Thursday, January 31, 2008

CAFC: Damage Apportionment in Action

American Seating Company v. USSC Group, Inc. (2007-1112) January 39, 2007

USSC appealed a jury verdict which awarded American Seating damages for patent infringment relating to tie-down wheelchairs for mass transit transportation. Likewise, American Seating was appealing a JMOL that reduced damages due to convoyed sales being improperly included in the calculations.

A "convoyed sale" refers to the relationship between the sale of a patented product and a functionally associated non-patented product. A patentee may recover lost profits on unpatented components sold with a patented item, a convoyed sale, if both the patented and unpatented products "together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit." A functional relationship will not exist when independently operating patented and unpatented products are purchased as a package solely because of customer demand.

In this case, the CAFC agreed with the district court that the damages were properly reduced, based on the language of the patent:

Tie-downs and passenger seats were usually but not always purchased by bus manufacturers from the same company; package sales were for reasons of convenience and "one-stop shopping," not because of an absolute requirement that the two items function together. Although the specification refers to a preferred embodiment in which the tie-down of the invention is located "adjacent chairs that fold against the side of the bus," . . . the claims make no mention of the passenger seats and the references to the "adjacent chairs" do not indicate any functional relation between the seats and the wheelchair tie-downs.
Also, the market demand was independent of the patented product:
A bus utilizing American Seating’s tie-down restraint system and outfitted by USSC’s passenger seats would be equally as functional as a bus furnished with only American Seating products. The evidence shows that passenger seats command a market value and serve a useful purpose independent of the patented product . . . Because it is clear that no interrelated or functional relationship inheres between the seats and the tie-down restraint system on a passenger bus, the district court was correct that the jury had no basis to conclude that lost profits on collateral sales of passenger seats were due American Seating.

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