Patent Damages

CAFC grants new trial – Royalty base can be total sales, but the royalty rate must be properly apportioned

The United States Court of Appeals for the Federal Circuit, in Exmark Manuf. Co. Inc. v. Briggs & Stratton Power Prods. Grp, LLC, 879 F.3d 1332 (Fed. Cir. Jan. 2018) on appeal from the District of Nebraska, before Judges Wallach, Chen, and Stoll, with Judge Stoll writing the opinion, issued an order regarding apportionment, vacating the jury’s $24,280,330 compensatory damages verdict, which had been doubled upon a finding of enhanced damages for willful infringement.  The court held “that the district court erred in denying a new trial on damages” and “abused its discretion by limiting the evidence relevant to damages to prior art that had been commercialized.”  The court held that it was not wrong for the expert to use the royalty base as the sales price of the entire mower, but the opinion was fatally flawed because it did not properly tie the royalty rate to the facts of the case, “plucking the 5% rate out of nowhere.”


Damages opinion related to FRAND excluded due to lack of supporting evidence

The Eastern District of Texas, Tyler Division, Magistrate Judge K. Nicole Mitchell presiding, in Network-1 Techs., Inc. v. Alcatel-Lucent USA, Inc.,[1] Civil Action 6:11-cv-492-RWS-KNM (E.D.TX Sept. 21, 2017) granted-in-part Plaintiff’s motion to exclude certain opinions of Defendant Hewlett-Packard Company’s (“HP”) F/RAND licensing expert M. Ray Perryman.  The patent-at-issue relates to remotely powering access equipment over an Ethernet network, an act which is essential for practicing certain IEEE standards.  Under Rule 702 of the Federal Rules of Evidence, as well as the Daubert standard, the Court analyzed Plaintiff’s motion to exclude HP’s expert’s opinions on 1) royalty stacking; 2) applying definitions from an IEEE document to its patent policy; 3) patent hold-up; and 4) influence of the threat of an injunction on past licenses.  Due to a lack of supporting evidence, the Court excluded Perryman’s opinions, with the exception that Perryman would be allowed to apply the definitions from an IEEE document to Plaintiff’s patent policy.


Reputation of defendant and its products not relevant to analytical method

The Eastern District of Michigan, in Linear Group Services, LLC v. Attica Automation, Inc., Case No. 13-10108 (Judge Gershwin A. Drain) (Aug. 25, 2014), addressed several motions in limine. One of the issues involved evidence related to the analytical method for computing reasonable royalty damages. The opinion is brief, and so we quote in full (slip op. at 7-8):


EDTX rejects arguments that expert should have included sunk costs and did not apportion

The Eastern District of Texas, in Affinity Labs of Texas, LLC v. Ford Motor Co., Civil Action No. 1-12-CV-580 (Judge Ron Clark) (Aug. 22, 2013) (Doc. No. 201), denied a motion to exclude testimony from expert Carl Degan.  Ford contended there were two deficiencies in Degan’s opinions:  (1) his failure to factor sunk engineering costs into his profitability analysis; and (2) his failure to apportion. 


EDTX refuses to exclude expert’s conversion of lump sum into per unit royalty

The Eastern District of Texas, in Affinity Labs of Texas, LLC v. Ford Motor Co., Civil Action No. 1-12-CV-580 (Judge Ron Clark) (Aug. 22, 2013) (Doc. No. 200), denied a motion to exclude testimony from damages expert Julie Davis in which she had converted lump sum royalties into per unit royalties.  The opinion is brief, and we quote the relevant portion in full:

Affinity next argues that Ms. Davis’s testimony regarding her conversion of a lump-sum license agreement into per-unit royalties was improper and requires exclusion. “[L]ump sum payments … should not support running royalty rates without testimony explaining how they apply to the facts of the case.” Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 30 (Fed. Cir. 2012). Ms. Davis provided a chart as part of her expert report detailing her conversion of the Apple lump-sum royalty to per-unit royalty. [Doc. # 141-5]. As to the Panasonic license, upon which Affinity itself relies, Ms. Davis did not rely upon it specifically to calculate a value, but rather generally states that it would lead to a “very modest running royalty rate.” Affinityalso argues that Ms. Davis’s analysis of Ford’s licenses with 911 Notify, LLC and Tendler Cellular of Texas, LLC is flawed. The calculation of a reasonable royalty is not an exact science, and just because one approach may be better does not make other approaches inadmissible. Apple Inc. v. Motorola, Inc., --- F.3d ---, 2014 WL 1646435, *19 (Fed. Cir. Apr. 25, 2014). The issues that Affinity raises regarding Ms. Davis’s calculations are a matter of weight for the jury to determine, rather than a matter of exclusion.


EDVA rejects Nash Bargaining Solution because not tied to facts

On April 12, 2013, Judge Ellis of the Eastern District of Virginia issued an opinion in Suffolk Tech. LLC v. AOL Inc. and Google Inc., Case No. 1:12-cv-625 (Doc. No. 518), addressing use of the Nash Bargaining Solution (NBS) by Suffolk’s damages expert (Roy Weinstein).  Google argued that Weinstein’s testimony was inadmissible because use of the NBS was not tied to the facts of the case.  The court granted Google’s motion.

According to the court, Weinstein applied the Georgia-Pacific factors to the revenue stream associated with the accused product and then conducted a hypothetical negotiation based on the NBS.  The court concluded that the NBS did not appear “to be tied to the facts of this case.”  Slip op. at 3.  According to the court, Weinstein appeared to “conclude summarily that the result of this hypothetical negotiation would be a ‘50/50 split of the incremental profits attributable to the patent-in-suit.’”  Slip op. at 3 (quoting Weinstein’s report). 


DDEL rejects reasonable royalty theory based on single settlement agreement

On February 21, 2013, Judge Andrews of the District of Delaware issued an opinion in AVM Tech, LLC v. Intel Corp.-d8cf79052b12, Case No. 1:10-cv-00610-RGA (Doc. No. 283), addressing various Intel pretrial motions concerning damages.  (See February 22, 2013 post on this blog concerning a different opinion from this same case.)  Judge Andrews concluded that AVM could not present a damages theory that was based on a single Intel settlement agreement (from a previous litigation involving a different plaintiff), even though the technology at issue in the agreement was allegedly comparable, in part because AVM failed to analyze the underlying litigation that lead to the settlement or to explain why other Intel licenses were not comparable.  See slip op. at 8 (“An analysis that relies on a single license agreement but does not take into account why other licenses are not comparable cannot be a reliable analysis.”) (footnote omitted).


NDCA finds EMVR unnecessary for lost profits; allows royalty based on entire revenue without EMVR

On May 15, 2013, Magistrate Judge Grewal of the Northern District of California issued an opinion in Brocade Communications Systems, Inc. v. A10 Networks, Inc., Case No. C 10-3428 PSG (Doc. No. 998), addressing a motion by A10 seeking to exclude evidence from Brocade’s damages expert (James Malackowski) in an upcoming retrial.  A10 moved to strike Malackowski’s lost profits and reasonable royalty theories because Brocade failed to provide evidence sufficient to support an entire market value rule (EMVR) theory.  The court denied the motion, finding Brocade’s patent damages evidence to be relevant to its damages theories.


Judge Posner precludes royalty rate testimony based on disparate licenses for unknown different inventions

On May 28, 2013, Judge Posner, sitting by designation in the Northern District of Illinois, issued an opinion in Promega Corp. v. Applied Biosystems, LLC, et al., Case No. 13-cv-2333 (Doc. No. 378), addressing Daubert motions to exclude opinions by plaintiff’s and defendant’s experts, including damages experts for both sides.  The patentee in the case was Life Technologies, and the accused infringer was Promega.  Promega’s motion to exclude royalty rate testimony by Life Tech’s expert (Jed Greene) will be addressed here.  Judge Posner granted the motion to exclude Greene’s testimony because “[u]sing the midpoint of a range of royalty rates in disparate licenses for unknown different inventions as the estimate of a reasonable royalty for a license for Promega products outside the field of use of the 2006 patent is arbitrary.”  Slip op. at 3 (citing Federal Circuit’s opinions in Wordtech and Lucent).  Judge Posner observed that “Greene testified simply that he considered the totality of the circumstances. But generalized impressions are no substitute for a method of computing, and evidence justifying, a reasonable royalty rate.”  Id.


WDWA allows lost profits market share evidence based on third party analyst reports; rejects 3X litigation multiplier for reasonable royalty

On March 11, 2013, the WDWA issued an opinion in Avocent Redmond Corp. v. Rose Electronics, Case No. C06-1711RSL (Doc. No. 874), addressing Belkin’s Daubert motion to exclude opinions by Avocent’s damages expert (William O. Kerr) concerning lost profits and reasonable royalty.  The lost profits issue concerned Kerr’s use of third party market analyst reports to support his market share analysis.  The reasonable royalty issue concerned his use of a 3X multiplier to upwardly adjust the royalty rate in an allegedly comparable settlement agreement.  The court denied the lost profits motion, but granted the reasonable royalty motion.