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Ameritox, Ltd. v. Millennium Health, LLC

United States District Court, W.D. Wisconsin

July 18, 2016

AMERITOX, LTD., and MARSHFIELD CLINIC, INC., Plaintiffs,
v.
MILLENNIUM HEALTH, LLC, Defendant.

          OPINION AND ORDER

          WILLIAM M. CONLEY DISTRICT JUDGE

         In this patent lawsuit, there are still two, post-trial motions pending before this court, both brought by plaintiffs Ameritox Ltd. and Marshfield Clinic, Inc., and then stayed by virtue of defendant Millennium Health, LLC's filing for Chapter 11 protection in the United States Bankruptcy Court for the District of Delaware, Case No. 15-12284. (Dkt. #523.) Having received notice from the Bankruptcy Court that plaintiffs' claim may proceed (dkt. #524), the court now takes up those motions.

         In the first motion, plaintiffs seek prejudgment interest and enhanced damages pursuant to 35 U.S.C. § 284. (Dkt. #462.) In light of the United States Supreme Court's recent decision in Halo Elec., Inc. v. Pulse Elec., Inc., No. 14-1513 (U.S. June 13, 2016), the court will reserve on plaintiffs' renewed request for enhanced damages pending supplemental briefing on the impact of this intervening change in controlling law in light of the court's prior decisions on plaintiffs' willful infringement claim and the jury's determination that the subjective prong of the now-rejected test was satisfied. In this opinion and order, however, the court will award prejudgment interest, calculated on the total damages award from the first date of infringement, at the prime rate, compounded annually.

         In the second motion, plaintiffs seek attorneys' fees, expert witness fees and additional expenses under 38 U.S.C. § 285 and this court's inherent authority. (Dkt. #465.) While this proves a closer question in light of the change in law after Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014), the court will nonetheless deny that motion.[1]

         BACKGROUND

         In this case, plaintiffs alleged that Millennium infringed two patents, U.S. Patent No. 7, 585, 680 ("the '680 patent") and No. 7, 785, 895 ("the '895 patent"). At summary judgment, this court granted defendant Millennium Health, LLC's motion for summary judgment on the '895 patent, finding it invalid under 35 U.S.C. § 101, but denied the same motion as to the '680 patent. (2/19/15 Op. & Order (dkt. #215) 2.) After additional briefing on infringement of the '680 patent, the court granted summary judgment in plaintiffs' favor, finding infringement of claims 1, 2, 4-7, 10 and 16-18 of that patent. (3/6/15 Op. & Order (dkt. #256).)

         The court then proceeded to trial on (1) certain invalidity challenges to the '680 patent, (2) damages, and (3) willfulness. The jury found that Millennium had not proven that the asserted claims of the '680 patent were invalid, and awarded damages for infringement in the amount of $8, 652, 760. (Verdicts (dkt. ##414, 430).) As for the willful infringement claim, the court found as a matter of law that at least one of defendant's infringement defenses was objectively reasonable, and therefore plaintiff's claim failed under the objecting prong of the willfulness test established by In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc). (4/17/15 Op. & Order (dkt. #420).) Nonetheless, the court allowed the jury to consider whether the subjective prong was satisfied, and they advised that it was. (Advisory Verdict (dkt. #431).)

         OPINION

         I. Motion for Prejudgment Interest and Enhanced Damages Under § 284

         A. Prejudgment Interest

         Title 35 U.S.C. § 284 governs the award of prejudgment interest in patent infringement claims. "In the typical case an award of prejudgment interest is necessary to ensure that the patent owner is placed in as good a position as he would have been in had the infringer entered into a reasonable royalty agreement." Gen. Motors Corp. v. Derex Corp., 461 U.S. 648, 655 (1983). As such, "prejudgment interest should be awarded under § 284 absent some justification for withholding such an award." Id. at 657; see also Energy Transp. Grp., Inc. v. William Demant Holding A/S, 697 F.3d 1342, 1358 (Fed. Cir. 2012) ("The award of pre-judgment interest is the rule, not the exception.") (quotation and citation omitted).

         Millennium does not dispute that an award of prejudgment interest is appropriate in this case. Rather, it challenges plaintiffs' calculations, arguing that "[a]t every step, " they "choose the measure that produces the highest result, from the interest rate to whether and how frequently to compound." (Def.'s Opp'n (dkt. #497) 7.) Even so, the parties do agree that the determination of an appropriate prejudgment interest award turns on three key inputs: (1) whether interest should be calculated based on the total damages award, as if the jury awarded a lump sum royalty, or based on annual sales, as if the jury awarded a running royalty; (2) the appropriate interest rate; and (3) whether and how frequently to compound the interest.

         First, as to the issue of a fixed or running royalty, the parties agree that the damage period started on June 2, 2011, the date of first infringement (see PX63), and ended on April 27, 2015, the date of judgment (see dkt. #441). See Nickson Indus., Inc. v. Rol Mfg. Co., Ltd., 847 F.2d 795, 800 (Fed. Cir. 1988) ("Generally, prejudgment interest should be awarded from the date of infringement to the date of judgment."). As for how interest should be calculated during this period, plaintiffs begin in their opening brief with the total amount of damages, $8, 642, 760, and the number of years of infringement, 3.9 years, then make various calculations based on different, possible interest rates. In its opposition, defendant agues that this approach rests on the faulty assumption that all of the infringing sales occurred on the first day of infringement rather than overtime as was actually the case, arguing instead that "prejudgment interest should be calculated by examining Millennium's infringing sales and apportioning interest based on when those sales actually occurred." (Def.'s Opp'n (dkt. #497) 8.)

         While defendant's criticism appears facially correct, Millennium offers no evidence as to when its infringing sales were actually made, information that was readily available had it wished to propose an alternative calculation. Instead, as plaintiffs point out, Millennium "assumes the hypothetical license would have been structured to require four equal lump sum royalty payments and further arbitrarily picks four, roughly-equal time periods." (Pls.' Reply (dkt. #512) 5.) Presumably, Millennium chose this method because it resulted in a smaller interest amount, or (less cynically) was simpler than doing the calculations required for an actual running royalty amount based on its own sales records. At minimum, Millennium could have easily offered evidence that the actual sales fell roughly equally over the relevant time period. Having neither done the actual calculations, nor justified its simple ...


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