United States: Reduction Of Compensatory Damages Requires Offer Of New Trial By Jury-Article by Leigh J. Martinson

The U.S. Court of Appeals for the Federal Circuit recently vacated a judicial reduction in damages for violating the Seventh Amendment, while affirming a jury's finding of infringement of a means-plus-function claim by applying well-known precedent. Floyd M. Minks v. Polaris Industries, Inc., Case Nos. 07-1490, -1491 (Fed. Cir., Oct. 17, 2008) (Gajarsa, J.).
Floyd M. Minks is an electrical engineer who designs electronic components for a variety of vehicle types. Minks holds U.S. Patent No. 4,664,080 (the '080 patent), which is drawn to an electric governor system for internal combustion engines that uses a circuit to limit the reverse speed of an all-terrain vehicle (ATV). When the ATV is shifted into reverse gear, the reverse speed limiter circuit senses the direct current (DC) voltage. Once activated, the circuit also senses the alternator's alternating current (AC) output to thereby sense engine speed. If the alternator's AC voltage output exceeds a predetermined limit, the circuit emits a control signal to interrupt the ignition of the engine. Minks sued Polaris, a customer for years, for infringement of the '080 patent after making numerous attempts to obtain a license from Polaris for its use of a reverse-speed limiter produced by a different vendor. The only asserted claim was claim 2, which included means-plus-function elements.
The jury found willful infringement and awarded just under $1.3 million in royalty damages. The district court subsequently granted Polaris' motion for a reduction in damages or remittitur pursuant to Rule 59(e). The court reduced the jury's damages award to $27,904.80, an amount which was later double based on the willfulness finding. The court failed to offer Minks a new trial on damages, holding that reduction was necessitated by legal error. Minks appealed the reduction of the damages award, among other things. Polaris cross-appealed from the district court's denial of its judgment as a matter of law (JMOL) motion on non-infringement.
The Supreme Court has long interpreted the Seventh Amendment as requiring that the exercise of a district court's discretion to set aside an excessive jury award be accompanied by an offer of a new trial. However, in the Eleventh Circuit, when a jury's award is premised on "legal error," a court may reduce the award and enter an absolute judgment in an amount sufficient to correct the legal error without offering the plaintiff the option of a new trial. The Eleventh Circuit recognizes two types of legal error that fit this situation: where a portion of a verdict is for an identifiable amount that is not permitted by law and when the award enter[s] that zone of arbitrariness that violates the due process clause of the Fourteenth Amendment.
After reviewing the facts on appeal, the Federal Circuit concluded that neither of the above exceptions applied. The Court stated, after reviewing in the district court's analysis of this award, that the district court had identified no legal principle that would limit the amount of a reasonable royalty. Thus, it was improper to reduce the award without offering Minks a new trial. As such, the Court vacated the district court's judgment and remanded for a new trial on the issue.
Also, the Court reiterated that to determine infringement of a means-plus-function claim, "the court must compare the accused with the disclosed structure, and must find equivalent structure as well as identity of the claimed function for that structure." On appeal, Polaris failed to make any argument that the accused devices did not perform a function identical to that recited in the claim to achieve an identical result. In its analysis, the Court applied the function-way-result test to determine equivalence between the accused product and the '080 patent. The Court also reiterated that differences in physical structure alone is not determinative of § 112 ¶ 6 equivalence. Rather, once the identity of function is established, the test for infringement is whether the structure of the accused device performs in substantially the same way to achieve substantially the same result as the disclosed structure. Citing both expert testimony and the '080 patent itself, the Court agreed that the jury's verdict of infringement was supported and thus affirmed.