Philips Burns Another DVD Infringer: Officer Personally Liable

Posted on | May 30, 2008 | No Comments

2008-1385 US Philips v. Int’l Norcent
CD/CA 06-cv-01366

Defendant Jennifer Long appeals Judge Edward Rafeedie’s order denying her JMOL and the jury’s verdict finding her joint and severally liable for over $12 million.  Philips sued Long and Norcent for infringing 5,677,903 and 5,463,607 directed to certain optical read/write storage devices (i.e., DVD players).  These patents are also subject to another lawsuit on appeal from Judge Rafeedie in Philips v. KXD (reported by us here).

Long is the CEO and, indirectly, a 50% owner of Norcent.  Norcent apparently purchased DVD players from a Philips-licensed Chinese manufacturer, but Philips terminated that license.  Nevertheless, Norcent continued to import and sell these DVD players.  The jury found Long willfully (1) directly infringed, (2) induced infringement of, and (3) contributed to the infringement of claims 1 and 6 of the ‘903 and claims 6 and 12 of the ‘607.

In her JMOL (Norcent apparently did not file a JMOL), Long claims that she cannot be personally liable since she is just the CEO and owner of Norcent.  The court disagreed, finding sufficient evidence for the jury to conclude that Long was personally liable.

Direct Infringement:  The court wrote:

[3] For a corporate officer to be liable for direct infringement under 35 U.S.C. § 271 (a), there must be evidence to justify piercing the corporate veil [citing Manville Sales Corn. v. Paramount Sys. Inc., 917 F.2d.544, 553-54 (Fed. Cir. 1986)].  The evidence at trial established that Defendant Long is the CEO of International Norcent and owns 50% of Norcent Holdings with her mother, that she continued to offer unlicensed DVD players after Philips terminated the licensing agreement with her Chinese affiliate, continued to authorize sales and import unlicensed DVD players into the U.S. and Ms. Long herself testified that she personally visited customers to offer DVD players for sale. Thus viewing the evidence in the light most favorable to the Plaintiff, the jury’s verdict with regard to Defendant Long’s direct infringement was supported by substantial evidence.

[PATracer: While the cited evidence may support finding that Long actively and perhaps knowingly caused the infringement, the court's statement of this evidence doesn't seem to support "piercing the corporate veil."  Corporations, of course, always act through individuals--the fact that Norcent acted often through Long can't be enough to pierce the corporate veil.  Usually there needs to be evidence to show a disregard of corporate formalities, form, etc.]

Inducement: The court wrote:

[4] A corporate officer who actively aids and abets her corporation’s infringement may be personally liable for inducing infringement under § 271(b) [citing Orthokinetics v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1579 (Fed. Cir. 1986)]. First, aside, from Ms. Long’s own assertion that she did not know of the patents in suit prior to the filing of this lawsuit, there was ample evidence at trial indicating that Ms. Long did in fact know of the patents throughout the period of infringement (e.g. her knowledge of the agreement between Philips and her Chinese affiliate, license agreement and list of patents kept in her company files, letters and notifications re the license and termination, etc.) And there was also substantial evidence to support the jury’s conclusion that Ms. Long induced infringement based on the evidence that she knew of the patents yet continued to authorize her companies to import and sell unlicensed DVD players for years after she learned of the termination of the license agreement. She even accompanied her vice president of sales on over 90% of her sales visits to encourage customers to buy her product. Thus the jury saw and heard evidence that substantially supports its conclusion that Defendant Long knew of the patents and actively induced infringement of those patents.

Contributory Infringement:  The court rejected Long’s argument that the DVD players had a substantial, non-infringing use:

[5] Because substantial evidence of direct infringement exists, there can be liability for contributory infringement if the defendant sells products that have no substantial non-infringing uses [citing DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1303 (Fed. Cir. 2006)].  The Defendant argues playing single-layer disks on Norcent players would not infringe Plaintiffs patents, and thus constitutes a substantial non-infringing use. However, Plaintiffs expert Mr. Laub testified that because the Norcent DVD player uses the optics necessary to play a multi-layer disk in order to determine what type of disk is in the machine, the Norcent DVD players would infringe Plaintiffs patent regardless of which type of DVD disk was loaded. Expert testimony constitutes substantial evidence.  In light of that, the jury finding Ms. Long liable for contributory infringement was supported by evidence that she was actually aware of the patents in suit and actively participated in the sale of infringing DVD players with no noninfringing uses.

More reading:

JMOL Order

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