This California court awarded a 20% reasonable royalty on defendant’s infringing sales of a switchblade-style divot repair tool. With the Georgia-Pacific factors lined up solidly with the plaintiff, the judge notes several factorssupporting the royalty rate: (1) defendant earned gross profits of 70% (substantially above average), (2) unrebutted testimony by plaintiff’s expert, Randall Smith, that gross profits are more important than net profits (which were 5% here), (3) defendant was President of plaintiff Divix and was thus uniquely positioned to undercut Divix’s pricing, (4) almost half of Mohr’s sales came from Divix’s customers, (5) Mohr threatened to ruin Divix before leaving its employment, and (6) the patented product was highly important to plaintiff, as it made up 96% of their sales.
The court also rejected plaintiff’s lost profits claim, where the plaintiff apparently sought lost profits on all the infringing sales, despite the existence of non-infringing alternatives in the market. The judge notes: “Although the expert testified that forty-six percent of revenue [defendant] received from plaintiff’s former customers would have gone to plaintiff but for [defendant’s] infringement, plaintiff put forth no evidence to demonstrate that it would have received [defendant’s] remaining fifty-four percent of revenue in light of the existence of other companies that sold a similar, non-infringing product.” This doesn’t sound like a particularly surprising lost profits ruling, as a market share approach (or some paring down of the remaining 54%) would seemingly make more sense where there are significant competitors selling similar products.
Case: Divix Golf Inc v. Mohr, et. al., 3-05-cv-01488 (S.D. CA, August 19, 2011, Order) (Houston)