The court excluded the testimony of plaintiff’s damages expert, because his damages theory on what would be a reasonable royalty, “improperly inflates both the royalty base and the royalty rate by relying on irrelevant or unreliable evidence and by failing to account for the economic realities of this claimed component as part of a larger system.” Slip. Judge Rader excluded this testimony because the damages methodology did not “show a sound economic connection between the claimed invention and this broad proffered royalty base.” . Judge Rader first found that “the claimed invention is but one relatively small component of the accused operating systems” particularly in view of “the relative importance of other features such as security, interoperability, and virtualization.” .In addition, the court noted that there was no evidence in the record supported the notion that the claimed feature drove demand – “users do not buy the accused operating systems for their workspace switching feature.” at 4.The purpose of this requirement “is to assure that, in light of the evidence as a whole, ‘the invention was not abandoned or unreasonably delayed.’” Slip Op. Under that standard, the court stated that an inventor is not required to work on reducing his invention to practice every day during the critical period and periods of inactivity do not automatically require a finding of no diligence.Also, the court held that the PTAB erred by not properly weighing the evidence of diligence under a rule of reason analysis because the PTAB fixated on portions of the critical period where no evidence or specific activities had been provided to conclude that diligence was not continuous.cases “indicate an emerging trend to more carefully scrutinize the evidentiary and economic basis of reasonable royalty-based patent damages awards in the setting of the appropriate royalty base, the application of the entire market value rule, and the calculation of the appropriate royalty rate.” We also noted that contemplated legislative reforms in the area of patent damages may likewise “seek to put the burden on district court judges to act as ‘gatekeepers’ and to closely scrutinize the evidence that is relied upon to prove patent damages.” Shortly after our article was published, the U. Senate announced a new “compromise” patent reform bill (full text available here), which includes a section addressing patent damages.Whereas prior versions of the patent reform bill which had been considered over the past years had contemplated introducing more specific statutory limitations on patent damages, hearing on patent damages mandatory.The court found that “these [older specific] licenses are far more relevant than the general market studies” that plaintiff’s expert selected to rely upon.
He also presented evidence that he submitted comments to his attorney about the initial draft on March 2, received questions from his attorney on March 4 and 12, participated in a conference with the attorney on March 16, and received a revised application on April 13.
For example, the 2007 Patent Reform Bill proposed limiting the amount of damages recovered as a reasonably royalty based on an attribution of “the economic value properly attributable to the patent’s specific contribution over the prior art” and statutorily limits the application of the “entire market value rule” to circumstances where the patentee has established that that the claimed feature is “the predominant basis for market demand” of an entire product.
A split panel of the Federal Circuit held that the PTAB applied a standard that was too exacting when it required an inventor to prove the “continuous exercise of reasonable diligence” to antedate a prior art reference. Olympus America identified a Japanese Patent Application published on February 10, 1998, as prior art that both anticipated and rendered obvious the ’384 patent.
In the section entitled “Procedure For Determining Damages,” it requires that “[t]he court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such a determination.” In addition, in a section entitled “Sufficiency of Evidence,” it requires that “the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis” and that “[t]he court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.” We expect that this proposed reform bill will not alter the traditional role of the factors, which have been used in the reasonable royalty analysis, or other established damages law.
Thus, other than providing for a first review of the damages evidence by the judge before a case is sent to a jury, it is unclear whether the Senate’s proposal would have the effect of limiting damages.