Confectionery giant Mars, Incorporated, and a subsidiary, Mars Electronic International, Inc., sued Coin Acceptors for infringing patents on technology that recognizes coins electronically and allows vending machines to drop correct change into the tray. The district court found infringement and ordered Coinco to pay a reasonable royalty of seven percent for the period 1996 through 2003. It also refused to allow Mars to recover under a lost profits theory and held that MEI lacked standing to sue for pre-1996 infringement.
The Federal Circuit affirmed but concluded that Mars itself didn’t have standing in 1996-2003. Mars, Incorporated v. Coin Acceptors, Inc., No. 07-1409 (Fed. Cir. June 2, 2008). That left Mars with a claim for reasonable royalties before 1996.
First let’s tackle the lost profits thing. Mars said it lost profits because its transfer of the patents-in-suit to subsidiary MEI required MEI to pay Mars everything it got from selling coin changers and that, therefore, MEI’s profits "inexorably flowed" to Mars. But MEI didn’t pass on its profits to Mars; it paid royalties. So, even assuming that a subsidiary’s profits can, ipso facto, count as profits of the parent — a question the court declined to reach — Mars didn’t show what profits MEI made, only the revenues MEI received on sales.
On standing, we get into a peculiarity of patent law (one of many). A non-exclusive licensee doesn’t have standing because it doesn’t have the right to prevent others from using the patent. The Federal Circuit pointed out that Mars transferred the patents-in-suit to MEI in 1996 but that another subsidiary continued to hold a license to practice the inventions in the U.S. (and elsewhere). That existence of another licensee deprived MEI of the right to exclude all others from practicing the invention and thus of standing to sue for the pre-1996 period.
The 1996-2003 time frame presented a question of whether Mars regained ownership of the patents before final judgment. A Confirmation Agreement recited that Mars "owns and retains the right to sue for past infringement" of the patents and that, "[t]o the extent MEI may have or claim any rights in or to any past infringement . . . , MEI does hereby irrevocably assign all such rights to Mars." Transferring the right to sue, the court held, doesn’t convey title of the patent itself. As a non-exclusive holder of rights under the patent, Mars therefore lacked standing.
Also something about how to determine a reasonable royalty.
