“An Unusual Case” – Promega Corp. v. Life Technologies Corp.
I am going to try to summarize the Fed. Cir.’s holding and reasoning in Promega Corp. v. Life Tech Corp., Appeal No. 2013-1011 et al. (Fed. Cir., November 13, 2017), without burying you in the procedural details, but it won’t be easy.
In Promega I, 773 F.3d at 1341, the Fed. Cir. reversed a district court verdict that Promega was entitled to $52 million in lost profits for Life’s worldwide and/or U.S. sales of a test kit Life put together in England using one component imported from the United States. The only foundation under the damages calculation was the worldwide sales figures (about $708 million).
Infringement under both 271(a) (direct infringement due to U.S. sales) and sales under 271(f)(1) (liability for sales anywhere if a defendant supplies all or a “substantial portion” of the components of a patented invention that are assembled abroad) were both at issue. Remember, that if a defendant violates 271(f)(1), all of the sales of the finished invention (the test kit) are treated as if they were direct infringement under 271(a).
Life appealed to the Supreme Court, that sided with Life and with the district court and held that providing a single component of a multi-component device does not meet the statutory requirement that the defendant provide (or cause to be provided) a “substantial portion” of the components of the finished invention. 137 S.Ct. 734 (2017).
Now, on remand, it became important that Promega had previously stated that it was not seeking a reasonable royalty for any of the sales, but sought only lost profits, as damages. The question presented to the Fed. Cir., since the Supreme Court had voided the possibility of infringement under 271(f)(1), and thus the possibility of using worldwide sales as the basis for calculating damages, was the sufficiency of Promega’s evidence of profits due to U.S. sales.
The Fed. Cir. called the insistence on being awarded damages for lost profits an “all-or-nothing” strategy. Promega ended up with no damages and no chance of a new trial on damages, since the district court and the Fed. Cir. found that Promega had failed to present evidence of any amount of damages due to direct infringement in the U.S., even though the Fed. Cir. agreed that some direct infringement had occurred. (You can stop reading now, if you wish, since the salient points of this convoluted litigation have been covered.)
At the district court, Promega was given an opportunity to present additional evidence on infringement damages, particularly damages for U.S. sales under 271(a). Promega provided some evidence of sales by Life to certain law enforcement agencies in the U.S. and that a certain type of kit required Life to send two components of the kit abroad, but the Fed. Cir. concluded that “Promega did not proffer evidence or elicit testimony intended to prove a specific amount of domestic, foreign or any other subset of total sales.”
Slip. op. at 8. In crafting jury instructions, Promega “sought to prevent the jury from calculating separated damages numbers under 271(a) and 271(f)(1), proposing instead that the jury calculate a single damages amount.”
As noted above, the jury awarded $52 million in lost profits. At the hearing for the JMOL, Promega continued to argue that the singe provided component, a polymerase, qualified as a substantial portion of the accused products. The district court disagreed with the substantial portion argument that led to its ruling that Promega had waived any argument that the evidence at trial could support a damages calculation based on any subset of total sales. Slip op. at 11.
The court also denied Promega’s motion for a new trial on the basis that Promega had waived any arguments based on a subset of worldwide sales by failing to respond to Life’s arguments on this issue in its JMOL briefing. Id.
However, once the Supreme Court held that a single component could not constitute a substantial portion of the components, Promega’s worldwide sales argument was gone. At the Fed. Cir., Promega argued, in part because Life had admitted 271(a) direct infringement in the U.S., that the Fed. Cir. should reinstate the judgment of infringement and order a new trial on damages. Instead, the Fed. Cir. agreed with the district court that Promega “waived any argument that the trial record could support a damages award based on a subset of total sales by wholly failing to address Life’s argument on this point.” Slip op. at 17.
There are other fine points of procedure that you may grapple with, or dissect at your leisure. My overall impression is that the Fed. Cir. might have sided with Promega’s request for a new trial on damages if the panel had not felt that Promega’s waiver was so unambiguous and so consistent; even when Promega might have introduced more evidence of U.S. sales and profits, it simply guarded its one egg, but the basket of law around it didn’t hold.
Since the change in the law doctrine has been a factor in some other recent cases, it is worth noting that the Fed. Cir. also noted that “this is not a case where a change in law provides an exception to the law of the case doctrine…The only relevant law affecting the outcome in this case that was addressed by the Supreme Court was the “substantial portion” provision of 272(f)(1). No law stood in the way of Promega’s proving liability and damages separately under 271(a) and Promega’s reading of 271(f)(1) was untested.” Slip. op. at 25.