United States Court of Appeals
for the Federal Circuit
__________________________
WORDTECH SYSTEMS, INC.,
Plaintiff-Appellee,
v.
INTEGRATED NETWORKS SOLUTIONS, INC.,
(DOING BUSINESS AS INTEGRATED NETWORK
SOLUTIONS CORP., ALSO KNOWN AS
INTEGRATED NETWORK SOLUTIONS,
INTEGRATED SYSTEMS, INTERNET NETWORK
STORAGE COMPANY AND INSC), NASSER
KHATEMI, AND HAMID ASSADIAN,
Defendants-Appellants,
and
EHTERAM GHODSIAN, SHOHREH JAVADI,
MICHAEL F. ELLSWORTH,
AND BRIAN J. DEAN,
Defendants.
__________________________
2009-1454
__________________________
Appeal from the United States District Court for the
Eastern District of California in case No. 04-CV-1971,
Judge Morrison C. England, Jr.
__________________________
Decided: June 16, 2010
__________________________
WORDTECH SYSTEMS v. INTEGRATED NTWRK 2
CHRISTIAN J. MARTINEZ, General Counsel, Wordtech
Systems, Inc., of Concord, California, argued for plaintiff-
appellee. With him on the brief was RICHARD ESTY
PETERSON, Richard Esty Peterson, Patent Attorney, of
Pacifica, California.
CHRIS GIBSON, Boutin, Gibson Di Gusto Hodell Inc., of
Sacramento, California, argued for defendants-appellants.
With him on the brief was MICHAEL E. CHASE.
__________________________
Before MAYER, GAJARSA, and LINN, Circuit Judges.
LINN, Circuit Judge.
This is a patent infringement case involving technol-
ogy for automated duplication of compact discs. Wordtech
Systems, Inc. (“Wordtech”) sued Integrated Networks
Solutions, Inc. (“INSC”) and its employees Nasser
Khatemi and Hamid Assadian (collectively “Defendants”)
in the District Court for the Eastern District of California
for infringement of U.S. Patents No. 6,141,298 (“’298
patent”), No. 6,532,198 (“’198 patent”), and No. 6,822,932
(“’932 patent”). A jury found INSC, Khatemi, and As-
sadian each liable for direct infringement, contributory
infringement, and inducement of infringement, and
awarded damages. Khatemi and Assadian appeal the
liability verdicts against them as individuals; all three
defendants appeal damages and the district court’s denial
of their motion for leave to amend their answer to allege
invalidity defenses. Because the jury instructions lacked
legal tests necessary to determine Khatemi and As-
sadian’s individual liability, and because the damages
verdict conflicts with the clear weight of the evidence, we
reverse the district court’s denial of Defendants’ motion for
new trial and remand. Because the district court did not
3 WORDTECH SYSTEMS v. INTEGRATED NTWRK
abuse its discretion by denying Defendants’ motion for
leave to amend, we affirm that ruling.
BACKGROUND
The three asserted patents share a common parent
application and cover “Programmable Self-Operating
Compact Disk Duplication Systems.” Wordtech alleged
that Defendants infringed the patents by modifying and
selling disk duplication devices called “Robocopiers,”
model numbers 600 and 8000. The accused devices copy
video files from computer memory to multiple discs.
Wordtech also alleged that INSC, Khatemi, Assadian, and
other “INSC personnel” contributorily infringed and
induced third parties to infringe “by selling infringing
products to them.” First Am. Compl. ¶ 27.
INSC was founded by Khatemi’s mother, Ehteram
Ghodsian, and incorporated in Nevada on March 17, 1994.
Nevada law requires corporations to file annual forms
that include the names and addresses of officers and
directors. See Nev. Rev. Stat. § 78.150 (2009). Failure to
file the annual forms results in revocation of the corporate
charter, which cannot be reinstated after five consecutive
years of noncompliance. Id. §§ 78.175, 78.180. INSC filed
annual lists of corporate officers in 1994 and 1995, identi-
fying Khatemi as President and as a Director, respec-
tively. 1 However, after 1995, INSC did not file the
mandatory annual statements in Nevada. On November
3, 2006, after Wordtech filed suit (on September 22, 2004),
1 The record contains additional copies of INSC’s
1994 and 1995 forms that do not list Khatemi under any
position. Wordtech claims that these copies were “falsi-
fied.” Wordtech’s Br. 11. On appeal, Defendants admit
that the 1994 and 1995 filings listed Khatemi’s name.
Defs.’ Principal Br. 17.
WORDTECH SYSTEMS v. INTEGRATED NTWRK 4
INSC filed a “Certificate for Revival for a Nevada Corpo-
ration.”
Khatemi and Assadian worked for INSC but denied
that they served as officers. Khatemi testified that he
was a “salesman,” that his “specialty is software and
software solution,” and that he sold Robocopier 600 and
8000 models. Reporter’s Tr., Trial Proceedings, Nov. 4,
2008, 144:20-146:21. Assadian described himself as an
engineer responsible for INSC “product development.”
Id., Nov. 5, 2008, 109:13-19; id., Nov. 10, 2008, 46:6-23.
Khatemi said, “We generally never had titles at the
company,” but identified Assadian as the company repre-
sentative at the time of trial. Id., Nov. 4, 2008, 151:20-25,
136:19-24. According to Assadian, INSC had at most “20
and maybe 15” employees between 2000 and 2005, and
only two full-time employees—himself and Khatemi—at
the time of trial. Id., Nov. 10, 2008, 11:6-12, 22:14-18.
Assadian also testified that “mostly Mr. Khatemi and
myself” were responsible for the company, but neither
held an office. J.A. 537.
Wordtech named the San Juan Unified School District
(“School District”) of Carmichael, California as a co-
defendant for allegedly purchasing and using INSC
Robocopiers. First Am. Compl. ¶ 28. In response, the
School District pleaded “Patent Invalidity” as an affirma-
tive defense. San Juan Unified Sch. Dist.’s Answer to
First Am. Compl. 10. However, INSC, Khatemi, and
Assadian did not plead invalidity defenses or counter-
claims. The School District later settled with Wordtech
and left the lawsuit. The remaining defendants learned of
this settlement on January 23, 2007 and moved to amend
their answer to allege invalidity defenses on February 13,
2007. The district court denied this motion. Wordtech
Sys., Inc. v. Integrated Network Solutions, Inc., No. 04-
CV-1971 (E.D. Cal. Mar. 22, 2007) (order denying motion).
5 WORDTECH SYSTEMS v. INTEGRATED NTWRK
The district court conducted a jury trial on Wordtech’s
infringement theories. The jury answered questions
involving infringement on a sixteen-page verdict form.
Part I of the verdict form, “INFRINGEMENT,” asked as
to each defendant whether Wordtech proved that the
Robocopier 600 and 8000 infringed each of the asserted
claims of the three patents, but only displayed check
boxes for “(A) Inducing Infringement in the U.S.” and “(B)
Contributing to infringement in the U.S.” Joint Verdict
Form 2-14. Part II, “Infringement Detail,” asked whether
Wordtech proved that “any valid claim of these patents”
was infringed by INSC, Assadian, and Khatemi. Id. 14-
15. The jury checked “Yes” for all infringement questions
in Parts I and II. It also awarded damages of $150,000 for
infringement of the ’298 patent and $50,000 for infringe-
ment of each of the ’198 and ’932 patents, for a total of
$250,000. Finally, the jury found that all defendants
infringed all three patents willfully. After trial, the
district court found the case “exceptional” under 35 U.S.C.
§ 285 and awarded treble damages, attorneys’ fees, inter-
est, and costs to Wordtech. Wordtech Sys., Inc. v. Inte-
grated Network Solutions, Inc., No. 04-CV-1971 (E.D. Cal.
Jan. 15, 2009) (memorandum and order). Defendants
filed pre- and post-verdict motions for judgment as a
matter of law (“JMOL”) under Rule 50 of the Federal
Rules of Civil Procedure, and a motion for new trial under
Rule 59(a), all of which the district court denied. Word-
tech Sys., Inc. v. Integrated Network Solutions, Inc., No.
04-CV-1971 (E.D. Cal. May 26, 2009) (“Order”).
Defendants do not appeal the verdicts of infringement
against INSC, the verdicts of willfulness, or the court’s
exceptional case determinations. They challenge only the
liability verdicts against Khatemi and Assadian, the
$250,000 damages award, and the court’s denial of their
WORDTECH SYSTEMS v. INTEGRATED NTWRK 6
motion to amend their answer. We have jurisdiction
under 28 U.S.C. § 1295(a)(1).
DISCUSSION
I. Individual Liability for Infringement
Khatemi and Assadian appeal the district court’s de-
nial of their motions for JMOL and new trial, arguing
that they cannot be individually liable for direct in-
fringement, contributory infringement, or inducement.
We review denial of post-trial motions for JMOL and
new trial under regional circuit law. Revolution Eyewear,
Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1370 (Fed. Cir.
2009). The Ninth Circuit reviews “a jury’s verdict for
substantial evidence in ruling on a properly made motion
under Rule 50(b).” Equal Employment Opportunity
Comm’n v. Go Daddy Software, Inc., 581 F.3d 951, 961
(9th Cir. 2009). “However, in ruling on a Rule 50(b)
motion based on grounds not previously asserted in a
Rule 50(a) motion, we are limited to reviewing the jury’s
verdict for plain error, and should reverse only if such
plain error would result in a manifest miscarriage of
justice.” Id. (quotation and citation omitted). “Under
Rule 50, a party must make a Rule 50(a) motion for
judgment as a matter of law before a case is submitted to
the jury.” Id. Rule 50(a) requires that a pre-verdict
JMOL motion “specify the judgment sought and the law
and facts that entitle the movant to the judgment.” See
Tortu v. Las Vegas Metro. Police Dep’t, 556 F.3d 1075,
1082-83 (9th Cir. 2009) (quoting Fed. R. Civ. P. 50(a)(2)).
The Ninth Circuit reviews a “ruling on a motion for a
new trial under Rule 59(a) for an abuse of discretion.” Go
Daddy, 581 F.3d at 962. “The trial court may grant a new
trial, even though the verdict is supported by substantial
evidence, if ‘the verdict is contrary to the clear weight of
7 WORDTECH SYSTEMS v. INTEGRATED NTWRK
the evidence, or is based upon evidence which is false, or
to prevent, in the sound discretion of the trial court, a
miscarriage of justice.’” United States v. 4.0 Acres of
Land, 175 F.3d 1133, 1139 (9th Cir. 1999) (citation omit-
ted). We may reverse the denial of a Rule 59(a) motion
“where the District Court has made a mistake of law.”
Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir.
2007) (quotation omitted).
A. Direct Infringement
According to Khatemi and Assadian, INSC’s corporate
veil shielded them from direct infringement liability
under 35 U.S.C. § 271(a) because they acted as company
employees, and INSC was a valid corporation during all
periods of alleged infringement. They insist that the
validity of “INSC’s corporate status was not an issue at
trial” and that Wordtech introduced insufficient evidence
to justify piercing INSC’s corporate veil. Defs.’ Principal
Br. 38-39. In their motions for JMOL and new trial,
Defendants preserved these arguments by contending
that they were not liable as INSC officers and did not
personally participate in infringement. See Defs.’ Mot. for
JMOL Pre-Verdict 5-7 (“Rule 50(a) motion”); Defs’ Memo.
in Support of JMOL Post-Verdict 8-9, 16-17 (“Rule 50(b)
motion”); Defs.’ Memo. in Support of New Trial 4-7 (“Rule
59(a) motion”).
“Patent infringement is a tort,” Mars, Inc. v. Coin Ac-
ceptors, Inc., 527 F.3d 1359, 1365 (Fed. Cir. 2008), and
“[i]n general, a corporate officer is personally liable for his
tortious acts, just as any individual may be liable for a
civil wrong,” Hoover Group, Inc. v. Custom Metalcraft,
Inc., 84 F.3d 1408, 1411 (Fed. Cir. 1996). However, the
“corporate veil” shields a company’s officers from personal
liability for direct infringement that the officers commit in
the name of the corporation, unless the corporation is the
WORDTECH SYSTEMS v. INTEGRATED NTWRK 8
officers’ “alter ego.” See Wechsler v. Macke Int’l Trade,
Inc., 486 F.3d 1286, 1295 (Fed. Cir. 2007). “To determine
whether corporate officers are personally liable for the
direct infringement of the corporation under § 271(a)
requires invocation of those general principles relating to
piercing the corporate veil.” Orthokinetics, Inc. v. Safety
Travel Chairs, Inc., 806 F.2d 1565, 1579 (Fed. Cir. 1986). 2
On appeal, Wordtech defends the verdict on two
grounds. First, Wordtech claims that INSC was “non-
existent” during the alleged infringement because, under
Nevada law, INSC permanently forfeited its corporate
charter when it neglected to file required annual state-
ments for five consecutive years and cannot be “rein-
stated.” See Nev. Rev. Stat. § 78.180(4) (2006);
Wordtech’s Br. 16. Defendants respond that they success-
fully “revived” INSC in 2006, with retroactive effect, by
filing appropriate paperwork. See Nev. Rev. Stat. §
2 Commentators have argued that the corporate
veil should apply only to owners, not to officers. See
Lynda J. Oswald, The Personal Liability of Corporate
Officers for Patent Infringement, 44 IDEA 115, 130 (2003)
(“Piercing is a mechanism for reaching the owners (i.e.,
shareholders) of a corporation, not the officers. It has no
application in the context of officer liability.”); see also
Patrick T. Schmidt, Note, The Internalization of Corporate
Patent Infringement, 88 Tex. L. Rev. 217, 233 (2009)
(“[V]eil-piercing is a doctrine by which shareholders are
held liable for obligations of the corporation and is gener-
ally thought to have nothing to do with non-owner liabil-
ity.”). Wordtech does not argue that Khatemi and
Assadian are owners of INSC, nor does it attempt to make
any distinction between officers and owners on the corpo-
rate veil issue. Moreover, until such a challenge is pre-
sented and reconsidered by the full court, “[p]anels of this
court are bound by previous precedential decisions until
overturned by the Supreme Court or by this court en
banc.” Barclay v. United States, 443 F.3d 1368, 1373
(Fed. Cir. 2006).
9 WORDTECH SYSTEMS v. INTEGRATED NTWRK
78.740 (2007); Redl v. Sec’y, 85 P.3d 797, 799-800 (Nev.
2004). Alternatively, Wordtech contends that even if
INSC was a valid corporation, the jury heard substantial
evidence that supported piercing INSC’s corporate veil.
We do not evaluate these arguments because the jury
instructions did not address any issue relating to corpo-
rate status. We have held that the doctrine of piercing
the corporate veil involves “general principles,” Orthoki-
netics, 806 F.2d at 1579, that do not apply only to patent
cases, Wechsler, 486 F.3d at 1295 (noting that “the alter
ego issue is not unique to patent law”). “More generally, a
court may exert its equitable powers and disregard the
corporate entity if it decides that piercing the veil will
prevent fraud, illegality, injustice, a contravention of
public policy, or prevent the corporation from shielding
someone from criminal liability.” Manville Sales Corp. v.
Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990).
Here, the district court never instructed the jury on
INSC’s corporate status. Neither the jury instructions
nor the jury’s verdict form mentioned piercing the corpo-
rate veil or the Nevada statutory scheme that Wordtech
asserts on appeal. Jury Instructions; Joint Verdict Form.
When Wordtech’s counsel claimed that the instructions
included corporate issues, the court replied: “That’s not a
jury instruction here.” Reporter’s Tr., Trial Proceedings,
Nov. 10, 2008, 35:5-11.
Because the jury was not instructed about INSC’s
corporate status, we must determine whether this omis-
sion requires a new trial. For issues not unique to patent
law, we review jury instructions under the law of the
relevant regional circuit. See Amgen Inc. v. F. Hoffmann-
La Roche Ltd., 580 F.3d 1340, 1368 n.13 (Fed. Cir. 2009).
In the Ninth Circuit, if a party does not object properly to
jury instructions at trial, the instructions are reviewable
only for plain error. See Warfield v. Alaniz, 569 F.3d
WORDTECH SYSTEMS v. INTEGRATED NTWRK 10
1015, 1029 (9th Cir. 2009); Fed. R. Civ. P. 51(d)(2) (2007)
(“A court may consider a plain error in the instructions
that has not been preserved as required by Rule 51(d)(1) if
the error affects substantial rights.”). The Advisory
Committee Notes to the 2003 revision of Rule 51(d)(2),
which explicitly authorized “plain error” review for jury
instructions in the situation where no party objects,
counsel that plain error depends on the “obviousness of
the mistake,” the “importance of the error,” the “costs of
correcting an error,” and the “impact a verdict may have
on nonparties.” Notes of Advisory Committee on 2003
Amendments, Fed. R. Civ. P. 51(d)(2) (2003); see also
United States v. Treadwell, 593 F.3d 990, 996 (9th Cir.
2010) (noting, in criminal context: “On plain error review,
we correct an error not raised at trial only if it is plain,
affects substantial rights, and ‘seriously affects the fair-
ness, integrity, or public reputation of judicial proceed-
ings.’”).
In this case, the jury’s verdict of Khatemi and As-
sadian’s individual liability, despite the lack of instruc-
tions on INSC’s existence or piercing its corporate veil,
was plain error that requires a new trial. Defendants
concede that they did not object to the jury instructions.
Nevertheless, failure to instruct the jury was plainly
erroneous because “[p]ersonal liability under § 271(a) . . .
requires sufficient evidence to justify piercing the corpo-
rate veil.” Al-Site Corp. v. VSI Int’l, Inc., 174 F.3d 1308,
1331 (Fed. Cir. 1999). Because resolution of INSC’s
corporate status was a legal prerequisite to finding
Khatemi and Assadian individually liable, the jury omis-
sions were obvious, important, and seriously affected the
trial’s fairness. Wordtech needed to prove either that
INSC was not a valid corporation when Khatemi and
Assadian committed infringing acts on its behalf, or that
INSC’s corporate veil should be disregarded under state
11 WORDTECH SYSTEMS v. INTEGRATED NTWRK
law. We recognize that if “the error in the jury instruc-
tion is harmless, it does not warrant reversal.” Dang v.
Cross, 422 F.3d 800, 805 (9th Cir. 2005). In this case,
however, we cannot deem the errors harmless. While
Wordtech identified evidence that INSC did not exist or
served as Defendants’ alter ego, a correctly instructed jury
could have concluded otherwise.
Moreover, the trial record shows that even though the
district court ruled that Wordtech waived its arguments
about INSC’s corporate status, it nonetheless allowed
Wordtech to introduce evidence on these issues. The
Final Pretrial Order did not mention any corporate issues.
Accordingly, when Wordtech’s counsel tried to examine
Assadian about INSC’s corporate filings, the court told
the parties: “Nobody has asked to add in the issue of the
corporate entity, corporate veil, anything else. . . . That’s
not an issue. It was never brought up. In the Complaint,
where did you say that they are not a valid corporation?”
Reporter’s Tr., Trial Proceedings, Nov. 10, 2008, 33:2-9,
35:12-14. On the trial’s final day, Wordtech moved to
amend its complaint to address “the identity of the corpo-
ration,” but the court denied the motion, noting that
“[a]nything with respect to issues of corporate ownership,
filing of corporate documents, could have been brought up
prior to the time of the Final Pretrial Order being issued .
. . .” Id., Nov. 12, 2008, 3:16-4:22. However, in closing
arguments later that day, the court allowed the parties to
argue to the jury about whether Khatemi and Assadian
were INSC officers. Id. 69:21-73:21, 86:12-87:17. The
court then denied Defendants’ post-trial motions on
individual liability because “Plaintiff produced evidence
tending to prove that INSC was not operating as a corpo-
ration during the time of infringement.” Order at 6.
However, because the jury instructions were plainly
erroneous, we conclude that the proceedings rested on “a
WORDTECH SYSTEMS v. INTEGRATED NTWRK 12
mistake of law” that warrants retrial. Molski, 481 F.3d at
729. We therefore reverse the district court’s denial of
Defendants’ Rule 59(a) motion and remand for further
proceedings on whether a new trial is warranted on
Khatemi and Assadian’s personal liability for direct
infringement. Because Defendants have not clearly
established that Wordtech waived its arguments about
INSC’s corporate status or failed to present substantial
evidence on which a properly instructed jury could find
Khatemi and Assadian personally liable, we affirm the
denial of Defendants’ motion for JMOL.
B. Inducement
Defendants also challenge their individual liability for
inducement. “Whoever actively induces infringement of a
patent shall be liable as an infringer.” 35 U.S.C. § 271(b).
“[I]nducement requires that the alleged infringer know-
ingly induced infringement and possessed specific intent
to encourage another’s infringement.” DSU Med. Corp. v.
JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc)
(quotations and citations omitted).
Khatemi and Assadian claim that Wordtech produced
insufficient evidence of inducement to support the verdict.
However, Defendants did not raise inducement in their
Rule 50(a) or Rule 50(b) motions. Therefore, they may not
challenge the sufficiency of the evidence on this issue. See
Go Daddy, 581 F.3d at 961-62. Defendants argued gener-
ally that INSC shielded them from personal liability. The
corporate veil can shield officers from liability under §
271(a). See Orthokinetics, 806 F.2d at 1578-79. However,
“corporate officers who actively assist with their corpora-
tion's infringement may be personally liable for inducing
infringement regardless of whether the circumstances are
such that a court should disregard the corporate entity
and pierce the corporate veil.” Manville, 917 F.2d at 553;
13 WORDTECH SYSTEMS v. INTEGRATED NTWRK
see also Hoover, 84 F.3d at 1412. 3 Thus, Defendants’
argument for JMOL was irrelevant to inducement. As a
result, we review only their motion for new trial on in-
ducement, asking whether the verdict conflicts with the
clear weight of the evidence or involved a mistake of law.
Molski, 481 F.3d at 728-29.
We begin with the jury’s verdict form. In Part I, the
jury was asked whether the Robocopier 8000 and 600
devices infringed by “(A) Inducing Infringement in the
U.S.” Joint Verdict Form 2-14. These verdict questions
were nonsensical: inducement requires intent, and as
Wordtech’s counsel acknowledged at the oral argument,
“a device cannot induce infringement.” Oral Arg. 24:57-
25:01, available at
http://oralarguments.cafc.uscourts.gov/mp3/2009-
1454.mp3. The verdict form included no other induce-
ment questions or instructions that might have mitigated
these errors.
Moreover, the legal test for inducement was never
presented to the jury. As Wordtech’s counsel confirmed,
inducement was not raised in the Final Pretrial Order, in
the jury instructions, or in the closing arguments. See id.
27:41-29:34. Wordtech argues that the instructions did
3 In Power Lift, Inc. v. Lang Tools, Inc., we ex-
plained that the history of the 1952 Patent Act supported
“a ‘broad’ reading of § 271(b) which, in our view, may
include liability of corporate officials who actively aid and
abet their corporation’s infringement.” 774 F.2d 478, 481
(Fed. Cir. 1985). We noted that regional circuits previ-
ously held officers liable for inducement without piercing
the corporate veil. E.g., Int’l Mfg. Co. v. Landon, Inc., 336
F.2d 723, 729 (9th Cir. 1964). The differing rules for
officer liability under §§ 271(a) and 271(b) and the treat-
ment of officer liability as distinguished from owner
liability in our precedent are important issues that cannot
be resolved on this record and are left for another day.
WORDTECH SYSTEMS v. INTEGRATED NTWRK 14
not mislead the jury because the jury received proper
instructions on willful infringement, and in fact found
willfulness. Wordtech’s Br. 56-57. However, the legal
standards for willfulness and inducement, such as the
requisite intent, are not identical. Cf. Broadcom Corp. v.
Qualcomm, Inc., 543 F.3d 683, 699 (Fed. Cir. 2008).
Therefore, these mistakes of law precluded legitimate
verdicts on inducement.
C. Contributory Infringement
Khatemi and Assadian also challenge their individual
liability for contributory infringement. Under 35 U.S.C. §
271(c), a party who sells a component with knowledge
that the component is especially designed for use in a
patented invention, and is not a staple article of com-
merce suitable for substantial noninfringing use, is liable
as a contributory infringer. See Ricoh Co. v. Quanta
Computer Inc., 550 F.3d 1325, 1337 (Fed. Cir. 2008).
Wordtech argues that Khatemi and Assadian waived
any challenge to the sufficiency of the evidence for con-
tributory infringement by failing to raise it in their pre-
verdict Rule 50(a) motion. The district court denied
Defendants’ post-verdict Rule 50(b) motion on the grounds
that “Defendants failed to raise any contributory in-
fringement theory in a pre-verdict Motion.” Order at 6.
We agree. Defendants did not refer to contributory in-
fringement in their Rule 50(a) motion, contesting only
their individual liability as INSC employees. The district
court thus correctly denied Khatemi and Assadian’s
motion for JMOL on contributory infringement. As with
inducement, a corporation does not shield officers from
liability for personally participating in contributory
infringement. See Hoover, 84 F.3d at 1411 (“When per-
sonal wrongdoing is not supported by legitimate corporate
activity, the courts have assigned personal liability for
15 WORDTECH SYSTEMS v. INTEGRATED NTWRK
wrongful actions even when taken on behalf of the corpo-
ration.”); Reynolds v. Bement, 36 Cal. 4th 1075, 1089-90
(2005) (recognizing that “corporate directors . . . ‘may be
joined as defendants if they personally directed or partici-
pated in the tortious conduct.’”). We therefore affirm the
denial of Defendants’ motion for JMOL and review only
their motion for new trial.
The district court’s legal error in presenting the con-
tributory infringement issue to the jury requires a new
trial. While the jury received no instruction on induce-
ment, it did receive an instruction on contributory in-
fringement, which Defendants did not oppose. Jury
Instructions No. 21. However, the verdict form asked the
jury the confusing question of whether the Robocopier
devices infringed by “(B) Contributing to infringement in
the U.S.,” even though devices cannot possess knowledge
required under § 271(c). Joint Verdict Form 2-14.
A new trial is also required because Wordtech fails to
identify proof of elements required for contributory in-
fringement. Wordtech points to no evidence that As-
sadian (who testified that he was an engineer) personally
participated in any sales of Robocopiers or nonstaple
components. The record also fails to show that any parts
that Defendants may have sold were especially designed
for infringing products. Wordtech cites INSC invoices
that show customer orders for abbreviated items such as
“RC-8800 16X BARE,” “RIBBON RIMAGE BLACK,” and
“Labor.” However, Wordtech identifies no evidence that
these items are “a material part of the invention,” or
“especially made or especially adapted for use in an
infringement of such patent, and not a staple article or
commodity of commerce suitable for substantial nonin-
fringing use.” § 271(c). Moreover, the jury did not find
any direct infringement corresponding to Khatemi and
Assadian’s alleged contributory infringement. “A defen-
WORDTECH SYSTEMS v. INTEGRATED NTWRK 16
dant’s liability for indirect infringement must relate to
the identified instances of direct infringement.” Dynacore
Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1274
(Fed. Cir. 2004). Although “[c]ircumstantial evidence can
support a finding of infringement,” Golden Blount, Inc. v.
Robert H. Peterson Co., 438 F.3d 1354, 1362 (Fed. Cir.
2006), when asked at oral argument, Wordtech’s counsel
could not identify any findings of direct infringement by
INSC customers. See Oral Arg. 25:48-26:54. While the
jury found that INSC infringed, § 271(c) requires a sale or
offer to sell by the accused contributory infringer to a
direct infringer. Here, no evidence shows that Khatemi or
Assadian sold or offered to sell nonstaple components to
INSC.
Overall, multiple errors in the jury charge and the
verdict form, across all infringement theories, compel the
conclusion that, “looking to the instructions as a whole,
the substance of the applicable law was [not] fairly and
correctly covered.” Dang, 422 F.3d at 805 (citation omit-
ted).
* * *
For the foregoing reasons, we vacate the liability ver-
dicts against Khatemi and Assadian, reverse the denial of
their Rule 59(a) motion on these issues, and remand for
consideration of whether a new trial is warranted on their
individual liability for direct infringement, inducement,
and contributory infringement. On remand, the district
court should address the issues of piercing INSC’s corpo-
rate veil and INSC’s corporate status, whether Wordtech
preserved these arguments for trial, the law governing
17 WORDTECH SYSTEMS v. INTEGRATED NTWRK
these issues, 4 and whatever jury instructions might be
necessary.
II. Damages
A. Arguments on Appeal
Khatemi, Assadian, and INSC challenge the jury’s
$250,000 damages award. As a threshold matter, we first
determine what arguments Defendants preserved. On
appeal, they assert two theories: (1) Wordtech’s evidence
was “insufficient to support a finding of any ‘hypothetical
royalty’” or to establish “the amount of INSC’s sales
revenues,” and (2) the damages award was “excessive.”
Defs.’ Principal Br. 25, 33, 34. Defendants’ first argument
suggests that the record supports no possible damages
and requests a new trial. Their second argument chal-
lenges the reasonableness of the award, without disputing
that some damages were warranted, and requests either a
new trial or a remittitur of $52,250.
Defendants raised their second theory before the dis-
trict court, but not their first. In their Rule 50(a), 50(b),
and 59(a) motions, they did not argue that the evidence
was insufficient as a matter of law to support any dam-
ages at all. Therefore, this argument is waived on appeal.
See In re Am. W. Airlines, Inc., 217 F.3d 1161, 1165 (9th
Cir. 2000) (“Absent exceptional circumstances, we gener-
ally will not consider arguments raised for the first time
on appeal, although we have discretion to do so.”). Defen-
dants raised their second theory in their post-verdict Rule
50(b) and 59(a) motions, arguing that the jury assessed
“punitive/exemplary” damages compared to Defendants’
4 In federal question cases with exclusive jurisdic-
tion in federal court, such as bankruptcy, the court should
apply federal, not forum state, choice of law rules.” In re
Lindsay, 59 F.3d 942, 948 (9th Cir. 1995).
WORDTECH SYSTEMS v. INTEGRATED NTWRK 18
calculation of $17,114. Wordtech did not object to this
argument at the trial court (or before us) on the grounds
that Defendants failed to present it in their pre-verdict
Rule 50(a) motion. See Pl.’s Opp’n to Defs.’ Mot. for
JMOL. However, the district court denied Defendants’
Rule 50(b) motion for this reason, and denied their Rule
59(a) motion because the verdict was “supported by the
evidence at trial.” Order at 4, 12. Defendants did not
request remittitur of $52,250 in their motion for new trial.
On appeal, Defendants do not dispute the denial of
their Rule 50(b) motion for waiver. In the Ninth Circuit,
failure to challenge the sufficiency of the evidence for
damages in a Rule 50(a) motion waives the right to raise
it in a Rule 50(b) motion. See Zhang v. Am. Gem Sea-
foods, Inc., 339 F.3d 1020, 1041-42 (9th Cir. 2003). 5
Therefore, we review Defendants’ challenge to excessive-
ness of damages only in the context of their Rule 59(a)
motion.
B. Reasonable Royalty
When reviewing damages in patent cases, we apply
regional circuit law to procedural issues and Federal
Circuit law to substantive and procedural issues “pertain-
ing to patent law.” Aero Prods. Int’l, Inc. v. Intex Recrea-
tion Corp., 466 F.3d 1000, 1016 (Fed. Cir. 2006); see also
Fiskars, Inc. v. Hunt Mfg. Co., 279 F.3d 1378, 1381 (Fed.
Cir. 2002) (noting that Federal Circuit law controls “the
distinctive characteristics of patent damages law”).
Under Ninth Circuit law governing motions for new trial,
“[w]e must uphold the jury’s finding unless the amount is
5 Cf. Go Med. Indus. Pty, Ltd. v. Inmed Corp., 471
F.3d 1264, 1272 (Fed. Cir. 2006) (“It would have been
impossible, however, for MMG and Rüsch to challenge the
jury’s award of damages as excessive in a Rule 50(a)
motion.”).
19 WORDTECH SYSTEMS v. INTEGRATED NTWRK
grossly excessive or monstrous, clearly not supported by
the evidence, or based only on speculation or guesswork.”
Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95
F.3d 1422, 1435 (9th Cir. 1996) (citations omitted).
A patentee is entitled to “damages adequate to com-
pensate for the infringement, but in no event less than a
reasonable royalty.” 35 U.S.C. § 284. A reasonable
royalty can be calculated from an established royalty, the
infringer’s profit projections for infringing sales, or a
hypothetical negotiation between the patentee and in-
fringer based on the factors in Georgia-Pacific Corp. v.
U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y.
1970). Lucent Techs. v. Gateway, Inc., 580 F.3d 1301,
1324 (Fed. Cir. 2009); Minks v. Polaris Indus., 546 F.3d
1364, 1372 (Fed. Cir. 2008). The hypothetical negotiation
“attempts to ascertain the royalty upon which the parties
would have agreed had they successfully negotiated an
agreement just before infringement began,” and “neces-
sarily involves an element of approximation and uncer-
tainty.” Lucent, 580 F.3d at 1324-25 (citation omitted).
At trial, Wordtech sought only a hypothetically nego-
tiated royalty, and the jury received damages instructions
for this theory alone. Jury Instructions No. 22, 23.
Wordtech claimed that INSC sold $950,000 of infringing
Robocopiers and asked for “at least 12 percent of the
[$]950,000 or [$]114,000.” Reporter’s Tr., Trial Proceed-
ings, Nov. 12, 2008, 48:6-9. However, the $250,000 ver-
dict equates to a 26.3% royalty on the $950,000 total
alleged sales. Wordtech offered no expert opinion on
damages, but relied on testimony from its President,
David Miller. Through Miller, Wordtech introduced
thirteen patent licenses that it previously granted to third
parties for rights to some or all of the patents-in-suit,
along with roughly forty INSC invoices for Robocopier
sales.
WORDTECH SYSTEMS v. INTEGRATED NTWRK 20
Defendants argue that Wordtech’s thirteen licenses
cannot support the verdict because they reflect different
economic circumstances. In this case, the licenses relate
to Georgia-Pacific factor 1: “The royalties received by the
patentee for the licensing of the patent in suit, proving or
tending to prove an established royalty.” 318 F. Supp. at
1120. We recently discussed the evidentiary value of past
licensing agreements for estimating royalties under
Georgia-Pacific. In Lucent, we held that a set of eight
licenses lacked sufficient relevance to the proven in-
fringement to support a lump-sum royalty verdict. 580
F.3d at 1332. Those licenses reflected rates that the
infringer paid to license comparable but different patents
under Georgia-Pacific factor 2, not the rates that the
patentee received for the patents-in-suit. Id. at 1325.
However, Lucent is relevant because it explained general
criteria for comparing patent licenses—specifically, the
differences between lump-sum royalties (where the pat-
entee receives a single upfront payment) and running
royalties (where the patentee collects ongoing per-unit or
percentage payments). We concluded that four of the
eight licenses, though lump-sum agreements, were not
“sufficiently comparable” because they arose from diver-
gent circumstances and covered different material. Id. at
1328-29. We rejected the remaining four licenses, which
contained running royalties, because the patentee pro-
vided no basis for comparing those running royalties to
the jury’s lump-sum award. Id. at 1329-30. Similarly, in
ResQNet.com, Inc. v. Lansa, Inc. (decided after argument
in this case), we overturned a running royalty verdict
based on seven licenses, “five of which had no relation to
the claimed invention,” and the other two of which arose
from litigation. 594 F.3d 860, 870 (Fed. Cir. 2010). We
stressed that comparisons of past patent licenses to the
infringement must account for “the technological and
economic differences” between them. Id. at 873.
21 WORDTECH SYSTEMS v. INTEGRATED NTWRK
In this case, Wordtech’s licenses suffer from similar
flaws. The jury awarded the $250,000 as a lump-sum
royalty. The verdict form asked the jury: “If the above
amount was based upon a running royalty rather than a
lump sum, what percentage or per unit rate did you use?
__.” Joint Verdict Form 15. The jury left this item blank,
indicating a lump sum. E.g., Lucent, 580 F.3d at 1325
(finding that “the jury decided on a lump-sum award, not
a running royalty” because “[t]he verdict form notes a
lump-sum damages amount and no amount (i.e., zero or
‘N/A’) on the lines for a running royalty.”). We explained
in Lucent that lump-sum licenses are generally more
useful than running-royalty licenses for proving a hypo-
thetical lump sum because “certain fundamental differ-
ences exist between lump-sum agreements and running-
royalty agreements.” Id. at 1330.
Of Wordtech’s thirteen licenses, only two were lump-
sum agreements. The first such licensee paid Wordtech
$175,000 for nonexclusive rights to the ’298 and ’198
patents and any related or Wordtech-owned patents. The
second licensee paid $350,000 for nonexclusive rights to
the ’298, ’198, and ’932 patents on similar terms. Word-
tech claims the verdict was reasonable because $250,000
is roughly the average of these two lump-sum fees, or
$262,500—even though Wordtech asked for only
$114,000, or less than half the verdict. This “averaging”
theory is flawed because the two lump-sum licenses
provide no basis for comparison with INSC’s infringing
sales. Neither license describes how the parties calcu-
lated each lump sum, the licensees’ intended products, or
how many products each licensee expected to produce.
Indeed, when asked if the record supplied “any idea of the
volume of sales or projected sales,” Wordtech’s counsel
admitted: “With the trial court, none of that was dis-
cussed.” Oral Arg. 19:19-54. Wordtech identified forty
WORDTECH SYSTEMS v. INTEGRATED NTWRK 22
Robocopier 600 and sixteen Robocopier 8000 models that
INSC sold. Wordtech’s Br. 32. If Wordtech’s previous
licensee paid $350,000 to produce one thousand devices,
for example, INSC would not have agreed ex ante to pay
$250,000 if it expected to make only fifty-six units. Thus,
without additional data, the licenses offered the jury
“little more than a recitation of royalty numbers.” Lucent,
580 F.3d at 1329.
The remaining eleven licenses, which used running
royalties, also fail to support the verdict. Running-royalty
agreements can be relevant to lump-sum damages, but
“some basis for comparison must exist in the evidence
presented to the jury.” Id. at 1330. The remaining li-
censes reveal no such basis. One license listed per-unit
fees of $100-195 instead of a royalty percentage. By
contrast, the verdict reflects a per-unit fee that exceeds
$4400 ($250,000 for fifty-six units). The other ten licenses
stated royalty rates in the range of 3-6% of the licensees’
sales—far less than the 26.3% rate that the jury effec-
tively awarded. Wordtech claims that these rates actually
ranged as high as 10%, but this argument distorts the
record. The only rates above 6% would result from penal-
ties for accounting lapses. A Wordtech license to An Chen
Computer Company, for example, employed a 5% base
rate that increased to 12% only if An Chen underreported
its sales in more than two audits. More importantly, even
a past royalty range of 3-12% fails to explain a 26.3%
hypothetically negotiated rate. Wordtech signed several
of these licenses after initiating or threatening litigation
against the licensees, and “litigation itself can skew the
results of the hypothetical negotiation.” ResQNet, 594
F.3d at 872 (citing Hanson v. Alpine Valley Ski Area, Inc.,
718 F.2d 1075, 1078-79 (Fed. Cir. 1983)).
Even if Wordtech’s licenses supported a high royalty
percentage under Georgia-Pacific factor 1, Wordtech’s use
23 WORDTECH SYSTEMS v. INTEGRATED NTWRK
of INSC’s invoices raises doubts about the sales volume to
which the jury could have applied the royalty rate. Word-
tech told the jury that INSC sold $950,000 of Robocopiers,
but now argues on appeal that INSC’s sales totaled “at
least $1,278,133” based on “reasonable inferences.”
Wordtech’s Br. 35. Wordtech supplies no evidence that
explains why its sales estimate abruptly increased by
$328,133. Wordtech’s original $950,000 figure is itself
suspect because Miller, who did not qualify as a damages
expert, calculated it by using “the second highest value”
from INSC’s invoices “as a phantom value.” Reporter’s
Tr., Trial Proceedings, Nov. 10, 2008, 39:21-40:6 (empha-
sis added). The invoice dates also suggest that the jury
incorrectly apportioned damages among the three pat-
ents. The jury was instructed to award damages for the
’932 patent only for infringement after the patent issued
on November 23, 2004. Jury Instructions No. 24, 25(c).
Wordtech introduced only two INSC invoices that post-
date the ’932 patent’s issue date, totaling $6620. How-
ever, the jury awarded $50,000 for the ’932 patent. Word-
tech implies that INSC withheld records of Robocopier
8000 sales, permitting the jury to infer greater sales.
Wordtech’s Br. 14, 32; see Beatrice Foods Co. v. New Eng.
Printing & Lithographing Co., 899 F.2d 1171, 1175 (Fed.
Cir. 1990) (“An infringer can not destroy the evidence of
the extent of its wrongdoing, and limit its liability to that
which it failed to destroy.”). Yet the district court did not
find that Defendants withheld or destroyed any docu-
ments. Moreover, the jury needed to infer almost
$417,000 of post-issuance sales to award $50,000 in
royalties at Wordtech’s proposed 12% royalty rate. There-
fore, it was impossible for the verdict to fall “within the
range encompassed by the record as a whole.” Unisplay,
S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 519 (Fed. Cir.
1995).
WORDTECH SYSTEMS v. INTEGRATED NTWRK 24
Apart from licenses and invoices, Wordtech insists
that the verdict is supported by Georgia-Pacific factor 13:
the portion of the infringer’s profit that “should be cred-
ited to the invention as distinguished from non-patented
elements.” 318 F. Supp. at 1120. Wordtech claims that
INSC purchased Robocopier hardware at low prices,
added only software, and resold the machines at much
higher prices. According to Wordtech, claims 13 and 14 of
the ’298 patent cover INSC’s software; therefore, INSC’s
entire profit corresponded to the inventions. Defendants
respond that the ’298 patent claims do not cover Robocop-
ier software and that Wordtech’s profit projections are
baseless. Even if Wordtech is correct that its patents
account for the entire value of the Robocopiers, its profit
arguments rest on speculation. For example, Wordtech
claims that INSC purchased the Robocopier 600 hardware
for $2000 per unit and sold the finished machine for
$14,000, reaping a $12,000 profit. Wordtech’s Br. 31.
This assumes, however, that INSC incurred zero costs.
Using these unproven profit numbers, Wordtech then
posits that “a reasonable 50% royalty on the infringer’s
profit of $800,000 would net $400,000. A reasonable 30%
royalty on the gross profit would net $240,000.” Id. 32.
Again, Plaintiff did not pose this theory to the jury, nor
explain why 50% or 30% would be “reasonable.” Word-
tech also postulates that “it is likely that Miller would be
more interested in a share of the expected profit than a
percentage royalty,” and that “[c]ommon sense would
dictate that Miller would ask for half of the profit or a
lump sum fee.” Id. 33-34. Instead of providing plausible
explanations for the verdict, these unsupported rationali-
zations highlight the speculative nature of the evidence.
Wordtech’s remaining Georgia-Pacific arguments con-
tinue this pattern of guesswork. Wordtech argues that
numerous infringers existed when the ’298 patent issued,
25 WORDTECH SYSTEMS v. INTEGRATED NTWRK
and therefore “the jury could well infer that signing up
licensees and bagging cats were equally difficult.” Id. 27-
28. But it provides no grounds for estimating how this
licensing environment (if accurate) would influence
INSC’s royalty payments. Wordtech also cites prior
decisions where we affirmed certain royalty percentages.
E.g., Mitutoyo Corp. v. Cent. Purchasing, LLC, 499 F.3d
1284, 1292 (Fed. Cir. 2007) (29.2% royalty). Yet Wordtech
never tethers the facts of those cases to the circumstances
here. Furthermore, the district court’s order sheds no
light on Wordtech’s arguments because it provided no
damages analysis—only the conclusory statement that
the verdict was “supported by the evidence at trial.”
Order at 12.
Because the verdict was “clearly not supported by the
evidence” and “based only on speculation or guesswork,”
Del Monte, 95 F.3d at 1435, we reverse the denial of
Defendants’ Rule 59(a) motion and remand for a new trial
on damages. We deny Defendants’ request for remittitur
as untimely. In their Rule 59(a) motion, Defendants
suggested $17,114 as a proper award, but did not request
remittitur or propose the alternative $52,250 calculation
that they seek for the first time on appeal. We therefore
decline to calculate in the first instance “the maximum
amount sustainable by the proof” for remittitur. D&S
Redi-Mix v. Sierra Redi-Mix & Contracting Co., 692 F.2d
1245, 1249 (9th Cir. 1982).
III. Motion to Amend
Defendants claim that the district court erred by de-
nying their motion to amend their answer to allege inva-
lidity affirmative defenses. We disagree.
In the Ninth Circuit, denial of a motion for leave to
amend a pleading is reviewed for abuse of discretion. See
Lockheed Martin Corp. v. Network Solutions, Inc., 194
WORDTECH SYSTEMS v. INTEGRATED NTWRK 26
F.3d 980, 983 (9th Cir. 1999). Leave to amend pleadings
after the trial court enters a final scheduling order re-
quires good cause, which “primarily considers the dili-
gence of the party seeking the amendment.” Coleman v.
Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000)
(citation omitted).
On September 13, 2006, the district court issued its
Rule 16(b) scheduling order, which closed discovery on
November 7, 2006 and prohibited amendments to plead-
ings absent good cause. Defendants filed their motion on
February 13, 2007—five months after the scheduling
order, three months after the close of discovery, and
almost three weeks after it first learned that the School
District intended to settle. They offer no explanation for
their tardiness, arguing instead that the School District’s
pleading gave Wordtech notice of possible defenses.
However, the School District’s answer provided little
notice because it stated simply: “On information and
belief, the claims of the Patents are invalid for failure to
comply with the requirements of 35 U.S.C. §§ 102, 103,
and/or 112.” San Juan Unified Sch. Dist.’s Answer to
First Am. Compl. 10. Wordtech protests that it would
suffer prejudice from additional discovery for these de-
fenses, and the Ninth Circuit recognizes that “[a] need to
reopen discovery and therefore delay the proceedings
supports a district court’s finding of prejudice from a
delayed motion to amend the complaint.” Lockheed, 194
F.3d at 986. The district court also noted that INSC
retained an expert and secured an invalidity report as
early as November 10, 2004, and therefore should have
known its relevant defenses long before the Rule 16(b)
order. This delay resembles the situation in Coleman,
where the movants hired experts and obtained a report
“over a year before filing for summary judgment,” and
were therefore denied leave to amend their complaints.
27 WORDTECH SYSTEMS v. INTEGRATED NTWRK
232 F.3d at 1295. Considering all these factors, we con-
clude that the trial court did not abuse its discretion.
CONCLUSION
For the foregoing reasons, we reverse the denial of De-
fendants’ motion for new trial on Khatemi and Assadian’s
individual liability for direct infringement, inducement,
and contributory infringement. We also reverse the
denial of Defendants’ motion for new trial on damages.
However, we affirm the denial of Defendants’ motions for
JMOL and for leave to amend, and remand for further
proceedings.
REVERSED-IN-PART, AFFIRMED-IN-PART, and
REMANDED