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KEARNS v. FORD MOTOR CO.

November 27, 1989

ROBERT W. KEARNS, Plaintiff,
v.
FORD MOTOR COMPANY, Defendant



The opinion of the court was delivered by: COHN

 AVERN COHN, UNITED STATES DISTRICT JUDGE

 I.

 This is a patent case. Plaintiff Robert W. Kearns (Kearns) asserts that defendant Ford Motor Company (Ford) infringed patents that he owns -- United States Patents No. 3,351,836; No. 3,564,374; No. 3,581,178; No. 3,602,790; No. 3,796,936; and No. 3,582,747 -- relating to electronic intermittent windshield wiper (IWW) systems. Kearns filed suit in 1978, alleging that Ford began its infringing activities in 1969. On April 24, 1989, the Court set a tentative trial date for November 27, 1989. On September 22, 1989, Ford filed a motion styled "Motion in Limine to Exclude Evidence of Ford's Revenues and Profits" to keep evidence of the mark-up over manufacturing cost, reflected in the prices Ford charges dealers for parts and accessories, out of the damage phase of the trial. *fn1" Kearns has responded.

 Kearns seeks to introduce evidence regarding Ford's mark-up on IWW systems sold to dealers; Ford's sales forecasts; Ford's marketing and advertising of IWW systems; Ford's IWW manufacturing and installation costs; and Ford's decision to introduce IWW systems as an option, part of a convenience group or as standard equipment on each automobile manufactured by Ford. Kearns says that the mark-up on accessories such as IWW systems represents profit to Ford. Ford opposes admission of this evidence, arguing that the evidence is irrelevant to the issue of damages. For the reasons that follow, Kearns is prohibited from making any reference at trial before the jury, without prior approval of the Court, to the prices Ford charges to dealers for IWW systems.

 II.

 The methodology of assessing damages under 35 U.S.C. ยง 284 is within the sound discretion of the Court. *fn2" Yarway v. Eur-Control USA, Inc., 775 F.2d 268, 275, 227 U.S.P.Q. (BNA) 352 (Fed. Cir. 1985). Section 284 does not mandate how the district court must define computation of damages as long as it allows compensation to the injured party for the infringement. Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507, 12 L. Ed. 2d 457, 84 S. Ct. 1526 (1964). As a consequence, courts have taken different approaches to the methodology of assessing damages, including relying on different types of information in making an assessment.

 A.

 Kearns argues that it can be inferred from TWM Mfg. v. Dura Corp., 789 F.2d 895, 899, 229 U.S.P.Q. (BNA) 525 (Fed. Cir.), cert. denied, 479 U.S. 852, 93 L. Ed. 2d 117, 107 S. Ct. 183 (1986), that evidence pertaining to Ford's mark-up over manufacturing costs is clearly relevant to a determination of damages, either in the form of lost profits to him or a reasonable royalty to be paid to him should he succeed in establishing liability. As a threshold matter, it is clear that Kearns is not entitled to lost profits as a measure of damages because he cannot meet the test articulated in Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir. 1978). Panduit requires that Kearns show the existence of a demand for the patented product, an absence of acceptable noninfringing substitutes, the manufacturing and marketing capability to exploit the demand, and the amount of profits he would have made. Id. at 1156.

 Kearns's proposed findings of fact *fn3" establish that he does not meet the Panduit requirements. Kearns's proposed finding of fact (PFF) #515 states that "because of the infringement, Kearns lost his opportunity to build a company" that would supply electronic controls to the automobile industry. This proposed finding is revealing. First, Kearns clearly had no existing capability to exploit any demand for his IWW control circuits at the time of infringement. Second, the conclusory nature of PFF #515 requires that Kearns offer proofs as to the plans undertaken, the capital raised or available, and the other circumstances pertaining to intentions to organize a company to manufacture his electronic controls. Kearns's PFF #516-18 are clearly inadequate in this regard because they state in conclusory form only that Kearns intended to manufacture electronic controls in 1963 and in the 1970s. Neither of these time periods coincides with the time that the alleged infringement began. In addition, these conclusory statements lack sufficient detail to even suggest that producing electronic IWW control circuits would have been a realistic option for Kearns. Under the rules established in Panduit, lost profits simply cannot be a component of any damages awarded in this case.

 B.

 1.

 From examining both parties' proposed findings of fact, it appears that there will be no evidence offered at trial as to any established royalty. See Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078-79, 219 U.S.P.Q. (BNA) 679 (Fed. Cir. 1983). If there is such evidence, the jury most likely will be required to decide that question before determining what is a reasonable royalty. As the Court reads the cases and academic discussion as to what constitutes a reasonable royalty, it appears that the rules discussed below apply.

 Determination of a reasonable royalty is based on the willing licensee-willing licensor rule. Radio Steel & Mfg. Co. v. MTD Products, Inc., 788 F.2d 1554, 229 U.S.P.Q. (BNA) 431 (Fed. Cir. 1986). Radio Steel says: "The determination of a reasonable royalty . . . is based not on the infringer's profit, but on the royalty to which a willing licensor and licensee would have agreed at the time the infringement began." Id. at 1557. That is, a reasonable royalty is the royalty that a licensee would be willing to pay and ...


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