Order Granting in Part Daubert Motion, Finjan, Inc. v. Sophos, Inc., Case No. 14-cv-1197 (Judge William Orrick)
Yogi Berra once said that “baseball is 90% mental; the other half is physical.” The humor in this statement, of course, is that Yogi’s percentages add up to more than 100%, which is impossible. The same idea applies to patent damages—a patent expert cannot double-count the value of patented features, especially when doing so might lead to damages greater than 100% of a product’s overall value. It sounds easy enough, but applying this rule can be difficult in multi-patent cases. A recent opinion from Judge Orrick sheds light on how to value patented features where multiple patents purport to cover similar features.
The Finjan order addresses two patents and an accused product having seven allegedly valuable features. Finjan’s expert attributed 28.6% (2/7) of the product’s value to one of the patents allegedly covering two of the seven product features, live protection and a threat engine. So far, so good. But the expert went on to attribute 2/7 of the product’s value to a second patent allegedly covering the same two features. Adding the two amounts resulted in a royalty base that was over 100 percent of the total value of the accused product features.
Finjan attempted to justify this calculation in a couple of ways. It argued that its calculations properly calculated the damages on a per-patent basis so that, if any of the patents were found invalid, the jury would still be able to calculate damages specific to each patent. Finjan also explained that it applied a royalty rate to its proposed royalty base to calculate an overall reasonable royalty well below the total revenues for the products.
Judge Orrick ruled, however, that by double counting patented features, Finjan improperly presented an inflated damages calculation. He explained that if Finjan’s patented technologies are truly overlapping, then it can recover damages only for one patent because “no patent can issue for an invention actually covered by a former patent. If Finjan’s patents cover identical technologies, then its later patents cannot be valid as a matter of law.” Judge Orrick acknowledged that the patented technologies might merely be “intermingled” such that “together [they] contribute to the total value of the [accused product features].” But in that case, it was improper to separately attribute the full value of those features to each of the two patents.
Despite the setback, Finjan should not despair. Judge Orrick granted it leave to amend its expert report “to reflect a royalty base that does not exceed the total possible value added of the combined asserted patents.” And as Yogi Berra also said, “it ain’t over till it’s over.”