Tuesday, October 03, 2006

Actual Damages On Trademark and Patent Infringement Impermissible Double-Recovery

Aero Products Int'l v. Intex Recreation Corp. (05-1283) - October 2, 2006

Aero sued Intex Recreation Corp. for infringement of U.S. Patent No. 5,367,726 ("the ’726 patent") and for infringement of Aero’s registered trademark "ONE TOUCH." Following a jury trial, the district court entered judgment of infringement in favor of Aero with respect to the asserted claims of the ’726 patent and with respect to Aero’s trademark claim. Based upon that judgment, the court awarded Aero damages in the total amount of $6.9 million.

Intex appealed, arguing that an improper claim construction was given by the lower court, and further argued that Aero's recovery of actual damages from both patent and trademark infringement resulted in an impermissible double-recovery of damages.

With regard to issue of damages, the Federal Circuit stated that "[a]lthough the question relates in part to trademark damages, it also involves a matter unique to patent law, damages for patent infringement ." Accordingly, the court concluded that "[w]e believe that this question is properly determined under Federal Circuit law ."

Looking at numerous Federal Circuit decisions, the court stated that when a question arises whether one or more wrongs have been committed by a defendant, the court will focus on the conduct that damaged the plaintiff, and whether the damages arose "from the same set of operative facts":

• Bowers v. Baystate Techs., Inc. - the trial court did not abuse its discretion by allowing the jury to award damages for copyright and contract claims for the same cause of action and then omitting the duplicative copyright damages, since the breach of contract damages arose from the same copying and included the same lost sales that formed the basis for the copyright damages.

• Catalina Lighting, Inc. v. Lamps Plus, Inc. - faced with the question of whether a patentee may recover both infringer profits and a reasonable royalty when both a design patent and utility patent have been infringed by the sale of a single product, the court found that the plaintiff was entitled to damages for each infringement, but once it receives profits under § 289 for each sale, it is not entitled to a further recovery from the same sale because the award of infringer profits under § 289 also constitutes "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."

• Junker v. Eddings - "[t]he dollar amount that Junker now seeks as damages for breach of contract is identical to the dollar amount the jury awarded him for infringement. Both claims arose out of the same set of operative facts regarding Galt’s unauthorized use of the design Junker had developed. The circumstances at least suggest that awarding Junker the damages he seeks on his breach-of-contract claim would constitute a double recovery."

• CPG Prods., Corp. v. Pegasus Luggage, Inc. - "[t]hough the district court ordered accountings for damages resulting from patent infringement and from unfair competition, Lark is not entitled to dual damages resulting from the same act."

Applying the law to the Aero case, the court concluded that an impermissible double-recovery had been obtained by Aero:

[t]he record demonstrates that Aero based both its patent and trademark damages solely on sales of the accused Intex mattresses. Aero did not rely on any other evidence in support of its trademark damages. In other words, there was no evidence introduced at trial of Intex’s use of the mark "ONE TOUCH" other than in connection with the sales of mattresses that formed the basis for Aero’s patent infringement claim. In short, all of the damages awarded to Aero flowed from the same operative facts: sales of the infringing Intex mattresses. Aero was fully compensated for defendants’ patent infringement when it was awarded a reasonable royalty for patent infringement based on sales of the infringing Intex mattresses. It could not also be awarded defendants’ profits for trademark infringement based on the same sales of the same accused devices.


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