Bio-Rad Laboratories, University of Chicago v. 10X Genomics Inc. (Federal Circuit, August 3, 2020)

This case finally made it to the Federal Circuit. A2C awaited its outcome and the prospect of available lessons. Way back in September 2018, Judge Andrews in Delaware issued an opinion on Daubert motions. The court found defendant expert Ryan Sullivan’s analysis of comparable licenses sufficiently reliable to pass Daubert.

The court also found that James Malackowski, Bio-Rad’s expert, offered sufficient support for his comparable license analysis opinion, but not enough economic analysis to support his lost profits opinions which asserted a two-supplier market:

Judge Andrews also rejected Mr. Malackowski’s apportionment of the royalty base, which presupposed apportionment through the comparable license relied upon:

Judge Andrews allowed Bio-Rad and Mr. Malackowski to “supplement” damages opinions after having excluded Mr. Malackowski’s lost profits and reasonable royalty opinions. In this second bite of the apple, Mr. Malackowski did not offer a lost profits opinion, but rather only a reasonable royalty opinion. Mr. Malackowski relied upon the same licenses as those relied upon by the opposing expert. And in relying upon those same licenses, Mr. Malackowski’s opinions, like Dr. Sullivan’s initial opinions, were not excluded. Judge Andrews explained that Mr. Malackowski provided sufficient evidence of apportionment with what A2C views as creative analogous analysis of unpatented and unlicensed features:

Trial ensued, Plaintiffs prevailed, and they were awarded approximately $24 million. Defendant appealed the award based upon infringement, validity, willfulness and damages. The Federal Circuit affirmed the jury verdict in full and rejected the claims by defendant 10X that Mr. Malackowski failed to apportion and failed to use comparable licenses. In the first instance, while the Federal Circuit found two of three asserted patents were not infringed, because jury instructions were mute on the question of division of damages among patents, the award necessarily stood:

With regard to comparability, the Federal Circuit noted there was sufficient analysis for its assessment, and that Mr. Malackowski had met a showing of “baseline comparability.” With respect to apportionment, the Federal Circuit agreed with Judge Andrews noting:

This case is interesting to A2C, because it concerns litigation strategy and second bites at the damages apple. Had defendant’s counsel not been so successful in its first Daubert motion, would an appeal have been subsequently more successful? Additionally, would different jury instructions have afforded a new trial on damages for only the single patent?

Hologic, Inc., Cytyc Surgical Products, LLC v. Minerva Surgical, Inc. (Federal Circuit Opinion, April 22, 2020)

The Federal Circuit issued an opinion regarding apportionment, supplemental damages, post-verdict royalty rate, and enhanced damages. Delaware Federal Circuit Judge Bataillon’s decisions regarding all of these damages issues were affirmed by the Federal Circuit.

The most interesting of the Federal Circuit’s affirmations concerns apportionment. The initial suit accused defendant Minerva of infringing claims of the ‘183 patent and ‘348 patent. Subsequent to the complaint, the PTO determined that the claims (including all asserted claims) of the ‘183 method patent were obvious & invalid. By the time of trial, only the ‘348 patent remained asserted; however, the patent damages experts did not apportion damages between the two patents. Post verdict, Minerva moved for judgment that the jury was not instructed to apportion damages on a per patent basis.

Judge Bataillon and the Federal Circuit agreed that given the overlapping nature of the two asserted patents, as well as the fact that the patent claims found invalid were those of the method patent, the jury’s damages award should stand. The Federal Circuit distinguished this opinion from other opinions about per-patent damages as follows:

This provides an interesting exception to the rule that damages must be apportioned on a patent-specific basis.

Netfuel, Inc. v. Cisco Systems Inc. (Order, March 17, 2020)

Judge Davila from the Northern District of California granted a Defendant’s motion to strike the technical expert and damages expert opinions on apportionment, and the damages expert report on all other issues as well. The court’s order serves as a cautionary tale not only for technical experts, but also for damages experts who would rely on technical experts for apportionment.

Plaintiff’s damages expert, Walter Bratic, relied on technical expert, Aviel Rubin, for an apportionment analysis. Dr. Rubin informed Mr. Bratic that certain percentages of practicing products and accused products were associated with the patents in suit. Mr. Bratic applied those percentages to his damages figures to apportion royalty rates. The court found, however, that Dr. Rubin’s percentages were “plucked out of thin air.” As such, the court further ruled that Mr. Bratic’s damages analysis, which relied on those percentages, would not be presented to the jury.

While reliance on a technical expert for damages opinions is both allowed and encouraged, it must also itself be subject to the damages expert’s critical consideration. Judge Davila made clear that a damages expert may not blindly rely upon a technical expert whose opinions have no basis in the facts of the case, but instead derive solely from his or her unrelated expertise. Damages experts must assess the reasonableness or the logic of the opinions relied upon. In this matter, while the apportionment exercise was not performed by Mr. Bratic himself, reliance on Dr. Rubin’s resulted in the exclusion of both.

Mr. Bratic’s comparable license approach to damages was also struck for being “plucked out of thin air.” Heavily citing the GPNE Corp. matter as well as LaserDynamics, the court rejected Plaintiff’s damages analysis in its entirety:

Finally, in this instance, the court would not entertain a “do over.” Judge Davila sagely noted, “Allowing a ‘second bite’ can encourage ‘overreaching on the first bite.'” We decidedly welcome that perspective.

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.

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.

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.

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:

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.

Dowagiac Manufacturing v. Minnesota Moline Plow Co. (Supreme Court Decided January 1915)

Approximately 103 years ago (almost to the day), the Supreme court issued an opinion which we believe remains relevant. The opinion will likely be cited frequently this year in light of the Supreme Court’s future Westerngeco opinion (which we will hopefully read in June 2018), as well as in light of recent opinions regarding patent damages and apportionment.

This case has it all. Consider the following quotations by topic:

On foreign sales: Some of the drills, about 261, sold by the defendants, were sold in Canada, no part of the transaction occurring within the United States, and as to them there could be no recovery of either profits or damages. The right conferred by a patent under our law is confined to the United States and its territories (Rev. Stat. § 4884, Comp. Stat. 1913, § 9428), and infringement of this right cannot be predicated of acts wholly done in a foreign country.

Georgia Pacific Factor #1: So, had the plaintiff pursued a course of granting licenses to others to deal in articles embodying the invention, the established royalty could have been proved as indicative of the value of what was taken, and therefore as affording a basis for measuring the damages.

Georgia Pacific Factor #13: We think the evidence, although showing that the invention was meritorious and materially contributed to the value of the infringing drills as marketable machines, made it clear that their value was not entirely attributable to the invention, but was due in a substantial degree to the unpatented parts or features.

Apportionment: But as the drills were sold in completed and operative form, the profits resulting from the several parts were necessarily commingled. It was essential, therefore, that they be separated or apportioned between what was covered by the patent and what was not covered by it; for, as was said in Westinghouse Electric & Mfg. Co. v. Wagner Electric & Mfg. Co. supra (p. 615): ‘In such case, if plaintiff’s patent only created a part of the profits, he is only entitled to recover that part of the net gains.’

Georgia-Pacific Factor #15 or Profits for reasonable royalty damages: Of course, the result to be accomplished is a rational separation of the net profits so that neither party may have what rightfully belongs to the other, and it is important that the accounting be so conducted as to secure this result, if it be reasonably possible. As was said in Tilghman v. Proctor, 125 U. S. 136, 145, 31 L. ed. 664, 667, 8 Sup. Ct. Rep. 894: ‘It is inconsistent with the ordinary principles and practice of courts of chancery, either, on the one hand, to permit the wrongdoer to profit by his own wrong, or, on the other hand, to make no allowance for the cost and expense of conducting his business, or to undertake to punish him by obliging him to pay more than a fair compensation to the person wronged.’

Early Panduit or Lost profits proof: While the number of drills sold by the defendants was shown, there was no proof that the plaintiff thereby lost the sale of a like number of drills or of any definite or even approximate number. During the period of infringement several other manufacturers were selling drills in large numbers in the same localities in direct competition with the plaintiff’s drill, and under the evidence it could not be said that, if the sales in question had not been made, the defendants’ customers would have bought from the plaintiff rather than from the other manufacturers. Besides, it did not satisfactorily appear that the plaintiff possessed the means and facilities requisite for supplying the demands of its own customers and of those who purchased the infringing drills. There was therefore no adequate basis for an assessment of damages upon the ground of lost sales.

It is fun to see that a case over 100 years old may be so relevant.