Opinion ID: 210109
Heading Depth: 3
Heading Rank: 2

Heading: VPRo II Lost Sales

Text: It is undisputed that the patented features of American Seating's tie-down wheelchair restraint system prompted consumer demand, in large part because of its efficiency and ADA-compliance, and that USSC's VPRo I restraint system infringes these patented features. It is also undisputed that USSC's VPRo II restraint system does not infringe. In instances involving five transit authorities, however, the jury awarded American Seating lost profit damages for USSC sales of the non-infringing VPRo II restraint system, because in those cases USSC first made infringing offers to sell the VPRo I, but ultimately delivered the VPRo II. To prove lost profits from lost sales, the patent owner bears the initial burden to show a reasonable probability that but for the infringement, he would have made the sales. Grain Processing Corp. v. Am. Maize-Products Co., 185 F.3d 1341, 1349 (Fed.Cir.1999); State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577 (Fed.Cir.1989). Once this reasonable probability is shown, the burden shifts to the infringer to show that the but for causation analysis is unreasonable under the specific circumstances. Grain Processing, 185 F.3d at 1349. Here, it appears the jury determined that American Seating met its initial burden, and that USSC failed to persuasively rebut. The evidence upon which the jury relied Included: (1) an e-mail from USSC's Vice President of Sales, Richard Klotz, announcing on March 16, 2004, that the VPRo I would no longer be available, that orders already placed would be filled by the VPRo II, and naming several jobs that needed to be switched over to the VPRo II; (2) testimony analyzing such correspondence by David McLaughlin, Vice President of American Seating, and Kathleen Kedrowski, American Seating's damages expert at trial; and (3) inconsistent testimony by Christian Hammarskjold, president and owner of USSC, regarding the events surrounding the sales in question, and whether customers were effectively informed about the switch. USSC did not prove that its customers specifically consented to receive the VPRo II rather than the VPRo I for the sales in question. On the following instruction, the jury concluded that USSC offered to sell the infringing device to the five relevant customers, not the non-infringing substitute. American Seating also seeks to recover profits it claims it lost due to USSC's offer to sell its VPRo I when, prior to delivery, the order was changed to the noninfringing VPRo II. To recover any lost profits as a result of each such offer to sell, American Seating must show that USSC made an offer to sell the VPRo I to a customer, that the customer agreed to purchase the VPRo I, that USSC substituted the VPRo II when it delivered the product, and that but for the offer to sell the VPRo I, American Seating would have, made the sale. You must determine what the customer would have done. . . . USSC argues that the jury's award of lost profit damages for sales of the non-infringing VPRo II after April 2002 was not supported by substantial evidence. It also argues that Grain Processing created a bright-line rule that the presence of a non-infringing replacement product precludes lost profit damages in all circumstances. However, USSC overlooks that Grain Processing instructs that a non-infringing replacement product is not considered a substitute unless it is acceptable to all purchasers of the infringing product. Id. at 1343. In other words, buyers must view the substitute as equivalent to the patented device. See id. at 1347. Here, the jury did not conclude that customers viewed the VPRo II as an equivalent substitute for American Seating's patented wheelchair restraint system. It viewed specimens and, demonstrations of both the VPRo I and VPRo II, and heard testimony from Lee Peterson, a regional sales manager for American Seating, that USSC's Klotz admitted that a manager of the Los Angeles County Metropolitan Transit Authority objected to the switch from the VPRo I to VPRo II because of differences in the way the two devices lock into use. On all the evidence, it was reasonable for the jury to decline to find that the VPRo II was an acceptable substitute for the patented device and the infringing VPRo I. Grain Processing says that patentees have significant latitude to prove and recover lost profits for a wide variety of foreseeable economic effects of the infringement. Id. at 1350. Although the evidence in this case was relatively sparse, it sufficed for the jury to assume that USSC offered the VPRo I for sale and then substituted the non-infringing VPRo IIa bait-and-switchand to find that absent USSC's offer to sell the VPRo I, the sales would have gone to American Seating.