On March 24, 2025, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) issued an opinion affirming a district court’s judgement of infringement while vacating and remanding the district court’s damages award, finding that there was insufficient evidence to support the damages ascribed to convoyed sales. Wash World Inc. v. Belanger Inc., No. 2023-1841, slip op. at *26 (Fed. Cir. Mar. 24, 2025).
Background
Belanger Inc. owns U.S. Patent No. 8,602,041 (the ’041 Patent), which claims a car wash system with a vehicle spray washer with lighted spray arms designed to guide drivers into a car wash bay. The claims did not recite additional components—such as the dryers—that are traditionally associated with car wash systems.
The jury found that Wash World Inc.’s “Razor EDGE” car wash system infringed the ’041 Patent and awarded Belanger $9.8 million in lost profits damages. The $9.8 million damages award included approximately $2.6 million in profits from unpatented components sold alongside the patented system.
After the jury award, Wash World moved for judgment as a matter of law on the basis that its system did not infringe the ’041 Patent and, alternatively, for a new trial or reduction of the damages award. Regarding the damages award, Wash World argued that the district court abused its discretion by entering judgment on a damages award that improperly included the $2.6 million in lost profits from auxiliary products lacking any functional relationship to the ’041 Patent’s claims.
The district court denied Wash World’s motion. Regarding the damages award, the district court analyzed the issue under the apportionment standards set forth in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). These factors require a patentee to establish 1) demand for the patented product, 2) absence of acceptable, non-infringing alternatives to the patented product, 3) manufacturing and marketing capability to exploit the demand for the patented product, and 4) that the patentee would have made a profit if it had made the infringer’s sales. The district court concluded that Belanger had sufficiently accounted for the apportionment of lost profits between patented and unpatented features of the system by satisfying the Panduit factors.
The Federal Circuit’s Decision
The Federal Circuit, however, shifted the focus from apportionment to convoyed sales, referencing Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995). The Federal Circuit explained the critical difference between apportionment and convoyed sales: Apportionment, and the Panduit factors, apply when a patentee is seeking lost profits for a device covered by the patent in suit. However, where the issue is incremental damages for portions of products not covered by the patent, the proper inquiry is whether the unpatented components qualify as convoyed sales.
Here, the issue was whether Belanger was entitled to incremental damages for the auxiliary dryer components that were not included in the claims. As such, the Federal Circuit found that the question was whether these components are convoyed sales under Rite-Hite. Convoyed sales damages require a showing that the unpatented and patented products together technically constitute a “functional unit,” meaning that they are analogous to components of a single assembly or parts of a complete machine. However, convoyed sales damages are not available for “items that have essentially no functional relationship to the patented invention and that may have been sold with an infringing device only as a matter of convenience or business advantage.”
The Federal Circuit found that Belanger failed to establish the necessary functional relationship between its patented car wash system and the unpatented components, primarily dryers, for which it sought damages. For example, the primary evidence presented by Belanger included testimony that approximately three-quarters of customers purchased the patented car wash systems with unpatented dryers already installed, and that these components were typically sold as an “entire system” or “package.” This evidence was found insufficient to demonstrate how the components functionally interacted or depended on each other. Specifically, there was no detailed technical explanation of functional interdependence between components. The fact that these components may typically be sold and used together as a complete system does not mean that they together form a functional unit. On the basis of this holding, the Federal Circuit instructed the district court to reduce the damages award by the amount of the damages award attributable to convoyed sales.
Take-Aways
The Federal Circuit’s decision highlights the distinction between apportionment and convoyed sales in patent damages. Patent owners seeking lost profits for unpatented components must provide specific evidence demonstrating a functional relationship between the patented and unpatented products. This requires specific technical explanations of how these components interact to form a functional unit.
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