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WBIP, LLC v. Kohler Co.

United States Court of Appeals, Federal Circuit

July 19, 2016

WBIP, LLC, Plaintiff-Cross-Appellant
v.
KOHLER CO., Defendant-Appellant

         Appeals from the United States District Court for the District of Massachusetts in No. 1:11-cv-10374-NMG, Judge Nathaniel M. Gorton.

          David Andrew Simons, K&L Gates LLP, Boston, MA, argued for plaintiff-cross-appellant. Also represented by Andrea B. Reed; Michael E. Zeliger, Palo Alto, CA.

          E. Joshua Rosenkranz, Orrick, Herrington & Sut-cliffe LLP, New York, NY, argued for defendant-appellant. Also represented by Rachel Wainer Apter; Brian Philip Goldman, San Francisco, CA; Katherine M. Kopp, T. Vann Pearce, Jr., Eric Shumsky, Washington, DC; Steven M. Bauer, William David Dalsen, Safraz Ishmael, Proskauer Rose LLP, Boston, MA.

          Before Moore, O'Malley, and Chen, Circuit Judges.

          MOORE, CIRCUIT JUDGE.

         Kohler Co. appeals from the United States District Court for the District of Massachusetts' denial of judgment as a matter of law that claims 1–6, 8, and 10–12 of U.S. Patent No. 7, 314, 044 and claims 26 and 28 of U.S. Patent No. 7, 832, 196 (collectively "asserted claims") would have been obvious and lack sufficient written description and the determination that Kohler willfully infringed the asserted claims. WBIP, LLC cross-appeals the court's denial of its post-trial motion for a permanent injunction. We affirm the court's denial of judgment as a matter of law on all issues raised by Kohler and its willful infringement determination, vacate the court's denial of WBIP's motion for a permanent injunction, and remand for further consideration.

         Background

         Westerbeke Corporation[1] and Kohler are competitors who manufacture and sell marine generators ("gen-sets") that are used on houseboats to create electrical power for appliances such as refrigerators and air conditioners. Gen-sets have two main parts, an engine and a generator. The exhaust from a typical engine in a gen-set, like any gasoline-powered engine, contains carbon monoxide, which can cause asphyxiation at certain concentrations. Carbon monoxide is particularly dangerous on boats, where the living quarters are confined in close proximity to the engine. Prior to the invention of the patents in suit, the exhaust pipes of prior art marine gen-sets were vented out of the boat into a safe location to reduce potential exposure to carbon monoxide. In the early 2000s, the National Institute for Occupational Safety and Health ("NIOSH") investigated concerns about carbon-monoxide-related poisonings and deaths on houseboats. NIOSH found that, for houseboats with gen-sets that discharged exhaust around the swim platform, carbon monoxide levels in the swim area were at or above levels that are immediately dangerous to life and health.

         The '044 and '196 patents, which claim priority to 2003 and have similar specifications, are directed to marine engine exhaust systems that reduce the amount of carbon monoxide released in the exhaust. See '044 patent at Abstract, 1:13–14, 1:47–58, 2:12–30. The Background sections of the patents discuss the use of chemical catalysts as "[s]ome of the most effective and cost-efficient emissions controls" and discuss that it was generally known that these catalysts work better at higher temperatures. Id. at 1:21–27. They note that most of the development work for exhaust catalysts focused on catalytic converters in automotive applications. But they explain that marine gen-sets are subject to different regulations than automotive engines, including regulations for emissions and safety. Id. at 1:27–32. One such regulation requires that exposed engine and exhaust system surface temperatures be kept low to reduce fire hazard potential. Id. at 1:32–35. The specifications explain that typical marine engines inject seawater into exhaust flows to cool exhaust gases and frequently circulate seawater through exhaust system components to keep surface temperatures low. Id. at 1:35–39.

         Claim 1 of the '044 patent is representative of the asserted claims, and recites:

1. A marine engine comprising: [A] an exhaust system including
[B] a catalyst cooled by a flow of coolant, [C] the catalyst arranged to intercept a flow of exhaust;
[D] a coolant injector that injects coolant into the flow of exhaust at a point downstream of the catalyst; and
[E] a sensor arranged to sense a characteristic of the flow of exhaust; and
[F] an engine controller configured to control an air/fuel ratio of the engine as a function of the sensed exhaust flow characteristic;
[G] wherein the engine controller is also configured to govern engine speed with respect to a constant speed while maintaining the air/fuel ratio.

'044 patent, 7:4–17 (emphases and bracketed letters added).

         Westerbeke makes a low–carbon monoxide gen-set ("Safe-CO") that incorporates the technology of the patents in suit. It introduced the Safe-CO gen-sets at a boat show in 2004. Two Kohler employees visited Westerbeke's trailer at that show and asked how the low carbon monoxide levels were achieved. Westerbeke explained the technology to them and in particular how the Safe-CO gen-set used a catalyst and electronic fuel injection. About one year later, Kohler launched its own low–carbon monoxide gen-sets.

         The '044 and '196 patents issued in 2008 and 2010, respectively. In 2011, WBIP, the assignee of the patents in suit, sued Kohler for patent infringement, asserting that Kohler's low–carbon monoxide gen-sets infringed the asserted claims. Following a six-day trial in May 2013, a jury ruled in favor of WBIP, finding that Kohler infringed all the asserted claims and that Kohler had failed to prove that any of the asserted claims were invalid either for obviousness or for lack of written description. The jury also set a reasonable royalty rate, calculated a damages award of $9, 641, 206, and found that WBIP had proven by clear and convincing evidence that Kohler's infringement was willful. After the jury verdict, WBIP moved for a permanent injunction. The district court denied the motion. It also denied Kohler's renewed motion for judgment as a matter of law that the asserted claims were invalid for obviousness and for lack of written description. The district court granted Kohler remittitur, reducing the damages from $9, 641, 206 to $3, 775, 418. It granted WBIP's motion for enhanced damages under 35 U.S.C. § 284. It applied the factors from Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), and concluded it was appropriate to enhance the damages by 50%. It found the case exceptional under 35 U.S.C. § 285 on account of Kohler's willful infringement and awarded reasonable attorney fees to WBIP. It denied WBIP's motion to reconsider the denial of a permanent injunction. Kohler appeals; WBIP cross-appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

         Discussion

         We review a district court's denial of judgment as a matter of law under the law of the regional circuit. Marine Polymer Techs., Inc. v. HemCon, Inc., 672 F.3d 1350, 1357 (Fed. Cir. 2012). The First Circuit reviews such denials de novo, explaining "a jury's verdict must be upheld unless the facts and inferences, viewed in the light most favorable to the verdict, point so strongly and overwhelmingly in favor of the movant that a reasonable jury could not have reached the verdict." Id. at 1357–58 (quoting Astro-Med, Inc. v. Nihon Kohden Am., Inc., 591 F.3d 1, 13 (1st Cir. 2009)).

         I. Obviousness

         Obviousness is a question of law based on underlying facts. Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1360 (Fed. Cir. 2012). When reviewing a denial of judgment as a matter of law of obviousness, where there is a black box jury verdict, as is the case here, we presume the jury resolved underlying factual disputes in favor of the verdict winner and leave those presumed findings undisturbed if supported by substantial evidence. Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1342 (Fed. Cir. 2011). We then examine the legal conclusion de novo in light of those facts. Id.

         Kohler argues that the district court erred in refusing to grant it judgment as a matter of law that the asserted claims would have been obvious in light of U.S. Patent No. 5, 832, 896 ("Phipps") and standard elements that would have been known to an ordinarily skilled artisan.[2] It also argues that WBIP's objective evidence of non-obviousness cannot overcome the prima facie case and that WBIP failed to establish a nexus between the objective evidence and the merits of the claimed invention. We disagree on both points.

         A. Obviousness and Motivation to Modify

         Kohler argues, and WBIP does not dispute, that Phipps teaches every element of claim 1 of the '044 patent except elements [B] and [D] (identified above). And it is not disputed that these elements [B] and [D] existed in other prior art. Citing KSR, Kohler argues that because each of the elements was known in the prior art, the question is whether a skilled artisan starting with Phipps would have found it obvious to add the conventional coolant features to Phipps to produce the claimed invention. At trial, Kohler presented evidence that a skilled artisan could do so if asked. See, e.g., J.A. 15, 858 ("Basically, one of ordinary skill, if they had [Phipps'] system and they were asked to apply that to -- in a marine environment, they would have known that the Coast Guard requires the exhaust system surface to be cooled."); J.A. 14, 873 ("[I]f someone said, Well, now you need to put [Phipps' engine] in a marine environment, they would expect that by -- you know, No. 1, the Coast Guard tells them what they need to do."). Kohler's expert testified that if an ordinarily skilled artisan was told to put Phipps' system in a marine engine, that artisan would have been "very confident that [he] would get predictable results." J.A. 15, 873. Kohler argues that combining Phipps' land-based engine with the known coolant related elements necessary for marine engines would yield predictable results and that there were "design incentives and other market forces" prompting one of skill in the art to adapt Phipps to boats. Appellant's Br. 33.

         At trial, Kohler offered evidence that the government was encouraging marine gen-set manufacturers to look to automotive engines that successfully controlled exhaust emissions and adapt them into marine engines, J.A. 19, 445, including by evaluating the efficacy of using catalytic converters, J.A. 18, 897. And Kohler's expert testified that "people would have been motivated to include technology of reducing emissions even with a 'wet' exhaust system" like that in marine engines. J.A. 15, 881. Kohler provided evidence that skilled artisans looking to manufacture marine engines would look to land engines generally. And Kohler argued that Phipps emphasizes that its invention is "particularly useful" in "low emission" engines. J.A. 19, 049 at 9:42–46.

         Whether an ordinarily skilled artisan would have been motivated to modify the teachings of a reference is a question of fact. Kinetic Concepts, 688 F.3d at 1366–67; Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1073 (Fed. Cir. 2015); see also Wyers v. Master Lock Co., 616 F.3d 1231, 1238–39 (Fed. Cir. 2010) (noting that KSR "did not change th[e] rule" that "motivation to combine prior art references [i]s a question of fact"). We presume that the jury found that an ordinarily skilled artisan would not have been motivated to modify the teachings of Phipps. If such a fact finding is supported by substantial evidence, we may not reverse it.

         WBIP's primary argument is that one of skill in the art would not have been motivated to convert Phipps into a marine engine. WBIP criticizes Kohler's expert testimony on the ground that it focuses on whether one of skill in the art could convert Phipps to a marine engine, not whether one of skill in the art would have been motivated to do so. WBIP's main argument is that one of skill would not have started with Phipps because of concerns over whether Phipps would even work for its intended purpose. WBIP's expert testified that Phipps discloses an "exhaust, gas, recirculation" control system for land, not marine, generators that is not only atypical, but "totally reverse" from any control system he had ever seen or read about. J.A. 16, 026–28. He explained how an ordinarily skilled artisan would have viewed Phipps' reverse control system at the time of WBIP's invention:

[I]f I can equate this one to kind of a simple analogy, if you're trying to build a piece of furniture. What's a typical thing? You put on a piece of wood. You take a nail, and you hit the nail with a hammer. In control terms, what Mr. Phipps is suggesting is that you put the hammer on the workbench, pick up the piece of furniture and bash the piece of furniture onto the hammer. It's totally backwards from what I believe one of skill in the art would even attempt to make an engine run, much less try to gain some secondary control like carbon monoxide.

J.A. 16, 027 (emphasis added). He further explained that modifying Phipps' land engine to make a marine engine would require a number of conversions, including adding a water jacket around the exhaust, adding ignition protection for any electrical component that could accidentally cause a spark, and scaling down the engine parts in order to fit within the smaller-sized marine engine. And he explained that, given that modifying Phipps to make it a marine engine would be "a lot of work, " an ordinarily skilled artisan would not have seen the point in making such a modification because he would not have expected it to result in a gen-set that produced low amounts of carbon monoxide. J.A. 16, 030. The expert explained that there was a "catch up" problem with Phipps which would prove particularly problematic in marine conditions. J.A. 16, 027; see J.A. 15, 197. WBIP argued that based on this evidence, a skilled artisan would not have had a reasonable expectation the significant changes to Phipps would be successful.

         WBIP argues that it presented evidence upon which a jury could have found that Phipps is "somehow so flawed that there was no reason to upgrade it, or [devices] like it, to be compatible with modern [devices]" and that this evidence may be sufficient to show that an ordinarily skilled artisan would not have modified that reference or combined it with others. Cf. KSR, 550 U.S. at 418. Thus, there is evidence of record from both sides regarding the presence or absence of a motivation to convert Phipps into a marine-based environment. As the ultimate question of obviousness is one of law which must consider all four Graham factors including objective indicia, we turn next to those factors, which can be powerful, real-world indicators of what would have been obvious.

         B. Objective Considerations

         The objective indicia of non-obviousness play an important role as a guard against the statutorily proscribed hindsight reasoning in the obviousness analysis. Indeed, we have held that "evidence of secondary considerations may often be the most probative and cogent evidence in the record." Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1538 (Fed. Cir. 1983); see also Truswal Sys. Corp. v. Hydro-Air Eng'g, Inc., 813 F.2d 1207, 1212 (Fed. Cir. 1987) ("That evidence is 'secondary' in time does not mean that it is secondary in importance."); Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 36 (1966) ("[Objective indicia] may also serve to guard against slipping into use of hindsight, and to resist the temptation to read into the prior art the teachings of the invention in issue." (internal quotation marks and citation omitted)).

         Kohler asserts on appeal that objective considerations of non-obviousness can never overcome a strong prima facie case of obviousness. Kohler misperceives the obviousness inquiry. A determination of whether a patent claim is invalid as obvious under § 103 requires consideration of all four Graham factors, and it is error to reach a conclusion of obviousness until all those factors are considered. In re Cyclobenzaprine Hydrochloride Extended-Release Capsule Patent Litig., 676 F.3d 1063, 1075 (Fed. Cir. 2012) (citing Richardson-Vicks Inc. v. Upjohn Co., 122 F.3d 1476, 1483 (Fed. Cir. 1997)); see also Asyst Techs., Inc. v. Emtak, Inc., 544 F.3d 1310, 1313–16 (Fed. Cir. 2008) (considering, e.g., both the scope and content of the prior art and the objective considerations of non-obviousness before affirming the district court's judgment as a matter of law). Indeed, we have repeatedly stressed that objective considerations of non-obviousness must be considered in every case. Transocean Offshore Deepwater Drilling Inc. v. Maersk Drilling USA, Inc., 699 F.3d 1340, 1349 (Fed. Cir. 2012) ("[E]vidence rising out of the so-called 'secondary considerations' must always when present be considered en route to a determination of obviousness." (quoting Stratoflex, 713 F.2d at 1538)). This requirement is in recognition of the fact that each of the Graham factors helps to inform the ultimate obviousness determination. Kinetic Concepts, 688 F.3d at 1360; Nike, Inc. v. Adidas, 812 F.3d 1326, 1340 (Fed. Cir. 2016) (holding that evidence of secondary considerations must be examined to determine its impact on the first three Graham factors). Thus, the strength of each of the Graham factors must be weighed in every case and must be weighted en route to the final determination of obviousness or non-obviousness.

         Kohler also argues that the objective evidence of non-obviousness is so weak in this particular case that it does not support a finding of non-obviousness. As explained below, we disagree with Kohler's argument that the objective evidence of non-obviousness is entitled to little or no weight in this case. In fact, we find substantial evidence for the jury's fact findings as to each of the objective considerations of non-obviousness, which we conclude collectively support the jury verdict.

         1. Nexus

         On appeal, Kohler argues that the objective evidence of non-obviousness WBIP presented to the jury should not be considered because WBIP failed to prove there is a nexus between the presented evidence and the merits of the claimed invention. Kohler's argument is that, in order to prove a nexus exists, WBIP must show that what is "novel in the claim, " which Kohler asserts are elements [B] and [D] ...


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