In declining to exclude a damages expert’s opinion that Intel should pay patent infringement damages of $6.16 billion, a Delaware court permitted a damages expert to compute a reasonable royalty rate for infringing computer chip products without requiring him to apportion the entire market value of the products between patented and unpatented technologies in those products.
To determine a reasonable royalty, courts often consider the compensation paid in prior license agreements. In Intel Corp. v. Future Link Systems LLC, a Delaware court ruled that an expert’s opinion on a reasonable royalty rate was not unreliable where the expert relied on prior license agreements without specifically apportioning the patented technologies from unpatented technologies in the accused products.
Future Link accused Intel of infringing fourteen of its patents and claimed that $6.16 billion was a reasonable damages award for infringing six of the patents. In calculating this amount, Future Link’s damages expert applied a royalty rate from prior license agreements to the entire market value of each of the accused products, having concluded that the prior licenses were comparable and a reasonable starting point for determining a reasonable royalty.
Intel sought to exclude the testimony of Future Link’s expert, arguing that the expert failed to apportion between patented technologies and unpatented technologies in the accused products and that the prior licenses relied upon by the expert were not comparable.
The Future Link Decision
The Delaware court found that the analysis of Future Link’s expert witness was consistent with the Federal Circuit’s approved methodology for valuing asserted patents based on comparable licenses because the expert sufficiently addressed the comparability of the prior licenses to a hypothetical negotiation involving the patents in suit. The court specifically noted the expert considered the patents subject to the prior licenses and concluded that the licensed patents had "extraordinarily similar technology" to the technology of Future Link’s asserted patents. The court also observed that the expert considered the economic comparability between the prior license agreements and a hypothetical license in the present case, and conducted an analysis to determine whether any adjustments were needed to be made to the rate of the prior licenses.
Although the court found that the prior licenses were sufficiently tied to the facts of the case to be admissible, it explained that the ultimate issue of whether they are sufficiently comparable to support the expert’s proposed royalty rate is a factual issue best addressed by examination, including cross-examination at trial.
Strategy and Conclusion
Apportionment between patented and unpatented features may not be necessary to the reasonable royalty analysis even where the patented feature has not been shown to create the basis for customer demand for the accused product. The Intel Corp. v. Future Link Systems LLC decision demonstrates that apportionment may not be necessary in order to rely on comparable licenses in computing a reasonable royalty, such as when the prior licenses are shown to be technologically and economically comparable to the patents and accused products.
The Future Link decision can be found here.
Originally printed in LES Insights on July 25, 2017.