Federal Circuit Opinion Limiting Patent Damages

Today the Federal Circuit decided LaserDyamics v. Quanta Computer.  This is an interesting case on patent damages.  The case covers a lot of interesting areas, including limits on the use of the entire market value rule, admissibility of settlement licenses, the starting date for royalty calculations, and using Daubert to challenge a large damage calculation.

The case involved LaserDyamics' patent that can distinguish between DVDs and CDs inserted into an optical disc drive.  It's useful in personal computers, particularly laptops.

First, the court reversed the use of the "entire market value" rule to calculate damages.  LaserDyamics' expert had calculated damages based on the sales of the entire computer, instead of just the disc drive portion affected by the patent.

We reaffirm that in any case involving multi-component products, patentees may not calculate damages based on sales of the entire product, as opposed to the smallest salable patent-practicing unit, without showing that the demand for the entire product is attributable to the patented feature.

. . .

LaserDynamics’ use of the entire market value rule was impermissible, however, because LaserDynamics failed to present evidence showing that the patented disc discrimination method drove demand for the laptop computers. It is not enough to merely show that the disc discrimination method is viewed as valuable, important, or even essential to the use of the laptop computer. Nor is it enough to show that a laptop computer without an ODD practicing the disc discrimination method would be commercially unviable. Were this sufficient, a plethora of features of a laptop computer could be deemed to drive demand for the entire product. To name a few, a high resolution screen, responsive keyboard, fast wireless network receiver, and extended-life battery are all in a sense important or essential features to a laptop computer; take away one of these features and consumers are unlikely to select such a laptop computer in the marketplace. But proof that consumers would not want a laptop computer without such features is not tantamount to proof that any one of those features alone drives the market for laptop computers. Put another way, if given a choice between two otherwise equivalent laptop computers, only one of which practices optical disc discrimination, proof that consumers would choose the laptop computer having the disc discrimination functionality says nothing as to whether the presence of that functionality is what motivates consumers to buy a laptop computer in the first place. It is this latter and higher degree of proof that must exist to support an entire market value rule theory.

Second, an issue in the case was when the licensing experts should figure out the "hypothetical negotiation" began to calculate a royalty.  Since Quanta wasn't liable for actively inducing infringement until August 2006, LaserDynamics' expert used that date, instead of the earlier date when Quanta began selling the computers.  The Federal Circuit rejected that approach:

Thus, we hold that in the context of active inducement of infringement, a hypothetical negotiation is deemed to take place on the date of the first direct infringement traceable to QCI’s first instance of inducement conduct—in this case, 2003.

Third, the court excluded a prior settlement agreement as "the least reliable license by a wide margin."  The settlement in question was forced on the settling party due to a series of adverse decisions in the litigation.

Finally, the court held that LaserDynamics' experts use of a 6% running royalty wasn't reliable or admissible: "In sum, the 6% royalty rate was untethered from the patented technology at issue and the many licenses thereto and, as such, was arbitrary and speculative."

In sum, this opinion is quite favorable to limiting excessive patent damages.

Apple Wins Huge Verdict Against Samsung

Today a San Jose jury awarded Apple over $1 billion against Samsung in a patent infringement case over features of the iPhone and iPad.  The verdict form is here (assuming the link works; the jury was then asked to clarify some things, resulting in an amended verdict form).  Dennis Crouch and Joe Mullin explain the verdict (Joe's post also has a copy of the verdict).  According to The Verge, there will be a hearing on September 20 to consider Apple's request for an injunction and Samsung's motions to set aside the jury verdict.  

As EFF explains, it's not clear whether this outcome is actually good for either innovators or for smartphone and tablet consumers.

Thanks to Judge Alsup and Google for Publicizing My Blog!

I wrote previously about the Oracle v. Google trial involving the copyrightability of Java APIs.  A few weeks ago, Judge Alsup ordered Oracle and Google to disclose if they had paid money to anyone who had commented or blogged about the case.  I figured that wouldn't include me -- neither party pays me anything to write this blog.

After Oracle and Google filed their disclosures, the Judge ordered Google to do a better job.  That order included organizations to whom the parties gave money and whose employees commented or blogged -- whether or not the payment was to comment about the case.  That was quite a broad standard for disclosure.  I figured that might include the Electronic Frontier Foundation (EFF), since Google donates to EFF and (independently of the donations) EFF blogged about the case.  I still didn't figure it would include me, since EFF doesn't sponsor my blog, and I'm not an EFF employee anyway -- I'm an unpaid volunteer.

Today Google filed its supplemental disclosure.  Google made it clear that "neither it nor its counsel has paid an author, journalist, commentator or blogger to report or comment on any issues in this case."  However, at page 7, Google identified its contributions to EFF, and identified EFF's blog posts about the case.  But Google also identified this blog and me. 

Michael Barclay, now a volunteer fellow for the Electronic Frontier Foundation, commented on the case on his blog, IP Duck.  See Ex. Y (available at http://ipduck.blogspot.com/2012/05/judge-alsup-rules-that-java-apis-are.html); Ex. Z (available at http://ipduck.blogspot.com/2012/05/phase-one-verdict-in-oracle-v-google.html). Mr. Barclay’s interest in the copyrightability of software interfaces, however, long predates his association with EFF, and in fact predates Google’s existence—Mr. Barclay represented Borland in Lotus v. Borland. Ex. AA (Borland’s Supreme Court merits brief).

I assume Google was just being overly careful here by including me although it didn't really have to.  (Or as Mike Masnick put it -- since Google also listed him and his Techdirt blog -- "Apparently I'm a Google Shill and I Didn't Even Know It.")  Anyway, since people will read this filing, my thanks to Judge Alsup and Google for publicizing this blog!

Update: Here's Eric Goldman's post about this filing.

Oh Darn, I Should Have Gone Here When I Was in Israel

I went to Israel a couple of years ago, but somehow missed this: "Israeli biblical park outfits donkeys with wi-fi."  Darn.

Patent of the Day -- The Taco Shell!

I just came across U.S. Patent No. 2,570,374, which covered the commercial taco shell.  A truly historic invention in the food industry.

My Musician Friends and I Already Knew This

Why choose?

Ian Fleming, George Lucas, Lewis Carroll and Others Rewrite "Lord of the Rings."

Read them all here.  For example, here's the one by George Lucas:

"Did you ever wonder who your father was, Frodo?"

"Uncle Bilbo was my father, Obi Gan Dalf."

"Your Uncle is a fine man, but he is not your father. Your father was a fine warrior and a great captain, strong in the Force. He was called Sarumann the Wise, and he was a good friend."

"Was? Is he dead?"

"He is no more. It is your destiny to avenge his death, young Baggins."

Federal Circuit Reaffirms Patentability of Isolated Gene Sequences, But Not Methods for "Comparing" or Analyzing" Them

Last July the Federal Circuit issued an opinion the Myriad case involving the patentablity of genes directed to detection of breast cancer and related methods for using them, which I blogged about here.  

 

In March 2012, the U.S. Supreme Court issued an opinion in Mayo v. Prometheus, which I also blogged about.  Mayo limited the patentablity of medical diagnostic processes.  Following that decision, the Supreme Court ordered the Federal Circuit to reconsider its decision in view of Mayo's reasoning.

 

Today the Federal Circuit issued a new opinion in Myriad.  To summarize 106 pages very briefly, there was no change in the outcome from last year's original opinion.  Isolated DNA remains patentable subject matter, as do some of the method claims.  However, some of the method claims (method claims directed to comparing or analyz-ing gene sequences) are unpatentable.  Judge Bryson again dissented on the isolated DNA claims.  

 

Expect a cert petition or two.

Recent Patents You Don't Need

Here's a slideshow of some recently-granted patents that you don't need. 

Best Escalator Ever?

Imagine doing something like this in 1977.

Good Thing I Don't Have a Cat

Because if I did, something like THIS would happen to me.

My Latest EFF Amicus Brief

Today EFF filed an amicus brief in The Authors Guild v. Google, a case in the Southern District of New York.  I helped prepare that brief.  EFF's press release describes the case as follows:

The Electronic Frontier Foundation (EFF) filed an amicus brief today urging a federal court to find that the fair use doctrine shelters Google's Book Search "snippet" project from copyright infringement claims from the Authors Guild. EFF was joined by three associations representing over 100,000 libraries, the Association of Research Libraries, the American Library Association, and the Association of College and Research Libraries.

For years, Google has been cooperating with libraries to digitize books for a searchable database available to the public. Google Book Search now includes over 12 million works that users can search for keywords. Results include titles, page numbers, and small snippets of text. Google Book Search has become an extraordinarily valuable tool for librarians, scholars, and amateur researchers of all kinds. For example, librarians surveyed about Google Book Search said the service can help them find valuable research sources inside their own libraries as well as lead them to rare books they can borrow from other institutions. Many librarians say that they have purchased new books for their collections after discovering them through using Google Book Search. However, the Authors Guild argues that its members are due compensation in exchange for their books being digitized and included in the database – even though blocking Google Book Search's digitization wouldn't bring any author any additional revenue.

"Google Book Search is a reference tool that helps people find books. It doesn't take the place of sales," said EFF Fellow Michael Barclay. "The fair use doctrine allows for services like Google Book Search – they cause no economic harm and serve the welfare of the public."

The amicus brief filed today is part of EFF's long involvement in Authors Guild v. Google. In 2009 EFF and a coalition of authors and publishers objected to a proposed broad settlement of the case that would have created a business for Google selling access to whole books, based on the failure of the settlement to protect the privacy of readers. A judge rejected that broad settlement last year. Now Google seeks approval of the more narrow search and snippet project, and EFF agrees that the fair use doctrine applies.

"Google Book Search is a digital update to the old card catalog that helps libraries, helps researchers, and ultimately helps authors reach their audiences," said EFF Legal Director Cindy Cohn. "We hope the court protects Google Book Search – and the researchers and other readers who depend on it – from these meritless copyright claims."