Daubert Motion: Patent Damages Hot Topics

Recent Entire Market Value Rule Daubert Challenges

Versata Software Inc. v. SAP America, Inc.

2011 WL 40179392 (E.D. TX, 2011)

ISSUE: As the Court discussed when it granted SAP's motion for a new trial on damages for the ′350 patent, the Federal Circuit has recently addressed the calculation of a reasonable royalty and the standards by which expert witnesses should make this calculation. In particular, the Federal Circuit has emphasized the need for experts to connect their theories to the actual facts of the case at hand. See Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1316 (Fed.Cir.2011) (“The bottom line ... is that one major determinant of whether an expert should be excluded under Daubert is whether he has justified the application of a general theory to the facts of the case.”); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed.Cir.2010) (stating that, to be admissible, expert testimony opining on a reasonable royalty rate must “carefully tie proof of damages to the claimed invention's footprint in the market place.”); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1323–1339 (Fed.Cir.2009) (“[W]e are left with the unmistakable conclusion that the jury's damages award is not supported by substantial evidence, but is based mainly on speculation and guesswork.”).

HOLDING: Accordingly, the Federal Circuit stated in Uniloc that “[t]he Supreme Court and this court's precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.”

 

Lucent Technologies, Inc. v. Microsoft Corp.

2011 WL 272831707 (S.D. CA, 2011)

ISSUE: Microsoft brings this motion in limine to challenge the supplemental report on damages submitted by Lucent's expert Raymond Sims as in violation of Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and the entire market value rule. Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed.Cir.2011). The Court has already ruled on two sets of motions in limine filed by the parties. (See Doc. Nos. 1179–80, 1284–85.) The first motions in limine were filed on December 7, 2010. (See Doc. Nos. 1008–1013, 1020–1032.) On the day of the motion hearing, January 4, 2011, the Federal Circuit rendered its opinion in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed.Cir.2011). In Uniloc, the Federal Circuit rejected the 25% rule of thumb under Daubert holding that the rule “fails to tie a reasonable royalty base to the facts of the case at issue” and further clarified the entire market value rule. 632 F.3d at 1315.

HOLDING: In light of the impact of the Uniloc opinion on the damages analysis in this case, the Court permitted the parties to update their damages expert reports and submit additional briefing.

 

Inventio Ag v. Otis Elevator Co.

2011 WL 335970506 (S.D.N.Y., 2011)

ISSUE: In Uniloc, the Federal Circuit warned against the danger of admitting consideration of the entire market value of the accused product where the patented component does not create the basis for customer demand. It is, therefore, important to give a motion to bar calculation of a reasonable royalty using the rule serious consideration. However, the court sitting on a motion in limine is not the trier of fact, and cannot arrogate the jury's function as trier of fact—even when ruling on a Daubert motion.

HOLDING: If the patentee proffers competent evidence in opposition to the motion in limine that, if believed, would permit the jury to conclude that customer demand was a function of the patented feature, the expert testimony should not be disallowed.

 

Lucent Technologies, Inc. v. Microsoft Corp.

2011 WL 766441607 (S.D.CA, 2011)

ISSUE: The Court has already ruled on one set of motions in limine filed by the parties. (See Doc. Nos. 1179–80.) On the day of the motion hearing, the Federal Circuit rendered its opinion in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed.Cir.2011). In Uniloc, the Federal Circuit rejected the 25% rule of thumb under Daubert holding that the rule “fails to tie a reasonable royalty base to the facts of the case at issue” and further clarified the entire market value rule. 632 F.3d at 1315. In light of the impact of the Uniloc opinion on the damages analysis in this case, the Court permitted the parties to update their damages expert reports and submit additional briefing. The parties now bring new motions in limine to address the supplemental reports. The fact that consumers of Defendant Microsoft's product Outlook may enjoy a time savings as a result of the Day patent technology is relevant to the Georgia–Pacific factor 9, the advantages of the patented technology. 

HOLDING: Accordingly, the Court permits Lucent to introduce the time savings analysis but only with a limiting instruction to the jury that the number represents only the time savings value of the Day patent technology to consumers and not necessarily what Microsoft would pay for the feature. Since the time savings represents a relevant factor under the Georgia–Pacific analysis and with the limiting instruction to the jury, the Court concludes that the testimony does not violate Daubert or the entire market value rule. After careful consideration of the parties' arguments as to this analysis, the Court declines to exclude the survey results analysis under Daubert or the entire market value rule. By apportioning the value of Outlook by the number of users who would not have purchased Outlook but for the Day patent technology (7%), Sims accounts for a portion of the market of Outlook users that may be attributable to the Day patent technology, subject to Microsoft's challenges on cross-examination. Accordingly, the Court denies Microsoft's motion to exclude Lucent's survey results analysis.

 

LaserDynamics, Inc. v. Quanta Computer, Inc.

2011 WL 75638182 (E.D. TX, 2011)

ISSUE: Now before the Court is Quanta’s Daubert motion to exclude Plaintiff expert testimony relating to the entire market value rule.  Plaintiff responds that its expert has not used the entiremarketvalue rule, but instead has applied a reasonable royalty already approved by the court to the value that an optical disk drive adds to a finished computer.

HOLDING: Defendants' Daubert Motion to Exclude Expert Testimony Regarding Royalty Rates is GRANTED in part. Mr. Murtha's entiremarketvalue rule testimony is excluded. Mr. Murtha's testimony relating to the Philips/ACI agreement, the QSI/Philips agreement, and the Toshiba agreement is excluded. Mr. Murtha's testimony relating to the Licensing Executive Society survey is limited to discussion of the prevalence of running royalty versus lump sum agreements, and references to the rates discussed in the survey are excluded.

 

Rembrandt Data Technologies, LP v. AOL, LLC

2009 WL 22426241 (E.D. VA, 2009)

ISSUE: THIS MATTER is before the Court on Defendant Hewlett-Packard Company's Motion to Exclude the Testimony of Plaintiff's Damage Expert Christopher Bokhart. (Dkt.380.) The issue before the court is whether Mr. Bokhart's should be excluded from testifying to his damage calculation under Daubert because in calculating his reasonable royalty, Mr. Bokhart employs a flawed methodology.

HOLDING: The court denies H-P's Motion to Exclude the Testimony of Plaintiff's Damage Expert Christopher Bokhart. First, H-P argues that the Court should exclude the testimony of Mr. Bokhart because he relies on a flawed methodology when calculating the reasonable royalty of the alleged patents-in-suit by determining his royalty base from the end-user H-P products that contain the accused device without satisfying the entiremarketvaluerule. Second, H-P argues that Mr. Bokhart should be prohibited from testifying to any damage calculation prior to September 26, 2008, because Rembrandt did not satisfy the marking requirement of 35 U.S.C. § 287(a) and therefore cannot recover damages prior to the filing of the lawsuit as a matter of law.

 

Cornell University v. Hewlett-Packard Co.

609 F.Supp.2d 279 (N.D.N.Y. 2009)

ISSUE: Cornell originally sought damages on the revenue from Hewlett-Packard's entire server and workstation systems. These servers and systems include vast amounts of technology beyond the infringing part of the processors. In anticipation that Cornell would assert entitlement to damages beyond the claimed invention, this court repeatedly advised before trial that it would scrutinize the damages proof. With this advance warning, this court expected Cornell to present well-documented economic evidence closely tied to the scope of the claimed invention. To this court's surprise, when the trial commenced, Cornell had not revised its attempts to prove entitlement to damages far beyond the scope of the claimed invention. Because the claimed invention is “a component of a component within the processors used in Hewlett-Packard's servers and workstations,” this court interrupted the trial to conduct a Dauberthearing to determine whether Cornell's damages expert, Dr. Marion Stewart, had properly applied the entiremarketvalue rule or had improperly expanded the rule to claim damages far in excess of the contribution of the claimed invention to this market (and thus to gain more than “damages adequate to compensate for the infringement.”).  Cornell Univ. v. Hewlett-Packard Co., No. 01-CV-1974, 2008 WL 2222189, at *2 (N.D.N.Y. May 27, 2008). In particular, Dr. Stewart sought to testify that the jury should compute damages using a royalty base encompassing Hewlett-Packard's earnings from its sales revenue from its entire servers and workstations.

HOLDING: GRANTED

 

All cases reprinted from Westlaw with permission of Thomson Reuters.  If you wish to check the currency of any case using KeyCite on Westlaw, you may do so by visiting www.westlaw.com.