1267, -1588 GO MEDICAL INDUSTRIES PTY, LTD. and ALEXANDER G.B. O’NEIL v. INMED CORPORATION (doing business as Rüsch)

United States Court of Appeals for the Federal Circuit
05-1241, -1267, -1588
GO MEDICAL INDUSTRIES PTY, LTD.
and ALEXANDER G.B. O’NEIL,
Plaintiffs-Appellants,
v.
INMED CORPORATION (doing business as Rüsch),
Defendant-Cross Appellant,
and
ALPINE MEDICAL, INC.
(formerly known as Medical Marketing Group, Inc.),
Defendant-Cross Appellant.
Patrick J. Flinn, Alston & Bird, LLP, of Atlanta, Georgia, argued for plaintiffs-
appellants. With him on the brief were Robin L. McGrath, Angela Payne James and
Andrew J. Wilson.
William K. West, Jr., Howrey LLP, of Washington, DC, argued for defendant-
cross appellant Inmed Corporation. Of counsel on the brief were Juliana M.
Cofrancesco, Susan M. Kayser and Jim W. Ko.
Ron L. Quigley, Davis, Matthews & Quigley, P.C., of Atlanta, Georgia, argued for
defendant-cross appellant Alpine Medical, Inc. Of counsel was Charles E. Campbell,
McKenna Long & Aldridge, LLP, of Atlanta, Georgia.
Appealed from: United States District Court for the Northern District of Georgia
Judge Thomas W. Thrash, Jr .

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United States Court of Appeals for the Federal Circuit
05-1241, -1267, -1588
GO MEDICAL INDUSTRIES PTY, LTD.
and ALEXANDER G.B. O'NEIL,
Plaintiffs-Appellants,
v.
INMED CORPORATION (doing business as Rüsch),
Defendant-Cross Appellant,
and
ALPINE MEDICAL, INC.
(formerly known as Medical Marketing Group, Inc.),
Defendant-Cross Appellant.
__________________________
DECIDED: October 27, 2006
__________________________
Before MICHEL, Chief Judge, ARCHER, Senior Circuit Judge, and LINN, Circuit Judge.
MICHEL, Chief Judge.
Go Medical Industries, Pty., Ltd. and Dr. Alexander G.B. O'Neil (collectively "Go")
appeal from a final judgment of the United States District Court for the Northern District
of Georgia. Go challenges orders (1) granting its motion for summary judgment of
patent infringement but finding, inter alia, that the asserted claims were invalid as
anticipated because Go was not entitled to claim the priority date of an earlier

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application, Go Medical Indus. Pty., Ltd. v. Inmed Corp., No. 01-CV-313 (N.D. Ga.
July 9, 2003) ("SJ Order"); (2) denying its motion for prejudgment interest, Go Medical
Indus. Pty., Ltd. v. Inmed Corp., No. 01-CV-313 (N.D. Ga. Sept. 30, 2004)
("Prejudgment Interest Order"); and (3) reducing the jury's award of damages on Go's
claims for trademark infringement and breach of contract upon granting judgment as a
matter of law ("JMOL"), Go Medical Indus. Pty., Ltd. v. Inmed Corp., No. 01-CV-313
(N.D. Ga. Jan. 25, 2005) ("First JMOL Order"). Specifically, Go argues that (1) the
district court erred in granting summary judgment on the patent claim because there
were factual disputes as to whether the earlier patent application met the requirements
of 35 U.S.C. § 112; (2) prejudgment interest should have been awarded because the
contract damages were liquidated; and (3) the damages award should not have been
reduced.
Inmed Corporation, doing business as Rüsch, International ("Rüsch"), and Alpine
Medical, Inc., formerly known as Medical Marketing Group, Inc. ("MMG"), separately
cross-appeal. Rüsch contends that the district court erred in entering a permanent
injunction, Go Medical Indus. Pty., Ltd. v. Inmed Corp., No. 01-CV-313 (N.D. Ga.
Sept. 30, 2004) ("Injunction Order"), because Go had no trademark rights in the
surname "O'Neil." MMG, on the other hand, asserts that (1) public policy bars Go's
claims; (2) the district court erred in denying its second motion for JMOL requesting
elimination of all the contract damages, Go Medical Indus. Pty., Ltd. v. Inmed Corp.,
No. 01-CV-313 (N.D. Ga. Aug. 5, 2005) ("Second JMOL Order"); and (3) there can be
no implied trademark license of a surname that has not achieved secondary meaning.
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As described in further detail below, we conclude that the district court
misapplied the doctrine first set forth by Lear, Inc. v. Adkins, 395 U.S. 653 (1969), in
reducing the damages for MMG's breach of contract. On all other issues, however, we
find no reversible error. We thus affirm-in-part, vacate-in-part, and remand for a
recalculation of damages.
I. BACKGROUND
Urinary catheters typically increase the risk of urinary tract infections because
inserting a catheter can push bacteria into the normally sterile bladder. Most of the
bacteria are concentrated in the first 1.5 cm to 2 cm of the urethra, due to a natural
pressure barrier located about 1.5 cm from the outer end.
Dr. O'Neil invented a catheter with a sheath that does not extend beyond this
pressure barrier—thus reducing the likelihood of contamination caused by the sheath
itself—and obtained United States Patent No. 4,652,259 ("the '259 patent") in 1987.
The '259 patent was issued from a 1985 continuation-in-part application that claimed the
priority date of an application filed on September 12, 1979.1 The claims of the '259
patent recite the use of a stop member to limit the insertion of the sheath to either
"about 1.5 cm" or moving the sheath along the urethra such that the distal end is in a
"known position of maximum pressure," but not beyond that position.
Go Medical Industries, Pty., Ltd., founded by Dr. O'Neil in 1982, is an Australian
limited liability company that manufactures and markets the type of urinary catheters
1 The original 1979 application was not limited to urinary catheters; instead,
the claims were drafted broadly to include a variety of medical instruments "for insertion
into a body passage." The examiner repeatedly rejected the claims as anticipated or
obvious over the prior art, and the application was subsequently abandoned. Dr. O'Neil
also filed continuation applications in 1981 and 1984, but both were eventually
abandoned as well.
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described in the '259 patent. Go's products were initially distributed in the United States
by Penine Healthcare, a medical manufacturing and supply company based in the
United Kingdom.
In 1988, Go and MMG entered into a 99-year contract that gave MMG the
exclusive right to distribute such catheters within the United States. The agreement
provided that Go and MMG would share the net profits equally. At first, MMG
purchased products from Go, but, for various reasons, soon started manufacturing
catheters itself and selling them as "MMG/O'Neil" catheters. MMG registered the
"MMG/O'Neil" trademark on January 12, 1993.
Starting in 1991, MMG began paying Go 7% of gross sales on the "MMG/O'Neil"
catheters in lieu of 50% of net profits, although it was later revealed that this amount
was not equivalent. In 1997, the 1988 agreement was amended. Significantly, the
parties agreed that 7% of the gross sales "represent[ed] Go Medical USA's 50% net
profit share." The term of the contract was also reduced from 99 years to the life of the
'259 patent. Finally, the 1997 amendment explicitly provided that the parties would
share any intellectual property enforcement costs. Both the 1988 agreement and the
1997 amendment were silent on whether MMG was also licensing the right to use the
"O'Neil" name on its catheters.
In 1992, MMG urged Go to sue when C.R. Bard entered the market with a
competing catheter. Go alleges that MMG refused to share in the costs of litigation,
despite their contractual obligation to do so. In March 1999, the district court granted
summary judgment in favor of C.R. Bard, finding the '259 patent unenforceable due to
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inequitable conduct and invalid as anticipated.2 On August 1, 2000, this court reversed
and remanded for further proceedings. Go Medical Indus. Pty., Ltd. v. C.R. Bard, Inc.,
250 F.3d 763, 2000 WL 1056063 (Fed. Cir. 2000) (unpublished table decision). That
case settled shortly thereafter.
Meanwhile, in a letter dated June 21, 1999, MMG notified Go that it believed they
"no longer ha[d] a contract" since the district court had found the '259 patent invalid.
Consequently, it started placing its royalty payments in escrow around April 1999. In
August 1999, Go terminated the agreement and demanded that MMG cease using the
"O'Neil" trademark. MMG refused and continued to sell "MMG/O'Neil" catheters even
after it sold its assets to Rüsch in February 2000 for $38 million. In 2003, however,
Rüsch changed the name of its catheters to "Rüsch/MMG."
* * *
On February 1, 2001, Go sued MMG and Rüsch in the United States District
Court for the Northern District of Georgia. Go alleged patent infringement, breach of
contract, tortious interference with contract, conspiracy to breach fiduciary duty,
trademark infringement, and unfair competition.
On July 3, 2003, the district court granted summary judgment in favor of MMG
and Rüsch, finding the '259 patent infringed, but invalid as anticipated. The parties
agreed that a 1982 article written by Dr. O'Neil anticipated the '259 patent if Go could
2 During the course of that litigation, Go corrected two gaps in co-pendency
of the chain of applications leading up to the '259 patent so it could claim the benefit of
the 1979 filing date. Go had conceded that the '259 patent was otherwise anticipated
by the 1980 publication of Dr. O'Neil's U.K. patent application. C.R. Bard alleged that
Dr. O'Neil misrepresented when he first became aware that the 1979 application had
been abandoned, such that his petition to revive that application was not timely filed.
See Go Medical Indus. Pty., Ltd. v. C.R. Bard, Inc., 250 F.3d 763, 2000 WL 1056063, at
*2-5 (Fed. Cir. 2000) (unpublished table decision).
05-1241, -1267, -1588 5

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not claim the 1979 priority date. SJ Order, slip op. at 4-5. The court concluded that Go
was not entitled to claim the benefit of that filing date because the 1979 application did
not satisfy the written description or best mode requirements under 35 U.S.C. § 112,
¶ 1. Id., slip op. at 6-16. It denied summary judgment on the issue of enablement,
however, because there remained a genuine factual dispute whether the amount of
experimentation required to practice the invention was undue. Id., slip op. at 16-18.
In addition, the court granted summary judgment in favor of Go on the inequitable
conduct issue, concluding that there was insufficient evidence to support a finding of
material misrepresentation in light of the Federal Circuit's decision in the previous
litigation. Id., slip op. at 22-31. The district court further granted summary judgment in
favor of MMG and Rüsch on lost profits, finding that Go could not satisfy the four-factor
test for recovering lost profits for patent infringement. Id., slip op. at 39-47.
As for the trademark claims, MMG and Rüsch had themselves asserted a
likelihood of confusion between "O'Neil" and "MMG/O'Neil" in their trademark
counterclaims; the court found this to constitute a judicial admission on that issue. Id.,
slip op. at 38-39. Yet, the district court denied summary judgment because there
remained questions of triable fact as to whether "O'Neil" had acquired secondary
meaning, whether the agreement between the parties included an implied trademark
license, and whether the "O'Neil" mark was abandoned due to naked licensing. Id., slip
op. at 31-38.
In February 2004, the case proceeded to trial. At the close of plaintiff's case, the
district court granted JMOL on Go's claims for the breach of fiduciary duty and tortious
interference with contract. This ruling is not being appealed. At the close of evidence,
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MMG and Rüsch made motions for JMOL under Rule 50(a), which were denied. The
jury returned a verdict in favor of Go. On the breach of contract claim against MMG, the
jury awarded $6,156,571. On the trademark infringement claim against MMG, the jury
awarded $350,838 as a reasonable royalty, $3,873,236 for unjust enrichment, and
$19,000,000 in punitive damages. As for the trademark infringement claim against
Rüsch, the jury awarded $2,672,419 as a reasonable royalty and $32,265,634 for unjust
enrichment. MMG and Rüsch both challenged these damages awards with renewed
motions for JMOL under Rule 50(b).
On September 30, 2004, the district court denied Go's motion for prejudgment
interest. The court found that the contract claim was not a liquidated claim; it further
declined to award prejudgment interest on the Lanham Act claim. Prejudgment Interest
Order, slip op. at 1. The same day, the court granted Go's motion for a permanent
injunction and prohibited MMG and Rüsch from using "O'Neil" or any confusingly similar
mark. Injunction Order, slip op. at 2.
On January 25, 2005, MMG's motion for JMOL was granted-in-part and
denied-in-part; Rüsch's motion was also granted. See First JMOL Order. The district
court applied the Lear doctrine to preclude royalties owed after March 1999 (when the
'259 patent was found invalid in the litigation against C.R. Bard) and reduced MMG's
contract damages accordingly. Id., slip op. at 6-11.
As for the trademark damages, the court characterized the jury's reasonable
royalty award as recovery based on profits rather than actual damages (and thus
subject to reduction in accordance with the principles of equity) because it was based
on a wholly speculative royalty rate that Go's expert "arbitrarily pulled out of the air." Id.,
05-1241, -1267, -1588 7

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slip op. at 16. The court also exercised its discretion under the Lanham Act to set aside
the jury's award of lost profits, id., slip op. at 17-22, and expressly rejected Go's
argument that the jury awarded lost profit damages under common law. Id., slip op. at
22-23. The court further reasoned that the award of punitive damages against MMG
(which allegedly infringed for six months), but not Rüsch (which allegedly infringed for
forty months), suggested that the jurors were punishing MMG for actions relating to its
breach of contract, which was not permitted by O.C.G.A. § 13-6-10. Id., slip op. at
24-25. The court concluded that the jury, which had not been told that the '259 patent
was ruled invalid, was "obviously swayed" by counsel's argument that MMG had stolen
Dr. O'Neil's invention as well as "the mass of irrelevant and prejudicial evidence that
was admitted during the trial." Id., slip op. at 26.
In a separate order, also dated January 25, 2005, the court found that this case
was not exceptional and denied Go's motion for attorney's fees. This ruling is not being
challenged on appeal.
On February 10, 2005, final judgment was entered. A timely appeal and
cross-appeals followed. On February 25, 2005, however, MMG filed another JMOL
motion, challenging the breach of contract damages. In April 2005, this court
deactivated the notice of appeal to allow the district court an opportunity to dispose of
this last outstanding motion. On August 5, 2005, the district court rejected MMG's
additional arguments concerning various contractual provisions and denied the motion.
Second JMOL Order, slip op. at 7-12. The notice of appeal was reactivated on
August 17, 2005. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
05-1241, -1267, -1588 8

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II. DISCUSSION
A. Patent Invalidity
A district court’s grant of summary judgment on the issue of patent invalidity is
reviewed without deference. Augustine Med., Inc. v. Gaymar Indus., Inc., 181 F.3d
1291, 1302 (Fed. Cir. 1999). Here, Go conceded that a 1982 article written by
Dr. O'Neil fully anticipated the '259 patent if it was not entitled to claim the filing date of
its original 1979 application. Whether a patent is entitled to an earlier priority date is
also reviewed without deference. In re Daniels, 144 F.3d 1452, 1455 (Fed. Cir. 1998).
A patent application for an invention disclosed in a previously-filed application in
a manner that satisfies all the requirements of 35 U.S.C. § 112 is entitled to the benefit
of the earlier filing date. 35 U.S.C. § 120. A continuation-in-part application "contains
subject matter from a prior application and may also contain additional matter not
disclosed in the prior application." Augustine, 181 F.3d at 1302. New subject matter
does not receive the benefit of the earlier priority date. Id.
The claims of the '259 patent require the catheter sheath to be inserted "about
1.5 cm" or up to (but not beyond) a "known position of maximum pressure." The
specification of the 1979 application discloses that
"the stop means can be set [at] a predetermined
distance along the sheath depending on the usual
extent of bacteria within the passage." Figure 1,
shown here, "is a schematic diagram showing the
distribution of bacteria in a female urethra."
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The specification further discloses that the sheath should be inserted "to an extent
whereby its distal end penetrates beyond bacteria disposed adjacent the proximal end
of the passage," such that in at least one embodiment, the distal end of the cover is at
the area marked "X" in Figure 1.
In determining whether the best mode requirement of 35 U.S.C. § 112, ¶ 1 is
met, we first determine whether Dr. O'Neil subjectively considered a particular mode of
practicing the invention to be superior to all other embodiments at the time the 1979
application was filed. See, e.g., Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209,
1223 (Fed. Cir. 2006). If so, we then ask whether he provided a sufficient disclosure to
allow others to practice that best mode. Id.
As to the first prong of this test, Dr. O'Neil admitted during his deposition that at
the time he filed his patent application in 1979, he had already made sample catheters
where the distance from the stop member to the distal end of the sheath was 1.5 cm.
He further characterized it as "the preferred embodiment at that stage." O'Neil Dep.
228:12-14, Sept. 21, 1994. The '259 patent, at col.2, ll.65-69, describes this distance as
"crucial" to preventing bacteria from being pushed into the bladder by the catheter or by
the sheath itself. The district court thus correctly concluded that Dr. O'Neil possessed a
best mode—i.e., a sheath length of 1.5 cm. SJ Order, slip op. at 13.
We also agree with the district court that the 1979 application lacked sufficient
disclosure to allow others to practice the best mode. Id., slip op. at 14. There is no
dispute that the preferred length of 1.5 cm was not expressly disclosed. Dr. O'Neil even
testified at his deposition that when drafting the 1979 application, he purposely
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"avoid[ed] any comment with relation to length" because he "was aware that numbers
would become limiting themselves." O'Neil Dep. 228:23-229:6.
Nor were the drawings submitted with the 1979 application sufficient. There is no
indication that Figure 1 was drawn to any particular scale, much less one where the
distance between the "X" and the outer end of the urethra is exactly 1.5 cm. “[P]atent
drawings do not define the precise proportions of the elements and may not be relied on
to show particular sizes if the specification is completely silent on the issue.”
Hockerson-Halberstadt, Inc. v. Avia Group. Int’l, Inc., 222 F.3d 951, 956 (Fed. Cir.
2000); see also In re Wright, 569 F.2d 1124, 1127 (C.C.P.A. 1977) (“Absent any written
description in the specification of quantitative values, arguments based on
measurement of a drawing are of little value.”).
Moreover, Dr. O'Neil also testified that "[i]t took [him] a few weeks of experiments
to define the distance" and others would "have to do a small amount of experimental
work" to reach the same conclusion. O'Neil Dep. 229:12-19. In other words, one of
ordinary skill would not know from reading the 1979 application that the preferred length
between the stop member and the distal end of the sheath was 1.5 cm.
In sum, we conclude that the invention of the '259 patent was not disclosed in the
1979 application in a manner that satisfies the best mode requirement—and no
reasonable jury could find otherwise—such that Go is not entitled to claim the priority
date of that application. Thus, the 1982 article anticipates. In light of this ruling, we
need not address whether the district court erred in finding that the 1979 application
also failed to meet the written description requirement. We affirm the grant of summary
judgment of patent invalidity.
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B. Prejudgment Interest
On procedural issues not unique to patent law, we apply the standard of review
of the regional circuit. Sulzer Textil A.G. v. Picanol N. V., 358 F.3d 1356, 1363 (Fed.
Cir. 2004). The denial of prejudgment interest is reviewed for abuse of discretion.
Smith v. Am. Int'l Life Assurance Co., 50 F.3d 956, 958 (11th Cir. 1995).
The relevant statute provides:
In all cases where an amount ascertained would be the damages at the
time of the breach, it may be increased by the addition of legal interest
from that time until the recovery.
Ga. Code Ann. § 20-1408 (emphasis added). Because an award of prejudgment
interest is intended to be compensatory rather than punitive, equitable considerations
should be evaluated by the district court. Osterneck v. E.T. Barwick Indus., Inc., 825
F.2d 1521, 1536 (11th Cir. 1987).
The district court did not err in concluding that the alleged contract damages
were not liquidated because the amount owed to Go was not ascertained until the jury's
verdict was rendered. In other words, the royalties due under the license (i.e., 50%
profits versus 7% gross sales, depending on how the contract was interpreted by the
jury) was in dispute. Neither the 1988 agreement nor the 1997 amendment contained a
liquidated damages provision. We also find that the district court did not abuse its
discretion in declining to award prejudgment interest on Go's claim under the Lanham
Act. We therefore affirm the denial of prejudgment interest.
C. Damages
We now consider whether the district court erred in reducing the jury's contract
and trademark damages. Judgment as a matter of law is appropriate when "a party has
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been fully heard on an issue and there is no legally sufficient evidentiary basis for a
reasonable jury to find for that party on that issue." Fed. R. Civ. P. 50(a). We review
the grant or denial of JMOL de novo, by reapplying the same standard used by the
district court. Telecom Tech. Servs. Inc. v. Rolm Co., 388 F.3d 820, 830 (11th Cir.
2004).
As a preliminary matter, Go argues that a district judge may not rely on new
grounds not raised in a Rule 50(a) to set aside the jury's verdict. Ross v. Rhodes
Furniture, Inc., 146 F.3d 1286, 1289 (11th Cir. 1998). It would have been impossible,
however, for MMG and Rüsch to challenge the jury's award of damages as excessive in
a Rule 50(a) motion. By definition, such a motion is made "before submission of the
case to the jury." Fed. R. Civ. P. 50(a). Moreover, Go failed to object to the Rule 50(b)
motions on this procedural ground and cannot do so for the first time on appeal.
1. Breach of Contract
In Lear, the Supreme Court held that a licensee was not estopped from
challenging the validity of the licensor's patent. 395 U.S. at 671. For various policy
reasons, a licensee may cease payments due under a license—i.e., contractual royalty
provisions will not be enforced—during the time it is challenging patent validity in the
courts. Id. at 673. Our court has since clarified that the Lear doctrine does not prevent
a patentee from recovering royalties until the date the licensee first challenges the
validity of the patent. Studiengesellschaft Kohle, M.B.H. v. Shell Oil Co., 112 F.3d
1561, 1568 (Fed. Cir. 1997). In other words, a licensee "cannot invoke the protection of
the Lear doctrine until it (i) actually ceases payment of royalties, and (ii) provides notice
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to the licensor that the reason for ceasing payment of royalties is because it has
deemed the relevant claims to be invalid." Id.3
The district court erred in applying the Lear doctrine to relieve MMG of the
obligation to pay any royalties after the finding of patent invalidity during Go's litigation
against C.R. Bard in March 1999. That ruling had no effect on the contractual
relationship between Go and MMG. Although the 1997 amendment tied the term of the
contract to the life of the '259 patent, the license did not automatically terminate with the
district court's ruling, as MMG believed, because the invalidity finding was still pending
appeal. In fact, MMG's June 21, 1999 letter to Go stated that it was placing its royalty
payments "in an escrow account until such time as the appeal is decided" (emphasis
added). This was an implicit acknowledgment that Go was entitled to the royalty
payments, meaning the funds would be transferred out of escrow, in the event that the
district court's invalidity finding was reversed.
Moreover, MMG's June 21, 1999 letter did not state that its reason for ceasing
payment of royalties was that it deemed the '259 patent to be invalid. Instead, it merely
indicated that MMG was placing its royalty payments in escrow until the validity of the
patent was resolved on appeal. (Even if it had been sufficient to constitute the requisite
notice, the district court still erred in finding that Lear relieved MMG from all royalty
payments after March 1999 instead of the date of this notice—i.e., June 1999.)
MMG is trying to have it both ways. As the exclusive U.S. distributor of the
urinary catheter described in the '259 patent, MMG not only urged Go to sue C.R. Bard,
but was the primary beneficiary when we later reversed the invalidity finding from that
3 During oral argument, MMG conceded that, in light of Shell Oil, the Lear
doctrine did not preclude all contract damages, as it had argued in its briefs.
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litigation. Significantly, it did not file its own declaratory judgment suit to challenge the
patent's validity after it learned about the district court's March 1999 ruling. Indeed, until
the agreement was terminated by Go in August 1999, MMG was contractually obligated
to share the costs of enforcing the '259 patent, including the costs of pursuing the
appeal.
Because the district court misapplied the Lear doctrine, we vacate and remand
for a recalculation of the contract damages.
2. Trademark Infringement
The relevant section of the Lanham Act provides:
(a) Profits; damages and costs; attorney fees. When a violation of any
right of the registrant of a mark . . . shall have been established in any civil
action arising under this Act, the plaintiff shall be entitled, subject to the
provisions of . . . [15 U.S.C. §§ 1111, 1114], and subject to the principles
of equity, to recover (1) defendant's profits, (2) any damages sustained by
the plaintiff, and (3) the costs of the action. The court shall assess such
profits and damages or cause the same to be assessed under its
direction. In assessing profits the plaintiff shall be required to prove
defendant's sales only; defendant must prove all elements of cost or
deduction claimed. In assessing damages the court may enter judgment,
according to the circumstances of the case, for any sum above the
amount found as actual damages, not exceeding three times such
amount. If the court shall find that the amount of the recovery based on
profits is either inadequate or excessive the court may in its discretion
enter judgment for such sum as the court shall find to be just, according to
the circumstances of the case. Such sum in either of the above
circumstances shall constitute compensation and not a penalty. The court
in exceptional cases may award reasonable attorney fees to the prevailing
party.
15 U.S.C. § 1117 (emphasis added).
First, we agree with the district court that § 1117 does not allow for a downward
adjustment of actual damages. The jury's award of a reasonable royalty, however, was
not based on substantial evidence of actual damages. There was no evidence of an
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explicit agreement setting forth a royalty rate for use of the "O'Neil" name on catheters.
Rather than analyze how much MMG would have agreed to pay as a trademark royalty
in a hypothetical negotiation, Go's expert merely considered MMG's excess earnings
and attributed 3% to the trademark and the remaining 20% to other factors. This was
correctly characterized as a recovery based on MMG's profits, rather than actual
damages in the amount of lost royalties. As such, the district court had discretion under
§ 1117 to adjust this portion of the jury's award.
Go's expert provided no explanation for how he assigned the 3% figure as a
reasonable royalty for use of the trademark; in fact, the district court thought it seemed
to be "arbitrarily pulled out of the air." First JMOL Order, slip op. at 16. The court also
pointed to the abundance of evidence in the record that the success of MMG's catheters
was more likely due to its marketing and advertising efforts, the superiority of the
product, its eligibility for Medicare reimbursement, and other factors, not to the "O'Neil"
name. Id. We find no abuse of discretion in the court's reduction of this award.
As to the jury's award of profits, § 1117 gives district courts broad latitude to
adjust this amount.4 The district court pointed to numerous equitable considerations
(which we do not repeat here) weighing against an award of profits. Id., slip op. 17-23.
Likewise, the district court gave sufficient reasons why the jury's punitive damages
award was properly set aside. Id., slip op at 25-43. In short, we find no abuse of
discretion here.
4 Go's argument that the district court erred in treating the jury's verdict as
advisory lacks merit. Section 1117 expressly empowers the district court to adjust the
jury's award if "the amount of the recovery based on profits is either inadequate or
excessive."
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D. Permanent Injunction
On cross-appeal, MMG and Rüsch challenge the district court's grant of a
permanent injunction, although Rüsch voluntarily dropped the "O'Neil" designation and
has been calling its products "MMG/Rüsch" catheters since 2003. As such, the
permanent injunction, it seems, may have no impact on its operations.
To the extent that we need to reach the merits, however, we find that substantial
evidence supports the jury's findings (1) that "O'Neil" had acquired secondary meaning;
(2) that the agreement between Go and MMG included an implied trademark license;
and (3) that the "O'Neil" mark was never abandoned by Go. Thus, permanent injunctive
relief was an appropriate remedy.
* * *
We have considered the remaining arguments made by each party on the appeal
and cross-appeals and find them to be unpersuasive.
III. CONCLUSION
For the aforementioned reasons, we affirm-in-part, vacate-in-part, and remand
for further proceedings consistent with this opinion.
AFFIRMED-IN-PART, VACATED-IN-PART, and REMANDED.
05-1241, -1267, -1588 17

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