George W. Jurgens and Margaret M. Jurgens, Plaintiffs/appellees, v. Timothy Mckasy D/b/a Tonka Marketing and Cbk, Ltd.,defendants-appellants, 927 F.2d 1552 (Fed. Cir. 1977)

These appeals are from a judgment of the United States District Court for the District of Minnesota in a jury case involving patent infringement and unfair competition. The judgment awarded increased damages and injunctive relief to plaintiffs George and Margaret Jurgens for defendants' patent infringement, unfair competition under Lanham Act Sec. 43(a), and violation of the Minnesota Deceptive Trade Practices Act. We affirm the judgment in No. 90-1105, except to the extent it awarded increased Lanham Act damages. We dismiss appeal No. 89-1645 for lack of appellate jurisdiction.

BACKGROUND

While driving by an airport in the summer of 1975, Jelmer Shjeflo saw an airport windsock with a ball on top of the pole supporting the windsock. The arrangement reminded Shjeflo of a goose, and gave birth to his idea of a windsock hunting decoy. In 1976 Shjeflo developed a windsock decoy having a goose-head, stake, and windsock body bag.

Shjeflo applied for a utility patent on his conception on October 27, 1976. A single claim was presented for examination, which was allowed without rejection or amendment. The claim reads:

1. A decoy comprising a head portion having a neck portion therebeneath and made of relatively rigid material, a hoop member attached to the bottom of the neck portion and extending downward therefrom, a spike attached to the bottom of the hoop and projecting downward therefrom, said spike being adapted to be inserted into the ground, said head and neck portions simulating the head of a water fowl, a flexible bag having a wind sock construction with an opening at the front end with the edges of the bag adjacent the opening fixed to the hoop to keep and maintain the opening in an open condition, the bag having flared out center portions, a tapered rearward portion, whereby when the decoy is positioned so that the opening in the bag is facing into the wind, the wind will inflate the bag so that the bag will give the appearance of the body of a water fowl with the flared out center portions giving the appearance of the folded wings of the decoy, and the tapered rearward portion giving the appearance of the tail of the water fowl.

See also Figures 1 and 4 of the Shjeflo patent, No. 4,062,141, issued December 13, 1977, entitled "DECOY," reproduced below.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

In support of his argument that the Mattson patent is a windsock-type decoy, McKasy relies on the bag-like structure of Mattson's cover 21, and language in the patent specification that " [a]ny wind or air movement through the longitudinal opening will produce a riffling effect of the flexible cover so that body movement of the fowl will be simulated."

In response, the Jurgens contend that the Mattson patent does not show a windsock, so it cannot "link" windsocks and decoys. The Jurgens contend that Mattson is not a windsock decoy since its cover assumes the shape of a fowl by means of "transverse frame elements" 14, not by wind. A windsock, the Jurgens argue, is inflated by wind; it needs no internal frame. As to the language in the specification cited by McKasy, the Jurgens argue that the mere fact of "riffling" does not make Mattson's cover a windsock.

Once again, we need not say which of these arguments is more persuasive. What a reference teaches is a question of fact for the jury to decide, and we presume they resolved it in the Jurgens' favor. Panduit, 810 F.2d at 1579 n. 42, 1 USPQ2d at 1606 n. 42 (what a reference teaches is a question of fact). McKasy cannot challenge that presumed finding because he failed to move for a directed verdict. And if we assume, as we must in this appeal, that the Mattson patent does not disclose a windsock, but merely a stationary bird-decoy, then that decoy would be no different than the stationary decoys considered twice by the PTO in determining obviousness. On the record before us, it would not have rendered obvious the Shjeflo claim.

Infringement may be found only if "every limitation set forth in a claim [is] found in an accused product or process exactly or by a substantial equivalent." Johnston v. IVAC Corp., 885 F.2d 1574, 1577, 12 USPQ2d 1382, 1384 (Fed. Cir. 1989) (citations omitted). Where all claim limitations are present in the accused device exactly, the claims "read on" the accused device and literal infringement is made out. Even where there is no literal infringement, infringement may still be found under the doctrine of equivalents if the limitation or limitations not literally present are there by equivalents. Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 795-96 (Fed. Cir. 1990).

An analysis of infringement involves two steps. First, a claim is construed without regard to the accused product. See Moeller v. Ionetics, Inc., 794 F.2d 653, 656-57, 229 USPQ 992, 994-95 (Fed. Cir. 1986). Second, the claim is compared with the accused product, to determine whether all of the limitations of the claim are present either exactly or by a substantial equivalent. See id.; Lemelson v. United States, 752 F.2d 1538, 1551, 224 USPQ 526, 533 (Fed. Cir. 1985).

Here, McKasy challenges the verdict of infringement, assuming that the jury found both literal infringement and infringement by equivalents.

McKasy's challenge to the presumed verdict of literal infringement focuses on the following claim limitations (see Figures 1 and 4, above):

[A] hoop member attached to the bottom of the neck portion and extending downward therefrom, a spike attached to the bottom of the hoop and projecting downward therefrom....

McKasy asserts that the word "attached" in these limitations means directly connected or touching. The Jurgens counter that "the claim only requires that the hoop member support the neck portion, and the spike support the hoop member." The parties agree that resolution of this dispute--a question of law which we review de novo, see Howes v. Medical Components, Inc., 814 F.2d 638, 643, 2 USPQ2d 1271, 1273-74 (Fed. Cir. 1987)--resolves the question of literal infringement. They are not in disagreement as to whether the claim literally covers the product, once properly construed. If the Jurgens' interpretation prevails there is literal infringement; if McKasy's interpretation prevails there is no literal infringement.⁴ 

We hold that the quoted claim limitations literally require a direct series connection between neck, hoop, and spike. That is the meaning which the reexamination examiner ascribed to the limitation, without dispute by Shjeflo's attorney, when he stated:

There simply is no teaching of a head, neck, hoop and stake connected in series....

Reasons for Allowance and/or Confirmation at 4. Moreover, neither the specification nor the prosecution history indicates that Shjeflo intended another meaning.

As a matter of law, there is no literal infringement.

McKasy challenges the judgment of infringement by equivalents on two grounds. First, he asserts that the jury could not have found from the evidence that the accused windsocks contain every limitation of the claim--either exactly or equivalently. See Johnston, 885 F.2d at 1577, 12 USPQ2d at 1384 (infringement may be found only if the accused product contains every limitation either exactly or by a substantial equivalent). Second, he asserts that even if the jury could have found the exact or substantial presence of every limitation in the accused windsocks, the judgment would be erroneous as a matter of law because the patent would then encompass the prior art described above. See Wilson Sporting Goods Co. v. David Geoffrey & Assoc., 904 F.2d 677, 683, 14 USPQ2d 1942, 1947-48 (Fed. Cir.) (prior art may prevent infringement by equivalents even if every limitation of an asserted claim is exactly or substantially present in an accused product), cert. denied, --- U.S. ----, 111 S. Ct. 537, 112 L. Ed. 2d 547 (1990).

McKasy's first argument submits to a simple answer given the procedural posture of this appeal: whether the McKasy windsocks contain structure that is "equivalent" to every claim limitation was a disputed question of fact at trial. See Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 936, 4 USPQ2d 1737, 1740-41 (Fed. Cir. 1987) (equivalency of claim limitations and accused structure is a question of fact), cert. denied, 485 U.S. 961, 108 S. Ct. 1226, 99 L. Ed. 2d 426 (1988). It was presumably resolved by the jury against McKasy and he may not challenge that finding on this appeal.

McKasy's second argument for noninfringement presents a question of law, which may have factual underpinnings. See Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 870, 228 USPQ 90, 96 (Fed. Cir. 1985); Wilson, 904 F.2d at 683-84, 14 USPQ2d at 1948. In this situation, as for obviousness, we presume that the jury resolved the underlying factual disputes in favor of the Jurgens and (because McKasy failed to move for a directed verdict) inquire only whether the legal conclusion embodied in the judgment--that the patent did not encompass the prior art--is correct in light of the presumed jury findings.

We have recently noted that it may be helpful to "conceptualize" the prior art limitation on the doctrine of equivalents by envisioning a hypothetical patent claim--similar to the asserted claim but broad enough to literally cover the accused products--and testing whether that claim would have been patentable in view of the prior art. Id. at 684-85, 14 USPQ2d at 1948-49. Using that approach in this case, to cover McKasy's windsocks literally the hypothetical claim would be identical to the original claim, except that it would relax the limitation that requires a direct series connection between neck, hoop, and spike. The hypothetical claim would permit that connection to be made indirectly, through the windsock fabric. See note 4, supra.

McKasy strenuously argues that the Mattson patent (see Figure 1 above) shows precisely this indirect connection between neck, hoop, and spike. But as we have explained earlier, the jury presumably found that Mattson does not disclose a windsock, an underlying finding which McKasy cannot challenge here. If we assume that Mattson does not disclose a windsock, then the hypothetical claim, viewed as a whole, would not have been obvious in view of Mattson for reasons we have stated earlier. As for the Dacian windsock, McKasy's other new found reference, the jury presumably found that that reference was not analogous art.

As discussed above with respect to validity, the PTO examiner found, and we agree, that there was no linkage between "decoy" prior art (such as Mattson) and windsock prior art (such as the Dacian windsock). That reasoning holds true for patentability of the hypothetical claim. Thus, the prior art does not bar infringement by equivalents.

If patent infringement is willful, as the jury found here, increased damages may be awarded at the discretion of the trial judge. 35 U.S.C. § 284 (1988); Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418, 1429, 8 USPQ2d 1323, 1332 (Fed. Cir. 1988). In deciding whether to increase damages, the court must consider all of the circumstances of the case. See Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1579, 230 USPQ 81, 90-91 (Fed. Cir. 1986), cert. denied, 479 U.S. 1034, 107 S. Ct. 882, 93 L. Ed. 2d 836 (1987).

McKasy argues that the judge abused his discretion in doubling the patent damages, because McKasy had no knowledge of the patent when he began selling his windsocks and, upon learning of the Jurgens' threat of infringement, he removed the windsocks from his shelves. According to McKasy, he resumed sales only when he was assured by CBK (through CBK's patent attorney) that there was no infringement. In addition, he asserts he made a substantial challenge to the charge of patent infringement.

The Jurgens assert that McKasy's argument is unpersuasive because McKasy had a duty to obtain legal advice before, not after, he began selling CBK's products, citing Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 219 USPQ 569 (Fed. Cir. 1983). We disagree. Although the court in Underwater Devices stated that infringers have a "duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity," id. at 1390, 219 USPQ at 576, the infringer in that case knew of the patent before it began infringing. In that context advice of counsel before selling the product may be appropriate, and at least is possible.⁵  In contrast, here McKasy had no knowledge of the patent when he began selling windsocks.

The Jurgens' attack on the quality of the legal advice ultimately relied upon by McKasy is more persuasive. The "opinion of counsel" that McKasy wore as a shield after he was threatened with infringement was merely a letter of assurance from CBK, informing McKasy that CBK had obtained an opinion of counsel that the patent was invalid and not infringed. No copy of the opinion accompanied CBK's assurance letter, and McKasy did not investigate further. Moreover, the record shows that although McKasy did temporarily stop selling windsocks, he started selling again after receiving an indemnity agreement from CBK--still without advice of counsel. Finally, McKasy employed a "shotgun" approach to the defense of this patent suit, asserting and pursuing every conceivable defense, only to concede many of them during oral argument in the trial court.

Under these circumstances, the judge did not abuse his discretion in doubling the patent damages award against McKasy.

Under Eighth Circuit law, a combination of design features--a "trade dress"--is entitled to protection under Sec. 43 of the Lanham Act if that combination is nonfunctional, has acquired secondary meaning, and if a product using those features is likely to cause confusion, mistake, or deception. Truck Equip. Serv. Co. v. Fruehauf Corp., 536 F.2d 1210, 1217, 191 USPQ 79, 85 (8th Cir.), cert. denied, 429 U.S. 861, 97 S. Ct. 164, 50 L. Ed. 2d 139 (1976).⁶  Here, McKasy and CBK challenge the judgment of trade dress infringement on several grounds.

McKasy and CBK first argue that the court erred by refusing to instruct the jury that it could not find the Jurgens' asserted trade dress to be "nonfunctional" if doing so would hinder competition. We disagree. While that is a correct statement of Eighth Circuit law, see Prufrock, Ltd. v. Lasater, 781 F.2d 129, 133, 228 USPQ 435, 438 (8th Cir. 1986), and it would have been preferable for the court to include the instruction, we are not convinced that the omission was prejudicial. The instructions given by the court stated the basic factors to be considered by the jury in determining functionality. An additional instruction on whether competition would be hindered was not essential in view of the instructions which were given.

McKasy and CBK also assert prejudicial legal error in the judge's instruction that "You are permitted to decide whether there is a likelihood of confusion based solely upon inspection of the CBK and Jurgens wind-inflated decoys and their manner of use." McKasy contends the instruction was erroneous because it failed to list several other factors that should be considered under Eighth Circuit law. See SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1090-91, 207 USPQ 897, 900 (8th Cir. 1980) (listing the "SquirtCo factors"). While McKasy and CBK correctly state the law, they fail to recognize that jury instructions must be considered as a whole in determining whether the jury was properly instructed. See, e.g., Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1518, 220 USPQ 929, 940 (Fed. Cir.), cert. denied, 469 U.S. 871, 105 S. Ct. 220, 83 L. Ed. 2d 150 (1984). Here, the jury instructions as a whole correctly stated Eighth Circuit law because elsewhere the judge stated that " [l]ikelihood of confusion is also determined by evaluating the following [SquirtCo ] factors...." McKasy and CBK also challenge the instruction because it failed to tell the jury that likelihood of confusion must result from the use of nonfunctional features. We reject this argument on the same reasoning: elsewhere the jury was instructed multiple times that it must find the asserted trade dress to be nonfunctional before it could find infringement.

Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a) (1988), which sets forth monetary remedies, states in pertinent part:

When a ... violation under section 43(a), shall have been established ... the plaintiff shall be entitled, ... subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. The court shall assess such profits and damages or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty. The court in exceptional cases may award reasonable attorney fees to the prevailing party. [Emphasis ours.]

In Metric & Multistandard Components Corp. v. Metric's, Inc., 635 F.2d 710, 209 USPQ 97 (8th Cir. 1980), the Eighth Circuit held that this section gives a district court broad discretion to adjust monetary relief to serve the interests of justice, including trebling the jury verdict, "provided it does not award such relief as a penalty." Id. at 715, 209 USPQ at 102. McKasy and CBK contend that in this case the district court abused its discretion in increasing the jury damage award because it did so, not to compensate for difficulty in measuring or proving damages, but to penalize them for opprobrious conduct. In response, the Jurgens contend that courts have allowed trebling of damages to punish willful infringement. In addition, the Jurgens contend that the court's award in this case was compensatory, not punitive.

We agree with the Jurgens that at least one court has allowed the trebling of damages to penalize willful infringers. See Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 435-36 (7th Cir. 1989). But on issues of unfair competition, our precedent requires us to defer to the views of the regional circuit in which the district court sits. Cicena, 900 F.2d at 1548, 14 USPQ2d at 1403. Here, Eighth Circuit law controls and Metric makes clear that the district judge may increase damages, "providing it does not award such relief as a penalty." 635 F.2d at 715, 209 USPQ at 102.

The Jurgens' argument that the judge increased damages with "compensation" in mind is disingenuous. The Jurgens' attorney urged the court to increase the award for one reason:

The purpose of the trebling provisions is to punish the defendants and deter similar conduct. And this is clearly such a situation where trebling would be appropriate. It ... recognizes the fact that the jury in this case clearly believed that the defendants ... had engaged in conduct with willful indifference to the rights of the Jurgens....

The court's reliance on this punitive purpose is equally clear. When it ruled on the Jurgens' motion for increased damages, the court remarked:

As to the Lanham Act damages ... the court holds that plaintiffs are entitled to an award of treble damages against defendant CBK. The jury found that CBK willfully violated the Lanham Act. There was sufficient evidence that CBK knowingly copied plaintiffs' product and attempted to assert the good will plaintiffs had established in the decoy market. The court believes the jury's attempted award of $800,000 in punitive damages shows that the jury reached the conclusion as well. CBK's obvious attempt to mimic the appearance of plaintiffs' product warrants treble damages.

Additionally, in denying the Jurgens' motion to reinstate the previously-struck $800,000 punitive damages award under the MDTPA, the court stated:

[T]he court states for the record that it believes that its trebling of the Lanham Act damage award against CBK fully satisfies any punitive or deterrent purpose that would be accomplished by a punitive damage award [under the MDTPA.]

In summary, it is clear that the district court increased the jury damage award "as a penalty" against McKasy and CBK. Under Metric this is an impermissible reason for increasing Lanham Act damages. Since the Jurgens advanced no other reason at trial why the district court should have increased damages, the district court abused its discretion in increasing Lanham Act damages.

We have considered McKasy's and CBK's numerous other arguments, including their argument that the judge abused its discretion in denying their motion for a new trial, but find them unpersuasive.

CONCLUSION

We reverse the judgment in Appeal No. 90-1105 insofar as it increased Lanham Act damages. In all other respects, we affirm. We dismiss Appeal No. 89-1645 for lack of appellate jurisdiction.

COSTS

No costs.

89-1645 DISMISSED.

90-1105 AFFIRMED-IN-PART

REVERSED-IN-PART.