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ARTICLES
Court Wrestles with EMVR Issue of Smallest Saleable Unit
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 ... Read MoreNV Court: Nash Equilibrium 50% Profit Split is not a “Supercharged” 25% Rule
A Nevada judge rejected a Daubert motion against a damages expert who based his royalty partly on a 50% profit split. Defendants called this a “rule of thumb” similar to the 25% Rule that the Federal Circuit rejected in Uniloc but the judge disagreed. Defendant Pulse Electronics sought to exclude Plaintiff Halo’s damages expert, John Hansen, among other reasons because of his methodology in arriving at a 10-15% reasonable royalty. The court explains: "Pulse next argues Hansen improperly arrived at a 10-15% royalty rate by dividing the profit margins of [Plaintiff] Halo and [Defendant] Pulse in half and using the resulting figures as the upper and lower limits for the rate. Pulse contends this is a ‘supercharged’ 50% version of the ‘25% rule of thumb’ rule rejected by the Federal Circuit in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011). Halo counters that Hansen did not rely on a ‘rule of thumb’ concept, and properly relied on the 15 factors in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) to determine his proposed royalty rate." After noting that Halo’s expert also analyzed each of the 15 Georgia-Pacific factors, the judge concludes: “Because Halo has demonstrated ... Read MoreWA Court May Allow Royalty Applied to Entire Product Despite Failing EMVR
In a Daubert ruling, a Washington district court judged allows Motorola’s expert to testify that the reasonable royalty should apply to the complete product, despite failing to meet the entire market value rule. In this patent infringement case related to Microsoft’s Xbox 360, the court had previously determined that due to Microsoft’s commitments to standard-setting bodies, the damages shall be at reasonable and non-discriminatory (RAND) royalty rates. Motorola’s expert, Charles Donohoe, opined that such a RAND royalty in this case would be 2.25% of the selling price of the Xbox 360. Microsoft moved to exclude the expert testimony of Mr. Donohoe among other reasons because it did not meet the entire market value rule; specifically, he applied the royalty to the complete product without attempting to satisfy the predicate that the patents create the basis of customer demand of the complete product. In rejecting the Daubert motion, the judge first points to the Federal Circuit’s Lucent ruling that accepts the use of a larger base as long as you compensate for that by using a smaller royalty. We at IP Value Blog have noted that the Federal Circuit, in its Uniloc decision, backed away from that position. The judge then notes that ... Read MoreCourt Allows Lost Profits Claim if Presented as the Expert’s Assumption, not Opinion
Defendants filed a Daubert motion to exclude a lost profits claim where the expert assumed a 50% market share, based only on his client’s estimates. The district court denied the motion, thus allowing the testimony as long as the expert presents the 50% as assumption, not his opinion. Plaintiff’s expert Christopher Barry explained in his expert report that it was a two-supplier market, however, “some customers might not be educated on [Plaintiff’s] products and the availability of the [patented] hand-held atomizing induction tool. Therefore I conservatively assume that only 50% of [Defendant’s] accused induction tools and associated fluids would be captured by [Plaintiff].” His conclusion and opinion that Plaintiff would capture 50% was based exclusively on information provided by Plaintiff, and he conducted no independent investigation in this regard. The court allows the expert testimony as long as it is presented as a factual assumption. However, the expert is precluded from continuing to testify that his opinion is that Plaintiff would receive 50% of the sales, because such testimony does not appear to be grounded in sound economic and factual predicates. Illinois Tool Works Inc. v. MOC Products Company, Inc., 3-09-cv-01887 (S.D. CA, August 17, 2012, Order)(Sammartino)
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