Whitserve, LLC v. Computer Packages, Inc., (Aug. 7, 2012);
Laserdynamics, Inc. v. Quanta Computer, Inc., et al., (Fed. Cir. 2012).
In a split decision in Whitserve, LLC, the Federal Circuit affirmed the judgment of infringement but vacated and remanded for a new damages trial, continuing a trend of closer scrutiny of patent damages awards. The patentee improperly based its royalty rate on a proposed, but unaccepted, license; and used two lump sum licenses without explaining how to derive a royalty rate from them. The court found that the analysis of the Georgia Pacific royalty factors by the patentee’s damages expert was insufficient, because the expert “did not explain how much each factor affected the rate …. Expert witnesses should concentrate on fully analyzing the applicable factors, not cursorily reciting all fifteen. And, while mathematical precision is not required, some explanation of both why and generally to what extent the particular factor impacts the royalty calculation is needed.”
A few weeks later, on August 30, the Federal Circuit continued this stricter scrutiny. In Laserdynamics, Inc., the court considered a patent concerning an optical disc discrimination method used in laptop computers. With respect to whether a feature drives demand for an entire product, such that the entire market value rule would apply, the court held that:
It is not enough to merely show that the disc discrimination method is viewed as valuable, important, or even essential to the use of the laptop computer. Nor is it enough to show that a laptop computer without an ODD practicing the disc discrimination method would be commercially unviable. Were this sufficient, a plethora of features of a laptop computer could be deemed to drive demand for the entire product. Id., pp. 25, 26.
The court further observed that "it is generally required that royalties be based not on the entire product, but instead on the 'smallest salable patent-practicing unit.'" (Quoting Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 283, 287-88 (N.D.N.Y. 2009)). Laserdynamics, supra. at p. 23. Finally, the court rejected the 6% royalty rate proffered by the patentee's expert because it "was untethered from the patented technology at issue and the many licenses thereto and, as such, was arbitrary and speculative.”