In a patent case pending against Intel in the District of New Mexico, the plaintiff sought to compel the production of Intel’s future products that were under development. The litigation involved plaintiff’s claim that Intel infringed its patent for a process called “double patterning,” which is a process that allows for the manufacture of smaller, more powerful computer processor chips.
Plaintiff sought production from Intel of a certain size of Intel chips that were not yet sold to the public and that would not be marketed until after September 2012, a date which is after the plaintiff’s patent expires. Intel argue that the information was not relevant to a reasonable royalty calculation and production of the information would be overly burdensome because the processes were likely to change multiple times before the launch of the product.
The plaintiff argued that it was entitled to production of the information under the theory of “accelerated market entry” and that production of research and development documents would not be overly burdensome.
The district court began its analysis by noting that “accelerated market entry (“AME”) is a recognized theory of damages in patent litigation.” Noting that AME represents compensation for lost sales after the patent’s expiration based on a defendant’s entry into the market at a level accelerated by its earlier infringement, the district court explained that it was not applicable here because the plaintiff’s would not be entitled to lost profits as they were not a competing manufacturer, but rather were limited to reasonable royalties. “Defendant argues that AME does not apply in this case because Plaintiff does not manufacture or sell products and cannot recover lost profits. . . . Plaintiff argues that there are very few AME cases at all, and while it is true that they involve patentees who manufacture their own product, there is no reason why the theory should not apply equally to patentees who license their products and collect royalties from third party manufacturers.”
The district court found the plaintiff’s argument unpersuasive, reasoning that “[w]hile it is true that infringing sales could decrease the post-expiration sales and profits of those third party manufacturers, the patentee’s damages could only be the corresponding decrease in royalty from those decreased third party sales. The law is clear, however, that royalties are not paid after expiration of a patent”
“Accordingly, the Court sees no basis for a post-expiration claim of lost royalties, whether based on AME or otherwise.”
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The attempt to use the AME theory to seek discovery of additional products not yet on the market, and never to appear on the market before the expiration of the patent, is a novel approach, but did not work in this case. As the products here would not be marketed and sold until after the expiration of the patent, it makes sense that discovery was denied and that AME was inapplicable because the plaintiff was not a manufacturer. A more difficult issue will occur when a plaintiff, who is not a manufacturer, seeks to use AME to increase its royalty rate or royalty base. The AME theory has not been invoked often but in the right case the theory may work even where the plaintiff is not a manufacturer.
STC.UNM v. Intel, Case No. 1-10-cv-01077 (D.N.M. May 31, 2011)
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The authors of www.PatentLawyerBlog.com are patent litigation lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.