June 12th, 2019
Summary: A finding of infringement may result in an award of actual damages or a reasonable royalty to a patent owner. To be entitled to actual damages, the patent owner must at least prove the absence of acceptable noninfringing alternatives. Even if the accused infringer did not have an acceptable noninfringing alternative on the market during the period of infringement, the accused infringer may prove that it had the necessary infrastructure and understanding to make such an alternative. However, courts have held that design-arounds to patented technology involving high costs and/ or requiring a substantial period of time for production may weigh against a finding of availability of a noninfringing alternative.
The United States District Court for the Southern District of Ohio recently addressed the availability of noninfringing alternatives in Ethicon Endo-Surgery, Inc. v. Covidien, Inc., No. 1:11-cv-871, slip op. at 34-39 (S.D. Ohio May 16, 2019). In particular, the district court held that Covidien, Inc.’s (“Covidien”) design-around options, which would require at least ten months for production, to Ethicon Endo-Surgery, Inc.’s (“Ethicon”) patented technology would not qualify as an available noninfringing alternative. Id. at 39.
Ethicon is a manufacturer of ultrasonic surgical devices and has a patent portfolio covering those devices marketed under the “Harmonic” brand. Id. at 2. Covidien is a manufacturer of laparoscopic, ultrasonic dissection devices marketed under the “Sonicision” brand. Id. Generally, these devices are surgical shears which include an ultrasonic surgical blade for transecting and sealing blood vessels. Id. at 5-13. In addition, the devices include a spring for limiting a clamping force that results in a particular pressure exerted on tissue in contact with a clamping surface area. Id. at 6-8.
Initially, in 2011, Ethicon sued Covidien alleging infringement of several of its patents. Id. at 2. While the district court granted summary judgment in favor of Covidien on the issues of both noninfringement and invalidity, the Federal Circuit reversed the court’s ruling in part, holding that none of the patents were invalid. Id. (citation omitted). Subsequently, in another suit, Covidien sought a declaratory judgment of noninfringement of several of Ethicon’s patents and Ethicon counterclaimed alleging infringement of various patents. Id. at 2-3. After that action was consolidated with the 2011 suit, the parties agreed to dismiss all of the claims relating to all of the patents, except U.S. Patent No. 9,168,055 (the “’055 patent”). Id. at 3. During trial, the district court granted Ethicon’s motion for summary judgment of infringement of certain claims of the ’055 patent and denied Covidien’s motion for summary judgment that the ’055 patent was invalid for lack of written description or obviousness. Id. at 21, 28, 34. Because Covidien was found to have infringed at least one claim of the ’055 patent, the court then addressed the issue of damages. Id. at 34.
Upon a finding of infringement, 35 U.S.C. § 284 (2012) provides that “the court shall award . . . damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.” Accordingly, the patent owner may be entitled to actual damages (e.g., lost profits) or a reasonable royalty. Ethicon Endo-Surgery, slip op. at 34-35. With respect to actual damages and in particular lost profits, the patent owner must show “causation in fact” and establish that “but for” the infringement, the patent owner would have made the sales and additional profits. Grain Processing Corp. v. American Maize-Prods. Co., 185 F.3d 1341, 1349 (Fed. Cir. 1999). To satisfy this burden, the patent owner must prove the following: (1) demand for the patented product; (2) absence of acceptable noninfringing alternatives; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of the profit it would have made. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978).
With respect to the second Panduit factor, “a noninfringing alternative need not be on the market during the infringement period to factor into a lost profits analysis.” Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1298 (Fed. Cir. 2007). In this regard, while a court may infer that a noninfringing alternative was not available, the accused infringer may overcome such inference by proving a noninfringing alternative was in fact available. Grain Processing, 185 F.3d at 1353 (citation omitted). For instance, the accused infringer may demonstrate that they possessed “the necessary equipment, know-how, and experience” to make a noninfringing alternative during the period of infringement. Id. at 1354-55. However, high material costs or a need to design-around patented technology for the development and manufacture of an alternative may weigh against a finding of availability. Micro Chem., Inc. v. Lextron, Inc., 318 F.3d 1119, 1123 (Fed. Cir. 2003) (citation omitted) (finding that the purported non-infringing alternative was not available at the time of infringement based on design-around activity after infringement was established).
Turning back to the present case, both Ethicon and Covidien focused their summary judgment motions on the second Panduit factor. Ethicon Endo-Surgery, slip op. at 35. In particular, Ethicon contended that Covidien’s noninfringing alternatives were neither acceptable nor available. Id. As an initial matter, Covidien did not dispute the absence of a noninfringing alternative on the market during the period of infringement. Id. at 36. Instead, Covidien contended that two acceptable noninfringing alternatives were available during this time period. Id. at 37. In particular, Covidien presented a first design-around option that would have applied a pressure on tissue in contact with a clamping surface area that was outside of the claimed range of the ’055 patent. Id. In addition, Covidien presented a second design-around option that would have replaced the spring required by the ’055 patent with a rigid member. Id. However, Covidien’s expert indicated that the first design-around option would take “an estimated 46 weeks and $390,000” while the second design-around option would take “an estimated 62 weeks and $675,000.” Id. at 38-39. Accordingly, either design-around option would have taken at least ten months. Id. at 39.
As a result, the court found that Covidien failed to overcome the inference of non-availability and thus Covidien’s alleged noninfringing alternatives were not available at the time of infringement. Id. at 37, 39; see also Micro Chem., 318 F.3d at 1123 (finding that a noninfringing alternative was not available because it took over four months to convert the infringing devices to noninfringing devices); cf. Grain Processing, 185 F.3d at 1346 (finding that even though the noninfringing alternative was not on the market at the time of infringement, “it took only two weeks to perfect the [alternative] and begin mass produc[tion]”).