Damages and Other Monetary Remedies – Basics

  • BASICS: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. … the court may increase the damages up to three times the amount found or assessed….” 35 U.S.C. § 284. “‘Damages adequate to compensate’ means ‘full compensation for any ‘any damages’ [the patent owner] suffered as a result of the infringement.’ [i.e.] the statutory measure of damages is ‘the difference between [the patent owner’s] pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.’” Mentor Graphics (Fed. Cir. 03/16/17) (aff’g award of $36.4 MM in lost profits on lost sales), rehearing denied (Fed. Cir. 09/01/17) (10-2) (two opinions on damages). “The ‘but for’ damages the patentee must establish in patent law … are an answer to a simply stated question: ‘[H]ad the Infringer not infringed, what would the Patent Holder-Licensee have made?’” Id. “The remedy of damages seeks to compensate the victim for its loss, whereas the remedy of an accounting, which Congress abolished in the patent context in 1946, sought disgorgement of ill-gotten profits.” SCA Hygiene III (U.S. 03/21/2017) (7-1). An “accounting” within the meaning of 28 U.S.C. § 1292(c)(2) (allowing appeal from judgment that is final except for an accounting) may include a trial on damages (and a determination of willfulness). Robert Bosch (Fed. Cir. 06/14/13) (en banc).
  • Patentee Must Show “But For” Causation Of Damages Sought: “Under §284, damages are ‘adequate’ to compensate for infringement when they ‘plac[e] [the patent owner] in as good a position as he would have been in’ if the patent had not been infringed. Specifically, a patent owner is entitled to recover ‘the difference between [its] pecuniary condition after the infringement, and what [its] condition would have been if the infringement had not occurred.’” WesternGeco III (U.S. 06/22/2018) (7-2) (expressly not addressing proximate cause). Cf. Comcast (U.S. 03/23/2020) (remanding dismissal of federal antidiscrimination § 1981 action for failure to plausibly plead “but for” causation; “Few legal principles are better established than the rule requiring a plaintiff to establish causation. In the law of torts, this usually means a plaintiff must first plead and then prove that its injury would not have occurred ‘but for’ the defendant’s unlawful conduct.”)
  • Patentee Entitled To “Full Compensation” For “Any Damages” Suffered As A Result Of The Infringement, With “Damages” Restricted By “Proximate Cause” Principles: “Congress sought to ensure that the patent owner would in fact receive full compensation for ‘any damages’ he suffered as a result of the infringement. Accordingly, Congress expressly provided in § 284 that the court ‘shall award the claimant damages adequate to compensate for the infringement.’” General Motors (U.S. 05/24/1983); Aro Mfg. (Aro II) (U.S. 06/08/1964) (“we must ask how much CTR suffered by Aro’s infringement—how much it would have made if Aro had not infringed.”) But balancing this “full compensation” principle with principles of “proximate cause” that limit compensable damages for patent infringement, means that injuries which were not “reasonably foreseeable” cannot be compensated: “if a particular injury was or should have been reasonably foreseeable by an infringing competitor in the relevant market, broadly defined, that injury is generally compensable absent a persuasive reason to the contrary.” Rite-Hite (Fed. Cir. 06/15/95) (en banc) (8-4 on this section). “The term ‘damages’ in the patent statute must be interpreted in light of the familiar common law principles of legal or proximate cause associated generally with that term.” Rite-Hite (Fed. Cir. 06/15/95) (en banc) (4 judge dissenting op.) (“the lack of proximate causation will preclude recovery for certain losses even though a ‘but-for’ standard of injury in fact is satisfied.”) See Power Integrations (Fed. Cir. 03/26/13) (“the entirely extraterritorial production, use, or sale of an invention patented in the United States is an independent, intervening act that, under almost all circumstances, cuts off the chain of causation initiated by an act of domestic infringement,” even if the damages were foreseeable).
  • Sec. 284 Expansive; Permits Various Types of Damages: statutory language is expansive; damages are not limited to lost profits, established royalty and reasonable royalty. Mars (Fed. Cir. 06/02/08).
  • A Patentee May Recover Mixed Damages: A patentee can sometimes get a mixed award of lost profits for some infringing activities and reasonable royalty for other infringing activities. Siemens Med. (Fed. Cir. 02/24/11) (remanding for trial court to determine reasonable royalty for units where lost profits were not proven).
  • Patentee Has Burden Of Proof On Fact And Amount Of Damage: For reasonable royalty, a patentee has the burden to prove the amount of damage. Dow Chem. (Fed. Cir. 09/05/03); Info-Hold (Fed. Cir. 04/24/15). For lost profits, a patentee has the burden to prove both the fact of damage and the amount. Rite-Hite (Fed. Cir. 06/15/95) (en banc).
  • Expert Testimony On Damages May Not Be Based On Speculation: Cyntec (Fed. Cir. 10/16/23) (rev’g for abuse of discretion denial of Daubert motion where damages expert’s calculation of imported sales was based on calculations using customer sales and importations of non-infringing products); Niazi (Fed. Cir. 04/11/22) (aff’g exclusion of expert opinion because he failed “to limit damages to a reasonable approximation of actual infringing uses of the claimed method”).
  • Court May Award Zero Damages: Sec. 284 “does not require an award of damages if none are proven that adequately tie a dollar amount to the infringing acts.” TecSec (Fed. Cir. 10/23/20) (aff’g award of zero damages where only direct infringement proven but damages theory limited to indirect infringement); Promega II (Fed. Cir. 11/13/17) (aff’g trial court that patent owner’s “all-or-nothing damages strategy” had waived any damages theory based on a subset of the infringer’s worldwide sales, leaving patent owner with no damages, despite finding of infringement).
  • Damages For Multiple Types Of Liability Limited When Based On Sale Of Same Goods: Tex. Advanced (Fed. Cir. 05/01/18) (vacating monetary award for patent infringement; awarding damages for both trade secret misappropriation and patent infringement (based on same feature) was improperly duplicative to the extent based on same defendant sales of same products).
  • Damages Verdict Based On Multiple Patents Sometimes May Stand When Some Of The Patents Are Declared Invalid Or Non-Infringed: If a jury renders “a single verdict on damages, without breaking down the damages attributable to each patent, the normal rule would require a new trial as to damages” when one of the patents is found to not support damages. Verizon (Fed. Cir. 09/26/07). But a single damages award based on multiple patents can be sustained if the remaining infringed patent was necessarily infringed by all of the accused activity on which the damages award was based. WesternGeco (Fed. Cir. 01/11/19); Hologic I (Fed. Cir. 04/22/20) (aff’g upholding of single verdict of damages even though one patent was later invalidated, where patent owner expert testified that same royalty applied whichever patent was infringed and defendant presented no contrary evidence to the jury).
  • TIPS:

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