## United States Court of Appeals for the Federal Circuit

05-1241, -1267, -1588

GO MEDICAL INDUSTRIES PTY, LTD. and ALEXANDER G.B. O’NEIL, Plaintiffs-Appellants,

v.
INMED CORPORATION (doing business as Rüsch), Defendant-Cross Appellant, and ALPINE MEDICAL, INC. (formerly known as Medica l Marketing Group, Inc.), Defendant-Cross Appellant.

Patrick J. Flinn , Alston & Bird, LLP, of Atlanta, Georgia, argued for plaintiffsappellants. With him on the br ief were Robin L. McGrath , Angela Payne James and Andrew J. Wilson

. William K. West, Jr. , Howrey LLP, of Washi ngton, DC, argued for defendantcross appellant Inmed Cor poration. Of counsel on the brief were Juliana M. Cofrancesco , Susan M. Kayser and Jim W. Ko

. Ron L. Quigley , Davis, Matthews & Quigley, P.C., of Atlanta, Georgia, argued for defendant-cross appellant Alpine Medical, Inc. Of counsel was Charles E. Campbell , McKenna Long & Aldridge, LLP, of Atlanta, Georgia. Appealed from: United States District C ourt for the Northern District of Georgia Judge Thomas W. Thrash, Jr .

## United States Court of Appeals for the Federal Circuit
05-1241, -1267, -1588

GO MEDICAL INDUSTRIES PTY, LTD. and ALEXANDER G.B. O'NEIL, Plaintiffs-Appellants,

v. INMED CORPORATION (doing business as Rüsch), Defendant-Cross Appellant, and ALPINE MEDICAL, INC. (formerly known as Medica l Marketing Group, Inc.), Defendant-Cross Appellant.

__________________________

DECIDED: October 27, 2006

__________________________

Before MICHEL, Chief Judge , ARCHER, Senior Circuit Judge , and LINN, Circuit Judge

. MICHEL, Chief Judge

. Go Medical Industries, Pty., Ltd. and Dr. Alexander G.B. O'Neil (collectively "Go") appeal from a final judgment of the United States District C ourt for the Northern District of Georgia. Go challenges orders (1) gr anting its motion for summary judgment of patent infringement but finding, inter alia, t hat the asserted claims were invalid as anticipated because Go was not entitled to claim the priority date of an earlierapplication, Go Medical Indus. Pty., Ltd. v. Inmed Corp. , No. 01-CV-313 (N.D. Ga. July 9, 2003) ("SJ Order"); (2) denyi ng its motion for prejudgment interest, Go Medical Indus. Pty., Ltd. v. Inmed Corp. , No. 01-CV-313 (N.D. Ga. Sept. 30, 2004) ("Prejudgment Interest Order"); and (3) reduc ing the jury's award of damages on Go's claims for trademark infringement and breach of contract upon granting judgment as a matter of l a w ("JMOL"), Go Medical Indus. Pty., Ltd. v. Inmed Corp. , No. 01-CV-313 (N.D. Ga. Jan. 25, 2005) ("First JMOL Order") . Specifically, Go argues that (1) the district court erred in granting summary judgment on the patent claim because there were factual dis putes as to whet her the earlier patent application met the requirements of 35 U.S.C. § 112; (2) pr ejudgment interest should ha ve been awarded becaus e t h e contract damages wer e liquidated; and (3) t he damages award s hould not have been reduced. Inmed Corporation, doing bus iness as Rüs c h, Internat ional ("Rüs c h"), and Alpine Medical, Inc., formerly known as Medical Marketing Group, Inc. ("MMG"), separately cross-appeal. Rüsch contends that the distri ct court erred in entering a permanent injunction, Go Medical Indus. Pty., Ltd. v. Inmed Corp. , No. 01-CV-313 (N.D. Ga. Sept. 30, 2004) ("Injunction Order"), bec ause Go had no tr ademark rights in the surname "O'Neil." MMG, on th e other hand, asserts that (1 ) public policy bars Go's claims; (2) the district court erred in deny i ng its sec ond motion for JMOL requesting elimination of all the contract damages, Go Medical I ndus. Pty., Ltd. v. Inmed Corp. , No. 01-CV-313 (N.D. Ga. Aug. 5, 2005) (" S e cond JMOL Order"); and (3) there can be no implied trademark license of a surname that has not achieved secondary meaning.

05-1241, -1267, -1588 2As described in further detail below, we conclude that the district court misapplied the doctrine first set forth by Lear, Inc. v. Adkins , 395 U.S. 653 (1969), in reducing the damages for MMG's br each of contract. On all other issues, however, we find no reversible error. We thus affi rm-in-part, vacate-in-part, and remand for a recalculation of damages. I. BACKGROUND Urinary catheters typically increase the risk of urinary tract infections bec a use inserting a catheter can pus h bacteria into the normally st erile bladder. Most of the bacteria are concentrated in the first 1.5 cm to 2 cm of the uret hra, due to a natura l pressure barrier located about 1.5 cm from the outer end.
Dr. O'Neil invented a catheter with a sheath that does not extend beyond this pressure barrier—thus reducing the likelihood of contamination caused by the sheath itself—and obtained Unit ed States Patent No. 4,652,259 (" the ' 259 patent ") in 1987. The '259 patent was issued from a 1985 conti nuation-in-part application that claimed the priority date of an applicat ion filed on September 12, 1979. 1 The claims of the '259 patent recite the use of a stop member to lim it the insertion of the sheath to either "about 1.5 cm" or moving the sh eath along the urethra such t hat the distal end is in a "known position of maximum pressure ," but not beyond that position. Go Medical Industries, Pty., Ltd., founded by Dr. O'Neil in 1982, is an Australian limited liability company that manufactures and markets the type of uri nary catheters

1 The original 1979 applica tion was not limited to ur inary catheters; instead, the claims were drafted broadly t o include a va riety of medical ins t ruments "for insertion into a body passage." The examiner repeatedl y rejected the claims as anticipated or obvious ov er the prior art, and the applicatio n was s ubs equently abando ned. Dr. O'Neil also filed continuat ion applications in 1981 and 1 984, but both were eventually abandoned as well.
05-1241, -1267, -1588 3described in the '259 patent. Go's products were initially distributed in the United States by Penine Healthcar e , a medical manufac turing and supply company based in the United Kingdom. In 1988, Go and M M G entered into a 99 -year contract that gave MMG the

exc l usiv e right to distribute such catheter s within the United Stat es. The agreement provided that Go and MMG would share the net profits equa lly. At first, M M G purchased products from Go, but, for va rious reasons, soon started manufacturing catheters itself and selling them as "MM G/O'Neil" catheters. MMG reg i stered the "MMG/O'N e il" trademark on January 12, 1993. Starting in 1991, MMG began paying Go 7% of gross sales on th e "MMG/O'Neil" catheters in lieu of 50% of net profits, although it was later rev ealed that this amount was not equivalent. In 1997, the 1988 agr eement was amended. Significantly, the parties agreed that 7% of the gross sales "represent[ed] Go M edical USA' s 50% net profit share." The term of t he contract was also reduc ed from 99 years to the life of the '259 patent. Finally, the 1997 amendment explic itly provided that the parties would share any intellectual proper ty enforcement costs. Bo th the 1988 agreement and the 1997 amendment were silent on whether MMG was also licen sing the right to use the "O'Neil" name on its catheters. In 1992, MMG urged Go to sue when C.R. Bard entered the market with a competing catheter. Go alleges that MMG refused to share in the costs of litigation, despite their contractual obligation to do so . In March 1999, the district court granted summary judgment in favor of C

. R. Bard, fi nding the ' 259 patent unenforceable due to

05-1241, -1267, -1588 4inequitable conduct and invalid as anticipat ed. 2 On August 1, 2000, this court reversed and remanded for further proceedings. Go Medical Indus. Pty., Ltd. v. C.R

. Bard, Inc

. , 250 F.3d 763, 2000 WL 1056063 (F ed. Cir. 2000) (unpublished table dec ision). That case settled shortly th ereafter. Meanwhile, in a letter dated June 21, 1999, MMG notifi ed Go that it believ ed they "no longer ha[d] a cont ract" since the district court had found the '259 pat ent inva lid

. Consequently, it started plac ing its royalty payments in escrow around April 1999. In August 1999, Go terminated the agreemen t and demanded that MMG cease using the "O'Neil" trademark. MMG refused and c o ntinued to sell " MMG/O'Neil" c a theters even after it sold its assets to Rüsch in Febr uary 2000 for $38 million. In 2003, howev er, Rüsch changed the name of its catheters to "Rüsch/MMG."
* * * On February 1, 2001, Go sued MMG and Rüsch in the Unit ed States Dist r ict Court for the Northern District of Georgia. Go alleged patent infringement, breach of contract, tortious interference with contra ct, conspiracy to breach fiduciary duty, trademark i n fringement, and unfair competiti on. On July 3, 2003, the district court granted summary judgment in favor of MMG and Rüsch, finding the '259 pat ent infringed, but inv a lid as anticipated. The parties agreed that a 1982 article written by Dr. O'Neil anticipated the '259 patent if Go could

2 During the course of t hat litig atio n, Go correct ed two gaps in co-pendency of the chain of applic at ions leading up to the '259 patent so it c o uld c l aim the benefit of the 1979 filing date. Go had conceded that the '259 patent was otherwise anticipated by the 1980 publication of Dr. O' Neil's U.K. patent application. C.R. Bard alleged that Dr. O'Neil misrepresented when he first bec ame awar e that the 1979 application had been abandoned, such that hi s petition to revive that applic ation was not timely filed. See Go Medical Indus. Pty., Ltd. v

. C.R. Bard, Inc. , 250 F.3d 763, 2000 WL 1056063, at *2-5 (Fed. Cir. 2000) (unpub lished table decision).
05-1241, -1267, -1588 5not claim the 1979 priority date. SJ Order, slip op. at 4-5. The court concluded that Go
was not en titled to claim the benefit of t hat filing date because th e 1979 a p p lication di d not satisfy the written description or best mode requirements under 35 U.S.C. § 112, ¶ 1. Id. , slip op. at 6-16. It denied summa ry judgment on the issue of enablement, however, because there remained a genuine fa ctual dispute whet her the amount of experimentation requir ed to prac ti ce the invention was undue. Id. , slip op. at 16-18. In addition, the court granted summary judgm ent in favor of Go on the inequit a ble conduct is sue, concluding that there was insu fficient evidence to support a finding of material misrepresentation in light of the Federal Circuit's decision in the previou s litigation. Id

. , slip op. at 22-31. T he district court further granted summary judgment in favor of MMG and Rüsch on lost pr ofits, fi nding that Go coul d not satisfy the four-factor test for recovering lost prof its for patent infringement. Id. , slip op. at 39-47. As for the trademark claims, MMG and Rüsch had themselves asserted a likelihood of confusion bet ween "O'Neil" and "MMG/O'N eil" in their trademark counterclaims; the court found this to constitu te a judicial admiss i on on that issue. Id. , slip op. at 38-39. Yet, the district c ourt denied summary judgment because there remained questions of triable fact as to whether "O'Neil" had acquired secondary meaning, whether the agreem ent between the parties in cluded an implied trademark licens e, and whether the "O 'Neil" mark was abandoned due to nak ed licens ing. Id. , slip op. at 31-38. In February 2004, the case proceeded to trial. At the close of plaintiff's case, the district court granted JMOL on Go's claim s fo r the breach of fiduciary duty and tortious interference with contract. This ruling is no t being appealed. At the close of evidenc e,

05-1241, -1267, -1588 6MMG and Rüsch made motions for JMOL under Rule 50(a), which were denied. The jury returne d a verdict in fa vor of Go. On the breach of contract claim agains t MMG, the jury awarded $6,156, 571. On the trademark in fringement claim against MMG, the jury awarded $350,838 as a reasonable royalty, $3,873,236 for unjust enrichment, and $19,000,000 in punitive damages. As for the trademark infri ngement claim against Rüsch, the jury awarded $2,672, 419 as a reas onable royalty and $32, 265,634 for unjust enrichment. MMG and Rüsc h both challen ged these damages awards with renewe d motions for JMOL under Rule 50(b). On September 30, 2004, t he district court denied G o 's motion for prejudgment interest. The court found that the contract claim was not a liquidated claim; it further declined to award prejudgment in terest on the Lanham Act claim. Prejudgment Interest Order, slip op. at 1. The same day, the court granted Go's motion for a permanent injunction and prohibited MMG and Rüsch from using "O'Neil" or any confusingly similar mark. Injunction Order, slip op. at 2. On January 25, 2005, MMG's motion fo r JMOL was granted-in-part and denied-in-part; Rüsch's moti on was als o granted. Se e First JMOL Order. The district court applied the Lear doctrine to preclude royaltie s owed after March 1999 (when the '259 patent was found invali d in the litigation against C.R. Bard) and reduc ed MMG's contract damages accordingly. Id. , slip op. at 6-11. As for the trademark damages , the court characterized the jury's reasonable royalty award as recovery based on profit s rather than actual damages (and thus subject to reduction in accordance with the principles of equity) because it was based on a wholly speculativ e royalty rate that Go's expert "arbitrarily pulled out of the air." Id. ,

05-1241, -1267, -1588 7slip op. at 16. The court also exercised its discretion under the Lanham Act to set aside the jury's award of lost profits, id. , slip op. at 17-22, and expressly rejected Go' s argument that the jury awarded lost profit damages un der common law. Id. , slip op. at 22-23. The court further reasoned that t he award of punitive damages against MMG (which allegedly infringed for si x months), but not Rüsch (whi ch allegedly infringed for forty months), suggested that the jurors were punish ing MMG for actions relating to its breach of contract, which was no t permitte d by O.C.G.A. § 13- 6-10. Id. , slip op. at 24-25. The court concluded t hat the jury, which had not been told that the '259 patent was ruled invalid, was "obvious ly swayed" by counsel's argument that MMG had stolen
Dr. O'Neil's invention as well as "the mass of irrelevant and prejudicial evidence that was admitted during the trial." Id. , slip op. at 26. In a separate order, also dated January 25 , 2005, the court found that this case was not exceptional and denied Go's motion for at torney's fees. This ruling is not being challenged on appeal. On February 10, 2005, final judgment was entered. A timely appeal and cross-appeals followed. On February 25, 2005, however, MMG filed another JMOL motion, challenging the breach of contra ct damages. In April 2005, this court deactivated the notice of appeal to allow the district c ourt an opportunity to dispos e of this last outstanding motion. On August 5, 2005, the district court rejected MMG's additional arguments conc erning various contractual prov isions and denied the motion. Second J M OL Order, slip op. at 7-12. The notice of appeal was reactivated on August 17, 2005. We have jurisdiction pursuant to 28 U

. S.C. § 1295(a)(1).

05-1241, -1267, -1588 8II. DISCUSSI ON A. Patent Invalidity A district c ourt’s grant of summary judgm ent on the issue of patent invalidity is reviewed without def erence. Augustine M ed., Inc. v. Gaymar Indus., Inc. , 181 F.3d 1291, 1302 (Fed. Cir. 1999). Here, Go conc eded that a 1982 article written by
Dr. O'Neil fully antic ipated the ' 259 patent if it was not entitled to claim the filing date of its original 1979 applicati on. W hether a patent is entitled to an earlier priority date is also reviewed without deference. In re Daniels , 144 F.3d 1452, 1455 (Fed. Cir. 1998). A patent applic ation f o r an invention disc lo s ed in a previously-f iled application in
a manner t hat satisfies all t he requirements of 35 U.S.C. § 112 is entit led to the benefit of the earlier filing dat e. 35 U.S.C. § 120. A continuat ion- in-part application "contains subject matter from a prior application and may also contain additional m a tter not disclos ed in the prior applic ation." August i ne , 181 F.3d at 1302. New subject matter does not receive the benefit of the earlier priority date. Id. The claims of the ' 2 59 patent require th e c a theter sheath to be inserted "about 1.5 cm" or up to (but not beyond) a "know n positio n of maximum pressure." The specification of the 1979 ap plic ation discloses that "the stop means can be set [at] a predetermined distance along the s heath depending on the usual extent of bacteria within the passage." Figure 1, shown her e, "is a schematic diagram showing the distribution of bacteria in a female urethra."

05-1241, -1267, -1588 9The spec ification further disclos es that t he sheath s hould be inserted "to an extent whereby its distal end penetra tes beyond bacteria disposed adjacent the prox imal end of the passage," such that in at least one em bodiment, the dist al end of the c o ver is at the area marked "X" in Figure 1. In determi ning whether the best mode r equirement of 35 U.S.C. § 112, ¶ 1 is met, we first determine whether Dr. O'Neil s ubjectively consider ed a partic u lar mode of practicing the invention to be superior to a ll other embodiments at the time the 1979 application was filed. See, e.g. , Liquid Dynamics Corp. v. Vaughan Co. , 449 F.3d 1209, 1223 (Fed. Cir. 2006). If so, we then ask whet her he provided a sufficient disclosure to allow others to practi ce that best mode. Id. As to the first prong of this test, Dr. O' Neil admitted during his deposition that at the time he filed his patent application in 1979, he had already m ade sample catheters where the distance from the st op member to the distal end of the sheath was 1.5 cm. He further characterized it as "the preferred embodim ent at that stage." O'Neil Dep. 228:12-14, Sept. 21, 1994. The '259 patent, at col.2, ll.65-69, describes this distance as "crucial" to preventing bacteria from being pushed into t he bla dder by the catheter or by the sheath itself. The distri ct court thus correctly conc luded that Dr. O'Neil possessed a best mode—i.e., a sheath length of 1.5 cm. SJ Order, slip op. at 13. We also agree with t he district court t hat the 1979 applic at ion lacked sufficient disclos ure to allow ot hers to practice the best mode. Id. , slip op. at 14. There is no dispute that the preferred lengt h of 1.5 cm was not expressly dis c losed. Dr. O'Neil eve n testified at his deposition that when dr afting the 1979 application, he purpos ely

05-1241, -1267, -1588 10"avoid[ed] any comment with relation to length" because he " w as aware that numbers would become limiting themselves ." O'Neil Dep. 228:23-229:6. Nor were t he drawings submitted with t he 1979 applic ation sufficient. There is no indic a tion that Figure 1 was drawn to any particular scale, much less one where the distance between the "X" and the outer end of the ur ethra is exactly 1.5 c m . “[P]atent drawings do not define the precise proportions of the elements and may not be relied o n to show particular sizes if the specific ation is c o mplete ly silent on the issue.” Hockerson- Halberstadt, Inc. v. Avia Group. Int’l, Inc. , 222 F.3d 951, 956 (Fed. Cir. 2000); see also In re Wright , 569 F.2d 1124, 1127 (C.C.P.A. 1977) (“Absent any written description in the specification of quantitative values, arguments based on measurement of a drawing are of little value.”). Moreover, Dr. O'Neil also test ified that "[i]t took [him ] a few weeks of experiment s to define the distanc e" and others would " have to do a small amount of experimental work" to reach the same conclusion. O'Neil Dep. 229:12-19. In other words, one of ordinary skill would n o t know from reading t he 1979 ap plication that the preferred length between the stop member and the distal end of the sheath was 1.5 cm. In sum, we conclude that the inv ention of the '259 patent was not disclos ed in the 1979 application in a manner that satisfies the best mode requirement—and no reasonable jury could find other wise—suc h that Go is not entitled to claim the priority date of that applic ation. Thus , t he 1982 ar ticle antic ipates. In light of this ruling, we need not address whether the di strict court erred in find ing that the 1979 applic ation also failed to meet the writt en description requirement. We affirm the grant of summary judgment of patent invalidity.

05-1241, -1267, -1588 11B. Prejudgment Interes t On procedural iss ues not unique to patent law, we apply the standard of review of the regional c i rcuit

. Sulzer Tex t il A.G. v. Picanol N. V. , 358 F.3d 1356, 1363 (Fed. Cir. 2004). The denial of prejudgment interest is reviewed for abuse of discretion. Smith v. A m . Int'l Life Assurance Co. , 50 F.3d 956, 958 (11th Cir. 1995). The relevant statute provides: In all cases where an amount ascertained wou l d be the damages at the time of the breach, it may be increased by the addit ion of legal interest from that time until the recovery. Ga. Code Ann. § 20-1408 (emphasis add ed). Because an award of prejudgment interest is intended to be compensatory rat her than punitive, equitable consideration s should be evaluated by t he dist rict court. Osterneck v. E.T. Barwick Indus. , Inc. , 825 F.2d 1521, 1536 (11th Cir. 1987). The district court did not err in conclu ding that the alleged cont ract damages were not liquidated because the amount owed to Go was not as certained until the jury's verdict was rendered. In other words, the royalties due under the licens e (i.e., 50% profits versus 7% gross sales, depending on how the contract was interpreted by the jury) was in dispute. Neither the 1988 agreement nor the 1997 amendment contained a liquidated damages provision. We also find that the district court did not abuse its discretion in declining to award prejudgment interest on Go's claim under the Lanham Act. We therefore affirm the denial of prejudgment interest. C. Damages We now c onsider whether the district c ourt erred in reducing the jury's contract and trademark damages. Judgment as a matter of law is appropriate when " a party has

05-1241, -1267, -1588 12been fully heard on an issue and t here is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that i ssue." F e d. R. Civ. P. 50(a). We review the grant or denial of JMOL de novo, by reapplying the same standard used by the district court. Telecom Tech. Servs. Inc. v. Rolm Co. , 388 F.3d 820, 830 (11th Cir

. 2004). As a preliminary matter, Go argues t hat a district judge may not rely on new grounds not raised in a Rule 50(a) to set aside the jury's verdict. Ross v. Rhodes Furniture, Inc. , 146 F.3d 1286, 1289 (11t h Cir. 1998). It would hav e be en impossible, however, for MMG and Rüsch to challenge t he ju ry's award of damages as excess ive in a Rule 50( a) motion. By def inition, such a motion is m ade "before submis sion of the case to the jury." Fed. R. Civ. P. 50(a). Mo reover, Go failed to object to the Rule 50(b) motions on this procedural ground and cannot do so for the first time on appeal.
1. Breach of Contract
In Lear , the Supreme Court held that a lic ensee was not estopped from challenging the validit y of the lic ensor's pat ent. 395 U.S. at 671. For var i ous policy reasons, a licens ee m a y cease payments due und er a license—i. e ., contractual royalty provisions will not be enforced—during the time it is c hallen g in g patent valid ity in th e courts. Id. at 673. Our court has since clarified that the Lear doctrine does not prevent a patentee from recovering ro y a lties until the date the lic ensee first challenges the validity of the patent. Studiengesellsc haft Kohle, M.B.H. v. Shell Oil Co. , 112 F.3d 1561, 1568 (Fed. Cir. 1997). In other words, a licensee "cannot inv o ke the protection of the Lear doctrine until it (i) actually ceases payment of royalties, and (ii) provides notic e

05-1241, -1267, -1588 13to the licensor that the reason for ceasi ng payment of royalties is bec ause it ha s deemed the relevant claims to be invalid." Id. 3 The district court erred in applying the Lear doctrine to relieve MMG of the obligation t o pay any royalties after the findi ng of patent invalidity during Go' s litigation against C. R. Bard in March 1999. That ruling had no effect on the contractual relationship between Go and MMG. Although the 1997 amendment tied the term of the contract to the life of the '259 pat ent, the license did not automati c ally terminate with the district court's ruling, as MMG believ ed, because the invalidity finding was s t ill pend in g appeal. In fact, MMG's June 21, 1999 letter to Go stated that it was placing its royalt y payments "in an escrow account until such time as the appeal is decided " (emphasis added). T h is was an implic it acknowledgm ent that Go was entit led to the royalty payments, meaning the f unds would be transferred out of e scrow, in the event that the district court's invalidity finding was reversed. Moreover, MMG's June 21, 1999 letter did not state that its reason for ceasing payment of royalties was that it deemed the '259 patent to be invalid. Instead, it merely indic a ted that MMG was placing its royalt y pay ments in escrow until the valid ity of th e patent was resolved on appeal. (Even if it had been sufficient to consti tute the requis it e notice, the district court still erred in finding that Le ar relieved MMG from all royalty payments after March 1999 instead of the date of this notice—i.e., June 1999.) MMG is trying to have it both ways. As the exclusive U.S. distributor of the urinary catheter described in the '259 patent , MMG not only ur ged Go to sue C.R. Bard, but was the primary beneficiary when we later reversed the invalidity finding from that

3 During oral argument, MMG conceded that, in light of Shell Oil , the Lear doctrine did not preclude all cont ract damages, as it had argued in its briefs.
05-1241, -1267, -1588 14litigation. Sign ificantly, it did not file its own declaratory j udgment suit to challenge the patent's validity after it learned about the di strict court's March 1999 ruling. Indeed, until the agreement was terminated by Go in Augu st 1999, MMG was cont ractually obligated to share the costs of enforcing the '259 patent, including the costs of pursuing the appeal. Because the district court misapplied the Lear doctrine, we vac a te and remand for a recalculation of the contract damages.
2. Trademark Infringement The relevant section of the Lanham Act provi des: (a) Profits; damages and costs; attor ney fees. When a violatio n of any right of the registrant of a mark . . . shall have been established in any civil action arising under t h is Act, the plaint iff shall be entitled, subject to the provisions of . . . [ 15 U.S.C. §§ 1111, 1114], and subject to the principles of equity , to recover (1) defendant's profits , (2) any damages sus t ained by the plaintiff, and (3) th e costs of the action. The c ourt shall assess such profits and damages or cause the same to be assessed under its direction. In assessing profits the plaint iff shall be required to prove defendant' s sales only; defendant must prove all elements of cost or deduction claimed. In assess ing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual dam ages, not exceeding three times such amount. If the court shall find t hat the amount of the recovery based on profits is either inadequat e or excess ive the court may in its discretion enter judgment for such sum as the cour t shall find to be just, according t o the circumstances of the case. Such sum in either of the above circumstances shall c onstitute com pensation and not a penalty. The court in exceptional cases may award reasonabl e attorney fees to the prevailing party. 15 U.S.C. § 1117 (emphasis added). First, we agree with the district court that § 1117 does not allow for a downward adjustment of actual damages. The jury's award of a reasonable royalty, however, was not based on substantial evidence of actual damages. There was no evidence of an

05-1241, -1267, -1588 15explic it agr eement setting forth a royalty rate fo r use of the "O'Neil" name on catheters. Rather than analyz e how much MMG would hav e agr eed to pay as a trademark royalty in a hypothetical negotiation, Go's expert merely considered MMG's excess earning s and attributed 3% to the trademark and the rema ining 20% to other factors. This was correctly characterized as a recovery bas ed on MMG's profits, rather than actua l damages in the amount of lost royalties. As such, the district court had discretion under § 1117 to adjust this portion of the jury's aw ard. Go's exper t provided no ex planation for how he assi gned the 3% figure as a reasonable royalty for use of t he trademark; in fact, the dist rict court thought it seemed to be "arbitrarily pulled out of the air." First JMOL Or der, slip op. at 16. T h e court als o pointed to the abundance of ev idence in the record that the succes s of MMG's catheter s was more likely due to its marketing and adv ertising efforts, the super i ority of the product, its eligibility for Medicare reimbursem ent, and other factors, not to the "O'Neil"

name. Id. We find no abuse of discretion in t he court's reduction of this award. As to the jury's awar d of profits, § 1117 gives district courts broad latitude to adjust this amount. 4 The district court pointed to numerous equit a ble cons iderations (which we do not repeat here) weig hing against an award of profits. Id. , slip op. 17-2 3

. Likewise, the district cour t gave sufficient reasons why the jury's punitive damages award was properly s e t aside. Id. , slip op at 25-43. In short, we find no abuse of discretion here.

4 Go's argument that the district court erred in treating the jury's verdict as advisory lacks merit. Section 11 17 expressly empowers the dist rict court to adjust the jury's award if "the amount of the recovery based on profits is either inadequate or excessive."
05-1241, -1267, -1588 16D. Permanent Injunction On cross-appeal, MMG and Rüsch c h allen ge the district c ourt's grant of a permanent injunction, although Rüsch voluntarily dropped t he "O' N eil" des ignation a n d has been calling its products "MMG/Rüsch" catheters since 2003. As such, the permanent injunction, it seems, may have no impact on its operations. To the extent that we need to reach the merits, however , we find that substantial evidenc e s upports the jury's findings (1) that "O'Neil" had acq u ired secondary meaning; (2) that the agreement betw een Go and M M G included an implied trademark license; and (3) that the "O'Neil" mark was never abandoned by Go. Thus, permanent injunctive relief was an appropriate remedy.
* * * We have c onsidered t he remaining argum ents made by each party on the appeal and cross-appeals and find t hem to be unpersuasive. III. CONCLUS ION For the aforementioned r easons, we affirm-in-part, va cate-in-part, and remand for further proceedings consis tent with this opinion. AFFIRMED-IN-PART, VACAT ED-IN-PART, and REMANDED

.

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