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Award of Patent and Trademark Infringement Damages Based on Same Sales Is Impermissible Double Recovery

05-1283
October 02, 2006

Decision icon Decision

Last Month at the Federal Circuit - November 2006

Judges: Rader, Schall (author), Dyk (concurring)

[Appealed from: N.D. Ill., Judge Darrah]

In Aero Products International, Inc. v. Intex Recreation Corp., No. 05-1283 (Fed. Cir. Oct. 2, 2006), the Federal Circuit affirmed a district court’s holding of infringement and noninvalidity, but vacated an award of $1 million in trademark damages as impermissible double recovery.

Aero Products International, Inc. and Robert B. Chaffee (collectively “Aero”) sued Intex Recreation Corporation (“Intex”), Quality Trading, Inc., and Wal-Mart Stores, Inc. in the United States District Court for the Northern District of Illinois for infringement of U.S. Patent No. 5,367,726 (“the ’726 patent”) for sales of inflatable air mattresses and for infringement of Aero’s registered trademark “ONE TOUCH” in conjunction with marketing and sales of the mattresses.

After a jury trial, the district court entered judgment of infringement and noninvalidity in favor of Aero for all asserted claims of the ’726 patent and for the trademark claim. The district court awarded Aero $6.9 million in total damages, based on the jury’s finding of $2.95 million for patent infringement damages (which the district court doubled based on the jury’s finding of willfulness), and $1 million in trademark infringement damages.

On appeal, Intex argued that the district court’s construction of claims 9 and 12 was incorrect and that under the correct construction, the accused Intex air mattress did not infringe. The disputed claims related to the inflation and sealing of the air mattresses. The district court had construed the claim term “inflation input” to mean the point at which air enters the passageway. Intex argued that the “inflation input” must include the end of the coupling that is most distal from the end of the inflatable body because the inflation input must be above or below, and not within, the valve. Intex asserted that under its proposed claim construction, there was no infringement, but did not argue that the mattress did not infringe under the district court’s claim construction. On appeal, the Federal Circuit held that the claim language, specification, and prosecution history supported the district court’s claim construction of the term “inflation input.” Intex also challenged the district court’s claim construction of the term “complete hermetic seal,” but the Federal Circuit found support for the district court’s claim construction in the claim language, specification, and prosecution history. Accordingly, the Federal Circuit affirmed the district court’s claim construction of both claims.

Intex also argued that claim 12 of the ’726 patent was invalid by reason of indefiniteness because the district court had to rewrite the claim to make it valid. Intex argued that because the claim required both a “substantially hermetic seal under low pressure conditions” and a “complete hermetic seal when the valve is in the closed position,” the claim was indefinite because the terms were ambiguous and inconsistent. The Federal Circuit held that because the claim wascapable of construction, it was not indefinite. Specifically, the Federal Circuit agreed with the district court’s finding that the term “complete hermetic seal” refers to the mechanical completeness of the seal, while the term “substantially hermetic seal” refers to the quality of the seal. Accordingly, the Federal Circuit found no error in the district court’s determination that claim 12 was not indefinite.

Finally, Intex argued that awarding damages for both patent and trademark infringement constituted an impermissible double recovery. In the district court, Aero had argued that the jury should award patent infringement damages based on a 15.7% reasonable royalty on $21.8 million in sales of the accused mattresses, and trademark infringement damages based on $2.2 million in profits (equal to 10% of the $22 million in sales of the same mattresses). Aero argued that the $2.95 million for patent infringement and the $1 million for trademark infringement were compensation for two separate wrongs: (1) infringement of the ’726 patent and (2) infringement of the “ONE TOUCH” trademark.

Because the question involved a matter unique to patent law—damages for patent infringement—the Federal Circuit applied its own law to determine the issue, declining to follow a Ninth Circuit case, Nintendo of Am., Inc. v. Dragon Pac. Int’l, 40 F.3d 1007 (9th Cir. 1994) (allowing recovery for trademark and copyright infringement damages arising from sales of the same video game cartridges). The Federal Circuit held that its own case law teaches that in determining whether there has been an impermissible double recovery of damages, the inquiry focuses on whether the damages issue arose from the same set of operative facts.

The Federal Circuit found that Aero based its proposed trademark damages solely on the patent infringement damages calculations, and did not rely on any other evidence in support of its trademark damages for infringement of the “ONE TOUCH” trademark. The damages awarded to Aero arose out of the same set of operative facts because all damages were calculated based on the same sales. Because Aero was fully compensated for patent infringement when it was awarded a reasonable royalty based on the sales of the mattresses, the district court should not have awarded Aero profits for trademark infringement based on the same sales. The Federal Circuit accordingly reversed the award of $1 million in trademark damages.

Judge Dyk concurred, expressing a different opinion for finding no error in the district court’s claim construction of the claim term “inflation input.”