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 More
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.
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.
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.
The court explains that “the parties do not dispute that apportionment is required in this case.” But the court ... Read More
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
On appeal after a $2.2 million jury award of lost profits, the Federal Circuit vacated the lost profits award, ruling that insufficient evidence regarding non-infringing alternatives supported the finding. While this ruling may not be particularly ground-breaking, it does add another data point as to how the Federal Circuit sees the issue of non-infringing alternatives.
Presidio had sued ATC for infringement of a patent related to a multilayer capacitor design. ATC sold two types of capacitors: the infringing 550 series, and the non-accused 560L. The question before the court is whether Presidio established its right to recover lost profits for its sales of the BB capacitors, which Presidio claimed were harmed by the infringement.
The court faults the district court for focusing on the shortcomings of the 560L relative to the 550, instead of comparing it to Plaintiff’s BB product, with which the 560L would have been competing in the but-for market. In concluding that the 560L was not an acceptable non-infringing alternative, “the district court stated that ‘ATC’s own witness testified that the 560 capacitors are not as good as the 550 capacitors.”
The court then explains:
“The correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the ... Read More