Page 38 - Intellectual Property Disputes

and a correspondingly greater share of Mor-Flo’s sales. If it is wrong in whole or in part, State
Industries would have been entitled to its current share or to a lesser increase in share. fn 25

The patent holder in State Industries was allowed to recover lost profits to the extent of its 40% national
market share. fn 26 Additionally, the Federal Circuit determined that the lower court did not err in its
determination of a reasonable royalty, which applied to the remaining 60% of infringing sales. fn 27

In performing a market share analysis, the expert may consider recasting the market without the
infringing product’s sales, as depicted in the following figure.

With the market defined as including the defendant’s infringing sales, the plaintiff’s actual, unadjusted
market share is 50% (left pie chart). With the infringing sales excluded from the market, the plaintiff’s
market share is 67% (right pie chart). fn 28

The plaintiff’s ability to satisfy the second Panduit factor often hinges on (a) the interpretation of the
relevant market and (b) what the consumer was looking for when purchasing the infringing item.
Although the relevant market might be argued as encompassing nearly all competing substitute products,
the Federal Circuit has narrowed the scope of the patent holder’s burden by ruling that substitute
products, which incorporate some, but not all, of the elements of the patented invention, do not
necessarily constitute an acceptable substitute. Specifically, in Standard Havens Products, Inc. v.
Gencor Industries, Inc., the Federal Circuit ruled that

fn 25 Id.

fn 26 Id. at 1579.

fn 27 Id. at 1575.

fn 28 When determining the reconstructed market share, the plaintiff’s adjusted market share is calculated as 50% (plaintiff’s actual
market share) divided by 75% (the combined market share of plaintiff’s sales [50%] and other non-infringing sales [25%], which
excludes the infringing sales).

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