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ARTICLES
Reasonable Royalty Apportionment Excluded For Lack of Factual Foundation
In this Delaware patent infringement suit, the district court judge excluded plaintiff’s damages expert’s reasonable royalty opinion that apportioned 50% of product value to the patents-in-suit because his apportionment, based solely on discussions with their technical expert, lacked a factual foundation. While the ruling isn’t exactly surprising—plenty of other cases have rejected royalty rates pulled out of thin air—the opinion provides a useful summary of relevant case law and provides some pointers for attorneys on both sides of such a case. In his expert report, the damages expert explained his reasoning: “[The technical expert] informs me that the Patents-in-Suit are foundational to the commercial success of the Accused Products, and account for at least as much value as the non-patented contributions made by [Defendant]. This suggests an apportionment factor of no less than 50% of the value of the Accused Products to the Patents-in-Suit. For the purposes of my determination of the reasonable royalty, I have assumed an apportionment factor of 50% to the Patents-in-Suit.” The expert further noted that “[b]ased on my discussion with [the technical expert], it is reasonable and conservative to assume that the Patents-in-Suit contribute at least 50% of the value of the Accused Products. Other [unpatented] elements that ... Read MoreTidy Cats Trial Ends in $3M Verdict as Both Sides Seem to Win
Tidy Cats found to infringe an Oil-Dri patent, but the jury was not too enthused about damages. This week a jury awarded Chicago-based Oil-Dri damages of $3 million after a 7-day patent infringement trial against Nestle Purina, makers of Tidy Cats cat litter. The jury ruled for Oil-Dri on the issue of validity and infringement of its patent-in-suit, but accepted defendant Purina’s position on damages, giving somewhat of a win to both sides. Oil-Dri had sued Nestle Purina for infringement of its U.S. Patent No. 5,975,019, which describes cat litter formulations. Oil-Dri, represented at trial by Michael P. Mazza LLC and The Collins Law Firm PC, argued that with its patent, a cat litter could be made with much less sodium bentonite, resulting in substantial cost savings as compared to prior formulations that were mostly or entirely sodium bentonite. Purina’s counsel, Morgan Lewis & Bockius LLP, argued at trial that the asserted claims require predetermined mean particle sizes for the non-swelling clay and swelling clay (sodium bentonite). But they argued that Purina does not predetermine mean particle sizes since the manufacturing processes only limit the maximum particle size. Purina also argued that its massive investments in marketing, consumer research, and R&D meant that ... Read MoreIL Court Rejects Damages Expert’s Arbitrary Royalty Conclusions
In a patent case regarding infant play yard arches, an Illinois district court this week excluded the royalty opinion of plaintiff’s damages expert because his royalty rate “might have been picked out of a hat.” In Kolcraft v. Chicco, plaintiff’s expert first estimated a baseline royalty of 7.7% of sales, then adjusted it upward to 8% based on the Georgia-Pacific factors, resulting in total damages of $3.73 million. The starting point of 7.7% was based on the expert’s decision to apportion one-third of the incremental profit from the accused devices to their patented features. The court rejects the expert’s analysis, explaining: “There is no justification for the one-third figure anywhere in the report or attached exhibits. Although [the expert] discusses the value added by the patented features in abstract terms, … he does not explain how those advantages translate to the one-third apportionment number. Nor is there any other evidence that would support the apportionment figure … As far as the record shows, the one-third number might have been picked out of a hat.” Just as the 25% rule-of-thumb apportionment methodology was rejected for good in Uniloc v. Microsoft (Fed. Cir. 2011), the judge explains: “[Expert’s] number was 33%, not 25%, but the principle ... Read MoreEvaluating Lost Profits Damages During Early Stages of Litigation
For clients and counsel (either plaintiffs or defendants) that are considering possible lost profits claims in their IP litigation, we’ve put together a short primer to get you started. The download link is below. As we cover in this paper, both plaintiffs and defendants are increasingly focusing more attention to damages nearer the outset of litigation. This paper covers the legal framework and key cases, as well as the basics of quantifying the damages. As always, contact us for more information or to see how we might assist your case.
VLF Consulting, Inc.
