Design Patent Owner Entitled to Lost Profits Based on Entire Infringing Product: Federal Circuit | Practical Law

Design Patent Owner Entitled to Lost Profits Based on Entire Infringing Product: Federal Circuit | Practical Law

In Nordock, Inc. v. Systems, Inc., the US Court of Appeals for the Federal Circuit reversed and remanded the district court's decision to deny Nordock, Inc.'s motion for a new trial to calculate damages for infringement of its design patent, holding that recovery under 35 U.S.C. § 289 should be based on the infringer's total profits from the infringing product and not just the portion of the product covered by the design patent.

Design Patent Owner Entitled to Lost Profits Based on Entire Infringing Product: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 30 Sep 2015 • USA (National/Federal)
In Nordock, Inc. v. Systems, Inc., the US Court of Appeals for the Federal Circuit reversed and remanded the district court's decision to deny Nordock, Inc.'s motion for a new trial to calculate damages for infringement of its design patent, holding that recovery under 35 U.S.C. § 289 should be based on the infringer's total profits from the infringing product and not just the portion of the product covered by the design patent.
On September 29, 2015, in Nordock, Inc. v. Systems, Inc., the US Court of Appeals for the Federal Circuit reversed and remanded the US District Court for the Eastern District of Wisconsin's decision to deny Nordock, Inc.'s motion for a new trial to calculate damages under 35 U.S.C. § 289 for infringement of its design patent (Nos. 2014-1762, -1795, (Fed. Cir. Sept. 29, 2015)). Notably, the court held that under § 289, recovery for infringement of a design patent should be based on the infringer's total profits from the infringing product and not just the portion of the product covered by the design patent.
This case involves US Design Patent No. D579,754 (the D'754 patent), owned by Nordock, which claims the ornamental design of a lip and hinge plate for a dock leveler used to create a level surface between a loading dock and truck bed. Nordock brought suit against its rival, Systems, Inc. claiming that Systems' hydraulic dock levelers infringed the D'754 patent. After trial, a jury found that the patent was not invalid and was infringed, and awarded Nordock $46,825 as a reasonably royalty payment. The jury also found that Systems' profits were $0.
Both parties then filed post-trial motions. Among other motions, Nordock moved to amend the damages judgment, or in the alternative, for a new trial on damages, arguing that under 35 U.S.C. § 289, it was entitled to recover Systems' profits for the latter's sales of the infringing dock levelers. The district court denied this motion, stating that:
  • The jury reasonably based its verdict on the presented evidence.
  • The jury was instructed that it could award Nordock:
    • compensatory damages in the form of either lost profits or a reasonable royalty under 35 U.S.C. § 284; or
    • an amount equal to Systems' profits as a measure of potential recovery with respect to the sale of each infringing product.
  • The jury heard testimony on lost profits but chose to award a reasonable royalty.
On appeal, Nordock argued that:
  • The district court relied on Systems' expert's legally deficient "cost savings" methodology to determine that Systems' profits were less than $15 per dock leveler.
  • There is no credible evidence that Systems' profits on its sales of the infringing levelers was $0.
  • The district court erred in its jury instructions on damages.
The Federal Circuit held that the district court had erred in denying Nordock's motion and remanded the case back for a new trial on damages. The court explained that:
  • The district court erred in relying on Systems' expert's cost savings methodology rather than the gross profits methodology required by law because:
    • the cost savings methodology is inconsistent with § 289, which provides for recovery of the infringer's total profits from the product with the patented design;
    • the methodology ignores the fact that total profits are based on the entire article of manufacture not just a portion of it, in this case the lip and hinge;
    • apportioning profits in the context of design patent infringement is not appropriate; and
    • no reasonable jury could have believed Systems' expert's testimony that profits were less than $15 per unit.
  • There is no credible evidence that Systems' profits on its sales of the infringing products was $0 and a new trial is warranted.
  • The district court confused the interplay between § 289 and § 284 and erred to the extent it believed that the jury could simply choose between awarding damages under either section. An award of § 284 damages is appropriate only where § 289 damages are not sought, or are less than would be recoverable under § 284.
Finally, the Federal Circuit rejected Systems' cross-appeal and affirmed the district court's decision to deny both Systems' motion for judgment as a matter of law as to validity of the patent and its FRCP 59(e) motion to amend judgment of infringement on a specific product that Systems argued had not been supported by evidence at trial.