This Wednesday, December 4, 2013, we will be presenting via the web on The Continuing Evolution of Patent Damages: What You Don’t Know May Hurt You. This is the next webinar in Fish & Richardson’s INSIGHTS webinar series.
Despite congressional and judicial efforts aimed at reining in patent damages, the law still lacks clarity in many areas. As the courts impose new legal restraints, clever litigants hatch novel damages theories in an effort to skirt those restraints. Today, the world of patent damages continues to evolve: solve one problem (such as the entire market value rule in reasonable royalty cases), and new issues pop up around it. You may feel damages is like a game where you overcome one hurdle, only to have another jump up out of nowhere.
WDPA relies on Lucent to allow royalty base of entire product revenue where rate is sufficiently small
On November 13, 2013, Judge Caldwell of the Western District of Pennsylvania issued an order in Kimberly-Clark Worldwide, Inc. v. First Quality Baby Products, LLC, Civil No. 1:09-CV-1685, addressing motions in limine. Defendant First Quality (FQ) sought to prevent Kimberly-Clark’s expert, Julie L. Davis, from offering opinions or otherwise testifying on damages. FQ attacked two parts of Ms. Davis’ opinions: (1) her computation of reasonable royalty using the entire revenue of the accused diapers as the base; and (2) her use of allegedly comparable licenses. The court denied both motions. The decision on issue (1) is interesting because the court cited the well-known language from Lucent where the court indicated that the base “can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range (as determined by the evidence).” Lucent, 580 F.3d at 1338-39.
On October 30, Judge Payne of the Eastern District of Texas issued a pre-trial order in Personalized Media Communications, LLC v. Zynga, Inc., Case No. 2:12-CV-00068-JRG-RSP (Doc. No. 213), addressing motions in limine. PMC had filed numerous MILs, including one seeking to exclude evidence of settlement demands made in other negotiations over the same patents. The ruling is brief, and we quote it in full:
Denied. PMC provides no reason that its demands from other negotiations on
these same patents are not relevant. Contrary to Zynga’s argument, the mere fact
that such a category is not specifically identified as a factor in Georgia Pacific
does not mean that it is wholly irrelevant or otherwise inadmissible.
This is a promising ruling for defendants facing plaintiffs who have previously licensed the patents-in-suit (or have reached prior litigation settlements). Settlement demands from other litigations (or even parties who have previously settled out of the current litigation) may reflect numbers much smaller than the damages sought at trial against the current defendant. Of course, the defendant will have to introduce evidence showing the comparability of the circumstances surrounding the prior settlements and the current damages case, e.g., same products at issue, similar sales volume, effective royalty rates, and other ways to demonstrate comparability. But if this marks a trend, defendants may have a forceful weapon to inform the jury that the plaintiff’s damages figure is inflated.
On October 23, 2013, Judge Kronstadt in the Central District of California issued an opinion in NetAirus Technologies, LLC v. Apple, Inc., No. LA CV10-03257 JAK, addressing a Daubert motion filed by Apple to exclude the surveys, expert reports, and opinions of the plaintiff’s survey experts (Howard Marylander and James Berger) and references to the same evidence by the plaintiff’s damages expert (Joseph Gemini). The Court granted-in-part Apple’s motion.
NDCA excludes damages expert because EMVR not satisfied for smallest salable unit; revised report not allowed
On September 26, 2013, Judge Alsup of the Northern District of California issued an opinion in Network Protection Sciences, LLC v. Fortinet, Inc., No. C 12-01106 WHA (Doc. No. 334), addressing a Daubert motion to exclude the patentee’s expert’s damages testimony. Fortinet argued that NPS’s damages expert (John Jarosz) improperly based royalties on the entire value of the accused products. The court agreed and excluded Mr. Jarosz’s opinion in its entirety—and refused to give NPS a second bite at the apple to submit a revised report for Mr. Jarosz.
On August 14, 2013, Judge Rakoff of the Southern District of New York issued an opinion in Tomita Tech. USA, LLC v. Nintendo Co., 11 Civ. 4256 (JSR) (Doc. No. 166), addressing post-trial motions after a jury awarded over $30M in damages to Tomita. Nintendo moved for remittitur on the ground that Tomita’s expert, Mr. Wayne Hoeberlein, erroneously used the EMVR to include all revenue from the accused Nintendo “3DS” gaming console in the damages analysis. The court rejected this argument because, according to the court, the 3DS constituted the smallest salable patent-practicing unit (SSU). The court stated:
On September 6, 2013, Magistrate Judge Grewal of the Northern District of California issued an opinion in HTC Corp. v. Technology Properties Ltd., Case No. 5:08-cv-00882 PSG (Doc. No. 563), addressing a Daubert motion filed on the eve of trial to strike the patentee’s expert’s damages testimony. (Note the parties are reversed from the standard order: HTC was accused of infringement, and TPL was the patentee.) HTC argued that TPL’s damages expert (Dr. Stephen Prowse) had made two errors: (1) he used a lump sum royalty to avoid the EMVR; and (2) the license agreements on which he relied were not comparable. The court denied the motion.
On September 10, 2013, Judge Jones of the Western District of Virginia issued an opinion in Electro-Mechanical Corp. v. Power Distribution Products, Inc., Case No. 1:11CV00071 (Doc. No. 292), addressing post-trial motions concerning lost profits and the entire market value rule (EMVR). The number of cases addressing EMVR in the lost profits context are relatively rare, in comparison to the frequency in reasonable royalty cases, making this case an interesting read. The court rejected defendant’s JMOL motion on procedural grounds, but granted defendant’s new trial motion on lost profits, agreeing with defendant that the jury’s damages award based on EMVR was not supported by the evidence.
On May 20, Judge Whyte in the Northern District of California issued his second FRAND-related opinion of the month, this time in Realtek Semiconductor Corp. v. LSI Corp., Case No. 5:12-cv-03451. According to the Court
This dispute concerns whether a holder of patents essential to an industry standard ("standard-essential patents") may commence an action before the U.S. International Trade Commission ("ITC") pursuant to Section 337 of the Tariff Act of 1930 ("Section 337 action") seeking an exclusion order and injunctive relief against a party practicing that standard without violating its obligation to license the standard-essential patents on reasonable and non-discriminatory ("RAND") terms.
Realtek had moved for summary judgment that LSI and Agere had breached their FRAND obligations by failing to offer a license on reasonable terms prior to seeking an exclusion order from the ITC. Realtek also moved for an order barring LSI and Agere from enforcing or seeking to enforce an exclusion order. The patents at issue related to 802.11 wireless standards, and Agere had agreed to license its 802.11-related patents on FRAND terms.