Back in January, and again in March, we went into detail on how valuators would have to calculate infringement damages for the courts after Uniloc. U.S.A. v. Microsoft, in which the Federal Circuit Court of Appeals resoundingly rejected the 25% “rule of thumb,” “because it fails to tie a reasonable royalty base to the facts of the case” and, as an abstract and largely theoretical construct, “is a fundamentally flawed tool.”
Importantly, that court followed others in also rejecting the expert’s use of Microsoft’s “entire market share” as a sanity check to support reasonable royalty damages, suggesting damages should flow from the demand created by the patented component only.
Though on its face we could speculate on how the latter limitation would impact damage awards, we will only know for certain after enough time has passed. Has a federal jury in Marshall, TX given us pause to rethink this?
In a 2009 patent infringement trial litigating SAP’s unauthorized use of their customer relationship software in SAP’s ERP offerings, Versata was awarded $138.6M in damages (Versata Software Inc. v. SAP America Inc.). SAP won an appeal, arguing the award was excessive because it was based on the “entire market value,” a now flawed concept.
On Friday, in an illogical twist, in the Eastern District of Texas, a jury more than doubled Versata’s award, ordering payment of $260M in lost profits and $85M as a reasonable royalty. So much for idle speculation.