Volterra Semiconductor Corporation v. Primarion, Inc., 3:08-cv-05129

Background

Volterra sued Primarion/Infineon for patent infringement; liability was resolved in Volterra's favor and the case proceeded to damages. A jury previously rejected some invalidity defenses. Damages trial scheduled for Nov. 4, 2013.
Volterra's damages theory: price erosion caused by defendants’ infringement reduced revenues on specific Volterra and Volterra Asia sales to IBM and HP; experts quantified ~ $99.34 million in lost revenue (mostly Volterra Asia).
Experts: Michael Wagner (Volterra) reconstructed a but‑for market and quantified price‑erosion revenues; Dr. Christine Meyer (Volterra) translated Volterra Asia lost revenue into alleged direct economic harm to parent Volterra Semiconductor; Dr. Matthew Lynde (defendants) criticized Wagner and offered alternative causal explanations.
Defendants moved for summary judgment and to exclude Volterra experts (Daubert). They argued (1) parent cannot recover subsidiary lost profits (Poly‑America, Mars), (2) damages based on foreign sales/extraterritorial acts are barred (Power Integrations), (3) no causal link to domestic infringing acts, and (4) experts’ methodologies are unreliable.
Volterra opposed: argued §284 permits full compensation for direct injury to patentee (Rite‑Hite), contended harm to parent via subsidiaries’ diminished cash/value is direct and compensable, and defended expert methodologies.
District court: denied summary judgment as to damages for Volterra’s own direct sales; granted summary judgment as to damages premised on Volterra Asia sales because Meyer’s theory effectively sought subsidiary lost‑profits/value upstream in a manner inconsistent with Federal Circuit precedent and her valuation lacked an accepted methodology under Daubert.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether parent may recover damages based on subsidiary (Volterra Asia) losses	Volterra: §284 and Rite‑Hite allow full compensation for direct injury to patentee; parent control of subsidiaries means parent was directly harmed	Defendants: Corporate separateness bars recovery of a subsidiary's lost profits/value (Poly‑America, Mars); Volterra seeks derivative recovery	Held: For summary judgment court GRANTED for defendants — Volterra's Meyer theory is indistinguishable from recovering subsidiary lost profits and is barred by Poly‑America/Mars; plaintiff offered no other admissible evidence of direct parent harm
Whether damages tied to foreign sales or foreign acts are recoverable	Volterra: §284 has no geographic limit; here defendants committed infringing acts in U.S. that caused price erosion affecting foreign sales	Defendants: Power Integrations forbids awarding damages based on foreign exploitation; lost foreign sales require a U.S. act directly causing them	Held: Court REJECTED defendants’ broad reading of Power Integrations on these facts — where domestic infringing acts (design‑win efforts, testing, meetings) plausibly caused price erosion, damages tied to sales abroad may survive (fact question)
Whether Volterra’s damages for its own direct U.S. sales fail for lack of evidence of actual costs	Defendants: Variable transfer prices from Volterra Asia to parent make actual/prospective profits unprovable so lost‑profits speculative	Volterra: Price‑erosion damages can be measured by difference between actual price and but‑for price; if costs are identical actual cost cancels out	Held: Court DENIED summary judgment on this ground — defendant’s argument was not a bar because calculation can rely on price differences where costs cancel out
Admissibility of experts (Daubert challenges to Wagner and Meyer; plaintiff challenge to Lynde)	Volterra: Wagner and Meyer are reliable; Meyer may value parent harm; challenge Lynde where he asserts a legal requirement of "direct competition" and offers credibility/state‑of‑mind opinions	Defendants: Wagner cherry‑picked and ignored macro factors; Meyer merely adopts Wagner and reaches legal conclusion and unreliable dollar‑for‑dollar valuation; Lynde validly critiques causation and considers market factors	Held: Court DENIED Daubert challenge to Wagner (methodological disputes go to weight). Court GRANTED Daubert challenge as to Meyer — her opinion (dollar‑for‑dollar parent harm from subsidiary lost revenue) is legally inconsistent with Federal Circuit and lacks an accepted valuation methodology. Plaintiff's Daubert motion GRANTED in part: Lynde may not testify that law requires "direct competition," and certain credibility/state‑of‑mind or record‑expectation opinions were limited; most of Lynde's causal critiques remain admissible

Key Cases Cited

Poly‑America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303 (Fed. Cir. 2004) (patentee may not recover lost profits of a separate licensee/sister corporation)
Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008) (parent could not recover wholly owned subsidiary's lost profits on record presented; leaves open narrow exception if subsidiary profits flowed inexorably to parent)
Rite‑Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (§284 entitles patentee to damages adequate to fully compensate for infringement)
Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F.3d 1348 (Fed. Cir. 2013) (limits recovery when damages are based on foreign exploitation not tied to domestic infringing acts)
Gen. Motors Corp. v. Devex Corp., 461 U.S. 648 (U.S. 1983) (§284 aims to give full compensation for damages caused by infringement)
King Instruments Corp. v. Perego, 65 F.3d 941 (Fed. Cir. 1995) (§284 compensates direct injury to patentee)
Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555 (Fed. Cir. 1992) (announcement/promoted intent to sell infringing products can support price‑erosion causation — question for jury)
Crystal Semiconductor Corp. v. Tritech Microelectronics Int'l, Inc., 246 F.3d 1336 (Fed. Cir. 2001) (but‑for market reconstruction and consideration of elasticity required in lost‑profits/price‑erosion analyses)
Daubert v. Merrell Dow Pharm., 509 U.S. 579 (U.S. 1993) (trial judges gatekeep expert methodology under Rule 702)
Wechsler v. Macke Int'l Trade, Inc., 486 F.3d 1286 (Fed. Cir. 2007) (causation in lost‑profits claims must be shown; factual record matters)
Vulcan Eng'g Co. v. Fata Aluminum, Inc., 278 F.3d 1366 (Fed. Cir. 2002) (lost profits require proof that prices were reduced in response to competitor's bid in factual context)
Lam, Inc. v. Johns‑Manville Corp., 728 F.2d 1056 (Fed. Cir. 1983) (when patentee and infringer are only suppliers, causation may be inferred)
Minco, Inc. v. Combustion Eng'g, Inc., 95 F.3d 1109 (Fed. Cir. 1996) (patentee may have distinct, non‑lost‑profits recovery theories tied to transactions in which infringement was an important factor)