In two contemporary choices, each issued on February 4, 2022, the USA Court docket of Appeals for the Federal Circuit (the “CAFC”) erased two large patent damages awards since the underlying professional opinion on damages was once untethered to the particular details of every case. In Apple Inc. v. Wi-LAN Inc., 25 F.4th 960 (Fed. Cir. 2022) and California Inst. of Tech. v. Broadcom Ltd., 25 F.4th 976 (Fed. Cir. 2022), the courtroom vacated verdicts of $85 million and $1.1 billion, respectively, and remanded each instances for brand spanking new trials on damages. Plaintiffs, and their respective professionals, must heed this caution or possibility a an identical destiny.
Background at the Patent Damages Research
As a short lived reminder, the statute governing patent damages is 35 U.S.C. § 284. Below § 284, when a patent is located legitimate, enforceable, and infringed, the patent holder is entitled to “damages good enough to atone for the infringement however in no match lower than a cheap royalty for the use fabricated from the discovery by way of the infringer, along side hobby and prices mounted by way of the courtroom.” Misplaced earnings are from time to time to be had, however patent holders way more recurrently pursue cheap royalties from accused infringers.
Affordable royalties serve to relatively compensate the patentee for the usage of the discovery by way of an infringer, and may also be calculated in numerous techniques. Regularly they’re made up our minds by way of taking into account the result of a “hypothetical negotiation” between the patentee and the accused infringer, on the graduation of infringement. This synthetic assemble turns again the clock with a view to derive the royalty fee the events would have negotiated to license the patent(s) ahead of any allegedly infringing process happened. In examining a hypothetical negotiation, professionals and courts glance to the fifteen Georgia-Pacific elements, used since 1970. Regardless of the Federal Circuit’s admonishment that it hasn’t ever described the fifteen elements as “a talisman for royalty fee calculations,” and that no longer they all are appropriate in each and every state of affairs, they’re frequently used because the governing framework in a cheap royalty research. Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1230 (Fed. Cir. 2014).
A rising frame of case regulation is elucidating the misapplication of those elements, and failure to narrate them to the particular details of the case. The Federal Circuit’s most up-to-date choices on this line of instances, defined beneath, proceed this pattern and spotlight positive patent damages-related pitfalls that plaintiffs must keep away from.
Apple v. Wi-LAN
In the newest construction of the tortured procedural historical past within the lengthy dispute between Wi-LAN and Apple, Leader Circuit Pass judgement on Kimberly Moore penned a panel choice concluding that Wi-LAN’s damages professional’s method in the second one damages trial between the events was once mistaken. In consequence, the district courtroom abused its discretion by way of denying Apple’s movement for a brand new trial. This ruling despatched the case again to district courtroom for a 3rd trial on damages.
Apple first sued Wi-LAN in 2014 in quest of a declaratory judgment that it didn’t infringe Wi-LAN’s LTE usual crucial patents. Wi-LAN countered with claims of infringement and sought ensuing damages. A jury in the end returned a verdict of $145.1 million in choose of Wi-LAN, and then Apple moved for judgment as a question of regulation (JMOL) and requested for a brand new damages trial or, on the other hand, a remittitur. The district courtroom granted Apple’s movement on damages—on account of mistaken professional testimony—and gave Wi-LAN the choices of a remittitur to $10 million or a brand new trial. Wi-LAN selected to have a brand new trial.
At the second one damages trial, the jury awarded Wi-LAN decreased damages of $85.23 million. Apple once more moved for JMOL, arguing that Wi-LAN’s damages professional failed to correctly apportion the related licenses to replicate the worth of the asserted patents. The district courtroom denied Apple’s movement and Apple appealed.
In figuring out a cheap royalty, events frequently depend on related license agreements. However the regulation is obvious that, when doing so, they should “account for variations within the applied sciences and financial instances of the contracting events.” VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014). Wi-LAN’s damages professional, David Kennedy, culled greater than 150 Wi-Lan license agreements down to simply 3 that shaped the foundation of his opinion. He decided on those 3 licenses as a result of they: (1) concerned telephones as authorized merchandise; (2) was efficient in 2013 or later; (3) authorized patents overlaying LTE or connected generation; and (4) have been completed after the asserted patents issued.
Mr. Kennedy then tried to regulate for variations between the ones licenses and the person who would have resulted from the events’ hypothetical negotiation. He famous that essentially the most precious property in a portfolio normally pressure the licensing fee and that the others are incorporated for a nominal upcharge. He likened this to throwing chaff in with the wheat. He then opined that Apple’s endured use of the generation after the patents have been asserted towards it was once a transparent indication in their worth to Apple.
Federal Circuit Opinion
The Federal Circuit discovered a number of deadly flaws within the professional’s opinion, in the principle as it concluded that the opinion was once untethered to the details of the case. Regardless of Mr. Kennedy’s try to modify for variations within the related licenses, he did not account for the inclusion of non-asserted patents. He additionally did not apportion the royalty particularly and only to the asserted patents. For those causes, the Federal Circuit concluded his final opinion was once unreliable and, as a result, the jury’s reliance upon it was once mistaken. The courtroom additionally emphasised that Mr. Kennedy had opined, with out toughen, that the asserted patents have been “key” and tried to seize the similar charges because the related licenses with out additional research.
The Federal Circuit additional famous that there was once no proof that the asserted patents if truth be told have been thought to be “key,” and in addition took factor with the professional’s failure to imagine different non-asserted patents within the related licenses. The courtroom deemed this failure “troubling.” For all of those causes, the courtroom tossed the damages award as depending on knowledgeable research that was once unreliable.
Caltech v. Broadcom and Apple
In the second one case, California Inst. of Tech. v. Broadcom Ltd., the Federal Circuit affirmed a Central District of California jury’s findings on invalidity and infringement. However, like the end result within the Apple v. Wi-LAN case, the courtroom vacated the jury’s $1.1 billion damages award to Cal Tech on account of a mistaken damages method and remanded the case for a brand new trial on damages.
In January 2020, a Central District of California jury discovered that Broadcom and Apple infringed 3 Caltech information transmission patents by means of their sale of Wi-Fi chips and awarded Caltech a blended $1.1 Billion in damages, with $837 million towards Apple and $270 million towards Broadcom. Broadcom and Apple appealed.
Caltech’s damages professionals offered a two-tier cheap royalty style according to hypothetical negotiations with Broadcom and Apple. The professionals opined that the events would have engaged in two simultaneous hypothetical negotiations, one with Broadcom on the “chip degree” and one with Apple on the “tool degree.” The hypothetical negotiations tried to exclude from the scope of the negotiation the ones Broadcom chips included into Apple’s gadgets, at the principle that Apple would were negotiating a separate license for the ones chips. Apple and Broadcom argued that the idea improperly complicated two other hypothetical negotiations for a similar merchandise—most effective at other issues within the provide chain. Over those objections, the district courtroom allowed the idea to visit the jury, which reached the huge award assessed by way of the Federal Circuit.
Federal Circuit Opinion
The Federal Circuit agreed with defendants, and located the professionals’ reviews to be legally unsupportable. There was once no proof appearing that businesses in a similar way located to Broadcom and Apple would have interaction in separate negotiations. Nor have been there any further details within the file that may justify other remedy of the similar merchandise at other issues within the provide chain. In different phrases, the courtroom concluded that there was once little proof to toughen the professionals’ opinion. Significantly, the Federal Circuit discovered that the presence of 2 separate accused infringers in the similar swimsuit didn’t toughen treating the similar accused merchandise in a different way. This all intended that the professionals’ reviews weren’t sufficiently tied to the details within the case to reliably toughen the jury’s damages award.
The courtroom in the end disagreed that the Broadcom and Apple merchandise might be valued in a different way primarily based only on their other respective degree within the provide chain. To trust this premise would forget about established precedent that, within the absence of a compelling appearing another way, a better royalty isn’t to be had for a similar tool at a distinct level within the provide chain. The Federal Circuit additionally discovered not anything within the file to signify that Broadcom and Apple would were keen to barter within the synthetic two-tiered means utilized by the professionals and no longer within the extra standard means events normally negotiate a unmarried license for a similar merchandise.
Either one of those choices emphatically display that knowledgeable’s opinion should be sufficiently tied to the details of a case to be admissible, and that the Federal Circuit isn’t shy in erasing an award of damages according to mistaken professional method. Specifically, those instances edify that any cheap royalty research must account for variations in related licenses to the hypothetical one between the events, and give an explanation for how the details toughen divergence from established norms, if any. In brief, the professional’s opinion should be intently tied to the particular details, together with the patents, merchandise at factor, and events. It is going to be fascinating to look how every of the patent holders in those high-profile instances shift their manner on remand.