Opinion ID: 526174
Heading Depth: 4
Heading Rank: 2

Heading: Manufacturing/Marketing Capability To Exploit the Demand

Text: 24 The district court based its finding that Datascope had not met its burden of proving manufacturing and marketing capability on subsidiary findings that (1) many of SMEC's customers would not have entered the percutaneous IAB market but for their confidence in SMEC president Schiff; and (2) Datascope would not have made SMEC's sales to foreign customers. Datascope argues that those findings are clearly erroneous. Datascope is right on finding (1) and wrong on finding (2). SMEC's Customers 25 We note, first, the logical error in considering the preference of customers for the infringer as a source of supply. That preference, if it exists, bears no relevance to element three of the Panduit test, which concerns only the manufacturing/marketing capability of the patentee to meet the demand. The demand which a patentee must have the capacity to meet is measured by the total sales, by the patentee and the infringer, of the patented product. In this case there is no question that Datascope had the manufacturing and marketing capability and could have sold to every domestic SMEC customer. 26 Witnesses testified, and the court found, that purchasers of the infringing product prefer to buy from SMEC, rather than from Datascope. (Unsurprisingly, all those witnesses being long-standing SMEC customers.) The court also found, however, that: SMEC lost customers during the period that Datascope was the only company on the market with the percutaneous balloon (678 F.2d at 463, 5 USPQ2d at 1969); the evidence revealed a certain urgency on SMEC's part prior to entering the percutaneous market (id.); and Schiff considered Datascope's introduction of a percutaneous balloon to be a significant development in the market. Id. at 463, 5 USPQ2d at 1968. Those subsidiary findings undermine the ultimate finding that Datascope had not proven to a reasonable probability that, but for the infringement, it would have made the sales that were made by the infringer. Del Mar Avionics v. Quinton Instrument, 836 F.2d 1320, 1326, 5 USPQ2d 1255, 1260 (Fed.Cir.1988). 27 SMEC's discussion of the evidence presumes a legitimate choice between two manufacturers of percutaneous IABs. That evidence, however, is irrelevant when, as here, Datascope would, but for infringing devices, have been the sole supplier of percutaneous IABs. 28 The question at this point in the appeal, rightly stated, is whether SMEC's showing of loyalty of some of its customers overcame the reasonable inference (when the patentee and infringers are the only suppliers of the patented product) that the patent owner would have made the sales made by the infringers. Id. (citing Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065, 219 USPQ 670, 675 (Fed.Cir.1983)). It did not. The district court found, and SMEC does not challenge the finding, that those sales would have been made by Datascope (albeit later): [R]egardless of the doctors' high regard for Schiff and SMEC, these doctors would have adopted the percutaneous method because of [its] advantages [over the prior art methods]. 678 F.Supp. at 460, 5 USPQ2d at 1966. The district court also noted (and SMEC admits in its brief) that percutaneous IABs overcame the initial reluctance of doctors and became the method of choice. Id. at 459, 5 USPQ2d at 1965. 29 It is clear that the district court, in arriving at its ultimate finding on element three of the Panduit test, applied too rigorous a standard of proof. The patentee is not obligated to negate every possibility that a purchaser might not have bought the patentee's product instead of the infringing one, or might have foregone the purchase altogether. Del Mar, 836 F.2d at 1326, 5 USPQ2d at 1260. The error in the ultimate finding is further illustrated by the district court's unchallenged findings that: Datascope proved a steadily increasing demand for percutaneous IAB's over the infringing period (678 F.Supp. at 464, 5 USPQ2d at 1969); the percutaneous method is medically superior to the surgical method (id. at 459-60, 5 USPQ2d at 1965-66); and the chief impediments to immediate adoption of percutaneous IAB's were inertia and the need for test results. Id. 678 F.2d at 459-60, 5 USPQ2d at 1965-66. 30 Our review of the record related to the finding that Datascope failed to carry its burden of proof of entitlement to lost profits on domestic sales under the Panduit test leads us inexorably to the definite and firm conviction that a mistake has been committed. United States v. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948); see Anderson, 470 U.S. at 573, 105 S.Ct. at 1511; Fed.R.Civ.P. 52(a). We therefore must reverse that finding. 6 Foreign Sales 31 Datascope says the court's finding that it made no showing that it could have captured the sizable number of foreign sales made by SMEC is clearly erroneous and asserts that the only inference that can be drawn from the evidence presented is that Datascope would have made those sales by virtue of Datascope's worldwide presence. We are unconvinced of clear error. 32 Exactly what Datascope means by evidence presented is a mystery. Its main brief contains this: Datascope sells outside this country as well as within it [A. 952-56], and Datascope even has foreign subsidiaries in Germany, the Netherlands and the United Kingdom. Its reply brief notes, without record citation, facts such as its extensive worldwide presence, and that its size and reputation, and substantial advertising would have led to foreign sales. The court's search of the record found no support whatever for Datascope's oft-repeated statement that it has foreign subsidiaries. Our search of the record shows that the pages Datascope cites, 952-54 and 956 contain no evidence even touching on foreign sales; page 955 contains the naked statements in an accountant's testimony that sales are made to customers overseas and sales to foreign customers are very significant. 33 In sum, no evidence presented supports Datascope's argument that the only permissible inference was the one it wanted. On the contrary, the record provides clear support for the court's findings that (1) [a]lthough [Datascope's] sales team was divided into regions throughout the United States, no sales representatives were assigned to foreign customers; and (2) no attempt was ever made at making inroads in this area. In view of those findings, we cannot say that Datascope's evidence, in light of the entire record, was so compelling as to render any contrary view of that evidence implausible. Accordingly, we affirm the denial of lost profits on SMEC's foreign sales. Anderson, 470 U.S. at 574, 105 S.Ct. at 1511.