## Facts

- Rite-Hite owned U.S. Patent No. 4,373,847 covering a truck loading-dock vehicle restraint.
- Rite-Hite sold the patented MDL-55 restraint and also sold an unpatented competing restraint, the ADL-100.
- Kelley manufactured and sold infringing vehicle-restraint systems that competed with Rite-Hite’s restraint products.
- Rite-Hite sought lost profits for (a) lost sales of the patented MDL-55, (b) lost sales of the unpatented ADL-100, and (c) lost sales of unpatented dock levelers often sold in “packages” with restraints.
- Rite-Hite used wholly owned sales units and independent distributors; certain distributors intervened claiming they were exclusive licensees entitled to their own lost-profits damages.
- The district court found infringement and awarded Rite-Hite lost profits on MDL-55, ADL-100, and dock levelers, and awarded certain distributors lost profits as alleged exclusive licensees.
- Kelley appealed the scope of damages; Rite-Hite and distributors cross-appealed; the Federal Circuit heard the case en banc.

## Issues

1. Whether 35 U.S.C. § 284 permits lost-profits recovery for sales diverted from an unpatented but directly competing product.
2. Whether lost profits may include unpatented “package” items (dock levelers) under the entire market value rule/convoyed sales doctrine.
3. Whether independent distributors possessed sufficient exclusionary patent rights to recover their own lost-profits damages as exclusive licensees.

## Decision

- The court affirmed in part, vacated in part, and remanded for recalculation of damages.
- The court affirmed awarding Rite-Hite lost profits for diverted sales of the unpatented ADL-100 because the losses were a foreseeable, but-for consequence of the infringement in the relevant market.
- The court vacated the dock-leveler lost-profits award, holding the entire market value rule did not apply where restraints and dock levelers were sold together for marketing reasons and did not function together to achieve a single end.
- The court rejected (or substantially limited) independent distributors’ claims for separate lost-profits damages, concluding they lacked the exclusionary rights necessary to obtain such relief in their own names.

## Legal Principles

- Patent damages under § 284 are compensatory and require proof of but-for causation; recovery may extend to foreseeable, proximately caused economic injury from infringement.
- Lost profits are not categorically limited to the patented product; a patentee may recover for diverted sales of an unpatented product that directly competes in the relevant market when the diversion is a foreseeable result of the infringement.
- The entire market value rule permits inclusion of unpatented items only when the patented feature is the basis for customer demand for the combined product and the unpatented and patented items function together to produce a desired end; marketing bundling alone is insufficient.
- A non-patentee seeking its own infringement damages must hold substantial exclusionary rights in the patent (typical of a true exclusive license); sales-agent or distributor arrangements without such rights do not support separate lost-profits recovery.

## Conclusion

The Federal Circuit permitted lost profits on an unpatented competing product based on proximate cause and foreseeability, restricted recovery for bundled unpatented products under the entire market value rule, and limited independent distributors’ ability to claim separate lost-profits damages absent exclusionary patent rights.


Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc)