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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

SDS KOREA CO. LTD.,

Plaintiff,

v.

SDS USA, INC., et al.,

Defendants.

Civ. No. 2:10-cv-4053 (WJM)

MEMORANDUM 

OPINION

THIS MATTER comes before the Court on Plaintiff’s motion for default 

judgment against Defendant XM Systems, Inc. (“XM”), a South Korean 

corporation, pursuant to Federal Rule of Civil Procedure 55(b)(2). Plaintiff

commenced this action on August 6, 2010 against SDS USA, Inc., iBend, LLC, 

Simon Song, and various John Doe defendants, seeking damages and injunctive 

relief for federal trademark infringement, copyright infringement, unfair 

competition, and related claims. Defendants all filed answers. Plaintiff thereafter 

represented that it learned that XM was also involved in the allegedly wrongful 

conduct and sought leave to amend to add XM and several related claims arising 

from the same factual allegations. Defendants opposed. The Court granted leave, 

and, on February 21, 2011, Plaintiff filed the Amended Complaint naming XM as a 

party and adding new, but related, claims against all Defendants. On May 10, 

2012, the Court entered default judgment against XM in an amount to be 

determined and order Plaintiff to submit additional briefing and evidence on the 

issue of damages. ECF No. 57. On May 29, 2012, the Court entered a revised 

permanent injunction against XM. ECF No. 64. Also before the Court is Plaintiff’s 

motion for an award of attorney’s fees and costs. The Court has received Plaintiff’s 

supplemental briefing, which includes documentary evidence and additional sworn 

declarations, and now has an adequate record from which to fix the appropriate 

judgment amount. 

Plaintiff requests compensatory damages for the profits it lost as a result of 

XM’s patent infringement violations in the United States and further argues that 

the Court should treble the damages on the basis that XM willfully infringed and 

acted in bad faith. The Court finds that Plaintiff is entitled to lost profits and that an 

award of treble damages is appropriate. 

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Section 284 of the Patent Act provides, in pertinent part, that “[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 

the use made of the invention by the infringer, together with interest and costs as 

fixed by the court.” 35 U.S.C. § 284; see Rite–Hite Corp. v. Kelley Co., Inc., 56 

F.3d 1538, 1544 (Fed.Cir. 1995). The amount of damages, or harm sustained by a 

patentee, is a question of fact, and “[w]hen the damages are not found by a jury, 

the court shall assess them.” 35 U.S.C. § 284. The phrase “damages adequate to 

compensate” means “full compensation for any damages’ [the patentee] suffered as 

a result of the infringement,” General Motors Corp. v. Devex Corp., 461 U.S. 648, 

654 (1983), which includes any foreseeable lost profits the patentee can prove, 

Grain Processing Corp. v. American Maize–Prods. Co., 185 F.3d 1341, 1349 

(Fed.Cir. 999). When basing alleged lost profits on lost sales, the patentee has an 

initial burden to show a reasonable probability that it would have made the asserted 

sales “but for” the infringement. Grain Processing Corp., 185 F.3d at 1349. 

A patentee who claims lost profits must show: (1) demand for the patented 

product; (2) absence of acceptable non-infringing substitutes; (3) capacity to 

exploit the demand in the absence of the infringing products; and (4) the amount of 

profit the patentee would have made. See Panduit Corp. v. Stahlin Brothers Fibre 

Works, Inc., 575 F.2d 1152 (6th Cir.1978); Rite–Hite Corp. v. Kelley Co., Inc., 56 

F.3d at 1545 (“[ Panduit ] articulated a four-factor test that has since been accepted 

as a useful, but non-exclusive, way for a patentee to prove entitlement to lost 

profits damages.”). In calculating lost profits, absolute certainty is not required; 

rather, a party must only show with reasonable probability that he would have 

made additional sales in the absence of the infringing product. See Crystal 

Semiconductor Corp. v. Tritech Microelectronics Int’l, Inc., 246 F.3d 1336, 1353-

54 (Fed.Cir. 2001).

Based on the undisputed record evidence, including the declarations of 

Kyong Chan Lim, President of the Plaintiff’s U.S. Operations, Man Sik Cho, 

former Executive Director of XM, and Sang Moo Lee, former Auditor of XM, and 

invoices showing the sale of specific infringing products by XM, the Court finds 

that XM sold $799,580 worth of infringing products and that Plaintiff ordinarily 

would have enjoyed a profit of 35% on that amount. Plaintiff is thus entitled to 

compensatory damages of $279,853 for lost profits.

Pursuant to 35 U.S.C. § 284, a court may “increase the damages up to three 

times the amount found or assessed.” Enhanced damages are punitive in nature and 

are based upon the conduct and culpability of the infringer. Jurgens v. CBK, Ltd., 

80 F.3d 1566, 1570 (Fed.Cir. 1996). An award of enhanced damages requires a 

showing of willful infringement, but a finding of willfulness does not mandate 

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enhanced damages, much less treble damages. See Cybor Corp. v. FAS Techs, Inc., 

138 F.3d 1448, 1461 (Fed.Cir. 1998) (citations omitted). Rather, “the paramount 

determination . . . is the egregiousness of the defendant’s conduct based on all the 

facts and circumstances. ” Id. (quotation omitted). Thus, enhancement of damages 

is within the discretion of the district court and is informed by the totality of the 

circumstances. See State Indus., Inc. v. Mor–Flo Indus., Inc., 948 F.2d 1573, 1576 

(Fed.Cir.1991). The Federal Circuit has provided district courts with several 

factors commonly referred to as the “Read factors” to consider when determining 

whether damages should be enhanced: (1) whether the infringer deliberately copied 

the ideas or design of another; (2) whether the infringer, when he knew of the 

other’s patent protection, investigated the scope of the patent and formed a goodfaith belief that the patent was invalid or not infringed; (3) the infringer’s behavior 

as a party to the litigation; (4) the infringer’s size and financial condition; (5) 

closeness of the case; (6) duration of the infringer's misconduct; (7) remedial 

action by the infringer; (8) the infringer’s motivation for harm; and (9) whether the 

infringer attempted to conceal its misconduct. See Read Corp. v. Portec, Inc., 970 

F.2d at 826-27 (Fed.Cir. 1992) (superseded on other grounds as recognized in

Hoechst Celanese Corp. v. BP Chemicals Ltd., 78 F.3d 1575, 1578 (Fed.Cir.

1996)).

Based on the undisputed record evidence and an analysis of the Read factors, 

the Court finds that an award of enhanced damages is appropriate. Plaintiff has 

shown that XM’s infringement was willful and has been ongoing since 2006, 

despite previous litigation and attempts to prevent infringement. XM has acted in 

bad faith and has not attempted to investigate the proper scope of the patents it 

infringed. Thus, the Court trebles Plaintiff’s award for lost profits to $839,559.

Plaintiff also requests an award of attorney’s fees and costs. Section 285 of 

the Patent Act provides for the “award [of] reasonable attorney fees to the 

prevailing party” in “exceptional” patent infringement cases. 35 U.S.C. § 285. To

determine whether to award fees, a court should undertake a two-step process: (1)

whether the prevailing party has proven by clear and convincing evidence, that the 

case is “exceptional.”; and (2) whether an award of fees is appropriate. See Forest 

Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1327 (Fed.Cir. 2003). Exceptional 

circumstances include willful infringement, misconduct, and vexatious or frivolous 

litigation. Hoffman-La Roche Inc. v. Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 

2000). XM’s continuous and ongoing willful infringement justifies a finding that 

this case is “exceptional” and, accordingly, an award of attorney’s fees. 

The amount of the award is assessed at the discretion of the district court, 

but in determining the reasonableness of the award, the Court must find some

evidence to support the reasonableness of, inter alia, the billing rate charged and 

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the number of hours expended. Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 

1068 (Fed. Cir. 1983). Here, the facial value of Plaintiff’s total request for fees and 

costs is surprisingly high in light of the procedural posture of this case – Plaintiff 

requests $120,045.99 for obtaining a default judgment against XM. That amount 

includes $111,073.50 in fees and $8,972.49 in costs. But, on further reflection of 

the facts and history of the litigation and the billing information provided by 

Plaintiff, the request appears more reasonable. This was a complicated 

infringement action and required Plaintiff’s counsel to become acquainted with 

international service procedures and attempt service in a foreign country. Plaintiff 

only learned of the level of XM’s involvement after the litigation had begun, and 

Plaintiff had to litigate the issue of adding XM as a defendant – which the other 

defendants opposed. The Court also notes that Plaintiff has strived to limit its 

request for fees and costs to only those expenses which it believes are associated 

with its litigation against XM in particular. 

But the Court notes that on review of Plaintiff’s filings that a full award of 

the requested amount is not reasonable. First, the Court notes that while Plaintiff’s 

amendment was to add XM as a party, at least some of the litigation costs 

associated with that amendment arose because of the acts of the other defendants; 

the Court does not believe that it would be reasonable to award that entire amount 

against XM based on the present record and a reduction is appropriate to avoid as 

much. The Court also notes that it denied Plaintiff’s original motion for default 

judgment, see ECF No. 53, and thus an additional reduction is appropriate to 

account for the fact that Plaintiff was unsuccessful in its first attempt. The Court 

also notes that at least some entries in Plaintiff’s filings appear to be connected to 

Plaintiff’s litigation in Korea against XM and not clearly connected to merely 

enforcing this Court’s orders in that foreign jurisdiction – a reduction is also 

appropriate to account for this. Finally, the Court finds that the overall number of 

hours counsel expended, to the extent the Court is able to make such calculations 

on the basis of these filings, was slightly higher than would be reasonable given 

that the proceedings against XM never advanced to include in-depth discovery or 

complex motion practice, other than for default judgment. To reflect these 

findings, the Court will reduce the overall award of fees by 10% but will award the 

full amount of expenses, all of which appear reasonable.1

 1 Plaintiff’s fee application does not indicate individual hourly rates for the attorneys or the time 

spent on particular assignments: it only provides amounts charged. While this provides the Court

with information necessary to assess the reasonableness of Plaintiff’s fee request, it makes lineby-line reduction of fees or calculation of the lodestar amount difficult. As such, the Court will 

resort to this modest, across-the-board reduction, rather than a more precise entry-by-entry 

calculation. The Court finds that this reduction is reasonable under the circumstances and does 

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In sum, the Court will award Plaintiff’s $839,559 in lost profits, $99,966.15 

in fees, and $8,972.49 in expenses, for a total award of $948,497.64.

2 An 

appropriate order follows.

 /s/ William J. Martini

 WILLIAM J. MARTINI, U.S.D.J.

 

not wish to force Plaintiff to incur additional fees in making yet another supplemental filing, 

especially in light of the fact that those additional fees likely would not be part of any final 

award. 

2 Pursuant to 28 U.S.C. § 1961, Plaintiff will also be entitled to post-judgment interest on the 

total amount, as calculated in accordance with subsection (a) of that statute. 

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