Page 55 - Intellectual Property Disputes

required even for non-royalty forms of damages." (citing Garretson, 111 U.S. at 121)); VirnetX,
Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014) ("No matter what the form of the
royalty, a patentee must take care to seek only those damages attributable to the infringing
features" (citing Garretson, 111 U.S. at 120-21)). In this case, apportionment was properly
incorporated into the lost profits analysis and in particular through the Panduit factors. Panduit's
requirement that patentees prove demand for the product as a whole and the absence of non-
infringing alternatives ties lost profit damages to specific claim limitations and ensures that
damages are commensurate with the value of the patented features. We leave for another day
whether a different theory of "but for" damages adequately incorporates apportionment
principles.[7] We hold today that on the undisputed facts of this record, satisfaction of the
Panduit factors satisfies principles of apportionment: Mentor's damages are tied to the worth of
its patented features....

Panduit limits lost profits to sales where there are no acceptable non-infringing alternatives that
the customer would have purchased. We hold that the district court did not err in refusing to
further apportion lost profits after the jury returned its verdict applying the Panduit factors. We
conclude that, when the Panduit factors are met, they incorporate into their very analysis the
value properly attributed to the patented feature. We affirm the district court's denial of judgment
as a matter of law and/or motion for new trial with regard to damages. fn 104

Convoyed or Collateral Sales

Lost profits can be awarded for the lost sales of ancillary or accessory products (that is, convoyed or
collateral sales). Convoyed sales generally include sales of products not covered by the intellectual
property in suit but that are caused by the sale or use of that intellectual property, for example, the
unpatented juice mix used in a patented juice machine.

When determining whether a patent holder may recover damages for convoyed sales, the expert should
be careful to distinguish that issue from the application of the entire market value rule. The entire market
value rule allows for the recovery of damages based on the value of an entire apparatus containing
several features, even though only one feature is patented. fn 105 In contrast, convoyed sales are of items
that are not typically a physical part of the original device but which are sold as a result of the sale of the
patented item.

The Federal Circuit has stated that "[t]he expression ‘convoyed sales’ should preferably be limited to
sales made simultaneously with a basic item; the spare parts here should best be called ‘derivative
sales.’" fn 106 "[I]t is not the physical joinder or separation of the contested items that determine their
inclusion in or exclusion from the compensation base for computing a royalty ... so much as their
financial and marketing dependence on the patented item under standard marketing procedures for the
goods in question." fn 107

fn 104 Mentor Graphics Corporation v. EVE-USA, Inc., No. 15-1470 (Fed. Cir. Mar. 21, 2017) (Moore, J.)

fn 105 Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 22 (Fed. Cir. 1984).

fn 106 Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 881n8 (Fed. Cir. 1995).

fn 107 Leesona, 599 F.2d 958, 974, cert. denied, 444 U.S. 991 (1979).

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