Avid Identification Systems, Inc. v. Global ID Systems
Docket: No. 00-1573
Court: Court of Appeals for the Federal Circuit; February 5, 2002; Federal Appellate Court
Defendants Global ID Systems and Douglas Hull (GIDS) appeal a district court's summary judgment on counts of patent infringement, trademark infringement, unfair competition, and violations of the California Business and Professions Code, as well as the associated damages awarded. The appeals court affirms the summary judgment of liability but reverses the damages determination, remanding for resolution of factual disputes.
Avid Identification Systems (Avid) initiated the lawsuit in the Central District of California, alleging multiple infringements related to its radio frequency identification products, which allow tracking of animals via implanted transponders. Avid owns design patent No. 318,658 for its Reader and the "Avid" trademark. Hull, a former executive at Avid, established GIDS in Thailand, where he purchased Readers from Semiconductor Venture International (SVI), which originally built them for Avid. The number of Readers purchased by GIDS is contested, ranging from 569 to 1018, and their final disposition remains unclear, though Hull admits to reselling some.
Avid filed its complaint on May 22, 1998. After GIDS failed to respond, Avid sought a default judgment, which was later vacated after GIDS filed an answer. Avid's request for admissions went unanswered, leading to deemed admissions under Federal Rule of Civil Procedure 36. Avid then moved for partial summary judgment concerning GIDS's defenses, which the court granted, eliminating GIDS's affirmative defenses. Avid subsequently moved for partial summary judgment on the main infringement claims, which the court also granted on August 3, 1999.
Defendants forfeited their right to contest patent ownership by failing to timely oppose the plaintiff's initial motion for partial summary judgment. The court found GIDS’s sale of goods under the Avid trademark to be in violation of federal and state trademark laws. Avid filed for damages and injunctive relief on October 15, 1999, leading to the court awarding $540,550.00 in damages on February 16, 2000, alongside permanent injunctive relief. On appeal, defendants raised three issues: 1) denial of GIDS's motion to withdraw deemed admissions; 2) granting of summary adjudication on liability; and 3) the denial of a trial on damages. Jurisdiction is based on 28 U.S.C. § 1295(a), with procedural matters reviewed under the relevant regional circuit law, here the Ninth Circuit. The Ninth Circuit reviews rulings on deemed admissions for abuse of discretion. The court reviews summary judgment de novo, determining appropriateness based on whether any material fact is genuinely in dispute. Avid contended that GIDS did not preserve its right to appeal the deemed admissions ruling because it did not appeal the magistrate judge’s order. GIDS's failure to appeal resulted in waiver of its opportunity to contest the decision. Due to these deemed admissions, GIDS could not raise factual disputes on liability, but a genuine issue regarding the number of infringing Readers sold in the U.S. remained. The district court accepted GIDS's data on Reader purchases for calculating damages, determining GIDS purchased 569 Readers at $550 each, and allowed GIDS to mitigate damages through the return of the Readers.
The district court's analysis of damages was flawed in two key respects. Firstly, it failed to recognize that liability arises only for Readers sold or used within the United States. Secondly, the court improperly shifted the burden of proof regarding damages to the defendant, GIDS, instead of placing it on the plaintiff as required by law. The district court's reliance on the figure of 569 units, which GIDS admitted to purchasing in Thailand, was inappropriate since it did not reflect the actual sales or usage within the U.S. According to 28 U.S.C. § 271(a), infringing acts include making, using, selling, or importing patented inventions in the U.S., and the relevant issue is how many Readers were involved in such acts. GIDS admitted to selling only 10 units in the U.S., indicating a genuine dispute over the total number of infringing units. The court also erred in assuming GIDS had to disprove the 569 figure without evidence of bad faith on their part regarding missing business records. Consequently, due to the existence of material factual disputes about both the number of infringing Readers and the damages associated with each, the district court’s judgment on damages was reversed, while the liability judgment was affirmed, and the damages issue was remanded for further fact resolution. No costs were awarded.
Federal Rule of Civil Procedure 36 allows a party to serve written requests for the admission of facts or the application of law to facts, including the authenticity of documents, relevant to a case. Each request must be distinctly stated, and if the receiving party does not respond with a written answer or objection within 30 days, the requested admission is automatically deemed admitted. An admission established under this rule is conclusive unless the court allows for its withdrawal or amendment. In the context of a trademark and patent infringement case, although the district court suggested that damages for trademark infringement should be distinct from patent infringement, its calculations imply that trademark damages were included in the patent damages, resulting in a potentially misleading total. The ruling on remand calls for clarification on this issue.
