The U.S. Court of Appeals for the Federal Circuit has nowruled that courts may not consider that portion of a sale of an infringingcompany's business attributable to "goodwill" when calculating thebase for a determination of reasonable royalty. Transclean Corporation v.Bridgewood Services, Inc., Case No. 01-1268, 01-1269, 2002 U.S. App. LEXIS9609 (Fed. Cir. May 21, 2002). Transclean, the assignee of U.S. Patent No. 5,318,080,directed to an automatic transmission fluid changing system, sued Bridgewoodclaiming that Bridgewood's automatic transmission fluid changing deviceinfringed the '080 patent. Bridgewood was no longer in business, having soldall its assets, including goodwill, to Century Manufacturing Company for$7,744,000 $6,522,000 more that the book value of Bridgewood's tangible networth. Prior to the sale, Bridgewood's sole source of revenue was from the saleof the allegedly infringing devices. At trial, the jury found that Bridgewood willfully infringedthe '080 patent and awarded Transclean three types of damages: $934,618 as areasonable royalty based on Bridgewood's sale of infringing products;$1,874,500 as additional damages to compensate Transclean for Bridgewood'sinfringement; and $2,708,225 as a reasonable royalty based on Bridgewood's saleof its business. The district court, on post-trial motions, overturned thatportion of the jury's award based on the sale of Bridgewood's business, findingthat, as a matter of law, Transclean was not entitled to a reasonable royaltybased on that sale. On appeal, Transclean claimed it was entitled to the entire$6,522,000 Bridgewood received for its goodwill because Bridgewood's solesource of revenue was the sale of infringing products. Citing Minco, Inc. v.Combustion Eng'g, Inc., Transclean...
Hunting for Goodwill: Federal Circuit Says Goodwill Is Not Germane to Reasonable Royalty Analysis
|Author:||Mr Ronald Pabis|
|Profession:||McDermott Will & Emery|
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