00-1005 INSITUFORM TECHNOLOGIES, INC., INSITUFORM (Netherlands) B.V. v. CAT CONTRACTING, INC., FIRSTLINER U.S.A., INC., and GUILIO CATALLO

United States Court of Appeals for the Federal Circuit
99-1584, 00-1005
INSITUFORM TECHNOLOGIES, INC.,
INSITUFORM (Netherlands) B.V.,
and INSITUFORM GULF SOUTH, INC.,
Plaintiffs-Cross Appellants,
v.
CAT CONTRACTING, INC.,
FIRSTLINER U.S.A., INC., and GUILIO CATALLO,
Defendants-Appellants,
and
MICHIGAN SEWER CONSTRUCTION COMPANY,
Defendant-Appellant,
and
KANAL SANIERUNG HANS MUELLER GmbH & CO. KG,
Defendant-Appellee.
Harold James, Epstein Drangel Bazerman & James LLP, of New York, New
York, for plaintiffs-cross appellants.
Arnold Anderson Vickery, of Houston, Texas, for CAT Contracting, Inc., et al.
N. Elton Dry, Dry & Tassin, LLP, of Houston, Texas, for defendant-appellant
Michigan Sewer Construction Company.
Richard L. Stanley, Howrey Simon Arnold & White, LLP, of Houston, Texas, for
defendant-appellee Kanal Sanierung Hans Mueller GmbH & Co., KG. With him on the
brief was Albert B. Deaver, Jr.
On remand from the Supreme Court of the United States

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United States Court of Appeals for the Federal Circuit
99-1584, 00-1005
INSITUFORM TECHNOLOGIES, INC.,
INSITUFORM (NETHERLANDS) B.V.,
and INSITUFORM GULF SOUTH, INC.,
Plaintiffs-Cross Appellants,
v.
CAT CONTRACTING, INC.,
FIRSTLINER U.S.A., INC., and GIULIO CATALLO,
Defendants-Appellants,
and
MICHIGAN SEWER CONSTRUCTION COMPANY,
Defendant-Appellant,
and
KANAL SANIERUNG HANS MUELLER GmbH & CO. KG,
Defendant-Appellee.
__________________________
DECIDED: October 4, 2004
__________________________

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Before MAYER, Chief Judge, MICHEL, and SCHALL, Circuit Judges.
SCHALL, Circuit Judge.
Defendants Cat Contracting, Inc. (“CAT”), Firstliner U.S.A., Inc. (“Firstliner”),
Giulio Catallo (sometimes referred to as “Catallo”), and Michigan Sewer Construction
Company (“MSC”) (“defendants”) appeal the judgment of the United States District
Court for the Southern District of Texas holding them liable for infringement of United
States Patent No. 4,366,012 (“the ‘012 patent”) and awarding plaintiffs Insituform
Technologies, Inc. (“Insituform Technologies”), Insituform (Netherlands) B.V.
(“Insituform Netherlands”), and Insituform Gulf South, Inc. (“Insituform Gulf”) (“plaintiffs”)
damages for that infringement. Insituform Techs., Inc. v. Cat Contracting, Inc., No. H-
90-1690, slip op. (S.D. Tex. Aug. 31, 1999) (“District Court Opinion”). Defendants also
appeal the joinder of Insituform Netherlands as a plaintiff. Id. at 21-22. In addition,
CAT, Firstliner, and Catallo appeal the district court’s joinder of Catallo as a defendant.
Insituform Techs., Inc. v. Cat Contracting, Inc., No. H-90-1690, slip op. at 9 (Aug. 30,
1999) (“Joinder Order”). For their part, plaintiffs cross-appeal the ruling of the district
court declining to hold defendant Kanal Sanierung Hans Mueller GmbH & Co. KG (“KS”)
vicariously liable to plaintiffs under an alter-ego theory of induced infringement. District
Court Opinion, slip op. at 44-45.
We affirm the judgment of infringement with respect to all defendants. We also
affirm the district court’s joinder of Insituform Netherlands as a plaintiff, its joinder of
Giulio Catallo as a defendant, and its ruling declining to hold KS vicariously liable for
induced infringement. However, we vacate the judgment that the infringement of CAT
and Firstliner was willful and remand for further proceedings on the issue of willful

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infringement. We also vacate the district court’s damages award and remand for further
proceedings to determine damages based on when defendants ceased selling the pipe
repair process that was found to infringe the ‘012 patent. Accordingly, we affirm-in-part,
vacate-in-part, and remand.
BACKGROUND
I.
Underground pipes, such as sewer pipes, are often subject to great stress. As a
result, over time, the pipes develop cracks and other structural defects, which can result
in leakage. In the past, the only way to rehabilitate a section of underground pipe was
to dig up the broken section and replace it. Eric Wood, the sole inventor named on the
‘012 patent, pioneered a process for rehabilitating underground pipe without digging it
up.
The ‘012 patent discloses Wood’s invention. The patent relates to a method for
performing pipe repair without removing the damaged pipe from the ground. The
method involves installing a liner into the pipe. Claim 1 of the patent, the only claim at
issue, claims a process for impregnating a flexible tube liner with resin prior to insertion
of the liner into a damaged pipe. The liner has an impermeable film on the outside and
a resin-absorbent, felt layer on the inside. A vacuum is applied to the inside of the liner
by cutting a window into the outer, impermeable film, applying a cup (a “vacuum cup”) to
the outside of the window, and connecting the other end of the cup to a vacuum source.
Using the created vacuum, a section of the inside of the liner is impregnated with resin,
which is drawn through the liner. The vacuum cup is then moved to another section of
the liner while the previously used window is sealed. This process for impregnating the

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liner with resin allows for impregnation at the jobsite, eliminating the need to transport a
heavier, already impregnated liner to the site.
II.
This case has a lengthy procedural history. The issues before us arise from a
complex series of trials, appeals, and cross-appeals that now span nearly fourteen
years. We briefly review each significant decision in turn.
A. Plaintiffs’ suit for patent infringement
The original defendants in this action were CAT, Inliner U.S.A., Inc. (“Inliner”),
MSC, and KS. Inliner subsequently changed its name to Firstliner U.S.A., Inc., and we
refer to this defendant as Firstliner throughout. Firstliner and CAT are in the business of
rehabilitating and restructuring various types of pipes, including sanitary, storm sewer,
water main, conduit, and industrial pipe. District Court Opinion, slip op. at 5. Firstliner
oversees the marketing of its trenchless procedure for pipe rehabilitation to potential
licensees. Id. In addition, Firstliner manufactures pipeliners and related materials,
which it sells to CAT and its licensees. Id. CAT is responsible for marketing, bidding
for, and negotiating contracts with customers and managing its pipeline rehabilitation
contracts. Id. Giulio Catallo, who was subsequently added as a defendant, is the
individual principal of both CAT and Firstliner. MSC is also in the pipe rehabilitation
business. CAT was involved in a joint venture with MSC for performing the accused
processes.
KS is a German sewer rehabilitation company owned by Hans Mueller. After
reading about KS’s proprietary sewer rehabilitation technology in a trade magazine,
Giulio Catallo contacted KS to obtain a license for that technology. Id. Catallo

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subsequently acquired the rights to use the accused processes from Kanal Mueller
Gruppe International GmbH & Co. (“Gruppe”), a German export licensing company also
owned by Hans Mueller. Although KS stated in a letter written on November 10, 1989,
that CAT was a “qualified Licensee for our KM-INLINER sewer relining process for the
territories of the USA,” there was no formal license agreement executed by the parties.
Id. at 6. An actual license agreement, however, was later executed between Gruppe
and Firstliner, permitting CAT’s use of the accused process. Id. This license
agreement stated that “[t]he licensee has been informed of a threat of a possible claim
for infringing the INSITUFORM method.” Id.
The original accused process used by defendants—referred to as the “Multiple
Cup Process” or “Process 1”—was a method of tube liner impregnation involving the
serial application of vacuum cups. In Process 1, from four to six cups were used to
draw a vacuum from a corresponding number of slits in the tube liner. As a result, when
the cup closest to the advancing resin was removed, and its slit was sealed, the
remaining downstream cups continued to draw a vacuum in the tube liner.
At some point in either 1991 or early 1992, on the advice of counsel, defendants
switched to an alternate process. In the alternate process—referred to as the “Multiple
Needle Process” or “Process 2”—the multiple cups were replaced with multiple metal
tubes, known as needles. In Process 2, the needles are inserted through the layers of
the impregnated tube liner, rather than merely placed over holes in the wall of the liner.
Defendants did not develop Process 2 until after the first phase of the case had already
been tried to a jury.

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The original action for infringement of the ‘012 patent was brought in February
1990. The original plaintiffs were Insituform of North America, Inc.; Insituform
Licensees, B.V.; and Insituform Gulf. Insituform Licensees, B.V. was the owner of the
‘012 patent at the commencement of the suit. As explained more fully below, Insituform
Licensees, B.V. subsequently assigned the ‘012 patent to Insituform Netherlands, along
with the right to sue for past infringement. Insituform Netherlands was thus eventually
substituted for Insituform Licensees, B.V. as a plaintiff. Insituform Technologies, Inc.
(“ITI”) is the parent company and administrative headquarters for the Insituform
organization, including Insituform Gulf. Id. at 4. Insituform Gulf is authorized to do
business in Louisiana, Mississippi, and Texas and licensed to perform Insituform
technology in designated regions throughout the United States.1 Id. at 5. Insituform of
North America, Inc. is no longer a party to the suit.
Only claim 1 of the ‘012 patent was asserted at trial. It recites
1. A method of impregnating with a curable resin an
inner layer of resin absorbent material disposed in an
elongate flexible tube having an outer layer formed by an
impermeable film, the method comprising the steps of
(1) introducing into one end of the elongate tube a
mass of the curable resin sufficient to impregnate the entire
resin absorbent inner layer of the tube,
(2) forming a window in the impermeable outer layer
of the tube at a distance from said one end of the tube,
(3) drawing through the window a vacuum in the
interior of the tube downstream of said one end by disposing
over the window a cup connected by a flexible hose to a
vacuum source which cup prevents ingress of air into the
interior of the tube while the tube is being evacuated, the
outer layer of the tube being substantially impermeable to
air,
1 The district court ruled that neither Insituform Gulf nor ITI had standing to
sue. Plaintiffs do not appeal that ruling.

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(4) beginning at or near the end at which the curable
resin mass was introduced, passing the tube between
squeezing members which force the resin to flow towards
the region of vacuum application as the tube progresses
through the squeezing members,
(5) when the resin reaches the vicinity of the region of
vacuum application, removing the cup and sealing the
window,
(6) providing another window in the impermeable
layer of the tube downstream of the previously formed
window,
(7) drawing through the new window a vacuum in the
interior of the tube while progressively moving the tube
through the squeezing members to force the resin to flow
toward the new region of vacuum application, and
(8) repeating steps 5, 6, and 7, where necessary to
impregnate the entire resin absorbent inner layer of the
flexible tube.
‘012 patent, col. 6, l. 37 – col. 7, l. 6.
The case was first tried to a jury in June 1991. The jury returned a verdict that
the ‘012 patent was not invalid and was infringed, both literally and via equivalents, by
Process 1, the only accused process then at issue. The district court granted
defendants’ motion for judgment notwithstanding the verdict (“JNOV”) with respect to
literal infringement and ordered a new trial as to infringement under the doctrine of
equivalents. In June 1994, the case was reassigned to a different judge. A bench trial
was held in February 1995, and in November of that year the court held that Process 1
and Process 2 (which had been introduced after the 1991 trial) infringed the ‘012 patent
under the doctrine of equivalents. The court held defendants CAT, Firstliner, and MSC
liable for direct infringement. The court also found CAT and Firstliner liable for induced
infringement. Additionally, the court found that KS also had induced infringement of the
‘012 patent. Defendants appealed.

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B. Insituform I
On appeal, we ruled that claim 1 of the ‘012 patent, which recites use of a single
cup moved to different windows along the tube to draw a vacuum, did not encompass
the accused methods of using several cups or several needles attached at different
points along the tube, and thus was not literally infringed by either Process 1 or Process
2. Insituform Techs., Inc. v. Cat Contracting, Inc., 99 F.3d 1098, 1106-07 (Fed. Cir.
1996) (“Insituform I”). We also ruled that plaintiffs were not barred by prosecution
history estoppel from asserting infringement under the doctrine of equivalents. Id. at
1107-08. Finally, we ruled that the district court had erred in construing claim 1. We
therefore vacated the judgment of infringement with respect to both processes under
the doctrine of equivalents and remanded the case for new findings regarding
infringement under the doctrine of equivalents under the correct claim construction. Id.
Because we vacated the judgment of direct infringement, we did not reach the issue of
whether KS had induced infringement of the ‘012 patent.
C. Insituform II
On remand, the district court again held that claim 1 of the ‘012 patent was
infringed by both Process 1 and Process 2 under the doctrine of equivalents. Insituform
Techs., Inc. v. Cat Contracting, Inc., CA No. H-90-1690 (S.D. Tex. Dec. 31, 1996). The
court subsequently enjoined defendants from practicing those processes. In addition,
the court ruled again that KS had induced infringement of the ‘012 patent. Defendants
again appealed.
On the second appeal to us, we reaffirmed that prosecution history estoppel did
not bar plaintiffs from asserting infringement under the doctrine of equivalents.

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Insituform Techs., Inc. v. Cat Contracting, Inc., 166 F.3d 688, 692 (Fed. Cir. 1998)
(“Insituform II”). On the infringement issue, insofar as Process 1 was concerned, we
affirmed the district court’s holding that the process infringed claim 1 of the ‘012 patent
under the doctrine of equivalents. Id. at 693. However, with respect to Process 2, we
held that there were substantial differences between the claimed single cup process
and the accused multiple needle process. Id. at 694. Accordingly, we reversed the
court’s holding that Process 2 infringed. Id.
Turning to the liability of KS2 for induced infringement, we noted that “a separate
corporation related to [KS] licensed the infringing technology to [Firstliner] after [KS]
received notice of the ‘012 patent.” Id. at 695. That corporation was Gruppe. Because
Gruppe was not a party to the case, and because “there were no findings that this
affiliate was [KS]’s alter ego,” we vacated the district court’s holding and remanded for
further proceedings on the inducement issue. Id.
D. Insituform III
On remand, the district court determined that Gruppe was not the alter ego of KS
and that KS, therefore, was not liable for induced infringement. District Court Opinion,
slip op. at 45. Additionally, the district court joined Giulio Catallo in his personal
capacity as a defendant, and held him jointly liable for damages. Joinder Order, slip op.
at 9. With both the liability and damages trials now concluded, the court awarded
damages for infringement of the ‘012 patent by Process 1 under the doctrine of
equivalents. District Court Opinion, slip op. at 62. Additionally, the court found CAT
2 In Insituform II, we referred to KS as “KM.”

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and Firstliner’s infringement to be willful and thus enhanced the actual damages award
by fifty percent, id. at 55, and awarded Insituform attorney fees, id. at 57.
Defendants appealed, raising a number of different issues. These included (1)
whether Insituform Netherlands, the new assignee of the ‘012 patent, had been
improperly joined as a plaintiff; (2) whether Giulio Catallo, as president of CAT, had
been improperly joined as an individual defendant jointly and severally liable for
damages; (3) whether the district court had properly assessed damages following our
decision in Insituform II; (4) whether the district court had erred in holding that the
infringement that was found in the case was willful; and (5) whether the district court
had erred in determining the extent to which accused infringers CAT and Firstliner
instructed, and therefore induced, their licensees to use the infringing process. For their
part, plaintiffs cross-appealed the district court’s ruling that Gruppe was not the alter ego
of KS and that KS therefore was not vicariously liable for induced infringement.
After oral argument in the appeal, defendants filed motions asking us to apply our
holding in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 234 F.3d 558
(Fed. Cir. 2000) (en banc) (“Festo I”). In Festo I, we ruled that a narrowing amendment
to a claim limitation made for a substantial reason related to patentability completely
bars the application of the doctrine of equivalents to that amended claim limitation. Id.
at 569. Because our Festo I decision represented an intervening change in controlling
authority, we revisited our infringement holdings in Insituform I and II. Insituform
Techs., Inc. v. Cat Contracting, Inc., 10 Fed. Appx. 871, 877 (Fed. Cir. 2001)
(unpublished) (“Insituform III”).

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After reexamining the prosecution history of the ‘012 patent, we determined that,
under Festo I, Insituform had made a narrowing amendment to claim 1 of the ‘012
patent. Insituform III, 10 Fed. Appx. at 879-80. The claim was narrowed, we pointed
out, because claim 1 in its original form did not limit the number of cups that could be
used to create a vacuum, whereas claim 1 in its amended form was limited to the use of
one cup. Id. Accordingly, we held that “Insituform cannot assert any range of
equivalents for this claim limitation [and] Process 1, which uses multiple cups, cannot
infringe under the doctrine of equivalents, the only finding of infringement affirmed by
this court.” Id. at 880. We therefore reversed the district court’s final judgment of
liability and damages, and remanded the case with instructions “(i) to vacate all orders
entered after the finding of infringement as moot, including those relating to damages
and Catallo’s joinder as defendant; and (ii) to dismiss the case as to all parties.” Id. We
thus did not address the several remaining issues noted above that originally were on
appeal to us in Insituform III. Plaintiffs petitioned the Supreme Court for a writ of
certiorari, as did the plaintiff in Festo I.
E. Remand from the Supreme Court
The Supreme Court vacated and remanded our decision in Festo I. Festo Corp.
v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 525 U.S. 722 (2002) (“Festo II”). In
Festo II, the Court overruled the complete bar we established in Festo I, establishing a
flexible bar instead. Id. at 738 (“[W]e have consistently applied the doctrine [of
equivalents] in a flexible way, not a rigid one.”). The Court also held, inter alia, that
where the equivalent was “unforeseeable at the time of the amendment” or the rationale
underlying the amendment bore “only a peripheral relation” to the equivalent, the

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patentee could rebut the so-called “Festo-presumption.” Id. at 740. That presumption is
that a narrowing amendment made for a reason of patentability surrenders the entire
territory between the original and the amended claim limitation. Id. Accordingly, the
Court vacated our decision in Insituform III and remanded the case to us for further
proceedings in light of its decision in Festo II. Insituform Techs., Inc. v. Cat Contracting,
Inc., 535 U.S. 1108 (2002).
F. Festo III
After the Supreme Court remanded Festo to us, we rendered our second en
banc decision in the case. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd.,
344 F.3d 1359 (Fed. Cir. 2003) (“Festo III”). In Festo III, we summarized the three ways
in which the Supreme Court stated that the Festo presumption could be rebutted. Id. at
1369. First, the patentee may demonstrate that “the alleged equivalent would have
been unforeseeable at the time of the narrowing amendment.” Id. Second, the
patentee may demonstrate that “the rationale underlying the narrowing amendment
bore no more than a tangential relation to the equivalent in question.” Id. Finally, there
may be “‘some other reason’ suggesting that the patentee could not reasonably have
been expected to have described the alleged equivalent.” Id. (citing Festo II, 535 U.S.
at 740-41).
ANALYSIS
The following issues are now before us on direct appeal: (1) whether plaintiffs
are barred from asserting infringement under the doctrine of equivalents by reason of
prosecution history estoppel in light of Festo II and Festo III; (2) whether Insituform
Netherlands, the new assignee of the ‘012 patent, was improperly joined as a plaintiff;

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(3) whether Giulio Catallo, president of CAT, was improperly joined as an individual
defendant and held jointly and severally liable for damages; (4) whether the district court
properly assessed damages following our decision in Insituform II; (5) whether the
district court erred in holding that the infringement that was found in this case was
willful; and (6) whether the district court erred in determining the extent to which
accused infringers CAT and Firstliner instructed their licensees to use the infringing
process. On cross-appeal, we consider whether the district court erred in ruling that
Gruppe was not the alter ego of KS, and that KS therefore was not vicariously liable for
induced infringement. We address the parties’ contentions in turn, beginning with the
Festo issue.
I.
With the complete bar of Festo I overturned, we asked the parties to give us their
views as to how we should decide the case in light of Festo II and Festo III. In
response, both plaintiffs and defendants urged us to decide the Festo issue on the
record now before us. We of course are not bound by the wishes of the parties on a
question such as this. However, because resolution of the issue turns on whether
Insituform’s rationale underlying the narrowing amendment bore no more than a
tangential relation to accused Process 1, and because the record has been fully
developed on this point, we agree that we can decide the issue. See Festo III, 344 F.3d
at 1370 (“[W]hether the patentee has established a merely tangential reason for a
narrowing amendment is for the court to determine from the prosecution history record
without the introduction of additional evidence, except, when necessary, testimony from
those skilled in the art as to the interpretation of that record.”).

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Plaintiffs urge that nothing in either Festo II or Festo III invalidates Insituform II,
where we determined that plaintiffs were not barred by prosecution history estoppel
from asserting infringement under the doctrine of equivalents. Plaintiffs contend that
any presumption of surrender is rebutted because the rationale underlying the
amendment narrowing claim 1 to a single cup process bears at most a tangential
relation to the infringing equivalent—the multiple-cup method of Process 1. Specifically,
plaintiffs assert that the reason for the amendment was to overcome the prior art
teaching of a single vacuum source at the far end of the tube liner. As such, plaintiffs
argue, the amendment is, at most, only tangentially related to Process 1, which places
multiple cups near the resin front.
For their part, defendants note that claim 1, as originally filed, covered a process
using single or multiple cups at any location downstream of the resin front. See
Insituform I, 99 F.3d at 1108. They also note that we construed claim 1, as amended, to
cover a single vacuum cup, which inherently creates a discontinuous vacuum. Id. at
1106. Defendants thus argue that accused Process 1 falls squarely within the territory
surrendered by the narrowing amendment.
For the reasons which follow, we hold that plaintiffs have rebutted the Festo
presumption that a narrowing amendment made for a reason of patentability surrenders
the entire territory between the original claim limitation and the amended claim
limitation. See Festo II, 535 U.S. at 740-41. We reach this conclusion because we
conclude that the prosecution history establishes that “the rationale underlying” the
amendment narrowing the scope of literal claim coverage from multiple cups to a single
cup bears “no more than a tangential relation to the equivalent in question,” accused

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Process 1. Id. Therefore, application of the doctrine of equivalents in this case was not
barred. Accordingly, we again affirm the judgment of the district court that Process 1
infringed claim 1 of the ‘012 patent under the doctrine of equivalents.3
In Insituform I, we construed claim 1 of the ‘012 patent as limited to “a process
using only one vacuum cup which inherently creates a discontinuous vacuum.” Id. at
1106. Based upon that construction, we affirmed the district court’s JNOV that
Firstliner’s Process 1, employing multiple cups beyond the resin, did not literally infringe
claim 1. Id. As noted, we also held, however, that Insituform was not barred by
prosecution history estoppel from asserting that Process 1 infringed claim 1 under the
doctrine of equivalents. Id. at 1109. In so holding, we first looked at the original claims
in Insituform’s application. Of those, only the first four are relevant to this appeal.
Those claims recited:
1. A method of impregnating a flexible tube comprising an
inner layer of resin absorbent material and an outer layer in
the form of an impermeable film, wherein the resin absorbent
layer is impregnated with a curable resin by applying a
vacuum to the inside of a flexible tube whilst the resin is
brought into impregnation contact with the resin absorbent
material, the impermeable film serving as a means to
prevent ingress of air into the interior of the tube, whilst the
impregnation process is taking place.
2. A method according to claim 1, wherein the resin is
introduced into one end of the tube in a quantity calculated
effectively to impregnate all of the resin absorbent material
of the tube, and the vacuum is applied to the interior of the
tube, downstream of the resin mass, so that the resin will
tend to flow towards the vacuum application region.
3. A method according to claim 2, wherein the lining tube
containing the mass of resin is fed through a pressure
3 Firstliner’s Process 2 is no longer before us, it having been determined
that it does not infringe claim 1 either literally or under the doctrine of equivalents.

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applying nip, such as may be defined by a nip roller, which,
together with the movement of the tube, squeezes the resin
in a direction towards the region of the application of the
vacuum, at the same time flattening the tube and assisting in
the even distribution of the resin.
4. A method according to claim 2, wherein the vacuum is
applied through a window in the film in the wall of the tube by
means of a cup applied to said window and connected to a
source of vacuum by means of a flexible hose, whereby the
cup can move with the tube during its movement relative to
said nip, the cup being moved and applied to a position
spaced downstream from the previous window, said
previous window being sealed by means of a patch or the
like, whereby the process is repeated for respective lengths
of the tube until the entire tube length has been
impregnated.
As can be seen, the position and number of vacuum cups were not specified in
independent claim 1. Neither did claim 1 specify the location of the vacuum source.
Dependent claim 2 referred to the vacuum being applied to the interior of the tube,
“downstream of the resin mass,” while dependent claim 3 stated that the resin is
squeezed “in a direction towards the region of the application of the vacuum.” It was
only in dependent claim 4 that the inventor recited application of the vacuum through a
window in the wall of the tube by means of a cup applied to the window, as well as
repositioning of the cup. All four claims were rejected over United States Patent No.
4,182,262 to Everson (“Everson”).
We stated in Insituform I that the original four claims “were rejected over
Everson, which discloses both the use of a continuous vacuum and the creation of that
vacuum from only a single vacuum source at the far end of the tube opposite the resin
source.” Id. at 1108. The objection was overcome by amending claim 1 to include, in a
different form, the limitations of original dependent claims 2-4. Further examining the

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prosecution history, we determined that Insituform had stated to the examiner that the
problem with Everson was that Everson’s method was ineffective when dealing with a
long length of tube because it required an exceedingly large suction compressor. We
pointed out that Insituform solved this problem by placing the suction source closer to
the resin front, thus allowing the use of a smaller suction compressor. Id. Based on our
examination of the prosecution history, we concluded that Insituform was not estopped
from asserting that Inliner’s multiple cup process infringed claim 1 of the ‘012 patent
under the doctrine of equivalents:
[I]t cannot be said that a reasonable competitor could
conclude that Insituform relinquished coverage of processes
using either multiple vacuum sources or a continuous
vacuum. At no point did Insituform indicate that the Everson
problem could be solved only in the manner used by
Insituform, i.e., Insituform never stated that the problem
could not be solved by using more than one vacuum source
or a continuous vacuum. Rather, the only express limitation
put on the invention by Insituform was the use of a vacuum
source close to the resin.
Id. at 1109. We remanded the case to the district court for further proceedings on
whether Process 1 infringed claim 1 under the doctrine of equivalents.
On remand, the district court held that Process 1 infringed claim 1 under the
doctrine of equivalents, and the case returned to us on appeal in Insituform II. On
appeal, Firstliner argued that Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520
U.S. 17 (1997), issued after Insituform I, limited the doctrine of equivalents so that it
could not apply in the case. Firstliner pointed to Warner-Jenkinson’s holding that where
no explanation is given for an amendment made during prosecution of a patent, a
presumption is to be applied against the patentee that the amendment was made for
purposes of patentability. Firstliner asserted that when Insituform amended claim 1 in

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response to the examiner’s 35 U.S.C. § 103 rejection over Everson, it necessarily gave
up coverage of any process in which the vacuum was created at multiple vacuum
sources because it provided no explanation for that narrowing amendment. Insituform
II, 161 F.3d at 691. We rejected this argument, pointing out that, during prosecution,
Insituform had explained the reason for the amendment of claim 1:
The stated reason . . . for Insituform’s amendment to
overcome the Everson reference was to avoid the need to
use a large compressor when the vacuum is created a
significant distance from the resin source. The Warner
Jenkinson presumption, therefore, which comes into play
only when no explanation is given for a claim amendment, is
not applicable to this case because Insituform made clear
that the reason for the amendment was to overcome the
prior art teaching creation of a single source vacuum at the
far end of the liner.
Id. at 692 (citation omitted, emphasis in original). Having rejected Inliner’s prosecution
history estoppel argument, we went on to affirm the district court’s judgment of
infringement under the doctrine of equivalents. Id. at 692-93. As noted above,
however, we subsequently reversed the judgment of infringement in Insituform III based
on our short-lived complete bar rule arising out of Festo I.
In our view, Insituform has rebutted the Festo presumption. The prosecution
history and our discussion of that history in Insituform I and II compel the conclusion
that the amendment limiting the literal scope of claim 1 to a single cup process bears
“only a tangential relation,” if that, “to the equivalent in question,” a process using
multiple cups. The question we must address is “whether the reason for the narrowing
amendment was peripheral, or not directly relevant, to the alleged equivalent.” Festo III,
344 F.3d at 1365. As the discussion above indicates, the narrowing amendment in this
case was for the purpose of distinguishing the invention over Everson. Insituform made

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it clear that the difference between its process and Everson was that its process did not
have the disadvantage of the Everson process of a large compressor at the end of the
liner. There is no indication in the prosecution history of any relationship between the
narrowing amendment and a multiple cup process, which is the alleged equivalent in
this case. Thus, we hold that plaintiffs have successfully rebutted the Festo
presumption by establishing that the amendment narrowing the claimed invention from
multiple cups to a single cup was tangential to accused Process 1, which used multiple
cups attached at different points along the liner tube. We therefore affirm the judgment
of infringement under the doctrine of equivalents.
Because we have sustained the judgment of infringement, we must consider the
several additional issues that were mooted when we reversed the judgment of
infringement under the short-lived complete bar rule arising out of Festo I.
II.
We consider first the issues raised by defendants in their direct appeal.
Defendants appeal (1) the joinder of Insituform Netherlands, (2) the joinder of Catallo in
his individual capacity, (3) the damages award for infringement by Process 1, (4) the
district court’s willfulness determination, and (5) the extent to which CAT/Firstliner
induced infringement by their licensees.
A. Joinder of Insituform Netherlands
Defendants appeal the joinder of Insituform Netherlands. According to
defendants, the current owner of the ‘012 patent, Insituform Netherlands, never filed suit
and was named to this litigation only because of a misrepresentation to the district court
in 1994, after the case was reassigned to a new judge. They assert that the district

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court’s 1994 decision adding Insituform Netherlands as a party was in error and that no
properly named party has standing to sue for damages. Plaintiffs respond that the
district court acted well within its discretion (i) in granting the joint 1994 motion that
Insituform Netherlands be added as a party, and (ii) in refusing to alter that decision in
1999.
The original corporate plaintiff, and owner of the ‘012 patent, was Insituform
Licensees B.V. Insituform Licensees B.V. filed this lawsuit in 1990. In 1992, the case
went to trial. At that time, the plaintiffs were Insituform Licensees B.V.; Insituform of
North America, Inc.; and Insituform Gulf South, Inc. The defendants were CAT, MSC,
KS, and Firstliner.
Following a jury trial, a verdict, and after a new trial was ordered, Insituform
Licensees B.V. assigned the ‘012 patent to Insituform Netherlands. The assignment
included the right to sue for past infringement. At the time of the assignment, Insituform
Netherlands was not a party to the lawsuit, and it did nothing to join the suit for two
years. On November 30, 1994, the parties entered a joint motion asking the court to
make Insituform Netherlands a party. The motion stated that “legal title to the patent in
suit has been transferred from Insituform Licensees B.V. to Insituform (Netherlands)
BV.” Plaintiffs also represented to defendants and to the district court that Insituform
Licensees B.V. had changed its name to Insituform Netherlands. This was not
technically true. While ownership of the patent had, indeed, changed hands, Insituform
Licensees B.V. was still an existing corporate entity at the time of the motion. After the
motion to join Insituform Netherlands was granted, defendants discovered the alleged
misrepresentation and, on that basis, now challenge Insituform Netherlands’ standing.

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Probably to remedy what they perceived to be a potential defective parties
problem, plaintiffs, in 1999, sought leave to amend their pleadings to include Insituform
North America, Inc.4 and, if necessary, Insituform Netherlands as parties under Fed. R.
Civ. P. 15(a) and 21. The district court stated that “[Insituform Netherlands] was made a
party to this suit by order of this court on November 30, 1994.” District Court Opinion,
slip op. at 21. The court also stated that “the rights of the legal patent owner have been
at issue since the inception of this case and . . . [Insituform Netherlands] has presented
evidence of recoverable monetary damages that Defendants have been able to rebut at
trial. Therefore, Defendants would not be prejudiced if [Insituform Netherlands] is
recognized as a party plaintiff in this suit.” Id. at 21-22. In other words, the district court
ruled that it had already joined Insituform Netherlands as a party in November 1994,
and it refused to change that decision in 1999, despite the arguments of defendants.
Because the joinder issue is not unique to patent law, we apply the law of the
regional circuit. McGinley v. Franklin Sports, Inc., 262 F.3d 1339, 1357 (Fed. Cir. 2001)
(“A district court’s decision to grant or deny a motion for leave to join a party involves a
procedural question that raises no special issues relating to patent law, and therefore
[regional circuit] law applies.”); Datascope Corp. v. SMEC, Inc., 962 F.2d 1043, 1045
(Fed. Cir. 1992) (Regional circuit law determines “the standard for determining whether
the district court abused its discretion in denying [the patentee] leave to amend” its
complaint to add a new party.). Rule 15(a) provides that a party may amend its
pleadings “only by leave of court or by written consent of the adverse party; and leave
shall be freely given when justice so requires.” Fed. R. Civ. P. 15(a). Rule 21 states
4 As noted above, Insituform North America, Inc. is no longer a party to the
suit.

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that “parties may be dropped or added by order of the court on motion of any party or of
its own initiative at any stage of the action and on such terms as are just.” Fed. R. Civ.
P. 21. In applying Rule 21, the court is governed by the liberal amendment standards of
Rule 15(a). See McLellan v. Miss. Power & Light, 526 F.2d 870, 873 (5th Cir. 1976).
The decision to grant or deny a motion for leave to amend thus lies within the sound
discretion of the trial court. Jacobsen v. Osborne, 133 F.3d 315, 318 (5th Cir. 1998);
Datascope Corp., 962 F.2d at 1045. The Fifth Circuit has stated that leave should be
granted “in the absence of any apparent or declared reason—such as undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, [or] futility of amendment.” Jacobsen, 133 F.3d at 318.
The district court exercised its discretion in this case fully aware of plaintiffs’
alleged misrepresentation in the 1994 joint motion and determined that defendants
would suffer no prejudice were Insituform Netherlands joined as a party. District Court
Opinion, slip op. at 21-22. We discern no abuse of discretion in this decision, and thus
affirm the district court’s ruling.5 We have considered the defendant’s other arguments
on this point and find them not persuasive.
B. Joinder of Giulio Catallo
Defendants appeal the joinder of Giulio Catallo as a defendant in his individual
capacity. According to defendants, the addition of Catallo as a party to this suit violated
due process and was contrary to the Supreme Court’s decision in Nelson v. Adams
5 Because we affirm the district court’s ruling that Insituform Netherlands
was properly joined as a party, we need not address plaintiffs’ additional argument on
appeal related to adding Insituform North American, Inc. as a party.

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U.S.A., Inc., 529 U.S. 460 (2000). For their part, plaintiffs distinguish Nelson and rely
on our decision in Fromson v. Citiplate, Inc., 886 F.2d 1300 (Fed. Cir. 1989). Plaintiffs
assert that Catallo is the main executive officer of both CAT and Firstliner and (1) had
controlling authority of their day-to-day operations, (2) was directly and actively involved
in all aspects of the litigation, and (3) was individually responsible for all of the conduct
that led the district court to increase damages and award attorney’s fees. As explained
below, the district court’s ruling on this point is supported by our decision in Fromson,
and we see no clear error in the court’s interpretation of the facts. We accordingly
affirm the court’s decision on this point.
Giulio Catallo is the sole owner of defendants CAT and Firstliner. He also is
president of both corporations. Plaintiffs first attempted to join Catallo in his individual
capacity in January of 1991, before the first infringement trial in the case. That motion
was denied without prejudice and without opinion. Plaintiffs renewed their motion after
the infringement trial (the trial for damages was bifurcated) in July 1991. This motion
also was denied without prejudice and without opinion. In each case, the reason
asserted for the joinder of Catallo was that he was “directly responsible for all of the
activities of CAT and INLINER [and] was clearly the moving force behind infringement
[and] personally financially benefited from the payments made [under one of the
contracts found to be infringing.]” Additionally, plaintiffs asserted that Catallo was
personally a licensee of the accused process because he signed a license agreement
twice, on behalf of himself and as President of Firstliner.
The damages portion of the case was tried in September 1997. After trial, the
court found that defendants’ infringement had been willful. In July 1999, plaintiffs

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moved again to add Giulio Catallo as a defendant. In so doing, they argued that
Catallo’s corporations were a “real credit risk.” They also argued that Catallo was a
personal tortfeasor. Finally, they urged that in the intervening years (1991-1999) many
facts had come to light that weighed in favor of making Catallo personally liable as an
individual party.
Defendants acknowledge that a corporate entity may be disregarded if doing so
will prevent fraud, illegality, injustice, a contravention of public policy, or prevent the
corporation from shielding someone from criminal liability. See Manville Sales Corp. v.
Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990). They argue, however, that
none of these reasons were present in this case. They state that Catallo “was merely
acting in accordance [with] the duties and scope of his position” and that he “had a good
faith belief and basis that the Firstliner process did not infringe any Insituform patents
when the contracts were performed.” In short, defendants contend that there was no
reason to pierce the corporate veil in this case.
In an August 30, 1999 order, the district court granted plaintiffs’ motion to join
Giulio Catallo. Joinder Order, slip op. at 9. In granting this third request to add Catallo
as a defendant, the district court recognized that it was faced “with the uncommon
situation where an individual is sought to be added as a party after the conclusion of
trial.” Id. at 5. With respect to the propriety of adding Catallo as a defendant, the district
court relied on our decision in Ohio Cellular Products Corp. v. Adams, U.S.A., Inc., 175
F.3d 1343 (Fed. Cir. 1999), rev’d sub nom. Nelson v. Adams, U.S.A., Inc., 529 U.S. 460
(2000), which was, at that time, pending before the Supreme Court. The court also
pointed to our decision in Fromson. With respect to the personal liability of Catallo, the

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court relied on Walker v. Federal Deposit Insurance Corp., 970 F.2d 114, 122 (5th Cir.
1992), where the Fifth Circuit stated that “[a]n officer is individually liable for any tortious
conduct that he committed in connection with his corporate duties . . . . If a corporate
officer knowingly participates in a tortious act, there is no need to pierce the corporate
veil in order to impose liability.” In light of the facts that led to a finding of willful
infringement, and because the court believed that Catallo “was personally responsible
for many, if not all, of the aggravating facts which led this court to award attorney’s fees
and enhanced damages,” Joinder Order, slip op. at 7, it granted the motion to add
Catallo as a defendant in his individual capacity, id. at 9.
As noted above, because the amendment of a pleading to add a party is not
unique to patent law, we apply the law of the regional circuit. McGinley, 262 F.3d at
1357. We thus review a district court’s decision to add a party pursuant to Rules 15 and
21 of the Federal Rules of Civil Procedure for an abuse of discretion. Jacobsen, 133
F.3d at 318. Our decision in Ohio Cellular, upon which the district court relied, was
subsequently overturned by the Supreme Court. Nelson, 529 U.S. at 472. Resolution
of this issue thus turns on whether the facts of this case fall more closely under the
Supreme Court’s decision in Nelson, or our decision in Fromson, which the Supreme
Court distinguished in Nelson. If the facts are closer to Nelson, then the district court
decision is incorrect as a matter of law, and Catallo was improperly joined. If the facts
are closer to Fromson, then the district court decision should be affirmed.
In Nelson, Ohio Cellular Products Corp. (“OCP”) sued Adams, U.S.A., Inc.
(“Adams”) for patent infringement. Eventually, the action was dismissed and Adams
was awarded costs and attorney fees. Nelson, 529 U.S. at 462. Adams, fearful that

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OCP would be unable to pay, moved to amend its pleadings pursuant to Fed. R. Civ. P.
15 to include Nelson, the sole shareholder of OCP, as a party. Id. The district court
granted the motion and simultaneously subjected Nelson to the judgment, a decision we
subsequently affirmed in Ohio Cellular.
The Supreme Court reversed our decision in Ohio Cellular on due process
grounds. The Court determined that Nelson was never afforded a proper opportunity to
respond to the claim against him. Id. at 467. He was never served with an amended
pleading, nor was any such pleading actually composed and filed in the court. Id. at
466. Nor, after the amendment naming him as a party, was Nelson accorded ten days
to state his defenses against personal liability for costs and fees. Id. Instead, judgment
was entered against him the moment permission to amend the pleading was granted.
Id. The Court stated that “appeal after judgment, in the circumstances this case
presents, did not provide an adequate opportunity to defend against the imposition of
liability.” Id. Finally, the Court noted that Adams never once sought to sue Nelson
individually until after judgment was entered against Ohio Cellular. Id. at 467.
In Fromson, Citiplate, Inc. (“Citiplate”) was sued by Howard A. Fromson
(“Fromson”) for patent infringement. Fromson moved before trial to add the individual
owners of Citiplate as parties, because he suspected that the defendant corporation
might not be able to pay a judgment against it. Fromson, 886 F.2d at 1301. The district
court initially denied the motion because of defendant Citiplate’s assurances that its
financial condition was sound. Id. These assurances turned out to be false. After
judgment had been entered, the court allowed Fromson to amend its original complaint

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to add the individual owners of Citiplate as parties pursuant to Fed. R. Civ. P. 15(c). Id.
at 1302.
We affirmed the district court’s decision. In so doing, we relied upon the test
articulated by the Supreme Court in Schiavone v. Fortune, Inc., 477 U.S. 21 (1986), to
determine whether the requirements of Rule 15(c) had been met. In Schiavone, the
Court articulated a four-part test:
Relation back is dependent upon four factors, all of which
must be satisfied: (1) the basic claim must have arisen out of
the conduct set forth in the original pleading; (2) the party to
be brought in must have received such notice that it will not
be prejudiced in maintaining its defense; (3) that party must
or should have known that, but for a mistake concerning
identity, the action would have been brought against it; and
(4) the second and third requirements must have been
fulfilled within the prescribed limitations period.
Schiavone, 477 U.S. at 29. Based on this test, we determined that the “identity of
interests between Citiplate and [its individual owners] is virtually complete and that [the
individual owners] should have known all along that joinder was a possibility.” Fromson,
886 F.2d at 1304. We concluded that the owners of Citiplate “themselves created the
‘mistake’ respecting the identity of the proper party rightfully to be sued and capable of
responding to damages.” Id.
The original 1991 motions to add Giulio Catallo presumably were denied
because the district court believed defendants’ assertions that Catallo “was merely
acting in accordance [with] the duties and scope of his position” and that he “had a good
faith belief and basis that the Inliner process did not infringe any Insituform patents
when the contracts were performed.” When all the facts were determined following the
1997 damages trial, the court concluded that these assertions were not true, finding that

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Catallo “was personally responsible for many, if not all, of the aggravating facts which
led this court to award attorney’s fees and enhanced damages.” Joinder Order, slip op.
at 7. Furthermore, the court found that “Catallo diligently acted to protect his interests at
every stage of the proceedings.” Id. The court subsequently exercised its discretion
and granted the motion requesting that Catallo be added as a defendant.
Applying the Fifth Circuit’s abuse of discretion standard, we cannot say that the
district court abused its discretion in adding Catallo as a defendant in his individual
capacity. In our view, the controlling case is Fromson, which the Supreme Court
distinguished in Nelson. As in Fromson, plaintiffs in this case sought from the very
beginning to add Catallo as a defendant in his individual capacity on the theory that he
was liable as an individual tortfeasor. We have stated that “it is well settled that
corporate officers who actively aid and abet their corporation’s infringement may be
personally liable for inducing infringement under § 271(b) regardless of whether the
corporation is the alter ego of the corporate officer.” Orthokinetics, Inc. v. Safety Travel
Chairs, Inc., 806 F.2d 1565, 1579 (Fed. Cir. 1986). The facts of this case are closer to
Fromson than to Nelson. Accordingly, we affirm the decision of the district court.
C. Damages
The overarching issue with respect to damages is the propriety of the district
court’s procedure in reassessing damages in light of our decision in Insituform II. The
issues of infringement and damages were bifurcated in the case. The damages trial
concluded while the appealed infringement decision still was pending before us in
Insituform II. The damages trial was conducted under the assumption that Process 1
(using cups) and Process 2 (using needles) both infringed the ‘012 patent. We

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determined, however, that only Process 1 infringed and that Process 2 did not.
Insituform II, 161 F.3d at 694. Not knowing that the damages trial had already
concluded, we stated that “the bifurcated damages trial will determine for what amount
[defendants are] actually responsible . . . .” Id. at 695.
Following our decision in Insituform II, the district court, over the objection of
defendants, chose to allow only limited discovery to address the issue of damages,
instead of again opening up trial proceedings. District Court Opinion, slip op. at 3-4.
The primary issue on which the final damages award turned was one of fact.
Specifically, the district court had to determine the date on which defendants stopped
using infringing Process 1 and started using the non-infringing Process 2. Id. at 35-36.
To that end, the court turned to the June 1991 trial testimony of Giulio Catallo, which
indicated that defendants switched to Process 2 “sometime after June of 1991.” Id. at
35.6 Defendants urged the court to rely instead on Catallo’s February 1995 trial
testimony, where he indicated that defendants had shifted to needles exclusively by
March of 1991. Id. During the discovery period, defendants presented deposition
testimony of two additional witnesses to support their assertion that February 14, 1991,
was the actual date by which they had stopped using Process 1. This testimony was
offered to establish a specific date and to buttress Catallo’s February 1995 testimony.
Id. at 35-36.
Based on Catallo’s previous testimony at the 1991 and 1995 trials, and the new
evidence presented during discovery, the district court amended its damages ruling.
The court stated that the deposition testimony of the two additional witnesses “do[es]
6 At that time, the court made no specific finding regarding the actual date of
the switch as both Process 1 and 2 were found to be infringing.

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nothing to persuade the Court that needles were actually being used for production
purposes during the first quarter of 1991.” Id. In conclusion, the court found that “the
totality of the testimony of these witnesses does make it appear credible that
Defendants had switched to needles for production by the end of 1991 . . . . Therefore,
for purposes of these damages calculations, the court finds that a preponderance of the
evidence necessitates that the Court enter a finding that Defendants had switched to
the use of Process 2 for production by the beginning of 1992.” Id. at 36.
Defendants argue on appeal that rendition of judgment without a trial specifically
focusing on damages relating to Process 1 violated their due process rights and our
mandate in Insituform II. For their part, plaintiffs respond that there was no procedural
error in the district court’s damages calculation because, in their view, the district court
did not make credibility choices except as to Catallo’s testimony in open court.
Additionally, plaintiffs argue that the due process requirements in a civil case, where
only property interests are at stake, are much less stringent than in criminal cases.
We agree with defendants that “the procedure chosen by the district court in this
case was tantamount to a ‘trial by affidavit’ which has long been disapproved in our
federal judicial system.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Defendants characterize the trial court’s action as a “de facto summary judgment”
proceeding because the district court essentially ruled based on deposition and affidavit
testimony without the opportunity to observe or assess the credibility of the new
witnesses. We agree with defendants’ characterization and accordingly review the
district court’s decision on this point under the summary judgment standard.

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We review summary judgment de novo. Merck & Co., Inc. v. Mylan Pharms.,
Inc., 190 F.3d 1335, 1338 (Fed. Cir. 1999). Summary judgment is appropriate where
the record indicates “that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). We
believe that the deposition testimony of the two additional witnesses, combined with the
inconsistent testimony of Catallo at the two trials created a disputed issue of material
fact upon which the quantum of damages turns. The district court should have resolved
this issue with trial-type proceedings. We therefore vacate and remand on this issue so
that the trial court may properly weigh the new evidence regarding the quantum of
damages attributable to infringing Process 1.
D. Willful Infringement
The district court determined that defendants CAT and Firstliner’s infringement
had been willful. District Court Opinion, slip op. at 55. One crucial aspect of the district
court’s willfulness determination was the failure of CAT and Firstliner to obtain an
opinion of counsel. Id. at 52-54. The district court stated that “due to a complete
absence of competent advice regarding possible infringement of the ‘012 patent and a
flagrant display of deliberate misconduct by CAT/[First]liner throughout this proceeding,
the Court finds that actions of CAT/[First]liner’s evidenced the degree of willfulness
necessary to support the award of enhanced damages.” Id. at 54 (emphasis added). In
our recent en banc decision in Knorr-Bremse Systeme Fuer Nutzfahrzeuge, Gmbh v.
Dana Corp., Nos. 01-1357, -1376, 02-1221, -1256, slip op. at 11 (Fed. Cir. Sept. 13,
2004), we addressed, inter alia, whether the failure of a defendant in a patent
infringement suit to obtain an opinion of counsel “will provide an inference or evidentiary

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presumption that such opinion would have been negative.” We held in Knorr-Bremse
that “the failure to obtain an exculpatory opinion of counsel shall no longer provide an
adverse inference or presumption that such an opinion would have been unfavorable.”
Id. at 12. Such an inference was one factor upon which the district court based its
willfulness determination in this case. A determination of willfulness is made on
consideration of the totality of the circumstances. See Gustafson, Inc. v. Intersystems
Indus. Prods., Inc., 897 F.2d 508, 510 (Fed. Cir. 1990). Because elimination of the
adverse inference arising from failure to obtain an opinion of counsel is a material
change in the totality of the circumstances in this case, a fresh weighing of the evidence
is required. For this reason, we vacate the district court’s willfulness finding and remand
for further proceedings.
E. Inducement of Infringement
The district court determined that CAT and Firstliner were liable for induced
infringement under 35 U.S.C. § 271(b) on account of work done by their licensees.
District Court Opinion, slip op. at 45. CAT and Firstliner raise two issues related to their
alleged induced infringement. First, they contend that there was a lack of proof with
regard to the scienter element of induced infringement. Second, they contend that there
was insufficient evidence to sustain the district court’s determination of damages related
to the licensees’ use of infringing Process 1.
Section 271(b) provides that “[w]hoever actively induces infringement of a patent
shall be liable as an infringer.” In order to succeed on a claim of inducement, the
patentee must show both direct infringement and a certain level of intent on the part of
the alleged inducer that the patent be infringed. Water Techs. Corp. v. Calco, Ltd., 850

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F.2d 660, 668 (Fed. Cir. 1988). However, there is a lack of clarity concerning whether
the required intent must be merely to induce the specific acts or additionally to cause an
infringement. See Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553
(Fed. Cir. 1990) (“The plaintiff has the burden of showing that the alleged infringer’s
actions induced infringing acts and that he knew or should have known his actions
would induce actual infringements.”). But see Hewlett-Packard Co. v. Bausch & Lomb,
Inc., 909 F.2d 1464, 1469 (Fed. Cir. 1990) (“Proof of actual intent to cause the acts
which constitute the infringement is a necessary prerequisite to finding active
inducement.”). Nevertheless, we need not resolve any ambiguity in the case law on this
point because there is sufficient evidence to support the district court’s finding under
either standard.
The district court relied on Manville and applied the stricter standard for induced
infringement, requiring that “the alleged infringer’s actions induced infringing acts and
that he knew or should have known his actions would induce actual infringement.”
District Court Opinion, slip op. at 40 (citing Manville, 917 F.2d at 553). In finding the
requisite intent, the court noted a response to a questionnaire submitted by one of
CAT/Firstliner’s licensees. Id. at 47. The licensee claimed to have used infringing
Process 1 in 100 percent of its contracts and that, with regard to how it acquired
knowledge of the impregnation process, “[w]e expected to get directives from [Firstliner]
representatives, and we did.” Id. at 47-48. The district court thus concluded that
defendants taught their licensees to use Process 1. Additionally, Firstliner did not begin
its licensing program until 1992, which was after the original June 1991 trial. CAT and
Firstliner’s licensing activity thus occurred with full knowledge that Process 1 had been

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accused of infringing the ‘012 patent. On this evidence, the court determined that the
intent requirement was met.
Intent is a factual determination particularly within the province of the trier of fact
and may be inferred from all of the circumstances. Water Techs., 850 F.2d at 669. We
review factual determinations by the court for clear error. Tegal Corp. v. Tokyo Electron
Am., Inc., 257 F.3d 1331, 1345-46 (Fed. Cir. 2001). “A finding is ‘clearly erroneous’
when although there is evidence to support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mistake has been committed.” United
States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). There is evidence in
the record to support the district court’s finding that CAT/Firstliner induced infringement
of the ‘012 patent and we are not left with the definite and firm conviction that a mistake
has been committed.
We now turn to the method the district court used to arrive at the quantum of
damages. To assess damages, the court had to make findings as to the percentage of
CAT/Firstliner licensees that were instructed to use infringing Process 1. The issue
before us is whether the district court correctly determined the extent to which
defendants CAT and Firstliner instructed their licensees to use the infringing Process 1,
thereby inducing infringement under 35 U.S.C. § 271(b). Specifically, the issue is
whether the district court’s method for determining the percentage of licensees who
were instructed to use infringing Process 1 was flawed. The parties agreed to resolve
this aspect of the lawsuit by licensees’ questionnaire answers, subject to correction by
deposition if either party so desired. District Court Opinion, slip op. at 45-46. It appears
that the district court resolved this issue on the basis selected by the parties, and

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properly exercised its discretion in so doing. Accordingly, we affirm the district court’s
ruling on this point.
Defendants assert that the district court clearly erred in its methodology in
determining the extent to which CAT/Firstliner instructed their licensees to use infringing
Process 1. Primarily, defendants argue that plaintiffs failed to carry their burden of proof
with respect to the royalty revenue received by defendants CAT and Firstliner from use
of the accused Process 1. Plaintiffs respond that the parties stipulated to a procedure
for establishing the extent to which CAT and Firstliner instructed their licensees to use
Process 1. Plaintiffs argue that the district court, having resolved the issue in the
manner selected and stipulated to by the parties, should be given full deference as the
factfinder in the case.
As part of the stipulated procedure for determining the extent of induced
infringement, a formal questionnaire was prepared and distributed to CAT/Firstliner’s
licensees. Only two licensees responded. The first licensee said it was instructed to
use Process 1; the second licensee said it was instructed to use Process 2. The district
court noted that the response to the questionnaires was “admittedly less than
satisfactory.” District Court Opinion, slip op. at 46. However, the court judged that the
poor response “was due in no small part to actions of Defendants in publishing
statements in trade publications and in disseminating letters which implied that the
finding of this Court would be reversed.” Id. at 46-47. The court concluded that
“[b]ecause this limited statistical sampling was caused by no fault of Insituform, the
Court will not, as Defendants have requested, limit Insituform’s damage claim for lack of
supporting proof. Instead, the Court will rely on these questionnaires in making its

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determination regarding the extent to which the licensees used the infringing methods
and were induced to do so by the Defendants.” Id. at 47. Accordingly, the district court
determined that half of CAT and Firstliner’s licensees were instructed to use infringing
Process 1, while half used non-infringing Process 2.
“[C]ertain subsidiary decisions underlying a damage theory are discretionary with
the court, such as . . . [determining] the methodology for arriving at a reasonable royalty
[citations omitted]. Such decisions are, of course reviewed under the abuse of
discretion standard.” SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d
1161, 1164 (Fed. Cir. 1991). “[A court] may . . . adopt in its discretion a reasonable way
to determine the number of infringing units. Such subsidiary choices are left to the
court’s sound discretion under our precedent.” Id. at 1165 n.2. “Discretion, in this
sense, is abused if the record contains no basis on which the district court rationally
could have made its decision or if the judicial action is arbitrary, fanciful, or clearly
unreasonable.” Datascope Corp. v. SMEC, Inc., 879 F.2d 820, 827-28 (Fed. Cir. 1989).
We do not believe that CAT/Firstliner has shown an abuse of discretion in this
case. Accordingly, we will not disturb the district court’s ruling that at least half of
defendants’ licensees used Process 1, while the other half used Process 2. District
Court Opinion, slip op. at 48.
III.
We now address plaintiff’s cross-appeal. Plaintiffs appeal the district court’s
decision declining to hold KS liable for infringement based on an alter-ego theory of
induced infringement. We begin with a brief review of the key entities and the facts
surrounding the alleged alter ego relationship.

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KS is a German corporation, and is one of the named defendants in the lawsuit.
As noted above, it is a sewer rehabilitation company, owned by Hans Mueller. KS was
(legally) using the Firstliner process in Germany under a patent owned by Mueller,
United States Patent No. 4,770,562 (“the ‘562 patent”). KS is also the entity that initially
met with Giulio Catallo and demonstrated to him use of the accused process in
Germany. At that time, KS informed Catallo that it had been involved in patent litigation
involving certain European patents held by one of the Insituform entities. Nevertheless,
Catallo remained interested in the KS process, and KS signed a letter of intent to
license the process to him. KS also prepared a “To Whom it May Concern” letter
identifying Mr. Catallo as a “qualified licensee” of the process under the ‘562 patent. It
is undisputed that at the time of these activities, KS was not aware of the ‘012 patent.
Insituform II, 161 F.3d at 695.
The non-party to whom plaintiffs are trying to link to KS via their alter ego
argument is Kanal Mueller Gruppe International GmbH & Co, a German corporation
also owned by Hans Mueller, which we refer to as “Gruppe.” Gruppe is an export
licensing company that was formed on January 1, 1990. Gruppe is a separate
corporate entity from KS. According to KS, Gruppe took over responsibility for licensing
the accused process and Catallo, from that point forward, dealt with Gruppe. It appears
that, at all times, Hans Mueller himself owned the relevant German patent and rights to
license the accused process. He did not officially transfer those rights to Gruppe until
1995.
The present lawsuit was filed on February 2, 1990. At that time, Gruppe, KS,
and Catallo first became aware of the ‘012 patent. Despite the lawsuit and notice of the

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‘012 patent, Catallo persisted in pursuing a license for the accused process, which
Gruppe granted. The license agreement was executed in July 1990 and provided that
Gruppe was obligated to provide instruction to CAT/Firstliner employees sent to
Germany, and to provide CAT/Firstliner with continued technical support. Plaintiffs
assert that KS, the sewer rehabilitation company first contacted by Catallo, and not
Gruppe, would have been the entity to provide such instruction and technical support to
CAT/Firstliner. In other words, plaintiffs essentially seek to impute the post-lawsuit
licensing activity of non-party Gruppe to KS, who is the current party in the suit. In
doing so, plaintiffs argue that KS is the alter ego of Gruppe.
The issue before the district court, as directed by this court in Insituform II, was
whether Gruppe was the alter ego of KS. Because the alter ego issue is not unique to
patent law, this court applies the law of the regional circuit. Panduit Corp. v. All States
Plastic Mfg. Co, Inc., 744 F.2d 1564, 1574-75 (Fed. Cir. 1984). In the Fifth Circuit,
“resolution of the alter ego issue is heavily fact-specific and, as such, is peculiarly within
the province of the trial court.” United States v. Jon-T Chems., Inc., 768 F.2d 686, 649
(5th Cir. 1985); Bridas Sapic v. Gov. of Turkmenistan, 345 F.3d 347, 360 (5th Cir. 2003)
(“Alter ego determinations are highly fact-based and require considering the totality of
the circumstances in which the instrumentality functions.”). The Fifth Circuit reviews
alter ego determinations only for clear error. Bridas Sapic, 345 F.3d at 360. We will
thus reverse only if, after reviewing the evidence as a whole, we are “left with the
definite and firm conviction that a mistake has been committed.” United States v.
United States Gypsum Co., 333 U.S. 364, 395 (1948). “Errors of law, however, are not
entitled to deference.” Bridas Sapic, 345 F.3d at 359. It is an error of law if a district

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court fails to take into account all of the aspects of the relationship between the entities
alleged to have an alter ego relationship. Id. at 359-60.
The district court correctly noted that, “[u]nder Texas law, a finding by the court
that [KS] is the alter ego of [Gruppe] permits the Court ‘to disregard the corporate fiction
and pierce the corporate veil, thereby attributing [Gruppe’s] infringing conduct to [KS].”
District Court Opinion, slip op. at 42 (citing Gundle Lining Constr. Corp. v. Adams
County Asphalt, Inc., 85 F.3d 201, 208 (5th Cir. 1996)). The court noted that “under the
alter ego theory, the court may disregard the corporate form ‘where a corporation is
organized and operated as a mere tool or business conduit’ for another entity.” Id. at 43
(citing Zahra Spiritual Trust v. United States, 910 F.2d 240, 245 (5th Cir. 1990)). The
court went on to list a number of factors typically considered when determining whether
an entity is the alter ego of a corporation, noting that resolution of the issue is based on
the totality of the circumstances. Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir.
1985).
The district court then set forth the evidence that plaintiffs presented to show the
alter-ego relationship:
(1) [KS] and [Gruppe] are both 100% owned by Hans Mueller.
(2) In 1989, [KS] held itself out as the owner and licensor of the ‘562 patent
but in July of 1990, [Gruppe] held itself out as the owner and licensor,
although legal title remained at all times in Hans Mueller.
(3) The German defendants actively participated in and were represented by
counsel in this litigation throughout its history, and all defendants, German
and domestic, used the term “Kanal-Mueller” to identify both the German
defendants [KS] and the German licensor [Gruppe].
District Court Opinion, slip op. at 44.
The district court concluded that “[t]he evidence does not show that either [KS] or
[Gruppe] owned stock in the other at any relevant time. Nor did Insituform present any

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proof that [KS] and [Gruppe] failed to follow separate corporate formalities. In fact,
Insituform does not submit any evidence relevant to the [Stuart] factors listed above.
Absent such proof, [KS] cannot be held liable as the alter ego of [Gruppe].” Id. at 45.
Thus, the district court essentially pointed to a failure of proof on the part of plaintiffs to
show that KS was the alter ego of Gruppe.
The district court accurately stated the law with respect to plaintiffs’ alter ego
theory of induced infringement. Moreover, although plaintiffs attempt to characterize the
district court’s ruling as an error of law, they do not tell us exactly what legal error the
district court comitted. For that reason, and because we discern no legal error, we are
left to review the district court’s factual findings.
The district court accurately summarized the totality of plaintiffs’ evidence. On
appeal, plaintiffs appear to merely reargue their version of the facts. Indeed, plaintiffs
praise the district court for “making no reference whatsoever” to allegedly inadmissible
submissions by KS. Given the highly deferential standard of review, we do not disturb
either the district court’s finding that plaintiffs essentially failed to carry their burden of
proof or its ultimate ruling that KS cannot be held liable as the alter ego of Gruppe.
CONCLUSION
In sum, we decide the issues before us as follows:
(1) Because plaintiffs are not barred from asserting infringement under the
doctrine of equivalents, we affirm the judgment of infringement with respect to
Process 1.
(2) We affirm the ruling of the district court joining Insituform Netherlands as a
party plaintiff.

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(3) We affirm the ruling of the district court joining Giulio Catallo as a party
defendant.
(4) We affirm the ruling of the district court with respect to CAT’s and Firstliner’s
inducement of infringement, as well as its ruling with respect to the extent to which CAT
and Firstliner instructed their licensees to use infringing Process 1.
(5) We vacate the outstanding award of damages and remand to the district
court for (i) a determination of the factual issue of when defendants stopped using
Process 1 and began using Process 2, and (ii) a calculation of the quantum of damages
based upon that determination.
(6) We vacate the district court’s finding of willful infringement and remand for
reconsideration in light of our en banc decision in Knorr-Bremse.
(7) On plaintiffs’ cross-appeal, we affirm the ruling of the district court declining
to hold KS vicariously liable to plaintiffs under an alter-ego theory of induced
infringement.
COSTS
Each party shall bear its own costs.
AFFIRMED-IN-PART, VACATED-IN-PART, and REMANDED

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United States Court of Appeals for the Federal Circuit
99-1584, 00-1005
INSITUFORM TECHNOLOGIES, INC.,
INSITUFORM (NETHERLANDS) B.V.,
and INSITUFORM GULF SOUTH, INC.,
Plaintiffs-Cross Appellants,
v.
CAT CONTRACTING, INC.,
FIRSTLINER U.S.A., INC., and GIULIO CATALLO,
Defendants-Appellants,
and
MICHIGAN SEWER CONSTRUCTION COMPANY,
Defendant-Appellant,
and
KANAL SANIERUNG HANS MUELLER GmbH & CO. KG,
Defendant-Appellee.
Before MAYER, Chief Judge, MICHEL, and SCHALL, Circuit Judges.
PER CURIAM
O R D E R
The Supreme Court vacated the judgment in this case, Insituform Technologies,
Inc. v. CAT Contracting, Inc., 10 Fed. Appx. 871 (Fed. Cir. 2001) (non-precedential
decision), and remanded the case to this court on June 3, 2002, “for further
consideration in light of Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co.”
Insituform Techs., Inc. v. CAT Contracting, Inc., 535 U.S. 1108 (2002). Following the

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Supreme Court’s decision in Festo, this court issued a second en banc Festo decision.
See Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 344 F.3d 1359 (Fed. Cir.
2003). Following that decision, we requested that the parties submit briefs addressing
the consequences of both the Supreme Court’s decision in Festo and this court’s
subsequent en banc decision for this case.
After considering the parties’ submissions, we vacated the judgment of the
United States District Court for the Southern District of Texas awarding damages to
plaintiffs for infringement of United States Patent No. 4,366,012, Insituform Techs., Inc.
v. Cat Contracting, Inc., No. H-90-1690, slip op. (S.D. Tex. Aug. 31, 1999), and
remanded the case for further proceedings in light of the Festo cases. Insituform
Techs., Inc. v. CAT Contracting, Inc., 87 Fed. Appx. 180 (Fed. Cir. 2004)
(nonprecedential order). After considering the subsequent Petition for Rehearing and
Response, we conclude that the case may be decided on the merits based on the
record now before us.
Accordingly,
IT IS ORDERED THAT
(1) The Petition for Rehearing is granted.
(2) The Order vacating the district court’s judgment and remanding for further
proceedings is hereby withdrawn and the decision attached to this Order is substituted
in its place.
FOR THE COURT
_____________________ _________________________
Date Jan Horbaly
Clerk

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