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 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 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
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.”
The expert mapped all of defendant’s products into the corresponding plaintiff products, with his understanding that the two were the “dominant suppliers” in the market. The court finds that the expert “equates his nomenclature of ‘dominant suppliers’ with a ‘two-supplier’ market without independent support…” and that he “conducts no independent analysis in this regard and does not quantify what ‘dominant suppliers’ means. The court rules that the expert’s approach “does not embody the use of sound economic principles because it does not properly account for the other competitors in the ‘but for’ market.” Further, the expert’s mapping methodology “is not the answer” because it still “does not overcome the ... Read More