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Hafco Foundry and Machine Co., Inc. v. GMS Mine Repair And Maintenance, Inc.

United States District Court, S.D. West Virginia, Bluefield

June 26, 2018

HAFCO FOUNDRY AND MACHINE COMPANY, INCORPORATED, Plaintiff,
v.
GMS MINE REPAIR AND MAINTENANCE, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          David A. Faber Senior United States District Judge.

         Pending before the court is plaintiff's motion for reconsideration of this court's order granting defendant's motion for a new trial as to damages. (ECF No. 100). That motion has been fully briefed and a hearing on the motion was held on June 13, 2018. For the reasons discussed below, the motion for reconsideration is DENIED.

         I. Background

         Plaintiff Hafco Foundry and Machine Company, Inc. (“Hafco”) filed the instant action for patent infringement on December 15, 2015. Hafco owns the patent for a Rock Dust Blower, U.S. Design Patent No. D681, 684S. In 2014, Hafco entered into an agreement with Pioneer Conveyor, an affiliate of GMS Mine Repair and Maintenance, Inc. (“GMS”), by which Pioneer Conveyor was to distribute Hafco rock dust blowers to mining customers. The distribution agreement between Hafco and Pioneer Conveyor was terminated in or around early May 2015. According to Hafco, following termination of the aforementioned distribution agreement, GMS began selling infringing rock dust blowers within the Southern District of West Virginia.

         Trial of this matter began on May 15, 2017. After a three-day trial, the jury returned a verdict finding that GMS had infringed Hafco's `684 patent and that the infringement was willful. The jury awarded Hafco damages in the amount of $123, 650.00. On May 18, 2017, the court entered judgment in plaintiff's favor in the amount of $123, 650.00.

         By Memorandum Opinion and Order dated March 30, 2018, the court granted GMS's motion for a new trial on the issue of damages. In so doing, the court found that the jury's award of $123, 650 was against the weight of the evidence and that, on the evidence presented, $0 in compensatory damages was the outermost award that could be sustained. The court therefore reduced the award to $0 and granted a new trial nisi remittitur at Hafco's option.

         Hafco rejected the remittitur and filed the instant motion for reconsideration.

         II. Analysis

         It is important not to lose sight of the fact that Hafco, as the plaintiff, bore the burden of proving each and every element of its case by a preponderance of the evidence.

In patent cases “[t]he burden of proving damages falls on the patentee, ” Lucent Techonologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009), and “[t]he [patentee] must show his damages by evidence, ” Philp v. Nock, 84 U.S. 460, 462, 17 Wall. 460, 21 L.Ed. 679 (1873). Damages “must not be left to conjecture by the jury. They must be proved, and not guessed at.” Id.
When a patentee seeks lost profits as the measure of damages, “the patent holder bears the burden of proving the amount of the award.” Minco, Inc. v. Combustion Eng'g, Inc., 95 F.3d 1109, 1118 (Fed. Cir. 1996) (emphasis added). “[T]he amount of a prevailing party's damages is a finding of fact on which the plaintiff bears the burden of proof by a preponderance of the evidence.” Smith-Kline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). “[T]he amount is normally provable by the facts in evidence or as a factual inference from the evidence.” Lindemann, 895 F.2d at 1406.

Promega Corp. v. Life Techs. Corp., 875 F.3d 651, 660 (Fed. Cir. 2017).

         To recover lost profits, Hafco had to prove a causal relation between the GMS's infringement and its loss of profits. Oiness v. Walgreen Co., 88 F.3d 1025, 1029 (Fed. Cir. 1996). In other words, the burden rested on Hafco to show a reasonable probability that “but for” the infringing activity, it would have made GMS's sales. See id. It is Hafco's failure of proof on this point that led the court to grant a new trial on damages.

         As the court noted in its Memorandum Opinion and Order of March 30, 2018,

To show causation and entitlement to lost profits, a patentee must reconstruct the market to show “likely outcomes with infringement factored out of the economic picture.” Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999) (“Reconstructing the market, by definition a hypothetical enterprise, requires the patentee to project economic results that did not occur.”). “To prevent the hypothetical from lapsing into pure speculation, th[e] court requires sound economic proof of the nature of the market.” Id. Lost profits awards have been affirmed “based on a `wide variety of reconstruction theories in which the patentee has presented reliable economic evidence of `but for' causation.'” Ericsson, Inc. v. Harris Corp., 352 F.3d 1369, 1377 (Fed. Cir. 2003) (quoting Crystal Semiconductor Corp. v. TriTech Microelecs. Int'l, Inc., 246 F.3d 1336, 1355 (Fed. Cir. 2001)).
One “useful, but non-exclusive, way for a patentee to prove entitlement to lost profits damages” is the four-factor test articulated in Panduit Corp. v. Shahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1545 (Fed. Cir. 1995). “The Panduit test requires that a patentee establish: (1) demand for the patented product; (2) absence of acceptable non-infringing substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit it would have made.” Id. “A showing under Panduit permits a court to reasonably infer that the lost profits claimed were in fact caused by the infringing sales, thus establishing a patentee's prima facie case with respect to `but for' causation.” Id.
Whether a patentee relies on Panduit or some other means of showing entitlement to lost profit damages, it “must reconstruct the market to determine what profits the patentee would have made had the market developed absent the infringement product.” Ericsson, 352 F.3d at 1377 (emphasis added). In a two-supplier market, “lost profits for all sales made by an infringer are easier to obtain because there are only two suppliers in the market.” Water Techs. Corp. v. Calco, LTD., 850 F.2d 660, 672 (Fed. Cir. 1988). However, “an accurate reconstruction of the hypothetical `but for' market takes into account any alternatives available to the infringer.” Grain Processing Corp. v. American Maize-Products Co., 185 F.3d 1341, 1351 (Fed. Cir. 1999).
In the instant case, there was no attempt to reconstruct the market. “[Hafco] simply assumed that every sale made by [GMS] would have been theirs in the absence of the infringement.” Keg Techs., Inc. v. Laimer, 436 F.Supp.2d 1364, 1369 (N.D.Ga. 2006). The record is silent with respect to the second and third Panduit factors - absence of acceptable non-infringing substitutes and manufacturing and marketing capability to exploit the demand.
Nor did Hafco show that it was a “two-supplier market where any sale made by one competitor can be presumed attributable to its opponent were it not for the infringement.” Id. at 1369-70; see Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983) (“Where, as here, the patent owner and the infringer were the only suppliers of the product, causation may be inferred.”). Indeed, Hafco aggressively fought to keep any mention of other can rock ...

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