Opinion ID: 210959
Heading Depth: 2
Heading Rank: 6

Heading: JMOL on Lost Profit Damages

Text: 67 Medtronic argues on cross-appeal that the court erred in denying its motion for JMOL on the subject of lost profits because DePuy Spine did not become an exclusive licensee of Biedermann Motech's '678 patent until the 1999 Exclusive License Agreement was entered into on August 31, 1999. Because Biedermann Motech lacked manufacturing and marketing capacity to meet demand, Medtronic argues that neither party can claim lost profit damages prior to that date and that the jury's judgment awarding damages from before that date should be adjusted. 68 DePuy counters that determining an exclusive licensee relationship is a factual matter and that substantial evidence supports the jury's finding that an exclusive licensee relationship was created by a 1993 Technology Agreement that became operative with respect to the '678 patent in January 1998. DePuy argues that the 1999 Exclusive License Agreement merely confirmed the rights created by the 1993 Technology Agreement. 69 Medtronic replies that determining the date when lost profits are legally compensable is a question of law and that the district court determined when DePuy Spine became an exclusive licensee in an Order dated November 18, 2002. Medtronic replies that a 1993 Exclusive License Agreement specifically addressed patent rights whereas the 1993 Technology Agreement did not, and that therefore the 1993 Technology Agreement could not form the basis for an exclusive license under the '678 patent. 70 Whether DePuy Spine is entitled to lost profits is a question of law. Poly-America, 383 F.3d at 1310-11. DePuy's assertion that determining whether an exclusive license exists is a factual matter is based on Wang Laboratories v. Mitsubishi Electronics, 103 F.3d 1571 (Fed.Cir.1997). Wang Laboratories dealt with whether an implied license was created as a result of the parties' conduct. Id. at 1578. Though the parties in Wang Laboratories agreed to submit that question to the jury, id., we recognized that the ultimate conclusion was a legal one that was based on underlying findings of fact regarding the parties' conduct and the existence of consideration, id. at 1579-80. Here, the underlying facts are not in dispute. Accordingly, we review this issue de novo. 71 Medtronic limits its cross-appeal to a challenge of the jury's lost profit award during the period prior to the 1999 Exclusive License Agreement, arguing that (1) DePuy Spine was not an exclusive licensee during the relevant time period, and therefore its lost profits were not recoverable; and (2) Biedermann Motech lacked manufacturing and marketing capacity to meet demand, and therefore it had no basis to recover its own lost profits. Medtronic does not contest that if DePuy Spine was an exclusive licensee during the relevant time period, it is entitled to the lost profits at issue here. See Weinar v. Rollform Inc., 744 F.2d 797, 806-08 (Fed.Cir.1984) (affirming an award of lost profit damages to a licensee with the exclusive right to sell in the entire United States). We begin our analysis by determining whether DePuy Spine was an exclusive licensee of the '678 patent during the relevant time period. 72 Medtronic's assertion that the district court ruled on this issue with finality in its November 18, 2002 Order is incorrect. In that Order, the court stated that [t]he standing of Plaintiff DePuy Acromed, Inc., commenced on August 31, 1999, when Biedermann Motech granted DePuy Acromed an exclusive license to the '678 patent. DePuy Acromed, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-10165-EFH (D.Mass. Nov. 18, 2002). To the extent this order reflected the court's initial conclusion, that conclusion was apparently reversed. In denying Medtronic's motion in limine to exclude evidence of lost profits damages before August 31, 1999, the district court found that Biedermann Motech can recover lost profits [before August 31, 1999] because it was `closely tied' via a joint venture to the manufacturer, DePuy Acromed, Inc. DePuy Acromed, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-10165-EFH (D.Mass. Sept. 14, 2004) (citing WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339, 1361 (Fed.Cir.1999)). In denying Medtronic's renewed motion for JMOL on the subject of lost profit damages, the court noted that DePuy introduced extensive evidence that DePuy had an exclusive license to the patent in suit as of January 23, 1998. DePuy Acromed, Inc. v. Medtronic Sofamor Danek, Inc., No. 01-10165-EFH (D.Mass. Feb. 15, 2005). Thus, the court ultimately concluded that DePuy was an exclusive licensee as of January 1998. 73 We must therefore examine the 1993 Technology Agreement to determine if it supports the conclusion that DePuy was an exclusive licensee to the '678 patent under its terms. 74 Determining whether a licensee is an exclusive licensee or a bare licensee is a question of ascertaining the intent of the parties to the license as manifested by the terms of their agreement and examining the substance of the grant. The use of the word exclusive is not controlling; what matters is the substance of the arrangement. Because patent rights are rights to exclude others, a licensee is an exclusive licensee only if the patentee has promised, expressly or impliedly, that others shall be excluded from practicing the invention within the field covered by the license. Put another way, an exclusive license is a license to practice the invention accompanied by the patent owner's promise that others shall be excluded from practicing it within the field of use wherein the licensee is given leave. 75 Textile Prods. v. Mead Corp., 134 F.3d 1481, 1484 (Fed.Cir.1998) (internal citations omitted). 76 The 1993 Technology Agreement provides that it shall be construed in accordance with Indiana law. Indiana follows the four corners rule of contract interpretation in which courts do not look beyond the instrument in question to determine the parties' intent if the terms of the instrument are unambiguous. Schmidt v. Schmidt, 812 N.E.2d 1074, 1080 (Ind.Ct.App.2004); see also Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 532 (Ind.2006). The terms of a contract are ambiguous only when reasonably intelligent persons would honestly differ as to the meaning of those terms. Schmidt, 812 N.E.2d at 1080; see also Baker, 843 N.E.2d at 532. 77 The terms of the 1993 Technology Agreement unambiguously provide an exclusive license to DePuy Spine for all of Biedermann Motech's current and future knowledge, techniques, processes, data designs, prints, drawings, specifications, procedures and other information relating to the manufacture of any product for use in the treatment of the human spine. In January 1998, Biedermann Motech acquired the '678 patent, which covers a particular design of pedicle screw for use in the treatment of the human spine. It follows that in 1998, when Biedermann Motech acquired the '678 patent, it acquired the design of the products covered by that patent as well. That design is a future design under the express terms of the 1993 Technology Agreement and provides a basis for the jury's lost profit award. 78 The terms of the 1993 and 1999 Exclusive License Agreements do not affect this conclusion. First, the 1993 Exclusive License Agreement is a license between Ort-Med, the licensor, and DePuy Spine, the licensee. Ort-Med never was—nor became—the owner of the '678 patent. Thus, the 1993 Exclusive License Agreement is not relevant to any determination of rights as between Biedermann Motech and DePuy Spine. Second, the 1999 Exclusive License Agreement was entered into on August 31, 1999; it is thus not relevant to the rights that were created between the parties by the 1993 Technology Agreement entered into on February 4, 1993. Therefore, we conclude that DePuy was entitled to lost profit damages prior to August 31, 1999, and the court did not err in denying Medtronic's motion for JMOL on this issue.