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Federal Circuit Affirms $20.8 Million Patent Infringement Judgment Against Home Depot

The Court of Appeals for the Federal Circuit (CAFC) has affirmed a $20.8 million dollar judgment for patent infringement against Home Depot (See 2010-1409, -1416, November 14, 2011).  The judgment includes $15 million in damages for wilfulness, $3 million in enhanced damages, $2.8 million for attorney fees and pre-judgment interest.

Home Depot competes with Lowe’s and other home improvement stores.  The stores provide lumber cutting services which both helps customers and increases sales of other store products.   Employees were suffering significant personal injuries from the existing saw designs that were costing Home Depot upwards of $1,000,000 per years.

For many years, Michael Powell was a supplier of radial arm saws for Home Depot.  Because of the significant number of personal injuries, Home Depot considered removing the radial arm saws from its stores.  Mr. Powell recognized an opportunity to improve the safety of radial arm saws and prevent the loss of business from Home Depot.  Mr. Powell developed a saw guard and demonstrated it to Home Depot in 2004.  He also filed a US Patent Application that issued as US Patent 7,044,039 (“the ‘039 patent”).   Home Depot later contacted another company, Industrialplex to build and install saw guards for its radial arm saws.  Home Depot invited Industrialplex to view Mr. Powell’s invention and asked it to build nearly identical copies at a price less than what they had agreed to purchase guards from Mr. Powell.  Mr. Powell continued to negotiate with Home Depot, but could not reach an agreement.  Mr. Powell sued Home Depot for patent infringement in 2007 of the ‘039 patent.  After a 14 day trial, the jury reached a unanimous verdict that Home Depot willfully and literally infringed the ‘039 patent.

On appeal Home Depot challenged the district court’s claim construction of “dust collection structure” and “table top”  but the CAFC affirmed the lower court’s construction.

Home Depot also challenged Mr. Powell on the basis of inequitable conduct because he had filed a Petition to Make Special on the grounds that he was obligated to manufacture devices embodying the claims sought.  Because Home Depot did not follow through with a purchase agreement with Mr. Powell, Home Depot asserted that Mr. Powell had a duty to notify the US Patent and Trademark Office and withdraw the Petition to Make Special.  The CAFC held that where the patent applicant fails to update the record to inform the PTO that the circumstances which support a Petition to Make Special no longer ex-ist—that conduct does not constitute inequitable conduct. citing Therasense, 649 F.3d at 1290.

On damages, the CAFC rejected Home Depot’s theory that damages should be calculated based on negotiations that occurred in 2004, well before infringement began, and on amounts based on what Home Depot paid Industrialplex, rather than what it would have paid to Mr. Powell to use his invention.  In rejecting Home Depot’s theory, the court affirmed the jury’s award of $7,736 per unit concluding that such a royalty amount was reasonable.

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