Lost Profits Damages & On-Sale Bar To Patentability Hinge On Equipment Contract Interpretation

• Published date: 13 March 2024
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Patent, Trials & Appeals & Compensation
• Law Firm: YMF Law Tokyo
• Author: Mr York M. Faulkner

In the appeal from the district court's judgment in this case, the Federal Circuit, inter alia, (1) reversed the district court's rejection of Venture's on-sale bar defense and (2) affirmed the district court's rejection of Sunoco's demand for lost profits damages. Both issues ultimately turned on the courts' interpretation of an equipment installation contract. . . .

In Sunoco Partners Marketing & Terminals L.P. v. U.S. Venture, Inc., Nos. 2020-1640, 2020-1641 (Fed. Cir. April 29, 2022), the plaintiff-patentee, Sunoco, had asserted four patents against Venture in the Northern District of Illinois. The four patents were directed to equipment and processes for blending gasoline with butane to increase fuel volatility and enhance cold-weather vehicle performance. Following a bench trial, the district court ruled that the butane blending equipment that Venture had installed and operated at its gasoline storage terminals infringed the four patents and awarded damages of $2 million based on a reasonable royalty.

Only two of the four patents, U.S. Patent Nos. 7,032,629 ("the '629 patent") and 6,679,302 ("the '302 patent"), were at issue on appeal. After the bench trial, the other two patents were invalidated by a judgement in a separate proceeding before the Patent Trial and Appeal Board, which was affirmed by the Federal Circuit. See id. at 16 (citing Sunoco Partners Mktg. & Terminals L.P. v. Magellan Midstream Partners L.P., 853 F. App'x 668 (Fed. Cir. 2021)).

In the appeal from the district court's judgment in this case, the Federal Circuit, inter alia, (1) reversed the district court's rejection of Venture's on-sale bar defense and (2) affirmed the district court's rejection of Sunoco's demand for lost profits damages. Both issues ultimately turned on the courts' interpretation of an equipment installation contract between Sunoco and third-party, Equilon Enterprise LLC., which was executed two days before the patents' critical date of February 9, 2000. See Sunoco, Nos. 2020-1640, 2020-1641 at 5-6 n.2 (applying pre-AIA ' 102(b)). According to the contract, Sunoco agreed to install butane blending equipment at Equilon's Detroit facility "'in consideration for' Equilon's commitment to purchase at least 500,000 barrels of butane from [Sunoco] over roughly five years." Id. at 6.

For two reasons, the district court rejected Venture's contention that the installation contract resulted in an on-sale bar to patentability. First, the district court observed that the...