Opinion ID: 697651
Heading Depth: 2
Heading Rank: 2

Heading: the lost convoyed sales of dock levelers

Text: 216 The basic principle of damages law is that the injured party shall be made whole. On the facts on which the district court awarded damages for certain lost sales of dock levelers, the relationships were direct, causation was proved, the scope of recovery was narrow, and the circumstances were unusual. Reversing the district court, the majority holds that if the patented and convoyed items also have a separate market, there can never be recovery for the lost sales of the convoyed items. I do not believe that such a rule is necessary, or correct, in patent cases. 217 The majority adopts the rule for patent cases that lost convoyed sales can not be recompensed, whatever the directness of the injury and whatever the weight of the proof, unless the thing convoyed is a functional part of the thing patented. Heretofore, the question of recovery for lost sales of collateral items was a matter of fact and proof, the court looking at the closeness of the relationship between the items and the quality of the proof, cognizant of the policy of setting reasonable limits to liability. 218 The district court awarded damages only for those lost dock leveler sales that were bid and sold in a package with the truck restraint, and for which Rite-Hite proved it had competed with Kelley for the same customers, presenting transaction-by-transaction evidence. The district court's finding that Rite-Hite would have sold an additional 1,692 dock levelers, in specifically proven restraint-leveler packages, is not disputed. It is not disputed that there was a direct, causal, foreseeable relationship between Kelley's infringement and these lost sales. This court's decision to withhold compensation for these specifically proven lost sales is a decision of policy, not law, for damages law supports compensation on these proofs. Refusing a remedy for proven injury caused by wrongdoing is an unusual judicial policy. It is not required by patent law, and it contravenes the rule that the injured party shall be made whole. Thus my colleagues carve a patent-based exception into the rule of general damages, refusing to award compensatory damages that have been proved. 219 The purpose of tort damages is to place the wronged party, as closely as possible, in the financial position that it would have occupied but for the wrong. The patent statute requires that damages for infringement shall be adequate to compensate for the losses caused by the infringement: 35 U.S.C. Sec. 284. Damages 220 Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interests and costs as fixed by the court. 221 When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. 222 The statute codifies the general rule of damages resulting from wrongful economic behavior: 223 And where a legal injury is of an economic character, [t]he general rule is, that when a wrong has been done, and the law gives a remedy, the compensation shall be equal to the injury. The latter is the standard by which the former is to be measured. The injured party is to be placed, as near as may be, in the situation he would have occupied if the wrong had not been committed. 224 Albemarle Paper Co. v. Moody, 422 U.S. 405, 418-19, 95 S.Ct. 2362, 2372, 45 L.Ed.2d 280 (1975) (quoting Wicker v. Hoppock, 73 U.S. (6 Wall.) 94, 99, 18 L.Ed. 752 (1867)). This rule is the cardinal principle of damages law: 225 The cardinal principle of damages in Anglo-American law is that of compensation for the injury caused to plaintiff by defendant's breach of duty. 226 . . . . . 227 .... 228 ... The primary notion is that of repairing the plaintiff's injury or of making him whole as nearly as that may be done by an award of money. The remedy [should] be commensurate to the injury sustained. 229 4 Fowler V. Harper et al., The Law of Torts Sec. 25.1, 490, 493 (2d ed. 1986) (quoting Rockwood v. Allen, 7 Mass. 254, 256 (1811) (Sedgwick, J.)) (alteration in the original, footnotes omitted). See also Charles T. McCormick, Handbook on the Law of Damages, Sec. 44 (1985): 230 [The law] will only seek, as near as may be, by awarding money compensation, to place you in the same position as respects your pocketbook as you would have occupied if no wrong had taken place. 231 The threshold condition is embodied in 35 U.S.C. Sec. 284 and its requirement that the court shall award the claimant damages adequate to compensate. The majority correctly applied this rule to Rite-Hite's lost sales of the ADL-100 model of truck restraint, but inappropriately rejected the district court's recognition of the lost sales of the dock levelers. 232 The district court recognized that the purpose of the award of damages for patent infringement is to compensate the claimant for the losses incurred. 35 U.S.C. Sec. 284. This is a question of fact, reviewable for clear error. For convoyed sales there are issues of the directness of the injury and associated policy implications, but there is no prohibition in legal principle against recovery of the actual economic loss caused by the infringement. Indeed, this is the most fundamental of damages principles. See William M. Landes and Richard A. Posner, The Economic Structure of Tort Law (1987). 233 The Supreme Court has well stated the requirement that losses due to patent infringement shall be fully recompensed: 234 The question to be asked in determining damages is how much had the Patent Holder and Licensee suffered by the infringement. And that question [is] primarily: had the Infringer not infringed, what would the Patent Holder-Licensee have made? 235 Aro Manufacturing Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S.Ct. 1526, 1543, 12 L.Ed.2d 457, 141 USPQ 681, 694 (1964) (quoting Livesay Window Co. v. Livesay Industries, Inc., 251 F.2d 469, 471 (5th Cir.1958)). The Court recognized that damages in patent cases are general damages: 236 [T]he present statutory rule is that only damages may be recovered. These have been defined by this Court as compensation for the pecuniary loss he has suffered from the infringement, without regard to the question whether the defendant has gained or lost by his unlawful acts. They have been said to constitute the difference between his pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred. 237 Aro Manufacturing, 377 U.S. at 507, 84 S.Ct. at 1543, 141 USPQ at 694 (citations omitted). 238 The Federal Circuit heretofore conscientiously recognized that the rules of general damages applied to patent infringement cases. E.g., Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1064, 219 USPQ 670, 674-75 (Fed.Cir.1983) (quoting Aro Manufacturing ): 239 [Damages adequate to compensate for the infringement constitute]  'the difference between [the patent owner's] pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.'  240 Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1574, 7 USPQ2d 1606, 1612 (Fed.Cir.1988): 241 The statute ... mandates that damages shall be adequate to compensate the patent owner for the infringement. That requirement parallels the criterion long applicable in other fields of law. 242 See also Paper Converting Machine Co. v. Magna-Graphics Corp., 745 F.2d 11, 21, 223 USPQ 591, 598 (Fed.Cir.1984); Weinar v. Rollform, Inc., 744 F.2d 797, 807, 223 USPQ 369, 375 (Fed.Cir.1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1844, 85 L.Ed.2d 143 (1985); Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1326, 5 USPQ2d 1255, 1260 (Fed.Cir.1987); Bio-Rad Labs., Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 616, 222 USPQ 654, 663 (Fed.Cir.), cert. denied, 469 U.S. 1038, 105 S.Ct. 516, 83 L.Ed.2d 405 (1984); Gyromat Corp. v. Champion Spark Plug Co., 735 F.2d 549, 553, 222 USPQ 4, 7 (Fed.Cir.1984). 243 A wrongdoer is, simply put, responsible for the direct, foreseeable consequences of the wrong. Indeed, in General Motors Corp. v. Devex Corp., 461 U.S. 648, 655, 103 S.Ct. 2058, 2062, 76 L.Ed.2d 211, 217 USPQ 1185, 1188 (1983), the Court referred to Congress' overriding purpose of affording patent owners complete compensation, the Court observing that: 244 When Congress wished to limit an element of recovery in a patent infringement action, it said so explicitly. 245 461 U.S. at 653, 103 S.Ct. at 2061, 217 USPQ at 1187. Thus the Court reiterated that limitations to recovery for patent infringement are not to be inferred. 246
247 The district court found that Kelley developed its Truk Stop restraint both to capture part of the newly-developed restraint market and to avoid losing leveler sales. Rite-Hite Corp. v. Kelley Co., 774 F.Supp. 1514, 1522, 21 USPQ2d 1801, 1806 (E.D.Wis.1991). The district court discussed customers' requests for package bids for the simultaneous installation of vehicle restraints and dock levelers, especially for new dock installations. Id. at 1530, 21 USPQ2d at 1812. The court found that customers almost invariably purchased both items from the same manufacturer. Id. The court also referred to testimony that Kelley representatives told some customers that Kelley would void its warranties on its dock levelers if they were used with a Rite-Hite restraint, id., Kelley itself linking sale of the dock levelers to the infringing restraints. 248 The district court assessed the damages caused by Kelley's infringement after meticulous review of an extensive body of evidence. The elements of causation and foreseeability, although fully satisfied on the evidence, are scarcely at issue. It is not disputed that these 1,692 dock levelers were sold, warranted, installed, and used together with the truck restraints. Kelley's actual package sales of dock levelers and infringing restraints were the only convoyed sales for which compensation was awarded. 249 These dock leveler sales were as direct a target of the infringement as were the ADL-100 sales, and the quality of the proofs was equally high. The evidence shows the same transaction-by-transaction losses of sales to Kelley for the dock levelers as for the ADL-100 truck restraints, indeed in the same bid and sale packages. Precedent previously recognized that compensation may be appropriate when the items are sold together, whether or not they also have separate markets. See TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 229 USPQ 525 (Fed.Cir.1986) (damages awarded for lost sales of unpatented wheels and axles that were sold with patented suspension systems); Deere & Co. v. International Harvester Co., 710 F.2d 1551, 218 USPQ 481 (Fed.Cir.1983) (royalty damages assessed based on sales of unpatented combines and patented corn heads). 250 Recovery of damages for lost convoyed sales has always required a high standard of proof, lest remote and speculative claims be opportunistically pressed. However, it is not correct to hold that recovery is never possible unless the relationship of the patented and convoyed products is such that the only and necessary use is as a single functioning unit. Indeed, even the majority's new requirement is met in this case. These specific dock levelers were not sold separately because the customer or Kelley required that they be sold together; and it is undisputed that they are used together. 251 The correct question is not whether the infringing truck restraint was part of a larger combination whereby the truck restraint could not function without the dock leveler, or whether the truck restraint or the dock leveler also had an independent market and use. The correct rule was stated in Leesona Corp. v. United States, 599 F.2d 958, 974, 220 Ct.Cl. 234, 202 USPQ 424, 439, cert. denied, 444 U.S. 991, 100 S.Ct. 522, 62 L.Ed.2d 420 (1979), that 252 it is not the physical joinder or separation of the contested items that determines their inclusion in or exclusion from the compensation base, so much as their financial and marketing dependence on the patented item under standard marketing procedures for the goods in question. 253 The sales of dock levelers and truck restraints met this criterion. 254 As the Court reiterated in Aro Manufacturing and in General Motors v. Devex, general damages in patent cases are whatever damages the plaintiff can prove. The history of the 1946 enactment reports this legislative purpose: 255 The object of the bill is to make the basis of recovery in patent infringement suits general damages, that is, any damages the complainant can prove, not less than a reasonable royalty, together with interest from the time the infringement occurred, rather than profits and damages. 256 Report of the Senate Subcommittee on Patents, S.Rep. No. 1503, 79th Cong., 2d Sess. 1, reprinted in 1946 U.S.Code Cong. Serv. 1386, 1387. The record shows that Kelley foresaw the potential loss of dock leveler sales, and that this contributed to Kelley's infringement of Rite-Hite's truck restraint patent. The record shows Kelley and Rite-Hite both bidding on the same restraint/leveler packages. The evidence established that Rite-Hite's loss of 1,692 dock leveler sales was the direct, foreseeable, and indeed intended result of Kelley's infringement. 257 Kelley bore the risk that if it was found to infringe Rite-Hite's restraint patent, it would be liable for compensatory damages on the restraint/leveler packages. By eliminating recovery for this proven loss, this court makes a policy decision contrary to the principles of compensatory damages. Heretofore Federal Circuit precedent treated lost convoyed sales as a matter of fact and proof. I discern no clear error or discretionary abuse in the district court's award of actual damages for these specific lost sales of restraint/leveler packages.