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When “convoyed sales” entitle patentees to lost profits
A convoyed sale occurs when a patent-infringing product is sold with a functionally associated nonpatented product. In some cases, a patentee is entitled to lost profits for such sales — but not always.
Colliding car wash systems
Belanger Inc. manufactures car wash systems and owns a patent for a spray-type system with lighted spray arms. The company sent a cease-and-desist letter to Wash World, another car wash system maker, alleging that Wash World’s “Razor EDGE” system infringed the patent.
Wash World responded by suing Belanger, seeking a declaratory judgment that its system didn’t infringe the patent. Belanger counterclaimed for infringement. After a trial, a jury returned a general verdict finding that the Razor EDGE system infringed the patent. It awarded Belanger $9.8 million in lost profits damages.
Shutting down convoyed damages
Wash World challenged the lost profits award, specifically the $2.6 million stemming from convoyed sales. The court agreed that the trial record didn’t support damages for convoyed sales.
To prove entitlement to such sales, a patentee must prove that the unpatented products and the patented product together constitute a “functional unit.” That means they’re analogous to components of a single assembly or parts of a complete machine. Convoyed sales damages aren’t appropriate for items that have essentially no functional relationship to the patented invention and that may have been sold with an infringing device only as a matter of convenience or business advantage.
According to the court, no reasonable juror could have found that the unpatented components of Belanger’s Razor EDGE system — dryers — constituted a functional unit with the patented portions of the system. The fact that the dryer was typically sold as part of an entire system or package with the patented system didn’t demonstrate the requisite functional relationship to justify additional lost profits. Rather, selling the products together was the exact sort of convenience or business advantage that doesn’t, of itself, support damages liability.
In this case, the jury didn’t explicitly break down the portion of its award attributable to convoyed sales. The court noted that Belanger’s expert presented five possible lost profits damages amounts, all including damages for convoyed sales. As the jury’s award was precisely equal to the bottom figure of his proposed calculations, it was “overwhelmingly likely” that the jury adopted all of the components of his calculation, including the convoyed sales.
Demonstrating function over form
Belanger’s award was reduced by $2.6 million because of the improper inclusion of convoyed sales. Patentees seeking lost profits on unpatented components can avoid a similar fate by clearly demonstrating a functional relationship with the patented products.
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