In a patent infringement suit, plaintiffs often seek damages for lost sales of infringing products. While this is the most obvious source of recovery, opportunities for larger damage rewards may be available as a result of sales of non-infringing products. An example of this is in the event of convoyed sales to infringing products.
Convoyed sales are product sales that are made at the same time as sales of infringing products. For a sale of a non-infringing product to be considered a convoyed sale, the non-infringing product should be “functionally related” to the patented item. Put another way, the infringing product is often essential to use the non-infringing product. Non-infringing products included with infringing products for consumer convenience or business advantage are generally not considered convoyed sales. If the convoyed sale has a use independent of the infringing device, it suggests a non-functional relationship. Further, any increase in sales of the non-patented product should be reasonably foreseeable and the patented item should constitute a basis for demand of the non-patented product.
For example, if an infringing hammer is sold, and at the same time non-infringing nails are sold, the sale of the nails may be a convoyed sale. If the hammer is required to use the nails correctly, then the sale of the nails would likely be a convoyed sale upon which damages could be recovered. If the nails could be used without the hammer, they likely would not be a convoyed sale because they were likely included for the convenience of the customer or for a business advantage (they could have been included at a discount to entice budget-conscious home improvers). Further, if the non-infringing nails could be used independently from an infringing hammer and instead with a non-infringing hammer, the sale of the nails, although made at the same time as the infringing hammer, suggests that there is a non-functional relationship between the infringing hammer and the non-infringing nails. Further still, it is possible that the there is demand for the non-infringing nails independent of their sale with the infringing hammer. Accordingly, the infringing hammer likely would not constitute a basis of demand for the nails.
It should also be noted that for a plaintiff to recover lost profit damages on convoyed sales, the plaintiff would need to prove that they suffered a lost sale as a result of the convoyed sale. Continuing with the above example, the plaintiff hammer vendor likely cannot recover damages for lost profits on sales of nails if it does not, or would not, sell nails.
When estimating the potential costs and rewards of litigating a patent infringement case, it is important to do a complete accounting of injuries resulting from the infringement. Businesses frequently sell products related to their patented products. If an infringer is selling not only an infringing product, but also products that are used with the infringing products, these associated sales may be a substantial source of injury to the patentee and give rise to a substantial damage reward.
WHIPgroup is leading counsel for U.S. and international technology companies. We specialize in patent and trademark law.
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