Engineered Products Co. v. Donaldson Co., Inc., C 98-2106-MWB.

335 F.Supp.2d 973

ENGINEERED PRODUCTS CO., Plaintiff, v. DONALDSON COMPANY, INC., Defendant.

No. C 98-2106-MWB.

United States District Court, N.D. Iowa, Eastern Division.

September 20, 2004.

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Craig J. Lervick, Cyrus A. Morton, Edward M. Laine, Oppenheimer Wolff & Donnelly, Minneapolis, MN, Richard S. Fry, Shuttleworth & Ingersoll, Cedar Rapids, IA, for Plaintiff and Counter Defendant.

Annamarie A. Daley, Robins Kaplan Miller Ciresi, Minneapolis, MN, Stephen J. Holtman, Simmons Perrine Albright Ellwood, Cedar Rapids, IA, for Defendant and Counter Claimant.

Christopher A. Seidl, Christopher J. Sorenson, Merchant & Gould, Minneapolis, MN, for Counter Claimant.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTION TO AMEND JUDGMENT AND PLAINTIFF'S MOTION FOR ATTORNEY FEES AND EXPENSES

BENNETT, Chief Judge.

                                     TABLE OF CONTENTS
I.   INTRODUCTION .......................................................976
II.  LEGAL ANALYSIS .....................................................978
     A. Donaldson's Motion To Amend end Judgment ........................978
        1. Arguments of the parties .....................................978
        2. Applicable standards .........................................979
        3. Analysis .....................................................980
           a. Double recovery ...........................................980
           b. Improper enhancement ......................................980
     B. EPC's Motion For Attorney Fees And Expenses .....................980
        1. Arguments of the parties .....................................980
        2. Attorney fees and expenses ...................................982
           a. Applicable standards ......................................982
           b. Analysis ..................................................984
        3. Expert witness fees ..........................................986
           a. Applicable standards ......................................986
           b. Analysis ..................................................988
III. CONCLUSION .........................................................988

This matter comes before the court pursuant to what appears to be the final episode, at least in the trial court, of a long-running serial involving the plaintiff's claims of infringement of its patent for a progressive air filter restriction indicator. Like most "final" episodes of a serial, this one involves more than one plot line to tie up loose ends: One plot line involves the defendant's last ditch effort to amend at least part of an adverse judgment of over $15 million, and a second plot line involves the plaintiff's request for attorney fees and expenses, including expert witness fees, pursuant to 35 U.S.C. § 285, on the ground that this is an "exceptional case." Tempting though it may be to follow the lead of Hollywood by shifting unexpectedly between these plot lines to maintain a mood of high drama, the court will take the more mundane approach of playing out the two plot lines in turn. However, the court must first set the stage. Therefore, this episode begins with a familiar voice over: "As you remember, last episode...."

I. INTRODUCTION

In Engineered Products Co. v. Donaldson Co., Inc., 330 F.Supp.2d 1013, 2004 WL 1798296 (N.D.Iowa 2004) (EPC V), this court explained,

[T]his patent infringement action between plaintiff Engineered Products Company (EPC) and defendant Donaldson Company (Donaldson) arises from Donaldson's creation and sale of two air filter restriction indicator devices that EPC contends infringe its U.S. Patent Number 4,445,456 (the '456 patent). EPC's '456 patent, which issued on May 1, 1984, and expired in 2001, is for a mechanical air filter restriction indicator with a lock-up feature. Such a device allows the operator of a vehicle with a combustion engine to see how much restriction is present in the engine's air filter, i.e., how dirty the air filter is, without having to operate the vehicle at the same time. The accused devices are Donaldson's Air Alert, which is also called the "original GMT-800" in this litigation, and Donaldson's Next Generation Air Alert or NG Air Alert, which is also called the "NG GMT-800" in this litigation.

* * * * * *

On May 12, 2004, the jury rendered a verdict favorable to EPC on all issues before them. Somewhat more specifically, the jury found that the original GMT-800 and the NG GMT-800 each infringe the '456 patent, both "literally" and under the "doctrine of equivalents." The jury also found that the infringement by the original GMT-800 was "willful." Next, the jury rejected Donaldson's defenses of patent invalidity ("on sale" and "in use" bars) and patent misuse. Consequently, for infringement by the original GMT-800, the jury awarded EPC $5,269,270 in damages for lost profits (allocated as $3,826,889 for "lost sales" and $1,442,381 for "price erosion"), with an alternative award of $226,458 as a "reasonable royalty." For infringement by the NG GMT-800, the jury awarded $434,267 as a "reasonable royalty" for sales to Mack and Delphi and $31,194 as a "reasonable royalty" for sales to DAF, but no "lost profits" or "price erosion" damages. See Verdict Form (docket no. 398).

EPC V, at 1018-21. In EPC V, this court rejected Donaldson's defenses of obviousness-type double patenting, laches, and estoppel, which were tried to the court; denied Donaldson's post-trial motions for judgment as a matter of law and for new trial challenging the jury's verdict on various grounds; granted EPC's post-trial motions for pre- and post-judgment interest; and granted EPC's post-trial motion for enhanced damages pursuant to 35 U.S.C. § 284 based on the jury's finding of "willfulness." See id. at 1047-49 (stating the specific resolution of the equitable defenses tried to the court and each post-trial motion considered therein).

In consequence, on August 12, 2004, judgment entered as follows:

The plaintiff, Engineered Products Co., recover against defendant, Donaldson Company, the following:

1) For infringement by the original GMT-800, $5,269,270 as los[t] profit damages awarded by the jury, trebled by the Court pursuant to 35 U.S.C. § 284 to the sum of $15,807,810.

2) For infringement by the Next [Generation] GMT-800, $465,461 as a reasonable royalty.

3) Prejudgment interest in the amount of $1,106,378 through May 11, 2004, plus such additional interest, at the same rate, as has accumulated from May 11, 2004, until entry of this judgment.

4) Post-judgment interest pursuant to 28 U.S.C. § 1961(a) and (b).

Judgment, August 12, 2004 (docket no. 464).

In the court's August 12, 2004, ruling, the court reserved for later disposition EPC's June 4, 2004, Motion For Attorneys' Fees And Expenses (docket no. 406). The time is now ripe to resolve that motion. Also, on August 26, 2004, Donaldson filed its Motion To Alter Or Amend Judgment Pursuant To Fed.R.Civ.P. 59(e) (docket no. 466), which challenges certain portions of the August 12, 2004, Judgment.¹ The court concludes that resolution of the latter motion should logically precede resolution of the former, as some significant change in the judgment could affect the amount of attorney fees and expenses, if any, to which EPC is entitled. Therefore, the court's legal analysis will begin with Donaldson's motion to amend the August 12, 2004, Judgment.

II. LEGAL ANALYSIS

A. Donaldson's Motion To Amend Judgment

1. Arguments of the parties

In Donaldson's Motion To Alter Or Amend Judgment, Donaldson contends that the August 12, 2004, Judgment grants an improper double recovery to EPC by awarding both lost profits and royalties for sales of the NG GMT-800 and miscalculates enhanced damages by improperly enhancing damages for sales of the NG GMT-800 as to which the jury made no "willfulness" finding. Donaldson argues that the court itself recognized that the jury found no lost profits as to the NG GMT-800; thus, Donaldson contends, it follows that the jury did not intend to award lost profits damages for Donaldson's sale of the NG GMT-800 in its lost profits calculation for the original GMT-800. Nevertheless, Donaldson contends that, based upon EPC's damages expert's calculations apparently accepted by the jury, some two-thirds of the nearly $4 million in lost profits awarded were actually based on sales of the NG GMT-800. Donaldson argues that two errors flow from this erroneous inclusion of lost profits for sales of the NG GMT-800: (1) much of the award of lost profits is improperly duplicative of the reasonable royalty also awarded by the jury for infringement by the NG GMT-800; and (2) the court improperly enhanced damages for sales of the NG GMT-800, a product as to which EPC did not assert, and the jury did not find, "willful" infringement. Therefore, Donaldson requests that the court amend the Judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure to rectify these manifest errors.

In its response, EPC concurs in the need for clarification of the Judgment with respect to the reasonable royalty issue, but resists Donaldson's contention that there is any error in the Judgment concerning enhanced damages. EPC agrees that there is a clerical error in numbered paragraph 2 of the Judgment, because the jury's royalty award for infringement by the NG GMT-800 includes $434,267 for sales to Mack Truck and Delphi, which is an alternative to the lost profits award based on sales to those entities. However, EPC contends that the further award of $31,194 as a reasonable royalty for sales of the NG GMT-800 to DAF is not duplicative of any lost profits damages, because EPC did not seek, and the jury did not award, any lost profits damages for those sales. Therefore, EPC requests that numbered paragraph 2 of the Judgment be amended pursuant to Rule 60(b) of the Federal Rules of Civil Procedure to state the...