Federal Circuit Summary

Before Dyk, Clevenger, and Chen. Appeal from the United States District Court for the Northern District of California.

Summary: In order to rely on the entire market value rule to calculate damages, a patentee must prove that the unpatented features in the accused product did not influence consumer demand.

Power Integrations sued Fairchild for patent infringement of two patents. In the district court, the jury found that Fairchild infringed and awarded damages of roughly $140 million. The damages verdict rested on testimony relying solely on the entire market value rule. Fairchild appealed, challenging the infringement decisions and the damages award.

The Federal Circuit first affirmed the district court’s judgments of infringement. Turning to damages, the Federal Circuit reiterated that the entire market value rule only allows for the recovery of damages based on the value of an entire, multi-feature, apparatus when the patented feature constitutes the basis for consumer demand. When a product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions.

The Federal Circuit found that the accused products had other valuable features and that Power Integrations did not meet its burden to show that these features did not affect consumer demand. Thus, because the evidence presented was insufficient to invoke the entire market value rule, the Federal Circuit vacated the award of damages and remanded for a new trial.

This case is: POWER INTEGRATIONS, INC., V. FAIRCHILD SEMICONDUCTOR

Editor: Paul Stewart

Written by: Thomas E. Woodland and Karen M. Cassidy