Grain Processing Corporation v. American Maize-Products Company

Facts

This case spanned more than eighteen years and eight prior judicial opinions. Maltodextrins are a family of food additives made from starch. Commercial food manufacturers purchase hundreds of millions of pounds of maltodextrins annually from producers such as P and D. Maltodextrins improve the structure or behavior of food products by inhibiting crystal growth, add body, improve binding and viscosity, and preserve food properties in low temperatures. P is the assignee of the '194 patent, which claims maltodextrins with particular attributes, and processes for producing them. P manufactures and sell a line of maltodextrins under the 'Maltrin' brand name since 1969. None of the Maltrin products fall within claim 12 because they are all made from a non-waxy starch. D made and sold several types of maltodextrins including 'Lo-Dex 10,' a 10 D.E. waxy starch maltodextrin. P owned the '194 patent rights which covered a process to make Lo-Dex 10. P used four different processes for producing Lo-Dex 10. P sued D for infringement. While the suit was pending, D reduced the amount of alpha-amylase enzyme in its process to lower its production costs. To achieve the same end result with less enzyme, P continued the reaction longer. D used this process (Process II) exclusively to produce Lo-Dex 10 from August 1982 to February 1988. P asserted that Process II infringed the '194 patent. P sued D for infringement. While the suit was pending, D reduced the amount of alpha-amylase enzyme in its process to lower its production costs. To achieve the same end result with less enzyme, P continued the reaction longer. D used this process (Process II) exclusively to produce Lo-Dex 10 from August 1982 to February 1988. P asserted that Process II infringed the '194 patent. D developed yet another process for producing Lo-Dex 10, using more alpha-amylase, adjusted the temperature and pH, and reduced the reaction time. D used Process III exclusively to produce Lo-Dex 10 from March 1988 to April 1991. The district court initially held D in contempt for continuing to sell an infringing product. The court modified the order based on evidence and a holding that the Schoorl test, not Lane-Eynon, determines the relevant values in this case. P adopted a fourth process (Process IV) for producing Lo-Dex 10. P added a second enzyme, glucoamylase, to the reaction. It took only two weeks to perfect the reaction and begin mass-producing Lo-Dex 10 using Process IV. D had not used Process IV to produce Lo-Dex earlier because the high cost of glucoamylase makes Process IV more expensive than the other processes. The parties agree that Process IV yielded only noninfringing Lo-Dex 10. P claimed lost profits in the form of lost sales. P claimed that, for any of D's infringing sales not covered by a lost profits award, P should receive a 28% royalty. The district court denied lost profits and determined that a 3% reasonable royalty was appropriate. The court held that P could not establish causation for lost profits, because D 'could have produced' a noninfringing substitute 10 D.E. maltodextrin using Process IV. D did not actually produce and sell this noninfringing substitute until April 1991, seven months before the '194 patent expired, but the district court found that its availability destroys P's request for lost-profits damages. The cost to make IV was only 2.3% more and the court concluded that if P had insisted on a rate greater than 3% in the hypothetical negotiations, D instead would have chosen to invest in producing noninfringing Lo-Dex 10 with Process IV. P appealed. P appealed and this court reversed and remanded. This court noted that a product or process must be 'available or on the market at the time of infringement' to qualify as an acceptable non-infringing substitute. On remand, the district court denied P lost profits. The district court found that Process IV was 'available' throughout the period of infringement. It found that everything D needed to use IV existed and was easily available and well known in the industry. Process IV was simply more expensive and D did not make the switch because it believed it did not infringe. The district court concluded that 'the profit lost from infringement is the cost and market price difference attributable to using glucoamylase.' The court concluded that P does not have a patent on D.E. 10 maltodextrins, the economically significant product, and therefore cannot recover lost profits damages. P appealed once again. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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