Thursday, August 22, 2013

U.S. Federal Circuit Amends Statement About Joint and Several Liability in Calico Brand, Inc. v. Ameritek Imports

I blogged about this lost profits case, which was decided on July 18, here.  As I noted at the end of my post, the court stated that "In entering judgment, the district court held that Acme and Ameritek were jointly and severally liable for damages. On appeal, neither party challenges the district court's decision to impose joint and several liability."  Yesterday, the Federal Circuit amended this portion of its opinion as follows.  (Hat tip to Bloomberg Law for reporting on this; the order doesn't appear to be up on the Federal Circuit's website or on Westlaw yet, thought presumably it will be shortly.)
On appeal, we vacated the award of lost profits and reinstated the jury's reasonable royalty award of $113,471 and stated that liability was "joint and several." See Calico Brand, Inc. v. Ameritek Imports, Inc., Nos. 2008-1324, -1341, --- Fed. Appx. ---, 2013 WL 3746163, at *9 (Fed. Cir. Jul. 18, 2013) (nonprecedential). We further stated that if either Ameritek or Acme was unable to satisfy its respective obligation, the co-defendant would be liable for the remaining balance. Id. at *4.  

Acme filed a Petition for Rehearing and requested clarification of this court's reinstatement of the reasonable royalty award. Among other arguments, Acme points out that the jury found Acme liable for reasonable royalty damages associated only with its own sales of Ameritek lighters.

It is clear that, regardless of what the district court meant by "joint and several" liability, the district court accepted the jury's apportionment of damages and did not make Acme liable for the full amount assessed by the jury against Ameritek. Stated differently, the district court judgment limited liability for each defendant up to the amount established by the jury. In this regard, the district court stated as follows:

This judgment is joint and several, meaning in this case that the total judgment is for $719,395.  Should Defendant Ameritek pay Plaintiffs that amount, Defendant ACME would not be required to pay anything. Likewise, should Defendant ACME pay Plaintiffs $178,035 (or any portion thereof) Defendant Ameritek will receive credit for that amount and only be required to pay the remaining balance (e.g., $719,395 - $178,035 = $541,360).
J.A. 1-2.
While the district court did not render a determination of joint and several liability with respect to reasonable royalties, by accepting the jury's apportionment of damages for reasonable royalties, we arrive at the same conclusion the district court reached in connection with lost profits; that Acme is liable only for the amount determined by the jury. Consequently, we clarify that Acme is liable only for $23,250 in reasonable royalties.
At the conclusion of my blog post, I wrote "The imposition of joint and several liability is, I believe, correct under U.S. law."  That does appear to be a correct statement of the law, as stated in Shockley v. Arcan, Inc., 248 F.3d 1349, 1364 (Fed. Cir. 2001): 
. . . courts, including the Supreme Court, have held that parties that make and sell an infringing device are joint tort-feasors with parties that purchase an infringing device for use or resale. Birdsell v. Shaliol, 112 U.S. 485, 488–89, 5 S.Ct. 244, 28 L.Ed. 768 (1884); Dowagiac Mfg. Co. v. Deere & Webber Co., 284 F. 331, 337 (8th Cir.1922). Each joint tort-feasor is liable for the full amount of damages (up to a full single recovery) suffered by the patentee. Birdsell, at 488–89, 5 S.Ct. 244; Dowagiac at 337. Entry of judgment against one infringer does not automatically release other related infringers. Sherman, Clay & Co. v. Searchlight Horn Co., 225 F. 497, 500 (9th Cir.1915) (“There may be as many causes of action as there are joint tort-feasors, and as many recoveries, but there can only be one satisfaction.”). This court agrees with and adopts this rule.

In the present case, the record shows that Sunex, Telesis, and Arcan benefited from a manufacturing, supply and distribution relationship. Each infringing Z–Creeper made by Sunex was imported by Telesis into the United States and resold to Arcan. Telesis, therefore, is a joint tort-feasor and is jointly and severally liable for damages assessed against Arcan.
Sunex, however, cannot be held jointly and severally liable. To be liable for infringement under 35 U.S.C. § 271, a party must make, use, offer to sell, or sell within the United States, or import into the United States, the patented invention. Although Sunex manufactured every Z–Creeper that Arcan sold in the United States, all of Sunex's activities took place in Shanghai. Sunex, therefore, cannot be liable for infringement under § 271 nor be jointly liable with Arcan and Telesis.
I think the two cases are reconcilable if, in Calico Brand, the portion of the damages assessed only against Ameritek (the importer) were for sales made to parties other than Acme (the distributor).   Otherwise, I'm not sure I get it.

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