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Reasonable Royalty Cannot Include Activities That Do Not Constitute Patent Infringement – IPWatchdog.com

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The Federal Circuit vacated a $four million damages award to Seoul Semiconductor Co. (“Seoul”), holding that the district courtroom erred when it denied Enplas Show System Corp.’s (“Enplas”) movement for judgment as a matter of regulation that the damages award was not supported by substantial proof. See Enplas Show Gadget Corp. v. Seoul Semiconductor Co., No. 2016-2599, 2018  (Fed. Cir. Nov. 19, 2018) (Earlier than Newman, Hughes, and Stoll, J.) (Opinion for the courtroom, Stoll, J.) (Concurrence-in-part and Dissent-in-part, Newman, J.).

The patents at situation, USPN 6,473,554 (“the ‘554 patent”) and USPN 6,007,209 (“the ‘209 patent”), claimed strategies for backlighting show panels, specifically LED shows utilized in digital units like laptops and televisions. Enplas filed a declaratory judgment motion towards Seoul, looking for a declaration that the patents have been invalid and never infringed. Seoul counterclaimed for infringement and sought damages.

At trial, the jury discovered that Enplas induced infringement of each patents. The jury awarded Seoul $four million in damages, representing a one-time freedom-to-operate cost, for the ‘554 patent, and awarded $70,000 in damages for the ‘209 patent. Particularly, the award for the one-time freedom-to-operate cost was for “all [Enplas] merchandise,” together with merchandise that had not been accused of infringement. The district courtroom denied Enplas’s pre-trial motions to exclude the testimony of Seoul’s damages professional for together with merchandise that weren’t at situation, and in addition denied Enplas’s post-trial motions for judgment as a matter of regulation (“JMOL”) of anticipation, no inducement, and extreme damages. Enplas appealed the denial of its post-trial motions.

The Federal Circuit affirmed the district courtroom’s denial of JMOL with respect to anticipation and inducement. With respect to Enplas’s JMOL of extreme damages, nevertheless, the Courtroom reversed the district courtroom’s denial.

Enplas argued that the jury’s $four million damages award was extreme and never supported by substantial proof. Specifically, Enplas argued that the one proof supporting the $four million award was testimony from Seoul’s damages skilled and that this testimony improperly included non-infringing units when calculating royalties. The Federal Circuit agreed.

Previous to trial, Enplas filed a movement in limine in search of to exclude skilled damages testimony regarding units not at problem within the case. Nevertheless, the district courtroom denied the movement, holding that “[Seoul’s expert] might current proof that beneath a lump-sum royalty negotiation, [Enplas] would search to cowl all of its probably infringing merchandise,” and that “[a]s lengthy as [the] final damages willpower is satisfactorily adjusted” to account just for the units at situation within the case, the testimony was permitted.

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The Federal Circuit interpreted the district courtroom’s choice as limiting Seoul’s skilled to a damages principle based mostly on infringing and “probably infringing” merchandise, however not non-accused merchandise. At trial, Seoul’s skilled opined that a hypothetical lump sum royalty for the patents, when restricted to the accused units, would have been $500,000 for the ‘554 patent at $70,000 for the ‘209 patent. Nevertheless, Seoul’s professional went on to testify that Enplas and Seoul wouldn’t have restricted the license to the accused merchandise if there have been a danger of Enplas infringing the patents by manufacturing different comparable merchandise. The professional then concluded that a freedom-to-operate license would have been a extra sensible answer to the events’ licensing dialogue and that Enplas would have agreed to pay $2 to $four million for a freedom-to-operate license, relying on the “quantity of gross sales of probably infringing merchandise past those on this case.”

After the jury awarded damages of $four million for the ‘554 patent and $70,000 for the ‘209 patent, Enplas moved for JMOL on extreme damages. In denying JMOL, the district courtroom held that the professional’s testimony a few lump sum freedom-to-operate license complied with its earlier ruling that Seoul might current proof relating to Enplas’s probably infringing merchandise in a hypothetical lump-sum negotiation. Nevertheless, the Federal Circuit overturned the damages award with respect to the ‘554 patent, as a result of an inexpensive royalty “can’t embrace actions that don’t represent patent infringement, as patent damages are restricted to these ‘enough to compensate for infringement.’” See AstraZeneca v. Apotex Corp., 782 F.3d 1324, 1343 (Fed. Cir. 2015). As a result of Seoul’s damages professional opined that a freedom-to-operate license would have been $2-$four million by contemplating a royalty base comprising gross sales of non-accused units, the testimony couldn’t help the jury’s damages award for the ‘554 patent, and the courtroom vacated and remanded the award for additional proceedings. Nevertheless, the Courtroom didn’t disturb the award for the ‘209 patent.

Decide Newman’s Concurrence-in-part and Dissent-in-part.

Decide Newman concurred within the Courtroom’s choice with respect to validity and inducement however dissented from the Courtroom’s reversal of the damages verdict. Decide Newman discovered that the district courtroom appropriately denied JMOL on the damages verdict. She famous that Enplas didn’t problem Seoul’s professional testimony at trial, nor did they attraction the district courtroom’s Daubert ruling or movement in limine ruling associated to Seoul’s professional testimony. Decide Newman additionally argued that the Courtroom misapplied AstraZeneca; she discovered that the case didn’t exclude a patentee from presenting proof that “a possible infringer would fairly embrace all probably infringing merchandise in a paid-up license, as a way to keep away from the uncertainty of attainable infringement and future litigation.” Subsequently, Decide Newman discovered that the Courtroom carried out an improper de novo hypothetical negotiation on attraction in figuring out that the damages award was faulty and that this hypothetical that was faraway from what the events would have achieved in actuality.

Take Away

An inexpensive royalty award can’t embrace royalties obtained from actions that don’t represent patent infringement, as patent damages are restricted to these sufficient to compensate for infringement.

Robert Schaffer

Robert Schaffer

is an mental property associate at Troutman Sanders. Bob applies greater than 30 years of expertise to IP counseling and litigation. His work consists of patent procurement, strategic planning and transactional recommendation, due diligence investigations, district courtroom patent instances, and Federal Circuit appeals. He recurrently handles complicated and high-profile home and worldwide patent portfolios, mental property agreements and licensing, IP evaluations for collaborations, mergers, and acquisitions. In disputed courtroom instances Bob’s work consists of representing and counseling shopper in ANDA litigations, complicated patent infringement instances and appeals, and multidistrict and worldwide instances. In disputed Patent Workplace issues his work consists of representing and counseling shoppers in interferences, reexaminations, reissues, post-grant proceedings, and in European Oppositions. For extra info and to contact Bob please go to his profile web page on the Troutman Sanders web site.

Robert Schaffer

Joseph Robinson

has over 20 years of expertise in all points of mental property regulation. He focuses his apply within the pharmaceutical, life sciences, biotechnology, and medical system fields. His follow encompasses litigation, together with Hatch-Waxman litigation; licensing; counseling; due diligence; and patent and trademark prosecution. He has served as litigation counsel in quite a lot of patent and trademark disputes in many various jurisdictions, and has additionally served as appellate counsel earlier than the Courtroom of Appeals for the Federal Circuit. Joe additionally focuses on complicated inter partes issues earlier than the united statesPatent and Trademark Workplace, inventorship disputes, reexaminations and reissues. His expertise consists of quite a few interferences, a specific benefit in new U.S. Patent and Trademark Workplace post-grant proceedings. He additionally counsels on patent–associated U.S. Meals and Drug Administration points, together with citizen petitions, Orange Ebook itemizing, and trademark points. For extra info and to contact Joe please go to his profile web page on the Troutman Sanders web site.

Robert Schaffer

Dustin Weeks

is an affiliate within the mental property apply group at Troutman Sanders. His follow spans all areas of mental property regulation, together with patent prosecution, patent litigation (together with Hatch-Waxman litigation), and shopper counseling. He represents shoppers starting from start-ups and solo inventors to Fortune 500 corporations. Dustin works intently together with his shoppers to study their enterprise aims in order that he can tailor methods to acquire, shield, and implement their mental property. Dustin focuses on post-grant proceedings (e.g. Inter Partes Critiques) earlier than the Patent Trial and Attraction Board (PTAB) the place he has in depth expertise representing each patent house owners and petitioners throughout a variety of applied sciences, together with wi-fi networking, prescription drugs, MEMs units, medical units, and electro-mechanical shopper units. Dustin’s broad expertise in patent prosecution, counseling, and patent litigation uniquely positions him to navigate the blended follow of post-grant proceedings.

For extra info or to contact Dustin, please go to his Agency Profile Web page.

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