Lost Profits Require a Showing That the Patentee’s and the Infringer’s Products Are Substitutes but Not Necessarily Direct Competitors, and General Verdict Can Be Sustained if Valid Theories Necessarily Support the Judgment

The patents-at-issue relate to marine seismic surveys for discovering oil and gas deposits. The patentee uses the patented technology to create marine surveys and sells the surveys. The alleged infringer was accused of using the patented technology to make and sell devices for creating marine surveys. The alleged infringer did not specifically make or sell marine surveys. A jury found the alleged infringer’s device for creating the marine surveys infringed and awarded a single amount of lost profits for all the patents. After the judgment of infringement, the majority of the claims were found unpatentable in an inter partes review proceeding. On appeal, the alleged infringer argued that the lost profits award was not supported because the patentee’s products and the alleged infringer’s products were different and because the lost profits were based on invalid claims. The Federal Circuit affirmed in part and remanded.

To establish lost profits, “the patentee must show a reasonable probability that ‘but for’ the infringement, it would have made the sales that were made by the infringer.” The alleged infringer argued that this test required direct competition between the patentee’s products and the alleged infringer’s products. The Federal Circuit rejected that argument. The “but for” test for lost profits requires a showing that the patentee’s products and the alleged infringer’s products were substitutes and competed. It was not necessary to show that the products were the same. Because the sale of devices for performing marine surveys competed with and were substitutes for performing the service of providing marine surveys, lost profits were available. Presumably, a customer had a choice between purchasing the patentee’s services or buying the infringing product and doing the survey itself. While the service and the product are not the same thing, they are substitutes. 

As for the impact of the invalid claims, the general rule is that a general verdict must be set aside when a jury could have relied on one or more independent bases, which were defective. The court held that “the jury must have found the technology covered [by the remaining valid claims] was essential for” or “necessary” to the creation of the marine surveys. The court found the briefing on the issue was inadequate and remanded for the district court to apply this test.