The Eastern District of Texas, in Mars, Inc. v. TruRX LLC, No. 6-13-cv-00526 (E.D. Tex. March 14, 2016) (Mag. Judge Nicole Mitchell), questioned whether the “inexorable flow” doctrine of lost profits is viable. The Federal Circuit had previously addressed inexorable flow in an earlier litigation involving Mars. Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1365 (Fed. Cir. 2008) (refusing to award “lost profits” to the patent holder when its subsidiary corporation lost sales due to infringement, but recognizing the possibility of lost profits if the parent-patent holder can prove that the subsidiary’s lost profits inexorably flow up to the parent), mandate recalled and amended on other grounds, 557 F.3d 1377 (Fed. Cir. 2009).
The Western District of Wisconsin, in Kahr v. Cole, Case No. 13-C-1005 (Judge Griesbach) (July 28, 2016), granted defendant’s motion in limine to exclude evidence of plaintiff’s claimed lost profits. Plaintiff contended that it should be allowed to introduce evidence at trial of lost profits under the “inexorable flow” doctrine—in other words, plaintiff, who did not manufacture the patented product, had a licensee who did, and that the licensee’s losses from the alleged infringement inexorably flowed to the patent owner-licensor. The court cited the fact that the plaintiff did not have an exclusive license with the manufacturer (DDM). The Kahr court cited two cases, in which, according to Kahr, the courts had indicated that a non-manufacturing patent owner-plaintiff can recover lost profits if the patent owner has an exclusive license with the manufacturer. Slip op. at 2 (citing Carver v. Velodyne Acoustics, Inc., 202 F. Supp. 2s 1147, 1149 (W.D. Wash. 2002), and Kalman v. Berlyn Corp., 914 F.2d 1473 (Fed. Cir. 1990)). The Kahr court cited testimony from the plaintiff in which he testified that he could have licensed his patent to the defendant. Slip op. at 2.