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ARTICLES
Evaluating 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.Federal Circuit Addresses Royalty Apportionment and Royalty Rates in Exmark
In Exmark v. Briggs & Stratton, the Federal Circuit added to the pool of cases dealing with royalty apportionment, ruling that even though apportionment was required in the reasonable royalty determination, the apportionment could be done on the royalty rate, instead of the base, mainly because the patent claims refer to the broader product. Let’s start with the case facts. A trial court jury awarded $24 million in compensatory damages at a 5% royalty rate for Briggs’ infringement of Exmark’s ‘863 patent. The patent is directed to a lawn mower having improved flow control baffles (metal parts under mower deck that direct air flow and grass clippings). The Federal Circuit vacates the award primarily because Exmark’s damages expert failed to justify the 5% royalty rate. Issues Briggs had raised three arguments: (1) the district court erred by permitting Exmark to use the sales price of the accused mowers as the royalty base instead of the sales price of the flow control baffles; (2) Exmark’s damages expert failed to justify the 5% royalty rate, and (3) the district court improperly excluded evidence relevant to damages. Royalty Base The court explains that “the parties do not dispute that apportionment is required in this case.” But the court ... Read MoreExpert’s Royalty Excluded due to License Comparability and Methodology
In Acantha v. DePuy, a patent case dealing with spinal implant orthopedic devices, a Wisconsin district court judge excluded what seems to be the bulk of the reasonable royalty opinions of Plaintiff’s damages expert. The court ruled that (1) the main basis for the expert’s proposed royalty rate improperly includes royalties paid to a licensee that is not a party to this litigation; (2) the expert failed to show that a litigation settlement was sufficiently comparable (beyond just technical aspects) to be a useful data point; and (3) the expert’s Georgia-Pacific analysis was not sufficiently tied to his royalty rate conclusion to demonstrate proper apportionment. Plaintiff’s expert relied upon Acantha’s exclusive license of the patent-in-suit to Stryker (not a party to this litigation) calling for royalties of 4.25% of sales (later revised to a non-exclusive license at 3.25%) plus 40% of any sublicensing royalties. Rather than adopt the rate of 4.25%, the expert concluded that the hypothetical negotiation would include Stryker (not plaintiff) and the resulting rate would be 10.6% to 21.2% in order to remit 4.25% to Acantha. The court explains that licensees are normally included as parties to a hypothetical negotiation when they are parties to the patent infringement ... Read MoreMaking Sense of the Federal Circuit’s Finjan Ruling on Royalty Apportionment
In its January 2018 ruling in Finjan v. Blue Coat, the Federal Circuit reversed a $24 million jury award of damages and took a strict stance on apportionment that seems to reverse the more flexible position from its Ericsson decision. This creates some uncertainty about how a reasonable royalty base and structure should be determined going forward. A jury had previously found that Blue Coat infringed four Finjan patents, and awarded $39.5 million in reasonable royalty damages. $24 million of this relates to Finjan’s ‘844 patent, which pertains to a system that analyzes and categorizes web sites to prevent malware and bar access. WebPulse, the infringing product, contains a DRTR module (“dynamic real-time rating engine”) that analyzes previously-uncategorized URLs for malicious code and for content (e.g. pornography, news, etc.). All of the ‘844 infringing activity occurs in DRTR, but some DRTR functions infringe and some do not. Plaintiff’s damages expert determined the royalty base by multiplying all WebPulse 75 million users by 4%, having found that DRTR processes roughly 4% of WebPulse’s total web requests. No further apportionment was done. The royalty was then calculated by multiplying the royalty base by an $8-per-user royalty rate. The court rejected the jury’s award, finding ... Read More
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