Patent litigation underwent a downturn in 2014, but there’s been an uptick in 2015. That’s one message from a panel on IP litigation at the recent AICPA FVS Conference in Las Vegas. The panel included damages experts Glenn S. Newman (Baker Tilly Virchow Krause LLP), who served as moderator, Jeffrey M. Buchakjian, Joseph W. Lesovitz (both with EisnerAmper LLP), and an intellectual property lawyer, Steve G. Schortgen (K&L Gates). They offered other valuable observations.
Georgia-Pacific: Experts are divided over the continued importance of Georgia-Pacific: Some worry that a failure to discuss the factors in a reasonable royalty analysis spells exclusion of their testimony. Others say it’s become less important over time. What is clear is that experts only have to discuss the factors relevant to their case.
Particularized analysis: Of course, experts must know the legal principles, but, most important, they must tie the law to the facts of the case. Time and again, courts find the link is missing and discredit a damages analysis.
EMVR: The entire market value rule (EMVR), which comes into play in a lost profits and reasonable royalty calculation, is an exception to the rule that an expert must apportion damages according to the value the patented feature contributes to a product that also contains nonpatented features. EMVR allows basing damages on the entire value of a product only if “the patent-related feature is the basis for customer demand.”
Courts interpreting EMVR have created confusion as to damages proof. Plaintiffs’ experts don’t know how deep to go in their analysis to show “customer demand.” The calculation gets increasingly more complicated because high-tech devices contain so many components besides the patented feature. Better to ask yourself: What value does the protected feature add to what component of the accused device?
Royalty base: Select your royalty base carefully to reflect only the value the patented feature adds to the infringing product, the panel cautions. Do not count on being able to adjust an improperly high royalty base by lowering the royalty rate.
Rules of thumb and surveys: Courts generally frown on the use of rules of thumb, including the Nash bargaining solution, in part because experts don’t explain a particular rule’s applicability to the facts of the case. Courts also tend to be skeptical about the use of surveys to support damages claims because of the potential for biased questions.
Litigation costs: Clients today are scrupulous about litigation costs, the lawyer on the panel says. Therefore, it’s tempting for the attorney on the case to rein in costs whenever possible. But limiting an expert to a tight budget may be penny-wise and pound-foolish. The last thing the attorney wants is to hear the expert testify he or she would have done a more thorough damages calculation but for budget constraints.