CAFC: Reasonable royalty in design infringement only if greater than infringer’s total profits

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Federal Circuit Review No. 71-2.
A Reasonable Royalty Award Under § 284 Is Appropriate Only if the Amount Is Greater Than Infringer’s Total Profits Under § 289 in A Design Patent Infringement Suit

Nordock, Inc., v. Systems Inc., No. 2014-1762, -1795, 2015 U.S. App. LEXIS 17117 (Fed. Cir. Sep. 29, 2015) (Before O’Malley, Reyna, and Chen, J.) (Opinion for the court, O’Malley, J.).  Click Here for a copy of the opinion.

Nordock, Inc. (“Nordock”) sued Systems, Inc. (“Systems”) for infringing its patent claiming the ornamental design of a lip and hinge plate for a dock leveler. Systems counterclaimed for a declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102, 103, and 112. At trial, the jury found that Systems infringed Nordock’s patent. The jury awarded Nordock $46,825 as a reasonable royalty, and it found that Systems had no actual profits associated with the infringing features of its product. Nordock moved for a new trial on damages under 35 U.S.C. § 289 to recover damages based on profits from Systems’ sales of its infringing product, not merely infringing features. Systems moved for judgment as a matter of law that the Nordock patent is invalid and not infringed. The district court denied these motions and the parties appealed.

Damages for infringement of a design patent can be recovered for the greater of: (1) total profits from the infringer’s sales under 35 U.S.C. § 289, (2) damages in the form of the patentee’s lost profits or a reasonable royalty under § 284, or (3) $250 in statutory damages under § 289. Here, the Court held that the district court incorrectly instructed the jury to choose between awarding damages under § 284 or § 289.

According to the Court, “[o]nly where § 289 damages are not sought, or are less than would be recoverable under § 284, is an award of § 284 damages appropriate.” On remand, the jury should be given clear instructions that in a case where the patent is found to be valid and infringed, the patentee should be awarded total profits attributable to infringement under § 289.

With respect to the actual calculations, the Federal Circuit found that there was evidence suggesting System’s total profits for the infringing levelers were over $600,000. The district court erroneously relied on the “cost-savings” methodology, which limited the calculations to the “lip and hinge plate” portion of the dock levelers. This methodology was inconsistent with § 289, which would allow recovery of total profits based on the dock leveler as a whole and not just a portion. Additionally, there was no evidence that Systems sold a “lip and hinge plate” separate from the leveler as a complete unit.

Finally, the Court held that Systems’ oral post-verdict JMOL motions, which sought to renew its pre-trial motions, were properly denied by the district court on all grounds, because the jury’s verdict was supported by substantial evidence. Systems had no newly discovered evidence relevant to infringement, and Systems failed to specifically challenge the verdict on validity in its oral post-verdict motions.

Accordingly, the Court vacated the jury’s damages award, remanded for a new trial on damages, and affirmed the district court’s decisions denying System’s renewed motion as to validity and its motion as to infringement.


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