Court Finds 25 Percent “Rule Of Thumb” To Be A Fundamentally Flawed Patent Damages Tool
Today’s guest post was written by our friends at Foley Lardner, Cynthia J. Franecki and Rebecca J. Pirozzolo-Mellowes.
In Uniloc USA, Inc. v. Microsoft Corp., ___ F.3d ___ (Fed. Cir. Jan. 4, 2011), the Federal Circuit addressed arguments relating to a number of damages issues. Most notably, the Federal Circuit held that the 25 percent rule of thumb often used by damages experts in patent infringement cases “is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation” and “inadmissible under Daubert and the Federal Rules of Evidence.”
Background
United States Patent No. 5,490,216, assigned to Uniloc, relates to “a software registration system to deter copying of software.” Uniloc accused Microsoft of infringing the ‘216 patent. In 2007, the district court granted summary judgment of non-infringement. Specifically, the district court concluded that the algorithm used in Microsoft’s technology was different from that claimed in the ‘216 patent. On appeal, the Federal Circuit reversed and remanded the case. Thereafter, a jury found: (1) the ‘216 patent valid and infringed, and that (2) Microsoft’s infringement was willful. The jury then awarded Uniloc $388 million in damages. Microsoft filed a number of post-trial motions, including a motion for a new trial on damages based on its assertion that Uniloc’s expert improperly relied on the 25 percent rule of thumb and the entire market value rule. The district court granted Microsoft a new trial on damages based on the improper use of the entire market value rule, but rejected Microsoft’s arguments regarding the 25 percent rule. (more…)
Contemporary Issues in Patent Royalty Damages
Written by our friends at Kilpatrick Stockton, E. Danielle Thompson Williams and Leslie T. Grab, Ph.D..
TMI: How Much Settlement Information is Too Much Settlement Information?
“Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty.”[1] Damages are a hotly contested issue in nearly every patent litigation. Patentees have traditionally had three remedies available to compensate for patent infringement: lost profits; an established royalty; or a reasonable royalty. Each of the remedies considered unique information on which a patentee could rely in establishing a damages award. When requesting a reasonable royalty, patentees also often relied on the entire market value rule as another tool to determine the amount of the damages award. However, a recent string of cases has changed the methodologies for determining a reasonable royalty as well as the standard for using the entire market value rule. These cases put both the district courts and patent litigants on notice that the standards for establishing damages have been tightened. Patentees must now “carefully tie proof of damages to the claimed invention’s footprint in the marketplace.”[2] These decisions have benefits and risks for both plaintiffs and defendants in litigation that include both settlement strategies as well as expert testimony. (more…)
10.13.10 | Federal Circuit Cases, Patent Damages, Patent Issues, Patent Litigation, posts | Stefanie Levine
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01.7.11 | Federal Circuit Cases, Patent Damages, Patent Litigation, Patent Reform, posts | Stefanie Levine