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Dyson v. SharkNinja - PL MSJ Disgorgement (289) Brief
Dyson v. SharkNinja - PL MSJ Disgorgement (289) Brief
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)
DYSON, INC. and )
DYSON TECHNOLOGY LIMITED, )
)
Plaintiffs and ) Case No. 1:14-cv-00779
Counterclaim-Defendants, )
) Judge: Hon. Robert M. Dow, Jr.
v. )
) JURY TRIAL DEMANDED
SHARKNINJA OPERATING LLC and )
SHARKNINJA SALES COMPANY, )
)
Defendants and )
Counterclaim-Plaintiffs. )
)
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TABLE OF AUTHORITIES
Page(s)
Cases
Taylor v. Meirick,
712 F.2d 1112 (7th Cir. 1983) .................................................................................. 8, 9, 15
Statutes
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Rules
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accused products also include next-generation versions of those products, including the HV310,
HV320, and HV380 stick-vac series of products, all of which Shark has introduced to the market
made in net sales for the Accused Products through November 2016. (Dysons
L.R. 56.1 Statement of Material Facts (hereafter, SMF) 6, [P&L by channel tab of
(SMF 7.)
(SMF 8,
[P&L by Channel tab of EP0523266].) A majority of these expenses do not vary with
incremental sales; rather, they are overhead expenses that are already allocated though
2
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85:5-23].) Mr. Haas admitted that the only information he gleaned from Mr. Stevenson in that
conversation was
with Mr. Stevenson about the rest of the expenses only in general terms. (SMF 32, [Haas
Dep. at 86:12-87:4].)
Mr. Haas, when discussing the Administrative Expenses with Mr. Stevenson, did not
ask
Mr. Haas took Mr. Stevensons word that all s of Admin Expenses
90:10].) Other than the P&L and his assurances from Mr. Stevenson, Mr. Haas did not review
any documents or other evidence tying any of these categories of expenses to the production of
Moreover, other than repeating what he heard from Mr. Stevenson, that each category of
expense Mr. Haas could not provide any further information. For example,
when asked
(SMF 35, [Haas Dep. at 122:21-123:3].) When asked how much, Mr. Haas conceded,
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Mr. Stevenson whether he could identify how much lower those expenses would have been in
unable to say whether Shark during the damages period for the
meant, Mr. Haas was unable to answer, even by reference to his expert report. (SMF 38, [Haas
Shark Rocket, (SMF 37, [Haas Dep. at 138:16-139:5]), or whether the expense for Facilities
would change in any way in the absence of the Shark Rocket, (id. at 139:6-21). Mr. Haas also did
not know what meant, or how it was tied in any way to the Shark
Rocket. (SMF 39, [Haas Dep. at 139:22140:14].) For the Administrative Expense
Mr. Haas likewise did not know what it meant, or whether and how it differed from
142:12].)
Ultimately, Mr. Haas could not say one way or another whether Shark would have
incurred any of the Administrative Expenses in whole or in part regardless of the Shark Rocket,
such as in connection with its other existing lines of business, or with an alternative product.
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Summary judgment is proper if there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). After a properly
supported motion for summary judgment is made, the adverse party must set forth specific facts
showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250 (1986). Conclusory statements ungrounded in specific facts are insufficient to avoid
summary judgment. Anderson, 477 U.S. at 256 (1986); Lucas v. Chicago Transit Authority, 367
IV. ARGUMENT
Shark bears the burden to prove the costs that it seeks to deduct from disgorgement
profits. See, e.g., Nike, Inc. v. Wal-Mart Stores, Inc., Civil Action No. 96-38-A, 1996 WL
754076, at *5 (E.D. Va. Nov. 18, 1996), affd in relevant part, 138 F.3d 1437, 1447 (Fed. Cir.
1998) ([T]he information necessary to portray more accurately their net profits was in the hands
of the defendants. It was their burden to establish the costs which would truly reflect their net
profit.); Taylor v. Meirick, 712 F.2d 1112, 1121 (7th Cir. 1983) ([I]t was up to [Defendant] to
show what if any overhead items were really variable costs too.); Rocket Jewelry Box, Inc. v.
Quality Intl Packaging, Ltd., 250 F. Supp. 2d 333, 34041 (S.D.N.Y. 2003), vacated in-part on
other grounds, 90 F. Appx 543 (Fed. Cir. 2014) (analogizing design patent damages to
copyright damages, and noting that the infringer has the burden of proving deductible
expenses). Consistent with this burden, fundamental principles of justice require [courts] to
throw the risk of any uncertainty upon the wrongdoer instead of upon the injured party in the
calculation of profits. Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 22
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(Fed. Cir. 1984) (discussing patentees lost profits); see also, e.g., Gibson Guitar Corp. v. Paul
Reed Smith Guitars, LP, 325 F. Supp. 2d 841, 853 (M.D. Tenn. 2004) (If there is uncertainty in
the showing by [Defendant] on its relevant costs, then the Court will resolve that doubt in the
Plaintiffs favor).
This Court, when addressing design patent damages, has applied what is known as the
incremental income method to determine whether costs may be properly deducted. John O.
Butler Co. v. Block Drug Co., Inc., 620 F. Supp. 771, 778 (N.D. Ill. 1985). Under that
approach, fixed or indirect costs such as management and administrative salaries which do not
vary with increases in production are not deductible. Id. (citing Paper Converting, 745 F.2d
11). The approach recognizes that it does not cost as much to produce unit N + 1 if the first N
(or fewer) units produced already have paid the fixed costs. Paper Converting, 745 F.2d at 22.
This computation methodology is analogous to that applied by the Seventh Circuit in copyright
infringement cases holding that [c]osts that would be incurred anyway should not be subtracted,
because by definition they cannot be avoided by curtailing the profit-making activity. Taylor,
712 F.2d at 1121; Baldwin Cooke Co. v. Keith Clark, Inc., 420 F. Supp. 404, 406 (N.D. Ill. 1976)
(Defendant could not deduct overhead where it failed to make some showing of increase in its
administrative expenses and general overhead resulting from its manufacture of the infringing
books.). That is, if the cost does not change with the sale of additional unitse.g., overhead
costs such as rent and basic phone service, Taylor, 712 F.2d at 1121it is not deductible
The incremental method requires that there be proof of a direct link between the alleged
overhead cost and the infringing activity; that requirement is contained in the tests adopted by
every other circuit that has considered the issue. In Henry Hanger & Display Fixture Corp. of
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Am. v. Sel-O-Rak Corp., 270 F.2d 635, 643 (5th Cir. 1959), for example, the Court explained that
deduction for overhead expenses should not be done unless it is shown that the particular
Further, it was not enough, according to the Henry Hangar Court, that the infringer
merely report the overall overhead as a stated percentage of overall sales. Id. Yet that
insufficient approach is precisely what Shark seeks to do here. Likewise, the Second Circuit has
long followed the guidance of Judge Learned Hand, who explained: Overhead which does not
assist in the production of the infringement should not be credited to the infringer; that which
does, should be. Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, 54 (2d Cir. 1939).
Ultimately, [t]he guiding principle must always be that the patentee recover every dollar of
advantage realized by the infringer from the infringement, and that with respect to overhead,
the factual relationship between the infringing production and the claimed expense [is]
determinative. Schnadig Corp. v. Gaines Mfg. Co., Inc., 620 F.2d 1166, 1175 (6th Cir. 1980);
accord Levin Bros. v. Davis Mfg. Co., 72 F.2d 163, 166 (8th Cir. 1934) (The profit on the
patented articles is the difference between the cost of producing them and the price received for
them. To put into this cost an overhead expense, in nowise caused thereby, would be an improper
inclusion.).
; SMF 8, [P&L by
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(SMF 10, [Admin Expenses tab of EP0523266]); but see Taylor, 712 F.2d at 1121 (But it is
possible, indeed likely, that he would have incurred at least some of these costs (rent, for
example, and basic phone service) even if he had not sold the infringing maps. Costs that
evidence that the particular overhead classifications are such that an apportionment is proper.
Henry Hanger, 270 F.2d at 643. Nor has Shark produced any evidence to meet its burden to
establish that these costs are related to the infringing products in such a way that they would not
be incurred anyway were the Accused Products never sold. Taylor, 712 F.2d at 1121. Rather,
Because Shark failed to prove that the amount it deducted in Administrative Expenses bears
any relation to the Accused Products, an allowance for overhead was not established by Shark.
Henry Hanger, 270 F.2d at 643; Taylor, 712 F.2d at 1121; John O. Butler, 620 F. Supp. at 778.
V. CONCLUSION
For the foregoing reasons, the Court should enter partial summary judgment finding that
Shark is not entitled to deduct its Administrative Expenses when determining Sharks profits
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CERTIFICATE OF SERVICE
I hereby certify that on this 15th day of May, 2017, the foregoing document was filed
electronically through the Courts Electronic Case Filing System. Service of this document is
being made upon all counsel of record in this case by email with a redacted copy being served by
Notice of Electronic Filing issued through the Courts Electronic Case Filing System on this
date.