This Virginia court ruled that the “patentee may base a reasonable royalty rate on the entire market value of an accused product where the evidence presented demonstrates that, in a hypothetical negotiation, it would be appropriate to do so.” This seems to be a somewhat different interpretation of Lucent and Uniloc than some recent rulings (such as Mirror Worlds v. Apple) that put little emphasis on real-world (or hypothetical) licensing considerations.
Here, Verizon sought to exclude plaintiff’s expert, Michael Wagner, for failing to abide by the entire market value guidelines by using the entire product as a royalty base. As we know, the Federal Circuit in Lucent v. Gateway stated that “the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range.” The Federal Circuit in Uniloc then seemed to contradict that statement by ruling that “Supreme Court and this court’s precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.” Yet this VA court concludes that there was no contradiction there – Uniloc’s issues related to minor patent improvements, unlike the present case where the patented technology is “at least a substantial basis of customer demand.” Thus, “the Court finds that the fact that Mr. Wagner may have admitted that other factors influence customer demand does not preclude him from basing his reasonable royalty calculation on the entire market value of the allegedly infringing system, where the royalty rate asserted accounts for the substantial value attributable to the patented VOD feature.”
It seems that the court may have been swayed by real-world licensing considerations (which Lucent and Uniloc seem to play down): “[r]eading Lucent in light of Uniloc, the Court finds that a patentee may base a reasonable royalty rate on the entire market value of an accused product where the evidence presented demonstrates that, in a hypothetical negotiation, it would be appropriate to do so.”
Case: ActiveVideo Networks, Inc. v. Verizon Communications, Inc., et. al., 2-10-cv-00248 (ED VA, August 3, 2011, Order) (Jackson)