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Mass Engineered Design, Inc. v. Planar Systems, Inc.

United States District Court, D. Oregon

September 11, 2018

MASS ENGINEERED DESIGN, INC., Plaintiff,
v.
PLANAR SYSTEMS, INC., Defendant.

          John J. Edmonds, Stephen F. Schlather, Shea N. Palavan, and Brandon G. Moore, Collins, Edmonds, Schlather & Tower, PLLC, John Mansfield, Harris Bricken, Of Attorneys for Plaintiff.

          Andrew T. Oliver, Amin, Turocy & Watson, LLP, Jacob S. Gill, Stoll Stoll Berne Lokting & Shlachter, PC, Jenny W. Chen, Taiwan (R.O.C.). Of Attorneys for Defendant.

          OPINION AND ORDER

          Michael H. Simon, United States District Judge

         Before the Court are two issues relating to the jury's verdict in favor of Plaintiff, Mass. Engineered Design, Inc. (“Mass”), and against Defendant, Planar Systems, Inc. (“Planar”). The first is Plaintiff's motion to set a prejudgment interest rate relating to the jury's award of money damages. The second is Plaintiff's request for post-verdict royalty.

         A. Prejudgment Interest

         The Supreme Court has held “that prejudgment interest should be awarded under § 284 absent some justification for withholding such an award.” Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983); see also DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1263 (Fed. Cir. 2014) (“Prejudgment interest should ordinarily be awarded absent some justification for withholding such an award.”). An award of prejudgment interest is necessary to ensure that a patent owner is placed in as good a position as he would have been in had the infringer entered into a reasonable royalty agreement. General Motors, 461 U.S. at 655-56 (“An award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the forgone use of the money between the time of infringement and the date of the judgment.”).

         Mass requests that prejudgment interest be set at six percent. Mass. asserts that it had to borrow money during the relevant time period as a result of Planar's infringement and failure to pay royalties. Mass. further asserts that it paid rates ranging from five and one-half percent to nearly eight percent. Thus, Mass. argues, a rate of six percent is a reasonable rate to compensate Mass. and put it in the position it would have been in had Planar entered into a reasonable royalty agreement. Mass. submits the declaration of Jerry Moscovitch as evidence of these loans and their interest rates. In the alternative, Mass. argues that the prime rate should be used, because the Treasury bill rate during the relevant time period was at historically low rates and did not represent the realistic cost of borrowing.

         Planar objects to the admission of Mr. Moscovitch's declaration because the information it contains was not timely disclosed during fact discovery. Planar also argues that the Treasury bill rate is standard in the Ninth Circuit and should be used in this case, regardless of how low or high it was during the relevant time period. Planar further argues that Mass. should not be awarded prejudgment interest for three years because Mass. caused undue delay in waiting two years to file the litigation after dismissing the first lawsuit against Planar, and then by filing the case in the Eastern District of Texas instead of Oregon.

         Planar's objection to Mr. Moscovitch's declaration is overruled. The Court stated during the telephone conference with parties relating to the issue of prejudgment interest that the Court was interested in the actual cost of borrowing during the relevant time period. Mass. responded by submitting evidence relating to its actual cost of borrowing. This evidence is timely.

         Planar's request that Mass. not be awarded prejudgment interest for three years also is rejected. Prejudgment interest may be limited or denied “where the patent owner has been responsible for undue delay in prosecuting the lawsuit.” General Motors, 461 U.S. at 657. Mass. explains that its two-year delay in filing a new lawsuit against Planar was the result of Mass. defending several declaratory judgment actions that had been filed throughout the United States. Mass. had to use attorneys charging by the hour, after Mass's contingency-fee attorney withdrew due to illness. One month after the last of those actions was settled, and after Mass. obtained new contingency-fee counsel, Mass. filed this action. The Court does not find undue delay on the part of Mass. The Court also does not find undue delay on the part of Mass. based on the original filing of this action in the Eastern District of Texas. That court denied Planar's motion based on improper venue, and only granted the motion to transfer venue based on convenience. The delay in transferring was because that court decided to retain jurisdiction until after claim construction.

         In considering the appropriate interest rate for prejudgment interest, courts have broad discretion. Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991) (citation omitted) (“A trial court is afforded wide latitude in the selection of interest rates, and may award interest at or above the prime rate.”). The Ninth Circuit, in a case involving a collision at sea, noted that the Treasury bill rate is appropriate for fixing the prejudgment interest rate “in cases such as this . . . unless the trial judge finds, on substantial evidence, that the equities of the particular case require a different rate.” Western Pac. Fisheries, Inc. v. S.S. President Grant, 730 F.2d 1280, 1289 (9th Cir. 1984). In patent cases arising in California, however, district courts routinely apply the California state statutory interest rate of seven percent. See, e.g., Columbia Sportswear N. Am., Inc. v. Seirus Innovative Accessories, Inc., 2018 WL 1805102, at *2 (S.D. Cal. Apr. 17, 2018) (“Here, the Court finds that California's statutory rate of seven percent is appropriate to fully compensate Columbia and to prevent Seirus from being unjustly enriched by its infringement of the Design Patent.”); Presidio Components Inc. v. Am. Tech. Ceramics Corp., 723 F.Supp.2d 1284, 1330 (S.D. Cal. 2010), aff'd in part, vacated in part, 702 F.3d 1351 (Fed. Cir. 2012) (“California courts have found that a simple interest rate of 7% is usually appropriate to fully compensate the plaintiff for the infringement.”).

         Courts also consider whether the patent holder borrowed money at a rate other than the Treasury rate. See, e.g., Kowalski v. Mommy Gina Tuna Res., 2009 WL 855976, at *6 (D. Haw. Mar. 30, 2009) (considering whether it was the patent holder or an unrelated entity who actually borrowed the money and thus paid the higher interest rate); Mars, Inc. v. Conlux USA Corp., 818 F.Supp. 707, 721 (D. Del. 1993) (noting that where the plaintiff is a net borrower, “the cost of borrowing money-and not the rate of return on investing money-provides a better measure of the harm [the plaintiff] suffered as a result of the loss of the use of money over time”); Sun Studs, Inc. v. ATA Equip. Leasing, Inc., 1990 WL 293886, at *3 (D. Or. Sept. 19, 1990) (“I awarded plaintiff prejudgment interest on its patent claims at the rate of interest actually paid by plaintiff. Plaintiff is entitled to be compensated for the actual amount of interest it paid.” (emphasis in original)); cf. Uniroyal, 939 F.2d at 1545 (“[I]t is not necessary that a patentee demonstrate that it borrowed at the prime rate in order to be entitled to prejudgment interest at that rate.”). Thus, the Treasury rate is not necessarily the de facto rate, even for courts in the Ninth Circuit.

         Mr. Moscovitch states in his declaration that he created a separate entity, Sidlin Realty, Inc. (“Sidlin”), which he owned during the relevant time period. Sidlin held title to the building and real estate of Mass's headquarters. Because of Mass's legal and financial situation, including in part Planar's infringement and failure timely to enter into a royalty agreement, Mass. could not obtain any loan. Sidlin thus borrowed money from 2007 through 2015, secured by the building and land that was Mass's headquarters. Those loans were passed through to Mass. to pay operating expenses. At first Sidlin did not charge Mass. any extra interest, but within one year Sidlin began charging Mass. one percent additional interest.

         Sidlin's loans from 2007 through early 2015 were at fluctuating interest rates, but all were above 6 percent. For example, the rate paid by Sidlin in 2009 was 6.625 percent and the rate in 2015 was 6.85 percent. Because Sidlin was charging Mass. an extra one percent, Mass. was paying 7.625 percent and 7.85 percent in those years respectively. In March 2015 Sidlin borrowed funds at 4.5 percent and paid off all earlier loans. In June 2015, Sidlin and Mass. merged, with Mass. as the remaining entity. On July 6, 2015, Mass. sold the ...


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