Idenix Pharmaceuticals LLC, et al. v. Gilead Sciences, Inc. (JMOL decided February 16, 2018)

This case went to trial in December 2016 and Judge Stark issued his second opinion on JMOL on February 16, 2018. Relevant for damages is Judge Stark’s opinion that comparability of licenses should go to the weight, and not the admissibility of a damages opinions:

Courts appear to disagree about comparable license analysis. In some cases, courts have determined that licenses are not comparable and opinions should be stricken. In others, the comparability goes to the weight, and not the admissibility of the evidence. Given the lack of a clear road map to determine comparability, this issue will continue to be difficult for damages experts to navigate.

Additionally, Judge Stark makes the following patent-portfolio observation in a footnote:

This footnote is interesting for two reasons. First, as a matter of law, an expert may aggregate patents into an assumed portfolio for the purposes of a hypothetical negotiation. Second, as a matter of fact, Judge Stark appears persuaded that Mr. Carter tied his aggregation to the facts of the case. It is unclear whether Mr. Carter would have been precluded from testifying about his portfolio approach had it been the subject of a Daubert motion, like the one found here in the Oracle v. Google matter. Referencing general “real-world negotiations” is not necessarily a strong tie to specifics of a contemplated negotiation. The hypothetical negotiation is not a real-world negotiation. Arguing patent aggregation under this guise appears potentially fraught.

Also relevant is Judge Stark’s opinion that the entire market value rule did not apply in this case and that Plaintiffs were entitled to get damages on a royalty base consisting of the entire pharmaceutical.

Lawrence E. Tannas v. Multichip Display, Inc., et al. (Decided February 21, 2018)

Judge Guilford of the Central District of California issued an opinion regarding damages, fees and prejudgment interest in this patent infringement case.

Neither plaintiff nor defendants used damages experts, and the court decided that, “Plaintiff essentially relies on attorney argument with minimal analysis” which renders its proffered damages award unsupported. The court specifically notes that even if attorneys want to argue that an established royalty rate exists, they must provide sufficient proof for that rate. In this case, the court held that the plaintiff failed to do that.

A second opinion, regarding legal fees, quotes both former Justice O’Connor and current Justice Kagan when concluding that the fixed sum of $250,000 is reasonable considering “what is happening in the legal profession as hourly billing has become increasingly unpopular and clients prefer to look at aggregate, global numbers”:

Finally, the plaintiff requested statutory prejudgment interest of 7%, compounded quarterly. After finding apparent fault with plaintiff’s lack of basis for its preferred quarterly-compounded 7% rate, the court instead decided that 5% without compounding was the appropriate rate.

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.

Part 2: Finjan v. Blue Coat (Mistrial January 10, 2018)

Judge Freeman declared a mistrial on the second Finjan v. Blue Coat matter (“Blue Coat II”).

In her order, Judge Freeman bifurcates the case and sets the infringement trial for February, and sets the damages trial for December.

It is unclear whether she will allow new reports on damages. The CAFC opinion appears to disagree with the use of the $8 figure (which is used as a “reasonableness” check in Blue Coat II). And the CAFC opinion also appears to disagree with the use of prior verdict royalty rates (which is relied on in Blue Coat II, as well).

Finjan, Inc. v. Blue Coat Systems, Inc. Decided January 10, 2018

Today, the CAFC offered an opinion on Finjan v. Blue Coat Systems. In August 2015, a jury determined that Blue Coat owed approximately $39.5 million for its infringement of several of Finjan’s patents. For one patent, the CAFC found that Finjan’s expert failed to apportion, and failed to demonstrate the technological and economic comparability of the license on which she relied.

Regarding the failure to apportion, the CAFC cites to VirnetX and Ericsson stating,

Regarding the failure to establish comparability, the CAFC states:

With regard to damages concerning two other patents, Finjan’s expert was found to have properly apportioned revenue using the equal-apportionment methodology described below:

The CAFC explains that her quantification was supported by: 1) a document which suggested that there were 24 functions of the accused product, and 2) conversations with experts and witnesses who told her that the 24 functions were of equal value. Despite evidence that Blue Coat provided contradicting this equal division by 24, the CAFC concludes that the jury heard conflicting testimony and was entitled to make up its own mind.

For damages experts, however, it remains unclear precisely where the evidentiary threshold supporting “function analysis” lies; and thus, when one might pursue equal-apportionment to derive a royalty base.

We note that Finjan and Blue Coat are currently back in court. Attached is Judge Freeman’s most recent order on motions in limine.