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The Legal System and Patent Damages Recent Developments

The Legal System and Patent Damages Recent Developments. Prof. Amy Landers University of the Pacific/McGeorge School of Law. Recent Cases Reasonable Royalty. Evidence supporting rate Licenses Non-infringing features Hypothetical/actual sales of accused product

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The Legal System and Patent Damages Recent Developments

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  1. The Legal System and Patent DamagesRecent Developments Prof. Amy Landers University of the Pacific/McGeorge School of Law

  2. Recent CasesReasonable Royalty • Evidence supporting rate • Licenses • Non-infringing features • Hypothetical/actual sales of accused product • Reference product as comparator • Entire market value rule • Relation between royalty base and rate

  3. Comparable licenses: Lucent v. Gateway Predetermined, named fields Dependent claim 21: “Bit-mapped graphics field”

  4. Comparable licenses: Lucent v. Gateway • Microsoft Outlook, Money and Windows Mobile • 110 million units - $ 8 billion in sales • Lucent sought 8 % royalty ($ 561.9 million) • Jury award $ 358 million lump sum

  5. Comparable licenses: Lucent v. Gateway • What is a “comparable license”? • Negotiated under comparable circumstances • Comparable technology • Comparable scope • Comparable terms • Proponent bears the burden of linking licenses and the invention’s footprint in the market

  6. Comparable licenses: ResQNet v. Lansa • Technology: graphical user interface for a remote mainframe computer • Award: 12.5% royalty - $506,000 • Held: Reversed, amount was based on “speculative and unreliable evidence” • Licenses must provide insight into the market value of the patent in suit

  7. Comparable licenses: Lucent and ResQNet Fed. Cir.: The “trial court must carefully tie proof of damages to the claimed invention’s footprint in the marketplace” • Bundled licenses to products and services • No license to patent in suit • Licenses did not embody the claimed technology • Licenses arising from litigation

  8. Summary: Comparable Licenses • Licenses supporting royalty must be comparable • Scope • Technology • Legal right conferred • Negotiating circumstances • Terms • Proponent bears burden of demonstrating relevance to hypothetical negotiation

  9. Royalty RateMulti-function Product/ Uses • Mix of patented and unpatented features may affect royalty % rate • Lucent v. Gateway- Award reversed, where an infringing feature is a minor component of larger product • Rate: Both hypothetical and actual uses • Anticipated sales • Actual sales

  10. i4i v. Microsoft • Accused product: MS Word ($97) • Patentee sought $98 royalty per infringing product • Used “reference product” as comparator, combined with 25% rule of thumb • Affirmed

  11. Entire Market Value RuleReasonable Royalty • EMVR permits recovery of damages based on the value of the entire apparatus • Allows non-infringing features to be included in the royalty base if necessary for full compensation

  12. Entire Market Value RuleLucent v. Gateway • Date picker feature- Microsoft Outlook • Patentee bears burden to demonstrate a “basis for consumer demand”

  13. Entire Market Value RuleLucent v. Gateway • Patentee bears burden to demonstrate that the patented technology is the basis for consumer demand • Date-picker • Small % of code • Large % of non-infringing features • Comparative importance of non-infringing features • Patentee showed no sales attributable to patented method

  14. Entire Market Value RuleCornell v. Hewlett-Packard (N.D.N.Y. 2009)(Rader, C.J.) Instruction recorder buffer CPU Module CPUBrick PA-8000 series processor Server Cell board

  15. Entire Market Value RuleCornell v. Hewlett-Packard (N.D.N.Y. 2009)(Rader, C.J.) • “Entire market value”– what is the proper “market” for the royalty base? • Proper base must be linked to a market with a consumer demand • Based on real-world transactions • Invention must drive demand in the market

  16. Entire Market Value RuleCornell v. Hewlett-Packard (N.D.N.Y. 2009)(Rader, C.J.) • The infringing components must be the basis for consumer demand for the entire machine; • The individual infringing and non-infringing components must be sold together; and • Individual infringing and non-infringing units components must be analogous to a single functioning unit “Notably, these requirements are additive, not alternative[s]”

  17. Entire Market Value RuleOPTi v. Apple

  18. Relationship between Royalty Rate and Base: Comparison • Lucent v. Gateway: • Entire value can be used where the rate is within an “acceptable range” • Nothing inherently wrong with relying on price of entire product where there is no market value for the invention, so long as the rate accounts for the proportion • Here, expert was not justified in raising rate from 1% - 8%

  19. Relationship between Royalty Rate and Base/ Comparison • Cornell v. Hewlett-Packard: • An over-inclusive royalty base including revenues from the sale of non-infringing components is not permissible simply because the royalty rate is adjustable. • Base and rate are conceptually separate

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