The CAFC issued a precedential opinion today which seems to offer a different interpretation of the entire market value rule. In this matter, Briggs appealed the damages award of $24,280,330, claiming that Exmark’s damages expert both violated the entire market value rule and failed to relate her 5% royalty rate to the facts of the case. The Nebraska District Court denied a new trial on damages.
The CAFC found that the expert did not violate the entire market value rule when employing as a royalty base the entire mower, as opposed to the flow control baffles in the mower.
While the CAFC agreed that the patent in suit “related to the mower’s flow control baffle” which serves to direct the cut grass to discharge through the side of the mower, the court cites to Astrazeneca and concludes that it was acceptable to employ the entire mower sales, rather than the smaller baffle component:
The court also notes that in a real-world negotiation, the parties would base a royalty rate on the lawn mower sales, not the baffle component.
The CAFC did find that the expert failed to tie the royalty rate to the facts of the case. The expert failed to guide the trier of fact to the rate, and instead just offered a “superficial recitation of the Georgia Pacific factors, followed by conclusory remarks,” as was done in the Whitserve case.
Damages experts in recent years have been understandably wary of running afoul of the court’s guidance on the entire market value rule when quantifying a royalty base. This decision, among others, appears to afford experts some leeway to make such recourse… when the facts of the case permit.
Judge Bataillon, Senior District Judge in Delaware, issued a ruling on summary judgment on the eve of trial. Shortly thereafter, the case settled. Prior to this ruling, the judge issued an opinion on several Daubert motions which were filed. The one motion of particular interest involves untimely disclosure, SSPU issues, and use of irrelevant profit information from unrelated, non-practicing, third parties.
The judge granted portions of the motion involving untimely disclosure and failure to tie the profit margin used to infringement. Judge Bataillon seems to be advising that if an infringer wishes to proffer any affirmative opinions (for which it bears the burden of proof) through its experts, those must be timely disclosed.
Anchoring is the concept of tying one’s ship to a mooring to keep it from drifting into the open seas. In the late 1970’s Kahneman and Tversky determined that people can unconsciously tie opinions to unrelated moorings which keep them within a constrained area.
Anchoring may be found in all aspects of decision making. And many academics have determined that juries anchor their opinions to potentially unrelated aspects of a matter. For example, in Uniloc USA v. Microsoft, the court notes that “the ‘$19 billion cat was never put back into the bag,'” suggesting that once a jury hears a large number, its opinion regarding damages can be anchored to that number. This appears to be the number one reason why the entire market value rule (EMV) and the smallest saleable practicing unit (SSPU) have become so important in damages.
In his recent opinion, Judge Alsup appears to conclude that the trade secret’s damages expert in the Waymo matter was in danger of anchoring the jury with a large value:
In short, anchoring issues appear to have reached the trade secret realm.
Judge Bryson in the District of Delaware excluded an expert opinion not once, but twice, over violation of the entire market value rule. Heavily citing to LaserDynamics and Uniloc, Judge Bryson notes that no matter what apportionment is performed, if the royalty base includes more than the SSPU, then the analysis is fatally flawed.