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ARTICLES
District Court Reviews Lucent’s New (2011) Damages Opinions
On remand after the Federal Circuit’s 2009 decision (Lucent v. Gateway et al.), the district court reconsiders the appropriate royalty base then reviews four new damages approaches by Raymond Sims, Lucent’s damagesexpert, and rejects one of them on Daubert grounds. First, Lucent whittled down the total Outlook revenues from $7.4 billion to $4 billion to only account for where the Day patent was practiced. The Court finds this appropriate, although noting that damages do not have to be limited to actual use (only “correlated, in some respect”). Yet the Court rejects this $4 billion as a royalty base because Lucent fails to show, under the entire market value rule, that the Day patent was the basis of customer demand (due to the numerous non-infringing features) and that, under Uniloc, the entire revenue of Outlook could have a potentially prejudicial effect (although presenting this apportionment on a unit-price basis is acceptable). Instead, “Lucent must perform an additional apportionment” to meet the entire market value rule. On the four Sims approaches, the Court first rejects his approach using the price of add-in programs as a proxy for value since Lucent failed to show any actual sales of those add-ins. The Court then accepts a ... Read MoreVA Court May Have a Slightly Different Take on the Entire Market Value Rule: Activevideo v. Verizon
This Virginia court ruled that the “patentee may base a reasonable royalty rate on the entire market value of an accused product where the evidence presented demonstrates that, in a hypothetical negotiation, it would be appropriate to do so.” This seems to be a somewhat different interpretation of Lucent and Uniloc than some recent rulings (such as Mirror Worlds v. Apple) that put little emphasis on real-world (or hypothetical) licensing considerations. Here, Verizon sought to exclude plaintiff’s expert, Michael Wagner, for failing to abide by the entire market value guidelines by using the entire product as a royalty base. As we know, the Federal Circuit in Lucent v. Gateway stated that “the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range.” The Federal Circuit in Uniloc then seemed to contradict that statement by ruling that “Supreme Court and this court’s precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.” Yet this VA court concludes that there was no contradiction there – Uniloc’s ... Read MoreBackgrounder: Lucent Technologies v. Gateway et al.
In this patent infringement case, Lucent sought reasonable royalties of $562 million for Microsoft’s use of a patent covering a date-picker feature of Outlook, based on an 8% royalty applied to Outlook sales. Microsoft countered that $6.5 million would be a reasonable royalty, and the jury awarded $358 millionbut did not identify a royalty rate. On appeal, the Federal Circuit overturned the damages finding, stating that “for the entire market value rule to apply, the patentee must prove that the patent-related feature is the ‘basis for customer demand,’ (Rite-Hite)” and that Lucent failed to demonstrate that the Day patent was “the basis—or even a substantial basis—of the consumer demand for Outlook.” The Court also makes an interesting statement: “Simply put, the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range (as determined by the evidence).” This sounds reasonable on its face, and seems to agree with Cornell v. Hp, where the Court decided the smallest salable unit should be the royalty base. Yet the later Uniloc decision overturned this position. The Court also cites a number of factors that affect the lump ... Read MoreBackgrounder: Cornell University v. Hewlett Packard Company
This March 2009 decision by the Federal Circuit’s judge Rader (sitting by designation) was the first of the recent cases that applied the Entire Market Value rule to royalty bases, thereby setting up more stringent requirements for computing the royalty base in patent infringement damages calculations.Specifically, the court found that the EMVR must be met in order to use the entire unit as the royalty base. This requires “adequate proof of three conditions: (1) the infringing components must be the basis for customer demand for the entire machine including the parts beyond the claimed invention, (2) the individual infringing and non-infringing components must be sold together so that they constitute a functional unit or are parts of a complete machine or single assembly of parts, and (3) the individual infringing and non-infringing components must be analogous to a single functioning unit. It is not enough that the infringing and non-infringing parts are sold together for mere business advantage. Notably, these requirements are additive, not alternative ways to demonstrate eligibility for application of the entire market value rule.” The patented invention was a method for instruction issuance within a computer processor. The patent read on one component of the instruction reorder buffer ... Read More
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