Arctic Cat Inc. v. Bombardier Rec. Prods., No. 2017-1475, (Fed. Cir. Dec. 7, 2017) (Before Moore, Plager, and Stoll, J.) (Opinion for the court, Moore, J.)
After unsuccessfully defending a patent infringement lawsuit, Bombardier Recreational Products, Inc. (“BRP”) appealed the district court’s denial of its motion for judgment as a matter of law. BRP argued that the asserted claims of U.S. Patent Nos. 6,568,969 (“the ‘969 patent”) and 6,793,545 (“the ‘545 patent”) were obvious, that patentee Arctic Cat failed to mark patented products, that the jury based its royalty award on improper expert testimony, and that BRP did not willfully infringe the asserted claims. BRP also appealed the district court’s award of treble damages and the ongoing royalty to Artic Cat.
In an obviousness inquiry, the court considers whether one of ordinary skill in the art had a motivation to combine the prior art to achieve the claimed combination. Apple Inc. v. Samsung Elecs. Co., 839 F.3d 1034, 1047–48, 1051.
Motivation to Combine
The ‘545 patent and the ‘969 patent are directed toward automatic thrust while steering a personal watercraft (“PWC”). BRP argued the asserted claims were obvious because its PWC, the 1997 Sea-Doo Challenger 1800 Jet Boat (“Challenger”), and an existing PWC disclosed all elements of most asserted claims. To show that a personal of ordinary skill in the art would have been motivated to use the Challenger features with a PWC, BRP attempted to show “a design need or market pressure to solve a problem” and “a finite number of identified, predictable solutions.” KSR International Co. v. Teleflex Inc., 550 U.S. 421 (2007). To show market pressure and/or a design need, BRP cited a National Transportation Safety Board report, discussing the need to improve off-throttle steering loss because it caused a disproportionate number of accidents. Although BRP presented reports identifying the Challenger’s throttle reapplication system as one of four solutions to the problem of off-throttle steering, the same reports indicated its potential to create other hazards. Further, Artic Cat’s expert testified to both the possibility of other solutions and the unpredictability of the results. Therefore, substantial evidence existed to support a finding of no motivation to combine the references.
Objective evidence such as solving a long-felt need and industry praise can support a finding of non-obviousness. To prove industry praise, Artic Cat presented evidence of a Coast Guard official’s praise of its product and testimony that the product impressed many at a prototype demonstration. Rather than disputing a long-felt need, BRP argued that the Challenger solved the need. However, an SAE report noted an ongoing effort to unsuccessfully solve the issue for more than three decades as well as pros and cons of the Challenger. Consequently, substantial evidence existed to support the jury’s finding of a long-felt need and industry praise for the invention, despite the Challenger evidence. The combination of objective considerations and an unclear motivation to combine supported a finding of non-obviousness.
Patentees and persons who make or sell a patented article must mark their articles or notify infringers of their patent in order to recover damages. 35 U.S.C. § 287(a). When a patentee licenses its patent, courts consider “whether the patentee made reasonable efforts to ensure compliance with the marking requirements.” Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111–12. While the burden of persuasion under the statute is always on the patentee, circuits are split as to which party must initially identify the allegedly unmarked products.
The Federal Circuit held that the alleged infringer who challenges the patentee’s compliance with the marking statute has the initial burden of production because placing the burden on the patentee “could lead to a large-scale fishing expedition.” BRP’s identification of fourteen Honda PWCs that practiced Artic Cat’s patents satisfied the burden of production. To prove lack of compliance with the patent marking statute, BRP presented Artic Cat’s license agreement with Honda which expressly stated Honda “shall have no obligation or requirement to mark.” In denying BRP’s motion for judgment as a matter of law regarding the defense of marking, the district court erroneously placed the burden of persuasion for patent marking compliance on BRP. The Federal Circuit vacated and remanded because Artic Cat did not receive proper notice of its burden.
BRP attempted to exclude the reasonable royalty testimony of Artic Cat’s expert because: (1) he based the reasonable royalty rate on BRP’s later-developed Intelligent Brake and Reverse (“iBR”) system as opposed to the earlier infringing Off-Throttle Assisted Steering (“OTAS”) system; and (2) he improperly relied on another expert. The basis for the reasonable royalty rate was proper because OTAS and iBR are of comparable technological and safety value. Rather than excluding the testimony, the district court properly gave BRP the opportunity to attack the testimony through cross-examination. As here, precedent demonstrated the propriety of reasonable royalty awards at or near the infringer’s profit margin. Therefore, the district court did not abuse its discretion.
In finding willful infringement against BRP, the district court did not abuse its discretion because substantial evidence demonstrated that BRP knew about the patents before they issued, conducted only a cursory analysis of the patents, waited years before seeking the advice of qualified and competent counsel, and unsuccessfully tried to buy the asserted patents through a third-party. Further, instructing the jury to find willful infringement if BRP “should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent” was proper because the instructions did not contradict Halo. Finally, the district court sufficiently explained the trebling of damages and BRP failed to demonstrate how briefing from both parties would have the changed the award of treble damages.
In an obviousness inquiry, questionable evidence of a motivation to combine may be insufficient for obviousness, in view of secondary considerations, e.g. long felt need. The initial burden of production for a patent marking defense rests on the alleged infringer. However, the burden of persuasion is always on the patentee. A reasonable royalty rate near the profit margin of the infringing product is supported by substantial evidence. Further, the reasonable royalty rate may be based on an alleged infringer’s non-infringing product if it proves similar. Willful infringement may be proven by a subjective standard of “should have known” without disturbing the Supreme Court precedence in Halo.