​Derivative Sales

Derivative sales includes sales made after the initial sale of a patented item. Derivative sales may factor into the calculation of a reasonable royalty rate.

[W]hen the patentee's business scheme involves a reasonable expectation of making future profits by the continuing sale to the purchaser of the patented machine, of supplies to be furnished by the patentee, which future business he will lose by licensing a competitor to make the machine, this expectant loss is an element to be considered in retroactively determining a reasonable royalty[.]

Egry Register Co. v. Standard Register Co., 23 F. 2d 438, 443 (Court of Appeals, 6th Circuit 1928).

Derivative sales may also factor into a lost profits calculation.

Metaullics was not fully compensated for the infringement because the damages award did not include future lost sales of repair parts for which Metaullics had established entitlement.

Carborundum Co. v. Molten Metal Equipment Innovations, Inc., 72 F.3d 872, 882 (Fed. Cir. 1995).

Derivative sales may be included in a damages calculation only if the patentee can normally anticipate sales of the non-patented component.

The controlling touchstone in determining whether to include the non-patented spare part in a damage award is whether the patentee can normally anticipate the sale of the non-patented component together with the sale of the patented components.

King Instrument Corp. v. Otari Corp., 767 F. 2d 853, 866 (Fed. Cir. 1985).

Derivative sales do not include subsequent sales of the same article, even when the article is reconditioned to increase its value.

The [patent] monopolist cannot prevent those to whom he sells from ... reconditioning articles worn by use, unless they in fact make a new article.

Aro Mfg. Co. v. Convertible Top Replacement Co., 365 US 336 (S. Ct. 1961).

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