Addressing whether the entire market value rule permits recovery of lost profits on unpatented components sold with a patented item, the U.S. Court of Appeal for the Federal Circuit reversed the district court’s exclusion of evidence of lost profits on unpatented syrup concentrate sold with a patented dispenser. Juicy Whip, Inc. v. Orange Bang, Inc. et al., Case No. 03-1609 (Fed. Cir. Sept. 3, 2004) (Lourie, J.).
Juicy Whip is the owner of U.S. Patent No. 5,575,405 (the `405 patent), which is directed to a beverage machine that mixes syrup concentrate and water just before it is dispensed. The machine features a transparent bowl that creates the visual impression that the bowl is the primary source of the dispensed beverage, which induces the sale of the beverage.
Juicy Whip sued Orange Bang and others alleging infringement of the `405 patent. Juicy Whip attempted to present damages evidence of lost syrup sales, claiming that because a functional relationship exists between the patented dispenser and the unpatented syrup, the recovery of lost profits for the unpatented syrup should be permitted under the entire market value theory of recovery. Orange Bang argued a functional relationship did not exist because the syrup and machines were capable of use independent of each other — the patented dispenser could be used with other syrups, and the syrup could be used in unpatented dispensers. The district court excluded evidence of lost profit of syrup sales Juicy Whip appealed.
The Federal Circuit reversed, ruling that a functional relationship was clearly present between the syrup and the dispenser. Citing Rite Hite and MicroChemical, the Court noted that under the market value rule if a functional relationship exists between patented and unpatented items, the unpatented item is properly part of a lost profit analysis. Since the dispenser and the syrup are parts of a single assembly and together function to produce the visual appearance that is central to the `405 patent, the Federal Circuit found the two items function together to achieve one result. The fact the dispenser could be used with other syrups and the syrup could be used in unpatented dispensers did not detract from this conclusion.
Practice Note:
Always consider whether a lost profit claim can include the sale of non-patentable items used with any patented devices. In prosecuting patents on devices that utilize consumables, consider including claims which combine the device together with the consumables.The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
