Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.
904 F.3d 965 (2018)
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Rule of Law:
To recover patent infringement damages based on the entire market value of a multi-component product, the patentee must prove the patented feature is the sole driver of customer demand. It is insufficient to show the feature is merely valuable, important, or even essential if the product contains other valuable features that also contribute to demand.
Facts:
- Power Integrations, Inc. and Fairchild Semiconductor Corporation are competing manufacturers of power supply controller chips used in electronic devices.
- Power Integrations owns U.S. Patent No. 6,212,079 ('079 patent), which covers a switching regulator feature that improves energy efficiency during low power periods by reducing the frequency of on/off cycles rather than skipping them.
- Power Integrations also owns U.S. Patent No. 6,538,908 ('908 patent), which covers a power supply controller with a multi-function circuit.
- Fairchild manufactured and sold power supply controller chips that Power Integrations alleged infringed on both the '079 and '908 patents.
- Fairchild's accused products contained the frequency reduction feature of the '079 patent, but also included other valuable features, such as a "jittering" function designed to reduce electromagnetic interference.
Procedural Posture:
- Power Integrations, Inc. sued Fairchild Semiconductor Corp. in U.S. District Court for patent infringement.
- In a first trial, a jury found Fairchild infringed both patents and awarded Power Integrations $105 million in reasonable royalty damages.
- The district court denied Fairchild's motion for judgment as a matter of law (JMOL) on infringement.
- Following a subsequent appellate court decision in an unrelated case (VirnetX), the district court granted a new trial solely on the issue of damages.
- In the second trial, a jury awarded Power Integrations $139.8 million in damages, based entirely on the entire market value rule for the '079 patent.
- The district court denied Fairchild's renewed motion for JMOL or a new trial on both infringement and damages.
- Fairchild (appellant) appealed the judgment of infringement and the damages award to the U.S. Court of Appeals for the Federal Circuit, with Power Integrations as the appellee.
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Issue:
Does the entire market value rule apply for calculating patent infringement damages when the accused product contains the patented feature but also includes other valuable, non-patented features that contribute to consumer demand?
Opinions:
Majority - Dyk, Circuit Judge.
No. The entire market value rule does not apply here because the patentee failed to prove that the patented feature was the sole driver of consumer demand for the infringing products. The court affirmed the jury's findings of infringement for both patents but vacated the damages award. To invoke the entire market value rule, the patentee bears the burden of proving that the patented feature alone motivates customers to purchase the infringing product. It is not enough to show that the feature is valuable or essential. Here, Fairchild's controller chips contained other valuable features, such as jittering, which were also marketed and contributed to consumer demand. Because Power Integrations presented no evidence to show that these other features did not affect consumer demand, it failed to meet the high burden required for the entire market value rule, and the damages must be apportioned to the value of the infringing feature only. The court also affirmed the finding of literal infringement of the '079 patent, holding that minor, inherent variations in frequency do not negate the claim term "fixed switching frequency." Finally, the court affirmed the finding of infringement of the '908 patent under the doctrine of equivalents, concluding that prosecution-history estoppel did not bar Power Integrations from arguing that a voltage value was equivalent to the claimed "current limit."
Analysis:
This decision significantly reinforces the strict standard for applying the entire market value rule (EMVR) in patent damages calculations. It clarifies that a patentee's burden is not met simply by showing a feature is "essential" or that a product would be commercially unviable without it. By requiring the patentee to affirmatively disprove the demand-driving effect of other valuable features on a multi-component product, the court makes it substantially more difficult to obtain damages based on the entire product's value. This holding protects manufacturers of complex products from over-compensation claims and forces patentees to present more granular evidence apportioning damages to the specific value of their invention.
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