Don't Take It Personally; An Officer of a Willful Infringer is Not Necessarily Personally Liable

Wechsler v. Macke International Trade, Inc., [05-1242, 1243](May 18, 2007)[PROST, Mayer, Gajarsa] The Federal Circuit reversed JMOL that O’Rourke was personally liable for inducing infringement of U.S. Patent No. 5,636,592, and affirmed JMOL that the jury’s award of lost profits damages was not supported by substantial evidence.
SIGNIFICANCE: Where the patent is not making a product, lost profits are only avaiable upon proof that the infringing sales prempted subsqueent sales or eroded the patentee's price. Proof that the patentee could have made sales is not the same as proof that the patentee would have made those sales.
BRIEF: The jury returned special verdicts that defendants willfully infringed the ‘592 patent, but that O’Rourke was not personally liable for inducing infringement. The jury awarded a combination of lost profits and reasonable royalty damages. The trial court granted JMOL that O’Rourke was personally liable for inducement, and denied defendants motion for JMOL to set aside the lost profits award on the grounds that plaintiff did not manufacture a product until after defendants’ product was off the market. The trial court found the jury’s special verdict that O’Rourke was not personally liable to be inconsistent with the special verdict that O’Rourke and the corporate defendant had willfully infringed, and granted the JMOL to reconcile the inconsistency. The Federal Circuit rejected the trial court’s conclusion that the record fully supports that the jury intended to find Rourke personally liable, which was in direct conflict with the jury’s special verdict. The Federal Circuit said that under the trial court’s logic, a person that incorporates to conduct business can never escape personal liability for willful infringement by the corporation, which is inconsistent with Federal Circuit law. Unless the corporate structure is a sham, personally liability for inducement must be supported by personal culpability, which requires a specific intent to aid and abet the infringement.
LOF: Whether lost profits are legally compensable in a particular situation is a question of law reviewed de novo. To recover lost profits, the patent owner must show causation in fact, establishing that but for the infringement he would have made additional profits. The Federal Circuit found that not only was substantial evidence of causation lacking, but that the availability of lost profits was a question for the court, and not the jury. Ordinarily, if the patentee is not selling a product, by definition there can be no lost profits, the only exception is where the patentee has the ability to manufacture, and simply chooses not to. The Federal Circuit said that a patentee could still receive lost profits if the infringing sales preempted subsequent sales by the patentee, and or eroded the market price the patentee was able to charge for its product. The Federal Circuit found a lack of substantial evidence under either theory. Evidence that the patentee could have sold the infringing product, is not evidence that the patentee would have made the sales.