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paribus [holding all other things constant], be equal to the profit attributable to the patented features."  fn
               162

               For example, in TWM Manufacturing Co., Inc. v. Dura Corp.,   fn 163   the special master computed
               "reasonable royalty" damages based on an internal memorandum, written by the infringer’s top
               management before the infringement began. The memo indicated that the infringer projected a
               substantial gross profit (52.7%) from the proposed infringing sales. Using this figure, the special master
               subtracted overhead expenses to obtain the infringer’s projected net operating profit (37% to 42%) and
               then divided the projected net operating profit between the infringer and the patent holder. The special
               master concluded that, at the time infringement began, the infringer would have accepted the standard
               industry profit on the item. The profit for the infringer was set at the standard industry rate (6.6% to
               12.5%), and the remaining 30% became the "reasonable royalty."

               On appeal to the Federal Circuit, the infringer contended that it was erroneous for the special master to
               use this method, asserting that the more traditional "willing licensor–willing licensee" test was legally
               mandated. The infringer also downplayed the significance of its pre-infringement memorandum, instead,
               highlighting that the actual profits realized on the infringing products were much lower than the
               projected figures. The Federal Circuit, however, rejected the infringer’s contentions and affirmed the
               award. After noting that there is no single way to determine patent damages, the Federal Circuit held
               that it was of no consequence that a lesser royalty may have resulted from another analysis.  fn 164   "On
               appeal, an infringer cannot successfully argue that the district court abused its discretion in awarding a
               ‘high’ royalty by simply substituting its own recomputation to arrive at a lower figure."  fn 165   The
               relevant question was whether the method used by the lower court was proper, and the appellate court
               concluded that it was. In particular, the Federal Circuit upheld the special master’s use of the analytical
               method because, unlike the infringer’s alternative, it focused on the critical time when infringement
               began, rather than thereafter.

               In its 2009 decision in Lucent v. Gateway, the Federal Circuit addressed the application of the analytical
               method as one of "several approaches for calculating a reasonable royalty." In addition to the
               hypothetical negotiation construct, the court described the analytical method, which "focuses on the
               infringer’s projections of profit for the infringing product. (See TWM Mfg. Co. v. Dura Corp., 789 F.2d
               895, 899 (Fed. Cir. 1986) [describing the analytical method as "subtract[ing] the infringer’s usual or
               acceptable net profit from its anticipated net profit realized from sales of infringing devices"]; see also
               John Skenyon et al., Patent Damages Law & Practice § 3:4, at 3-9 to 3-10 (2008) [describing the

        fn 162  Metaswitch Networks LTD. v. Genband US LLC, et al. (EDTX 2:14-cv-744, March 5, 2016). In its opinion, the district court
        addressed the defendant’s argument that plaintiff’s damages expert improperly considered profits from specific accused and non-
        accused products offered by the defendant, rather than "standard industry profits," as considered in the TWM Mfg. case, addressed in
        the subsequent paragraphs. Here, the district court ruled that "there is nothing about the analytical approach that precludes a
        comparison between profit margins on specific products," rather than a comparison to "industry standard profit" and that the defendant
        failed to demonstrate "why comparing the profitability of specific products is somehow less reliable...So long as the comparison
        isolates the value of the patented features – and no more – it is immaterial whether the profitability of a specific product or of an
        industry is used." The Federal Circuit does not appear to have specifically addressed the appropriateness of applying the analytical
        method using profit margins of actual products, rather than "industry standard rates" or using actual results, rather than projected
        results.

        fn 163  TWM Mfg. Co., Inc. v. Dura Corp., 789 F.2d 895, 899 (Fed. Cir. 1986).

        fn 164  Id.

        fn 165  Id.


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