SynQor, Inc. v. Artesyn Technologies, Inc., Nos. 2011-1191, -1192, -1194, 2012-1070, -1071, 1072, --- F.3d ---, 2013 WL 950743 (Fed. Cir. Mar. 13, 2013)

http://www.cafc.uscourts.gov/images/stories/opinions-orders/2011-1191.Opinion.3-8-2013.1.PDF

SynQor, Inc. asserted four patents generally directed to “high-efficiency DC-DC power converter systems used to power circuitry in large computer systems and telecommunication and data communication equipment” in an action in the U.S. District Court for the Eastern District of Texas against nine power converter manufacturers who manufactured and sold “intermediate bus converters” overseas. 2013 WL 950743, at *2.

SynQor asserted claims for induced and contributory infringement under 35 U.S.C. § 271(b), alleging that the defendants sold power supply components with knowledge that they would be, or were especially made to be, used in infringing systems imported into the United States. SynQor also asserted direct infringement under § 271(a) with respect to certain U.S. sales.

The district court granted partial summary judgment of infringement for three of the four asserted patents, and denied the defendants’ motions for judgment as a matter of law after a jury found all asserted claims valid and infringed, and awarded lost profits damages of more than $95 million. The district court also awarded supplemental and enhanced damages for post-trial infringement. A panel of the Federal Circuit (Chief Judge Rader, Judge Lourie, and Judge Wiley Y. Daniel, Chief District Judge of the U.S. District Court for the District of Colorado, sitting by designation) affirmed, rejecting the defendants’ challenges to certain of the district court’s claim constructions, as well as jury instruction on induced infringement, exclusion of evidence of reexamination proceedings, the jury’s damages verdict and the court’s damages rulings.

With respect to the jury instruction, the defendants argued that the jury was incorrectly instructed as to the knowledge standard required to find induced infringement. Liability for induced or contributory infringement requires “knowledge that the induced acts constitute patent infringement,” which includes “actual ‘knowledge of the existence of the patent that is infringed.’” Id. at *8. The district court instructed the jury, in pertinent part, that “[t]he Plaintiff must show that the Defendants actually intended to cause the acts that constitute direct infringement and that the Defendants knew or should have known that its [sic] actions would induce actual infringement. A Defendant also cannot be liable for inducing infringement if it had no reason to be aware of the existence of the patent.” Id. at *9 (emphasis in original). The defendants argued that this instruction allowed the jury to find liability for induced infringement upon only a showing that a defendant “had reason to be aware of” the asserted patents, rather than actual knowledge.

The Federal Circuit stated that “[w]hile this instruction might be erroneous if considered in isolation ... the instructions as a whole in the context of the trial informed the jury that actual knowledge was required.” Id. The Federal Circuit found that SynQor premised its theory at trial on defendants’ actual knowledge and presented evidence of actual knowledge. In addition, the jury instructions on contributory infringement required actual knowledge, and the jury found each defendant liable for contributory infringement. The Federal Circuit thus concluded that the jury found that each defendant had actual knowledge. Id.

The defendants challenged several aspects of the damages portion of the trial. The defendants argued that SynQor’s price erosion theory was not supported by the evidence because the “but for” prices used by SynQor’s expert were roughly two to three times the prices actually charged by the defendants. The Federal Circuit found that SynQor introduced sufficient evidence that the power-converter industry would not have moved to non-infringing “fully-regulated converters” rather than paying SynQor’s higher prices for the patented unregulated converters because the alternatives lacked capability, efficiency, and stability. Id. at *11. The Federal Circuit also found no error in the district court’s instruction that the jury should consider whether non-infringing alternatives “were available from suppliers,” rejecting the defendants’ arguments that the instruction suggested that the products must have been “on the market.” Id.

The Federal Circuit affirmed the district court’s award of supplemental damages and enhanced damages in view of the defendants’ post-verdict sales. After the infringement verdict, the defendants issued a stop order on shipments,regardless of destination. After some customers reported that they required further supply to meet sales obligations in the United States, one defendant entered into indemnification agreements with its customers, and another defendant entered into an agreement with terms that showed the defendant knew that U.S. imports would continue until a permanent injunction was entered. The Federal Circuit held that “while a true non-importation agreement with which a Defendant complies may prevent a post-verdict finding of intent to induce infringement,” the agreements at issue “contemplated continued U.S. sales.” Id. at 15.

The Federal Circuit also held that the district court did not abuse its discretion in awarding enhanced damages for the defendants’ “egregious” and willful post-verdict conduct, despite the fact that SynQor did not pursue a willful infringement claim at trial. “This court sees no reason why SynQor’s decision not to argue pre-verdict willful infringement at trial should preclude the district court from finding willful infringement for post-verdict sales.” Id.