Opinion ID: 454957
Heading Depth: 2
Heading Rank: 1

Heading: Compensatory damages for infringement of the '153 patent.

Text: 53 The district court has discretion in choosing the methodology for assessing and computing damages. The limitation on the court's discretion is that the award must be adequate to compensate for the infringement, and cannot be less than a reasonable royalty. 35 U.S.C. Sec. 284; Seattle Box Co. v. Industrial Crating and Packing, Inc., 756 F.2d 1574, 1581, 225 USPQ 357, 363 (Fed.Cir.1985). It is Otari's burden, as appellant, to show that the amount or method of assessing damages constituted an abuse of discretion by the district court. 54 In ascertaining the amount of damages, the court properly set forth and considered the following factors: the amount or number of lost sales; the gross receipts plaintiff would have obtained from the lost sales had there been no infringement; the cost of sales to be deducted from gross receipts; and King's profit on the lost sales. On the basis of King's audited financial statements, the court found King's representative gross profit percentage to be 58.9% in 1977, 60.8% in 1978, and 59.0% in 1979. The number of sales of the infringing machines was determined to be 19 VL-100 machines, 85 VL-500 machines, 33 VL-600 machines, 91 DP-2700 machines and 3 DP-6755 machines. King's gross revenue which would have been received from sale of these machines was $3,831,685, and, by applying the gross profit percentages, lost profits were calculated to be $2,282,535. Otari asserts that this amount is erroneous because (1) there was no showing of causation, i.e., King would not have made the sales, and (2) the calculation of damages was improper. 55 In general, the determination of a damage award is not an exact science. The trial court must best approximate the amount to which the patent owner is entitled. Paper Converting Machine Co. v. Magna-Graphics Corp., 745 F.2d 11, 22, 223 USPQ 591, 599 (Fed.Cir.1984). 8 When a patent owner would have made the sale of a product but for the infringement, the award based on his lost profits is appropriate. Paper Converting Machine Co., 745 F.2d at 21, 223 USPQ at 598; Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739 F.2d 604, 616, 222 USPQ 654, 663 (Fed.Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 516, 83 L.Ed.2d 405 (1984). Generally, as the parties agree, a lost profits award requires (1) a showing that the patent owner would have made the sale but for the infringement, i.e., causation existed, and (2) proper evidence of the computation on the loss of profits. Id. 56 The patent owner's burden of proof is not absolute, but one of reasonable probability. This proposition is exemplified in the recent opinion of this court in Kori Corp. v. Wilco Marsh Buggies and Draglines, Inc., 761 F.2d 649 (Fed.Cir.1985). In Kori, we held that the district court's use of an infringer's profit margin for comparison purposes in determining the reasonableness of a patent owner's estimate of lost profits did not constitute an abuse of discretion. The bottom line is that the trial court must be afforded reasonable flexibility in awarding lost profit damages. 9 57 Otari alleges here that King failed to carry the burden of proving causation. More specifically, Otari says that any King machines that may have been equivalent to Otari's infringing machines were not in production until 1982, long after the period of accounting used by the district court to calculate damages. Thus, King could not have made the sales made by Otari. Otari states, also, that King would not have sold any of its machines to Minnesota Mining & Manufacturing Company which purchased the vast bulk of the accused Otari machines. 58 As we have said, King need not prove causation as a certainty. Evidence which shows a reasonable probability that King would have made the infringing sales made by Otari will suffice. See Bio-Rad, supra, 739 F.2d at 616, 222 USPQ at 663. There was evidence that at the time of Otari's infringing activities, King was Otari's main competitor and the only other company capable of manufacturing under the claims of the '153 patent. This capability was demonstrated by the later development and sale of the King Model No. 590 in-cassette video winder and loader. King need not meet the impossible burden of negating every possibility that a purchaser might not have bought another product or might not have bought any comparable product at all. See Gyromat, supra, 735 F.2d 554, 222 UPSQ at 7. The district court heard extensive and relevant testimony from both sides, naturally weighing and assessing the credibility of such testimony. On this record, we cannot say that the district court was clearly erroneous in its implicit 10 determination of causation. 59 Apart from the issue of causation, Otari urges that the district court's damage calculation was clearly erroneous. Since the bulk of lost sales occurred in the 1980's when King was manufacturing an equivalent machine to the Otari machines, Otari states that the earlier 1970's gross profit percentages should not have been used as the base to compute damages. King retorts that Otari is essentially requesting mitigation of damages caused by its own infringement. There is evidence that during Otari's infringement in the 1980's, sales by King were artificially depressed, thereby depressing King's profit margin. Otari should not benefit for being a better infringer in the 1980's than in the 1970's. Under controlling principles of equity, any risk of uncertainty must be cast upon the wrongdoer rather than upon the injured party. See Kori, supra, at 655. Moreover, the use of the patent owner's profit margin, unaffected by the infringing sales, is necessary to estimate what the patent owner's lost profits would have been had there never been an infringement. Thus, the use of the profit margin obtained from the 1970s is a relevant basis for approximating King's lost profits. 60 Otari also assails the profit margin level applied by the district court as exceptionally high and unreasonable on its face. But Otari failed below to controvert evidence of King's gross profit percentages which were set forth in financial statements. Therefore, we cannot conclude that the profit margin used by the district court is clearly erroneous or that the size of the overall award for lost profits is too speculative or constitutes an abuse of discretion. 61