Rite-Hite made a popular
device to help trucks back up into loading docks called the ADL-100.
Rite-Hite had also invented
and got a patent on a different kind of device to help trucks back up
into loading docks called the MDL-55. It was a lot less popular than the
ADL-100.
Rite-Hite also made a number
of other unpatented accessories (e.g. 'dock levelers') that were designed
to be installed along with ADL-100 and MDL-55.
Kelly was a competitor that
made a device designed to compete with the ADL-100. Rite Hite sued for infringement.
Rite Hite argued that
Kelly's device infringed on their patent on the MDL-55. (Despite the
fact that Kelly was selling their device as a competitor to the ADL-100).
The Trial Court found for Rite
Hite. Kelly appealed.
The Trial Court found that
damages should be calculated by determining how many more sales Rite Hite
would have made "but for" Kelly's infringement.
See 35 U.S.C. §284.
The Court found that Rite
Hite would have sold 80 more MDL-55s, 3,200 more ADL-100s, and a bunch of
'dock levelers' if it wasn't for Kelly's infringement.
Kelly argued that since they
didn't infringe any patents on the ADL-100 and the 'dock levelers' were
unpatented, they shouldn't have to pay for those lost sales. The damage
award should be limited to only the MDL-55 sales, since that was the
patent they infringed.
The Appellate Court partially
affirmed and partially reversed.
The Appellate Court found
that damages from §284 should be
limited to things that are reasonably, objectively foreseeable.
The Court found that it was
reasonably, objectively foreseeable that Kelly was infringing sales of
the ADL-100, so those lost sales should be included in the damage award
even though Kelly didn't infringe any patent associated with the
ADL-100.
There needs to be 'but for'
causation in order to include the claim in the damage award.
With regard to the 'dock
levelers', the Court reversed. The Court found that under the entire
market value rule, when there was an
infringement of a patent that represented a small component in a larger
machine, the value of lost sales of the larger machine would only be
awarded if it could be shown that the entire value of the whole machine
was properly and legally attributable to the patented component.
See Paper Converting
Machine Co. v. Magna-Graphics Corp.
(745 F.2d 11 (1984)).
The Court found that the entire
market rule didn't cover accessories
or other things that were sold as a matter of convenience or business
advantage.
In addition, they aren't
covered because the 'dock levelers' weren't part of the same physical
unit as the patented product. They were a separate thing.
In a dissent it was argued that
Rite-Hite had a patent on the ADL-100 and Kelly hadn't been accused of
infringing it, so how could Rite-Hite get damages?
What if a third-party company
could show that they lost sales on their product also? Would they be able
to claim damages even though they didn't own the MDL-55 patent?
Basically, under the entire
market value rule you can only get the
value of a larger product if you show that the small, patented component
is what drives sales.
So for example if you had a
patent on automatic locks for a car, you probable can't get damages for
the entire cost of the car since no one buys a car because they like the
automatic locks.
