Transmatic, Inc. v. Gulton Industries, Inc.

180 F.3d 1343, 50 U.S.P.Q. 2d (BNA) 1591, 1999 U.S. App. LEXIS 8108, 1999 WL 247764

• Court: Court of Appeals for the Federal Circuit
• Decided: April 29, 1999
• Docket: 98-1385
• Status: Published

Opinions

Opinion for the court filed by Circuit Judge LOURIE. Dissenting opinion filed by Circuit Judge GAJARSA.

LOURIE, Circuit Judge.

In 1995, we vacated and remanded a decision on damages awarded by the United States District Court for the Eastern District of Michigan in a patent infringement case between Transmatic, Inc. and Gulton Industries, Inc. See Transmatic, Inc. v. Gulton Indus., Inc., 53 F.3d 1270 (Fed.Cir.1995). Gulton now appeals from the district court’s remand Judgment and Order that Guitón pay Transmatic, inter alia, interest from the initial judgment date to the remand judgment date at the prejudgment rate. See Transmatic, Inc. v. Gulton Indus., Inc., No. 90-CV-70987-DT (E.D.Mich. Apr. 9, 1998). Because we conclude that, under Sixth Circuit precedent, interest from the district court’s initial judgment date to the remand judgment date should have been awarded at the postjudgment interest rate, we vacate and remand.

BACKGROUND

In 1990, Transmatic filed suit against Guitón, asserting infringement of claim 1 of U.S. Patent 4,387,415. On cross-motions for summary judgment, the district court held that claim 1 was not proved to be invalid and was not literally infringed, but that factual issues existed regarding Transmatic’s doctrine of equivalents and willful infringement claims and Gulton’s inequitable conduct defense. See Transmatic Inc. v. Gulton Indus. Inc., 818 F.Supp. 1052, 27 USPQ2d 1561 (E.D.Mich.1993) (Transmatic I). The district court impaneled an advisory .jury to try these remaining issues. See Transmatic Inc. v. Gulton Indus. Inc., 849 F.Supp. 526, 529, 31 USPQ2d 1225, 1226-27 (E.D.Mich.1994) (Transmatic II). The district court thereafter granted Gulton’s motion for judgment as a matter of law on willful infringement. See id. The advisory jury found that the accused products infringed claim 1 under the doctrine of equivalents, that Transmatic did not engage in inequitable conduct, and that Guiton was liable for damages of approximately three million dollars in lost profits. See id. As required in all actions tried with an advisory jury (see Fed.R.Civ.P. 52(a)), the district court set forth factual findings and conclusions of law on the doctrine of equivalents issue and determined that the accused products infringed claim 1 under the doctrine. See Transmatic II, 849 F.Supp. at 530-32, 31 USPQ2d at 1227-29. The district court also set forth findings and conclusions of law on the willfulness and inequitable conduct issues when it denied both claims. See id. at 532-43, 849 F.Supp. 526, 31 USPQ2d at 1229-38. However, and most importantly for the history of this appeal, the district court failed to state any independent factual findings with regard to damages. Instead, the district court merely stated that it found the jury’s damages verdict reasonable and supported by the evidence. See id. at 543, 31 USPQ2d at 1238-39.

On appeal, we (1) reversed the district court’s summary judgment ruling of no literal infringement; (2) vacated its doctrine of equivalents finding as moot; (3) vacated and remanded its damage award; and (4) affirmed on the other issues raised. See Transmatic, Inc. v. Gulton Indus., Inc., 53 F.3d 1270, 35 USPQ2d 1035 (Fed.Cir.1995) (Transmatic III). We vacated and remanded the damage award because the court’s opinion failed to explain the award sufficiently to permit appellate review. See id. at 1275-76, 53 F.3d 1270, 35 USPQ2d at 1039-40.. Specifically, we held that the district court failed to comply with the requirement of Federal Rule of Civil Procedure 52(a) that it “find the facts specifically” when it summarily rejected Gulton’s challenge to Transmatic’s lost profits claim. See id. We stated that we presumed that the district court considered and rejected Gulton’s claim as either factually incorrect or unsupported by the evidence, but that the court’s opinion did not indicate its basis for doing so. See id. at 1276, 53 F.3d 1270, 35 USPQ2d at 1040. We accordingly vacated the district court’s damage award and remanded for the court to make the findings required by Rule 52(a) and to reconsider the amount of damages if appropriate. See id.

On remand, the district court issued “Supplemental Findings Regarding Damages” in which it explained its initial damages award in full detail. See Transmatic, Inc. v. Gulton Indus., Inc., No. 90-CV-70987-DT (E.D.Mich. Jan. 23, 1998) (Transmatic IV). Specifically, the district court explained why Transmatic’s damages award should include forced price cuts but not foregone price increases; why certain expenses were fixed, not variable, and thus not compensable; why damages did not include certain fixture sales; and why prejudgment interest should be awarded at the prime lending rate minus ten percent, compounded monthly. See id. at 8-19. Because the district court’s factual findings did not require it to recalculate the damages award, it did not modify its initial award. See id. at 20. The district court thereafter reentered judgment in favor of Transmatic in the amount of $3,023,773, which included prejudgment interest calculated to October 1993. It also awarded Transmatic $1,119,588 in prejudgment interest for the period from October 1993 to the date of the district court’s remand judgment,, and postjudgment interest at the rate prescribed in 28 U.S.C. § 1961 (1994) for the time thereafter. See Transmatic, Inc. v. Gulton Indus., Inc., 90-CV-70987-DT (E.D.Mich. Apr. 9, 1998) (Transmatic V).

Guitón now appeals from the district court’s decision to apply the prejudgment, rather than the postjudgment, interest rate from the date of the district court’s initial judgment to the date of the remand judgment (hereinafter “the interim period”). It does not challenge the quantum of damages awarded or the pre- and post-judgment interest rates used by the district court. However, awarding prejudgment interest during the interim period resulted in a higher award to Transmatic because, during this period, the prejudgment interest rate awarded by the district court was several percentage points higher than the statutory postjudgment interest rate provided for under 28 U.S.C. § 1961. We have jurisdiction under 28 U.S.C. § 1295(a)(1) (1994).

DISCUSSION

Guitón contends that Transmatic should have been awarded postjudgment interest for the interim period. Guitón asserts that the determination of the dividing line between pre and postjudgment interest is a procedural matter that requires us to follow Sixth Circuit law, in particular its interpretation of 28 U.S.C. § 1961(a), which states that postjudgment interest “shall be calculated from the date of the entry of the judgment.” 28 U.S.C. § 1961(a) (1994). According to Gulton, the Sixth Circuit determines the judgment date for purposes of calculating interest awards by examining both the facts and circumstances of the case in light of the “equity of § 1961” under Bailey v. Chattem, 838 F.2d 149 (6th Cir.1988), and the time when damages were “meaningfully ascertained” under Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990). Guiton argues that Bailey’s “equity” test and Kaiser’s “meaningfully ascertained damages” test both require that postjudgment interest be awarded during the interim period. Gui-tón argues that, in this case, damages were “meaningfully ascertained” at the time of the initial judgment because this court vacated the damage award on procedural, not substantive, grounds, and the only difference between the district court’s initial and remand damages awards is an adequate explanation of its award. Guitón also argues that since we affirmed the infringement judgment on appeal, terminating prejudgment interest and beginning postjudgment interest at the initial judgment date would be “equitable” because it accords with both § 1961(a)’s purpose of compensating prevailing parties for any delays between judgment and payment and 35 U.S.C. § 284’s purpose of fully compensating the patent owner for infringement damages. See 35 U.S.C. § 284 (1994) (“Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, ... together with interest and costs as fixed by the court.”).

Transmatic responds that the district court correctly applied the prejudgment interest rate during the interim period. Transmatic also raises a choice-of-law issue. Transmatic agrees that the dividing line between pre- and postjudgment interest is a § 1961 issue, but argues that we are not bound by Sixth Circuit law because the district court’s authority to award prejudgment interest arises under § 284 of the patent statute, and that it is the policies of that provision which need to be considered. Transmatic notes that this should be an issue of Federal Circuit law for reasons of both patent jurisprudence and geographic uniformity. However, Transmatic does not point to any Federal Circuit case law, and only argues that we should follow a Ninth Circuit decision, American Telephone & Telegraph Co. v. United Computer Systems, 98 F.3d 1206 (9th Cir.1996), which involved both pre- and postjudgment interest awards, unlike the relevant Sixth Circuit cases which involved only postjudgment interest awards. Because the AT & T court held that the “equities” underlying § 1961(a) favor calculating interest “in a manner that more fully compensates the plaintiff,” id. at 1211, Transmatic argues that the district court properly applied the prejudgment interest rate during the interim period since it awarded Transmatic the higher interest rate. Transmatic also argues that affirming the district court’s award would be “equitable” because it would require Guitón, the wrongdoer, to bear the burden caused by the district court’s error, prevent Guitón from benefiting from the delay its appeal caused, accord with § 1961’s purpose of eliminating an economic incentive to appeal, and accord with § 284’s purpose of fully compensating the patent owner for the infringement it has suffered.

A. Choice of Law

We first address whether reference to regional circuit law and § 1961 is appropriate in determining the correct dividing line for calculating pre- and postjudgment interest. In answering that question, we must initially decide whether the issue involved is one that concerns a subject unique to patent law. See Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 855-56. (Fed.Cir.1991). We conclude that it is not.

First, the patent laws do not determine the issue before us. Section 284, the patent damages provision, does not connect the award of interest to any particular judgment date; that provision only prescribes damages and interest as a remedy for patent infringement. When interest begins or ends is not stated. In contrast, § 1961, the postjudgment interest provision, expressly specifies the date post-judgment interest begins. It states that “[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court.... Such interest shall be calculated from the date of the entry of the judgment....” 28 U.S.C. § 1961(a) (1994). There is a consensus among the regional circuit courts that even when prejudgment interest is awarded, postjudgment interest begins with the date of judgment; clearly, the “date of entry of judgment” demarcates the boundary between pre- and post-judgment interest.¹ The determination of that date is a matter of general procedural, not patent, law.

Second, neither pre- nor postjudgment interest awards are unique to patent law. Many other areas of law besides patent law, including contract, tort, insurance, admiralty, employment, securities, and civil rights, also provide for prejudgment interest awards under both statutory and common-law authority.² Postjudgment interest is awarded on monetary judgments recovered in all civil cases. See § 1961(a). We are not aware of any cases in which the dividing line between them was analyzed under a statutory provision other than § 1961. Thus, we find no reason to depart from the rulings of other circuits and remodel this as a § 284 issue.

Third, the rationale for awarding interest to successful plaintiffs is also not particular to patent law; prejudgment interest, like all monetary interest, is simply compensation for the use or forbearance of money owed. See Black’s Law Dictionary 812 (6th ed.1990). No matter what area of law is considered, prejudgment interest, when awarded, is part of a successful plaintiffs complete compensation. See, e.g., West Virginia v. United States, 479 U.S. 305, 310 n. 2, 107 S.Ct. 702, 93 L.Ed.2d 639 (1987) (breach of contract) (“Prejudgment interest serves to compensate for the loss of use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress”). Post-judgment interest is similar, as it selves to further compensate a winning plaintiff from the time of a judgment until payment is made. See §§ 1961(a), (b).

Finally, regarding nonpatent issues, “we have generally conformed our law to that of the regional circuits, without regard to the relationship of the issue to our exclusive jurisdiction, when there is existing and expressed uniformity among the circuits. Indeed, in such circumstances, a choice of different law might [be] problematic.” Biodex, 946 F.2d at 856. Although the regional circuits do not uniformly interpret § 1961 in all respects, they agree that determining when judgment occurs for purposes of setting the dividing line between pre- and post-judgment interest is a § 1961 issue. See supra, note 1. Reformulating this issue as a § 284 patent law issue might thus be counterproductive to uniformity by injecting more uncertainty and conflict into this area of the law. For the foregoing reasons, we conclude that we must analyze this issue under § 1961 and defer to Sixth Circuit law.

B. Section 1961

Having determined that Sixth Circuit law applies and that § 1961(a) is the governing statutory provision, we now address the specific application of that statute under Sixth Circuit law. Section 1961(a) provides that:

Interest shall be allowed on any money judgment in a civil case recovered in a district court.... Such interest shall be calculated from the date of the entry of the judgment, at a rate equal to the coupon issue yield equivalent ... of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the judgment.

28 U.S.C. § 1961(a) (1994) (emphasis added). Kaiser is the leading Supreme Court decision addressing the determination of the date from which a court should calculate interest when a damages judgment has been vacated. In Kaiser, the district court concluded that two successive jury verdicts awarding damages to the plaintiffs were unsupported by the evidence. After the first jury verdict, the district court vacated the judgment entered on that verdict and granted the defendant’s motion for a new trial. However, the second jury awarded the plaintiffs a higher damage award than the first jury. Upon defendant’s motion, the court granted judgment notwithstanding the verdict as to part of the damages awarded, vacated the judgment entered on the second jury verdict, and entered a third judgment on a reduced damages amount. The Third Circuit vacated the third judgment entered by the district court and reinstated the judgment entered on the second jury’s damage award. The Supreme Court granted cer-tiorari to consider the calculation of post-judgment interest, and held that, under § 1961, postjudgment interest should run from the date of the second vacated judgment. The Court reasoned that

“[T]he purpose of postjudgment interest is to compensate the successful plaintiff for being deprived of compensation for the loss from the time between the ascertainment of the damage and the payment by the defendant.” Poleto v. Consolidated Rail Corp., 826 F.2d 1270, 1280 (3rd Cir.1987). Where the judgment on damages was not supported by the evidence, the damages have not been “ascertained” in any meaningful way. It would be counterintuitive, to say the least, to believe that Congress intended postjudgment interest to be calculated from such a judgment.

Kaiser, 494 U.S. at 836. The Court thus established a “meaningful ascertainment” test for determining when postjudgment interest begins.

In this case, both Transmatie and Guitón argue that we must use an “equities approach” in addition to Kaiser to determine the date from which postjudgment interest should be calculated. Before Kaiser, it was clear that the Sixth Circuit took the “equity of the statute” approach to the calculation of post-judgment interest. See Oates v. Oates, 866 F.2d 203, 208 (6th Cir.1989); Bailey, 838 F.2d at 153; United States v. Bank of Celina, 823 F.2d 911, 914-15 (6th Cir.1986). However, since the Supreme Court decided Kaiser in 1990, the Sixth Circuit has decided four cases addressing the calculation of postjudgment interest: Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413 (6th Cir.1990), Coal Resources, Inc. v. Gulf & Western Industries, Inc., 954 F.2d 1263 (6th Cir.1992), Adkins v. Asbestos Corp., Ltd., 18 F.3d 1349 (6th Cir.1994), and Kelly v. HUD, 97 F.3d 118 (6th Cir.1996). In each of these cases the Sixth Circuit followed Kaiser’s “meaningfully ascertained damages” approach without using or even mentioning its pre-Kaiser “equities” approach. See Langenderfer, 917 F.2d at 1447; Coal Resources, 954 F.2d at 1274-75; Adkins, 18 F.3d at 1351-52; Kelly, 97 F.3d at 122. Therefore, it seems clear that, since the 1990 Kaiser decision, the Sixth Circuit has abandoned the “equities” approach for the Supreme Court’s “ascertained damages” approach.

In this case, the damages were meaningfully ascertained at the time of the initial district court judgment because that damages decision was ultimately correct on the merits. In our earlier decision, we stated that we presumed that the district court considered and rejected Gulton’s claimed adjustments to Transmatic’s damages award, but we could not discern that from the court’s summary opinion. See Transmatic III, 53 F.3d at 1276. The district court’s error was procedural, and we ordered it to make explicit that which we suspected was implicit in its decision, as required by Rule 52(a). On remand, the district court explained its earlier decision and awarded the same amount. See Transmatic IV, slip op. at 8-19. Thus, we can infer from the fact that the district court awarded the same amount as the initial judgment, and the fact that Gulton does not appeal the merits of this award, that our suspicions were correct — damages were meaningfully ascertained, but just not explained, at the date of the initial judgment.

The parties ask us to choose between a higher prejudgment interest rate and a lower postjudgment interest rate for an interim period, in part, by considering the “equities” — Guitón argues that awarding the lower postjudgment interest rate is adequate compensation and Transmatie argues that awarding the higher prejudgment interest rate would be closer to full compensation. Because the Sixth Circuit has so clearly departed from the “equity” approach in favor of Kaiser’s “ascertained damages” test, we will not evaluate the equities of the case despite both parties’ urgings. In Kaiser, the Supreme Court held that, regardless of the equities, it would not award a higher postjudgment interest rate than that afforded by § 1961 because Congress made the legislative judgment as to the applicable interest rate, and “courts may not legislate to the contrary.” Kaiser, 494 U.S. at 840. The same consideration applies here. Congress has mandated a postjudgment interest rate, and we too must not “legislate to the contrary” by basing our analysis on whether the rate of interest provided by Congress under § 1961 is “equitable.” Transmatie directs us to AT & T, which held that when prejudgment interest is involved, the § 1961 “equities” approach favors calculating interest “in a manner that more fully compensates the plaintiff.” AT & T, 98 F.3d at 1211. However, AT & T is a Ninth Circuit case and, as we have discussed, supra, the Sixth Circuit has not followed the “equities” approach since Kaiser.

We are also unpersuaded by Transmatic’s argument that awarding the higher prejudgment interest rate for the interim period would require Guitón, the wrongdoer, to bear the burden of the district court’s error, prevent Guitón from benefiting from the delay it caused by appealing, and eliminate any economic incentive to appeal. The legislative history of § 1961 shows that Congress specifically intended postjudgment, not prejudgment, interest to “eliminate an economic incentive ... for a losing defendant to appeal a judgment and accumulate interest on the judgment award at the commercial rate during the pendency of the appeal.” S.Rep. No. 97-275, at 11 (1981), reprinted in 1982 U.S.C.C.A.N. 11, 21. Thus, we must defer to Congress’s judgment concerning the best means to meet its policy goals.

Finally, we are unpersuaded by Trans-matic’s argument that the Sixth Circuit’s precedents do not apply because these cases only awarded postjudgment interest, whereas this case also involves a prejudgment interest award. Other courts have considered the fact that prejudgment interest was awarded, either under statutory or common-law authority, irrelevant in determining the date postjudgment interest should begin under § 1961. See Foley, 948 F.2d at 22; Fuchs, 939 F.2d at 1280; Happy Chef Sys., 933 F.2d at 1437-38. In summary, we conclude that the district court erred in determining that interest during the interim period should be calculated at the prejudgment rate.

CONCLUSION

The district court erred in awarding prejudgment interest during the interim period. Accordingly, the Judgment and Order entered by the United States District Court for the Eastern District of Michigan on April 9, 1998, is hereby vacated and the case is remanded for calculation of interest in a manner consistent with this opinion.

VACATED AND REMANDED.

1 . See, e.g., American Tel. & Tel. Co. v. United Computer Sys., 98 F.3d 1206 (9th Cir.1996); Foley v. City of Lowell, 948 F.2d 10 (1st Cir.1991); Fuchs v. Lifetime Doors, Inc., 939 F.2d 1275 (5th Cir.1991); Happy Chef Sys., Inc. v. John Hancock Mut. Life Ins. Co., 933 F.2d 1433 (8th Cir.1991) (each decision determining the timing of pre- and postjudgment interest under § 1961).

2 . See, e.g., 15 U.S.C. §§ 15(a), 15a (1994) (antitrust); 17 C.F.R. § 201.600 (1994), reprinted in 15 U.S.C. foll. § 78u (securities); 29 U.S.C. § 1132(a)(9) (1994) (ERISA); City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 115 S.Ct. 2091, 132 L.Ed.2d 148 (1995) (admiralty); United States v. Texas, 507 U.S. 529, 113 S.Ct. 1631, 123 L.Ed.2d 245 (1993) (contract); Milwaukee Brewery Workers’ Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995) (ERISA); Loeffler v. Frank, 486 U.S. 549, 108 S.Ct. 1965, 100 L.Ed.2d 549 (1988) (Title VII); Morales v. Freund, 163 F.3d 763 (2nd Cir.1999) (securities); Gierlinger v. Gleason, 160 F.3d 858 (2nd Cir.1998) (§ 1983); United States v. Township of Brighton, 153 F.3d 307 (6th Cir.1998) (CERCLA); Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir.1998) (tort); Fratus v. Republic W. Ins. Co., 147 F.3d 25 (1st Cir.1998) (insurance).