Aqua Shield v. Interpool Pool Cover Team , 774 F.3d 766 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
AQUA SHIELD,
Plaintiff-Appellant,
v.
INTER POOL COVER TEAM,
ALUKOV HZ SPOL. S.R.O.,
ALUKOV SPOL. S.R.O., AND
POOL & SPA ENCLOSURES,
Defendants-Appellees.
______________________
2014-1263
______________________
Appeal from the United States District Court for the
District of Utah in No. 2:09-cv-00013 TS, Chief Judge Ted
Stewart.
______________________
Decided: December 22, 2014
______________________
TODD E. ZENGER, Kirton McConkie, of Salt Lake City,
Utah, argued for plaintiff-appellant.
GREGORY J. COFFEY, Coffey & Associates, of Morris-
town, New Jersey argued for defendants-appellees. Of
counsel on the brief was H. DICKSON BURTON, Trask Britt,
PC, of Salt Lake City, Utah.
______________________
2 AQUA SHIELD v. INTER POOL COVER TEAM
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 enti-
tled 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 proceed-
ings consistent with this opinion.
BACKGROUND
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 re-
quested 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
AQUA SHIELD v. INTER POOL COVER TEAM 3
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 in-
fringement 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 in-
fringement 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 obvious-
ness, the court ruled that IPC did “not argue[] obvious-
ness 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 moti-
vated to combine the prior art to produce the claimed
invention.” Id. at *5. For those reasons the district court
granted summary judgment in favor of Aqua Shield
regarding validity. Id. Neither party appeals the sum-
mary judgment rulings (except for one discrete infringe-
ment issue concerning the “Elegant” model).
4 AQUA SHIELD v. INTER POOL COVER TEAM
The district court next conducted a two-day bench tri-
al on issues concerning relief. In one ruling not chal-
lenged 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 evidence to determine what that rate
should be higher than.”). The court thus awarded Aqua
Shield no damages at all. Id. at 27–28.
The court also found no willfulness on IPC’s part. The
court determined that, until summary judgment of in-
fringement was granted, IPC had a reasonable belief that
its products were non-infringing, based on the New York
district court’s denial of Aqua Shield’s motion for a pre-
liminary injunction. Id. at 29. And after summary judg-
ment of infringement was granted, the court found, IPC
“made a good faith effort to design around the [p]atent.”
Id. Based on those conclusions, the court found that IPC
had not willfully infringed the ’160 patent. Id. Further
concluding that IPC did not otherwise “act in bad faith,
engage[] in litigation misconduct, or exhibit[] bad behav-
ior,” the court determined that this was not an “excep-
tional case” within the meaning of 35 U.S.C. § 285 and so
denied Aqua Shield’s motion for fees. Id. at 28–30.
AQUA SHIELD v. INTER POOL COVER TEAM 5
Aqua Shield then moved to alter the district court’s
judgment. The district court reassessed several of the
conclusions it had reached, but it changed only the no-
royalty finding. Aqua Shield, Inc. v. Inter Pool Cover
Team, No. 2:09-CV-13 TS, 2013 WL 6410975, at *1, *5–6
(D. Utah Dec. 9, 2013). Noting 35 U.S.C. § 284’s “clear”
instruction “that the Court ‘shall’ award damages ‘in no
event less than a reasonable royalty,’ ” id. at *5, the court
relied on evidence of IPC’s profits on past infringing sales
as the foundation for a royalty calculation, id. at *3–5.
The court found that IPC’s net profit on infringing sales
had been five percent, amounting to $135,000. Id. at *5.
Then, “[c]onsidering the[] benefits [of the patented inven-
tion], while still allowing Defendants a profit on infring-
ing sales,” the court stated that, in a hypothetical
negotiation occurring before infringement began, IPC
would have been willing to pay a royalty of five percent of
those net profits, but the court raised that figure to eight
percent to reflect the Georgia-Pacific considerations that
pointed toward a higher royalty. Id. The result was an
award to Aqua Shield of $10,800 in damages. Id.Aqua Shield now appeals, principally challenging the
royalty-award methodology and the rejection of willful-
ness. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
A. Reasonable Royalty
The amount of damages awarded to a patentee, when
fixed by the district court, is a factual finding reviewed for
clear error. SmithKline Diagnostics, Inc. v. Helena Labs.
Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). But the
methodology underlying the district court’s damages
computation is reviewed for abuse of discretion. Id. A
district court abuses its discretion when it “ma[kes] a
clear error of judgment in weighing relevant factors or
6 AQUA SHIELD v. INTER POOL COVER TEAM
exercise[s] its discretion based upon an error of law or
clearly erroneous factual findings.” Genentech, Inc. v.
Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997).
In the damages context, therefore, we examine the meth-
odology for consistency with the legal principles defining a
reasonable royalty.
After making a finding of infringement, “the court
shall award the claimant damages adequate to compen-
sate for the infringement, but in no event less than a
reasonable royalty for the use made of the invention by
the infringer.” 35 U.S.C. § 284. The “value of what was
taken”—the value of the use of the patented technology—
measures the royalty. Dowagiac Mfg. Co. v. Minn. Moline
Plow Co., 235 U.S. 641, 648 (1915). A traditional heuris-
tic for assessing this market value is to posit a “hypothet-
ical negotiation” between the patentee and adjudicated
infringer and to “attempt[] to ascertain the royalty upon
which the parties would have agreed had they successful-
ly negotiated an agreement just before infringement
began.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d
1301, 1324 (Fed. Cir. 2009). The inquiry, besides being
hypothetical, involves approximation: “[t]he hypothetical
negotiation tries, as best as possible, to recreate the ex
ante licensing negotiation scenario and to describe the
resulting agreement.” Id. at 1325.
Aqua Shield does not challenge the district court’s de-
cision to use a hypothetical-negotiation approach, but it
does challenge how the court applied that approach. We
agree with that challenge in part. The district court
correctly noted that the infringer’s actual profits earned
during the period of infringement can be relevant to the
inquiry, see Trans-World Mfg. Corp. v. Al Nyman & Sons,
Inc., 750 F.2d 1552, 1568 (Fed. Cir. 1984), but it erred in
the use it made of IPC’s profit figures.
AQUA SHIELD v. INTER POOL COVER TEAM 7
What an infringer’s profits actually turned out to have
been during the infringement period may be relevant, but
only in an indirect and limited way—as some evidence
bearing on a directly relevant inquiry into anticipated
profits. Thus, when the infringer is a profit-making
enterprise, a “reasonable royalty is the amount that ‘a
person, desiring to manufacture[, use, or] sell a patented
article, as a business proposition, would be willing to pay
as a royalty and yet be able to make[, use, or] sell the
patented article, in the market, at a reasonable profit.’ ”
Id. (bracketed changes in original; quoting earlier author-
ity). In hypothetical-negotiation terms, the core economic
question is what the infringer, in a hypothetical pre-
infringement negotiation under hypothetical conditions,
would have anticipated the profit-making potential of use
of the patented technology to be, compared to using non-
infringing alternatives. If a potential user of the patented
technology would expect to earn X profits in the future
without using the patented technology, and X + Y profits
by using the patented technology, it would seem, as a
prima facie matter, economically irrational to pay more
than Y as a royalty—paying more would produce a loss
compared to forgoing use of the patented technology. See
Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302,
1312 (Fed. Cir. 2002) (“The economic relationship between
the patented method and non-infringing alternative
methods, of necessity, would limit the hypothetical nego-
tiation.”); Dowagiac, 235 U.S. at 648 (it is “permissible to
show the value [of using the patented technology] by
proving what would have been a reasonable royalty,
considering the nature of the invention, its utility and
advantages, and the extent of the use involved” (emphasis
added)); Suffolk Co. v. Hayden, 70 U.S. (3 Wall.) 315, 319–
20 (1865).
The hypothetical negotiation is hypothetical not only
because, in the typical case, no successful pre-
infringement negotiation ever occurred, but also because
8 AQUA SHIELD v. INTER POOL COVER TEAM
the negotiation is constructed on hypothetical assump-
tions. Most basically, the method assumes infringement
and validity of the patents and willingness of the parties
to negotiate an agreement. See Lucent, 580 F.3d at 1325.
Another hypothetical assumption, bearing particularly on
the anticipated-profits inquiry, abstracts away from the
particular infringer’s degree of efficiency. An especially
inefficient infringer—e.g., one operating with needlessly
high costs, wasteful practices, or poor management—is
not entitled to an especially low royalty rate simply
because that is all it can afford to pay without forfeiting
or unduly limiting its profit if it uses the patented tech-
nology rather than alternatives. Thus, the royalty the
particular infringer could profitably pay by going about its
business in its particular way does not set the market
value that the hypothetical negotiation aims to identify.
See Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1373
(Fed. Cir. 2008), modified in other respect, 577 F.3d 1377(Fed. Cir. 2009); Monsanto Co. v. Ralph, 382 F.3d 1374,
1384 (Fed. Cir. 2004); Golight, Inc. v. Wal-Mart Stores,
Inc., 355 F.3d 1327, 1338 (Fed. Cir. 2004); Rite-Hite Corp.
v. Kelley Co., 56 F.3d 1538, 1555 (Fed. Cir. 1995); State
Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580
(Fed. Cir. 1989).
Real-world application of this conceptual structure of-
ten involves “approximation and uncertainty,” Lucent, 580
F.3d at 1325 (internal quotation marks omitted), and the
ultimate royalty determination must reflect the two-sided
nature of the posited negotiation. 1 The inquiry, besides
1 In copyright law, which uses a hypothetical nego-
tiation to estimate fair market value in a similar way, see
Gaylord v. United States, 678 F.3d 1339, 1343 (Fed. Cir.
2012), the Ninth Circuit recently wrote:
AQUA SHIELD v. INTER POOL COVER TEAM 9
being hypothetical, asks about a comparative business
prediction in an uncertain, complex world, and many
variables may affect the hypothetical forecast, including
costs and availability of non-infringing alternatives, the
patented technology’s role in the firm’s (expected) overall
business, and the (expected) actions of competing firms in
the market. Moreover, various kinds of evidence, such as
licenses, business prognostications, and information about
cost savings or value enhancements compared to alterna-
tives, where such evidence is reliable, relevant, and not
unduly prejudicial, may be used in the inquiry to deter-
mine “the economic value of the patented technology in
the marketplace” at the relevant time. LaserDynamics,
Inc. v. Quanta Computer, Inc., 694 F.3d 51, 79 (Fed. Cir.
2012). But we do not have before us broad questions
Fair market value in a voluntary licensing
transaction between arms-length parties ordinari-
ly lies somewhere between the two poles of cost to
the seller and benefit to the buyer. That is, the
seller will not ordinarily charge less for a license
than its anticipated cost, and the buyer will not
ordinarily pay more for a license than its antici-
pated benefit. In the case of a hypothetical li-
cense, it is often difficult to determine what, at
the time of the infringement, the seller and buyer
thought would be their respective cost and benefit.
Further, even if the cost and benefit can be de-
termined with some degree of certainty, it is often
difficult to determine the range between the two
poles of cost and benefit within which the parties
would likely have settled.
Oracle Corp. v. SAP AG, 765 F.3d 1081, 1089 (9th Cir.
2014).
10 AQUA SHIELD v. INTER POOL COVER TEAM
about what evidence meets admissibility standards or
would support a sustainable royalty award.
We deal here only with a challenge to the soundness
of the district court’s particular use of IPC’s profits in its
rationale. For purposes of Aqua Shield’s challenge, two
points are key. First, anticipated incremental profits
under the hypothesized conditions are conceptually cen-
tral to constraining the royalty negotiation, as recognized
in Trans-World Mfg., 750 F.2d at 1568. Second,
“[e]vidence of the infringer’s actual profits generally is
admissible as probative of his anticipated profits.” Id.; see
Interactive Pictures Corp. v. Infinite Pictures, Inc., 274
F.3d 1371, 1385 (Fed. Cir. 2001); see also Sinclair Ref. Co.
v. Jenkins Petrol. Process Co., 289 U.S. 689, 698 (1933)
(post-infringement evidence can be a relevant “book of
wisdom”); Lucent, 580 F.3d at 1333.
Contrary to Aqua Shield’s broader contention, there-
fore, the district court did not err in considering IPC’s
profits. But it did err in treating the profits IPC actually
earned during the period of infringement as a royalty cap.
That treatment incorrectly replaces the hypothetical
inquiry into what the parties would have anticipated,
looking forward when negotiating, with a backward-
looking inquiry into what turned out to have happened.
See Interactive Pictures, 274 F.3d at 1385 (expectations
govern, not actual results).
The district court’s analysis also incorrectly replaces
the inquiry into the parties’ anticipation of what profits
would be earned if a royalty (of amounts being negotiated)
were to be paid with an inquiry into what profits were
earned when IPC was charging prices without accounting
for any royalty. Thus, the district court seems to have
simply assumed that any royalty paid by IPC would have
directly reduced its profits, dollar for dollar. But that
would not be true, in general, if IPC could have raised its
AQUA SHIELD v. INTER POOL COVER TEAM 11
prices (over what it actually charged for infringing sales)
to account (fully or partly) for a royalty payment. The
district court did not find, and IPC has not argued here,
that IPC was selling in a perfectly competitive market in
which it was forced to act as a pure price-taker. We have
not been shown proof that this case is different from the
typical one in which pricing might be adjusted to account
for a royalty based on sales price. Indeed, IPC has not
pointed to any evidence supporting the district court’s
conclusion that a royalty should be a percentage of profits
rather than sales revenues. 2
In Douglas Dynamics, LLC v. Buyers Prod. Co., 717
F.3d 1336, 1346 (Fed. Cir. 2013), this court explained:
“The infringer’s selling price can be raised if necessary to
accommodate a higher royalty rate, and indeed, requiring
the infringer to do so may be the only way to adequately
compensate the patentee for the use of its technology.”
The court held, for that reason, that “the district court
clearly erred by ensuring the ongoing royalty rate it
awarded would ‘leave some room for profit’ by [the in-
fringer] at its current prices.” Id. On the record before
us, we conclude that the district court committed the
same error in the present case.
We vacate the district court’s royalty calculation and
remand for redetermination in a manner consistent with
this opinion. On remand, the court should consider all
relevant record evidence, including the advantages of the
2 Evidence of the parties’ abandoned settlement ne-
gotiations refers to percentages of “selling prices.” J.A.
329. One IPC witness may have recognized a sales-based
royalty, though the testimony leaves room for interpreta-
tion. J.A. 239–40. On appeal, IPC has not specifically
answered Aqua Shield’s assertion that the sale price is
the appropriate base on this record.
12 AQUA SHIELD v. INTER POOL COVER TEAM
patented product, the ease and cost of designing around
the claimed invention, and the relevance of IPC’s actual
profits to what IPC’s expectations would have been in a
hypothetical negotiation. Our correction of the erroneous
focus on the net profits IPC actually earned may require
reconsideration of aspects of the district court’s analysis
we have not specifically discussed. For example, in reject-
ing the testimony of Mr. Brooks, the court relied in part
on its focus on IPC’s actual profits, which we hold to be
erroneous. Initial Damages Op. at 26. The district court
also should reconsider the relevance of Aqua Shield’s
evidence regarding IPC’s gross profits now that the in-
quiry is not constrained by the erroneous focus on IPC’s
net profits.
B. Willful Infringement
To prove that its patent was willfully infringed, a pa-
tentee must make two related showings. First, it must
“show by clear and convincing evidence that the infringer
acted despite an objectively high likelihood that its ac-
tions constituted infringement of a valid patent.” In re
Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007).
Second, “the patentee must also demonstrate that this
objectively-defined risk (determined by the record devel-
oped in the infringement proceeding) was either known or
so obvious that it should have been known to the accused
infringer.” Id. The first issue is legal, with our review de
novo, Bard Peripheral Vascular, Inc. v. W.L. Gore &
Assocs., Inc., 682 F.3d 1003, 1006–07 (Fed. Cir. 2012), and
the second issue is factual, see id. at 1008, which means
clear-error review in a bench-trial case. Our disposition
here, however, does not turn on the standard of review.
The district court did not lay out its willfulness analy-
sis in Seagate’s two-part terms. See Initial Damages Op.
at 10–11, 29–30; Aqua Shield, 2013 WL 6410975, at *1–2.
And with regard to infringement that occurred before the
AQUA SHIELD v. INTER POOL COVER TEAM 13
court’s decision granting Aqua Shield summary judgment
of infringement, the court gave only one reason for con-
cluding that “Defendants[] reasonably believed that their
products did not infringe the ’160 Patent”—namely, that
“the Eastern District of New York denied Aqua Shield’s
motion for preliminary injunction.” Initial Damages Op.
at 10. The court gave no additional reasons when, in
ruling on Aqua Shield’s post-judgment motion, it reiterat-
ed that IPC “prudently conducted [itself] with confidence
that a court might hold the patent invalid or not in-
fringed.” Aqua Shield, 2013 WL 6410975, at *2.
Our opinion in Seagate expressly connects findings of
willfulness to preliminary-injunction rulings. Seagate,
497 F.3d at 1374 (“A substantial question about invalidity
or infringement is likely sufficient not only to avoid a
preliminary injunction, but also a charge of willfulness
based on post-filing conduct.”). But it states no rigid rule,
and it notes that preliminary injunctions can be denied
even when a defendant has not raised “substantial ques-
tion[s] about invalidity or infringement.” See id. In a
later willfulness determination, the significance of a
preliminary-injunction denial depends on why the prelim-
inary injunction was denied. In this case, the Eastern
District of New York’s decision to deny Aqua Shield’s
motion for a preliminary injunction cannot reasonably be
read to support a conclusion that any substantial basis
existed for doubting infringement or validity. The New
York court denied Aqua Shield’s motion because of per-
sonal-jurisdiction questions and because Aqua Shield
lacked sufficient knowledge of IPC’s product to make the
required showing of a likelihood of success on the merits.
Personal jurisdiction does not speak to infringement or
validity at all. And Aqua Shield’s ignorance of IPC’s
products appears irrelevant to a validity analysis and
does not indicate what an infringement analysis of those
products would show once the details of those products
were fully known—as they were all along to IPC. The
14 AQUA SHIELD v. INTER POOL COVER TEAM
denial of Aqua Shield’s motion for a preliminary injunc-
tion is thus a legally insufficient reason for determining
that IPC did not willfully infringe.
With respect to the willfulness of any infringement
that occurred after summary judgment of infringement,
the evidence cited by the district court stops short of
demonstrating that IPC did in fact design around the ’160
patent and, if so, when. The court pointed to evidence
that IPC instructed its factory to fix the end panels of its
pool enclosures in place, in a manner it believed to avoid
the patent’s claims. Initial Damages Op. at 11; Aqua
Shield, 2013 WL 6410975, at *2. Questions remain about
whether that change was actually implemented or wheth-
er the resulting products avoided infringement. Both
inquiries are relevant to the issue of willfulness. They
may also bear on the royalty issue, because they may be
relevant to the ease and cost of designing around the
patented technology.
We therefore vacate the court’s decision that IPC did
not willfully infringe and remand for an analysis that
conforms to Seagate’s standard. 497 F.3d at 1371. We do
not reach an ultimate conclusion ourselves. We observe,
however, that Seagate’s first requirement focuses on
whether the infringer’s defenses, as ultimately presented
to the court, were reasonable. Bard, 682 F.3d at 1008. On
remand, the district court should focus on IPC’s defenses
as articulated during the infringement and invalidity
proceedings—during which IPC presented no infringe-
ment defenses for claims 2–9, 11–14, or 16, Aqua Shield,
830 F. Supp. 2d at 1287–89, and presented no element-by-
element argument for invalidity, Aqua Shield, 2013 WL
164244, at *4–5. If the court finds that the defenses were
objectively unreasonable, in the sense that no “reasonable
litigant could realistically expect” them to succeed, Bard,
682 F.3d at 1008 (internal quotation marks omitted), it
should proceed to consider Seagate’s second requirement.
AQUA SHIELD v. INTER POOL COVER TEAM 15
On that issue, we note that the objective baselessness of
an infringer’s defenses, assessed on the litigation record,
may have a strong bearing on whether the “objectively-
defined risk” of infringement “was either known or so
obvious that it should have been known to the accused
infringer.” Seagate, 497 F.3d at 1371; see Kilopass Tech.,
Inc. v. Sidense Corp., 738 F.3d 1302, 1314 (Fed. Cir. 2013)
(under the then-similar approach in the fee-shifting
context, “[o]bjective baselessness alone can create a
sufficient inference of bad faith to establish exceptionality
under § 285, unless the circumstances as a whole show a
lack of recklessness on the patentee’s part”).
If the court determines on remand that IPC willfully
infringed Aqua Shield’s patent, it should reconsider its
decision to deny enhanced damages and attorney’s fees.
C. The “Elegant” Model
One issue remains. Aqua Shield argues that the dis-
trict court erroneously omitted one of IPC’s pool-enclosure
models—the “Elegant”—from the calculation of IPC’s
infringing sales and, thus, from the royalty award and
injunction. We reject this challenge.
Aqua Shield argues that, in the summary-judgment
proceedings, it asserted that the Utah Installation in-
fringed and that it was an Elegant model that was in-
stalled. But the district court, while finding that the
Utah Installation infringed, made no finding that the
Utah installation was an Elegant model. Aqua Shield,
830 F. Supp. 2d at 1291; Initial Damages Op. at 6; Aqua
Shield, 2013 WL 6410975, at *6. And the subsequent
trial involved no infringement issues, but was limited to
issues concerning relief. Aqua Shield thus never obtained
a finding of infringement by the Elegant model, and there
was no error in the district court’s refusal to include that
model in its royalty calculation or injunction.
16 AQUA SHIELD v. INTER POOL COVER TEAM
CONCLUSION
For the foregoing reasons, we vacate the district
court’s royalty award, non-willfulness finding, and denial
of enhanced damages and attorney’s fees. We remand the
case for further proceedings consistent with this opinion.
Costs are awarded to Aqua Shield.
VACATED IN PART AND REMANDED