Bayer Healthcare LLC, v. Baxalta Inc., et al. (Order January 25, 2019)

It remains unclear what damages theories might remain after Judge Andrews provided his order on Daubert motions. Defendant’s expert was excluded in part and Plaintiff’s expert was excluded in part. The resulting questions: “What remains – what might damages testimony at trial look like?”

The order explains that Bayer sued Baxalta for patent infringement concerning the drug Adynovate. Dr. Rausser, Baxalta’s expert, claimed that the damages were small based upon the perspective that the patent possessed little to no value. Plaintiff’s counsel argued that Dr. Rausser failed to assume infringement, used non-comparable licenses and derived a lump sum from licenses that were, in contrast, running royalty licenses. Judge Andrews struck Dr. Rausser’s opinion based upon Plaintiff’s final complaint, noting:

Dr. Addanki, Bayer’s expert, argued that the patents are valuable and that damages would be derived from a 50/50 split of profits. Evoking the Nash Bargaining Solution (which damages experts should understand now to create Daubert exposure), Dr. Addanki claims that this outcome would be “reasonable as a matter of economics.” Judge Andrews disagreed and struck the 50/50 split analysis and “any subsequent opinions that rely on that mid-point rate.”

It would seem little remained of damages for this matter given the exclusions. We shall return later to see whether and how Baxter might advance opinions regarding damages at trial.

Princeton Digital Image Corp. v. Ubisoft Entertainment SA, et al. (Opinion December 11, 2018)

We have previously written about a damages opinion having been excluded for relying on a jury verdict from an unrelated matter. Another recent effort to use a jury verdict has also been excluded in this opinion from Judge Burke in the District of Delaware.

In the opinion, Judge Burke observes that some may reasonably conclude that courts appear to have established jury-verdict reliance as per se unreliable:

In contrast to this view, however, Judge Burke suggests no such blanket rule should be presupposed to exist:

Judge Burke goes on to describe in a footnote a scenario where a jury verdict might prove relevant for damages:

It appears clear to us that the lesson remains to exercise extreme caution when entertaining use of a jury verdict in damages analysis. While the unique facts of a case may support such reliance, those occasions will likely prove exceedingly rare.

Enplas Display Device Corp., et al. v. Seoul Semiconductor (Decided, November 19, 2018)

Although not considered “precedential,” the opinion by the Federal Circuit in this matter merits closer review. Often, damages experts are heard to discuss “freedom to operate” as a consideration at the hypothetical negotiation. The idea of freedom to operate is that one takes a license and then enjoys the freedom to practice any claim in the patent in any existing product and any future product.

The reason this becomes a relevant consideration is because any reasonable licensee would prefer to conduct one negotiation to allow the two companies to walk away and pursue business in any manner the licensee sees fit. This was the analytic approach Defendant’s expert took to damages in this matter, offering an opinion as to the “premium” that might be paid to afford freedom to operate.

The CAFC disagreed. The statutory language specifically states that a royalty rate should be “adequate to compensate for the infringement.” The language is not “adequate to compensate for any use of the patented technology.”

Arguments seeking to link a lump-sum construct to a broader freedom to operate were found unpersuasive, because the estimate relied on non-accused products.

This Enplas opinion is a gentle reminder that the hypothetical negotiation is not a real negotiation, but rather a fake one: one that didn’t happen and one that would never have happened. The CAFC reminded the district court that a damages expert does not enjoy freedom to operate in a manner that includes damages greater than the amount adequate to compensate for infringement.

Acceleration Bay LLC v. Activision Blizzard, Inc. (Opinion on Motion to Exclude – August 29, 2018)

Delaware District Court Judge Andrews ruled on a very creative damages analysis. And when we say “creative” we mean really, really outlandishly creative.

Plaintiff’s expert, Dr. Christine Meyer, determined the hypothetical negotiation date for her patent infringement damages analysis and then recalculated a jury verdict award from a separate and unrelated patent infringement matter (namely, Uniloc USA, Inc. v. EA) to use as her anchoring point for her Georgia Pacific analysis.

Yes, you read that correctly, and we represented it faithfully:

It appears from Judge Andrew’s opinion that Dr. Meyer attempted to introduce an unrelated jury verdict award as a “comparable license” analog by relying upon a technical expert’s analysis of both the unrelated verdict-patents and their relative value as compared to the patents in suit. Such malarkey was unacceptable and the motion to exclude on this issue was granted.

Apart from this unrelated jury verdict “analytic” sideshow, Judge Andrews offered insight into lump sum and running royalty rates.

Dr. Meyer’s lump sum opinion was not excluded for looking into the future and thereby forecasting hypothetical future sales. But Judge Andrews suggests that such analysis would have been excluded if she had ultimately settled upon a running royalty rate:

Judge Andrews thereby clarifies a subtle, but important (and now specifically-articulated) rule for lump-sum opinions as necessarily distinct from running royalty opinions.

EcoServices, LLC v. Certified Aviation Services, LLC (Order on Motions in Limine, June 19, 2018)

In this matter, Defendant sought to exclude evidence upon which Plaintiff’s damages expert relied for his reasonable royalty analysis. Specifically, Defendant argued that lost profits should not be considered when conducting a reasonable royalty analysis.

The court, however, disagreed and offered a declarative view.

We have seen this Defendant’s argument floated numerous times over the years, and judges reliably explain that consideration of lost profits is rightfully relevant for the hypothetical negotiation construct.

It is relevant to Georgia Pacific Factor #5 (i.e., whether the licensor and licensee are competitors).

It is relevant to Georgia Pacific Factor #13 (i.e., the portion of the realizable profit that should be credited to the invention).

Last year, the Court of Appeals for the Federal Circuit ruled similarly in Asetek v. CMI:

Some subset of attorneys will likely continue to pursue the “No lost profits consideration!” line of attack. We expect them to continue to encounter a judicial wall of adverse rulings that make pointless the time & effort.

Power Integrations, Inc. v. Fairchild Semiconductor International, et al. (Federal Circuit Opinion, July 3, 2018)

This recent opinion is a lesson in, “If at first you don’t succeed, try, try again,” and for defendant Fairchild, the third time proved the charm.

You see, when plaintiff’s damages expert, Dr. Putnam, first offered his opinion that the parties at the hypothetical negotiation would anticipate “lost sales, reduction in price due to competition, and lost licensing fees,” A2C doubted Judge Chesney would approve such methodology. When she did (on two occasions), we figured that the Federal Circuit would finally disapprove of the reduction-in-price analysis.

Alas, the Federal Circuit remanded this matter for a new damages trial… but not on the reduction-in-price analysis issue of interest to us. Rather, the remand was based on misapplication of the entire market value rule.

This litigation began years ago. At the first trial, the jury found that all but one patent was infringed and awarded Power Integrations $105 million. Less than a week after Judge Chesney’s denial of the JMOL on that verdict, the Federal Circuit issued its opinion in VirnetX. Accordingly, Fairchild requested – and was granted – a new damages trial based on violation of the entire market value rule. That ensuing trial, as the Federal Circuit observes in this recent opinion, resulted in a verdict of $139.8 million “based on damages testimony that relied solely on the entire market value rule.” An additional question on the verdict form asked whether the patented feature created the basis for consumer demand, to which the jury marked, “Yes.” After that trial and subsequent denial on JMOL, Fairchild appealed to the Federal Circuit which ruled in favor of Fairchild and remanded for further proceedings.

While much of this Federal Circuit opinion constitutes a summary of past entire market value rule matters, the court did provide the following valuable and pointed guidance for attorneys & damages experts alike:

With regard to the case at hand, Fairchild reaps the reward of determination:

Apple Inc. v. Samsung Electronics Co. Ltd. et al. (Jury Verdict May 24, 2018)

Yesterday, a jury awarded Apple $533 million for the infringement of its design patents. In doing so, the jury appears to afford design patents more value than patents supporting the underlying technology in a smart phone. How could this determination have happened?

We think it useful to provide background to explain how this jury verdict came to be.

First, consider that this case revolves around the definition of the term “article of manufacture.” The Supreme Court explained, “Section 289 of the Patent Act makes it unlawful to manufacture or sell an ‘article of manufacture’ to which a patented design or a colorable imitation thereof has been applied and makes an infringer liable to the patent holder ‘to the extent of his total profit.’ 35 U.S.C. §289.”

Way back in April 2011, Apple sued Samsung for infringement of (among other patents and a trade dress claim) three design patents which roughly cover: 1) a black, rectangular front screen face, 2) a front face with rounded corners and a bezel, and 3) a grid of colorful icons displayed on the screen face. Judge Koh issued opinions on Daubert motions and the case went to a jury trial.

Samsung’s products were found to infringe multiple patents and found to violate trade dress allegations: as a result, a jury verdict awarded Apple close to $1 billion. Judge Koh issued judgment for that jury verdict.

Samsung appealed to the Federal Circuit multiple times, and what remained for this most recent jury was the question of the monetary remedy associated with design patent infringement (N.b., there was an additional patent at issue which we are not discussing here). During the appeals process, the Federal Circuit affirmed that the article of manufacture subject to disgorgement in this design patent matter should be the entire phone, because no portion was sold separately that might constitute a smaller, distinct article of manufacture. Samsung appealed to the Supreme Court, which provided little guidance other than to observe that the Federal Circuit’s definition of the article of manufacture was too narrow. Specifically, the Court found, “Because the term ‘article of manufacture’ is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not, the Federal Circuit’s narrower reading cannot be squared with §289’s text.”

The Federal Circuit then issued an opinion and remanded the case back to Judge Koh for further proceedings; and specifically to articulate a test to define an article of manufacture. In her order for a new trial on damages, Judge Koh provided the following definition of an “article of manufacture”:

After providing the new definition, expert reports were submitted, subject to new rounds of Daubert motions, resulting in new Daubert rulings. Judge Koh excluded Samsung’s damages expert, Mr. Wagner, for relying on surveys that did not properly tie to the facts of the case or to the patents’ footprint in the marketplace. Ms. Davis, Apple’s damages expert, was allowed to testify, but neither expert could offer opinions regarding the actual “article of manufacture,” which was left to other experts.

The jury instructions arguably led jurors to an inevitable verdict. The instructions specifically guided those jurors through the requisite analysis to arrive at disgorgement of total profits:

No doubt, Samsung will appeal.

Again.

Chrimar Holding Company, LLC et al. v. ALE USA Inc. et al. (Federal Circuit – Decided May 8, 2018)

Plaintiff damages expert Robert Mills had his analysis excluded in part by Judge Love of the Eastern District of Texas. The part that was not excluded formed Mr. Mills’ testimony in trial which resulted in a damages award of $324,558 for ALE’s patent infringement.

ALE challenged the damages award at the Federal Circuit stating that, “Mr. Mills, in calculating a reasonable royalty, (1) relied on licenses not comparable to the hypothetical negotiation for the present case; (2) did not adequately separate the value of patented features from the value of standardization and the value of nonpatented features; and (3) prejudicially referred to ALE’s total net revenue and profit.” The Federal Circuit sided with Chrimar and found ALE’s arguments wanting.

With regard to the first issue, the court noted that there was not sufficient basis to exclude Mr. Mills in the Daubert motion nor in the JMOL phase of the matter, and that his license analysis satisfied the standard of “reasonable adjustments for differences in contexts.”

Regarding the second issue, the court said that Mr. Mills relied upon a standards expert, and a damages expert has right to do so for their own opinion.

Finally, for the third issue, the court explained that it was ALE itself which had first “opened the door” to introduction of defendant’s net revenue.

As in Exmark v. Briggs, the court appears perhaps to afford EMV somewhat greater latitude as part of a comparable license approach, especially where licenses make reference to a unit larger than what might otherwise be considered “the smallest saleable unit” under other analytic approaches to damages.

Johns Hopkins University v. Alcon Laboratories, Inc. et al. (Order Issued April 25, 2018)

Judge Lawrence Stengel of the District of Delaware, Sitting by Designation, approved and adopted the recommendations of Magistrate Judge Sherry Fallon. Among other recommendations, Judge Fallon recommended denying the motion to exclude plaintiff’s damages expert.

The case involves a method patent for performing eye surgery. Alcon moved to exclude Brian Napper, plaintiff’s expert, based on alleged violation of the entire market value rule for his use of product and ancillary sales in his royalty base. Mr. Napper relied upon a comparable patent licensing analysis to support his royalty base which included more than the accused cannula at issue.

Citing to Commonwealth Scientific and Industrial Research Organization (“CSIRO”) v. Cisco, Judge Fallon noted that the royalty base in the comparable license and the one contemplated by Mr. Napper were the same.

Judge Fallon also noted that Mr. Napper provided some accounting for non-infringing uses. Accordingly, she recommended denying the Daubert motion related to these issues.

An additional issue that arose in the motions for summary judgment was whether the reasonable royalty could be tied to defendant’s sales. Alcon explained that Alcon would not infringe the patented method because it only sells products; it does not use the products in an infringing manner. Thus, Alcon reasoned, its sales are not the proper royalty base. Judge Fallon denied Alcon’s motion because Johns Hopkins showed that the product was purchased for use in an infringing way and because both damages experts (for plaintiff and for defendant) used Alcon sales as the basis for their royalty base.

Ericsson Inc., et al. v. TCL Communication Technology Holdings, LTD., et al. – Part 3 (Jury Verdict Reinstated May 10, 2018)

Yesterday, this blog witnessed a sudden surge in search-engine referrals for Ericsson v. TCL. Our earlier posts on this matter are located here and here. A summary of the damages issues is newly-provided by the court:

In an unexpected turn of events, Judge Payne has reconsidered his decision to vacate the jury verdict and has reinstated the previous award.

The crux of Judge Payne’s reversal hinges on his reconsideration of whether “the Daubert filter” was called for in this matter. Previously, he had concluded that it was; in his reversal, however, he decides instead that trial afforded sufficient opportunity to defendant to address issues of evidentiary weight.

With regard to the prior conclusion that future products – neither existing nor practicing – were improperly “accused” and thereby improperly made subject to damages, the indeterminate nature of a jury’s decision making now affords the plaintiff its award:

Judge Payne not only affirmed the jury’s verdict of $75 million, but he made the award subject to a $25 million enhancement.

His lengthy discussion of “willfullness” provides useful background to the topic and includes the pithy observation that, “One juror’s ‘malicious’ conduct might be another’s benign competitive business activity.” Finally, Judge Payne concludes:

We admit that we did not foresee Judge Payne’s reconsideration; we suspect TCL is even more surprised. Yesterday’s developments make a “Part 4” seemingly inevitable.