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Southern District of New York Clarifies the Evidentiary Test for Damages Based on the Entire Market Value Rule

White & Case Technology Newsflash

In Schindler Elevator Corp. v. Otis Elevator Co., 1-06 CV 05377 (S.D.N.Y. June 23, 2011), the Southern District of New York clarified the evidentiary burden plaintiffs face when they seek to use the entire market value rule to calculate damages in patent infringement cases. Under this rule, a patentee calculates damages based on the entire market value of the accused's product on the premise that the product's entire value is attributable to the patented feature. In Schindler, Judge McMahon clarified that to benefit from the rule, plaintiffs must put on "competent evidence" that the patented feature of the product is the basis for customer demand for the entire product, and not just a substantial basis for demand. Plaintiffs in Schindler fell short of this standard and were barred from using the entire market value rule to calculate damages.

The decision may decrease the potential damages recoverable, as well as the settlement value of certain patent infringement lawsuits. It also continues the trend of requiring plaintiffs to more clearly establish the connection between acts of infringement and damages, as in Uniloc USA, Inc. v. Microsoft Corp., No. 03-CV-0440 (Fed. Cir. Jan. 4, 2011).

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