Page 76 - Intellectual Property Disputes

of infringing "NewLook" software. The Federal Circuit, in vacating the lower court’s decision, found
that the "district court’s award relied on speculative and unreliable evidence divorced from proof of
economic harm linked to the claimed invention and is inconsistent with sound damages jurisprudence."
In particular, the court rejected the expert’s use of "licenses with no relationship to the claimed invention
to drive the royalty rate up to unjustified double-digit levels." The court found that none of the five
rebundling licenses that had "extremely high rates," which the expert relied upon, mentioned the patents
at issue or could be linked to the claimed technology. The court found that the expert did not provide a
convincing reason to consider them. The court stressed that comparable licenses need to take into
account "the technological and economic differences" between the licenses. The fact that the defendant
chose not to proffer an expert to rebut the plaintiff’s expert also should not result in the court affirming
an inappropriate royalty rate because the evidentiary burden is on the plaintiff "to persuade the court
with legally sufficient evidence regarding an appropriate reasonable royalty." fn 34

In LaserDynamics, Inc. v. Quanta Storage America, Inc., the district court overturned the jury verdict of
$52 million, determining the award to be excessive. fn 35 The jury awarded a royalty of 5% on stand-
alone drives priced at $28 and a 2% royalty on computers incorporating the drives priced at $800. The
defendant had been a party to a number of license agreements, which carried a lump-sum royalty
ranging from $57,750 to $266,000. The plaintiff had not entered into any licenses with royalties near
$52 million. Therefore, none of the licenses bore any relationship to the damages amount. In 2012, the
Federal Circuit ordered a new trial on damages, addressing certain elements of LaserDynamics’ expert’s
damages opinion and reliance on previous licenses and a third-party licensing survey. fn 36 The Federal
Circuit disagreed with the district court’s decision to allow LaserDynamics to rely on licensing evidence
when comparability to the hypothetical negotiation could not be established. Specifically, the Federal
Circuit noted that two licensing programs relied upon by LaserDynamics’ expert did not involve the
patent in suit, and evidence did not support that the programs involved the specific technology at issue.
Further, a 1997 licensing survey "was even further removed from the patented technology, since it was
not even limited to any particular industry, but ‘was across whatever technologies were being licensed
by the people who responded.’" fn 37 The Federal Circuit further noted that LaserDynamics’ expert
improperly "dismissed the probative value" of lump-sum licenses that did not exceed $1 million, which
were "highly probative of the patented invention’s economic value in the marketplace, and of the form
that a hypothetical license agreement would likely have taken," and, instead, opted for a 6% running
royalty. The court determined that the running royalty was "untethered from the patented technology at
issue and the many licenses thereto and, as such, was arbitrary and speculative." fn 38

Relying on the court’s decision in ResQNet.com, Federal Circuit Judge Randall Rader, sitting by
designation, precluded a damages expert in IP Innovation, LLC v. Red Hat, Inc., from testifying because

fn 34 Id.

fn 35 LaserDynamics, Inc. v. Quanta Storage Am., Inc., 2:06-cv-00348 (E.D. Tex 2010).

fn 36 LaserDynamics, Inc. v. Quanta Storage Am., Inc., 694 F.3d 51 (Fed. Cir. 2012).

fn 37 Id.

fn 38 Id. The Federal Circuit went on to note, "As a final matter, we do not hold that LaserDynamics’ past licenses create an absolute
ceiling on the amount of damages to which it may be entitled, see 35 U.S.C. § 284, or that its history of lump sum licenses precludes
LaserDynamics from obtaining damages in the form of a running royalty. Full consideration of all the Georgia-Pacific factors might
well justify a departure from the amount or even the form of LaserDynamics’ past licensing practices, given the appropriate evidence
and reasoning."

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