United States District Court, D. Colorado
ORDER ON POST-TRIAL MOTIONS
William J. Martínez United States District Judge
Plaintiff and Counterclaim Defendant XY, LLC (“XY”) brought this case against Defendant and Counterclaim Plaintiff Trans Ova Genetics, LC (“Trans Ova”) arising out of disputes over a License Agreement which had permitted Trans Ova to use XY’s patented technology. (ECF No. 301.) The Court held a three-week jury trial commencing on January 25, 2016, and the jury rendered a verdict on February 12, 2016. (ECF Nos. 419, 461.)
The jury found that XY breached the License Agreement (the “Agreement”) and the duty of good faith and fair dealing because it had not proven it had the right to terminate the Agreement in November 2007, and awarded Trans Ova $528, 000 in damages for that breach. (ECF No. 461 at 1-2.) The jury also found that Trans Ova had committed a material, uncured breach of the Agreement prior to April 16, 2009, such that the Agreement terminated on that date, and awarded XY $1, 481, 000 in damages for that breach. (Id.) The jury found that Trans Ova had infringed all claims of the ten patents in suit, that Trans Ova’s infringement was willful, and that Trans Ova had not proven that any of the patent claims was invalid or unenforceable. (Id. at 3-9.) Consequently, the jury awarded XY $4, 585, 000 in patent infringement damages. (Id. at 9.) The jury also found that XY had unclean hands, barring claims for unjust enrichment and injunctive relief. (Id.) Finally, the jury rejected Trans Ova’s recoupment claim under the antitrust laws, finding that Trans Ova had not proven that the semen sorting technology market was a relevant market or that XY had a specific intent to monopolize that market. (Id. at 10-12.) The Court has yet to enter Final Judgment.
Before the Court are eight post-trial motions:
(1) Trans Ova’s Renewed Motion for Judgment as a Matter of Law Under Rule 50(b) or, in the Alternative, Motion for a New Trial Under Rule 59(a) or, in the Alternative, Motion to Alter or Amend a Judgment Under Rule 59(e) (“Breach Motion”) (ECF No. 473);
(2) Trans Ova’s Motion to Alter or Amend a Judgment Under Rule 59(e) (“Willful Infringement Motion”) (ECF No. 477);
(3) Trans Ova’s Motion for a New Trial Under Rule 59(a) (“Relevant Market Motion”) (ECF No. 479);
(4) Trans Ova’s Motion for a New Trial Under Rule 59(a) on the Issue of Invalidity (“Invalidity Motion”) (ECF No. 480) (together with the Relevant Market Motion, “New Trial Motions”);
(5) XY’s Motion to Declare this Case Exceptional Pursuant to 35 U.S.C. § 285 and to Award Attorneys’ Fees (“Fee Motion”) (ECF No. 467);
(6) XY’s Motion for Award of Enhanced Damages for Patent Infringement Under 35 U.S.C. § 284 (“Damages Motion”) (ECF No. 468);
(7) XY’s Motion to Set an Ongoing Royalty Rate (“Royalty Motion”) (ECF No. 471); and
(8) XY’s Motion for Prejudgment Interest (“Interest Motion”) (ECF No. 472).
For the reasons set forth below, the Willful Infringement Motion is granted, the Royalty Motion and the Interest Motion are granted in part, and the remaining motions are denied.
I. TRANS OVA’S BREACH MOTION
Trans Ova’s Breach Motion seeks to reconcile the two breaches of contract found in the jury’s Verdict with a ruling that XY’s breach rendered Trans Ova’s breach legally inoperative. (ECF No. 473.) Trans Ova seeks judgment as a matter of law under Federal Rule of Civil Procedure 50(b), or in the alternative, an amended judgment or new trial under Rule 59. (Id.)
A. Legal Standards
In evaluating a motion brought under Rule 50(b), the Court must examine all the evidence admitted at trial, construe that evidence and the inferences from it in the light most favorable to the non-moving party, and refrain from making credibility determinations and weighing the evidence. See Tyler v. RE/MAX Mountain States, 232 F.3d 808, 812 (10th Cir. 2000). Judgment as a matter of law is appropriate “only if the evidence points but one way and is susceptible to no reasonable inferences which may support the opposing party’s position.” Finley v. United States, 82 F.3d 966, 968 (10th Cir. 1996).
Alternatively, Defendant seeks a new trial under Rule 59(a)(1), which permits the Court to order a new trial “for any of the reasons for which a new trial has heretofore been granted in an action at law in federal court.” Fed.R.Civ.P. 59(a)(1). Such a motion can be granted based on any error so long as “the district court concludes the ‘claimed error substantially and adversely’ affected the party’s rights.” Henning v. Union Pac. R.R. Co., 530 F.3d 1206, 1217 (10th Cir. 2008) (quoting Sanjuan v. IBP, Inc., 160 F.3d 1291, 1297 (10th Cir. 1998)).
Defendant’s next alternative request to amend the judgment is brought under Rule 59(e). “Rule [59(e)] was adopted to make clear that the district court possesses the power to rectify its own mistakes in the period immediately following the entry of judgment.” White v. N.H. Dep’t of Emp’t Sec., 455 U.S. 445, 450 (1982) (internal quotation marks omitted). Accordingly, the Court may amend the judgment in its discretion where there has been an intervening change in the controlling law, new evidence that was previously unavailable has come to light, or the Court sees a need to correct clear error or prevent manifest injustice. Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).
Where a jury’s verdict appears internally inconsistent, “[t]rial courts have a duty to attempt to reconcile juries’ answers to special verdict questions in order to avoid the need for retrials.” Palmer v. City of Monticello, 31 F.3d 1499, 1505 (10th Cir. 1994) (citing Gallick v. Baltimore & Ohio R.R. Co., 372 U.S. 108, 119 (1963)). The obligation to harmonize the jury’s findings if possible arises from the Seventh Amendment. See Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 364 (1962). “If there is any view of the case which makes the answers consistent, the case must be resolved in that way.” Palmer, 31 F.3d at 1505. The Court may find fatal inconsistency only where the verdict is completely irreconcilable. Diamond Shamrock Corp. v. Zinke & Trumbo, Ltd., 791 F.2d 1416, 1424-25 (10th Cir. 1986). “In determining whether there is inconsistency in the jury’s findings, the findings are to be construed in the light of the surrounding circumstances and in connection with the pleadings, instructions, and issues submitted.” Garcia v. Salt Lake Cnty., 768 F.2d 303, 309 n.7 (10th Cir. 1985) (citing 9 C. Wright & A. Miller, Fed. Prac. & Proc. Civ. § 2510 (1971)); see also A. Miller, Fed. Prac. & Proc. Civ. §§ 2504.1, 2510 (3d ed., updated Apr. 2015).
Trans Ova argues that the jury’s Verdict, which found breaches of contract by both parties and assessed damages against each party, was inconsistent because Trans Ova’s duties under the Agreement should have been deemed suspended after XY’s material breach. (ECF No. 473.) Trans Ova contends that, therefore, the jury’s finding that Trans Ova materially breached the Agreement is “legally inoperative, ” and that the Court should strike the jury’s award of contract damages to XY and hold that the Agreement did not terminate, but remained in effect. (Id.) Consequently, Trans Ova argues that the Court should strike the jury’s award of infringement damages to XY, because Trans Ova could not have infringed while under a valid license, and that Trans Ova’s contract damages should be increased due to the jury’s “erroneous assumption” that the Agreement terminated in 2009. (Id. at 10-13.)
These arguments are all premised on the preliminary question of whether XY’s breach was material. This is so because, as the jury was instructed, “a material breach by one party excuses performance by the other party to the contract.” (Jury Instructions (ECF Nos. 455, 456, 457) p. 30.) XY disputes whether its breach was material, and, as both parties recognize, the Verdict Form did not require the jury to make that determination. (See ECF No. 461 at 1, 2.)
Colorado courts have adopted the analysis in the Restatement (Second) of Contracts in determining whether a breach of contract is material. DBA Enters., Inc. v. Findlay, 923 P.2d 298, 301 (Colo.App. 1996) (citing Converse v. Zinke, 635 P.2d 882, 887 (Colo. 1981)). The Restatement provides the following factors to be considered in determining materiality of a breach:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Restatement (Second) of Contracts § 241 (1981). “Whether a breach is material is a question of fact. A material term goes to the root of the matter or essence of the contract.” Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59, 64 (Colo. 2005) (citations omitted).
Considering the evidence presented at trial about the Agreement at issue here, and the jury’s determination that XY breached the Agreement and its duty of good faith and fair dealing by attempting to terminate the Agreement, the Court finds that a reasonable jury must have concluded that XY’s breach was necessarily material. By improperly treating the Agreement as terminated, XY denied Trans Ova its legal authorization to continue to practice its patents, which the evidence showed was the essence of the Agreement from Trans Ova’s perspective. XY’s actions thus deprived Trans Ova of the benefit it reasonably expected from the Agreement, and as the jury found, thereby breached the duty of good faith and fair dealing. See Restatement (Second) of Contracts § 241(a), (e). (See also ECF No. 461 at 2.) The Court concludes that, under Colorado law, XY’s attempted termination of the Agreement constitutes a material breach.
Trans Ova argues that, if XY’s breach was material, Trans Ova’s duties under the Agreement were thereafter suspended, invalidating the jury’s finding that Trans Ova breached the Agreement. However, Trans Ova assumes that XY’s breach must have occurred first. The Verdict need not be read that way. In Question 1, the jury found that XY had failed to prove that it had the right to terminate the Agreement in November 2007, and in Question 5, the jury found that XY’s attempt to terminate the Agreement breached both the Agreement and the duty of good faith and fair dealing. (ECF No. 461 at 1-2.) In Question 2, the jury found that Trans Ova materially breached the Agreement “at any time before April 16, 2009, and failed to cure the breach by that date.” (Id. at 1.) A plain reading of the Verdict permits two readings: Trans Ova’s breach may have occurred either before or after XY’s breach, as long as it occurred prior to April 16, 2009.
The Court further notes that the jury was instructed as to the effect of a material breach on the other party’s contractual duties. (Jury Instructions p. 30.) The Court must presume that the jury followed its instructions. See Weeks v. Angelone, 528 U.S. 225, 234 (2000). Since the jury awarded XY damages for Trans Ova’s breach, the jury must have concluded that such breach was not excused by any prior material breach by XY. Accordingly, the Court concludes that the Verdict can be harmonized by finding ...