By Vic Lin, of Myers Dawes Andras & Sherman LLP, Partner

Would you be liable for selling (or making, using or advertising) an entire device when only one of its components is patented? Perhaps of more practical concern to business owners is whether you would have to pay money to someone who owns a patent on only one part of the device or system, but not the entire device.

In other words, is a patent owner entitled to royalties or lost profits on solely the patented component of a piece of equipment, or can the patent owner be entitled to lost profits or a royalty on the equipment itself?

The answer: it depends on the circumstances of each case (which means that it is at least possible for a patent owner to be entitled to money damages for sales of entire devices/systems when only one component is patented). Also known as the “entire market value rule” or apportionment, this determination is made on a case-by-case basis depending upon certain factors.

Some of these factors include:

• whether the sale of the whole device is highly dependent upon the sale of the component.

• whether the patent-related feature is the basis for customer demand.

• whether the unpatented components must function together with the patented component in some manner so as to produce a desired end product or result.

• whether the unpatented and patented components are physically part of the same machine.

These factors give both patent owners and accused infringers much to argue about (and, quite passionately too when money is on the line).

The entire market value rule should also be carefully considered by patent owners and applicants, particularly by potential applicants who are unsure of whether or not to file a patent application that would only cover one component or feature of a larger system. Consult with your patent attorney to see if patenting such component or feature might at least give you a reasonable basis for arguing entitlement to sales of the entire device.

Bookmark It

Hide Sites