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License-Related Terms Between Companies Cannot Create Lost Profits Where None Exist

September 14, 2004

Decision icon Decision

Last Month at the Federal Circuit - October 2004

Judges: Lourie (author), Michel, and Rader

In Poly-America, L.P. v. GSE Lining Technology, Inc., No. 04-1022 (Fed. Cir. Sept. 14, 2004), the Federal Circuit affirmed a denial of motions for JMOL of invalidity of U.S. Patent Nos. 5,763,047 (“the ‘047 patent”) and 5,804,112 (“the ‘112 patent”), and reversed the denial of a motion for a new trial on damages.

Poly-America, L.P.’s (“Poly-America”) predecessor company sued Serrot International, Inc. (which became GSE Lining Technology, Inc., “GSE”) for infringement of the ‘047 and ‘112 patents. The ‘047 patent claimed a layered, textured landfill liner and the ‘112 patent covered the method for making such a liner. GSE conceded infringement, and a jury awarded $7.15 million in lost profits and a reasonable royalty of $5.08 million.

GSE filed a post-trial motion for JMOL of invalidity of the ‘047 and ‘112 patents, and JMOL, or, alternatively, a new trial, on damages. The district court denied the post-trial motion by GSE for JMOL of invalidity but concluded that the evidence did not support the reasonable royalty awarded by the jury. The court denied GSE’s motion for a new trial, however, based on Poly-America’s acceptance of a remittitur of $266,502 of the reasonable royalty award.

On appeal, the Federal Circuit affirmed the district court’s holding that the ‘112 patent was not anticipated by the sale of a die similar to that used in the method of the ‘112 patent. Similarly, the Federal Circuit affirmed the district court’s holding that the ‘047 patent was not anticipated or rendered obvious by the manufacture of a similar liner because the preambles of the claims at issue recited an important characteristic of the invention and represented a limitation in the claims not found in the prior art.

The Federal Circuit reversed the district court’s denial of a new trial on damages, however, concluding that the district court had misapprehended the law of damages and lost profits. Poly-America could not claim the lost profits of its related corporation, Poly-Flex, Inc. (“Poly-Flex”). The Court concluded that while Poly-America may have the right to sue under its patents, both as an owner and as a back-licensee, it can recover only its own lost profits, not those of Poly-Flex.