Page 78 - Intellectual Property Disputes

"were not relevant to the facts of this case." The district court found that the expert failed to prove that
the license agreements were "in any way comparable" to the patent at issue. fn 44

In 2014, the Federal Circuit again addressed the issue of establishing the comparability of licenses. In
VirnetX, Inc. v. Cisco Sys., fn 45 the Federal Circuit summarized the issue at hand, stating the following:

We have held that in attempting to establish a reasonable royalty, the "licenses relied on by the
patentee in proving damages [must be] sufficiently comparable to the hypothetical license at
issue in suit." Lucent, 580 F.3d at 1325. "When relying on licenses to prove a reasonable royalty,
alleging a loose or vague comparability between different technologies or licenses does not
suffice." LaserDynamics, 694 F.3d at 79. However, we have never required identity of
circumstances; on the contrary, we have long acknowledged that "any reasonable royalty
analysis ‘necessarily involves an element of approximation and uncertainty.’" Lucent, 580 F.3d
at 1325 (quoting Unisplay, 69 F.3d at 517). Thus, we have cautioned that "district courts
performing reasonable royalty calculations [must] exercise vigilance when considering past
licenses to technologies other than the patent in suit," ResQNet, 594 F.3d at 869, and "must
account for differences in the technologies and economic circumstances of the contracting
parties," Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed. Cir. 2010).

In 2015, the Federal Circuit specifically addressed the use of related party licenses, stating, "[R]oyalties
paid by related parties have little probative value as to the patent’s value," highlighting its prior decision
in Allen Archery, Inc. v. Browning Mfg. Co. in which it rejected "agreements between related parties as
establishing a royalty rate because the transactions were not arms-length." fn 46

Certain courts have found that settlement license agreements are not instructive with regard to the
willing licensor and licensee negotiation. This is because the circumstances under which the settlement
license agreements are negotiated and executed may not be comparable to the negotiation that would
occur prior to any litigation and without any threat of litigation. fn 47 However, as noted in the section,
"Classification of the Georgia-Pacific Factors," in this chapter, various decisions have found that even if
the prior licenses were obtained under threat of litigation or in settlement, the royalty rate of the license
may offer some degree of evidence regarding a reasonable royalty. Recent decisions further support the
potential comparability of settlement license agreements, indicating that certain facts of the case may
dictate the inclusion of settlement agreements and, in fact, settlement agreements may be the most
comparable license agreements available.

fn 44 Utah Med. Prods. v. Graphic Controls Corp., 350 F.3d 1376 (Fed. Cir. 2003). The patent at issue is a transducer-tipped
intrauterine pressure catheter. The accused product is the "Softrans" device. The jury awarded $20 million in damages, approximately
96% of the defendant’s sales of the accused product.

fn 45 VirnetX, Inc. v. Cisco Sys., Inc., No. 13-1489 (Fed. Cir. 2014).

fn 46 Allen Archery, Inc. v. Browning Mfg. Co., 898 F.2d 787 (Fed. Cir. 1990).

fn 47 This chapter does not include a discussion of admissibility of settlement agreements under Federal Rules of Evidence 408 and
403. Under Rule 408, settlement agreements are barred from admission. Under Rule 403, relevant evidence "may be excluded if its
probative value is substantially outweighed by the danger of "unfair prejudice or confusion."

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