R-Boc Representatives, Inc. v. Minemyer

R-BOC REPRESENTATIVES, INC., et al., Plaintiffs-Counterclaim Defendants, v. JOHN T. ("TOM") MINEMYER, Defendant-Counterclaim Plaintiff.

JOHN T. ("TOM") MINEMYER, Plaintiff, v. R-BOC REPRESENTATIVES, INC., et al., Defendants.

No. 11 C 8433

No. 07 C 1763

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 15, 2017

Magistrate Judge Jeffrey Cole

MEMORANDUM OPINION

A.

Now in its eleventh year, the dispute about the patented, colored, plastic couplers continues to challenge, confound, and divide the parties. The history of the present trial and of the earlier one some years ago - both of which were resolved in Mr. Minemyer's favor - is found in R-BOC Representatives, Inc. v. Minemyer, 233 F. Supp. 3d 647 (N.D. Ill. 2017). In the wake of the second trial in this case - a bench trial in which the roles were reversed, and Mr. Minemyer was the defendant and R-BOC Representatives the plaintiffs - the plaintiffs were found guilty of not only continued patent infringement, but contempt of the injunction entered in the wake of the first trial. Following the second trial in this case, the parties have now endeavored to arrive at an agreement as to the amount of damages, although they continue to disagree on the question of whether liability was properly found in the second trial.

The parties have stipulated that Mr. Minemyer is entitled to his lost profits in the amount of $1,599,732, which, pursuant to the proof at the second trial, the court's order of February 10, 2017, and 35 USC §284 (the damage provision of the Patent Act), are trebled to $4,799,195.¹ Prejudgment interest - calculated at $408,928 brings that amount to $5,208,123. The parties have also come to an amount of attorneys' fees of $1,161,331.44, covering the period through early March 2017. [Dkt. #243, at 4]. Costs and nontaxable expenses come to $53,794.52.²

Dura-Line objects to the fees incurred after the parties stipulated to the foregoing amounts, but it does so in a footnote without citing any caselaw or making any supportive argument as to why plaintiff should not be awarded fees for ongoing pursuit of the recovery the defendants chose tocontest. [Dkt. #244, at 3 n.5]. As such, that's a position that need not be considered, for it is not up to the court to develop the parties' positions for them. As the Court of Appeals has instructed time and again, the parties—not the courts—must research and construct supporting legal arguments. United States v. Collins, 796 F.3d 829, 836 (7th Cir. 2015); Anderson v. Catholic Bishop of Chicago, 759 F.3d 645, 650 (7th Cir. 2014). That brings the fee total to $1,252,753.07. [Dkt. #250-8].

Interest on the attorney's fees is another bone of contention. R-BOC Representatives argue that, until the court's order of February 10, 2017, this case was not "exceptional," and plaintiff had no expectation - entitlement is a more apt word - for the plaintiff certainly had an expectation of success - of an award of fees. [Dkt. #246, at 4]. Thus, trebling is not, say the R-BOC Representatives, appropriate. The flaw in this logic is obvious. No plaintiff, in any case, is entitled to any damages, or to any fee award, until it wins the trial. That does not, however, preclude trebling and an award of fees or they would never be proper. Yet the Patent Act and the implementing cases clearly allow it under the appropriate circumstances. See e.g., Spindelfabrik Suessen-Schurr v. Schubert & Salzer Maschinenfabrik Aktiengesellschaft, 903 F.2d 1568, 1578 (Fed. Cir. 1990).

In Spindelfabrik Suessen-Schurr, the Federal Circuit said:

Schubert next challenges the district court's award of treble damages and attorney fees. The district court trebled the damages "by reason of the willful and deliberate nature of the infringement," and awarded attorney fees "by reason of the exceptional nature of the case." In the prior contempt proceeding, the district court also awarded increased damages and attorney fees. Thus, the damages here awarded were for the additional infringements upon which the finding of contempt rested—the importation of the six Spincomat machines—and the attorney fees were for attorney services rendered to Suessen in the present contempt proceeding. As we have shown, the court justifiably characterized Schubert's actions as "flagrant contemptuous conduct." Id. at 34. In these circumstances, the district court did not abuse its discretion in trebling the damages and awarding attorney fees.

The default setting is an award of prejudgment interest absent some justification for withholding such an award. Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983); Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 36 (Fed. Cir. 2012). In the case of a fee award, the idea is to "compensat[e] the prevailing party for the costs it incurred in the prosecution . . . of a case where it would be grossly unjust . . . to require it to bear its own costs." Kilopass Tech., Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013). If, as the R-BOC Representatives say without contradiction, the plaintiff wasn't paying as he went, the risk fell on the attorneys, who were out-of-pocket throughout the case. A dollar now doesn't fully make up for a dollar when this case began and winning attorneys should not be placed in this position in a Patent Act case.

So, in this respect and for the reasons discussed earlier, we must respectfully disagree with the conclusion in BASF Corp. v. Old World Trading Co., 839 F. Supp. 528, 535 (N.D. Ill. 1993), that a plaintiff would not be "'out of pocket' in its attorney's fees in this case until the court ruled that the case was 'exceptional.'" Id. at 535. The district court reasoned this was true because a "plaintiff had no expectation that its attorney's fees would be reimbursed if it prevailed in the case, and was not 'out of pocket' until such a determination was made." Id. But that rationale serves only to detract from the deterrent effect of an award of attorney's fees in appropriate cases. For, as we have shown, no case is exceptional except in hindsight; that is until the judge says it is.³

On appeal of the BASF decision, the Court of Appeals held that a decision to award attorney's fees under the Lanham Act is committed to the district court's discretion, and that the district court did not abuse that discretion. It rejected the defendants' argument that plaintiffs mustshow willfulness or bad faith to be entitled to a fee award, holding instead that a plaintiff need show that the infringement was malicious, fraudulent, deliberate or willful. It noted that the district court had concluded that although Old World's conduct was not malicious, it was deliberate. Hence, it affirmed the district court's fee award to BASF. That conclusion would not be possible if malice, fraud, deliberateness or willfulness could only be concluded to have existed after the trial was over.

Mr. Minemyer maintained that this was an exceptional case from the very beginning. [No. 07-1763, Dkt. #27, ¶¶ 18, 24, 28]. And it was. The fact that a plaintiff in a patent case might lose cannot be the basis for determining entitlement to enhanced fees once it wins. The final judgment merely recognizes what the case has been all along. Plaintiff is entitled to prejudgment interest on both the damage award and the fee award.⁴

B.

The next disputed point is Mr. Minemyer's claimed entitlement to "disgorgement" of the defendants' profits resulting from their violations of the '726 patent. Disgorgement initially developed as a remedy to provide a plaintiff relief in equity, to serve as a proxy for damages, or to deter the wrongdoer from continuing his violations. BASF, 41 F.3d at 1095-96. Awarding disgorgement was discretionary not obligatory. It is not even the norm in a Lanham Act case, see 41 F.3d at 1095, et seq., let alone a Patent Act case. Thus, an award of disgorgement may over-compensate for a plaintiff's actual injury, resulting in a windfall judgment at the plaintiff's expense. Id. at 1096. Phrased differently, while damages directly measure the plaintiff's loss, defendant'sprofits measure the defendant's gain. Thus, disgorgement may overcompensate for a plaintiff's actual injury and create a windfall judgment at the plaintiff's expense. Id.

In the instant case, damages were significant, and the plaintiff was awarded treble his damages and attorney's fees. The purpose of the award was not to deter further violations to protect the public at large, and thus there was not a criminal contempt proceeding. Lightspeed Media Corp. v. Smith, 830 F.3d 500, 508 (7th Cir. 2016). In light of the award of treble damages and attorney's fees, disgorgement of the defendants' profits - even had they been proven - was not necessary, even if that were permissible under §284 of the Patent Act.

Indeed, Mr. Minemyer didn't ask for disgorgement of profits in his answer and counterclaim to the R-BOC Representatives' declaratory judgment action in this case. He did raise it in his motion for contempt, but never followed through with the proof he indicated would be forthcoming. [No. 07-1763, Dkt. #560, at 8-9]. He didn't offer any proof of "profits" in the trial and, actually, didn't even raise the issue of disgorging the R-BOC Representatives' profits until his closing argument.

But, even there, he injected disgorged profits into the proceedings only as "an alternate remedy" to the plaintiff's lost profits. [Minemyer II, Trial Tr., at 1358]. Even now, according to the plaintiff, we only know what the defendants' "markup" on the couplers was. [Dkt. #243, at 3; Ex. 2]. But markup is not the same as profits, Nordock, Inc. v. Systems, Inc., 803 F.3d 1344, 1354 (Fed. Cir. 2015), as plaintiff's counsel wisely conceded:

COURT: When you say disgorge profits, is it just profits, or is it sales?

PLAINTIFF'S COUNSEL: Well, I mean, I think there are cases that have done all kinds of things, revenue, gross revenue.

COURT: Right. That's what I

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