Opinion
Civ. File No. 02-1138 (PAM/RLE).
June 18, 2004
MEMORANDUM AND ORDER
This matter is before the Court on two Motions for Summary Judgment filed by Defendant Jiffy Lube International, Inc. ("Jiffy Lube"); a Motion for Summary Judgment filed by Defendants Regional Car Wash Distributors, Inc., Walt Gislason, and Mike's In and Out 10 Minute Oil Change, LLC; three Motions for Summary Judgment or Partial Summary Judgment filed by Plaintiffs; and a Motion to Supplement the Record and a Motion to Strike, both filed by Plaintiffs. Defendants Indy Lube, Inc., Fresh Start, Inc., Lubrication Technologies, Inc., Perfect "10" Quick Lube, Inc., Regional Car Wash Distributors, Inc., Walt Gislason, and Mike's In and Out 10 Minute Oil Change, LLC, join Jiffy Lube's Motion for Summary Judgment on claim preclusion and damages.
BACKGROUND
Plaintiff Transclean Corporation ("Transclean") is the exclusive licensee of the socalled Viken patent, U.S. Patent 5,318,080. This patent teaches a machine that dispenses automatic transmission fluid. In 1997, Transclean brought a patent infringement lawsuit in this District against the manufacturer of a competing machine, the so-called "T-Tech machine." Magistrate Judge Raymond L. Erickson eventually tried that case and the jury found for Transclean, awarding damages of $1,874,500. The Federal Circuit affirmed the verdict and the damages award.Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364 (Fed. Cir. 2002) (hereinafter, "Transclean I").
The jury actually awarded Transclean approximately $5.5 million in damages, but Magistrate Judge Erickson reversed a portion of the award and entered a remittitur on a portion of the award.
Shortly after the Federal Circuit's decision, Transclean and the two patent holders instituted this action against service stations and quick-lube centers who use the T-Tech machine.
DISCUSSION
A. Plaintiffs' Motion for Default Judgment as to Defendant Ultra Lube, Inc.
As stated at the hearing on the various Motions, the Court will deny without prejudice Plaintiffs' motion for a default against Defendant Ultra Lube, Inc. The owner of Ultra Lube communicated with both the Court and Plaintiffs prior to the hearing, and thus default is inappropriate at this time.
B. Jiffy Lube's Motion on claim preclusion and damages and Plaintiffs' Motion on Jiffy Lube's affirmative defenses of collateral estoppel and res judicata
In response to Jiffy Lube's Motion, Plaintiffs submitted an opposition brief that included arguments in support of Plaintiffs' Motion for Partial Summary Judgment on Jiffy Lube's affirmative defenses of collateral estoppel and res judicata. Because Plaintiffs' Motion is in large part a response to Jiffy Lube's claim and issue preclusion arguments, the Court will discuss the two Motions together.
1. Claim Preclusion
Jiffy Lube contends that Transclean is precluded from bringing infringement claims against Jiffy Lube under the principles of claim preclusion. According to Jiffy Lube, because Transclean litigated the infringement issue with respect to the T-Tech machines to a final judgment, and because Transclean knew during the previous litigation that Jiffy Lube had purchased and was using T-Tech machines, Transclean is precluded from trying to get another bite at the apple by bringing infringement claims against Jiffy Lube.
Claim preclusion is a doctrine that "treats a judgment, once rendered, as the full measure of relief to be accorded between the same parties on the same `claim' or `cause of action.'" 18 Charles A. Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice Procedure § 4402 (2d ed. 2002) (quoting Kaspar Wire Works, Inc. v. Leco Engr'g Mach., Inc., 575 F.2d 530, 535-36 (5th Cir. 1978)). "When a plaintiff obtains a judgment in his favor, his claim `merges' in the judgment; he may seek no further relief on that claim in a separate action." Id. As the Supreme Court has stated, a judgment "puts an end to the cause of action, which cannot again be brought into litigation between the parties upon any ground whatever, absent fraud or some other factor invalidating the judgment." Comm'r v. Sunnen, 333 U.S. 591, 597 (1948).
The "general rule" of claim preclusion is
when a court of competent jurisdiction has entered a final judgment on the merits of a cause of action, the parties to the suit and their privies are thereafter bound "not only to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose."Id. (quoting Cromwell v. County of Sac, 94 U.S. (4 Otto) 351, 352 (1876)). Thus, a Court evaluating whether claim preclusion should bar a party from asserting a claim must examine: first, whether there has been a final judgment on the merits of a cause of action; second, whether the court that issued the judgment was "of competent jurisdiction;" third, whether the person seeking to preclude a claim was a party or a privy to a party in the first litigation; and fourth, whether the claim sought to be precluded either was actually litigated or is a claim that "might have been offered" in the first litigation.
There is no dispute that the Transclean I litigation ended in a final judgment on the merits, and that the court was properly exercising jurisdiction in that matter. Nor does Transclean dispute that Jiffy Lube is in privity with the defendant in the prior litigation. (Pls.' Opp'n Mem. at 4 ("[Jiffy Lube and Bridgewood] are in privity because Bridgewood was a manufacturer of the infringing product and Jiffy Lube is a user of the same infringing product.").) Transclean also does not dispute that its claims against Jiffy Lube were claims that could have been brought in the previous litigation. Instead, Transclean argues that preclusion is inappropriate here because Transclean has not collected on the prior judgment and thus has not been paid in full for its claims.
According to Transclean, the judgment in the first litigation was not complete, and thus does not bar Transclean's claims against Jiffy Lube. Transclean argues that the judgment in the first case is not complete because Transclean has not collected from Bridgewood the damages Transclean was awarded by the jury. In support of this argument, Transclean cites the Supreme Court case of Birdsell v. Shaliol, 112 U.S. 485 (1884). TheBirdsell Court noted that a patentee will be precluded from raising claims against both a manufacturer and a user of an alleged infringing machine "only when actual damages have been paid" to the patentee. Id. at 488-89. Transclean also cites a number of cases holding that a patentee can sue both a manufacturer and a user of an alleged infringing machine.
The issue presented here is not whether Transclean may sue both the manufacturer of the T-Tech and the users of that machine. There is no doubt that Transclean has claims against both the manufacturer and users. The issue here is whether, having failed to bring claims in the first litigation against users of which it was aware, Transclean should now be barred from raising those claims.
Birdsell does not stand for the proposition that Transclean advances. At most, Birdsell stands for the proposition that, if a patentee does not receive adequate compensation for an infringing machine from the manufacturer of that machine, the patentee can seek such compensation from the users of that machine. Here, Transclean does not contend that the jury award of more than $1.8 million was not adequate compensation for the T-Tech's alleged infringement of the Viken patent. Rather, Transclean claims that it did not collect this amount from Bridgewood and so should be allowed to attempt to collect from Jiffy Lube and from other users. However, Transclean does not explain why it was unable to collect on the judgment against Bridgewood, nor does Transclean offer any description of the efforts it made to collect on the judgment. If Transclean sat on its hands and failed to collect on a valid money judgment, Transclean cannot now claim to be prejudiced by that failure. Transclean's failure does not allow Transclean to avoid the application of claim preclusion. "[A] plaintiff who chooses to bring two separate actions against two tortfeasors who are jointly responsible for the same injury runs the risk that the court will find the parties sufficiently related that the second action is barred by claim preclusion." Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 58 F.3d 616, 620 (Fed. Cir. 1995). Transclean's claims against Jiffy Lube, and against all users of the T-Tech of which Transclean was or should have been aware during the pendency of the first litigation, are precluded as a matter of law.
Several Defendants filed papers purporting to join in Jiffy Lube's Motion. However, in order to take advantage of claim preclusion, these Defendants must show that Transclean was or should have been aware of their purchase or use of the T-Tech machine during the pendency of the previous litigation. Thus, summary judgment is not appropriate as to any other Defendant until those Defendants come forward with evidence that Transclean knew or should have known about them during the Transclean I litigation, absent a concession by Transclean that it could have brought claims against these Defendants in the prior litigation.
2. Damages
It is not necessary for the Court to reach Jiffy Lube's alternative argument as to Plaintiffs' claims against Jiffy Lube. However, because some of the remaining Defendants may not be entitled to claim preclusion, it is appropriate to discuss Jiffy Lube's alternative argument, because that argument may impact Plaintiffs' claims against the remaining Defendants.
Jiffy Lube contends that Transclean should be barred from relitigating the damage award it received in the first litigation. In the previous litigation, the court determined that Transclean's damages were approximately $550 per infringing machine. In this litigation, Transclean seeks damages of approximately $10,000 per infringing machine. According to Jiffy Lube, Federal Circuit precedent prohibits the use-based royalty that Transclean seeks, and in any event, Transclean's new damages theory should be barred by issue preclusion.
Jiffy Lube argues that the Federal Circuit has held that a plaintiff in a patent infringement case cannot ask for different damages from different infringers. Stickle v. Heublein, 716 F.2d 1550, 1561-62 (Fed. Cir. 1983). Jiffy Lube contends thatStickle stands for the proposition that, absent evidence of a practice of use-based royalties in the industry, a patentee cannot secure damages based on a use-based royalty.
This portion of Jiffy Lube's Motion is the subject of Transclean's Motion to Supplement the Record. In the Motion to Supplement, Transclean contends that only days before Transclean's response to Jiffy Lube's Motion was due, Jiffy Lube disclosed evidence that it pays use-based royalties for some machines it uses. This evidence, Transclean claims, makes Stickle inapposite. Jiffy Lube does not object to supplementing the record with the evidence, but does object to Transclean's attempt to paint Jiffy Lube as somehow unethical in its disclosure of the evidence.
Ultimately, it is of no moment whether the new evidence shows a practice of use-based royalties in the quick-lube business or not. If claim preclusion does not bar all of Transclean's claims, then issue preclusion bars Transclean from pursuing different damages in this litigation than it claimed in the previous litigation. The final judgment in the prior litigation was damages of approximately $550 per infringing T-Tech machine. Transclean did not challenge on appeal either the amount of this damage award or the manner in which damages were calculated. The final award itself was a significant remittitur of the jury's damage award. Moreover, the Federal Circuit characterized the damage award as full compensation for Bridgewood's infringing sales of the T-Tech machine. Transclean I, 290 F.3d at 1377.
As noted above, the principles of preclusion operate to prevent a party from raising in a second litigation either an issue that was finally adjudicated in a prior litigation or an issue that could have been raised in the prior litigation. The issue of use-based royalty is certainly a theory of damages that could have been raised in the previous litigation. Transclean chose not to raise this damages theory, and must suffer the consequences of its choice. Even if Transclean's claims against Jiffy Lube are not precluded, Transclean's use-based royalty theory of damages is precluded.
C. Jiffy Lube's Motion for Summary Judgment of Noninfringement and Plaintiffs' Motion to Strike
Because Plaintiffs' claims against Jiffy Lube are precluded as a matter of law, Jiffy Lube's Motion on the issue of noninfringement is moot. Plaintiffs have moved to strike this Motion, and while the Motion to Strike is likewise moot, the situation giving rise to the Motion to Strike is worthy of comment.
No other Defendant joined Jiffy Lube's Motion on noninfringement.
Plaintiffs filed a Motion to Strike the Motion for Summary Judgment as untimely under the scheduling order for this matter. The scheduling order provided that dispositive motions would be noticed, filed, and heard on or before April 1, 2004. The original hearing date for the pending Motions was April 1. Because of the Court's schedule and the parties' schedules, the hearing was moved several times and eventually was scheduled for more than two months after the dispositive motion cut-off. After the hearing date was moved, Jiffy Lube filed the instant Motion on the issue of noninfringement. According to Jiffy Lube, the Motion is not untimely because it was filed within the time required by Local Rule 7.1(b), which sets the briefing schedule for dispositive motions based on the hearing date for the motion.
It appears to the Court that the confusion with respect to the timing of this Motion arises out of the changes to the Local Rules brought about by Electronic Case Filing. Although the Local Rules do not purport to change scheduling orders in any given case, the Local Rules drastically changed the rules for the filing of briefs. The previous procedure was that all briefs on a motion were filed together, and only after briefing was complete would the moving party seek a hearing date from the Court. The new Local Rules provide that the moving party first secures a hearing date, and then the briefing schedule flows from that hearing date.
In this Court, at least, the new Local Rules do not alter the Court's scheduling orders. If a scheduling order requires dispositive motions to be noticed, filed, and heard by a certain date, the parties should not assume, if the hearing is ultimately moved to a date months after the dispositive motion cut-off, that any new motions may be filed after the dispositive motion cut-off. A scheduling order means what it says, and dispositive motions must be, at the very least, fully briefed by the date required in the scheduling order. The rescheduling of hearings does not toll the dispositive motion deadline absent specific order of the Court to that effect.
D. Motion of Regional Car Wash Distributors, et al.
Defendants Regional Car Wash Distributors, Inc., Walter Gislason, and Mike's In and Out 10 Minute Oil Change, LLC, move for summary judgment on the same claim preclusion and issue preclusion grounds raised in Jiffy Lube's Motion. The moving brief recites Jiffy Lube's arguments of claim preclusion and issue preclusion on damages, but does not offer any additional evidence that Transclean knew or should have known about T-Tech purchases by these Defendants. Rather, the brief states generally that Transclean "introduced evidence at trial [inTransclean I] concerning the purchase of T-Tech machines by Jiffy Lube and other customers." (Defs.' Supp. Mem at 9.) Thus, as noted above, until Defendants come forward with evidence that Transclean knew or should have known about their use of the T-Tech machines, summary judgment on claim preclusion is not appropriate as to these Defendants.
However, as in the opposition to Jiffy Lube's Motion, Transclean concedes that these Defendants and Bridgewood are in privity. (Pls.' Opp'n Mem. at 6 n. 4.)
There is one issue in this Motion that is not presented in Jiffy Lube's Motion. That issue is whether Defendant Walter Gislason can be liable for infringement of the T-Tech machines at all, whether or not Transclean's claims against him are precluded. Defendant Gislason is a 50% shareholder and corporate officer of Defendant Mike's In and Out 10 Minute Oil Change, LLC ("Mike's"). According to Transclean, Gislason is liable for inducing Mike's willful infringement of Transclean's patent. Transclean contends that because Mike's had notice in July 2002 that its use of the T-Tech machine infringed Transclean's patents, and because Mike's did not stop using the T-Tech machine, Mike's infringement is willful. Because Gislason allegedly knew about the notice and did nothing to stop Mike's continuing use of the infringing machine, Transclean contends that Gislason can be personally liable for Mike's infringement.
Transclean also claimed in the Amended Complaint that Gislason was personally liable for the infringement by Regional Car Wash Distributors, Inc. However, Transclean does not mention this claim in its opposition to the instant Motion and thus apparently concedes that this claim should be dismissed.
As an initial matter, if Transclean's infringement claim against Mike's is barred by claim preclusion, then its claim against Gislason fails as well, because there is no liability for inducing infringement unless there is an actual infringement by the party alleged to have been induced. See Young Dental Mfg. Co. v. Q3 Special Prods., Inc., 891 F. Supp. 1345, 1348 (E.D. Mo. 1995). However, if Transclean's claim against Mike's is not barred, then Gislason can be liable for inducing Mike's alleged infringement if Gislason intended to cause the infringement or encouraged Mike's to infringe. Maxwell v. K Mart Corp., 851 F. Supp. 1343, 1349 ( D. Minn. 1994) (Doty, J.). Although the citations to the record are sparse, the evidence shows that questions of fact exist as to whether Gislason was aware of Transclean's lawsuit, the Viken patent, and that Transclean had secured a judgment of infringement against Bridgewood. Thus, questions of fact remain as to whether Gislason should have but did not stop Mike's from using the alleged infringing machines, or whether he should have sought the advice of counsel on the allegations in the Amended Complaint. The evidence in the record, taken in the light most favorable to Transclean, could establish that Gislason possessed the requisite intent to induce Mike's to infringe the patent. If Transclean's claim against Mike's survives, then its claim against Gislason for inducing Mike's infringement likewise survives.
E. Plaintiffs' Motion for Partial Summary Judgment on the affirmative defenses of waiver, estoppel, acquiescence, laches, statute of limitations, etc.
Only Jiffy Lube responded to this Motion. However, because Transclean's claims against Jiffy Lube are barred by claim preclusion, this Motion is moot as to Jiffy Lube. The Motion will be granted as to the other Defendants named in the Motion.
F. Plaintiffs' Motion on Issue Preclusion and the Affirmative Defense of Obviousness
In this Motion, Plaintiffs contend that all remaining Defendants are bound by the judgment of infringement rendered inTransclean I and should be precluded from claiming noninfringement. In technical terms, while Jiffy Lube seeks defensive non-mutual claim preclusion, Plaintiffs seek non-mutual offensive issue preclusion. As the Court has held, Transclean is precluded from raising infringement claims against Jiffy Lube and perhaps against other users of the T-Tech machine. However, Transclean has not established that these users are bound by the previous finding of infringement. In particular, because the determination of infringement inTransclean I was in large part a sanction for abuse of discovery against Bridgewood, the issue of infringement was not actually litigated in the prior litigation, as is required to apply the infringement judgment against non-parties.
The parties do not dispute the necessary elements for the application of issue preclusion. Issue preclusion will apply to bar a party or its privy from litigating issues that have previously been litigated if: (1) the issue is identical with an issue in the prior proceeding; (2) the issue was actually litigated; (3) the determination on the issue was necessary to the judgment; and (4) the party defending against preclusion had a full and fair opportunity to litigate that issue. See Banner v. United States, 238 F.3d 1348, 1354 (Fed. Cir. 2001).
There is no dispute that the infringement issues in the instant matter are identical to the infringement issues in theTransclean I litigation. It is interesting to note, however, that while in the context of this Motion, Transclean contends that the issues are identical, in the context of Jiffy Lube's Motion, Transclean insists that the issues are different.
The dispute between the parties on this Motion is whether the issue of infringement was "actually litigated" within the meaning of the issue preclusion doctrine. In the previous litigation, Transclean contended that the T-Tech machine infringed claims 1, 2, 3, 4, 12, and 13 of the Viken patent. These same claims are at issue in this litigation. In Transclean I, Magistrate Judge Erickson granted Transclean summary judgment of infringement as to claims 1, 2, 3, 4, and 12, and the jury ultimately found that Bridgewood infringed claim 13. Thus, at least at first glance, it appears that the same infringement issues in dispute in the instant matter were fully litigated in the prior litigation. However, Magistrate Judge Erickson's determination that Bridgewood infringed five claims of the patent rested on his decision to preclude Bridgewood from arguing noninfringement as a sanction for Bridgewood's failure to answer an interrogatory. Transclean I, 290 F.3d at 1369. Thus, the question remains whether a judgment of infringement based on a discovery sanction constitutes an actual litigation of infringement sufficient to invoke issue preclusion.
In this portion of its argument, Transclean accuses Jiffy Lube of "blatant mischaracterization" of the record by stating that the summary judgment of infringement was a discovery sanction. (Pls.' Supp. Mem. at 12.) Transclean's inflammatory and baseless accusations are not well-taken. Indeed, the Federal Circuit itself recognized that the grant of summary judgment inTransclean I was a discovery sanction. See Transclean I, 290 F.3d at 1373 ("We conclude that the district court acted within its discretion when it granted summary judgment of infringement as a discovery sanction."). Transclean would be well-advised to refrain from accusations against opposing counsel that have no basis in law or fact.
Transclean also argues that, because the jury determined that Bridgewood infringed claim 13 of the patent, and because claim 13 is a dependent claim that incorporates claim 1 of the patent, the jury determined that Bridgewood infringed claim 1 of the patent. Claim 1 is the only independent claim in the patent. However, the jury in Transclean I was instructed that Bridgewood had infringed claim 1, and only determined whether Bridgewood infringed the single element of claim 13 that was not also found in claim 1. Thus, the argument that a finding of infringement of claim 13 necessarily means that the jury found infringement of claim 1 is disingenuous at best. Moreover, the Federal Circuit vacated the jury's verdict of infringement of claim 13, leaving the only infringement findings those based on the discovery sanction imposed by Magistrate Judge Erickson.
Transclean has cited no case, and indeed it is unlikely that there is such a case, holding that a judgment based solely on a discovery sanction constitutes "actual litigation" for the purposes of issue preclusion. Although Transclean may have had a full opportunity to present evidence on its claims of infringement, there is no doubt that Bridgewood did not. Thus, Bridgewood's privies, Defendants here, cannot be precluded from relitigating the infringement issue. Transclean's issue preclusion argument fails.
CONCLUSION
Jiffy Lube has established that claim preclusion bars Plaintiffs' claims against Jiffy Lube and against other Defendants of which Plaintiffs knew or should have known during the pendency of the previous litigation. Further, Jiffy Lube has established that, if any claims of infringement remain, Plaintiffs are limited to the per-machine damages established in the previous litigation.
Accordingly, IT IS HEREBY ORDERED that:
1. Plaintiffs' Motion for Default Judgment as to Defendant Ultra Lube (Clerk Doc. No. 133) is DENIED without prejudice;
2. Defendant Jiffy Lube's Motion for Summary Judgment on claim preclusion or, in the alternative, for partial summary judgment on damages (Clerk Doc. Nos. 144, 154) is GRANTED;
a. Plaintiffs' Motion to Supplement Record as to this Motion (Clerk Doc. No. 173) is GRANTED;
3. Defendant Jiffy Lube's Motion for Summary Judgment of non-infringement (Clerk Doc. No. 191) is DENIED as moot;
a. Plaintiffs' Motion to Strike this Motion (Clerk Doc. No. 198) is DENIED;
4. Defendant Regional Car Wash Distributors, et al.'s Motion for Summary Judgment (Clerk Doc. No. 164) is DENIED without prejudice;
5. Plaintiffs' Motion for Summary Judgment on Jiffy Lube's affirmative defenses of collateral estoppel and res judicata (Clerk Doc. No. 204) is DENIED;
6. Plaintiffs' Motion for Partial Summary Judgment on the affirmative defenses of waiver, estoppel, acquiescence, laches, statute of limitations (Clerk Doc. No. 177) is DENIED as moot as to Defendant Jiffy Lube and GRANTED as to other Defendants;
7. Plaintiffs' Motion for Summary Judgment on issue preclusion and the affirmative defense of obviousness (Clerk Doc. No. 177) is DENIED.