On January 12, 2018, the Federal Circuit vacated and remanded a district court summary judgment determination of no invalidity, as well as jury findings of willfulness and damages, in its decision in Exmark Manufacturing, Co. v. Briggs & Stratton Power Products Group, LLC. In particular, the Federal Circuit held the district court erred when it granted summary judgment of no invalidity to Exmark Manufacturing, Co. ("Exmark") based solely on the fact that its patent survived multiple reexaminations involving the same art. The Federal Circuit also found insufficient evidence to support the jury's damages award, and held the district court abused its discretion when it excluded certain evidence related to willfulness.
This appeal arose from an infringement suit filed by Exmark against Briggs & Stratton Power Products Group, LLC ("Briggs") and Schiller Grounds Care Inc.1 ("Schiller") for infringement of Exmark's lawn mower patent in the District Court for the District of Nebraska. The Exmark patent generally claims a lawn mower having improved flow control baffles, which are metal structures under a mower deck that direct air flow and grass clippings during operation.
Before filing suit, Exmark placed its patent in a reexamination in which the PTO confirmed the patentability of its claim 1. Both Briggs and Schiller also requested reexaminations of the Exmark patent, asserting the same prior art that it raised in its invalidity defenses in the district court litigation. The district court stayed the litigation pending completion of the Briggs and Schiller reexams. The PTO confirmed patentability of claim 1 of the Exmark patent in both of those reexams as well.
Once the reexams completed and the district court lifted its stay, Exmark moved for summary judgment of no anticipation and no obviousness. The district court granted Exmark's motion, holding that "no reasonable juror could find that the defendants have met their burden of proving by clear and convincing evidence that the claims of the patent are invalid," in view of the fact that Exmark's patent survived three reexaminations by the PTO.
On review, the Federal Circuit held that a reexamination confirming patentability of a claim is not, by itself, determinative of whether genuine issues of fact preclude summary judgment of no invalidity. The Federal Circuit reasoned that such a grant would improperly give complete deference and preclusive effect to the PTO's patentability determinations, thus foreclosing challenges to validity in district courts. Rather, the deference owed to a decision of the PTO comes in the form of the presumption of validity, which can be overcome by clear and convincing evidence. The Federal Circuit recognized the logical appeal of Exmark's argument that a party that was unable to invalidate claims before the PTO under the lower preponderance standard and applying a broader claim construction standard could not possibly meet its clear and convincing burden to prove invalidity in a district court. Nevertheless, the Federal Circuit held that substantive and procedural differences between the district court and the PTO, including the level of involvement permitted a challenger in an ex parte reexamination, preclude a district court from relying solely on the PTO's determination to award summary judgment of no invalidity.
Briggs also challenged the jury's approximately $24 million damages verdict on appeal. First, Briggs argued that Exmark's expert failed to properly apportion the improved baffle feature claimed in the Exmark patent through the royalty base, rather than the royalty rate. The Federal Circuit rejected this argument, and held that the accused mower could serve as an acceptable royalty base so long as apportionment was then accomplished through the royalty rate: "The essential requirement is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product."
Second, Briggs argued that Exmark's damages expert's opinion was inadmissible because she failed to tie her royalty rate to the facts of this particular case. The Federal Circuit agreed with this argument. In particular, the Federal Circuit found that Exmark's expert failed to show how her proposed 5% royalty rate connected to the relevant Georgia-Pacific factors. More specifically, the Federal Circuit held that it was not enough for Exmark's expert to recite the advantages of the claimed invention. She was required to explain the extent to which those advantages factored into the 5% royalty rate. The Federal Circuit further held that some accounting must also be made for other components that Exmark's expert stated did not influence the overall value of the lawn mowers.
In remanding the case for a new trial on damages, the Federal Circuit further held that the district court abused its discretion when it previously ruled that prior art is relevant to damages only to the extent that the prior art was commercialized. The Federal Circuit reasoned that the fact that some prior art mowers were not commercialized does not make them immaterial to determining the extent to which Exmark's patented invention provides utility and advantages over the prior art.
Finally, Briggs argued that it was entitled to a new trial on willfulness and vacatur of the district court's enhanced damages award based on the Supreme Court's decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016). Before holding a trial on willfulness, the district court excluded Brigss' evidence regarding the validity of claim 1 of the Exmark patent because it found Briggs' litigation defenses unreasonable based on the standard set forth in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007).
The Federal Circuit vacated the district court's evidentiary ruling, holding that, under Halo, a jury must decide the entire willfulness determination, including whether a litigation defense is reasonable. Thus, the district court erred to the extent it excluded evidence relevant to Briggs' state of mind at the time of the accused infringement. In remanding this aspect of the district court's decision, the Federal Circuit instructed the district court to determine whether Briggs knew of the prior art at the time of the accused infringement, and should therefore, be granted a new trial on willfulness, or whether the previously-excluded evidence only relates to litigation-inspired defenses.
Exmark Manufacturing, Co. v. Briggs & Stratton Power Products Group, LLC, No. 8:10-cv-00187-JFB-TDT (Fed. Cir. Jan 12, 2018)
1 Schiller did not participate in this appeal.
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