Western District of Michigan allows accelerated market entry theory to proceed to trial

The Western District of Michigan, in Magna Elec., Inc. v. TRW Auto. Holdings Corp., et al., 1:12-cv-654 (Judge Maloney) (December 31, 2015), denied Defendants' motion for summary judgment, allowing Plaintiff's accelerated market entry theory and its claim for future damages to proceed to the jury.

Plaintiff sought damages from Defendants' sales of certain products from 2013 to 2023. At least a portion of the damages Plaintiff sought were post-expiration of the patent. Relying on Kimble v. Marvel Entm't, LLC, 135 S. Ct. 2401 (2015), Defendants argued that Plaintiff's claim for post-expiration damages, in the form of lost profits, was barred.

The Court said that:

"Ultimately, [Plaintiff] is correct. 'While the Supreme Court, in its recent decision in Kimble . . ., upheld its 50 year old opinion in Brulotte . . . holding that post-expiration running royalties were not recoverable. . . Kimble does not expressly prohibit the recovery of all damages after the expiration of a patent and does not even speak to lost profit damages, instead being limited to whether running royalties can be paid after a patent expires. Kimble does not bar a claim for lost profits damages.'"

(slip op. at 6 - 7)

The Court recognized that Kimble permits parties to enter into royalty agreements that avoid its restrictions. The Court said:

"The hypothetical negotiation leading to a license agreement is not limited to a running royalty requiring the payment of royalties on sales made after the patent expired which may run afoul of Kimble. Kimble explicitly allows other business arrangements other than a post-expiration running royalty. In this case, in the hypothetical negotiation, Magna and TRW could have agreed to enter into a lump sum royalty paid before patent expiration. And here the parties do not disagree."

(slip op. at 7).

The Court acknowledged that Defendants advanced a "fairly persuasive back-up argument" that Plaintiff's post-expiration estimated sales were speculative. Plaintiff relied on Defendants' own sales projections, however, those sales projections in past years had been off by as much as 55%. Defendants further argued that buyers to an OEM contract may terminate the contract at any time, further confirming the speculative nature of the lost profits. (slip op. 7 - 8). The Court concluded that Defendants' arguments went to the weight and not the admissibility of the evidence at trial over damages. 'The Court cannot say that there is not a genuine factual dispute whether [Defendants'] estimates of future sales are sufficiently reliable to use them as a basis to claim future damages." (slip op. at 8).

Lastly, the Court found persuasive that other courts have allowed an accelerated market entry theory proceed to a jury. The Court also found persuasive the Federal Circuit's approval of the theory:

"Most important to this court, the Federal Circuit cited approvingly to BIC Leisure Products, Inc. v. Windsurfing Int'l, Inc., 687 F. Supp. 134 (S.D.N.Y. 1988), rev'd in part on other grounds, 1 F.3d 1214 (Fed. Cir. 1993), stating that "trial courts, with this court's approval, consistently permit patentees to present market reconstruction theories showing all of the ways in which they would have been better off in the 'but for world,' and accordingly to recover lost profits in a wide variety of forms." The Court then cited approvingly in a parenthetical, "permitting recovery for . . . accelerated market reentry by the infringer." Grain Processing Corp., 185 F.3d at 1350. The BIC Leisure case held that Brulotte did not preclude accelerated market entry damages, and indeed, Kimble itself notes that there are instances in which post-expiration damages are available as a matter of law."

(slip op. at 8 - 9).