Opinion ID: 2403365
Heading Depth: 1
Heading Rank: 17

Heading: District court's post-verdict damage award

Text: The WideBand defendants argue that the exemplary damages awarded by the district court to ClearOne after trial were impermissibly excessive. We review for abuse of discretion the district court's exemplary damage award. See Ensminger v. Terminix Int'l Co., 102 F.3d 1571, 1576 (10th Cir.1996) (reviewing for abuse of discretion punitive damages awarded by the district court under Kansas law); see also Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed.Cir.1992) (An award of enhanced damages for [patent] infringement, as well as the extent of the enhancement, is committed to the discretion of the trial court.), abrogated on other grounds by Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed.Cir.1995). [6] The district court's exemplary damages award, which was issued on April 20, 2009, just prior to the entry of final judgment, was made, at ClearOne's request, pursuant to Section 4(2) of the UUTSA, which provides that [i]f willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award, Utah Code Ann. § 13-24-4(2), of damages for actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss, id. § 13-24-4(1). The district court concluded that, with respect to the WideBand defendants, an award of exemplary damages ... [wa]s appropriate, JA at D17554, in an amount equal to two times the compensatory damages awarded against each of the WideBand defendants, id. at D17558. In other words, the district court awarded ClearOne the maximum amount of exemplary damages against the WideBand defendants that was statutorily authorized under the UUTSA. In support of its award, the district court noted that the UUTSA's exemplary damages provision was modeled after federal patent law, i.e., 35 U.S.C. § 284. Id. at D17553. In turn, the district court looked to federal case law construing federal patent law, and noted that [c]ourts have focused most of their analyses on three factors, which are: (1) whether the defendant deliberately copied the ideas or design of another; (2) whether the defendant held a good faith belief that the conduct did not infringe on another's rights; and (3) the defendant's behavior as a party to the litigation. Id. (citing Read, 970 F.2d at 826-27). The district court also noted that additional factors have been identified and applied in decisions addressing whether to award exemplary damages: (4) the defendant's size and financial condition; (5) the closeness of the case; (6) the duration of the defendant's conduct; (7) remedial action taken by the defendant; (8) the defendant's motivation for harm; and (9) whether the defendant attempted to conceal the misconduct. Id. at D17554 (citing Read and other cases). Applying those factors in light of the evidence presented at trial and the jury's findings, the district court concluded that: (1) the WideBand defendants acted willfully in misappropriating the Honeybee Code; (2) none of the WideBand Defendants held a good faith belief that the copying and use of [the] Honeybee Code trade secret was proper, id. at D17555; (3) [t]he WideBand Defendants' behavior during the litigation ... compound[ed] their problems because Yang lied during his deposition, Chiang ... made a `sudden discovery' of materials late in the litigation, the WideBand defendants in general often resisted ClearOne's discovery efforts and offered less than convincing reasons therefor, id. at D17556, the district court had to enter a preliminary injunction to halt WideBand's intended licensing and transfer of object code at issue in the litigation to non-party Harman Music Group even after ClearOne instituted the lawsuit, id. at D17556-57, the district court held `show cause' hearings to determine whether certain WideBand Defendants had violated two different court orders, id. at D17557, and the magistrate judge sanctioned the WideBand Defendants for discovery abuses by awarding approximately $36,000 in attorneys' fees to ClearOne, id.; (4) the WideBand defendants attempted to conceal their misconduct, id.; and (5) the case was not a close call, id. The district court also placed [s]pecial weight ... on the jury's verdict, id., and found [p]articularly compelling ... th[e] fact that the jury found willful and malicious misappropriation and awarded not only substantial compensatory damages to ClearOne but substantial punitive damages as well, id. at D17558. [7] In sum, the district court concluded that an award of exemplary damages would accomplish the public objective of punishing and deterring malicious conduct. Id. On appeal, the WideBand defendants assert four challenges to the district court's reasoning. First, they argue that ClearOne never definitively demonstrated that [Lonny] Bowers, WideBand Solutions, or Versatile DSP ever had actual knowledge or possession of the source code at issue in this case. Aplt. Br. at 42-43. The initial problem with this argument is that the WideBand defendants have not directly challenged the sufficiency of the evidence supporting the jury's findings. In any event, we have already noted that, having reviewed the trial transcript, we believe the evidence presented at trial was sufficient to establish that each of the WideBand defendants possessed the Honeybee source code, either directly or constructively. Moreover, the jury specifically found that each of the WideBand defendants, including Lonny Bowers, WideBand, and Versatile, knowingly and maliciously misappropriated the Honeybee Code. We thus reject the WideBand defendants' first argument. The WideBand defendants next argue that, had the [district court] not abused its discretion by preventing [them] from impeaching [ClearOne's] Trial Exhibit 156 and ClearOne's expert witness testimony [from Thomas Makovicka], the jury's ultimate deliberation would have likely been, at the very least, a close call. [8] Id. at 43. According to the WideBand defendants, [t]heir experts would have been able to impeach ... Makovicka's test results, and they would have proven that the tests that ClearOne's experts performed on ClearOne's echo cancellation units and WideBand's units were egregiously flawed, because the tests could not make a comparison between the actual software that was operating inside each of the units. Id. We find no merit to this argument. To begin with, the WideBand defendants fail to identify who their experts are. Presumably, they are referring either to one or more of the individual WideBand defendants, or to hypothetical experts that they would have hired had the district court granted Lonny Bowers' Rule 60(b) motions and afforded all of the WideBand defendants a new trial. In any event, we conclude that this argument is nothing more than a rehash of the WideBand defendants' challenge to the district court's denial of Lonny Bowers' pro se Rule 60(b) motions. For the reasons we have already discussed, the district court did not abuse its discretion in denying those motions. In their third argument, the WideBand defendants contend that the district court failed to take several crucial Read factors into consideration, id. at 44, including the Defendants' size and financial conditions, id., the duration of [their] supposed wrongful conduct, id. at 45, and whether they had taken any remedial action during the course of litigation, id. The defendants, however, are clearly mistaken. In considering the amount of exemplary damages to impose, the district court expressly outlined all of the Read factors, but ultimately discussed in detail only the ones it found relevant under the facts of this case. In other words, the district court did not ignore or overlook the three Read factors now cited by the defendants; instead, the district court effectively concluded that none of those factors weighed heavily, if at all, in the defendants' favor. And our own review of the record on appeal supports that conclusion. Of these three factors, only the size/financial condition factor remotely favors defendants. As for the other two factors, the record clearly establishes that the WideBand defendants' wrongful conduct continued well past the time of trial, and indeed necessitated several show cause hearings and, ultimately, orders of contempt. In sum, we conclude the district court did not abuse its discretion in awarding exemplary damages equal to double the amount of actual damages imposed by the jury against the WideBand defendants.