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

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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