Formax, Inc. v. Alkar-Rapidpak-Mp Equip., Inc.

FORMAX, INC., Plaintiff, v. ALKAR-RAPIDPAK-MP EQUIPMENT, INC. and TOMAHAWK MANUFACTURING, INC., Defendants.

Case No. 11-C-298

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

SO ORDERED: June 26, 2014

DECISION AND ORDER

Defendants Alkar-Rapidpak-MP and Tomahawk Manufacturing have filed a motion seeking a partial summary judgment ruling that they did not wilfully infringe U.S. Patent No. 4,996,743. For the reasons given below, the motion will be denied.

I. Background

Because the present motion involves the limited question of willfulness, the operative facts are brief. The '743 patent (now expired) describes a "mold plate drive linkage for a food patty molding machine." Formax has accused five of the defendants' food patty molding machines of using a connecting rod that infringes the '743 patent. Prior to using these connecting rods in the building of its own machines, Tomahawk sought advice from its patent counsel, Donald Cayen. Cayen responded with a letter dated January 18, 2002. (ECF No. 158-5.) In the letter, Cayen counseled that although Formax owned several patents with relevant technology, the '743 patent"has been allowed to expire for failing to pay the eighth-year maintenance fee." (Id.) The defendants argue that Tomahawk relied on this information in proceeding with the technology they developed and used. They also argue that they have arguable defenses to infringement and validity, either of which would undermine the notion that their conduct was willful.

II. Analysis

Summary judgment is proper when the moving party has demonstrated that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. Establishing that a defendant has willfully infringed a valid patent is a two-step inquiry. First, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc). After the "threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer." Id. The threshold objective prong" is a question of law based on underlying questions of law and fact and is subject to de novo review." Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1005 (Fed. Cir. 2012). The second prong, which is largely subjective, is a question of fact. Id.

A. Objective Component

Defendants argue that they have objectively reasonable defenses to infringement, and these defenses—even if ultimately unsuccessful—undermine any claim that their infringement was willful.

1. Claim Construction

In their Markman briefing, Defendants argued that the claims of the '743 patent require hydraulic fluid to transit from the reservoir into both ends of the cylinder and then back into the reservoir in each cycle of the mold plate. This court rejected that construction, noting that "nowhere does the specification explain that the fluid actually makes a complete transit during a single cycle." (ECF No. 78 at 18.) Thus, I found that "Defendants' proposed definition improperly imports an unsupported limitation to the claim and must therefore be rejected." (Id.)

Although their claim construction was rejected, the defendants argue that it was a good faith reading of the claim terms that entitled them to proceed with at least a fair chance that they were not infringing Formax's patent. "A defendant may get off the [willfulness] hook under In re Seagate by identifying an objectively reasonable defense, even if the court ultimately disagrees with the defense." Riddell, Inc. v. Schutt Sports, Inc., 724 F. Supp. 2d 981, 999 -1000 (W.D.Wis. 2010).

The problem with the defendants' argument is that it essentially equates compliance with Rule 11 to non-willfulness. Fed. R. Civ. P. 11. That is, the defendants seem to argue that as long as they had a non-frivolous defense (via their claim construction arguments), that is enough to let them "off the hook." Id. The Seagate standard is not so loose, however. Under Seagate, objective recklessness requires an objectively high likelihood that the infringer's actions constituted infringement—not a guarantee. 497 F.3d at 1371. A "high likelihood" falls somewhere between an obvious, brazen infringement and one that is a close call. Just as in criminal law the term "reckless" means something between negligent and intentional misconduct, in civil cases a person is reckless when he "acts . . . in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known." Id. (citations omitted).

Here, I rejected the defendants' proposed claim construction and considered it a weak attempt to insert limitations from the specification into the claim terms. (ECF No. 78 at 17-18.) Although restricting claim terms in such a fashion is a commonplace effort waged by accused infringers, patent attorneys know very well that the Federal Circuit has repeatedly cautioned against this in no uncertain terms. Texas Digital Systems, Inc. v. Telegenix, Inc., 308 F.3d 1193, 1203-04 (Fed. Cir. 2002). The defendants' effort was no more than a run-of-the-mill limiting argument tailored to achieving a specific outcome (non-infringement), and although it was not frivolous I do not view it as one that had a reasonable chance of success in any court. The defendants' precedent to the contrary involves cases where the question was "relatively close," or arguable, and thus I do not view it as persuasive under these circumstances. Wisconsin Alumni Research Foundation v. Intel Corp., 656 F. Supp. 2d 898, 924 (W.D.Wis. 2009). Accordingly, the fact that Defendants had an argument in this case does not mean there was not also a "high likelihood" of infringement. Saint-Gobain Autover USA, Inc. v. Xinyi Glass North America, Inc., 707 F. Supp. 2d 737, 748 (N.D.Ohio 2010) (rejecting post-verdict challenge to jury's willfulness finding)("Because the Court would have had to contravene a cardinal principle of claim construction to adopt Xinyi's construction, namely to import limitations not found in the claims, the Court cannot find that Xinyi's position was reasonable.")

2. Obviousness

Defendants also argue that they have a strong argument that the patent is invalid for obviousness. Specifically, they have retained an expert engineering professor, who opines that the claims of the patent would have been obvious to one of ordinary skill because the patent solved well-known engineering problems in a routine, well-known fashion. (ECF No. 158-18, 158-20.)Defendants suggest that because Plaintiffs have not moved for summary judgment on the obviousness question, even the Plaintiffs have implicitly conceded that the point is arguable and not subject to resolution without a trial. As such, given that they had an arguable case for invalidity, they cannot be said to have willfully infringed the patent.

A claim is invalid for obviousness if, to one of ordinary skill in the pertinent art, "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made . . . ." 35 U.S.C. § 103(a). Although obviousness is a question of law, it is one based on underlying findings of fact. KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 427 (2007).

Here, Plaintiffs have retained an expert of their own, who disputes the defendants' expert's conclusions. It is therefore true that there is a classic "battle of experts," as the defendants point out. But it does not follow that the mere existence of a "battle" renders infringement non-willful. Presumably one could hire an expert to say just about anything, and that would not be enough to win judgment on the question of willfulness. That is, the fact that there is a difference of opinion does not ipso facto render that difference a reasonable one; one side could be clearly right and the other clearly wrong. Without a thorough review of the experts' positions and the other prior art—which the parties do not even attempt at this stage—it is impossible to conclude that summary judgment of non-willfulness should be entered.

B. Subjective Factors

As noted above, the first part of the analysis considers, objectively, whether a defendant's conduct was reckless. The second part of the analysis looks at a defendant's subjective, i.e., actual, state of mind to determine whether its conduct was reasonable.

1. Cayen Letter

Defendants rely on the 2002 letter from Atty. Cayen indicating that the '743 patent "has been allowed to expire for failing to pay the eighth-year maintenance fee." (ECF No. 158-5.) Given this apparent green light from Tomahawk's patent attorney, the defendants argue they can hardly be blamed for proceeding under the belief that there would be no infringement of the '743 patent. Formax argues, however, that accepting the defendants' position would reward them for burying their head in the sand and blinding themselves to the truth, which is that the '743 patent had been very much alive the entire time. Formax notes that Tomahawk frequently checked the intellectual property of its competitors, and the viability of the '743 patent was something easily discoverable on the PTO's own website.

Formax is correct, at least at this stage of the proceedings. Suppose an attorney wrote a letter containing erroneous information, but then the client later learned the information was wrong and that it was at risk for infringement. The client then proceeded to infringe anyway. No one would argue, under those circumstances, that the defendant was insulated from willfulness simply because it was in possession of an old letter from counsel containing erroneous information. The point is that the mere existence of a...