Amsted Industries Incorporated, Plaintiff/cross-Appellant v. Buckeye Steel Castings Company

Citations: 24 F.3d 178; 1994 WL 135277Docket: 93-1333

Court: Court of Appeals for the Federal Circuit; May 24, 1994; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Buckeye Steel Castings Company appeals a final judgment from the United States District Court for the Northern District of Illinois favoring Amsted Industries Incorporated. The court found Buckeye willfully infringed Amsted's U.S. Patent 3,664,269, awarding Amsted $1,497,232 in damages. Buckeye also contests the district court's decision to enhance damages and award attorney fees. Amsted cross-appeals regarding the damages amount. The district court denied both parties' motions for judgment as a matter of law on the issues of willful infringement and damages. The Federal Circuit affirmed the findings on willful infringement, enhanced damages, and attorney fees but vacated and remanded the damages issue.

The '269 patent, titled "Combined Body Bolster Center Filler and Center Plate for Railway Cars," claims a specific center plate for railroad car underframe structures. The patent was initially assigned to Dresser Industries and later sold to Amsted. Buckeye, aware of the patent since 1976, attempted to create a design that circumvented it but ultimately copied the Low Profile center plate, despite legal advice warning of potential infringement.

Amsted filed a suit against Buckeye for contributory infringement in 1991, alleging willful infringement. The jury found in favor of Amsted on all counts, confirming the patent's validity and determining the damages based on Amsted's lost profits following notification of the infringement. Post-trial, Buckeye sought judgment as a matter of law or a new trial, while Amsted pursued enhanced damages and attorney fees, leading to the district court's rulings on these matters.

Buckeye appeals only the jury's findings related to willful infringement, enhanced damages, attorney fees, and notice under section 287(a), not the infringement or validity of the '269 patent. Amsted cross-appeals regarding the limitation of its damages under section 287(a). The jury determined that Buckeye's infringement was willful, supported by sufficient evidence indicating Buckeye acted with deliberate or reckless disregard for Amsted’s patent rights. The district court upheld this finding, stating it was based on the totality of circumstances. Buckeye contends this determination was erroneous, arguing it had a good faith belief in the patent's invalidity, supported by testimony from its engineering director and written opinions from counsel. However, the law establishes that potential infringers have a duty of due care, including obtaining competent legal advice before engaging in potentially infringing activities. While obtaining an opinion of counsel can influence findings of willfulness, it is not conclusive; the opinion's nature and its impact on the infringer's actions are critical. Thus, the appeal hinges on whether substantial evidence supports the jury's verdict, with a review favoring Amsted as the non-moving party.

Downes testified that he relied on a Pigott opinion from October 13, 1976, which, while addressing infringement, explicitly stated it would not discuss validity in detail. Pigott described this opinion as preliminary and not intended for final reliance by Buckeye. In 1980, Pigott was aware of another attorney's opinion suggesting the '269 patent was likely invalid due to prior art. The first opinion addressing validity came in 1982, initiated by a request from Downes regarding the Dresser Center Plate. Pigott conducted a validity search and concluded the patent was probably invalid for obviousness, but he requested Downes or another Buckeye representative to confirm or dispute his findings and indicate if any measures could avoid infringement.

There is no evidence that Buckeye responded to this request. Instead, on August 24, 1984, Buckeye decided to copy the patented invention. Pigott later reiterated his strong belief in the patent's invalidity but also warned that Buckeye's proposed center plate would likely infringe the patent. As late as March 2, 1989, Pigott acknowledged that no thorough prior art search had been conducted.

The evidence suggests that Downes understood the 1982 letter was not a complete validity analysis, casting doubt on his good faith belief in the patent's invalidity when deciding to copy the plate. Additionally, there was evidence that Pigott was not fully informed about the patented invention's functions, and Downes failed to correct Pigott's misunderstandings. Pigott consistently stated that the spacer plates served only a reinforcement function. However, Downes' testimony indicated he was aware that the spacer plates also transferred load into the center plate, suggesting he knew more than he communicated to Pigott.

At the time of receiving Mr. Pigott's letters questioning the validity of the '269 patent, the witness did not believe that the sole invention pertained to using spacer plates for reinforcing the sill. While the witness acknowledged that reinforcing the sill was an important function of the spacer plates, he indicated that it was not the only function. The jury could reasonably infer that Downes was aware that Pigott lacked a complete understanding of the invention, impacting the validity of Pigott's opinions. 

Furthermore, Downes did not present objective evidence of nonobviousness to Pigott, failing to inform him of skepticism expressed by skilled individuals regarding the invention's functionality. Buckeye argued that Downes' uncontradicted testimony of a good faith belief in the patent's invalidity should be accepted, but the court clarified that the jury has the discretion to assess witness credibility and the weight of testimony. Consequently, the jury could reasonably determine that Downes did not genuinely believe the patent was invalid when deciding to copy it, supporting the finding of willful infringement.

Regarding enhanced damages, Buckeye challenged the district court's decision to grant treble damages under 35 U.S.C. Sec. 284. The court has discretion in deciding on damage enhancements, which will only be overturned for clear abuse of discretion. In awarding the maximum enhancement, the court considered factors from the Read Corp. case, including deliberate copying and the infringer's conduct during litigation. The court concluded that Buckeye's deliberate copying and litigation behavior warranted full legal effect of the jury's willfulness finding, entitling Amsted to treble damages.

Buckeye contends that the court improperly exercised its discretion by trebling Amsted's damage award, claiming errors in the court's findings and alleging a failure to consider mitigating factors. All of Buckeye's arguments are rejected, as Buckeye admitted to intentionally copying the patented invention, and the jury's finding of willfulness is upheld. The district court correctly determined that Buckeye did not possess a good faith belief regarding the patent's validity and found that Buckeye acted inappropriately during litigation by submitting numerous meritless motions, including one that violated a court order. The trial judge's authority to evaluate litigation conduct and make equitable decisions regarding damage awards is affirmed, and the decision to triple Amsted's damages is deemed appropriate.

Buckeye also contests the district court's award of attorney fees to Amsted under 35 U.S.C. Sec. 285, which allows for fees in exceptional cases. The determination of whether a case is exceptional is a factual one, reviewed for clear error, while the decision to award fees lies within the trial judge's discretion. Given the jury's finding of willful infringement, the district court's classification of the case as exceptional is upheld as not clearly erroneous, and no abuse of discretion is found regarding the attorney fee award.

Amsted's cross-appeal addresses the district court's ruling limiting its recovery of damages due to the absence of proper marking of the patented articles. According to 35 U.S.C. Sec. 287, patentees must mark their products to recover damages, unless they notify the infringer of the infringement, with damages recoverable only post-notification. The court determined that Amsted's customers were implied licensees who were making or selling the patented articles, thereby obligating Amsted to fulfill its marking duty under Section 287.

Amsted contends that section 287(a) does not limit its damages because it did not manufacture the patented articles, and its customers, who did, did not operate 'for or under' Amsted. Therefore, Amsted argues that its damages should not depend on the marking or notice requirements of section 287(a) and should commence from the onset of Buckeye's infringement. The critical issue is interpreting the 'for or under' language of section 287(a), which is a matter of statutory construction reviewed for correctness. A licensee that makes or sells a patented article does so 'for or under' the patentee, thereby limiting the patentee's recovery if the article is unmarked.

The purpose of section 287 is to motivate patentees to notify the public about patent status; thus, it applies to both express and implied licensees. Amsted implicitly authorized its customers to manufacture, use, and sell the patented articles, illustrated by its provision of installation drawings and the sale of related components. Amsted's argument against marking, citing potential violation of 35 U.S.C. Sec. 292, is unconvincing, as appropriate marking could have been achieved without infringement. Consequently, Amsted's ability to recover damages prior to notification relies on adherence to marking or notice requirements under section 287(a). Since the articles sold by its customers were unmarked, Amsted cannot recover damages before Buckeye was notified of the infringement.

The next issue concerns which of two letters from Amsted to Buckeye constituted effective notice under section 287. The 1986 letter, which informed Buckeye of Amsted's ownership of the '269 patent and warned against infringement, was sent to multiple companies but did not explicitly accuse Buckeye of infringement. The 1989 letter referred to the 1986 correspondence and reiterated Amsted's position on its patent rights.

The document asserts that the center plate or its application to a freight car infringes the '269 patent, demanding an immediate cessation of unauthorized production and sales of infringing castings. The parties acknowledge that a 1989 letter served as proper notice, but dispute whether a 1986 letter met the notice requirements. A jury concluded that the 1986 letter constituted statutory notice, with the court affirming that specific charges of infringement are not mandated under section 287, noting evidence that Buckeye was aware of its infringement upon receiving the letter. Buckeye contends the 1986 letter was insufficient as it lacked a specific infringement charge, arguing they were not notified until the 1989 letter, thus precluding damage recovery prior to that date. In contrast, Amsted claims the notice provision only requires informing the defendant of the type of infringing product and maintains that Buckeye's prior knowledge of the patent sufficed for notification. The interpretation of "notified of the infringement" is a legal question for review. Section 287(a) stipulates that absent marking, a patentee cannot recover damages without notifying the infringer of the infringement. The precedent set in Dunlap v. Schofield emphasizes that notice must be an affirmative act by the patentee, specifically informing the defendant of their infringement, which the document regards as persuasive in interpreting section 287's notice requirement.

Notice of infringement under section 287(a) must communicate a specific charge of infringement related to a particular accused product, rather than simply informing the infringer of the patent's existence. The 1986 letter from Amsted to Buckeye did not satisfy this requirement, as it only informed the industry of Amsted's patent ownership and advised against infringement without specifically charging Buckeye with infringement. Therefore, Amsted did not provide adequate notice until its 1989 letter, which explicitly identified Buckeye's infringement. The district court erred in denying Buckeye's motion for judgment as a matter of law (JMOL) on this issue, as damages can only be recovered post-notification. 

Regarding the jury's damage award, Buckeye claimed it was excessive due to failure to account for a $40 charge per center plate that Amsted owed Dresser, but the district court found Buckeye had waived this argument by not objecting during the trial. The court concluded that there was no evidence the jury included the $40 charge in its award, and the jury's decision was supported by sufficient evidence. 

The district court's rulings on willful infringement and the awarding of treble damages and attorney fees were upheld. However, the court's decision regarding the appropriate notice date for damages was incorrect, leading to a remand for recalculating damages from the date of the 1989 letter. Each party will bear its own costs, and the judgment is affirmed in part, vacated in part, and remanded for further proceedings.

Both parties reference district court cases to support their arguments, but these cases are not binding. Approval is noted for Buckeye's reliance on *In re Yarn Processing*, which asserts that section 287 applies to non-manufacturing patentees who license others to produce or sell patented articles, regardless of the authorization's form. The discussion includes *Dunlap*, which pertains to the previous statute, Revised Statute 4900, that required patentees to provide notice of the patent. Under this statute, failure to mark precluded damage recovery unless the infringer was notified and continued infringement. The statement in *AMS* clarifies that cases under previous statutes do not control the current interpretation of section 287(a), particularly as the current provision allows patentees to optionally provide notice, contrasting the former mandatory requirement. As established in *AMS*, delays in marking do not impede damage recovery for infringements occurring after marking begins. Additionally, the district court's assertion that the notice requirement is met if the infringer acknowledges a notice of infringement is not evaluated, as there is no evidence that Buckeye recognized a 1986 letter as such.