On April 25, 2012, the Western District of Pennsylvania in University of Pittsburgh v. Varian Medical Systems, Inc., Case 2:08-cv-01307-AJS, addressed ongoing royalties in a case that has produced several orders on damages issues. (One of those orders is cited below in the summary of the Mformation case.) The court concluded that the ongoing royalty rate should be the same as the jury's rate because circumstances had not changed between the dates of the two hypothetical negotiations—the date used at trial and the post-verdict date.
The court first observed that validity and infringement of the patent were the same for both hypothetical negotiations. The jury was told that, in the hypothetical negotiation, the patent was assumed valid and infringed. In the ongoing royalty negotiation, the patent had been adjudged valid and infringed.
The court distinguished the Federal Circuit's Amado and Paice opinions and Affinity Labs of Texas, LLC v. BMW North America, LLC, 783 F. Supp. 2d 891 (E.D. Tex. 2011), because in those cases the plaintiff had sought a permanent injunction, whereas here the plaintiff ("Pitt") did not. The change in position in those cases was that a permanent injunction was not available for sales pre-judgment but could have been for post-judgment. Here, Pitt never sought a permanent injunction and thus no such change in position had occurred.
The court rejected Pitt's argument that the ongoing royalty rate should be higher because the jury found Varian's infringement willful. The court distinguished Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 2009 WL 920300, at *4-9 (D. Ariz. March 31, 2009), aff'd, 670 F.3d 1171 (Fed. Cir. 2011), in which the district court increased the ongoing royalty in part due to willful infringement, and the Federal Circuit affirmed. The Varian court said it carefully read Bard and found the reason the district court awarded a higher royalty was the interaction between the willful infringement and other factors that were not present in this case. It cited as an example the direct competition between the parties in Bard, which meant the patentee would have stood to improve its competitive position, while the infringer would have been harmed if the infringer had been forced to stop selling its product. In contrast, Pitt and Varian did not compete, and thus if Varian had been forced to stop selling its products both Pitt and Varian would have suffered financially. The court concluded that enhancement of damages and attorneys' fees were the correct punitive measures for willful infringement—not an increased ongoing royalty.
Finally, the court found that the jury's reasonable royalty would adequately compensate Pitt in the future while leaving Varian with a substantial profit margin. The court opted not to undertake a detailed Georgia-Pacific analysis at this point because it had presided over the trial on damages and read all the damages experts' reports. Based on this experience, the court concluded the jury's verdict adequately considered Georgia-Pacific and was just. The court thus awarded Pitt the same ongoing royalty rate as the jury had awarded.