United States District Court, D. Nebraska
MEMORANDUM AND ORDER
Joseph F. Bataillon Senior United States District Judge
This matter is before the court after a bench trial on defendant Briggs and Stratton Power Products Group, LLC's ("Briggs's") motion for a judgment of laches, Filing No. 658. This is a patent infringement action initiated on May 12, 2010, by plaintiff Exmark Manufacturing Company, Inc. ("Exmark"), accusing defendant Briggs of infringing claims 1, 2, 6 and 7 of its U.S. Patent No. 5, 987, 863 (“the ‘863 patent”). Filing No. 1, Complaint. The patent at issue involves a "Lawn Mower Having Flow Control Baffles and Removable Mulching Baffles." Id., Trial Exhibit ("T. Ex.") 1, '863 Patent. The patent infringement action was tried to a jury from September 8-11, 2015, and September 14-17, 2015, resulting in a compensatory award to the plaintiff for infringement in connection with Brigg's original mower deck in the amount of $24, 280, 330 and in a finding of willful infringement. See Filing No. 599, Verdict. The court held a bench trial on the equitable laches defense on October 21-22, 2016. See Filing No. 643, Laches Proceeding Transcript ("Laches Proc. Tr."), Vol. I; Filing No. 644, Laches Proc. Tr., Vol. II. The court took judicial notice of the trial record and exhibits. Filing No. 643, Laches Proc. Tr., Vol. I at 6. The following are the court's findings of fact and conclusions of law.
I. FINDINGS OF FACT
Exmark is a manufacturer of commercial lawnmowers located in Beatrice, Nebraska. See Filing No. 611, Trial Transcript ("T. Tr."), Vol. II at 146, 154, 161, 174. Exmark, a wholly-owned subsidiary of the Toro Company ("Toro"), is the owner of the ‘863 Patent, which is directed to a lawn mower having “flow control baffles” that improve the function of the mower when operating in a side-discharge configuration. See, e.g., Trial Exhibit ("T. Ex."). 1, '863 Patent at 2; Filing No. 156, Memorandum and Order at 1-2.
At trial, Garry Busboom, one of the inventors of the '863 Patent, testified that before his invention, the conventional wisdom was that in order to maximize the cutting performance of a side discharge mower, the flow of grass should facilitated around the front of the cutting deck, out of the path of the downstream cutting blades, and out the side opening. Filing No. 613, T. Tr., Vol. IV at 610-11. Busboom stated that he departed from conventional wisdom by designing a side discharge mower that intentionally directed grass clippings into the path of the next cutting chamber. See T. Ex. 1, '863 Patent at Fig. 4; Filing No. 611, T. Tr., Vol. II at 210, 222. The resulting mower cut and discharged the grass better, requiring less horsepower. Filing No. 611, T. Tr., Vol. II at 210, 222.
Exmark was a relatively small competitor in the commercial lawnmower industry at the time of the invention. Filing No. 611, T. Tr., Vol. II at 199; Filing No. 612, T. Tr., Vol. III at 505, 512. Before the invention, Exmark was not viewed as a premier manufacturer of commercial mowers. Filing No. 613, T. Tr., Vol. IV at 672-73. After the invention its reputation in the industry improved. Filing No. 612, T. Tr., Vol. III at 597; Filing No. 615, T. Tr., Vol. VI at 1067. Exmark considered its patented flow control baffles to be a very important feature of its mowers and would have liked to be the sole company employing that invention, using it as a market differentiator to justify charging premium prices. See Filing No. 611, T. Tr., Vol. II at 174-78; Filing No. 612, T. Tr., Vol. III at 537.
The ‘863 patent was issued in 1999 and was reexamined by the Patent and Trademark Office (“PTO”) in an ex parte proceeding filed by Exmark in 2003. See T. Ex. 1, '863 Patent at 1, 12; Filing No. 643, Laches Proc. Tr., Vol. I at 12. In the course of this lawsuit, Briggs and Schiller each separately filed for reexamination of the ‘863 patent. See Filing No. 643, Laches Proc. Tr., Vol. I at 47; Filing No. 196, Schiller Motion to Stay. The case was stayed for over two years pending the outcome of these reexaminations. Filing No. 197, Order staying case; Filing No. 215, Order lifting stay. The PTO again found the patent valid. See Ex. 1, '863 Patent 14-17. Exmark has always believed its patent was valid. Filing No. 644, Laches Proc. Tr. at 146-47.
Exmark employee Rodney Benson testified at the laches proceeding. Filing No. 643, Laches Proc. Tr., Vol. I at 9-160. The court generally credits his testimony. He testified he has worked at Exmark since 1999, first as Chief Engineer and later as Engineering Services Manager. Id. at 10. His duties included providing support for the engineers, designers, and drafting groups and acting as liaison with counsel on product safety and patent issues. Id. at 11-12. He stated he helped engineers or inventors review patent applications and worked with patent attorneys and division counsel. Id. at 11. He stated that Exmark did not have its own legal department and that he generally spent about five percent of his time on legal issues. Id. at 12.
In 2001, Exmark sued Scag Power Equipment, Inc. ("Scag"), for patent infringement. Toro Co. v. Scag Power Equip., Inc., No. 8:01-cv-279, Filing No. 1, Complaint (D. Neb. May 16, 2001). Scag initially disputed the validity of the patent and accused Exmark of inequitable conduct. Filing No. 643, Laches Proc. Tr., Vol. I at 15-16. Benson testified that the litigation took two years, was expensive and drained Exmark's resources. Id. at 17-19. Eventually the case settled for $3.3 million dollars, which barely covered Exmark's expenses. Id. at 17-18, 92; T. Ex. 252, Settlement Agreement. As part of the settlement Scag agreed to design a noninfringing mower deck. Filing No. 643, Laches Proc. Tr., Vol. I at 18.
Benson testified that beginning in 2001, he kept a list of potential infringers. Id. at 20-21. Exmark employees who observed a potentially infringing product in the field or at a trade show came to him with names of those companies. Id. at 21. He compiled and maintained the list, and kept a file on each potential infringer, but did not determine whether the products were actually infringing. Id. He stated he presented the list to management and counsel from time to time. Id. at 21-22. A memo about the mower industry exposition in 2001 shows that there were 4 potential infringers, including Briggs's predecessor, Ferris Industries, on the list. Id. at 23; see Ex. 621.
Benson stated only that he and other Exmark employees suspected infringement. Id. He had no knowledge of the scope of the potential infringement. Id. Benson testified Exmark's resources were being consumed by the Scag litigation at that time and Exmark was not considering suing Ferris. Id. at 22, 24. He further stated that Exmark did not view Ferris as a primary competitor prior to 2009-it was not in the top five. Id. at 36. He also testified that Exmark did not have knowledge of the scope of Ferris's infringing sales until this litigation. Id. at 36-37. Prior to this action, he thought Ferris had approximately 1/7 of Exmark's sales, but it turned out to be much more. Id. at 38; see T. Ex. 152, market-share chart.
A summary of notes from a trade show in 2002 lists potential infringers for the '863 Patent and infringers of other patents are listed as well. See Ex. 622; Filing No. 643, Laches Proc. Tr., Vol. I at 27. In 2002, Exmark had identified ten potential infringers of the ‘863 patent. See Ex. 622 at 4-5. By 2007, the number of potential infringers of the ‘863 patent had grown to fourteen. Filing No. 643, Laches Proc. Tr., Vol. I at 30. Briggs, Snapper Pro, Simplicity and Derby were never on the list. Id. All of the ten potential infringers listed prior to 2007 were small competitors and were not touting flow control baffles and quality of cut in their marketing materials. Id. at 34.
He stated Exmark had purchased a Ferris mower in 2001, before the list was made, for the purpose of evaluating Ferris’ independent suspension system. Filing No. 643, Laches Proc. Tr., Vol. I at 25. The Exmark engineers did not look at the baffles. Id. Just prior to filing this action, Exmark bought another Ferris model. Id. No Ferris or Briggs models were bought between 2001 and 2009. Id. at 26.
Benson testified that prior to 2009, Briggs or Snapper Pro were not suspected as infringers. Id. at 32, 112. Between 2004 and 2009, Exmark's efforts were focused on its Lazer product and its legal resources were tied up with a horsepower class action suit. Id. at 34, 97. Benson denied that Exmark ...