The German Federal Supreme Court recently held that patentees can recover compensation for springboard convoyed goods and services. If you have no idea what I'm talking about, read on.
The decision is BGH, Judgment of Nov. 14, 2023, I ZR 30/21—Polsterumarbeitungsmaschine. It can be found in 2/2024 Mitteilungen der deutschen Patentanwälte pp. 75-79; you can also find a short write-up about the case by Dr. Matthias Meyer and Dr. Daniel Misch here, and an English-language machine translation courtesy of Dr. Tillman Müller-Stoy on LinkedIn, here.
The patent in suit, EP 776 760, claimed a cushioning conversion machine (described as “relating generally to a cushioning conversion machine which converts paper stock into cushioning material”). The lower court held that two types of machines sold by the defendants infringed. On the question of monetary recovery, however, there were more than a few wrinkles. One such wrinkle is that, under German law, the general statute of limitations for a claim for damages is only three years, and here the plaintiff was seeking compensation for harms preceding that period of time. German law also provides, however, that a claimant has up to ten years to recover a reasonable royalty or the defendant’s profit, under an unjust enrichment theory (for previous discussion on this blog, see here). A second wrinkle is that the plaintiff was seeking discovery (information and access to accounts, in German Auskunft und Rechnungslegung) pertaining to sales of what in the U.S. would be referred to as “convoyed goods”: supplies for the infringing machines (especially paper), as well as leasing and maintenance contracts. As I have previously noted in my book (p.272 & n.195), German courts “may award profits earned on convoyed goods (Peripherigeräten) that are attributable to the sales of the infringing goods and not to other factors,” and the BGH reaffirms that principle here subject to the caveat that the profits must be tied to the sales of products or services that are used with the patented subject matter (para. 39). The court states that the causal connection would not be sufficient in cases in which, for example, the plaintiff sought the recovery of income the defendant earned from reinvesting its ill-gotten gain, or from the fame the defendant derived from its infringement (para. 34). (In the U.S., by way of comparison, the patentee can recover lost profits on sales of convoyed goods only if those goods “function together . . . in some manner so as to produce a desired end product or result,” in a manner “analogous to components of a single assembly or . . . parts of a complete machine, or . . . constitute a functional unit,” and are not merely sold together “as a matter of convenience or business advantage.” Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1550 (Fed. Cir. 1995) (en banc). For discussion of the pros and cons of the U.S. rule, see my article with Roger Blair, Rethinking Patent Damages, 10 Tex. Intell. Prop. L.J. 1 (2001).) Third, the plaintiff was seeking discovery on sales the defendant made of these convoyed goods after patent expiration, but which the plaintiff asserts were caused by sales of infringing machines that occurred during the term of protection. The court concludes that such springboard damages (as they are referred to in English) are permissible under German law. (Where proven, such “springboard” damages also are allowed in the U.S., though springboard injunctions and related remedies such as destruction are not, as they are in the U.K. and Germany. For discussion, see my article with Chung-Lun Shen, Destruction, Proportionality, and Sustainabiltiy: A Law and Economic Analysis, 32 Tex. Intell. Prop. L.J. 111, 123 n.53 (2024), and my article Extraterritorial Damages in Patent Law, 39 Cardozo Arts & Enter. L.J. 1, 32 (2021).) Along the way, the court also reaffirms the principle (which I have previously noted and disagreed with, see here) that (as in the U.K.) the defendant’s ability to have earned the same profit by resorting to a noninfringing alternative is irrelevant.
Presumably the amount of the recovery will be determined, as needed, in future proceedings, if the parties do not settle.
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