Court Opinion

ID: 9956167
Source: CourtListenerOpinion
Date Created: 2024-04-01 13:01:26.72979+00
Date Added: 2024-06-11T08:15:16.032405
License: Public Domain

Case: 23-1140    Document: 30     Page: 1   Filed: 03/20/2024

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

      IN RE: CALIFORNIA EXPANDED METAL
                 PRODUCTS CO.,
                Defendant-Appellant
               ______________________

                        2023-1140
                  ______________________

    Appeal from the United States District Court for the
 Central District of California in No. 2:20-cv-10409-MCS-
 JEM, Judge Mark C. Scarsi.
                  ______________________

                 Decided: March 20, 2024
                 ______________________

     RAYMOND JOSEPH TROJAN, Trojan Law Offices, Beverly
 Hills, CA, argued for appellant. Also represented by DYLAN
 C. DANG.
                  ______________________

     Before DYK, MAYER, and TARANTO, Circuit Judges.
 TARANTO, Circuit Judge.
     California Expanded Metal Products Co. (CEMCO)
 owns several patents that describe and claim fire-retardant
 head-of-wall assemblies. In 2020, Seal4Safti, Inc. filed an
 action in district court seeking a declaratory judgment of
 noninfringement, unenforceability, and invalidity of sev-
 eral of those patents, and CEMCO filed affirmative
Case: 23-1140    Document: 30      Page: 2    Filed: 03/20/2024

 2           IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.

 defenses and counterclaims for patent infringement. In a
 2022 trial, a jury determined that Seal4Safti had willfully
 induced infringement of all asserted patent claims and
 awarded CEMCO damages in the form of a reasonable roy-
 alty. J.A. 1267–69. Subsequently, the district court denied
 CEMCO’s request for a permanent injunction, J.A. 50–52,
 and set aside the jury’s damages award on the ground that
 CEMCO did not meet its burden to prove the amount of a
 reasonable royalty, Seal4Safti, Inc. v. California Expanded
 Metal Products Co., No. 20-cv-10409, 2022 WL 16710721,
 at *3–4 (C.D. Cal. Oct. 3, 2022) (Post-Trial Order); see also
 id. at *5–6 (finding case exceptional and declaring CEMCO
 entitled to attorney’s fees). The court entered judgment for
 CEMCO on all its claims and against Seal4Safti on all its
 claims, but awarded “no monetary or injunctive relief.”
 J.A. 1200.
     On appeal, CEMCO challenges the denial of monetary
 and injunctive relief. We affirm the district court’s setting
 aside of the jury’s royalty award but vacate the denial of
 the permanent injunction and remand the case for further
 proceedings.
                               I
     CEMCO is the current owner of the five patents at is-
 sue in this case: U.S. Patent Nos. 7,681,365; 7,814,718;
 8,136,314; 8,151,526; and 10,406,389. The patents gener-
 ally describe and claim fire-retardant assemblies for the
 top of a wall, the assemblies including an intumescent strip
 that seals construction joints or gaps when exposed to heat.
 E.g., ’365 patent, Abstract. At the time of trial, there were
 two dominant participants in the market for fire-retardant
 head-of-wall products that can be installed before construc-
 tion of a wall is complete: CEMCO’s exclusive licensee,
 Clarkwestern Dietrich Building Systems LLC (ClarkDie-
 trich), and Seal4Safti. J.A. 43.
     On November 13, 2020, Seal4Safti filed a complaint in
 the United States District Court for the Central District of
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 IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.             3

 California seeking declaratory judgments of noninfringe-
 ment, unenforceability, and invalidity of the five above-
 listed patents, and in response, CEMCO filed several af-
 firmative defenses and counterclaims for patent infringe-
 ment. The present litigation, originated by Seal4Safti,
 followed previously initiated litigation in which CEMCO
 and ClarkDietrich sought and obtained relief, based on sev-
 eral of the patents at issue in the present case, against
 Seal4Safti, individuals affiliated with Seal4Safti, and com-
 panies having a relation to Seal4Safti. See Seal4Safti, Inc.
 v. California Expanded Metal Products Co., No. 20-cv-
 10409, 2022 WL 2199031, at *2 (C.D. Cal. Jan. 19, 2022)
 (summarizing history of this case); California Expanded
 Metal Products Co. v. Klein, No. 18-cv-00659, 2023 WL
 8086968, at *1 (W.D. Wash. Nov. 21, 2023) (summarizing
 parallel contempt proceedings).
     In a May 2022 trial, a jury determined that CEMCO’s
 asserted patents were not invalid, concluded that
 Seal4Safti had willfully induced infringement of all as-
 serted claims, and awarded damages of $156,000. J.A.
 1264–72. The damages award was based on a hypothetical
 royalty negotiation, which the jury determined would re-
 sult in an ongoing royalty payment of 12% of $1,300,000 in
 sales made by Seal4Safti. J.A. 1269. After the jury trial,
 the district court held a bench trial on several remaining
 equitable issues, and it ruled against Seal4Safti on those
 issues, J.A. 45–50, except for denying CEMCO’s request for
 a permanent injunction to bar Seal4Safti from selling and
 advertising its firestopping products, J.A. 50–52. A few
 weeks later, the district court resolved the parties’ post-
 trial motions.     As relevant here, the court granted
 Seal4Safti’s request to amend the anticipated judgment to
 set aside the jury’s damages award pursuant to Federal
 Rule of Civil Procedure 59(e). Post-Trial Order, 2022 WL
 16710721, at *3, *6.
    The district court entered final judgment on October 3,
 2022. J.A. 1199–200. Seal4Safti timely filed a notice of
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 4           IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.

 appeal and CEMCO timely filed a notice of cross-appeal.
 Seal4Safti soon moved to dismiss its appeal, explaining
 that it had decided to formally discontinue its operations,
 and we granted the motion, leaving only CEMCO’s cross-
 appeal. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
                              II
                              A
     We first consider the district court’s decision to set
 aside the jury’s reasonable-royalty award. In reviewing the
 court’s decision on a motion under Rule 59(e), we use the
 standard of review applicable in the regional circuit. See
 CODA Development S.R.O. v. Goodyear Tire & Rubber Co.,
 916 F.3d 1350, 1357 (Fed. Cir. 2019). The Ninth Circuit
 reviews a district court’s decision to alter or amend a judg-
 ment pursuant to Rule 59(e) for abuse of discretion. Kauf-
 mann v. Kijakazi, 32 F.4th 843, 847 (9th Cir. 2022).
      A Rule 59(e) motion may be granted when “necessary
 to correct manifest errors of law or fact upon which the
 judgment rests.” Allstate Insurance Co. v. Herron, 634 F.3d
 1101, 1111 (9th Cir. 2011). Here, the district court set
 aside the jury’s damages award as a matter of law because
 it determined that the jury “had no basis to arrive at a rea-
 sonable royalty of 12%,” so the award was “based on imper-
 missible speculation.”       Post-Trial Order, 2022 WL
 16710721, at *3 (citing Amgen Inc. v. Hospira, Inc., 944
 F.3d 1327, 1341 (Fed. Cir. 2019) (“A jury’s damages award
 ‘must be upheld unless the amount is grossly excessive or
 monstrous, clearly not supported by the evidence, or based
 only on speculation or guesswork.’” (quoting Lucent Tech-
 nologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1310 (Fed.
 Cir. 2009)))). That ruling, we conclude, was not an abuse
 of discretion.
     At trial, CEMCO sought damages in the form of a rea-
 sonable royalty and adopted a hypothetical-negotiation ap-
 proach incorporating a familiar recitation of facts courts
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 IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.               5

 have considered within that framework, set forth in Geor-
 gia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116,
 1120 (S.D.N.Y. 1970), modified on appeal sub nom. Geor-
 gia-Pacific Corp. v. U.S. Plywood-Champion Papers Inc.,
 446 F.2d 295 (2d Cir. 1971). CEMCO presented several
 pieces of evidence corresponding to several Georgia-Pacific
 considerations. See, e.g., J.A. 363 (testimony about Clark-
 Dietrich’s sales under its license); J.A. 1131–32 (total sales
 of Seal4Safti’s fire-retardant gasket products); J.A. 1147–
 50 (inventor’s declaration discussing the benefits, commer-
 cial success, and popularity of patent-covered products);
 J.A. 1172–90 (profitability of similar products). But the
 district court concluded that CEMCO did not provide ade-
 quate testimony tying this evidence to any particular roy-
 alty rate, and CEMCO has not identified such evidence on
 appeal. 1 CEMCO first presented its proposed royalty rate
 of 20% in its closing arguments, and its analysis of Georgia-
 Pacific considerations was limited to attorney argument.
 See, e.g., J.A. 293 (arguing ClarkDietrich’s dominance in
 the market would “drive[] up” the reasonably royalty); J.A.
 294–95 (arguing the commercial success of patent-covered
 products “is significant”).

     1   CEMCO notes in this court that it also sought to
 introduce several prior licensing and settlement agree-
 ments that, it says, would have provided evidence of com-
 parable licensing rates. The district court excluded that
 evidence due to deficiency of the disclosure required by
 Federal Rule of Civil Procedure 26. J.A. 755–56. In this
 court, CEMCO does no more than assert that the exclusion
 of the evidence was improper; it does not develop an argu-
 ment challenging the exclusion of the evidence. We there-
 fore consider the argument forfeited. See Rodriguez v.
 Department of Veterans Affairs, 8 F.4th 1290, 1305 (Fed.
 Cir. 2021).
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 6           IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.

     “The burden of proving damages falls on the patentee.”
 Lucent, 580 F.3d at 1324. And when a party chooses to use
 a hypothetical-negotiation framework, “while mathemati-
 cal precision is not required, some explanation of both why
 and generally to what extent the particular factor impacts
 the royalty calculation is needed.” Whitserve, LLC v. Com-
 puter Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012). We
 find no error in the district court’s conclusion that, as a
 matter of law, CEMCO failed to carry its burden to prove
 damages for lack of such explanation of the proper royalty
 rate in its evidence. See Exmark Manufacturing Co. v.
 Briggs & Stratton Power Products Group, LLC, 879 F.3d
 1332, 1350 (Fed. Cir. 2018) (requiring claimant to “care-
 fully tie” Georgia-Pacific considerations “to the proposed
 royalty rate”); see also Whitserve, 694 F.3d at 31–32.
                               B
     We next turn to the district court’s denial of CEMCO’s
 request for a permanent injunction. A plaintiff seeking a
 permanent injunction “must demonstrate: (1) that it has
 suffered an irreparable injury; (2) that remedies available
 at law, such as monetary damages, are inadequate to com-
 pensate for that injury; (3) that, considering the balance of
 hardships between the plaintiff and defendant, a remedy
 in equity is warranted; and (4) that the public interest
 would not be disserved by a permanent injunction.” eBay
 Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). We
 review a district court’s denial of a permanent injunction
 for abuse of discretion. Robert Bosch LLC v. Pylon Manu-
 facturing Corp., 659 F.3d 1142, 1147 (Fed. Cir. 2011). A
 district court abuses its discretion if it bases its ruling on
 “‘an error of law or clearly erroneous factual findings’” or
 commits “‘a clear error of judgment in weighing relevant
 factors.’” Ecolab, Inc. v. FMC Corp., 569 F.3d 1335, 1352
 (Fed. Cir. 2009) (quoting Innogenetics N.V. v. Abbott Labor-
 atories, 512 F.3d 1363, 1379 (Fed. Cir. 2008)).
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 IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.                7

      The district court based its denial of a permanent in-
 junction solely on a finding that CEMCO had failed to
 demonstrate an irreparable injury. J.A. 51. And it based
 that finding solely on its reading of our decision in ActiveVi-
 deo Networks, Inc. v. Verizon Communications, Inc., 694
 F.3d 1312 (Fed. Cir. 2012). The district court read that de-
 cision as standing for the proposition that “[w]henever a
 patentee only stands to lose licensing fees for the sale of a
 product when the licensee is not joined in the case,” an in-
 junction should be denied because “‘[s]traightforward mon-
 etary harm of this type is not irreparable harm.’” J.A. 51
 (quoting ActiveVideo, 694 F.3d at 1338).
      The district court gave too broad a reading to ActiveVi-
 deo, which is materially different from the present case. In
 ActiveVideo, the plaintiff patent owner was ActiveVideo,
 and the injunction it obtained against defendant Verizon
 (for infringement) was based on Verizon’s competition with
 Cablevision, a licensee of ActiveVideo. See 694 F.3d at
 1337–38. This court, holding the issuance of the injunction
 to have been improper, id. at 1337–41, explained that “Ca-
 blevision does not have an exclusive license to the patents
 at issue,” id. at 1338, and that it was “conclud[ing] only
 that in light of the record in this case, which shows exten-
 sive licensing, licensing efforts, solicitation of the defend-
 ant over a long period of time preceding and during
 litigation, and no direct competition between [defendant
 and plaintiff], it was clearly erroneous for the district court
 to conclude that money damages would not adequately
 compensate” the plaintiff, id. at 1340. The court did not
 conclude that, on different facts, particularly where a pa-
 tentee has granted an exclusive license to a third party to
 sell patent-covered products, the patentee may not suffer
 irreparable harm from infringement. Such an exclusive-
 licensing patentee might well face harm beyond the simple
 loss of reliably measurable licensing fees, including price
 erosion, damage to intangible reputation, harm to brand
 loyalty, and permanent loss of customers. See Robert
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 8           IN RE: CALIFORNIA EXPANDED METAL PRODUCTS CO.

 Bosch, 659 F.3d at 1152–55 (finding irreparable harm even
 though neither the plaintiff nor defendant directly sold pa-
 tent-covered products to customers). ActiveVideo does not
 foreclose consideration of such issues in this case.
     Because the district court based its denial of injunctive
 relief solely on its erroneous conclusion that CEMCO stood
 only to lose licensing fees and thus failed to demonstrate
 an irreparable injury, the court did not make additional
 findings necessary for the injunctive-relief inquiry. We
 therefore vacate the court’s denial of injunctive relief and
 remand for the court to reconsider the appropriateness of
 CEMCO’s requested permanent injunction.
                              III
      We have considered CEMCO’s additional arguments
 and find them unpersuasive. For the foregoing reasons, we
 affirm the district court’s decision to set aside the jury’s
 damages award, vacate the court’s denial of injunctive re-
 lief, and remand for further proceedings consistent with
 this opinion.
      CEMCO shall bear its own costs.
     AFFIRMED IN PART, VACATED IN PART, AND
                   REMANDED