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

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

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

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

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

Latest on SSPU: Is the EMVR back?

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

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

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

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

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

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)

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

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

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

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

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

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)

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