Entire Market Value Rule May Be Applied to Products Where Infringing Feature Is an Application of a Law of Nature

Abstract

In a recent patent-infringement suit, a district court permitted damages to be based on the value of the entire product under the Entire Market Value Rule and denied a motion that argued the Entire Market Value Rule should not be permitted because the claimed invention involved the application of a law of nature.

Exergen¹ accused thermometers sold by Kaz, of infringing patent claims directed to a method for taking a temperature from a subject's forehead.

The parties disputed whether the Entire Market Value Rule should be applied to determine Exergen's lost profits and a reasonable royalty based on the value of an entire infringing product—rather than just the value added by the infringing feature.

To show that the Entire Market Value Rule is appropriate, the patented feature must constitute the basis for customer demand of the product, and Exergen's damages expert provided evidence of such customer demand by citing a 2011 study showing that the location for taking temperature was the first decision customers make when choosing a thermometer, and primary reason customers would purchase the accused forehead thermometers.

Kaz moved the court to exclude Exergen's evidence pertaining to the Entire Market Value Rule, arguing that because taking temperature from the forehead was an unpatentable law of nature, it couldn't be the patented feature of the product, and therefore Exergen provided no evidence tying the patented feature to consumer demand.

The Exergen Order

The Court denied Kaz's motion to exclude Exergen's proposed expert testimony, finding that the argument "impermissibly borrows a partial analysis under section 101."

"The court is not aware of the use of a section 101 analysis in the context of damages, but it falls short even at face value. As the Supreme Court has acknowledged in its section 101 cases, ultimately all inventions utilize a law of nature (or abstract concept) on some level, and useful and novel applications of laws of nature are patentable. To determine whether a claim is patentable, in addition to determining whether the claim uses a law of nature, the court must look to the combination of elements to determine whether the claim offers more by way of an inventive concept. To the extent that an application of a law of nature is patentable, there is no reason why that application cannot also be the primary driving factor in the sales of products embodying the claims."

Conclusion and Strategy

The case shows that the Entire Market Value Rule might be appropriate where a claimed invention includes the application of a law of nature where that application is the primary driving factor of demand for products that embody the asserted claims.

Endnotes
¹ The Exergen decision and relevant motions are available at http://www.finnegan.com/files/upload/LES_Insights_Column/2016/mad-1-13-cv-10628-344.pdf and http://www.finnegan.com/files/upload/LES_Insights_Column/2016/DI316-KAZSMOTIONINLIMINENO4–TOEXCLUDEEVIDENCE.PDF.