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ARTICLES
TX Court: Ongoing Royalty? Fuhgeddaboudit, You Were Awarded a Lump Sum.
In this post-trial order, the judge denies plaintiff’s request for ongoing royalties because the $8 million awarded by the jury was intended to cover both past and future infringement. Defendant Apple’s expert had testified thatthe parties would have negotiated a lump sum “freedom-to-operate” license that was fully paid up for any future use. Further, the jury verdict form allowed the jury to choose a lump sum royalty to cover “all past and future sales of Apple products.” The court finds that defendants failed to raise any timely objections, and instead “hid behind the log, choosing to point out the wording of various instructions only after the verdict was returned.” A court ruling that a lump sum award precludes future royalties is of course nothing new, which makes one wonder what distinctions Personal Audio might have drawn for this case. From the judge’s decision, it’s not exactly clear. Case: Personal Audio, LLC v. Apple, Inc., et. al., 9-09-cv-00111 (ED TX, August 22, 2011, Order) (Clark).District Court: Lost Profits For a Could-Have-Been Supply Chain are Not Appropriate
In this California district court pretrial order, Judge Whyte excluded plaintiff Synthes lost profits claim. Here, the accused Spinal Kinetics products were primarily sold in Germany, and the judge clearly agrees that but for theinfringement, those sales would have gone to a Synthes product. The problem is that the sales would have been made by Synthes’ European distribution chain, which is not a party to the litigation. The court describes how, despite this situation, Synthes constructs a “fictional supply chain wherein [the relevant] ProDisc products destined for Europe could have been manufactured in the United States then artificially funneled through Synthes USA, LLC for no other reason than to make its lost profits claim.” As a result, Synthes USA may only recover reasonable royalty damages. Case: Synthes (USA) v. Spinal Kinetics Inc., 5-09-cv-01201 (ND CA, August 19, 2011, Order) (Whyte)ED Texas OK With Litigation-Related Licenses: DataTreasury v. Wells Fargo
In this long-running patent infringement case regarding check imaging technology, where a jury had found lump-sum royalty damages of $27 million, the court now considers post-verdict royalties.The court first awards supplemental damages at a rate of $0.002 per check (the implied rate from the jury verdict) for the time between trial and final judgment (the present date). Turning to post-judgment (future) royalties, the court first rules that defendant U.S. Bank failed to prove the availability of its proposed non-infringing alternative (using Wells Fargo, a licensee, as a correspondent bank to clear checks). Thus, Dr. Hausman’s opinion relying on the Nash solution was not useful. In reviewing the Georgia-Pacific factors, the court first finds (not unlike the Federal Circuit in ResQNet) that past litigation-related licenses are more useful than the non-litigation licenses that were produced. The court rejects (as did the jury) the opinion of plaintiff’s expert, Christopher Bokhart, that the non-litigation licenses with low-volume non-bank entities should dictate the ongoing royalty rate (here, $0.015 per check, several times higher than the jury award). The court places little weight on such non-litigation licenses where the party paid little or nothing, despite Mr. Bokhart’s conclusion “that actual payment does not affect his opinion and ... Read MoreNY District Court Further Clarifies Entire Market Value Rule: Inventio AG v. Otis Elevator Co.
Here, the district court precludes the proposed expert testimony of Dr. Russell Mangum, who intended to opine that the reasonable royalty base should consist of infringing Otis elevator installations because the patented featureis a “substantial basis for demand” for the elevator installations. The court concludes that such a royalty base runs afoul of Lucent v. Gateway and Uniloc, which allows a patentee to assess damages based on the entire market value of the accused product only where the patented feature “creates the basis for customer demand” or “substantially create[s] the value of the component parts” (see Rite-Hite, which cites to Marconi). The court finds that the patented “seamless entry” destination dispatching was indeed a desirable feature, and that lacking such feature would be a competitive disadvantage for Otis, however, it was not the basis for public demand for an Otis (or any other manufacturer’s) elevator system. Thus, Dr. Mangum used the incorrect standard (“a” basis instead of “the” basis). Instead, the court suggests Dr. Mangum should have taken into account other factors, including the vendor’s history, reliability, price or ability to get the job done in a timely fashion. Demonstrating a “sound economic connection” could be done with “econometric studies, customer surveys, ... Read More
VLF Consulting, Inc.
