The recent Uniloc U.S.A. v. Microsoft Corp. decision—in which the U.S. Court of Appeals for the Federal Circuit abolished the 25% rule of thumb in patent infringement cases—didn’t surprise many IP damages experts. The Federal Circuit first began signaling its tougher stance in 2009, in Lucent Technologies, Inc. v. Gateway. In considering a reasonable royalty rate derived from the parties’ hypothetical negotiation, the court confirmed that it would “exercise vigilance” to make sure an expert has relied on actual licensing agreements with clear links to the claimed invention: The law does not require an expert to convey all his knowledge to the jury about each license agreement in evidence, but a . . . damages award cannot stand solely on evidence which amounts to little more than a recitation of royalty numbers, one of which is arguably in the ballpark of the jury's award, particularly when it is doubtful that the technology of those license agreements is in any way similar to the technology being litigated here.
After Lucent, the Federal Circuit decided ResQnet.com v. Lansa (2010), in which it rejected an expert’s calculations because he used “licenses with no relationship to the claimed invention to drive the royalty rate up to unjustified levels.” (A strong dissent criticized the decision for taking the Lucent standard to “untenable” levels, resulting in a “new rule whereby no licenses involving the patented technology can be considered in determining the value of the infringement, if the patents themselves are not directly licensed” or if the licenses include additional products. Nevertheless, four months later, in Wordtech Systems v. Integrated Network Solutions (2010), the court rejected licenses that provided “no basis of comparison” to actual sales and amounted to “little more than a recitation of royalty numbers.”
What now for IP and damages experts? By “setting such strict barriers as to what evidence can be considered,” as the ResQnet.com dissent asserted, has the Federal Circuit left the damages analysis “without access to relevant information”? Find out next Wednesday, March 9, when David Jarczyk (ktMINE) will address the new rules in BVR’s next webinar, “Finding & Analyzing Royalty Rates.” Topics will include benchmarking intangible assets, how to utilize available (and appropriate) licensing information, and how to analyze licensing terms. To find out more and to register, click here.
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