Articles Posted in Damages

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Defendant filed a motion for summary judgment on lost profits challenging plaintiff’s use of the entire market value rule. Defendant contended that plaintiff had not presented sufficient evidence to go to the jury on the entire market value rule. Plaintiff asserted that the defendant was misapplying the entire market value rule and ignoring the evidence.

The district court began its analysis by quoting from the Federal Circuit’s decision in Lucent that “[f]or the entire market value rule to apply, the patentee must prove that ‘the patent-related feature is the basis for the customer demand.'” Lucent Techs, Inc. v. Gateway, Inc. 580 F.3d 1301, 1336 (Fed. Cir. 2009). The district court noted that “[p]laintiff acknowledges the language from Lucent that the entire market value rule does not apply unless the patent-related feature is the basis for the customer demand, but argues the rule is not as narrow as that language suggests.”
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Google filed a motion to strike the revised damages expert report submitted by Oracle in their continuing battle over Android. In the second expert report, Oracle’s expert “estimated damages, from 2007 through 2011, to be $201.8 million for patent infringement, $823.9 million in unjust enrichment for copyright infringement (not deducting for expenses or apportionment), and $136.2 million in lost profits or $102.6 million in lost licensing fees for copyright infringement.” For the patent infringement matter, Oracle’s expert calculated damages using a hypothetical negotiation method beginning with a $100 million starting value that was based on real-world negotiations between the parties in 2006, then adjusted downward for patent apportionment, then adjusted upward for lost revenue that was expected from the licensing agreement.

Google moved to exclude the patent damages, among others, arguing that the damages cannot be based on a hypothetical lost license fee because Sun (Oracle’s predecessor) would never have licensed an incompatible version of Java to Google. The district court disagreed. The district court found that Oracle’s expert had “a non-speculative factual basis to value a license for an incompatible version of Java.” The district court found this appropriate because the analysis started with the real-world negotiations between Sun and Google for a compatible Java, and then adjusting that amount up to compensate for the incompatibility. “The amount of the upward adjustment was based on Sun’s own revenue projections for the value of compatibility. Dr. Cockburn’s calculation was based on real-world facts and not incurably speculative. Google fights the hypothetical by ignoring the legal requirement for a hypothetical negotiation that the licensing agreement must be reached as the result of a hypothetical meeting between the parties.”
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Internet Machines LLC (“iMac”) filed a patent infringement action against Alienware Corporation and PLX Technology, Inc. (“PLX”) and several other defendants alleging infringement of two patents pertaining to PCI Express switches. With respect to PLX, iMac moved to compel the production of various sales documentation for all sales of the accused products regardless of whether the products shipped to the United States. PLX produced a sales summary and underlying documents for all PCI Express switches shipped to the United States. PLX declined to produce any additional documentation relating to those switches shipped to international markets.

The primary disagreement centered on whether PCI Express switches which were not shipped to the United States qualify as a “sale” under 35 U.S.C. § 271. iMac contended that all sales, whether shipped domestically or internationally, are still accepted by PLX in its Sunnyvale, California office and therefore count as domestic sales and are relevant for calculating damages.
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Spine Solutions, Inc. (“SSI”) sued Medtronic Sofamor Danek (“Medtronic”) for patent infringement alleging that three of Medtronic’s artificial disc implants infringed an SSI patent. The case proceeded to trial and the jury awarded $5.7 million in lost profits and an 18 percent royalty on the other infringing sales. The jury also determined that the infringement was willful.

Following the jury verdict, the district court doubled the damages and awarded attorneys’ fees against Medtronic. The district court also entered a permanent injunction. On appeal, the Federal Circuit reversed the decision in part, vacated in part and affirmed in part. With respect to the finding of lost profits, the Federal Circuit determined that lost profits were unavailable due to lack of standing. It also reversed a finding of the district court that one of the Medtronic products (the O-Mav) infringed the patent-in-suit and directed that the district court enter a finding of non-infringement with respect to that product. The Federal Circuit also reversed the willfulness finding and the injunction due to certain extraterritorial restrictions in the injunction. On remand, the Federal Circuit directed that, among other things, the district court determine the proper reasonable royalty to which SSI might be entitled on the infringing sales for which the jury awarded lost profits.
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Oracle served an opening damages expert report in May 2011 and it did not serve any other opening damages expert reports. Google challenged the expert report with a Daubert motion, which the district court granted in July 2011.

In the order granting the Daubert motion, the district court allowed Oracle an opportunity to cure the defects in the expert report. During a case management conference a month later, Oracle stated that it might present a second, additional damages expert. Oracle served a revised opening damages expert report in September 2011 from the same expert that it had used to prepare the May 2011 report. It did not submit an additional expert report on damages at that time.
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In the ongoing trial over damages for several Microsoft products between Lucent and Microsoft, the United States District Court for the Southern District of California has reduced the damage award against Microsoft from $70 million to $26.3 million, plus prejudgment interest. The new trial on damages occurred after the Federal Circuit affirmed a jury’s finding that the so-called Day patent was valid and infringed but reversed the jury’s determination of damages. The Day patent claims a date-picker feature in the calendar function of Outlook, one of just many uses for Microsoft’s popular Outlook program. The Federal Circuit remanded the case for a new trial on damages to determine an appropriate royalty based on one feature of Outlook.

After the jury returned a verdict of $70 million, the district court addressed whether the amount should be reduced on post-trial motions. Before addressing that issue, the district court noted that “[t]his case illustrates the difficulty of properly valuing a small patented component, without a stand-alone market, within a larger program.” Lucent’s damage calculation was based on a lump-sum license in the form of an upfront, paid-in-full royalty. The royalty calculation is particularly difficult in this case because the date-picker feature is just one among many Outlook features and Outlook, although sold separately, is much more commonly purchased as part of the suite of products found in Microsoft Office.
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In the continuing battle over the Android operating system, the United States District Court for the Northern District of California decided to appoint its own damage expert. The district court explained that under Fed.R.Evid. 706(a), the district court “may appoint expert witnesses of its own selection” and noted that the Supreme Court has long recognized the constitutionality of court-appointed experts. The district court also noted that the Federal Circuit and the Ninth Circuit have acknowledged and recognized that the district courts enjoy wide latitude in making such appointments.

After explaining the authority for the appointment of expert witnesses, the district court turned to why such an appointment was necessary in the ongoing battle between Google and Oracle. Stating that “[t]he damages aspect of this controversy is particularly involved,” the district court noted that “[t]he accused items are not entire products but rather elements of products, whose roles and relative importance within the larger units are disputed.” The parties also further complicated the damage analysis by using elaborate nontraditional business models for distributing and monetizing the relevant products. “For example, Google allegedly distributes its accused Android software free of charge, hoping to later benefit from improved market position and advertising revenue generated by Google searches on Android devices. Oracle, for its part, claims to have been harmed by the supposed fragmentation of its Java platform and developer community due to Google’s allegedly selective use of Java elements in Android.”
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Sandisk Corp. (“Sandisk”) filed a patent infringement action against Kingston Technology Co., Inc. (“Kingston”). Prior to trial, Sandisk moved to exclude defendant’s expert witness on damages because the expert’s methodology was unreliable and because the supplemental report contained untimely opinions.

In terms of reliability, Sandisk asserted that the expert used an incorrect legal standard for defining the relevant geographic market and the expert’s definition did not fit the facts of the case. The expert defined the market to include “all manufacturers, regardless of where located, with the legal right to sell flash memory products in the United States.” Plaintiff asserted that this was the wrong market because the expert defined the market in terms of the location of sales instead of by the region where consumers are able and willing to purchase substitutes. The district court disagreed, finding that “[c]ontrary to plaintiff’s assertions, this definition does not exclude foreign competitors who may divert products into the United States or competitors without a license from plaintiff.”
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In a patent infringement case pending before the United States District for the Western District of Wisconsin, the plaintiffs filed a motion in limine before the damages phase of the trial to preclude the defendants from arguing that the work performed by their scientists should be taken into account in apportioning damages. The district court granted the plaintiff’s’ motion to exclude the evidence.

Defendants contended that the work performed by their scientists added value and should be considered when the jury determined plaintiffs’ lost profits. Defendants essentially argued that the damages should be apportioned to reflect the added value that was provided by their scientists.
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ActiveVideo filed a patent infringement action against several Verizon entities asserting that Verizon infringed certain of ActiveVideo’s patents. After a three week jury trial, the jury found that Verizon infringed asserted claims of four of the patents and awarded ActiveVideo $115,000,000 in damages. After the verdict, ActiveVideo sought an award of prejudgment infringement, post-judgment interest and post-discovery damages for the continuing infringement. Verizon opposed the motion.

In addressing the issue of damages for continuing infringement, the district court stated that “[w]here a patent infringer is found to have infringed one or more patents, the ‘patentee is entitled to damages for the entire period of infringement and should therefore be awarded supplemental damages for any period of infringement not covered by the jury verdict'” (citations omitted). ActiveVideo asserted that it was entitled to an award of supplemental damages because the discovery provided by Verizon only accounted for information through March 2011 and did not address the period from April 2011 to August 2011 when the jury returned its verdict. Verizon opposed the motion by contending that ActiveVideo waived any entitled to the supplemental damages because it failed to request them in the amended complaint or in the final pre-trial conference order.
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