A recent court decision precluding a patent owner from relying on any of its proffered evidence to support a proposed reasonable royalty rate should be studied carefully by patent owners. See Acceleration Bay LLC. v. Activision Blizzard Inc., C.A. No. 16-00453-RGA, 2018 U.S. Dist. LEXIS 178362 (D. Del. Oct. 17, 2018). The case underscores how closely courts are evaluating evidence put forward to support a proposed reasonable royalty and the need to carefully vet such evidence (and decide who will present it) early in the case. In Activision, the defendant moved to preclude the plaintiff’s damages theories and supporting evidence. The court granted-in-part defendant’s motion. The plaintiff patentee had sought to support its proposed reasonable royalty rate of 15.5 percent with four pieces of evidence: (1) testimony of its Vice President of Licensing; (2) testimony of its CEO; (3) an industry report; and (4) an agreement between the defendant and a third party. The court precluded all four categories of evidence. First, the court precluded the testimony of the plaintiff’s licensing executive, stating that a reasonable royalty opinion is necessarily based on specialized knowledge, which the executive lacked. The court also found that the executive lacked personal knowledge of the...
Tagged: Patent Damages
Two recent District Court decisions provide IP practitioners with guidance about royalty base in patent damages calculations. Last week, in Inventio AG v. Thyssenkrupp Elevator Americas Corp., et. al., 1-08-cv-00874 (D. Del. Dec. 13, 2013), Judge Andrews denied defendants’ motion for summary judgment and motion to strike that plaintiff improperly calculated damages. The defendants argued that plaintiff’s expert incorrectly included revenue from defendants’ service contracts in the damages calculation. However, the court determined that the expert relied on the service contracts to increase the royalty rate not the base. Thus, the court denied the motion. This case provides support that revenue generated outside of the royalty base can still be used to increase the royalty rate, thus potentially achieving higher damages.
On April 12, United States District Judge Ellis of the Eastern District of Virginia excluded the testimony of patentee Suffolk’s damages expert directed to a reasonable royalty based on the Nash Bargaining Solution, a kind of negotiation model. Suffolk’s expert used the Nash Bargaining Solution to determine that damages should be based on a 50/50 split of incremental profits. The Court struck this analysis, finding that the 50/50 split was analogous to the 25% rule previously rejected by the Federal Circuit in Uniloc v. Microsoft.
Deferring judgment until after he hears testimony prior to trial, U.S. District Judge Richard G. Andrews of the District of Delaware nonetheless indicated in a recent Memorandum Opinion that he was inclined to exclude plaintiff’s patent damages expert. In AVM Techs., LLC v. Intel Corp., C.A. No. 10-610-RGA, plaintiff AVM sued Intel for patent infringement relating to U.S. Patent No. 5,859,547, which claims improved dynamic logic circuits used in microprocessors. Intel filed a Daubert motion seeking to exclude AVM’s damages expert, who had opined that AVM was entitled to reasonable royalty damages of over $150 – $300 million.