United States Court of Appeals
for the Federal Circuit
__________________________
SPECTRALYTICS, INC.,
Plaintiff-Appellant,
v.
CORDIS CORPORATION,
Defendant-Cross Appellant,
and
NORMAN NOBLE, INC.,
Defendant-Cross Appellant.
__________________________
2009-1564, 2010-1004
__________________________
Appeal from the United States District Court for the
District of Minnesota in Case No. 05-CV-1464, Judge Pat-
rick J. Schiltz.
___________________________
Decided: June 13, 2011
___________________________
J. DEREK VANDENBURGH, Carlson Caspers Vandenburgh
& Lindquist, P.A., of Minneapolis, Minnesota, argued for
plaintiff-appellant. With him on the brief were ALAN G.
CARLSON, MATTHEW J. GOGGIN and DENNIS C. BREMER.
SPECTRALYTICS v. CORDIS CORP 2
GREGORY L. DISKANT, Patterson, Belknap Webb & Tyler
LLP, of New York, New York, argued for defendants-cross
appellants. With him on the brief were EUGENE M.
GELERNTER and ROBERT W. LEHRBURGER. Of counsel on the
brief was JAMES B. NIEHAUS, Frantz Ward LLP, of Cleve-
land, Ohio, for defendant-cross appellant Norman Noble Inc.
__________________________
Before NEWMAN, CLEVENGER and BRYSON Circuit Judges.
NEWMAN, Circuit Judge.
In this suit for infringement of United States Patent No.
5,852,277 (“the ’277 patent”), brought by Spectralytics, Inc.,
trial was held in the United States District Court for the
District of Minnesota. The jury sustained the validity of the
patent, found that the defendants Cordis Corporation and
Norman Noble, Inc. willfully infringed the patent, and
awarded damages calculated as a 5-percent royalty on
Norman Noble’s infringing sales to Cordis. The district
court granted Spectralytics’ motion for a permanent injunc-
tion, an accounting, and pre- and post-judgment interest.
The court denied the defendants’ motions for a new trial, for
judgment as a matter of law, or for remittitur. The court
also denied Spectralytics’ motion for enhanced damages and
attorney fees based on the jury verdict of willful infringe-
ment. 1
Each side challenges rulings adverse to it, although the
defendants do not appeal the judgment of infringement. We
affirm on all aspects, except for the district court’s applica-
tion of the law of willful infringement. We vacate that
1 Spectralytics, Inc. v. Cordis Corp., 576 F. Supp. 2d
1030 (D. Minn. 2008); Spectralytics, Inc. v. Cordis Corp., 650
F. Supp. 2d 900 (D. Minn. 2009).
3 SPECTRALYTICS v. CORDIS CORP
portion of the judgment, and remand for reapplication of the
law to the issues of enhanced damages and attorney fees.
BACKGROUND
Spectralytics manufactures medical devices, including
the coronary stents that are the subject of the ’277 patent.
Norman Noble manufactures the coronary stents that were
found to infringe the ’277 patent, and provides these stents
to the Cordis Corporation in accordance with an exclusive
supply contract.
The patented stents are stainless steel tubes that are
designed to be surgically inserted into an occluded artery
and expanded in place, thereby opening the artery to blood
flow. In order to expand the steel tube, the tube is cut into a
pattern, described as “lace-like,” that permits expansion and
retention of shape after insertion into the artery. A laser
metal-cutting device is used to manufacture such stents,
whereby a laser beam cuts the desired pattern into the steel
tube. Various machines had been designed for this use, but
cardiac surgeons sought ever more complex stent patterns,
requiring manufacturing techniques of extreme accuracy.
The evidence at trial was that the Spectralytics device
achieved a precision that was not achieved by the laser-
cutting machines then in use.
Previously, two producers of stents, LPL Systems and
RMS Laser, had adapted a “Swiss-style” laser machine to
the cutting of steel stents. A Swiss-style machine typically
has a workpiece fixture that holds the workpiece in a canti-
levered manner, and both the workpiece fixture and the
laser cutting tool are rigidly mounted in order to suppress
movement and vibration. Applying this machine to laser
cutting of steel stents, LPL Systems and RMS Laser pro-
duced an improved stent. However, this machine still did
SPECTRALYTICS v. CORDIS CORP 4
not provide the pattern accuracy that was desired by sur-
geons, and in turn by Cordis as a supplier of medical de-
vices.
Spectralytics undertook to develop improved stent prod-
ucts. Spectralytics started with a Swiss-style machine, but
changed its structure in a manner that significantly in-
creased the precision of the laser cut, and permitted more
complex and versatile patterns. Unlike the prior Swiss-
style machines, the Spectralytics machine was not based on
suppressing vibration of the machine, but worked by essen-
tially eliminating relative movement between the workpiece
fixture and the cutting tool. The Spectralytics machine thus
eliminated the deleterious effects of vibration by a design
that ensured that if the laser tool and the workpiece did
move or vibrate, they moved in precise unison. Spectra-
lytics achieved this result by mounting the workpiece fix-
ture directly on the laser cutting head so that it was “rigidly
carried on” the cutting tool, as the ’277 patent describes the
apparatus. It was not disputed at trial that the Spectra-
lytics ’277 machine achieved improved precision and en-
abled more intricate pattern design as compared with prior
steel stents.
The ’277 patent issued on December 22, 1998. Claim 1
is as follows:
1. An apparatus for manufacturing a hollow, gen-
erally tubular workpiece having a pattern cut
around the circumference and along the length
thereof, which comprises:
(a) a laser cutting tool, the laser cutting
tool having means for generating a la-
ser beam used as a cutting implement;
and
(b) a workpiece fixture rigidly carried on
the cutting tool in a fixed spatial ar-
5 SPECTRALYTICS v. CORDIS CORP
rangement during use of the fixture,
the fixture having a cantilever support
for supporting a piece of stock tubing
beneath the laser cutting tool in a can-
tilever manner with the cantilever
support being located on just one side
of the laser beam with the tubing ex-
tending from the cantilever support
past the laser beam and the tubing be-
ing unsupported on the other side of
the laser beam, and wherein the
workpiece fixture comprises:
(i) a fixture body secured to the cutting
tool; and
(ii) a generally horizontal bushing
carried on the fixture body and
extending beneath the cutting
tool, the bushing having a cen-
tral bore which is sized to be
slightly greater than an outside
diameter of the stock tubing.
The testimony at trial included the following: both
Spectralytics and Norman Noble were producers of coronary
stents, and both hoped that Cordis would select it as the
producer, for further provision by Cordis to users. In April
of 1995 Spectralytics hired a sales representative named
Jack Lundeen, who stated that he had close connections
with key Cordis executives. Unbeknownst to Spectralytics,
two months later, in June of 1995, Lundeen was also hired
by Norman Noble.
By early August of 1995 the Spectralytics machine was
designed and constructed and had been successfully shown
to produce the desired precise complex designs in steel
stents. Spectralytics and Norman Noble entered into a
SPECTRALYTICS v. CORDIS CORP 6
confidentiality agreement for the purpose of facilitating
discussions of a possible business arrangement between the
companies. On August 24, 1995 Larry and Scott Noble
traveled to the Spectralytics plant in Minneapolis, for the
stated purpose of learning about Spectralytics’ laser stent-
cutting technology. Spectralytics’ president, Gary Oberg,
testified that he gave the Nobles a tour of the shop floor.
Mr. Oberg testified that he did not recall all details of the
visit, after ten years, but that Spectralytics’ new laser
cutting machine was on the shop floor, and there was no
reason he would not have shown the machine to the Nobles
when they toured the shop.
Norman Noble then built a Swiss-style stent cutting
machine that had the workpiece fixture carried on the laser
cutting tool. The stents produced by the new Noble machine
were significantly improved over the stents previously
produced by Noble, and Cordis entered into an exclusive
supply contract with Noble. Cordis agreed to indemnify
Noble for any patent infringement.
Spectralytics filed suit in July of 2005 against Cordis for
patent infringement, and in August of 2006 Spectralytics
added Norman Noble, Inc. as a defendant. Trial to a jury
was held on the issues of validity, infringement, willful
infringement of the ’277 patent, and damages.
VALIDITY
We review the district court's decision on a motion for
judgment as a matter of law by reapplying the district
court’s standard of review. Sextant Avionique, S.A. v.
Analog Devices, Inc., 172 F.3d 817, 824 (Fed. Cir. 1999). In
Reeves v. Sanderson Plumbing Products., Inc., 530 U.S. 133,
150-51 (2000), the Court explained that a reviewing court
must view the facts in the light most favorable to the pre-
7 SPECTRALYTICS v. CORDIS CORP
vailing party and must grant the benefit of all reasonable
inferences to the party to whom the jury awarded the ver-
dict. The Court explained that the reviewing court on
JMOL must “give credence to the evidence favoring the
nonmovant,” and must “disregard all evidence favorable to
the moving party that the jury is not required to believe.”
Id. at 151. In discussing the jury role with respect to the
issue of obviousness, the court stated in Railroad Dynamics,
Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed. Cir. 1984):
[I]t is neither error nor dangerous to justice to sub-
mit legal issues to juries, the submission being ac-
companied by appropriate instructions on the law
from the trial judge. The rules relating to interroga-
tories, jury instructions, motions for directed ver-
dict, JNOV, and new trial, and the rules governing
appeals following jury trials, are fully adequate to
provide for interposition of the judge as guardian of
the law at the proper point and when necessary.
727 F.2d at 1515. In Tec Air, Inc. v. Denso Manufacturing
Michigan, Inc., 192 F.3d 1353, 1357 (Fed. Cir. 1999), this
court reiterated that for a party to prevail on appeal of
denial of JMOL “it must prove that the jury's factual find-
ings were not supported by substantial evidence or that the
facts were not sufficient to support the conclusions necessar-
ily drawn by the jury on the way to its verdict.” The appli-
cable standard of the Eighth Circuit, in which this case
arose, does not differ. See, e.g., Jackson v. Prudential Ins.
Co., 736 F.2d 450, 453 (8th Cir. 1984) (JMOL “motions
should not be granted if reasonable persons could differ as
to the conclusions to be drawn from the evidence,” and a
trial court does not err when it denies a motion for JMOL if
there is “substantial evidence – more than a mere scintilla
of evidence – to support a verdict in favor of the party
opposing such a motion.”).
SPECTRALYTICS v. CORDIS CORP 8
As did the district court, we apply this standard to the
issues raised on JMOL. Therefore, for Cordis to prevail it
must establish that the jury's actual or inferred factual
findings were not supported by substantial evidence, or that
the evidence was not sufficient to support the findings and
conclusions necessarily drawn by the jury on the way to its
verdict. See Applied Med. Res. Corp. v. United States Surgi-
cal Corp., 147 F.3d 1374, 1376 (Fed. Cir. 1998).
The defendants argued at trial that it would have been
obvious to change the Swiss-style machine into the struc-
ture that is the subject of the ’277 patent. Witnesses testi-
fied for both sides, and the jury verdict was that the
defendants did not prove that claim 1 of the ’277 patent is
invalid on the ground of obviousness. On motion for judg-
ment as a matter of law, the district court discussed the
evidence and concluded that the jury findings were sup-
ported by substantial evidence, that obviousness had not
been proved by clear and convincing evidence, and that the
jury verdict was not a miscarriage of justice. Spectralytics,
650 F. Supp. 2d 900.
The defendants argue that the district court abdicated
its role as the ultimate decisionmaker, in relying on the
presumed jury findings. The defendants point to the district
court’s statement that “if this case had been tried to the
Court, the Court likely would have found the ’277 patent
invalid. But the Court cannot, on a post-trial motion, sub-
stitute its view of the evidence for the jury’s.” 650 F. Supp.
2d at 905. We discern no error in the court’s procedure for
review of a jury verdict on the issue of obviousness where
the underlying facts were disputed. “We first presume that
the jury resolved the underlying factual disputes in favor of
the verdict winner and leave those presumed findings
undisturbed if they are supported by substantial evidence.
Then we examine the legal conclusion de novo to see
9 SPECTRALYTICS v. CORDIS CORP
whether it is correct in light of the presumed jury fact
findings.” Jurgens v. McKasy, 927 F.2d 1552, 1557 (Fed.
Cir. 1991) (citations omitted).
The district court discussed the evidence before the jury,
determined that the jury’s presumed findings were sup-
ported by substantial evidence, and that such evidence
supported the jury’s conclusion that obviousness had not
been proved. The defendants concentrate their appeal on
two prior art references, and assign error to the district
court’s comment that the jury could have found that the
prior art and prior knowledge “taught away” from the ’277
machine. The defendants also challenge the weight that
may have been given to the objective factors including
copying and commercial success.
The defendants argue that U.S. Patent No. 5,324,913 to
Oberg and U.S. Patent No. 5,026,965 to Ohe render the
Spectralytics machine obvious. The defendants state that
these references teach attaching a fixture directly to a laser
cutting tool. Spectralytics presented evidence at trial that
in the Ohe machine the connection is not rigid, and in the
Oberg machine the fixture is supported by the frame rather
than the cutting tool. We agree with the district court that
a reasonable jury could have credited Spectralytics’ evidence
as to these references.
There was expert testimony for both sides about the
Swiss-style machines, and the district court discussed this
evidence in its opinion on JMOL. 650 F. Supp. 2d at 906.
The experts generally agreed that laser metal-cutting
machines had gone through several modifications, all of
which failed to achieve the precision, yield, and complexity
of cut that is achieved by the ’277 design. There was testi-
mony that in all of the prior modifications the designers
kept the workpiece fixture firmly attached to the base of the
SPECTRALYTICS v. CORDIS CORP 10
machine. The Cordis expert on Swiss-style machines, Mr.
Huber, testified that the machine of the ’277 patent was
“contrary to the accepted teachings of Swiss automatic
screw machines.” Trial Tr. 2105. Another Cordis witness,
Jeff Miller, testified that when he first heard about the idea
of carrying the workpiece fixture directly on the cutting tool
he thought it was a “fantastic” idea.
Spectralytics’ expert, Mr. Madsen, testified that the
prior Swiss-style machines taught away from the ’277
design because the prior machines dealt with the problem of
vibration by attempting to suppress or deaden vibration by
fastening the entire apparatus to a cast iron support. Trial
Tr. 2585 / 7, 2587 / 11. Mr. Madsen testified that, by con-
trast, the ’277 design attaches the workpiece fixture to the
laser cutting tool so that “if there is any vibration, they both
move together because they are both attached.” Trial Tr.
2586 / 7-8.
The defendants argue that the district court misappre-
hended the law of “teaching away,” and erred in concluding
that the jury could have found that the prior Swiss-style
machines taught away from the ’277 invention. The defen-
dants cite cases where this court rejected assertions of
“teaching away” on the ground that the prior art did not
directly warn against the claimed invention or teach that
the claimed invention would not work, e.g., Baxter Interna-
tional, Inc. v. McGaw, Inc., 149 F.3d 1321, 1328 (Fed. Cir.
1998) (finding no teaching away where nothing in the prior
art device suggested that the claimed invention was
unlikely to work); In re Gurley, 27 F.3d 551, 553 (Fed. Cir.
1994) (“A reference may be said to teach away when a
person of ordinary skill, upon reading the reference, would
be discouraged from following the path set out in the refer-
ence or would be led in a direction divergent from the path
that was taken by the applicant.”). The defendants argue
11 SPECTRALYTICS v. CORDIS CORP
that nothing about the prior Swiss-style machines teaches
that other designs should not or cannot be devised, or warns
against mounting the workpiece fixture on the laser-cutting
tool.
“Teaching away” does not require that the prior art fore-
saw the specific invention that was later made, and warned
against taking that path. It is indeed of interest if the prior
art warned against the very modification made by the
patentee, but it is not the sole basis on which a trier of fact
could find that the prior art led away from the direction
taken by the patentee. Instead, the jury could find, based
on the expert testimony, that prior Swiss-style machines
taught away from embracing vibrations to improve cutting
accuracy because all prior machines improved accuracy by
dampening vibrations. 2 Nor is “teaching away” an essential
element of a conclusion of unobviousness.
Whether the prior art teaches away from the claimed
invention is a question of fact, Dystar Textilfarben GmbH v.
C.H. Patrick Co., 464 F.3d 1356, 1360 (Fed. Cir. 2006), and
the district court took cognizance of the parties’ arguments
on this aspect. The court concluded that on the evidence
presented “a reasonable jury could have found that the
Swiss art taught away from attaching the workpiece fixture
to the laser-cutting head as is done in the ’277 patent,” 650
F. Supp. 2d at 906-07, and explained that such a finding
supported the verdict that obviousness had not been proved.
We agree that the correct law was applied, and that an
2 Cordis suggests that under KSR International Co. v.
Teleflex Inc., 550 U.S. 398, 421 (2007), it would have been
obvious to try mounting the workpiece fixture on the cutting
tool because there were only a finite number of predictable
places to mount the fixture. That suggestion ignores the
expert testimony indicating that the cutting tool was not a
predictable place to mount the workpiece fixture.
SPECTRALYTICS v. CORDIS CORP 12
implicit finding of teaching away was supported by substan-
tial evidence.
The defendants also argue that the district court erred
by failing to give appropriate weight to “admissions” by
Spectralytics’ technical expert. Mr. Madsen was asked
whether attaching the fixture to the laser would be “just as
obvious as attaching it to the shelf,” if the only goal was to
maintain a fixed spatial relationship between the fixture
and the cutting tool. Mr. Madsen answered that “if you are
just wanting to attach [the workpiece fixture], if that’s your
only concern, your only thought, you can attach it anywhere
you want.” Trial Tr. 2731-33. As the district court recog-
nized, Mr. Madsen did not state that this “only thought”
produced the ’277 device. Spectralytics, 650 F. Supp. 2d at
906. We discern no “admission” of obviousness.
Spectralytics points to the evidence of copying and
commercial success. In Stratoflex, Inc. v. Aeroquip Corp.,
713 F.2d 1530, 1538-39 (Fed. Cir. 1983), this court observed
that “evidence of secondary considerations may often be the
most probative and cogent evidence in the record. It may
often establish that an invention appearing to have been
obvious in light of the prior art was not. It is to be consid-
ered as part of all the evidence, not just when the decision-
maker remains in doubt after reviewing the art.” The
objective considerations reflect the contemporary view of the
invention by competitors and the marketplace. In Iron Grip
Barbell Co. v. USA Sports, Inc., 392 F.3d 1317, 1324 (Fed.
Cir. 2004), the court stated: “This court has previously
identified, inter alia, commercial success, satisfaction of a
long-felt need, and copying to be relevant factors.” The jury
could have considered this evidence, in deciding the ques-
tion of obviousness. See Comark Commc’ns. v. Harris Corp.,
156 F.3d 1182, 1192 (Fed. Cir. 1998) (“It is not the province
of an appellate court to second guess the jury’s credibility
13 SPECTRALYTICS v. CORDIS CORP
determinations or to reevaluate the weight to be given the
evidence.”).
Although the defendants argue that the requisite
“nexus” was not established between the ’277 device and
commercial success, Spectralytics points to the evidence
that Norman Noble stated that its new machine was the
reason why its product was better than then-competing
products, and that Cordis described the new Noble machine
as “superior” and “advanced technology,” with “cutting
capabilities and precision not attainable” by the prior laser-
cutting system. There was substantial evidence whereby a
reasonable jury could have found copying and commercial
success, and could have weighed these factors in favor of
nonobviousness. See Pro-Mold & Tool Co. v. Great Lakes
Plastics, Inc., 75 F.3d 1568, 1574 (Fed. Cir. 1996) (factual
disputes concerning commercial success and copying are
within the province of the trier of fact).
The district court recognized that “although the Court
must review the conclusion of obviousness de novo, that
conclusion depends on underlying factual findings that were
the jury’s to make.” Spectralytics, 650 F. Supp. 2d at 906.
The district court did not “abdicate its role,” but reviewed
the evidence, applied the correct legal standard to findings
that the court determined were supported by substantial
evidence, and concluded: “Considering the evidence in the
light most favorable to Spectralytics, as the Court must, the
Court agrees with the jury that Cordis failed to carry its
burden of showing by clear and convincing evidence that the
’277 patent was obvious.” Id. at 907. We discern no re-
versible error in this procedure, or in the court’s analysis of
the evidence, or in the court’s ultimate conclusion based
thereon.
SPECTRALYTICS v. CORDIS CORP 14
DAMAGES
The jury awarded damages at the rate of 5-percent of
the sales price received by Norman Noble from Cordis for
laser-cut stents made using the machine covered by the ’277
patent. The defendants argue that the 5-percent royalty is
excessive.
A party challenging a jury damages verdict “must show
that the award is, in view of all the evidence, either so
outrageously high or so outrageously low as to be unsup-
portable as an estimation of a reasonable royalty.” Rite-Hite
Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. Cir. 1995) (en
banc) (quoting Lindemann Maschinenfabrik GmbH v. Am.
Hoist & Derrick Co., 895 F.2d 1403, 1406 (Fed. Cir. 1990)).
As discussed in Lucent Technologies, Inc., v. Gateway, Inc.,
“on post-trial JMOL motions, district court judges must
scrutinize the evidence carefully to ensure that the ‘sub-
stantial evidence’ standard is satisfied, while keeping in
mind that a reasonable royalty analysis ‘necessarily in-
volves an element of approximation and uncertainty’.” 580
F.3d 1301, 1336 (Fed. Cir. 2009) (quoting Unisplay, S.A. v.
Am. Elec. Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995)).
In the district court the defendants argued that there
was insufficient evidence to support the jury’s award of a 5-
percent running royalty. However, in accordance with 35
U.S.C. §284, the damages awarded should be “adequate to
compensate for the infringement, but in no event less than a
reasonable royalty for the use made of the invention by the
infringer.” The jury was instructed that “a reasonable
royalty is the amount of royalty that Spectralytics and
Norman Noble would have agreed to in a hypothetical
negotiation in December 1998, when the ’277 Patent issued
and the alleged infringement began.” The jury was given a
non-exhaustive list of eleven factors to consider, as follows:
15 SPECTRALYTICS v. CORDIS CORP
(1) What royalties did Cordis, Norman Noble,
or others pay for licenses to patents comparable to
the ’277 Patent?
(2) Did Spectralytics have a policy of licensing
or not licensing the ’277 Patent? What were the
terms of those licenses?
(3) Was Spectralytics in competition with
Cordis and/or Norman Noble?
(4) Does the ability to use the patented inven-
tion help in selling other products or services?
(5) How profitable was the patented device?
Was it commercially successful or popular?
(6) What advantages and benefits did the pat-
ented invention provide over devices not claimed in
the ’277 Patent?
(7) Was an acceptable, non-infringing alterna-
tive available to Cordis and Norman Noble in De-
cember 1998, when the alleged infringement began?
(8) How extensively did Cordis and Norman
Noble use the patented invention, and what was the
value of that use to them?
(9) Is there a customary portion or percentage
of the profit or selling price that is customarily paid
in the field as a royalty for the use of patented in-
ventions comparable to the invention claimed in the
’277 Patent?
(10) What portion of profit is attributable to
the patented invention versus other factors such as
unpatented elements or unpatented manufacturing
processes, or features or improvements developed by
Cordis or Norman Noble?
(11) What opinions do experts have as to what
would be a reasonable royalty?
Trial Tr. 3056-58.
SPECTRALYTICS v. CORDIS CORP 16
In deciding the motions for JMOL, the district court dis-
cussed the defendants’ arguments. The defendants repeat
on appeal that the royalty is much larger than the cost of
switching to non-infringing alternatives. The defendants
state that two acceptable non-infringing alternative ma-
chines were available: a modified version of the ’277 ma-
chine that was made by Norman Noble in October 2008, and
a modified version of a Comtal machine that was available
in 1998. Spectralytics pointed out to the jury that Norman
Noble’s October 2008 machine was not made until ten years
after the infringement began, and that it had not been used
to cut production stents. As for the modified Comtal ma-
chine, the evidence was that Norman Noble had rejected
this machine in 1998 because it was “not user friendly” and
did not function correctly, and also that Cordis owned a
modified Comtal machine but never used it.
The district court stated that the jury was not required
to accept the defendants’ position that these alternative
machines were available and acceptable, in light of the
contrary evidence. Spectralytics, 650 F. Supp. 2d at 907. A
fact finder “must proceed with caution in assessing proof of
the availability of substitutes not actually sold during the
period of infringement.” Grain Processing Corp. v. Am.
Maize-Prods. Co., 185 F.3d 1341, 1353 (Fed. Cir. 1999). We
agree with the district court that a reasonable jury could
have found that the alleged alternatives were either not
acceptable or not available, and that such a finding was
supported by substantial evidence.
The defendants also argue that the jury may have based
the 5-percent royalty rate on the 5-percent sales commission
paid to Jack Lundeen by Norman Noble, and that Mr.
Lundeen’s sales commission is not related to any of the
standard measures of infringement damages. As the dis-
trict court observed “Cordis does not really know if the jury
17 SPECTRALYTICS v. CORDIS CORP
based its award on Lundeen’s commission,” and the “fact
that Lundeen’s commission was five percent did not some-
how put the number five off limits to the jury.” Spectra-
lytics, 650 F. Supp. 2d at 919. Moreover, the commission
paid to Lundeen was not irrelevant to a hypothetical nego-
tiation between Spectralytics and Norman Noble because it
shed light on what Norman Noble was willing to pay to
procure a business relationship with Cordis.
Spectralytics’ expert, Ms. Davis, testified that the hypo-
thetical negotiations favored a 20-percent royalty, based on
the factors set out in Georgia-Pacific Corp. v. United States
Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970),
and as reflected in the jury instructions ante. The evidence
was that Spectralytics had never licensed a competitor
under relevant patents, and that at the time of the hypo-
thetical negotiation Spectralytics and Norman Noble were
direct competitors in the market for metal stents. It was
not disputed that the product of the machine of the ’277
patent was superior to prior products, that for the six year
period Norman Noble had approximately $447,000,000 in
sales to Cordis for stents made with the infringing machine,
and that Noble’s profit margin was about 67-percent. There
was also testimony that Cordis would have played a role in
the hypothetical license negotiation in view of its agreement
to indemnify Noble for patent infringement.
The defendants suggested a low lump sum payment,
and apparently did not suggest any royalty rate. We agree
with the district court that the jury’s choice of a 5-percent
royalty was not “outrageously high” in view of the expert
testimony that 20-percent was reasonable and appropriate
in light of trade practices and the economic and competitive
circumstances.
SPECTRALYTICS v. CORDIS CORP 18
The defendants also argue that Spectralytics placed a
low value on its invention, because in 2004 Spectralytics
sold its assets for $4 million plus a contingent 25-percent of
any recovery for patent infringement. The district court
found that the jury could reasonably have concluded that
this pricing arrangement had little relevance to a reason-
able royalty. We agree with the district court that this
circumstance does not render a 5-percent royalty unreason-
able, for, as the district court explained, Spectralytics
“hoped that the patent would survive any challenge to its
validity, but Spectralytics did not really know for certain,
and it could not really know for certain without paying
millions of dollars in legal fees to launch lengthy and risky
litigation. Thus, the value assigned to the ’277 patent in
2003 would have reflected a very deep discount.” 650 F.
Supp. 2d at 916. The district court observed that the weight
to be given to this aspect “was a task for the jury, and a
reasonable jury could have chosen to give very little weight
to this evidence.” Id.
Spectralytics’ economics expert had testified that a 20-
percent royalty was appropriate, but Spectralytics does not
appeal the jury’s 5-percent royalty rate. The jury was
entitled to choose a damages award within the amounts
advocated by the opposing parties. See Fuji Photo Film Co.
v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005)
(“the jury is not bound to accept a rate proffered by one
party’s expert but rather may choose an intermediate roy-
alty rate.”). The jury’s assessment was neither outrageously
high nor outrageously low. See Rite-Hite, 56 F.3d at 1554.
We agree with the district court that the 5-percent roy-
alty awarded by the jury was supported by substantial
evidence in the record as a whole. See Unisplay, 69 F.3d at
519 (“a jury’s [royalty] choice simply must be within the
range encompassed by the record as a whole”).
19 SPECTRALYTICS v. CORDIS CORP
WILLFUL INFRINGEMENT
The jury found that the infringement was willful. Spec-
tralytics appeals from the district court’s denial of Spectra-
lytics’ request for enhanced damages and attorney fees,
stating that the district court misapplied the law, and thus
abused its discretion.
The district court’s decision on whether to enhance
damages is reviewed for abuse of discretion, that is, whether
the decision was based on clearly erroneous findings of fact,
an incorrect conclusion of law, or a clear error of judgment.
SRI Int’l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462,
1469 (Fed. Cir. 1997). We observe that the district court
applied our decision in In re Seagate Technology, LLC, 497
F.3d 1360 (Fed. Cir. 2007) (en banc), in a more rigorous
manner than is appropriate, as has been elaborated in
intervening decisions. The district court also applied the
Seagate criteria for determining whether infringement is
willful, to the separate determination of whether to enhance
damages after willful infringement is found. Recent prece-
dent has clarified that the factors relevant to these determi-
nations are not coextensive.
In Seagate this court held that failure to exercise due
care by obtaining an exculpatory opinion of counsel before
commencing infringing activity is not of itself probative of
willful infringement; the court held that there must be
“objective recklessness,” before failure to obtain an exculpa-
tory opinion of counsel can establish willful infringement.
Id. at 1371. However, the court did not hold that after
willful infringement is established, it is improper to con-
sider whether the infringer exercised adequate investigation
of any adverse patents. This distinction was clarified in i4i
v. Microsoft, where this court explained that “the test for
willfulness is distinct and separate from the factors guiding
SPECTRALYTICS v. CORDIS CORP 20
a district court’s discretion regarding enhanced damages.”
i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 859 (Fed.
Cir. 2010), cert. granted on other grounds, 131 S. Ct. 647
(2010).
Precedent has also clarified that the failure to obtain an
opinion of counsel or otherwise investigate the patent situa-
tion can be considered, in the totality of the circumstances.
See Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., 605 F.3d
1305, 1313 (Fed. Cir. 2010) (“the timing as well as the
content of an opinion of counsel may be relevant to the issue
of willful infringement, for timely consultation with counsel
may be evidence that an infringer did not engage in objec-
tively reckless behavior”) (citing Finisar Corp. v. DirecTV
Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008)). In i4i
this court sustained the district court’s enhancement of
damages, because “Microsoft was aware of i4i’s patent,
never formed a good faith belief of noninfringement, and
clearly intended to add a custom XML editor in Word with
similar capabilities to i4i’s patented products.” 598 F.3d at
858. Although Microsoft had presented the same argument
as here offered, viz. that Seagate abrogated the duty to
investigate previously placed upon those with knowledge of
an adverse patent, this court held that the district court
could and should consider whether infringement had been
investigated, explaining: “Although a finding of willfulness
is a prerequisite for enhancing damages under § 284, the
standard for deciding whether – and by how much – to
enhance damages is set forth in Read, not Seagate . . . .
Under the Read factors, the district court properly consid-
ered . . . whether Microsoft investigated the scope of the
patent.” i4i, 598 F.3d at 859.
In Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir.
1992), the court identified factors that may be relevant to
determination of whether damages should be enhanced: (1)
21 SPECTRALYTICS v. CORDIS CORP
whether the infringer deliberately copied the ideas or design
of another; (2) whether the infringer, when he knew of the
other’s patent, investigated the patent and formed a good
faith belief that it was invalid or that it was not infringed;
(3) the infringer’s behavior in the litigation; (4) the in-
fringer’s size and financial condition; (5) the closeness of the
case; (6) the duration of the misconduct; (7) the remedial
action by the infringer; (8) the infringer’s motivation for
harm; and (9) whether the infringer attempted to conceal its
misconduct. Id. at 826-27. Thus although the district court
was correct in holding that a finding of willful infringement
may not warrant enhancement of damages, nonetheless,
after willful infringement is found, it is inappropriate to
discount evidence relating to whether there was adequate
investigation of adverse patent rights. That is only one of
the Read factors, but Seagate did not hold that it should be
ignored.
Applying the Read factors, the district court found that
“[m]ost of these factors weigh against, or are neutral to-
ward, a finding of enhanced damages in this case.” Spectra-
lytics, 650 F. Supp. 2d at 922. The district court stated that
“after Seagate, greater emphasis must be placed on objective
factors in assessing the degree of a defendant’s willfulness.”
Id. The district court remarked that the jury was not asked
for a specific finding as to whether Noble copied the Spectra-
lytics machine. Spectralytics argues that the jury verdict of
willful infringement necessarily was based on a finding of
copying. The district court stated: “With respect to defen-
dants’ investigation, the Court finds that Cordis did not
carefully investigate the ’277 patent until trial, but the
Court discounts this factor in light of Seagate’s abrogation of
the duty of due care.” Id.
Seagate removed the presumption of willful infringe-
ment flowing from an infringer’s failure to exercise due care
SPECTRALYTICS v. CORDIS CORP 22
to avoid infringement, but Seagate did not change the
application of the Read factors with respect to enhancement
of damages when willful infringement under §285 is found.
We thus vacate the district court’s denial of enhanced
damages, and remand to the district court to redetermine
whether enhanced damages are warranted under the guid-
ance of Read, 970 F.2d at 826, that the “paramount deter-
mination in deciding to grant enhancement and the amount
thereof is the egregiousness of the defendant’s conduct
based on all the facts and circumstances.”
ATTORNEY FEES
The patent statute provides that “The court in excep-
tional cases may award reasonable attorney fees to the
prevailing party.” 35 U.S.C. §285. Although an attorney fee
award is not mandatory when willful infringement has been
found, precedent establishes that the court should explain
its decision not to award attorney fees. Transclean Corp. v.
Bridgewood Servs., Inc., 290 F.3d 1364, 1379 (Fed. Cir.
2002) (“[T]he general rule [is] that the district court must
normally explain why it decides that a case is not excep-
tional under 35 U.S.C. §285 when a factual finding of willful
infringement has been established and, if exceptional, why
it decides not to award attorney fees.”); Modine Mfg. Co. v.
Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990)
(“[W]hen a trial court denies attorney fees in spite of a
finding of willful infringement, the court must explain why
the case is not ‘exceptional’ within the meaning of the stat-
ute.”).
Here, the district court did not separately analyze the
attorney fee issue, but denied attorney fees in conjunction
with denial of enhanced damages. Indeed, similar consid-
erations may be relevant to both enhanced damages and
attorney fees. See Transclean, 290 F.3d at 1379 (“In this
23 SPECTRALYTICS v. CORDIS CORP
case, the court’s careful analysis of the Read factors regard-
ing enhancement of damages suffices as grounds for affirm-
ing the court’s implicit conclusion that the infringement
case was not exceptional within the meaning of 35 U.S.C.
§285.”). However, the situations in which §284 and §285
may be invoked are not identical. For example, attorney
misconduct or other aggravation of the litigation process
may weigh heavily with respect to attorney fees, but not for
enhancement of damages.
We take note of the district court’s remark that both
sides did not exhibit immaculate trial behavior. However,
in view of our remand for redetermination of enhancement
of damages, reconsideration of the request for attorney fees
is also warranted.
CONCLUSION
The judgment of validity, infringement, and the royalty
rate for measurement of damages is affirmed. The denial of
enhanced damages and attorney fees is vacated, and the
case is remanded for redetermination of these issues, as
well as other steps appropriate to completion of this litiga-
tion.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED