In this district court case, the Court ruled on summary judgment that Plaintiff ATEN was not entitled to lost profits damages. Plaintiff's expert acknowledged that there were competitors in the relevant market other than plaintiff and defendant, however, he stated that he was unable to identify market share data that would allow for a market share lost profits approach. Lacking such market share data, he calculated that plaintiff would capture 100% of the infringing sales. The judge rejects this, concluding that “ATEN cannot meet the reasonable probability standard for establishing lost profits.”
This ruling is a bit interesting for a couple reasons. First, courts have long taken the approach that doubts shall be resolved against the infringer. The infringer and their expert could make rebuttal arguments with their own market share estimates to correct the numbers. Second, failing to account for some smaller competitors doesn’t mean that lost profits shouldn’t be available; it merely means that they were overestimated. So defendants could use deposition or their expert to show how to correct the calculus and leave it to the jury.
But the ruling does note that defendants suggested (probably exaggerating) that even up to 50% of the market might consist of other ... Read More
A district court in Florida doubled the reasonable royalty rate awarded by a jury to arrive at a post-judgment royalty rate. The Court had already concluded that the jury’s royalty rate (for past damages) of $103 would set the floor on the parties’ negotiations of an ongoing rate. The Court also notes that defendant BRP conceded it continues to make and sell infringing products.
While plaintiff Arctic Cat argued for an ongoing rate of $205 (double the jury’s rate), Defendant argued that the jury rate should not be increased. The Court notes, citing Paice II (Paice LLC v. Toyota Motor Corp., 504 F.3d), that “once a judgment of validity and infringement has been entered, however, the calculus is markedly different because different economic factors are involved.” The court here had already awarded treble damages ($308 per unit), and Defendant BRP must consider that it “continues to willfully infringe” the patent-in-suit. The court also seems unimpressed that Defendant’s corporate representatives recently referred to the verdict as “unfounded” and “baseless” on several occasions, and that “such actions in fact demonstrate a lack of proper respect for the Court, the jury, and the U.S. patent system.” The Court ultimately accepts Plaintiff’s proposed ongoing rate ... Read More
In this patent infringement case about mobile handset digital watermarking technology, a Texas court rejected the royalty rate methodology of plaintiff’s expert because the expert failed to explain, mathematically, how his survey data led to his 10% factor to apportion the value of the handset to the patented technology. Further, he failed to show how the patented features compared to the features that were the subject of the surveys.
Here, plaintiff’s expert Leon Hawk Travis did not argue that the patented technology was the basis of customer demand for the mobile handsets, instead opining that the smallest salable unit of the accused product was the handset itself, not the internal chipset. He then set out to apportion the total value of the handsets to account for the patented technology, and arrived at an apportionment factor of 10%. In doing so, he relied upon two consumer surveys that indicate that consumers value broader security features. The court accepts that these surveys may not provide an exact analog for the patented technology, but leaves that as a question of the weight the jury gives his testimony. However, the court excludes the expert’s opinions for two reasons. First, he did not separate out the patented ... Read More
In Aqua Shield v. Inter Pool, the Federal Circuit explains in a bit more detail why an infringer’s profitability really, for sure, we-mean-it-this-time, definitely does not represent the ceiling on a reasonable royalty. It made the same point in its past decisions in Douglas Dynamics v. Buyers (Fed. Cir. 2013), Golight v. WalMart (Fed. Cir. 2004) and even back in the 1989 decision in State v. Mor-Flo (“There is no rule that a royalty be no higher than the infringer’s net profit margin.”).
The court first notes that an infringer’s actual profits are only relevant “in an indirect and limited way—as some evidence bearing on a directly relevant inquiry into anticipated profits.”
The court explains that “an especially inefficient infringer—e.g., one operating with needlessly high costs, wasteful practices, or poor management—is not entitled to an especially low royalty rate simply because that is all it can afford to pay without forfeiting or unduly limiting its profit if it uses the patented technology rather than alternatives.”
The court finds that “the district court did not err in considering [defendant’s] profits. But it did err in treating the profits [defendant] actually earned during the period of infringement as a royalty cap.” By incorrectly focusing on ... Read More
The CAFC has ruled in the past that an infringer’s net profit margin is not the ceiling capping a reasonable royalty (Golight v. WalMart, 2004) and here it again finds a lower court erred by doing just that in Douglas Dynamics v. Buyers Products.
Following a jury verdict that found two patents valid and infringed, the district court in 2011 denied plaintiff Douglas Dynamics a permanent injunction and assigned an ongoing royalty to Buyers. In a post describing that opinion, we explained how the lower court applied the discredited 25% Rule to determine the ongoing royalty rate. The lower court also wrote: “the royalty should realistically leave some room for profit, either on the initial sale or on ancillary ones; otherwise it makes little sense to enter into an ongoing royalty at all. In light of all of these considerations, Douglas’s suggested royalty rates are simply too high.”
Here, the CAFC first finds that “the district court abused its discretion by applying the infamous 25% rule of thumb, which this court held in Uniloc was fundamentally flawed. [citing Uniloc] Second, the district court clearly erred by limiting the ongoing royalty rate based on [defendant’s] profit margins. This court has held that an ... Read More