Lawyers have to answer a very basic question in preparing a case for trial: How can we prove damages? In a patent case with a discovery dispute over lost-profit damages, the ultimate question was what damages were “adequate to compensate for the infringement” and how to prove them. Polaris Indus. v. Arctic Cat, No. 15-4129, 2018 U.S. Dist. LEXIS 111452, at *2 (D. Minn. July 3, 2018), citing 35 U.S.C. § 284.
The test for recovering lost profits requires a patentee to show a “reasonable probability that, ‘but for’ the infringement, it would have made the sales that were made by the infringer.” Polaris at *2, citing Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (en banc). However, damages are limited in that a patentee cannot claim the lost profits of a related company, unless the patentee can show that the profits of the related company flow inexorably to the patentee. Polaris at *2, citing Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365, 1375 (Fed. Cir. 2015) and Schwendimann v. Arkwright Advanced Coating, Inc., 220 F. Supp. 3d 953, 974 (D. Minn. 2016).
The Discovery Dispute
The Defendant served a Rule 34 request for production on the Plaintiff seeking any lost profits it claimed it was owed for the alleged patent infringement. The Plaintiff objected to Defendant’s broad definition of the Plaintiff and instead interpreted “Polaris” to mean Polaris Industries Inc. Polaris at *2-4.
The Plaintiff produced a “Marketing and Distribution Agreement” between Polaris and PSI in 2015 that allegedly brought to light that the Plaintiff sold its products through a company named PSI. Moreover, the Plaintiff claimed they cited this agreement in response to two interrogatories about damages, with hundreds of records also produced. Polaris at *4.
The Defendant brought a motion to compel the Plaintiff to produce documents related to the financial relationship between the Plaintiff and PSI. Id. The Defendant further claimed it was a recent development that they learned the Plaintiff would be seeking lost profits from the inexorable-flow theory. Id.
Josh Gilliland is a California attorney who focuses his practice on eDiscovery. Josh is the co-creator of The Legal Geeks, which has made the ABA Journal Top Blawg 100 Blawg from 2013 to 2016, the Web 100 from 2017 to 2018, and was nominated for Best Podcast for the 2015 Geekie Awards. Josh has presented at legal conferences and comic book conventions across the United States. He also ties a mean bow tie.