Illinois Tool Works, Inc. v. MOC Products Co., Inc., No. 09CV1887 JLS (MDD), slip op. (S.D. Cal. June 24, 2013).
In Illinois Tool Works, the court rejected every Defendant’s challenge to the jury’s award of lost profits and reasonable royalties on both accused and convoyed products. Without saying as much, the court apparently took to heart the notion that the risk of a lack of certainty on the amount of damages falls on the infringer and not on the patent owner.
A jury found Defendant liable for direct infringement, awarding Plaintiff $4.4 Million in lost profits and a reasonable royalty of $1.1 Million. Id. at 1-2. Defendant moved for a new trial on damages. Id. at 2.
First, Defendant argued at least three products were substantially similar to the patented tool and competed in the same market, thus eliminating the second Panduit factor (the absence of acceptable non-infringing substitutes). Id. at 27-28. Defendant emphasized Plaintiff’s own expert, Christopher Barry, estimated Plaintiff would have captured at best 50% of Defendant’s sales because of acceptable alternatives. Id. at 28.
The court concluded the jury could have credited Plaintiff’s evidence that the alternatives put forward by Defendant were not acceptable, non-infringing substitutes because they did not have the same key features as the patented products. Id. at 29. Barry’s concession that inferior products might still capture 50% of the market was “not inconsistent with the Panduit analysis.” Id. at 30.
Second, Defendant argued there was no evidence to support a lost-profits award for (convoyed) products sold for use with the infringing tools. Id. Rejecting this argument, the court found that Plaintiff’s 50% reduction for any products used with non-infringing tools was adequate to account for market imperfections. Id.
First, Defendant argued the jury erred by awarding a reasonable royalty in excess of the cost of designing around the patent-in-suit. Id. at 32. Defendant argued that its design-around cost would be a mere $0.03 to manufacture, and it would not have paid millions of dollars in royalties. The court disagreed, concluding Defendant’s non-infringing product did not have all of the features of the patented tool. Under Georgia-Pacific, the jury was entitled to consider the unique advantages of the patented tool. Id. at 33.
Second, Defendant argued there was no basis for an award of royalties on a non-patented (convoyed) product sold with the infringing tool. Id. at 33. The court rejected the argument, saying that, despite an absence of analogous royalty agreements, Georgia-Pacific allows the jury to consider the value of patent as a generator of sales of non-infringing items. Id.
The court also denied Defendant’s motion for a new trial on damages when it concluded the jury’s split between lost profits and reasonable royalties was defensible. Id. at 34.