Page 87 - Intellectual Property Disputes

stronger position to negotiate for a lower royalty rate knowing it had a competitive non-infringing
device in the wings." fn 98 The infringer must establish that (a) the alternative is sufficiently similar to the
infringed patent, and (b) the non-infringing alternative was available, that is, in existence and covered by
a patent owned by a third party, at the time the infringement began. fn 99 The patent owner may counter
that the fact that the infringer opted for the patented technology reveals the advantages of the patented
technology over alternatives. fn 100

In Mars, the Federal Circuit explained that a non-infringing alternative is not necessarily a cap on
damages. Coinco argued that "an infringer should not be required to pay more in reasonable royalty
damages than it would have paid to avoid infringement in the first place by switching to an available
non-infringing alternative." The court found that this rationale failed for two reasons:

1. First...the district court found...that the available "design around was not as good as it would
like." There was, therefore, no available and acceptable non-infringing alternative to which
Coinco could have switched at the time of the hypothetical negotiation; there was merely the
possibility that it could have come up with one.

2. Second, even if Coinco had shown that it had an acceptable non-infringing alternative at the time
of the hypothetical negotiation, Coinco is wrong as a matter of law to claim that reasonable
royalty damages are capped at the cost of implementing the cheapest available, acceptable, non-
infringing alternative...To the contrary, an infringer may be liable for damages, including
reasonable royalty damages, that exceed the amount that the infringer could have paid to avoid
infringement. fn 101

In addition, the court rejected Coinco’s position that a reasonable royalty, when applied to an infringer’s
sales, "can never result in an infringer operating at a loss." fn 102

The Federal Circuit, in its 2015 decision in AstraZeneca AB v. Apotex Corp., noted the following:

When an infringer can easily design around a patent and replace its infringing goods with non-
infringing goods, the hypothetical royalty rate for the product is typically low...("The economic
relationship...between the patented method and non-infringing alternative methods, of necessity,
would limit the hypothetical negotiation."). There is little incentive in such a situation for the
infringer to take a license rather than side-step the patent with a simple change in its technology.
By the same reasoning, if avoiding the patent would be difficult, expensive, and time-consuming,
the amount the infringer would be willing to pay for a license is likely to be greater. fn 103

fn 98 Zygo Corp. v. Wyko Corp., 79 F.3d 1563, 1571–72 (Fed. Cir. 1996).

fn 99 See, generally, D. Chisum, 7 Chisum on Patents, § 20.03[3][b][v] (2000).

fn 100 See, for example, GNB Battery Techs., Inc. v. Exide Corp., 886 F. Supp. 420, 439 (D. Del. 1995).

fn 101 Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008).

fn 102 Id.

fn 103 Astrazeneca AB v. Apotex Corp., 782 F. 3d 1324 – (Fed. Cir. 2015).

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