Patent Damages

September 23, 2015

Litigation Webinar Series: INSIGHTSOur take on litigation and trial developments across the U.S.

Chris MarchesePrincipal, Southern California

Overview

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• INSIGHTS Series

• Key Developments & Trends

• Housekeeping

• CLE Contact: Georgie Stocks

• stocks@fr.com

• Questions

• Materials: fishlitigationblog.com/webinars

• #fishwebinar

Patent Damages

Wednesday, October 7

1:00 p.m. EST

Legislative

Developments in

Post-Grant Practice

Wednesday, October 14

1:00 p.m. EST

Agenda

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1. Daubert trends

2. Reasonable royalty (apportionment)

3. Extraterritorial issues

4. Lost profits (EMVR and apportionment)

5. Daubert strategy

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Daubert Trends

Damages Experts- Daubert Motions

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0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015

DENIED DENIED IN PART/GRANTED IN PART GRANTED

Apple v. Motorola

(Apr. 2014)

6

Reasonable Royalty—

Apportionment

2009Lucent v. Gateway (September 2009)- EMVR is narrow exception; “the presence of that [patented feature] is what

motivates consumers to buy a [product] in the first place.”

2010ResQNet v. Lansa (February 2010)- Settlement agreements/past licenses must be “sufficiently comparable” to the

hypothetical license being calculated; “[T]he most reliable license in this record arose out of litigation.”

2011 Uniloc v. Microsoft (January 2011)- Rejected 25% rule of thumb

2012LaserDynamics v. Quanta (August 2012)- EMVR requires that “the presence of [the patented] functionality . . .

motivate[ ] customers to buy [the product] in the first place.”

2014

Apple v. Motorola (April 2014)- “[I]f the record evidence does not fully support either party’s royalty estimate, the

fact finder must still determine what constitutes a reasonable royalty from the record evidence. . . [A] fact finder may

award no damages only when the record supports a zero royalty award.”

VirnetX v. Cisco (September 2014)- “Where the smallest salable unit is, in fact, a multi-component product

containing several non-infringing features with no relation to the patented feature (as VirnetX claims it was here), the

patentee must do more to estimate what portion of the value of that product is attributable to the patented

technology. To hold otherwise would permit the entire market value exception to swallow the rule of apportionment.”

Ericsson v. D-Link (December 2014)- “As with all patents, the royalty rate for SEPs must be apportioned to the

value of the patented invention.”

2015

Astrazeneca v. Apotex (April 2015)- EMVR did not apply. “It is not the case that the value of all conventional

elements must be subtracted from the value of the patented invention as a whole when assessing damages.”

Info-Hold v. Muzak (April 2015)- "35 U.S.C. § 284 requires the district court to award damages 'in an amount no

less than a reasonable royalty' even if the plaintiff[] has no evidence to proffer."

Reasonable Royalty

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Reasonable royalty

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Apportionment – key cases

• Garretson v. Clark, 111 U.S. 120, 121 (1884) (quoting lower court)

• “The patentee must in every case give evidence tending to…

• [APPORTIONMENT] separate or apportion the defendant's profits and the patentee's damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative, or

• [EMVR] he must show by equally reliable and satisfactory evidence that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.”

• But see Univ. of Pittsburgh v. Varian Med. Sys., Inc., 561 Fed. App’x934, 950 (Fed. Cir. Apr. 10, 2014)

• Garretson decided under “an antiquated damages regime”

• Not all conventional elements must be subtracted from the royalty base

• Cited by Astrazeneca

Reasonable royalty

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Apportionment – key cases

• SSPPU apportionment: VirnetX, Inc. v. Cisco Sys. Inc. & Apple Inc.,

767 F.3d 1308, 1327 (Fed. Cir. 2014)

• “[T]he requirement that a patentee identify damages associated with the

smallest salable patent-practicing unit is simply a step toward meeting

the requirement of apportionment.”

• Where the SSPPU is a multi-featured product, “the patentee must do

more to estimate what portion of the value of that product is attributable

to the patented technology.”

• Resolved district court split re SSPPU

• SEP apportionment: Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d

1201, 1232 (Fed. Cir. 2014)

• “As with all patents, the royalty rate for SEPs must be apportioned to

the value of the patented invention.”

Reasonable royalty

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Why apportion with FRAND?

• Argument: patent is blocking drives demand

• But…

• Patent hold-up: standard creates SEP value, not the opposite

• Design-around options during adoption

• Lack of alternatives to the standard

• Ericsson’s hold-up rules:

• Royalty award must “not [be based on] the value of the standard

as a whole or any increased value the patented feature gains

from its inclusion in the standard” (773 F.3d at 1235)

• However, hold-up instruction only required when the accused

infringer provides evidence of actual hold-up

Reasonable royalty

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Apportion to SSPPU and beyond

Reasonable royalty

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Apportioning beyond the SSPPU

Apportion patented v. non-

patented features…but also… Apportion out other IP?

Apportion over next best

noninfringing alternative?

Reasonable royalty

13

Apportioning beyond the SSPPU

Patented featureValuable

brand name

Patented feature

Brand value?

Reasonable royalty

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Practice pointers for apportionment

• Apportionment is inexact—and that’s OK

• VirnetX, 767 F.3d at 1328:

• “[W]e have never required absolute precision in [assigning value to

a feature that may not have ever been individually sold]; on the

contrary, it is well-understood that this process may involve some

degree of approximation and uncertainty.” (emphasis added)

• Triangulate:

• Multiple apportionment methods

• Daubert proofing

• One may survive while others fall

• “Checks” (e.g., licenses)

• Be creative

Reasonable royalty

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Practice pointers for apportionment

• Fact witnesses are increasingly important

• Apple, Inc. v. Motorola, Inc., 757 F.3d 1286, 1330 (Fed. Cir. 2014)

(“Even if Apple had not submitted expert evidence, this alone

would not support a finding that zero is a reasonable royalty.”)

• Phillip M. Adams & Assoc., LLC v. Windbond Elecs. Corp., Case

No. 1:05-CV-64-TS (D. Utah Sept. 14, 2010)

• http://patent-damages.com/2010/10/inventor-can-testify-factual-basis-for-

damages-district-of-utah/

• Fact witnesses may support apportionment

• Damages expert may rely on plaintiff, defendant, and/or third

party fact witnesses

Reasonable royalty

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Practice pointers for apportionment

• Expert communication

• Regardless of reliance

• Expert piggy-backing

• Technical experts can share opinions

related to damages issues

• Apple Inc. v. Motorola, Inc., 757 F.3d

1286, 1321 (Fed. Cir. 2014)

• “Experts routinely rely upon other

experts hired by the party they

represent for expertise outside of

their field.”

Reasonable royalty

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Apportionment methods/pitfalls

• Defendant’s product feature documents

• Marketing or engineering presentations divide features, rank by importance

• Company surveys, consumer research

• Pitfalls

• Scenarios limited

• Omitted features

• Feature valuation

• Allowed…

• Finjan, Inc. v. Blue Coat Sys., Inc., Case No. 13-cv-03999-BLF (N.D. Cal. July 14, 2015) (Labson Freeman, J.)

• http://patent-damages.com/2015/09/ndca-allows-real-estate-approach-lines-of-code-for-apportionment/

• Affinity Labs of Texas, LLC v. Ford Motor Co., No. 1-12-CV-580 (E.D. Tex. Aug. 22, 2013) (Clark, J.)

• http://patent-damages.com/2014/10/edtx-rejects-arguments-that-expert-should-have-included-sunk-costs-and-did-not-apportion/#more-985

Reasonable royalty

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Apportionment methods/pitfalls

• Comparison to comparable noninfringingproducts

• Isolate value of the comparable feature

• Plaintiff’s own products or third party products

• Pitfalls

• Finding comparable product/features

• Isolating comparable feature value

• Allowed…

• Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. 2014)

• Touchscreen gesture patent compared to touchpad

• Technical expert opines on comparability

• Damages expert isolates value of touchpad’s comparable features to derive royalty

• “Checked” royalty against licenses

Reasonable royalty

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Apportionment methods/pitfalls

• Conjoint analysis (surveys)

• Statistical technique to determine how

people value different product features

• May be used to determine most influential

features and their relative value

• Use apportionment

• Pitfalls

• Complex, expensive

• Feature selection, limits

• Allowed…

• Oracle v. Google, 2012 WL 850705 (N.D.

Cal. March 13, 2012) (Alsup, J.)

• Apple Inc. v. Samsung Elecs. Co., No.

2014-1802 (Fed. Cir. Sept. 17, 2015)

(injunction case)

Reasonable royalty

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Apportionment methods/pitfalls

• Cost savings/revenue enhancement

• Focuses on incremental patent value

• May exceed plaintiff’s lost profits

• Pitfalls

• Scenarios limited

• Relation to hypo date

• Allowed…

• Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1240

(Fed. Cir. 2011) (“Reliance upon estimated cost savings from

use of the infringing product is a well settled method of

determining a reasonable royalty.”) (quoting Hanson v. Alpine

Valley Ski Area, Inc., 718 F.2d 1075, 1080-81 (Fed. Cir.

1983))

• TracBeam LLC v. AT&T Inc., Case No. 6:11-CV-96 (E.D. Tex.

Nov. 25, 2013) (Davis, J.)

• http://patent-damages.com/2014/01/edtx-allows-cost-savings-

approach-for-royalties-based-on-cost-of-entire-location-network/

Reasonable royalty

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Apportionment methods/pitfalls

• Real estate approach

• Integrated circuits, software

• Others?...be creative

• Pitfalls

• Relative importance, synergies

• Pinpoint vs. spread out

• Interconnections/calls

• Allowed…

• Finjan, Inc. v. Blue Coat Sys., Inc.,

Case No. 13-cv-03999-BLF (N.D. Cal.

July 14, 2015) (Labson Freeman, J.)• http://patent-damages.com/2015/09/ndca-allows-real-

estate-approach-lines-of-code-for-apportionment/

Reasonable royalty

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Apportionment methods/pitfalls

• Count, rank, divide approach (e.g., SEPs)• Count patents covering accused product

• Rank by relative value

• Divide profits by ranked patent values

• Obtain value of asserted patent(s)

• Pitfalls• Complex and costly

• Identifying the universe of patents

• Assigning relative patent value

• Allowed…• Oracle v. Google, 2012 WL 44485 (N.D. Cal.

Jan. 1, 2012), and 2012 WL 877125 (N.D. Cal. March 5, 2012) (Alsup, J.)

• LG Display Co. v. AU Optronics Corp., 722 F. Supp. 2d 466 (D. Del. 2010)

Reasonable royalty

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Can apportionment be avoided?

• No—unless plaintiff can satisfy EMVR

• VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014)

• Patented feature must be “‘the basis for customer demand or

substantially create[] the value of the component parts.’ In the absence

of such a showing, principles of apportionment apply.” (Quoting Versata

Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir. 2013))

• Helios Software, LLC v. Awareness Tech., Inc., Civil Action No.

11:1259LPS (D. Del. April 13, 2015) (Stark, J.)

• “The only exception to the apportionment requirement is evidence

demonstrating that the entire market value of the accused product is

properly and legally attributable to the patented feature.” Slip op. at 11

• http://patent-damages.com/2015/05/dde-addresses-various-daubert-issues-including-emvr-and-

apportionment/#more-1049

• But in some circumstances, apportionment may be inherent or

even avoided…

Reasonable royalty

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Inherent apportionment

• License agreements based on entire value

• Mondis Tech., Ltd. v. LG Elecs., Inc., No. 2:07-CV-565-TJW-CE (E.D. Tex. June 14, 2011) (Everingham, J.)

• http://patent-damages.com/2011/06/battle-between-comparable-licenses-and-emvr-resolved-in-favor-of-comparable-licenses/

• Multimedia Patent Trust v. Apple Inc., 2012 WL 5873711 (S.D. Cal. Nov. 20, 2012) (Huff, J.) (“[T]he use of the accused products’ entire market value as a royalty base can be economically justified where sophisticated parties have entered into ‘agreements that base the value of the patented invention as a percentage of the commercial products’ sales price.”)

• Lump sum licenses

• HTC Corp. v. Technology Properties Ltd., Case No. 5:08-cv-00882 PSG (N.D. Cal. Sept. 6, 2013) (Grewal, J.) (patentee consistently and regularly negotiated lump sums with its licensees)

• http://patent-damages.com/2013/09/ndca-addresses-lump-sumemvr-and-comparable-licenses/

Reasonable royalty

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Expansive claims—avoiding apportionment

• Focus on full scope of claims:

• Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1317-18 (Fed. Cir. 2014)

• “[T]he district court incorrectly focused on individual claim limitations in

isolation when evaluating the reliability of [the damages expert’s

methods].”

• “[T]he proper inquiry evaluates the expert's methodology in view of the

full scope of the infringed claims.”

• Claims may be too expansive:

• DataQuill Ltd. v. HTC Corp., 887 F. supp. 2d 999, 1027 (S.D. Cal.

2011)

• Claim scope: covered handset

• EMVR applied because accused handsets had many unclaimed features

Reasonable royalty

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Expansive claims—avoiding apportionment

Astrazeneca v. Apotex, 782 F.3d 1324, 1338-39

(Fed. Cir. 2015)

• Claims covered omeprazole pill No EMVR

• Inquiry shifts to conventional claim elements:

• Account for the patented feature relative “to the

value of the conventional elements recited in the

claim, standing alone.”

• BUT: “It is not the case that the value of all

conventional elements must be subtracted from

the value of the patented invention as a whole

when assessing damages.”

• Novel subcoating sufficiently important not to

exclude conventional drug core from royalty

base

Claim:-Drug core

-Inert water soluble

subcoating

-Enteric coating

Reasonable royalty

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Expansive claims—avoiding apportionment

Univ. of Pittsburgh v. Varian, 2:08-cv-01307-AJS (W.D.

Pa. Feb. 10, 2012), aff’d in relevant part, 561 Fed.

App’x 934 (Fed. Cir. 2014) (non-precedential)

Linear

Accelerator

RPM system

Reasonable royalty

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Expansive claims—avoiding apportionment

• Varian con’t:

• Federal Circuit—non-precedential—but worth a read

• Dependent claim 38 swept LA into royalty base

• EMVR was inapplicable for LA because Pitt was “not attempting to include the value of unpatented features within its royalty base.” 561 F. App’x at 947 (emphasis in original).

• Even where dependent element is conventional (here, the LA), if inventive feature (RPM) adds value to that conventional element, damages may reflect that value.

• Astrazeneca, 782 F.3d at 1339 n.5:

• In Varian, “we declined the defendant's invitation to remove the conventional elements from the overall value of the combination apparatus; we noted that guarding against compensation for more than the added value attributable to the invention ‘is precisely what the Georgia-Pacific factors purport to do.’” (quoting Varian)

Linear

Accelerator

RPM system

Reasonable royalty

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Take-aways—practice pointers

• Apportionment may or may not end at SSPPU

• Many options exist for apportionment

• Each has pitfalls

• Don’t limit yourself—triangulate/check

• Fact/expert witnesses can share information to bolster

apportionment

• Apportionment can be avoided in limited circumstances

• Comparable licenses

• Expansive claims—premium on claim drafting, claims of

varying scope

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Extraterritorial Issues

2005

NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005)- The Federal Circuit held that the entire

accused system was used in the U.S. and affirmed infringement of the system claims despite the server location in

Canada. The Federal Circuit analyzed the use of the accused technology based on where (1) the system was put to

beneficial use, and (2) control of the system was exercised. This holding demonstrates that a component of an

accused system can be located outside the U.S. States and infringement of a system claim can still occur.

2007Microsoft v. AT&T (U.S. Supreme Court May 2007)- Liability does not extend to products made in another country

when loaded with software copied abroad from a master disk or electronic sent from the United States

2009Cardiac Pacemakers v. St. Jude Medical (August 2009)- §271(f) does not apply to method claims such that there

is no liability for exporting devices for practicing a patented method abroad.

2013Power Integrations v. Fairchild (March 2013)- “Our patent laws . . . do not thereby provide compensation for

defendant’s foreign exploitation of a patented invention, which is not infringement at all.”

2014

Halo v. Pulse (October 2014)- “[W]hen substantial activities of a sales transaction, including the final formation of a

contract for sale encompassing all essential terms as well as the delivery and performance under that sales contract,

occur entirely outside the United States, pricing and contracting negotiations in the United States alone do not

constitute or transform those extraterritorial activities into a sale within the United States for purposes of §271(a).”

2015

WesternGeco v. Ion Geophysical Corp. (July 2015)- “Just as the United States seller or exporter of a final product

cannot be liable for use abroad, so too the United States exporter of the component parts cannot be liable for use of

the infringing article abroad.”

Carnegie Mellon v. Marvell (August 2015)- “Where a physical product is being employed to measure damages for

the infringing use of patented methods, we conclude, territoriality is satisfied when and only when any one of those

domestic actions for that unit (e.g., sale) is proved to be present, even if others of the listed activities for that unit

(e.g., making, using) take place abroad.”

Extraterritorial Decisions

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Extraterritorial Issues

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Key Cases

• Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711

F.3d 1348 (Fed. Cir. 2013)

• Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed.

Cir. 2014)

• WesternGeco v. Ion Geophysical Corp., No. 13-1527 (July 2, 2015

Fed. Cir.)

• Carnegie Mellon Univ. v. Marvell Techs., No. 14-1492 (Aug. 4, 2015

Fed. Cir.)

Extraterritorial Issues- Power Integrations

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• “Our patent laws . . . do not thereby provide compensation for defendant’s

foreign exploitation of a patented invention, which is not infringement at all.”

• “[T]he entirely extraterritorial production, use, or sale of an invention

patented in the United States is an independent, intervening act that, under

almost all circumstances, cuts off the chain of causation initiated by an act

of domestic infringement.”

• “While [the expert’s] data source was unreliable, so was his methodology.

First, the document on which [the expert] relied . . . indicated worldwide

shipment of Samsung phones . . ., however, the infringing power circuits

were found in mobile phone chargers. . . . [The expert’s] sales document

lists no model numbers or other indicia from which he could reasonably

infer that chargers assumed to be included incorporated [defendant’s]

infringing power circuits.”

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Price negotiation

Final price approval

Marketing meetings

Samples

Sales meetings

Design meetings

Manufacture

Sales

Invoices

Shipping

Most important considerations

Location of contract

Location of delivery and

performance

Extraterritorial Issues- Halo

Extraterritorial Issues- WesternGeco

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v.

Customers

Service contracts

Performance

Manufacture of components

Export of components

No recovery of lost profits for failure to win foreign service contracts

Extraterritorial Issues- Carnegie Mellon

“Where a physical product is being employed to measure damages

for the infringing use of patented methods, we conclude, territoriality

is satisfied when and only when any one of those domestic actions

for that unit (e.g., sale) is proved to be present, even if others of the

listed activities for that unit (e.g., making, using) take place abroad.”

36

Extraterritorial Issues- Carnegie Mellon

“The standards for determining where a sale may be said to occur do

not pinpoint a single, universally applicable fact that determines the

answer, and it is not even settled whether a sale can have more than

one location. . . . At this point, we do not settle on a legal definition or

even to say whether any sale has a unique location.”

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Places of Seeming Relevance

Place of inking legal

commitment to buy and sell

Place of delivery

Place where other substantial

activities of the sales

transactions occurred

Extraterritorial issues

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Take-aways—practice pointers

• Proving sale/offer for sale in U.S.

• Issue for companies that custom make products for a specific

customer or bid for a specific project

• Both vendor and customer are in the U.S.

• Suggestions for defense

• Consummate sales via foreign subsidiaries

• “With regard to Carnegie Mellon, Marvell seems to have learned its

lesson because it has now put forward undisputed evidence that the

manufacturing, sale, and delivery of the accused chips all occurred

outside the United States.” – France Telecom v. Marvell, No. 12-cv-

04967-WHO (N.D. Cal. Apr. 14, 2014)

• Split engineering/programmers between U.S. and abroad

Extraterritorial issues

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Take-aways—practice pointers

• Apportioning U.S. imports when sales made abroad

• Scenario

• Defendant makes/sells/ships abroad

• Chip fab is in Asia

• Sale is made by defendant’s Asian subsidiary

• Payment is received by Asian sub from customer based abroad

• Payment is deposited in foreign bank

• Fab delivers chip to customer outside U.S.

• Customer manufactures chip into end product (in foreign facility) and

ships all over the world

• How does the plaintiff quantify the infringing products that are

imported into the U.S. and subject to liability and damages? …

Extraterritorial issues

40

Take-aways—practice pointers

• Discovery from defendant/third parties

• Direct imports

• Sales to US companies

• Estimates of geographic product distribution

• Defendant’s internal estimates

• Third party discovery of foreign customers (but very expensive;

Hague issues)

• Third party market research

• Passive defense?

41

Lost Profits—

EMVR and Apportionment

Lost profits

42

2008

American Seating v. USSC Group (January 2008)- Alleged substitute must be “acceptable to all purchasers of

the infringing product,” and buyers must view the substitute “as equivalent to the patented device”; convoyed sales

unavailable where customers purchase convoyed item for ease of purchase, repair, and uniform design.

2009DePuy Spine v. Medtronic Sofamor Danek (June 2009)- Panduit does not require demand for the patented

feature; suggesting lost profits do not require proof of EMVR (“basis for consumer demand”) or apportionment.

2012

Edwards Lifesciences v. CoreValve (November 2012)- “But for” causation not overcome by defendant that

claimed it could have manufactured overseas instead of the U.S.

Presidio v. Am. Tech. (December 2012)- Lost profits awarded on unpatented product; products without the

advantages of the patented invention "can hardly be termed a substitute acceptable to the customer who wants

those advantages.”

2013

SynQor, Inc. v. Artesyn (March 2013)- Suggesting EMVR (“basis for customer demand”) applies to lost profits;

however, entire product revenue not used to justify the damages figure (just to show demand elasticity).

Versata Software v. SAP (May 2013)- “[T]he Panduit factors place no qualitative requirement on the level of

demand necessary to show lost profits.” (citing DePuy)

2015Warsaw v. Nuvasive (March 2015)- “Lost profits must come from the lost sales of a product or service the

patentee itself was selling”; true-up payments not recoverable as lost profits in this case.

Lost profits

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EMVR/apportionment apply?

• Fundamental legal principle: “but for”

causation

• Does “but for” inherently apportion?

• No need for EMVR/apportionment?

• Panduit four-part test

• Does factor 1 obviate EMVR?

• Does “absence of non-infringing

alternatives” obviate apportioning?

• No clear rule

• Federal Circuit has vacillated

• District courts are split

Lost profits

44

EMVR/apportionment apply?

• Paradigm case:

• Head to head competitors

• Plaintiff loses customer to defendant

• Defendant’s product infringes, but has

other non-patented features

• Plaintiff proves “but for” infringement, it

would have made the sales

• Why apportion damages when plaintiff

has proven lost profits were caused by

infringement?

• Would this penalize the plaintiff?

Patented feature

Infringing feature

Lost profits

45

Federal Circuit—tennis anyone?

• Ferguson Beauregard v. Mega Sys., LLC, 350 F.3d 1327, 1345-56 (Fed. Cir. 2003)

• Narrow facts—requiring “allocation” of lost profits between infringed patent and non-infringed patent

• DePuy Spine, Inc. v. Medtronic SofamorDanek, 567 F.3d 1314 (Fed. Cir. 2009)

• Panduit only requires product demand

• SynQor, Inc. v. Artesyn Tech., Inc., 709 F.3d 1365, 1383 (Fed. Cir. 2013)

• Suggesting EMVR for lost profits—but overall product revenue was only used for elasticity

• Versata Software, 717 F.3d at 1265 (Fed. Cir. 2013)

• Panduit does not require demand for the patented functionality (citing DePuy)

• Calico Brand, Inc. v. Ameritek Imports, Inc., No. 2008-1324, slip op. at 14-15 (Fed. Cir.

July 18, 2013) (non-precedential)

• Lost profits require proof of demand for the patented feature

• Ericsson, 773 F.3d at 1226 (Fed. Cir. 2014)

• “[A]pportionment is required even for non-royalty forms of damages …” (dicta)

Lost profits

46

District courts split—apportionment required

• Good Tech. Corp. v. MobileIron, Inc., Case No. 5:12-cv-05826-

PSG (N.D. Cal. June 23, 2015) (Grewal, J.)

• Cites Ferguson, 350 F.3d at 1345-56 (Fed. Cir. 2003)

• Electro-Mech. Corp. v. Power Distrib. Prods., Inc., Case No. 1:11-

cv-00071 (Doc. 292) (W.D. Va. Sept. 10, 2013)

• Holding that patentee could not recover lost profits on sales of the

entire power system because it failed to adduce evidence that the

patented draw-out tray was “the basis for customer demand”

• http://patent-damages.com/2013/09/wdva-addresses-lost-profits-and-

emvr/

Lost profits

47

District courts split—apportionment NOT required

• Universal Elecs., Inc. v. Universal Remote Control, Case No. SACV 12-00329 AG (JPRx) (C.D. Cal. March 24, 2014) (Guilford, J.)

• Distinguishing Ferguson (which “could be read to support Defendant’s argument”) because Ferguson “did not discuss the entire market value rule, nor involve the market conditions asserted to be present here.”

• Plantronics, Inc. v. Aliph, Inc., Case No. C 09-01714 WHA (N.D. Cal. Feb. 21, 2014) (Alsup, J.)

• Relying on DePuy and distinguishing Ferguson on the facts (lost profits based on a product with patented and non-patented features, when there was another product that only embodied the patent)

• Rejecting defendant’s position that in lost profits there is “a duty to apportion consumer demand for the allegedly infringing features”

• http://patent-damages.com/2014/03/ndca-denies-motion-to-strike-reports-for-inadequate-apportionment-in-lost-profits-and-reasonable-royalty-allows-testimony-on-disputed-licenses-and-offer-to-license/

Lost profits

48

Take-aways—practice pointers

• EMVR/apportionment appears to be an unresolved issue for

lost profits

• District courts have split

• “But for” causation and the Panduit test arguably account for

these principles

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Daubert Strategy

Damages Experts- Daubert Motions

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0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015

DENIED DENIED IN PART/GRANTED IN PART GRANTED

Apple v. Motorola

(Apr. 2014)

Daubert and MIL Strategy

51

• Start developing your damages case early

• Evidence establishes zero damages, not exclusion of damages

theories

• Apple v. Motorola has had little impact

• Present multiple damages theories

• Homeruns and singles

• Mulligans

• Use the facts of your case

• Use fact witnesses to back up your experts

• Use complementary experts where needed

• Appropriate expertise

• Know your judge and your court

NPE/Forum Shopping

522011-2014 Patent Litigation Studies, PWC

2011 2012 2013 2014

NPE

Total Total

NPE

Success

NPE

Total Total

NPE

Success

NPE

Total Total

NPE

Success

NPE

Total Total

NPE

Success

E.D. Tex. 8 14 57% 2 5 40% 5 16 31% 5 12 42%

N.D. Ill. 1 4 25% 1 4 25% 1 3 33% 3 12 25%

S.D.N.Y. 0 3 0% 2 4 50% 3 12 25% 3 10 30%

N.D. Cal. 0 7 0% 1 10 10% 7 15 47% 3 10 30%

D.DE 1 24 4% 0 11 0% 6 17 35% 3 25 12%

C.D. Cal. 3 6 50% 0 5 0% 0 5 0% 2 11 18%

Resources

53

1. The Blog & Book

2. Onsite CLE (just ask or let us invite ourselves)

3. Deeper Dive Webinar in December

www.patent-damages.com

54

Questions?

Mark your calendar!

Wednesday, October 7

Live Replay – Patent Damages INSIGHTS Webinar

fishlitigationblog.com/webinars

Wednesday, October 14

Patent Webinar

Topic: Legislative Developments in Post-Grant Practice

Fish Webinars

Thank you!

56

Please send your NY CLE forms or questions about the webinar to Georgie Stocks at stocks@fr.com.

A replay of the webinar will be available for viewing at http://fishlitigationblog.com.

Chris Marchese

Principal, San Diego

858-678-4314

marchese@fr.com

57

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