1. APLI: Patent Damages
Presented by Ashok Ramani, Leah Waterland, & Melissa Pittaoulis December 6, 2018

2. Patent damages topics
Apportionment update: latest on EMVR, SSPPU, and use of surveys
Update on mandatory patent-damages contentions
Extraterritorial damages after WesternGeco

3. Apportionment update: Is the EMVR back?
Ensure damages accounts only for value of patented technologies/features (and excludes value of unpatented technologies/features)
Focus on smallest salable patent-practicing unit (SSPPU)
Unless entire market value rule (EMVR) applies

4. Latest on SSPPU: Is the EMVR back?
Same week, two very different Federal Circuit rulings
Finjan v. Blue Coat
Rejected jury verdict that relied on SSPPU, because SSPPU had patented and unpatented features
Suggests further apportionment beyond SSPPU needed
Exmark v. Briggs & Stratton
Declined to limit royalty base to SSPPU (lawn-mower flow-control baffle) because “apportionment in this case can be done through a thorough and reliable analysis to apportion the rate”
Rejected royalty rate because not adequately tied to case’s facts

5. Latest on SSPPU: Is the EMVR back?
Power Integrations v. Fairchild
To use EMVR, patentee must show unpatented features in the accused product did not influence consumer demand
$140M verdict overturned

6. Latest on SSPU: Is the EMVR back?

7. Latest on SSPU: From the (in-house) trenches
As a practical matter how determine what is the SSPPU?
How does default state affect this analysis?
On/off
Capability to perform

8. Main types of patent-damages surveys
Usage survey
How much do consumers use a certain feature
Demand/conjoint survey
How much are consumers willing to pay for a certain feature
and/or
Does the presence/absence of specific feature(s) impact/drive purchasing decision

9. Surveys: patentholder considerations
Experts
How many?
Timing
How long?
Cost
How much?
Daubert challenge
How likely?

10. Surveys: accused-infringer considerations
Conduct own survey?
Rebuttal Work
Division of labor between survey and damages experts

11. Surveys: criticisms of survey evidence
Goes to Weight
Small sample
No pretest
Not all features evaluated
No incentive alignment
Demand-side measurement
Grounds for Exclusion
Patent mischaracterized
Patent not isolated
Key features omitted
Non-infringing alternatives not articulated

12. Surveys: patentholder considerations
Ericsson v. TCL: a cautionary tale
$75M damages verdict overturned on JMOL
“To conclude that any one of these features—simply because it is considered essential to a consumer—could account for as much as a quarter of TCL’s total profit is unreliable and does not consider the facts of the case, particularly the nature of smartphones and the number of patents that cover smartphone features.”
Survey expert: 28% of consumers would not have purchased phone missing (allegedly) patented feature
Damages expert:
TCL would have lost 28% of profits
Parties would have negotiated lump-sum that split 28% profit loss (so TCL would recover at least 14% of profits on all phones)

13. Mandatory damages contentions
ND Cal
Requires patentholder to disclose:
Category(-ies) of damages seeking, as well as theories of recovery, factual support for those theories, and computations of damages within each category
If cannot provide “a fulsome response,” must say categories of info needs to do so
Requires accused infringer to disclose:
Specifically how and why it disagrees with patentee’s contentions

14. Mandatory damages contentions
ND Cal case-law guidelines:
Twilio, Inc. v. Telesign Corp.:
Patentee must “identify the theories of recovery; identify the known facts that support the theories; do the math.”
Patentee ordered to identify:
Royalty rate
Royalty base
Date(s) of hypothetical negotiation currently used; and
Factors identified to date are/will be used for apportionment
Hunter Douglas Inc. v. Ching Feng Home Fashions Co.: patentee need not identify supporting witnesses or underlying supporting evidence

15. Mandatory damages contentions
Outside-counsel perspective
Expert involvement
In-house perspective

16. Extraterritorial damages after WesternGeco
Four patents on marine seismic streamer technology
Sued competitor ION under § 271(f)
$93.4M lost profits, $12.5M reasonable royalty
Fed Cir reversed lost profits because Patent Act does not cover losses resulting from extraterritorial infringement

17. Extraterritorial damages after WesternGeco
Supreme Court reversed 7-2
“[T]he second step of our framework asks ‘whether the case involves a domestic application of the statute.’ RJR Nabisco, 579 U. S., at ___ (slip op., at 9). Courts make this determination by identifying ‘the statute’s ‘focus’’ and asking whether the conduct relevant to that focus occurred in United States territory. Ibid. If it did, then the case involves a permissible domestic application of the statute. See ibid.”
WesternGeco
Four patents on marine seismic streamer technology
Sued competitor ION under § 271(f)
$93.4M lost profits, $12.5M reasonable royalty
Fed Cir reversed lost profits because Patent Act does not cover losses resulting from extraterritorial infringement
Supreme Court reversed 7-2
Export of components infringed, so any resulting damages recoverable even if overseas

18. Extraterritorial damages after WesternGeco
District courts have applied WesternGeco to direct infringement under § 271(a)
Both cases to consider issue have found it applicable
Verinata Health v. Ariosa Diagnostics (ND Cal)
Power Integrations v. Fairchild (DE)
Rationale is that direct infringement “involved a permissible domestic application of” § 271(a)

19. THANK YOU