1. Peter L. Michaelson, Esq. Michaelson and Associates Red Bank, New Jersey US www.mandw.com © 2003-2004, P.L. Michaelson All rights reserved M&A -- Case Study -- Title --1 Case Study Hurrimone AS v. Whaghton, Inc.

2. M&A -- Case Study -- Time line –2 Hurrimone furnished tech specs, eng. dwgs and eng. samples of inventive shaver to US co., 3PCO March 951 April 96 Hurrimone’s earliest patent filing (Australia) -- priority date for subsequent US patent filing(s) > 1 year Exclusive 5 year license to Whaghton to make and sell invention in Australia, China, Europe, HK and US -- royalty to Hurrimone US $.50/unit 1 July 9830 June 03 Whaghton sells Queenie shaver along with Queensplug shaver 31 Dec 03 30 June 06 3 year renewal term of license -- royalty to Hurrimone US $ 1.00/unit time Chronology of Events (time line)

3. M&A -- Case Study --35 USC 102(b)–-3 "A person shall be entitled to a patent unless --... (b) the invention was... on sale in this country more than one year prior to the date of the application for patent in the United States." 35 USC 102 - Conditions for patentability; novelty and loss of right to patent Next

4. M&A -- Case Study -- Damages criteria –6 M&A -- Case Study -- 35 USC 284--M&A--7 35 USC 284 - Damages “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention, together with interest and costs as fixed by the court. When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed....” 35 USC 285 - Attorney fees “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”

5. M&A -- Case Study -- enhanced damages--M&A--8 Enhanced Damages -- Factors Considered 1.whether the infringer deliberately copied the ideas or design of another; 2.whether the infringer, when he knew of the other’s patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or was not infringed; 3.the infringer’s behavior as a party to the litigation; Bott v. Four Star Corp. 807 F.2d 1567, 1 USPQ2d 1216 (Fed. Cir. 1986) Other factors which have been considered include: 4.the infringer’s size and financial condition; 5.closeness of the case; 6.duration of the infringer’s misconduct; 7.remedial action taken by the infringer; 8.infringer’s motivation for harm; and 9.whether the infringer attempted to conceal its misconduct.

6. M&A -- Case Study -- Lost Profits -M&A--9 Lost Profits  once infringement is established, amount of damages is subject to proof established by a preponderance of evidence  can not be based on speculation or optimism but must be established by evidence  may include profits due to diverted sales, price erosion and increased expenditures caused by infringement  patentee must establish, to a reasonable probability, that, but for the infringement, he would have made the sales and profits that were lost as a result of the infringement  where patentee does not seek to make and sell the invention, then lost profits are not appropriate measure of damages  adequacy of damages measure depends on circumstances of each case in claiming lost profits, burden of proof on patentee, who has not yet begun to manufacture the patented product but is claiming lost profits, is heavy THESE DAMAGES ARE BASED ON WHAT WOULD THE PATENTEE HAVE EARNED BUT FOR THE INFRINGEMENT Herbert v. Lisle Corp. 99 F3d 1109, 40 USPQ2d 1611 (Fed Cir. 1996)

7. M&A -- Case Study -- Reasonable Royalties -M&A--10 Reasonable Royalties  applicable to infringer’s sales not included in lost profit calculation segment of infringer’s sales may not warrant a lost profits award if patentee can not establish causation for that segment ─ patentee may not operate in a specific geographic area covered by infringer or may not have had manufacturing or marketing capability to make the infringer’s sales  calculation may be made by postulating a hypothetical negotiation between a willing licensor and licensee at the time infringement commenced. This hypothetical construct seeks the percentage of sales or profit likely to have induced the hypothetical negotiators to license use of the invention Minco, Inc. v. Combustion Engineering, Inc., 95 F3d 1109, 40 USPQ2d 1001 (Fed Cir. 1996)  if an established royalty rate exists, the patentee may show that it would be entitled to that rate; if no such rate exists, then is it calculated hypothetically and inferred from evidence Marhurkar v. C.R. Bard, Inc. 79 F3d 1572, 38 USPQ2d 1288 (Fed. Cir. 1995) and Minco, Inc.

8. Reasonable Royalties -- Georgia-Pacific Factors 1.royalties received by patentee for licensing patent in suit, proving or tending to prove an established royalty 2.rates paid by licensee for use of other patents comparable to patent in suit 3.nature and scope of license for use of other patents comparable to patent in suit, as exclusive or non-exclusive; or as restricted or non- restricted in terms of territory or with respect to whom the manufactured product many be sold 4.licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others or by granting licenses under special conditions designed to preserve that monopoly 5.commercial relationship between licensor and licensee, such as whether they are competitors in same territory in the same line of business; or whether they are inventor and promoter 6.effect of selling the patented specialty in promoting sales of other products of the licensee; that existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales 7.duration of the patent and the term of the license 8.established profitability of the product made under the patent; its commercial success; and its current popularity 9.utility and advantages of the patent property over the old modes or devices, if any, that had been sued for working out similar results 10.nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention 11.extent to which the infringer has made use of the invention and any evidence probative of the value of that use 12.portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions 13.portion of the realizable profit that should be credited to the invention, as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer 14.opinion testimony of qualified experts 15.amount that a licensor (such as the patentee and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is the amount which a prudent licensee -- who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention -- would have been wiling to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license. Georgia-Pacific Corp. v. United States Plywood Corp. 318 F.Supp. 1116, 166 USPQ 235 (SDNY 1970); Unisplay, S.A. v. American Elec. Sign Co., 69 F3d 512, 36 USPQ 1540 (Fed Cir. 1995) M&A -- Case Study -- G-P factors -M&A--11