The Federal Circuit, in Prism Tech. LLC v. Sprint Spectrum L.P., Nos. 2016-1456, 2016-1457 (Fed. Cir. March 6, 2017) (Judge Taranto authoring), issued an opinion addressing comparable license agreements and the cost savings approach for reasonable royalties. We summarize the opinion here. The section on comparable license agreements is lengthy and worth reading in full.
DDE excludes settlement agreements; allows licenses as a “check”; addresses apportionment of accused products & services
The District of Delaware, in ART+Com Innovation GMBH v. Google Inc., Case No. 14-217-RGA (Judge Richard G. Andrews) (April 28, 2016), considered several motions related to royalty calculations. In a previous blog post, we addressed the motion for reconsideration of the 13% apportionment issue addressed below. This post covers the earlier order addressing that issue plus others.
Plaintiff ART+Com Innovation (“ACI”) challenged the reliance of Google’s expert Reed on seven licenses as a "check" on his reasonable royalty analysis. Five of these licenses were settlement agreements. The court excluded these (except as to their lump-sum nature) because they were products of litigation and not economically comparable. The other two licenses were the product of licensing negotiations. ACI disputed that these licenses were technologically comparable. The court allowed these licenses because Reed acknowledged the differences, and his analysis was consonant with using the licenses as a "check" against his reasonable royalty calculations. The jury could then weigh the evidence for itself.
The Southern District of Florida, in Arctic Cat Inc. v. Bombardier Recreational Producs, Inc., Case No. 0-14-cv-62369 (May 3, 2016) (Judge Beth Bloom), addressed motions to strike and summary judgment. Arctic Cat (patentee) filed a Daubert motion against defendant BRP’s expert, Dr. Keith Ugone. Arctic Cat contended that Dr. Ugone’s methodology was a “black box” and that his use of Arctic Cat’s licensing proposals as an indicator of value was impermissible. Slip op. at 9. The court denied this motion—on the “black box” issue, stating that Dr. Ugone’s methodology was “based on specific evidence, and his report clearly explains each step in his methodology.” Id.
EDTX denies Daubert motions involving apportionment, entire market value rule, license agreements, and patent valuations
The Eastern District of Texas, in Core Wireless Licensing SARL v. LG Electronics, Inc. et al, Case No. 2-14-cv-00911 (Judge Payne) (March 19, 2016), addressed motions filed by both parties seeking to exclude the other party’s damages expert’s opinions and testimony. LG, the alleged infringer, filed a motion to exclude the opinions of Core’s damages expert, Dr. Stephen Magee, on Daubert and untimeliness grounds. Similarly, Core, the patent owner, sought to exclude the opinions of LG’s damages expert, Dr. Thomas Vander Veen, on the same grounds. The court concluded that both experts’ opinions were reliable under FRE 702, and thus denied both parties’ Daubert motions. The court also concluded that the parties’ late disclosures were harmless and denied the parties’ motions to exclude the adverse party’s supplemental report for untimeliness.
The District of Delaware, in M2M Sols. LLC v. Enfora, Inc., Case No. 12-32-RGA (Judge Andrews) (March 9, 2016), considered, in part, plaintiff's Daubert motion and defendants' summary judgment motion (MSJ) on damages issues. The court granted plaintiff's Daubert motion, and granted in-part and denied in part defendants' MSJ.
The Eastern District of Texas, in Metaswitch Networks Ltd. V. Genband US LLC, Case No. 2:14-cv-00744 (Judge Payne) (March 7, 2015), addressed a number of issues in a FRAND case involving an IETF standard. Specifically, defendant moved under Daubert to exclude certain opinions of plaintiff’s damages expert Matthew R. Lynde. The court granted in part and denied in part the motion.
The Middle District of Florida, in StoneEagle Services, Inc. v. Pay-Plus Solutions, Inc., Case No. 8:13-cv-02240 (Judge Hernandez) (June 19, 2015), allowed the plaintiff’s damages expert (Weston Anson) to offer a theory based on the “market approach” and him to testify on the technical comparability of an allegedly comparable license agreement. The court reasoned that the defendants could challenge the market approach and the expert’s qualifications on cross examination.
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.
On June 11, 2014, Judge Bernal of the Central District of California issued an opinion on motions in limine, including denying Texchem’s request to exclude opinions by e.PAK’s damages expert, Lawrence Simon, concerning a third partY license. The case is Texchem Advanced Products Inc. v. e.PAK Int’l Inc., Case No. EDCV 12-1341 JGB (SPx). Texchem argued that the license agreement was not comparable to the hypothetical negotiation. The court denied the motion. The court cited the Federal Circuit’s recent opinion in Apple Inc. v. Motorola, Inc., 2014 WL 1646435 (Fed. Cir. Apr. 25, 2014). We quote the court’s brief analysis in full:
On April 21, 2014, Judge Guilford of the Central District of California issued an opinion on Daubert motions. The case is Universal Electronics, Inc. v. Universal Remote Control, Inc., Case No. SA-CV 12-00329 AG (JPRx). The parties had filed several motions to exclude evidence on a wide array of issues. One motion of interest relates to plaintiff’s damages expert’s opinions on reasonable royalty. The expert, Frank Bernatowicz, had reached a “baseline” royalty rate of 3% using allegedly comparable licenses as a benchmark. Defendant moved to exclude the royalty opinions contending that Bernatowicz’s license analysis was flawed. The court agreed and excluded Bernatowicz’s testimony on reasonable royalty damages.