CAFC issues detailed opinion on apportionment and lost profits; apportionment not required when Panduit test is met
The Federal Circuit, in Mentor Graphics Corp. v. Eve-USA, Inc. (also including Synopsys, Inc. as a defendant), Nos. 2015-1470, 2015-1554, 2015-1556 (Fed. Cir. March 16, 2017) (Judge Moore authoring), issued an opinion addressing apportionment and lost profits damages. The case addressed an open question that has gone both ways in district courts: whether lost profits requires further apportionment on top of the Panduit test. In other words, if a patentee is able to prove-up lost profits under Panduit, must the patentee apportion those lost profits to determine the incremental value of the patented feature vis-à-vis any unpatented features? The court answered the question in the negative, but reserved judgment on whether the same outcome would attach in all lost profits cases, particularly where the patentee relied on a theory other than Panduit to prove lost profits. Because the case is replete with meaningful language, the following summary consists mainly of direct quotes.
DDE denies request to strike lost profits opinion re non-patented items; addresses test data admissibility
The District of Delaware, in Masimo Corp. v. Philips Elec. North Am. Corp., (Judge Leonard P. Stark) (October 31, 2016), addressed motions to strike opinions of several experts related to damages. The experts in question were Michael Keeley (Finance), Joseph Dyro (Technical), Nitin Shah (Technical), Vijai Madisetti (Finance), and Michael Wagner (Finance). The court granted in part and denied in part the motions. The key motions are addressed below.
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.
District of Minnesota Orders Additional Expert Discovery and Sanctions Based on Information Not Produced During Discovery
The District of Minnesota, in Luminara Worldwide, LLC v. Liown Electronics Co. Ltd. et al., Case No. 14-3103 (Magistrate Judge Noel) (May 18, 2016), agreed that Plaintiff should have produced its manufacturing capacity data on which its damages expert relied for his lost profits analysis during discovery. The Court allowed Defendants to take further discovery and supplement their expert report. The Court declined to exclude the data because there was enough time before trial to complete the additional discovery. The Court denied Defendants’ motion to strike the history of the technology at issue from the Plaintiff’s report, leaving it for cross-examination.
In this case, Defendants moved to strike Plaintiff’s expert report regarding damages because the damages expert presented theories based on evidence Plaintiff withheld during fact discovery.
District of Connecticut Declines to Exclude Survey, Finding Alleged Deficiencies Go To Weight, Not Admissibility
The District of Connecticut, in Gerber Scientific International, Inc. v. Roland DGA Corp., et al., Case No. 3:06cv2024 (Judge Covello) (June 27, 2016), denied Defendant’s Summary Judgment of No Lost Profits. Plaintiff’s damages expert presented a lost profits theory relying solely on a survey. Defendant contended that the survey was “unreliable, untrustworthy, and prejudicial.” (Slip op. at 1). The Court noted that there is a split in authority over the proper consequence for unreliable or untrustworthy survey evidence. “While some courts . . . believe such flaws are proper grounds for exclusion, others view methodological errors as affecting only the weight of the evidence.” Schering Corp. v. Pfizer, 189 F.3d 218, 225-26 (2d Cir. 1999).
While the Court agreed that “indications of unreliability and/or untrustworthiness may result in the exclusion of a survey,” the Court held that “the deficiencies alleged by [Defendant] in this case are not clearly egregious or sufficiently prejudicial to warrant exclusion at this time.” (Slip op. at 1).
The Western District of Michigan, in Magna Elec., Inc. v. TRW Auto. Holdings Corp., et al., 1:12-cv-654 (Judge Maloney) (December 31, 2015), denied Defendants’ motion for summary judgment, allowing Plaintiff’s accelerated market entry theory and its claim for future damages to proceed to the jury.
Plaintiff sought damages from Defendants’ sales of certain products from 2013 to 2023. At least a portion of the damages Plaintiff sought were post-expiration of the patent. Relying on Kimble v. Marvel Entm’t, LLC, 135 S. Ct. 2401 (2015), Defendants argued that Plaintiff’s claim for post-expiration damages, in the form of lost profits, was barred.
On July 2, 2015, in WesternGeco L.L.C. v ION Geophysical Corp., Case 13-1527, the Federal Circuit reversed almost $100 million in lost profits due to the “infringing” activity being outside of the United States and therefore not an infringement at all. Specifically, the defendant ION exported components that were combined by ION’s customers into a larger system, overseas, for performing marine geophysical surveys for the Oil & Gas industry. The plaintiff, WesternGeco, argued that it lost profits from 10 lost surveys that utilized these systems. The “lost surveys” all occurred outside of the United States.
On April 4, 2014, Judge Conley of the Western District of Wisconsin issued an opinion in Douglas Dynamics, LLC v. Buyers Products Co., Case No. 09-cv-261-wmc, in which the court addressed a number of pretrial motions in limine, some of which related to damages. One of those motions is interesting.
On March 29, 2014, Judge Robert N. Chatigny in the District of Connecticut issued an opinion denying motion for leave to add plaintiff Protegrity’s subsidiary as a co-plaintiff, effectively killing Protegrity’s lost profit claims. Specifically, the Court found that there was no good cause for adding Protegrity USA, Inc. (PUSA) long after the deadline in the scheduling order. The Court found that: