Texas Advanced Optoelectronic Solutions, Inc. v. Renasas Electronics America, Inc. F/K/A Intersil Corporation – Part 2 (CAFC Opinion May 1, 2018)

A few months ago, we provided background on this matter and discussed the available oral argument.   A summary of Intersil’s appeal is provided by the Federal Circuit:

The Federal Circuit issued an opinion reversing the District Court regarding disgorgement of profits.  The Federal Circuit found that the monetary award for trade secret damages should be vacated, in part, because only one of three asserted trade secrets was found to have been misappropriated; whereas the plaintiff expert had advanced a single damages value concerning all three of those trade secrets… and the resulting monetary award had not been allocated on a trade-secret-by-trade-secret basis.

There were other issues relevant from this opinion.  The Federal Circuit directs damages experts to embrace a finite period of time when assessing disgorgement of profits in trade secrets matters, especially as it concerns analysis involving a supposed “head start.”

The court also decided that TAOS was not entitled to a jury decision on disgorgement, and that the District Court should make that determination.

The Federal Circuit rejected “double recovery” of damages/monetary remedy awards on sales of the same accused product.  In this instance, it was unacceptable that a reasonable royalty should be paid on the same accused sales for which disgorgement was afforded.

Finally, we were hoping for guidance on the issue of gross versus net profits, but alas… the Federal Circuit only briefly notes in passing:

Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc. (Opinion April 17, 2018)

In yet another case, a judge has ruled that an appropriate prejudgment interest rate is the California statutory rate of 7%.

The case in question involved a design patent and an apparatus patent.  A jury found the apparatus patent invalid; however, it found the design patent infringed, and those claims not invalid.  As a result, the jury awarded the infringer’s profits to the plaintiff, Columbia Sportswear.

After trial and after judgment was rendered, Columbia Sportswear requested the California 7% statutory rate as prejudgment interest, as well as supplemental lost profits.  Judge Marco Hernandez from the Southern District of California awarded both, despite defendant Seirus’ arguments that awarding seven percent interest on top of profits would deprive it of more than it originally earned. The justification for the amount was as follows:

“Prejudgment interest removes the incentive to live off of the profits until caught.” This elegant formulation enjoys enormous economic and judicial leverage.

There is, however, a flip-side….

Court’s recourse to a 7% statutory rate set decades ago divorces compensation from the facts of a case, relies on a rate detached from current financial and economic reality, and we would argue is inappropriate for most awards.

Whirlpool v. TST Water (Judgment March 29, 2018)

Eastern District of Texas Judge Gilstrap denied TST’s motion for Judgment as a Matter of Law in this patent infringement case.  The jury award of $7.6 million stands.

Mr. Bruce McFarlene, Whirpool’s damages expert, offered the opinion that damages for infringement of the ‘894 patent should be $8.7 million.  TST sought to exclude Mr. McFarlene for violation of the entire market value rule; however, prior to the ruling, the parties had stipulated that a filter at issue was the smallest saleable unit.

When TST moved for judgment as a matter of law based upon for Mr. McFarlene’s failure to apportion, Judge Gilstrap reminded the parties of their stipulation and concluded that Mr. McFarlene “did engage in the proper apportionment required by the law, beginning with an appropriate rate.”

Rembrandt Wireless Technologies, LP v. Samsung Electronics Co. Ltd., et al. (Final Judgment March 28, 2018)

The long-running dispute between Rembrandt and Samsung may be over.  Eastern District of Texas Judge Gilstrap issued final judgment in which he determined that Samsung owes Rembrandt $11,111,920 as damages for Samsung’s infringement of the ‘580 and ‘228 patents. This judgment came after years of litigation, after a February 2015 jury verdict, after a ruling on a JMOL, and after an appeal to the Federal Circuit.

In February 2015, a jury determined that Samsung infringed both patents and that the patent claims were not invalid.  The jury awarded Rembrandt a lump sum of $15.7 million.  Judge Gilstrap determined that this award fell within the range offered by Mr. Roy Weinstein (Rembrandt’s damages expert), who had suggested a damages range of $14.5 million to $31.9 million.  Judge Gilstrap denied the JMOL on damages, and Samsung appealed to the Federal Circuit.

The Federal Circuit agreed with Judge Gilstrap’s opinions regarding infringement and damages, but it questioned his decision to allow Rembrandt to recover pre-notice damages.  In its defensive case, it appears Samsung argued that a licensee of Rembrandt’s practiced claim 40 of the ‘580 patent, but that Rembrandt did not require said-licensee to mark those products.  In response, Rembrandt disclaimed said-claim 40 which Samsung argued said-licensee practiced.  Rembrandt then successfully argued to the district court that, because it disclaimed said-claim 40 of the ‘580 patent, there was no marking requirement for the Rembrandt licensee, who did not practice any other claim of the ‘580 patent.  On appeal, the Federal Circuit questioned the district court’s allowance of pre-notice damages based upon disclaiming a claim, and remanded the case for adjustment of the damages award.

The Federal Circuit was interested in discussing whether the marking statute should be on a patent-by-patent basis – or instead, a claim-by-claim basis.  But it did not offer any definitive determination and instead left decision on the matter to the district court.  Ultimately, Rembrandt dropped its pre-notice damages award request, and accordingly, Judge Gilstrap left the patent-by-patent/claim-by-claim marking issue for another day.

The only remaining issue was how best to interpret the jury verdict in order to remove pre-notice damages.  Both parties volunteered competing guidance to Judge Gilstrap concerning how best to remove the pre-notice damages:

Ultimately, Judge Gilstrap decided Rembrandt’s method made more sense and that damages should be $11,111,920, to reflect the jury award minus the pre-notice time period.

Which all leads us to proclaim that the strategy of seeking to reclaim pre-notice damages by disclaiming a claimed claim is one meritorious of some acclaim….

Precision Fabrics Group, Inc. v. Tietex International, Ltd. (Jury Verdict March 8, 2018)

Precision Fabrics (“PFG”) lost its patent infringement case against competitor Tietex. The jury found that Tietex did not infringe the two patents in suit.  South Carolina District Judge Schroeder rendered judgment in favor of Defendant Tietex just one day after the jury verdict.  The week before trial, Judge Schroeder had disallowed untimely-provided non-infringing substitute considerations.  Months before, the judge granted in part and denied in part multiple motions in limine regarding lost profits.  His opinions are interesting in that they are well referenced and very specific.

In an order issued in late February, Judge Schroeder granted in part PFG’s Motion to Strike Tietex’s Supplemental Interrogatory Response.  Citing to Ziilabs v. Samsung, the judge denied the motion for products “whose sales are referenced in Dr. Alford’s expert report or deposition testimony, but otherwise granted as to other non-infringing alternatives sold by competitors apart from PFG and Tietex.”

In the earlier order on motions to strike, Tietex sought to preclude Joel Wacek’s opinions on lost profits.  Mr. Wacek opined that the market for the infringing mattress fabric was divided into high-end and low-end products; and that PFG would have captured 100% of the high-end market, 90% of the low-end market, and 100% of sales to A. Lava & Sons (a purchaser of low-end product).  The judge found all of these percentages grounded in a relatively sparse, but sufficiently acceptable measure of evidence, except for those sales to A. Lava & Sons.  Citing to BIC Leisure Products, the court granted the motion to strike use of 100% lost profits for A. Lava & Sons based upon the existence and availability of non-infringing substitutes.

Finally, PFG sought to exclude the opinions of Dr. Charles Alford on lost profits.  Dr. Alford opined that the percentages relied upon by Mr. Wacek were wrong. The judge decided to reserve judgment on this motion until after he heard Dr. Alford’s testimony.

The attached orders provide many interesting case citations.  Ultimately, Judge Schroeder determined that if there was some evidence (albeit, weak), that made the damages expert’s opinion admissible.

 

 

 

Greatbatch Ltd. v. AVX Corp. and AVX Filters Corp. Court Grants Motion to Set Aside Verdict (March 30, 2018)

Delaware District Court Judge Stark granted AVX’s motion to set aside the damages verdict.  The reason for the set aside was solely because the jury verdict form did not separate damages for each patent accused, and thus constituted a damages award for all patents and all products.

Judge Stark himself observes this case possesses “a convoluted history.”  It seems that Judge Stark sanctioned AVX because of its late production of core technical documents relevant to the infringement issues on one of the four patents in suit (i.e., the ‘715 patent).  The sanctions levied involved the judge granting a motion for summary judgment that all of AVX’s Ingenio products infringed the ‘715 patent. When the case proceeded to trial concerning the three other patents in suit, the jury returned a damages award in the form of a lump sum of $37.5 million for infringement of all four patents by all of AVX’s accused products.  After the jury trial, the court granted a motion for reconsideration of the sanctions.  A new trial for the ‘715 patent was held and the result was that the jury found no infringement concerning some of AVX’s Ingenio products, while finding infringement with regard to a smaller subset of Ingenio products.

The reason for the jury award set-aside is attributed to the jury verdict form, which failed to request damages figures on a patent-specific and product-specific basis.  Citing two Federal Circuit cases (Verizon Services Corporation v. Vonage Holdings Corp. and DDR Holdings, LLC v. Hotels.com, L.P.), the judge’s opinion seems to provide the only solution – a new trial on damages.

Important to note, AVX initially requested that the verdict form offer a damages line on a patent-by-patent basis; however, Greatbatch prevailed with its insistence for the general verdict form ultimately provided to the jury.  Note in this instance, however, that because not all accused Ingenio products were found to infringe the ‘715 patent, a patent-by-patent jury verdict form might not have obviated the need for a new trial on damages under these specific circumstances.

GlaxoSmithKline LLC and SmithKline Beecham Ltd. v. Teva Pharmaceuticals USA, Inc. (JMOL granted March 28, 2018)

The jury verdict states that Teva infringed the ‘000 patent and owes GlaxoSmithKline (“GSK”) $234,110,000 in lost profits and $1,400,000 in reasonable royalty damages.  District Court Judge Stark granted-in-part Teva’s JMOL motion and determined that Teva did not induce infringement.  Consequently, the jury verdict was vacated.

While largely an issue of liability, this opinion collides with issues of damages. The damages analysis was focused on lost profits, and the lost profits construct requires that a damages expert conceive a but-for world where infringement does not occur.  Conceptualization of that but-for world proved critical for Judge Stark.

A little history:  It appears that GSK determined that a drug (carvedilol) which was already used to treat high blood pressure and left ventricular dysfunction (“LVD”) after a heart attack, was also effective for treatment of congestive heart failure (“CHF”).  Glaxo applied for, and received a patent (namely, the ‘000 patent at issue) for the method of using carvedilol for CHF treatment.

Meanwhile, Teva and other generic manufacturers had been marketing and selling generic carvedilol for treatment of high blood pressure and LVD; but not explicitly for treatment of CHF.  Four years after Teva entered the generic carvedilol market, the FDA instructed Teva to add CHF treatment indication to its labels.  (The ‘000 patent had been delisted from the Orange Book.)

The question facing GSK’s damages expert, Dr. Robert Maness, and defendants’ experts, Dr. DeForest McDuff and Dr. Sumanth Addanki, was whether in the but-for world where GSK is entitled to lost profits, are generic carvedilol products (which are not indicated for practicing the patented method) on the market?  Given the generic’s prior & ongoing availability for non-accused indications (i.e., high blood pressure and LVD), the answer is not self-evident. The experts answered the question differently and forced Judge Stark to decide.

Judge Stark’s pre-trial determination to exclude defendants’ experts, portions of which are reproduced below, seems to recognize when damages analysis diverges from liability, while also seeming to foreshadow his ruling on the post-trial JMOL motions.  Ultimately, Judge Stark granted the motions to strike defendant experts Dr. McDuff and Dr. Addanki based upon their misapplication of the law when formulating a but-for world of lost profit damages.  Their failure in this instance was to assume the existence of non-party generics, available for non-accused indications, and therefore available to satisfy the but-for demand.  (Dr. Maness’ reliance upon a survey expert who determined what portion of the Teva users likely used the product in an infringing manner was allowed.)

With respect to vacating the jury award, Judge Stark pointed to the fact that GSK failed to establish a causal nexus between the purchase of accused Teva product and actual infringement of the patented method.  Documents did not support Teva’s inducement; so there was no proof that Teva induced infringement.  That is, product was sold, but toward what use, no one could provide the necessary evidence.

A physician, who provided testimony, claimed that when he prescribed the Teva generic for CHF, he did not look at the label first to determine whether the generic product was indicated for the infringing use.  Absent that link between Teva and infringement, Judge Stark concluded the jury award could not stand.

Finally, in his footnote 16, Judge Stark offers insight into broader policy implications of this matter which is well worth the read.  He notes, however, that those implications “have not impacted the Court’s ruling on the pending motions.”

Nox Medical EHF v. Natus Neurology Inc. (Order on Motion to Strike Issued March 26, 2018)

Delaware District Court Judge Andrews issued an order and an opinion regarding patent infringement damages analyses by Richard Bero and Scott W. Cragun.  Judge Andrews granted in part the motion to exclude Mr. Cragun, while denying the motion to exclude Mr. Bero.

The alleged infringing product is a sleep belt that was used together with a non-accused sleep monitor.  Plaintiff’s expert Mr. Cragun was excluded from issuing some, but not all of his lost profit opinions regarding accused belt sales.  Mr. Cragun advanced the view that, but for the alleged infringement, 75 percent of accused belts would have been sold by plaintiff Nox.  The basis for his 75 percent figure was grounded in three different categories of belt consumers: 1) those Nox monitor consumers who purchased the accused belt, 2) those Natus monitor consumers who, but-for infringement, would have purchased both Nox’s monitor and Nox’s belt, and 3) those consumers of defendant’s monitor or other third-party monitors, for which consumers would purchase an accused belt.

Judge Andrews allowed Mr. Cragun’s lost profit calculations on #1 (i.e., the installed base of Nox monitor users), but found that his categories #2 and #3 above were speculative.

With regard to category #2, Judge Andrews notes that Mr. Cragun failed to “identify a single customer who would have but did not purchase Plaintiff’s device due to Defendant’s alleged infringement.”  With regard to category #3, Judge Andrews explains that Nox only had adapters which connected its patented belt to its own monitor base.  To substantiate his third category, Mr. Cragun would have had to prove that “an adapter would have been available in the United States to use Plaintiff’s patented belt with Defendant’s or third-parties’ sleep-monitoring devices.”  Mr. Cragun failed to prove any such adapter was available.

Judge Andrews did find Mr. Bero’s reasonable royalty calculation to be based on an acceptable methodology and chose not to exclude those opinions, despite what appears to be a strong motion by the plaintiffs.  Mr. Bero appears to have used a novel method as the starting point for his royalty rate considerations: namely, he multiplied the estimate of plaintiff’s lost sales (i.e., 15%) times defendant’s profit margin on accused products to establish his starting point:

We will await to see whether the jury is convinced.

Limelight Networks, Inc. v. XO Communications, LLC and Akamai Technologies Inc. (Opinion March 23, 2018) Part 2

Earlier this year, we discussed Judge Gibney’s rulings on motions to strike the testimony of both Dr. Prowse (i.e., damages expert for plaintiff Limelight) & Mr. Meyer (i.e., damages expert for the defendants).  On March 23, Judge Gibney granted another motion to strike new damages analysis provided by plaintiff Limelight.

In this new opinion, Judge Gibney recounts the basis for his earlier exclusion of Dr. Prowse’s damages:

With the most recent iteration, it appears Limelight – without benefit of any expert opinion – sought to apply Dr. Prowse’s royalty rate to a different royalty base: namely, defendant Akamai’s “network traffic” revenue.  Doing so, presumably, sought to avoid running afoul of Judge Gibney’s guidance to apportion the sales base, and thereby limit damages so as only to include the incremental value of the patent.

With Limelight’s latest effort, Judge Gibney appears to have had enough:

We will continue to follow this case, especially with an eye on the question of how damages might be determined if Limelight wins on liability.

Ericsson Inc., et al. v. TCL Communication Technology Holdings, LTD., et al. (Jury Verdict Vacated on March 8, 2018) Part 2

In an earlier post, we discussed the possible reasons Judge Payne vacated a jury damages verdict of $75 million for TCL’s infringement of Ericsson’s patents.  The redacted version of Judge Payne’s order now provides explanations for why he believes the jury’s award should not stand.

First, Ericsson’s damages expert, Mr. Robert Mills, relied upon a survey expert in a manner that, according to Judge Payne, was “not based on sufficient facts or data, not the product of reliable principles, and not reliably based on the facts of the case.” The survey asked consumers whether they would have purchased the accused products, had those products not possessed the commercial embodiment of the patented technology.  Apparently, 28% of those survey respondents said they would not have made the purchase without the accused features. Mr. Mills linked that 28% survey response to a damages theory relating to 28% of TCL’s profits:

Judge Payne explains that Mr. Mills’ use of the otherwise-reliable survey: 1) fails properly to apportion the numerous “essential” features of the phone, and 2) fails to “account for how his theory would result in the erosion of all of TCL’s profit. Realistically, there are many features on a phone that would likely yield survey results similar to those obtained for the ’510 patent, e.g., ability to make a call, text messaging, Wi-Fi connection…. To conclude that any one of these features—simply because it is considered essential to a consumer—could account for as much as a quarter of TCL’s total profit is unreliable and does not consider the facts of the case, particularly the nature of smartphones and the number of patents that cover smartphone features.”

Second, Judge Payne found that Mr. Mills’ use of forecast-products, neither named nor accused in the case, together with a lump sum resulted in the inclusion of unaccused products in his royalty calculation.

Finally, more broadly and of expressed interest in our earlier post, Judge Payne notes timing issues involving a contemplated lump-sum payment, and implied consequences for discounting/interest, might need to be left for a jury to decide: