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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

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