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:

In the Matter of Certain Road Milling Machines and Components Thereof (Order #16 Decided January 23, 2018)

The International Trade Commission denied a motion for summary determination (ITC-speak for summary judgment) that Wirtgen had satisfied the economic prong of the domestic industry requirement. The order explains what is considered in an assessment of an economic domestic industry analysis:

Citing Lelo Inc., the ITC explains that there must be a presentation of quantitative data to support domestic industry claims. The citation also explains that a ratio analysis of domestic and foreign activity should be provided. It appears that some minimum economic analysis is a requirement, without which there may arise “a genuine issue of material fact.”

Integra Lifesciences Corp. et al. v. Hyperbranch Medical Technology, Inc. (Motion to Strike Granted in Part March 13, 2018)

Magistrate Judge Burke granted in part and denied in part John Jarosz’s damages analysis on November 14, 2017. Four months later, Judge Stark adopted the Magistrate’s order.

Judge Stark denied Defendant’s motion to strike Mr. Jarosz’s price-erosion analysis, but granted exclusion of Mr. Jarosz’s market-share apportionment.

Review of the redacted order by Magistrate Judge Burke reveals that the decision to strike – or not to strike – appears to have nothing to do with the actual analysis done, but instead pivots on whether Plaintiffs failed properly to disclose their damages theories. For Mr. Jarosz’s market-share apportionment analysis, Judge Burke and Judge Stark both agree that the late disclosure “could cause prejudice to Defendant.” The footnote excerpted below suggests that even late disclosure is better than no disclosure:

This case affords yet another cautionary tale about timely disclosure.

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.