NDILL certifies for appeal two lost profits issues relating to a foreign patent owner and its US subsidiary
On May 23, 2013, Chief Judge Holderman of the Northern District of Illinois issued an opinion in Fujitsu Ltd. v. Tellabs, Inc., Case No. 09-C-4530 (Doc. No. 1103), addressing a summary judgment motion by Tellabs on the issue of whether Fujitsu Ltd. could recover lost profits. Tellabs offered two grounds for summary judgment: “(1) Fujitsu Limited is not entitled to damages in the form of the lost profits because it sells no products in the United States and (2) Fujitsu Limited cannot claim the lost profits of its North American subsidiary and non-exclusive licensee, Fujitsu Network Communications, Inc.” Slip op. at 1.
The court offered a comprehensive review of cases addressing lost profits in the parent-subsidiary context. It is worth reading for its summary of Federal Circuit and district court precedent on the issue. That analysis will not be summarized here.
The court also certified two issues for interlocutory appeal (slip op. at 16):
- Can a foreign patent owner that does not sell any products in the U.S. market collect lost profits damages based on sales lost by its wholly-owned U.S. subsidiary, which is a non-exclusive licensee under the patent?
- Can a foreign patent owner that manufactures and sells component parts to its wholly-owned U.S. subsidiary via a transfer pricing mechanism designed to comply with the Internal Revenue Code, 26 U.S.C. § 482, recover as lost profits the lost payments from its wholly-owned U.S. subsidiary for these component parts?
The court explained the issues as follows:
The court finds that the two questions identified above are controlling questions of law that are pivotal to the ultimate termination of this litigation. See 28 U.S.C. § 1292(b). The court further finds that there is substantial ground for difference of opinion as to the application of Federal Circuit precedent to the specific, yet common, facts of this case. Id. On the discrete issue of lost profits damages, there is a need for additional precedent for purposes of offering guidance to foreign patent owners—and district courts—regarding the circumstances, if any, under which a foreign patent owner that does not sell any products in the U.S. market can nevertheless collect as damages the lost profits of its wholly-owned U.S. subsidiary, specifically when the foreign patent owner sells component parts of the patented device to its wholly-owned U.S. subsidiary for sale of the patented device in the U.S. market.
Slip op. at 16.