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.

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.

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.

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

Judge Payne of the Eastern District of Texas vacated a jury verdict awarding Ericsson a lump sum of $75 million for infringement of its ‘510 patent by TCL Communication.  Noting “for reasons stated in a contemporaneous order” (which appears not to be on the PACER docket yet), Judge Payne decided that Plaintiff expert Robert Mills’ damages analysis – partially adopted by the jury – was not acceptable as a matter of law.

From defendant’s motion for judgment as a matter of law, it appears Mr. Mills relied upon sales forecasts which included products not accused of infringing.  Further, he relied upon a survey expert who did not tie analysis to the claimed invention.  He is also accused of violating the entire market value rule.  Finally, Mr. Mills is accused of failing properly to discount his damages analysis back to the date of the hypothetical negotiation, having instead discounted back to the date of notice (i.e., that date damages began to accrue).  All but the ultimate issue regarding discounting seem sound reasons for vacating a jury award.

This last alleged transgression is most interesting, however, because it is unclear which date might make most sense for discounting a damages value.  Mr. Mills appears to have derived a lump-sum damages award using a hypothetical negotiation construct.  The award appears to be based upon past and future (expected) infringement.  Mr. Mills then adjusted his lump sum back to the date damages should begin to accrue based upon notice.  The JMOL legal argument claims, in contrast, that he should have discounted the award back to the date of the hypothetical negotiation (which was years before the notice date):

The citation above to Wang Labs, Inc. v. Toshiba Corp. appears unrelated to the specific issue of discounting.  Similarly, LaserDynamics addresses an issue unrelated to discounting a royalty payment.  In both those cited cases, the expert failed to assess a reasonable royalty at the time of the hypothetical negotiation, and instead used the date damages began to accrue as the hypothetical negotiation date.  This appears to be different from what Mr. Mills did.  Defendants are not arguing that Mills used the wrong hypothetical negotiation date: rather, they are arguing that his proffered lump-sum damages should have been discounted to the date of the hypothetical negotiation.  Judge Payne’s order, however, does not elaborate on which of the defendant’s arguments he found persuasive; nor does it afford guidance with regard to the specific issue of proper discounting.

Exergen Corporation v. Kaz USA, Inc. (CAFC decided March 8, 2018)

The Court of Appeals for the Federal Circuit affirmed the damages analysis conducted by Exergen’s damages expert, Barry Sussman, but remanded the case back to the Massachusetts District court for further proceedings.

The two patents at issue involve a thermometer which takes body temperature from the forehead.  The jury verdict form shows that Exergen was awarded both reasonable royalty and lost profit damages. The questions before the CAFC were: 1) whether the royalty rate, amounting to 71% of defendant-Kaz’s projected per-unit net profit, was adequately supported, and 2) whether lost profits should have included infringing sales to CVS, a store which did not sell plaintiff-Exergen’s competing thermometer.

Citing to Asetek v. CMI USA, the CAFC determined that the damages could be split between reasonable royalties and lost profits.  In its affirmation, the court notes that the expert provided substantial evidence from analysis of the Georgia Pacific factors to support the reasonable royalty damages award.  The court also found that the lost profits analysis showed that in a but-for world where Kaz was not selling to CVS, Exergen would have been the only other branded product available for CVS to sell, and that such information was sufficient to support the lost profits award:

Interestingly, because the court reversed the jury’s finding on infringement of claims of one of the two patents-in-suit, the parties agreed that the damages would need to be recalculated: accordingly, the CAFC remanded the damages issue for further proceedings.  This is odd given plaintiff’s damages expert was allowed to offer one reasonable royalty damages figure for both patents, and did not proffer a per-patent rate.

Prisua Engineering Corp. v. Samsung Electronics Co., Ltd., et al. (Verdict February 26, 2018)

A jury in the Southern District of Florida found that Samsung infringed Prisua’s asserted patent claims and owed $4.3 million for that infringement.  Prior to that verdict, Judge Moore issued opinions and orders on cross Daubert motions, as well as multiple motions in limine.

Of interest is that neither of the Daubert motions – on Prisua’s expert or Samsung’s expert – were granted; however, a critical motion in limine was.

Prisua moved to exclude Samsung’s damages expert, Mr. Lettiere, based upon his use of information that: 1) post-dated the hypothetical negotiation, 2) pertained to litigation settlements, 3) relied upon software licensing agreements, and 4) used the market-based approach.  Citing Lucent and Sinclaire Refinery, Judge Moore denied #1. The judge declined to grant #2 based upon citations from Cornell, but reserved judgment. With regard to #3, Judge Moore observed, “The Court is persuaded that the ArcSoft Licensing Agreements—which directly relate to the allegedly infringing technology—are relevant and the probative value of Mr. Lettiere’s related testimony outweighs the risk of prejudice.” Finally, with regard to #4, the market-based approach was permitted to stand.

Samsung moved to exclude Mr. Leathers’ damages analysis because he relied upon Prisua’s pre-litigation offer to Samsung to license its patents.  While such basis for exclusion appears compelling, Judge Moore refused to exclude via Daubert the implied pre-litigation benchmark rate.

In a motion in limine, however, Samsung successfully argued exclusion of the licensing negotiations between Prisua and Samsung:

From Samsung’s JMOL on damages, it appears that Mr. Leathers advanced the $0.09 royalty rate, but represented that the rate was derived using the ArcSoft Licensing Agreement.  We will see whether Judge Moore finds this testimony (and the implied disregard of the pre-litigation offer) compelling, or whether instead he will grant the JMOL offered by Samsung.

Limelight Networks, Inc. v. XO Communications and Akamai Tech. (Opinion February 2, 2018)

On February 2, 2018, Judge Gibney re-struck the expert opinions of Stephen Prowse and Paul Meyer.

Dr. Prowse had applied the Rubenstein Bargaining Model to the hypothetical negotiation.  The judge decided that such a model was properly tied neither to the facts of the case, nor to the patents in suit.  Judge Gibney found Mr. Meyer’s reasonable royalty analysis based upon comparable licenses no more relevant than Dr. Prowse’s.  Judge Gibney found Mr. Meyer’s comparable license analysis failed to establish that the agreements compare economically to the hypothetical license at issue.

Dr. Prowse’s analysis was excluded because it was deemed to be similar to the Nash Bargaining Model and the 25% rule of thumb, both of which have been excluded in the past.  The concept of a Rubenstein Bargaining Model is that where two parties engage in a negotiation, the party with the most patience and least concern receives the benefit of that patience.  In his effort to apply the model, Dr. Prowse used each company’s weighted average cost of capital as a proxy for patience.

This game theoretic model is much like other game theory models which mathematically conclude that the party with the most bargaining power or least concern enjoys the better outcome.  The problem with such models is that they are irrelevant as a guide for damages experts seeking to determine the outcome of a hypothetical negotiation.  In a hypothetical negotiation, there is no assessment for patience: only consideration for the value of the patented technology to those using the technology.  Unlike the Rubenstein Model (and the Nash Model), the hypothetical negotiation is not iterative and the parties do not have endless time to complete the negotiation.  While Judge Gibney did not delve into such specifics, he notes that:

Mr. Meyer’s exclusion based upon the use of comparables is possibly the more interesting of the two damages exclusions.  Mr. Meyer had attempted to assess economic and technical comparability.  In the end, however, the judge found the expert did not apportion the comparable licenses on a patent-specific basis; and when using a company acquisition price as another comparable, the expert failed to determine what portion of that acquisition was specifically for the comparable patent.

Verinata Health, Inc. & Illumina vs. Ariosa Diagnostics (Verdict January 25, 2018)

A jury just awarded Illumina damages of $15.7 million for the infringement of the ‘794 patent and $11 million for infringement of the ‘430 patent.

Prior to the jury verdict, defendant Ariosa submitted a Daubert motion on plaintiff damages expert that was denied; and also submitted a JMOL on damages (in part) that was not granted.  One critical issue is that the JMOL alleges Mr. Malackowski violated the law of demand when he asserted that accused products sold by the defendant at a lower price would have been sold, in his but-for world, at a higher price.  The motion states:

The final judgment will be an interesting read.  Ariosa’s JMOL on lost profits damages is compelling.  Interestingly, the jury verdict form did not allow for a breakdown of a damages award between lost profits and reasonable royalty amounts.  There was only one line for the jury to write in its damages award (in words and in numbers), but there was no area to specify the type of royalty or the amount of lost profits.  It is unclear whether such an ambiguous form will impact Judge Illston’s post-trial rulings.

Arctic Cat v. Bombardier Rec. (December 7, 2017)

The CAFC issued this opinion regarding marking, ongoing royalties, willfulness and damages.  The court reviewed the Daubert motion and found that the court did NOT err in NOT excluding the expert analysis which involved comparing an infringing product to a non-infringing product.  Citing Apple v. Motorola the CAFC opined that, “factually attacking the accuracy of a benchmark goes to evidentiary weight, not admissibility.”

The initial rulings on the Daubert Motions and Motions for Summary Judgment are good reads as well.