Appeal from the United States District Court for the District of Utah in No. 2:09-cv-00013 TS, Chief Judge Ted Stewart.
TODD E. ZENGER, Kirton McConkie, of Salt Lake City, Utah, argued for plaintiff-appellant.
GREGORY J. COFFEY, Coffey & Associates, of Morristown, New Jersey argued for defendants-appellees. Of counsel on the brief was H. DICKSON BURTON, Trask Britt, PC, of Salt Lake City, Utah.
Before WALLACH, TARANTO, and CHEN, Circuit Judges.
Taranto, Circuit Judge.
Aqua Shield sued Inter Pool Cover Team, Alukov Hz spol. s.r.o., Alukov spol. s.r.o., and Pool & Spa Enclosures (collectively, IPC) for infringement of U.S. Patent No. 6,637,160. Aqua Shield won summary judgment that IPC infringed and that no claim was invalid. A bench trial led eventually to determinations that Aqua Shield was entitled to damages in the form of a royalty of $10,800 and that IPC had not been willful in its infringement. Aqua Shield appeals the amount of the royalty award and the finding of no willfulness that led to the denial of enhanced damages and attorney's fees. For the reasons set forth below, we vacate the district court's decision on those issues, affirm on one narrow infringement issue also raised by Aqua Shield, and remand for further proceedings consistent with this opinion.
The '160 patent claims enclosures designed to cover pools or create sun rooms. The enclosures consist of arched sections that can slide over or under one another to enclose or expose the encompassed area as desired. The inventor, Bob Brooks, is the chief executive officer of Aqua Shield, to which he assigned ownership of the patent.
In 2005, Aqua Shield sued IPC in the Eastern District of New York, alleging that IPC, by importing and selling pool enclosures, was infringing claims 1-16 of the '160 patent. The district court in New York denied the requested preliminary injunction because Aqua Shield lacked information needed to show a likelihood of success on the merits and because of questions about personal jurisdiction over the defendants. Eventually, the case was transferred to the District of Utah. Aqua Shield, Inc. v. Inter Pool Cover Team, No. 05 CV 4880(CBA), 2009 WL 29312, at *3 (E.D.N.Y. Jan. 5, 2009).
Aqua Shield moved for summary judgment of infringement based on IPC's sales of various enclosure models. One allegation involved an installation in Utah (the Utah Installation). IPC responded with non-infringement arguments only as to claims 10 and 15, not the other fourteen asserted claims. The district court held that there was no genuine issue of fact about IPC's infringement of all claims except claim 15, and therefore entered summary judgment of infringement of claims 1-14 and 16. Aqua Shield, Inc. v. Inter Pool Cover Team, 830 F.Supp.2d 1285, 1291 (D. Utah 2011). Aqua Shield later dropped its allegation of infringement of claim 15, and it presented no infringement issues at the later trial.
With respect to invalidity, the parties filed cross-motions for summary judgment. As to anticipation, the district court ruled that IPC failed to " compare the construed claims of the '160 patent to the prior art" and did " not introduce evidence showing that the [prior art] discloses each limitation of the '160 patent." Aqua Shield, Inc. v. Inter Pool Cover Team, No. 2:09-CV-13 TS, 2013 WL 164244, at *4 (D. Utah Jan. 15, 2013). As to obviousness, the court ruled that IPC did " not argue obviousness on a claim-by-claim basis," " try to show that all of the
elements of even a single claim in the '160 patent were made obvious by prior art," or " articulate why a person of ordinary skill in the art would have been motivated to combine the prior art to produce the claimed invention." [WL] at *5. For those reasons the district court granted summary judgment in favor of Aqua Shield regarding validity. Id. Neither party appeals the summary judgment rulings (except for one discrete infringement issue concerning the " Elegant" model).
The district court next conducted a two-day bench trial on issues concerning relief. In one ruling not challenged on appeal, the court found that Aqua Shield failed to prove lost-profit damages. Aqua Shield, Inc. v. Inter Pool Cover Team, No. 2:09-CV-13 TS, slip. op. at 13-17 (D. Utah Aug. 14, 2013) ( Initial Damages Op.). The court also granted Aqua Shield a permanent injunction against IPC's infringement. Id. at 31-38.
The court rejected not only Aqua Shield's claim for lost-profits damages but also its claim for damages in the form of a reasonable royalty. Id. at 17-28. It determined that several familiar considerations favored a " higher" royalty rate, id. at 19-23 (citing Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970), modified, 446 F.2d 295 (2d Cir. 1971)), but that it lacked sufficient evidence from which to determine an initial royalty rate, id. at 26-27 (" Although some of the factors weigh in favor of a 'higher' royalty rate, the Court is without sufficient ...