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denying JMOL where defendant advertised and sold the accused products as part of a "system," frequently highlighted compatibility between those separately sold elements, and end-users needed only perform "a few simple steps" to connect the elements, even though end-users could use combined system in non-infringing manner if they so chose
Summary of this case from Chamberlain Grp., Inc. v. Techtronic Indus. Co.Opinion
No. C 02-0710 CW.
January 10, 2005
ORDER DENYING PARTIES' MOTIONS FOR JUDGMENT AS A MATTER OF LAW AND ADDRESSING OTHER MATTERS
Defendants Sony Computer Entertainment America, Inc., (SCEA) and Sony Computer Entertainment, Inc., (SCEI) (collectively Sony) renew, pursuant to Federal Rule of Civil Procedure 50(b), their previous motions for judgment as a matter of law, on the grounds that no reasonable jury could have found that SCEI induced infringement of, or SCEA itself infringed, the patents-in-suit. Sony also moves for judgment as a matter of law that Immersion failed to present evidence sufficient for an award of damages. Plaintiff Immersion Corporation (Immersion) opposes the motions, and cross-moves for judgment as a matter of law on its claims of indirect and willful infringement. Sony opposes Immersion's motions.
Immersion also moves for an award of supplemental damages, entry of judgment and issuance of a permanent injunction, and an award of pre-judgment interest. Sony opposes these motions, and moves to strike Immersion's motion for entry of judgment and injunction as premature. Immersion opposes Sony's motion to strike.
Immersion moves for an award of attorneys' fees pursuant to 35 U.S.C. § 285. Sony opposes the motion, and cross-moves for its own award of attorneys' fees. Immersion opposes Sony's cross-motion.
Immersion moves to strike the September 15, 2004 Declaration of Sonal N. Mehta Attaching Correspondence Re: Sony's Objections to and Designations of Trial Exhibits. Sony does not oppose this motion. The Court accordingly grants Immersion's motion to strike.
These matters were heard on December 10, 2004. Having considered all of the papers filed by the parties and oral arguments on the motion, the Court denies the parties' motions for judgment as a matter of law. The Court denies without prejudice Immersion's request for an injunction and entry of judgment, but orders imposition of a compulsory license and pre-judgment interest as described below. The Court denies both parties' motions for attorneys' fees.
BACKGROUND
Immersion filed its original complaint against Sony on February 11, 2002, alleging that Sony and Microsoft Corporation infringed U.S. Patent Nos. 6,275,213 (`213 patent) and 6,424,333 (`333) owned by Immersion. The patents-in-suit are both entitled "Tactile Feedback Man-Machine Interface Device" and address providing complex tactile sensations to users of interactive computer applications. Immersion accused Sony's Playstation consoles and DualShock controllers in conjunction with forty-seven Playstation computer games. On March 2, 2004, the Court issued an order denying Sony's motion for summary judgment as to invalidity, and granting in part and denying in part SCEI's motion for summary judgment as to non-infringement. The Court granted Immersion's motion for summary judgment as to Sony's affirmative defenses of inequitable conduct with respect to the '213 patent and granted in part and denied in part Immersion's motion regarding Sony's inequitable conduct defense with respect to the prosecution of the '333 patent.
Immersion has settled its claims against Defendant Microsoft Corporation.
The accused games were: A Bug's Life; Amplitude; Ape Escape; Atlantis: The Lost Empire; Bloody Roar 2; Cool Boarders 3; Cool Boarders 4; Cool Boarders 2001; Crash Bash; Crash Team Racing; Drakan: The Ancients' Gate; Emperor's New Groove; Extermination; FantaVision; Final Fantasy X; Formula One 2001; The Getaway; Gran Turismo; Gran Turismo 2; Gran Turismo 3; Grand Theft Auto: Vice City; Grand Theft Auto 3; Grind Session; ICO; Jak Daxter; Kinetica; Kingdom Hearts; Legend of the Dragoon; The Mark of Kri; Medal of Honor Frontline; Medievil 2; Metal Gear Solid 2; Monster's, Inc.; Sly Cooper and the Thievius Racoonus; SOCOM Navy Seals; Speed Punks; Spyro: Ripto's Rage; Spyro: Year of the Dragon; Stuart Little 2; Syphon Filter 2; Syphon Filter 3; Tony Hawk's Pro Skater 3; Twisted Metal: Black; Twisted Metal 4; Twisted Metal: Small Brawl; Treasure Planet; and War of the Monsters.
From August 17 through September 21, 2004, a jury trial was held on Immersion's claims of infringement, willful infringement and damages, and Sony's defenses and counterclaims of invalidity of the patents-in-suit (other than inequitable conduct). At trial, Immersion asserted claims 7, 41 through 46, 49, 50, 53 and 54 of the '213 patent and claims 14 through 18 of the '333 patent.
On September 21, 2004, a panel of eight jurors returned a unanimous verdict finding that the Playstation consoles and Dualshock controllers in conjunction with 44 of the accused games were covered by the asserted claims of the '213 patent, and that 42 of the accused games in conjunction with the consoles and controllers were covered by the asserted claims of the '333 patent. The jury found that SCEA had directly infringed both the '213 and '333 patents, but that SCEI had not directly infringed. The jury found that SCEI had induced infringement of both patents, but that SCEA had not induced infringement of the asserted claims. The jury found that the asserted claims of both patents were not invalid due to anticipation, obviousness, or inadequate written description. The jury awarded Immersion $82 million as a reasonable royalty for the infringement of its patents. The jury found that neither SCEA nor SCEI had willfully infringed either patent. A bench trial on Sony's inequitable conduct defense with respect to the '333 patent is scheduled for January 5, 2005.
The jury found that the games Cool Boarders 3, Cool Boarders 2001, and Formula One 2001 did not infringe the asserted claims of the '213 patent and that Amplitude, Emperor's New Groove, Gran Turismo 3, Grand Theft Auto: Vice City, and Grant Theft Auto 3 did not infringe the asserted claims of the '333 patent. These findings were consistent with Immersion's expert's conclusions. See Trial Ex. 992A, Summary Chart Summarizing Dr. Colgate's Opinions on the Accused Games and Events Listed by Claim for the '213 and '333 Patents (hereinafter Colgate Summary Chart).
I. Cross-Motions for Judgment as a Matter of Law.
A motion for judgment as a matter of law after the verdict renews the moving party's prior Rule 50(a) motion for directed verdict at the close of all the evidence. Fed.R.Civ.P. 50(b). The post-trial motion may be raised only as to the same claims and upon the same grounds as the prior motion. Murphy v. City of Long Beach, 914 F.2d 183, 186 (9th Cir. 1990); Collins v. City of San Diego, 841 F.2d 337, 342 (9th Cir. 1988).
Judgment as a matter of law after the verdict may be granted only when the evidence and its inferences, construed in the light most favorable to the non-moving party, permits only one reasonable conclusion as to the verdict. Where there is sufficient conflicting evidence, or if reasonable minds could differ over the verdict, judgment after the verdict is improper.See, e.g., Kern v. Levolor Lorentzen, Inc., 899 F.2d 772, 775 (9th Cir. 1990); Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 181 (9th Cir. 1989); Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir. 1985); L.A. Mem'l Coliseum Comm'n v. NFL, 726 F.2d 1381, 1387 (9th Cir. 1984).
A. Direct Infringement.
Sony moves for judgment as a matter of law that SCEA did not directly infringe the patents-in-suit, literally or under the doctrine of equivalents. Immersion moves for judgment as a matter of law that SCEI directly infringed the patents-in-suit literally and under the doctrine of equivalents by making, using, selling, offering for sale, and importing the accused products.
In its post-verdict reply brief, Immersion appears to abandon its request for JMOL that SCEI directly infringed the '213 patent. Accordingly, the Court denies this motion.
Sony does not dispute that there was sufficient evidence from which a rational jury could find that the use of a Playstation console, Dualshock controller, and an accused game constitutes direct infringement whenever the player encounters the complex vibrations. Instead, Sony contends that, even if direct infringement is possible through use of the system, the sale of Playstation system components does not directly infringe the patents. Sony further argues that the verdict is unsupported because there is no direct evidence that SCEA actually used each game in an infringing manner, i.e. encountered one of the events that result in infringement. See Trial Exhibit 992A, Colgate Summary Chart (listing the events in the game that trigger accused vibrations, e.g., "A Bugs Life Mushroom Bouncing").
Despite Sony's assertion to the contrary, circumstantial evidence here was sufficient to permit a rational jury to infer that SCEA directly infringed the patents-in-suit by use. Circumstantial evidence may be sufficient to prove direct infringement. Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986); Metabolite Lab., Inc., v. Lab. Corp. of Am., 370 F.3d 1354, 1364-65 (Fed. Cir. 2004). Shuhei Yoshida, a SCEA vice president, testified that SCEA tested all of the accused games in the United States, and described the high standards and attention to detail of the testers, who use "game cheats" and other means to reach all levels of a game easily. Trial Tr. 1108-1115. Andrew House, another SCEA executive vice-president, testified that Sony set up "hundreds" of kiosks at one of the most popular video game trade shows with a Playstation console, one or two Dualshock controllers, and a game to play. Trial Tr. 1833:7-1834:1. Dr. James Colgate testified that he had played all of the accused games, and that infringing vibrations are "widespread" throughout the games. Trial Tr. 712:4-14 and 708:17-18. From this and other circumstantial evidence, the jury could reasonably have inferred that it was more likely than not that SCEA had used each game and encountered the infringing vibration.
Sony also argues that Immersion failed to provide proof as to user perception of the claimed vibration, a limitation found in every claim. Sony notes that neither Dr. Colgate nor Dr. Lin performed psychosocial tests of user perception, and that the jurors themselves did not play the games. However, Dr. Colgate did testify that he played all of the games and found them to practice every limitation of the asserted claims. The jury could reasonably have based its decision on Dr. Colgate's testimony. The jury could also have inferred from that the fact that Sony includes the infringing specialized vibrations in the accused games that users can perceive those specialized vibrations.
There is also a legally sufficient evidentiary basis from which a rational jury could conclude that SCEA directly infringed the patents-in-suit by selling the Playstation system to its customers. Sony contends that, as a matter of law, SCEA cannot directly infringe claims 7 and 43 of the '213 patent. Claim 7 discloses a "system for providing a tactile sensation to a sensing body part, said system comprising" a means for generating a variable state signal, a plurality of mass-moving actuators, and a signal processor. '213 Patent 19:5-19. Claim 43 discloses a "vibrotactile unit for generating tactile vibration sensations and in communication with a host computer," the unit comprising a rotary motor with a shaft, an "eccentric mass coupled to said shaft," a separate processor "receiving a signal from said host computer, said signal used to correlate events within a graphical computer simulation running on said host computer. . . ." '213 Patent 22:50-23:2.
Claims 7 and 43 are apparatus claims; all other asserted claims are method claims. Because the Court finds that the jury's verdict is factually and legally supported with respect to the asserted apparatus claims, it does not address Sony's argument that SCEA's sales cannot directly infringe the asserted method claims as a matter of law.
While Sony correctly notes that the entire Playstation system (console, controller and game) is required to comprise the elements of the apparatus claims, it does not follow that only use and not sale of the system constitutes direct infringement. Sony argues that certain claim elements involving verbs in present-participle form necessarily limit practice of the invention to use; e.g., the system in claim 7 is comprised in part of mass-moving actuators for "transmitting vibrations," with each of the said mass-moving actuators comprised of a shaft and eccentric mass for "rotating said associated shaft." Defs.' Reply Br. at 4, n. 4 (quoting claim 7 of the '213 patent) (emphasis in brief). According to Sony's interpretation, these and similar elements of claims 7 and 43 effectively require operation in order to practice the invention because, e.g., the mass-moving actuators cannot "transmit" vibrations until the system is operational. The Court finds that the verbs identified by Sony describe the purpose and function of the system's components when used, but do not require that the patented invention literally be in motion. This less-strained approach avoids erroneous construction of all claims to be "method" claims. Furthermore, it is consistent with the text of the patent, which does not explicitly require a user and instead describes a "system" (claim 7) or "apparatus" (claim 43) as comprising certain physical elements with certain purposes, as in an "eccentric mass mounted on said shaft for transmitting vibrations to said sensing body part." '213 patent, 19:10-11 (emphasis added). Therefore, claims 7 and 43 may be directly infringed by sale of the system or apparatus.
Sony further argues that even if claims 7 and 43 can be directly infringed by sale of the invention, SCEA sold mere components of the invention, not the entire system or apparatus, and therefore did not infringe the patents as a matter of law. Sony relies heavily on the principle that "a patent on a combination is a patent on the assembled or functioning whole, not on the separate parts," quoting Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 528 (1972) (rejecting view that "substantial manufacture of constituent parts" constitutes direct infringement where constituent parts could be assembled into complete invention in less than one hour). Sony also relies onAro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 344 (1961) (holding that replacement of essential element of invention is not an infringing reconstruction of entire invention) and Decca Ltd. v. United States, 640 F.2d 1156, 1168 (Ct.Cl. 1980) ("Direct infringement does not occur until a system [. . .] has been constructed and is available for use"). However, the Federal Circuit subsequently has interpreted the language of Deepsouth "to be narrowly construed as applicable only to the issue of the extraterritorial effect" of patent law.Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 17 (Fed. Cir. 1984). In Paper Converting, a manufacturer directly infringed where it constructed and tested an "operable assembly" that fell short of the complete and entire patented combination. Id. at 19-20. More recently, the Federal Circuit found a manufacturer of a software program potentially liable for direct infringement of a patent that disclosed an apparatus for playing fantasy football games on a computer, including a "means for setting up individual football franchises; means for drafting" players, and so forth. Fantasy Sports Properties, Inc., v. Sportsline.com, Inc., 287 F.3d 1108, 1111 (Fed. Cir. 2002) (quoting patent). The elements of the patent included both "a computer" and "means" for playing a game, yet the product manufactured by the accused infringer consisted only of software. A direct infringement analysis was nevertheless deemed appropriate on the grounds that users needed only to activate "means that are already present in the underlying software," without having to modify code. Id. at 1118. Contrary to Sony's assertion that the invention in Fantasy Sports was "just" software, there the accused "product [was] software installed on a computer that enables a user to play fantasy football games"; users could begin to play after performing "a few simple steps." Id. at 1118-19. The court rejected the defendants' argument that only game customers could directly infringe the patent, in part because, as in claims 7 and 43 of Immersion's '213 patent, "there is no `user participation' or `control' limitation in the claims . . . requiring that an accused fantasy football game be operated by any specific entity." Id. at 1119.
Here, the jury could reasonably have found that SCEA sells a complete and operable system or apparatus rather than mere constituent parts, despite the fact that most of the consoles, controllers and games are sold separately. SCEA advertises and sells all the accused products as part of the Playstation "system," e.g. Trial Ex. 746, and frequently highlights compatibility between system elements. E.g., Trial Ex. 731 (Playstation.com advertisement); see generally Trial Exs. 813-864 (Playstation hardware and games). Playstation users need perform only a few simple steps to connect the consoles, controllers and games, after which the means to infringe are present. Trial Ex. 340, PlayStation2 Instruction Manual. The instruction manual notes that the system features "a vibration function when the function is supported by the software title," and that the function can be set to either on or off. Id. at 11. One accused game was sold already bundled with the hardware. Trial Tr. 1093:19-1094:14. A reasonable jury could therefore have found that SCEA's actions were more than mere sale of constituent parts. The fact that consumers may use the system in a non-infringing manner (e.g., they may choose to play non-infringing games or turn off the vibration function) does not alter the direct infringement analysis. Cf. Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1276 (Fed. Cir. 2004) (discussing circumstances in which sellers may be liable for indirect infringement based on goods lawfully sold with substantial non-infringing uses).
B. Indirect Infringement.
The jury found that SCEI induced infringement of both the '213 and '333 patents, but that SCEA did not. Sony moves for adjudication that the jury's indirect infringement verdict in favor of SCEA warrants judgment as a matter of law in favor of SCEI on the same issue.
Sony's argument that the jury's finding of no inducement of infringement by SCEA mandates judgment as a matter of law in favor of SCEI on inducement is not persuasive. The jury's findings are not necessarily inconsistent. The jury could reasonably have found that SCEI as the parent company induced its subsidiary SCEA to infringe directly by using the Playstation systems. All of Sony's other arguments with respect to the finding of inducement by SCEI merely reiterate Sony's position that there is no evidence of any direct infringement and no evidence of intention by SCEA or SCEI to cause direct infringement.
Immersion, on the other hand, moves for judgment as a matter of law that no reasonable jury could have found that SCEA did not also induce its customers to infringe. Immersion argues that just as sufficient evidence exists to support the jury's finding that SCEA directly infringed, the evidence the jury heard about extensive Sony sales and customer support provides sufficient circumstantial evidence that Sony customers more likely than not directly infringed by playing the games and encountering the infringing vibration effects. See Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986) (upholding district court finding that patent-holder met burden of showing direct infringement by puzzle customers with "circumstantial evidence of extensive puzzle sales, dissemination of an instruction sheet teaching the method of restoring the preselected pattern with each puzzle, and the availability of a solution booklet on how to solve the puzzle"). Immersion also argues that SCEA fulfilled the other elements of inducement: that SCEA took actions that actually induced its customers' direct infringement and that SCEA knew or should have known that taking those actions would induce direct infringement. See 35 U.S.C. § 271(b); Metabolite Laboratories, Inc. v. Laboratories Corp. of America, 370 F.3d 1354, 1365 (Fed. Cir. 2004) (requiring proof of intent as element of inducement).
However, the fact that the jury could reasonably have rendered a verdict that SCEA induced its customers to infringe the patents is not enough for Immersion to meet its burden with respect to its motion for judgment as a matter of law. The grant or denial of a motion for judgment as a matter of law is "a procedural issue not unique to patent law, reviewed under the law of the regional circuit in which the appeal from the district court would usually lie." Summit Tech., Inc., v. Nidek Co., Ltd., 363 F.3d 1219 (Fed. Cir. 2004) (citing Riverwood Int'l Corp. v. R.A. Jones Co., Inc., 324 F.3d 1346, 1352 (Fed. Cir. 2003); BBA Nonwovens Simpsonville, Inc. v. Superior Nonwovens, LLC, 303 F.3d 1332, 1336 (Fed. Cir. 2002). In the Ninth Circuit, the standard for JMOL, like the standard for summary judgment, requires that the Court find that reasonable minds could come to only one conclusion with respect to elements of the verdict.See Kendall Jackson Winery, Ltd. v. E. J. Gallo Winery, 150 F.3d 1042 (9th Cir. 1998) (upholding district court's refusal to enter JMOL in favor of plaintiff on trademark infringement claim where genuine issues of fact existed as to an element of claim). Immersion urges the Court to follow Minnesota Mining and Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002) and enter judgment as a matter of law based on a jury's conclusion that was in turn based on disputed evidence. InMinnesota Mining, the Federal Circuit reversed a district court's denial of JMOL on inducement where the jury found that defendant Chemque directly infringed but did not also induce infringement; however, this holding is inapposite. The standard used in that context by the Federal Circuit was whether the jury's failure to find inducement was "supported by substantial evidence." Id. at 1304. Applying Ninth Circuit law, this Court instead considers whether the evidence, construed in the light most favorable to SCEA, permits only one reasonable conclusion as to inducement. In Minnesota Mining, defendant Chemque did not even argue that it had not known that its customers would infringe, attempting instead to contest the jury's underlying infringement finding as inconsistent, a position the Federal Circuit found to be barred by estoppel.Id. at 1305, 1302-1303. The Federal Circuit began its inducement analysis with the assumption "we must accept that claim 9 is infringed," and found that Chemque failed to provide substantial evidence that it had not committed the other elements of inducement. Id. at 1304. Here, in contrast, the elements of inducement are in dispute. For instance, the jury could reasonably have found that, despite Sony's knowledge of the patents, Immersion failed to meet its burden to prove the necessary intent element of inducement, on the grounds that SCEA's good faith belief that its customers did not infringe meant that SCEA was not aware, nor should it have been aware, of its customers' infringing acts. Therefore, the Court cannot enter judgment as a matter of law in favor of Immersion with respect to its claim of inducement of infringement by SCEA.
For the foregoing reasons, the Court denies Immersion and Sony's motions for judgment as a matter of law with respect to infringement.
C. Damages.
Sony moves for judgment as a matter of law that Immersion failed to present evidence that proved its claim for damages to a reasonable certainty. Immersion opposes this motion.
The jury was instructed to calculate damages in the form of a reasonable royalty, and was told to consider the fifteenGeorgia-Pacific factors in its determination. See September 14, 2004 Final Jury Instructions at 24-26 (quotingGeorgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970)). The jury found that Immersion was entitled to $82 million compensation for Sony's patent infringement. This award represented 1.37 percent of Sony's total United States sales of all Playstation consoles, DualShock controllers, and accused games. It is less than the $299.3 million that Immersion's expert proposed based on a five percent royalty rate on these sales, but more than the $9.4 million Sony proposal based on two percent of sales of the DualShock controllers only. See Trial Ex. 423A.
Sony contends that the jury's royalty award was unfounded because the jury improperly included in its royalty base sales of every accused console, controller, and game, when all of these units have non-infringing uses. For instance, the consoles and controllers may be used with non-accused games that have no vibration function; the consoles may be used with non-accused third party controllers; and users of the accused games may turn the vibration function off. However, as described in Section IA, use is not a required element of all the asserted claims.
Sony's reliance on Jacobs v. Nintendo of America for the proposition that the jury's award was unfounded is unavailing. The non-infringing use doctrine articulated in Jacobs applies "when a patentee or its licensee sells an article and the question is whether the sale carries with it a license to engage in conduct that would infringe the patent owner's rights." 370 F.3d 1097, 1100 (Fed. Cir. 2004). Sony is clearly not an Immersion licensee.
Sony also argues that the award was unfounded due to the lack of direct proof of infringement. As concluded above, the jury could reasonably have found that SCEA directly infringes based on circumstantial evidence of its use and sale of the Playstation system.
Even Sony's expert failed to gather direct data on actual use of the accused vibration function, instead basing his calculations on sales of all controllers, some of which may be used to play non-infringing games or games with the vibration function turned off. Immersion did present evidence that nine of the top ten best-selling Playstation games were accused, and that the number of accused games sold exceeds the number of consoles sold by 15 million.
The jury could therefore reasonably use the entire Playstation system as a royalty base. The jury may have taken account of the fact that the Playstation system does have non-infringing uses when it awarded a relatively low royalty rate of 1.37 percent. The jury also may have calculated damages using a higher rate but a smaller royalty base. For these reasons, the Court denies Sony's motion for judgment as a matter of law with respect to the jury's damages award.
D. Willful Infringement
Immersion moves for judgment as a matter of law that SCEI and SCEA willfully infringed the patents-in-suit. Sony opposes this motion.
In order to prove that SCEI or SCEA willfully infringed the patents, Immersion would have had to prove that it was highly likely that SCEI and SCEA had "no reasonable basis" for believing that their products do not infringe or that the patents were invalid. See Final Jury Instructions at 14. The jury was instructed to consider five factors, including whether SCEI or SCEA intentionally copied an Immersion product and whether they had a good faith belief that the patents were invalid or not infringed. Id.
Contrary to Immersion's characterization (see Pl.'s Reply Supp. Pl.'s Mot. JMOL at 9 n. 3), the jury had ample evidence to support its finding of no willful infringement. Shinichi Okamoto, former Sony Chief Technology Officer responsible for development of the Playstation consoles and DualShock controllers, testified that Sony developed the Playstation products without copying Immersion's technology. Trial Tr. 1551:7-1553:11, 1593:8-1594:5. The jury heard Sony's vigorous defenses of non-infringement and invalidity. A jury could reasonably have found that Immersion failed to prove that it was highly likely that SCEI and SCEA willfully infringed the '213 and '333 patents.
For the foregoing reasons, the Court denies Immersion's motion for judgment as a matter of law on the issue of willful infringement.
II. Supplemental Damages, Permanent Injunction, and Pre-Judgment Interest.
Immersion moves for additional discovery and an award of supplemental damages, pre-judgment interest, entry of judgment and an immediate permanent injunction against Sony's manufacture, use, sale, and import of Sony Playstation consoles, Dualshock controllers, and infringing games. Sony opposes an award of supplemental damages or pre-judgment interest, opposes entry of judgment as premature and opposes any injunction, proposing instead that the Court order a compulsory license.
A. Supplemental Damages.
Immersion seeks an order directing Sony to provide updated sales data on the infringing products since June 30, 2004 and awarding supplemental damages on those infringing sales.
The sales data and expert testimony available to the jury from which to calculate damages included only Playstation sales up to June 30, 2004. Therefore, the Court finds that Immersion is entitled to compensation based on Sony's sales of infringing systems from July 1 onward. The cases cited by Sony suggesting that such an award is unavailable are inapposite, because continued payments on sales after June 30 will not be punitive and will be proved upon Sony's production of up-to-date sales data. See, e.g., Beatrice Foods v. New England Printing and Lithographing Co., 923 F.2d 1576 (Fed. Cir. 1991) (rejecting district court's award of treble damages in order to enhance what it thought was inadequate compensation); Oscar Mayer Foods Corp. v. Conagra, Inc., 869 F. Supp. 656 (W.D. Wisc. 1994) (rejecting plaintiff's request for supplemental pre-trial damages as not proved and therefore an invasion of jury's role). In lieu of awarding Immersion supplemental damages for the period from July 1 to the present, 2004, the Court imposes a compulsory license and orders Sony to pay Immersion a 1.37 percent compulsory license fee based on sales from July 1, 2004, until judgment enters. These fees will be paid directly to Immersion; no escrow account will be required. In order to enable Immersion to calculate the fee, the Court granted Immersion's request for supplemental discovery. Sony was ordered to provide Immersion with its sales data from June 30, 2004 until September 30, 2004 within ten days of the December 10 hearing, that is, by December 27, 2004. If Sony has not already provided this data it must do so within three days of the date of this order, and pay the license fee on those sales forthwith. Sony shall continue to provide Immersion with its sales data, and pay the license fee, ten days after the close of each quarter for as long as the compulsory license remains in effect.
B. Injunction and Entry of Judgment.
Immersion correctly notes that injunctive relief is the "general rule [to remedy infringement] . . . absent a sound reason for denying it." Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226, 1246-47 (Fed. Cir. 1989) (reversing trial court's denial of injunction against defendant Suzuki's sale of motocross bicycles and noting that appeal process would take "several years" and patent expired in four years); see also W.L. Gore Assoc. v. Garlock, Inc., 842 F.2d 1275, 1281 (Fed. Cir. 1988) (directing district court to enter injunction against sale of packing material); Eli Lilly Co. v. Medtronic, Inc., 7 U.S.P.Q.2d 1439, 1445 (E.D. Pa. 1988), rev'd on other grounds, 872 F.2d 402 (Fed. Cir. 1989) (entering permanent injunction against sale of defibrillator). Nevertheless, the decision to award injunctive relief is clearly left to the Court's discretion. See 35 U.S.C. § 283 (courts "may grant injunctions in accordance with the principles of equity" to prevent violation of patent rights); Roche Prods. v. Bolar Pharm. Co., 733 F.2d 858 (Fed. Cir. 1984), superceded by statute on other grounds, (refusing to order district court to enter permanent injunction and noting that adequacy of money damages could obviate need for equitable relief).
Immersion presents no evidence that it will suffer actual irreparable harm if an injunction does not issue immediately. Immersion is not a direct competitor of Sony. Immersion has previously stated its intention to license its patents freely. The Federal Circuit has held that evidence showing that the patent holder is willing to license its patent rights "suggests that any injury suffered by [the patent holder] would be compensable in damages assessed as part of the final judgment in the case." High Tech Med. Instrumentation, Inc. v. New Image Indus., Inc., 49 F.3d 1551, 1557 (Fed. Cir. 1995) (reversing grant of preliminary injunction). Here, money damages will provide an adequate remedy for Immersion's injury, at least for the present.
Thus, in lieu of an injunction at this time, as noted above, the Court imposes a compulsory license and orders that Sony pay Immersion a fee of 1.37 percent on sales of all Playstation consoles, Dualshock controllers and games found by the jury to infringe. For the reasons discussed above, the license will be effective as of July 1, 2004, and will continue until the date of judgment. At that time, pursuant to Federal Rule of Civil Procedure 62(c), the Court will enter a permanent injunction, which it may stay pending appeal, in which case the compulsory license will remain in effect. Sony will be enjoined from manufacturing, using, selling, and importing the infringing Sony Playstation system, including Playstation consoles, Dualshock controllers, and the infringing games. This could be accomplished by removing the software library that enables the infringing vibration and disabling the vibration function on the controllers and in the games. The Court will not require a recall, but Sony will pay the license fee on all products placed in the stream of commerce.
Entry of judgment is premature at this time because Sony's defense of inequitable conduct is still pending.
C. Pre-Judgment Interest.
Finally, Immersion asks the Court to award pre-judgment interest.
Patent claimants are entitled to compensatory damages that are no less than a reasonable royalty "together with interest and costs as fixed by the court." 35 U.S.C. § 284; see General Motors Corp. v. Devex Corp., 461 U.S. 648 (1983) (holding that district court has general authority to award pre-judgment interest as an ordinary matter). Courts are afforded discretion to decide the interest rate to be used. Studiengesellschaft Kohle, m.b.H. v. Dart Indus., Inc., 862 F.2d 1564, 1580 (Fed. Cir. 1988).
Sony argues that the jury must have included interest in its $82 million award. But just as the jury's damages award was necessarily based on sales only up to June 30, the expert testimony the jury heard regarding damages did not include a calculation of interest owed. The Court finds that an award of pre-judgment interest is therefore appropriate, and can be fairly calculated over time by assuming that the jury's damage award was determined based on sales of Sony's Playstation consoles, DualShock controllers and infringing games. The 1.5 percent per month interest rate Immersion suggests is inappropriate because it is punitive rather than compensatory, while Sony's proposition of the Treasury bill rate assumes an unnecessarily low estimation of the returns Immersion would have earned if a royalty agreement had been in place. Accordingly, the Court awards Immersion pre-judgment interest at the prime rate. Interest for each quarter's sales will begin to accrue at the end of that quarter based on that quarter's Sony sales data, calculated at the prime rate as of the end of that quarter.
Thereafter, the interest will be compounded annually.
IV. Attorneys' Fees.
Immersion moves for a determination pursuant to 35 U.S.C. § 285 that this is an "exceptional case" and therefore it is entitled to attorneys' fees, and for an award pursuant to Federal Rule of Civil Procedure 37(c)(2) of reasonable attorneys' fees incurred proving matters that Sony should have admitted in response to Immersion's requests for admissions (RFAs). Sony opposes this motion, and counter-moves for an award of attorneys' fees pursuant to § 285 with respect to Immersion's claims of infringement of U.S. Patent No. 5,889,672 ('672 patent). Immersion opposes that motion.
Immersion argues that Sony engaged in a pattern of repeated misconduct that increased the cost of litigation, including discovery abuses, late production of documents, and frivolous defenses and refusals to reply fully and candidly to requests for admissions.
Title 35 U.S.C. § 285 provides that the court in "exceptional cases may award reasonable attorney fees to the prevailing party" in a patent case. See Reactive Metals and Alloys Corp. v. ESM, Inc., 769 F.2d 1578, 1582-83 (Fed. Cir. 1985) (noting that district court decision to award attorneys' fees is reviewable for abuse of discretion). The types of conduct which can form a basis for finding a case exceptional include "willful infringement, inequitable conduct before the PTO, misconduct during litigation, vexatious or unjustified litigation, and frivolous suit." Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989) (affirming district court award of attorneys' fees where defendant engaged in vexatious conduct and repeatedly violated permanent injunction). When the alleged misconduct relates to the discovery process, courts rarely grant attorneys' fees pursuant to § 285 absent a serious breach, such as dishonest responses or failure to comply with discovery orders. See White Consolidated Industries, Inc. v. Vega Servo-Control, Inc., 713 F.2d 788, 791 (Fed. Cir. 1983) (upholding denial of request for attorneys' fees pursuant to § 285 and Rule 37(c) despite allegedly "egregious" failure to disclose information); Arbrook, Inc. v. Am. Hosp. Supply Corp., 645 F.2d 273, 279 (5th Cir. 1981) ("we reject the contention that the plaintiffs' alleged improper conduct during discovery supports a fee award. Assuming such improprieties took place, the proper remedy lies under Fed.R.Civ.P. 37 and not under § 285.").
The Court is disturbed by the discovery conduct in this case. The proper remedy for discovery abuses, however, is sanctions pursuant to Federal Rule of Civil Procedure 37. Immersion sought such sanctions only once and was denied. Furthermore, it appears that both parties participated in this misconduct to at least some extent; in granting a motion to compel by Sony, Magistrate Judge Brazil noted generally that he was "extremely DISAPPOINTED by the present inability of counsel to professionally resolve discovery disputes." February 3, 2004 Order Granting Defs.' Mot. Compel (emphasis in the original). The Court finds that Sony's discovery conduct and willful delays do not render this case "exceptional" under § 285. Nor do the numerous defenses asserted by Sony warrant an award of attorneys' fees. See Stickle v. Heublein, Inc., 716 F.2d 1550 (Fed. Cir. 1983) (finding that "disclosure [of] the entire litany of defenses commonly asserted in patent cases" does not constitute vexatious litigation).
Similarly, Sony's refusals to admit certain facts in its responses to Immersion's RFAs do not warrant attorneys' fees. Sony's refusals and its justifications thereof were aggressively unhelpful, but this Court cannot say they were entirely unreasonable, because they were based on the arguments Sony did present as a defense, e.g. the existence of non-infringing uses.
On the other hand, Sony is clearly not entitled to attorneys' fees. Title 35 U.S.C. § 285 limits attorneys' fees to "the prevailing party" in exceptional cases. In order to be a prevailing party, the Federal Circuit has recently ruled that "one must receive at least some relief on the merits." Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1320 (Fed. Cir. 2004). While Immersion may be estopped from reasserting its '672 patent infringement claims against Sony, this estoppel does not constitute "relief on the merits." None of the cases Sony cites suggests that a defendant against whom a verdict has been entered is entitled to prevailing party status as to a claim that was voluntarily dropped from the case by the plaintiff.
Accordingly, both parties' motions for attorneys' fees are denied.
CONCLUSION
For the foregoing reasons, the Court DENIES Sony's motion for judgment as a matter of law and DENIES Immersion's motion for judgment as a matter of law (Docket No. 1223).The Court DENIES without prejudice Immersion's motion for entry of judgment and a permanent injunction (Docket No. 1309), and DENIES Sony's motion to strike Immersion's motion for entry of judgment (Docket No. 1359). Instead, the Court imposes a compulsory license on Sony as described above. The Court GRANTS Immersion's motion for additional discovery but DENIES Immersion's motion for damages based on Sony sales as of July 1, 2004 (Docket No. 1332), in favor of compensation by way of the compulsory license. The Court GRANTS Immersion's motion for pre-judgment interest (Docket No. 1314). The Court DENIES Immersion's motion for attorneys' fees (Docket No. 1410) and DENIES Sony's motion for attorneys' fees (Docket No. 1427).
The Court GRANTS Immersion's motion to strike (Docket No. 1270) the September 15, 2004 Declaration of Sonal N. Mehta. The Mehta Declaration (Docket No. 1262) shall be stricken from the record and Sony shall resubmit only email correspondence sent to the Court during trial.
IT IS SO ORDERED.