CHARLES J. SIRAGUSA, District Judge.
Now before the Court are the following applications: 1) a motion by Izzo Golf for attorney fees (Docket No. [#176]); 2) a motion by Izzo Golf for enhanced damages and pre-judgment interest and post-judgment interest (Docket No. [#182]); and 3) a motion by William J. Baird ("Baird") to intervene in this action (Docket No. [#196]). Baird's motion to intervene is denied and Izzo's applications are granted as set forth below.
The reader is presumed to be familiar with the underlying facts of this action and the related action, Izzo Golf Inc. v. King Par Corp, et al., 10-CV-6507 CJS ("the companion case"), as set forth in prior decisions of the Court including Docket Numbers [#107] and [#195] in this action, and Docket Numbers [#38] and [#59] in the companion case.
Very briefly, Izzo and King Par were competing manufacturers of golf equipment. On January 8, 2002, Izzo commenced this action alleging that King Par was infringing Izzo's patent for a golf-bag strap system, U.S. Patent No. 5,042,704 ("the '704 Patent"). The Court eventually granted partial summary judgment to Izzo as to liability, finding that King Par's "old style" bag infringed the '704 patent. Between June 14, 2010 and June 18, 2010, this Court presided over a jury trial on the issue of damages.
At trial, Izzo introduced evidence showing the following: As of 1997, King Par was a golf company with annual gross receipts of approximately $70 million. At that time, King Par was selling a large volume of golf bags to various national retail- and sporting-goods chains. King Par was not selling golf bags utilizing a dual-strap system, but was preparing to do so, as that design was becoming increasingly popular with golfers. King Par was aware of Izzo's patented dual-strap system and had some discussions with Izzo about obtaining a license, after which Izzo prepared a draft license agreement that would have required King Par to pay Izzo $2.75 per bag. However, King Par's patent attorney advised that it might be unnecessary to obtain such a license, since King Par could "design around" the Izzo patent. In particular, the attorney essentially indicated that the key feature of Izzo's '704 Patent was that the strap attachment points were spaced axially along the golf bag. The attorney opined that King Par could "design around" this by utilizing a dual-strap system in which the strap attachment points were "circumferentially spaced rather than axially spaced" along the side of the golf bag. The attorney indicated, however, that if King Par chose to attempt to "design around" the Izzo patent, it should first submit the new design to him to review.
In January 2002, Izzo notified King Par that its "junior bag" infringed the '704 Patent. However, King Par continued to manufacture the infringing bag, possibly until 2005.
King Par, on the other hand, attempted to demonstrate at trial that it did not intentionally infringe the Izzo patent, and that it immediately stopped producing the infringing design after being accused of infringement by Izzo in early 2002. In that regard, King Par insisted that in or about 1997, it followed its attorney's advice and "designed around" the Izzo patent by utilizing a dual-strap design in which the strap attachment points were not axially spaced, even though this Court later found otherwise.
On June 18, 2010, the jury returned a verdict against King Par in the amount of $3,286,476.65, for the period January 2000 through 2005.
Immediately following the jury verdict and the Court's entry of judgment in the amount determined by the jury, Plaintiff Izzo filed the subject motion [#176] for attorney fees and expenses, and the subject motion [#182] for enhanced damages and pre- and post-judgment interest. King Par filed a motion for a new trial.
On September 7, 2010, Izzo commenced the companion case (10-CV-6507 CJS) against King Par's owner, Mr. Baird, seeking, inter alia, a declaration that Baird is the alter ego of King Par. Izzo's position was that while the patent litigation was pending, Baird had committed fraud against Izzo by selling King Par's assets and leaving only a judgment-proof corporate shell. In that regard, Izzo established that just prior to the patent infringement trial, Baird sold King Par's assets and deposited the proceeds into his personal bank account, without notifying anyone, including Izzo, this Court or his own attorney. Baird eventually notified Izzo of the sale prior to the patent infringement trial, and attempted to use the fact of the sale (and Izzo's resulting uncertainty as to whether it would be able to collect on any judgment) as leverage during settlement negotiations. In sum, Izzo sought to establish that Baird was King Par's alter ego based on Baird's complete disregard for corporate formalities in connection with the sale of King Par's assets and the disposition of the sales proceeds.
Baird responded to Izzo's filing of the companion case by instantly placing King Par in Chapter 7 bankruptcy. Baird now regrets that decision,
On or about August 10, 2017, prior to any determination in the companion case concerning Baird's alter-ego status, the party which had purchased King Par's rights to defend this action from the Bankruptcy Trustee withdrew all opposition to Izzo's post-trial motions, leaving them unopposed. Baird responded by filing the subject motion [#196] to intervene in this action, in an attempt to accomplish what King Par could no longer do. Baird essentially contended that the Court should permit him to intervene, since he faced potential liability for the patent infringement (if he were found to be King Par's alter ego) and King Par had no ability to oppose Izzo's post-trial motions or to appeal the verdict. Alternatively, Baird contended that he should be permitted to file amicus papers in opposition to Izzo's motions.
Subsequently, on June 6, 2018, while Izzo's post-trial motions and Baird's motion to intervene remained pending in this action, the Court determined in the companion case that Baird is the alter ego of King Par. In that regard, the Court found that
Decision and Order [#59] in Companion Case, 10-CV-6507.
Thereafter, the Court held off deciding the pending motions in this action (Izzo's post-trial motions and Baird's motion to intervene) to give the parties a chance to explore settlement.
Baird has moved to intervene in this action, by right or by permission, and has alternatively requested leave to submit amicus filings in opposition to Izzo's post-trial motions. The legal standard applicable to motions to intervene is well settled:
Griffin v. Sheeran, No. 18-1862-cv, 767 F.App'x 129, 132 (2d Cir. Apr. 16, 2019).
Baird's motion to intervene is denied because he has no legal interest in defending this action that is separate from the right that King Par already gave up. In the bankruptcy action, King Par lost the right to defend this action.
Further, this Court has determined that Baird is King Par's alter ego. Indeed, the Court has indicated that under the applicable law, the alter-ego shareholder "stands in the shoes" of the corporation.
The Court must now consider whether Izzo's unopposed post-trial motions should be granted.
Izzo maintains that this Court should award enhanced damages, as well as pre- and post-judgment interest, under 35 U.S.C. § 284 and Fed. R. Civ. P. 59(e).
35 U.S.C. § 284, the relevant statute concerning damages for patent infringement, states that
35 U.S.C.A. § 284 (West 2019) (emphasis added). Enhanced damages under this provision are to punish the infringer, not to compensate the plaintiff:
Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1932, 195 L. Ed. 2d 278 (2016) (citations omitted). An award of such enhanced damages may be appropriate where the infringer acted intentionally or knowingly, even if not recklessly. See, id., 136 S.Ct. at 1933 ("The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless."). In sum, enhanced damages should not be awarded under 35 U.S.C. § 284 "in garden-variety cases," but should be reserved for "egregious cases of misconduct beyond typical infringement." Id. at 1935.
Whether to award such enhanced damages under 35 U.S.C. § 284, and how much to award, are matters left to the discretion of the district court, though such discretion must be exercised in light of the purposes and history of the statute and the particular circumstances of the case:
Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. at 1933-34 (emphasis added).
In exercising its discretion in this regard, a district court may consider what are known as the "Read factors."
Georgetown Rail Equip. Co. v. Holland L.P., 867 F.3d 1229, 1245 n. 6 (Fed. Cir. 2017) (citation and internal quotation marks omitted).
A preponderance of the evidence standard applies to applications under 35 U.S.C. § 284. Halo, 136 S.Ct. at 1934 ("[P]atent infringement litigation has always been governed by a preponderance of the evidence standard. Enhanced damages are no exception.").
Here, the Court notes preliminarily that the jury's finding of willful infringement is supported by substantial evidence, and, indeed, by clear and convincing evidence. This predicate finding of willfulness permits the Court to exercise its discretion as discussed above. See, Innovention Toys, LLC v. MGA Entm't, Inc., 667 F. App'x 992, 994 (Fed. Cir. 2016) ("[T]he predicate of willful misconduct is established by the jury's finding that MGA was subjectively willful under the second part of the Seagate standard. The jury made that finding under the clear-and-convincing-evidence standard, which is more demanding than needed. See Halo, 136 S.Ct. at 1934. The Supreme Court in Halo did not question our precedents on jury determination of that issue. See WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1340-41 (Fed. Cir. 2016). Nor did it doubt that a finding favorable to the patentee on the second part of the Seagate standard suffices to establish the subjectively willful misconduct that, when present, moves the enhancement inquiry to the stage at which the district court exercises its discretion.").
In the exercise of its discretion, the Court has considered the Read factors and finds that they weigh in favor of imposing enhanced damages. With regard to the first and second factors, Izzo maintains that King Par, which had not previously sold dual-strap bags, copied the '704 patent and began selling infringing bags shortly after rejecting Izzo's offer concerning a license. Izzo further contends that in doing so, King Par did not have a good faith belief that its bags did not infringe Izzo's patent, since King Par ignored the advice of its patent attorney, both with regard to the design of the product and with regard to the necessity of having the attorney review the design. These arguments are supported by the evidence, and the Court therefore finds that these factors weigh in favor of enhanced damages.
With regard to the third and ninth Read factors, Izzo contends that during the course of this litigation, King Par engaged in misconduct and attempted to conceal the duration and extent of its infringement, by repeatedly failing to provide timely and accurate information about its sales of golf bags.
The size and complexity of King Par's operations ("$70 million annual sales) would also typically weigh strongly in favor of enhanced damages under the fourth Read factor. Of course, the Court is aware, as discussed earlier, that Baird sold King Par's assets while this litigation was pending. Consequently, King Par is not presently a corporation with $70 million annual sales. Izzo maintains that Baird's decision to sell the corporation on the eve of trial (without any notice to the Court or opposing counsel) should not matter to the Court's analysis under this factor, since an infringing party should not be able to manipulate its financial circumstances in this way to avoid liability. The Court agrees and finds that this factor weighs in favor of an award of enhanced damages.
As for the fifth Read factor, Izzo contends that this is not a "close case," since King Par's attorney warned that an attempt to "design around" the Izzo patent would fail if the strap attachment points were axially spaced, and King Par nevertheless went ahead and sold a bag with axially-spaced attachment points. The "closeness of the case" in this regard refers to the issue of whether the infringement was willful or not, see, Read, 970 F.2d at 827, and as already discussed the jury found that infringement was willful under the rigorous pre-Halo Seagate standard, thereby indicating that this was not a close case. Accordingly, this factor also weighs in favor of imposing enhanced damages.
With regard to the sixth and seventh Read factors, the "duration of the defendant's misconduct" and "remedial action by the defendant," Izzo maintains that King Par sold infringing bags beginning in 1997 and continued until three years after this litigation was commenced. King Par attempted to show otherwise, but as previously discussed the jury clearly rejected King Par's assertion that it sold the infringing bags for less than two years, and that it immediately stopped selling the bags after being contacted by Izzo in early 2002. Consequently, these factors weigh in favor of assessing enhanced damages.
Finally, with regard to the eighth Read factor, "the defendant's motivation for harm," Izzo's position is unclear, since its motion indicates both that this factor is "neutral"
Having considered and weighed all of these factors, the Court finds in its discretion that an award of enhanced damages is warranted. Specifically, the Court finds that an award of treble damages, or $9,859,429.95, is appropriate, particularly in light of King Par's lack of candor with regard to the duration and extent of the infringement.
Izzo maintains that it is entitled to attorney fees and expenses, because King Par's willful infringement and litigation misconduct make this an "exceptional case." Izzo's argument is summarized in its papers as follows:
Docket No. [#176-19] at pp. 15-16 (citations omitted).
35 U.S.C. § 285 states that in a patent-infringement action, "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." As the term is used in this statute,
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554, 134 S.Ct. 1749, 1756, 188 L. Ed. 2d 816 (2014). Under this standard, "a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award." Id., 134 S. Ct. at 1757 (emphasis added). "Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one." Id., 134 S. Ct. at 1758. In considering the totality of the circumstances,
Id., 134 S. Ct. at 1756 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S.Ct. 1023, n. 19 (1994)).
Having considered the legal principles set forth above, as well as the facts set forth above and in Izzo's papers, the Court finds that this is an exceptional case within the meaning of 35 U.S.C. § 285, based on King Par's will infringement and its conduct during the litigation of this action. An award of attorney fees and expenses is warranted. Further, the Court finds that the amounts requested by Izzo are fair and reasonable. Accordingly, Izzo's motion [#176] is granted in its entirety, and Izzo is awarded fees and expenses under 35 U.S.C. § 285 in the amount of $441,835.99.
Izzo seeks an award of prejudgment interest pursuant to 35 U.S.C. § 284. In particular, Izzo requests pre-judgment interest on both "royalty damages" and "attorneys' fees."
In patent cases, "prejudgment interest should ordinarily be awarded where necessary to afford the plaintiff full compensation for the infringement." Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 654, 103 S.Ct. 2058, 2062, 76 L. Ed. 2d 211 (1983). Such interest applies to compensatory damages,
As mentioned earlier, Izzo requests pre-judgment interest, on the jury's award of reasonable royalty damages, in the amount of $1,751,101.14. Such an award is necessary to fully compensate Izzo, and the Court accordingly grants that request. Izzo also makes a cursory reference to a similar award of pre-judgment interest "on any attorneys' fees awarded," but, unlike the request for pre-judgment interest on compensatory damages, does not request a particular amount or propose how such an award would be calculated.
Finally, Izzo indicates that it is entitled to post-judgment interest pursuant to 35 U.S.C. § 284 and 28 U.S.C. § 1961(a) on the "total award, including the compensatory damages found by the jury, attorney's fees and expenses, enhanced damages and pre-judgment interest," "at the statutory rate."
Baird's motion to intervene [#196] is denied. Izzo's post-trial motion [#182] for enhanced damages and interest is granted.
SO ORDERED.