Glenayre Electronics, Inc. v. Jackson

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United States Court of Appeals for the Federal Circuit

04-1568

GLENAYRE ELECTRONICS, INC.,

Plaintiff-Appellee,

v.

PHILLIP JACKSON and PMJ FAMILY LIMITED PARTNERSHIP,

Defendants-Appellants.

Douglas D. Salyers, Troutman Sanders, LLP, of Atlanta, Georgia, argued for
plaintiff-appellee.

Mark D. Roth, Orum & Roth LLC, of Chicago, Illinois, argued for defendants-
appellants. With him on the brief was Keith H. Orum. Of counsel was Catherine L.
Gemrich.

Appealed from: United States District Court for the Northern District of Illinois

Judge Harry D. Leinenweber
 United States Court of Appeals for the Federal Circuit

04-1568

GLENAYRE ELECTRONICS, INC.,

Plaintiff-Appellee,

v.

PHILLIP JACKSON and PMJ FAMILY LIMITED PARTNERSHIP,

Defendants-Appellants.

__________________________

DECIDED: April 11, 2006
__________________________

Before NEWMAN, BRYSON, and PROST, Circuit Judges.

Opinion for the court filed by Circuit Judge PROST. Dissenting opinion filed by Circuit
Judge NEWMAN.

PROST, Circuit Judge.

Phillip Jackson and PMJ Family Limited Partnership (collectively, “Jackson”)

appeal from the order of the United States District Court for the Northern District of

Illinois denying Jackson’s motion to set trial on the issue of indirect infringement of

United States Patent No. 4,596,900 (“the ’900 patent”) by Glenayre Electronics, Inc.

(“Glenayre”). See Glenayre Elecs., Inc. v. Jackson, No. 02-CV-256 (N.D. Ill. June 29,

2004) (“June 29th Order”). We conclude that, as a matter of law, Jackson has been

fully compensated for infringement of the ’900 patent by the manufacture and sale of

Glenayre’s products and the use of the same products by Glenayre’s customers.

Jackson may not collaterally challenge the district court’s previous judgment that he is
entitled to only $2.65 million rather than $12 million in damages for the manufacture,

sale, and use of Glenayre’s products that infringe the ’900 patent, because that

judgment, which was affirmed in a previous appeal, disposed of his current argument

that he should be awarded greater damages based on the benefits Glenayre’s

customers enjoyed by using products sold by Glenayre. Furthermore, Jackson is not

entitled to a second trial as a matter of right simply because the district court stayed his

counterclaims of indirect infringement. We therefore affirm the district court’s denial of

the motion to set trial.

BACKGROUND

The ’900 patent discloses and claims an apparatus for producing control signals

in response to receiving predetermined tone signals from remote telephones over a

telephone line. Glenayre utilizes this technology in its voicemail server systems, which

it manufactures and sells to wireless telephone service companies. These companies

in turn incorporate the systems into their networks for further sale and the provision of

services to end users.

While the present appeal requires us to review the district court’s denial of

Jackson’s motion to set trial on the issue of indirect infringement by Glenayre, the entire

procedural history of this case, in all its complexity, provides necessary context.

Jackson originally filed a patent infringement suit against Glenayre’s customers,

alleging direct infringement of the ’900 patent. Thereafter, Glenayre filed a separate

declaratory judgment action. Glenayre sought a judgment of noninfringement with

respect to the voicemail server systems that it manufactured and sold to its customers.

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The district court stayed the suit against the customers pending resolution of the

declaratory judgment suit.

In response to the stay of the suit against the customers, Jackson filed several

counterclaims in the declaratory judgment suit. Jackson filed counterclaims against

Glenayre for indirect infringement of the ’900 patent, and counterclaims against several

of Glenayre’s customers, named and unnamed in Glenayre’s amended complaint, for

direct infringement of the ’900 patent. The district court first enjoined the counterclaims

against the unnamed customers and stayed the counterclaims against the named

customers. The court then stayed the counterclaims against Glenayre, reasoning that

“Glenayre’s liability as an alleged contributory infringer/inducer depends, as a matter of

law, on the logically prior determination of liability against one or more direct infringers

(i.e., Glenayre’s customers).” Glenayre Elecs., Inc. v. Jackson, No. 02-CV-256, slip op.

at 2 (N.D. Ill. Sept. 27, 2002) (“Sept. 27th Order”). Because the court had already

enjoined and stayed the counterclaims of direct infringement against the customers, the

court reasoned that the question of the measure of damages against Glenayre as an

alleged contributory infringer/inducer did not present itself at that time. The court

therefore stayed the counterclaims of indirect infringement against Glenayre. Jackson

then filed a counterclaim against Glenayre for direct infringement of the ’900 patent.

The district court ultimately conducted a jury trial on the issue of Glenayre’s

alleged direct infringement. During the trial, Jackson introduced and relied on evidence

of the benefits Glenayre’s customers enjoyed by infringing the ’900 patent.

Furthermore, during closing arguments, Jackson pointed to this evidence and asked the

jury to return a verdict that assessed damages in the range of $6.2 million to $15 million

04-1568 3
based on a reasonable royalty calculation. The jury returned a verdict in favor of

Jackson in the amount of $12 million. After the jury verdict, Jackson voluntarily

withdrew an interlocutory appeal in this court seeking reversal of two of the district

court’s orders enjoining Jackson from pursuing infringement actions against Glenayre’s

customers. See Glenayre Elecs., Inc. v. Jackson, 66 Fed. Appx. 875 (Fed. Cir. May 29,

2003) (“May 29th Order”) (granting Jackson’s unopposed motion to voluntarily dismiss

his appeal).

Glenayre then submitted a post-trial motion requesting that the district court remit

the jury award. In response to Glenayre’s motion, Jackson argued that the jury’s

damages award was reasonable based on the evidence that he adduced at trial

showing the benefits Glenayre’s customers enjoyed by infringing the ’900 patent.

Despite Jackson’s arguments, the district court granted the motion for remittitur, finding

the jury’s damages award to be “grossly excessive.” Glenayre Elecs., Inc. v. Jackson,

No. 02-CV-256, slip op. at 11-17 (N.D. Ill. July 8, 2003) (“Remittitur Order”). The court

identified license agreements related to similar technology that Jackson and Glenayre

separately negotiated with third parties as constituting the most cogent, probative basis

for determining a reasonable royalty for infringement of the ’900 patent. These license

agreements included various royalty rates calculated as percentages of sales, lump-

sum payments, or combinations of these two methods of payment. Furthermore, the

court characterized these license agreements as “broadly grant[ing] the right to use

every aspect of the ’900 Patent”; “conferr[ing] an unrestricted right to use patents

covering a complete, complex voicemail system”; or conveying “unbounded rights to

use every aspect of the patents” that were the subject of the licenses. Id. at 15. The

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court then noted that neither party contested that Glenayre’s overall sales of the

infringing products during the damages period totaled approximately $40 million. Based

on this information, the court determined that “the jury’s $12,000,000 damages award

reflects a whopping royalty rate of 30%, a rate five times greater than the very highest

rate disclosed in any license agreement offered into evidence.” Id. at 16. The court

concluded that “[t]here is absolutely no support in the record for such an extravagantly

high royalty percentage.” Id. It ruled that the maximum reasonable royalty would be 6%

of sales plus a $250,000 lump-sum payment, and proposed a remittitur to $2.65 million

as an alternative to a new trial.

Rather than refuse the remittitur or request a new trial, Jackson accepted the

district court’s decision to award him the remitted damages award plus prejudgment

interest. In response, the court entered judgment under Federal Rule of Civil Procedure

54(b), stating that “additional claims, dependent upon the finality and affirmance of the

patent infringement claim against Glenayre, remain for adjudication . . . .” Glenayre

Elecs., Inc. v. Jackson, No. 02-CV-256, slip op. at 2 (N.D. Ill. July 22, 2003) (“July 22nd

Order”). Glenayre, but not Jackson, appealed. This court summarily affirmed the

district court’s judgment without issuing an opinion. See Glenayre Elecs., Inc. v.

Jackson, 95 Fed. Appx. 344 (Fed. Cir. Apr. 8, 2004). After the judgment was affirmed,

Jackson voluntarily dismissed his counterclaims against Glenayre’s customers without

prejudice, and Glenayre subsequently paid the remitted damages award.

Jackson then filed a motion to set trial on the stayed counterclaims of indirect

infringement by Glenayre. The district court denied the motion, stating that the

04-1568 5
judgment completely compensated Jackson for direct infringement and therefore there

was nothing else owed to Jackson. June 29th Order, slip op. at 2.

In connection with its response to Jackson’s motion to set trial, Glenayre filed a

motion for sanctions against Jackson and his attorneys for seeking to continue the

litigation. The district court denied the motion. In doing so, the court noted that its

“previous orders carried some ambiguity as to the continuing viability of Jackson’s

counterclaims. . . . That said, the Court has also made clear in oral comments and by

previous rulings from the bench that no counterclaims survive.” Glenayre Elecs., Inc. v.

Jackson, No. 02-CV-256, slip op. at 5 (N.D. Ill. Sept. 8, 2004) (“Sept. 8th Order”).

Jackson appeals the denial of his motion to set trial on the issue of indirect

infringement by Glenayre. We have jurisdiction over the appeal under 28 U.S.C.

§ 1295(a)(1).

DISCUSSION

I.

As a preliminary matter, the parties disagree as to what standard of review we

should apply in this case. Jackson, comparing the denial of the motion to set trial with a

grant of a motion for summary judgment or a motion to dismiss for failure to state a

claim, submits that we should review the district court’s action de novo. See

Weinberger v. Wisconsin, 105 F.3d 1182, 1186 (7th Cir. 1997) (summary judgment

reviewed de novo); Olson v. Wexford Clearing Servs. Corp., 397 F.3d 488, 490 (7th Cir.

2005) (dismissal for failure to state a claim reviewed de novo). Glenayre characterizes

the denial of the motion to set trial as a trial management decision, subject to review for

04-1568 6
abuse of discretion. See Research Sys. Corp. v. IPSOS Publicite, 276 F.3d 914, 919

(7th Cir. 2002).

We treat the district court’s denial of the motion to set trial as a dismissal of the

counterclaims for failure to state a claim upon which relief can be granted.

Consequently, we review the district court’s action in accordance with the criteria of

Federal Rule of Civil Procedure 12(b)(6). That is, we review the district court’s action de

novo. See Olson, 397 F.3d at 490. While we must take well-pleaded facts as true and

construe all reasonable inferences in favor of Jackson, we are not obligated to accept

assertions of law or unwarranted factual inferences. Stachowski v. Town of Cicero, 425

F.3d 1075, 1078 (7th Cir. 2005).

II.

Jackson presents this court with two arguments in his effort to obtain a second

trial addressing his claims of indirect infringement by Glenayre. First, as a factual

matter, Jackson contends that the district court bifurcated the case into two separate

trials, where the first trial would address Glenayre’s direct infringement, and the second

would address both Glenayre’s customers’ direct infringement and Glenayre’s indirect

infringement. Jackson argues that by doing so the district court preserved his right to a

second trial. He indicates that he relied on the district court’s plan to hold the second

trial, and that the district court erred by losing sight of its own plan and procedure and

denying his motion to set trial. Next, Jackson, relying primarily on three Supreme Court

cases, argues that he has not been fully compensated for infringement of the ’900

04-1568 7
patent even though he accepted the district court’s remittitur and has since collected the

$2.65 million damages award plus prejudgment interest.1

As we will show, neither of Jackson’s arguments persuade us that he is entitled

to a second trial addressing indirect infringement by Glenayre. With regard to his first

argument, Jackson is wrong in his interpretation of the legal effect of the district court’s

decision to stay his counterclaims of indirect infringement by Glenayre. The fact that his

counterclaims of indirect infringement were stayed does not automatically mean that as

a matter of right he is entitled to a second trial to present evidence and argument to a

new jury. Jackson is particularly incorrect to the extent he argues that the stay of his

counterclaims for indirect infringement automatically means that he is entitled to present

the same evidence and arguments on damages to two juries. Further, even assuming

that a promise by the district court to hold a second trial would be binding, in reality

Jackson was never promised a second trial on indirect infringement.

Without being able to show that he is entitled to a second trial as a matter of right

based on the fact that the district court stayed his counterclaims of indirect infringement,

we are left with Jackson’s argument that as a result of the first trial he did not receive

“full compensation” for infringement. Several relevant factors will guide our analysis of

this argument. First, Jackson’s allegations of indirect infringement are not based on

1
Jackson, apparently conceding that he is not entitled to lost profits, seeks
a reasonable royalty based on Glenayre’s customers’ profits under 35 U.S.C. § 284.
See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y.
1970), modified and aff’d, 446 F.2d 295 (2d Cir. 1971). Furthermore, because the ’900
patent expired before the district court entered its remittitur order, Jackson was not then
and is not now entitled to injunctive relief with regard to the ’900 patent. Lans v. Digital
Equip. Corp., 252 F.3d 1320, 1328 (Fed. Cir. 2001) (indicating that a district court
cannot enjoin a party from infringing an expired patent).

04-1568 8
conduct other than Glenayre’s sales of infringing products to its customers followed by

those customers’ use of the same products. Thus, his theory is that he is entitled to

pursue an additional damages award based on Glenayre’s customers’ use of infringing

products sold by Glenayre, even though he has already collected compensation for

direct infringement by Glenayre because of the same sales. Second, in the first trial

Jackson actually introduced and relied on evidence regarding benefits Glenayre’s

customers would experience by using infringing products purchased from Glenayre.

Indeed, the jury’s $12 million damages award undoubtedly reflected this evidence.

Third, Jackson did not refuse the district court’s remittitur which purported to

compensate Jackson based on a reasonable royalty for broad rights to his patent, see

supra p. 4, and in fact collected the remitted damages award. As explained below,

these factors lead us to the conclusion that Jackson has fully litigated his full measure of

damages such that the remitted damages award that Jackson collected constitutes full

compensation as a matter of law for (1) direct infringement of the ’900 patent by

Glenayre due to its manufacture and sale of infringing products; (2) direct infringement

of the ’900 patent by Glenayre’s customers due to their use of products purchased from

Glenayre; and (3) possible indirect infringement of the ’900 patent by Glenayre due to

its sale of infringing products and the resulting use of those same products by its

customers. In short, if the remitted damages award did not constitute full compensation

as a matter of fact, it was incumbent upon Jackson to refuse the district court’s

remittitur. His failure to refuse the remittitur requires that we reject his collateral attack

on that judgment in this appeal.

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 A.

Jackson alleges that various statements and conduct of the district court and

Glenayre require that a second trial be held to address his claims of indirect

infringement by Glenayre. In our view, however, none of these statements or conduct

constitutes a guarantee or promise by the district court that entitles Jackson to a second

trial as a matter of right.

Jackson points to the court’s statement that “Glenayre’s liability as an alleged

contributory infringer/inducer depends, as a matter of law, on the logically prior

determination of liability against one or more infringers (i.e., Glenayre’s customers)” and

that “the question of the measure of damages against Glenayre as an alleged

contributory infringer/inducer will not present itself until final judgment is rendered in this

case.” Sept. 27th Order, slip op. at 2. Jackson also points to the court’s later

clarification of its understanding of the procedural posture of the case:

Both parties have misperceived the court’s order as simply bifurcating the
issues of liability and damages. That is not what the order accomplished.
Rather, the court’s order meant to stay Jackson’s counterclaim against
Glenayre in its entirety insofar as it is premised on the theory that
Glenayre is merely a contributory infringer/inducer, and its customers the
direct infringers.

Glenayre Elecs., Inc. v. Jackson, No. 02-CV-256, slip op. at 1 (N.D. Ill. Oct. 9, 2002).

Jackson next directs our attention to the fact that the district court sustained one of

Glenayre’s objections to an exhibit showing that Glenayre indemnified its customers. In

addition, he points out that the district court only instructed the jury to calculate

Jackson’s damages based on Glenayre’s profits. He then points to the fact that, prior to

the previous appeal, the court entered its judgment pursuant to Federal Rule of Civil

Procedure 54(b) “[b]ecause additional claims, dependant on the finality and affirmance

04-1568 10
of the patent infringement against Glenayre, remain for adjudication . . . .” July 22nd

Order, slip op. at 2. Jackson further argues that the court admitted that it contemplated

adjudicating additional claims beyond the claims resolved in the first trial when it stated

that its “previous orders carried some ambiguity as to the continuing viability of

Jackson’s counterclaims . . . .” Sept. 8th Order, slip op. at 5. Finally, he argues that

Glenayre’s actions during the first trial support a second trial, because Glenayre did not

at any time seek an order that the claims of indirect infringement were resolved by the

judgment of direct infringement.

Contrary to Jackson’s assertions, the district court never ensured him a second

trial on the issue of indirect infringement by Glenayre. Rather, the court simply stayed

his counterclaims of indirect infringement by Glenayre pending the conclusion of the trial

that would address his counterclaims of direct infringement by Glenayre. See Sept.

27th Order, slip op. at 2 (“Defendant’s counterclaim against Glenayre is STAYED

pending resolution of the instant declaratory judgment action.”).2 None of the

statements or actions by the district court constitute a promise to hold a second trial,

even if it were the case that such a promise is somehow binding. In staying Jackson’s

counterclaims for indirect infringement and proceeding with a trial addressing Jackson’s

2
The propriety of the decision by the district court to stay Jackson’s
counterclaims of indirect infringement pending disposal of his counterclaim of direct
infringement is not before us in this appeal. As mentioned above, after the jury verdict
Jackson voluntarily withdrew an interlocutory appeal in this court seeking reversal of two
of the district court’s orders enjoining Jackson from pursuing infringement actions
against Glenayre’s customers. See May 29th Order (granting Jackson’s unopposed
motion to voluntarily dismiss his appeal). Furthermore, neither party has argued that it
was an abuse of the court’s discretion to manage its docket in the way that it did in this
appeal. See Research Sys. Corp., 276 F.3d at 919 (stating that trial management
decisions are subject to review for abuse of discretion).

04-1568 11
counterclaim of direct infringement, the district court determined to revisit the issue of

whether any additional relief was available against Glenayre, if necessary, after the

completion of the trial. And once the trial was completed, indeed after the judgment had

been affirmed on appeal and Glenayre satisfied the judgment against it, the court

considered the parties’ contentions, determined that Jackson was not eligible for

additional relief in the form of added damages, and therefore ruled that a second trial

was not necessary. June 29th Order, slip op. at 2. Having been mistaken in his belief

that the district court guaranteed him a second trial, it is irrelevant whether Jackson in

fact relied on his mistaken belief. Furthermore, Jackson cannot show that the district

court “lost sight” of its own plan and procedure when he cannot show that the district

court actually had a plan and procedure to hold a second trial regardless of the outcome

of the first.

B.

Jackson next argues that he has not been fully compensated for infringement of

the ’900 patent by Glenayre’s customers. We disagree. As we will now show, by

accepting the remitted damages award, Jackson has already been fully compensated

for damages incurred by the use of Glenayre’s products by Glenayre’s customers.

1.

Before reviewing the merits of Jackson’s argument that he has not been fully

compensated for indirect infringement by Glenayre, it is important to understand what

conduct by Glenayre Jackson challenges here. Jackson’s allegations of indirect

infringement are based solely on Glenayre’s sales of infringing products to its customers

followed by those customers’ use of the same products. Jackson has not identified, in

04-1568 12
his complaint, in his briefs to this court, or at oral argument, any other act by Glenayre

giving rise to a claim of indirect infringement other than sales of infringing products

themselves. When asked at oral argument, Jackson’s attorney explained that

Jackson’s complaint did not need to allege specific acts of indirect infringement due to

the lenient standard of notice pleading, and that discovery would be needed to identify

specific acts. But Jackson’s complete failure to identify even a category or type of

indirectly infringing act, again other than Glenayre’s directly infringing sales of its

products, militates against allowing Jackson to begin a fishing expedition in the form of

a second trial. Properly understood, then, Jackson seeks to recover an additional

damages award solely based on Glenayre’s customers’ use of products manufactured

and sold by Glenayre.

To prove his case of indirect infringement by Glenayre, Jackson must show that

Glenayre’s customers directly infringe the ’900 patent. See Novartis Pharms. Corp. v.

Eon Labs Mfg., Inc., 363 F.3d 1306, 1308 (Fed. Cir. 2004) (“When indirect infringement

is at issue, it is well settled that there can be no inducement or contributory infringement

absent an underlying direct infringement.”); Dynacore Holdings Corp. v. U.S. Philips

Corp., 363 F.3d 1263, 1272 (Fed. Cir. 2004) (“Indirect infringement, whether

inducement to infringe or contributory infringement, can only arise in the presence of

direct infringement, though the direct infringer is typically someone other than the

defendant accused of indirect infringement.”). And at least in cases like this one, where

a patentee alleges that a manufacturer contributes to and induces infringement by its

customers simply because it sells infringing products to its customers, damages

assessed for indirect infringement normally will be the same as damages that would be

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assessed had the patentee sued and obtained a judgment against the customers. See

Jerry R. Selinger & Jessica W. Young, Suing an Infringing Competitor’s Customers: Or,

Life under the Single Recovery Rule, 31 J. Marshall L. Rev. 19, 52 (1997) (“[A] patentee

who suffers lost profits or loss of royalty income ordinarily can be compensated and

made whole by the manufacturing infringer. In the usual course of events, the length of

the accused manufacturer’s distribution chain should have no impact on the patentee’s

ability to be made whole by the manufacturer.”). Indeed, in most cases damages

assessed for indirect infringement will be equal to damages assessed for the underlying

direct infringement. See 7 Donald S. Chisum, Chisum on Patents § 20.03[7][b][iv]

(2001) (“In many instances the appropriate measure of monetary relief against an

indirect infringer (i.e. one who contributes to or induces infringement) will be the same

as that against the direct infringer.” (footnotes omitted)). This case does not fit within

one of the exceptions to the basic rule, such as “when the indirect infringer does not

cause the original infringement but merely prolongs an infringing use of a product by

providing supplies or spare parts.” Id. See also, e.g., Aro Mfg. Co. v. Convertible Top

Replacement Co., 377 U.S. 476, 508 (1964) (“Aro II”) (noting that, in a proper case

against a contributor infringer that prolongs use of an infringing product, a patent owner

might be able to obtain an injunction; recover damages based on the prolongation of the

use; obtain punitive or increased damages for willful or bad-faith infringement; and

perhaps damages primarily caused by the direct infringer when those damages could

not be recovered from the direct infringer); King Instrument Corp. v. Otari Corp., 814

F.2d 1560, 1563-64 (Fed. Cir. 1987) (authorizing separate proceedings to resolve the

appropriate amount of damages for (1) infringing sales of machines and (2) potential

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indirect infringement in the form of sales of spare parts, including spare parts used for

reconstruction to extend the useful life of the machines and spare parts associated with

new machine sales for which the patentee had not already been compensated).

At the root of Jackson’s argument, as made abundantly clear in his briefs to this

court, is his belief that the district court should not have remitted the jury’s $12 million

damages award to $2.65 million. In Jackson’s view, had the district court allowed the

jury to consider the customers’ use of the voicemail server systems sold by Glenayre,

there would have been no basis for remitting the damages award because the jury’s

damages award would have been supported by evidence showing the amount of profits

earned by the customers. Jackson seeks a second trial to submit this evidence to a

new jury. He cites Georgia-Pacific, and argues that several of the factors that opinion

identifies permit inquiry into customers’ profits.3 According to Jackson, a reasonable

royalty should be based on evidence of the “use” of the patented invention. He argues

that the district court prohibited introduction of evidence of Glenayre’s customers’ use of

Jackson’s patent or of the customers’ profits from such use during the first trial.

Jackson admits he argued before the district court that the hypothetical negotiation at

3
Specifically, on appeal Jackson points to the following factors:
6. The effect of selling the patented specialty in promoting sales of other
products of the licensee; that existing value of the invention to the licensor
as a generator of sales of his non-patented items; and the extent of such
derivative or convoyed sales.
....
8. The established profitability of the product made under the patent; its
commercial success; and its current popularity.
....
12. The portion of the profit or of the selling price that may be customary
in the particular business or in comparable businesses to allow for the use
of the invention or analogous inventions.
Georgia-Pacific, 318 F. Supp. at 1120.

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the time of infringement would reference the liability and potential damages that result

from indemnification agreements from previous sales. Jackson points out, however,

that the district court sustained an objection to an exhibit that related to Glenayre’s

indemnification of its users. Jackson also objects to the district court’s jury instruction

as “preventing” the jury from considering the profitability of consumers’ use of the

invention. Only after each of these logical steps does Jackson argue that, in the

absence of this second trial, he has not received “full compensation” for infringement of

the ’900 patent. See Birdsell v. Shaliol, 112 U.S. 485 (1894); Union Tool Co. v. Wilson,

259 U.S. 107 (1922); Aro II, 377 U.S. at 476.

2.

Based on our understanding of what Jackson seeks to litigate here, the proper

amount of a reasonable royalty based on Glenayre’s customers’ infringing use of

products purchased from Glenayre, it is clear that this issue is the same as one of the

issues resolved in the first trial. Thus, Jackson’s theory is that he has an absolute,

inviolable right to pursue an additional damages award based on Glenayre’s customers’

use of infringing products sold by Glenayre, even though he has already collected

compensation for direct infringement by Glenayre because of the same sales. We

disagree.

The problem with Jackson’s argument is that at the first trial Jackson actually

introduced evidence showing the customers’ anticipated profits from using Glenayre’s

products; the district court determined the highest possible royalty Glenayre was entitled

to collect for infringing use as being based solely on Glenayre’s sales. Remittitur Order,

slip op. at 15. Jackson recognized that the remitted award was based on Glenayre’s

04-1568 16
customers’ use; and yet Jackson accepted the district court’s judgment. In other words,

Glenayre has shown that the same issue Jackson seeks to litigate in a second trial was

before the district court during the first trial and that the issue was actually litigated to a

final, unappealed judgment.4

Even a cursory review of the record shows that Jackson presented evidence and

arguments regarding customer use to the jury and judge during and after the first trial.

For example, in closing arguments, Jackson asked the jury to calculate damages based

on Glenayre’s customers’ use of the patented invention:

But let’s assume you look at that period and you have 40 million or
more in sales in that period. But what you also have in this 1.5-year
period -- let’s just take that 3.3 million that a user gets [per year] times --
and they said they have 50 million users [per year], that’s 165 million --
times -- we can take it times 1.5, it should be. That’s about 250 [million],
or thereabouts.
So, you could take that times 6%, and that gets you about -- that’s
around 15 [million]. And if you do it at the low end, it’s 6.2 [million].

(J.A. 4110.) Ignoring Jackson’s noticeable mathematical leap,5 Jackson was clearly

attempting to steer the jury away from the relatively low royalty base of $40 million to

the relatively high royalty base of $250 million, which was based on customer use.

Jackson apparently succeeded. The jury agreed upon a damages figure that was within

the range that Jackson identified: $12 million is, obviously, between $6.2 million and

$15 million; it is about 5% of $250 million.

4
There is no question that Jackson was fully represented in the prior action.
Not only was he a party to the previous trial and appeal, but he was represented by
counsel, albeit apparently different counsel than appear before us in this case.
5
It is unclear how multiplying 3.3 million by 50 million can result in 165
million. The obvious omission in the explanation of how the jury should calculate the
award might relate to the error discussed in footnote 7.

04-1568 17
 Furthermore, in responding to Glenayre’s post-trial motion for a remittitur,

Jackson explained that the jury’s damages calculation was supported by evidence he

adduced at trial. He explained that “[t]here was trial evidence presented on nearly every

one [of the Georgia-Pacific] factors.” See Georgia-Pacific, 318 F. Supp. at 1120.

Specifically, he pointed to evidence showing the following “benefits to those who have

used the invention,” which is how he characterized the ninth factor identified in Georgia-

Pacific6:

• Glenayre promotes the benefits of its voice mail systems to end
users as one of its key selling points (Tr. 241-42).
• Users can achieve a full payback of the system cost in 13 months
or even as little as five months (Tr. 242, 244-45; DX-79, DX-80).
• Each system can earn as much as $3.3 million per year per
100,000 subscribers (Tr. 250-51; DX-100). Since Glenayre has 50
million subscribers for its MVP equipment (Tr. 240; DX-237), its
MVP equipment base can earn more than $164 million per year or
nearly $250 million for the 18 month damage period (Tr. 674, 677).

(J.A. 4291-94.) While Jackson’s math was obviously errorneous,7 the fact that Jackson

pointed out evidence regarding benefits to Glenayre’s customers to the district court in

6
The ninth factor is:
9. The utility and advantages of the patent property over the old modes or
devices, if any, that had been used for working out similar results.
Georgia-Pacific, 318 F. Supp. at 1120.
7
After dividing 50 million subscribers by 100,000 subscribers and
multiplying the result by $3.3 million, the “MVP equipment base” should have been
$1.65 billion per year, or nearly $2.5 billion for the 18 month damages period, instead of
$250 million. In short, it appears that somewhere Jackson cut himself short by a factor
of ten. Perhaps the facially erroneous calculations explain why the district court did not
even refer to Jackson’s argument in its decision explaining the grounds for remittitur.
See generally Remittitur Order. On the other hand, 6% of $2.5 billion is $150 million,
which of course would make the jury’s determination of damages, $12 million, seem low
rather than high. Regardless, Jackson did not appeal the district court’s remittitur, and
moreover Jackson has collected the $2.65 million judgment plus prejudgment interest.
We therefore cannot disturb the district court’s remittitur in this appeal.

04-1568 18
an attempt to prevent Glenayre from succeeding on its motion for a remittitur shows that

the issue of the reasonableness of a damages award based on customers’ use of

Glenayre’s products was contested immediately after the trial. The unavoidable

conclusion is that Jackson did present arguments to both the jury and the judge

supporting a damages award based on evidence of the benefits consumers

experienced by infringing the ’900 patent.

Although Jackson presented evidence and arguments regarding customer use to

the jury and judge, the district court based the damages award on other evidence

showing the value of using the ’900 patent. As discussed above, the court chose

instead to rely on contemporaneous license agreements to reach its conclusion that

$2.65 million is the “highest possible royalty rate the jury could have properly awarded”

for “broad” and “unbounded” rights “to use every aspect” of the ’900 patent and other

patents covering similar technology. Remittitur Order, slip op. at 15. In other words, the

remitted damages award reflects the district court’s best judgment as to the value of

using the ’900 patent. If Jackson believed that the remittitur would not fully compensate

for these broad rights, he should not have accepted it.

The remittitur reduced the jury’s damages award by $9.35 million plus the

associated amount of prejudgment interest. Jackson chose to accept it. The

appropriate amount of damages based on the benefits customers experienced by use of

products that infringe the ’900 patent has been litigated to a final judgment, which is not

appealable. See Donovan v. Penn Shipping Co., 429 U.S. 648, 650 (1977) (holding

that a plaintiff may not appeal from a remittitur order he has accepted). In this situation,

04-1568 19
Jackson is precluded from arguing here that the remittitur was improper, or that he was

not fully compensated for infringement of the ’900 patent.

To summarize, the problem here boils down to the fact that Jackson accepted

the district court’s remittitur, which rejected the same argument he makes here, that a

jury should award damages based on evidence showing the benefits of Glenayre’s

customers’ infringing use of Glenayre’s products. Even if Jackson were to succeed in

convincing a new jury that the customers directly infringe the ’900 patent, the issue of

the appropriate damages award based on that infringement has already been litigated

to a final judgment. Jackson is therefore barred from raising arguments before us that

he chose not to raise in the prior appeal.

3.

In effect, Jackson attempts an end run around his collected, unappealable

remitted damages award by arguing that that award does not fully compensate him for

infringement of the ’900 patent. In the attempt, Jackson misapplies three Supreme

Court cases, Birdsell, Union Tool, and Aro II, failing to come to terms with the

significance of the fact that, after we affirmed the district court’s judgment, Glenayre

subsequently paid the remitted damages award to Jackson in full. We will summarize

the facts and the holdings of the three Supreme Court cases, addressing the

applicability of each separately.

a.

The Birdsell case involved alleged infringement of a patent for an improvement in

machines for threshing and hulling clover-seed. The inventor, Mr. Birdsell, granted to

Birdsell Manufacturing Company an exclusive license to make, vend, and use his

04-1568 20
invention. He later sued Ashland Machine Company (“Ashland”) for making and selling

infringing machines, but did not join Birdsell Manufacturing Company. In that suit, a

permanent injunction was entered against Ashland, but only one dollar in nominal

damages was awarded to Mr. Birdsell because Ashland had made no profits. And while

damages sustained by the Birdsell Manufacturing Company were proved and claimed,

these damages could not be awarded because the company was not a party to the

case. Ashland, after paying the nominal damages award, but during pendency of the

suit, became insolvent. Birdsell and Birdsell Manufacturing Company then together

sued two individuals who had used one of the machines manufactured by Ashland. The

circuit court held that because Birdsell Manufacturing Company, although not a named

party, was in reality a co-plaintiff in the previous suit, because the suit was final, and

because nominal damages had been paid, Birdsell and Birdsell Manufacturing

Company were estopped from suing the two individuals in the present suit.

Birdsell and Birdsell Manufacturing Company objected on three grounds: (1) that

Birdsell Manufacturing Company was not a party to the first suit; (2) that the two

individuals were not parties to the first suit; and (3) that only nominal damages were

recovered and paid. The Supreme Court reversed the circuit court.

The Supreme Court apparently adopted Birdsell and Birdsell Manufacturing

Company’s first objection. It stated that

when a suit in equity has been brought and prosecuted, in the name of the
patentee alone, with the licensee’s consent and concurrence, to final
judgment, from which, if for too small a sum, an appeal might have been
taken in the name of the patentee, we should hesitate to say that the
licensee, merely because he was not a formal plaintiff in that suit, could
bring a new suit to recover damages against the same defendant for the
same infringement.

04-1568 21
Birdsell, 112 U.S. at 487 (emphasis added). In other words, the Supreme Court likely

would not allow Birdsell and Birdsell Manufacturing Company to sue the same

defendant that Birdsell alone sued in the first suit. But because this case involved a

different defendant, two of Ashland’s customers rather than Ashland itself, the Court

seemed to indicate that estoppel would not apply.

The Court framed the second objection as raising the “more serious question” of

“whether a decree in favor of the patentee, upon a bill in equity against one person for

making and selling a patented machine, is a bar to a subsequent suit by the patentee

against another person for afterwards using the same machine within the term of the

patent.” The Court began by summarizing the first sale doctrine articulated in Adams v.

Burke, 84 U.S. 453 (1873), which releases licensees and downstream users from

liability for patent infringement. It then stated:

But an infringer does not, by paying damages for making and using a
machine in infringement of a patent, acquire any right himself to the future
use of the machine. On the contrary, he may, in addition to the payment
of damages for past infringement, be restrained by injunction from further
use, and, when the whole machine is an infringement of the patent, be
ordered to deliver it up to be destroyed. No more does one, who pays
damages for selling a machine in infringement of a patent, acquire for
himself or his vendee any right to use that machine. In the case of a
license or a sale by the patentee, the rights of the licensee or the vendee
arise out of contract with him. In the case of infringement, the liability of
infringers arises out of their own wrongful invasion of his rights. The
recovery and satisfaction of a judgment for damages against one wrong-
doer do not ordinarily confer, upon him or upon others, the right to
continue or repeat the wrong.

Birdsell, 112 U.S. at 487-88 (citations omitted). In this way, the Court seemed to decide

that while the collection of license fees may trigger the first sale doctrine, the collection

of damages for infringement does not. Thus, because Birdsell had collected damages

rather than a license fee from Ashland, Birdsell and Birdsell Manufacturing Company

04-1568 22
would not be precluded by the first sale doctrine from maintaining a suit against

Ashland’s customers.

The Court went further, however, to address Birdsell and Birdsell Manufacturing

Company’s third objection. In doing so, the Court appears to have limited the scope of

its holding with regard to the second objection:

If one person is in any case exempt from being sued for damages
for using the same machine for the making and selling of which damages
have been recovered against and paid by another person, it can only be
when actual damages have been paid, and upon the theory that the
plaintiff has been deprived of the same property by the acts of two wrong-
doers, and has received full compensation from one of them. . . . [A]
judgment for nominal damages against one wrongdoer does not bar a suit
against another for continuance of the wrong.

Id. at 488-89. In this way, the Court suggested, but in light of the facts before it did not

decide, that recovery of actual damages, rather than nominal damages, from a maker

and seller of a product would bar a suit against a buyer and user of the same product.

Contrary to Jackson’s contentions, Birdsell does not support granting Jackson a

second trial. In fact, Birdsell supports our conclusion that in the circumstances of this

case Jackson is precluded from relitigating the issue of the appropriate amount of

damages based on Glenayre’s customers’ infringing use of products purchased from

Glenayre.

Jackson’s situation differs from Mr. Birdsell and Birdsell Manufacturing

Company’s situation in important ways. For example, Jackson, unlike Mr. Birdsell, did

not recover nominal damages in the first trial. Rather, Jackson recovered actual

damages. Thus, Jackson’s situation fits nicely within the situation contemplated by the

Court in responding to Mr. Birdsell and Birdsell Manufacturing Company’s third

objection. That is, a party is precluded from suing to collect damages for direct

04-1568 23
infringement by a buyer and user of a product when actual damages covering that very

use have already been collected from the maker and seller of that product. Applied to

this case, Jackson is precluded from suing to collect damages for direct infringement by

Glenayre’s customers because actual damages have already been collected from

Glenayre and Glenayre’s customers simply use infringing devices made and sold by

Glenayre.8

b.

Jackson similarly misapplies Union Tool. In that case, the patentee Mr. Wilson

moved the district court to hold that Union Tool Company (“Union Tool”) and a number

of its officers were in contempt of court for violating a permanent injunction. The

injunction had issued after the Supreme Court denied a petition for a writ of certiorari to

review a Ninth Circuit decision affirming the district court’s decree for an injunction and

accounting for the infringement of a patent for underreamers. Once issued, the

injunction forbade Union Tool and its officers from manufacturing and selling infringing

machines, as well as parts or elements that might be used in combination to infringe Mr.

Wilson’s patent.

In the contempt hearing, the district court concluded that Union Tool and its

officers did sell both infringing machines and spare parts to be used with machines that

the company previously sold. The district court entered a finding of contempt with

respect to the sale of infringing machines, but not with respect to the sale of spare parts.

8
In our view the fact that Jackson is suing the same party, the first time for
direct infringement and second time for indirect infringement for the same acts, the sale
of infringing products, does not alter the applicability of Birdsell. If anything, as
discussed above, the fact that the same party has been sued twice bolsters the case for
precluding Jackson from collaterally attacking the previous judgment.

04-1568 24
The Ninth Circuit reversed the district court in part, holding the company in contempt for

the sale of the spare parts. The Supreme Court took the case to review the Ninth

Circuit’s reversal of the district court’s decision not to hold the company in contempt for

the sale of the spare parts.

After disposing of arguments related to appellate jurisdiction and procedure, the

Supreme Court addressed the merits of the dispute:

On the merits the contention is this: The interlocutory decree
awards to Wilson, among other things, compensation by way of damages
and profits, for employing the invention in any machine sold prior to the
service of the injunction. A patentee, in demanding and receiving full
compensation for the wrongful use of his invention in devices made and
sold by a manufacturer adopts the sales as though made by himself, and
therefore necessarily licenses the use of the devices, and frees them from
the monopoly of the patent. This license continues during the life of the
machine; it does not end when repairs become necessary. Spare parts
are needed for repairs. Those here in question were sold for use in, and
repair of, machines marketed by the company before the service of the
injunction. Therefore, it is argued, the sale of these parts is licensed and
thus not a violation of the injunction. But to this argument which prevailed
in the District Court, there are several answers; and, among them, this. It
does not appear that Wilson has received any compensation whatever for
the infringement by use of these machines. Compare Birdsell v. Shaliol,
112 U.S. 485, 487-89. There was, consequently, no implied license to use
the spare parts in these machines. As such use, unless licensed, clearly
constituted an infringement, the sale of the spare parts to be so used
violated the injunction. And the sale having been made with full
knowledge of all relevant facts the Court of Appeals properly held that, so
far as Wilson had sought remedial, as distinguished from punitive action,
the District Court was not justified in purging the petitioner of contempt
arising from the sale of spare parts.

Union Tool, 259 U.S. at 113-14. In this short discussion the Supreme Court indicated,

consistent with the suggestion in Birdsell, that when a patentee receives full

compensation for the wrongful use of an invention in devices made and sold by a

manufacturer, the patentee effectively adopts the sales by the manufacturer such that

purchasers and users of the devices receive implied licenses that free them from liability

04-1568 25
for infringement of the patent. But the facts of Union Tool, like Birdsell, did not involve a

patentee that had received full compensation: while in Birdsell the patentee received

nominal damages, in Union Tool the patentee did not receive any compensation.

If the patentee and licensee in Birdsell were not estopped from suing to obtain

full compensation when they had only received nominal damages, so much more

appropriate is the holding in Union Tool that the patentee should be able to sue to

obtain full compensation when the patentee has obtained no damages whatsoever. But

in stark contrast to the facts of Birdsell and Union Tool, here Jackson has already

received actual damages for the manufacture and sale of infringing devices which

explicitly were a measure of the royalty for full rights in the patent. Thus, consistent with

the indication in both Birdsell and Union Tool, Jackson has adopted Glenayre’s sales as

though those sales were made by him. He therefore, as a matter of law, has licensed

the use of those products and freed the products from the exclusive right conferred by

the ’900 patent. Jackson does not, indeed cannot, argue that the damages he already

collected, $2.65 million plus prejudgment interest, were either nominal or nonexistent.

And as discussed above, he also cannot collaterally attack the remittitur, which he

accepted, by arguing in this appeal that those damages do not fully compensate him.

Thus, the Supreme Court’s reasoning in both Birdsell and Union Tool support our

holding that Jackson is not entitled to a second trial.

c.

Finally, Jackson also is mistaken in his reliance on Aro II. Jackson argues that

Aro II requires that a comparison be made between a damages figure calculated based

on the infringing conduct of all potentially liable parties and the amount of damages

04-1568 26
actually received by the patentee. According to Jackson, if the amount of damages

actually received does not equal the calculated damages figure, then the patentee has

not been fully compensated. In Jackson’s view the patentee may receive remaining

compensation from any joint-tortfeasor. In this regard, Jackson separates the issues of

Glenayre making and selling infringing devices from the customers using the devices,

and states that the use of the devices creates most of the compensation to which he is

entitled. He now seeks to obtain a second trial to have a second jury consider the use

of the devices by Glenayre’s customers, where he alleges that Glenayre is liable for

those damages under the doctrine of indirect infringement. He points out that in Aro II,

the Supreme Court remanded the case for a determination whether any damages in

addition to damages for direct infringement were owed by a contributory infringer.

The Supreme Court resolved several contested issues in its opinion in Aro II,

most of which are raised in cases, unlike this one, involving allegations that a party

contributes to direct infringement by prolonging use of an infringing device, for example

by selling parts used to repair an infringing device. As with Birdsell and Union Tool, we

will summarize the entire case, for the full context is helpful in understanding the

relevance and meaning of particular language used by the Supreme Court in its opinion.

Aro II involved a patent covering a top-structure for convertible automobiles.

Ford and General Motors (“GM”) included the structures in their 1952-54 model

convertibles. GM had a license to do so; Ford did not, and so infringed. In 1955,

however, Ford entered into a settlement agreement with the patent owner, Automobile

Body Research Corporation (“AB”). Aro Manufacturing (“Aro”), which never entered into

04-1568 27
a license with the patent owner, sold fabric components designed as replacement tops

for the structures used in Ford and GM’s 1952-54 model convertibles.

Convertible Top Replacement Co. (“CTR”), which obtained exclusive rights in

Massachusetts to the patent at issue through an assignment from AB, sued Aro in 1956,

alleging contributory infringement. In Aro Manufacturing Co. v. Convertible Top

Replacement Co., 365 U.S. 336 (1961) (“Aro I”), the Supreme Court, addressing the

patentee’s right to relief with regard to GM cars only, Aro II, 377 U.S. at 479, held that

Aro merely enabled its customers to repair rather than reconstruct convertible tops and

so did not contributorily infringe. Aro I, 365 U.S. at 346 (“[T]he replacement of the fabric

involved in this case must be characterized as permissible ‘repair,’ not

‘reconstruction.’”). In Aro II, the Supreme Court granted certiorari to consider whether

Aro was liable for contributory infringement with respect to manufacture and sale of

replacement fabrics for the Ford cars.

Justice Brennan, the authoring justice in Aro II, divided his opinion into four parts

that address the merits of the parties’ contentions. Parts I and III express the views of

the Court, that is a majority of the justices. Part II and IV express the views of four

justices. As to Part II, Justice Harlan concurred in the result, but did not write a

separate concurrence. As to Part IV, Justice Harlan considered the matter discussed,

calculation of damages by the lower courts on remand, not ripe for decision.

In Part I, the Court analyzed the case as if Ford had never obtained its settlement

agreement with the patent owner. On this assumption, the Court determined that Ford,

lacking authority to make and sell infringing structures, could not confer on purchasers

of its convertibles an implied license to infringe, and therefore both Ford and its

04-1568 28
customers infringed. Because the owners’ use of the structure infringed, so too did the

repair of the structure by replacing worn-out fabric, because “[w]here use infringes,

repair does also, for it perpetuates the infringing use.” Aro II, 377 U.S. at 484. The

Court also determined, again under the assumption that Ford never obtained its

release, that Aro acted as a contributory infringer by supplying replacement fabrics for

use in infringing repair by Ford convertible owners. In this regard, the Court concluded

that the contributory infringement statute “does require a showing that the alleged

contributory infringer knew that the combination for which his component was especially

designed was both patented and infringing.” Id. at 488. According to the Court, Aro

clearly had the requisite knowledge for one part of the relevant time period, but the

Court remanded the case for findings as to the other part.

In Part II, four justices, with Justice Harlan concurring in the result, expressed

their view regarding the effect of Ford’s 1955 settlement agreement on Aro’s liability for

sales of replacement fabrics. The justices addressed the effect of the settlement

agreement on previous sales separately from the effect on future sales. They

determined that the agreement’s attempt to reserve rights in connection with future

sales of replacement fabric was invalid because the agreement authorized Ford car

owners to use the patented structures, and so authorized the owners to repair the

structures as held in Aro I. “When the patentee has sold the patented article or

authorized its sale and has thus granted to the purchaser an ‘implied license to use,’ it is

clear that he cannot thereafter restrict that use; ‘so far as the use of it was concerned,

the patentee had received his consideration, and it was no longer within the monopoly

04-1568 29
of the patent.’” Id. at 497 (quoting Adams, 84 U.S. at 456). The justices explained that

this holding was not inconsistent with Birdsell and Union Tool:

Both cases turned upon the fact that the patentee had not collected on the
prior judgment and thus had not received any compensation for the
infringing use—or, indeed, any compensation at all. Here, in contrast, the
amount paid by Ford under the agreement was expressly stated to include
compensation for the use of the patented structures by Ford’s purchasers;
moreover, the agreement covered future use and in this respect operated
precisely like a license, with the result that after the agreement date there
was simply no infringing use for which the patentee was entitled to
compensation. See Birdsell v. Shaliol, 112 U.S. at 487.

Id. at 499 (emphases added) (footnote omitted). In a footnote, the justices further

explained how they distinguished the facts of Birdsell and Union Tool:

In Birdsell the Court relied on the fact that only nominal damages had
been awarded in the prior suit. In Union Tool the Court’s statement that
the patentee had not “received any compensation whatever for the
infringement by use of these machines,” 259 U.S. at 113, was apparently
based on the fact that the damages and profits awarded by the prior
judgment had not yet been calculated or paid.

Id. at 499 n.14 (citations omitted).

In Part III, the Court addressed the effect of the settlement agreement on the

previous sales. The Court determined that the agreement releasing Ford and its

customers from liability did not negate Aro’s liability for its sales because Aro’s

contributory infringement had already taken place at the time of the agreement and the

agreement did not purport to release Aro from liability. After recognizing that a

contributory infringer is a species of joint-tortfeasor, the Court rejected the applicability

of the old common-law rule that a release given to one joint-tortfeasor necessarily

released another, because the rule had been repudiated by statutes, court decisions,

the overwhelming weight of scholarly authority, and the Supreme Court in Birdsell. The

Court summarized the rule set forth in Birdsell by quoting from a leading treatise on

04-1568 30
torts: “By our law, judgment against one joint trespasser, without full satisfaction, is no

bar to a suit against another for the same trespass.” Id. at 501. The Court then stated:

“What is true of a judgment is true of a release. A release given a direct infringer in

respect of past infringement, which clearly intends to save the releasor’s rights against a

past contributory infringer, does not automatically surrender those rights.” Id. (citation

omitted). Applying this rule to the facts at issue in Aro II, the Court held that “[t]he mere

fact that the agreement released Ford and Ford’s customers for their past infringement

does not negate Aro’s liability for its past infringement.” Id.

Finally, in Part IV, four justices deemed it in the interest of efficient judicial

administration to express their views on the measure of damages that CTR would be

entitled to collect as a result of Aro’s contributory infringement. Thus, while Part III

addressed Aro’s liability for contributory infringement, Part IV addressed the appropriate

amount of damages Aro would be required to pay for contributory infringement for which

it was liable. “If the sum paid by Ford for the release of it and its customers constituted

full satisfaction to AB for the infringing use of the patented structures, we think it clear

that CTR cannot now collect further payment from Aro for contributing to the same

infringing use.” Id. at 502-03. According to the justices,

if “actual damages” or “full compensation” paid by a maker-and-seller can
have the effect of releasing a user, as was indicated in Birdsell, such a
result should follow a fortiori where, as here, the damages paid were
expressly stated to be compensation for use of the device, and the person
subsequently sued is a contributory infringer liable merely for contributing
to the same infringing use. In such a case full payment by or on behalf of
the direct infringer leaves nothing to be collected from the contributory
infringer.

04-1568 31
Id. at 503. Based on this understanding of the law, the justices found it necessary to

consider whether Ford’s payment to AB fully compensated AB for the infringing use

committed directly by Ford’s purchasers and contributorily by Aro.

The justices disagreed with the assumption that a judgment holding Aro liable for

contributory infringement would result in damages in the form of a royalty on Aro’s

sales. After reviewing the 1946 amendment to the patent laws and concluding that it

eliminated the recovery of infringers’ profits in favor of the recovery of the patent

owner’s damages, the justices addressed what they deemed to be the ultimate question

of how much CTR suffered by Aro’s infringement, that is, how much CTR would have

made if Aro had not infringed. To answer this question, the justices first assumed that,

contrary to the facts of the case, there was no Ford settlement agreement. In this

circumstance, they determined that CTR was not deprived of a royalty on Aro’s sales

because such a royalty would violate the prohibition on patentees deriving their profit,

not from sales of the patented invention, but from sales of unpatented supplies used

with the patented invention. At the same time, however, the justices identified other

remedies CTR could obtain in the face of Aro’s contributory liability:

It could in a proper case obtain an injunction; it could recover such
damages as had actually been suffered from the contributory infringement
by virtue of the prolongation of the use of the infringing automobiles; it
could in a case of willful or bad-faith infringement recover punitive or
“increased” damages under the statute’s trebling provision; and it could
perhaps—we express no view on the question—recover from Aro a royalty
on Ford’s sales of the patented top-structures, even though such damages
were primarily caused not by Aro’s infringement but by Ford’s, in a case
where they could not be recovered from Ford or Ford’s customers. It is
difficult to conceive of any instance, however, in which actual damages
could properly be based on a royalty on sales of an unpatented article
used merely to repair the patented structure.

Id. at 508.

04-1568 32
 Then the justices analyzed the case taking into consideration the Ford settlement

agreement. They assumed that the amount received by AB under the settlement

agreement was the same amount AB would have received had it licensed Ford in the

first place to produce convertible tops, and on this assumption concluded that CTR’s

pecuniary position was not rendered one cent worse by the total infringement to which

Aro contributed. They determined, however, to allow the patentee to test their

assumption on remand. The justices then reviewed various policy reasons not to allow

a patent owner to recovery a royalty on Aro’s sales after receipt of the equivalent of a

royalty on Ford’s sales. The primary concern was the first-sale doctrine articulated in

Adams, and the justices expressed their view that to allow a patent owner to double his

rewards would violate the purchaser’s long-established right to use and repair an article

that has been legally purchased from the patentee, where the purchase price

compensates the patentee for the use of the article.

The justices also considered the purpose of the contributory infringement

doctrine, “to provide for the protection of the patent rights where enforcement against

direct infringers is impracticable.” Id. at 511 (quoting H.R. 5988, 80th Cong., 2d Sess.;

H.R. 3866, 81st Cong., 1st Sess.). They went on:

Such a purpose might have been applicable here if CTR and AB had been
unable to enforce the patent against Ford (a rather unlikely event), since it
would indeed have been impractical to sue every one of the car owners.
But where the patentee has in fact enforced the patent against so solvent
and accessible a direct infringer as Ford, it is difficult to see why it should
then be allowed to invoke the contributory infringement doctrine—
designed for cases “where enforcement against direct infringers is
impracticable”—so as to enforce the patent a second time and obtain a
reward that it could not extract from a direct infringer alone. Whatever the
result might have been under the old “damages and profits” provision, no
such perversion of the congressional purpose is possible within the rule
allowing recovery of “damages” only.

04-1568 33
Id. at 511-12. The justices again recognized the significance of the 1946 amendment

replacing the recovery of infringers’ profits with the recovery of the patent owner’s

damages. They summarized their opinion:

Hence we think that after a patentee has collected from or on behalf of a
direct infringer damages sufficient to put him in the position he would have
occupied had there been no infringement, he cannot thereafter collect
actual damages from a person liable only for contributing to the same
infringement. This principle is but an application of the rule that full
satisfaction received from one tort-feasor prevents further recovery
against another. It is consistent with the Court’s opinion in Birdsell.

Id. at 512. They also contrasted the facts of their case with a case decided by the

Second Circuit:

In [Farrand Optical Co. v. United States, 325 F.2d 328 (2d Cir. 1963)] . . .
the payment by the direct infringer was made under judicial decree, and
there could thus be no question but that it represented full compensation
for the infringing use. Where a private release of past infringement which
does not purport to release others is involved, the adequacy of the
compensation must always be a question of fact. Hence here, while it
seems unlikely that Ford’s payment under the agreement was any less
than would have been paid under a license—that is, anything less than full
satisfaction to AB for the infringing use committed directly by Ford’s
purchasers and contributorily by Aro—we think the case must
nevertheless be remanded for findings on the question. We would also
allow the lower courts to consider whether Aro’s conduct has been such
as to warrant an award of punitive or increased damages, although we
think that very unlikely.

Id. at 513.

The holding of the Court in Part I and the view of the four justices in Part II of Aro

II address scenarios we do not see before us in this case. Part I resolved issues raised

by alleged contributory infringement in the form of sales of materials used to perpetuate

infringing use, a situation simply not present here. Part II addressed the effect of a

settlement agreement on sales of products occurring after the settlement agreement.

An analogous situation does not present itself in this case. Jackson, for example,

04-1568 34
neither alleges that Glenayre continued to sell infringing products after Jackson

accepted the remitted damages award, nor does he allege that Glenayre committed

indirect infringement after he accepted the remitted damages award. Nor could he in

light of the fact that the ’900 patent expired before the district court remitted the

damages award.

The holding of the Court in Part III of Aro II also does not require that we grant

Jackson a second trial so that Jackson can attempt to obtain a second damages award

against Glenayre. In Part III, the Court addressed the liability of Aro as a contributory

infringer for actions it took before Ford and AB entered into the settlement agreement.

The Court did not address damages. As applied to this case, the Court’s holding in Part

III only means that, had Glenayre not paid the damages award which was calculated to

fully compensate Jackson for all rights in the patent, Jackson could have sued

Glenayre’s customers to hold them liable for their extant infringement in order to collect

full compensation. Of course, Glenayre did pay the damages award.

Regardless, the question of whether Glenayre’s customers are liable for actions

they took before Jackson accepted the remittitur is not before us in this appeal. We

need not and do not resolve that question. Nor could we, as Glenayre’s customers are

not parties to this appeal. We are tasked, however, with resolving the question of

whether Jackson may now litigate damages from Glenayre based on Glenayre’s

customers’ direct infringement. Thus, in an indirect way, we reach the same issue.

Importantly, in Aro II the Court held that “[a] release given a direct infringer in

respect of past infringement, which clearly intends to save the releasor’s rights against a

past contributory infringer, does not automatically surrender those rights.” Id. at 501. In

04-1568 35
contrast, in this case the judgment of the district court after the first trial did not clearly

intend to save Jackson’s rights against Glenayre to the extent it is also a past indirect

infringer by way of Glenayre’s customers’ past use of products sold by Glenayre.

Rather, the remitted award purported to compensate Jackson based on negotiations of

a broad license for his patent. Thus, as discussed above, Jackson is precluded from

obtaining a second trial against Glenayre to relitigate the same issue.

Stated another way, the judgment, affirmed on appeal, forecloses Jackson from

the opportunity of obtaining a second bite at the apple, where the apple is a reasonable

royalty based on the benefits Glenayre’s customers enjoyed by use of products sold by

Glenayre. To hold otherwise would be to empower a patentee to obtain trial upon trial

against the same party where it could relitigate issues regarding damages that it lost in

previous trials. There is no reason that we would allow a patentee to obtain a new trial

to litigate its entitlement to damages for buyers’ and users’ infringement when the

patentee already completed a previous trial that resulted in a damages award based on

the very same concept against the very same party. To allow the patentee to follow this

path would be to permit the patentee to relitigate his or her entitlement to “full

compensation” with the same adversary a number of times that is equal to the number

of steps that a product takes in the path of commerce. The inappropriateness of the

proposition is apparent.

In this regard our holding does not conflict with Shockley v. Arcan, Inc., 248 F.3d

1349, 1364 (Fed. Cir. 2001). In that case, this court stated:

Furthermore, other courts, including the Supreme Court, have held
that parties that make and sell an infringing device are joint tort-feasors
with parties that purchase an infringing device for use or resale. Birdsell v.
Shaliol, 112 U.S. 485, 488-89 (1884); Dowagiac Mfg. Co. v. Deere &

04-1568 36
 Webber Co., 284 F. 331, 337 (8th Cir. 1922). Each joint tort-feasor is
liable for the full amount of damages (up to a full single recovery) suffered
by the patentee. Birdsell at 488-89; Dowagiac at 337. Entry of judgment
against one infringer does not automatically release other related
infringers. Sherman, Clay & Co. v. Searchlight Horn Co., 225 F. 497, 500
(9th Cir. 1915) (“There may be as many causes of action as there are joint
tort-feasors, and as many recoveries, but there can only be one
satisfaction.”). This court agrees with and adopts this rule.

Id. Thus, in Shockley this court recognized that in patent infringement cases each joint-

tortfeasor is liable for the full amount of damages up to a full single recovery, and that

there may be as many causes of action as there are joint-tortfeasors. But this court did

not authorize patentees to sue joint-tortfeasors (as an indirect infringement suit against

Glenayre amounts to here) once damages accounting for their use has already been

accepted. In short, the Shockley decision did not in any way overrule any of the various

doctrines that prevent parties from collaterally challenging final judgments.

The views the four justices expressed in Part IV of Aro II also do not undermine

our holding that Jackson cannot seek to recover a second damages award based on

Glenayre’s customers’ infringement of the ’900 patent. The justices made clear that

when a patentee receives full compensation from a manufacturer for the infringing

activities of the manufacturer and its customers, the patentee cannot collect further

payment from a party alleged to contribute to the same infringing activities. They also

identified the test that must be used to determine whether a party has been fully

compensated: the compensation received must be compared to the amount of money

the patentee would have made had the infringers not infringed. To conduct this

comparison, of course, a court must assume that the patentee was never compensated

by the infringers in the first place. And while the court cannot consider money that the

patentee might have been able to earn by violating antitrust and patent misuse laws, it

04-1568 37
can consider money the patentee lost in the form of prolongation of infringing use, and it

can consider punitive or “increased” damages under 35 U.S.C. § 284. Importantly,

however, the justices recognized that where a patentee has enforced its patent against

a direct infringer and collected damages sufficient to put him in the same position he

would have been in had there not been infringement, the patentee cannot thereafter

collect actual damages from an alleged indirect infringer. Moreover, the justices made

clear that when the patentee has collected payment by a direct infringer under a judicial

decree calculated as a full compensation, as opposed to a private release, there can be

no question that the payment represented full compensation for the infringing use.

Here, we do not confront a situation that involves an allegation of contributory

infringement resulting in prolongation of infringing use. Moreover, because Jackson

collected payment by Glenayre under a judicial decree for full royalties, there can be no

question that the payment represented full compensation for the infringing use.

d.

For the reasons we have discussed, none of the Supreme Court cases cited by

Jackson calls for a different result in this case. It is true, of course, that an award of

damages for particular infringing acts, unlike a comprehensive license, does not

automatically entitle the infringer or others to continue infringing conduct in the form of

additional sales or uses of infringing products throughout the life of the patent. But in

this case, the theory of recovery Jackson presented at the first trial was based on a

reasonable royalty for past manufacture and sale of infringing products by Glenayre

and, importantly, past benefits derived from use of the same products by Glenayre’s

customers. The district court considered that theory and found that that reasonable

04-1568 38
royalty is, at most, $2.65 million. Jackson accepted that award of damages. Therefore,

the district court was correct to conclude that, as a matter of law, the damages award,

once collected, fully compensated Jackson for direct infringement by Glenayre, direct

infringement by Glenayre’s customers, and indirect infringement by Glenayre based on

Glenayre’s customers’ direct infringement.9

CONCLUSION

Had Jackson refused the district court’s remittitur, the case would be in a very

different procedural posture. Because he accepted the remittitur, however, Jackson

may not relitigate the issue of whether Glenayre can be held liable for additional

damages based on infringement by Glenayre’s customers; the damages award he has

accepted fully compensates him as a matter of law. Thus, Jackson is not entitled to a

second trial on the issue of indirect infringement by Glenayre for Glenayre’s customers’

use of products purchased from Glenayre. The district court did not err in denying

Jackson’s motion to set trial.

AFFIRMED

9
We do not read the district court opinion to have granted the remittitur in
order to exclude damages flowing from customer sales. Clearly, if that had been the
district court’s reasoning, the situation would be quite different.

04-1568 39
United States Court of Appeals for the Federal Circuit

04-1568

GLENAYRE ELECTRONICS, INC.,

Plaintiff-Appellee,

v.

PHILLIP JACKSON and PMJ FAMILY LIMITED PARTNERSHIP,

Defendants-Appellants.

NEWMAN, Circuit Judge, dissenting.

The court today holds that Jackson, the defendant in this declaratory action, was

required to refuse the remittitur in order to preserve the issue of damages based on the

unlitigated counterclaims. The court holds that Jackson's "failure to refuse the remittitur

requires that we reject his collateral attack on that judgment in this appeal." Maj. op. at 9.

However, he is not collaterally attacking that judgment, which was in his favor.

The remittitur limited damages to a reasonable royalty for Glenayre's direct

infringement, and did not apply to the severed counterclaims relating to indirect

infringement. The judgment that was subject to the remittitur is the judgment after the jury

trial, a trial that was limited to Glenayre's direct infringement. That judgment was appealed

by Glenayre, not Jackson. That judgment and the remitted damages for Glenayre's direct

infringement are not under collateral attack by Jackson. The judgment on the jury verdict of
Glenayre's infringement, and the remitted damages, were affirmed by the Federal Circuit,

Glenayre Electronics, Inc. v. Jackson, No. 03-1619, 95 Fed. Appx. 344 (Fed. Cir. April 8,

2004) (Table), and are not at issue.

This appeal relates solely to the stayed counterclaims for Glenayre's contributory

and induced infringement based on direct infringement by Glenayre's customers. These

counterclaims were excluded from the jury trial. The district court decided, after this court

affirmed the Rule 54(b) judgment of direct infringement, to dismiss the counterclaims

without further proceedings. The district court, today affirmed by the panel majority,

incorrectly held that there cannot be contributory infringement by a direct infringer. From

this ruling and its flawed premises, I respectfully dissent.

A

At the jury trial that was the subject of the first appeal to this court, Jackson's

counterclaims for indirect infringement were severed and stayed by the district court, and

the jury's damages award was remitted to a sum measured only by Glenayre's direct

infringement. Jackson then sought to pursue the severed counterclaims that were based

on infringement by use and resale of the MVP System by the telephone service providers.

The district court stated, incorrectly, that direct and contributory infringement are "just other

sides of the same coin," and refused further process. The panel majority's statement that

"Jackson recognized that the remitted award was based on Glenayre's customers' use,"

maj. op. at 16, is contrary to the record of the trial, the district court's statements, the post-

trial motions, and the record of the Rule 54(b) appeal.

Jackson initially filed suit against only the telephone service providers, charging

them with direct infringement of the '900 patent. Glenayre was not charged in that suit.
04-1568 2
Glenayre then filed a separate declaratory action against Jackson. Upon Jackson's

challenge to Glenayre's declaratory standing, Glenayre stated that it is the manufacturer of

the MVP System used by the phone service providers and that it is "the real party in

interest rather than [having] a multitude of suits against its customers." The district court

accepted Glenayre's declaratory suit; Jackson filed counterclaims in the declaratory action

charging Glenayre with contributory infringement and inducement to infringe the Jackson

patent; and Jackson's infringement suit against the telephone service providers was

withdrawn. Then, on the district court's observation that "the need to determine damages

against a contributory infringer/inducer only arises once it is determined that a direct

infringement has taken place," the district court limited the jury trial to direct infringement by

Glenayre. In staying the counterclaims for indirect infringement, the district court stated:

"Glenayre's liability as an alleged contributory infringer/inducer depends, as a matter of law,

on the logically prior determination of liability against one or more infringers (i.e. Glenayre's

customers)." The court explained that "the question of the measure of damages against

Glenayre as an alleged contributory infringer/inducer will not present itself until final

judgment is rendered in this case." Glenayre Electronics, Inc. v. Jackson, No. 02-256 (N.D.

Ill. Sept. 27, 2002).

In Glenayre's post-trial motion to the district court, Glenayre pointed out that "claims

directed to the customer's use of the MVP have been stayed," and objected to the jury's

damages award. Glenayre's Motion for JMOL or a New Trial, at 9. The district court

agreed, and ruled that the maximum royalty for Glenayre's infringement would be 6% of

Glenayre's sales, and proposed a remittitur to $2,650,000. See Unisplay, S.A. v. Am.

Electronic Sign Co., Inc., 69 F.3d 512, 519 (Fed. Cir. 1995) (in calculating a remittitur, the
04-1568 3
amount should be the maximum that the jury could have awarded). Jackson accepted the

remittitur to damages based solely on Glenayre's infringing sales, and the district court

stated that "[b]ecause additional claims, dependent on the finality and affirmance of the

patent infringement against Glenayre, remain for adjudication ," the court was certifying the

judgment under Rule 54(b). Glenayre, (N.D. Ill. July 22, 2003).

After the Federal Circuit affirmed, the district court changed its position and

dismissed the counterclaims, acknowledging that its previous orders "carried some

ambiguity as to the continuing viability of Jackson's counterclaims," and that the

proceedings that had been conducted "contemplate the possibility of additional claims."

However, the court now ruled that Jackson had been "completely compensated for direct

infringement" and that "[o]nce this has occurred, there is nothing more that is owed.

Contributory and inducing infringement are just other sides of the same coin."

I do not say that a court cannot change its mind; but the panel majority errs in stating

that Jackson somehow waived his right to pursue the counterclaims for contributory

infringement when he accepted the remittitur directed to Glenayre's direct infringement.

The panel majority misperceives the issue when it states that "Jackson cannot show that

the district court 'lost sight' of its own plan and procedure when he cannot show that the

district court actually had a plan and procedure to hold a second trial regardless of the

outcome of the first." Maj. op. at 12. That was not the district court's position. To the

contrary, as the district court stated, the second trial would be held only if the outcome of

the first were that the MVP System infringed Jackson's patent, and the Federal Circuit

affirmed that judgment under Rule 54(b). The second trial was directly dependent on the

04-1568 4
outcome of the first. The issue is not whether the district court can change its position; the

issue is whether it was correct in doing so.

B

Jackson states that the infringing application, resale, and use of the MVP System by

the telephone service providers incurred liability for which Jackson was not compensated

by Glenayre's damages as remitted. The district court made no findings, adduced no

evidence, and created no record on the issues of infringement by the phone service

providers and whether Jackson had been adequately compensated therefor; the court

simply dismissed the severed counterclaims.

Precedent establishes that a damages award against a manufacturer does not

automatically include a paid-up license for infringing operations by the manufacturer's

customers; that is a factual question, turning on the adequacy of the compensation. See

35 U.S.C. §284 (damages shall be "adequate to compensate for the infringement").

Jackson points out that Glenayre took responsibility for the infringement liability and

damages due to its customers' use of the MVP System, when it filed this declaratory action.

Glenayre's declaratory action proceeded on the premise that the counterclaims concerning

infringement by Glenayre's customers would be taken up after determination of whether

there was direct infringement by Glenayre.

The rule that there cannot be contributory infringement or inducement to infringe

without a finding of direct infringement does not mean that the indirect infringer must also

be a direct infringer. The rule is that the patent must be shown to be directly infringed,

usually by a third person who is not before the court, before the patentee can seek

damages from the entity that induced or contributed to that direct infringement. See
04-1568 5
Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1272 (Fed. Cir. 2004)

("Indirect infringement, whether inducement to infringe or contributory infringement, can

only arise in the presence of direct infringement, though the direct infringer is typically

someone other than the defendant accused of indirect infringement."); see generally

Chisum on Patents §17.01 ("Indirect infringement refers to . . . inducing or contributing to

direct infringement by other persons.")

Despite the district court's initial premise that Jackson's counterclaims for indirect

infringement would be taken up if direct infringement by the MVP System were found, on

remand the district court held that there can be no liability for contributory infringement

when the manufacturer is liable for direct infringement. That is an inapt statement of the

law, for, as precedent shows, whether such liability exists depends on the particular facts of

the infringement and the adequacy of the compensation. The panel majority departs in

major ways from precedent, in holding that, as a matter of law, there is no liability for a

manufacturer's contributory infringement, or even for direct infringement by users of an

infringing device, when damages have been accepted that are limited to the manufacturer's

direct infringement. Precedent is directly contrary. In Aro Mfg. Co. v. Convertible Top

Replacement Co., 377 U.S. 476 (1964) (Aro II), the Supreme Court discussed the positions

of direct and contributory infringers as joint tortfeasors, and explained that the common law

rule that release of one joint tortfeasor releases all tortfeasors does not apply in cases of

contributory infringement. The Court held that the provider of the unpatented convertible

automobile top was a contributory infringer, and that when the patented combination was

licensed to the direct infringer (the Ford Motor Company) additional liability of the

contributory infringer depended on the license terms and whether the payment from Ford
04-1568 6
was adequate compensation for the infringement. The Court held that it was necessary to

determine whether the license fee paid by Ford provided "full payment for the infringing

use." 377 U.S. at 503. The Court did not hold that there can never be additional liability of

the contributory infringer. The panel majority misconstrues Aro II.

The Court in Aro II cited Birdsell v. Shaliol, 112 U.S. 485 (1894), where the Court

held, inter alia, that since a purchaser of an infringing machine can be restrained from

continued use of the machine, the purchaser may be liable for damages for such use

unless "full satisfaction" was provided to the patentee by the manufacturer. The Court

explained that payment of damages by the infringing manufacturer does not automatically

free the device from the patent, in the same way as would an authorized first sale by a

patentee or licensee. "An infringer does not, by paying damages for making and using a

machine in infringement of a patent, acquire any right himself to the future use of the

machine." Birdsell, 112 U.S. at 487. The payment of damages by an infringer "does not

ordinarily confer, upon him or upon others, the right to continue or repeat the wrong." Id. at

488. An infringer is not an authorized seller whose wares are free of the patent after first

sale. The Court left no uncertainty:

No more does one, who pays damages for selling a machine in infringement
of a patent, acquire for himself or his vendee any right to use that machine.
In the case of a license or a sale by the patentee, the rights of the licensee or
the vendee arise out of contract with him. In the case of infringement, the
liability of infringers arises out of their own wrongful invasion of his rights.
The recovery and satisfaction of a judgment for damages against one wrong-
doer do not ordinarily confer, upon him or upon others, the right to continue
or repeat the wrong.

Birdsell, 112 U.S. at 487-88 (citations omitted). The Court established that while sales by

the patentee or an authorized licensee can trigger the first sale doctrine, the collection of

04-1568 7
damages for infringement does not. Payment of damages by an infringing manufacturer is

not an automatic "implied license" to itself or others to continue the infringement.

Birdsell does not "suggest," as the panel majority postulates, that "recovery of actual

damages, rather than nominal damages, from a maker and seller of a product would bar a

suit against a buyer and user of the same product." Maj. op. at 23. To the contrary,

Birdsell is explicit that such a bar arises "only . . . when actual damages have been paid,

and upon the theory that the plaintiff has been deprived of the same property by the acts of

two wrongdoers, and has received full compensation from one of them." Birdsell, 112 U.S.

at 489. The question of whether Jackson has received "full compensation from one of

them" has not yet been tried; it remains unlitigated in the severed counterclaims.

In Aro II the Court remanded for determination of the adequacy of the compensation

already received by the patent owner, since "the amount paid by Ford under the agreement

was expressly stated to include compensation for the use of the patented structures by

Ford's purchasers." 377 U.S. at 499. In Aro II "the damages paid were expressly stated to

be compensation for use of the device," 377 U.S. at 503, whereas here the telephone

service providers' use of the Jackson invention was excluded from the damages paid.

"Where a private release of past infringement which does not purport to release others is

involved, the adequacy of the compensation must always be a question of fact." Aro II, 377

U.S. at 513. The panel majority directly contravenes precedent in ruling that "as a matter of

law, Jackson has been fully compensated" for the infringement by the telephone service

providers.

The Court's decisions are consistent in principle, arising in a variety of factual

situations. In Union Tool Co. v. Wilson, 259 U.S. 107 (1922), the Court applied Birdsell to
04-1568 8
the sale of spare parts for machines that had been sold before the trial court found them to

be infringing. The Court observed that the patentee had not been compensated for use of

these machines, and thus the manufacturer's sale of repair parts was in contempt of the

injunction; the Court explained that since the patentee had not "received any compensation

whatever for the infringement by use of these machines," the continuing use was

unauthorized. Union Tool, 259 U.S. at 113. The Court found no "implied license" to use

infringing machines. Id. The panel majority is incorrect in holding that the payment of

damages for infringing manufacture includes "full rights" and license for ensuing uses and

users "as a matter of law." Maj. op. at 26. Whether users and resellers who acquire the

patented invention from an infringing manufacturer can incur liability for infringement and

additional damages, is independent of whether the infringing manufacturer has already paid

the judgment based on its own infringing manufacture.

C

Birdsell and Union Tool and Aro II establish that if the patentee was not fully

compensated for the entirety of the infringement, additional compensation may be available

based on the activity of other infringers. Although there cannot be more than a single full

recovery, as discussed in Shockley v. Arcan, Inc., 248 F.3d 1349, 1364 (Fed. Cir. 2001)

("each joint tortfeasor is liable for the full amount of damages (up to a full single recovery)

suffered by the patentee"), the patentee is not precluded from obtaining a full single

recovery from the tortfeasors.

The Aro II Court explained that to recover damages from the contributory infringer it

must be shown that the damages from the direct infringer are inadequate compensation.

377 U.S. at 509-10. Aro II confirmed the need to consider the totality of the infringement by
04-1568 9
the manufacturer and its customers, and Birdsell and Union Tool established that the

payment of damages by the manufacturer does not automatically release the infringing

product for free use. Precedent teaches that no rigid rule either limits damages to the first

link in the chain of infringing activity, or extends damages as of right. Precedent

establishes that compensation for use of the infringing system may be sought if full

compensation is not achieved, and that this question of fact warrants resolution. Whether

the compensation awarded to Jackson upon remittitur was full compensation for the

infringing activity by the telephone service providers is such a question of fact, and was

raised by Jackson's severed counterclaims.

The parties and the district court understood, at the time the remittitur was offered

and accepted, that the remitted damages were calculated as 6% of Glenayre's sales, and

did not include damages for application and resale and use by the service providers.

Ignoring the record, the panel majority makes the unsupported statement that the remitted

damages are "based on a reasonable royalty for broad rights to his patent." Maj. op. at 9.

The record mentions no "broad rights," and indeed negates the panel majority's postulate

that the remitted damages included full royalty compensation for customers' infringement in

the severed counterclaims. The severed counterclaims responded to Glenayre's voluntary

action in placing itself in the shoes of the telephone service providers for purposes of their

liability and damages as users of the MVP System. The district court erred in refusing to

permit litigation of the adequacy of the damages to compensate for infringement by the

04-1568 10
telephone service providers, and my colleagues err in their independently deduced theory

of this case.1

D

The panel majority states that by barring Jackson's counterclaims it is protecting

Glenayre from multiple suits. That is not at issue. Glenayre was not sued by Jackson, but

voluntarily brought this declaratory action; in turn, Jackson sought to resolve all of the

issues in this declaratory action. The problem that the panel majority claims to have

averted is not present. The problem is this appellate disposition of the merits, with the

panel majority creating not only new law, but creating new arguments unavailable for

response. For example, the panel majority states that "because Jackson collected

payment by Glenayre under a judicial decree, there can be no question that the payment

represented full compensation for the infringing use." To the contrary, the decree is

directed to Glenayre's direct infringement as manufacturer, for this was the only issue at

trial. The law is clear that damages from an infringing manufacturer do not automatically

free all infringing operations by the manufacturer's customers. The issue for which Jackson

1 The panel majority states that "the remitted damages award that Jackson
collected constitutes full compensation as a matter of law for (1) direct infringement of the
'900 patent by Glenayre due to its manufacture and sale of infringing products; (2) direct
infringement of the '900 patent by Glenayre's customers due to their use of products
purchased from Glenayre; and (3) possible indirect infringement of the '900 patent by
Glenayre due to its sale of infringing products and the resulting use of those same products
by its customers." Maj. Op. at 9. This conflicts with the district court's statement that:
"Here the direct infringement consisted of the manufacture and sale of Glenayre's MVP
products to others. . . . But, by accepting money instead of seeking an injunction, for
example, he has acquiesced in the use of the infringing goods by the infringer's customers."
The district court well recognized that the remittitur did not include damages for the
customers' use.

04-1568 11
seeks remand is whether there has been adequate compensation for the entirety of the

infringement. This is a question of fact, raised by the counterclaims and not yet decided.

The counterclaims were dismissed on an incorrect view of the law. Jackson is

entitled to determination of this issue on the correct law. From my colleagues' contrary

holding, I respectfully dissent.

04-1568 12