Background
Lufthansa Technik AG (“Lufthansa”) is the owner of a patent for a safety feature in in-seat power supply systems for aircraft. In prior proceedings, the courts found that Astronics, Safran, and Panasonic (the “Defendants”) had infringed this patent by manufacturing and selling their “EmPower Fusion” power systems. Following the finding of infringement, Lufthansa elected to receive an “account of profits,” a remedy that requires the infringer to pay over the profits it earned from the infringement, as an alternative to damages for the patentee’s own losses.
The matter went before a High Court judge, Mr Justice Leech, to determine the amount of profits the Defendants were liable to pay. The central dispute was whether the Defendants should have to surrender all profits from sales of the entire EmPower Fusion system, or only a portion attributable to the patented feature. The Defendants argued their products contained many valuable features beyond Lufthansa’s invention and that the infringement was not the sole reason for their sales. The judge agreed with the Defendants, finding that the patented invention was not the primary driver of sales.
As a result, the trial judge “apportioned” the profits, ordering Astronics and Panasonic to pay only 13% of the total profits they made on the infringing systems, amounting to over $12 million combined. Lufthansa appealed this decision to the Court of Appeal, arguing it is entitled to 100% of the profits. The Defendants also cross-appealed on other issues, including the calculation of interest and potential double recovery from parallel litigation in Germany and France.
The Court’s Holding
The High Court held that when calculating an account of profits for patent infringement, the court must determine what profits were “derived by [the infringer] from the infringement.” This requires an analysis of both factual and legal causation. It does not automatically follow that all profits from a product containing a patented feature are derived from the infringement. The court must assess the commercial importance of the invention and its role in driving sales and generating the profit.
The judge found that while the patented safety feature was necessary for the Defendants to obtain regulatory certification and airframe manufacturer approval, it was only one of many technical and safety requirements their products had to satisfy. He concluded that the infringement was not the commercial driver of sales for the entire EmPower Fusion system. Therefore, he ruled that it was appropriate to apportion the profits to reflect the value contributed by the invention relative to the other features of the product. He quantified this contribution at 13% of the profits for Astronics and Panasonic.
Key Takeaways
- In an account of profits for patent infringement, the court may apportion the infringer’s profits where the patented invention is not the primary commercial driver of sales for the infringing product.
- The legal test for causation requires the court to evaluate the importance of the patented feature in the context of the product as a whole to determine what portion of the profit is truly “derived from the infringement.”
- Even if a patented feature is technically essential for a product to be sold (e.g., to meet regulatory standards), this does not automatically entitle the patentee to 100% of the profits if other features also contribute to the product’s value and sales.
Why It Matters
This case addresses a fundamental question in intellectual property law: when a complex product infringes a patent relating to only one of its many features, is the infringer liable for all the profit, or just a portion? The High Court’s decision to apportion profits represents a significant limitation on the “account of profits” remedy. It moves away from a simple disgorgement of all profits from an infringing sale and towards a more nuanced analysis of the invention’s actual economic contribution.
The outcome of the appeal will provide crucial guidance for future patent cases, impacting how financial awards are calculated. It underscores the high stakes involved when a patentee elects for an account of profits instead of damages, as a finding that the invention was not the main driver of sales can dramatically reduce the final monetary award.