This district court wrestles with a conflicting area of patent damages that we at VLF have previously identified: although the Fed. Circuit wants patent royalties to be based on the “smallest saleable unit,” it later rejected the use of MS Outlook (presumably the smallest saleable unit) as a royalty base.
In this case, Plaintiff’s damages expert, Larry Evans, calculated damages based on Intel processors – the smallest saleable unit – per Judge Rader’s guidance in Cornell v. hp. As a result, Plaintiffs claim the Entire Market Value Rule (“EMVR”) does not need to be met; i.e. they do not need to show that the patented feature was the basis of demand for the processor. Intel argues that the general rule calling for the use of the smallest saleable unit should take a back seat to the EMVR, pointing to Lucent v. Gateway, where the Fed. Circuit refused to allow MS Outlook (the smallest saleable unit) to be used as the royalty base.
The judge here sides with Intel, explaining that in general, allowing a larger royalty base can permit increasingly large errors (and reversible errors as well, due to Uniloc). The judge also notes that it has not been shown that the patented feature drives demand for the entire microprocessor. At VLF Consulting, we expect this question of apportioning the royalty base below the level of the smallest saleable unit to likely continue unresolved for the near future, as district courts take differing positions.
The Court also rejects Plaintiff’s expert’s use of certain Intel license agreements because they include entire patent portfolios instead of single patents. The judge hints that he may exclude use of this agreement too, since the expert’s report “does not indicate that he performed any analysis to compare the benefits and value of the technology covered by this agreement.”
AVM Technologies LLC v. Intel Corporation, 1-10-cv-00610 (D. DE, January 4, 2013, Opinion)(Andrews)