Plaintiffs are awarded $469,018.00 as a reasonable royalty, enhanced damages of $469,018.00,
and prejudgment interest of $6,733.00 for the sales of infringing mattresses made between
January 1, 2004 and September 15, 2004.

The remaining damage issues arising out of the contempt order concern: (1) the proper
damage measure for sales made between September 15, 2004 and December 15, 2004, of
mattresses bearing product numbers prohibited by the injunction; and (2) royalties and
prejudgment interest on sales of the G1 mattress. Plaintiffs also seek to double the damages for
the sales of the G1 mattress.

Intex argues that no evidence exists concerning the proper damage amount to assess for
sales of mattresses found to be in violation of the injunction: (1) the G1 mattress and (2) sales
made between September 15, 2004 and December 15, 2004, of products bearing prohibited
product numbers. According to Intex, Plaintiffs’ damages experts only testified regarding
products sold between 2000 and 2003 but did not examine sales made after 2003, including the
G1 mattress that incorporated a new design.

However, the damages from sales at issue all arise out of the violations of the contempt
order, and “[a] court has broad discretion to fashion a remedy based upon the nature of the harm
and probable effect of alternative sanctions.” Connolly v. J.T. Ventures, 851 F.2d 930, 933 (7th
Cir. 1988). Assessing the royalty rate determined by the jury and found to be reasonable by the
Court strikes a fair balance between the harm suffered by Plaintiffs and the probable effect of
alternative sanctions. Assessing a lower royalty would not deter Intex from again violating the

injunction, while assessing a higher royalty rate would overcompensate Plaintiffs for the harm


at a “time before the infringement began.” Riles v. Shell Exploration & Prod. Co., 298 F.3d
1302, 1311 (Fed. Cir. 2002). Therefore, the evidence adduced at trial is sufficient to support a
13.5 percent reasonable royalty on sales made between January 1, 2004 through September 15,
2004.

It is proper to use the royalty rate determined by the jury to assess damages for the sales at
issue in this motion. Stryker Corp. v. Davol, Inc., 75 F. Supp. 2d 746, 747 (W.D. Mich. 1999);
Oscar Mayer Foods Corp. v. Conagra, Inc., 869 F. Supp. 656, 668 (W.D. Wis. 1994) (Oscar
Mayer). Plaintiffs contend that when a jury renders a general verdict, it is appropriate to
extrapolate a royalty rate from the general verdict. Oscar Mayer, 869 F. Supp. at 668.

Here, the jury awarded Plaintiffs a $2,950,000.00 general verdict on $21,817,103.00 in
sales. Dividing $2,950,000.00 by $21,817,103.00 results in 13.5 percent ratio of royalty for the
use of the product to total sales. Accordingly, Plaintiffs are awarded a reasonable royalty for the
sales of all products bearing the prohibited product numbers at the rate of 13.5 percent. Based on
all the relevant evidence, the totality of the circumstances, and considering all possible
alternative sanctions, the Court finds that a 13.5 percent royalty is reasonable amount based on
the reasonable probable harm to Plaintiffs.

Plaintiffs were awarded double the patent damages assessed by the jury by the Court on
the jury’s finding of willfulness. Aero Prods. Int'l y. Intex Recreation Corp., No. 02 C 2590,
2004 WL 1696749 (N.D. Ill. July 15, 2004). Intex does not dispute that Plaintiffs should receive
double damages for the sales made between January 1, 2004 and September 15, 2004. Intex also
does not dispute that Plaintiffs should receive prejudgment interest for these sales. Finally, Intex

does not dispute the calculations made by Plaintiffs regarding the royalty rate. Accordingly,


they suffered. Accordingly, a 13.5 percent royalty will be assessed against all sales made
between September 15, 2004 and December 15, 2004, of mattresses bearing product numbers
prohibited by the injunction and on sales of the G1 mattress.

Plaintiffs are awarded a reasonable royalty for these sales of all products bearing the
prohibited product numbers at the rate of 13.5 percent. The jury had determined this to be a
reasonable amount; based on all the relevant evidence, the totality of the circumstances, and
considering all possible alternative sanctions, the Court finds that is a reasonable amount based
on the probable harm to Plaintiffs.

Intex further contends that no evidence exists concerning that it willfully infringed the
‘726 patent and that, therefore, the standard required to enhance patent damages has not been
met. 35 U.S.C. § 285; Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570-73 (Fed. Cir. 1996) (Jurgens).
However, doubling the damages for sales of the G1 mattress is also appropriate and properly
balances the harm suffered by Plaintiffs and the need for an effective deterrent against the
probable effect of alternative sanctions. While Intex contends that the G1 mattress does not
infringe the ‘726 patent, Plaintiffs presented clear and convincing evidence to the contrary.
Permitting Intex to market largely unchanged products which infringe Plaintiffs’ patent rights
and violate the injunction are serious harms. Intex has twice violated Plaintiffs’ patent rights
and the injunction, and a lesser sanction would not deter Intex from further violations.

Similarly, doubling the damages for sales of mattresses bearing the product numbers
prohibited by the injunction is also appropriate. As detailed in the order finding Intex in

contempt of the injunction, Intex’s contrary statements in defense of its conduct violating the


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

AERO PRODUCTS INTERNATIONAL, INC.,
a Florida corporation, and
ROBERT B. CHAFFEE, an individual,

Plaintiffs,

v. No: 02 C 2590

a California corporation;
QUALITY TRADING, INC.,
a California corporation; and
WAL-MART STORES, INC.,

)
)
)
)
)
)
)
)
INTEX RECREATION CORPORATION, ) Judge John W. Darrah
)
)
)
)
a Delaware corporation, )
)
)

Defendants.

MEMORANDUM OPINION AND ORDER

The Plaintiffs, Aero Products International, Inc. (“Aero”) and Robert B. Chaffee, filed
suit against the Defendants, Intex Recreation Corporation (“Intex”); Quality Trading, Inc.; and
Wal-Mart Stores, Inc. Presently before the Court is Plaintiffs’ Motion to Enter Supplemental
Damages Calculation.

History

On February 25, 2004, a jury found Intex liable for Plaintiffs’ patent, United States Patent

No. 5,367,726 (“the ‘726 patent”). In a general verdict, the jury awarded $2,950,000.00 in

damages for the patent infringement. The jury also found that Intex’s infringement was willful.


injunction in this regard was disingenuous and evidenced a knowing and willful violation of the
order and the patent rights of Plaintiffs. Assessing anything less than double damages would be
an insufficient deterrent to such future conduct.

Intex does not dispute the calculations provided by Plaintiffs concerning the G1 mattress.
Therefore, Plaintiffs are awarded $825,627.00 as a reasonable royalty on Intex’s sales. Because
Plaintiffs are entitled to enhanced double damages, Plaintiffs are awarded another $825,627.00.
Plaintiffs are further awarded prejudgment interest of $11,853.00.

As to the sales made between September 15, 2004 and December 15, 2004, of mattresses
bearing product numbers prohibited by the injunction, Intex has previously been ordered to
account for these sales. Intex shall do so forthwith.

CONCLUSION

For the foregoing reasons, Plaintiffs’ Motion to Enter a Supplemental Damages
Calculation is granted. Plaintiffs are awarded $2,607,876.00 in supplemental damages.
Plaintiffs are also awarded a reasonable royalty of 13.5% of all sales made between September
15, 2004 and December 15, 2004 of mattresses bearing product numbers prohibited by the

injunction and enhanced double damages of this amount.

Dated: E G- OS”

JOHW W. DARRAH
Uniféd States District Judge


After the infringement and willfulness verdicts, Intex was ordered to pay double the patent
damages awarded by the jury, pursuant to 35 U.S.C. § 284. Aero Prods. Int'l v. Intex Recreation
Corp., No. 02 C 2590, 2004 WL 1696749 (N.D. Ill. July 15, 2004)

On September 15, 2004, Intex was enjoined from: (1) manufacturing new mattresses
which incorporate a valve that infringes the ‘726 patent and (2) selling products bearing product
numbers prohibited by the injunction. Aero Prods. Int'l y. Intex Recreation Corp., No. 02 C
2590, 2004 WL 2091996 (N.D. Ill. Sept. 16, 2004); Aero Prods. Int'l v. Intex Recreation Corp.,
No. 02 C 2590, 2004 WL 2255984 (N.D. Ill. Sept. 16, 2004). Thereafter, Plaintiffs filed a
motion for contempt, contending that Intex violated the injunction by: (1) selling products with
product numbers prohibited by the injunction; and (2) selling another product that infringes the
‘726 patent, the “G1” mattress, which was not part of the jury trial.

On December 15, 2004, Intex was ordered to immediately cease and desist selling
products bearing prohibited product numbers; and a hearing was set to determine whether Intex
violated the injunction. Aero Prods. Int'l v. Intex Recreation Corp., No. 02 C 2590, 2004 WL
2958688 (N.D. Ill. Dec. 16, 2004). On May 11, 2005, Intex was found in contempt for selling
products bearing the product numbers prohibited by the injunction and for selling the G1
mattress. The contempt order required Intex to account for all products sold in violation of the

injunction. Ruling was reserved on the issue of damages for the sale of these products.


Plaintiffs’ Motion to Enter Supplemental Damages Calculation

Plaintiffs seek royalties and prejudgment interest for: (1) sales of the infringing mattress
made between January 1, 2004 through September 15, 2004; and (2) sales of the G1 mattress,
which was found to violate the injunction. The proper damage measure for sales of products
bearing the prohibited product numbers must also be determined.

ANALYSIS

Plaintiffs seek both a 13.5 percent royalty rate, double damages, and prejudgment
interest on sales of infringing mattresses made between January 1, 2004 through September 15,
2004. Under 35 U.S.C. § 284, “[u]pon finding for the claimant the court shall award the
claimant damages adequate to compensate for the infringement, but in no event less than a
reasonable royalty for use made of the invention by the infringer, together with interest and costs
as fixed by the court.” “A reasonable royalty calculation envisions and ascertains the results of a
hypothetical negotiation between the patentee and the infringer at a time before the infringing
activity began.” Integra Lifesciences I, Ltd. v. Merck KgaA, 331 F.3d 860, 870-71 (Fed. Cir.
2003) (citations omitted). The determination of a reasonable royalty is committed to the
discretion of the district court. Golight, Inc. vy. Wal-Mart Stores, Inc., 335 F.3d 1327, 1338 (Fed.
Cir. 2004).

Intex argues that no evidence exists to support an a 13.5 percent royalty rate sought by
Plaintiffs, as the evidence relied upon at trial was only directed to sales occurring before 2004.

However, as discussed above, the computation of a reasonable royalty contemplates a negotiation