Panduit Prevents Apportioning the Profit Pie
In a split decision, the US Court of Appeals for the Federal Circuit denied an application by EVE-USA et al. for a panel or en banc rehearing on the issues of apportionment and assignor estoppel. Mentor Graphics Corp. v. EVE-USA, Inc. et al, Case Nos. 15-1470; -1554; -1556 (Fed. Cir., Sept. 1, 2017) (per curiam) (Stoll, J, concurring) (Dyk, J, dissenting) (Moore, J, concurring on assignor estoppel).
The prior three-judge panel found that even though a multi-component product was at issue in this case, apportionment was not called for because two of the Panduit factors for lost profits, i.e., demand for the patented product and absence of acceptable non-infringing alternatives, had tied the Panduit factors to the specific claim limitations and essentially incorporated apportionment in its analysis (IP Update, Vol. 20, No. 4). EVE-USA sought en banc review of the panel decision as it relates to apportionment principles in the context of a multi-component infringing product.
The majority of the en banc panel agreed with the original panel decision that these Panduit factors took into account the demand for the accused product as a whole and for the particular patented features allowing for a claim of the total lost profits. The Court allowed that apportionment is typically necessary in lost profit cases, but that in this narrow case the customers would not have purchased the accused device but for the patented features, and therefore the Panduit factor analysis was sufficient to justify total lost profits.
Judge Dyk, joined by Judge Hughes, dissented from the decision not to rehear the panel’s apportionment decision en banc. The dissenters argued that the Court’s logic effectively eliminated apportionment whenever the Panduitfactors for lost profits are met, thereby precluding apportionment where lost profits are granted. Although they agreed that the “but for” factors for lost profits are incorporated into these two Panduit factors, the two dissenters did not agree that “but for” was enough for total lost profits. Although the accused device would not have been sold but for the patented feature, it might equally not have been sold but for an unpatented feature, making a claim on the full profits inappropriate. The patent holder could claim only the value that his invention added to the accused device, and determining the value of the accused product features is at the core of apportionment. A combination of “but for” and consumer demand could not replace the entire market value rule.
The dissenters further argued that the district court had erred by excluding evidence on apportionment at trial and later recognized its error in its ruling denying the post-trial motion for a new trial. The dissenters concluded that the panel had overstepped by raising arguments that the patentee had specifically dismissed, and that this was an important enough issue that en banc hearing was warranted.
EVE-USA also petitioned for panel rehearing on the issue of assignor estoppel, arguing that the doctrine should be abolished. In a concurrence by Judge Moore, joined by Judge Chen, the Court refused EVE-USA’s request to reverse the panel’s application of the doctrine of assignor estoppel. EVE-USA argued that assignor estoppel was effectively precluded by the Supreme Court of the United States’ abolishment of the supposedly analogous licensee estoppel, but the concurrence found this argument overreaching. The similarity of the two doctrines is questionable, since the actions and duties of an assignor are very different from those of a licensee.