Page 41 - Intellectual Property Disputes

plaintiff, along with the defendant, controlled 95% of the market and, therefore, a two-supplier market
existed. The court accepted the plaintiff’s calculation of damages based upon lost sales of an entire
burner assembly as well as a full set of logs. The defendant appealed, arguing that the plaintiff had failed
to prove the parties were competing for sales of two-burner installations, the calculation of the plaintiff’s
margin was inaccurate, and certain sales should be excluded because they were returns from distributors.
The district court’s damages theory was reviewed for abuse of discretion, and factual findings were
reviewed for clear error. The Federal Circuit found that the patentee provided sufficient evidence
regarding the probability that the sales would have been made but for the infringement. "By coming
forward with no quantitative evidence to rebut this testimony, Peterson left itself open to the inference
reasonably drawn by the district court." fn 36 On the issue of the returns from distributors, the court found
that no lost sale existed upon which to base a damages award because no act of infringement occurred
and vacated the award on this limited basis. The case was remanded to reexamine and recompute
damages, if necessary, to exclude the returned units from the calculation of damages.

In Calico Brand, Inc. and Honson Marketing Group, Inc. v. Ameritek Imports, Inc. and Acme
International Enterprises, Inc., the district court supported a claim for lost profits damages, noting that
the second Panduit factor can be satisfied by applying the market share approach in instances when non-
infringing alternatives exist. However, on appeal, the Federal Circuit vacated the lost profits award,
concluding that application of the market share approach does not necessarily apply if the plaintiff
cannot establish a reasonable probability that it would have made additional sales.

We hold that Calico failed to demonstrate a reasonable probability that, in the absence of the
infringing Ameritek lighters, Acme and/or its customers would have purchased Calico lighters
rather than the non-infringing alternatives...Under these facts, Calico’s failure to establish that its
lost sales were a direct result of Acme’s sales of infringing lighters, and not due to the sales of
non-infringing lighters, precludes the recovery of lost profits.

...Given the crowded nature of this market, there is no reasonable basis to support an assumption
that Calico would have made additional sales "but for" the presence of Ameritek lighters. The
record evidence shows that there were 20 to 30 brands of utility lighters comparable to the
Ameritek product.

...

At trial, [Acme] offered unrebutted testimony that Acme had an established practice of
purchasing utility lighters from a California manufacturer that were interchangeable with the
Calico lighters. J.A. 184; see also J.A. 189 (testifying that there were a variety of other suppliers
whose utility lighters did not differ from the Ameritek product in terms of price, functionality, or
consumer preference). A seamless substitution of the asserted product with a non-infringing,
alternative product that is sourced from a third party supplier, is evidence of acceptable non-
infringing alternatives under the second Panduit factor.

fn 36 Id. The court also rejected "Peterson’s arguments regarding the profit margins on each lost sale. The district court based its
findings on both documentary and testimonial evidence, and Peterson has failed to convince us that these findings were clearly
erroneous."

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