Post-Uniloc Reasonable Royalty Damages

Vol. 6 No. 6

By

Eric A. Rudich, Ph.D. is a social psychologist and senior litigation consultant at Magna Legal Services, where he offers jury research, consulting, and graphics services for companies involved in patent litigation. Lewis M. Koppel, Ph.D. is the principal of LMKonsult, LLC, where he consults and testifies on the financial aspects of intellectual property and related litigation. Michael P. Padden is a partner at Pearne & Gordon LLP, where he leads the litigation group, focusing his practice on litigation of intellectual property disputes.

On January 4, 2011, the Federal Circuit released its landmark decision in Uniloc USA, Inc. v. Microsoft Corp.,1 abolishing use of the so-called 25 percent rule, under which a hypothetical licensee would be expected to pay as a reasonable royalty 25 percent of the expected profits of the product incorporating the patent. The court found that this “rule of thumb” was “a fundamentally flawed tool” for determining a baseline royalty rate in the hypothetical negotiation that sets the reasonable royalty to which the patentee is entitled under 35 U.S.C. § 284.2 Because the 25 percent rule fails to tie the reasonable royalty rate to the particular facts of the case at issue, expert testimony relying on that rule is inadmissible under Daubert.3

The Uniloc decision touches virtually every patent infringement case, because the damages claim in such cases almost always includes a reasonable royalty in case the plaintiff cannot prove actual damages. Studies have shown that, averaged over five-year periods, reasonable royalties have accounted for 68–81 percent of damages awards since 1995.4

The Uniloc decision clearly settled the dispute over the use of the 25 percent rule, but it also left unanswered questions. If 25 percent of the expected profit from the accused product is an unacceptably arbitrary starting point, what is a reasonable one? How does one tie the reasonable royalty analysis to the facts of the case, when the case has little direct evidence of the financial value of the patented invention? These and other questions must be appropriately answered in order for a plaintiff to avoid Daubert and present the theory to the jury, but will that evidence be persuasive to the jury? How do juries actually process the evidence and award damages?

This article will review some of the approaches that have been used to meet the Uniloc challenge, review how juries actually decide damages claims, and suggest how the post-Uniloc damages claims may be best presented to juries.

Meeting the Uniloc Challenge

The 25 percent rule was widely used before Uniloc because it provided a solution to a common problem—the lack of significant market evidence of the value of the patented invention. This problem has not gone away. It is not at all uncommon for patent owners to have little evidence or knowledge of the value of their patents. Some patent owners do not practice their patents and do not participate in the markets where the invention is used. Such patentees may include, for example, nonpracticing entities or traditional manufacturing firms that made the patented invention in the course of R&D aimed elsewhere or acquired it as part of the acquisition of another business.

Even those firms that participate in markets relevant to the particular patent may have made little or no effort to value the patent. Small startup firms are typically short of funds and prefer to devote their resources to commercializing their products. Larger firms, which can afford the expense of valuing patents, often have large portfolios of patents that would be expensive to value and see little utility in doing so. Hence many patent owners often come to litigation with little, if any, knowledge or evidence of the market value of the patent that is the subject of the litigation.

How can this challenge be met after Uniloc? It is useful to go back to basics and review the three approaches that underlie all valuation work—the market approach, the income approach, and the cost approach. In the market approach, an asset is valued using the values that have been established by transactions for other similar assets. The income approach values an asset by estimating the income it is expected to generate for its owner over its useful life. In the cost approach, an asset is valued at what it would cost to replace it with a similar asset. All three approaches have from time to time been used in estimating patent damages, and all three can be useful for estimating reasonable royalty damages post-Uniloc.

Market Approach

The market approach to valuation is familiar to anyone who has purchased or sold a house. Professional appraisers as well as purchasers and sellers often look to sales of similar houses to estimate the value of the house at issue.

The difficulty with this approach in the context of patent valuation is that the “comparables” are not easy to find. Given the numbers, this should be expected. The publicly available databases claim to have records of only a relatively small number of transactions (at best approximately 100,000 transactions), and this claim may be overstated. These databases include licensing information on not only patents, but also on other types of intellectual property, and they usually include transactions for which royalty rate data was not available. They may also include multiple records in which the same patent was licensed to a number of parties. A recent estimate of the number of U.S. patents currently in force was 2.1 million.5 The U.S. patent classification system includes more than 150,000 subclasses into which inventions may be categorized.6 Accordingly, it is not surprising that for any given patent it is difficult to find a transaction for a closely comparable patent in the publicly available databases.

The recent softening of the rule against the use of litigation-related licenses ameliorates the problem of finding comparables to some degree. In ResQNet.com, Inc. v. Lansa, Inc., the plaintiff’s expert used the market approach, examining a number of licenses ResQNet had granted.7 The Federal Circuit, observing that “the most reliable license in this record arose out of litigation,”8 remanded to the district court for a redetermination of the reasonable royalty that would include litigation-related licenses and exclude reliance on other license agreements that the court found inapposite. But ResQNet has not ushered in a blanket presumption in favor of admitting all litigation-related licenses. Rather, courts have continued to scrutinize all license agreements proffered as comparables, both litigation-related licenses and non-litigation-related licenses. In some instances the litigation-related licenses are excluded,9 but in others they are accepted,10 expanding the potential instances in which the market approach can be successfully used.

In some cases, the patentee’s own practices may provide the proof necessary for the market approach. For example, a business that adopts a policy for licensing its invention and licenses to a number of licensees in accordance with that policy may be able to develop evidence of an “established royalty” that has been accepted by the market.11 Even without an “established royalty,” the party’s licensing activity may provide evidence that could contribute to a market approach–based royalty. Licensing activity in the industry can also be important to a market approach. Thus, businesses that learn of these licenses and document them as part of routine competitive analysis will be able to use this information as evidence for a market approach in the event of a dispute.

Income Approach

Fundamentally, the economic value of a patent arises from the profits that can be made from its use. Most actual patent licensing agreements (which the hypothetical negotiations envisioned by Georgia-Pacific Corp. v. U.S. Plywood Corp. attempt to model12) are running royalty agreements, with the running royalty rate expressed as a percentage of the licensee’s sales revenue for products embodying the licensed patent(s), or, in a relatively small proportion of agreements, a per-unit royalty rate. This accords with common sense, in that it ties the compensation the licensor receives for allowing the use of its patents to the extent of the licensee’s use of them. Although the benefit to the licensee of using the licensor’s patents is the additional profit the licensee makes from so doing, the use of a revenue-based royalty rate provides a much more easily auditable calculation and a royalty base not subject to the accounting adjustments required to determine, from revenues, what the additional profit would be. In addition, as all royalties must ultimately come out of profits, the running royalty rate, although generally expressed as a percentage of revenues, is implicitly related to the rate of pre-tax profits. This is recognized by the 15th Georgia-Pacific factor (often considered to be a description of the hypothetical negotiation itself), which describes the royalty rate to be paid by the licensee as one which the licensee “would have been willing to pay as a royalty and yet be able to make a reasonable profit.”13

While there is no dispute with the concept that the value of a patent arises from the profit that can be made by the use of it, there is considerable controversy over how that profit should be split between the patentee and the infringer. Uniloc clearly rejected the 25 percent rule as unacceptably arbitrary, but it gave no guidance on what would be an acceptable split of the profit and how that should be determined. It should first be noted that the holding in Uniloc would not appear to prohibit using 25 percent of the infringer’s profits from the use of the invention as a baseline royalty rate, where there is evidence in the record to support it. In Mobil Oil Corp. v. Amoco Chemicals Corp., for example, evidence demonstrated that the patent owner historically had “sought a royalty of 25% of the low end of the benefits of [the patented inventions] over the prior technology” and had obtained a royalty of about 20 percent, and that such a licensing scheme was accepted in the industry.14 The court relied on that practice in determining the reasonable royalty. Uniloc would presumably not disallow such a result.

But in the absence of evidence that a percentage of profits rule was actually applied by the parties or in the industry, Uniloc demands a different approach. After Uniloc, damages experts have turned to various methods to bridge the gap, most notably the analytical approach and the Nash bargaining solution (NBS).

Analytical Approach

In the analytical approach, the reasonable royalty is estimated as the additional profit the infringer would expect to enjoy by selling the accused articles, over the infringer’s “normal” profit on similar, but not accused, articles. Thus, from the infringer’s selling price of the accused articles, one would subtract the direct and variable costs to produce them, the fixed costs, including overhead, and the normal profit on similar articles, to arrive at the reasonable royalty. A good example of this approach is given in the seminal case of TWM Manufacturing Co. v. Dura Corp. as follows:

[T]he special master found that Dura projected a gross profit averaging 52.7% from its infringing sales. From that figure, she subtracted overhead expenses to get an anticipated net profit in the range of 37% to 42%. Subtracting the industry standard net profit of 6.56% to 12.5% from that anticipated net profit range, she arrived at a 30% reasonable royalty.15

Although the reasonable royalty under this approach can be the entire expected additional profit from the use of the invention, the analytical approach has been able to withstand Daubert challenges post-Uniloc.16 Indeed, in Energy Transportation Group, Inc. v. William Demant Holding, the plaintiff’s use of the TWM analytical approach preserved a damages award that was tainted by the plaintiff’s pre-Uniloc use of the 25 percent rule.17 The Federal Circuit found that the plaintiff’s expert’s references to the 25 percent rule “did not irretrievably damage the reasonableness of his method” because he also relied on an analysis of the Georgia-Pacific factors and “an entirely separate” TWM analysis that supported the verdict.18

It is also interesting to note that the analytical approach was used in the damages retrial in Uniloc. While Uniloc’s original expert, using the 25 percent rule, had opined to damages of nearly $565 million (with the jury awarding $388 million), its new expert’s analytical method calculation resulted in a damages estimate of $626 million to $3.6 billion, and the court allowed him to testify to these amounts.19 Microsoft also had a new expert on retrial, and he also used a different approach. Microsoft’s expert abandoned the previously used market approach ($3–7 million) and instead used a cost approach based on the cost ($2 million) of relocating the infringing system to an existing facility outside the United States,20 which the court had ruled would have been a noninfringing alternative.21 Because the case settled during retrial, there was no verdict and no further rulings.

Nash Bargaining Solution

The NBS has had more difficulty gaining judicial approval as a tool for estimating the reasonable royalty rate. The NBS resulted from work done in the 1950s by John Nash, a game theorist who was awarded the Nobel Prize for economics and whose life was the subject of the 2001 movie A Beautiful Mind. In seeking a sound methodology for two-party bargaining problems, Nash found that under certain assumptions there would be a unique, optimum solution to the division of profits between two negotiating parties such that no other outcome would be better for one party and not worse for the other. One of the key requirements for calculating this split is knowledge of each party’s “disagreement profit”—the amount each party would still make if agreement was not reached.

In the very simplest case, an inventor with no ability to produce his invention licenses his patent to a manufacturer. In that case, both parties’ disagreement profits are zero. The method finds the optimum split of the profits that would result from an agreement would be 50/50, as, absent an agreement, neither party would have any profit. If, however, only the inventor had an alternative that would earn some profit absent an agreement, the optimal split of the surplus profits to be made (the total profits less the inventor’s disagreement profit) would be skewed favorably to the inventor, and vice versa.22

The formulas proposed for applying the NBS to the hypothetical negotiation either assume that each party has equal bargaining power or introduce a parameter representing each party’s relative bargaining power. Mathematically, if one party is thought to have, say, three times the bargaining power of the other, their relative bargaining power parameters would be 0.75 and 0.25. These values are used to adjust the profit split between the two parties.

Although use of the NBS to estimate reasonable royalties was suggested at least as early as 2001,23 decisions dealing with it have appeared only after Uniloc, and in those cases its reception has been mixed. In Oracle America, Inc. v. Google Inc., the court lambasted the NBS and excluded expert testimony based on it, concluding that “[t]he Nash bargaining solution would invite a miscarriage of justice by clothing a fifty-percent assumption in an impenetrable facade of mathematics.”24 In Suffolk Technologies LLC v. AOL Inc., the court found that although the plaintiff’s damages expert “arguably applied” the Georgia-Pacific factors in a hypothetical negotiation, his hypothetical negotiation, “based on the Nash Bargaining Solution (‘NBS’), does not appear to be tied to the facts of this case.”25 Rather, the expert appeared to “summarily conclude that the result of this hypothetical negotiation would be a 50/50 split of the incremental profits attributable to the patent-in-suit.”26 The court found the expert’s damages opinion “not meaningfully distinguishable from the damages opinion rejected in Uniloc,” and granted the defendants’ motion to exclude it.27

However, NBS analysis has been accepted in other cases where the expert adequately explained the rationale for his or her proposed profit split and where NBS was used with or in support of other methods of estimating the reasonable royalty. In VirnetX Inc. v. Apple Inc., the defendant argued that the plaintiff’s damages expert’s 45–55 percent profit split based on the NBS “is akin to the disdained ‘25% rule’ and does not support a damages award since it has no basis in reality.”28 The court denied the motion, finding that the plaintiff’s expert had adequately supported the theory. The court implicitly accepted the NBS and found that the expert had calculated the contribution of the patented feature to Apple’s profits and had adequately explained his rationale for his proposed profit split.29 In the companion case of VirnetX Inc. v. Cisco Systems, Inc.,30 the court rejected a similar attempt to bar testimony regarding a reasonable royalty based on the NBS.

In Mformation Techs., Inc. v. Research in Motion Ltd., the defendants sought to exclude the testimony of the plaintiff’s damages expert because he “relie[d] on the ‘Nash Bargaining Solution’ in determining a royalty rate, which is an inadmissible rule of thumb.”31 The court rejected the defendant’s argument, finding that “[i]n addition to performing an extensive Georgia-Pacific analysis, [the plaintiff’s expert] also used the Nash Bargaining Solution system ‘as a check’ on the reasonableness of the rate reached through his Georgia-Pacific analysis. Because [the expert] used [NBS] in addition to, rather than in lieu of, the Georgia-Pacific analysis, . . . it does not constitute a ground for exclusion of his testimony.”32

Cost Approach

The cost approach is perhaps most easily recognized as the valuation approach used for insurance purposes, where the value of an insured house is set by the cost that would be required to rebuild it. This approach has been used in patent cases. In Slimfold Manufacturing Co. v. Kinkead Industries, Inc., the Federal Circuit upheld a district court award of “all profits that [infringer] Kinkead realized in the form of manufacturing cost savings” and a reasonable royalty of 0.75 percent of Kinkead’s sales of infringing bifold metal doors.33

In most patent cases in which it is used, the cost approach is used to suggest an upper limit on the royalty to which the parties would have agreed in the hypothetical negotiation. The argument is that the infringer would not agree to pay more in a royalty than it would need to pay to obtain or develop a noninfringing alternative. In Grain Processing Corp. v. American Maize-Products Co.,34 the Federal Circuit upheld a reasonable royalty of 3 percent of sales of infringer AMP’s sales of a food additive, based on the manufacturing cost difference of an alternative noninfringing process to manufacture it. The court accepted the argument that if Grain Processing had insisted on more than 3 percent in the hypothetical negotiations, AMP would have chosen to invest in the noninfringing alternative manufacturing process. More recent trial court decisions have accepted this argument as well.35

We have reviewed above several approaches that can be used to estimate a reasonable royalty rate after Uniloc, but that is only half the battle. Assuming that these theories survive legal scrutiny on a motion in limine or at summary judgment, they must still be persuasive to the jury, an issue that has become more and more significant in patent cases. Use of jury trials in patent infringement cases jumped from 26 percent in the 1990s to 62 percent in the 2000s, and trial success rates were consistently substantially greater for jury trials than for bench trials since the 1995–2000 period.36 Median damages awarded were $1.5 million greater for jury trials than bench trials in the 1995–2000 period, but the difference jumped to more than $10 million in the 2001–2006 and 2007–2012 periods.37

We will now review how juries actually decide damages claims and then suggest how the post-Uniloc damages claims may be best presented to juries.

Juror Determination of Damages

During the liability phase of a patent trial, jurors are provided with a great deal of information regarding the invention, patent language, infringement, and invalidity issues. Due to the complexity of the information presented, jurors feel the need to simplify and synthesize this information so that they can later make verdict determinations.38 Jurors tend to process this flood of information by developing stories. Stories convey information and enable people to make sense of the world around them. The need and importance of stories is found in all cultures and manifests itself in people’s predilection for movies, television shows, gossip, and news. Our affinity for stories may have developed out of the evolutionary advantage it gave to our ancestors. Rather than making their own mistakes, storytelling has enabled people to learn from another’s cautionary tales.

Scientific research has shown that people’s brains are particularly responsive to stories. Paul Zak and his colleagues have found that when watching a short, sad story about a father and son, people produce the neurochemicals cortisol, a hormone released in response to stress, and oxytocin, a hormone released in response to social intimacy.39 The researchers determined that higher levels of cortisol caused individuals to experience distress and to pay greater attention to the story and higher levels of oxytocin were associated with greater empathy, promoting connection and care for others. Interestingly, after listening to the story, people whose oxytocin levels were highest were the most likely to give more generous donations to charities or larger monetary gifts to fellow research participants. This finding suggests that raising jurors’ oxytocin levels may increase their damages awards. Other researchers studied the levels of brain activation while participants were read excerpts from a story called One Boy’s Day, which chronicled the activities of a youngster.40 The results of this research found that rather than passively listening to the story, study participants were instead mentally simulating the same actions as the young protagonist.

The protagonist in many patent cases is the inventor of the patent(s). Many jurors have an idealized notion of inventors that is rooted in heroic figures such as Thomas Edison, Alexander Graham Bell, or Steve Jobs. The inventor story typically follows a standard storyline known in the comparative literature field as “the hero’s quest.” Based on the work of the noted mythologist Joseph Campbell,41 this storyline consists of a protagonist, an unlikely hero, setting out on a quest in which he or she meets many challenges and is continually tested. Following a great deal of struggle, the protagonist overcomes the obstacles and achieves a great reward.

In a patent case, the inventor is the protagonist who encounters a technical problem. After a great deal of struggle, he or she finally has the epiphany to overcome the challenges, which results in achieving significant benefits to consumers and to society as a whole. The Zak research suggests that jurors’ oxytocin levels and a corresponding desire to reward the inventor will increase after listening to an inventor story that incorporates this narrative arc. In contrast, an inventor story that lacks key storyline elements can lead to much lower damages. For example, it is incongruous for jurors to learn that an invention was developed rather quickly. Although the value of the invention should not be related to the amount of time it took to develop it, the perception is that great achievements do not occur overnight but take much longer to develop. Moreover, without learning the obstacles encountered by the inventor, jurors may feel that the patented invention does not reflect a significant improvement in the field.

The inventor’s testimony with regard to the problem or issue in the art demonstrates to the jury that no one made the invention beforehand. The inventor’s toil and the ultimate benefit highlight the value of the patent. The invention underlying the Uniloc case had a compelling story in which Ric Richardson, the inventor, portrayed himself as the prototypical scientist “who is always trying to solve problems.” In the early 1990s, software piracy was rampant. The challenge he encountered was to create a process to prevent individuals from sharing software and copying it onto multiple computers. Richardson’s epiphany was to create unique registration numbers for the software that would work only on the machine for which the software was registered. The key benefit, of course, was that this system enables companies such as Microsoft to be compensated for each computer on which its software is installed.42

As in the Uniloc case, to the extent that jurors are presented with a compelling inventor story, they will identify with the inventor and reward the plaintiff. The Zak research suggests that jurors’ oxytocin levels and a corresponding desire to reward the inventor will increase after listening to a compelling inventor story. In contrast, an inventor story that lacks these components can lead to much lower damages. Defendants in patent cases should evaluate the inventor story and determine which components may be challenged effectively in order to prevail in the liability phase or to mitigate any damages.

Presenting Damages to the Jury

After listening to evidence regarding liability, if the jury finds that the defendant infringed a valid patent, then they must determine “how much is this invention worth?” Most jurors do not have a good understanding of valuation methods, and their eyes tend to become glazed as economists discuss their methodology for determining damages. As noted above, jurors are very much influenced by the strength of the inventor story. The inventor’s evidence regarding the amount of work that went into developing the patented ideas and the benefit of the invention impact the perceived worth of the intellectual property. Thus, it is important that the damages theory be connected with the invention story. The amount of work that went into developing the invention and the benefits of the intellectual property give the impression that substantial damages may be warranted. However, a compelling inventor story doesn’t provide information with regard to the level of damages. The intellectual property may be worth $10 million or $100 million—both figures reflect a lot of money to jurors.

Without any information on how to value the level of damages, jurors often rely on evidence demonstrating the amount of value the market has placed on the intellectual property. The market approach has intuitive appeal, as it resonates with jurors’ experiences for determining the value of homes, cars, and many other goods and services. The amounts that other companies pay for licenses establishes, in jurors’ minds, fair comparables for the intellectual property. Licenses taken by other companies have the added benefit of bolstering jurors’ perceptions that the patent is valid. Jurors reason that these companies would not have purchased a license if they believed that the patent was not valid. For defendants, it is important to highlight to the jury that the licenses do not provide any indication of the validity or infringement of the patent, as these companies may have chosen to settle rather than incur the costs of litigating. If the patent has not been licensed, then industry norms may serve as anchors for establishing the going rates for intellectual property.

Jurors are receptive to a plaintiff’s market approach argument that the defendant(s) should pay a higher reasonable royalty because the plaintiff was forced to incur the expense of litigation to obtain the royalties to which he or she is entitled. Moreover, if permitted by the court, previous litigation-related licenses may be the most persuasive evidence to jurors for determining damages because jurors see them as apples-to-apples comparisons involving companies that were similarly situated and were also involved in litigation and agreed to pay a certain level of damages. During mock jury research and discussions with shadow jurors, we frequently observe individuals relying on comparable licenses for determining the value of intellectual property and the amount of damages warranted. For defendants, demonstrating the minimal benefits of the invention, thus justifying a low royalty rate, may help to show that the intellectual property is more like owning a one-bedroom apartment adjacent to train tracks than a beachfront estate.

The income approach may have the most intuitive appeal for jurors because the defendant’s profits directly relate to the benefits that are part of an inventor story. Because the defendant would not have been able to obtain these profits but for the use of the patents, jurors’ focus is then on giving back a portion of these profits to the plaintiff. In jury research, mock jurors frequently view the plaintiff’s and defendant’s damages suggestions as initial offers with the true amount of damages somewhere between these figures. The amount of damages awarded in actual patent jury trials also typically falls somewhere between the plaintiff’s and defendant’s damages. For example, in the Uniloc case, Uniloc requested $564 million in damages, Microsoft argued for a damages award of $7 million, and the jury awarded $388 million.43 The income approach can be particularly effective because it begins by establishing the size of the pie that should be divided among the parties. The Georgia-Pacific factors can then be used to show which side, if either, would have had more leverage and thus deserves a larger portion of the profits. Importantly, because the focus is on the amount that the defendant benefited from the use of the technology, this approach is naturally connected with the invention story and can be particularly compelling when used by plaintiffs.

Among the various approaches, the cost approach has the least intuitive appeal, as it doesn’t directly relate to the inventor story or jurors’ everyday experiences. For many jurors, it is incongruous to believe that the defendant could have found a way to avoid using the plaintiff’s invention when, in fact, it did not. Jurors want to know why, if there was a noninfringing alternative, the defendant did not pursue this option. The idea that what it would have cost the defendant to pursue a noninfringing alternative measures the value of the plaintiff’s invention is generally not intuitive for jurors. Instead, jurors’ tendency is to focus on the benefit derived from the defendant for using the plaintiff’s patent.

Conclusion

While the Uniloc decision made it clear that the 25 percent rule is generally no longer an acceptable method for setting a reasonable royalty rate using the income approach, it is still not clear how the profit earned from the invention should be split in the hypothetical negotiation. We have reviewed some approaches that have been used or could be used to fill the gap, but the process of estimating the reasonable royalty remains, as Judge Markey famously wrote, “a difficult judicial chore, seeming often to involve more the talents of a conjurer than those of a judge.”44 As the courts sort out the acceptable approaches, juries will continue to make decisions based on their own approaches, which are not neatly cabined by legal damages rules. Those who litigate patent damages claims in this uncertain environment are well advised to keep in mind the observations we have noted when attempting to convince the jury that their client’s position is the just and fair one.

Endnotes

1. 632 F.3d 1292 (Fed. Cir. 2011).

2. Id. at 1315.

3. Id.

4. PricewaterhouseCoopers LLP, 2013 Patent Litigation Study 11 (2013).

5. Dennis Crouch, How Many US Patents Are In-Force?, Patently-O (May 4, 2012), http://patentlyo.com/patent/2012/05/how-many-us-patents-are-in-force.html.

6. Overview of the U.S. Patent Classification System (USPC), U.S. Pat. & Trademark Off. (Dec. 2012), http://www.uspto.gov/patents/resources/classification/overview.pdf.

7. 594 F.3d 860 (Fed. Cir. 2010).

8. Id. at 872.

9. See, e.g., LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 77–78 (Fed. Cir. 2012); Apple, Inc. v. Samsung Elecs., Co., No. 12-CV-00630-LHK, 2014 WL 794328 (N.D. Cal. Feb. 25, 2014).

10. See, e.g., Multimedia Patent Trust v. Apple, Inc., No. 10-CV-2618-H(KSC), 2012 WL 5873711 (S.D. Cal. Nov. 20, 2012); ReedHycalog UK, Ltd. v. Diamond Innovations, Inc., 727 F. Supp. 2d 543 (E.D. Tex. 2010).

11. Mobil Oil Corp. v. Amoco Chems. Corp., 915 F. Supp. 1333, 1342–48 (D. Del. 1994).

12. 318 F. Supp. 1116 (S.D.N.Y. 1970).

13. Id. at 1120.

14. 915 F. Supp. 1333, 1357 (D. Del. 1994).

15. 789 F.2d 895, 899 (Fed. Cir. 1986).

16. See Apple, Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2012 WL 2571332 (N.D. Cal. June 30, 2012); Caluori v. One World Techs., Inc., No. CV 07-2035-CAS(VBKx), 2012 WL 630246 (C.D. Cal. Feb. 27, 2012).

17. Energy Transp. Grp., Inc. v. William Demant Holding, 697 F.3d 1342 (Fed. Cir. 2012).

18. Id. at 1356–57.

19. Microsoft Corporation’s Memorandum of Law in Support of Its Motion to Exclude Expert Testimony of [Uniloc’s Damages Expert] at 8, Uniloc USA, Inc. v. Microsoft Corp., No. 03-cv-440 (D.R.I. Feb. 7, 2012), ECF No. 515-1; see also Transcript of Proceedings, Uniloc v. Microsoft, No. 03-cv-440 (D.R.I. Feb. 29, 2012), ECF No. 607.

20. Expert Report of [Microsoft’s Damages Expert] at 13, Uniloc v. Microsoft, No. 03-cv-440 (D.R.I. Feb. 26, 2012), ECF No. 574-5.

21. Defendant Microsoft Corporation’s Emergency Motion to Strike the September 7, 2011 Expert Report of Mr. Klausner on Infringement at 1, Uniloc v. Microsoft, No. 03-cv-440 (D.R.I. Oct. 14, 2011), ECF No. 467.

22. John C. Jarosz & Michael J. Chapman, Application of Game Theory to Intellectual Property Royalty Negotiations, in Licensing Best Practices: Strategic, Territorial, and Technology Issues ch. 17 (Robert Goldscheider & Alan H. Gordon eds., 2006).

23. See William Choi & Roy Weinstein, An Analytical Solution to Reasonable Royalty Rate Calculations, 41 IDEA 49 (2001).

24. 798 F. Supp. 2d 1111, 1120 (N.D. Cal. 2011).

25. Suffolk Techs. LLC v. AOL Inc., No. 1:12cv625, slip op. at 3 (E.D. Va. Apr. 12, 2013), ECF No. 518.

26. Id.

27. Id.; see also Robocast, Inc. v. Microsoft Corp., No. 10-1055-RGA, 2014 WL 350062 (D. Del. Jan. 29, 2014) (rejecting damages analysis based on NBS where expert failed to take account of the relative bargaining power of the parties and otherwise failed to tie the royalty split to the facts of the case); Dynetix Design Solutions, Inc. v. Synopsys, Inc., No. C 11-05973 PSG, 2013 WL 4538210 (N.D. Cal. Aug. 22, 2013) (rejecting 50 percent starting point for negotiations where plaintiff’s expert failed to cite any evidence to support it).

28. 925 F. Supp. 2d 816, 839 (E.D. Tex. 2013) (footnote omitted).

29. Id. at 838–39.

30. No. 6:10-CV-417, 2013 WL 789288 (E.D. Tex. Mar. 1, 2013).

31. No. C08-04990JW, 2012 WL 1142537, at *2 (N.D. Cal. Mar. 29, 2012).

32. Id. at *3 n.19; see also Gen-Probe Inc. v. Becton Dickinson & Co., Nos. 09-CV-2319, 10-CV-0602, 2012 WL 9335913 (S.D. Cal. Nov. 26, 2012) (allowing damages testimony based, in part, on NBS where the analysis was tied to the facts of the case).

33. 932 F.2d 1453, 1458–59 (Fed. Cir. 1991). Slimfold’s prayer for lost profits damages was denied; it is unclear why the infringer’s manufacturing cost savings appear not to have been described as part of the reasonable royalty.

34. 185 F.3d 1341 (Fed. Cir. 1999).

35. See Brandeis Univ. v. Keebler Co., Nos. 1:12-cv-01508, – 01509, – 01511, – 01513, 2013 U.S. Dist. LEXIS 18948, at *25 (N.D. Ill. Jan. 18, 2013); Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540, 2012 U.S. Dist. LEXIS 105387, at *34–35 (N.D. Ill. May 22, 2012); In re AI Realty Mktg. of N.Y., Inc., 293 B.R. 586, 616–17 (Bankr. S.D.N.Y. 2003). But see Rosco, Inc. v. Mirror Lite Co., 626 F. Supp. 2d 319, 336 (E.D.N.Y. 2009) (finding that infringer would have been willing to pay a royalty more than its design around costs).

36. 2013 Patent Litigation Study, supra note 4, at 9.

37. Id. at 10.

38. Eric A. Rudich, Litigation Strategies That Win or Lose Patent Jury Trials, Landslide, Jan./Feb. 2011, at 20–23.

39. Paul Zak et al., Ctr. for Neuroeconomic Studies, Empathy, Neurochemistry, and the Dramatic Arc, Vimeo (Oct. 1, 2012), http://www.vimeo.com/50579996.

40. Nicole K. Speer et al., Reading Stories Activates Neural Representations of Visual and Motor Experiences, 20 Psychol. Sci. 989–92 (2009).

41. Joseph Campbell, The Hero with a Thousand Faces (1949).

42. See A Done Deal – Transcript, Australian Story (Apr. 9, 2012), http://www.abc.net.au/austory/content/2012/s3473536.htm.

43. Susan Decker, Microsoft Loses Court Ruling in Uniloc Patent Case, Bloomberg (Jan. 4, 2011), http://www.bloomberg.com/news/2011-01-04/microsoft-loses-appeal-in-388-million-uniloc-verdict-update1-.html.

44. Fromson v. W. Litho Plate & Supply Co., 853 F.2d 1568, 1574 (Fed. Cir. 1988).

Advertisement

BNA Books

 

Pre-ANDA Litigation: Strategies and Tactics for Developing a Drug Product and Patent Portfolio

  

IPL Spring Conference 2015 ad

 

Landslide Webinar December 2014

 

  • About LANDSLIDE

  • Subscriptions

  • More Information

  • Contact Us

Advancing Intellectual Property Law®