Tuesday, June 15, 2010

Dow "Bags" a $62M Verdict From Nova Chemicals -- But Will it Hold Up on Appeal?

Dow Chemicals convinced a Delaware jury today to award it $61.7 million in damages in its patent infringement lawsuit against rival Nova Chemicals in a lawsuit which involved Dow's patents for super-strong thin-film plastics used in grocery bags.

As readers here know, I applaud any damages award in patent infringement cases between competitors. In fact, $57.5 million of the award was for profits Dow claimed it lost because of Nova's sales of competing plastic products.

However, there is some reason to think that the Dow lost profits award may not hold up on appeal -- or even on a challenge in the District Court.

In order to obtain an award of lost profits, a plaintiff must satisfy the so-called Panduit test -- which requires the plaintiff to prove that there were no non-infringing alternatives to the infringing product. The theory behind this requirement is that, to be awarded lost profits, a plaintiff must show that, if the infringer's customer did not buy the infringing product, it would have bought the plaintiff's product instead -- thus, the infringement caused the sale to be "lost." [If the "alternative" is also infringing -- even if sold by another company -- it does not "count"]

According to Nova, in presenting its damages case, Dow did not properly consider the existence of alternatives to the infringing Nova product which Nova's customers could have selected. Dow's own expert, in fact, conceded that Exxon made a non-infringing alternative and that, in fact Nova also sold an alternative product which Dow admitted did not infringe.

Dow also based its claim that it would have captured 80% of Nova's sales of its infringing product, not on rigorous market research, but on the testimony of "enthusiastic" Dow salesmen -- not the kind of solid economic data the Federal Circuit demands.

It remains to be seen whether the economic testimony supporting this verdict will hold up at the Federal Circuit or whether the District Court itself may strike down the award.

Though Dow seems to think it has this verdict in the bag, it might want to check for holes in the bottom.

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