Brief Fact Summary. Rite-Hite (Plaintiff) was awarded damages for lost sales of products not covered in the patent.
Synopsis of Rule of Law. (1) 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. (2) The “entire market value rule” requires that the unpatented component must function together with the patented component in some manner to produce a desired end.
Damages have been said to constitute the difference between his pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.
View Full Point of LawIssue. (1) If a particular injury was or should have been reasonably foreseeable by an infringing competitor in the relevant market, broadly defined, is that injury generally compensable? (2) Does the “entire market value rule” require that the unpatented component function together with the patented component in a way that would produce the desired result?
Held. (Lourie, J.) (1) Yes. If a particular injury was or should have been reasonable foreseeable by an infringing competitor in the relevant market, broadly defined, that injury is generally compensable. (2) Yes. The “entire market value rule” requires that the unpatented component must function together with the patented component in a way that would produce the desired result. If an unpatented component does so, then the entire value market rule allows recovery of damages based on the value of the patentee’s entire apparatus. In this case, the dock levelers were sold only for marketing reasons; they did not operate together to achieve one result. The damages award based on the lost sales of the dock leveler is vacated.
Dissent. (Nies, J.) Diversion of ADL-100 sales is not an injury to Plaintiff’s property rights granted by the patent. Damages should be limited to the lost MDL-55 sales.
Concurrence. (Newman, J.)Â Eliminating recovery of actual damages serves no law or policy when patents are involved. Damages for the dock levelers should be granted.
Discussion. Note that both dissents also concur in part, and completely contradict each other. Judge Nies found for Defendant on both appealed claims, but Judge Newman found for Plaintiff on both. Judge Newman felt the marketing interdependence of the product was much more significant than “functionality.” Judge Nies supported his argument with case law and a policy argument that incentive for investing in patented products would fade if a new product’s patent protected both the status quo and lost profits for the old.