Accused Infringer Must Disclose Foreign Sales Data in U.S. Patent Infringement Case

Authored by D. Brian Kacedon, Daniel F. Klodowski, and John C. Paul

Abstract

A New York district court recently held that a defendants foreign sales figures for a product accused of patent infringement were discoverable, explaining that such data are potentially relevant to determining patent-infringement damages because, at a minimum, the data have implications for valuing the invention. In reaching its conclusion, the court rejected the defendants argument that the discovery of foreign sales information is precluded by the presumption against extraterritoriality.

In a recent case, GE Healthcare Bio-Sciences AB v. Bio-Rad Laboratories, Inc.,¹ the U.S. District Court for the Southern District of New York held that a defendant's foreign sales data for a product accused of patent infringement were discoverable, explaining that such data are relevant to the determination of damages because, at a minimum, the data have "implications for the valuation of the invention." The court rejected the defendant's argument that the discovery of foreign sales information is precluded by the presumption against extraterritoriality.

Background

GE sued Bio-Rad for patent infringement, seeking damages and injunctive relief based on Bio-Rad's manufacturing and sales of its NGC protein purification device. Bio-Rad admitted that it produces the device in the United States. During discovery, Bio-Rad refused to disclose documents relating to foreign sales figures of the accused device. Following a discovery conference, the Magistrate Judge ordered that Bio-Rad did not need to produce the foreign sales information. GE objected to the order.

The GE Healthcare Decision

At the outset, the district court noted that under long-standing Federal Circuit precedent, when an allegedly infringing product is produced in the United States and subsequently sold by the manufacturer to foreign buyers, the foreign sales are relevant to determining damages suffered as a result of the domestic act of infringement. Bio-Rad argued, however, that recent Federal Circuit cases precluded discovery concerning foreign sales of an allegedly infringing product based on a presumption against extraterritoriality. In particular, Bio-Rad contended that extraterritoriality concerns would be implicated by the court considering sales made abroad, even where the infringing device is manufactured in the United States, such that foreign sales figures are insulated from discovery. The court disagreed.

According to the court, no Federal Circuit decision of which it was aware held that extraterritorial conduct was entirely irrelevant to determining damages arising from infringement committed in the United States. The court also determined that none of Bio-Rad's cited cases demonstrated that the discovery of foreign sales information was precluded by the presumption against extraterritoriality. To the contrary, the court held that such foreign sales data are relevant to GE's claim for damages because the data have, at a minimum, "implications for the valuation of the invention."

The court concluded that, even if GE were only entitled to a reasonable royalty for patent infringement, Bio-Rad's foreign sales would be relevant to determining the royalty. Accordingly, the court sustained GE's objections to the Magistrate Judge's order, and ordered Bio-Rad to produce the foreign sales information sought by GE.

Strategy and Conclusion

This case demonstrates that U.S. courts may find information regarding foreign sales relevant to damages in U.S. patent infringement cases and compel accused infringers to produce such foreign information in U.S. litigation.

Endnotes

¹ The GE Healthcare decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/Order-GE_Healthcare_Bio-Sciences_AB_et_al_v_Bio-Rad_Laboratories_Inc.pdf.