Mentor Graphics Corp. v. Eve-Usa, Inc.

• Decision Date: 01 September 2017
• Docket Number: 2015-1470 2015-1554 2015-1556.
• Citation: 870 F.3d 1298 (Mem)
• Parties: MENTOR GRAPHICS CORPORATION, an Oregon Corporation, Plaintiff–Cross–Appellant v. EVE–USA, INC., a Delaware Corporation, Synopsys Emulation and Verification S.A.S., Formed Under the Laws of France, Synopsys, Inc., a Delaware Corporation, Defendants–Appellants
• Court: U.S. Court of Appeals — Federal Circuit

870 F.3d 1298 (Mem)

MENTOR GRAPHICS CORPORATION, an Oregon Corporation, Plaintiff–Cross–Appellant

v.EVE–USA, INC., a Delaware Corporation, Synopsys Emulation and Verification S.A.S., Formed Under the Laws of France, Synopsys, Inc., a Delaware Corporation, Defendants–Appellants

2015-1470 2015-1554 2015-1556.

United States Court of Appeals, Federal Circuit.

September 1, 2017

Mark E. Miller , O'Melveny & Myers LLP, San Francisco, CA, filed a response to the petition for plaintiff-cross-appellant. Also represented by Anne E. Huffsmith , Luann Loraine Simmons .

E. Joshua Rosenkranz , Orrick, Herrington & Sutcliffe LLP, New York, NY, filed a petition for rehearing en banc for defendants-appellants. Also represented by Daniel A. Rubens , Andrew D. Silverman ; Robert M. Loeb , Eric Shumsky , Washington, DC; Vicki L. Feeman , Travis Jensen , Scott T. Lonardo , Menlo Park, CA; William H. Wright , Los Angeles, CA; Indra Neel Chatterjee , Goodwin Procter LLP, Menlo Park, CA.

Eric E. Bensen , Garden City, NY, as amicus curiae.

Phillip R. Malone , Stanford Law School, Stanford, CA, for amici curiae Public Knowledge and Jeremy W. Bock, et al. Also represented by Jeffrey Theodore Pearlman .

Before Prost, Chief Judge, Newman, Lourie, Dyk, Moore, O'Malley, Reyna, Wallach, Taranto, Chen, Hughes, and Stoll, Circuit Judges.

Stoll, Circuit Judge, with whom Newman, Moore, O'Malley, Reyna, and Wallach, Circuit Judges, join, concurring in the denial of rehearing en banc.

Dyk, Circuit Judge, with whom Hughes, Circuit Judge, joins, dissenting from the denial of rehearing en banc.

Moore, Circuit Judge, with whom Chen, Circuit Judge, joins, concurring in the denial of panel rehearing.

ORDER

Per Curiam.

Appellants EVE–USA, Inc., Synopsys Emulation and Verification S.A.S., and Synopsys, Inc. filed a petition for rehearing en banc. A response to the petition was invited by the court and filed by the cross-appellant Mentor Graphics Corporation. Two motions for leave to file amici curiae briefs were also filed and granted by the court.

The petition, response, and briefs of amici curiae were referred to the panel that heard the appeal, and thereafter were referred to the circuit judges who are in regular active service. A poll was requested, taken, and failed.

Upon consideration thereof,

IT IS ORDERED THAT:

The petition for panel rehearing is denied.

The petition for rehearing en banc is denied.

The mandate of the court will be issued on September 8, 2017.

Stoll, Circuit Judge, with whom Newman, Moore, O'Malley, Reyna, and Wallach, Circuit Judges, join, concurring in the denial of rehearing en banc.

Because the panel's decision is consistent with longstanding patent law damages principles,¹ I concur in the denial of rehearing en banc.

We have consistently held that where an infringing product is a multi-component product with patented and unpatented components, apportionment is required. See VirnetX, Inc. v. Cisco Sys., Inc. , 767 F.3d 1308, 1326 (Fed. Cir. 2014) ("No matter what the form of the royalty, a patentee must take care to seek only those damages attributable to the infringing features."); Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc. , 809 F.3d 1295, 1301 (Fed. Cir. 2015) ("[D]amages awarded for patent infringement ‘must reflect the value attributable to the infringing features of the product, and no more.’ ") (quoting Ericsson, Inc. v. D–Link Sys., Inc. , 773 F.3d 1201, 1226 (Fed. Cir. 2014) ); Ericsson , 773 F.3d at 1226 ("[A]pportionment is required even for non-royalty forms of damages."). The apportionment requirement dates back to Garretson v. Clark , 111 U.S. 120, 4 S.Ct. 291, 28 L.Ed. 371 (1884), where the Supreme Court held that "[t]he patentee ... must in every case give evidence tending to separate or apportion the defendant's profits and the patentee's damages between the patented feature and the unpatented features." Garretson , 111 U.S. at 121, 4 S.Ct. 291.

Garretson , however, also holds that damages for patent infringement may be based on the value of the entire infringing product if the patentee can show that "the entire value of the whole machine ... is properly and legally attributable to the patented feature." Id . In other words, "[i]f it can be shown that the patented feature drives the demand for an entire multi-component product, a patentee may be awarded damages as a percentage of revenues or profits attributable to the entire product." LaserDynamics, Inc. v. Quanta Comput., Inc. , 694 F.3d 51, 67 (Fed. Cir. 2012).

In this case, on the question of lost profits, the jury was instructed to consider the Panduit factors, including "demand for the patented product" (factor one) and an "absence of acceptable noninfringing substitutes" (factor two). See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc. , 575 F.2d 1152, 1156 (6th Cir. 1978). As the panel recognized, these two factors together "consider[ ] demand for the patented product as a whole" and "consider [ ] demand for particular limitations or features of the claimed invention." Mentor Graphics Corp. v. EVE–USA, Inc. , 851 F.3d 1275, 1285 (Fed. Cir. 2017) (citing DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc. , 567 F.3d 1314, 1330–31 (Fed. Cir. 2009) ). As the panel noted, the jury found that "Intel would not have purchased the [infringing] Synopsys emulator system without the two patented features and that there were no other alternatives available." Id. at 1287. This undisputed fact finding established that Mentor proved that the patented features were what imbued the combined features that made up the emulator with marketable value. Under these circumstances, further apportionment is unnecessary. See Ericsson , 773 F.3d at 1227 ("[W]here the entire value of a machine as a marketable article is ‘properly and legally attributable to the patented feature,’ the damages owed to the patentee may be calculated by reference to [the entire value of the machine.]") (quoting LaserDynamics , 694 F.3d at 67 ); VirnetX , 767 F.3d at 1326. Whether one views this in terms of what imbues value to the ultimate combination of features or what is a driver of demand for those combined features, the result is the same: the apportionment required by Garretson is satisfied.

In my view, the dissent mischaracterizes the panel's holding in this case, suggesting the panel held that in all cases where lost profits are awarded, apportionment is not required. Dissent Op. 1. To the contrary, the panel made clear that apportionment is typically necessary in both reasonable royalty and lost profits analyses. See Mentor Graphics , 851 F.3d at 1287–88. Under the narrow facts of this case, however, the panel determined that because the Panduit factors are satisfied, the damages award properly accounted for apportionment. I do not read the panel's decision to apply broadly to all lost profits analyses.

Accordingly, based on the jury's undisputed fact findings on the Panduit factors in this case, I agree with the panel that Mentor properly accounted for apportionment of lost profits between the patented and unpatented features of the infringing emulator system. For this reason, I concur in the denial of rehearing en banc.

Dyk, Circuit Judge, with whom Hughes, Circuit Judge, joins, dissenting from the denial of rehearing en banc.

I respectfully dissent from the court's decision to not rehear this case en banc. In my view, the panel decision here improperly holds that when lost profits are awarded for patent infringement, there is no requirement for apportionment between patented and unpatented features, contrary to longstanding Supreme Court authority.

For over a century, it has been established by both the decisions of the Supreme Court and this court that awards of lost profits or reasonable royalties for patent infringement must be apportioned between patented and unpatented features. See, e.g. , Dowagiac Mfg. Co. v. Minn. Moline Plow Co. , 235 U.S. 641, 646–48, 35 S.Ct. 221, 59 L.Ed. 398 (1915) ; Dobson v. Hartford Carpet Co. , 114 U.S. 439, 443–44, 5 S.Ct. 945, 29 L.Ed. 177 (1885) ; Blake v. Robertson , 94 U.S. 728, 733–34, 24 L.Ed. 245 (1876) ; Garretson v. Clark , 111 U.S. 120, 121, 4 S.Ct. 291, 28 L.Ed. 371 (1884) ; Seymour v. McCormick , 57 U.S. (16 How.) 480, 489–90, 14 L.Ed. 1024 (1853) ; Ericsson, Inc. v. D–Link Sys., Inc. , 773 F.3d 1201, 1226 (Fed. Cir. 2014). Indeed, the panel opinion acknowledges that "apportionment is ... necessary in both reasonable royalty and lost profits analysis." Mentor Graphics Corp. v. EVE–USA, Inc. , 851 F.3d 1275. 1287 (Fed. Cir. 2017). At the same time, the case law is also clear that any award of lost profits is not appropriate unless the patentee establishes that it would have sold the item but for the infringement. See, e.g. , Grain Processing Corp. v. Am. Maize–Prods. Co. , 185 F.3d 1341, 1349 (Fed. Cir. 1999). This but-for requirement is encapsulated in the first and second Panduit factors, which are "demand for the patented product" and the "absence of acceptable noninfringing substitutes," i.e. , alternatives that could have prevented the patentee from itself making the sale.¹

The panel here holds that applying the first and second Panduit factors results in the required apportionment. See Mentor , 851 F.3d at 1285 ("[T]he absence of non-infringing alternatives ties lost profit damages to specific claim limitations and ensures that damages are commensurate with the value of the patented features."). But calling the first and second Panduit factors apportionment "ignore[s] the ancient wisdom that calling a thing by a name does not make it so." City of Madison, Joint Sch. Dist. No. 8 v. Wis. Emp. Relations Comm. , 429 U.S. 167, 174, 97 S.Ct. 421, 50 L.Ed.2d 376 (1976). In my view, the panel opinion simply does not apportion—even though it purportedly recognizes apportionment's importance.

The panel cites cases from the Supreme Court and other circuits holding that but-for causation is necessary both for lost profits generally and for an...