PHILLIP M. ADAMS & ASSOCIATES v. WINBOND ELECTRONICS CORPORATION
PHILLIP M. ADAMS & ASSOCIATES, LLC, a Utah Limited Liability Company, Plaintiff,
v.
WINBOND ELECTRONICS CORPORATION, ASUS COMPUTER INTERNATIONAL, MICRO-STAR INTERNATIONAL CORP., LTD, AND MSI COMPUTER CORP., et al., Defendants.
Case No. 1:05-CV-64 TS.
United States District Court, D. Utah, Northern Division.
September 8, 2010.
MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT LIMITING DAMAGESTED STEWART, District Judge
I. INTRODUCTIONASUS and MSI joined former Defendant Sony's Motion for Partial Summary Judgment seeking to limit Plaintiff's damages on two grounds: first, because Plaintiff attempts to rely on the entire market value rule; second, because Plaintiff failed to comply with the marking requirement of 35 U.S.C. § 287(a). The Court finds that the first ground is moot because Plaintiff's expert on damages does not rely on the entire market value to determine damages. As to the second ground, the Court finds that the marking requirement does not apply on the facts proffered. Accordingly, the Court will deny the Motion.
DISCUSSION AND CONCLUSIONSA. Entire Market Value Rule
The Court need not go into detail about the entire market value rule because the parties agree that it does not apply. Briefly, the "entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand."1 "For the entire market value rule to apply, the patentee must prove that the patent-related feature is the basis for customer demand."2
1. Rite-Hite Corp. v. Kelley Co., Inc.,56 F.3d 1538, 1549 (Fed. Cir. 1995) (quoting State Indus., Inc. v. Mor-Flo Indust., Inc.,883 F.2d 1573, 1580 (Fed. Cir. 1989)). 2. Lucent Technologies, Inc. v. Gateway, Inc.,580 F.3d 1301, 1336 (Fed. Cir. 2009) (internal quotation and citation omitted). 3. Docket No. 1097 at 15.
4. Id. at 23.
5. Docket No. 1191, at 2 (quoting Cornell University v. Hewlett-Packard Co.,609 F.Supp.2d 279, 288 (N.D. N.Y. 2009)). 7. Docket No. 1644 (Order Denying Defendants' Motion for Clarification) at 3 and n. 8.
8. Gemini August 14, 2009 Report at 45-46.
9. See Lucent Technologies, Inc. v. Gateway, Inc.,580 F.3d 1301, 1326-27, 1330 (Fed. Cir. 2009) (reversing damages award because plaintiff had not met its burden of showing that either lump-sum or running royalties were "sufficiently comparable to support lump-sum damages award" and also considering separately that no basis shown for entire market value rule); Wordtech Systems, Inc v. Integrated Networks Solutions, Inc., 2010 WL 2384958, *10 (Fed. Cir. 2010) (reversing and remanding for new trial on the issue of damages because the evidence did not support the $250,000 lump-sum reasonable royalty award). 10. Uniloc USA, Inc. v. Microsoft Corp.,632 F.Supp.2d 147, (D. R.I. 2009). In Uniloc, it was the alleged infringer's expert who argued for a lump-sum royalty while Mr. 11. Docket Nos. 1401 and 1405 (Defendant's Motions to Exclude all or part of Mr. Gemini's report and testimony).
12. Because Sony is no longer a party, leaving only MSI's and ASUS' joinder in this portion of the Motion to be decided, MSI and ASUS will be referred to as Defendants in this section.
13. Much later, MSI attempted to file a supplemental brief, which was denied. Docket No. 1575. MSI also raises this defense in a Motion in Limine, which ASUS joined. Docket Nos. 1475 (MSI's Motion in Limine No. 19) and 1481 (ASUS' joinder).
14. Docket No. 1083.
15. 35 U.S.C. § 287(a).
16. Radar Industries, Inc. v. Cleveland Die & Mfg. Co., 2010 WL 777077, 2 (E.D.Mich.) (E.D. Mich. 2010) (citing Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998)).
17. Id. at 3.
18. Id.
19. In re Yarn Processing Patent Validity Litigation (No. II),602 F.Supp. 159, 169 (D.N.C. 1984). 20. Maxwell v. J. Baker, Inc.,86 F.3d 1098, 1111 (Fed. Cir. 1996). 21. Defendants concede that the marking statute does not apply to only method claims "because there is no `patented article' to be marked." Docket No. 1083 at 25.
22. Id.
23. TransCore, LP v. Elect. Transaction Consultants Corp.,563 F.3d 1271, 1275 (Fed. Cir. 2009) (explaining that a patent license "passes no interest in the monopoly, it has been described as a mere waiver of the right to sue by the patentee" and "[t]o like effect, this court and its predecessors have on numerous occasions explained that a non-exclusive patent license is equivalent to a covenant not to sue") (first phrase quoting De Forest Radio Telephone & Telegraph Co. v. United States,273 U.S. 236, 242 (1927)). 24. There is no allegation that HP or Compaq knew that the Winbond chips were (allegedly) infringing when HP and Compaq purchased them and incorporated them into their products.
25. Docket No. 1165 at 10 (emphasis in original; internal citations to exhibits omitted). The HP license agreement is Def.s' Ex. 3, the Compaq agreements are Def.s' Exs. 4 and 12. Plaintiff's Mem. in Opp. to this Motion is filed under seal. However, Plaintiff makes the identical argument to that quoted above in its opposition to MSI's and ASUS's Motion in Limine No. 19 to limit evidence of pre-notice damages under § 287(a), Docket No. 1544, which is filed on the public docket. Therefore, the Court will not file this order under seal.
26. Id. at 10-11 (citing Amsted Indus., Inc. v. Buckeye Steel Castings Co.,24 F.3d 178, 185 (Fed. Cir. 1994) for the proposition that a marking requirement only applies to sales authorized by the patent owner). 27. In Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) a patent exhaustion case, the license authorized the licensee to sell products that embodied the method patents but, after such sale purported to limit the ability of third parties to combine the purchased patented parts with components of any other maker for use, import, or sale in combination and required the licensee to provide notice of the provision. Notwithstanding receiving such notice Quanta did combine the patented part it purchased from the licensee with parts not manufactured by the patentee or licensee in a manner that practiced the patents. The Court found that because the initial sale was authorized, and because the products' "constituted a material part of the patented invention and all but completely practice[d] the patent," "lacking only the addition of standard parts", the doctrine of patent exhaustion applied. However, Quanta is of no assistance because unlike the sales in Quanta, the use in the present case by suppliers to the licensee was not authorized under the license.
30. Id. at 361.
31. Id. at 362.
32. Id. at 365-66.
33. Def.'s Ex. 3 at PMA0028584 (choice of law provision providing it will be construed in accordance with the laws of the State of California) and Ex. 4 PMA0022567(same for Compaq agreement).
34. National City Police Officers' Ass'n v. City of National City,87 Cal.App.4th 1274, 1279 (Cal. App. 2001) (internal citations and quotations omitted). 35. Def.'s Ex. 3 at PMA0028598 and PMA0028606 (adding "to be executed solely on" an HP product to definition of Licensed Products).
36. Tulip Computers, 262 F.Supp.2d at 366.
37. Def.'s Ex. 3 at PMA0028584 ¶¶ 6 and 8.
38. Def.'s Ex. 4 at MA0022566.
39. See also Robert A. Matthews, Jr., Annotated Patent Digest § 30:154 (2010) ("A patentee cannot be found not to comply with the marking statute based on unauthorized manufacture and sale by a third party. Such use is not `for or under' the patentee.") (citing cases including Tulip Computers).