Opinion ID: 208638
Heading Depth: 3
Heading Rank: 2

Heading: Pull-Through Products

Text: The jury also awarded DePuy $77.2 million in profits that DePuy believes it would have made from selling so-called pull-through products but that were purportedly lost when Medtronic sold its infringing Vertex® pedicle screws. DePuy's damages expert could not identify specifically what products he included in his lost-profits analysis, but speculated that pull-through products included such things as head braces, vests, and other products not used in spinal surgeries. J.A. 5246. He admitted that these products are not covered by the '678 patent, do not compete with the patented pedicle screws, have no functional relationship with the patented pedicle screws, and can be used independently of the patented pedicle screws. Id. Instead, these products are related only by virtue of the business relationship that is created when a customer first buys a patented SummitTM or MountaineerTM device. Id. at 5235 (The advanced product serves as ... a door-opener. It gets you in. It gets you working with the surgeon, subsequently you have the opportunity to makes sales that you might not otherwise have made.). It is this business relationship that gave rise to DePuy's characterization of these products as pull-through products. Medtronic argues that these lost-profit damages are foreclosed by our decisions in Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed.Cir.1995) (en banc), and American Seating Co. v. USSC Group, 514 F.3d 1262 (Fed.Cir.2008). Whether lost profits are legally compensable in a particular situation is a question of law that we review de novo. Poly-Am., L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1311 (Fed.Cir.2004) (citing Rite-Hite, 56 F.3d at 1544). A patentee may recover lost profits on unpatented components sold with a patented item, a convoyed sale, if both the patented and unpatented products `together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit.' Am. Seating, 514 F.3d at 1268 (quoting Rite-Hite, 56 F.3d at 1550). In contrast to such functionally-integrated components that are properly subject to lost profits, there is no basis for extending that recovery to include damages for [unpatented] items that are neither competitive with nor function with the patented invention. Rite-Hite, F.3d at 1551. For example, lost profits cannot be recovered on unpatented items that have essentially no functional relationship to the patented invention and that may have been sold with an infringing device only as a matter of convenience or business advantage. Id. at 1550. Because it is undisputed that DePuy's unpatented pull-through products neither compete nor function with its patented SummitTM and MountaineerTM devices and were sold (i.e., pulled-through) only by virtue of DePuy's business relationship with surgeons, DePuy was not legally entitled to recover lost profits on those unpatented products. DePuy attempts to distinguish Rite-Hite and American Seating on the ground that those cases dealt with convoyed sales, in which the patented and unpatented products were sold together, whereas DePuy's pull-through products are sold in separate transactions following the initial sale of its patented SummitTM and MountaineerTM devices. This is a distinction without a difference. To hold otherwise would be to allow a patentee to circumvent Rite-Hite and American Seating by simply executing separate sales contracts. Like DePuy's pull-through products, the unpatented dock levelers in Rite-Hite were sold with the patented vehicle restraints only for marketing reasons, not because they essentially functioned together. 56 F.3d at 1551. Similarly, in American Seating, the patented tie-down system and unpatented passenger seats were sold together for reasons of convenience and `one-stop shopping,' not because of an absolute requirement that the two items function together. 514 F.3d at 1269. Because the Rite-Hite `functional unit' test set[s] forth the key criterion for lost profits of unpatented materials that are sold with (or sold separately as a result of) a patented item, the jury had no legal basis to award lost profits on DePuy's unpatented pull-through products, which neither compete nor function with its patented pedicle screws. Juicy Whip, Inc. v. Orange Bang, Inc., 382 F.3d 1367, 1372 (Fed.Cir.2004). Accordingly, we reverse the award of lost-profit damages on pull-through products.