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The critical time period for determining availability of an alternative is the period of infringement for which the patent owner claims damages, i.e., the "accounting period." Switching to a non-infringing substitute after the accounting period does not alone show availability of the non-infringing substitute during this critical time. When an alleged alternative is not on the market during the accounting period, a trial court may reasonably infer that it was not available as a non-infringing substitute at that time. The accused infringer then has the burden to overcome this inference by showing that the substitute was available during the accounting period.
The patent featured in this infringement suit involved maltodextrins, a versatile family of food additives made from starch. Commercial food manufacturers purchased hundreds of millions of pounds of maltodextrins annually from producers such as Grain Processing and American Maize. Grain Processing was the assignee of the '194 patent, "Low D.E. Starch Conversion Products," which claimed maltodextrins with particular attributes, and processes for producing them. The claimed invention represented improvements in the "heavily explored" field of starch hydrolysates. Grain Processing has manufactured and sold a line of maltodextrins under the "Maltrin" brand name since 1969. The Maltrin line includes "Maltrin M100," a 10 D.E. maltodextrin. On the other hand, American Maize began selling maltodextrins in 1974. It made and sold several types of maltodextrins, including "Lo-Dex 10," a 10 D.E. waxy starch maltodextrin. American Maize sold Lo-Dex 10 (called Fro-Dex 10 before 1982) during the entire time Grain Processing owned the '194 patent rights, from 1979 until the patent expired in 1991. During this time, however, American Maize used four different processes for producing Lo-Dex 10. Grain Processing sued American Maize for infringement on May 12, 1981, based on American Maize's Lo-Dex 10 sales as well as sales of two other maltodextrins - Lo-Dex 5 and ARD 2370. Grain Processing asserted all fourteen claims of the '194 patent, including product and process claims. As the case progressed, American Maize developed multiple processes for production, which eventually resulted in Process IV which yielded only noninfringing Lo-Dex 10 and that consumers discerned no difference between Process IV Lo-Dex 10 and Lo-Dex 10 made by Processes I-III. American Maize used Process IV exclusively to produce Lo-Dex 10 from April 1991 until the '194 patent expired in November 1991, and then switched back to the cheaper Process III. Grain Processing claimed lost profits in the form of lost sales of Maltrin M100, price erosion, and American Maize's accelerated market entry after the patent expired. Grain Processing further claimed that, for any of American Maize's infringing sales not covered by a lost profits award, Grain Processing should receive a 28% royalty. The district court found that American Maize proved that a non-infringing substitute was available, though not on the market or for sale, during the period of infringement. The court found further that this substitute was acceptable to all purchasers of the infringing product and concluded that American Maize rebutted the inference of "but for" causation for Grain Processing's alleged lost sales.
Is Process IV considered a non-infringing substitute which was available during the accounting period?
Acceptable substitutes that the infringer proves were available during the accounting period can preclude or limit lost profits; substitutes only theoretically possible will not. In this case, the district court did not base its finding that Process IV was available no later than October 1979 on speculation or possibilities, but rather on several specific, concrete factual findings, none of which Grain Processing challenges on appeal. The district court found that American Maize could readily obtain all of the materials needed for Process IV, including the glucoamylase enzyme, before 1979. The court also found that the effects of the enzymes in starch hydrolysis were well known in the field at that time. Furthermore, the court found that American Maize had all of the necessary equipment, know-how, and experience to use Process IV to make Lo-Dex 10, whenever it chose to do so during the time it was instead using Processes I, II or III. American Maize "did not have to 'invent around' the patent," the district court observed; "all it had to do was use a glucoamaylase enzyme in its production process. The trial court also explained that "the sole reason [American Maize] did not use Process IV prior to 1991] was economic: glucoamylase is more expensive than the alpha amylase enzyme American Maize had been using," and American Maize reasonably believed it had a non-infringing product. While the high cost of a necessary material can conceivably render a substitute "unavailable," the facts of this case show that glucoamylase was not prohibitively expensive to American Maize. The district court found that American Maize's "substantial profit margins" on Lo-Dex 10 were sufficient for it to absorb the 2.3% cost increase using glucoamylase. Moreover, the district court's unchallenged finding that there is no "economically significant demand for a product having all of the [claimed] attributes" supports its conclusion of availability. Consumers demand "low-dextrose maltodextrins of which the patented product is just one exemplar." Because consumers find the "waxy" and "descriptive ratio" elements of claim 12 "irrelevant," the prospect of an available, acceptable non-infringing substitute expands because a competitor may be able to drop or replace the "irrelevant" elements from its product. Grain Processing cannot exclude Process IV Lo-Dex 10 because it does not have a patent on 10 D.E. maltodextrins, "the economically significant product" as the district court stated, but rather on a particular variety of 10 D.E. maltodextrins. In sum, these factual findings support the district court's conclusion that Process IV was available to American Maize for making non-infringing Lo-Dex 10, no later than October 1991. American Maize had the necessary chemical materials, the equipment, the know-how and experience, and the economic incentive to produce Lo-Dex 10 by Process IV throughout the entire accounting period.