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Damages Expert Testimony Is Not Necessary to Establish a Reasonable Royalty

September 05, 2003

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Last Month at the Federal Circuit - October 2003

Judges: Dyk (author), Clevenger, and Bryson

In Dow Chemical Company v. Mee Industries, Inc., No. 03-1117 (Fed. Cir. Sept. 5. 2003), the Federal Circuit affirmed a judgment of invalidity of some claims, but reversed as to others, and affirmed the judgment of no infringement as to some claims, but, as to certain other claims, vacated and remanded for proceedings as to contributory and induced infringement by one of the Defendants. In addition, the Federal Circuit ruled that the district court had erred in concluding that Dow Chemical Company (“Dow”) did not carry its burden to establish damages because it failed to provide expert testimony on the damages issue.

Dow owns U.S. Patent Nos. 5,867,977 (“the ‘977 patent”) and 5,930,990 (“the ‘990 patent”), both of which are directed to achieving power augmentation in gas turbines via wet compression. Dow sued Mee Industries, Inc. (“Mee”) and Florida Power Corporation (“Florida Power”) for infringement of the ‘977 and ‘990 patents. During the trial, the district court excluded the testimony of Dow’s expert on damages, then later issued an opinion finding that Dow was not entitled to damages as a matter of law because it had not carried its burden to establish damages. The district court also held certain claims to be invalid for obviousness and certain claims to be not infringed by Mee or Florida Power. The obviousness determination was based on the combination of an article by J.P. Nolan (“the Nolan Article”) and a proposal by Mee to Fern Engineering (“the Mee proposal”).

On appeal, the Federal Circuit first considered whether the Mee proposal was prior art. The Federal Circuit ruled that this proposal constituted an offer for sale under 35 U.S.C. § 102(b) for the systems and methods of use disclosed therein. As to the validity of certain claims, Dow conceded that if certain parameters were not required by the claims, then the claims would be obvious in view of the prior art. The Federal Circuit concluded that the claim language did not require the parameters argued by Dow and, therefore, claim 14 of the ‘997 patent and claim 30 of the ‘990 patent were invalid. The Federal Circuit also found that the prior art expressly taught the limitations of dependent claims 15, 16, 21, and 22 of the ‘977 patent. As to claims 23 and 24 of the ‘977 patent, the Federal Circuit ruled that the district court had improperly interpreted statements in the prior art as discussing certain claim limitations. Because these limitations were effectively missing from the prior art, the Court reversed the findings of invalidity for these claims.

The Court also affirmed the judgment of noninfringement for all assertions except Dow’s contention that Mee indirectly infringed claims 23 and 24 of the ‘977 patent.

The Federal Circuit ruled that the district court had erred in finding no induced or contributory infringement because it improperly considered only Mee’s motives when performing the claimed method. Accordingly, the Court remanded for further consideration of indirect infringement by Mee.

The district court had excluded Dow’s expert’s testimony concerning damages, and Dow did not appeal this ruling. Rather, Dow argued that reasonable royalty damages can be awarded even without expert testimony, because there is a presumption of damages where infringement has been established and there is other evidence in the record that must be considered. The Federal Circuit ruled that 35 U.S.C. § 284 is unequivocal that the district court must award damages in an amount no less than a reasonable royalty when infringement has been proven.