Patent Damages
8Feb/13Off

EDVA grants motion in limine precluding pre-notice data to be used for determining post-notice price erosion

In Morpho Detection, Inc. v. Smiths Detection, Inc. (E.D. Va. December 3, 2012), Judge Mark S. Davis granted the Defendant’s motion in limine to prevent the Plaintiff from using pre-notice data for calculating post-notice price erosion damages.  The Court noted that this issue is disputed by scholars, and that he sided with those in favor of excluding pre-notice data, but that the particular facts in dispute rendered that determination unnecessary.  Specifically, the Court found that Morpho’s expert was making an assumption about sales that was barred due to section 287’s marking provisions:

There is an obvious and important difference between considering historical pricing and market information to determine the amount the patentee could have charged later, to account for damages caused by infringement occurring during the damages period (which is proper), and calculating damages for defendant’s infringing conduct that occurred before the patentee complied with the marking statute (which is improper).  Here Morpho seeks to do the latter, which is expressly prohibited by the marking statute.

Morpho’s expert assumed that, but for infringement, some products that were sold in the pre-notice period in the actual world would have been sold in the post-notice period in the “but-for” world because of higher prices (i.e., the customers would not have been able to purchase all accused products before the notice date in the but-for world because of budgetary constraints, but would have nonetheless purchased those same accused products after the notice date once their budgets allowed for it).

While certainly novel and creative, the Court found that this would turn the patent marking statute on its head.  Looking at section 287, the Court held that the statute allows for recovery only for actual infringement occurring after notice, not hypothetical infringement under a but-for world.  Because all of the infringing sales in this case occurred prior to the notice date, the Court found that there was no actual infringing competition, and thus no actual damages.  Moreover, “[t]here is nothing Smiths could have done after being notified of Morpho’s patent on September 2, 2011 to eliminate or mitigate Morpho’s price erosion damages, since they were allegedly caused by Smith’s actions taken back in 2009.”

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