Panduit Corp. v. Stahlin Bros. Fibre Works, Inc. (901422128)

Read for 4/27/11

Reading Notes

• Decided by the CAFC in 1978
• Reverse and remand decision of the DC to award 2.5% as a reasonable royalty for infringement
• Panduit sued Stahlin for infringement of a patent for covering duct for wiring of electrical control systems
  • Affirmed on appeal
• Also found them in contempt for violating the injunction
• The patent was bought from GE after they were found in an interference hearing to have invented it first
• Seek damages for lost sales as well as lost profits due to Stahlin's price cut
  • Denied both by the DC
• Panduit did (1) and (3) below
  • Master found substitutes under (2) but the CAFC says this was in error
  • Still doesn't prove (4)
    • No fair determination of the amount of profit he could have made
    • Lack of evidence on Panduit's fixed costs - deficient accounting
• Affirm the DCs decision with regard to lost profits on lost sales
• Master found any loss due to price reduction was made up for by sales volume as a result of that price cut
  • Net increase in profit
• Affirm DC's ruling on losses from price cut
• Key element of royalty determination is to return to original date of infringement (March 6, 1962)
• Stahlin made over $1 million from infringing sales
• Can't assume the original royalty because then the infringer loses nothing
• CAFC finds error with the master's findings with regards to substitutes
  • By infringing Stahlin pays tribute to the utility of the device
  • All the competition was also infringing
  • Found evidence of substantial customer preference
• The royalty rate suggested by the master and adopted by the DC is erroneous
• Master was also wrong about Panduit's inability to maintain a high price differential as well as their awareness at the time of future price cuts
  • Erroneously relied on expert testimony
    • Had no experience in royalty determination, only licenses
• Factors to consider on remand:
  • Lack of substitutes
  • Panduit's policy of no licensing the patent
  • Future business and attendant profit Pranduit would expect to lost by licensing
  • Infringed patent gave the entire marketable value to the infringed duct

Remedies

• 35 USC 283 states that a patent owner should receive "damages adequate to compensate for the infringement"
  • Statutory rule says only damages can be recovered - "compensation for the pecuniary loss he has suffered from the infringement, without regard to the question whether the defendant has gained or lost by his unlawful acts"
• Have to ask what the patent holder would have made if the infringement hadn't happened
• To receive damages for lost sales must prove:
  • Demand for product
  • Absence of non-infringing substitutes
  • Manufacturing and marketing to exploit demand
  • Amount he would have made
• Reasonable royalty is awarded when lost profits cannot be proven