Opinion ID: 403684
Heading Depth: 1
Heading Rank: 3

Heading: Cleaning Out the Well

Text: 25 Although not technically before us, the method of submission to the jury and the calculation of damages leave us with serious doubts about their propriety. While we need not reach the other alleged errors in the submission to the jury and the issue of validity, we wish to make clear that we in no way approve of the manner in which this case was submitted to the jury. First, the District Judge utilized two general verdict forms, one for the plaintiff and one for the defendant. Although the verdict forms specifically allowed the jury to determine which of the several defendants infringed Baumstimler's alleged valid patent, if any, the instructions require that the defendants sustain all of their defenses. 12 26 This is certainly in conflict with the actual requirement that any one defendant need only sustain one decisive defense, not all of them. This problem with the submission, like those discussed below, could largely have been solved through the use of special interrogatories under F.R.Civ.P. 49(a). 27 Second, from the instructions it is clear that the District Judge left the issue of validity of the patents to the jury. The instructions specifically stated that the disputed issue of the validity of the patents was left to the jury. 13 While the charge made clear that the elements of invention included novelty, utility, and nonobviousness, clearly factual issues, the ultimate legal issue of validity should have been determined by the judge, not the jury. (T)he ultimate question of patent validity is one of law.... Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 694, 15 L.Ed.2d 545, 556 (1966). This determination is based on certain factual inquiries which are properly resolved by the jury, including the scope and content of the prior art, differences between the prior art and the claims at issue, and the level of ordinary skill in the art. Id. Here the jury made no discernible factual determination concerning the prior art so that the District Judge could then determine obviousness, an issue to be determined by a judge, not a jury. Rather, the ultimate issue of validity, dependent on factual inquiries of prior art and legal criteria of obviousness, was left to the jury. 28 While we generally presume that disputed matters of fact have been resolved favorably to the prevailing party, this case presents a more serious problem than that raised in Control Components, Inc. v. Valtek, Inc., 609 F.2d 763 (5th Cir.), rehearing denied, 616 F.2d 892, cert. denied, 449 U.S. 1022, 101 S.Ct. 589, 66 L.Ed.2d 484 (1980). In Valtek, the District Court submitted to the jury the issue of obviousness without requiring separate special interrogatories on the factual inquiries underlying the obviousness question, the scope and content of prior art and the differences between that art. We held in that case that the interrogatory was not so broadly framed as to leave the ultimate determination of obviousness to the jury. But see Valtek, 609 F.2d at 775 (Rubin, J., dissenting). We found implicit in the answer to the interrogatory the jury findings on the three factual underpinnings to obviousness as indicated in John Deere. We then upheld the jury findings after reviewing to determine if there was substantial evidence to support these findings. 29 Full review in this context amounts to an inquiry whether the judge correctly applies the law set out in Graham. ... Like the trial court, we are aided in our inquiry by the jury's findings of fact. If supported by substantial evidence, these findings are apt to strengthen the trial court's legal conclusion. 30 Valtek, 609 F.2d at 768. See also Hammerquist v. Clarke's Sheet Metal, Inc., 658 F.2d 1319, 1322-23 & n.5 (9th Cir. 1981). 31 In the instant case, the jury made no findings of fact on prior art and factual aspects of obviousness, nor did they make a finding on the issue of obviousness. The District Judge incorrectly allowed the jury to determine obviousness and validity, two issues which are clearly legal, not factual. There simply is no factual or legal determination that the patents are valid, given the general verdict form which deliberately left open the question of validity, using the phrase valid patent, if any. 32 In a cogent and convincing partial concurrence and partial dissent in Valtek, Judge Rubin reviews this Circuit's response to the Supreme Court's determination in John Deere that the ultimate question of patent validity is one of law. Specifically, he argues that a general verdict in a patent case deprives the appellate court of any meaningful review. If the reviewing court is to presume that disputed matters of fact have been resolved favorably to the prevailing party, then the only review is an analysis of the correctness of the jury charge and the existence of substantial evidence to support the verdict. 33 I think meaningful devotion to Graham requires a different course, unique to patent litigation. In this area where decisional responsibility is so clearly divided, the methods of reaching a decision must be more sharply defined; the path to this end is required jury verdicts on special interrogatories, as permitted by Fed.R.Civ.P. 49(a).... Moreover, that course (general verdict) has pragmatic difficulties: a relatively minor error in the charge may require a lengthy new trial. Submission on special interrogatories can avert that. See Brown, Federal Special Verdicts: The Doubt Eliminator, 1968, 44 F.R.D. 338. 34 Valtek, 609 F.2d at 775 (Rubin, J., dissenting). 14 35 Special interrogatories under Rule 49(a), whose songs of praise we have repeatedly sounded 15 , have especial value in a patent case tried to a jury. Their use is not only practical, facilitating appellate review and avoiding lengthy (as patent cases invariably are) retrial for even relatively minor errors in jury instructions, but accords with the inherent divisional lines between the roles of judge and jury, the boundaries of which are so easily transgressed in patent cases tried to juries. While the use of special interrogatories is left to the sound discretion of the trial judge, failure to utilize this method in a patent case places a heavy burden of convincing the reviewing court that the trial judge did not abuse his discretion. 36 The fact is that one of the sometimes unexpected, but wholesome, results of special interrogatories jury submission is to emphasize the absolute necessity that there be first a clear understanding of the precise legal issues for jury resolution and then a translation of them into articulate questions which may be authoritatively answered by a simple categorical. In a general way this is to say that not only is it the jury's imprecision which is hidden by the traditional general charge and verdict. Many juridical errors of omission and commission by court and counsel are likewise perpetually concealed. 37 R. B. Co. v. Aetna Insurance Co., 299 F.2d 753, 756-57 (5th Cir. 1962). 38 In the instant case, had the burden of proof not been incorrect, the use of special interrogatories would have allowed us to determine if the judge correctly interpreted complicated aspects of the patent law and if the jury under the judge's direction did not decide improperly, or at all, the legal question of validity of the patent. We would have specific factual findings to the three John Deere questions on obviousness to support a finding by the judge of validity. Further, interrogatories could have covered the willfulness of infringement to provide support for the award of the treble damages. The issue of fraud on the patent office so as to invalidate the patent would also be appropriate for special interrogatories on the factual issues of deliberate withholding and concealment. Judge, jury, and counsel would have been required to stop, look, listen & think, Brown, Federal Special Verdicts: The Doubt Eliminator, 44 F.R.D. 338, 351 (1968), and we would be provided with factual findings allowing meaningful appellate review. Like Cassandra of old, our prophecies of doom resulting from the use of a general verdict have too often been ignored. 39 Our final note of concern is with the issue of damages. We have serious doubt about whether the District Judge properly determined the basis for the award. While not technically before us, we wish to highlight some difficulties lest our silence be mistaken for approval. First there is the problem of whether lost profits are the correct measure of damages since Baumstimler's corporation, BPC, was technically the user of the patent and yet held no proprietary interest in the patent, see note 3 supra, Baumstimler having never gone through the formalities of licensing the patent to the company in which he and his wife were the sole shareholders. When actual damages are not proved, we have allowed the plaintiff to recover a reasonable royalty. Hughes Tool Co. v. G. W. Murphy Industries, Inc., 491 F.2d 923, 930 (5th Cir. 1973); 35 U.S.C. § 284. Since Baumstimler did not manufacture, sell or use the patented invention, but rather the invention was exploited by BPC, Baumstimler technically had no lost profits. 40 Even if the proper measure of damages was lost profits, it is uncertain whether Baumstimler proved but for the infringement he would have made the sales made by Laughlin. See Livesay Window Co. v. Livesay Industries, Inc., 251 F.2d 469 (5th Cir. 1958); Hughes Tool Co., supra. While lost profits need not be established by scientific accuracy, conjecture alone is not sufficient. In Hughes Tool Co., we made clear that the plaintiff must demonstrate with reasonable probability the portion of defendant's infringing sales it would have made and while not deciding whether proof of market share was sufficient for the reasonable probability test, we made clear that market share analysis requires an examination of substitutes, demand, manufacturing capability of the patentee, and the amount of profit that would have been made from these additional sales. In this case, the District Court determined that the competing tool, that sold by Cavins, held ten percent of the market. This alone is not sufficient to determine that Baumstimler would have received 90% of the market since possibly the infringers cut into not only Baumstimler's market but that of Cavins as well. 41 The actual computation of damages also is questionable. There is little evidence of Baumstimler's profit margin which appears to have been determined by the District Court purely on the basis of Laughlin's profit margin. The measure of recovery is not the infringer's profit but those profits lost to the patentee. See Aro Manufacturing Co. v. Convertible Top Replacement Co., 377 U.S. 476, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964). Also raised by Laughlin are the issues of whether Laughlin's total billings, which included services sold with the tool, should properly have been used in determining damages and whether the damages should have been allocated so as to reflect that portion of the value of the tool attributable to the patented improvements as opposed to the value of the tool without the improvements. It appears that the District Judge did not allow the introduction of evidence showing that the entire rental fee of the tool represented two elements, a fee for the unpatented prior art portions of the tool and a fee for the patented improvements. While we do not decide whether allocation was proper or necessary, this argument is one that must be considered by the District Court in assessing damages. Cf. Bigelow v. RKO Radio Pictures, 327 U.S. 251, 265, 66 S.Ct. 574, 580, 90 L.Ed. 652, 660 (1946). 42 Finally, we have strong reservations about whether the damage award should have been trebled. Such award is within the discretion of the District Court when the infringement is willful and wanton. The jury's general verdict made no finding on willful or wanton infringement since the issue of damages was not tried to the jury and since the issue of liability was submitted in the form of a general verdict as discussed above. In fact, the District Judge who presided over the trial, having been assassinated, was replaced by another District Judge for the determination of damages. Moreover, we have much doubt that there is sufficient evidence of willful and wanton infringement to support such treble damages. This Court has held that where the issue of patentability is close and litigated in good faith, the court should be more reluctant to impose punitive damages. Yoder Bros., Inc. v. California-Florida Plant Corp., 537 F.2d 1347, 1383 (5th Cir. 1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977). Certainly the issue of validity is a close one here, depending largely on the issue of prior art, the Cavins Corp. tools. Laughlin's device did not contain possibly the only patentable feature of Baumstimler's tool, the interchangeable orifice. Laughlin also could have maintained a reasonable doubt as to the validity of the Baumstimler patent since he, Laughlin, was familiar with the Cavins tools. That his belief was reasonable is also illustrated by Baumstimler's disclaimer, almost 10 years after the award of the patent, and three years after institution of this lawsuit, of five of the seven claims in one of the patents. 43 Upon retrial, we would urge the District Court to submit a special interrogatory on the issue of willful and wanton infringement and to provide a more thorough analysis of the relevant market and the evidence supporting the determination of Baumstimler's lost profits, that is how the profit margin was determined, and what effect, if any, BPC's lack of a license and relationship to Baumstimler has on the determination of damages. 44 With submission under proper instructions, along with special interrogatories under F.R.Civ.P. 49(a) and consideration of our perhaps too lengthy comments on the prior trial, should this case come before us again for review, the process will be much briefer. 45 REVERSED AND REMANDED.