Shearman & Sterling LLP | IP Blog | Eastern District Of Wisconsin Upholds Jury’s Willful-Infringement Finding And Awards Prejudgment Interest, But Declines To Enhance Damages; Employee Engineer’s Invalidity Analysis An Issue<br >  
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  • Eastern District Of Wisconsin Upholds Jury’s Willful-Infringement Finding And Awards Prejudgment Interest, But Declines To Enhance Damages; Employee Engineer’s Invalidity Analysis An Issue

    Last fall, a jury found Snap-On Inc. to be a willful patent infringer and awarded patent owner Milwaukee Electric Tool Corp. (Milwaukee) approximately $28 million in damages.  On December 29, 2017, Judge J. P. Stadtmueller of the United States District Court for the Eastern District of Wisconsin entered an order resolving the parties’ post-trial motions.  In the order, Judge Stadtmueller upheld the jury’s finding of willful infringement and required Snap-On to pay prejudgment interest for part of the time period requested by Milwaukee, but denied Milwaukee’s request to further enhance damages.  Milwaukee Electric Tool Corp. v. Snap-On Inc., case no. 14-CV-1296-JPS.

    At trial, Snap-On sought to base its defense to the willfulness allegation in part on the actions of its head engineer for power tools.  In October 2011, Milwaukee sent a letter to Snap-On offering to enter into patent licensing discussions.  Snap-On’s head engineer for power tools, John Fuhreck, testified at trial that he was assigned to review the letter.  Snap-On proffered further testimony from Mr. Fuhreck to the effect that “he had analyzed the patents-in-suit and found that they were not valid because their only innovation was to replace Ni-Cd battery cells with Li-ion battery cells in power tool battery packs,” and that other Snap-On employees, consultants and business partners whose testimony was also proffered had agreed with his analysis at the time.  The obviousness of using Li-ion battery cells to replace Ni-Cd cells was a central part of Snap-On’s unsuccessful invalidity defense at trial.

    However, Judge Stadtmueller excluded the proffered testimony, ruling that “the witnesses’ lay invalidity opinions were not admissible,” because the opinions in question “were not from experts and pre-dated the court’s claim construction by several years.”

    There was no mention in the order of any finding that Fuhreck was not at least of ordinary skill in the power-tool battery-pack art.  And the legal question posed by Snap-On’s obviousness defense was whether the asserted patent claims would have been obvious to one of skill in the art at the time of the invention.  Fuhreck’s testimony about his own reaction to the patent claims might therefore have been probative on the issue of Snap-On’s state of mind concerning patent invalidity.  The judge agreed, but because Fuhreck was not a patent expert and because the Court had not yet construed the patent claims at the time Fuhreck made his analysis, the Court found that the testimony should be excluded under Federal Rules of Evidence 403.

    In the order, the judge explicitly noted that while Snap-On’s failure to seek an opinion of counsel could not be admitted at trial to support the threshold finding of willfulness, it could be considered as part of the enhanced-damages analysis, and that Snap-On’s reliance on its engineers’ analysis alone “means that Snap-On likely did not hold a reasonable belief that the patents were invalid”; the judge found that by relying on this analysis and failing to seek an opinion of counsel, Snap-On chose “to bury its head in the sand.”

    Despite this finding, the judge chose not to enhance the $28 million jury verdict, in part because of his finding that Milwaukee’s 2011 letter did not explicitly allege infringement and did not give Snap-On an opportunity to seek declaratory judgment.  The judge did choose to award pre-judgment interest to Milwaukee, but, again because the 2011 letter did not specifically allege infringement, chose to impose the interest charge only from the 2014 filing of the complaint, not from the date of the 2011 letter.

    The judge’s order excluding Fuhreck’s testimony and upholding the jury’s willfulness verdict points out that as reasonable at it may seem for a business accused of infringement to rely on the technical analysis of a skilled employee, although such a business may be operating in good faith, and despite the changes to willfulness law in recent years, it can still be safer for a business also to obtain an opinion of counsel, even if just for purposes of later litigation.  On the other hand, the order denying prejudgment interest for the 2011–2014 time period—a difference of $5.5 million in this case—points out the downside to a patent owner of any delay in making specific infringement allegations (which nonetheless may still be the better tactical decision in particular circumstances).  Under Judge Stadtmueller’s analysis, if Milwaukee’s 2011 letter had been more specific, Snap-On’s decision to rely initially on the opinion of its own engineer could have resulted in the judge trebling the $28 million verdict and imposing interest charges for the full post-2011 period.