NOTE: This disposition is nonprecedential. 

## United States Court of Appeals for the Federal Circuit

2008-1483 HEELING SPORTS LIMITED, Plaintiff-Appellant,

v. US FURONG INTERNATIONAL INC., AIR FLY, APPLE FOOTWEAR INC., ZI ZHEN QIAO (also known as Jenny Qiao), 2000 SHOES and DOES 1-10 Inclusive, Defendants-Appellees.
Craig B. Florence , Gardere Wynne Sewell LLP, of Dallas, Texas, for plaintiffappellant. With him on the brief was Stacy R. Obenhaus . Of counsel was Thomas C. Wright

. Jen-Feng Lee , WorldEsquire Law Firm, LLP, of Pasadena, Ca lifornia, for defendants-appellees. Appealed from: United States District Cour t for the Central Dis trict of California Judge Florence-Marie CooperNOTE: This disposition is nonprecedential. 

## United States Court of Appeals for the Federal Circuit

2008-1483 HEELING SPORTS LIMITED, Plaintiff-Appellant,

v. US FURONG INTERNATIONAL INC., AIR FLY, APPLE FOOTWEAR, INC., ZI ZHEN QIAO (also known as Jenny Qiao), 2000 SHOES and DOES 1-10 Inclusive, Defendants-Appellees.

Appeal from the United States Distric t Court for the Central District of California in case no. 2:06-CV- 07624, Judge Florence-Marie Cooper.

___________________________ DECIDED: April 3, 2009

___________________________ Before MAYER, PLAGER, and BRYSON, Circuit Judges

. PER CURIAM. DECISION Heeling Sports Ltd. appeals the am ount of a damages award for patent infringement and the amount of the associated attorney f ee award. Based on the record before us, we are unable to determine whether the district court’s damages award can be sustained. We therefore vacate and remand to allow the district court to reassess the damages and fee award, or to explai n the basis for the damages award.BACKGROUND Heeling owns a series of patents relat ed to shoes that have an embedded “covert wheel assembly” in the heel, which allows the w earer to walk, run, or roll in shoes that have the appearance of normal footwear. Heeli ng sells its embodiment of the invention as “Heelys Skates.” In 2006, Heeling s ued the defendants, a num ber of footwear importers and distributors, for infringing its patents by selling footwear similar to the Heelys Skates. The defendants failed to appear , and the United States District Court for the Central District of California entered a default judgment agains t them. The court issued a preliminary injuncti on and ordered discovery relating to damages. After the defendants failed to respond to the court-order ed discovery, Heeling filed a motion for contempt. The district c ourt granted the motion and allow ed seizure of defendants’ documents in order to assist in calculati ng damages. The documents indicated that the defendants had imported at least 186,150 units of “roller skate” shoes. Heeling then filed a motion for an awar d of damages. The motion was supported by the declaration of an exper t witness. Based on various factors, including his determination that each unit would produce at least $15.00 in profit, the expert concluded that a reasonable royalty w ould be $15.00 per infringing unit. See GeorgiaPacific Corp. v. United States Plywood Corp. , 318 F. Supp. 1116 (S.D.N.Y. 1970), modified and aff’d , 446 F.2d 295 (2d Cir. 1971); see also Interactive Pictures Corp. v. Infinite Pictures, Inc. , 274 F.3d 1371, 1385-86 (Fed. Cir. 2001). By multiplying the royalty rate by the number of infringing units imported, Heeling concluded that its damages were $2,792,250.00. Heeling accordi ngly requested that th e court enter an award in that amount and grant $54,436.95 in attorney fees.

2008-1483 2In response, the defendants asserted that rather than selling the shoes for $45.00 per pair, as Heeling’s expert had concl uded they could have, they actually sold the shoes for $6.50 per pair. The defendants claimed that thei r profit per pair was only $1.50. After hearing from both sides, the di strict court issued a permanent injunction, awarded damages of $279,000.00, and ordered the defendants to pay a total of $9,184.50 in attorney fees pur suant to 35 U.S.C. § 285 and C entral District of California Local Rule 55-3. Heeling appeals the damages award and the attorney fees award. DISCUSSION After a finding of patent infringement, “the court shall award the claimant damages adequate to compensate for the infr ingement, but in no event less than a reasonable royalty for the use made of the invention by t he infringer, together with interest and costs as fixed by the court.” 28 U.S.C. § 284. One appropriate means of calculating the amount of a reasonable royalty is to empl oy “the conceptual framework of a hypothetical negotia tion between the patentee and the infringer.” Interactive Pictures , 274 F.3d at 1384; see also Rite-Hite Corp. v. Kelley Co. , 56 F.3d 1538, 1554 (Fed. Cir. 1995) (en banc). As we have previously explained, “T he question to be asked in determining damages is how much had the Patent Holder and Licensee suffered by the infringement. And that question is primarily: had the Infringer not in fringed, what would the Patent Holder-Licensee have made?” King Instruments Corp. v. Perego , 65 F.3d 941, 948 (Fed. Cir. 1995) (citations removed); see also Paper Converting Mach. Co. v. FMC Corp. , 432 F. Supp. 907, 916 (E.D. Wis. 1977), aff’d , 588 F.2d 832 (7th Cir. 1978) (“If a rule were to be applied lim iting post-infringement court determination of royalties to

2008-1483 3the infringer’s actual profits, the effect would be to insure the infringer against losses in those situations where actual profits are less than the royalt y level that would have been freely negotiated prior to the in fringement.”). Heeling assert s that in selecting an award of damages that was only 10 percent of Heeling’s request, the court must have determined the reasonable royalty based on t he defendants’ profits rather than the profits the patentee would hav e made absent infringement. Heeling asks us to set aside the district court’s award and to grant its entire damages request. When reviewing the court’s “methodology fo r arriving at a reasonable royalty,” we employ a deferential abuse- of-discretion standard. See SmithKline Diagnostics, Inc. v. Helena Labs. Corp. , 926 F.2d 1161, 1164 (Fed. Cir. 1991). However, in this case we cannot review the court’s methodology becaus e the court did not provide an explanation of how it arrived at the dam ages award that it entered. As we have explained, “To enable appellate review, a district court is obli gated to explain the ba sis for the award.” Read Corp. v. Portec, Inc. , 970 F.2d 816, 828 (Fed. Cir. 1992). While we have cautioned that in light of the need to conserve judicial resources, a remand is a “step not lightly taken,” Consol. Aluminum Corp. v. Foseco Int’l Ltd. , 910 F.2d 804, 814 (Fed. Cir. 1990), we remand when it is necessary to ensure that we are reviewing a judgment rather than speculating as to the methodology used by the district court or making determinations on our own that should be made in the first instance by the district court. While Heeling may be correct about the method the district court used to calculate the damages award, there is nothing in the court’ s order that compels that conclusion. We could gue ss that the trial court bas ed its damages award on the defendants’ claimed profit levels , but it would be a guess, and we think it preferable for

2008-1483 42008-1483 5 the district court to explain the rationale under lying its decision, so that we can review that decision with that rationale in mind. Based on Local Rule 55-3, the district court awarded attorney fees in an amount calculated directly from the damages award. Because Heeli ng contends that the district court’s presumed method of calculating damages was incorrect, it challenges the award of attorney fees as well (a lthough it does not cha llenge the district court’s methodology of basing the attorney fee award on the amount of the dam ages award under Local Rule 55). Because review of the damages award cannot stand without a fuller explanation by the district court as to how the court arrived at the award, and because the attorney fee award was apparently tied directly to t he damages award, we remand to allow the district court either to reassess the dam ages and fees or to explain how the damages award was calculated. If the damages aw ard is based on a determination of the reasonable royalty per unit, the court should explain why the per unit damages award represents a reasonable royalty that would have been agreed upon following a hypothetical negotiation between the patentee and the infringer. Costs for this appeal are awarded to Heeling.