Patent Damages
6Feb/17Off

NDCA allows evidence of capped royalty/book of wisdom and monetarily unquantified noninfringing alternatives

Posted by Chris Marchese

The Northern District of California, in France Telecom S.A. v. Marvell Semiconductor Inc., (Judge William H. Orrick) (August 28, 2014), addressed motions in limine concerning a variety of issues, including damages issues.  We address a couple damages issues here.

10Jan/17Off

Southern District of Florida Awards Ongoing Royalty and Pre-Judgment Interest

The Southern District of Florida, in Arctic Cat Inc. v. Bombardier Recreational Products, Inc., Case No. 14-cv-62369 (Judge Bloom) (Jan. 3, 2017), awarded Plaintiff an ongoing royalty and pre-judgment interest.

In an earlier order, the Court determined that Plaintiff was entitled to an ongoing royalty based on Defendant’s concession that it is continuing to sell the infringing personal watercrafts and that the jury’s royalty rate of $102.54 per unit set the “floor” for the ongoing royalty rate.  The Court ordered the parties to negotiate an ongoing royalty rate, but mediation was unsuccessful.

30Dec/16Off

Zilabs Inc., Ltd. v. Samsung Electronics Co. Ltd., et al.

Posted by Chris Marchese

Case name: Zilabs Inc., Ltd. v. Samsung Electronics Co. Ltd., et al.,

Area of Law: Patent Law, reasonable royalty, apportionment, hypothetical negotiation, real estate apportionment, surface area apportionment

Grounds:

  • Defendant sought to exclude expert’s reliance on litigation settlement license covering 100 patents as not economically comparable and not the most reliable license in the record.
  • Defendants sought to exclude expert’s reliance on licensing negotiations that never resulted in executed licenses, and were not technically comparable.
  • Defendant sought to exclude apportionment based on surface area of accused element on the chip.
  • Defendants sought to exclude expert’s testimony on several economic theories

Outcome: Defendant’s motion was granted-in-part as to all references to unconsummated license agreements and denied as to the remainder

Analysis:

  • Litigation settlement license (Denied)

The court declined to exclude the Plaintiff’s expert’s (damages expert) opinion based on a license between the Samsung and a third party (MicroUnity) that covered 100 U.S. and foreign patents, and arose out of a litigation settlement. Slip op. at 3. The expert calculated his effective royalty rate based on the value of 10 of the patents in the license, justifying this by stating that in certain patent groups, 10% of the patents account for 81% to 93% of the value of the portfolio. Id. at 3–4. The expert also selected a license period based on the expiration dates of most of the patents, and a second license period based on the expiration of the last patent in the portfolio. Id. at 4. The court allowed these opinions because they were testable and supported by publications, or, in the case of the licensing periods could be challenged on cross-examination. Id. at 5.

The court rejected defendant’s arguments that the MicroUnity license was not economically or technically comparable. Regarding economic comparability, the court stated that, while LaserDyanmics, Inc. v. Quanta Comput., Inc., discouraged relying on litigation settlements, if there were no more reliable licenses in the record, they could be used. 694 F.3d 51, 77 (Fed. Cir. 2012); Slip op. at 5. The court found the license agreement proposed by defendants was not “more reliable” because it was also a settlement agreement, and thus declined to exclude the expert’s testimony on the MicroUnity agreement. Slip op. at 6–7.  Regarding technical comparability, the court found the damages expert’s reliance on the technical expert’s opinion was proper and sufficient to establish technical comparability. Id. at 7.

  • Unconsummated license negotiations (Granted)

The court granted Samsung’s motion with regard to four licensing negotiations between Apple and Samsung that were never executed. Slip op. at 8. The court agreed that Plaintiff had not shown how the negotiations were factually analogous to the hypothetical negotiation, because Apple and Samsung were direct competitors, whereas Plaintiff and Defendant were not. Id. at 8–9.

  • Surface area apportionment (Denied)

The expert analyzed the surface area that the Graphics Processing Unit (GPU) covered of the System-on-Chip (Soc), stating that the area of an SoC will be budgeted to various components based on the value of the component. Id. at 9–10. He used this value to qualitatively analyze the profit that should be credited to the invention, and then used it to adjust the royalty rate for the asserted patent upward. Id. at 10. He did not appear to use the surface area analysis as the royalty base. Id. at 10.  The court declined to exclude the expert’s opinion because he explained his method, and the defendant could challenge it on cross-examination. Id.

  • Various economic theories (Denied)

The expert also used 3 economic theories in his hypothetical negotiation analysis: 1) “settlement discounts” based on litigation uncertainty; 2) that a significant majority of the value of a patent portfolio is concentrated in a small subset of the patents in the portfolio; and 3) a survey discussion of running and lump-sum royalties. Id. at 11. The court allowed each of these because the expert tied the discussion of each theory to the facts and evidence of the case. See id. at 11.

 

///

 

Fields to the side (on the right):

 

Date:     12/04/2015

Court: E.D. Tex.

Judge:  Roy S. Payne

Area of Law:  Patent Law, reasonable royalty, apportionment, hypothetical negotiation, real estate apportionment, surface area apportionment

Expert’s name: Robert Mills

Area of Expertise, Technology or Science: Economics Expert, Damages Expert

 

Filed under: Uncategorized No Comments
30Dec/16Off

Motio, Inc v. BSP Software LLC, Brightstar Partners, Inc., and Avent, Inc.

Posted by Chris Marchese

Case name: Motio, Inc v. BSP Software LLC, Brightstar Partners, Inc., and Avent, Inc.

 

Area of Law: patent damages

 

Grounds: Defendants sought to exclude Plaintiff’s expert’s report and testimony related to Plaintiff’s damages in a patent infringement case because:

  1. Expert’s opinion regarding lost profits relies on an “unsupported, and speculative, assumption” that the parties control 95% of the market space.
  2. Expert’s approximation of the royalty rate is arbitrary, is not tied to the facts of the case, and has no relation to the patented technology at issue.
  3. The patented technology does not support the Expert’s application of the “entire market value rule” in calculating lost profits and damages. Therefore the Expert’s calculation is based on speculation and conjecture.
  4. Testimony regarding total sales from 2012-2014 should be excluded because they have no connection to the accused technology or the asserted patent.

 

Outcome: Defendant’s motion was denied

 

Analysis:

  1. Expert’s opinion regarding lost profits relies on an “unsupported, and speculative, assumption” that the parties control 95% of the market space.

Defendants argued that the Expert’s (Mr. Cobb) opinion regarding lost profits relied on an ―unsupported, and speculative, assumption that Motio and BSP control 95% of the market.  While Defendants noted that Mr. Cobb acknowledged there are other competitors that provide competing products and yet still made conclusions based on the 95% figure, Plaintiff countered that Mr. Cobb did not merely base his opinion upon the 95% market ownership figure at face value; but rather stated where he obtained this figure, explained that his independent analysis of other potential competitors led him to discount their presence, and further gave him no reason not to assume that the 95% figure provided to him, and presented in his report, was accurate. Plaintiff highlighted that Mr. Cobb prepared and provided other lost profits figures for the circumstance that the finder of fact determines that 95% market share is incorrect, specifically calculations assuming an 85% market share and a 75% market share.

Defendants also asserted that, even if 95% of the market was controlled by Motio and BSP, it does not necessarily follow that ―but for infringement, Motio would have received any additional profits. Further, Defendants contended that Mr. Cobb failed to perform a market reconstruction analysis, claiming that the court requires a market reconstruction analysis for any lost profits opinion. Plaintiff countered by stating that the court does not require a complete market reconstruction for a two-supplier market, and argued that parties represent effectively a two-supplier market.

The Court found that Mr. Cobb made no expert assertion that the 95% figure was correct, and did not present that percentage to prove a market share figure. Rather, the court found that the Expert simply relied on 95% as a reasonable assumption, and, even accounted for circumstances where the fact finder finds that 85% or 75% is more appropriate. The Court also found that, under the factual assumption Mr. Cobb based his opinion on—that this is effectively a two-supplier market—it is reasonable to assume causation. Further, the court found that Mr. Cobb did not arbitrarily determine the 95% figure, conducted an independent analysis to determine that the figure wasn‘t clearly unreasonable.

  1. Expert’s approximation of the royalty rate is arbitrary, is not tied to the facts of the case, and has no relation to the patented technology at issue.

Defendants contested Mr. Cobb‘s approximation of a royalty rate of 75%, claiming the figure was arbitrary, not tied to the facts of the case, and had no relation to the patented technology at issue. Plaintiff argued that Mr. Cobb‘s opinion regarding a reasonable royalty is properly premised upon the Georgia Pacific factors. Plaintiff noted, although unable to be known with certainty, Mr. Cobb’s estimation was based on relevant factors. Plaintiff explained that Motio would likely have little or no incentive to discount a royalty to provide patented technology to its sole competitor, and that Mr. Cobb’s royalty rate of 75% was appropriate given that direct competition over the same finite number of customers.

The court found that Mr. Cobb reached his opinions based upon his knowledge, training, and experience and application of the Georgia Pacific factors. The Court noted that reliability and validity do not require certainty, but there must be evidence that the knowledge is more than mere speculation of the expert witness. Daubert, 509 U.S. at 590.

  1. The patented technology does not support the Expert’s application of the “entire market value rule” in calculating lost profits and damages. Therefore the Expert’s calculation is based on speculation and conjecture.

Defendants did not question Mr. Cobb‘s qualifications or calculations or methodology, but instead challenged the reliability of Mr. Cobb‘s opinions. Defendants argued that Mr. Cobb‘s application of the entire market value rule in calculating lost profits and reasonable royalty was unsupported by any demonstration that the patented technology was the basis for demand, simply assumed that this is the case. Defendants contended that Mr. Cobb‘s analysis was therefore based on speculation and conjecture, was unreliable, and should be excluded. Plaintiff noted that Mr. Cobb stated in his report that he assumed, for the purposes of his opinions, that the technology encompassed by the patent was the essential driver behind demand for Defendants‘ products.

The Court acknowledged Mr. Cobb‘s assumption and did not find that Mr. Cobb‘s assumption was unsupported or that his analysis was unreliable.

The Court found that, considering the purpose of the testimony is to make estimations of damages, certain underlying factual assumptions are appropriate and Mr. Cobb‘s report was relevant and sufficiently reliable. The court noted its role as a gate-keeper should not invade upon the trier fact‘s role in making credibility determinations at trial. See Daubert, 509 U.S. at 596. The court further emphasized that it makes no determination on the merits of Defendants‘ challenges to the factual assumptions, but recognizes that these particular challenges would be more appropriately presented to the trier of fact, rather than the Court under a Daubert challenge.

  1. Testimony regarding total sales from 2012-2014 should be excluded because they have no connection to the accused technology or the asserted patent.

Finally, Defendants asked the Court to exclude testimony of total sales from 2012 through 2014 despite the fact that the Expert’s damages analysis did not rely on these revenues. Defendants argue that the total sales were mainly attributable to the distribution of electronic components which had no connection to the accused technology or the asserted patent. Defendants contended that the inclusion of these figures rendered Mr. Cobb‘s opinion needlessly prejudicial, and that he could have arrived at a similar conclusion by just comparing profit margins as percentages without discussing the dollar amount of total revenues.

Plaintiff argues that Mr. Cobb‘s reference to Defendants‘ total sales was appropriate as part of his determination of Defendants‘ gross profit in furtherance of his analysis that a 75% reasonable royalty figure would still leave Defendants with a profit ―more than two times the Gross Profit‖ reported by Defendants from 2012-2014.

The Court made no judgment as to whether presentation of Defendants‘ total sales was appropriate in the form presented, but did find that Mr. Cobb relied upon the total sales appropriately as part of his analysis of reasonable royalty. The Court concluded that Defendants’ argument regarding prejudice and alternative methods of referencing total sales by Defendants is more properly advanced as a motion in liminie.

///

 

Fields to the side (on the right):

 

Date: January 8, 2016

Court: Eastern District of Texas (Sherman)

Judge:  Amos Mazzant

Area of Law:  patent infringement and damages

Expert’s name: Mr. Arthur Cobb

Area of Expertise, Technology or Science: damages related to infringement of patented technologies

 

 

Filed under: Uncategorized No Comments
30Dec/16Off

Better Mouse Company, Llc v. Steelseries Aps et al

Posted by Chris Marchese

Case name:

Better Mouse Company, Llc v. Steelseries Aps et al

Area of Law:

Patent Law.  Plaintiff, Better Mouse Company, sued Steelseries Aps, among other defendants, for patent infringement.

Grounds:

Better Mouse Company moved to strike portions of the Rebuttal Expert Report and testimony of Richard Eichmann, Defendant’s damages expert.  Better Mouse Company moved to strike on the grounds that Eichmann’s forward citation analysis was flawed because it ignored citations to related patents with similar disclosures.

Outcome:

Denied.

Analysis:

The Eastern District of Texas, in Better Mouse Company, Llc v. Steelseries Aps et al, No. 2:14-cv-198-RSP (Magistrate Judge Roy Payne) (Jan. 16, 2016) considered a motion to strike the expert report and testimony of Defendant’s damages expert, Richard Eichmann.

Plaintiff asserted that Eichmann’s forward citation analysis was flawed. Specifically, Plaintiff argued that Eichmann ignored related patents with similar disclosures and thus unacceptably underrepresented the number of relevant forward citations in his forward citation count.  In support of its motion, plaintiff cited a Northern District of California case, Oracle, for the proposition that failing to include citations to patents with identical disclosures was a fatal flaw. Oracle Am., Inc. v. Google Inc., No. C 10-03561 WHA, 2012 WL 877125, at *2 (N.D. Cal. Mar. 15, 2012).  Defendant responded that forward citation analysis was widely accepted in economic literature and that Eichmann’s analysis was consistent with the literature.

The Court denied the motion to strike.  It reasoned that Eichmann’s testimony was sufficiently relevant and reliable to clear Daubert.

The Court found Eichmann’s testimony was relevant because he tied the asserted patent to the comparable license used in the forward citation analysis.  Defendant’s expert tied the asserted patent to the comparable license by agreeing with the technical analysis of Plaintiff’s infringement expert, which found that the asserted patent was comparable to four patents in the comparable license.  The court also dismissed Plaintiff’s reliance on Oracle, stating, “[n]o binding authority states that forward citation analysis is per se not relevant to the facts of any case.”  Because Defendant submitted evidence that forward citation numbers correlate to patent value, Plaintiffs could not prevail on an argument that forward citation analysis was per se not relevant.

The Court also found that Eichmann’s forward citation analysis was reasonably reliable under Daubert.  He used the analysis in typical fashion to get an indication of the value of the four comparable patents in the comparable license.  Plaintiff’s means of redress here was to challenge the underlying data and the criteria Eichmann used to analyze that data, not to strike Eichmann’s testimony wholesale. Further, Eichmann was not required to perform independent analysis of what patents in the comparable license were comparable to the asserted patent.  The court noted that he could rely on the analysis of Plaintiff’s infringement expert, so long as he believed the analysis regarding comparable patents was accurate, even if he disagreed with Plaintiff’s expert on other issues.

///

 

Fields to the side (on the right):

 

Date:     Jan. 4, 2016.

Court: E.D. Texas

Judge:  Roy S. Payne

Area of Law:  Patent Law

Expert’s name: Richard Eichmann

Area of Expertise, Technology or Science: Patent Licensing and Valuation

Filed under: Uncategorized No Comments
30Dec/16Off

Exergen Corporation v. Kaz USA, Inc.

Posted by Chris Marchese

Case nameExergen Corporation v. Kaz USA, Inc.

Area of Law:  Patent Law

Grounds:  Defendant moved in limine to exclude Plaintiff’s patent damages analysis under the entire market rule on ground that it was improper to use the fact relating to laws of nature as the primary driving factor in sales of Plaintiff’s products.

Outcome:  Denied

Analysis:

The court stated that it was not aware of the use of section 101 (35 U.S.C. § 101 which guides patentability of inventions) analysis in the context of damages.  It noted the Supreme Court noted with regard to section 101, that ultimately all inventions utilize a law of nature (or abstract concept) on some level, and useful and novel applications of law of nature are patentable.  And to the extent that an application of a law of nature is patentable, there is no reason why that application cannot also be the primary driving factor is sales of products embodying the claims.

///

Fields to the side (on the right):

Date:     01/07/2016

Court:  D. Ma.

Judge:  Richard G. Stearns

Area of Law:  Patent Law

Expert’s name: N/A

Area of Expertise, Technology or Science:  Damages

Filed under: Uncategorized No Comments
23Dec/16Off

DDE denies request to strike lost profits opinion re non-patented items; addresses test data admissibility

Posted by Chris Marchese

The District of Delaware, in Masimo Corp. v. Philips Elec. North Am. Corp., (Judge Leonard P. Stark) (October 31, 2016), addressed motions to strike opinions of several experts related to damages.  The experts in question were Michael Keeley (Finance), Joseph Dyro (Technical), Nitin Shah (Technical), Vijai Madisetti (Finance), and Michael Wagner (Finance).  The court granted in part and denied in part the motions.  The key motions are addressed below.

7Dec/16Off

Federal Circuit Opinion Asetek Danmark a/s v. CMI USA Inc. Cites Patent Damages Treatise

Posted by Chris Marchese

In a December 2nd opinion by the Federal Circuit, the court cited Patent Damages Law and Practice as a “leading commentary.” The comprehensive treatise was co-authored by Chris Marchese, one of the bloggers on this site, and has been cited in numerous district courts as well.

6Oct/16Off

EDTX denies exclusion of settlement license and “real estate” apportionment

Posted by Chris Marchese

The Eastern District of Texas, in ZiiLabs, Inc. v. Samsung Electronics Co., (Judge Roy S. Payne) (December 4, 2015), granted in part and denied in part defendant’s motion to exclude various opinions from plaintiff’s damages expert, Robert Mills.

6Sep/16Off

D.Ariz excludes expert for not apportioning the rate, but OKs entire product as base

Posted by Chris Marchese

The District of Arizona, in GoDaddy.com LLC v. RPost Communications Limited, Case No. CV-14-00126-PHX-JAT (Judge James A. Teilborg) (May 10, 2016), excluded the entire report of Defendant’s damages expert, Gregory Smith, but allowed a do-over.

Plaintiff GoDaddy moved to exclude Smith’s testimony under FRE 702, asserting two grounds: (1) Smith inappropriately accounted for non-infringing features in his royalty rate analysis rather than apportioning the royalty base, and (2) because Smith used the entire revenue of the accused product as the royalty base, he necessarily applied the entire market value rule (“EMVR”) but failed to demonstrate that the patented features form the basis of consumer demand.  Defendant RPost denied that Smith applied the EMVR, arguing that the accused products were the smallest saleable unit (“SSU”), and the Federal Circuit has never defined a particular formula for apportioning damages for SSUs.  Smith used the operating margin of the accused products and apportioned the royalty rate instead of the royalty base.