. Doc. 365 at 3-4. Brunswick did not dispute that compounding is appropriate, but it argued that Cobalt must prove its entitlement to compounding that is quarterly rather than annual. Doc. 381 at 3-4. Cobalt replies to note that no authority in this District has ever required some showing to obtain quarterly compounding. Doc. 385 at 3.

         Because both Parties are arguing for a different default frequency of compounding, neither offers much analysis regarding why their preferred frequency is appropriate here. It appears that courts in this District routinely grant quarterly compounding in patent infringement cases. See, e.g.. Morpho Detection. Inc.. 2013 WL 5701522, at *1; I/P Engine. Inc. v. AOL Inc.. No. 2:11cv512, 2013 WL 3991472, at *4 (E.D. Va. Aug. 1, 2013); ActiveVideo Networks. Inc. v. Verizon Commc'ns. Inc.. No. 2:10cv248, 2011 WL 4899922, at *6 (E.D. Va. Oct. 14, 2011). Brunswick's authority to the contrary only demonstrates that other districts default to annual compounding in patent infringement cases. See Doc. 381 at 3-4 (citing Kaneka Corporation v. SKC Kolon PI. Inc.. No. Ilcv3397, 2016 WL 4150756, at *28 (CD. Cal. 2016), among others). Given the sparse analysis on either side of this issue, there is little reason to depart from this District's apparent general practice. Thus, the Court GRANTS pre-judgment interest compounding quarterly.

         iii. Royalty for Continuing Damages

         The third and final dispute between the Parties on this Motion concerned the appropriate royalty for continuing damages. Cobalt sought a royalty for any post-judgment sales, acknowledging that entry of an injunction may curtail much of the need for such a royalty. Doc. 365 at 5. Specifically, it requested $3, 125 per unit, which is halfway between the jury's royalty in this case and Cobalt's requested royalty. Id., at 5. It cites Amando v. Microsoft Corp.. 517 F.3d 1353, 1361-62 & n.2 (Fed. Cir. 2008) for the proposition that a reasonable royalty is higher after a judgment of infringement. Id. at 6. Brunswick responded to note that Amando does not require a higher royalty for post-judgment infringement and to assert that its possibility of winning on appeal balances out any advantage from the judgment in what constitutes a reasonable royalty. Doc. 381 at 4-5. It asserted that a royalty no higher than the jury's royalty would be appropriate. Id. at 5-6. Cobalt contended in reply that the reasonable royalty should be higher than the jury's award at a minimum, and it continues to insist that a higher royalty is appropriate, especially since Brunswick is a willful infringer. Doc. 385 at 4-6.

         The Court FOUND at the hearing that the jury's royalty adequately compensates Cobalt for any post-judgment sales and GRANTS a continuing royalty of $2, 500. After the briefing on this Motion, Brunswick's final calculation was that it produced one thousand four hundred and thirty nine (1439) boats with infringing swim steps before it ceased production. See Doc. 408. This represents an increase of one hundred and three (103) boats with infringing swim steps over the final judgment number. Accordingly, Cobalt's final amount of continuing royalties is $257, 500 for the one hundred and three (103) additional boats with infringing swim steps.

         iv. Conclusion

         The Court GRANTS the Motion for Interest and a Continuing Royalty with prejudgment interest at the prime rate, compounded quarterly, for compensatory damages from November 19, 2015 through June 23, 2017, post-judgment interest in accordance with 28 U.S.C. § 1961(a), and a continuing royalty of $2, 500 on the post-judgment infringing products for a total of $257, 500. The Court will enter separate judgment for the $257, 500, with post-judgment interest at the statutory rate. Since the date of these additional sales was not established as significantly before the judgment date, the Court is not awarding prejudgment interest on these sales.

         C. Motion for Enhanced Damages

         Upon a finding of willful infringement, "the court may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284 (2017). Enhanced damages are in the court's discretion, and "courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount." Halo Elecs.. Inc. v. Pulse Elecs., Inc.. 136 S.Ct. 1923, 1933 (2016). "When deciding how much to award in enhanced damages, district courts often apply the non-exclusive factors articulated in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), abrogated in part on other grounds by Markman v. Westview Instruments. Inc.. 517 U.S. 370 (1996)." Georgetown Rail Equip. Co. v. Holland L.P.. No. 16-2297, ___ F.3d ___, 2017 WL 3499240, at *10 (Fed. Cir. Aug. 1, 2017) (citing i4i Ltd. P'ship v. Microsoft Corp.. 598 F.3d 831, 858-59 (Fed. Cir. 2010); Innovention Toys. LLC v. MGA Entm't. Inc.. 667 Fed.Appx. 992, 993 (Fed. Cir. 2016)).

         Before examining the Read factors, the Parties discuss a preliminary argument about whether the jury's finding is "advisory." See Doc. 382 at 5-6. Brunswick cobbles together a few unreported trademark cases labeling jury findings of willfulness as advisory and invites this Court to use the same terminology in this patent case because the Court is not obligated to grant enhanced damages in a patent case. See id. Cobalt protests that the Federal Circuit has not approved of such a treatment of jury findings in patent cases. Doc. 388 at 3-4. It also observes in its opening brief that the Federal Circuit requires courts to adequately explain their reasons for not granting enhanced damages when a jury found willfulness. Doc. 371 at 16 (citing Jureens v. CBK. Ltd.. 80 F.3d 1566, 1570 (Fed. Cir. 1996)). The argument that the Court could simply deny enhanced damages by labeling the verdict as advisory seems to go beyond current authority. See Jureens. 80 F.3d at 1566. This argument is moot since the Court agrees with the jury's finding and FINDS that Brunswick's infringement was willful based on five (5) factors: Brunswick's denial of knowledge of the relevant patent in its initial Answer, Brunswick's prior attempts at designing a heavy step in order to avoid the patent, Brunswick's failure to provide any dictionary or learned treatise or authority beyond the testimony of its expert in support of its position that its mechanism was not a lock, Brunswick's transparently false explanations for its design, and Brunswick's deceptive presentation of dealer witness testimony upon the swim step's usefulness and value.[3] The court's finding renders this advisory finding argument MOOT.

         In addition, Brunswick asserted in its briefs that the jury's royalty adequately compensates Cobalt and that the Court should decline enhanced damages on that basis. Doc. 382 at 29. It cited example cases where courts mentioned the jury's high award as part of their reason for not awarding enhanced damages. See id Cobalt observed in reply that all of Brunswick's cited cases on this issue also involved other reasons why the Court did not award enhanced damages. Doc. 388 at 18. Brunswick's argument is not persuasive because enhanced damages are warranted on the facts of this case, as explained below.

         When deciding how to exercise its discretion, the Court can obtain helpful guidance from considering the evidence under the nine (9) Read factors. Those factors are:

1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other's patent, investigated the patent and formed a good faith belief that it was invalid or that it was not infringed; (3) the infringer's behavior in the litigation; (4) the infringer's size and financial condition; (5) the closeness of the case; (6) the duration of the misconduct; (7) the remedial action by the infringer; (8) the infringer's motivation for harm; and (9) whether the infringer attempted to conceal its misconduct.

Read. 970 F.2d at 826-27.

         i. Factor One: Whether Brunswick Deliberately Copied Cobalt's Ideas or Design

         This factor weighs in favor of enhanced damages. It appears from the record that Brunswick examined the Cobalt patent and step and tried to design something as close as possible, but the evidence indicated that it either copied Cobalt's lock idea intentionally or it redesigned its way back to a lock. Both sides presented evidence for their respective views, and the jury ultimately found Cobalt's evidence more credible. The Court agrees that Brunswick willfully infringed. At least one of Brunswick's explanations about why they developed their particular hinge was not credible. See Trial Tr. at 91:2-10 (offering the explanation at issue). If a boat owner drives his boat over a rock, and he manages to pass the entire boat over that rock, the "safety" from a step that pops up when the rock hits it will be of minimal use on his destroyed boat. That explanation sounds like an ex post facto description by Brunswick to avoid a copying charge rather than an actual decision by a Brunswick engineer.[4] Thus, in light of the evidence and the finding of willful infringement, the Court FINDS that Factor One favors enhanced damages.

         ii. Factor Two: Whether Brunswick Investigated Cobalt's Patent and Formed a Good Faith Belief That It Was Invalid or That It Was Not Infringed

         This factor weighs in favor of enhanced damages. Brunswick was not willing to assert advice of counsel and waive associated privilege, which means that there is no evidence in the record of any opinion that would support a good faith belief that they did not infringe. Despite lacking that evidence, Brunswick has consistently maintained that its hinge mechanism is not a lock, and it proffered expert testimony that its belief was in good faith, but failed to adequately support such testimony in response to Cobalt's more persuasive evidence. Cobalt is also correct that other evidence indicates that Brunswick designed its final hinge mechanism in a short period of time and did not adequately consider whether it infringed the '880 patent. See Doc. 371 at 21-22. The jury found and the Court concurs that Cobalt's cited evidence is more persuasive on willfulness. As a result, the Court FINDS that Factor Two favors enhanced damages.

         iii. Factor Three: Brunswick's ...

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