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Awarding Lost Profits for “Unpatented” Products: Rite-Hite and Other Cases

Awarding Lost Profits for “Unpatented” Products: Rite-Hite and Other Cases. By Jack Ko. Outline. Relevant Statutory Provisions Supreme Ct. Cases on Lost Profits Rite-Hite : a paradigm shift? Subsequent Cases Applying Rite-Hite. Awarding Lost Profits for “Unpatented” Products.

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Awarding Lost Profits for “Unpatented” Products: Rite-Hite and Other Cases

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  1. Awarding Lost Profits for “Unpatented” Products: Rite-Hite and Other Cases By Jack Ko Jack Ko

  2. Outline Relevant Statutory Provisions Supreme Ct. Cases on Lost Profits Rite-Hite: a paradigm shift? Subsequent Cases Applying Rite-Hite Jack Ko

  3. Awarding Lost Profits for “Unpatented” Products Rite-Hite v. Kelley(Fed. Cir. 1995) (en banc: Lourie) King Instrument (Fed. Cir. 1995) (Nies, Newman, Rader) Juicy Whip (Fed. Cir. 2004) (Newman, Linn, Lourie) Jack Ko

  4. Relevant Statutory Provisions The Patent Act: 35 U.S.C. § 284 (2005) (enacted 1952, amended 1999) § 284. Damages Upon finding for the claimant the court shall award the claimant -damages adequateto compensate for the infringement, - but in no event less than areasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. Jack Ko

  5. Relevant Supreme Ct. Decisions Aro Manuf. Co., 377 U.S. 476 (1964): "had the Infringer not infringed, what would the Patent Holder-Licensee have made?" General Motors v. Devex, 461 U.S. 648 (1983): "full compensation for ‘any damages’ [the PO] suffered as a result of the infringement." Jack Ko

  6. Panduit Test (DAMMP Factors) Panduit Corp. v. Stahlin Bros., 575 F.2d 1152 (6th Cir. 1978, Markey J., sitting by designation) : • Demand for the patented product; • Absence of acceptable noninfringing substitutes; • Manufacturing and Marketing capability; • Profit that would have been made. Jack Ko

  7. Rite-Hite: Summary of Facts Jack Ko

  8. Rite-Hite: Judges’ Positions Jack Ko

  9. Patent-in-suit (‘847 Patent) Releasable Locking Device : ADL-100 MDL-55 Jack Ko

  10. Rite-Hite: Parties’ Arguments Kelley Argues : “patentee must prove that, ‘but for’ the infringement, it would have sold a product covered by the patent in suit to the customers who bought from the infringer.” Rite-Hite Argues : “the only restriction on an award of actual lost profits damages for patent infringement is proof of causation-in-fact.” “The [PO] is entitled to all the profitsit would have made on any of its products ‘but for’ the infringement.” Jack Ko

  11. Rite-Hite: Majority Interpreting §284 : “the balance between - full compensation, which is the meaning that the Supreme Court has attributed to the statute, and - the reasonable limits of liability encompassed by general principles of law can best be viewed in terms of reasonable, objective foreseeability.” New Test “but for” + “foreseeability” Jack Ko

  12. Rite-Hite: Lost Profits Majority Interpreting §284 : “Whether a patentee sells its patented invention is not crucial in determining lost profits damages.”  Lost profits on ADL-100 affirmed Jack Ko

  13. Rite-Hite: Foreseeable? Was lost profits for the ADL-100 reasonably foreseeable? Who’s right? Majority or Nies? OR Jack Ko

  14. Who’s Right on LP for ADL-100: Majority or Nies? Nies: Majority: • Cohen • Yates • Edsenga • Murshak • Cleary • Olin • Frostick • Kolb • Shui • Pearson Jack Ko

  15. Rite-Hite: Convoyed Sales Entire Market Value Rule : “entire value of the whole machine, as a marketable article, was ‘properly and legally attributable’ to the patented feature” Physically separate unpatented components normally sold with the patented components - single assembly - parts of a complete machine - afunctional unit. Jack Ko

  16. Rite-Hite: Functional Unit? Majority: “merely sold … for convenience and business advantage” Newman: “customer or Kelley required that they be sold together; and … they are used together” Who’s right? Majority or Newman? OR Jack Ko

  17. Who’s Right on LP for Dock Levelers: Majority or Newman? Newman: Majority: • Cohen • Yates • Edsenga • Murshak • Cleary • Olin • Frostick • Kolb • Shui • Pearson Jack Ko

  18. Fed. Cir. Cases After Rite-Hite Jack Ko

  19. Rader’s Hypo in King Instrument AI: PO: • Literally infringed Claims 2 and 3, which do not have any products. • Claim 1: ABC + Q1 • Claim 2: ABC + Q2 • Claim 3: ABC + Q3 •  Markets product covered by Claim 1 •  No lost profits available? Jack Ko

  20. Characterizing Rader’s Hypo Critical: Favorable: • Cohen: Captain Kirk • Yates: Chessmaster • Murshak: Brilliance • Pearson: X-ray Vision • Shui: King Soloman • Frostick: Sky is not falling • Olin: Little Bo Peep • Edsenga: Mr. Magoo • Kolb: Disingenuous • Cleary: Give me a break Jack Ko

  21. Juicy Whip: Patent-in-suit (‘405 Patent) Post-mix beverage dispenser with an associated simulated visual display of beverage : Jack Ko

  22. Summary Rite-Hite is still the controlling Fed. Cir. decision on awarding lost profits PO: possibility of getting lost profits on “unpatented” products AI: can’t successfully argue for reasonable royalty if there’s a lost-profits hook Jack Ko

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