The District of Utah, in Waterton Polymer Products USA, LLC v. Edizone, LLC, Case No. 2:12-CV-17 TX (Judge Ted Stewart) (Nov. 6, 2014), denied the accused infringer’s motion in limine to preclude patentee’s introduction of evidence regarding minimum royalty payments by third party licensees of the patentee.
Each of the disputed license agreements were directed to the patent-in-suit and included a percentage-based running royalty and a minimum royalty amount. The accused infringer argued that the minimum royalties were not relevant because the license agreements specifically envisioned active sales and marketing by the licensees, whereas the accused infringer alleged it endeavored not to make sales in the U.S. and made only one such sale.
The Central District of Illinois, in Philippi-Hagenbuch, Inc. v. Western Tech. Services Int’l, Inc., Case No. 12-1099 (Chief Judge James E. Shadid) (April 8, 2015), denied defendants’ motion to exclude opinions of plaintiffs’ damages expert, Michael E. Tate. Tate had offered opinions on lost profits and reasonable royalty. The reasonable royalty issue—whether Tate’s opinion that the royalty base should be the entire products at issue, which were truck bodies and water tanks, or should be apportioned—is addressed here.
The case involved two sets of patents: water tank patents and truck body patents. The plaintiffs contended that their patented design process created a water tank or a truck body and that no smaller, salable unit was separable or could be apportioned from the larger products for purposes of damages computation. To this end, the court noted that the truck body patents claim a process for designing a custom truck body for specific environments by use of three-dimensional modeling of the loads to be hauled. Some of the evidence indicated that the defendants’ customers purchased the custom truck bodies over generic bodies because the custom bodies were designed to meet the customers’ specifications, to carry a particular load, and to “max out” the truck’s performance, making the premium cost for the patented truck bodies worthwhile to the customers.
The District of Minnesota, in Ecolab USA, Inc. v. Diversey, Inc., Case No. 0-12-cv-01984 (SRN/FLN) (Judge Susan R. Nelson) (May 15, 2015), denied defendant’s motion in limine to preclude plaintiffs from comparing the defendant’s reasonable royalty calculation to the fees defendant incurred in the litigation. Defendant argued that its defense costs, i.e., its expert costs, costs for outside counsel to prepare noninfringement opinions, and attorneys’ fees incurred in litigation, were irrelevant to the amount of damages. The defendant argued that none of these costs are covered by the Georgia-Pacific factors and should not be presented to the jury.
The District of Delaware, in Helios Software, LLC v. Awareness Tech., Inc., Civil Action No. 11:1259LPS (Judge Stark) (April 13, 2015), addressed a variety of motions to exclude damages testimony. Plaintiff and defendant each moved to dismiss its counterpart’s damages expert on various grounds. The most interesting issues are addressed below.
On February 5, 2015, in Rembrandt Wireless v. Samsung, Case No. 2:13CV213-JRG-RSP, Judge Payne entered a Magistrate’s Recommendation recommending that Samsung’s motion for summary judgment be denied. Samsung argued that Rembrandt should be barred from receiving any pre-notice damages, because Rembrandt had allegedly not complied with the marking statute. Specifically, Samsung alleged that while Rembrandt itself had no products to mark, one of its licensees – Zhone – had sold products embodying claim 40 of the asserted ‘580 patent but had not marked them.
On March 2, in azd-2-12-cv-01797-267, Case No. CV-12-01797-PHX-JAT, Judge Teilborg of the District of Arizona denied a motion for summary judgment based on a marking defense. Holland moved for summary judgment of no damages for units sold before the date of actual notice, arguing that no constructive notice had been provided since PCT did not properly mark. The products at issue were coaxial connectors, and PCT argued that the products were too small to make it feasible to legibly mark on the products themselves. That being said, Holland pointed out that PCT did affix a label to some of the connectors, bearing the PCT logo as well as the PCT part number. These labels, however, are 5mm in height and have text of only 2.8mm, and PCT countered that it was not feasible to add the patent information to these labels, or to make the labels any larger.
On January 28, in Open Text S.A. v Box, Inc., Case No. 13-cv-04910-JD,Judge Donato of the NDCA denied a motion-in-limine that would have prevented Defendant Box from putting forth a fully paid-up, lump sum form of damages at trial. Plaintiff Open Text moved to prevent Box from arguing a fully paid-up lump sum covering the life of the patents, arguing that such an outcome “would preclude Open Text from seeking an injunction or post-verdict ongoing royalties.” The Court cited numerous cases holding that a fully paid-up lump sum award is an allowable form of damages.
On January 29, two opinions from two jurisdictions denied motions to exclude reference to settlement agreements. In the NDCA, in Open Text S.A. v Box, Inc., Case No. 13-cv-04910-JD,Judge Donato denied a motion by plaintiff to exclude defendant’s expert’s opinions regarding four settlement agreements the defendant’s expert opined were comparable. In a nutshell, plaintiff argued that the agreements were depressed in value because they were settlements, but the Court disagreed, and held it was subject matter for cross-examination: “The differences between the Box licenses and the hypothetical negotiation that Open Text points to (like the timing of the licenses, or the fact that the patent office had issued a non-final rejection of the licensed claims in one of the licenses) would be easily understandable to a jury.”
The NDCA, in Digital Reg of Texas v. Adobe, Civil Action No. 12-1971 CW (Judge Claudia Wilken) (August 19, 2014), granted a motion to exclude testimony from Digital Reg’s damages expert Robert Parr on a number of grounds.
The patents-in-suit related to digital rights management. Mr. Parr, in deriving his royalty rate, looked at software piracy rates across the software industry and from Symantec (who had settled out), but not Adobe itself. Moreover, Mr. Parr did not seek to adjust the industry data or Symantec data to account for differences that might be applicable to Adobe. Digital Reg stated that the information it desired was not produced by Adobe, and Adobe responded that it did not track that specific statistic. The Court analyzed all of the various things Mr. Parr could have done, but did not do, and held “the inputs of Mr. Parr’s damages calculation are inherently unreliable.”
The District of Nebraska, in Prism Technologies LLC v. AT&T Mobility, Civil Action No. 8:12-cv-00122-LES-TDT (Judge Lyle E. Strom) (September 22, 2014), granted a motion to exclude testimony from Prism’s damages expert James Malackowski. As described by the Court:
Mr. Malackowski’s model has multiple stages. First, he attempted to isolate the “economic footprint” of the invention in each defendant’s revenues to create a royalty base in a three-step calculation. First, he identified each defendant’s data services revenue. Second, he reduced the revenue of RIM subscribers per Prism’s RIM agreement. Third, he “apportioned” these revenues by each defendant’s cost savings fraction….The cost-savings fraction is a separate, two-step, calculation. Mr. Malackowski identified the numerator of this fraction as the cost savings value of the asserted patents (Filing No. 265-3, at 43-46).Then, Mr. Malackowski identified the denominator as the total network costs for each defendant (Id.). The resulting fraction represented the “benefit cost savings” of the infringing system.
From this royalty base, Mr. Malackowski applied a royalty rate that varied between 2-4%. The defendants took issue with this damages model on three main grounds, 1) that a revenue-based royalty was inappropriate as a matter of law, 2) that the “cost-savings” apportionment was flawed, and 3) the methodology was effectively a “black box” that could not be correlated with the invention’s economic footprint.