Phillip Oiness and Sun Products Group, Inc.,plaintiffs/cross-appellants, v. Walgreen Company, Atico International Incorporated, F/k/a J& M Enterprises, D/b/a Atico, New Aticointernational, Ltd, D/b/a New Atico,a/k/a Atico, Defendants-appellants, 980 F.2d 742 (Fed. Cir. 1992)

Oiness and Sun Products sued Walgreen Company and Atico International and New Atico International for infringement of United States Patent No. 4,544,203 (the '203 patent). See Oiness v. Walgreen Co., 774 F. Supp. 1277, 21 USPQ2d 1654 (D. Colo. 1991). A jury found that Oiness owned the '203 patent, that defendants had not established the invalidity of the '203 patent, and that defendants willfully infringed the patent. The jury then awarded $300,000 in actual damages. The court trebled damages and denied attorney fees and prejudgment interest. Upon review, this court finds substantial evidence to support most of the jury's findings. However, due to reversible errors affecting the damages award and the trial court's denial of prejudgment interest, this court affirms-in-part, vacates-in-part, and remands.

Damages

This court reviews the jury's findings for reasonableness

under the substantial evidence standard of review. Orthokinetics v. Safety Travel Chairs, 806 F.2d 1565, 1571, 1 USPQ2d 1081

, 1084-86 (Fed. Cir. 1986). The district court instructed the

jury to award the "net profits" Oiness would have made

absent Walgreen's infringement. Under the unique facts of

this case, that instruction likely misled the jury and

caused reversible error. Moreover, this court detects no

substantial evidence supporting the jury's damage award. On

this record, no reasonable jury could have reached this result.

In a separate 1988 suit, the United States District Court

for the Eastern District of Michigan awarded Oiness damages

for a short-lived infringement of the '203 patent by B & E

Sales Company. Sun Prods. Group v. B & E Sales Co., 700 F. Supp. 366, 9 USPQ2d 2009

(E.D. Mich. 1988). Due to repeated references throughout

this trial, the jury was acutely aware that Oiness

previously had received damages from B & E Sales. In

particular, Sun Products received damages for loss of

"future profits" caused by B & E Sales' infringement.

The jury instructions advised the jury to award Oiness

damages for any "net profits on sales Sun Products would

have made absent the infringement." The instructions

further defined "net profits" as "revenue from the sale of

head rests less the cost of obtaining or manufacturing the

head rest, cost of goods sold, and less all operating costs

and expenses such as advertising, rent, salaries,

promotions, et cetera." The instructions did not

distinguish between a lost profits award for B & E Sales'

1985-86 infringement and a lost profits award for Walgreens'

1987-90 infringement.

Without this distinction between damages for B & E Sales'

1985-86 infringement and Walgreen's 1987-90 infringement,

the jury may well have read the term "net profits" to

require reduction of the damages caused by Walgreen's

infringement to account for damages awarded for B & E Sales'

infringement. Regardless of the source of the jury's

confusion, however, substantial evidence does not support

the jury's damage award.

The jury awarded Oiness $300,000 in damages for injury to

three distinct markets--premium, advertizing specialty, and

retail. Plaintiffs' witnesses testified to over $5 million

in retail damages, over $16 million in premium product

damages, and $500,000 in advertising specialty damages, for

a total of over $22 million. Walgreen's witness admitted

that injury to the advertising specialty market alone ranged

from $250,000 to $500,000. Walgreen's expert based this

estimate on the cost of reintroducing the product and did

not include any lost profits. On the record, this court

finds no substantial evidence supporting the jury's damage award.

An offending notion woven into the fabric of this case

is: Plaintiff recovered for lost profits in the suit

against B & E Sales, therefore, plaintiff cannot recover for

lost profits against Walgreen. To recover under lost

profits, plaintiff must show that, absent infringement, it

would have made the profits claimed. King Instrument Corp. v. Otari Corp., 767 F.2d 853, 863, 226 USPQ 402

, 409, (Fed. Cir. 1985), cert. denied, 475 U.S. 1016

(1986). Plaintiff must show a direct causal connection

between the infringer's activities and the patent owner's

lost profits. Sun Products met this burden in recovering

lost profits for B & E Sales' 1985-86 infringement. In this

suit against Walgreen, plaintiffs certainly cannot recover

for profits lost due to B & E's infringement. Plaintiffs

may recover, however, all profits lost due to Walgreen's

1987-90 infringement.

Because the jury instructions did not adequately distinguish

between damages for the separate 1985-86 infringement and

because substantial evidence does not support the jury's

damages award, this court vacates that award and remands.

Prejudgment Interest

This court reviews the district court's decision not to award prejudgment interest for abuse of discretion. See Hughes Tool Co. v. Dresser Indus., Inc., 816 F.2d 1549, 1558, 2 USPQ2d 1396, 1404 (Fed. Cir. 1987). The district court did not grant prejudgment interest because Sun Products received damages in a prior case. Sun Prods., 700 F. Supp. at 381-87, 9 USPQ2d at 2019-24. The court reasoned that prejudgment interest would give Sun Products a duplicative recovery. The jury, however, awarded $250,000 for injury to the premium sales market. Premium products are purchased in bulk to be given away as part of the sales promotion of other products. In B & E Sales, Sun Products recovered for retail sales, not premium sales. Therefore, an award for premium sales in the instant case would not overlap with the B & E award.

The district court said: " [t]he jury concluded that plaintiffs were only entitled to recover $300,000 for damages incurred after 1992." Oiness, 774 F. Supp. at 1285, 21 USPQ2d at 1660. In the same paragraph, the court relied on testimony that Walgreen's infringement affected premium sales from 1988 through 2002. Id. The district court's rationale for denying prejudgment interest does not account for the prejudgment interest on those premium sales. This failure amounts to an abuse of discretion. Therefore, this court vacates the trial court's denial of prejudgment interest and remands. See Nickson Indus. v. Rol Mfg. Co., 847 F.2d 795, 800-01, 6 USPQ2d 1878, 1881-82 (Fed. Cir. 1988).

CONCLUSION

Both plaintiffs and defendants raised several other objections to the jury's verdict and the trial court's conduct of the case. In all respects, this court rejects those objections and affirms the district court's judgment. This court only vacates and remands for reconsideration of the award of damages for lost profits and of the denial of prejudgment interest.

COSTS

Each party shall bear its own costs.