Intervening Rights and Lost Profits

by Dennis Crouch

Presidio Components v. American Technical Ceramics (Fed. Cir. 2017)

Intervening Rights: When issued claims are substantially amended — whether during reissue, reexamination, or AIA-Trial — an accused defendant will have “intervening rights.”   In particular, the defendant will not pay back-damages for any infringement prior to completion of the post-issuance action.  Section 252 explains that the question is whether the amended claim is “substantially identical” to the original.

Here, the patentee added limitations to its capacitor claims in a way that changed the claim scope — and thus entitled the defendant to “absolute intervening rights.”

The patentee argued that it had no intent to change the claim patent scope. On appeal, however, the patentee ruled that intent is not relevant. Rather, the inquiry is simply whether the scope of original claims is identical to the scope of the amended claims (based upon a “normal” Phillips claim construction analysis.)  Under that approach, the court found a difference in scope and thus intervening rights kicked-in.

Presidio argues that the scope of its claims did not change during reexamination because its stated goal in amending the claims was to adopt the district court’s construction in Presidio I.

Equitable Interlude: Note here that the focus is on the statutory intervening rights.  The Federal Circuit has also adopted a second-level equitable intervening rights.  Following SCA Hygiene, I expect that there is a good chance that this doctrine may be eliminated.

Lost Profits:  Like definiteness, lost profit award also requires “reasonable certainty.”  In the lost profit context, the rule is applied in a more-standard approach. Namely, reasonable certainty is traditionally thought of as a standard of evidentiary proof needed for factual conclusions. This makes sense in the fact-heavy damages context but not so much in the indefiniteness arena that is very often seen as wholly a question of law.

Here, the appellate court held that lost profits due to the infringement were not proven because the district court did not consider whether a non-infringing alternative would have been an acceptable/available substitute to the patentee’s product. A new trial is necessary now to calculate the reasonable royalty damages that will presumably be less than the $2 million lost profit verdict overturned on appeal.

4 thoughts on “Intervening Rights and Lost Profits

  1. Re: “The Federal Circuit has also adopted a second-level equitable intervening rights. Following SCA Hygiene, I expect that there is a good chance that this doctrine may be eliminated.”
    35 U.S.C. S 307(b) provides for intervening rights following reexamination. If a claim is amended, or a new claim allowed, the effect is similar to that of a reissue patent. Absolute rights are granted to those actually practicing an activity only infringing a new claim, AND rights are granted by this statute [not just the Fed. Cir.] to those who have made prior “substantial preparations” to do so.

    1. Note that since 35 U.S.C. S 307(b) is expressly for reexaminations, in which new claims can only be narrowed, the latter provision must apply to narrowed claims.

      1. The CAFC decision that a reexamination that results in patent claim narrowing creates “intervening rights” defenses like a reissue is Bloom Engineering Co. v. North American Mfg. Co., CAFC 11/21/97, extrapolating from 35 USC 307(b). Bloom Engineering says that: “[35 USC] Sections 307 and 252 shield those who deem an adversely held patent to be invalid; if the patentee later cures the infirmity by reissue or reexamination, the making of substantive changes in the claims is treated as an irrebuttable presumption that the original claims were materially flawed. Thus the statute relieves those who may have infringed the original claims from liability during the period before the claims are validated.”

        1. P.S., I could not find anything in SCA Hygiene I though could clearly be applicable? That Fed. Cir. case was relying on the patent statute providing a specific pre-suit back damages time limit as precluding application of patent suit delay laches, per the Sup. Ct. decision on copyrights.
          Admittedly the “substantial preparations” part of the “intervening rights” statute gives discretion to judges, but is that really like laches?

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