Tinnus Enters., LLC v. Telebrands Corp.

Citation: 369 F. Supp. 3d 704Docket: CIVIL ACTION NO. 6:16-CV-00033-RWS

Court: District Court, E.D. Texas; March 15, 2019; Federal District Court

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The Court addressed several post-trial motions from the parties involved in a patent infringement case regarding water balloon products. The motions included plaintiffs' requests for enhanced damages, apportionment of damages, a permanent injunction, and prejudgment and post-judgment interest, all of which were granted. The defendants' motions for judgment as a matter of law and for a new trial were partially granted and partially denied, while a renewed supplemental motion was denied. Additionally, the plaintiffs' motion to declare the consolidated cases exceptional for the purpose of awarding attorneys' fees was granted.

The case revolves around patents owned by Tinnus Enterprises, specifically concerning products that fill multiple water balloons simultaneously. The plaintiffs, Tinnus Enterprises and Zuru Ltd., accused defendants Telebrands Corporation and Bulbhead.com, LLC, of infringing on these patents, particularly U.S. Patent Nos. 9,315,282 and 9,242,749. The Court previously granted a preliminary injunction against Telebrands' Balloon Bonanza product. Subsequently, the plaintiffs filed additional suits against various retailers for infringement, leading to a consolidated action and further injunctions against both Telebrands and the retailers.

The Federal Circuit affirmed injunctions against Telebrands and its retailers in the case Tinnus Enterprises, LLC v. Telebrands Corp. Following a consolidated jury trial in November 2017, the jury found that Telebrands infringed claims 1-3 of the '282 Patent and claim 1 of the '749 Patent, both of which were deemed valid. The jury awarded Plaintiffs $10,250,000 in lost profits, $2,000,000 in reasonable royalties, and $67,000 for retailer infringement, also determining that the infringement was willful.

Plaintiffs have moved for enhanced damages under 35 U.S.C. § 284, which allows for damages to be increased up to three times in exceptional cases at the court's discretion. In determining enhanced damages, courts consider the circumstances and apply the nine non-exclusive factors from Read Corp. v. Portec, Inc., which include whether the infringer copied the patent, conducted a good-faith belief investigation, and the infringer's conduct during litigation. The analysis focuses on "egregious infringement behavior" rather than a strict application of the factors.

Plaintiffs contend that Telebrands' infringement was particularly egregious, citing internal communications that reflect intent to copy their "Bunch O Balloons" product. They argue that Telebrands did not present evidence of a reasonable investigation into the validity or non-infringement of the patents and that their litigation tactics were aimed at delaying the case and increasing costs.

Plaintiffs accuse Defendants of filing dilatory motions, trying to reintroduce excluded Post Grant Review (PGR) proceedings, repeatedly presenting previously rejected claim constructions, and engaging in inappropriate discovery practices that resulted in delays and expenses. Plaintiffs assert that Defendants lacked a legitimate defense against infringement or invalidity claims concerning the patents in question, arguing that Defendants' misconduct spanned the entire duration of the patent validity and that infringement began upon the patents' issuance and continued until an injunction was imposed. Additionally, Plaintiffs claim Defendants attempted to obscure their motivations for developing the Battle Balloons product under claims of privilege, later altering their narrative at trial regarding the development's leadership. They argue these circumstances justify enhancing the jury's damages award to the maximum allowed under 35 U.S.C. § 284, totaling $36,951,000.

In contrast, Defendants maintain that the case was closely contested and assert that their non-infringement and invalidity defenses were reasonable. Telebrands claims that the Battle Balloons product was designed to circumvent the '066 Patent to avoid litigation and believed it had not infringed upon the patent due to its understanding of the patent's limitations. Telebrands also states that it had a good-faith belief in the invalidity of the patents based on PTAB proceedings and that it had begun selling the potentially infringing product before the patents were issued. Furthermore, Telebrands argues its reliance on expert opinions supports its position against enhancement of damages, asserting that its litigation conduct was not egregious, especially after stipulating to infringement of the '282 Patent. Finally, Telebrands emphasizes its limited size and financial condition, arguing that the damages sought would significantly impact its yearly profits, asserting there was no intent to harm Plaintiffs or conceal any wrongdoing.

Defendants' alleged deliberate copying of Plaintiffs' ideas or designs is supported by internal communications from Telebrands regarding the development of the Balloon Bonanza product, which was inspired by Mr. Malone's Kickstarter campaign. Evidence presented at trial indicates that Telebrands collaborated with consultant Mr. Rogai to create a product similar to Plaintiffs' Bunch O Balloons, with emails detailing the development process and acknowledging the similarities. Although Balloon Bonanza is not the accused product, it is relevant as the precursor to Battle Balloons, which was modified superficially after Balloon Bonanza was enjoined. The court finds that the evidence shows Telebrands copied Mr. Malone's idea, favoring enhanced damages.

Regarding Defendants' investigation of Plaintiffs' patent, Plaintiffs argue that the lack of evidence supporting a good-faith belief in non-infringement or invalidity strengthens their case for enhanced damages. They contend that Defendants waived their advice of counsel defense and that their expert, Dr. Kamrin, provided flawed opinions that were excluded by the court and did not adequately address non-obviousness. Conversely, Defendants claim a good-faith belief in non-infringement based on their interpretation of patent terms and assert that they believed the patent was invalid due to PTAB actions regarding related patents. The court emphasizes the importance of the case's timeline in its analysis.

On January 4, 2016, the Patent Trial and Appeal Board (PTAB) authorized a post-grant review of the '066 Patent, concluding that Telebrands was likely to prevail in showing the challenged claims, except for claims 7 and 9, were unpatentable. The '749 Patent was issued on January 26, 2016, followed by the '282 Patent on April 19, 2016. Defendants may have reasonably believed they did not infringe the '749 Patent, as Telebrands stated that the Battle Balloons product was designed to avoid the "common face" and "second end" limitations of the '066 Patent and was released prior to the '749 Patent's issuance. Plaintiffs became aware of Battle Balloons on January 11, 2016. After the '749 Patent was issued, Dr. Kamrin analyzed it and concluded that Battle Balloons did not infringe because it avoided the relevant limitations, and he deemed the '749 Patent invalid due to similarities with the '066 Patent. However, defenses related to the '282 Patent are not applicable, as it lacks those specific terms. The Defendants conceded to infringing the '282 Patent at trial but argued they had a good-faith belief in its invalidity based on obviousness and lack of written description, supported by Dr. Kamrin's analysis. The court questioned the "good-faith" nature of Defendants' beliefs, noting the lack of consideration for secondary factors in Dr. Kamrin's opinions. Despite their investigation into the '282 Patent, the court remained unconvinced of Defendants' good-faith belief in its invalidity, rendering this factor neutral.

Regarding litigation conduct, Plaintiffs accused Defendants of tactics intended to delay proceedings and increase costs, citing numerous dilatory motions and frivolous positions. Defendants countered that they cooperated with Plaintiffs in discovery and that their actions were justified. The court noted excessive motion practice and abuse of emergency procedures by Telebrands, leading to significant resource expenditure for both parties and the court. Consequently, the court found this factor favored enhanced damages.

Telebrands filed a motion to reconsider the Court's preliminary injunction after a comprehensive evidentiary hearing and extensive briefings, which was denied as baseless, and the injunction was upheld on appeal. Telebrands also sought to stay the injunction multiple times, but all motions were denied, with the Court stating that the factors did not support a stay. The PTAB later determined that the claims asserted by Telebrands were not invalid. In the lead-up to trial, Telebrands filed a motion to dismiss after the deadline for dispositive motions, which the Court viewed as an attempt to delay proceedings. This excessive motion practice influenced the decision to enhance damages due to obstructive intent. 

In terms of discovery conduct, Telebrands was found to have unjustifiably refused to produce documents related to its Easy Einstein Balloons product, leading to a motion to compel from the Plaintiffs. The Magistrate Judge deemed Telebrands' refusal unwarranted, resulting in an order for costs and fees due to wasted resources from unnecessary discovery disputes. Telebrands also resisted producing documents related to PGR proceedings, causing further complications that could have been avoided with good-faith negotiations.

Additionally, Telebrands engaged in repeated re-argument over terms previously construed by the Court, which added to unnecessary litigation efforts. The overall conduct of Telebrands in these matters contributed to the determination that enhanced damages were warranted.

At the preliminary injunction stage, the Court evaluated Dr. Kamrin's testimony and determined that his interpretation of "common face" exaggerated the Court's previous definition, leading to the rejection of the Defendants' narrower interpretation. The Court clarified its construction regarding "second end" after resolving expert disputes. This led to a finding of a likelihood of success on the merits regarding claim 1 of the '749 Patent. Despite the Court's previous rulings, Defendants continued to challenge the claim meanings, prompting another claim construction hearing where the Court reaffirmed its prior interpretations. Dr. Kamrin persisted with his original opinions, resulting in Plaintiffs moving to strike portions of his report deemed irrelevant, which the Court approved. The Court cautioned that any future violations of its claim construction order by Dr. Kamrin could result in sanctions. Defendants' attempts to reassert rejected claims were noted, with a Magistrate Judge indicating that their positions could be preserved for appeal without the need for further argument. Due to Defendants' ongoing circumventions of court orders, the Court considered this behavior as a factor favoring enhanced damages.

Additionally, Plaintiffs argued that Defendants maintained untenable positions regarding non-infringement of the '282 Patent and inequitable conduct. Defendants claimed their stipulation of infringement was a tactical move to streamline the case, and the withdrawal of the inequitable conduct claim did not impose burdens on Plaintiffs. While the Court generally values efforts to narrow claims as cases approach trial, in this instance, the late dismissal of issues resulted in significant resource waste. The Court acknowledged that Telebrands was aware of the weakness of its inequitable conduct claim, which barely survived initial dismissal motions. Nevertheless, the allegations suggested a potential failure to properly notify the PTO regarding a PGR decision, allowing for some discovery on this counterclaim. Ultimately, the Court granted a motion for summary judgment regarding inequitable conduct, which was deemed baseless by the Magistrate Judge, with no objections from Defendants.

Defendants' non-infringement defense relied solely on interpretations of terms not included in the claims of the '282 Patent, yet they refused to acknowledge infringement until trial, despite a preliminary injunction from the Court. This behavior favors enhanced damages. During trial, Defendants filed multiple motions on issues already adjudicated and ignored the Court’s clear prohibition against discussing PTAB or PGR proceedings in front of the jury. They repeatedly violated this ruling by attempting to introduce inadmissible evidence and soliciting testimony related to these prohibited proceedings, despite the Court's sustained objections. Defendants' counsel displayed a blatant disregard for the Court's orders, continuing to raise prohibited issues throughout the trial. An objection concerning testimony on lost profits was resolved when Plaintiffs’ counsel agreed to modify the evidence presented, leading Defendants to withdraw their objection.

Defendants' counsel violated their own objection during cross-examination by soliciting testimony from Mr. Ratliff regarding previously objected-to information. The Court reprimanded Defendants' counsel for this conduct, highlighting that their actions opened the door to the subject matter they later complained about. The Court warned that such behavior could result in a reduction of their closing argument time. The Defendants' overall conduct throughout the litigation was deemed problematic, with the Court indicating that their actions created unnecessary complications for both the parties and the Court, warranting potential sanctions.

Regarding the financial condition of Defendants, Plaintiffs presented evidence of substantial revenue and profits for Telebrands, asserting its position as a leader in the infomercial market. Telebrands, however, claimed to be a small company with limited employees and margins. The Court found this financial factor neutral.

Plaintiffs contended that the case was not close, as Defendants failed to provide a legitimate defense for the patents in question. The Court previously determined that Plaintiffs demonstrated a likelihood of success during preliminary injunction proceedings. Defendants did not introduce new defenses and repeatedly attempted to argue previously rejected claim constructions. They did not contest infringement at trial and only pursued invalidity defenses that had already been deemed unpersuasive. After a brief jury deliberation, the jury concluded that Defendants had willfully infringed the patents and upheld their validity, which aligns with case law indicating that willful infringement favors enhancement of damages.

The Court concludes that the duration of the Defendants' misconduct favors enhancement of damages. Although the infringement period was approximately nine months, significant factors include the Defendants' continued sale of infringing products from July 2016 until the issuance of injunctions in October 2016 and February 2017. Plaintiffs highlighted that Telebrands was aware of Mr. Malone's '066 Patent as early as June 2015 and that their redesign efforts were superficial, failing to likely alter the infringement outcome. The Court noted that Telebrands continued selling infringing products even after receiving notice of the infringement and during litigation, which supports the decision for enhanced damages. 

Regarding remedial actions, Plaintiffs argued that Telebrands did not take any steps to cease selling the accused products after being notified of the infringement. Telebrands' design-around efforts were deemed insufficient and primarily motivated by the preliminary injunction rather than genuine remedial action. The Court found that Telebrands' CEO admitted the redesign efforts were initiated only after the Court's recommendations, indicating a lack of proactive compliance. The Court further stated that Telebrands attempted to hide its redesign efforts, which led to sanctions. As the Defendants failed to take meaningful remedial action and only acted under court pressure, this factor also supports enhancement of damages.

Defendants' motivation for harming Plaintiffs is highlighted by Plaintiffs' claims that Telebrands copied their product and repeatedly introduced new infringing items despite injunctions, indicating an intent to harm. Defendants counter that their primary motivation was commercial gain. Although Defendants had profit-based incentives, their market position as the only two competitors meant that any profit for them came at Plaintiffs' loss. The jury's finding of willful infringement supports the argument for enhanced damages.

Regarding concealment of misconduct, Plaintiffs assert that Defendants tried to hide their Easy Einstein and Battle Balloons products. Defendants argue they disclosed the Battle Balloons prior to patent issuance and claimed their design-around motivations were legitimate. However, Telebrands was not transparent about the Easy Einstein product, necessitating Plaintiffs to compel information production, which Telebrands resisted, claiming irrelevance. The Court found Telebrands' withholding unjustified, leading to an enhancement factor in damages.

The Retailer Defendants, while primarily focused on Telebrands' actions, played an active role in the infringement by sharing legal representation and defense strategies. They were also indemnified by Telebrands. During injunction proceedings, the Retailers declined to be bound by rulings against Telebrands, leading to separate injunctions issued against them. Their refusal to comply prolonged the litigation related to approximately 200,000 units of balloon inventory, and they failed to provide necessary inventory disclosures, further supporting the case for enhanced damages.

None of the Retailers provided inventory accounts, which are typically expected in business operations. The Court denied a motion to stay the case concerning the Retailers, emphasizing that the necessity to consider injunctive relief for their inventory indicates that the claims against them are significant, not peripheral. The Court noted that the Retailers' lack of cooperation in discovery warranted allowing the Plaintiffs to seek relief against them. Despite an injunction, at least one Retailer continued selling the disputed products. The Court acknowledged the parties for resolving some issues without further intervention but pointed out that communication failures led to the need for an in-person meeting to address concerns. The Court indicated that a proper meet and confer could minimize unnecessary court involvement in future matters.

The Court has the discretion to enhance damages up to three times the amount assessed per 35 U.S.C. 284. The case began with a flawed attempt to design around the Plaintiffs' invention, which was deemed merely cosmetic. While full trebling of damages was not warranted due to the Defendants' ongoing litigation misconduct, a 100% enhancement was deemed appropriate, resulting in a total damages award of $24,500,000 for Telebrands and $106,488 for the Retailers. The jury's initial award of $12,250,000 for Telebrands was increased due to the enhancement, while the Retailers' award was adjusted based on a granted judgment as a matter of law (JMOL) regarding one Retailer's willfulness. 

Additionally, the Plaintiffs filed a motion to re-apportion damages among the Retailers, claiming that each is liable for reasonable royalties on infringing products sold, totaling nearly $1 million collectively.

Plaintiffs presented a damages model from their expert, indicating that the Retailers owe a "Total Adjusted Royalty," which includes "overlapping" sales amounting to $981,623. They assert that the Court should clarify this obligation and claim they previously raised this concern. In contrast, Defendants highlight that the jury capped the Retailers' liability at $67,000, as per Question 4c of the verdict form, and argue that the demonstrative exhibit PTX-254 was never submitted to the jury. Defendants also contend that Plaintiffs' request essentially seeks to have the Court replace the jury's decision, arguing that Plaintiffs did not adequately present their concerns during the jury charge conference. The Court maintains that it will not alter the verdict form, which it finds clear and unambiguous, and that Plaintiffs had the opportunity to address their issues with the verdict during the charge conference but failed to do so. Furthermore, the Court references a precedent indicating that failure to object to the verdict form prior to jury deliberations waives such issues. Consequently, Plaintiffs' Motion for Apportionment of Damages is denied. The text also outlines the standards for granting judgment as a matter of law, emphasizing the deference given to jury verdicts under Fifth Circuit law, and asserts that a jury's findings should not be overturned unless the evidence overwhelmingly favors one party.

In Cousin v. Trans Union Corp., the Fifth Circuit establishes that to avoid judgment as a matter of law, there must be more than a mere scintilla of evidence. A court evaluating such a motion must draw all reasonable inferences in favor of the verdict and cannot substitute its own inferences. It is required to disregard evidence favorable to the moving party that the jury is not compelled to believe and must refrain from making credibility determinations or weighing evidence, which are the jury's responsibilities. Uncontradicted and unimpeached evidence from disinterested witnesses is given credence.

In the Defendants' Renewed Motions for Judgment as a Matter of Law, four primary arguments are presented: (1) both patents are invalid as a matter of law; (2) there is insufficient evidence for a reasonable jury to find infringement of the '749 Patent; (3) there is inadequate basis for a reasonable jury to find willful infringement of either patent; and (4) Plaintiffs cannot recover lost profits, including price erosion damages and excess freight charges. 

In response, the Plaintiffs assert that the jury's verdict regarding the invalidity of both patents should be upheld, arguing substantial evidence supports the jury's findings on infringement and willfulness. They also contend that the jury reasonably found that Zuru Ltd. incurred lost profits.

Regarding patent invalidity, the concept of obviousness is defined under 35 U.S.C.A. § 103, stating that a patent is obvious if the claimed invention's differences from prior art would have been apparent to a person of ordinary skill in the relevant field before the effective filing date. Obviousness is a legal question based on factual findings that include the scope of prior art, differences from prior art, the skill level in the art, and objective indicia of nonobviousness.

A party attempting to invalidate a patent on the grounds of obviousness must provide clear and convincing evidence that a skilled artisan would have been motivated to combine prior art teachings to arrive at the claimed invention, and that there was a reasonable expectation of success in doing so. The Defendants failed to meet this burden for any claims, as the Plaintiffs presented sufficient evidence for a reasonable jury to conclude that the claims were not obvious. Notably, Plaintiffs’ expert, Dr. Kudrowitz, testified that the "sufficiently limited" limitation was absent in all prior art references, specifically addressing the Donaldson and Lee references. Additionally, the jury received extensive evidence demonstrating a lack of motivation to combine the teachings of prior art.

Plaintiffs also provided substantial objective indicia of nonobviousness, which can be compelling evidence in such cases. Evidence included testimony regarding copying by Telebrands of the Plaintiffs' Bunch O Balloons product, as well as the commercial success of both the Plaintiffs' product and the accused infringer's product, Battle Balloons. The jury also heard about industry praise, notably an appearance on the Today Show, and long-felt need, with testimony indicating the invention addressed the issue of filling and tying multiple balloons simultaneously. 

Defendants conceded the existence of non-infringing alternatives, and their expert, Dr. Kamrin, did not consider objective indicia in his obviousness analysis, stating that secondary considerations were not discussed. This omission raises questions about the appropriateness of granting Defendants' motion for judgment as a matter of law (JMOL) on obviousness, as established case law suggests that an expert must evaluate all relevant factors when addressing the ultimate question of obviousness. Consequently, the court denied the Defendants' JMOL for invalidity based on obviousness.

Defendants failed to provide clear and convincing evidence that claims 1-3 of the '282 Patent are invalid due to inadequate written description under 35 U.S.C. § 112(a). The requirement is met if the patentee conveys to a person of ordinary skill in the art (POSITA) that they possessed the invention as of the filing date. This determination is a factual question, and courts must defer to jury findings. Drawings may suffice as a written description. Defendants argue that the patent does not support the requirement for containers to press together when unfilled. However, the jury had substantial evidence indicating the patent's validity, including Dr. Kudrowitz's testimony that Figure 1 shows containers in an unfilled state and that they appear to touch, which a POSITA would assume. Figure 2 also supports the written description adequacy. Consequently, Defendants' motion for judgment as a matter of law (JMOL) on written description invalidity was denied.

Regarding the '749 Patent, Defendants contend that the accused products do not infringe because they lack specific features outlined in the patent. Plaintiffs counter that there was substantial evidence supporting the jury's infringement finding, including Dr. Kudrowitz's testimony, which confirmed that each claim element was present in the accused products. His analysis, based on the Court's claim construction, demonstrated that the products met the requirement for a "plurality of holes extending through a common face of the housing," leading to the conclusion that infringement occurred. The jury's finding on this issue was also deemed supported by the evidence presented.

Two or more holes must extend through the "common face of the housing," as clarified during cross-examination. Dr. Kudrowitz disagreed with Dr. Kamrin regarding the definition of the "second end," asserting that it is defined as an outer limit of the housing distinct from the first end, without reference to linear opposites. The jury received substantial evidence supporting its findings, leading to the denial of the Defendants' Judgment as a Matter of Law (JMOL) for non-infringement of the '749 Patent.

Regarding willfulness, the court denied the JMOL for Telebrands and all Retailers except Fry's Electronics. Evidence indicated that Telebrands willfully infringed, as shown by internal communications planning to copy the Plaintiffs' product. The Retailers also presented sufficient evidence for a willfulness finding, including acknowledgment of infringement and continued sales after the lawsuit commenced. In contrast, Fry's Electronics was granted JMOL for willfulness due to a lack of witness testimony, resulting in exclusion of damages related to Fry's from any enhancement.

As to lost profits, 35 U.S.C. § 284 requires damages adequate to compensate for patent infringement, with the burden of proof resting on the patentee. The law allows for a reasonable royalty and has been interpreted broadly regarding recoverable damages. To recover lost profits, the patentee must demonstrate a reasonable probability of having made the sales that the infringer achieved. The parties have a history of disputes over damages, with multiple motions filed before trial concerning lost profits and extensive hearings conducted by both the Magistrate Judge and the court. The issue of lost profits arose notably when the Defendants filed a motion arguing that the Plaintiffs were not entitled to such damages.

Defendants contended that Plaintiffs' Bunch O Balloons products were sold by Zuru Inc., a non-party, which meant Zuru Ltd. could not claim lost profits from those sales. In response, Plaintiffs sought to join all Zuru entities, leading to motions from both Plaintiffs and Zuru entities to intervene. The Magistrate Judge and the Court agreed that Zuru Ltd. could not recover for sales attributed to other Zuru entities, including Zuru Inc., although sales to Wal-Mart were preserved for trial due to unresolved factual disputes indicated by evidence like purchase orders and invoices. The motions to join Zuru Inc. were denied, and Plaintiffs' subsequent Motion to Reconsider was rejected, affirming that Zuru Inc. lacked exclusive rights to damages. Defendants raised the issue of lost profits again with last-minute motions before trial, which the Court denied, allowing testimony on Zuru Ltd.'s sales.

Post-trial, Defendants filed a Renewed Motion for Judgment as a Matter of Law, arguing Zuru Ltd. was ineligible for lost profits, claiming it never took title to the products. After post-trial briefs, Defendants sought to reopen discovery due to new evidence concerning Zuru Ltd.'s sales. The Court allowed further factual development and reopened discovery for 60 days, resolving related disputes and setting deadlines for supplemental motions. Following this, Defendants again sought to challenge the jury's damages award based on newly discovered evidence. The Court considered these motions together, applying a three-prong analysis to determine if the new evidence justified a new trial.

The excerpt outlines three critical factors to assess new evidence in a legal context: (1) the likelihood that the evidence would have influenced the trial's outcome; (2) whether the evidence could have been discovered earlier with due diligence by the moving party; and (3) whether the evidence is merely cumulative or impeaching. Defendants argue that new evidence undermines the Plaintiffs' sales theory presented at trial, citing emails from Zuru Ltd.'s CFO, Christian Pellone, which suggest that Zuru Ltd. acted as an undisclosed agent for Zuru Inc. and did not make direct sales. They reference board resolutions and minutes indicating an agency relationship, audited financials showing service income paid to Zuru Ltd., and a statement affirming Zuru Inc. as the parent company deriving all sales income. 

However, the court finds it unlikely that this new evidence would have altered the trial's damage outcome, as it hinges on the assertion that Zuru Ltd. did not sell to Wal-Mart. The court notes that the evidence presented by the Defendants, primarily an email statement from Mr. Pellone, lacks context and does not counter substantial evidence the jury considered, which supported Zuru Ltd.'s sales to Wal-Mart. This included supplier agreements explicitly stating Zuru Ltd. as the seller and testimony from Zuru Ltd.'s COO confirming sales transactions.

Plaintiffs' damages expert reviewed the supplier agreement, Wal-Mart purchase orders, and invoices indicating Bunch O Balloons sales to Wal-Mart, as well as Zuru Ltd.'s bank statements showing payments from Wal-Mart. Although Mr. Pellone's email might have cast doubt on Ms. Mowbray's credibility regarding these sales, the jury could still consider critical documents such as the supplier agreement and invoices. Defendants introduced circumstantial evidence concerning the agency relationship between Zuru Ltd. and Zuru Inc., suggesting Zuru Ltd. earned no profits, but this evidence was aimed at a previously rejected argument about Zuru Ltd.'s ability to recover lost profits under the Patent Act. The Court had determined that the corporate structure does not prevent recovery of lost profits and found Defendants' new evidence merely cumulative. Defendants failed to raise any defense regarding lost profits until mid-2017 and had knowledge of Mr. Pellone's role prior to the reopening of discovery. Despite opportunities for further discovery, Defendants did not pursue additional information concerning Mr. Pellone. The Court indicated that Plaintiffs had not withheld documents to mislead the jury; rather, Defendants' lack of diligence was evident. The supplemental evidence presented by Defendants was largely cumulative and reiterated arguments already made at trial.

Mr. Pellone's statements, although not presented at trial, would only serve to undermine the credibility of Plaintiffs' corporate representative, Ms. Mowbray, who testified about Zuru Ltd.'s sales. The newly discovered evidence does not justify a new trial, leading to the denial of Defendants' Renewed Supplemental Motion for Judgment as a Matter of Law (JMOL) or a new trial. Regarding the passing of title for Bunch O Balloons products, Defendants failed to provide supporting Federal Circuit case law and relied on general statements from other courts. The Court found no precedent to grant JMOL on this point. Under the Uniform Commercial Code (UCC), title passes to the buyer upon completion of the seller's performance related to physical delivery. Evidence presented at trial indicated that Zuru Ltd. made the sales, not Zuru Inc., thus denying Defendants' JMOL regarding lost profits based on title passing.

Defendants also argued that Zuru Ltd. could not have profited from additional sales because it acted as a sales agent for Zuru Inc. and operated on a cost-plus-ten-percent basis. They claimed a lack of causation between Bunch O Balloons sales and Zuru Ltd.'s lost profits. However, Plaintiffs countered that Zuru Ltd. conducted the sales and earned revenue from them. The trial evidence confirmed that all proceeds from Zuru Ltd.'s sales were deposited into its bank account, demonstrating that Zuru Ltd. profited. Consequently, Zuru Ltd. has a valid claim for lost profits, and Defendants' arguments regarding financial statements and profit booking do not negate this claim. Lastly, the jury had substantial evidence to support its verdict on lost profits, thus denying Defendants' JMOL on this basis. Defendants also contested the finding of price erosion but did not provide specific reasons in the excerpt.

Defendants challenge Plaintiffs' claims on three primary grounds. First, they argue that Plaintiffs failed to demonstrate "but for" causation from the alleged infringing sales, relying on testimony from Ms. Mowbray that discussed the difficulty of competing in the toy industry without considering the hypothetical scenario where Telebrands did not have an infringing product. However, Ms. Mowbray clarified that her statements were based on the assumption that Telebrands was already in the market with infringing goods, thus not applicable to the necessary "but for" analysis for price erosion claims. 

Second, Defendants contend that Plaintiffs' damages evidence regarding price erosion is inadequate because Plaintiffs’ expert, Mr. Ratliff, allegedly neglected price elasticity in his analysis. Defendants reference Crystal Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc. to support their claim of insufficiency. However, Mr. Ratliff did consider how price increases would impact demand, concluding that the market for the relevant product was inelastic. The court has clarified that an inelastic market does not preclude the recovery of price erosion damages. 

Third, Defendants assert that Mr. Ratliff's analysis improperly assumed infringement by Telebrands in 2015, a point not established by the court. Nonetheless, Mr. Ratliff consistently stated that his analysis was based on infringement commencing with the issuance of the '749 Patent in January 2016, suggesting that the damages analysis was aligned with the correct timeline of infringement. Overall, the jury's acceptance of Plaintiffs' price erosion theory was backed by substantial evidence, and Defendants' arguments for judgment as a matter of law (JMOL) are unconvincing.

Defendants' motion for judgment as a matter of law (JMOL) concerning price erosion and excess freight expenses has been denied. The jury did not award excess freight charges, and substantial evidence indicated Zuru Ltd. incurred these costs due to Defendants' infringement. Regarding the motion for a new trial under Federal Rule of Civil Procedure 59(a), a new trial can be granted if there is clear evidence of prejudicial error or unfairness in the trial. The burden of proof for establishing harmful error rests with the party seeking the new trial. Defendants argue for a new trial based on claims of an unfair verdict related to infringement, invalidity, willful infringement, and lost profits, asserting the verdict contradicts the weight of the evidence and was influenced by Plaintiffs' emotional appeal. In contrast, Plaintiffs argue that Defendants have not shown any unfairness or jury confusion. The evidence presented supports the jury's findings, and the court finds no absolute absence of evidence to justify a new trial.

Defendants' Motion for a New Trial has been denied, as the weight of the evidence does not support a new trial. The Court rejected Defendants' claims that the verdicts on willfulness, liability, and lost profits were adversely influenced by Plaintiffs' emphasis on Telebrands' pre-lawsuit conduct. The concerns regarding Plaintiffs' presentation about Balloon Bonanza were previously addressed by the Magistrate Judge, who allowed a limited presentation of facts to the jury, clarifying that the focus would be on the patent infringement claims pertaining to Mr. Malone and Tinnus. The trial adhered to this plan, with evidence presented regarding willfulness and non-obviousness linked to Battle Balloons and the relevant patents, ensuring that the jury was informed about which products were tied to the verdict. 

Additionally, Defendants contended that the willfulness verdict was compromised because they were not permitted to introduce PTAB institution decisions regarding the patents. The Magistrate Judge had ruled that such evidence would likely confuse the jury and be more prejudicial than probative, especially since the '066 Patent was not at issue and the PTAB later upheld the validity of the remaining patents. Consequently, the Court found no merit in Defendants' arguments and denied the motion for a new trial.

Defendants asserted at trial that their belief in the invalidity of the patents was based on Dr. Kamrin's advice. However, any claims that Telebrands failed to adequately present its case were attributed to their attempts to introduce expert testimony through fact witnesses. The exclusion of PTAB proceedings did not affect the verdict, leading to the denial of Defendants' Motion for a New Trial on that ground. 

Regarding the Plaintiffs' damages presentation, Defendants argued the absence of PTAB evidence limited their ability to cross-examine Mr. Ratliff on his claims that Telebrands was illegally on the market post-June 2015. Mr. Ratliff clarified that his analysis did not rely on infringement prior to January 2016, and defense counsel addressed this during a bench conference, confirming Mr. Ratliff's assertions. Thus, the PTAB evidence was deemed irrelevant to Mr. Ratliff's testimony, resulting in another denial of the Motion for a New Trial.

In the closing argument, Defendants contended that Plaintiffs misrepresented Dr. Hatch's testimony regarding a reasonable royalty figure of $16 million, whereas he had suggested $1.67 million. Upon review, Plaintiffs' characterization of Dr. Hatch's testimony was not found to warrant a new trial, as it was based on a calculation linking Ms. Mowbray's figure to the number of units sold. The jury was aware of Dr. Hatch's actual proposed number, and the full damages sought by Plaintiffs were not awarded. Consequently, Defendants' Motion for a New Trial on this issue was also denied.

Defendants claim that Plaintiffs improperly influenced the jury through emotional appeals and sectionalism, citing references to Plaintiffs' local ties and contrasting them with Defendants' larger, out-of-state firm. Defendants did not timely object to many of these statements, and their own counsel made similar assertions during voir dire. The court noted that both sides presented their backgrounds to the jury, including extensive testimony from Telebrands' CEO about his immigrant experience. Furthermore, Defendants also engaged in sectionalism by highlighting the origins of the competing companies. Comments regarding Defendants' counsel, David Boies, were deemed irrelevant since jurors did not recognize his name, and the court instructed Plaintiffs not to mention him further, which they complied with. Consequently, the court found that Defendants failed to meet the criteria for a new trial, denying their motion on these grounds.

Defendants' final argument for a new trial related to an analogy made by Plaintiffs' counsel comparing the clear and convincing evidence standard for invalidity to the "red zone" in football. The court determined that this analogy did not warrant a new trial, as Defendants' objection was acknowledged during trial, and proper jury instructions were provided that delineated the burdens of proof. The jury's finding on invalidity was supported by the evidence since Defendants' expert did not account for secondary considerations. 

Ultimately, the court denied Defendants' Motion for a New Trial, stating that none of their arguments met the high threshold required for such relief. Additionally, Plaintiffs filed a Motion for Permanent Injunction, referencing the eBay Inc. v. MercExchange case, and requested the return of a cash bond of $4,825,000 posted for a preliminary injunction.

Defendants do not contest Plaintiffs' analysis under the eBay factors but seek judgment as a matter of law (JMOL) or a new trial. They argue that the bond should remain in place until the appeal concludes. The Court found a permanent injunction appropriate, noting that Defendants’ arguments are largely unopposed. The eBay factors establish that a permanent injunction is warranted: Plaintiffs demonstrated irreparable injury, inadequacy of monetary damages, a favorable balance of hardships, and alignment with public interest. A preliminary injunction was previously issued, and the jury established that all Defendants willfully infringed. The direct competition between Zuru's Bunch O Balloons and Telebrands' Battle Balloons indicates significant potential for irreparable harm. Plaintiffs' concerns about brand recognition and customer goodwill further support their case for injunctive relief. The balance of hardships favors Plaintiffs, as Telebrands has a broader product range, while Plaintiffs rely more heavily on the infringed product. The public interest supports enforcing valid patents. The Court dismisses Defendants’ argument against releasing the bond, stating that the issuance of a permanent injunction renders the bond moot. Consequently, Plaintiffs' Motion for Permanent Injunction is granted; the Court finds that Plaintiffs have met all necessary criteria for such an injunction and permanently restrains all Defendants, including Telebrands Corp., Bulbhead.com, LLC, and Bed Bath & Beyond Inc.

Fry's Electronics, The Kroger Company, Sears Holdings Corporation, and Walgreens Boots Alliance, along with their associates, are permanently enjoined from manufacturing, using, importing, marketing, or selling the Battle Balloons product or any similar product that infringes U.S. Patent Nos. 9,242,749 and 9,315,282, until these patents expire. The Clerk of Court is instructed to return $4,825,000 in cash bonds to the Plaintiffs. 

The Court has granted the Plaintiffs' request for prejudgment interest at the prime rate, compounded quarterly from January 2016 until the final judgment, despite the Defendants' request for the 52-week Treasury Bill rate. Post-judgment interest will be awarded at the statutory rate as prescribed by 28 U.S.C. § 1961.

Additionally, the Plaintiffs have moved to declare the consolidated cases as exceptional under 35 U.S.C. § 285 and seek $5,003,016.58 in attorneys' fees and $1,027,656.54 in expert fees. The Court has discretion in determining whether a case is exceptional, considering factors such as the substantive strength of the litigating position and the manner in which the case was litigated. The exceptional nature of the case is assessed on a case-by-case basis, taking into account the totality of circumstances, including frivolousness and objective unreasonableness. Notably, conduct does not need to be independently sanctionable to be deemed exceptional.

A finding of bad faith is not a prerequisite for awarding attorney fees; however, cases with subjective bad faith or exceptionally meritless claims may justify such an award. The district court has discretion to determine the appropriateness of fees after deeming a case exceptional, and a party seeking fees must establish entitlement by a preponderance of the evidence. The trial court must also articulate reasons for not considering a case exceptional, particularly if willful infringement is found. Factors influencing the award of fees include the case's closeness, counsel tactics, party conduct, and other litigation burden considerations.

Plaintiffs allege that Defendants engaged in bad-faith litigation, causing delays and increased expenses, asserting that Defendants took untenable positions regarding infringement, non-infringing alternatives, and inequitable conduct. They claim Defendants employed dilatory tactics and attempted to re-litigate claim construction, asserting unreasonable discovery positions. In response, Defendants argue their motions were legitimate and that narrowing issues is not misconduct. They also contend that any alleged misconduct by Plaintiffs does not warrant fee awards.

The Court finds the case exceptional, noting that Defendants' motion practices were excessive and lacked legitimate purpose, primarily serving to burden Plaintiffs and delay proceedings. The Court had previously warned Defendants about abusing emergency motion practices, yet frivolous motions persisted, resulting in unnecessary resource expenditures. Defendants submitted multiple unmeritorious motions, including attempts to reconsider and stay injunctions, which were mostly upheld by the Federal Circuit. Additionally, a late motion to dismiss was denied and not appealed.

Defendants engaged in significant discovery misconduct, including the repeated raising of previously decided issues, which wasted resources and demonstrated unacceptable trial conduct. They violated court rulings, specifically motions in limine, leading to admonishment from the Court. The jury found willful infringement, supporting the case's exceptional status. Defendants claimed that Plaintiffs' alleged misconduct, such as inflating damages and improper discovery practices, negated the case's exceptional nature; however, the Court rejected these arguments. Plaintiffs' conduct, while not without criticism, did not undermine the finding of exceptionality. Issues around damages remained unaddressed until dispositive motions, and any alleged withholding of evidence by Plaintiffs was deemed unsubstantiated, as Defendants failed to diligently seek information. Moreover, the Court dismissed the significance of the '066 Patent's inclusion in the trial compared to Defendants' solicitation of objectionable testimony. Additionally, the Retailers' actions, including ignoring an injunction and continuing sales post-injunction, were deemed frivolous.

Retailers failed to provide specific accounts of their inventory and did not produce relevant discovery, resulting in the Defendants taking untenable positions throughout the litigation, which created unnecessary obstacles for all parties involved. This behavior persisted during the trial, leading to sustained objections and admonishments. The case was deemed exceptional, with the primary remaining issue being the determination of attorneys' fees. Plaintiffs requested $4,634,775.45 in fees, supported by declarations from three attorneys, arguing that their billing rates were below the average for Texas intellectual property attorneys. Including additional expenses, the total requested amounts to $5,003,016.58. Additionally, Plaintiffs sought $1,027,656.54 in expert fees as a sanction for the Defendants' conduct. Defendants contended that Plaintiffs failed to demonstrate the necessary fraud or bad faith for awarding expert fees and criticized the lack of supporting documentation for both attorney and expert fees. They argued for a potential 25% reduction in fees due to overstaffing. The Court agreed that while attorneys' fees were warranted due to Defendants’ behavior, it found no basis for awarding expert fees as a separate sanction. The Court cited a precedent indicating that both types of fees must be justified separately if based on the same conduct. It ordered the parties to confer on an appropriate amount for the awarded attorneys' fees, noting that the requested amount was not objectively unreasonable.

Disputes between the parties must be submitted with supporting documentation within seven days of the Order, including details of billed time and rates. The Motion for Attorneys' Fees is granted. The Court's rulings include: granting Plaintiffs' Motion for Enhanced Damages under 35 U.S.C. § 284; denying their Motion for Apportionment of Damages against Retailer Defendants; granting their Motion for a Permanent Injunction; granting their Motion for Prejudgment and Post-judgment Interest; and partially granting and denying Defendants' Renewed Motions for Judgment as a Matter of Law and for a New Trial, with the exception of granting the JMOL for willfulness against Fry's Electronics. The Federal Circuit affirmed the injunction on January 24, 2017. Plaintiffs initially sued Defendants regarding the Balloon Bonanza in 2015 for patent infringement. The PTAB found claims not proven invalid, while the jury applied a higher standard. Only Bulbhead among the Defendant Retailers was involved in the earlier case. Dr. Perryman, a damages expert for Plaintiffs, did not testify at trial, but his analysis was used by Mr. Ratliff. There is a dispute regarding Dr. Kamrin's role in developing the Battle Balloons products and the alleged concealment of this under attorney-client privilege. The Federal Circuit upheld the injunction. The request for a single damages question was deemed inappropriate due to the consolidation of the cases, and the Plaintiffs' prior comments contradicted their current position. The PTAB issued decisions affirming the validity of the patents before the briefing was completed.

Additional briefing was submitted regarding the applicability of PGR estoppel, but the Court determined it unnecessary to address this issue due to a prior ruling that the Defendants did not meet their burden on JMOL. The UCC defines a seller as someone who sells or contracts to sell goods. Defendants claimed that Plaintiffs violated a ruling during opening arguments and Ms. Mowbray's testimony, specifically regarding references to a "second lawsuit" to enforce patents. However, the Magistrate Judge had permitted references to "legal action" against Balloon Bonanza, and the Defendants failed to raise timely objections. Ms. Mowbray's comments were promptly corrected by Plaintiffs' counsel, negating the need for curative instruction. Additionally, the '066 Patent had been invalidated for indefiniteness, but this decision was later reversed by the Federal Circuit. Mr. Boies, who had recently been in the news for unrelated matters, attended pre-trial but did not appear at trial. Defendants pointed to unadopted jury instructions as grounds for a new trial on invalidity but did not specify any resulting prejudice. These claims, along with the affirmation of the preliminary injunction by the Federal Circuit, do not justify a new trial. The Court ruled in favor of Defendant Retailer Fry's, finding no willful infringement.