United States Court of Appeals for the Federal Circuit
2007-1112, -1135
AMERICAN SEATING COMPANY,
Plaintiff-Appellant,
v.
USSC GROUP, INC.,
Defendant-Cross Appellant.
Todd R. Dickinson, Fisher & Dickinson, of Ada, Michigan, argued for plaintiff-
appellant. Principal counsel on the brief was Conrad J. Clark, Clark & Brody, of
Washington, DC. With him on the brief was Christopher W. Brody.
Richard A. Gaffin, Miller, Canfield, Paddock and Stone, P.L.C., of Grand Rapids,
Michigan, argued for defendant-cross appellant. With him on the brief was Catherine T.
Dobrowitsky.
Appealed from: United States District Court for the Western District of Michigan
Senior Judge Avern C. Cohn
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
2007-1112,-1135
AMERICAN SEATING COMPANY,
Plaintiff-Appellant,
v.
USSC GROUP, INC.,
Defendant-Cross Appellant.
Appeal from the United States District Court for the Western District of Michigan in case
no. 1:01-CV-578, Senior Judge Avern C. Cohn.
________________________
DECIDED: January 29, 2008
_________________________
Before MAYER and BRYSON, Circuit Judges, and FOGEL, District Judge*
MAYER, Circuit Judge.
American Seating Company (“American Seating”) appeals the judgment of the
United States District Court for the Western District of Michigan granting-in-part USSC
Group, Inc.’s (“USSC”) motion for judgment as a matter of law, setting aside the portion
of a jury verdict compensating American Seating for convoyed sales of passenger seats
related to USSC’s infringement of Patent No. 5,888,038 (the “’038 patent”). USSC
cross-appeals the district court’s orders denying its motion for summary
__________________________
* The Honorable Jeremy D. Fogel, District Judge for the Northern District of
California, sitting by designation.
judgment on grounds of invalidity for public use and the parties’ cross motions for a new
trial following the jury verdicts on infringement and validity. Am. Seating Co. v. USSC
Group, No. 01-00578 (W.D. Mich. Aug. 24, 2006). On each issue, we affirm.
BACKGROUND
American Seating owns the ’038 patent, entitled “Tie-Down for Wheelchairs,”
which is directed toward a wheelchair restraint system that complies with the Americans
with Disabilities Act (“ADA”) for use in mass transit vehicles. The invention uses a
combination of belts and moving arms to secure wheelchairs and hold them in place
while buses and trains are in motion. USSC manufactures wheelchair tie-down devices,
the VPRo I and VPRo II.
American Seating sued USSC and others on September 7, 2001, for
infringement of, inter alia, the ‘038 patent. The district court determined that neither the
VPRo I nor VPRo II literally infringes the ‘038 patent. American Seating appealed, and
this court reversed the finding as to the VPRo I, affirmed as to the VPRo II, and
remanded because of claim construction error to determine whether the VPRo I literally
infringed and whether the VPRo II infringed under the doctrine of equivalents. Am.
Seating Co. v. USSC Group, 91 F. App’x 669 (Fed. Cir. 2004). On remand, the trial
court granted summary judgment to American Seating on the claim that the VPRo I
literally infringed the ‘038 patent, and left for the jury the issues of public use and
infringement by the VPRo II. The jury concluded that USSC failed to show that
American Seating’s tie-down restraint system was in public use before the critical date,
and awarded American Seating damages totaling $2,326,129 in lost profits.
2007-1112 2
Of the damage award, $1,366,612 related to lost profits from infringing sales by
USSC of the VPRo I, and $959,517 to lost profits as a result of USSC’s infringing offers
to sell the VPRo I that resulted in deliveries of the VPRo II. Of the infringing VPRo I
sales, $387,931 was allocated to lost profits from diverted sales of American Seating’s
patented tie-down restraint system, and $971,681 was allocated to lost profits from
diverted collateral sales of accompanying passenger seats. Of the infringing offers to
sell the VPRo I that resulted in deliveries of the non-infringing VPRo II, $288,919 related
to lost profits from sales of tie-down restraint systems, and $670,598 to lost profits from
collateral sales of passenger seats. Following the jury verdict, USSC moved for
judgment as a matter of law, a new trial or remittitur. The trial court granted USSC’s
motion in-part by setting aside the portion of the verdict relating to convoyed sales,
thereby reducing the overall award to $676,850. American Seating appeals, and USSC
cross-appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
We review a district court’s grant of judgment as a matter of law in a case tried to
a jury de novo by reapplying that standard under the law of the regional circuit. Dystar
Textilfarben GmbH & Co. v. C.H. Patrick, 464 F.3d 1356, 1359 (Fed. Cir. 2006). To
grant a motion for judgment as a matter of law, the trial court must determine that the
non-moving “party has been fully heard on an issue during a jury trial and . . . a
reasonable jury would not have a legally sufficient evidentiary basis to find for the party
on that issue.” Fed. R. Civ. P. 50(a)(1). In the Sixth Circuit, judgment as a matter of law
is appropriate “when ‘viewing the evidence in the light most favorable to the non-moving
party, there is no genuine issue of material fact for the jury, and reasonable minds could
2007-1112 3
come to but one conclusion in favor of the moving party.’” Johnson Controls, Inc. v. Jay
Indus., Inc., 459 F.3d 717, 723 (6th Cir. 2006) (quoting Tisdale v. Fed. Express Corp.,
415 F.3d 516, 527 (6th Cir. 2005) (internal quotation marks omitted)).
We likewise review a district court’s summary judgment determinations de novo.
Netscape Commc’ns Corp. v. Konrad, 295 F.3d 1315, 1319, 63 U.S.P.Q.2d 1580, 1582
(Fed. Cir. 2002). Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). Summary judgment is
improper “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When
ruling on a motion for summary judgment, all of the non-movant’s evidence is to be
credited, and all justifiable inferences drawn in the non-movant’s favor. Id. at 255.
I. Validity
USSC contends that American Seating’s ‘038 patent is invalid for public use. An
invention “in public use” more than one year prior to the date of the application for a
patent in the United States is unpatentable. 35 U.S.C. § 102(b). The purpose of the
public use bar to patentability is to discourage “the removal of inventions from the public
domain which the public justifiably comes to believe are freely available.” Bernhardt,
L.L.C. v. Collezione Europa USA, Inc., 386 F.3d 1371, 1379 (Fed. Cir. 2004) (internal
quotation marks omitted). Whether a patent is invalid for public use is a question of law
based on underlying facts. Netscape, 295 F.3d at 1320. The test for whether an
invention is ineligible for a patent due to the section 102(b) public use bar “is whether
2007-1112 4
the purported use: (1) was accessible to the public; or (2) was commercially exploited.”
Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1380 (Fed. Cir. 2005).
Consideration of public use includes analysis of, inter alia, the nature of and public
access to activities involving the invention; confidentiality obligations imposed upon
observers; commercial exploitation; and the circumstances surrounding testing and
experimentation. Id.; Netscape, 295 F.3d at 1320. An invention is in public use if it is
shown to or used by an individual other than the inventor under no limitation, restriction,
or obligation of confidentiality. Petrolite Corp. v. Baker Hughes Inc., 96 F.3d 1423, 1425
(Fed. Cir. 1996) (citing In re Smith, 714 F.2d 1127, 1134 (Fed. Cir. 1983)). However,
“use of an invention by the inventor himself, or of any other person under his direction,
by way of experiment, and in order to bring the invention to perfection, has never been
regarded as such a use.” City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S.
126, 134 (1877).
A patent carries a statutory presumption of validity, 35 U.S.C. § 282, so USSC
had the burden to show by clear and convincing evidence that the inventors of the
wheelchair tie-down system placed their invention in public use more than one year
before filing the ‘038 patent application. Bernhardt, 386 F.3d at 1378. The inventors,
James Ditch and Freridoun Razavi, applied for a patent on December 2, 1996, and later
assigned their patent to American Seating to commercialize the product. Ditch was the
Director of Maintenance for the Long Beach Transit Authority when, in 1994, he and bus
retrofitter Razavi invented the tie-down wheelchair restraint system with the goal of
better and more efficiently serving Long Beach’s wheelchair bound customers while
reducing the maintenance problems associated with an earlier generation of wheelchair
2007-1112 5
restraints. As they improved the invention, on several occasions Ditch and Razavi
placed evolving prototypes in an out-of-service bus for the purpose of soliciting
feedback from friends and colleagues who to varying degrees assisted in the invention’s
development.
Contrary to USSC’s argument, the fact that the inventors revealed the prototype
to a select group of individuals without a written confidentiality agreement is not
dispositive. When access to an invention is clearly limited and controlled by the
inventor, depending upon the relationships of the observers and the inventor, an
understanding of confidentiality can be implied. Id. at 1381; Moleculon Research Corp.
v. CBS, Inc., 793 F.2d 1261, 1265-66 (Fed. Cir. 1986). In this case, the jury was
entitled to conclude that Ditch, Razavi, and the limited number of people permitted to
view the tie-down restraint system prototype shared a general understanding of
confidentiality. Ditch demonstrated the prototype on an out-of-service bus, solicited
feedback, and removed the invention to store under his control. There was no evidence
that the prototype was placed in service before December 1995, and no evidence that
an unrestricted number of people unconnected with the development of the invention
observed the invention in use. The district court properly confirmed the jury verdict that
the ‘038 patent is not invalid for public use.
II. Lost Profits
Whether a party may be awarded lost profits is a question of law that we review
de novo. Mitutoyo Corp. v. Cent. Purchasing, LLC, 499 F.3d 1284, 1291 (Fed. Cir.
2007). We agree with the trial court’s conclusions that American Seating failed as a
matter of law to meet its burden of establishing a functional relationship between
2007-1112 6
passenger seats and the patented restraint system, and the jury properly awarded
damages for lost profits on USSC’s deliveries of the VPRo II predicated upon offers to
sell the infringing VPRo I. See BIC Leisure Prods. v. Windsurfing Int’l, 1 F.3d 1214,
1218 (Fed. Cir. 1993) (“To recover lost profits as opposed to royalties, a patent owner
must prove a causal relation between the infringement and its loss of profits. The patent
owner must show that ‘but for’ the infringement, it would have made the infringer’s
sales.”).
A. Convoyed Sales
A “convoyed sale” refers to the relationship between the sale of a patented
product and a functionally associated non-patented product. A patentee may recover
lost profits on unpatented components sold with a patented item, a convoyed sale, if
both the patented and unpatented products “together were considered to be
components of a single assembly or parts of a complete machine, or they together
constituted a functional unit.” Rite-Hite Corp. v. Kelly Co. Inc., 56 F.3d 1538, 1550 (Fed.
Cir. 1998). “Our precedent has not extended liability to include items that have
essentially no functional relationship to the patented invention and that may have been
sold with an infringing device only as a matter of convenience or business advantage.”
Id. Damages on these items would exceed that which suitably compensates for the
infringement. Id.
A functional relationship does not exist when independently operating patented
and unpatented products are purchased as a package solely because of customer
demand. The fact that customers prefer that passenger seats and tie-down wheelchair
restraint systems come from a single supplier for ease of purchase, repair, and uniform
2007-1112 7
design and appearance, does not compel the conclusion that the seats and tie-down
system are “analogous to components of a single assembly or . . . parts of a complete
machine.”
Here, the trial court granted USSC’s motion to set aside the verdict for convoyed
sales because the record evidence, viewed in the light most favorable to American
Seating, was insufficient as a matter of law for the jury to find that the patented tie-down
system and unpatented passenger seats were part of a single functional unit. The
evidence demonstrated that (1) neither flip-up nor fixed passenger seats are covered by
the claims of the ‘038 patent; (2) the tie-down operates independently of the passenger
seats; and (3) bus buyers do not require that passenger seats and tie-downs be
purchased from the same company. Tie-downs and passenger seats were usually but
not always purchased by bus manufacturers from the same company; package sales
were for reasons of convenience and “one-stop shopping,” not because of an absolute
requirement that the two items function together. Although the specification refers to a
preferred embodiment in which the tie-down of the invention is located “adjacent chairs
that fold against the side of the bus,” U.S. Patent No. 5,888,038 col.1, ll.60-61 (filed
Aug. 4, 1997), the claims make no mention of the passenger seats and the references
to the “adjacent chairs” do not indicate any functional relation between the seats and the
wheelchair tie-downs. Cf. Juicy Whip, Inc. v. Orange Bang, Inc., 382 F.3d 1367, 1372
(Fed. Cir. 2004) (noting that the non-patented syrup was central to the “visual
appearance” of the patented dispenser and therefore could be included in the lost
profits analysis).
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A bus utilizing American Seating’s tie-down restraint system and outfitted by
USSC’s passenger seats would be equally as functional as a bus furnished with only
American Seating products. The evidence shows that passenger seats command a
market value and serve a useful purpose independent of the patented product. Cf. Rite-
Hite, 56 F.3d at 1550 (citing Paper Converting Mach. Co. v. Magna-Graphics Corp., 745
F.2d 11 (Fed. Cir. 1984) (indicating that lost profit damages are properly granted for
collateral products that have no useful purpose or market value independent of the
patented product)). Because it is clear that no interrelated or functional relationship
inheres between the seats and the tie-down restraint system on a passenger bus, the
district court was correct that the jury had no basis to conclude that lost profits on
collateral sales of passenger seats were due American Seating.
B. VPRo II Lost Sales
It is undisputed that the patented features of American Seating’s tie-down
wheelchair restraint system prompted consumer demand, in large part because of its
efficiency and ADA-compliance, and that USSC’s VPRo I restraint system infringes
these patented features. It is also undisputed that USSC’s VPRo II restraint system
does not infringe. In instances involving five transit authorities, however, the jury
awarded American Seating lost profit damages for USSC sales of the non-infringing
VPRo II restraint system, because in those cases USSC first made infringing offers to
sell the VPRo I, but ultimately delivered the VPRo II.
To prove lost profits from lost sales, the patent owner bears the initial burden to
show a reasonable probability that “but for” the infringement, he would have made the
sales. Grain Processing Corp. v. Am. Maize-Products Co., 185 F.3d 1341, 1349 (Fed.
2007-1112 9
Cir. 1999); State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577 (Fed. Cir.
1989). Once this reasonable probability is shown, the burden shifts to the infringer to
show that the “but for” causation analysis is unreasonable under the specific
circumstances. Grain Processing, 185 F.3d at 1349. Here, it appears the jury
determined that American Seating met its initial burden, and that USSC failed to
persuasively rebut. The evidence upon which the jury relied included: (1) an e-mail
from USSC’s Vice President of Sales, Richard Klotz, announcing on March 16, 2004,
that the VPRo I would no longer be available, that orders already placed would be filled
by the VPRo II, and naming several jobs that needed to be “switched over” to the VPRo
II; (2) testimony analyzing such correspondence by David McLaughlin, Vice President of
American Seating, and Kathleen Kedrowski, American Seating’s damages expert at
trial; and (3) inconsistent testimony by Christian Hammarskjold, president and owner of
USSC, regarding the events surrounding the sales in question, and whether customers
were effectively informed about the switch. USSC did not prove that its customers
specifically consented to receive the VPRo II rather than the VPRo I for the sales in
question. On the following instruction, the jury concluded that USSC offered to sell the
infringing device to the five relevant customers, not the non-infringing substitute.
American Seating also seeks to recover profits it claims it
lost due to USSC’s offer to sell its VPRo I when, prior to
delivery, the order was changed to the noninfringing VPRo II.
To recover any lost profits as a result of each such offer to
sell, American Seating must show that USSC made an offer
to sell the VPRo I to a customer, that the customer agreed to
purchase the VPRo I, that USSC substituted the VPRo II
when it delivered the product, and that but for the offer to sell
the VPRo I, American Seating would have made the sale.
You must determine what the customer would have
done. . . .
2007-1112 10
USSC argues that the jury’s award of lost profit damages for sales of the non-
infringing VPRo II after April 2002 was not supported by substantial evidence. It also
argues that Grain Processing created a bright-line rule that the presence of a non-
infringing replacement product precludes lost profit damages in all circumstances.
However, USSC overlooks that Grain Processing instructs that a non-infringing
replacement product is not considered a substitute unless it is “acceptable to all
purchasers of the infringing product.” Id. at 1343. In other words, buyers must view the
substitute as equivalent to the patented device. See id. at 1347.
Here, the jury did not conclude that customers viewed the VPRo II as an
equivalent substitute for American Seating’s patented wheelchair restraint system. It
viewed specimens and demonstrations of both the VPRo I and VPRo II, and heard
testimony from Lee Peterson, a regional sales manager for American Seating, that
USSC’s Klotz admitted that a manager of the Los Angeles County Metropolitan Transit
Authority objected to the switch from the VPRo I to VPRo II because of differences in
the way the two devices lock into use. On all the evidence, it was reasonable for the
jury to decline to find that the VPRo II was an acceptable substitute for the patented
device and the infringing VPRo I.
Grain Processing says that patentees have “significant latitude to prove and
recover lost profits for a wide variety of foreseeable economic effects of the
infringement.” Id. at 1350. Although the evidence in this case was relatively sparse, it
sufficed for the jury to assume that USSC offered the VPRo I for sale and then
substituted the non-infringing VPRo II—a bait-and-switch—and to find that absent
USSC’s offer to sell the VPRo I, the sales would have gone to American Seating.
2007-1112 11
CONCLUSION
Accordingly, the judgment of the United States District Court for the Western
District of Michigan is affirmed.
AFFIRMED
2007-1112 12