On March 16, 2017, in Mentor Graphics Corp. v. Eve-USA, Inc., the US Court of Appeals for the Federal Circuit held that:

( (Fed. Cir. Mar. 16, 2017).)

Doctors Alain Raynad and Luc Burgun were employees of Mentor Graphics Corp. when they invented the emulation technology that would become U.S. Patent No. 6,240,376 (the '376 patent). They assigned the patent to Mentor before leaving to create a competing company, EVE-USA, Inc. In 2006, Mentor sued EVE claiming that EVE's "ZeBu" emulation technology infringed its '376 patent, as well as its U.S. Patent Nos. 6,009,531 and 5,649,176 (the '531 and '176 patents, respectively), which also involve emulation technology. The parties settled before trial with a license agreement that terminated if another company in the emulation industry acquired EVE.

In 2012, Mentor discovered that Synopsys, Inc., an emulation company, intended to buy EVE. Mentor then informed Synopsys that the Mentor-EVE license agreement would terminate if Synopsys acquired EVE. Synopsys and EVE then sued for a declaratory judgment that the '376, '531, and '176 patents were invalid and not infringed. One week later, Synopsys acquired EVE. Mentor then countered with a claim of willful infringement of the three patents.

At trial in the US District Court of Oregon:

The resulting Federal Circuit appeal involved several issues, including:

In its appeal of the damages award, Synopsys argued that because the product at issue is a complex, multi-component device, Mentor's lost profits should have been apportioned based on only the value that the patented features added to the accused emulation system. The Federal Circuit rejected this argument. To establish Mentor's entitlement to lost profits, the Federal Circuit employed the US Court of Appeals for the Sixth Circuit's Panduit test (Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978)). The Panduit test allows Mentor to recover lost profit damages if it can prove:

The case's facts were largely undisputed, and established that Mentor and Synopsys were the only companies that sold their emulators to Intel. Synopsys did not dispute that:

The court explained that the first two Panduit factors tie lost profit damages to the specific claim limitations and ensure that the damages are directly related to the value of the patented features. Because Intel would not have purchased emulators without the patented features, the loss of the sale was directly related to the value of the patented features. Therefore, the Federal Circuit held that, based on the facts of this case, Mentor satisfied the principles of apportionment when it met the requirements of the Panduit factors.

Mentor appealed the district court's grant of Synopsys's motion in limine preventing Mentor from presenting evidence of willful infringement. The district court held that Mentor could not assert willful infringement because its evidence was based on willful conduct that occurred after Synopsys's declaratory judgment action, and Mentor did not seek a preliminary injunction. The Federal Circuit ruled that:

Accordingly, the Federal Circuit vacated the district court's grant of the motion in limine and remanded for further proceedings.

Mentor also appealed the district court's grant of summary judgment for infringement of the '176 and '531 patents based on claim preclusion. The district court held that Mentor could not claim infringement of the two patents, because it was essentially the same claim and products at issue in the previous suit resolved by the Mentor-EVE license agreement. The Federal Circuit ruled that claim preclusion requires that the patentee had the opportunity to bring the claim in the previous judgment. The court held that Mentor could not have brought its infringement claims in the previous action because the alleged infringement occurred after the termination of the Mentor-EVE license agreement. Accordingly, the Federal Circuit reversed the grant of summary judgment and remanded for further proceedings.