Page 131 - Intellectual Property Disputes

In Aero Products International, Inc. v. Intex Recreation Corp., fn 98 the Federal Circuit overturned the
district court’s verdict on damages stemming from an action involving both patent and trademark
infringement. A jury awarded $6.9 million in damages, comprised of $2.95 million in patent
infringement damages that was doubled to $5.9 million and $1 million in trademark infringement
damages. The defendant appealed claiming impermissible double-recovery. Upon appeal, the Federal
Circuit found that the damages awarded did constitute impermissible double-recovery and reduced the
award by $1 million. The court stated that when patent damages and trademark damages are both based
on the same operative facts, for example, same sales of accused products, the plaintiff cannot receive
damages for both causes of action. Because the plaintiff brought forth no evidence at trial regarding the
defendant’s use of the mark "ONE TOUCH" except in connection with the sales of the accused product,
the same sales also formed the basis for the plaintiff’s patent infringement claim. The court found that
the plaintiff was fully compensated for the patent infringement when it was awarded a reasonable
royalty based on sales of the infringing product. The plaintiff could not also be awarded the defendants’
profits for trademark infringement based on the exact same sales.

The principal basis for the Federal Circuit’s opinion was that both trademark and patent claims were tied
to the same sale. "As just seen, the record demonstrates that Aero based both its patent and trademark
damages solely on sales of the accused Intex mattresses. Aero did not rely on any other evidence in
support of its trademark damages." Accordingly, the Federal Circuit determined that "Aero was fully
compensated for defendants’ patent infringement when it was awarded a reasonable royalty for patent
infringement based on sales of the infringing Intex mattresses. It could not also be awarded defendants’
profits for trademark infringement based on the same sales of the same accused devices." fn 99 Therefore,
the Federal Circuit concluded the district court erred in allowing the jury’s award of $1 million in
trademark infringement damages and vacated the award.

In MedImmune, Inc. v. Genentech, Inc., the Supreme Court held "that petitioner was not required,
insofar as Article III [of the U.S. Constitution] is concerned, to break or terminate its 1997 license
agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid,
unenforceable, or not infringed." "The licensee argued that it paid the royalties under protest to avoid the
serious potential consequences of the licensors’ threatened infringement action, and that the licensee was
not required to actually suffer those consequences as a precursor to seeking judicial relief." The
Supreme Court agreed that "[t]he licensee’s promise, in the licensing agreement, to pay royalties on
patents that had not been held invalid did not amount to a promise not to seek a holding of their
invalidity." "The licensee’s self-avoidance of imminent injury by paying the royalties was coerced by
the threatened enforcement action of the licensors, and the coercive nature of the exaction of royalties
preserved the licensee’s right to recover the royalties paid or to challenge the legality of the licensors’
demand for royalties." Consequently, it ruled that the Court of Appeals "erred in affirming the dismissal
of this action for lack of subject-matter jurisdiction." fn 100

The practitioner should work with client’s counsel to understand any issues surrounding standing to
collect damages, and whether any disputed issues of standing suggest that alternative damages scenarios
may need to be presented.

fn 98 Aero Prods. Int’l, Inc. v. Intex Rec. Corp., 466 F.3d 1000 (Fed. Cir. 2006). The trademark at issue is "ONE TOUCH" used on
inflatable mattresses.

fn 99 Id.

fn 100 MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007).

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