Power Integrations, Inc. v. Fairchild Semiconductor, No. 2016-2691 (Fed. Cir. July 3, 2018)
The patentee owns patents on power switching regulators and sued the alleged infringer on its power supply controller chips. To prove damages, the patentee relied solely on the entire market value rule – i.e., that damages could be calculated based on the entire value of the power supply controller chip even though the power switching regulators are only one component of the accused chips. On appeal, the Federal Circuit reversed and remanded.
The Federal Circuit explained that “[a] patentee is only entitled to a reasonable royalty attributable to the infringing features.” In determining the royalty, it is necessary to apportion the royalty to a “reasonable estimate of the value of the” patented technology. The entire market value rule is an alternative to the general rule of apportionment. Under the entire market value rule, the royalty may be determined based on the value of an entire multi-feature product – even features that are not infringing.
The Federal Circuit’s previous cases have held that: “the entire market value rule is appropriate only when the patented feature is the sole driver of customer demand or substantially creates the value of the component parts.” Thus, “[w]hen the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions.” In this case, there was no evidence that the non-patented features did not impact consumer demand. Accordingly, the patentee could “not meet its burden to show that the patented feature was the sole driver of consumer demand, i.e., that [the patented feature] alone motivated consumers to buy the accused products.” Thus, the case was remanded for recalculation of damages.